President Trump submitted his FY18 budget request, “The New Foundation for American Greatness,” to Congress this week. The budget proposes $607B in defense discretionary spending and $560B in non-defense discretionary spending for FY18. The spending caps in the 2011 Budget Control Act are $549B for defense and $515.6B for nondefense.

The President’s budget relies on more than $2T in added revenue over the decade by betting on 3% growth in the latter half of the decade as compared to an average annual of 1.9% forecast by the Congressional Budget Office (CBO). It also includes $1.5T in nondefense discretionary cuts and $1.4T in Medicaid cuts over the next 10 years while adding $489B to defense spending. Cuts are proposed for all federal departments except for the Department of Defense (DOD), Veterans Affairs, and Homeland Security.

President Trump’s FY18 Budget Request By Agency

(in millions)

President Trump’s fiscal 2018 budget proposal would completely eliminate 66 federal programs, for a savings of $26.7 billion. Some of the programs would receive funding for 2018 as part of a phasing-out plan. Here are the programs the administration wants on the chopping block:

Agriculture Department — $855 million

McGovern-Dole International Food for Education

Rural Business and Cooperative Service

Rural Water and Waste Disposal Program Account

Single Family Housing Direct Loans

Commerce Department — $633 million

Economic Development Administration

Manufacturing Extension Partnership

Minority Business Development Agency

National Oceanic and Atmospheric Administration Grants and Education

Education Department — $4.976 billion

21st Century Community Learning Centers

Comprehensive Literacy Development Grants

Federal Supplemental Educational Opportunity Grants

Impact Aid Payments for Federal Property

International Education

Strengthening Institutions

Student Support and Academic Enrichment Grants

Supporting Effective Instruction State Grants

Teacher Quality Partnership

Energy Department — $398 million

Advanced Research Projects Agency—Energy

Advanced Technology Vehicle Manufacturing Loan Program and Title 17 Innovative Technology Loan Guarantee Program

Mixed Oxide Fuel Fabrication Facility

Health and Human Services — $4.834 billion

Agency for Healthcare Research and Quality

Community Services Block Grant

Health Professions and Nursing Training Programs

Low Income Home Energy Assistance Program

Homeland Security — $235 million

Flood Hazard Mapping and Risk Analysis Program

Transportation Security Administration Law Enforcement Grants

Housing and Urban Development — $4.123 billion

Choice Neighborhoods

Community Development Block

HOME Investment Partnerships Program

Self-Help and Assisted Homeownership Opportunity Program Account

Interior Department — $122 million

Abandoned Mine Land Grants

Heritage Partnership Program

National Wildlife Refuge Fund

Justice Department — $210 million

State Criminal Alien Assistance Program

Labor Department — $527 million

Migrant and Seasonal Farmworker Training

OSHA Training Grants

Senior Community Service Employment Program

State Department and USAID — $4.256 billion

Development Assistance

Earmarked Appropriations for Non-Profit Organizations

The Asia Foundation

East-West Center

P.L. 480 Title II Food Aid

State Department, USAID, and Treasury Department — $1.59 billion

Green Climate Fund and Global Climate Change Initiative

Transportation Department — $499 million

National Infrastructure Investments (TIGER)

