The President's Budget Fiscal Year 2011: Impact on the States

Feb. 8, 2010 - Notes and Sources

This publication reviews Presidential budget requests spanning fiscal years 2008 to 2012 which include requested spending authorities from the final Bush budget to the Obama administration's projected 2012 budget.

The following are highlights of the proposed policy and fiscal goals embedded in the President's proposed Fiscal Year 2011 (October 1, 2010 to September 31, 2011) budget request:

  1. Save and create jobs for the many unemployed and underemployed people in the U.S.;
  2. Improve access to healthcare and education;
  3. Promote energy conservation efforts and move away from fossil fuel-based energy sources; and
  4. Lay the groundwork to contain and eventually reduce our national long-term debt.

Throughout the proposed budget, we also see efforts to create jobs while meeting other national needs. For example, jobs are created by hiring more claims processors in an effort to shorten the wait-time for new veterans to enter the VA system. Likewise, jobs are created when hiring home air-sealing and insulation workers in a national effort to improve home energy efficiency.

To meet many of these policy and fiscal goals, the FY11 request proposes numerous program consolidations and potential efficiency gains in the budgets of several agencies. For example, the President proposes to consolidate 38 programs into 11 new programs within the Department of Education. And payments to the Yucca Mountain nuclear waste repository project, which was deemed non-viable, will end. Similar proposals were made and many executed in the FY10 budget.

These consolidations and terminations are recommended in concert with a proposed 3-year freeze on non-security discretionary spending across agencies. A more balanced budget will need to consider traditional security-related spending which comprises the majority of discretionary spending yet is currently immune to the proposed freeze. Further, mandatory spending, 60% of the FY11 budget, is also on the table in the form of proposed healthcare reform and will be subject to greater scrutiny each year. The net interest on our debt takes a larger part of federal spending, going from 4% of total budget authority in FY10 to 7% in FY11.

The President's FY11 requested budget is a proposal of policy and spending that has only begun the winding road to law. Congressional appropriations committees will negotiate the President's requested budget authorities, as well as house and senate proposed budgets, for each agency. Each budget will be negotiated, reconciled, and approved before ultimately being signed into law by the President. From now until the budget appropriations become law, all constituents have opportunities to weigh in with their representatives on the spending priorities being mapped out for the nation. Questions to ask might include:

  1. Should the definition of “security” refer only to threats from other nations and not to threats internally in the form of hunger, poverty, and illness?
  2. Given that our national debt has been accumulating since at least WWII, when is the right time and to what degree should the debt be considered relative to providing a basic safety net to each constituent?
  3. How can a more balanced budget be achieved when agencies that receive the majority of discretionary spending are currently exempt from cuts? 

Budget Authority

FY2008 FY2009 FY2010 FY2011

Projected FY2012

Income Security & Labor

$975 $1,143 $1,289 $1,164 $1,150
Health $704 $824 $854 $860 $837
Military $719 $721 $728 $737 $635

Interest on the Debt

$257 $190 $188 $247 $332
Food $80 $109 $121 $132 $122

Veterans' Benefits

$90 $99 $125 $120 $125
Transportation $83 $127 $94 $90 $89
Education $66 $133 $64 $83 $85

Environment, Energy & Science

$70 $137 $79 $79 $77

Housing & Community

$298 $356 $88 $74 $80

International Affairs

$38 $53 $62 $56 $60
Government $4 $253 -$90 -$3 $16

Total Budget Authority

$3,385 $4,145 $3,601 $3,634 $3,608

Billions of Constant 2010 dollars







Numbers given in the above table are in billions of 2010 dollars (dollar amounts were deflated using total deflators from Historical Table 10-1 of the President's proposed 2011 budget). All numbers are in Budget Authority which is the allowance given for spending in a particular category. Budget authority is much like your home budget allotted for heating expenses, for example. You expect to spend a certain amount for heating from September 2010 to March 2011, the total amount being your “budget authority,“ although the bills (obligations) may arrive in different months throughout that period and beyond. Likewise, the budget authority given here may be spent in FY11, and in some cases, beyond. The budget authority is for the total of discretionary and mandatory spending as well as net interest.

It is important to note that some of the downward trending numbers in FY11 and FY12 are a result of the end of the American Recovery and Reinvestment Act (Recovery Act), spending intended to save and create jobs in the face of the recession. In addition, the Obama administration has called for a 3-year freeze on non-security discretionary spending for each government agency.


