A Tale of Two(ish) Budgets: Congressional Budget Negotiations in 2024

UPDATE: On March 23, 2024, Congress passed the final funding bill for fiscal year 2024, preventing a government shutdown. All appropriations bills for fiscal year 2024 have now been enacted into law. FY2024 ends on September 30, 2024.

With discretionary funding caps set by the Fiscal Responsibility Act (FRA) and a number of “side agreements” looming over budget negotiations for the current fiscal year (FY2024), there are various ways the funding fights could play out. This blog reviews several scenarios along with an overview of the supplemental emergency spending requests that the Biden administration recently submitted to Congress.

The Current State of Play

There are 12 regular appropriations bills Congress is tasked with passing by October 1, the beginning of the fiscal year. These bills fund a variety of government agencies and programs, from the U.S. military to schools, and represent 30% of annual federal spending (the rest being mandatory spending programs and interest payments).

Last year, bipartisan negotiations over the debt limit culminated in passage of the FRA. The legislation cuts discretionary spending in FY2024 relative to CBO projections and restricts discretionary spending growth to 1% in FY2025, slower than the projected rate of inflation. The FRA limits base discretionary spending to $1.59 trillion for FY2024. Of this amount, base defense spending is limited to $886 billion, a 3% increase from FY2023, and nondefense spending is capped at $704 billion, a 9% decrease from FY2023.

As of March 1, 2024, Congress has passed several CRs during fiscal year 2024, mostly recently a two part CR that expires for some federal agencies and programs on March 8 and for the remaining on March 22. While this buys Congress time to discuss appropriation levels, it also creates a series of funding deadlines that, if not met, will shut down parts of the government.

Appropriations Bill	CR Funding Amount (Budget Authority, Annualized Basis)	Expires
Agriculture and Food and Drug Administration (FDA)	$26 billion	March 8
Energy and Water Development	$56 billion	March 8
Military Construction and Veterans Affairs	$171 billion	March 8
Transportation, Housing and Urban Development	$95 billion	March 8
Commerce, Justice, Science	$83 billion	March 22
Defense	$799 billion	March 22
Financial Services and General Government	$27 billion	March 22
Homeland Security	$61 billion	March 22
Interior and Environment	$44 billion	March 22
Labor, Health and Human Services, and Education	$208 billion	March 22
Legislative Branch	$7 billion	March 22
State and Foreign Operations	$60 billion	March 22

Source: Congressional Budget Office

Scenario 1: Long-Term (or Full-Year) CR

If negotiators cannot reach agreement on full-year funding by the March deadlines, Congress could enact another CR. If they take this path and a CR is in place after April 30, the FRA’s across-the-board cuts to discretionary spending would go into effect beginning May 1.

These limits could cut government spending by $4 billion compared to the spending caps agreed to in the FRA and by $114 billion relative to the Congressional Budget Office’s baseline scenario before the FRA became law, making across-the-board cuts appeal to some lawmakers concerned about government spending.

CRs that extend months into the fiscal year can have a negative impact on federal agencies, though, forcing them to continue spending on priorities from the prior year rather than matching funding allocations to present needs. CRs also come with an opportunity cost, requiring federal employees to plan for associated unique circumstances and limitations. For example, CRs can slow federal hiring, travel, and grant-making, according to a 2022 report from the Government Accountability Office. Even so, enacting another CR would hardly be unprecedented: Congress enacted 200 CRs from FY1977 through FY2023.

Source: Congressional Research Service; BPC

The 131 CRs between FY1998 and FY2022 lasted a total of 3,566 days, meaning that the average CR is short-term: 27 days. Thus, a CR lasting more than a month, and past the April 30 deadline, would be longer than average.

Scenario 2: Full-Year Funding at FRA Levels, With Side Agreements

The Senate has passed bipartisan appropriations bills at FRA-negotiated spending levels, and Democratic members of the House are also generally in favor of this approach. Previously, House Appropriations Committee Republicans had adopted lower limits—a nearly $120 billion difference—though House Republicans may be moving towards adopting FY2024 appropriations at FRA levels rather than below them.

