While fiscal year 2018 officially begins on Sunday October 1, 2018, the House and Senate are just beginning action on passing their FY18 budget resolutions. The House and Senate budget resolutions include reconciliation instructions that will pave the way for a future tax reform measure. Reconciliation instructions allow the legislation to pass with a simple 51-vote majority in the Senate rather than usual 50-vote supermajority. In addition, Senate debate on a reconciliation bill is limited to 20 hours (10 hours on conference reports), and amendments must be germane.

The House may consider their FY18 budget resolution (H. Con. Res. 71) on the floor next week. The House Rules Committee announced that amendments are due to the committee by 3:00 PM on Monday, October 2. The House budget resolution requires the House Ways and Means Committee to submit reconciliation legislation by October 6. The budget resolution has been stalled since it was passed out of committee in July but was recently endorsed by the conservative House Freedom Caucus.

House FY18 Budget Resolution Bill Text:

https://www.gpo.gov/fdsys/pkg/BILLS-115hconres71rh/pdf/BILLS-115hconres71rh.pdf

House FY18 Budget Resolution Report Language:

https://www.gpo.gov/fdsys/pkg/CRPT-115hrpt240/pdf/CRPT-115hrpt240.pdf

The Senate Budget Committee released their FY18 budget resolution today, which also includes reconciliation instructions. The committee will mark up the resolution next Wednesday and Thursday. The Senate budget resolution balances the budget in 10 years, but assumes an average economic growth rate of 2.6%. The Senate Finance Committee has until November 13 to draft a tax reform measure that costs no more than $1.5T over the next 10 years. The Senate budget resolution also directs the Senate Energy and Natural Resources Committee to identify at least $1B over 10 years in deficit savings. The committee’s chairman Sen. Lisa Murkowski (R-AK) may opt to open the Arctic National Wildlife Refuge to oil and gas drilling to come up with this $1B.

Senate FY18 Budget Resolution:

https://www.budget.senate.gov/imo/media/doc/FY2018.FINAL%20TEXT%20OF%20MARK.pdf

Senate FY18 Budget Resolution Tables:

https://www.budget.senate.gov/imo/media/doc/FY18%20Budget%20Tables.pdf

Senate FY18 Budget Resolution Summary:

https://www.budget.senate.gov/imo/media/doc/FY18%20Budget%20Res%20-%20Title%20By%20Title%20Summary.pdf

Senate Budget Committee Justification for Tax Reform:

https://www.budget.senate.gov/imo/media/doc/FINAL.Tax%20Reform%20Resolution.9.27.17.pdf

The House passed a $1.23T spending bill (H.R. 3354) that funds the government for FY18, which begins on October 1. The bill was passed by a vote of 211 to 198 with one Democrat (Rep. Peterson – MN) voting in favor of passage and 14 Republicans voting against passage (Reps. Amash – MI, Biggs – AZ, Brooks – AL, Buck – CO, DeSantis – FL, Duncan – TN, Jones – NC, Katko – NY, LoBiondo – NJ, Massie – KY, Messer – IN, Rokita – IN, Sanford – SC, and Sensenbrenner – WI). The bill doesn’t stand a chance in the Senate as Democrats are expected oppose it if it came to the floor as it violates the statutory cap on defense spending by $72B. If it were to become law it would trigger across-the-board sequestration cuts to defense programs of about 13 percent. The measure also includes some “poison pills” that Democrats object to, including funding for the President’s wall on the Southwest border.

The Senate Appropriations Committee has marked up and reported out eight of their 12 annual spending bills, but none have been considered on the Senate floor. The committee will not consider any bills next week because of the shortened work week.

Congress passed a short-term continuing resolution (CR) funding the government for FY18 from October 1 through December 8 and the President signed it into law. Congress now needs to come up with a final FY18 spending deal by December 8. Treasury Secretary Steven Mnuchin said that the President will demand an increase in defense spending when he and Congress negotiate the end-of-the-year budget deal. Democrats are likely to require an equal raise in non-defense spending in order for their votes on any deal.

