August 23, 2017
Preparing for September
September is going to be an action packed month in Washington for sure. There is a long list of must pass measures and a long list of priorities the President and Members of Congress are anxious to make progress on. As is typically the case in Washington, there are many complexities to each of these issues, not to mention the calendar itself gets a little complicated with Rosh Hashanah and Yom Kippur both falling in the month of September. Prime Policy Group is offering our collective wisdom, expertise, and years of experience to consider all of complexities with each of these issues.
The debt ceiling is currently set at $19.81 trillion. The country hit that ceiling in March. However, the Department of Treasury has many tools available to them to manage our finances in order to avoid defaulting on our obligations. Those extraordinary measures taken by Treasury combined with the wave of revenues that arrives at the Treasury on and around Tax Day on April 15 have allowed the United States to meet all its obligations. That dynamic will change in October when obligations will significantly outpace revenues. A substantial obligation is owed to the Military Retirement Fund in early October, for example.
Voting to increase the debt limit is a difficult vote for Members to cast because it is a reminder to voters of past budgetary decisions that resulted in deficits and debt. Therefore, many Members of Congress look to include other measures to the legislation authorizing a higher debt ceiling. For conservatives, they like to see spending cuts or other fiscal restraints included with the debt ceiling legislation. The Treasury Secretary continues to ask Congress just to pass a so-called clean bill so the White House does not have to get pulled into contentious negotiations over the unrelated matters.
There is generally a bipartisan majority that can pass a clean debt ceiling bill, and we are likely to see that play out again this year. Look for the Senate to act first, as it may be difficult for Speaker Ryan to call up a free-standing clean bill in the House.
The Children’s Health Insurance Program (CHIP) funding expires on September 30. This is a program that began as a bipartisan initiative (the so-called Kennedy (D-MA)-Kassebaum (R-KS) bill) and has enjoyed bipartisan support to reauthorize and continue the program. Ordinarily, reauthorization would not be a controversial issue. However, this year the politics around health care legislation have made things a little less certain in the health policy arena.
However, we did see the FDA user fees extended in a solid bipartisan fashion (only one dissenting vote in the Senate). We expect this program will be extended along with several other smaller health programs expiring on September 30 such as the Family-to-Family Health Information Centers, the Abstinence Education Grants, the low-volume adjustment in Medicare and a few others. It is possible that the continuing of these programs could be done temporarily via a continuing resolution.
The fiscal year ends on September 30 when the appropriations authorized by the omnibus appropriation bill passed by Congress in May expires. The House passed a package of four appropriations bill in July, which includes the Defense, Military Construction and Veterans Affairs, Energy and Water, and Legislative Branch appropriations bills. It is possible for the Senate to pass in September this so-called “minibus” appropriations bill to partially fund the government.
However, there is one significant complication. The allocation in these appropriations bills is not consistent with the discretionary spending caps contained in the Budget Control Act (BCA). The Senate has a 60 vote point of order against any bill, resolution, or amendment that violates the caps in the BCA.
While it is possible this minibus appropriations bill could receive 60 votes in the Senate, we expect there to be an effort to revisit the discretionary spending caps of the BCA as a separate measure. It is likely the BCA will be revisited as a precursor to the consideration of the National Defense Authorization Act which also violates the caps in the BCA.
Given the limited floor time available in the Senate in the month of September, we expect Congress will likely pass a continuing resolution funding the federal government operations for a period of two to three months beyond the September 30 deadline.
The Federal Aviation Administration (FAA) authorization is set to expire on September 30. The House Transportation and Infrastructure Committee reported out a bill in June that establishes a non-profit company to run the Air Traffic Control (ATC) functions from the FAA sustained by new user fees on airline operators. That provision has met stiff opposition from the general aviation community. The House has not yet considered the bill. The Senate Commerce Committee has approved an FAA reauthorization bill that does not include the same ATC privatization provision. Senator Thune, who Chairs the Commerce Committee, has stated that he is open to considering ATC privatization but wanted to report a bipartisan bill from his committee.
While it is possible for the Senate to dedicate floor time in September to FAA reauthorization, it has not appeared on any lists of priorities for floor time from Senate Leadership. We expect a short-term extension should be passed in September.
The National Flood Insurance Program expires on September 30. The House Financial Services Committee has reported a package of bills to reauthorize and reform the NFIP. While some of the measures had the unanimous support of the committee, others of the measures were reported on a partisan basis. The Senate Banking Committee Chairman Senator Crapo (R-ID) and Ranking Member Senator Brown (D-OH) announced a bipartisan NFIP reauthorization bill in July. With provisions of the House bill being reported on a partisan basis, we are likely to see a short-term extension of NFIP passed in September.
Even though the Congressional Budget Act calls upon Congress to adopt a budget resolution by April 15, there is no real consequences for delayed or no action on this task. This year Congress has an important motivation for passing a fiscal year (FY) 2018 budget resolution – that is to include budget reconciliation instructions that can be used to pass a major tax bill on a simple majority vote in the Senate. The House Budget Committee reported an FY 2018 budget resolution with reconciliation instructions that can be used for a tax bill and many other reconciliation instructions calling for significant reductions in mandatory spending programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP).
The Republican Conference appears to be divided about the committee reported budget resolution. Moderate members think the calls for spending cuts are too high while many conservatives do not think the spending cuts go far enough.
Motivation to get reconciliation instructions for a tax bill should be sufficient for the House to pass the budget resolution in September. The Senate will likely alter the resolution to get the necessary votes for it. With the vote-a-rama likely to happen during consideration of the budget on the Senate floor, it will likely set up a conference committee with the House to resolve the differences rather than simply passing back the Senate passed resolution to the House for their approval. as those vote-a-ramas can result in some odd amendments being included.
National Defense Authorization Act
The Senate Armed Services Committee reported out the National Defense Authorization Act (NDAA) unanimously. Since the funding levels for this bill were negotiated in a bipartisan fashion, it is thought that this bill could be the impetus for a bipartisan agreement to amend the discretionary spending caps in the BCA. The deadline for passing the NDAA is not until the end of the year, but we think it will likely be completed in September in part to resolve the issue with the BCA. The House already has passed their version of the NDAA so this action will likely set up a conference committee with the House.
The Speaker of the House has publicly stated that he believes the House will unveil its comprehensive tax bill in September and begin committee work on it. Similarly, Chairman Hatch has announced that the Senate Finance Committee will hold hearings on comprehensive tax reform followed by a markup “this fall.” Leadership in the House and Senate are mindful of the peril of establishing deadlines for action on major legislation from the health care efforts. The White House and Congress have been closely coordinating the efforts on taxes and are discussing and planning for a rollout of the bill to build the necessary support for it in the business community and around the country. We expect there to be some action even if it is just the release of a high level summary of the bill in September to build momentum.
Another big priority for the President and Congress is a big infrastructure package. However, we continue to hear that this initiative will be sequenced after the tax bill. At various points this year, there has been speculation around using revenue from the tax bill for infrastructure, but that talk has died down particularly since the single largest revenue raising option – the border adjustment tax – has been taken off the table for the tax bill.