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What is “sequester” and why is it threatening to cut the funding of the 9/11 health and compensation programs?

Posted by Peg Seminario, Safety and Health Director for the AFL-CIO | October 9, 2012

Recent news stories published by the Huffington Post and NY1, report of the threatened cut to the recently enacted James Zadroga, 9/11 Health and Compensation Act through the budget sequester compromise from last year.

Even before the first compensation payment is made from the Victims Compensation Fund, and just days after the 11th Anniversary of 9/11, we heard elected leaders again declare that they would never forget the Heroes of 9/11. Then we get word from the Office of Management and Budget (OMB) that the Victims Compensation Fund is facing a possible $24 million cut starting in 2013 (for a total cut of $209 million over the next 4 years) and the WTC Health Program is also facing a $14 million cut next year as well (for a total cut of $116 million over the next 4 years).

This threat to funding comes from an initial determination by OMB that the World Trade Center (WTC) Health Program, administered by the Department of Health and Human Services and the September 11th Victim Compensation Fund (VCF), administered by the Department of Justice, are programs subject to cuts in their funding due to “sequestration” under the Budget Control Act. (OMB Report Pursuant to the Sequestration Transparency Act of 2012 (P. L. 112–155))

What exactly is “sequestration” or “sequester”? And why is the 911 Health and Compensation Programs slated for cuts after only just getting passed and signed by the President two years ago? Why should the 9/11 Health and Compensation Act be subject to a cut to help deal with the national deficit, when the program was fully paid for when it was passed and not only fully paid for but its funding stream produces more than what it spends for the program.

The short version is that sequestration is the automatic, across the board, budget cut for government programs that goes into effect January 2013, unless Congress acts to delay the cuts or reaches some other agreement to address the federal deficit.

The simple answer for why the 9/11 Health and Compensation Programs is slated for cuts is bad timing. Because Congress delayed and resisted the passing of the “James Zadroga, 9/11 Health and Compensation Act” for so many years, it wasn’t on the list of programs that were exempt from the across the board cuts, like so many programs that Congress exempted from sequestration. (August 9, 2012, CRS Memo Budget “Sequestration” and Selected Program Exemptions and Special Rules Karen Spar, Coordinator.)

Here is the history: In 1985 Congress passed the Balanced Budget and Emergency Deficit Control Act (BBEDCA) of 1985 (P.L. 99-177) known more widely as the Gramm Rudman Balanced Budget Act.

It was supposed to provide a mechanism to reduce the deficit by requiring across the board budget cuts, which is called “sequester.” Sequester had been imposed only five times since the law was enacted in 1985. Each time, there were across the board cuts, across the entire government, equal to the amount that had been overspent. However, there were always exemptions to the cuts. There were programs that Congress did not allow the cuts to apply to, such as veterans’ programs, disability programs, retirement programs and many others. Then Congress let the law lapse in 2002.

In early 2010, as part of the agreement to increase the national debt and in another attempt to do something about the deficit, the law was reenacted. Not only was it reenacted, but the list of exemptions of programs that the Congress felt should not be subject to possible across the board cuts was updated and expanded. Added to the list of programs exempted from sequester cuts were: Radiation Exposure Compensation Trust Fund, Black Lung Disability Trust Fund Refinancing, Energy Employees Occupational Illness Compensation Fund, Public Safety Officer Benefits among the over 80 new exemptions.

As the Congressional Research Service stated in “The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History”, Robert Keith April 2, 2010 page 17.

“Section 255 of BBEDCA of 1985 lists mandatory programs and activities that are exempt from reduction under any sequestration order issued by the President. The section, which was added to BBEDCA by the Budget Enforcement Act of 1990, is amended by Section 11 of the Statutory PAYGO Act to update the existing list for changes in account structure and headings and other changes, to add new accounts and programs (such as the Children’s Health Insurance Program and economic recovery programs), and to clarify the treatment of certain transportation programs subject to obligation limitations in annual appropriations acts.

The programs and activities exempt from sequestration under Section 255, as amended, include Social Security and Tier I Railroad Retirement benefits; federal employee retirement and disability programs; veterans’ programs; net interest; refundable income tax credits; Medicaid, CHIP, SNAP, SSI, TANF, and certain other low-income programs; and unemployment compensation, among others.”

