House and Senate conferees for the FY19 Homeland Security appropriations conference met this week to begin their negotiations. Congress has two weeks left to pass a spending bill to avoid another partial shutdown. Senate conferees include Sens. Shelby (R-AL), Moore Capito (R-WV), Hoeven (R-ND), Blunt (R-MO), Leahy (D-VT), Durbin (D-IL), and Tester (D-MT). House conferees include: Reps. Lowey (D-NY), Roybal-Allard (D-CA), Price (D-NC), Lee (D-CA), Cuellar (D-TX), Aguilar (D-CA), Granger (R-TX), Fleischmann (R-TN), Graves (R-GA), and Palazzo (R-MS).

The conference committee is tasked with deciding a way forward on Homeland Security funding. Both sides expressed optimism about reaching a compromise, though there has been little budging in positions so far.

House Democrats released a list of their proposals for border security that they intend to advocate for in the conference committee. Their proposal indicated that they are willing to spend more on border security but that they don’t plan to use emergency funding to get around the budget caps for FY19. The Democrat proposal also made no mention of funding for new physical barriers or a wall. It also restricts where approved funding for barriers can be built. 

On the other side of the negotiating table, Senate Appropriations Committee Chairman Richard Shelby (R-AL), in his opening remarks on Wednesday, advocated for an approach that includes technology, infrastructure, personnel, and physical barriers. Shelby said that “Smart technology alone does not actually stop anyone from crossing into the U.S. illegally.”

There is still some discussion about making the deal bigger than just funding for border security. Senate Majority Leader Mitch McConnell (R-KY) said that he would have no concerns about conferees expanding the scope of the discussion if they need to get an agreement. The expanded scope could include the debt ceiling and FY20 and FY21 budget caps. Senate Finance Committee Chairman Grassley (R-IA) wants to attach a tax extenders package renewing 26 expired tax breaks to any final spending deal.Outside of the conference negotiation room, President Trump was tweeting that if the final agreement did not include funding for a wall or physical barrier that “they are [w]asting their time!” The President also said that there is a good chance that he will declare a national emergency at the southern border in order to use Department of Defense dollars for a wall. He may announce this emergency declaration during his State of the Union address Tuesday evening. 

The current continuing resolution (CR) funding seven of the 12 annual appropriations bills expires at midnight next Friday (December 21). If Congress and the White House cannot reach agreement before then, nine cabinet departments and several dozen smaller federal agencies will shutdown.

House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) met with the President and Vice President earlier this week that was expected to be a private meeting negotiating the final spending bills. Instead, the President invited the press in to the Oval Office to cover the meeting. During that meeting the President said that he would be proud to shut down the government if Congress did not provide the funding he requested for the border wall.

There a few options Congress can consider to avoid a shutdown:

1. Pass a CR funding the seven bills through December 26
2. Pass a CR funding the seven bills through January 3 (the first day of the new Congress when Democrats will control the House)
3. Pass a CR funding the seven bills through early 2019 (January-March)
4. Pass a CR funding the seven bills for the rest of FY2019
5. Pass a “minibus” funding six bills and a year-long CR for the DHS bill
6. Pass a “minibus” funding all seven bills if agreement can be reached on how much funding should be appropriated for a border wall

The House does not return until Wednesday evening next week leaving only two days to pass something and prevent a partial shutdown of the federal government.

Only one more day to the midterm elections and knowing who will be in control of the House and Senate in the 116^thCongress. Most experts believe Democrats will win control of the House while Republicans will retain control of the Senate (and perhaps pick up a seat or two). Regardless of the outcome, Congress will return the week of November 12 and have a number of issues they will have to address during the lame duck session.

Below I’ve provided some information and analysis on what we can expect tomorrow, during the lame duck session, and in the next Congress.

2018 Mid-Term Elections

The 115^thCongress is comprised of 235 Republicans and 193 Democrats in the House, and 51 Republicans, 47 Democrats and 2 Independents in the Senate. There are 7 vacant seats in the House (5 were held by Republicans and 2 were held by Democrats). Most political experts are predicting Democrats will win 30 or more Republican-held seats in the House to win the majority (they need to win 23).