Status of FY18 Appropriations Spending Bills

Hurricane Harvey Funding, FY18 Continuing Resolution, and Debt Ceiling Bill

The House passed the $7.85B Hurricane Harvey emergency funding bill (HR 601) earlier in the week by a vote of 419 to 3. Reps. Justin Amash (R-MI), Andy Biggs (R-AZ), and Thomas Massie (R-KY) were the no votes. President Trump, Senate Minority Leader Chuck Schumer (D-NY), and House Minority Leader Nancy Pelosi (D-CA) then worked out an agreement to include an FY18 continuing resolution (CR) funding the government through December 8 as well as lifting the debt ceiling until December 8 on the emergency funding bill. Both provisions were attached to HR 601 when the Senate took up the measure. Senate Majority Leader Mitch McConnell (R-KY) was clear that the agreement to add the CR and the debt extension was between President Trump and Democratic leaders. Republicans had tried to get an 18-month debt ceiling extension.

The Senate amended the House-passed bill so that it included $7.4B for the Federal Emergency Management Agency, $450M for the Small Business Administration Disaster Loan Program (of which up to $225M may be used for administrative expenses to carry out the program), and $7.4B in Community Development Block Grant (CDBG) funding through the Department of Housing and Urban Development for areas most affected by 2017 disasters. The Senate bill also included an FY18 CR funding the federal government at current levels through December 8, and an extension of the debt ceiling through December 8. The CR also included a limited number of “anomalies,” which are programmatic or funding changes. The Senate passed the bill by a vote 80 of 17 (all no votes were from Republicans). The House then took up the bill and passed it by a vote of 316 to 90 (all no votes were from Republicans). The bill now goes to the President for his signature.

The bill temporarily suspends the debt limit through December 8 at which time it will be reset to a higher level that will include the debt issued while the debt limit was not in effect. This will also allow the Treasury Department to reset its extraordinary measures. The new amount of time granted by the extraordinary measures will depend on a number of factors, including Treasury’s borrowing patterns, incoming receipts, and the government’s rate at which is burns through cash. Extraordinary measures could meet the Treasury’s needs through next year’s April 15 tax date. If that happens, the debt ceiling debate could extend through August or September of 2018.

Section-By-Section Summary

https://www.appropriations.senate.gov/imo/media/doc/090617-CONTINUING-APPROPRIATIONS-ACT-FY18-SECTION-BY-SECTION.pdf

Additional Summary Information

https://rules.house.gov/sites/republicans.rules.house.gov/files/115/PDF/SA%20to%20HA%20to%20SA%20to%20HR%20601/Additional%20Summary%20Information.pdf

FY18 House Omnibus

The House began consideration of its $1.23T FY2018 omnibus appropriations bill this week but delayed a final vote on the bill citing the impending hurricane. They will resume consideration of the bill next week. The bill isn’t likely to be passed by the Senate as it exceeds the FY18 budget caps by $72B.

Senate

The Senate Appropriations Committee marked up and reported out two FY18 spending bills this week leaving the committee with four more FY18 spending bills to complete.

State Foreign Ops

The Senate Appropriations Committee approved its FY18 State, Foreign Operations, and Related Programs spending bill this week and reported it out of committee unanimously. The bill provides $51.2B in discretionary funding, of which $30.4B is for enduring costs and $20.8B is for Overseas Contingency Operations (OCO). This is $10.7B above the President’s FY18 budget request as scored by the Congressional Budget Office, and $1.9B below the FY17 enacted level. Funding for the agencies in the bill are at, or close to, the FY17 levels.

The bill included the Taylor Force Act, which would restrict U.S. economic aid to the West Bank and Gaza until the Palestinian Authority stops paying terrorists guilty of violence against Israelis and Americans. There is also a new provision to prohibit assistance to the central government of a country that contributes to the nuclear, ballistic missile, or cyber-intrusion/cyber-warfare capabilities of the Government of North Korea. The bill continues a prohibition on enforcement of any rules or regulations implemented by the Export-Import Bank, Overseas Private Investment Corporation, or the World Bank that would prohibit coal-fired power plants. The bill repeals the Mexico City policy, but continues the long-standing prohibition on the use of Federal funds for abortion as a method of family planning.

Committee members also highlighted that the bill does not endorse the reorganization or redesign of any part of the Department of State, USAID, or any other entity funded in the bill absent consultation with the committee.

