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OMB Issues Guidance on Sequestration as Cuts Begin

March 8, 2013—President Obama March 1 signed a presidential order implementing the FY 2013 sequestration required by the Budget Control Act of 2011 (BCA, P.L. 112-25) [see Washington Highlights, March 1].  The Office of Management and Budget (OMB) subsequently issued a March 1 Report to Congress with its calculations of the percentage and dollar amount of the reduction for each non-exempt budget account and an explanation of how these calculations were derived.

The sequestration order cancels $85 billion in budgetary resources across the federal government for the remainder of FY 2013. OMB calculates that, over the course of the fiscal year, the order requires a 7.8 percent reduction in non-exempt defense discretionary funding and a 5.0 percent reduction in non-exempt nondefense discretionary funding. The sequestration also requires reductions of 2.0 percent to Medicare, 5.1 percent to other non-exempt nondefense mandatory programs, and 7.9 percent to non-exempt defense mandatory programs.

Cuts to Medicare “individual payments for services rendered” are limited to 2 percent.  Medicare reductions for FY 2013 apply to services on or after April 1, 2013, through April 1, 2014, and total $11.3 billion.

The exact amounts of the discretionary cuts will depend on FY 2013 funding for the remainder of the fiscal year (see related story). The National Institutes of Health (NIH) are subject to a 5 percent cut, $1.553 billion from a $31.049 billion base used in the report.  HRSA is cut by $365 million from the $8.109 billion reported base. Within that amount, the Title VII and Title VIII health professions programs are subject to a 5 percent reduction, the National Health Service Corps (NHSC) is cut by 5.1 percent, and the health professions student loan programs are exempt.  The Department of Veterans Affairs also is exempt from sequestration.

In a corresponding memorandum for the heads of executive departments and agencies, OMB notified federal officials that the president’s sequestration order requires budgetary resources in each non-exempt budget account to be reduced by the amounts in the March 1 report. The memorandum indicates that “Agencies shall apply the same percentage reduction to all programs, projects, and activities within a budget account” and “should operate in a manner that is consistent with guidance provided by OMB in Memorandum 13-03, Planning for Uncertainty with Respect to Fiscal Year 2013 Budgetary Resources, and Memorandum 13-05, Agency Responsibilities for Implementation of Potential Joint Committee Sequestration.”


Dave Moore
Senior Director, Government Relations
Telephone: 202-828-0559

Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806