The AP is reporting that these are the races to watch (sorted by poll closing time):

7 pm ET

Kentucky-06   Barr (R) vs McGrath (D)

Virginia-07    Brat (R) vs Spanberger (D)

7:30 pm ET

NC-09              Harris (R) vs McReady (D)

Ohio-12          Balderson (R) vs O’Connor (D)

8:00 pm ET

Florida-27      Salazar (R) vs Shalala (D)

NJ-2                 Grossman (R) vs Van Drew (D)

NJ-3                 MacArthur (R) vs Kim (D)

NJ-11               Webber (R) vs Sherrill (D)

PA-01              Fitzpatrick (R) vs Wallace (D)

9:00 pm ET

Kansas-02      Watkins (R) vs Davis (D)

Minn-03         Paulsen (R) vs Phillips (D)

NM-02             Herrell (R) vs Torres Small (D)

NY-19              Faso (R) vs Delgado (D)

NY-22              Tenney (R) vs Brindisi (D)

10:00 pm ET

Iowa-04          King (R) vs Scholten (D)

11:00 pm ET

California-10Denham (R) vs Harder (D)

California-48Rohrbacher (R) vs Rouda (D)

WA-03             Herrera Beutler (R) vs Long (D)

While historical trends show the party of the president losing seats in the House during the midterm elections, this doesn’t necessarily hold true in the Senate. And turnout tomorrow will play a huge role. Right now we’re seeing record rates of early voting. Some experts predict Republicans in the Senate will pick up a seat or two.

Even though Republicans are expected to lose the majority in the House, the House Freedom Caucus is predicting that it will add a few new members to its roster. They expect to increase their roster of 35 members to 37-40 members. If Republicans lose seats in the midterms, but the Freedom Caucus increases its membership, it could have more influence in the House Republican Conference in the 116th Congress.

We may not know the results to all races tomorrow as there may be some races that are too close to call and may require a recount or some races may require a run-off.

In addition to changes in the House and Senate, the Executive Branch typically sees some changes/turnover after the midterm elections. A number of staff are expected to leave and join the President’s 2020 re-election campaign. And there are plenty of rumors circulating about members of the President’s cabinet that will exit after the midterm elections (Zinke, Sessions, Mattis, Ross).

Lame Duck Session

Congress returns the week of November 12 for one week of session prior to adjourning for the Thanksgiving week recess. They are currently scheduled to return the week of November 26 for three weeks before adjourning for the holidays. The House and Senate’s target adjournment dates are December 13 and December 14, respectively.

Leadership Elections

After the elections, newly elected members of Congress come to DC for orientation and leadership elections. Republicans in the House plan to hold their leadership elections on November 15, while Democrats said they would not hold their leadership elections before November 28.

House Republicans

Since House Speaker Paul D. Ryan (R-WI) is not running for reelection, House Republicans will need to select either a Speaker (if they retain the majority) or Minority Leader (if they lose the majority) for the 116^thCongress. House Majority Leader Kevin McCarthy (R-CA) is the frontrunner for Speaker, but he could face several challengers including House Majority Whip Steve Scalise (R-LA) and Rep. Jim Jordan (R-OH), co-founder of the House Freedom Caucus.  Chief Deputy Whip Patrick McHenry (R-NC) is expected to challenge Conference Chair Cathy McMorris Rodgers (R-WA) for majority whip, the number 3 post. Rep. Liz Cheney (R-WY) is running for House Republican Conference Chair. If Republicans are in the minority, the most likely scenario is McCarthy as Minority Leader and Scalise as Minority Whip.

House Democrats

House Minority Leader Nancy Pelosi (D-CA) has made it clear to her caucus that she is seeking the Speakership if Democrats win control of the House. However, a few Democratic candidates have pledged to not vote for Pelosi for Speaker and the Congressional Black Caucus is saying that one of their members should be Speaker or Majority Leader. Election as Speaker of the House requires support from 218 Members of the House. Democrats will have to figure out how they can get the votes needed to elect a speaker in the 116^thCongress. House Minority Whip Steny Hoyer (D-MD) and Assistant Democratic Leader Jim Clyburn (D-SC) have also indicated interest in retaining leadership positions in the next Congress. Clyburn doesn’t intend to challenge Pelosi or Hoyer for their positions. If Democrats fail to win the majority in the House, expect to see several challengers emerge in the leadership elections.

