United States: Steptoe Appropriations Newsletter

Steptoe is tracking the latest developments in the federal appropriations process on behalf of our clients. Below are the top developments you need to know.

The Topline:

After months of trying to come to an agreement, Senate Majority Leader Chuck Schumer (D-NY) and House Speaker Mike Johnson (R-LA) announced a deal last weekend on topline spending numbers. The deal includes $1.59 trillion in total spending, along with a $69 billion increase for non-defense spending, and also includes new language to cut $10 billion in IRS funding as well as $6.1 billion in unspent COVID-19 funds.

House and Senate appropriations chairs are now discussing dividing the topline allocation between the 12 subcommittees, known as the 302(b) allocations. We expected these subcommittee allocations to be announced by now. However, since the announcement, a group of House conservatives has expressed discontent over the deal, which has been complicating the process all week. With a two-seat majority, House Republicans are having trouble finding unity.

With the first tranche of spending bills expiring a week from today, we do expect a move in both chambers to pass a Continuing Resolution (CR) to continue funding government operations temporarily. Some in the House prefer a CR to extend to the end of the fiscal year, triggering a 1% sequester. We don't believe appropriators or defense hawks (or the Senate) will agree to this. Indeed, Senator Schumer plans to hold a test vote early next week on a bill which could serve as the legislative vehicle for the next short-term CR.

Meanwhile, there was hope earlier in the week that Senate negotiators were close to agreeing on a supplemental aid package for Ukraine, Israel, and border security. However, those hopes have faded as negotiators have reached a roadblock over reforms to parole policies, which give the administration authority to allow migrants to remain in the U.S. without the risk of being deported. Senate Minority Leader Mitch McConnell (R-KY) has stepped up his effort to win Republicans' support, emphasizing this may be Republicans' last chance to secure border reforms for the next few years.

Finally, in the midst of all the fiscal year (FY) 2024 discussions, clients should begin compiling their FY 2025 plans. While the President's budget could arrive as late as mid-March, appropriators will shift quickly to FY25 budget hearings once the blueprint is received.

House:

• Jan. 11 - Speaker Mike Johnson met privately with a group of House conservatives, after a dozen of them derailed House floor action this week in protest of the funding deal he struck with Senate Majority Leader Chuck Schumer over the weekend. The hard-liners are seeking revamped topline funding levels. But Johnson said he has made no commitments. Politico Pro
  • Related: Rebellious House conservatives allowed the leadership's floor agenda to get back on track after they buttonholed Speaker Mike Johnson to try to get him to renegotiate the bipartisan spending deal to seek deeper cuts. CQ
  • Related: Speaker Mike Johnson's right flank ground the floor to a halt again, this time amid conservative fury over a spending deal he cut with Senate Democrats. Thirteen House Republicans joined with Democrats to vote against starting debate on a trio of bills unrelated to the funding agreement, two of which are aimed at nixing Biden administration rules, a move that effectively freezes the floor. Additional votes were immediately canceled. It's the latest example of how House conservatives, largely in the ultra-conservative Freedom Caucus, are trying to punish leadership — even if they aren't willing to oust Johnson. Politico Pro
• Jan. 11 - The House and Senate will be ships in the night for most of February, complicating the selection of a new government funding date to write into the stopgap Senate leaders are trying to ready. The two chambers are only simultaneously in session in early February, then they're off for alternating recesses. Politico Pro
• Jan. 10 - Speaker Mike Johnson dropped his adamant opposition to any more short-term funding patches, saying he wouldn't rule out a continuing resolution even though that's not his preference. CQ
• Jan. 8 - Congressional leaders have clinched a deal on overall budget totals that could pave the way for a broader government funding compromise in the coming weeks — further enraging Speaker Mike Johnson's right flank. The long-stalled agreement, announced Sunday afternoon, establishes funding limits for the military and domestic programs for the fiscal year that began on Oct. 1, allowing House and Senate appropriators to begin hashing out their differences between a dozen annual spending bills. A partial government shutdown looms 12 days away. Politico Pro
  • Related: The speaker also previewed policy fights ahead in these breakneck funding negotiations, saying in his letter to House lawmakers over the weekend that the overarching agreement gives Republicans "a path" to "fight for the important policy riders" included in the fiscal 2024 bills House Republicans drafted. Democrats, however, are vowing to hold the line. Letter; Politico Pro

Senate:

• Jan. 11 - Senate Majority Leader Charles E. Schumer took the first procedural step needed for a stopgap funding bill to avoid a partial government shutdown at the end of next week. With funding for about 20 percent of federal agencies' operating expenses (PL 118-22) set to expire after Jan. 19, Schumer filed cloture to limit debate on a shell vehicle (HR 2872) that would carry a short-term funding extension. CQ
• Jan. 10 - Senate Appropriations Chair Patty Murray said Congress will need to pass a stopgap funding measure to avoid a shutdown next week, the latest Hill acknowledgment that lawmakers won't be able to finish their work on four spending bills before the first deadline. The Washington Democrat, in an interview, declined to endorse a specific timeline, in part because she is still negotiating with House Appropriations Chair Kay Granger on funding levels for each individual appropriations bill. Politico Pro
• Jan. 10 - Bipartisan talks on immigration policy changes at the southern border continue to struggle along, but there's no sign of an imminent deal. CQ
  • Related: Senate Majority Leader Chuck Schumer said that passing a national security supplemental "is one of the hardest things the Senate has done in a very long time." He said Senate negotiators met several times yesterday, and warned that a Russian victory in Ukraine would "commence an ominous domino effect." CQ
  • Related: Senate Republican Leader Mitch McConnell (R-Ky.) is stepping up his personal efforts to secure a deal on border reform and aid for Ukraine and Israel, which colleagues are characterizing as a major test of his leadership. The Hill
• Jan. 9 - Sen. Patty Murray (D-Wash.) and Rep. Kay Granger (R-Texas), the chairs of their chambers' Appropriations Committees, are negotiating top-line allocations for the 12 funding bills, Sen. Susan Collins (R-Maine) told reporters yesterday. Once they reach a deal on a slate of allocations, subcommittee leaders can work out the details of each bill. There's not much time for members to negotiate both of those steps ahead of the Jan. 19 deadline to fund four of the 12 bills. The other eight face a Feb. 2 deadline. BGOV
  • Related: When it comes to meeting the Jan. 19 shutdown deadline, much will hinge on how quickly top appropriators can lock in an agreement on the so-called 302(b)s, in addition to how fast CBO can work through scoring issues, said Sen. Susan Collins (R-Maine), the top GOP appropriator in the Senate. Politico Pro

Next Week

Hearings

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