Quick Hits - what it means
With all the discussion about the new administration’s policies, cabinet confirmations, filling senior executive positions throughout government, a Supreme Court nominee and following the Twitter sphere, where should one focus? Bottom line: plan for a late, short and quick legislative cycle for FY18. I’ve had the opportunity over the past month to engage with industry, Pentagon and Congressional leaders – a common message from all is the prospect of opportunities for defense. Be engaged and be ready. Your moment will come and pass quickly. SASC Chairman McCain’s first effort to mark a blueprint ahead is here.
What it Means
– The FY17 continuing resolution expires April 28th. It is likely that an FY17 appropriation will be signed before the end of April.
– A supplemental appropriation of $6-9B has been in the works since before the end of the last Congress. Expect it to reemerge within the coming weeks. It addressed a few items that were left on the cutting room floor of the FY17 debate and will provide a bridge of sorts into the FY18 debate.
– The FY18 budget is anticipated to come forward from OMB to Congress by late April, definitely by 1 May. The nominee for OMB director, Rep. Mick Mulvaney (R-SC), has faced a challenging confirmation process but should ultimately be confirmed. Delivery of the President’s budget request typically signals the start of the process and legislative season.
– Full-blown posture hearings will not begin before the budget is made public. This effectively delays the start of the process.
– Committee staffs are largely waiting for direction on a legislative schedule. If you have a stable program without special needs, it’s worth checking in with your committee professional staff member to provide your routine update. If you have special needs, it’s best to wait for confirmation of your budget number when the FY18 budget is released. Communication with your oversight committee’s professional staff member(s) early is always a good idea.
– Make sure your government customer understands the status of your program and your contract as we approach an interesting year. The flow of funds for FY17 will come quickly once that appropriation is signed.
Don’t be distracted by the noise. The process remains in place and really can’t be short-circuited.
With the Presidential Inauguration just days away, Senate confirmation hearings have dominated Hill activity in preparation for the start of the new administration.
The confirmation hearing for General James Mattis, up for Defense Secretary, was held last Thursday morning. His hearing went quite well. The Senate voted 81-17 to pass a required waiver that would allow General Mattis to take the position despite legislation that states that retired military officers cannot serve as civilian head of military within seven years of active duty. The House passed the waiver on Friday with a vote of 268-151, with only 36 Democrats supporting the bill. Democratic resistance in the House can be attributed to a last-minute reversal by the Trump transition team of a plan for Mattis to testify before the HASC last week. Waiver legislation will now move to the President’s desk to await his signature after he is inaugurated on Friday. Today, SASC voted 26-1 that the full Senate should approve General Mattis for this position once the President signs off on it after taking office, meaning it will not have to go through committee after the President’s signature.
Hearings for Rex Tillerson, nominee for Secretary of State, and Mike Pompeo, nominee for CIA Director, were completed last week. Jeff Sessions, nominee for Attorney General, faced two days of questioning during his confirmation hearing. President-elect Trump surprised some with his nominee for the Secretary of the US Department of Veterans Affairs, Dr. David Shulkin, who presently serves as Under Secretary of Health at the VA in the Obama administration.
Interior Secretary potential Ryan Zinke and Education secretary nominee Betsy DeVos had their respective hearings Tuesday afternoon. The hearing for President-elect Trump’s pick for UN Ambassador, Nikki Haley, and Treasury secretary, Steven Mnuchin, will take place today. Senator Elizabeth Warren has expressed her opposition to Trump’s nominee for this position, and will continue to do so leading up to the hearing. Tom Price, nominee for Department of Health and Human Services, faces confirmation today as well.
The hearing for Mick Mulvaney, Trump’s pick for the leader of the Office of Management and Budget, will occur on January 24th.
Early battles taking shape
Senator McCain, SASC Chairman, staked out his terrain in releasing a plan to increase the Pentagon’s base budget and spending on nuclear weapons by $430 billion over a span of five years. The bill would produce a total defense spending proposal of over $700 billion, which is almost $100 billion more than what was authorized for this year. The bill would bring in multiple changes, such as increased troop posture in the Army to over 500,000 active duty troops, increasing the size of the Marine Corps to 200,000 by FY22, newer warships and more fighter jets. This move will require overturning the spending caps put in place by the 2011 Budget Control Act. While some may argue the fine points of the plan, the defense industry overwhelmingly supports the plan’s fundamental concepts – remove sequestration; investment in readiness, and, smart investment in capability – reversing a multi-year decline in defense spending.
