Outlook for the FY2018 Appropriations Process

Matt Glassman | January 9, 2018

The FY2018 appropriations process in Congress—which will provide funding for the federal government from October 1, 2017, until September 30, 2018—is once again approaching a deadline. After its failure to enact full year appropriations bills by October 1, Congress has passed a series of continuing resolutions (the first through December 8; a second through December 22; and a third through January 19) to keep the government operating on a temporary basis. Given the state of negotiations in Congress, it is likely that a fourth continuing resolution will be enacted prior to the 19th, and that final action on the FY2018 appropriations will once again be delayed.

While the annual appropriations process is almost never completed on time—it has been more than two decades since all 12 regular appropriations acts were signed into law by October 1—the process this year appears particularly bogged down.  Not one of the twelve regular appropriations bills made it to the floor of the House or Senate (although the House did pass versions of all twelve in two Omnibus bills). Congressional leaders passed the first continuing resolution on September 8, over three weeks ahead of the deadline, in recognition that the prospects for completing the bills on time was too dim to even attempt. And there has been widespread resignation across Capitol Hill for months prior to the same effect.

At first glance, this may seem odd. After all, the 2016 election created unified government for the first time since 2010. Absent the need to negotiate with President Obama, shouldn’t Republicans have an easier time completing action on annual appropriations?

The answer is no. And in one sense, the explanation is simple. Appropriations bills are subject to debate in the Senate, and thus require 60 votes to end a filibuster by the minority. Given the certainty of such a filibuster on partisan bills, Republican leaders have no choice but to negotiate the terms of the bills with the Democrats, who in turn can seek to use their leverage to pull the bills further toward their positions.  And thus, despite unified government, the FY2018 appropriations process is no less bipartisan than the FY2017 process.

That explanation, however, disregards a set of political factors that make this year’s process particularly complicated. First, negotiations over appropriations bills tend to reach a wider set of issues than simply funding the government.  The existence of unified government makes the appropriations process one of the few places on the legislative calendar where the minority has a guaranteed leverage point in negotiations. Consequently, Democrats are using the appropriations negotiations to deal with non-appropriations priorities, such as health care and immigration. This naturally makes the negotiation process more difficult, and raises the stakes for any deal that is struck.

Second, the legislative calendar in 2017 made the appropriations process somewhat more difficult than usual. As with almost all first-year administrations, President Trump’s budget was not released in early February, but instead was delayed more than three months. In addition, action on the FY2017 appropriations was not completed until May. Throughout the summer and fall, legislative energy in Congress was focused on first health care reform, and then tax reform. An FY2018 budget resolution, which is used to set top lines for appropriators, had to wait until October, because earlier passage would have superseded the FY2017 resolution, whose reconciliation instructions were being used to try to pass health care reform. And Senator Cochran, Chairman of the Senate Appropriations Committee, fell ill during the year and has missed significant time in the Senate.

Third, the FY2018 appropriations will be subject to sequestration (an across-the-board cut to most discretionary programs) if they do not comply with the spending caps set by the Budget Control Act (BCA). With widespread bipartisan recognition that the current caps ($549B in defense spending; $515B non-defense) need to be raised, any appropriations deal will almost certainly include amendments to the BCA. This creates several complications. Unlike the individual appropriations bills, it forces top-line defense and non-defense numbers into the public debate, which may shift the negotiating positions of defense hawks and others in Congress. Second, it creates leverage for fiscal conservatives and budget hawks who want to restrain overall spending. Past adjustments to the BCA caps in 2013 and 2015 have been two-year deals that increased the caps for the current year and following year, but also provided for cuts to future mandatory spending. In effect, it makes the FY2018 appropriations process a negotiation over overall federal budgeting.

Finally, conservative House Republicans may not be willing to support the likely final FY2018 omnibus appropriations bill. Since 2010, many of the fiscal deals struck in Congress have passed the House via a centrist coalition of Democrats and Republicans agreeing to a Senate-endorsed deal, with the wings of each party voting in opposition. While a Senate filibuster might preclude a partisan majority appropriations bill from passing, Republican leaders might try bringing one up, in hopes of winning the public debate and forcing Democrats into a weaker negotiating position. But if Republicans do not have the votes to pass such a partisan bill through the House due to conservative defections, that strategy is foreclosed and results in a strengthened negotiating position for Democrats.

Here is a bit of good news in all the chaos. As with any appropriations deadline, there is the possibility of a government shutdown if Congress does not produce either an omnibus appropriations bill or another continuing resolution by January 19. Such a shutdown, however, seems unlikely. Almost all past shutdowns of more than a few days have been driven by a party (or a faction of a party) desiring it for political reasons. Currently, such a faction does not appear to exist. Republicans, with unified control, are presumably wary of being blamed for any shutdown. Democrats, sensing the 2018 political winds in their favor, are unlikely to want to create a situation as politically unpredictable as a shutdown, particularly over an issue such as immigration. But neither of these precludes the possibility of a full year continuing resolution similar to what happened in 2007.

The most likely outcome at this point appears to be another short-term CR into February or March, followed by a sizeable increase in the BCA caps on both defense and non-defense spending—although probably something less than a parity increase between the two—and completion of an FY2018 Omnibus Appropriations Act. The wild card is immigration. The broad outlines of a possible deal are visible, in which the repealed Deferred Action for Childhood Arrivals (DACA) policy is extended or modified in exchange for increased funding for border security. Whether such an agreement can be reached by the negotiating factions, however, isn’t certain. Given the negotiating context described above, such a deal is likely. But a temporary extension of current policy, putting off a final decision for several months or even a year, also seems possible.  If, however, the FY2018 appropriations negotiations result in a government shutdown, the failure to adjudicate the immigration questions would almost certainly be the culprit.

Matt Glassman is a Senior Fellow at the Government Affairs Institute


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