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CHIP, CHIMPs and Trump’s budget-rescission request: a guide to the debate

House Minority Whip Rep. Steny H. Hoyer (D-Md.) questioned Republican motives behind proposed budget rescissions. (Video: C-SPAN)

“Of course, there have been rescissions in the past; and although I don’t know what the rescissions are, there may well be a rescission that I might support. The gentleman is correct. I wouldn’t irrationally oppose a rescission which said we have had money lying in an account that has not been spent for one, two, three years. We shouldn’t just have it sitting in that account. The gentleman is absolutely correct. But very frankly, in my view, Mr. Speaker, this is to, in effect, negate an agreement that was reached and to, in effect, say, no, we really don’t want to spend that money. That may be correct, but the majority of the Republicans in this House voted for it. Nobody said: We are going to vote for it, but days later, we are going to come back and say we don’t want this, we don’t want that, and we don’t want the other.”
— House Minority Whip Steny H. Hoyer (D-Md.), in remarks on the House floor, April 13, 2018

We became interested in this statement by Hoyer after the White House budget director, Mick Mulvaney, in a May 22 opinion column for The Washington Post, cited an excerpt as an example of “hypocrisy in its purest form” on the part of Democrats. Mulvaney quoted only a portion — “I wouldn’t irrationally oppose a rescission which said we’ve had money lying in an account that has not been spent for one, two, three years; we shouldn’t just have it sitting in that account” — while leaving out the broader context.

As you can see from the full quote, Hoyer objected to the Trump administration’s plan to rescind (claw back) unspent government money because the two sides had just agreed to a massive omnibus budget deal and now the president — after fierce criticism from the right for signing it — had come back and asked to partially undo it. Hoyer’s objection was to a perceived process foul and mixed signals given by the White House.

As we often remind readers, the most complicated issues are the most susceptible to manipulation by politicians. If the subject is complex, it’s easier to mislead. So here’s a guide to the rescission debate, which revolves around acronyms like CHIP and CHIMPs.

The Facts

In early May, the president formally unveiled a request to cut $15.3 billion in budget authority from a variety of accounts. To some extent, this is a public relations exercise: A lot of this money cannot be spent because the authority has expired, so the actual impact on outlays (and the deficit) would be $1 billion over 10 years, according to the Congressional Budget Office.

Yep, $1 billion. In an era of $4 trillion annual budgets and $1 trillion deficits, that is the equivalent of coins found in the sofa.

Interestingly, all of the proposed cuts were on the domestic-policy side of the budget, with nothing from defense — even though one could imagine quite a bit of unused or expired funds lying around at the Pentagon.

About half of the money, $7 billion, would come from the Children’s Health Insurance Program (CHIP). About $5.1 billion would come from fiscal year 2017 funds that could not be spent; the rest would come from the Child Enrollment Contingency Fund, designed to help states (which share CHIP costs with the federal government) from running out of money. But it’s only been tapped on rare occasions, according to the Congressional Research Service.

Given that the Trump administration and Congress earlier in the year reached a bipartisan agreement to fund CHIP for 10 years, the move to cut money from CHIP might seem surprising.

But when the Congressional Budget Office examined the impact of the rescission on CHIP, it concluded that “rescinding the unobligated balances would reduce budget authority by $7 billion, but would not affect outlays, or the number of individuals with insurance coverage.” The CBO noted that the authority to distribute the $5 billion to states expired in 2017 — so it could not be used by CHIP — and that projections indicated the contingency fund had enough money to make possible payments until 2028.

Sounds simple, but as always, it is not. In fact, the rescission package is causing angst among Republican lawmakers because of fears that Democrats would attack them for harming children’s health — even though no one appears in danger of losing insurance coverage.

We will lay aside the issue of the CHIP contingency fund. That will get a new influx of money in the fiscal year that starts on Oct. 1. Given how rarely the fund has been tapped, rescinding the money does not appear to have much impact. But it would drop to about $500 million — down from $4.3 billion earlier this year — until those extra funds arrive.

But the $5 billion pot of money is a more interesting issue. Here’s what is going on.

In the omnibus bill, about $3.6 billion in CHIP money was turned into CHIMPs — which stands for “changes in mandatory programs.” In other words, the funding was shifted from the mandatory-spending part of the budget to the discretionary budget, which is funded year-by-year by Congress. Technically, that CHIP money was rescinded, but because it was moved from one ledger to another, there was no real budget savings.

By moving the money to the discretionary budget, lawmakers suddenly had billions more that could be spent on other health-care programs for children and families in the Labor-Health and Human Services-Education part of the budget. The National Institutes of Health, Head Start, immunizations, newborn screening and lead-poisoning prevention are among the programs that were funded with the CHIP money that was magically turned into CHIMPs.

Lawmakers started playing this budget dance when they faced the tight budget caps imposed by the 2011 budget agreement reached between Congress and President Barack Obama. The recent budget deal busted through those caps, but lawmakers still used about $17 billion in CHIMPs, including the $3.6 billion in CHIP funds, for discretionary spending, according to the nonpartisan Committee for a Responsible Federal Budget (CRFB).

Lawmakers hope to keep using CHIMPs in the next budget round. Thus if the administration succeeds in eliminating $5 billion in unused CHIP funds through the rescission, suddenly that pool of money would shrink — leaving billions less for health programs that assist children and families. It’s not the same as cutting CHIP, but in theory, there’s a potential boomerang effect in the future.

Still, the budget deal added $145 billion in additional spending over two years, so Marc Goldwein, CRFB senior vice president, says the CHIMPs are no longer necessary. He derides them as “(mostly) fake spending cuts to pay for real spending increases.”

Goldwein argued that “if you reduced the limit on CHIMPs by $5 billion, it would mean that next year’s appropriations bill will have to spend $5 billion less than they otherwise would — still about $20 billion more than the caps intend and still about $70 billion more (outside of the defense bill) than in 2017.”

But he said there may be more CHIMPS than Congress has in theory limited itself to, so even a $5 billion reduction might not have much of an impact. “There are more available CHIMPs than used CHIMPs, so you won’t get a $1-for-$1 reduction,” he said.

In any case, Democrats say the White House is breaking the deal reached when the House and Senate negotiated the two-year budget — that CHIMPs would continue at the levels allowed in the budget resolution, about $17 billion. Mulvaney had urged Congress to eliminate the use of CHIMPs in February, but his pleas fell on deaf ears.

“The White House did agree to rescind un-spendable and unnecessary funds for the Children’s Health Insurance Program in the omnibus,” a senior administration official said. “The rescissions package is simply further cleanup.”

The Bottom Line

This budget debate is about as clear as mud. But here’s a cheat sheet.

The White House wants to cut spending even though it will have virtually no impact on the budget deficit — and even though the request came only weeks after cutting a deal with Congress.

No children would lose their health insurance because of the proposal.

Other programs related to children’s health could be affected in the future because Congress has tapped these unused funds as a budget maneuver that boosted spending funded on a year-to-year basis.

But, with a little budget creativity, lawmakers might still be able to get around this problem, making the whole thing a moot point.

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