Laserfiche WebLink
Spending cuts baseline. <br />Under the interim final rule, to calculate the amount of spending cuts that are available to <br />offset a reduction in tax revenue, the recipient government must first consider whether there has <br />been a reduction in total net spending, excluding SLFRF funds (net reduction in total spending). <br />This approach ensures that reported spending cuts actually create fiscal space, rather than simply <br />offset other spending increases. A net reduction in total spending is measured as the difference <br />between total spending in each reporting year, excluding SLFRF funds spent, relative to total <br />spending for the recipient's fiscal year ending in 2019, adjusted for inflation. Measuring <br />reductions in spending relative to 2019 reflects the fact that the fiscal space created by a <br />spending cut persists so long as spending remains below its original level, even if it does not <br />decline further, relative to the same amount of revenue. <br />Public Comment: Several commenters expressed concern regarding the measurement of <br />spending cuts relative to the recipient's FY 2019, for example arguing that the choice did not <br />take into account increases in spending in 2020. As one commenter noted, the fiscal year 2020 <br />required extraordinary intervention by recipient governments and the ongoing public health <br />emergency continues to require extraordinary intervention. <br />Treasury Response: FY 2019 provides a reasonable and relatively generous baseline for <br />considering spending because it is the last full fiscal year prior to the COVID-19 public health <br />emergency and governments' extraordinary efforts to address the impact of the pandemic. This <br />approach also aligns with the FY 2019 baseline for measuring revenue loss. Measuring spending <br />cuts from year to year would, by contrast, not recognize any available funds to offset revenue <br />reductions unless spending continued to decline, failing to reflect the actual availability of funds <br />created by a persistent change and limiting the discretion of states and territories. <br />335 <br />