Washington Bulletin 2/12

February 13, 2018
Washington Update

On Capitol Hill

CR, Debt Limit, Spending Cap Deal

Congress approved legislation to fund the government through Friday, March 23 and raise spending caps by about $300 billion over two years under the agreement that was signed into law Friday, February 9.

The measure:

  • Suspends the debt limit for about one year.
  • Provides $84 billion for disaster relief and provide tax relief for wildfire victims.
  • Extends the Children’s Health Insurance Program an additional four years.
  • Repeals a Medicare cost-control panel known as the Independent Payments Advisory Board.
  • Renews a litany of expired tax provisions.
  • Increases support for cotton and dairy producers by modifying agriculture programs.

The Congressional Budget Office estimates that the measure’s changes to mandatory spending and revenue would reduce the deficit by a net $38.2 billion through fiscal year 2027. Over an initial five-year window from fiscal 2018 through 2022, the measure would increase the deficit by $24.3 billion, though those effects wouldn’t be reflected in pay-as-you-go budget scorecards. The increased spending caps aren’t reflected in that estimate because the effects will depend on future appropriations legislation.

The measure did not address the Deferred Action for Childhood Arrivals (DACA) program, which was a driving force of the three-day government shutdown last month. Senate Majority Leader Mitch McConnell (R-KY) stated he will allow debate on an immigration bill and House Speaker Paul Ryan (R-WI) said the House will consider a measure that the “president will sign,”.

Debt Limit

The limit on federal borrowing is now suspended through March 1, 2019. Suspending the current limit enables the U.S. government to continue to borrow money to pay its bills. Once the limit comes back into effect it would reflect all outstanding U.S. debt as of that date.

The limit came back into effect on Friday, December 8, at which point the U.S. had about $20.5 trillion in outstanding debt.

Turning the borrowing limit back on didn’t have an immediate effect as the Treasury Department can use “extraordinary measures” to prevent the U.S. from defaulting on its obligations.

The Congressional Budget Office has estimated that those measures will be exhausted in the first half of March.

The legislation specifies that the government could borrow money only if it “was necessary to fund a commitment incurred pursuant to law” and would bar the Treasury secretary from issuing debt to create a cash reserve.

Spending Caps

The measure increases the discretionary spending caps under the Budget Control Act for fiscal 2018 and 2019. That would clear the way for action on a fiscal 2018 omnibus spending package and ease the appropriations process for next year.

The measure would change the caps as follows:

Caps (in billions) Current Law Measure Increase
2018 defense $549.1 $629.0 +$79.9
2018 nondefense $515.7 $579.0 +$63.3
Subtotal $1,064.8 $1,208.0 $143.2
2019 defense $562.0 $647.0 +$85.0
2019 nondefense $529.1 $597.0 +$67.9
Subtotal $1,091.2 $1,244.0 +$152.9
Total $2,156.0 $2,452.0 +$296.1

Note: Numbers may not add due to rounding.

The caps were created under the 2011 Budget Control Act and are enforced through sequestration if spending exceeds the statutory limits. The law also triggered additional reductions to the discretionary caps and sequestration of mandatory spending after negotiations on a deficit reduction deal failed. Congress has since increased the discretionary caps for fiscal 2013 through 2017.

Continuing Resolution

The measure would fund the government through Friday, March 23 at the fiscal 2017 spending levels and would be the fifth continuing resolution for the fiscal year that began on October 1.

The legislation also would extend most anomalies and program extensions from the previous continuing resolutions, such as the National Flood Insurance Program.

Other anomalies included in the measure would:

Provide additional funding at a rate of $182 million for ramp-up activities related to the 2020 census.

Direct the Energy Department to draw down and sell $350 million worth of crude oil from the Strategic Petroleum Reserve in fiscal 2018. The proceeds would be used to carry out planned SPR modernization activities.

Allow funds for military construction, land acquisition, and family housing to be used for certain urgent planning, design, and construction projects identified by the Air Force.

Permanently extend the Transportation Department’s authority to transfer funds allocated for offices, functions, or administrative costs for programs that have been consolidated into its National Surface Transportation and Innovative Finance Bureau.

Require that collections related to Transportation Department railroad rehabilitation and improvement loans be deposited into the Transportation and Innovative Finance Bureau’s account rather than the Federal Railroad Administration’s safety and operations account.

