Quick Hits - what it means
FY18 Defense bills take important first steps
Recognizing that getting all appropriations bills completed before the October 1st start of the fiscal year, Congress appears to be positioning for a security “mini-bus” comprised of Defense, Homeland Security, VA/MILCON and Energy/Water.
VA/MILCON appropriations moved through committees almost without notice in June.
Last week, 3 of 4 defense committees/subcommittees approved their FY18 “mark” – their puts and takes on President Trump’s $603B budget request. Given the late arrival of the FY18 budget (late May), it was a bit of a surprise to see committee marks so quickly – attributable to a reduced hearing schedule and clear desire to keep the prospect of a long-term continuing resolution at bay.
Each committee has a slightly different approach; however, common themes include:
- Base + OCO approaching $700B
- Significant investment in readiness accounts
- Less investment in procurement than expected based on campaign message
- Hearing testimony suggests FY19 will be the “buildup” year for Trump
Topline numbers by committee
- Chairman Thornberry’s bill authorizes:
- Base $614B
- OCO $64.6B
- Chairman McCain’s bill authorizes:
- Base $632B
- OCO $60B
- Chairwoman Granger’s bill appropriates:
- Base $658B
- OCO $74B
Political forces continue to impinge on real legislative progress on appropriations and the President’s legislative agenda. Nine legislative workweeks remain until the new fiscal year (FY18). Some highlights and obstacles to consider (see bold for major areas in play):
What it Means
Despite the late arrival of the President’s FY 18 budget proposal, defense committees are attempting to press ahead with “posture” and “budget” hearings. DoD principals and service chiefs have been testifying regularly over the past few weeks and continue this week. Notably, HAC-D has forgone several traditional hearings. The HASC has scheduled their full committee markup 28 June, just before the July 4th recess. HASC is traditionally the first of the four defense committees to “mark” their bill.
Nearly two dozen budget or appropriations hearings are scheduled this coming week.
This past week was to have been “infrastructure” week, with coordinated messaging on the need for extensive investment in transportation. Messaging was completely eclipsed by the testimony of former FBI Chief James Comey.
This coming week, Attorney General Sessions will deliver equally captivating testimony sure to continue the distraction from required legislative business.
Senate Republicans appear to have established the end of June as an internal deadline to find a solution to their version of a fix to the Affordable Care Act. It appears less likely that health care overhaul will survive the political calendar.
OMB Director Mick Mulvaney
How did your programs fare?
Many had hoped the delay in forwarding the budget would allow for Trump administration priorities to be more clearly sorted out and funded. That is not the case. In the weeks immediately leading up to the public unveiling, there had been frenzied back-and-forth exchanges between OMB and various federal agencies.
Unfortunately, the result appears to be a budget document rife with errors and inconsistencies. Further, several of the attempts to fund or de-fund policies in the budget appear sure to cause politically charged debate throughout the summer.
Congressional appropriations committees are well into their hearing schedule and hoping to pick up the legislative process and recover some lost time. Several subcommittees have chosen to forego the rigid hearing process in order to speed things up. “Markups” of the budget will occur as early as the end of June (about two months later than normal).
Look for the DC summer to be as hot as ever.
What you need to know…
Wasting no time, the House and Senate are now fully engaged in the FY18 service posture hearings – we are months behind the traditional legislative schedule for beginning the budget process. The FY18 budget still has yet to be delivered to Congress, and is now estimated to arrive by the last week in May – nearly four months late.
Director Mulvaney (top) and Speaker Ryan (bottom) have all been working to ensure the government stays functioning. McConnell is confident the stopgap bill will provide short-term relief.
What you need to know…
Sen. Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer may have found common ground on FY17 appropriations, but little else.
