Update: Budget and Appropriations as August Recess Ends

As September approaches, time is running out to finalize FY 2018 spending before the beginning of the new fiscal year. Congress adjourned for August recess without making final spending decisions, leaving only 12 legislative days to put in place a bill to keep the government operational beyond the end of the fiscal year on September 30.

Making matters more complicated, the nation is set to reach its debt ceiling on September 29 and unless the ceiling is lifted or suspended, America will not have the ability to pay its current debt obligations. Additionally, the devastating Hurricane Harvey will likely require a significant investment in emergency disaster relief and could impact budget negotiations. And finally, the President has vowed to shut down the government unless funding is included to construct a border wall.

The House and the Senate have taken dramatically different approaches to the upcoming fiscal year that will need to be resolved in order to finalize spending for FY 2018. Realistically, this is unlikely to happen in 12 legislative days, so a continuing resolution (CR) is all but inevitable at this point. The question now is how long will a CR last and can a government shutdown (or greater economic crisis) be avoided?

House Update

The House is struggling to approve a budget resolution, but has been efficient in moving spending bills through committee. In June, the House Budget Committee released a draft budget resolution that provided an additional $72 billion for defense spending, while cutting non-defense programs like HUD by $5 billion. This is a violation of both the caps put in place by the Budget Control Act (BCA) and the required parity in cuts to domestic and defense spending. The proposal increased spending too much for deficit hawks, but did not increase defense spending enough for defense hawks.  After nearly two months of debate within the committee, the budget resolution was narrowly approved in July. It has not been brought to the floor yet for final consideration and it’s unclear whether it could be approved in its current state.

Meanwhile, the House Appropriations Committee drafted and approved spending bills written at the budget resolution level, making deep cuts to domestic programs. On July 17, the House Appropriations Committee voted 31-20 to advance its FY 2018 THUD bill. The bill provides $56.5 billion in funding for the bill, $1.1 billion lower than current spending levels and $8.6 billion above the President’s request for FY 2018.

Considering the President’s budget proposal to slash spending on most HUD programs and the House’s deep cuts to domestic spending, the House THUD spending bill could have been significantly worse. The bill rejects the President’s proposal to eliminate the Community Development Block Grant (CDBG) and HOME programs, though it does cut each by $100 million. It also rejected an attempt by the Administration to slash the Public Housing Capital Fund by 68 percent, though it does cut the program by nearly $100 million from current spending levels.

The Appropriations Committee managed to approve all 12 appropriations bills, but only four were passed on the floor. Unfortunately, Transportation, Housing and Urban Development (THUD) was not considered on the floor.

Senate Update

The Senate has not considered a budget resolution, but did pass six bills through the full committee, including THUD. The Senate wrote spending bills at the FY 2017 cap level, which is higher than FY 2018 and would trigger across-the-board sequestration cuts. Unless a budget resolution is agreed to, cuts to domestic spending are inevitable.

The Senate Appropriations Committee voted unanimously on July 27 to approve its FY 2018 THUD bill. The bill provides $60.058 billion in funding overall, $2.407 billion higher than current funding levels and $3.5 billion higher than the House THUD bill. Considering the constraints of the FY 2018 budget cap, the increased THUD allocation is a huge win and allowed appropriators to avoid making the same types of cuts seen in the House THUD bill.

Because of the higher overall spending cap, the Senate’s THUD bill provides level funding for CDBG and HOME, and increases spending for the Public Housing Capital Fund. It also provides $175 million more for Ongoing Administrative Fees.

The Senate has not considered any bills on the floor, including THUD.

September

When Congress resumes work in September, the House is expected to immediately consider an omnibus spending package to approve all remaining appropriations bills. It’s unclear whether this package of bills written at a controversial spending level can receive enough votes to be approved. Members were instructed to submit amendments to the omnibus bill during the August recess and more than 900 amendments were received by the Rules Committee.

Even if the omnibus is approved by the House, it is unlikely to be approved by the Senate, and it is likely that a CR will need to be approved to give Congress more time to work out the differences between House and Senate spending levels. It’s unclear at this point how much time Congress will give itself, though most initial CRs have been three months long, running out in early- to mid- December.

The passage of a CR could be made more complicated by the need for emergency disaster relief as a result of Hurricane Harvey; in recent years, some lawmakers have insisted that disaster relief be offset by other spending cuts and this debate could reemerge.

It could also be impacted by the debt ceiling, which is estimated the nation will reach on September 29. Recently, the nation has extended the debt ceiling without much debate or fanfare, but some members of Congress and the Administration have said that spending cuts will need to be made in order for them to agree to raising the debt ceiling in September. The last time spending cuts were required to raise the debt ceiling, the Budget Control Act and sequestration were put into place. It’s not clear yet whether the debate next month will rise to that level or if a “clean” extension of the ceiling will be allowed without any cuts.

Additionally, the President has threatened on multiple occasions to shut down the government unless funding is included in FY 2018 to begin construction on a border wall. It is unclear whether he intends to prevent a short-term CR from being put in place next month or if he is aiming for a fight later when FY 2018 spending is being finalized.