Some highlights are:
- BABs: The budget proposes to reinstate and, like last year, expand the BABs program to “certain additional program uses” at a rate that is essentially revenue neutral. The budget itself does not specify the rate, but separate information from the Treasury Department sets the rate at 28 percent.
- Bank Qualified: The Administration did not propose to reinstate the BQ provisions that expired last year. This is one of BDA’s highest priorities and we will be working with Congress and issuers to get these provisions reinstated.
- Financial Crisis Responsibility Fee: The Administration proposes a fee on financial institutions, including broker-dealers, with assets greater than $50 billion to raise approximately $30 billion over 10 years.
- SEC Fees: The Administration proposes increasing the SEC budget from approximately $1.1 billion to $1.4 billion. The SEC’s budget comes from the fees it collects, so this increase would come from as-yet-unspecified SEC fee increases.
- Cuts to State and Local Governments: The proposed budget includes cuts to a number of state and local government programs. One of the largest cuts is to the state clean water and safe drinking water revolving loan funds. Those funds would be cut by about $950 million, or about 28 percent. Overall, assistance to state and local governments would decline by about 7 percent, or about $40 billion from this year’s estimated assistance of $625 billion down to $585 billion. In FY 2009 assistance was $538 billion. Approximately half of these funds are for Medicaid.
- National Infrastructure Bank: The Administration again proposes establishing a National Infrastructure Bank (or I-Bank) to finance large-scale projects of national and regional significance. The Bank would be capitalized at $30 billion as part of the surface transportation proposal below.
- Transportation Funding: The budget proposes a 6-year, $556 billion surface transportation plan (including the I-Bank), but does not specify how to pay for it. The current estimated receipts into the Transportation Trust Fund, primarily from federal fuel taxes, are estimated to be about $250 billion over the next 6 years.
- Arbitrage: The proposed budget would simplify the arbitrage provisions of the tax code, including increasing the small issuer exemption from $5 million to $10 million and indexing it.
- Private use test: The budget would simplify the private use test by eliminating the 5 percent unrelated and disproportionate use test.
- Mortgage Revenue Bonds: The budget proposes to eliminate the purchase price limitation and also allow the bonds to be used for refinancing.
The next step is for the Congress to consider these proposals. There are several budget-related actions going on almost simultaneously.
- FY 2011. The continuing resolution that funds the government for the rest of the current fiscal year expires on March 4. Congress needs to act in some fashion before then, or the government will shut down.
- FY 2012. Starting tomorrow, Congress will hold hearings on the President’s FY 2012 proposal released today. Congress is supposed to agree on its own budget for FY 2012 by April.
- Debt Limit. The Treasury Department has said that the debt limit will be reached sometime before May of this year.
The full budget is available here. BDA will continue to monitor developments. If you have any questions, please contact Bill Daly at wdaly@BDAmerica.org or 202-204-7902.
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