FY25 Appropriations Impasse Continues, CR Could Last for Months

When the House and Senate return on September 9, they will immediately be drawn into negotiations on the first continuing resolution (CR) for FY25. The House Appropriations Committee has reported all twelve bills but the House has only passed five. The Senate Appropriations Committee has reported eleven of the twelve bills, (deferring action on Homeland Security due to unresolved border and Secret Service issues), but the Senate has not taken up any of the bills.

The House and Senate have significantly different toplines for FY25 discretionary spending and disagreements over policy language, necessitating enactment of a CR. Neither body is complying with the statutory toplines established in the Fiscal Responsibility Act (FRA), which provided 1% increases above FY24 for both defense and non-defense programs.

While the House bills fund defense programs at the FRA level of $895 billion (1% above FY24), they fund non-defense programs at a level $54 billion below the level agreed to by President Biden and then Speaker McCarthy (R-CA) (6% below FY24). Based on an agreement between Senate Appropriations Chair Murray (D-WA) and Vice Chair Collins (R-ME) to increase emergency spending by $34.5 billion ($21 billion for defense programs and $13.5 billion for non-defense programs), the Senate bills increase defense spending by 3% above FY24 to ($916 billion) and non-defense spending is increased by 2% above FY24 ($793 billion).

Depending on the outcome of the November elections, the $88 billion difference between the House and Senate will not likely be resolved until mid-December at the earliest, and potentially late March or April of 2025.

A government shutdown on October 1 is highly unlikely. Avoiding one requires adoption of a CR funding virtually all programs at the FY24 level without new priorities, new starts, or new procurements. Expect agencies to operate under CRs for the first three to six months of FY25.

*Non-Defense levels include “side-bar” adjustments agreed to by President Biden and then-Speaker McCarthy (R-CA) and subsequently by Speaker Johnson (R-LA). Chart I. Sources: CBO, HAC, FBIQ.

Key issues that need to be negotiated in the initial CR include:

• Duration: Some House Republicans are pressing for the CR to extend into March of 2025 so that the next President could be at the negotiating Democrats are expected to press for mid-December, which would provide the option to complete the appropriations process prior to President Biden leaving office.
• Disaster Supplementals: Will the CR include a $6-9 billion emergency supplemental for the FEMA Disaster Relief FEMA has already imposed its “Immediate Needs” rule, delaying recovery grants for prior disasters in order to have sufficient immediate response funds for new disasters such as Tropical Storms Debbie and Ernesto. Will the CR include funding for the Baltimore bridge?
• VA Medical Care Supplemental: Will the CR include $12 billion for the current VA Medical Care shortfall estimate?

The differences between the House and Senate bills have significant consequences. Some examples follow (comparisons between the House and Senate bills and to FY24):

• Numerous administrative/operating accounts, which either fund multiple activities (including tech) or are dedicated specifically for technology programs, receive large cuts in the House bills. Between these cuts and the need to absorb the January 2024 5.2% pay COLA and the 2% COLA proposed for January 2025, resources available for technology and any new hiring will be squeezed. Examples of such cuts below FY24 in the House bills include Social Security at $11.75 billion (-4%), Centers for Medicare and Medicaid Services at $3.5 billion (-6%), IRS at $10.1 billion (-18%), and VA Information Technology at $6.23 billion (-3%).
• The Senate bills restore these cuts and provide some increases- Social Security receives $12.7 billion (4% over FY24 and $1 billion more than the House). The Centers for Medicare and Medicaid Services receives $3.7 billion, roughly the same as FY24 and $.2 billion above the The IRS receives $12.3 billion, roughly the same as FY24 and $2.2 billion above the House. VA Information Technology receives $6.28 billion, slightly above the House.
• The House defense allocations total $895.2 billion, only 1% above FY24, consistent with the caps. The Senate allocations, when adjusted for the $21 billion increase in emergency spending is expected to total $916.2 billion (+3.4%). The Senate increases result in Procurement accounts being $9.9 billion above the House, and Operations and Maintenance accounts being $6.4 billion above the House. There are also significant increases for operational readiness, CENTCOM Operations, Global Counter Terrorism Force Protection, and Artificial Intelligence Scaling. The Senate Mil Con-VA bill provides $1.4 billion more than the House for military construction.
• The HAC Labor-HHS-Education bill substantially reduces the role of the Federal government in K-12 education, providing $72.3 billion for the Department of Education, an $11.1 billion (-13%) cut from FY24, including a $5 billion cut (-25%) for Title I, Education for the The Senate bill provides $80 billion for the Department (+1% over FY24) and $5 billion more than the House for Education for the Disadvantaged. The National Institutes of Health receive $47.0 billion in the House bill (roughly at the FY24 level) and $50.2 billion in the Senate bill.
• The House Energy-Water bill provides $1.96 billion for energy efficiency and renewable energy programs, a 43% cut. The Senate bill provides $3.44 billion. Both the House and Senate fund the Cyber program at $200 million, the same as FY24.
• Many law enforcement programs are reduced in the House bills, such as the FBI, funded at $10.3 billion (a -4% cut from FY24) and Alcohol, Tobacco, and Firearms at $1.4 billion (-12% from FY24). The Senate bill provides $11 billion for the FBI and $1.7 billion for ATF.
• The House Interior-Environment bill reduces the EPA budget from $9.2 billion to $7.4 billion (-20% from FY24), including a -30% cut for EPA Program Management. The Senate bill provides $9.3 billion for EPA (+1% over FY24 and $1.9 billion above the House and EPA Program Management is $1 billion above the House.)