Budget. No one in california in the legislature would be able to vote for this document because this is a madeup document with madeup numbers. It is one of the most fanciful things ive seen in all my years as an elected official and youll see through the markup how outrageous these numbers are. I yield back the balance of my time. Thank you mr. Chairman. I just want to thank all my colleagues on the democratic side for putting forward our critique of the republican budget and laying the ground work for the budget well friend present next week. I thank the ranking members and the other members. We will proceed with the staff walk through of the fiscal year 2016 concurrent resolution on the budget. We need staff to move to the witness stable, please. While staff is getting set, let me remind members this is an opportunity for members to ask questions that are factual and technical in nature. The staff is not here to answer questions or defend policy. Thats our job and well have great opportunity to do just that. So these questions coming forward ought to be technical in nature. How do you want us to do that. Do you want us as youre going through the section we have to stop it and do in the that section or can we what well do is i appreciate the question. What well do is just once we begin we will have the first question asked by whomever the minority decides to ask the question and the Staff Members will respond to the question in that area. It has to be about the information in that section . Theres no walk through of the entire piece of legislation. Its whatever portion of the resolution you wish to discuss. If i i think chairman has agreed that the best use of our time is to allow members to begin with questions rather than a presentation presentation. We have with us today rick may who is our staff director and his name tag says Something Else but its rick may. We have with us jane lee and jim hertz, the director of budget review. As i me these questions should be factual and technical in nature. Nature. Thank you, mr. Chairman. This provides members of the committee to understand some of the policies that are behind the numbers and we appreciate the opportunity and use this time for that purpose. Id like to put up a chart i used in my Opening Statement with respect to what this republican budget does with respect to what we call nondefense Discretionary Spending for people listening. Those are the funds we invest in our kids education in Scientific Research inknee separation Homeland Security those ongoing that are nondefense piece. As i understand the budget, it would cut below the post sequester level, in other words, below the sequester caps by 579 billion over the tenyear budget window, is that correct . [ inaudible ]. Thank you, now relative to what it would be required to maintain 2015 enacted levels adjusted for inflation, that cuts nondefense Discretionary Spending in our calculation by about 1. 1 trillion. Now, theres not much detail on how you would allocate these cuts. Youve got function 920 and function 930 that contain 766 billion in unallocated cuts over the next ten years. In other words youre saying make that huge magnitude of cuts but dont tell us where theyre coming from. By our calculation if you were to apply those cuts across the board it would come to a cut of 25 in that category of the budget by 2020. Is that square with your calculation . Mr. Chairman, mr. Van hollen, i think you have to would you turn on your mic, please. Oh, mr. Chairman. Many van hollen i dont think your mic is on you. There, im sorry. Mr. Chairman, mr. Van hollen you have to give us a minute to reconnoiter about what the best answer is. I think the best way to describe as a starting answer then ill turn to jim and jim for further detail s details remember, the budget resolution is a budget blueprint designed to provide a vision of where we believe the fiscal policy of the federal budget needs to go over the next ten years. It is not designed to provide every single solitary assumption behind the numbers and the Budget Committee has a tradition which started with previous chairman and have continued with this chairman is that we give examples of both mandatory or direct spending as well as discretionary site of how we achieve our numbers. This is based upon policies as the chairman eluded to earlier in his remarks. This is not a mathematical exercise, this is a policybased effort. We are not required to provide every single solitary assumption behind the numbers but we can assure you that there are policy assumptions behind every number. The concern about the discretionary number is a valid one. We just believe the size and scope of government should be reduced. The best way to do there that is through reduction in the Discretionary Spending levels. Thank you mr. May. I would point out as this chart illustrates that this budget does take that category of spending investments in our economy in areas Like Research and Development Education to 40 below the lower level in recorded history. And you have as i look in your budget, shown what you would allocate within certain functions over the next ten years. Maybe those are illustrative purposes but lets look at 2016 because thats upon us right now now. It appears that the budget as a lower amount for veterans programs than the president s budget. Is that your understanding . Or policy assumptions regarding veterans and, again, if jane needs to chime in, i will defer to her. Our assumptions are basically at the cbo baseline. We make a few minor assumptions regarding some direct spending on or mandatory spending that mirror the president s budget regarding some veterans benefits. So i think its the same. I hear you. If yours is a baseline i understand the answer. I think at baseline that does put funding for veterans programs at . 