The Budget Deal is Now Law. What Happens Next?

President Trump signed the Bipartisan Budget Act of 2019 on August 2nd. The bill sets discretionary spending caps (limits on annual appropriations for the day-to-day operations of government – except for mandatory spending on programs like Medicare) for fiscal years 2020 and 2021.
 
The legislation implements a budget deal that congressional leaders and the Trump Administration reached on July 22nd, and it avoids a $125 billion cut in FY20 from current spending levels. Over FY20-FY21, the bill adds $325 billion above prior discretionary cap levels. The bill also suspends the debt limit through July 31, 2021, well past the next election.
 
The Bipartisan Budget Act may help avoid major short-term battles over spending and federal debt. But there are many key budget deadlines and potential fiscal fireworks to look forward to through the duration of this two-year deal.
 
Senate Action on FY20 Spending
 
The Senate held back on taking any action on FY20 appropriations bills while it awaited the spending deal. The Senate Appropriations Committee (SAC) has not taken up any FY20 bill so far this year. In comparison, the first FY19 appropriations bill was approved by SAC on May 24, 2018.
 
Senate inaction on appropriations will change in September when SAC Chairman Shelby (R-AL) and Vice Chairman Leahy (D-VT) start moving their bills. Indications are that the first three bills out of the gate will be Defense, Labor-Health and Human Services-Education, and Energy-Water Development, which will likely be considered in subcommittee and committee the week of September 9th. These three bills will likely be bundled together as a single bill to be considered on the Senate floor. Bundling the FY19 Defense and the Labor-HHS-Education bills was a formula for success for the Senate last year (the combined bill passed 85-7), so look for a repeat this year.
 
Next Steps for the House
 
The House already approved 10 out of 12 FY20 appropriations bills, but the bills were based on spending totals there were $15 billion higher for nondefense spending and $5 billion lower for defense spending than the totals in the budget deal. This means that the House Democrats will have to lower their expectations for nondefense spending in the final FY20 appropriations bills.
 
But don’t look for the House to do much before it starts appropriations negotiations with the Senate. The House won’t go back and revise the bills they’ve already passed. In closed-door negotiations this fall, the House and Senate will agree on total spending levels for each individual bill, and those levels will force the House to make nondefense cuts to match nondefense spending allowed by the deal.
 
The two appropriations bills not yet adopted by the House are the Legislative Branch bill and the Homeland Security bill. These bills were approved the House Appropriations Committee but never made it to the floor. It’s unlikely the House will try to move Homeland Security under any circumstances since that will continue to be caught up in contentious disagreements over immigration policy and Republicans’ desire to fund the President’s border wall request. The Legislative Branch bill is a priority for House Majority Leader Hoyer (D-MD), so there is an outside chance that will be brought to the floor. This bill was delayed earlier this summer due to a dispute over funding a pay increase for Members of Congress, which will need to be worked out before it moves forward. The House may simply wait to consider Legislative Branch funding as part of a final agreement on appropriations.
 
Keeping the Government Open
 
The budget deal significantly reduces the threat of a government shutdown this fall. However, it’s unlikely that any appropriations bills will be enacted by October 1, the beginning of FY20. We’ll likely see a continuing resolution (CR) adopted by October 1 to fund government programs at FY19 levels while negotiations proceed on the FY20 bills. The length of the CR is to be determined, but a reasonable guess is that it will last until mid-November, with an extension into mid-December possible if agreements on the FY20 bills haven’t yet been reached.
 
Also, while the chance of a shutdown is significantly reduced, it is not zero. Political disputes over policy (immigration is again a prime candidate) are still possible and could be tied to congressional (or Presidential) support for a CR. However, the odds of a shutdown are probably less than 10 percent, especially since Members of Congress still feel the sting from the 35-day partial shutdown that ran from December 22, 2018 until January 25, 2019.
 
Final Decisions on FY20 Bills
 
The budget deal sets up House-Senate Appropriations Committee negotiations this fall. Coming to agreement on numbers for individual appropriations, even with the House needing to scale back $15 billion from its levels, shouldn’t be too hard. In the past, the hardest differences to resolve have been over policy provisions in the appropriations bills.
 
The deal agreed to between congressional leaders and the Administration includes a line that says “relative to the FY 2019 regular appropriations Acts, there will be no poison pills, additional new riders, additional CHIMPS [Changes in Mandatory Programs], or other changes in policy or conventions that allow for higher spending levels, or any non-appropriations measures unless agreed to on a bipartisan basis by the four leaders with the approval of the President.”
 
This part of the agreement essentially means that no controversial policy provisions can be added to final FY20 appropriations. This should ease negotiations on policy provisions, but there is no guarantee. Within the minutia of appropriations bill language, there can be disagreements on, for example, what constitutes a “poison pill,” or whether a substantive change to an existing rider to reflect new information constitutes a “new rider” (a rider is a policy provision in an appropriations bill). Only one out of the five parties to the budget deal (Democratic and Republican leaders of both the House and Senate and the President) can potentially veto any policy provision that differs from FY19 bill language. That will not sit well with certain members of the House and Senate who have been advocating for policy changes in front of their constituents all year.
 
Immigration provisions are an example of where negotiations could potentially go awry. Will Democratic members of the House accept a bill that does not place greater constraints on the President’s ability to move money to fund a border wall? If rank-and-file Democratic House members decide not to support final appropriations due to the lack of stronger policy provisions, and Republican support is lost due to higher spending levels, the chance of passing the full slate of FY20 appropriations in the House grows dimmer. The outcome in this case may be a full-year continuing resolution for some agencies.
 
What to Expect for FY 2021
 
The Bipartisan Budget Act of 2019 implements a two-year agreement covering discretionary spending levels both FY20 and FY21. In theory, this means that major budget battles can be avoided next year – an election year. But, as is the case with FY20 bills, disputes over policy provisions can get in the way of smooth passage of FY21 bills.
 
Presidential politics could also have a big effect. Trump’s interests may be served by refusing to sign appropriations bills and pushing instead for a continuing resolution that goes past the election, or even the inauguration. Certainly, that would appeal to fiscal conservatives who believe the spending levels in the budget deal are too high and who hope that a second Trump term and Republican gains in Congress will lead to spending cuts. Trump could calculate that a long-term CR will solidify his support among those conservatives.
 
The Bipartisan Budget Act of 2019 raises expectations that the FY20 and FY21 appropriations bills will be enacted with a minimum of drama. The Act does reduce the likelihood of a shutdown and increases the chance that most, if not all, agencies receive their FY20 funding before the end of the calendar year. However, many opportunities for budget drama still exist. Federal agencies and those who do business with them need to be prepared for any possibility.