Congress pulled the country back from the edge of the fiscal cliff late Tuesday night when the U.S. House of Representatives voted to pass an agreement urgently negotiated and passed by the Senate on New Year’s Day. But the possibility of sequestration, the across-the-board cuts to virtually all federal programs scheduled to occur on January 2, 2013, remains unresolved.
Instead of either implementing the cuts this month or cancelling the threat of sequestration, Congress delayed the cuts until March 1, 2013. Then, Congress will face yet another knock-down, drag-out fight over spending levels and deficit cutting because that’s close to the same time that lawmakers will grapple over the debt ceiling and the expiration of the stopgap measure for 2013 funding.
All this means the fiscal cliff agreement is really just a short respite on the way to the next fiscal cliff, scheduled to hit again in just two months. Admittedly, the next agreement may be slightly easier to reach, given that it will occur under a new Congress with more Democrats in both houses (though leadership will still be split, with a Democratic Senate and a Republican House), and the biggest tax issues are now settled.
But the circumstances haven’t changed, at least on the spending side. School districts are still at risk of losing significant federal funding (previously estimated at 8.2 percent per federal program, across the board). An 8.2 percent cut to Head Start (assuming 2012 funding) would total $653 million; cuts to the Child Care and Development Block Grant (CCDBG) would be close to $187 million mid-year. A Department of Education report that predicted the cuts would be closer to 7.8 percent said sequestration could mean 100,000 fewer slots in Head Start programs across the country, and another 80,000 fewer openings for CCDBG children.
However, the pending law – titled the American Taxpayer Relief Act of 2012 – does extend or make permanent a number of tax benefits for education. For example, the Child Tax Credit, which provides a $1,000, partially refundable credit per child to families, was set to revert to a credit half that size at the end of 2012. Instead, Congress extended the credit for five years at the full $1,000, costing taxpayers nearly $354.5 billion over 10 years.
Another education expenditure – the classroom expenses deduction for K-12 teachers – was extended through 2013 after it lapsed at the end of 2011. The short renewal Congress afforded to it this week means lawmakers have set themselves up for another fight over that deduction, as well as other temporarily-extended deductions, at the end of the 2013 calendar year.
For more details on how the deal affects education programs up through the college years, see our sister blog, Ed Money Watch.