Appropriations Sprint? More Like a Marathon

Congress begins its FY 2023 appropriations process in earnest this summer. But the spending bills may not see a vote for quite some time.

According to Inside-the-Beltway news outlets, U.S. House and Senate lawmakers have entered their “two-week sprint” on fiscal year (FY) 2023 spending bills. Congress must approve spending legislation before the expiration of the previous FY (typically at the end of September) in order to avert a government shutdown.

As U.S. Rep. Danny Davis (D-Ill.) recently explained, while the Senate can begin its work on the annual appropriations process before the House, the House aims to start voting on spending bills “in May and seeks to complete this by the August district work period.” But there have been no votes yet, and work barely has begun. Rep. Davis does not sit on the committee that oversees the federal spending process. (He is on the tax-writing Ways and Means Committee, however.) His description is, at best, aspirational.

While there may be a flurry of work over the next 14 days, don’t believe for a second that appropriations season in Washington is going to move quickly. This two-week sprint will likely last well into calendar year 2023 and could portend the first showdown between a Republican majority in the House and the Biden Administration.

Some Lawmakers Were Children Last Time Congress Got Spending Bills Done on Time

The U.S. House of Representatives approved the first national spending bill in 1789. It totaled $639,000, or about $21.2 million in today’s dollars. For the entire federal government.

Simpler times.

Back then, the House Ways and Means Committee and the Senate Finance Committee were in charge of both taxation and spending bills.) The House Appropriations Committee was not created until 1865. At that point, it handled 10 annual spending bills. The Senate established its own Appropriations Committee in 1867. These two committees are still in charge of writing each of the annual spending bills.)

Many Americans are not aware that the annual appropriations process does not govern most federal spending. In fact, House and Senate appropriators are responsible for spending just one-third of the total funds that the federal government sends out the door each year. The remaining two-thirds of federal spending is called “non-discretionary” — meaning it runs on automatic pilot based on rules written in other statutes. Examples of non-discretionary spending include Social Security and Medicare. The federal government has made commitments through those programs to beneficiaries, and those payments do not require Congress to pass spending bills to continue to be processed. Defense, education, housing, environmental, and other programs are considered “discretionary.” These are the categories of spending that the appropriations committees oversee. Overall discretionary spending limits are set by the annual fiscal year budget.

Today, there are 12 appropriations bills: agriculture; commerce, justice, science; defense; energy and water; financial services and general government; homeland security; interior and environment; labor, health and human services, and education; legislative branch; military construction and veterans affairs; state and foreign operations; and transportation, housing, and urban development.

The last time Congress completed all appropriations bills before the end of the FY was way back during the Clinton Administration in 1996, or 26 years ago. The youngest member of the current Congress was just one year old at the time. The youngest member of the current Senate was nine.

What happens if Congress does not get its spending work done by September 30? Let’s take a look.

Options After October 1

There are two options if Congress has not passed some or all of the appropriations bills by midnight on September 30.

The first option is for federal lawmakers to agree to a continuing resolution, or a “CR” in D.C. parlance, which extends current funding levels for a certain period of time. The length of time could be a day, a week, or even the entire fiscal year — the goal is simply to provide lawmakers with additional time to complete work on whatever spending bills are not yet finalized and signed into law by the president.

The second option is the worst option: departmental shutdown. If the president has signed standalone appropriations bills — say, for the Department of Defense — before October 1, that agency is able to remain in operation. All other departments for which no spending bill has been approved and signed into law must shut down since federal funding for their operations lapses. This is called a partial shutdown, and, unfortunately, this is an outcome that has become much more common over the last 15 years.

If the president has not signed into law a single spending bill, all of the agencies and departments impacted by the 12 spending categories listed in the section above are forced to close. While this is referred to a total shutdown, because appropriations bills only cover one-third of all government spending, it really is not a complete cessation of all of the federal government’s operations.

According to the Committee for a Responsible Federal Budget (CREB), “essential services — many of which are related to public safety — continue to operate” even during a “total” shutdown. In prior shutdowns, for example, border protection, in-hospital medical care, air traffic control, law enforcement, and power grid maintenance have been classified as essential. Some legislative and judicial staff also have continued to work. Mandatory spending like Social Security, Medicare, and Medicaid, continues as do operations like immigration services that are funded by permanent user fees.

A government shutdown has significant costs. As CREB noted, the 2013 shutdown forced the National Park Service to turn away millions of visitors to the country’s more than 400 parks and national monuments. The closures cost the federal government more than $500 million of lost visitor spending at national parks alone nationwide. Parks were allowed to remain open during the 2018-19 shutdown, but there was no money for maintenance or to pick up trash.

According to the Congressional Budget Office, the 2018-19 shutdown cost the U.S. economy $11 billion due to lost output from federal workers, delayed government spending, and reduced consumer and business demand. The loss was equivalent to 0.1 percent of GDP in the fourth quarter of 2018 and 0.2 percent of GDP in the first quarter of 2019.

What Can We Expect for Fiscal Year 2023?

With recession warning signs flashing bright red, we wish we could say that a government shutdown late this year or early next is remote possibility.

But it is not.

In the House, there are just 28 legislative days left until September 30, the last day of the current FY. The same is true in the Senate. While the appropriations committees can work when the chambers are not in session — and there are days on the legislative calendar marked specifically for committee work — lawmakers still do not have much time. And they are eager to spend as much time away from Washington, campaigning for re-election if their name will be on the ballot this November.

Which is why it is likely that the country will see the Democratic House and Senate try to pass a short-term CR in September. A continuing resolution would need the approval of 60 lawmakers in the Senate. Republicans could try to block it, but that is a difficult bet right before voters go to the polls. Our best guess is that they will approve a short-term resolution that keeps the government open until early or mid-December 2022, when a lame duck Congress would take the issue of government funding back up.

After that, however, all bets are off. If lawmakers make it to December, Democrats might try to put forward a full-year spending bill that would fund the federal government through FY 2023. But if Republicans take control of the House — and certainly if they take over both the House and Senate — they will want to try to put their stamp on FY 2023 spending when they take over in January 2023. If Republicans will be in partial control of Congress next year, this December GOP lawmakers are likely to only assent to another short-term CR so they can try to negotiate their priorities with the White House come January. To the extent the GOP finds itself in control of one or both chambers of Congress next January, they’ll have inflation and economic uncertainty to point to as a driving force in their electoral success. That will give Republicans very little appetite to agree to government spending at the levels that the Biden Administration is hoping Congress will enact, setting up the very real prospect of a government shutdown early next year.

In other words: like many other policy matters, election 2022 will determine how this debate ends. Get ready for the marathon.