During a rally speech in Phoenix, AZ this week, President Trump threatened to shut down the government if Congress doesn’t appropriate money for a wall on the Southwest border. The President said, “Build that wall. The obstructionist Democrats would like us to not do it, but believe me, if we have to close down our government, we’re building that wall.” House Speaker Paul D. Ryan (R-WI) responded that he doesn’t want a government shutdown and that he does think a continuing resolution (CR) will be needed to keep the government funded into the new fiscal year beginning October 1.

The House passed HR 3219, the Make America Secure Appropriations bill on July 27, which includes the FY18 Defense, Legislative Branch, Energy and Water, and Military Construction-Veterans Affairs spending bills. The “securitybus” included $1,571,239,000 for the Department of Homeland Security to construct physical barriers along the southwest border of the United States in the Rio Grande Valley of Texas and in San Diego, California. But the Senate appears unlikely to take up this spending package because its allocation for defense spending violates the spending caps set in the 2011 Budget Control Act.

There could be two shutdown showdowns this year – September and December. If Congress passes a clean debt ceiling and short-term CR funding the government through December, there could be another potential shutdown towards the end of the year. President Trump would have to veto any spending measure to trigger a shutdown, but Congress could then override the veto.

While the path to funding FY2018 isn’t clear, one thing that is clear is that the longer Congress “fights” over how to keep the government open, the less time they will be have to work on tax reform.

In other FY18 funding news, White House Office of Management and Budget Director Mick Mulvaney sent a letter to President of the Senate Mike Pence earlier this month notifying Congress that it is the President’s intention to exempt all military personnel accounts from sequestration in FY18, if sequestration is necessary. Mulvaney also writes that this action would mean that non-exempt accounts would then be subject to higher reductions to make up for this exemption.

Mulvaney’s letter to President of the Senate Pence:

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/Letters/Military_personnel_exemption_senate_transmit.pdf

Status of FY18 Appropriations Spending Bills

The House Rules Committee released the bill text and report language for an eight-bill appropriations minibus this week. Amendments are due by next Friday 8/25 at 10:00 am. The eight bills included in the minibus are: Agriculture, Commerce-Justice-Science, Financial Services, Homeland Security, Interior-Environment, Labor-HHS-Education, State-Foreign Operations, and Transportation-HUD.

The Rules Committee will meet the week of September 4^th to grant a rule to provide a structured amendment process for floor consideration of the minibus. The rule will not make in order amendments that have offsets or transfers between bills (e.g. members cannot transfer funds from an account in the Agriculture division to an account in the Interior division).

The notice from the Rules Committee also mentioned that they struck a provision from the FY18 Financial Services Appropriations bill that would ensure Deferred Action for Childhood Arrivals (DACA) recipients are eligible to be employed by the federal government.

The House Rules Committee also plans to use a self-executing rule to roll the text of the four appropriations bills passed in July (Defense, Energy & Water, Legislative Branch, and Military Construction-Veterans Affairs) into the eight-bill minibus creating a 12 bill omnibus for final vote.

While this movement by the House Rules Committee is a good indication that they have the 218 votes needed for passage on the floor, the omnibus isn’t expected to go far in the Senate where 60 votes are needed. The Senate Appropriations Committee has marked up and approved six of its 12 annual spending bills, but it is unclear if any of these bills will see floor time in September. A continuing resolution (CR) is likely come September 30.

Eight-Bill Minibus Bill Text:

https://www.gpo.gov/fdsys/pkg/BILLS-115hr3354rh/pdf/BILLS-115hr3354rh.pdf

Eight-Bill Minibus Report Language:

https://www.gpo.gov/fdsys/pkg/CRPT-115hrpt238/pdf/CRPT-115hrpt238.pdf

Status of FY18 Appropriations Spending Bills

Members are back in their districts/states for the August recess, but when they return in September they face a pretty daunting “to do” list with only 12 legislative days to complete some of the items on the list. Raising the debt ceiling to avoid default while simultaneously approving a spending deal to avert a government shutdown will be hefty lifts for Republican leadership. And all of this comes on the heels of failing to repeal and replace the Affordable Care Act (“Obamacare”) so there is pressure on GOP leaders to demonstrate an ability to deliver on some campaign promises while they control both the Executive and Legislative branches of government.

FY18 Appropriations

The FY18 spending bills need to be passed and signed into law by September 30, or Congress needs to pass a continuing resolution (CR) before then in order to avoid a government shutdown. Deep rifts over spending priorities could lead to a shutdown, but the more likely scenario is a short-term CR extending funding for the government for a few months, possibly through mid-December, at current funding levels. The CR could also include must-pass items such as a reauthorization of the Children’s Health Insurance Program and a raise in the debt limit.

