Federal Relations

September Stalemate on FY14 Appropriations

Members of Congress return to DC this week to take on the farm bill, try to keep student loan interest rates from doubling on July 1st, and continue with the FY14 appropriations process. And while immigration reform is still being debated, some are now skeptical that the House and Senate can come get to a compromise.

FY14 Appropriations

The path to enacting FY14 appropriations measures is paved with legislative friction as Congress is showing no signs of undoing the sequester. At this point, there are three budgets — House, Senate, and White House — all of which assume no sequestration, but include different ways to account for the cuts in later years. House Republicans would meet the overall cap but ignore the mandated split between security and non-security spending. Senate Democrats would use a higher overall level. And the White House budget request also ignores the overall cap. This is all leading up to a September stalemate as the current fiscal year comes to a close on September 30th.

Meanwhile, House Appropriations subcommittees approved their first two spending bills before Memorial Day (Homeland Security and Military Construction/Veterans Affairs), each with just a slight increase over current levels. These slight increases, along with spending increases expected in the soon-to-be-considered Defense bill, won’t leave much for the remaining non-defense bills – including the Labor-HHS-ED bill – which will have to take significant cuts to reach post-sequester levels as outlined by the 302(b) allocations approved in the House last month.

The Senate hasn’t approved its 302(b) allocations nor released any spending bills, but we expect to see Senate Appropriations Chairwoman Senator Mikulski (D-MD) move forward with FY 2014 using a top line spending number that assumes the sequester has been replaced.

FY15 Budget Process Underway

In Washington, DC there are usually three budget cycles ongoing at any given time. Right now, federal agencies are spending FY13 money; Congress is working to approve spending levels for FY14, which starts on October 1st; and federal agencies are beginning to build their FY15 budget requests. To guide this process, the White House released its annual guidance memo last week. This guidance memo noted that the President still hopes to replace the sequester with a combination of spending cuts and changes in entitlements and the tax code. But OMB Director Burwell effectively told agencies to plan for sequester by asking them for proposals that “reflect a 5 percent reduction below the net discretionary total provided for your agency for 2015 in the 2014 budget” as well as a plan that would double that reduction in 2015 to 10 percent. Agency budget requests will be submitted to the White House later this fall and ultimately combine to form the President’s budget delivered to Congress (usually) in early February.