One hundred dollar notes are seen in this photo illustration at a bank in Seoul January 9, 2013. Japan's drive to weaken the yen poses a threat to big South Korean exporters such as Hyundai Motor, but Koreans may benefit as the new president aims to shift policy away from supporting big exporting conglomerates. The yen's tumbling by some 10 percent to the dollar in the December quarter at a time when the won has been on the rise sent the shares of big exporters falling and raised concerns among the policymakers in Seoul. Picture taken January 9, 2013. To match Analysis KOREA-CURRENCY/ REUTERS/Lee Jae-Won (SOUTH KOREA - Tags: BUSINESS) - RTR3CGGO

“On or before April 15 of each year, the Congress shall complete action on a concurrent resolution on the budget for the fiscal year beginning on October 1 of such year. The concurrent resolution shall set forth appropriate levels for the fiscal year beginning on October 1 of such year…”

April 15. As set forth by the Congressional Budget Act of 1974 (CBA), on or before this date each year, the U.S. House of Representatives and the Senate shall jointly approve a budget resolution that governs all legislation related to Federal spending and receipts for the coming fiscal year.

A full 195 days elapsed before Congress passed its fiscal year 2018 budget resolution on October 26th. This has the unsettling effect of both chambers’ budget, authorizing, and appropriations committees advancing distinctly separate legislative agendas with no common agreement to either start from or arrive at.

Compromise is fundamental to the legislative process. Final agreement and passage of this budget blueprint 25 days into the start of this fiscal year only now starts the effort at compromise amidst a challenging docket of legislative priorities and challenges, chief among them is the litigation of the annual authorization and appropriations measures. The following table reflects funding levels for each major budget function as set forth in the budget resolution for fiscal year 2018:

The concurrent agreement on funding for the above budget functions, if passed on time, would provide the expressed shotgun start and a firm, yet attainable objective necessary for both the House and Senate to begin in earnest their annual, constitutionally mandated obligations.

So, April 15th does indeed represent an inviolable “agreement” within the congressional budgeting process. Falling short of this agreement enables each chamber to set its own, somewhat arbitrary, spending targets which may be difficult to not just defend within its own body, but to later find compromise with the other side of the Capitol at the end of an inherently complicated appropriations process.

Today, that process is even further hampered by an emotionally charged political landscape. Every year somehow offers a new course laden with seemingly unsurmountable hurdles. Evidence of these annual challenges facing the Appropriations Committees is that in all but 4 of the last 40 years the Federal government has begun the year under some form of a continuing resolution (CR). The current CR, H.R. 601, runs through December 8, 2017. More specifically, that means Federal agencies are functioning at last year’s rate for operations, preventing budget stability, promoting fiscal uncertainty and prohibiting the inventiveness of private sector involvement.

However, despite the absence of top-line spending limits affirmed by a budget resolution, the House and Senate Appropriations Committees nevertheless began their “budget season” disseminating spending allocations to each of their 12 subcommittees. Under these prescribed guidelines, the House ultimately passed four appropriations bills, together, in a so-called “Security Omnibus” just before the August recess (H.R. 3219). Subsequently, on September 14, 2017, the House concluded work on its annual appropriations bills upon the passage of H.R. 3354, a catch-all, omnibus spending package.

The Senate similarly rendered its own guidance on subcommittee allocations and moved eight of its 12 bills through the Committee process. However, none of those bills were brought before the full Senate for consideration.

The following table reflects the discretionary allocations (known as 302(b) allocations, after the section of the CBA detailing the sub-allocation process) as set forth by House and Senate Appropriations Committee guidance for fiscal year 2018, enabling each subcommittee to begin drafting its own spending legislation:

The current state of appropriations now requires the Congress to establish bicameral agreement on 302(b)s that support the terms of the budget resolution. As of early November, senior-level appropriations sources have told McKeon Group that these conference allocations have not yet been communicated to Subcommittee leadership. The absence of conference allocations alone would pose little challenge in meeting the expiration of the CR. However, there is a much larger political and legislative obstacle in play that suggests final passage of fiscal year 2018 funding will be an “11th hour” exercise, at best, or worse an extension of the CR deeper into fiscal year 2018.

In addition to the above process “foul” of the severely delayed adoption of a budget resolution, the proverbial “elephant in the room” looming over the entire appropriations process is the potential impact of the Budget Control Act of 2011 (BCA). The BCA was enacted to control the Nation’s debt ceiling crisis and induce deficit reduction and balanced budget mechanisms.  

The BCA originally sought to reduce the deficit by $2.1 trillion while incurring savings of $1 trillion over the ten-year period of 2012 – 2021. The $1 trillion in savings would be accomplished through “budget sequestration”, which obligates the White House’s Office of Management and Budget to implement across-the-board, indiscriminate reductions through the cancellation of spending authorities for all executive agencies, their programs and their activities if/when appropriations legislation exceed the spending caps.

The caps established by the BCA for fiscal year 2018 are estimated to be $603 billion for defense activities (budget function 050) and $553 billion for nondefense activities. According to a May 2017 Congressional Budget Office report, the estimated effect of sequestration would revise those caps downward to $549 billion for defense (-$54 billion) and $516 billion for non-defense (-$37 billion).

The fiscal year 2018 congressional budget resolution provides for approximately $634 billion in total defense-related spending. Yet, the BCA remains current law, and congressionally-proposed spending levels sit in direct contravention of the statutorily-imposed spending caps. So, the Congress faces four likely options: 1) pass appropriations bills that comport with the BCA caps, 2) ignore the BCA and subject the entirety of fiscal year 2018 funding to draconian sequestration reductions, 3) increase the spending caps through some other legislative maneuver, or lastly, 4) extend the CR, perhaps for the entire year. The only absolute is that any one of these options will be met with vigorous opposition, meaning that it could be a very long “11th hour” for fiscal year 2018.