It was a busy lead-up to the two-week Congressional Easter break. Despite the appearance of failing to pass key legislation and having to exercise a rules change in the Senate to confirm an Associate Justice, second order headlines could read“General optimism to pass FY17 appropriations before the CR expires.” Having visited 25 offices this week and meeting with Senators, Congressmen, Committee and Subcommittee Chairmen, committee staffs and member office staffs, there is a positive development in sight. Republicans and Democrats in both chambers acknowledge that it is likely we will see passage of an omnibus appropriation that includes at least the overdue FY17 defense and homeland security appropriations – and could include others such as State/Foreign Operations. International developments and the need to provide DOD with immediate support to address readiness challenges portend a brief moment of bi-partisan agreement. Readiness challenges in Dod were highlighted again this week in fairly stark terms during testimony from Service Chiefs. Should an omnibus pass, it frees up some workspace to get on with FY18 legislation…FY18 is now just six months away.
The FY18 budget delivery to Congress will occur by May 15th. Defense committees had been targeting mid-May as a potential “mark-up” window. Look for mark-ups in late May in the House, and early June in the Senate…best case.
The Senate confirmed Supreme Court nominee Neil Gorsuch on Friday with a 54-45 vote, after Senate Majority Leader Mitch McConnell and Republicans eliminated the 60-vote cloture to end debate and filibuster for high court nominees.Read more
With only eight legislative days left before the CR expires on April 28th, and a two-week recess between now and then, opportunities to close a funding deal are limited. While House Speaker Paul Ryan has confidently expressed there will be no shut down, House Minority Leader Nancy Pelosi has expressed concerns about the sheer number of problems to be solved, each requiring bipartisan support, in the next few weeks. There are still 11 appropriations bills required to come to the Senate floor, which will most likely be introduced in an omnibus for time’s sake.
Senator Roy Blunt (R-MO) had said that the likelihood of including President Trump’s funding for the border wall in the 2017 wrap-up bill was quite low.
What it Means
What should you be doing right now?
- Confirm your FY17 appropriation survived the House-passed bill last week
- Determine if any of your prior funding (FY15-16) suffered a rescission
- Confirm the status of your program(s) in the FY17 supplemental
- Maintain communication with your government customer; they know what they submitted for FY18 and should be revealed in May
- Recognize that your government customer is working diligently on FY19 and FY20 planning today; engage now
What You Need to Know…
Senator Thad Cochran (R-Mississippi), Chairman of the Senate Appropriations Committee and Chairman of the Defense Subcommittee in Appropriations
President Trump’s skinny budget (the broad outline of a budget) for FY18 was delivered to Congress last week. It would remove $15B from non-defense programs while adding $54B to DOD, DHS and some security portions of DOE. The “pay-fors” of the $54B equate to serious cuts in several remaining agencies. OMB Director Mulvaney made his position clear that this budget requires difficult discretionary spending cuts to help shift funds towards the new White House vision; a vision much more aligned to “hard power.”
The FY18 defense budget blueprint looks to bring $639B to defense with a $574B base budget, and an additional $65B in OCO funding. Specific details for the defense blueprint will likely not be available until May when they are delivered to Congress.
FY17 Spending Bill Movement
The FY17 spending bill has been in limbo for months. Recall that the government is presently operating under a continuing resolution that funds the government at FY16 funding levels; the CR expires April 28th.
Yesterday, the House Rules committee passed a rule allowing the FY17 defense appropriationto come to the House floor, which will happen today, for a vote that could reinvigorate the funding approval process. The $583B defense appropriation adds $9B above President Obama’s original budget request through the Overseas Contingency Operations (OCO) account. The original bill added $18B to OCO, broke the BCA spending caps and drew much criticism from budget experts. Bipartisan support of this revised FY17 defense appropriation in the House is anticipated.
The bill will then proceed to the Senate, where it is expected to stall; Senate Democrats are not yet in agreement on proposed increases/reductions to defense and non-defense spending categories. Democrats have long held that any increases to defense spending must be matched by increases in non-defense spending.