Reinstate the Housing and Urban Development Department’s authority to make grants for replacing and revitalizing public housing.

Disaster Aide

The measure would provide $84.3 billion in emergency supplemental funding for hurricane and wildfire relief efforts.

That would be about twice as much as the White House requested in November and would omit the administration’s proposed spending offsets. It would also be $3.33 billion more than provided in a disaster aid package that the House passed. The Senate didn’t take up that measure after some conservatives called for more offsets and several lawmakers sought more assistance for California, Puerto Rico, and the U.S. Virgin Islands.

The measure would also increase the Medicaid funding cap for Puerto Rico and the U.S. Virgin Islands by as much as $4.94 billion from Jan. 1, 2018, through Sept. 30, 2019, and waive local cost-sharing requirements.

The bill also includes tax breaks for individuals and businesses affected by recent hurricanes and wildfires and would increase support for cotton and livestock producers. It omits provisions from the House bill that would reauthorize emergency management performance grants and modify how the Federal Emergency Management Agency (FEMA) provides assistance.

Emergency Funding

The bill’s emergency funding would be the largest standalone total ever appropriated for disaster relief. The funding wouldn’t count against the nondefense discretionary spending cap under the Budget Control Act (Public Law 112-25), which the measure would increase.

The measure provides $23.5 billion for FEMA’s Disaster Relief Fund (DRF).

State and local recipients can use the money to respond to hurricanes, wildfires, and other disasters declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

DRF funding is mostly allocated for the Public Assistance Program, Individual Assistance Program, and Hazard Mitigation Grant Program.

FEMA typically covers 75 percent of the costs for DRF-funded projects. The measure would increase the federal share to 90 percent for debris removal projects following a 2017 wildfire disaster declaration, such as the October declaration for fires in Northern California. The president could also increase the federal share to as much as 85 percent for projects to mitigate damages from future disasters.

FEMA assistance for nonprofit facilities would be expanded to include houses of worship.

Community Development Block Grants

The measure would provide $28 billion in funds distributed to states and communities through HUD’s Community Development Block Grant (CDBG) program, including $2 billion for improving electrical power systems in areas damaged by Hurricane Maria.

Those funds could be used for disaster relief, long-term recovery, infrastructure restoration, housing, and economic revitalization.

Education

Funds provided for the Education Department would remain available through Friday, September 30, 2022, to help schools and displaced students.

The total would include $100 million for Federal Supplemental Educational Opportunity Grants, the Federal Work-Study program, and the Fund for the Improvement of Postsecondary Education. The measure would waive any matching or reservation requirements and allow the funding to be used for student financial assistance or salaries and equipment. The department would have to prioritize students who are homeless and institutions with extensive damage.

The bill would also appropriate “such sums as may be necessary” to forgive supplemental loans provided to students at historically black colleges and universities following hurricanes Katrina and Rita.

Agriculture

The bill would provide $2.36 billion to the Agriculture Department through December 2019, for agricultural losses resulting from hurricanes and wildfires. The department could provide the assistance to states and territories as block grants.

Assistance would be limited to 85 percent of losses in most cases. If a producer didn’t have insurance for the 2017 crop year, or the 2018 crop year as applicable, payments would be limited to 65 percent of losses.

Producers also would have to purchase crop insurance for the next two available crop years if they receive the disaster aid.

The measure would expand a livestock disaster assistance program so that it applies to producers who have sold livestock at a reduced price, in addition to those suffering excessive death.

It also would remove a $20 million cap on total funding for a separate disaster program for livestock, honey bees, and farm-raised fish and a $125,000 per-producer cap under a tree assistance program.

CHIP Extension

Federal funding for the Children’s Health Insurance Program (CHIP) would be extended for four additional years, through fiscal 2027. The last continuing resolution provided CHIP funding for fiscal 2018 through 2023.

The measure would provide “such sums as are necessary” for fiscal 2024 through 2027, plus an additional $15.3 billion for fiscal 2027.

Other aspects of the program would be extended through 2027, such as a Child Enrollment Contingency Fund and outreach grants, and maintenance of effort requirements.

Community Health Centers

The measure would provide community health centers with $3.8 billion for fiscal 2018 and $4 billion for 2019.

For example, supplemental grant funds would be established for health centers to implement evidence-based models for increasing access to high-quality primary care services.

