Overview
Offset Frets: As the reconciliation process moves forward, GOP leaders are making key decisions on spending cut proposals. This week, House Speaker Mike Johnson (R-LA) ruled out a proposal to decrease Medicaid funding through reducing the federal match. Speaker Johnson made the decision after meeting with about twenty House GOP moderates, who said they would not support any package that could result in millions of beneficiaries losing Medicaid coverage. The Speaker did not rule out other cost-saving measures, such as state per capita caps for Medicaid. The Speaker's decision to rule out this proposal has led to frustration among conservatives, who were hoping to lean on Medicaid as a cost saving mechanism.
The House Energy and Commerce Committee, which is marking up its portion of the bill on Tuesday, will have an uphill climb to find $880 billion in cuts — particularly with this Medicaid proposal off the table. The Ways and Means Committee will also mark up its portion of the bill on Tuesday. With the overall parameters of the package still in flux, Speaker Johnson has said he is working with Ways and Means on a smaller package than originally envisioned — now aiming for a $4 trillion topline instead of the initial $4.5 trillion goal.
Still Waiting on Rescissions: To add legitimacy to DOGE's cost-saving efforts and deliver long-term and substantive savings, the Trump administration is pursuing a formal "rescissions" package, which effectively removes funding for specific programs through cancelling budget authority for those programs. Senate Republicans met with OMB Director Russ Vought earlier this spring to discuss the current proposal, which is rumored to include approximately $10 billion in cuts to public broadcasting, the State Department, and other federal agencies and programs.
Along with the contents of the package, the White House and appropriators are discussing the best legislative strategy for passage — including whether it should ride with the reconciliation bill or wait until a later time. Right now, it appears more likely that they’ll wait until after reconciliation.
As a reminder, once the requests are submitted, Congress has 45 days to pass a rescissions package. In this window, the president can pause funding included in the request. If the 45-day clock runs out or Congress rejects any one rescission request, the president must obligate and spend those funds and cannot propose the same rescissions again.
Rescissions bills are not subject to the filibuster and are likely to be more fulsome this year with the current Republican "trifecta." While a number of President Trump's proposed cuts could lead to some "no" votes from Republicans, we don't expect there will be enough opposition to sink the effort. We do note, however, that the Senate rejected a $15 billion rescissions request during President Trump’s first term by a vote of 48-50.
FY26 Moves Ahead: In the week since the president released the FY26 "skinny" budget, congressional reactions have been lackluster — particularly among Republican defense hawks who want more funding for defense programs.
Frustration on the Hill has been compounded by a lack of information, as the White House has not yet released the full FY26 budget request. Despite this delay, House Republican appropriators have indicated that they have what they need to begin drafting their bills and are expected to mark very close to the president’s budget topline. The Senate is expected to mark to a higher level, which will create challenges later this year as the two chambers negotiate a path forward.
Meanwhile, both the House and Senate appropriations committees are moving ahead with their FY26 budget hearings, giving various agency heads the opportunity to state their respective agencies' needs for the upcoming fiscal year, as well as providing updates to the committees on the status of various programs. This process is in full swing, with both the House and Senate appropriations committees holding multiple hearings before Congress leaves town the week of May 26.
