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US Congress Details Cuts In 2011 Budget Deal As Votes Nears

WASHINGTON -(Dow Jones)- A deal to keep the U.S. government funded for the remainder of fiscal 2011 contains large budget cuts for high-speed rail projects and the Environmental Protection Agency and leaves almost no program immune from the largest spending reductions in the country's history.

The details of a plan to reduce spending by almost $39 billion from previous levels were posted Tuesday, just days before the U.S. House of Representatives and the U.S. Senate take up the measure. Congress must act in order to keep the government running beyond Thursday, when the latest interim spending measure expires. The fiscal year 2011 ends Sept. 30.

"My committee went line-by-line through agency budgets this weekend to negotiate and craft deep but responsible reductions in virtually all areas of government," said House Appropriations Committee Chairman Hal Rogers (R, Ky.) in a statement. "Our bill targets wasteful and duplicative spending, makes strides to rein in out-of-control federal bureaucracies, and will help bring our nation one step closer to eliminating our job-crushing level of debt."

The main exception was the Defense Department, which wound up with a $5 billion increase from previous levels, leaving it with $513 billion. But defense contractors will still suffer. Some $354 million in funding for an alternative engine for the F-35 Joint Strike Fighter was cut. That engine was being developed in an area that abuts House Speaker John Boehner's (R, Ohio) district. Another $325 million was cut for production of and modifications to Boeing Co.'s (BA) C-17 military transport plane.

The budget for the Obama administration's EPA will be cut by $1.6 billion. Funding for high-speed rail projects will be reduced by $2.9 billion, wiping out funding for all such new projects and taking back money that remained unspent.

An Energy Department program to provide loan guarantees for renewable and alternative energy projects was spared. That means the Obama administration will be able to honor commitments such as a $967 million loan guarantee for a 290-megawatt Arizona solar power plant. First Solar Inc. (FSLR) is developing the solar farm and has agreed to sell it to NRG Energy Inc. (NRG). The deal would have been scuttled without the loan guarantee.

Still, the budget deal eliminates funding for a White House position advising U.S. President Barack Obama on climate change, reflecting Republican displeasure for the administration's efforts to regulate greenhouse gases. The deal also cuts funding for the Energy Department's energy efficiency and renewable energy program by $438 million.

Financial regulators, facing requirements under the 2010 Dodd-Frank law to step up oversight, will not have as much money as they want. The Securities and Exchange Commission's budget will total almost $1.2 billion. The agency has said it needs $1.4 billion in fiscal 2012. Even so, the fiscal 2011 spending levels avoid rolling back the agency's budget to 2008 levels -- or about $906 million -- a level that the SEC chairman had said could force the agency to let go 1,000 people from its staff.

More than $1 billion would be cut from programs to prevent sexually transmitted diseases, AIDS, and viral hepatitis. The budget deal would also eliminate a provision of last year's health-care law enabling low-income workers to opt out of employer-offered health insurance and shop for more affordable coverage on insurance exchanges to be created in 2014.

Contributions to the United Nations would decline by $377 million from current levels. Some $433 million would be cut from the agriculture credit insurance fund.

Congressional negotiators decided against overriding an Obama administration effort to tighten federal financing for for-profit education companies such as Strayer Education Inc. (STRA) and ITT Educational Services Inc. (ESI). The Obama administration has been trying to make sure that students who take out loans are able to get the jobs for which they train.

-Siobhan Hughes; Dow Jones Newswires; (202) 862-6654; siobhan.hughes@dowjones.com

(Janet Hook, Corey Boles, Cassandra Sweet and Jessica Holzer contributed to this report.)

Copyright © 2011 Dow Jones Newswires


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