Treasury Department — $43 million

Global Agriculture and Food Security Program

Environmental Protection Agency — $493 million

Energy Star and Voluntary Climate Programs

Geographic Programs

National Aeronautics and Space Administration — $269 million

Five Earth Science Missions

Office of Education

Other Independent Agencies — $2.683 billion

Chemical Safety Board

Corporation for National and Community Service

Corporation for Public Broadcasting

Institute of Museum and Library Services

International Development Foundations

African Development Foundation

Inter-American Foundation

Legal Services Corporation

National Endowment for the Arts

National Endowment for the Humanities

Neighborhood Reinvestment Corporation

Overseas Private Investment Corporation

Regional Commissions

Appalachian Regional Commission

Delta Regional Authority

Denali Commission

Northern Border Regional Commission

U.S. Institute of Peace

U.S. Trade and Development Agency

Woodrow Wilson International Center for Scholars

Federal Agency FY18 Budget Document Links

White House Budget Documents

https://www.whitehouse.gov/omb/budget

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/fy2018/budget.pdf

Agriculture

https://www.obpa.usda.gov/fy18explan_notes.html

Commerce

http://www.osec.doc.gov/bmi/budget/

Defense

http://comptroller.defense.gov/Budget-Materials/Budget2018/

Education

https://www2.ed.gov/about/overview/budget/budget18/index.html

Energy

https://energy.gov/cfo/downloads/fy-2018-budget-justification

Environmental Protection Agency

https://www.epa.gov/planandbudget/fy2018

Federal Communications Commission

https://www.fcc.gov/document/fy-2018-fcc-budget

Health and Human Services

https://www.hhs.gov/about/budget/index.html

Homeland Security

https://www.dhs.gov/dhs-budget

Housing and Urban Development

https://portal.hud.gov/hudportal/HUD?src=/budget

Interior

https://www.doi.gov/budget/appropriations/2018

Justice

https://www.justice.gov/doj/fy-2018-congressional-budget-submission

Labor

https://www.dol.gov/general/budget

NASA

https://www.nasa.gov/news/budget/index.html

National Science Foundation

https://www.nsf.gov/about/budget/fy2018/index.jsp

Small Business Administration

https://www.sba.gov/about-sba/sba-performance/performance-budget-finances/congressional-budget-justification-annual-performance-report/fiscal-year-2018-congressional-budget-justification-annual-performance-report

Social Security Administration

https://www.ssa.gov/budget/

State

https://www.state.gov/s/d/rm/rls/ebs/2018/pdf/index.htm

Transportation

https://www.transportation.gov/budget

Treasury

https://www.treasury.gov/about/budget-performance/Pages/cj-index.aspx

Veterans Affairs

https://www.va.gov/budget/products.asp

House Armed Services Committee Chairman Mac Thornberry (R-TX) introduced his latest acquisition reform bill this week. The Defense Acquisition Streamlining and Transparency Act (HR 2511) is the third installment of the committee’s acquisitions reforms initiatives. This year’s bill has four titles that focus on the following goals: empowering the Department of Defense (DOD) to use E-Commerce marketplaces for purchasing commercial-off-the-shelf items, reforming the defense contract audit process and the acquisition of services, strengthening the accountability and professionalization of the DOD acquisition workforce, and improving transparency by empowering data-driven decisions.

This discussion draft is intended to inform provisions to be offered in the FY18 National Defense Authorization Act.

H.R. 2511 Bill Text:

https://armedservices.house.gov/sites/republicans.armedservices.house.gov/files/wysiwyg_uploaded/Defense%20Acquisition%20Streamlining%20and%20Transparency%20Act.pdf

Cover Memo and Section-by-Section Description:

https://armedservices.house.gov/sites/republicans.armedservices.house.gov/files/wysiwyg_uploaded/20170518154705967.pdf

Fact Sheet:

https://armedservices.house.gov/sites/republicans.armedservices.house.gov/files/wysiwyg_uploaded/FY%2018%20Reform%20Bill%20Fact%20Sheet%20FINAL%20.pdf

The House passed a bill, HR 1628, to repeal and replace the Affordable Care Act (“Obamacare”) on Thursday by a vote close vote of 217 to 213. Twenty Republicans and all 193 Democrats voted against the measure. Rep. Dan Newhouse (R-WA) did not vote as he is attending to his wife while she battles cancer.

