Mammoth Budget Deal Gives $131B for Non-Defense, $89B for Hurricane Relief

Thursday, February 8, 2018

At 11:40 p.m. last night, Senate leaders introduced the text of a mammoth budget deal that will add at least $296 billion in spending to the currently allowed levels over the two-year fiscal 2018-2019 biennium.

The deal includes a truly massive increase in non-defense discretionary (NDD) spending, the type of funding that supports air traffic control, Amtrak, new subway systems, TIGER grants, and Army Corps of Engineers water resources programs. Total non-defense discretionary funding would get an 11.6 percent increase in 2018 over the 2017 enacted level, and would then get an additional 3.2 percent increase in 2019. Compared to the spending caps in the Budget Control Act, the deal provides an increase of $130.7 billion over two years.

The budget deal has been offered as an amendment (SA #1930) to H.R. 1892, the continuing appropriations package that the House passed on February 6. The legislative text of the new deal can be read here. If the federal government is to avoid a shutdown starting at midnight tonight, all 100 members of the Senate must agree to allow a vote on the deal much more quickly than regular order would allow, and then the House would have to rush it through with almost no debate.

(Senate Majority Leader Mitch McConnell (R-KY) quickly moved to invoke cloture on the package, but under Senate rules, that cloture vote can’t occur until early Friday morning unless all 100 Senators agree to expedite things, and even then, Senators would have to agree to rid of 30 hours of post-cloture debate before a vote.)

And the House can’t vote until after the Senate votes. So a government shutdown of some duration is a strong possibility even if the legislation has huge supermajority votes in each chamber, which it might not have, since it does not address immigration issues. House Minority Leader Nancy Pelosi (D-CA) occupied the House floor for an epic 8-hour non-filibuster speech yesterday to urge her Democratic colleagues to oppose the budget deal unless it also included a promise from House Republican leaders to deal with the DACA immigration issue, which is so far not forthcoming. And the huge nature of the non-defense spending in the bill makes it likely that some Democratic votes will be needed to get the bill through the House.

The deal – which has been agreed to in public by Senate leaders McConnell and Chuck Schumer (D-NY) and House Speaker Ryan (R-WI), and which may also have been agreed to in most particulars by Pelosi – includes the following, which will be in the legislation that the Senate will consider in the next 48 hours:

  • $295.6 billion in increased spending caps on discretionary appropriations over the two-year 2018-2019 biennium, $164.9 billion for defense and $130.7 billion for non-defense. This will allow the Appropriations Committees to write an omnibus FY 2018 appropriations bill totaling $1.208 trillion in regular appropriations next month instead of the $1.065 trillion currently allowed by law.
  • An extension of the current stopgap continuing resolution through March 23, 2018 to give the Appropriations Committees time to write a final omnibus 2018 appropriations bill under the greatly increased spending caps.
  • $89.3 billion in immediate emergency supplemental appropriations for natural disasters – mostly hurricanes affecting Texas, Louisiana, Florida, Puerto Rico and the Virgin Islands, but also wildfires in the West.
  • A further suspension of the statutory limit on the public debt through March 1, 2019, punting the debt issue to the next Congress. (Under current law, we will probably hit the existing debt limit in early March 2018 according to this recent CBO report.)
  • A one-year extension of expired tax breaks that were not included in the December 2017 tax reform bill. The railroad track maintenance is one of these (sec. 40302), as are several energy related tax credits (secs. 40401-40416).
  • A whole host of health care program extensions and amendments that we don’t claim to understand.
  • Four additional years of extension of the CHIP program after the six year extension enacted last month runs out.
  • Creation within Congress of a new Joint Select Committee on Solvency of Multiemployer Pension Plans, to produce legislation fixing the Pension Benefit Guaranty Corporation by December 2018 with a guarantee that the bill will get a vote in the Senate under “fast track” procedures.
  • Creation within Congress of a new Joint Select Committee on Budget and Appropriations Process Reform, to produce legislation fixing the broken Congressional budget process by December 2018 with a guarantee that the bill will get a vote in the Senate under “fast track” procedures.
  • Section 30102 of the legislation wipes the statutory “PAYGO” scorecard clean, taking the budgetary effects of legislation enacted in recent years (through this bill) off the record.
  • Sections 30103-30104 eliminate the need for the Senate and House to consider a budget blueprint for fiscal year 2019 and to consider appropriations bills and other spending or revenue legislation even if no budget resolution ever comes to the floor. For non-appropriations measures, Congressional committees will be given total spending allocations based on the forthcoming Congressional Budget Office spring baseline, but the language applicable to the Senate also allows committees to pool their resources, or share “pay-fors” with the tax committees, through the “deficit neutral reserve funds” in title III of last year’s budget resolution, updated by one fiscal year – including the reserve fund for an infrastructure bill in sec. 3008 of last year’s budget.
  • Some $100 billion (so they say) in “pay-fors” that Republicans say will mitigate most of the new spending on the non-defense side of the bill, including, in section 30202, an extension of the portion of Transportation Security Administration aviation security fees that go towards deficit reduction into fiscal 2026 and 2027, estimated to total $1.64 billion in 2026 and $1.68 billion in 2027. Other pay-fors include the usual suspects – selling oil from the Strategic Petroleum Reserve, taking money from the Federal Reserve’s surplus fund, and extending the sequestration of non-exempt mandatory programs (mostly Medicare) into fiscal 2026 and 2027.

Spending priorities. There are other parts of the deal struck by McConnell, Schumer, Ryan and (possibly) Pelosi that are not written into the text of the legislation that has been introduced, but which are a promise between the leaders.