Budget requests are based on a variety of economic projections; these projections are assumptions about the performance of several economic indicators (see Technical Analyses, Table 26-4). Here is a brief outline of the economic assumptions which underlie the FY2011 budget request:

  1. A steady increase in constant dollar GDP: 3.5% increase from FY10 and FY11; 4.3% increase from FY11 and FY12.
  2. Declining unemployment rates: FY10: 10.1%, FY11: 9.5%, FY12: 8.5%.
  3. Decreases in inflation (CPI) relative to 2010: FY10: 2.0, FY11: 1.4, FY12: 1.9.
  4. 0.0 COLA to Social Security until 2012: FY10: 0.0, FY11: 0.0, FY12: 1.1.
  5. 0.0 COLA to Food Stamps (SNAP) through 2019.
  6. Rising short-term and long-term T-bill interest rates: (short-term, 91 days) FY10: 0.2, FY11: 1.3, FY12: 2.6; (long-term, 10 years) FY10: 3.7, FY11: 4.3, FY12: 4.9.

Income Security & Labor

Income Security & Labor includes funding for job training, disability, retirement, unemployment insurance, and social security. The total Income Security & Labor authority is down in FY11 relative to FY10 largely due to decreases in unemployment benefits in FY11 that have been raised and extended with additional COBRA payments through FY10. Increases are seen in this category to address backlogs of disability payment claims and to re-institute higher levels of reviews of those collecting disability and supplemental security income payments.


Health includes funding for Medicare, Medicaid, CHIP and other health-related expenses. The total Health budget authority is up in FY11 relative to FY10. Mandatory budget authority increases as costs increase and more people qualify for government programs. Also, the NIH and FDA receive more funds for research and monitoring.

Grants to states for Medicaid is reduced in FY11 and again in FY12 after a temporary increase from the Recovery Act which expires after the first quarter of FY11. States received an across-the-board increase in the percentage match from the federal government, and states with high unemployment rates received additional percentage matches.


Military includes funding for national defense and security, nuclear weapons activities and international security assistance. The total Military budget authority is up in FY11 relative to FY10 with increased salaries and benefits for military personnel and significant spending authority increases for programs related to nuclear nonproliferation and international weapons reduction and safekeeping. In FY12, costs associated with Overseas Contingency Operations decrease in the base budget. What remains to be seen is whether the Department of Defense will request further spending supplementals to support war-related expenses

Interest on the Debt

The Interest on the Debt has increased in FY11 relative to FY10 much of which can be attributed to increased interest payments on Treasury Debt Securities. In FY11, it is projected that smaller amounts of interest will be received from the Unemployment Trust Fund, whereas larger interest payments will be received from the Railroad Retirement Trust Fund, loans to the Commodity Credit Corporation, and Unemployment Insurance Loans to States, to name a few.


Food includes funding for agriculture and nutritional assistance. The total Food budget authority is up in FY11 relative to FY10 with increases to WIC (Women, Infant and Children's supplemental food and nutrition program), SNAP (Food Stamps), and children's school nutrition programs. Cuts are seen in FEMA emergency food and shelter program and subsidies for milk and peanut producers. Farm subsidy payments to “wealthy farmers” (non-farm AGI >$500,000 or farm AGI >$750,000) are reduced.

Veterans' Benefits

Veterans' Benefits includes funding for healthcare, housing, and income benefits for veterans. The total Veterans' Benefits budget authority is down in FY11 relative to FY10 due to a temporary compensation supplemental in FY10 and a front-loading of housing funds in FY10.

Budget authority for veterans' education is greater in FY11 with an upward adjustment in benefits. Hospital and medical spending authority increases for more services and facilities. Administrative operating costs increase to hire additional workers to process back-logged claims. Spending is also targeted towards a paperless claims/records system that has been piloted and will roll out nationally.


Transportation includes funding for the development and support of air, water, ground, and other transportation. The total Transportation budget authority is down in FY11 relative to FY10. After an initial boost for high speed rail in FY10, funds for the remainder of the 5-year plan continue at the requested lower levels. Other proposed changes include $4 billion for a new National Infrastructure Innovation and Finance Fund, cuts to grants-in-aid for airports (part of the FAA) and cuts to the FHA (Federal Highway Administration).


Education includes funding for elementary, secondary, higher and vocational education. The total Education budget authority is up in FY11 relative to FY10 with substantial increases to Pell grants (individual maximum awards increase by $200 to $5550) and savings from subsidy cuts to private lenders. Other changes include decreases in discretionary spending for individual institutions including National Technical Institute for the Deaf, Gallaudet University, and Howard University. Increases in discretionary spending were seen in programs such as English Learner Education and Supporting Student Success in the Office of Safe and Drug-Free Schools.

