Budget Brief 11-13
August 5, 2011

On August 2, 2011, President Obama signed the Budget Control Act of 2011 (BCA, P.L. 112-25), a bill designed to provide for an increase in the federal debt limit while reducing long-term budget deficits. The provisions of the bill are estimated to provide as much as $2.4 trillion in deficit reduction over 10 years [fiscal year (FY) 2012 to FY 2021] and to allow a maximum $2.4 trillion increase in the debt limit in two stages.

Among the BCA’s major components are the following with significant potential impacts on states:

1) Establishes caps on discretionary spending through 2021, which the Congressional Budget Office (CBO) estimates will reduce federal budget deficits by $917 billion between FY 2012 and FY 2021.
2) Creates a Congressional Joint Select Committee on Deficit Reduction to propose at least $1.2 trillion in additional deficit reduction over 10 years.
3) Implements automatic procedures (known as sequestration) to reduce spending by as much as $1.2 trillion over 10 years if the select committee does not achieve such savings.

In addition, the agreement includes other provisions affecting program integrity, student loans and grants, the debt limit, and a federal balanced budget amendment. This brief explains its components and their potential impact on state grant programs.