Grant terms for operating health centers would be reduced to one year, from two years, and applicants for operating grants would have to submit an implementation plan that meets general application requirements. Operating grants could also be used to establish new delivery sites for health centers and to expand their existing services.

Conservation

The measure would extend the Agriculture Department’s Environmental Quality Incentives Program by one year, through fiscal 2019. The measure would extend the fiscal 2018 rate of $1.75 billion for fiscal 2019. Program funds would remain available until expended.

 

In the Administration

Trump administration takes aim at California desert protection plan

The California desert is the latest target of Interior Secretary Ryan Zinke’s campaign to promote resource extraction on public lands across the West.

Sec. Zinke’s Interior Department said it would allow mining on 1.3 million acres, or more than 2,000 square miles, across the California desert, reversing an Obama-era effort to protect those lands. Vast swaths of Utah’s Bears Ears and Grand Staircase-Escalante national monuments were similarly opened to mining this month, following President Trump’s decision to dramatically reduce the size of those monuments.

Changes threaten to intensify the costly and time-consuming lawsuits and bureaucratic hurdles that commercial scale projects can bring. Facilities built on land the management plan designates for them are eligible for fast-track permitting. As the Trump administration suggests unraveling the year-old management plan could speed the production of clean power in California, the states own officials say it would have just the opposite effect.

State officials are likely to fight any moves by the Trump administration to shrink the areas the plan protects. They say it is absolutely unnecessary to put commercial-scale clean-power projects in those areas to meet California’s renewable energy goals. Some also warn tearing apart the plan would undermine the state’s efforts to shift toward more clean power, exposing energy companies to the litigation and bureaucratic delays that the carefully brokered plan was designed to help them avoid.

 

President Trump Is Said to Again Seek to Spin Off of U.S. Air Traffic

President Donald Trump’s proposed 2019 budget being released Monday, February 12, will include his plan to spin off U.S. air-traffic control to non-profit management.

President Trump included a similar proposal in his 2018 budget request and formally released a plan in June to end the current system he’s called an antiquated, wasteful mess.

While the president and members of his administration have made it clear they support splitting air-traffic off from government as a way to spur innovation and improve efficiency, the proposal is largely symbolic given strong bipartisan opposition in Congress.

Representative Bill Shuster (R-PA), the Republican chairman of the House Transportation and Infrastructure Committee, pushed such a plan the past two years, gaining support from his committee. But the proposal faced skepticism from some Republicans and most Democrats, and was never endorsed by the full House.

The hurdles were even greater in the Senate, where some Republicans openly opposed the plan, and it wasn’t included in Federal Aviation Administration reauthorization legislation last year.

The White House has proposed placing the FAA air-traffic division and its 14,000 to 15,000 controllers under the umbrella of a government-chartered nonprofit corporation. It would be funded by taxes on airline tickets and aviation fuel. Many developed nations have similar arrangements, including Canada, the U.K. and Australia.

Proponents, such as most airlines, argue that privatizing air-traffic control would enable swifter adoption of the new technologies known as NextGen, which are designed to reduce delays and aircraft fuel use as well as enhancing safety.

The National Air Traffic Controllers Association union, which hasn’t formally endorsed the plan, has been supportive of the idea due to uncertain FAA funding, said spokesman Doug Church. The union has also been concerned with falling numbers of controllers, which have fallen to about 14,000, he said.

Opponents say that the current system is working well and that air-traffic operations, with their implications for national defense, should remain under government control. Groups representing private aviation, such as the National Business Aviation Association, have pushed to kill the proposal.

 

Trump Administration Plans To Defang Consumer Protection Watchdog

The Consumer Financial Protection Bureau was created after the financial crisis to protect Americans from being ripped off by financial firms.

Now, President Trump’s interim appointee to run the bureau, Director of the Office of Management and Budget Mick Mulvaney, is making radical changes to deter the agency from aggressively pursuing its mission.

Within weeks of coming on board, Mulvaney has worked to make the watchdog agency less aggressive. Under his leadership, the CFPB delayed a new payday lending regulation from going into effect and dropped an investigation into one payday lender who contributed to Mulvaney’s campaign. In another move that particularly upset some staffers, the new boss also dropped a lawsuit against an alleged online loan shark called Golden Valley Lending. The suit says the lender illegally charges people up to 950 percent interest rates. It took CFPB staffers years to build the case.