The American Health Care Act (AHCA) would repeal most of the subsidies and penalties imposed under Obamacare thereby removing the mandate for Americans to obtain health insurance. The AHCA does the following:

• Replaces the individual mandate with allowing insurers to charge a 30% premium surcharge on people who have been uninsured for about two months.
• Eliminates Obamacare taxes that were used to fund the law – a 3.8% investment tax on people earning more than $250,000, a 0.9% surcharge on individuals in the same high-income bracket, and taxes on health insurers, medical device manufacturers, drug manufacturers, and tanning bed salons.
• Cuts Medicaid spending by $880B over 10 years.
• Defunds Planned Parenthood and other abortion providers for one year by blocking Medicaid reimbursement. The bill also includes a measure that would prohibit federal tax credits from being used to pay for insurance that covers abortion services.
• Allows insurers to charge older Americans up to five times as much as it does a 21-year old, this is up from the three times as much limit imposed by Obamacare.
• Allows states to opt out of the essential health benefits required by Obamacare. More specifically, insurers could charge sick patients more for coverage if the state sets up high-risk pools so that people with pre-existing conditions would have access to coverage. The bill provides states with an additional $8B in funding to set up the high-risk pools. It is unclear how many states will choose to opt out of the essential benefits if the bill is signed into law.
• Allows large employers to choose the benefits available in a state that sought a waiver from the ACA’s benefit requirements as they aren’t bound by the benefits mandated by their state. Employers looking to lower their costs could choose a state that would allow them to impose lifetime limits and eliminate the out-of-pocket cost cap from their plans.

The House also passed a separate bill (HR 2192) that would remove a provision regarding exemptions for members of Congress and their staff from state waivers.

The twenty Republicans voting against the AHCA in the house were: Reps. Andy Biggs (Ariz.), Mike Coffman (Colo.), Barbara Comstock (Va.), Ryan Costello (Pa.), Charlie Dent (Pa.), Dan Donovan (N.Y.), Brian Fitzpatrick (Pa.), Jaime Herrera Beutler (Wa.), Will Hurd (Tx.), Walter Jones (N.C.), David Joyce (Ohio), John Katko (N.Y.), Leonard Lance (N.J.), Frank LoBiondo (N.J.), Thomas Massie (Ky.), Pat Meehan (Pa.), Dave Reichert (Wa.), Ileana Ros-Lehtinen (Fla.), Chris Smith (N.J.) and Mike Turner (Ohio). Coffman, Lance, Reichert, and Turner changed their votes from what was expected last time. Nine of these members are in congressional districts that voted for Hillary Clinton in November. They are all likely to be targeted by Democrats in 2018.

The bill now heads to the Senate where Republicans hold a majority with 52 seats where we can expect to see a much slower pace. They can’t afford to lose more than two Senators to get the bill passed. Vice President Mike Pence would cast the deciding vote in a 50-50 tie.

Senate Majority Leader Mitch McConnell (R-KY) has convened a working group that includes members of his leadership team, moderates concerned about the Medicaid rollback, conservatives who are interested in states’ rights, and two key committee chairmen – Senate Finance Committee Chairman Orrin Hatch (R-UT) and Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) – to work out a compromise. McConnell had originally planned to bring the House bill directly to the Senate floor, but now wants to vet it through the working group to ensure that they have the votes necessary for passage. Bypassing the committees has been a concern to some Senate Republicans who would prefer that they hold hearings and pursue repeal and replace through regular order. Other Senators are insisting on a cost estimate and analysis from the Congressional Budget Office before voting on their bill.

The more deliberative pace in the Senate could have an effect on the FY18 appropriations process. Congress may delay passing an FY18 budget resolution that would set spending limits until they finish the health care measure using the FY17 budget reconciliation process. It isn’t clear yet if adopting an FY18 budget resolution before the health care bill is passed risks losing the protections of reconciliation and opens a door to a potential filibuster. Rather than test the rules, Republicans may opt to put an FY18 budget resolution on the back burner until they finish health care reform.

