Appropriations Impact on Industry
The Congressional appropriations process is important to monitor because it will ultimately decide which areas of the government receive or lose funding for the upcoming year. Under the proposed budget, the Departments of Defense, Homeland Security, Veterans Affairs, and Health and Human Services would see an increase to their budgets. Agencies who gain funding would be able to take on new projects such as modernizing the country’s nuclear infrastructure or combating the opioid crisis. The Administration also hopes to see the FDA receive more funding to expedite the process of approving new pharmaceuticals. The biggest losers of funding under this proposal would be the Departments of State, Transportation, Agriculture, and the Environmental Protection Agency. Drastic funding cuts to an agency will make it much harder for them to function and require them to slash programs. Drastic cuts to the EPA, for example, are in line with the Administration’s stated goal of cutting regulations. Businesses should monitor the agencies that deal with their industry to see how they may be impacted. A drawn out appropriations calendar leaves agencies without guaranteed funding and can make it much harder for businesses to plan ahead.
Appropriations Process in Detail
U.S. government spending is broken up into two main categories, “mandatory” and “discretionary” spending. Mandatory spending is for entitlement programs such as Social Security, Medicare, and the Supplemental Nutrition Assistance Program (SNAP). Funding from these programs are mandated by law and thus legislators do not have the power to adjust these funding levels on a year by year basis. Discretionary spending is the portion of the federal budget that is decided on by Congress every year through the appropriations process.
The appropriations process is started every year by the President who is expected to release a budget plan for the upcoming fiscal year sometime in early February. The release of a budget plan gives insight as to what the administration’s spending priorities are for the upcoming year. The budget plan is only the beginning, and usually the final spending package looks quite different once it has gone through the appropriations process. After receiving the President’s proposal, Congressional Budget Committees are then supposed to propose budget resolutions which “establishes various budget totals, divides spending totals into functional categories (e.g., transportation).” Once the budget resolutions are passed, the discretionary spending is broken up amongst the twelve different appropriations subcommittees which are:
- Agriculture, Rural Development, Food and Drug Administration, and Related Agencies;
- Commerce, Justice, Science, and Related Agencies;
- Energy and Water Development;
- Financial Services and General Government;
- Homeland Security;
- Interior, Environment, and Related Agencies;
- Labor, Health and Human Services, Education, and Related Agencies;
- Legislative Branch;
- Military Construction, Veterans Affairs, and Related Agencies;
- State, Foreign Operations, and Related Programs; and
- Transportation, Housing and Urban Development, and Related Agencies.
These subcommittees will then hold hearings on the allocation of the budget within their jurisdiction. Each subcommittee sends a spending bill to the full Appropriations Committee for a full Committee markup. After any additional changes are made, these Bills will be passed out of the Appropriations Committee and sent to the floor for consideration by the full House and Senate. When these Bills are passed, the differences between the House and Senate versions get worked out in a conference committee which has representatives from both chambers. After conference committee, the final bills will need to once again be passed by both the House and Senate before being sent on to the President to be signed.
A Drawn Out FY2018 Appropriations Process
Recently, Congress has not been keeping with the traditional appropriations process or calendar. Despite the FY2019 appropriations season being in full swing, Congress only completed FY2018 funding at the end of March. Over the past year, Congress has passed multiple Continuing Resolutions (CRs), five to be exact, which are stopgap measures that keep the government open (funded) without having an official budget deal in place. These CRs have been necessary because Congress had not been able to pass any of the twelve appropriations Bills. On February 9, Congress passed the Bipartisan Budget Act of 2018. In addition to serving as another CR, the Bipartisan Budget Act also funded the government through March 23, 2018, and increased the budget caps that were currently in place for both defense and non-defense funding. The Bipartisan Budget Act set up Congress to pass a massive, $1.3 trillion Omnibus Spending Bill, finally closing out FY2018. This larger package is called an Omnibus because it spans multiple budget areas in one Bill as opposed to the twelve individual bills that might be seen during regular order.
The Omnibus package has extended government funding through September 30, 2018. As the appropriations process continues to play out for FY2019, it remains to be seen if the appropriations process will go through regular order or if this fall, there will once again be a series of CRs. Chairman of the Senate Appropriations Committee, Sen. Richard Shelby (R-AL), indicated recently that he would like to move as many appropriations bills forward through regular order, but it remains to be seen if that will happen. Complicating factors a bit more is that this November there are midterm elections coming up, so Congress is less likely to want to have ongoing, highly political budget negotiations. While government affairs should already be actively participating in the appropriations process, they should also be prepared in the event this process continues for the rest of the year. When budgeting, it would be smart to save resources for later in the year should the FY2019 appropriations also result in a series of short term CRs. Despite having a very detailed process to follow, the timeline of the appropriations process remains unpredictable and government affairs professionals should plan accordingly. It is important to have a strategy that is nimble and able to be adapted to the changing Congressional timeline.