Senate to Vote on Continuing Resolution

With the deadline for avoiding a government shutdown approaching on Friday, Senate Majority Leader Mitch McConnell (R-KY) introduced last Thursday a continuing resolution (CR) extending funding through December 9. The bill also includes one of the appropriations bills (Military Construction and Veterans Affairs) as well as funding for the response to the Zika virus and flood relief for Louisiana.

According to the Congressional Budget Office, total new budget authority for this CR is $1,066.7 billion on an annual basis, equal to the FY 2016 spending level and $3 billion below the FY 2017 discretionary spending cap of $1.070 trillion.*

Even though the funding level in this bill is less than the aggregate spending limit, it does break the firewall between the discretionary defense and non-defense accounts by providing for non-defense spending at an annual rate of $1.57 billion above the cap while reducing defense spending by $4.58 billion below the defense limit. Total non-defense spending is $520.1 billion and defense is $546.5 billion on an annualized basis.

A pure CR generally maintains funding at the exact same level as the previous year. However, if last year’s spending levels and other provisions were simply carried forward, expiring cost-saving provisions and increased spending for FY 2017 already approved would raise the cost to $1.08 trillion, nearly $10 billion above the FY 2017 cap and $13 billion above the FY 2016 amount. These provisions include $10 billion in non-recurring Changes in Mandatory Programs (CHIMPs) and one-time rescissions from the FY 2016 appropriations bills, and a $4.4 billion increase in advance funding for VA health care approved last year for FY 2017.

To make up the difference, the Senate CR includes a $5 billion across-the-board cut of slightly less than 0.5%, $4.1 billion in additional CHIMPs beyond those continued from last year's appropriations, and a reduction of $4 billion below FY 2016 levels in the MilCon/VA appropriations bill.

Breakdown of FY 2017 CR
FY 2016 Enacted Level $1,066.7 billion
Non-recurring savings in FY 2016 appropriations bills +$10 billion
Increase in VA health care advance funding +$4.4 billion
Scoring adjustments for credit programs -$1.3 billion
Subtotal, FY 2017 CR Base $1,079.7 billion
Across the board cut (<0.5%) -$5 billion
Rescissions in FY2016 appropriations -$0.075 billion
Additional CHIMPs -$4.1 billion
Military construction and veteran’s affairs reduction -$4 billion
Total, FY 2017 CR as introduced $1,066.7 billion

Sources: CBO, CRFB calculations

The CR also provides $1.1 billion in budget authority for response to the Zika virus and $500 million for a "down payment" on flood relief for Louisiana and other areas. The Zika funding is partially offset by $400 million in rescissions of previously appropriated funds. However, most of the rescinded funds were unlikely to be spent, so the actual savings are only $75 million.

Notably, virtually all of the CHIMPs savings in the CR are gimmicks, achieved by delaying spending until the next fiscal year (only to be further delayed to claim "savings" again in the following year) or rescinding funds that would have never been spent. To illustrate the point: the CR is scored with $17.141 billion in budget authority savings from CHIMPs in FY 2017 to bring net spending below the spending limit, but only $441 million of actual outlay savings over ten years. The $4.1 billion in new CHIMPs in the CR do not produce any actual savings.

The Senate is scheduled to vote on the CR on Tuesday. For the most part, all of the policy issues that have caused delay have been resolved or dropped for now. There is bipartisan agreement on top-line spending levels and the length of the resolution. But Democratic leaders in the Senate and the administration have indicated that they oppose the CR introduced by Senator McConnell because it does not include funding to address the water crisis in Flint, Michigan, so further negotiations may be necessary before reaching a final agreement.

*Annual discretionary spending caps, commonly referred to as sequestration, were established by the Budget Control Act of 2011 and went into effect following the failure of the Joint Select Committee on Deficit Reduction to find agreement. The FY 2016 and FY 2017 caps were increased by the Bipartisan Budget Act of 2015.