Senate Republicans

Senate Majority Leader Mitch McConnell (R-KY) is expected to continue in his leadership position, but other positions will change due to conference-imposed term limits (3 full two-year terms, except Majority/Minority Leader). Majority Whip John Cornyn (R-TX) is term-limited and will step down. While Sen. John Thune (R-SD) is expected to replace him, Sens. John Barrasso (R-WY) and Roy Blunt (R-MO) may consider a run for the position or other leadership positions.

Senate Democrats

Senate Democrats do not have term limits. Their leadership is expected to remain the same in the next Congress. However, if Democrats lose more seats than anticipated, the caucus could challenge the existing leadership.

Lame Duck Agenda

There are a number of issues Congress must address in the four weeks they are scheduled to be in session after the midterm elections – FY19 appropriations bills, farm bill, tax extenders, National Flood Insurance Program, Violence Against Women Act, and Federal Insecticide, Fungicide, and Rodenticide Act.

The results of the midterm elections will have a significant impact on how the lame duck agenda plays out. If Democrats take over the House, Republicans could try to push through their agenda before they lose the majority. But they need 60 votes in the Senate and that will require support from Democrats in the Senate. It isn’t clear if Democrats would want to “clear the decks” before the new Congress or if they would want to postpone consideration of some legislation until they are in power (again, if they win the majority in the House).

Remaining FY19 Appropriations Bills

Congress has passed and the President has signed into law five of the 12 annual spending bills (Defense, Energy & Water, Labor HHS Education, Legislative Branch, and Military Construction-Veterans Affairs). The remaining seven FY19 appropriations bills (Agriculture, Commerce Justice Science, Financial Services, Homeland Security, Interior Environment, State Foreign Operations, and Transportation HUD) are funded by a continuing resolution (CR) through December 7.

President Trump and Congressional Republicans have been gearing up for a fight over funding for a border wall. The President has raised the possibility of a government shutdown if he does not get the funding he has requested for the wall. The Senate Homeland appropriations bill only has $1.6B for the wall compared to the House bill which includes $5B (the President’s FY19 requested amount). Democrats may also cause a shutdown if the spending bills are loaded up with conservative Republican priorities before they lose the majority. Or Democrats could force passage of another continuing resolution to carry funding into the new Congress. If Democrats fail to win the majority in the House, they could try to slow down the spending bills. But they would be in a politically weakened position, so negotiations on a spending deal could be faster under this scenario. There have been no serious discussions between Congress and the Administration during the recess on the remaining spending bills.

Congress may also consider a supplemental disaster aid spending package even though FEMA has indicated it has enough funding to cover those impacted by Hurricane Michael and Hurricane Florence.

Other Lame Duck Priorities

The Senate will take up the Coast Guard reauthorization bill when it returns. The National Flood Insurance Program expires on November 30, and the Violence Against Women Act and the Federal Insecticide, Fungicide, and Rodenticide Act both expire on December 7. All of these bills need to be reauthorized or extended. The 2018 Farm Bill is currently in conference and will be a priority during the lame duck session. The bill is being held up by a dispute over where the agriculture subsidies will go, but conferees are optimistic that they will be able to pass a full reauthorization before the end of this Congress. Congress may also consider a tax extenders and technical corrections package during the lame duck session. And Senate Majority Leader Mitch McConnell (R-KY) will continue to push to confirm as many nominees as possible. Already on deck is a cloture vote on a nominee for the Federal Reserve Board of Governors. Other possible items for consideration include criminal justice reform and retirement reform legislation (Retirement Enhancement and Savings Act or the Family Savings Act).

Select Committee on Budget and Appropriations Process Reform

The Bipartisan Budget Act of 2018 established the Joint Select Committee on Budget and Appropriations Process Reform. November 30 is the deadline for the select committee to present their recommendations. They are on track to release a bill during the next two weeks. Markup is scheduled for the week of November 13.

