August 02, 2019

Two-Year Federal Budget Deal Opens Doors for New Funding Opportunities

A two-year budget deal recently passed by Congress and signed by the president will pave the way for a flurry of activity over the weeks ahead to advance and ultimately finalize specific appropriations bills to fund the government for the fiscal year 2020 (FY2020). Hopefully, a replay of the prolonged partial government shutdown from earlier in the year will be avoided.

Congress still has plenty of work ahead, particularly the challenge of developing multiple spending bills in a two-month window, a prospect that makes a stop-gap spending bill (continuing resolution) a near certainty. Following is a brief overview of the state of play including some challenges that remain ahead and opportunities to advance priorities going forward.

Two-Year Budget Deal

The two-year deal, largely negotiated by House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, will increase federal spending caps and raise the government’s borrowing limit. This compromise will help avoid a fiscal crisis and ensure the next fight over the budget happens after the 2020 election.

Here are the main features of the budget deal:

  • It provides for $2.7 trillion in spending over two years.
  • The debt ceiling is suspended until the end of July 2021.
  • It raises FY2020 spending by almost $50 billion above fiscal year 2019 levels. This involves increasing non-defense spending by $27 billion in 2020 and increasing defense spending by $22 billion. However, funding from FY2020 to FY2021 will be near stagnant.
  • It allows for $320 billion (over two years) above the caps set by the 2011 budget law which memorably established sequestration.
    • Note that the 2011 budget law, which went into effect in 2013, would have caused an automatic $125 billion spending cut in FY2020 across defense and non-defense agencies if Congress did not act. This deal eliminates the previous looming threat of sequestration.

State of Play

On July 25, the House passed the budget deal on a 284-149 vote. Despite strong support from the White House, only 65 of 197 House Republicans supported the measure. On August 1, the Senate passed the deal with a 67-28 vote, with 29 of 53 Republican senators voting in favor of the deal. One senator missed the vote because of a health issue. The president signed the bill into law on August 2.

Next Steps

Congress adjourns for the August recess, returning after Labor Day. The budget deal sets the total amounts for the appropriations committees to spend. However, the 12 appropriations bills still need to be advanced to avoid a government shutdown like we saw this past December and January.

The House has passed 10 of 12 appropriations bills by mostly party-line votes. These bills will need to be reworked to reflect the new budget deal and remove partisan “poison pill” provisions. The Senate has held hearings but has not advanced any bills.

Sen. Richard Shelby (R-AL), chairman of the Senate Appropriations Committee, hopes to “hit the ground running” when Congress returns in September with congressional staff refining draft legislation over the August recess. The chairman will likely issue subcommittee allocations shortly to set the staff’s detailed work in motion. It would be ambitious to see all 12 bills marked-up individually, and it is unclear at this point if these bills will go straight to the Senate floor or if negotiations with the House will begin immediately.

Last year set a precedent for passing Defense and the usually controversial Labor-HHS-Education spending bills together. There continue to be strong indications that a similar package – perhaps with other bills – will be targeted for FY2020.

The appropriations bill that is expected to be the most challenging to resolve this fall is the homeland security measure given its relevance to immigration and border security issues. Last year, appropriators provided $1.3 billion in border barrier construction funding after which the president declared a national emergency and directed nearly $7 billion to the wall.

Conclusion

This week’s progress is all-too-rare bipartisan action at the end of what has been a tumultuous year so far in Washington. With this deal behind them, members of Congress, including those running for president, hope to focus on the campaign trail rather than a budget fight in the coming months.

However, September will be a telling time as the chambers have only 13 work days to finalize and pass the necessary spending bills before the end of the fiscal year. Because of this short timeframe, Capitol Hill staff will be hard at work in the coming weeks hoping to set the stage for action after Labor Day.

With all of this in mind, now is the time to make the final push for appropriations priorities with Congress. A larger non-defense spending limit may provide new funding opportunities. However, these levels are lower than what was assumed in the House-passed appropriations bills, so extra vigilance is needed as the House and Senate work out final levels with the newly agreed overall limits. While the new budget levels are higher than this year in total, the FY2021 number will be near stagnant over FY2020, and it remains unclear if certain congressional and administration priorities, like funding for the Department of Veterans Affairs, are expected to account for much – or all – of the increase.

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