FY17 Continuing Resolution (CR)

The House and Senate cleared a 10-week continuing resolution (CR) this week averting a shutdown of the federal government at the end of fiscal year 2016. The Senate passed the bill by a vote of 72 to 26 on Wednesday afternoon followed by the House who passed it by a vote of 342 to 85 later that evening. A deal negotiated between House Speaker Paul D. Ryan (R-WI) and House Minority Leader Nancy Pelosi (D-CA) over funding for the water crisis in Flint, MI paved the way for passage of the CR. The President signed the bill into law on Thursday.

The measures funds the government through December 9 and includes the following:

• Maintains FY16 funding levels through December 9, reduced by 0.496%
• $1.1B in supplemental emergency funding to combat the Zika virus (HHS, State Department, and USAID)
  • Funding is subject to the Hyde Amendment
  • Does not include a provision that would have suspended duplicative EPA permitting requirements for mosquito control
• $500M in aid for Louisiana and other states that have experienced natural disasters
• Higher rate of funding for the Department of Justice and the Department of Health and Human Services to begin implementation of the Comprehensive Addiction and Recovery Act (CARA), and directs the Department of Veterans Affairs to implement CARA using FY17 funds
• Higher rate of funding for commodity supplemental food program
• Full year funding for the FY17 Military Construction and Veterans Affairs conference report
  • The bill provides $82.3 billion in FY2017 discretionary funding, $2.5 billion above the FY2016 level
  • $260 million for continued modernization of the VA electronic health record system. The bill includes language restricting the use of this funding until the VA demonstrates functional improvements in the interoperability of a system to seamlessly exchange veterans’ medical data among the VA, DOD and the private sector.
• Additional funding and authorities related to the transition and inauguration of the incoming Presidential administration
• Rescission of $400M in funding
• Prohibition on DOD from starting new programs, entering into multi-year contracts, or increasing production rates
• Authorization for DOD to provide IT services to OPM’s National Background Investigations Bureau
• Provision for DHS to obligate funds in a new account and budget structure pursuant to agreement with the Appropriations Committees
• Funding flexibility for U.S. Customs and Border Protection and Transportation Security Administration to maintain their staffing levels
• Extension of authority needed to obtain leading edge Homeland Security R&D or prototypes using “other transactions” agreements for work with non-traditional government contractors
• Funding to implement new activities required by the Toxic Substance Control Act (offset by fees collected by the agency following a rulemaking)
• Allowance for the continued support of 60 privately-owned, militarily useful, U.S. flag, U.S. crewed, commercial ships in order to provide DOD with military sealift capacity for overseas operations

The measure did not include funding to help repair the lead-contaminated water system of Flint, MI nor a provision from Sen. Ted Cruz (R-TX) preventing the transition of the Internet Corporation for Assigned Names and Numbers (ICANN) to a multi-stakeholder community. While Democrats had held up action on the CR over funding for Flint, they relented on Wednesday after receiving assurances from House and Senate leadership that Flint aid will be part of the final Water Resources Development Act conference bill in the lame duck session. As for ICANN, the Commerce Department is scheduled to officially hand over its oversight of the California nonprofit tomorrow.

Congress will have less than three weeks in session to figure out how to fund the federal government through the rest of FY17 when they return after the election. Eleven FY17 appropriations bills still need to be passed, but there isn’t enough time to take them up individually. Speaker Ryan and Senate Majority Leader Mitch McConnell (R-KY) favor smaller appropriations packages (minibuses) as opposed to one big omnibus for FY17 where conservatives believe that excessive spending can get passed with little scrutiny or notice. The real holdup on any potential minibus or omnibus could be Inclusion of ideological policy riders.

