Overview
FY25 Status Check: With the deadline to fund the government one-month away, negotiations are still underway. The four corners insisted this week that negotiations are progressing and that they are not yet looking at a full-year continuing resolution (CR). However, House leadership has grown concerned with the slow pace and has quietly begun contemplating the logistics of getting a CR passed, while still giving appropriators additional time to work through topline negotiations, hoping for a breakthrough.
Defense hawks are growing anxious about the possibility of a full-year CR, reminding lawmakers that the Pentagon has never operated under these funding parameters before which will certainly cause operational difficulties within the military. There have been some discussions of attaching an increase in defense spending to the stopgap measure, but Democrats are unlikely to accept increases to the defense budget without a corresponding increase to non-defense spending. Despite some rumors that Senate Democrats may not be willing to help stave off a government shutdown, Senate Minority Leader Chuck Schumer (D-NY) has said he is still willing to support a bipartisan deal.
FY26 On Deck: This week, House Appropriations Chairman Tom Cole (R-OK) sent a series of letters to authorizing committee chairs urging them to update the authorizations of programs under their jurisdiction (more on this below). We also noted he plans to start marking up FY26 bills by late April, with the intent of passing them all by the start of the next fiscal year on October 1. As we noted in last week's edition, many congressional offices have also begun opening their online portals for FY26 requests. Off to the races!
Time for a Re-FRAme? Chairman Cole also argued this week that given shifts in our "political structure," the Fiscal Responsibility Act (FRA) should be re-negotiated – a statement on which Democrats have pushed back. To his point, the FRA was negotiated between Speaker Kevin McCarthy and President Joe Biden, neither of whom is still in office. If FRA is re-negotiated, FY25 funding will be able to bypass both the 1% cut from FY23 levels if operating under a full year CR as well as the “side deals” made at that time, the exact details of which are still unclear.
DOGE Watch: The Department of Government Efficiency's (DOGE) proposed slashing of unauthorized programs presents a new challenge for appropriators and authorizing committees. Although appropriators in the past continued to fund programs whose authorizations expired, we anticipate greater pressure on Congress to ensure programs are authorized in an attempt to save them from Musk’s sledgehammer. Recall that unauthorized programs account for roughly a third of federal appropriations.
Reconciliation Progress: Both the House and Senate budget committees reported their own budget resolutions out of committee this week. The House bill won the support of the conservative Freedom Caucus by adding a manager's amendment that would require budget savings of $2 trillion over 10 years. Securing the Freedom Caucus' support is a major win for Speaker Mike Johnson (R-LA) and may give him a leg up in his "one big beautiful bill" strategy. The Senate Budget Committee advanced its own bill on Wednesday, which would first enact border security, defense, and energy policy, but it would leave tax cuts to a second bill. This process – and whether Republicans can agree on a path forward soon – will have major implications for other spending discussions happening on the Hill in the near term.
