Overview
FY25 Stalemate: As the clock ticks down to the government funding deadline on March 14, topline discussions between Republicans and Democrats remain deadlocked. The impasse has centered upon Democratic insistence that a provision preventing the Office of Management and Budget (OMB) from freezing or impounding funds be included in the final agreement. Senate Appropriations Chair Susan Collins (R-ME) has said such measures are not typically included in appropriations bills, and thus would not be appropriate to include in a final deal. Further, convincing certain Republicans to vote in favor of such a measure would be a major challenge.
Chair Collins has expressed pessimism about the state of talks, saying Democrats have yet to respond to an updated offer she and Chairman Tom Cole (R-OK) proposed over the weekend. Ranking Member Patty Murray (D-WA) was more upbeat this week, saying that negotiators are "extremely close," but also added that a CR may still be needed even if a topline agreement is finalized since it will take time to draft the 12 appropriations bills. Though Ranking Member Murray expressed openness for a short-term CR, Democrats remain steadfast in their opposition to a year-long CR. Ranking Member Murray doubled down on this position in a memo sent to Senate Democrats this week, emphasizing that a year-long CR would eliminate new program starts and directives included in FY24, and give the Trump administration increased discretion in spending decisions.
DOGE Takes on DOD: This week, the Department of Government Efficiency (DOGE) and Secretary of Defense Hegseth announced that the Department of Defense plans to cut 8% of its budget each year over the next five years. Though they have yet to outline specifics, this plan stands in marked contrast to recent efforts by congressional Republicans to increase defense spending. Of note, the memo includes seventeen areas exempt from cuts, including operations related to enforcement at the southern border, missile defense, one-way attack drones, Indo-Pacific Command construction projects, and private sector medical care.
Clients with DOD funding priorities should get in touch as soon as possible to navigate the impact on any existing contracts or grants from DOD.
Dueling Reconciliation Plans: President Trump made his wishes clear this week that he prefers a one-bill reconciliation strategy, as opposed to the Senate's two-bill strategy. This comes after the two chambers have started on two separate paths for the budget measure. Last week, the Senate moved forward with marking up their own budget resolution, which included reconciliation instructions for energy, defense, and border priorities while excluding tax instructions. The Senate took another step forward last night, embarking on a "vote-a-rama" (late night votes on multiple amendments) for the budget measure, and after 10 hours of voting, the measure was adopted on the Senate floor by a 52-48 vote (Sen. Rand Paul [R-KY] was the only GOP defection). For now, the Senate strategy is being viewed by many as an alternative plan, to be used if the House plan fails.
Meanwhile, the House marked up and reported a budget resolution that included all priorities, including tax. With President Trump's recent endorsement of the House plan, Speaker Johnson has renewed momentum for bringing the House resolution to the floor for a vote next week. The vote could remain precarious as moderate Republican members have written a letter to the Speaker emphasizing the need to avoid cuts to entitlement programs such as Medicaid. Speaker Johnson has indicated that while Medicaid is not off the table, any cuts would only target "fraud, waste, and abuse."
The path forward on reconciliation remains arduous, but President Trump's endorsement of the House plan gives legislators a clearer picture on the way ahead.