Health Care Reform
The Obamacare debate continues, with Republicans pushing to repeal the Affordable Care Act that is said to cause 32 million people to lose their health insurance and double the price of premiums over the next ten years. The analysts at the Congressional Budget Office will play a critical role in the development of this legislation, especially as they bring to light the difficult compromises and sacrifices that arise with health care reform. During this process, Republicans have discussed funding up to $9 billion in health care subsidies to avoid wreaking havoc on the insurance market for the American people. It is still unclear whether this move would require an appropriations bill or a repeal and replacement bill.
Most Republicans believe the window is open to finally move on a significant streamlining of the tax code, including notable reductions in all tax rates. Some have been surprised to learn of the linkages between the Health Care Reform debate and the Tax Reform dialogue. Managing these federal revenue streams will require uncommon Congressional leadership to implement complimentary legislative changes.
Attendance and participation in the Presidential inauguration Friday is anticipated to be lighter than is typically the case; fewer than one million are expected to fill the National Mall. Many Democratic lawmakers have indicated they will “boycott” the inauguration. Regardless, the peaceful transition of power moves forward.Read more
President Obama visited the Hill today to urge Democrats against “Trumpcare.”
Players and movements aplenty
Paul Ryan was re-elected as House Speaker on Tuesday with 241 votes, defeating challenger Nancy Pelosi and her 194 seats. Ryan will continue his leadership for another two-year term on the Hill. There are several new players coming on the scene in the Senate, as freshman John Kennedy (R-La.) and Marco Rubio (R-Fl.) will join the Appropriations Committee. Elizabeth Warren (D-MA) turned heads with her move to the Senate Armed Services Committee. In the House, Diane Black is the most likely candidate for the Chair of the House Budget Committee, replacing current Chairman Tom Price (R-Ga.) if she is successful. Still to be confirmed are House appropriations seats and subcommittee chairmanships, most notably HAC-D. Many consider Kay Granger (R-TX) to be favored to get the nod for defense appropriations over Hal Rogers (R-KY)…we will know very soon.
Senate budget reveal
Senate Republicans unveiled a first look at the outline for their budget proposal that will seek to repeal Obamacare, supported by Senate Majority Leader McConnell. Expect a vote on the adoption of the budget to come next week, with the Republican-dominated House to follow shortly after.
Vice President-elect Mike Pence returned to the Hill today to meet with Republicans to discuss future plans for Obamacare.
Office of Congressional Ethics challenged
The biggest news of the 115th Congress’ first day back on the Hill revolved around House Republicans’ attempt to revamp the Office of Congressional Ethics in order to create the Office of Congressional Complaint Review. Suggested by Rep. Bob Goodlatte of Virginia, the change would put the new office under direct supervision of the bipartisan House Ethics Committee. Significant public backlash forced the GOP to drop the proposal and agree to revisit the matter at a later date. House Speaker Ryan objected to the proposal, and President-elect Trump expressed his disagreement as well. Now the House rules package will move forward without the OCE stipulation. This proved to be a needless early procedural and messaging stumble.
The New Administration comes into focus
Look for Republican defense hawks to encourage significant increases in defense spending, in accordance with President-elect Trump’s promises for a prominent military build-up while he is in office. Finally removing sequestration from the table of alternatives will be an early and visible effort. Additionally, and as previously reported in Quick Hits, expect a supplemental appropriation early in the calendar year.
Defense companies are quickly recognizing that a nimble communications staff will be required to keep up with President-elect Trump’s use of social media to quickly stake out a position on challenging issues.
It will be a busy year. Stay tuned for easy-to-read and easy-to-digest Quick Hits summaries.Read more
Wishing you a Happy Holiday and a joyful New Year from Capitol Integration!Read more
We are now operating the government on a Continuing Resolution (CR) that will take us seven months into FY17. Unlike a simple date extension CR’s of late, this CR ran 70-plus pages with numerous “anomalies.” The CR passed the House 326-96; passed the Senate 92-7.
Part of the reason the CR passed with relative ease is the knowledge that a significant supplemental appropriation will come forward early in 2017 – it could be as big as $10B before the dust settles.
The FY18 budget, typically due from the President to Congress the first Monday of February, likely won’t get to Congress before April. Agency inputs to the FY18 budget have been complete for some time, albeit without the final touches of a new administration.