The Statutory Pay-Go Act (PAYGO), with the list of updated exemptions was signed into law by President Obama in February of 2010.

The James Zadroga, 9/11 Health and Compensation Act was not signed into law until January 2nd of 2011. It did not exist when the new PAYGO law was enacted, so it never ended up on the list of exempted programs.

In fact, the Zadroga Act was one of the first major programs passed under the PAYGO requirement that it be fully paid for. Not only was the 9/11 Health Act fully paid for, but the revenues that provided the funds actually are estimated to produce $433 million dollars more than the Act will spend. Those extra funds, the result of the compromise that got the bill passed in the final hours of the Congressional session in 2010, would go to deficit reduction.

The fact that the 9/11 Health Act was not passed until after the PAYGO statute was reenacted was not the problem on its own, the real problem was what happened next.

We got the debt ceiling debacle in the summer of 2011.

In order to solve the debt ceiling crisis, Congress passed “the Budget Control Act (BCA)” in August 2011. That bill set up the “Super Committee,” which was supposed to come up with $1.2 trillion of cuts in return for raising the debt limit and averting the first ever default on our national debt. That law said that if the Congress failed to cut the budget, Sequestration – the law that was passed just the year before – would impose across the board cuts to get the cuts done. It was supposed to be the threat that was too much for Congress and that Congress would act on its own.

Well we know now that did not work out as planned.

So because Congress refused to act for so many years to help the heroes and survivors of 9/11, the law that finally got passed to help them is now facing cuts even though it was fully paid for.

That is exactly the arguments that New York State Senators Gillibrand and Schumer and Representatives Maloney, Nadler and King made in a letter to OMB.

In addition, as OMB is aware, the PAYGO Statute which was signed into law in February 2010 includes 150 exemptions. Among the programs exempted are similar health and compensation programs that have been established for other injuries and illnesses such as: the Payment to Radiation Exposure Compensation Trust Fund, Radiation Exposure Compensation Trust Fund, Energy Employees Occupational Illness Compensation Fund, Vaccine Injury Compensation, Vaccine Injury Compensation Program Trust Fund, and the Black Lung Disability Trust Fund to name a few. But the 9/11 health and compensation funds did not exist at the time the PAYGO Statute was enacted. The James Zadroga 9/11 Health and Compensation Act, which established these funds, was not passed by the Congress until December 2010 and was signed into law by the President in January of 2011. Clearly had the 9/11 Heath and Compensation programs existed in February 2010, when the PAYGO law was passed, they would have been included on the list of specific exemptions and therefore we request that both the health and compensation programs are excluded from sequestration.

Moreover, the James Zadroga 9/11 Health and Compensation Act, when enacted, was not only fully PAYGO compliant with a dedicated stream of revenue that fully pays for the program, but in fact provided an additional $433 million in deficit reduction, revenue above what the Act spent. Given that it was fully PAYGO compliant and in fact in the end will lead to over $400 million in deficit reduction we do not believe that subjecting the two programs to sequester is proper or consistent with the precedent set by similar health and compensation programs provided to injured workers.

Letter to OMB Acting Director Jeffrey Zients, September 28th, 2012

We will have to wait to see what Acting Director Zients’ response will be. Hopefully he will agree that that this makes no sense. That if the Sequester is in fact put in place, that the 9/11 Health and Compensation Program should not face a cut.

Having a cut to the programs would be disturbing enough on its own, but what is perhaps even more disturbing is the timing of this threatened cut. The announcement by OMB, coming just days after the 11th anniversary of the attack was bad enough, but it was also days after the announcement by NIOSH Director Dr. John Howard of the final rule extending the 9/11 health program to cover 50 cancers. While all who followed this issue and worked to get care for those exposed to the toxins at Ground Zero welcomed the news, many voiced concerns about what the additional costs of covering these cancers would mean. Will there be enough money to compensate those who were injured? Even before Special Master Sheila Birnbaum decides on her first compensation payment, she is facing the prospect of even less funding being available in the Victims Compensation Fund than the $2.75 billion provided in the 9/11 Health and Compensation Act.

Hopefully this can be avoided.


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