Bill Text:

https://www.appropriations.senate.gov/imo/media/doc/FY2018%20State%20Foreign%20Operations%20Appropriations%20Bill%20-%20S1780.pdf

Report Language:

https://www.appropriations.senate.gov/imo/media/doc/FY2018%20State%20Foreign%20Operations%20Appropriations%20-%20Report%20115-152.pdf

Labor HHS

The Senate Appropriations Committee also approved its $164.1B FY18 Labor HHS Education spending bill by a vote of 29 to 2. The bill is $3B above the FY17 enacted level and $27.5B above the President’s FY18 budget request. The bill provides $36.1B for the NIH ($2B more than FY17), $12B for the Department of Labor ($61.5M below FY17), $79.4B for the Department of Health and Human Services ($1.7B more than FY17), $68.3B for the Department of Education ($29M above FY17), $235M for the Institute for Museum and Library Services ($4M above FY17), $445M for the Corporation for Public Broadcasting (level with FY17), $1.02B for the Corporation for National and Community Service ($11M below FY17), and $274M for the National Labor Relations Board, $12B for the Social Security Administration.

Bill Text:

https://www.appropriations.senate.gov/imo/media/doc/FY2018%20Labor%20HHS%20Education%20Appropriations%20Bill%20-S1771.pdf

Report Language:

https://www.appropriations.senate.gov/imo/media/doc/FY2018%20Labor%20HHS%20Education%20Appropriations%20-%20Report%20115-150.pdf

Status of FY18 Appropriations Spending Bills

Before the August recess, the House passed a four-bill “securitybus” that included the FY18 Defense, Energy & Water, Legislative Branch, and Military Construction-Veterans Affairs spending bills. The House will consider an eight-bill appropriations “minibus” when they return next week and roll the four-bill securitybus into it before final passage. Over 900 amendments have been filed for the eight-bill minibus: https://rules.house.gov/bill/115/hr-3354. The House Rules Committee will meet on September 5 at 4:00 PM to determine which amendments will be made in order for consideration on the House floor. The Senate Appropriations Committee has passed six of their FY18 spending bills and is scheduled to mark up its FY18 Labor HHS Education and State Foreign Operations spending bills in subcommittee on September 6 and full committee on September 7.

Funding for FY2017 ends on September 30 leaving Congress four short weeks to pass the FY18 spending bills or risk a government shutdown. There has been discussion this week of combining a short-term (through December?) FY18 continuing resolution (CR) with emergency funding for Hurricane Harvey and possibly lifting the debt ceiling. The President may attach his disaster aid request to a measure increasing the debt limit. Rep. Mark Meadows (R-NC), Chairman of the House Freedom Caucus, said that conservatives could support attaching some Harvey aid to a CR but that the emergency aid bill should not be part of a vehicle to raise the debt ceiling. Meadows said that it would send the wrong message to add spending to a bill that is also increasing the debt ceiling. The caucus has been pushing for a debt ceiling package that includes spending reforms.

Emergency funding for Harvey may be complicated by the fight four years ago over funding for Superstorm Sandy. Some conservative Republicans voted against that emergency funding bill because of concerns that the funding included unrelated “pork,” while others pushed amendments that would have required offsetting part of the cost of the disaster aid with cuts to other discretionary programs. OMB Director Mick Mulvaney authored the offset amendment when he was a member of Congress. Tom Bossert, White House Homeland Security Advisor, said on Thursday that they want a clean supplemental that is focused on funding “obvious needs” like repairing a highway. He stressed that Harvey funding should not be part of a debate about the debt ceiling. While Texas Governor Greg Abbott estimates that the state might need $100 billion in federal aid, the Administration is still tabulating how much it will request from Congress.

House Majority Whip Steve Scalise (R-LA), OMB Director Mick Mulvaney, officials from FEMA and DHS, members of the Texas delegation, and House Appropriations Committee Chairman Rodney Frelinghuysen (R-NJ) held a conference call yesterday to discuss an emergency funding package for Texas. The President is expected to request an initial $5.95B in emergency relief – $5.5B for FEMA and $450M for the Small Business Administration. Whatever Congress appropriates for Hurricane Harvey relief might impact the timeframe with which Congress needs to lift the debt ceiling. And because the extent of the damage is not known yet, aid is likely to come in installments.

Status of FY18 Appropriations Spending Bills