National Defense Authorization Act (NDAA)
Passed the Senate with ease and moved to President Obama’s desk this week. Of particular note, the bill elevates US Cyber Command to Combatant Commander status, making it the 13th Major Combatant Command in the Unified Command Plan. Additionally, substantial acquisition reforms, too many to detail here, represent some of the most significant legislative policy prescriptions for DoD in decades.
Contrary to the media headlines of ExIm being a corporate welfare program, several small-to-medium-sized businesses indicate that ExIm affords their international customers access to funding that is not always available overseas. The CR mentioned above failed to include a provision that would restore the Export-Import Bank’s financing authority.
National Defense Authorization Act (NDAA)
On Friday the House passed the $619B NDAA by a vote of 375-34. The bill will move to the Senate this week, where it is expected to receive similarly strong support and easy passage. The bill reflects a compromise of the House and Senate versions passed out of committee earlier this year. The compromise provides for $9B in overseas contingency funding (OCO) versus the $18B in the original House version of the bill. The $9B in OCO directs $3.2B for readiness shortfalls in the base budget, and $5.8B for troops in Afghanistan and operations in Syria. See the text of the NDAA here.
See the HASC summary of the bill here.
Despite the relatively good news of agreement and compromise on the NDAA, appropriations will take months longer than previously anticipated. This week Speaker Ryan and Leader McConnell agreed to the incoming administration’s request to extend the continuing resolution (CR) into March, and possibly April. The time is expected to give the Trump team an opportunity to put its stamp on any funding agreement, while also allowing the Senate time to process the myriad confirmation hearings required in order to seat a new cabinet.
Fourth Annual Reagan National Defense Forum
- Generally very positive impressions of the defense spending outlook in the Trump administration with some caveats:
- As a practical matter, increases in defense spending and relief or repeal of sequestration, non-defense elements of government will have to receive some relief as well, although not necessarily equal relief
- Despite Republican control of the House and Senate, Democrats in the Senate can impose the 60 vote threshold and prevent passage of funding legislation – Republicans won’t be able to just force everything through
- The nomination of General Mattis is universally appealing to the defense industry and Congressional defense leadership.
- Senator Gillibrand (D-NY), a member of the Senate Armed Services Committee, has indicated she will not support the required legislative waiver for General Mattis to serve in this civilian role less than 7 years since his departure from active duty. The waiver legislation, supported by Chairman McCain and many others, may be a test case to see how difficult Senate Democrats will make the confirmation process for the Trump administration. Senator Gillibrand’s resistance can force a 60 vote requirement in the Senate, or we could see her use the leverage to force the Senate to revisit her previously failed legislation requiring changes to the pentagon’s handling of sexual assault cases. Look for the latter at this point.
- A supplemental funding request of between $6B and $9B is imminent. It is generally viewed as a welcome relief valve softening the impact of the CR. This supplemental will likely be passed soon after the new Congress forms in January.
See the recently published calendars of the new 115th Congress below.
The House and Senate returned from the election break to get back to work for the first time in the new political atmosphere Both chambers remain in Republican control, giving President-elect Trump a unified government for the first two years of his term – a scenario few would have predicted going into the election.
House Republicans re-elected their existing leadership team, retaining Paul Ryan (R-WI) as the Speaker of the House. House Democrats delayed their leadership elections amid loud opposition from younger members demanding recognition from more senior members. The top three House Democrats are 76, 77 and 76 years old, respectively. Rep. Tim Ryan (D-Ohio) announced on Thursday that he will challenge Leader Pelosi. Pelosi, however, has expressed confidence in her victory over a challenger.
Senate Republicans re-elected their existing leadership team as well, retaining Mitch McConnell (R-KY) as majority leader. Senate Democrats quickly elected Chuck Schumer (D-NY) as their leader, while simultaneously elevating four additional Senators to the Democratic leadership team. There are now TEN members on the leadership team, a nod to the diverse views of the party.
Congress had been expected to complete the FY17 spending bills in an omnibus appropriation before Christmas. As of Wednesday, the signal from President-elect Trump, delivered to Speaker Ryan by Vice President-elect Pence, was to do a short term Continuing Resolution into March 2017. In theory, this prevents a fight with Democrats over spending levels before the end of this Congress. While a CR is never a good solution, the Trump team and Republicans generally believe better outcomes can be agreed upon in the new Congress. This is not the solution Leader McConnell supported in the Senate, but the Senate has recognized demonstrating unity with the Trump administration will be a good start.