9 billion below the president s request for 2016 and 19 billion below the president s request over ten years but we can check that. Have you given this huge unallocated cuts to this part of the budget which includes Homeland Security and the veterans programs . Have you made any provision for protecting our investment in veterans programs or is that left to the whim of the appropriators . Mr. Chairman and mr. Van hollen, the im not certain the appropriators would appreciate theyre the the decisions they make are simply whims but i think right, the fiscal year 16 numbers are based upon an overall allocation that we provide to the Appropriations Committee in the infamous 3402a allocation. Appropriate raters have complete maximum flexibility in order to meet that allocation number and they can divide that as they see fit among the various 12 appropriation bills. To decide exactly how the appropriators are going to use those dollars is almost impossible for the Budget Committee to make those assumptions. I appreciate that. Just to point out that by our calculation this would result in a 25 cut in the out years to the extent that you cut less for some programs youre going to be cutting everyone more than 25 for others. Let me ask you about the cbo macroeconomic analysis that the budget that was released yesterday because if you look at it on page seven it indicates that as a result of the budget youre presenting, including the budget cuts in part of this portion of the budget that our national gdp, our National Economic output would fall by. 6 in the year 2016. 7 in 2017 and. 3 in 2018 relative to baseline. Relative to if we didnt have this budget in place and continued with the existing policies. Did you see that cbo outlook report . Mr. Chairman mr. Van hollen yes, of course. If you would like for us to explain more. We look at the macroeconomic feedback from the cbo as the kwif lent of what the president s budget and what the office of management and budget are able to do. The president s budget is a postpolicy analysis budget. In other words they put various assumptions together as their starting point for their budget just as we do but as the president s budget goes through over the tenyear period they have the ability or the tools to adjust their economic assumptions, their Interest Rate assumptions, etc. , to achieve their policy goals and they say the president s budget will drive the numbers to a certain point. The Budget Committee however, uses a different approach. We start with the cbo economic assumptions, Interest Rates, Economic Growth unemployment et cetera, and until we take that economic feedback approach then we are stuck with the positive things that occur from our deficit reduction efforts. We dont include that until the very last step when we do this economic feedback. You are correct, mr. Chairman and mr. Van hollen that there is a small change in the front end, but there is a very, very large change in the back end which we believe verifies the validity of the premise behind our budget that this is good for growth, this is good for job creation, and the numbers by the cbo, these are not Budget Committee numbers, we dont have our own black box in the back of the offices, these are cbo numbers done by reputable models that provide both positive feedback that we get from our budget. And id like to add im sorry were just trying to the chairman has given us an hour. Wed like more so if we can try and figure out this big budget here, we need to ask some more questions. Sure. It does raise the question about why wed want policies that slow down Economic Growth in the short term and hope we can make it up but let me respond, mr. May. So as i understand it you took as what you call the cbo dividend as part of the budget, is that right . Thats correct. Is there anything in the revenue assumptions youve made that is not based on cbo analysis . In other words, do you have any dynamic scoring assumption in this budget . Mr. Chairman, mr. Van hollen we started out with the cbo baseline because we thought that was a reasonable place to start. The cbo the economic feedback, the macroeconomic feedback we were talking about does not assume any changes regarding the tax reform assumptions that we are making in this document. We would argue that if we did provide the feedback it would be even higher. Cbo would not give that to us because we are not presenting a full detailed plan as we are on the deficit Reduction Plan of our assumptions in our budget. So that therefore there is no tax provision or tax benefit or feedback. This is simply the feedback you see is simply from lowering the deficit, lowering pressure on Interest Rates creating growth because of the substitution, if you will, of borrowing less money in the government and letting the private sector invest instead of using it to pay government bills. I understand. So just to bottom line is other than what you just described with respect to the cbo cbo. Theres no other assumption in the budget about impact from so call died name i can scoring on tax policy . No, no assumptions at all, mr. Chairman and mr. Van hollen, no assumptions on tax policy other than the cbo baseline. Im going ask transportation questions then i know mr. Mckahn has education questions. We all have more questions but let me just ask you quickly on transportation. Your budget shows the cut of 187 billion in outlays over ten years. Its primarily if discretionary and then youve got a Budget Authority cut of 166 billion on the mandatory side. So the combination suggests that this budget does what last years republican budget does which is that the spending out of the Highway Trust Funds will be cut to the level thats supported by current revenues, is that correct . That is correct. I would like to defer to my colleagues here. I dont want to be the hog of the limelight, shall we say, mr. Van hollen. So if jane or jim wants to add i know theres a fund enough your budget that would allow for people to come up with increased spending so my question for now is from this budget does not provide a specific solution to the problem. It assumes unless something is done through the other fund that the Transportation