The bill is likely to be limited to a provision that would move Congress from an annual to a biennial budget resolution. However, the bill could become broader if amendments are added during the markup or if the co-chairs agree to technical changes before the bill is officially introduced. Potential amendments include changing the fiscal year to calendar year, eliminating the need for Congress to raise the debt limit, encouraging the packaging of the 12 annual spending bills, disallowing the use of filibuster-proof budget reconciliation procedures in the Senate for deficit-increasing legislation, restoring PAYGO rules in the House, and requiring the Appropriations committees to adopt a full set of committee allocations before subcommittees can advance their bills.

FY2020 Budget and Appropriations

In an October cabinet meeting, President Trump ordered his cabinet secretaries to cut 5% of their agencies’ budgets in FY2020. With just a few weeks left in the FY2020 budget planning process, the Pentagon has been advised by the Office of Management and Budget that the defense topline for FY2020 will be $700B, not the $733B they had originally been told to expect. Up until now, DOD has been preparing its budget assuming a $733B topline. DOD Comptroller David Norquist is reportedly continuing to develop two parallel budget documents to demonstrate to Defense Secretary Mattis the cuts they will have to make and the impacts those cuts will have.

FY2020 Budget Control Act Limits and Sequestration

The Budget Control Act (BCA) of 2011 was signed into law on August 2, 2011 and imposes annual statutory discretionary spending limits for defense and nondefense spending through FY2021. Since it was signed into law, Congress has modified the spending limits through the following bills: American Taxpayer Relief Act of 2012, the Bipartisan Budget Act of 2013, the Bipartisan Budget Act of 2015, and the Bipartisan Budget Act of 2018. None of these bills have changed the discretionary caps imposed by the BCA for FY2020 and FY2021. The statement that the “sequester is returning in FY2020,” therefore, means that the discretionary spending limits will again be the level prescribed by the BCA unless Congress modifies them by passing legislation. If the caps are not lifted and Congress passes FY2020 spending bills that don’t comply with the FY2020 caps, then across-the-board sequestration cuts will automatically kick in. Adherence to the budget caps will obviously mean less funding for numerous federal programs and tough decisions for Congress and the executive agencies as well as the White House Office of Management and Budget (OMB).

For FY2019, defense spending is $647B and nondefense $597B. For FY2020, defense spending under the BCA is capped at $576B and nondefense is capped at $542B.

Debt Ceiling

The debt ceiling has been lifted until March 1, 2019. If Congress does not raise the debt limit or suspend the ceiling before March 1, 2019 the Treasury Department will be forced to use extraordinary measures to prevent a default by the U.S. government. Extraordinary measures can give Congress several additional months to work out a debt ceiling agreement. The debt ceiling could be part of a broader negotiation on an FY2020/2021 budget agreement lifting BCA discretionary spending caps.

116^thCongress

If Republicans retain control of the House we can expect to see a continuation of their current priorities. Republicans on the House Ways and Means Committee just released a joint statement with the White House that they would push for the President’s proposed 10% middle class tax cut next year. If Democrats take over the House, they will focus on their “A Better Deal” priorities. They also want to pursue ethics and campaign finance reform, an infrastructure package, legislation to reduce the price of prescription drugs, gun safety measures, a legislative solution to protect participants in the Deferred Action for Childhood Arrivals (DACA) program, and preserving the Affordable Care Act. They will also pursue a wide-ranging oversight agenda (the administration, climate change, intelligence agencies).

Should Republicans retain control of the Senate, judicial confirmations will continue to be one of the top priorities of Majority Leader McConnell in the 116th Congress as he tries to confirm as many judges as possible before the 2020 presidential election. They may also have some cabinet member nominations to consider in the new Congress.

Finally, the administration will want to see action on their recently negotiated trade agreements. President Trump is expected to sign the United States-Mexico-Canada Agreement (USMCA) in November on the sidelines of the G-20 meeting – right at the end of Mexican President Pena Nieto’s term. That will not leave enough time for the current Congress to consider implementing legislation.