A memorandum from the leaders accompanying the text of the legislation (read the memo here) says the following:

The Congressional Leaders agree to work with the leaders of the appropriations committees to ensure that the following non-defense spending priorities are funded in the fiscal year 2018 omnibus and the fiscal year 2019 appropriations bills at levels exceeding those provided in fiscal year 2017. Specific spending decisions shall be left to the members of the appropriations committees, but the Leaders will work to ensure that the resulting legislation complies with the terms and spirit of this agreement. The ranking members of the House and Senate Appropriations committees shall be consulted on conference subcommittee allocations, and the Leaders agree those allocations should be consistent with this agreement.

The document then gives the following totals, in billions of dollars:

FY18 FY19 Total
a. NIH 1 1 2
b. Opioids/Mental Health 3 3 6
c. Veterans Health 2 2 4
d. Infrastructure 10 10 20
e. Child Care 2.9 2.9 5.8
f. Higher Education 2 2 4
TOTAL, PROMISES 20.9 20.9 41.8

For infrastructure, the leadership documents gives this definition:

to invest in infrastructure, including programs related to rural water and wastewater, clean and safe drinking water, rural broadband, energy, innovative capital projects, and surface transportation.

The document also contains this Senate-only scheduling promise:

The Senate Leaders agree that if a bill has been reported on a bipartisan basis from the Appropriations Committee and is consistent with the BCA spending caps, has the support of the Chairman and Ranking Member, and the sequencing has the support of both the Majority and the Minority Leaders, we will work together to minimize procedural delays.

The big question is how this $20 billion in appropriations for infrastructure will intersect with the $200 billion in infrastructure funding that will be proposed on Monday in the President’s fiscal 2019 budget. The early iteration of the President’s proposal in the last budget proposed that the $200 billion would be mandatory (non-appropriated) funding. But will Congress count this $20 billion towards the President’s proposed $200 billion?

Cap adjustments. Last November, ETW wrote of the natural tension between the two conflicting fiscal demands espoused by Democrats. On the one hand, they wanted to “repeal the sequester” and return annual appropriations to the levels enjoyed before the March 2013 sequestration process caused a related reduction in the future discretionary spending caps for FY 2014-2021.

But Democrats were also insisting on 50-50 parity between any cap increases for defense and those for non-defense.

Those two sets of demands were not in conflict so long as Republicans were only willing to entertain small cap increases, but in this cycle, the demand for defense cap increases broke the system. Simply getting rid of the sequester would give defense an extra $54 billion per year but would only give non-defense an extra $37 billion per year, which was not anywhere close to 50-50 parity.

So the negotiators wound up splitting the baby. They got rid of the sequester, and then they gave 50-50 parity in spending cap increases above the pre-sequester level, but the total cap increases do not represent 50-50 parity. This table shows the numbers:

Defense Non-Defense
FY18 FY19   FY18 FY19
Current Law Caps 549.1 562.0   515.7 529.5
Eliminate Sequester +53.9 +54.0 +37.3 +36.5
Policy Increases +26.0 +31.0 +26.0 +31.0
Proposed New Caps 629.0 647.0   579.0 597.0

It cannot be overstated how massive a spending increase this is. The House wrote its FY 2018 appropriations bills towards a non-defense total of $511 billion, and the Senate bills were $519 billion according to their original plan (which was apparently beefed up later without public statement). $579 billion is so much higher than either of those totals that it renders the already-passed appropriations bills useless for guesstimating what the final 2018 year-end totals for programs will be.

However, the extra money is so huge that that one can obviously say that there will be no budgetary need for cuts to the FAA, or Amtrak, or mass transit new starts, or TIGER grants in the FY 2018 omnibus, and there will be no budgetary need for a highway contract authority rescission, either.

To put it another way, non-defense discretionary appropriations (aside from emergencies and OCO/wars) peaked during FY 2010 at $537 billion, and then once the Republicans took over the House, new Appropriations chairman Jerry Lewis (R-CA), God bless him, spent years preaching the gospel that his party leaders wanted him to preach – that we had to get non-defense spending back down as close as possible to its FY 2008 level of $434 billion.

Through CR’s and omnibi and then via sequestration in 2013, the NDD total dropped as low as $469 billion, and then crept back up. But under the new budget deal, NDD will now blow past the all-time 2010 high.

(If you want to put this cap deal in context, see this table that ETW has painstakingly maintained over the years that shows the original August 2011 BCA caps, their reduction for sequestration, and the amounts added back by the 2013, 2015, and 2018 budget deals.)

The table also makes clear what a large “fiscal cliff” has been set up for fiscal 2020. The spending caps for defense and non-defense spending will drop by $71 billion and $54.5 billion, respectively, in 2020 from the 2018 levels being established by this deal. So another round of budget negotiations on the caps for 2020 and 2021 is inevitable starting next year. (The fact that we are now looking ahead to the FY 2020 and 2021 cap negotiations brings up another point – the spending caps established in 2011 expire after 2021, and the issue of whether or not to extend the caps past then will also certainly be a part of the those future negotiations next year.)

Hurricane/wildfire relief. The new deal includes an aid package for hurricane relief in the Gulf Coast and Caribbean and for wildfire relief in the Western U.S. totaling $89.3 billion. Of this amount, $17.4 billion is for the Army Corps of Engineers water resources program (up from $12.1 billion in the House bill and just $499 million in the original White House request), $1.8 billion is for the U.S. Department of Transportation, and $845 million is for the Transportation Security Administration and the Coast Guard.

The following table shows the account-level funding.

RRIF loan authority. Tucked away in section 164 of the additions to the FY18 CR was a proviso sought by the Department of Transportation to put the Build America Bureau (in the Office of the Secretary) more fully in charge of the RRIF loan program by amending 45 U.S.C. §823 so that RRIF loan fees will now be deposited in the Office of the Secretary’s budget, not the FRA’s budget.

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