Quick Hits - What it Means
The headlines continue to suggest risk abounds. If you are selling to a government customer, you mitigate risk by remaining engaged. Despite what appears to be bad news at every turn, a nearly $700B defense authorization bill (NDAA) moved through the Senate last week. While an authorization doesn’t spend, as does an appropriation, the NDAA represents strong Congressional recognition of national security needs. Additionally, Congress moved a $15B disaster relief bill through both the House and Senate, and on to President Trump, in record time. When pressed, and when the ideological positions can be tempered, important things can get done.
- Health Care reform. The Senate is trying mightily to use the special status of an expiring reconciliation process to get ANY change to the Affordable Care Act (Obamacare) through a successful vote. Squeezing out any bill would allow that Senate version to proceed to conference with the previously passed House version of a Health Care bill. The resistance of Senators like McCain, Collins and Murkowski is largely rooted in the desire to have legislation of this magnitude move through “regular order” via committees, as opposed to moving through a deal with leadership. Odds of Graham-Cassidy passing with 51 votes before September 30th looks unlikely.
- Tax Relief package. Tax relief has been widely mentioned as the top priority for the Republican Party going into the 2018 midterm elections. The players striving to achieve consensus are known as “The Big Six”: Sen. Finance Chairman Hatch, Leader McConnell, Speaker Ryan, House Ways and Means Chairman Brady, Economic Council Director Gary Cohn, and Treasury Secretary Steven Mnuchin. The Senate appears to be striving to achieve a 1.5T tax cut. As with other issues, Republicans are attempting to align multiple inter-related issues to achieve consensus. The House Freedom Caucus leaders, Reps Jordan and Meadows, made clear in a WSJ op-ed this week that they have their own ideas of what a tax package must include.
- Continuing Resolution (CR). Yes, Fiscal Year 2018 begins on Sunday, October 1st. Congress has passed a CR that will run through December 9th. We are a long way from being done with the remaining appropriations process. As is typical, the House has outpaced the Senate on appropriations committee work. The Senate has yet to move any of the 12 appropriations bills to the floor. Look for a series of “mini-bus” appropriations through the fall. As much as we all dislike CR’s, they have been used to some degree in 36 of the past 40 years.
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After being out of office for a month, Congress returned to a significant drum of activity requiring attention in September. Time is critical for these upcoming decisions, as things both on and off the Hill are moving rapidly. See recent developments below.
- Natural disasters like Hurricane Harvey and Hurricane Irma are forcing legislators to pull their attention away from previous debates of tax reform and health care and focus on relief packages. The House and Senate passed a $15B emergency supplemental appropriation that included an increase in the debt ceiling effective until December 2017.
- Appropriations for FY18 have moved to the Senate floor. With less than a month until the start of FY18 on Oct. 1, look for a three-month or six-month CR to maintain funding at FY17 base levels. A CR is sure to include some “anomalies” or exceptions to the FY17 continuation – given the state of tension with North Korea, look for Missile Defense to receive a significant funding boost.
- The House passed its defense spending bill back in July, meaning the Senate’s equivalent is the only obstacle to a fully funded Department of Defense for FY18. Anticipate release of the Senate’s version of the Defense “mark” sometime later in September.
- The FY18 NDAA moves to the Senate floor. With Senator McCain back on the Hill, it will be crucial that the Senate passes their version quickly and moves forward to conference. As with defense appropriations, look for international tensions to influence decisions and provide supporting rationale for increases.
- This week, President Trump announced that his administration would be ending the Deferred Action for Childhood Arrivals program, or DACA, previously pioneered under Obama. He has given Congress a six-month window in which to engineer a replacement program before he begins cutting off the program’s benefits.
Stay tuned for a busy fall session of legislative activity. We watch it so you don’t have to!Read more
A busy July by any Congressional standard. Here’s a brief overview of recent legislation by the numbers:
- Completed House spending bills: 4
- Completed Senate spending bills: 0
- Total spending bills to be passed before October 1st: 12
Now take a closer look at the activity so far:
- The Senate had hoped to move its version of the NDAA to the floor immediately following Health Care debate; however, the wild ride of the Republican-led Health Care repeal effort threw a wrench in that plan. Chairman McCain had hoped to participate in an abridged NDAA floor debate. That didn’t happen and Chairman McCain has returned to Arizona for cancer treatment. It is unclear when the NDAA will move to the Senate floor.
- Congress hopes to move on to tax reform quickly in an effort to accomplish something this year. Frustrations boiled over on the Senate floor as Republicans acknowledged their only “win” this year has been the confirmation of Justice Gorsuch.
- The GOP timeline to produce a budget before the recess is shrinking. Current defense budget proposals far exceed the 2011 budget caps, as well as President Trump’s proposal. Differences among committees and chambers about what the topline can and should be continues to hamper real progress. OMB Director Mick Mulvaney is pushing back against the previously existing compromise of shifting funds into the OCO account, creating further standstill.
- Look for a likely Continuing Resolution to carry into at least late November, as opposed to traditional appropriating methods.
- The House passed defense appropriations for FY18 with a vote of 235-192, as part of a national security “minibus” that included Legislative Branch, Energy-Water, Defense and MilConVA. It is unlikely that this bill will pass in the Senate, and even more unlikely that it will move through without some sort of movement on the budget cap debate.
We’ll continue to track and report. Keep your great questions coming!Read more
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.