There are many repercussions of delayed FY17 funding. This will be a more complicated CR than just a single page change of date for expiration of funds. Several programs require special consideration and will be addressed as “anomalies” to the CR.
The National Defense Authorization Act (NDAA) for FY17 is nearly completed and will likely be ready to move to the President’s desk by early December. Relatively minor details remain, but big issues such as topline and OCO spending have been agreed. A compromise to add $9B above President Obama’s FY17 defense budget request, effectively split the difference between Senate and House proposals.
The House Republican caucus had clearly aligned enough votes to restore a newly formulated plan to allow a return to some level of Congressionally directed spending. Many lawmakers remain frustrated with surrendering their constitutionally derived authority to control federal spending to the Executive Branch. Speaker Ryan prevented the vote from taking place, strongly suggesting that this was not the time to vote on the issue. Look for earmarks to continue working their way back into the process as a new Congress, with renewed vigor, establishes its footing alongside a new Republican President.
FY18 Budget Outlook
A new budget is traditionally delivered from the President to Congress on the first Monday of February. Often this target date is missed in the first year of a new Presidency. It is anticipated that the FY18 budget will not be ready for delivery to Congress before early April 2017. This should allow sufficient time for a Trump administration to put some imprint on the input, as well as to be informed by any decisions of the FY17 CR.
Early indications suggest that sequestration will be quickly repealed in the new Congress. Ideally this should restore a sense of continuity in planning across government. Further, indications abound suggesting a near-term increase in national security spending across a variety of key programs.
Throughout the week on Capitol Hill, in both House and Senate offices, one could sense that change is clearly afoot. When there is change in Congress, there is opportunity, good and bad. Staying engaged in the process, thinking long-term about objectives and accepting the new realities are all part of doing business in Washington, DC.Read more
One of the most scrutinized election seasons in American political history finally concluded last night, and its immediate implications for upcoming legislation and policy direction cannot be understated. The political establishment has been put on notice that long-simmering issues such as immigration policy, the national debt, trade, size-of-government, and wage disparity, to name a few, must be addressed in a different and more urgent manner. Few recognized the depth and breadth of unrest within the electorate.
Of note, as relates to doing business with the US government customer, the process by which funds flow to departments and agencies remains the same.Knowing how, when and where to address needs, requirements, resourcing, budgets, appropriations and contracting remains unchanged by the election results.
Despite losing some seats, Republicans have maintained their majority in the House. The challenge in the coming legislative days for Speaker Paul Ryan will be to ensure that there is, in fact, a governing majority that can pass legislation. With a highly charged freedom caucus still firmly in place on the right, achieving the necessary 218 votes to pass legislation will routinely require significant Democratic support. Overall, expect to see a continued trend of difficult votes and special procedural maneuvers used on each side to achieve certain gains.
Control of the Senate remained in question until the final moments of this election cycle. Similarly to the presidential race, there were several key contests that made the race especially interesting: New Hampshire, Pennsylvania, Missouri, North Carolina and Florida.The razor thin margin by which Republicans have maintained control (51 – 47, with Louisiana holding a run-off on December 10th and New Hampshire Democrat Hassan leading at the time of this post) will assure that new policies will not simply be steam-rolled through Congress. In recent years, while in the minority, Democrats have successfully stalled or prevented passage of bills on demand. Working through this complex dynamic will require significant political skill.
The Lame Duck Session
Congress will return to the Hill on November 14th with a difficult laundry list facing them. Look for appropriations issues to dominate the headlines well into December.
To date, the VA/MilCon appropriation is only one of 12 FY17 spending bills to be enacted – it provided the legislative vehicle for the Continuing Resolution (CR). The CR will expire on December 9th, putting pressure on the remaining bills. With 11 appropriations bills left to complete in just 16 scheduled legislative days, an omnibus appropriations bill that rolls multiple spending bills into one is the most likely outcome. Recall that Speaker Ryan ran for his Speakership on a platform that vowed to avoid such giant spending deals because of their typically unclear final negotiations.
