Federal Update: Moving Toward the Close of Session, Congress Punts Government Funding to New Year

Late yesterday, overcoming last minute objections to the Biden Administration’s vaccine mandates, the House and Senate approved a FY22 continuing resolution that will extend current government funding through February 18, 2022 and the legislation was signed by President Biden this afternoon. This crosses one major item off Congress’s year-end to-do list, with the debt limit, the annual Defense policy bill, and continuing work on the Build Back Better reconciliation package expected to occupy the remaining days of the session. Given the list of outstanding items, legislative workdays are expected through the targeted adjournment date of December 10 and into late December. Following is a summary of key issues.Debt Limit

Although Congress voted in October to increase the debt limit by $480 billion to keep the government solvent in the short-term, Treasury Secretary Janet Yellen estimates that the government could reach the current statutory limit by December 15, with insufficient resources to finance the operations of the government and the potential for default. As part of the earlier debate, Senate Republicans said that they would not help the Democrats address the debt limit, but a group of ten, led by Senate Majority Leader Mitch McConnell (R-KY), ultimately voted to end a filibuster for the October patch. Thus far, Senate Minority Leader Mitch McConnell (R-KY) has been measured in his rhetoric around the coming deadline, leading many to believe that Senate leadership will find a compromise to avoid default. Senate Majority Leader Chuck Schumer (D-NY; AB’71, JD’74) has committed to bringing a debt limit solution to the floor before December 15, although it is unclear what form that will take and how complicated it may be by the faction of Republicans who want to use the debt limit to increase their leverage in FY2022 spending negotiations or to defeat the President’s signature Build Back Better Act.

Build Back Better Act

In early November, after passage of the bipartisan infrastructure deal, the House passed (220-213) its version of the social infrastructure reconciliation package – the Build Back Better Act (BBBA) – and sent the $1.7 trillion bill to the Senate for action. The House bill includes broad new funding for childcare, 4-weeks of paid family leave, extension of the enhanced child tax credit, broad new funding and tax provisions to address climate change including through research, a $550 increase in the Pell Grant maximum, new funding for HBCUs and other minority-serving institutions, increases in corporate taxes, expansion of health care, and beneficial immigration provisions. While included in earlier versions, the provision reforming the net investment income tax (endowment tax) for private colleges and universities was dropped just ahead of the full House’s vote on the bill.

In the Senate, the narrow Democratic majority and the concerns of moderates, like Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), and progressives, like Senator Bernie Sanders (I-VT), remain significant. Senate Majority Leader Schumer is publicly planning for a vote on the bill before Christmas, but that assumes Democratic leadership can win the support of skeptical members and clear potentially problematic policy provisions with the Parliamentarian. With these difficult negotiations, the packed slate of other issues, and the coming holiday, this legislation could potentially slip to next year or be backed up right before Christmas to motivate members and clear potential legislative and member roadblocks.

FY2022 Appropriations

Although the short-term continuing resolution will fund government operations through February, Congress will need to resume negotiations over full-year appropriations, which will, for the first time, reflect the Biden Administration’s spending priorities. (Currently, the federal government is funded based on the FY21 levels established during the Trump Administration.) Despite being three months into FY2022, Congress has been unable to agree to a topline spending level or the divide between defense and nondefense spending. Also, the House versions of the spending bills include policy provisions on abortion, labor, and immigration, which Senate Republicans have characterized as poison pills. Although many expect that the latest continuing resolution will provide the necessary time to address these issues, another short-term CR – or a full-year CR at current spending levels – cannot be ruled out at this point. Regardless of the final resolution, the late conclusion of FY2022 is beginning to intrude on the FY2023 process and could delay the President’s budget request, which is typically released in February. It also will create pressure on agencies as they seek to run their programs and adjust to whatever spending decision may ultimately be made on FY22.

Other Items

This week, the Senate has been working toward passage of the FY22 National Defense Authorization Act (NDAA), trying to balance scores of proposed amendments with the need to keep the annual Pentagon policy bill bipartisan. China’s global rise continues to be a concern, but progress on the NDAA has stalled over Republican complaints of its late consideration and limited opportunity for amendment. Thursday ended without a breakthrough on how to move forward on the NDAA, with members in wait and see mode. The slower than expected consideration of the must-pass NDAA frustrates effort to complete action on the legislation by the end of the year – and it consumes precious floor time, as members try to wrap up their legislative work by Christmas.

During Senate consideration, Leader Schumer had attempted to amend the NDAA with the US Innovation and Competition Act (USICA), legislation that authorizes funding for science agencies and establishes new priorities in emerging fields of science. Facing opposition, including from House leadership, he agreed to move instead to formal House-Senate conference on USICA, with many of the research security and China-related provisions expected to be considered in that context. Although limited informal conversations have been initiated on USICA and the package of House bills, including the NSF for the Future Act, it will take time to negotiate the two packages, with the final resolution expected to drift into 2022.