American Health Care Act:

https://www.gpo.gov/fdsys/pkg/BILLS-115hr1628rh/pdf/BILLS-115hr1628rh.pdf

American Health Care Act Report Language:

https://www.gpo.gov/fdsys/pkg/CRPT-115hrpt52/pdf/CRPT-115hrpt52.pdf

Amendment #32 Reps. Gary Palmer (R-LA) and David Schweikert (R-AZ)

The amendment creates a $15 billion risk sharing program to help states lower premiums for health coverage offered in the individual market.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/AHCA/Palmer-Schweikert%20Amendment.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/AHCA/Section-by-Section.pdf

Amendment #33 Rep. Thomas MacArthur (R-NJ)

The amendment allows states to waive essential health benefits, age rating, and community rating. Health insurers would not be allowed to [deny coverage,] discriminate based on gender or [limit access based on] preexisting conditions. States must explain how the waiver will reduce average premiums for patients, increase enrollment for residents, stabilize the state’s health insurance market, stabilize premiums for individuals living with preexisting conditions, or increase patients’ health care plan options.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/OMNI/MacArthur%20Amendment.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/OMNI/MacArthur%20Amendment%20Summary.pdf

Amendment #34 Rep. Fred Upton (R-MI)

The amendment increases the Patient and State Stability Fund by $8 billion from 2018 to 2023 to States with an approved community rating waiver, as established by the MacArthur Amendment, for providing assistance to reduce premiums or other out-of-pocket costs to individuals who may who may be subject to an increase in their monthly premium rates as a result of the States waiver. The amendment also resolves two minor technical drafting amendments, including the correction of an inaccurate cross-reference and to ensure proper labeling of subsections.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/OMNI/Upton%20Amendment.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/OMNI/Upton%20Section-by-Section.pdf

Amendment #4 Reps. Greg Walden (R-OR) and Kevin Brady (R-TX)

This amendment makes technical changes to conform with reconciliation instructions and address other drafting issues.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/tech_mngr_01.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/115-AHCA-SxS-MNGR-Tech.pdf

Amendment #24 Reps. Greg Walden (R-OR) and Kevin Brady (R-TX)

This amendment makes technical changes to address drafting issues.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/TECH-AMDT-TO-AMDT.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/TECH-SxS%20for%20AMENDMENT%20to%20Manager%27s%20Amendment.pdf

Amendment #5 Reps. Greg Walden (R-OR) and Kevin Brady (R-TX)

This amendment provides for the inclusion of additional policies affecting both Medicaid and the tax code.
Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/policy_mngr_01.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/115-AHCA-SxS-MNGR-Policy.pdf

Amendment #25 Rep. Greg Walden (R-OR)

This amendment makes technical changes to address drafting issues.
Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/POLICY-AMDT-TO-AMDT.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/POLICY-SxS%20for%20AMENDMENT%20to%20Manager%27s%20Amendment.pdf

Amendment #31 Rep. Greg Walden (R-OR) and Kevin Brady (R-TX)

This amendment delays the repeal of the additional .9 percent Medicare tax on high-income earners, require states to establish their own essential health benefits standards for purposes of the premium tax credit, and provide additional funding for the Patient and State Stability Fund for mental health and substance use disorders and maternity care.

Amendment: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/policymngr-amdt.pdf

Section-by-Section: https://rules.house.gov/sites/republicans.rules.house.gov/files/115/115-AHCA-SxS-Policy2ndDegree.pdf

Congressional Research Service Report on the AHCA:

https://fas.org/sgp/crs/misc/R44785.pdf

The House and Senate cleared a one-week FY17 continuing resolution (CR) funding the federal government through next Friday, May 5. The new CR also extends the December CR provision for health care benefits for retired coal miners and their dependents. President Trump said earlier this week that he would sign a one-week CR

The House passed the measure this morning by a vote of 382 to 30 (16 Republicans and 14 Democrats voted against the CR), and the Senate followed soon after passing it by a voice vote. On Thursday evening, the Senate had attempted to deem the measure passed by unanimous consent once approved by the House, but Senate Minority Leader Chuck Schumer (D-NY) objected. His move forced the Senate to stay in session on Friday to vote on the CR by voice vote.