The House Rules Committee posted a notice to members on its website this week informing them that they intend to take up the eight remaining FY18 appropriations bills in a single bill when they return from recess in September. They are likely to take up the bill the first week when they return. House Rules Committee Chairman Pete Sessions (R-TX) said that the committee will issue a deadline for amendment submission prior to the end of the August recess. The eight remaining bills are likely to be combined on the floor with the “security-bus” the House passed before the recess, effectively creating an FY18 omnibus spending bill. While the eight new bills will be subject to a limited number of amendments during floor consideration in September, the four bills already passed by the House would not be amended. Even though the House could potentially finish all of their FY18 spending bills before the end of the fiscal year, many members and staff still anticipated needing a CR to avoid a shutdown at the end of September. And if the House FY18 omnibus bill were enacted into law, the topline spending level of $1.13T and the defense discretionary spending level would break the caps set by the Budget Control Act of 2011 (BCA) triggering automatic spending cuts, or sequestration.

There are about a dozen conservatives in the House who won’t vote for most spending bills and also don’t want to increase the debt ceiling without corresponding spending cuts. That means that Republicans will need support from Democrats to both raise the debt ceiling and keep the government funded. Democrats will require a spending deal in return for their votes. The White House is pushing a deal that would lift the caps set by the Budget Control Act of 2011 in return for funding for the President’s proposed border wall with Mexico.

Status of FY18 Appropriations Spending Bills

Debt Ceiling

The debt ceiling is currently at the limit of $19.8T. The previous extension of the debt limit expired on March 15, and the Treasury Department has been using “extraordinary measures” to continue paying the nation’s bills since then. Treasury Secretary Steven Mnuchin has set a deadline of September 29 for Congress to raise the debt ceiling.

Health Care Reform

While Congressional Republicans want to use the August recess to talk about tax reform, their constituents are pressing them to stay focused on healthcare. Republicans are divided over whether to give up on health care reform or to continue the battle while also pursuing changes to the tax code. Senate Majority Leader Mitch McConnell (R-KY) said this week that there is a change the Senate could revive the measure to repeal and replace “Obamacare,” but acknowledged that the window for that is rapidly closing. McConnell noted that Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-TN) is working on a bipartisan approach that would involve subsidies for insurance companies. But he cautioned that Democrats would have to support some “real reforms” in the measure so that it isn’t just an insurance company bailout.

Tax Reform

Republican leaders announced last month that they plan to start hearings on a tax bill in September with the hope of holding a House vote in October and a Senate one in November. White House Director of Legislative Affairs, Marc Short reiterated that timeline this week when he said that the Trump Administration sees a bill to overhaul the tax code passing the House in October and being cleared by the Senate the following month. But this week Senate Majority Leader McConnell refused to put a timeline on tax reform. Learning from his experience with deadline for repealing Obamacare, McConnell is concerned about setting artificial deadlines that are “unrelated to the reality of the complexity of legislating.”

In order to move forward with tax reform, the House and Senate have to pass an FY18 budget resolution with reconciliation instructions that will prevent Democrats from filibustering their legislation in the Senate. House Republicans have been divided over their FY18 budget resolution and were unable to pass the measure before they left for the August recess. The Senate has yet to do an FY18 budget resolution. And the looming deadlines to fund the government and raise the debt ceiling in the tight House and Senate September floor schedules doesn’t leave much time for consideration of FY18 budget resolutions on the floor.

The biggest problem for Republicans is agreeing on the scope of their potential tax package. An increasing number of Republicans want to scale back the goal of comprehensive reform in favor of narrower tax cuts as they view the latter as more achievable. Others, like Senate Finance Committee Chairman Orrin Hatch (R-UT), House Speaker Paul D. Ryan (R-WI), and the White House, are still calling for comprehensive tax reform. Some Republicans are also calling for parts of the tax-reform package to be retroactive having some changes take effect as early as January 2017. This would add to the cost of tax reform and lawmakers would need to find more ways to pay for those retroactive cuts. In the end, Republicans may have to settle for a simple tax cut rather than a sweeping overhaul like some had imagined.

When the House and Senate reconvene after the August recess, the House is scheduled to be in session 12 days and the Senate 17 days before the end of the fiscal year. Senators of both parties have acknowledged the need for passing another stopgap continuing resolution (CR) when they return in September. The CR would likely extend current funding levels into the new fiscal year.

The House passed a $790B “securitybus” appropriations bill before leaving for the August recess. Senate Majority Leader Mitch McConnell (R-KY) executed a procedural move on that bill that sets it up for potential action on the Senate floor. However, the bill violates the 2011 Budget Control Act and would trigger sequestration. Senate Appropriations Ranking Democrat Patrick Leahy (D-VT) said the four-bill minibus would not get the 60 votes needed for passage on the floor. A new bipartisan budget deal may be needed to raise spending limits in order for any FY18 appropriations bills to have a chance of passing in the Senate.

Sen. James Lankford (R-OK) suggested an appropriations bill plan for after the August recess in which three minibus bills with four titles each would be brought to the Senate floor under a structured rule. Lankford said he had discussed the idea with leadership.

Status of FY18 Appropriations Spending Bills