Quick Hits - What it Means
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
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