Further complicating the budget dialogue is the Department of Defense and its role in the process thus far. The DoD has raised the specter of requesting a much larger “supplemental” appropriation in addition to the present FY17 bills under consideration. Many had expected a request of approximately $3 billion to forward in March 2017. The DoD has recently signaled a request closer to $6 billion, and has pushed up the timeline to before March. They have sent mixed signals as to exactly what needs this supplemental funding would address. DoD Comptroller Mike McCord says that need is $6 billion, whereas Secretary of Defense Carter contradicts his subordinate by suggesting the final figure is “not settled.” Chairman McCain says any supplemental funding shouldn’t be allocated solely for war funding, but must be used for the “total force” in order to address readiness and personal needs in addition to the foundational costs. This debate within the debate will significantly impact the passage of the FY17 omnibus.
Justice Against Sponsors of Terrorism (JASTA)
The bill previously passed both chambers with ease but was subsequently met with a veto from President Obama. It survived a swift veto override vote, the first delivered to President Obama. The popularity of the provisions allowing survivors of 9/11 to pursue justice carried the day. Now that we recognize some unintended consequences of the original bill, look for Congress to quietly insert some revisions to the bill into a lame duck legislative vehicle – this will likely be in the omnibus. Look for broader review of JASTA in the new Congress in January.
Supreme Court Nominee
The nomination of President Obama’s choice for the Supreme Court to replace the late Justice Scalia, Merrick Garland, will likely die and simply not be taken up before the 114th Congress concludes. . Look for President Trump to select a Supreme Court candidate from his previously released list of potential candidates.
Presidential Transition and Change of Government
President-elect Trump will make over 4,000 appointments to government positions, of which more than 1,000 will require Senate confirmation. This process of filling executive vacancies will take several months.
Future Quick Hits will address the new administration and the ongoing dynamic!
In the eleventh hour before breaking for the election recess, both chambers approved legislation to fund the government through December 9th and address key issues that had stalled its earlier passage.
Wednesday afternoon the Senate passed its stopgap funding measure with a 72-26 vote; the bill would include a prominent $1.1 billion towards combating Zika as well as $500 million to states suffering from natural disasters, along with its primary function of funding the government and avoiding shutdown. Initially met with resistance from House Democrats, a bipartisan Water Resources Development Act (WRDA) pushed the bill forward.
On Wednesday evening the House passed the aforementioned WRDA to address the crisis in Flint, Michigan with federal funding that will go towards drinking water infrastructure and aid. The bill passed overwhelmingly with a 399-25 vote, after an added amendment detailing $170 million in aid passed 284-141. The House version differs from the Senate version, in that the House version authorizes the spending and the Senate is looking to appropriate funding. The House WRDA will be part of a much larger conference for the Senate’s package that includes Army Corps of Engineers projects, transportation and environmental restoration provisions. Look for this conference to happen when Congress returns after the election, as well as further discussion on the specifics of the Flint crisis.
The WRDA significantly opened the way for an agreement to clear the impasse between the two chambers after clever work from House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and Minority Leader Nancy Pelosi. The final bill passed with a 72-26 vote from the Senate and 342-85 in the House.
The quick and decisive movement of this bill is coming directly following both chambers’ vote to override the president’s veto of the Saudi Arabia bill, which allows for families of 9/11 victims to sue Saudi Arabia.
Senators and Representatives, having tied up all loose ends last night, will now make their way back to the campaign trail to focus on elections, and will return to the Hill during the lame-duck session in November after the election.
The Senate voted overwhelming on cloture (decision to limit further debate to 30 hours) on the motion to proceed for the “shell” of a continuing resolution to fund the government through December 9th.
The vote was an overwhelming 89-7, easily surpassing the required 60-vote threshold to avoid filibuster. While the bill could still meet opposition later on, this move suggests at last the contours of a short-term spending agreement.
As with all CR actions, businesses with federal contracts should make the extra effort to assure their federal customer understands any special circumstances associated with he contract’s funding mechanisms.
Some of the most prominent issues at stake in the bill are transportation, campaign finance and Internet domain rights. The majority of discussion and debate, however, has centered on the bill’s provision for Zika funding (around $1.1 billion). The bill moved through after Senators removed language that would block Planned Parenthood’s partner clinic in Puerto Rico from accessing federal grants, considered a win for Democrats. It is looking more and more likely that the bill will not include relief funding for the contamination crisis in Flint, Michigan or for the flooding in Louisiana. Expect debates on these riders to continue this week, and potentially be revisited during the post-election lame duck session.
Also, late yesterday, Leader McConnell signaled to expect a Senate vote to override a threatened presidential veto on recently passed legislation allowing families of 9/11 victims to sue Saudi Arabia. The President has until Friday to veto the bill. An override vote would take place next week.