State-level Recovery Act funds targeted for schools end in FY11 and, coupled with continuing declines in state tax revenues, local primary and secondary schools face challenging decisions ahead. Likewise, state community colleges and universities face declining federal and state contributions ultimately placing higher costs on students, many of whom are returning to school due to under- and unemployment.

Environment, Energy & Science

Environment, Energy & Science includes funding for natural resources and environment, supply and use of energy, and science and research activities. Although total budget authority for this category is flat in FY11 relative to FY10, there are changes within the category. More money is allocated for basic research and laboratories while funding for NASA's behind-schedule, over-budget Constellation project is down. Substantially increased funding for federal-level energy efficiency and conservation programs serves two purposes: greening homes reduces reliance on fossil fuels and the work of energy audits, home sealing and insulation creates jobs.

Low priority Corps of Engineers programs were cut as was the Yucca Mountain nuclear repository program which was deemed non-viable. NOAA received additional funding for FY11 for satellite systems and IT infrastructure in an effort to improve meteorological and environmental forecasting.

Housing & Community

Housing & Community includes funding for housing assistance and credits, community development, disaster assistance, and services supporting social needs. The total budget authority for this category is down from FY10 to FY11 with an end to the First Time Home Buyers Credit which was intended to stimulate the housing market.

Also of note are reductions to budget authorities for Housing for the Elderly and Housing for the Disabled. Some of these monies are shifted to tenant-based rental assistance. The administration justifies these cuts because of delays, cost-overruns, and decreased economy of scale for these projects. In addition to cuts, the administration calls for a general revision of these housing programs. Because budget determinations and program revisions happen independently of one other, we sound a note of caution as it is possible for budgetary cuts to be approved in the absence of programmatic change, potentially jeopardizing these vulnerable populations.

International Affairs

International Affairs includes funding for diplomatic, development, and humanitarian activities abroad. The total budget authority is down from FY10 to FY11 with less funding to Diplomatic and Consular programs and Embassy Security, Construction, and Maintenance after substantial increases in funding in FY09 and FY10. Global health initiatives for AIDS relief and malaria prevention receive proposed additional funding in FY11.


Government includes funding for commerce, law enforcement, overhead costs of federal government, and undistributed offsetting receipts. The total budget authority is negative in FY11 and FY12 and significantly down from FY10 to FY11 as the repayment of TARP funds from financial institutions, proposed savings from healthcare reform, and elimination of waste in the Treasury due to payment systems modernization are greater than the proposed expenditures. Increased funds are provided for Community Oriented Policing (COPS), for asset limit reform, for regulatory reform to the financial system and for programs to boost innovation, domestic manufacturing, and exports.

Federal Aid to States

The following table outlines several federal programs and grants for states for fiscal years 2009-2011.

The Obama administration continues to focus on rebuilding the economy and creating jobs for millions of unemployed and underemployed people. Also driving the budgetary agenda are efforts to improve and expand healthcare and education access as well as efforts towards conservation and shifting to renewable sources of energy.

Like federal programs, state aid programs are being evaluated and consolidated. For example, as part of the administration's Elementary and Secondary Education Act (ESEA) proposal, the President's budget proposes to consolidate 38 programs into 11 new programs including the Effective Teachers and Leaders State Grants included in the table below.

For the remainder of FY10 and into FY11, states face grave fiscal challenges with the end of state-level Recovery Act funds coupled with significant declines in tax revenues. Many states project drastic budget short-falls for FY11 and beyond necessitating cuts in many high value programs. 

Total Federal Aid to States FY09 FY10 FY11




Children's Health Insurance Program (CHIP)

$9.6 billion

$12.5 billion

$13.3 billion


$269.9 billion

$278.8 billion

$266.2 billion





State Energy Program

$3.2 billion

$50 million

$74 million

Weatherization Assistance for Low-Income Persons

$5.3 billion

$210 million

$295.9 million

Low-Income Home Energy Assistance Program

$4.6 billion

$4.5 billion

$2.5 billion





Title I Grants

$24.9 billion

$14.5 billion

$14.3 billion

Head Start

$7.2 billion

$7.2 billion

$7.1 billion

Effective Teachers and Leaders State Grants

(new in FY11)


$2.5 billion





Community Development Block Grant

$8.2 billion

$11.8 billion

$4.3 billion

Social Services Block Grant

$1.7 billion

$1.7 billion

$1.7 billion

Billions of Constant 2010 dollars