FY16 Budget Forecast

The Senate and the House passed a Continuing Resolution (CR) today, which the President can sign by midnight to fund government at FY15 levels through December 11.  What happens after the December 11 deadline is up in the air, but we’ll either see more CRs for the rest of the year, or an omnibus (like what we had in FY15).

First, let’s cover some budget scenarios:

• Full Budget
  12 appropriations bills passed by the House and Senate and signed by the President by October 1 appropriating funds to each of the government agencies. These appropriations bills combine for over 20,000 pages of text and provide significant clarity from Congress on how money should be spent.  This hasn’t happened since 2008.
• Omnibus
   Twelve appropriations bills are consolidated into 1.  Agencies do receive new funding levels for the year and new programs can start, but the bill is significantly shorter (roughly 2,000 pages, compared to the 20,000 pages of the full budget) and lacks the direction from Congress on how the money should be spent.  FY15 ended on an omnibus.
• CROmnibus
  A combination of a CR and an omnibus – funding some agencies at new levels for the fiscal year, while other agencies are dependent upon prior year spending levels.
• Continuing Resolution (CR)
  Appropriations bills were not passed and new budget levels cannot be agreed upon in Congress.  A CR is a stopgap measure allowing the government to remain open and funded, but at the prior year’s spending levels, and no new programs can be started.
• Shutdown
  Congress can’t agree on any aspect of funding, and all non-essential governmental functions are suspended until a budget can be reached.

Various appropriations bills made it out of committee in both chambers of Congress this year, but nothing concrete enough for both Houses to agree on.  Agencies submitted their budget requests, but with no appropriations bills passed in Congress, those requests are unlikely to be met.  For months there has been a heated debate on defunding Planned Parenthood.  Republicans had a large enough majority to pass a CR that defunded Planned Parenthood 2 weeks ago, but it died in the Senate.

The Senate then began to work on a “clean” CR (meaning it had no caveats and required no concessions from either party).  Once the clean CR passed the Senate, an agreement was made between Boehner (Speaker of the House) and the far right wing of the House that he would step down in exchange for their agreeing to pass the clean funding bill (tangentially, Kevin McCarthy – Republican from California – is the likely candidate to take the Speaker’s role).

This CR extends until December 11.  This date is intentional, as it represents the time a decision will have to be made on the national debt ceiling.  If you’ll recall, the reason for the government shutdown in 2013 was Democrats wanted to raise the debt ceiling, but Republicans didn’t.  The Budget Control Act (BCA) hadn’t shown any results yet, so Republicans were still sensitive about the out-of-control discretionary spending and the deficit.  Thus, there is a potential that Republicans will again hold a new CR or an omnibus hostage until Democrats make concessions around spending. Ultimately we will see the debt ceiling raised so the country doesn’t default (thereby lowering our credit rating), but that’s not going to happen without Democrats compromising.

The debt ceiling conversation will be occurring concurrently with discussions around BCA caps/sequestration.  Federal agencies have requested budgets far exceeding the caps set by the BCA – so decisions need to be made around what agencies to give more money to and what agencies to cut funding from.  If Congress decides to work on an omnibus, most likely we won’t see significant increases (if any) to the spending caps set by the BCA.

What will likely happen, is the increased budget requests won’t be realized, we’ll comply (or at least come close to complying with) the BCA caps, sequestration won’t be an issue because we’re complying with the caps, and Congress will appropriate an extraordinary amount of money to Overseas Contingency Operations (OCO) funding to make up for the gap in DOD’s budget.  However, if Congress decides not to address the BCA spending caps and not to pursue an omnibus, we will be on another series of CRs for the remainder of the year.

In conclusion, after tonight, we’ll be under a CR until December 11^th, at which point Congress will have addressed the BCA caps and the debt ceiling.  In all likelihood we will remain on CR for the remainder of the year, with limited potential for an omnibus.  The final result of this will be similar buying patterns in FY16 as FY15.  If we get an omnibus after December 11, we’ll see more money flowing mid-year.