House and Senate Republicans and Democrats continue to negotiate the details of an FY17 omnibus appropriations bill. House Minority Whip Steny Hoyer (D-MD) said that Speaker Ryan plans to have the FY17 omnibus spending bill introduced by Monday night with the goal of a House floor vote on Thursday, May 4.

One sticking point in the negotiations is a shortfall in Medicaid funding for Puerto Rico. Democrats are pushing for a funding fix as part of the FY17 omnibus spending deal, but the Trump Administration has resisted. Without the fix, Puerto Rico could exhaust its entire $6.4B Medicaid allocation by this fall. It was supposed to last through FY19.

Another issue holding up the measure was the potential for a vote in the House this week on a measure to repeal the Affordable Care Act (“Obamacare”). Democrats in the House had warned that they would vote against the one-week CR if Republicans revived their health care bill.

President Trump made two concessions this week to get negotiators closer to a final agreement on the FY17 spending bills. The President said he would forgo FY17 funding for construction of the U.S.-Mexico border wall and instead would pursue the funding in the FY18 appropriations process. He also agreed to continue to make payments for health insurance subsidies created under Obamacare that help reduce out-of-pocket costs for those in the individual marketplace. The subsidies face a court challenge, so it is unclear how long the President will continue to provide them.

FY17 Continuing Resolution:

https://www.congress.gov/115/bills/hjres99/BILLS-115hjres99ih.pdf

President Trump’s Treasury Secretary Steve Mnuchin and Chief Economic Advisor Gary Cohn outlined the administration’s tax reform plan this week. The plan was light on details and left a lot of questions unanswered. The one-page summary was as follows:

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual and Business Tax Cut In American History

Goals For Tax Reform

• Grow the economy and create millions of jobs
• Simplify our burdensome tax code
• Provide tax relief to American families – especially middle-income families
• Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

• Tax relief for American families, especially middle-income families:
  • Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
  • Doubling the standard deduction
  • Providing tax relief for families with child and dependent care expenses
• Simplification:
  • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
  • Protect the home ownership and charitable gift tax deductions
  • Repeal the Alternative Minimum Tax
  • Repeal the death tax
• Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

• 15% business tax rate
• Territorial tax system to level the playing field for American companies
• One-time tax on trillions of dollars held overseas
• Eliminate tax breaks for special interests

Process

• Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive – and can pass both changers.

The President’s tax outline received a mostly lukewarm reception from Republicans. Conservatives are concerned about adding to the national debt as some analysts have said that the plan could add trillions of dollars in new debt over the next decade. Administration officials claim that the economic growth stimulated by the tax cuts would offset the costs. The administration believes that economic growth would be at 3% or higher, while the Congressional Budget Office projects growth under 2%.

The President’s plan did not include a border adjustment tax proposal supported by House Speaker Paul D. Ryan (R-WI). That tax is estimated to raise $1.2T over 10 years, which could help pay for the lower tax rates in the President’s proposed tax reform.

House and Senate Republicans said that the President’s outline would serve as “critical guideposts” as they pursue tax reform legislation. The White House plans on holding listening sessions with stakeholders on the emerging tax package.

While the President had once considered linking a $1T infrastructure bill to tax reform, there was no mention of infrastructure funding during the rollout this week.

The FY17 continuing resolution (CR) expires next Friday, April 28. Congress returns next week from a two-week recess and has just a few days to either pass another CR or a full-year omnibus for the 11 remaining FY17 appropriations bills. Negotiations between the House and Senate and Democrats and Republicans have occurred during the recess, but a final agreement hasn’t been reached yet. It isn’t clear which chamber will move the funding bill first. Some House appropriators prefer the Senate acting first. In the meantime, there may be a need for another one- or two-week stopgap CR to fund the government until they can get an omnibus passed. Today the Office of Management and Budget sent shutdown guidance to federal agencies.

