Understanding the Numbers Surrounding the Continuing Resolution Debate

Last week, we laid out our expectations for the government funding negotiations, outlining grades for lawmakers based on how responsibly they handled the issue. With the deadline fast-approaching on October 1, it’s helpful to take a step back and understand where the numbers are coming from in the various continuing resolution (CR) proposals.

House-passed CR – $986 billion

The recently House-passed CR at $986 billion ($518 billion for defense / $468 billion for non-defense) is being billed as a continuation of Fiscal Year (FY) 2013 post-sequester levels, but if you look at the Congressional Budget Office’s analysis, you’ll notice that discretionary spending was actually $1.002 trillion last year ($518 billion for defense / $484 billion for non-defense). So why were FY2013 appropriations actually $16 billion higher than those in the House bill?

The answer gets complicated fast, even to people familiar with the budget, but here’s a quick explanation:

First, each year, appropriators use a little-known tool that allows them to “offset” some higher spending on discretionary programs with certain cuts to mandatory spending – called “Changes in Mandatory Programs,” or CHIMPS for short. Under tight budgets due to the sequester in FY 2013, lawmakers used roughly $19 billion of these CHIMPS in order to maintain relatively higher spending on discretionary programs. Therefore, the $1.002 trillion level of discretionary spending is actually achieved by appropriating $983 billion ($1.002 trillion minus $19 billion), before CHIMPS are considered.

Additionally, receipts from the Federal Housing Authority (FHA) – which count as negative discretionary spending – were about $5 billion higher than anticipated in FY 2013. Removing the unanticipated extra receipts brings us to $988 billion ($983 + $5 billion), which would be the amount for a “clean” CR at 2013 levels.

As with all CRs, though, the House made a few other small adjustments (the biggest of which is not extending a small piece of Hurricane Sandy funding that was not counted as disaster nor emergency spending) to bring the total funding in their bill to $986 billion. Importantly, if a CR at these levels were signed into law, with defense funded $20 billion above the statutory cap ($518 bn vs. $498 bn), a sequester would take effect in January to cut defense spending in an across-the-board fashion in order to remove the additional $20 billion.

Van Hollen Proposal – $1.058 Trillion

The Budget Control Act (amended by the American Taxpayer Relief Act) actually created two sets of discretionary caps – those that would occur in the event the Super Committee succeeded and those imposed under “sequestration” if the Super Committee failed.

Congressman Chris Van Hollen, the ranking Democrat on the House Budget Committee, has proposed a continuing resolution at pre-sequester levels. Specifically, his CR would fund the government at $1.058 trillion, with $552 billion devoted to defense and $506 billion for non-defense. Encouragingly, Congressman Van Hollen’s legislation would more than fully offset the difference between the pre- and post-sequester caps through a combination of mandatory spending cuts, further defense cuts, and new revenue.

Current Law – $967 Billion

Current law, under sequestration, calls for funding levels of $967 billion for 2014 – including $498 billion for defense funding and $469 billion for non-defense funding. These levels are $91 billion lower than the pre-sequester caps supported by Van Hollen and about $20 billion lower than those in the house-passed CR. Notably, this entire $20 billion difference comes from the defense side.

Funding the government at $967 billion would be the most consistent with current law, and in fact without legislative change, any funding above that level will ultimately be cut through a second sequestration to occur in January.

The Path Forward

The ultimate, agreed-upon funding levels to keep the government open should be based on a conversation and negotiation about what the government should and shouldn’t do and at what cost. Given the apparent lack of support for truly appropriating at sequester levels, lawmakers would ideally replace at least a portion of sequestration with a broader set of policies sufficient to put debt on a downward path or at least improve our long-term fiscal situation.

Abiding by current law levels of $967 billion – or else offsetting spending above that amount – would at least be a demonstration that policymakers are willing to stick to the deficit reduction they have already agreed to. Congressman Van Hollen's proposal, for instance, would at least more than offset the one year of sequester being replaced with other savings. Violating sequestration without a plan to offset it could be viewed as an unfortunate demonstration that Congress is not serious about putting our fiscal house in order.