Federal Budget Update: Key Dates and Current Status of Negotiations

By NASBO Staff posted 12-05-2013 12:00 AM

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December 5, 2013

With one federal budget deadline next week, and more important deadlines to follow, NASBO staff prepared this reference sheet to provide members with an overview of key dates and an update on the current status of budget negotiations in Washington, DC.

Key Budget Dates & Possible Outcomes

December 13, 2013: The target date for the 29-member budget conference committee to reach a fiscal 2014 budget agreement and report it to the full Congress. (Note: This is also the date that the House is currently scheduled to adjourn for the year, though this is subject to change.)
What happens if...
Deadline is met	Deadline is NOT met
If the budget conference reaches a deal, it is expected that the conference report to Congress would set top-line discretionary spending levels for fiscal 2014 (and possibly fiscal 2015), as well as likely provide some sequester relief by raising overall spending levels somewhat. (For more details on proposals being considered, see “Current Status of Budget Negotiations” below.) House and Senate appropriators would then need to draft appropriations bills based on the budget framework agreed to in conference, which would then be sent to the full House and Senate for consideration.	If the budget conference fails to produce an agreement by this deadline, there will be no immediate consequences for the federal budget. Negotiations on funding the federal government in this case would likely continue, either by the budget conference leaders or other leaders in Congress and the Administration. However, if the budget conference fails, this is still likely to attract significant attention, which could either serve to put more pressure on Congress to work together to reach a deal or further exacerbate partisan divides.

January 15, 2014: This is the most important upcoming deadline, as this is when the current continuing resolution (CR) that is funding the federal government expires. Congress must pass all 12 appropriations bills, or another CR, by this date to keep the federal government funded and avoid another federal government shutdown. Congress will also need to extend program authorizations that are set to expire with the CR, such as the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF).
What happens if...
Deadline is met	Deadline is NOT met
The federal government remains funded. Depending on the nature of the spending legislation passed, appropriations may be enacted for the full fiscal year, or another short-term CR may be enacted to allow Congress more time to work out a full-year funding agreement.	The federal government would partially shut down again, as it did on October 1, 2013. In the bill that was signed into law on October 17, 2013 ending the most recent shutdown, a provision was included guaranteeing that states would be reimbursed for state funds expended during the shutdown to continue carrying out a federal program that the state was carrying out prior to the shutdown and that furloughed federally-funded state employees would be fully compensated with back-pay. The bill language stipulated that this provision applies to any period in fiscal 2014 when a lapse in appropriations occurs (see Section 116(c) of HR 2775).This means that if another shutdown takes place in January 2014, states will at least have some degree of certainty that they will eventually be reimbursed for expenses they choose to incur to keep federal programs operating. However, states will still be subject to numerous constraints and challenges that will restrict their ability to backfill federal programs in the event of another shutdown. Additionally, states are concerned about the harmful effects that another shutdown, or even the threat of a shutdown, could have on the economy, employment and tax revenues.

Mid-January 2014 (likely January 18): Fifteen days after the first session of Congress adjourns, another sequestration will be triggered if current spending levels exceed the caps under the Budget Control Act of 2011 (BCA). It is expected that this sequester would only impact defense spending (at current spending levels).
What happens if...
Deadline is met	Deadline is NOT met
If the defense and non-defense spending levels in effect at this time comply with discretionary spending caps – or the caps are sufficiently raised by Congress as part of a budget agreement – no sequester will be triggered.	If nondefense or defense spending levels exceed their respective caps, a sequester (across-the-board cut) will be triggered in mid-January for non-exempt programs to bring spending levels into compliance with the caps. At current spending levels, nondefense discretionary spending is roughly equivalent to its BCA cap, while defense spending exceeds its cap by $20 billion. Thus, if Congress were to maintain spending at current levels after the current CR expires on January 15th, the sequester would likely only be triggered for non-exempt defense programs.

Other Key Dates

January 1, 2014: A number of temporary tax extenders and emergency unemployment insurance benefits will expire on this date if Congress does not take action to extend them. Congress must also pass a new farm bill or extension by this date in order to prevent certain agricultural policy provisions from expiring. The leaders of the farm bill conference are expected to meet this week to continue negotiations and try to reach an agreement before the end of the year.
February 7, 2014: The suspension of the debt limit expires on this date. The debt limit will go back into effect and be automatically raised to a level that covers all borrowing that has taken place during the suspension period. The U.S. Treasury can then take actions commonly known as “extraordinary measures” to continue meeting the federal government’s obligations under existing borrowing authority for a short period until Congress approves another increase in the debt limit. The Congressional Budget Office (CBO) estimates that Treasury would likely exhaust the use of extraordinary measures sometime in March 2014, though the timing and amount of tax refunds and receipts could shift this date later.

Current Status of Budget Negotiations

(as of December 4, 2013)

Budget conference negotiators continued informal private talks over the Thanksgiving recess as they aim to reach a small compromise to set spending levels for fiscal 2014 and fiscal 2015 while providing some sequester relief. Senator Patty Murray (D-WA) and Representative Paul Ryan (R-WI), the leaders of the 29-member conference, are reportedly focused on reaching a narrow fiscal agreement that would partially restore sequester cuts and establish top-line discretionary spending amounts for two years. According to some reports, one proposal that has been discussed would restore sequester cuts by roughly $45 billion in fiscal 2014 and $20 billion in fiscal 2015, with the spending increase applying equally to defense and non-defense discretionary spending. This softening of the sequester would be paid for through a combination of non-tax revenue increases, such as the sale of wireless spectrum, raising aviation fees, and raising premiums charged by the Pension Benefit Guaranty Corporation, and savings in mandatory spending areas such as federal employee retirement benefits. It is also possible that the budget conference will include a one-year extension of emergency unemployment benefits in a deal. Such a limited agreement may draw enough support from lawmakers who wish to avoid the threat of another government shutdown and the negative effects of a defense sequestration in mid-January. However, any compromise, even a small one, is likely to face resistance from some lawmakers in both parties.

If the budget conference fails to produce an agreement by December 13, there will be no immediate consequences for the federal budget. Congress could still reach a funding compromise or pass another continuing resolution (CR) before the current stopgap funding measure expires on January 15 to prevent another federal government shutdown, as explained above. If a CR is enacted at current spending levels, this will trigger another sequestration in mid-January to bring defense spending into compliance with the post-sequestration discretionary cap established by the Budget Control Act (BCA). If partisan conflict once again leads to complete gridlock in Congress and prevents lawmakers from passing any funding bill by the January 15 deadline, this would result in another government shutdown. A number of federal lawmakers and Washington insiders say this outcome is highly improbable given the backlash that lawmakers faced as a result of the October 2013 shutdown, but it is still a possible scenario.

NASBO will continue to monitor and report on negotiations and legislative actions in Washington concerning the federal budget for fiscal 2014 and future years. If you have any questions, please contact Kathryn White at kwhite@nasbo.org or 202-624-5949202-624-5949.

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