FY17 Continuing Resolution:

http://www.appropriations.senate.gov/download/cr-text

FY17 Continuing Resolution Section-By-Section Summary

http://www.appropriations.senate.gov/imo/media/doc/092216-CR-FY17-Section-By-Section.pdf

FY17 Military Construction-Veterans Affairs Summary:

http://www.appropriations.senate.gov/imo/media/doc/092216-CR-MilConVA-Summary.pdf

Zika Research, Treatment, and Control Funding Summary:

http://www.appropriations.senate.gov/imo/media/doc/092216-CR-Zika%20Supplemental%20Summary.pdf

Explanatory Statement (Front):

http://www.appropriations.senate.gov/imo/media/doc/FRONT.PDF

Explanatory Statement (Division A):

http://www.appropriations.senate.gov/imo/media/doc/DIV%20A.PDF

Explanatory Statement (Divisions B, C, D):

http://www.appropriations.senate.gov/imo/media/doc/DIV%20B-C-D.PDF

FY17 Defense Supplemental Request

The Department of Defense (DOD) is expected to send a supplemental funding request to Congress in November. The request will come in the form of a supplemental request to the FY17 Overseas Contingency Operations (OCO) budget DOD submitted earlier this year. The additional OCO funds will be used to fight ISIL in Iraq and Syria and to pay for additional 3,000 U.S. troops in Afghanistan in 2017. Defense Secretary Ash Carter said that DOD has been planning a supplemental request since the spring.

FY17 Afghanistan Supplemental Request Expected

Senate Defense Appropriations Ranking Democrat Dick Durbin (D-IL) said this week that appropriators expect a supplemental military spending request for Afghanistan of at least $3B. The additional funds would provide for the 8,400 troops the administration announced that it was keeping in Afghanistan in 2017. This is up from the 5,500 troops it had initially budgeted for. Timing on the supplemental request is unclear, however, Republicans have been demanding it ever since the administration announced the increase in troops.

FY17 Continuing Resolution (CR)

Senators’ visions of an early adjournment this week were dashed when leadership was not able to cut a deal. Senate Majority Leader Mitch McConnell (R-KY) originally set a cloture vote on the motion to proceed on HR 5325, the vehicle for the FY17 continuing resolution (CR) for Thursday. He had to postpone the vote until Monday Sept 19 at 5:30 pm after their negotiations failed.

The CR is expected to extend current funding levels through December 9 as well as include a full year of funding for the Military Construction-Veterans Affairs spending bill and funding to combat the Zika virus. The CR may also include emergency funding for the victims of the Louisiana floods and the Flint, MI water contamination crisis, language allowing the Export-Import Bank to function again despite the lack of a quorum, a provision blocking admission of Syrian refugees, language blocking the administration from transferring Internet governance functions from the U.S. to a global nonprofit group beginning October 1, and funding to combat the opioid epidemic.

The procedural vote could get postponed again if a bill isn’t ready by Monday. There are 14 days left until the end of the fiscal year.

Defense Appropriations

For the third time, the Senate was not able to invoke cloture on the FY17 Defense Appropriations bill. The vote failed 55 to 43, falling short of the 60 votes needed to advance the measure. Two Democrats voted for cloture – Sens. Donnelly (D-IN) and Manchin (D-WV). Senate Democrats voted against cloture as part of a political gambit to keep defense funding in play for leverage in negotiations over domestic discretionary spending.

Military Construction-Veterans Affairs Appropriations/Zika Virus Funding

Also for the third time the Senate failed to invoke cloture on the conference report to the FY17 Military Construction Veterans Affairs appropriations bill, which includes emergency funding for the Zika virus. The vote failed 52 to 46 with one Democrat voting for cloture – Sen. Donnelly (D-IN) – and two Republicans voting against cloture – Sens. Lankford (R-OK) and Lee (R-UT). Some Senate Republicans have indicated that they may be open to removing language on Planned Parenthood from the conference report. However, House Speaker Paul D. Ryan (R-WI) is taking a hard stance against including money for Planned Parenthood in legislation to combat the Zika virus. Funding for the Zika virus is now likely to get rolled into a continuing resolution (CR). The conference report to the FY17 Military Construction-Veterans Affairs bill may also be attached to a CR.

