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Groundhog Day for FY24 Spending

Once again, we’re days away from a potential government shutdown. To recap, House Speaker Mike Johnson (R-LA) and Senate Majority Leader Chuck Schumer (D-NY) came to an agreement over the weekend on a topline spending amount of $1.6 trillion for Fiscal Year 2024. The total reflects a three percent increase to defense spending and a less than one percent cut to non-defense spending, along with some additional stipulations on accelerating cuts to IRS funding and $6 billion in unspent COVID-relief claw backs. While this deal initially came across as a major breakthrough, the reality of what has to follow quickly set in.


On the surface, a shutdown looks more likely than ever - again. Passing four appropriations bills through regular process in the next nine days is an extremely tall order, particularly for the Senate. Not to mention passing the eight remaining bills – which are significantly more contested in the House – in the two weeks that follow. House Republicans’ frustration with the Speaker’s perceived caving on a topline spending deal have spurred conversations about his ability to lead the conference – again.


Despite some optimism earlier this week, border security negotiations are also on shaky ground. Senator James Lankford (R-OK), the lead GOP negotiator on the potential immigration deal, said the text of the agreement could come later this week. Whenever the Senate text is revealed, it will be the subject of intense scrutiny by House Republicans, who want to see the provisions of their top-priority immigration bill become law and are in the midst of an effort to impeach Homeland Security Secretary Alejandro Mayorkas.


However, there may still be good news on the horizon. Objections from lawmakers on passing another short-term CR aside, it’s the most realistic path to avoiding a shutdown. Ultimately, forcing any kind of shutdown could seriously backfire for House Republicans - a less than ideal prospect in an election year. But even if GOP hardliners decide to take their chances on a shutdown, House Democrats could very well come to the aid of an embattled House Speaker with a razor-thin majority to push a funding extension over the finish line – again.


In any case, late April is shaping up to be a crucial time for appropriations. Under the Fiscal Responsibility Act, if Congress hasn’t passed a full-year spending package by April 30th, the act will trigger a one percent across-the-board spending cut. Last week, the Congressional Budget Office (CBO) sent a letter to the House Budget Committee outlining the implementation of the associated spending caps, which could include sequestration. According to CBO, “if enacted funding equaled the annualized amount of funding under the [November] continuing resolution, sequestration would be required and would result in across-the-board reductions ranging from 5 percent to 9 percent for nondefense funding and from zero to 1 percent for defense funding, depending on when appropriations were enacted and what form they took.” Not a great outlook. At the same time, “[t]he ultimate authority to decide those percentages rests with OMB” and changes to budgetary resources could occur in the interim.


On top of the widespread discomfort caused by mandatory spending cuts, the effects of repeatedly delayed FY24 appropriations could very well hamper the FY25 appropriations process. And then we’re all back to square one.


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