On July 25, 2019, the House of Representatives approved HR 3877, the Bipartisan Budget Act of 2019, legislation which will avert what otherwise would have been a massive sequestration of federal funds and a federal default on our Nation’s obligations. Under the Budget Control Act of 2011 (PL 112-25) discretionary budget caps were set at such a low level that discretionary spending in FY 2020 would be reduced by 10 percent ($125 billion) below the FY 2019 level. The Bipartisan Budget Act of 2019 will raise the spending caps for FYs 2020 and 2021, thus stopping the imposition of an across-the-board sequestration. The legislation also averts the impending federal government default on our Nation’s already incurred obligations by suspending the limit on public debt for two years.
The Bipartisan Budget Act of 2019 is the result of negotiations among House and Senate leaders of both parties (notably House Speaker Pelosi) and the Administration (primarily Treasury Secretary Mnuchin). While there is certainly opposition to the bill, mainly because its cost is not fully offset and that it increases the deficit, Senate passage and a signature by President Trump are expected. (We note that the bill will also provide an additional $2.5 billion to the Census Bureau for the 2020 count and that those funds will not count against the discretionary spending cap.) Congressional Leadership released an 8-point description of how they and the Administration intend to implement this budget agreement. A copy is attached.
Under the Bipartisan Budget Act of 2019, discretionary caps would be raised as follows:
- FY 2020 non-defense would be raised by $78.3 billion for a total of $621.5 billion (a 4.3 percent increase over FY 2019 enacted);
- FY 2020 defense would be raised by $90.3 billion for a total of $666.5 billion;
- FY 2021 non-defense would be raised by $71.6 billion for a total of $626.5 billion; and
- FY 2021 defense would be raised by $81.3 billion for a total of $671.5 billion
Impact on Mandatory Spending. We note that the Budget Control Act of 2011 not only placed caps on discretionary spending but it also made cuts to some categories of mandatory spending. As originally enacted, both the caps and the cuts were set to expire after FY 2021; however, in order to partially offset some of the increases for the discretionary spending caps, the end date for the cuts to mandatory spending has been repeatedly extended. The Bipartisan Budget Act of 2019 will extend these cuts for an additional two years, through FY 2029. Many large, mandatory funded programs are largely exempt from required annual reductions, i.e., Medicaid, Social Security. However, the two percent reduction to Medicare providers will continue.
FY 2020 Appropriations. Given the short time before the beginning of the fiscal year (October 1) and that Congress is out during August and through Labor Day, there is the distinct chance that there will be a number of Continuing Resolutions (CRs) as the House and Senate negotiate the details of these bills. As of this writing, the House has approved 10 of its 12 appropriations bills – only Homeland Security and Financial Services remain to be approved by the House. However, the House-approved bills total $15 billion more than the new FY 2020 non-defense spending cap, so those bills will need to be re-worked or will have to be dealt with in conference with the Senate. The Senate, on the other hand, wanted to wait to begin markup of its appropriations bills until adjustments to the FY 2020 spending caps were agreed to. The Senate Appropriations Committee will thus begin markup of its appropriations bills after they return to session on September 9; however, there will have been behind-the-scenes work during the August Recess. It is anticipated that the 12 appropriations bills will be grouped into several bills, rather than having a single omnibus piece of legislation.
Please let us know if we may provide additional information about the Bipartisan Budget Act of 2019 or FY 2020 Appropriations.