A supplemental appropriation has emerged at the same time as the renewed FY17 appropriations activity. Specific details of an approximately $30B supplemental appropriation have not yet been revealed, but are expected to be released publicly in March. This supplemental is widely expected to provide a “down payment” on President Trump’s signature border wall.
Last week, President Trump formally proposed the FY18 $603B “skinny budget” for defense, providing the contours of the topline without the details. The detailed FY18 budget will not be revealed before May. OMB Director Mulvaney claims this will be a 10% increase in defense; however, that 10% is as measured against the 2011 BCA cap baseline of $549B. The budget cap has been evaded each of the past several years using the Overseas Contingency Operations (OCO) account. Defense policy experts, as well as SASC Chairman McCain (pictured above) and HASC Chairman Thornberry, recognize it’s only a 3.2% increase above President Obama’s FY17 request. The House Armed Services Committee proposes that $640B in defense spending is the required number.Read more
What a time we’re in! A complex budget process has now been made even more challenging with a White House and Congress fully engaged in national security issues of great significance. Despite the high-energy news headlines and the distractions of the day, there will be funding bills that move forward in the coming months.
Congressional leadership appears to remain willing to help the new administration implement its agenda through legislative actions. How long the favorable alignment lasts is not known; however, it is likely Congress will prove to be a moderating force over time. Elections have a way of focusing actions and 2018 mid-term elections are not far off. Every Member of the House and roughly one third of the Senate – 23 Democrats, 2 Independents and 9 Republicans – are up for election in 2018.
- GOP advocates in Congress have softened their tone recently regarding the Affordable Care Act (ACA). The new tag line is “repair and replace” as many come to recognize that complete repeal may actually cause harm to many in the health exchange.
- The current House GOP tax proposal would see an increase in the federal debt by an estimated $3 trillion over the next ten years. President Trump foresees a quick one-year turnaround for this plan, which will require significant work going forward. Public statements look for movement before 2018.
- Rep. Buchanan (R-FL) (pictured above), Chairman of House Ways and Means, has called the plan very “pro-growth” and predicts a release date of August. He is confident that the new plan will help business interests and thus increase investment, propping up consumers who serve as 2/3 of the nation’s economy.
- Any delay in confirmation of Congressman Mick Mulvaney as OMB Director will directly impact timing of unfinished FY17 bills and the FY18 budget.
- Press Secretary Sean Spicer said the budget would be out in a few weeks, but there is much speculation among Democrats in particular that the timeline will be much longer.
- As reported in previous Quick Hits, the FY 18 budget will be delivered to Congress nearly three months later than is traditionally the case. Anticipate an FY18 budget to OMB byMay 1st, and to Congress by Memorial Day.
- A supplemental FY17 appropriation will be forwarded to Congress in March; inputs are due from Executive Branch agencies by March 1st.
- Questions are circulating about when the debt ceiling may actually be raised, as it could come as early as May or as late as August or September. GOP members will look to separate the debt ceiling discussion from appropriations battles.
- Rep. Diane Black (R-TN) (pictured below) will most likely become Budget Committee chair after the confirmation of Congressman Tom Price for HHS Secretary, and she could bring strong thoughts to the table regarding ACA.
- Countless senior civilian appointments remain unannounced, unconfirmed, and therefore, unfilled across government. SASC Chairman McCain has expressed concern at the slow pace of names being forwarded to his committee for consideration of numerous defense posts. Beneath the surface it is clear that SecDef Mattis has expressed his intent to offer input on leadership positions within his department.
Status of Cabinet confirmations
Secretary of State: Rex Tillerson
Defense: General James Mattis
Homeland Security: James Kelly
Transportation: Elaine Chao
Health and Human Services: Tom Price
Education: Betsy DeVos
Attorney General: Jeff Sessions
Treasury: Steven Mnuchin
Veterans Affairs: David Shulkin Still to be confirmed:
Labor: Andrew Puzder
Housing and Urban Development: Ben Carson
EPA: Scott Pruitt
OMB: Mick Mulvaney
Energy: Rick Perry