On March 16, President Trump requested an additional $30B in FY17 funds for defense ($24.9B for the base budget and $5.1B in Overseas Contingency Operations) and $3B for border security of which $1.4B was for the southwest border wall. The final omnibus bill could include $15B in OCO funding for defense, but Democrats are pushing for a comparable increase in nondefense war-related funds. While the latest negotiation offer did not include the $1.4B for the border wall because of Democrats’ (and some Republicans’) opposition to the project, Sean Spicer said this week that border wall funding is a priority for the administration.

In addition to the overall funding levels and funding for the border wall, some other potential sticking points for the FY17 omnibus include:

• The West Virginia congressional delegation wants to see a provision that would ensure the continued health coverage for retired coal miners and their spouses.
• Office of Management and Budget Director Mick Mulvaney opposes the appropriation of funds for cost sharing subsidies for health insurers to lower out-of-pocket costs for individuals who buy silver plans through a health care exchange.
• Mulvaney has also been urging Republicans to include a provision blocking federal grants for any city that does not enforce federal immigration law (“sanctuary cities”).

The House convenes on Tuesday making it difficult for them to abide by their three-day rule in which they make the text of the bill public three days before bringing the legislation to the House floor. While they can forgo this rule for the omnibus, it is likely that a short-term CR will be necessary to avoid a shutdown. And there is always the possibility of Congress punting on all FY17 bills and just passing a year-long CR.

The current FY17 continuing resolution (CR) expires on April 28 leaving only one week for Congress to act on it when they return from recess in order to avoid a government shutdown. Eleven of the 12 FY17 appropriations bills are currently funded under the CR. Some key sticking points in the negotiations are the supplemental funding requested by President Trump in March for the southwest border wall and funding for key Obamacare programs. Democrats are in favor of the latter, but not the former. Democrats could also block the omnibus if it includes riders or “poison pills” such as language barring federal grants from going to “sanctuary cities.” A long-term spending deal for FY17 will need some Democrat support to get through the Senate. When asked, White House spokesman Sean Spicer would not rule in or out a veto by President Trump if an FY17 spending deal does not include funding for the border wall. Office of Management and Budget (OMB) Director Mick Mulvaney echoed the concern about a veto saying this week, “The President has to sign off on this stuff. The President needs to see his priorities funded if he’s going to be participating in signing these bills.” As for the FY17 supplemental funding requested by the President for the Department of Defense, House Armed Services Committee Chairman Mac Thornberry (R-TX) is pressing appropriators to allow the Pentagon to roll over into FY18 any supplemental funds appropriated for FY17 giving them more time to spend it before the end of the fiscal year on September 30.

The current FY17 continuing resolution (CR) funding the federal government expires on April 28. With the House and Senate in recess the next two weeks, that leaves only one week for them to pass a spending bill when they return. Discussions are currently underway between House and Senate appropriators. House Minority Leader Nancy Pelosi (D-CA) said that there are more than 100 unresolved issues remaining in these talks.

Appropriators also need to consider the supplemental funding request the Trump administration submitted to Congress last month. Rep. Kay Granger (R-TX), Chair of the House Defense Appropriations subcommittee, said that she did not expect the full $30B defense supplemental funding request to be added to the FY17 omnibus spending bill. Democratic appropriators have warned that including the President’s supplemental funding request could doom an FY17 spending deal. And some Republicans have already dismissed the $18B in domestic discretionary spending cuts that were also proposed by the President. While the FY17 supplemental will likely have to be considered separately from the FY17 omnibus, it is unclear if the Administration will veto the final spending bill if it doesn’t include his supplemental funding request.

With time running out, there is the possibility of another weeklong FY17 CR to buy some time before the House and Senate can complete an FY17 omnibus spending bill.