A few hours after we sent out last Friday’s ETW, informing readers that the Appropriations Committees still hadn’t given spending totals to its subcommittees to allow them to commence final work on their fiscal 2024 spending bills, the news broke that, indeed, totals had finally been distributed and work could commence, ahead of the fast-approaching March 1 deadline for the first four bills to be signed into law.

The details are still shrouded in secrecy, but from a transportation funding point of view, it appears to be a classic “good news, bad news” situation.

• The Good News: The Transportation-HUD Subcommittees appear to have been given a final net spending allocation for 2024 that is in the ballpark of the Senate bill, which was $88.1 billion. (This makes sense, since the final budget deal struck by the new Speaker keeps the same overall net spending total for government-wide non-defense as the Senate committee used, and almost all THUD spending is non-defense.) The House bill used a far lower net spending total of $65.2 billion, which forced that chamber’s THUD bill to make massive and politically unpalatable cuts to transportation grant programs.
• The Bad News: Even a final net spending total slightly above the Senate bill might still force several billion dollars in cuts to gross spending in the bill, most of which would probably be taken out of DOT programs.

Net vs gross. Let’s try to use rumor and guesswork to compare what we think we know about the final agreement and compare it to last year and to earlier iterations of the bill. Assume that the final bill has a net total budget allocation somewhere close to the Senate’s $88.1 billion level of net discretionary budget authority (BA). (All these totals are only for appropriations provided directly by the annual THUD bill. Contract authority provided by authorization bills, and supplemental appropriations provided by the 2021 infrastructure law, are not counted.)

But there is a big difference between net and gross spending in this bill in particular. The appropriators can repeal spending from earlier THUD bills, or sometimes from other committee’s bills, to offset the new spending they provide. And gross spending is also offset by user fee collections and offsetting receipts. And starting last year, the Senate began declaring some of their regular program funding to be “unforeseen” and “temporary” off-budget emergencies even though the need for the funding was very easily anticipated by basically anyone and looks to be permanent.

As a result, in fiscal 2023, the gross total of appropriations in the THUD bill was $14.2 billion higher than the net total budget allocations because of all those offsets. In the House’s FY 2024 bill, this difference rose to $28.6 billion because the House used a one-time rescission of $25 billion in IRS funding. The Senate did not cut IRS funding but included a lot of non-emergency emergency offsets, and their bill total had $14.1 billion of gross spending offset.

The budget “side deal” struck by the new Speaker and Democrats increases the amount of THUD spending offset by HUD mortgage insurance receipts from $2.7 billion to $5.5 billion – that much was in the press release. One can also infer from the totals in the press release that there are no more IRS funding rescissions available for the THUD bill. And THUD always had the lion’s share of all of the spurious emergency designations in the whole 2023 budget and whole set of 2024 bills, so we think those are decreased in the final deal but not eliminated.

All told, the gross spending in the final FY 2024 THUD bill should total at least $101 billion, depending on how much money the staff can find to rescind from previous appropriations and/or authorizing laws. In billions of dollars:

At least $60 billion off the top. $100+ billion is a gigantic amount of money, but at least three-fifths of that is instantly taken away for just three bipartisan priorities that are roughly the same in both the House and Senate bills.

First, the appropriators always fund HUD housing renewal costs – annual, rent-driven increases in the cost of Section 8 housing voucher programs and project-based housing costs. If the appropriators refuse to pay for the annual increase, then people who are currently occupying subsidized housing get evicted. On television, probably. And neither party is willing to have that happen. The problem is, rent is going up so quickly right now that they aren’t quite sure how much will be needed in 2024, and that estimate has gone up since the House and Senate marked up their bills, So $1 billion to $2 billion in additional funding for those renewal costs may have to be found.

Second, the House and Senate always cover the budget request for Federal Aviation Administration operating expenses. Neither political party in Congress is willing to shoulder blame for air traffic control delays (or, God forbid, an accident) where the cause could be traced to Congress nickel-and-diming the FAA budget to a level below what the President asked for. The FAA Operations account got roughly identical funding in the House and Senate version of this year’s bill and there is no reason to think it will get cut in the final version.

Third, both chambers are now firmly back in the earmark game. But unlike policy accounts, where one chamber says $1 billion and the other chamber says $1.2 billion and they compromise somewhere in between, the list of projects in the House earmark list is almost always completely different than the list of projects in the Senate earmark list. So the House and Senate earmark totals tend to be additive. (In FY 2023, the House bill had $1.715 billion in USDOT earmarks, the Senate bill had a completely different list totaling $932 million, and they compromised by taking everybody’s earmarks, totaling $2.595 billion at DOT alone.) And since the Senate 2024 bill only had $2.1 billion to the House’s $4.0 billion (DOT and HUD together), that means that other stuff in the Senate bill has to be cut by several billion dollars in order to fund the House earmarks.

Here are those three priorities expressed numerically, in billions of dollars, compared to last year.

Everything else in the bill. At this point when the House and Senate were first putting together their bills, the House and Senate were $10 billion apart ($34.3 billion vs $44.3 billion, as shown above). As the table below shows, they had a fairly sizable difference in their priorities for FAA capital programs (because the Senate bill used a spurious emergency designation on some extra FAA Facilities and Equipment funding). But the (GOP) House and the (bipartisan) Senate were less than 10 percent apart on the totals for the remainder of the HUD budget, on the non-grant funding for the remainder of DOT, and on the independent agencies.

The House wound up taking their bad budget allocation out on the major USDOT grant programs, funding them at a level one-fifth of the Senate total ($1.7 billion, collectively, versus $8.5 billion).

We think that the final bill will have at least $38 billion to spread around for the everything else (after housing renewals, FAA Operations, and earmarks), perhaps a few billion more – but that compares to an equivalent Senate spending level of $44.3 billion. In the event that significant reductions from the Senate level need to be made, the easiest course of action (in terms of fewest potential policy impacts or personnel cuts0 are probably in some of the major DOT grant programs. To recap the relative levels of those: