Federal Budget Update

Fate of FY14 Appropriations
Depends on Debt Ceiling Debate

Federal Budget UpdateIn July 2013, the FY14 Transportation, Housing and Urban Development, and Related Agencies (THUD) bills, dramatically rose and fell on both the House and Senate floors, leaving both chambers without a viable FY14 bill.

The Senate THUD bill, S. 1243, which had bipartisan support early in the floor debate, failed with only one Republican member supporting the motion for cloture. The House bill, H.R. 2610, which gutted HUD funding for FY14, did not have sufficient support from Republicans or Democrats to reach passage, and was pulled from floor consideration.

Citing limited floor time because of the Syria debate, House leaders announced the week of September 2, 2013 that they would not resume consideration of the THUD bill in September. There is no indication that the sentiments of House Members shifted during August recess, so there is no reason to think that the bill would pass if it were to be considered on the floor again in September 2013.

After the July 2013 demise of the THUD bills, both chambers of Congress and the Administration began preparations for a short term continuing resolution (CR) to keep the government funded for several months through the beginning of the fiscal year.

Congress may consider a CR as early as the week of September 9, 2013 to allow time for other issues Congress must debate. The bill is expected to provide funding for two to three months, to allow time for Congress to come to agreement on an overall funding level. Earlier threats by some Republicans to use a government shutdown that would result from failure to pass CR to defund the Affordable Care Act have not materialized. A CR is expected to be adopted.

The White House submitted a list of “anomalies,” which are exceptions to a CR that could otherwise continue flat funding from the prior fiscal year, to Congress the week of September 2. The Administration’s request for anomalies is expected to be limited and likely does not include increases in program funding. It is not yet clear what anomalies Congress will consider including in the CR for HUD programs.

The Campaign for Housing and Community Development Funding (CHCDF) sent a letter to House and Senate leadership urging that FY14 federal appropriations package include strong funding for HUD programs. “It is essential that Congressional leadership ensures that any final agreement on the FY14 budget provides funding that can at least achieve the standard set by the Senate HUD appropriations bill, S. 1243,” wrote the 34 organizations.

Prior to the issue of Syria arising, Congress was expected to spend the fall work session debating the CR in conjunction with the issue of the debt ceiling and sequestration, which are the major fiscal issues blocking agreement on FY14 appropriations.

Sequestration is the major dividing fiscal issue that Congress must address in order to move forward with FY14 appropriations. While there is bipartisan agreement that the sequester was a poorly designed, blunt tool to achieve deficit reduction and bipartisan concern over the cuts that were implemented in FY14, there is no pathway to addressing the sequester that has received bipartisan support. The FY14 House budget would lift the spending caps put into place by the Budget Control Act (BCA) for discretionary defense spending at the expense of non-defense discretionary programs, which includes HUD and USDA Rural Housing Service funding. The FY14 Senate budget would lift sequestration, relying on other resources to achieve deficit reduction goals. The President’s FY14 budget request also replaces sequestration with other methods of deficit reduction. It is unlikely that Congress will be able to agree on FY14 appropriations without first reconciling these divergent approaches to sequestration.

Depending on the length of the CR and the timing of reaching the debt ceiling, the intertwined issue of FY14 funding, the debt ceiling, and sequestration may be wrapped into a single discussion or debated in succession.

The nation is expected to reach its debt ceiling in mid-October and once again, the question of whether to raise the ceiling to prevent default on the country’s debts has become a partisan issue that Republicans have threatened to use to gain traction in the FY14 appropriations debate. President Obama has stated that he will not negotiate an increase to the debt ceiling, saying that our nation must make good on debts incurred. In 2012, when increasing the debt ceiling was incorporated into a broader fiscal debate and Republicans threatened not to agree to an increase without concessions that Democrats were unwilling to concede, the nation’s debt rating was downgraded.

Click here for the CHCDF letter.