Author: Christy Gullion

Late yesterday, a potential budget agreement between the White House and Congress was released. It would boost both defense and domestic spending over the budget caps for the next two years, and lift the nation’s debt limit through March 2017. If the deal holds, it would eliminate the dual threats of a government shutdown and a debt default until after the November 2016 elections.

The Bipartisan Budget Act of 2015, which has not yet been finalized, would boost defense and domestic spending above sequestration levels by $50 billion in the first year and $30 billion in the second year. In each year, there would be an additional $16 billion spent using the Overseas Contingency Operations fund. It would also curtail a huge increase in Medicare premiums due to go into effect in January for some beneficiaries.

Specifically, the deal would:

• Increase discretionary spending by $80 billion above sequester-level spending caps (PL 112-25), with the increase split evenly between defense and nondefense programs. Sequester relief of $50 billion would be applied to FY 2016 and $30 billion for FY 2017.
• Include an additional $32 billion in Overseas Contingency Operations war account funding, split evenly between FY 2016 and FY 2017. That means spending would rise by $66 billion above the caps for FY 2016 and $46 billion above the caps for FY 2017.
• Draw offsets from other legislation, such as the House-passed 21st Century Cures medical research initiative (HR 6).
• Raise the debt limit, giving Republicans the opportunity to sell the package as raising the debt limit in exchange for constraints on spending. Democrats will insist that it is a so-called clean debt limit increase that is attached to other legislation. Two aides said the government’s borrowing authority increase would likely last through March 2017.

While it is no grand bargain like the Murray-Ryan Budget Deal from 2013, it will eliminate the risk of sequester cuts and provide some certainty in federal budget and appropriations for research universities.

With the passage of a continuing resolution late last night, the federal government is open for business on this first day of FY2016! The threat of shutdown diminished greatly last Friday when House Speaker John Boehner (R-OH) announced his retirement effective October 30, 2015.

The CR will fund federal through December 11 and includes $1.017 trillion in annualized spending, which is roughly equal to the FY2015 level (most programs would be funded under the CR at a rate 0.21 percent lower than enacted FY2015 levels). The CR would continue to fund Planned Parenthood and also provide $700 million in emergency dollars to fight Western wildfires. It would also renew expiring authorizations for the E-Verify program and the so-called Internet Tax Freedom Act (PL 105-277).

So, what happens between now and December 11? There are many possible outcomes for FY2016 appropriations. In the best case scenario, Congress could effectively negotiate a budget deal – similar to the 2013 Murray-Ryan deal – which would lift the budget caps for both defense and non-defense discretionary spending and remove the ongoing threat of sequester. This would pave the way for advancing spending bills (or an omnibus bill) before the December 11^th deadline. If a budget deal is slow to materialize, then we could see another short term CR to give Congress more time to negotiate this deal. If budget negotiations fail, we could see the threat of shutdown reemerge or Congress could agree to a yearlong CR at FY2015 levels.

Early signs indicate that a budget deal is possible. Senate Majority Leader Mitch McConnell (R-KY) has already initiated preliminary discussions with President Obama and Speaker Boehner on a possible deal. Additionally, Democratic staff said this week that they are already beginning to set new topline numbers and identify possible offsets.

The Office of Federal Relations will continue to monitor and report on progress.