An important and emerging dispute, however, is over a series of “side” or “handshake” agreements reportedly made between the Biden administration and former Speaker Kevin McCarthy (R-CA) as the debt limit deal was completed which include up to $69 billion of additional spending for non-defense programs. Whether House Republicans will support full-year appropriations that include those side agreements is an open question.

Scenario 3: Full-Year Funding at FRA Levels, Without Side Agreements

Should Speaker Mike Johnson (R-LA) and House Republicans balk at including $69 billion in side agreements with either a full-year CR or full-year appropriations, a dispute could emerge between House Republicans and both the Biden administration and congressional Democrats.

Absent the side agreements, non-defense discretionary spending will be much lower in FY2024 than it was in FY2023, which may not be a palatable outcome – particularly for Democrats, many of whom wish to preserve spending on those priorities.

Below, see all three of the above scenarios visualized, plus the caps if there is a CR past April 30:

	Scenario #1: Spending at FY2023 Levels	Spending Caps if CR Past April 30[1]	Scenario #2: Spending Under FRA Caps, With Side Agreements	Scenario #3: Spending Under FRA Caps, Without Side Agreements
Defense	$860 billion	$850 billion	$886 billion	$886 billion
Non-Defense	$777 billion	$736 billion	$704 billion	$704 billion
Non-Defense Side Agreements	N/A	N/A	$69 billion	$0
Total	$1.637 trillion	$1.586 trillion	$1.659 trillion	$1.590 trillion

Source: Congressional Budget Office, Congressional Research Service, Center for American Progress

And see how each scenario compares to the spending levels in FY2023:

	Scenario #1: Spending at FY2023 Levels	Spending Caps if CR Past April 30	Scenario #2: Spending Under FRA Caps, With Side Agreements	Scenario #3: Spending Under FRA Caps, Without Side Agreements
Defense	$0	-$10 billion	+$26 billion	+$26 billion
Non-Defense	$0	-$39 billion	-$4 billion	-$73 billion
Total	$0	-$49 billion	+$22 billion	-$47 billion

Source: Congressional Budget Office, Congressional Research Service, Center for American Progress

Emergency Spending: $100 Billion-Plus?

Other policy priorities may be included with either a CR or a full-year spending package. A supplemental appropriation is a funding bill passed outside of the regular annual appropriations process when an urgent need for funds cannot wait for the next regular cycle.

The Biden administration has sent Congress two supplemental funding requests: one focused on national security and another on domestic priorities. As the wars in Ukraine and the Middle East continue, the Biden administration has called for $105 billion in supplemental funding to aid U.S. allies’ defense efforts and support humanitarian aid. Of this amount, the administration proposed $61.4 billion in economic and military aid for Ukraine, $14.3 billion in military support for Israel, $13.6 billion for U.S. border security, $9.2 billion in humanitarian assistance for Israel, Gaza, and Ukraine, and $7.4 billion for support of Indo-Pacific allies such as Taiwan.

The White House has also requested $56 billion in supplemental domestic funding: $23.5 billion for disaster relief, $16 billion for child care, $6 billion for internet access among low-income households, $6 billion for software security and energy concerns, and $4.5 billion for other domestic issues such as energy assistance and opioid epidemic response.

 

It’s highly unlikely that all these supplemental requests will be fulfilled, but several have bipartisan support. The debate over this package will run in parallel to and may impact the annual appropriations negotiations.

These scenarios outline how government funding fights could be resolved in the months ahead. The element certain to any scenario is that bipartisan cooperation will be critical to avoid the worst outcome of the congressional budget process—a costly government shutdown.

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[1] These caps represent a 1% cut from base discretionary budget authority for FY2023, as projected by the Congressional Budget Office (CBO) when FY2023 appropriations were enacted in December 2022. Actual base discretionary budget authority for FY2023 came in higher than CBO originally projected, meaning the across-the-board cuts required to bring discretionary spending under the post-April 30 caps will be greater than 1% for non-defense spending in particular.