Trust fund will be funded by current revenue s revenues. Well, our assumption is that we have to follow the current law path. The current law presumes that if the expenditures dont match the revenues that are coming in that the expenditure ss will be ratcheted back. Right now there will be a shortfall in the Highway Trust Fund later on this year according to cbo so reprovide flexibility for the Transportation Infrastructure Committee to provide solution tos. Thank you, that would increase the spenting in your budget . In a deficit neutral way, sir. But it would increase the spending numbers. The answer is theres no provision to dealle with the shortfall within the budget of this fund you have a big cut for Budget Authority in this account. Whats going on there . Is there room for new starts in the Highway Program next year . Mr. Chairman mr. Van hollen i defer that to jim. The budget assumes that we will match the spending coming out of the trust fund with the revenue coming in. We the have a definite neutral reserve fund to address that, we have a rule in the budget resolution that was carried is from last year that says congress should pay for any general Fund Transfer into the Highway Trust Fund. Thank you. I know that function 500 mantdtory spending is cut by about 161 billion below the baseline over ten years and that your budget document says the maximum pell grant is frozen for the next ten years i have four questions. The first is what does that mean your budget does that mean your budget eliminates the 89 billion previously affected mandatory funding for pell grant . As the president himself noted in a previous state of the union the Pell Grant Program is facing a funding shortfall ifyn fy17. So in order to continue the payments through these programs the house budget assumes that the pell grant is fully funded at the maximum grant award for the Pell Grant Program at 5,775 there the out years as well, fully funded, sir. All right, let me try back in the yes and no format, if possible. Does that mean your budget eliminates the 89 billion previously funded increases . We fully fund the program on the discretion. Im trying a yes or no format. Yes, it would move the mandatory portion to the so the answer is yes. Fully funded in the discretionary sense. Lets try that form that way everyone can get questions in. Would the gentleman yield . Certainly. Theyre moving it from mandatory in the discretionary but thats under discretionary caps. Which is getting cut. So it means other areas would be cut out. Mr. Van hollen, this pell program was traditionally funded on the discretionary ledger. The purpose of this time is for questions not debate. Technical questions. Thats why if i can do yes or no answers mr. Chairman i can save everyone time so we can try for brevity. How much will the pell grant lose in purchasing power if its frozen over ten years . Do you know that offhand . We didnt have that analysis at hand. But we fully fund the program sir. If you can get back to us what those losses would be i would appreciate that. Ill move ahead. Past republican budgets have said they eliminated the in School Interest subsidyings and undergraduate Student Loans for need you students and have eliminated funding for social Services Block grants. Does your budget assume those savings . Yes, sir, those are two assumptions. Of course these assumptions yes is the answer. Thank you. So based on that, what policies account for the remaining 20 billion of mandatory cuts in function 500. Thats not a yes or no. Thats what else makes up the 20 billion. Yes, sir. We have the repeal of the expansion of the incomebased repayment program. This is the expansion. How much is that . Over ten years 16. 3 billion. As you mentioned, its the many School Interest subsidy for undergraduates. Aligning it to the graduate program has this enacted. It was a bipartisan forum. We eliminate the Public Sector loan forgiveness program. Thats a tenyear savings of 10. 5 billion. As you mentioned, the social Services Block grant. How much is that again . Its over the tenyear period it would be 16. 5 billion. Thank you very much. Thank you, sir. Yield back. I thank you. I have some questions. Other members have questions. I have a couple questions on medicare. As i look at the budget over the tenyear window theres a net medicare reduction of about 184 billion. Is that correct . Mr. Chairman, mr. Van hollen, yes. Approximately. Thank you. And does the budget assume whats being discussed as a potential agreement. I say potential agreement on sgr . Yes. And is that at 168 billion, as i understand it is. That right . Yes. Approximately. So that would mean if we have a net reduction of 184 and the medicare budget includes a potential sgr agreement, were talking about gross reductions of 359 billion. So what i want to do is get a sense of what those reductions in the medicare account are. First of all, as i understand the a piece of that is restructuring parts a and b of medicare. Can you tell me what savings youre assuming if any for that. Sir, one clarification. In terms of the sgr, and we do assume that the full permanent fix of the sgr is assumed and fully offset in our budget but it pulls from the 5. 5 trillion in savings. Theres no specific correlation or offset thats attached to the sgr fix. We assume in the our savings. In terms of the combining a and b deductibles in a single deductible deductible, thats over the tenyear window, sir of 94. 1 billion. Those are the two combined medigap plus a and b. Thank you. How much do you assume, if any, for medical malpractice reform. For med mall this would be over, again, the ten year window 36. 9. And for changes in income related premiums . Are there any changes in there . What would be the magnitude of the savings . Sorry, for means testing, sir . Yes, sir. Okay, for means testing for parts b and d we have an a assumption of 104. 