Continuing Resolution (CR)

While there was no action this week on a CR, there was a lot of talk and posturing on the length of a CR and what might be included in it. Senate Majority Leader Mitch McConnell (R-KY) engaged in talks with the White House this week discussing a CR that would last until December 9. The House Freedom Caucus is targeting the CR as a potential bargaining chip for language stopping the Administration’s Syrian refugee program in return for agreeing to a short-term CR. They have been pushing for a longer-term CR that would push off any final spending decisions until a new President and new Congress take office next year. Senate Minority Leader Harry Reid (D-NV) warned Republicans this week against any attempt to attach “ideological riders” to a CR. House Appropriations Committee Chairman Hal Rogers (R-KY) said that he is okay with Dec. 9 but would prefer the CR go through Dec. 16, the last day Congress is scheduled to be in session. The House Republican Conference was scheduled to meet this morning to discuss their CR strategy. They may also discuss a strategy of passing multiple small appropriations packages in the lame duck session instead of an all-inclusive omnibus bill. The President has invited Speaker Ryan, House Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader McConnell, and Senate Minority Leader Reid to the White House for a Monday afternoon meeting next week for a conversation on a CR.

And as if the CR process wasn’t complicated enough already, the Congressional Budget Office (CBO) now says that a CR written to FY16 levels would exceed the FY17 spending caps (triggering sequestration). CRs typically extend current funding levels into the new fiscal year. However, if the current funding level is simply extended, it would exceed the FY17 discretionary spending cap by $10B. This is due mainly in part to maneuvers that were used in FY16 including changes in mandatory programs (CHIMPS). CHIMPS are provisions in appropriations bills that reduce or constrain mandatory spending allowing for additional funding for discretionary programs. Closing the gap in an FY17 CR could be done through across-the-board cuts or new changes in mandatory spending. The $10B gap assumes that Congress operates under a CR for the full fiscal year.

House Majority Leader Kevin McCarthy (R-CA) sent out a memo to GOP members this week outlining the House’s upcoming agenda for September. The agenda includes:

Iran

• Legislation responding to the Administration’s disclosure that it timed the January release of hostages with a $400M cash payment to Tehran
• HR 5461, the Iranian Leadership Asset Transparency Act, which requires reporting on the financial assets acquired by Iranian leaders

FY17 Appropriations

• Stopgap spending measure/FY2017 continuing resolution (CR)
• “A path forward” for the $1.1B supplemental funding package to address the Zika crisis.

Republican “A Better Way” Agenda

• R. 5063, the Stop Settlement Slush Fund Act (Goodlatte)
• R. 5226, the Regulatory Integrity Act (Walberg)
• A bill to allow Congress to disapprove en bloc unacceptable “Midnight Regulations” issued in an Administration’s lame duck term.
• R. 3438, the Require Evaluation before Implementing Executive Wishlists (REVIEW) Act (Marino)
• R. 5620, the VA Accountability First and Appeals Modernization Act of 2016

Innovation

• R. 5577, the Innovation in Offshore Leasing Act (Garrett, Graves)
• R. 5424, the Investment Advisers Modernization Act (Hurt)
• R. 2357, the Accelerating Access to Capital Act (Wagner)
• R. 4850, the Micro Offering Safe Harbor Act (Emmer)
• R. 4852, the Private Placement Improvement Act (Garrett)

Defense

• The FY17 National Defense Authorization Act

Other

• Reauthorization of career and technical education programs
• Legislation “protecting seniors from a harmful Obamacare tax”

House Republicans are scheduled to meet as a conference next Wednesday morning, where they will discuss overall government funding, a CR, and Zika funding.

Majority Leader McCarthy’s Memo to House GOP Conference:

https://www.vantagepointstrat.com/8-31-16-house-republican-september-agenda/

On the Senate side, Senate Democrats outlined their agenda this week, which included funding the government through December at the latest (no six-month CR), confirming Merrick Garland to the U.S. Supreme Court, addressing the Zika virus, and other issues including student loan debt and campaign finance. Senate Minority Leader Harry Reid (D-NV) also said that Senate Majority Leader Mitch McConnell (R-KY) indicated that he wanted to move the Water Resources Development Act in September.

The House is scheduled to be in session 17 days in September, while the Senate is scheduled to be in session for 23 days through their target adjournment date of October 7.