Federal Update: Congressional FY16 Budget Debate Begins

March 20, 2015

Following the February release of the President’s budget request to Congress, the House and Senate Budget Committees this week considered their own spending outlines for the fiscal year beginning on October 1, 2015, and continuing through FY25. Congressional budget-writing is generally the next step in the annual process to formulate a federal budget, and often serves both political and procedural purposes. Politically, it is the first opportunity for Republicans to present a unified House and Senate budget after capturing control of both branches for the first time during this Administration, and provides the party a chance to broadly contrast its own priorities with those of the White House, as well as to demonstrate an ability to govern in the lead-up towards the presidential election. Procedurally, the legislative purpose of a budget resolution is to establish an overall framework that confines funding-related legislation moving later in the Congress. 

Recent Congresses have been unable to complete final budget resolutions as fiscal issues divided the two parties and chambers. However, with Republicans now in control of both sides of the Capitol, GOP leadership have placed a high priority on restoring the budget process and completing a joint resolution. Yet that has not proved as easy as hoped, at least initially, as the constraints of the sequester led this week to significant intra-party disagreements among Republicans over the competing demands of defense hawks for increased spending for the Defense Department, and of fiscal conservatives pushing for a balanced budget.  While both committees struggled with how to boost defense funding, both freeze non-defense discretionary spending in FY16, despite generally positive language on research, and outline significant cuts in subsequent years as part of an effort – along with significant gimmicks elsewhere in their budgets – to eliminate deficits in under a decade.  The Senate is also being forced to respond to the political realities of several Members preparing for presidential runs and numerous blue state Republicans facing re-election battles in 2016.

Below we provide an overview of the budget plans offered by House Budget Chair Tom Price (R-GA) and Senate Budget Chair Mike Enzi (R-WY) and highlights of committees’ consideration of these plans to date.

House Budget Plan

The House budget builds on past plans offered by former Chair Paul Ryan (R-WI) and massively reduces government spending to bring the federal budget into balance in less than a decade.  The plan outlines major changes in entitlement programs, including the block-granting of Medicaid and food stamps, the total repeal of the ACA, changes to Medicare and establishes reconciliation instructions for committees of jurisdiction to make these changes.  The bill also significantly shifts discretionary spending in favor of Defense over the 10 year budget window with DOD increases of $387 billion and decreases in non-Defense spending (which includes NIH, education and other domestic spending) totaling $759 billion. 

While not binding in its details, the resolution lays out a series of policy prescriptions that purportedly achieve balance by 2024.  Many included impact programs of significant concern.  The resolution targets student loan subsidies and the Pell Grant program for significant reductions, suggesting freezing the maximum, reducing eligibility and cutting all mandatory funding.  The blueprint calls for substantial cuts to non-Defense discretionary spending that undermines the potential to demonstrate any real domestic spending priorities.  For example, on research the resolution includes strong language supporting the federal role in basic research but is unable to propose additional spending due to the strict caps in the overall bill.   

Although the budget as a whole faces significant opposition from Democrats, outside groups and some moderate Republicans, the House committee’s difficulties have been within the majority party and centered around FY16 Defense funding levels.  The bill maintains the funding levels set in the 2011 Budget Control Act (including sequester cuts), providing a total of $1.017 trillion for FY16 discretionary spending with $523 billion for defense and $493 for non-defense programs.  The President’s budget offered in February rolled back much of the sequester cuts and restored funding with defense receiving $561 billion and non-defense $530 billion in FY16.  Defense hawks are deeply uncomfortable with the sequester spending level and many are dissatisfied with any number below the Presidential Budget request.  Pentagon advocates in both parties continue to press for more funding and express concern that accomplishing it in the narrow approach of the “war funding” account is a budgetary gimmick to an issue that has reached a critical level.  Others have complained that these moves have upset fiscal conservatives who are concerned that this funding increase is not offset so will simply raise the deficit.  The House committee’s consideration was suspended several times as the majority sought some consensus among its members, but the resolution was approved on a party-line vote with indications they would continue to work on this issue as it heads to the floor next week.                                                      

Senate Budget Resolution

Released a day after the House, the Senate budget resolution contains much fewer details beyond the top line.  The Senate outline calls for the budget to reach balance in the last year of the 10 year budget window and suggests $4.3 trillion in cuts mainly from “health and income support programs,” with little additional detail. The resolution provides modest reconciliation instructions to just the two committees with jurisdiction over the ACA, requiring them to report bills saving $1 billion each by July 31; this is largely seen as a placeholder for those committees to respond to the pending ACA case in the Supreme Court rather than a major push for deficit reduction.  The resolution stays closer to the current BCA discretionary spending limits, leaving Defense at the current levels and reducing non-Defense by $237 billion over 10 years.  As in the House, the Defense levels are creating significant problems in the majority party.  Chairman Enzi has attempted to thread this needle by matching the President’s increase with additional funding of $58 billion (although likely needing to be offset) in the off-budget war account; as well as the inclusion of several reserve funds that would allow for future negotiations around raising the spending caps through some larger budget deal.  The Senate committee approved the resolution on a party-line vote last night, with floor consideration expected for much of next week.

Contact

We are following developments with the budget closely and will remain in touch.  As always, please feel free to contact Suzanne Day or Jon Groteboer in the Washington office with any questions or concerns: (202) 863-1292.