CHN: Talks and Speculation Kick off FY20 Budget Season

Fiscal Year 2020 budget talks and speculation have kicked off on both ends of Pennsylvania Avenue. President Trump’s FY20 topline budget message, priorities, and summary tables are expected to be released the week of March 11. Detailed line-item information, including details on any proposed cuts to mandatory and discretionary (annually-appropriated) programs, will be released the week of March 18. Office of Management and Budget Acting Director Russ Vought confirmed that the President’s budget will ignore statutory spending caps for defense spending by using the uncapped Overseas Contingency Operations (OCO) fund. According to CQ, the President’s budget is expected to propose $174 billion in OCO funding allowed outside the caps, in addition to the cap of $576 billion for defense spending for FY20, leading to a total defense-related budget allocation of $750 billion. This would be $34 billion more than Congress appropriated for FY19 in total; the OCO funding would be more than double the $69 billion provided for OCO this year, despite the fact that OCO war-related operations are scheduled to diminish. If adopted, this would be an explicit effort to shatter budget caps in favor of Pentagon spending. Vought also confirmed that Trump will propose a 5 percent cut to nondfense programs, though it is unclear what baseline the Administration is using. The Coalition on Human Needs is hosting a webinar on President Trump’s budget on March 14 at 2pm ET. Register here and stay tuned to upcoming Human Needs Reports for additional analysis of the President’s and Congressional budget proposals.

Congressional leaders, meanwhile, are expected to try to negotiate a new budget deal to raise both defense and nondefense discretionary spending caps for FY20 and FY21. Without a new deal, deep sequestration cuts put in place by the Budget Control Act of 2011 will return, cutting discretionary spending by $126 billion, or 10 percent, in FY20. Domestic and international appropriations would be cut by $55 billion below this year’s level of $597 billion; military spending would drop $71 billion from this year’s level of $647 billion, not counting the uncapped OCO funds. According to CQ, House Budget Chairman John Yarmuth (D-KY) will propose a two-year budget deal that will lift discretionary spending caps only in line with inflation or slightly higher, a much more modest increase than the FY18-FY19 spending caps boost. Complicating matters are programs that will require at least $15 billion in additional funding over current year, including $4 billion for the 2020 Census, $6-8 billion for increased costs for veterans health services, and $1 billion in affordable housing aid. According to some reports, Congress could be months away from reaching an agreement on a deal. Meanwhile, some House committees have begun preparing their “views and estimates” letters. Sent to the House Budget Committee, these letters outline each committee’s budget and policy priorities for the year ahead, make their spending needs known for programs under their jurisdiction for the coming fiscal year, and react to the president’s request.

In related budget news, the debt limit, which had been suspended for a year, was reinstated on March 2. The Treasury Department issued a report on Feb. 26 saying that it can use “extraordinary measures” to extend its borrowing authority to near the end of the fiscal year or early into the next one, at which time it will run out of cash unless the debt limit is raised or extended again. The raising of the debt ceiling could be combined at that time with a bipartisan deal to continue funding government and avoid another government shutdown. It could also be combined with a deal to raise spending caps.