1 billion. And then does last years budget assumed an increase of the medical eligibility age to 67. Does this budget make the same assumption . It does starting by 2024 along with the premium support subsidy. And how much savings is assumed from that . In total we dont have the parse out. In total with the 2024 start it would be 61. 1 billion. 6 6. 1 billion. With premium support, sir. Are there any is there an increase in Medicare Advantage payments in this budget . We presume that there is a Deficit Neutral Reserve Fund sir, to deal with the access issues with the Medicare Advantage program. But theres no actual expenditure increased expenditure . Thank you. So im just are there any other medicare programmatic increases in the budget . Mr. Chairman mr. Van hollen, i think its important to note, again, for the nature of full disclosure, you asked about sgr. As i said, we assume the full cost of the sgr fix in our budget, as jane mentioned. I think its important to note in a state of fairness the president s budget does not provide any offsets. He assumes the cost of sgr fix within the base line, the omb baseline. So thats one distinction between our budget and the president s budget. Just, again full disclosure. Second, its also important to know, though, as you say we have a net or gross number of medicare cuts of approximately 325 billion. The president s budget has got medicare cuts to the tune of about 450 billion. So were about 120 billion below the president s budget in medicare cuts. But of course, one of the major medicare savings that the president has in his budget is from negotiating drug prices with Prescription Drug companies. I assume thats not in your budget. Is that correct . We assume the repeal of the Affordable Care plan Affordable Care act which had pro viegtsvisions that increased drug prices and Prescription Drug plans. We assumed the full repeal of this act, thereby lowering the costs. So that includes, for example, the measures in the Affordable Care act to close whats known as the Prescription Drug doughnut hole, correct . We assume the full repeal of the Affordable Care act. Again, also have a Deficit Neutral Reserve Fund to account for the replacement of more patiencentric health care system. Now if you repeal the full Affordable Care act, of course, you repeal the savings that were achieved through the Affordable Care act, which the medicare actuaries have indicated led to the reduction in medicare premiums because of that. So if youre fully repealing the Affordable Care act, i assume were no longer going get the benefit of those lower premiums . Is that correct. Well the medicare actuaries also predicted that current expenditures with the aca that the Medicare Trust fund would go bankrupt or insolvent in 2030. So in order to prevent that actuality, that end, the house budget assumes, as i mentioned, the repeal, the full repeal of the Affordable Care act and assume, unlike that president s plan, that we would apply the medicare savings back to strengthening the medicare program. Instead of new expenditures. So, in fact, what youre saying is the savings are included in the budget. No, sir. Let me go to medicaid for a moment. Oh, absolutely. Medical liability. Im assuming that what youve done is assumed savings from the elimination of defensive medicine practice and that youre are you using data from states that already have these programs . Some kind of medical malpractice preform proposals in place . Because im not sure if you leave it up to the state house that differs from what the current law is, what the Current Situation is. The specific assumptions will be at the jurisdiction of the committee of authorization. The overall broad assumption is that theres a cap on noneconomic damages. A cap on damages . Noneconomic damages. Okay, thank you. Thank you, mr. Chairman. This i have trouble figuring out what where things are in this budget. I read your embargo piece that was put out and read all that and i found some language in it that i thought looked familiar. It says moreover, this system will set up a carefully monitored exchange for medicare plans, health plans that choose to participate in the Medicare Exchange but agree to offer insurance to all Medicare Beneficiaries to avoid cherry picking and to ensure that medicares sickest and highestcost ben fish a areas receive coverage. Now, that same language word for word, was in the puff piece from last budget and i its right here again but i cannot find where theres any substance in the budget explaining this or putting this in place. Is this im just supposed to believe it theres there . Mr. Chairman mr. Mcdermott, that is the same proposal that was in last years budget relating to premium support from medicare. The assumptions are providing in the no longer embargoed document you mentioned and r and that is its no longer embargo sod youre more than welcome to share with anyone but thats an assumption behind how the premium support would theoretically be implemented in 2024. Could you tell me the page in the budget where i can read the substance of it . Mr. Chairman, mr. Mcdermott, as an experienced member of the committee you know that the budget resolution text itself is simply a series of budget functions, budget enforcement, budget reconciliation instructions and now weve moved to various Deficit Neutral Reserve Funds as well as policy statements and its not a requirement to spell out within the budget resolution documents. Its not a statute or legislation, its a condition courant resolution that provides as i said earlier to mr. Van hollen a budget blueprint that is designed to provide a plan of how were going to get to balance within ten years. So what youre saying is this is to let people know that this is what is planned but were not going to right any specifics . Sir, we do in our Committee Report that will be filed on friday. Sorry . On friday we will fire our Committee Report. On friday . Yes its traditional filing. Once we report this bill there will be a report with further details specifying our assumptions. So were supposed to go on faith. It reminds me of first corinthians 13 12 that says we see through a glass darkly. I dont know what im going to be voting on here. Am i voting on the exchanges that we have in the aca thats going to be the same exchange youre going to have for medicare . No sir, the Medicare Exchange, the carefully monitored Medicare Exchange would envision that instead of a governmentcentered Health Care Plan that it would be private companies that are competing for Seniors Business and part of that exchange would be the traditional medicare fee for Service Program and the assumption would be that the benefits for any plan that is provided by would be equivalent to the traditional medicare fee for Service Program as well as benefits and actuarial value. When you use the word carefully monitored youre talking about the government carefully monitoring these insurance plans . The premium support plan would be based on the average bid process of cbo itself and a report in 2013 noted that there be reductions out of pocket costs for consumers as well as have the added benefit of lowering the Health Care Inflation cost as well. Similar to the ones that have come from aca, then . I would respectfully disagree. Thank you, mr. Chairman. Thank you. The budget includes an extra 36 billion in the overseas Contingency Operation funding. Do you intend for this money to be used for more funding . Mr. Chairman, i think thats a decision that i think is jane is our policy director as well as our defense analyst. She probably can provide greater detail but i think the initial question is that it relates to the authorizers and appropriate rater to how to appropriately utilize the oco funds and as was traditionally done recently those were the committees that make sure that final determination is not within the purview of the Budget Committee. But i think you said this is a policybased document, a blueprint. So youre laying out the blueprint that says were going to put this into the overseas account versus putting into the budgets . Thats a radical change from any place weve ever been before. Yesterday we were with the joint chiefs and every one of them said they wanted it in the base account. So were looking at something that not only yesterday but this morning Arms Services thats where they need it. Not in the overseas account. Mr. Chairman, i think its important to note that unlike that president s budget we are trying to be responsible and trying to maintain a current discretionary cat for defense spending which is at 523 billion. Mr. Chairman, i would just say the purpose of this is for us to gather information and not make political arguments. I think the statement should stick to the response. The political sarkization of the president s budget. 2 gentleman will yield. The gentleman asking the question wasnt asking a question he was making a statement so i would direct the i would direct the witnesses to respond to the question would any opinion as to the nature of the response. So let me repeat the question so we have it. Did you intend this to be used for war funding. The answer would be yes. For the defense of our nation. If you consider that war funding. And why wasnt it put into the base . As i was trying to explain earlier, the president theres a current discretionary cap of 523 billion on defense spending. We believe that it is very difficult for the Budget Committee to propose spending something in the current fiscal year thats above the cap. We believe the best way to provide additional funding for defense was through the only mechanism available to us, which was the oco fund. So that we basically had the same thank you. Was this based on in request from the pentagon . We based this, mr. Chairman, mr. Norcross, we based this on the president s request. Was this based on any request from the pentagon . We had on going discussions with dod and the come trollers office. Youre saying yes they give you a different answer. This is the house budget estimate. Its a place holder estimate. Look, were not trying to jump around here. Its real simple. The question is real simple. Did the pentagon request that it go in over the seas account or was that a blueprint, a policy decision that you have now made . Will the gentleman yield . Will the gentleman yield . Yesterday before the Arms Services committee, in fact, there was the chairman the joint chiefs and they said that their testimony was that they would prefer it to be in the base but that that takes a change in law a budget resolution is not a change in law and they stipulated that if the global war on terror fund was the only place that it could get to at this point, which is the only place the budget resolution can get it to, then it was better than not having it there. I yield back. Thank you. So as a policybased document were now changing it. Instead of putting the request from the pentagon into the base were now shifting 36 billion over to the oco, is that correct . Mr. Chairman, that is correct. Thank you. But if i can if i could mr. Norcross, would you yield for a moment . I want to read from what this committees policy was last year as reflected in the report from the committee. It said abuse of the oco capped a justment is a back door loophole that undermines the integrity of the budget process. The Budget Committee will exercise its oversight responsibilities with respect to the use of oco gwot designation in the fiscal year 2015 budget process and it will opposeeppose increases above the level the administration and our military commanders say are needed to carry out operations unless it can be clearly demonstrated that such amounts are warrelated. Is that does that continue to be the policy in this budget . Mr. Chairman, mr. Van hollen, i not to place a sword of the burden on jane here next to me. I think its fair to say, though, which jane can provide much more of the technical details, i am not a defense expert, but i think what were trying to say to mr. Norcross question, the president s request was a grand total of 612 billion in both base and oco funding