Federal Update: House Advances Debt Limit Package; Action Now Shifts to the Senate
June 1, 2023
House Advances Debt Limit Package; Action Now Shifts to the Senate
On May 31, the House voted 314-117 to advance legislation – entitled the Fiscal Responsibility Act of 2023 (H.R. 3746) – that would raise the federal debt ceiling until 2025. The bipartisan deal, which was announced over the Memorial Day weekend, was negotiated by President Joe Biden and House Speaker Kevin McCarthy (R-CA). In order to reach agreement, both sides were forced to make a series of spending and policy concessions, many of which received a cool reception from conservative Republicans and progressive Democrats alike.
While about two-thirds of GOP lawmakers voted in favor of H.R. 3746, a number of House conservatives – including members of the far right Freedom Caucus – voted against the legislation. Therefore, Speaker McCarthy had to rely on Democratic votes to advance the bill. While a subset of progressive Democrats also voted against the legislation, the majority of the caucus supported the deal.
The action now shifts to the upper chamber, where both Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) have endorsed the Biden-McCarthy agreement. While it appears there are sufficient votes in the Senate to advance the legislation to the president’s desk, Senator Mike Lee (R-UT) has vowed to use every procedural tool at his disposal to “impede” the bill from moving forward under regular order. With the Treasury Department indicating that June 5 is the date on which the United States will no longer be able to meet all of its financial obligations, key senators are attempting to convince Lee not to stretch the floor debate past the June 5 deadline.
To follow is a summary of the major provisions of the debt ceiling agreement.
Increase in the Federal Debt Limit
H.R. 3746 would suspend the public debt limit through January 1, 2025. The deal pushes the next debate over the debt ceiling until after the 2024 presidential campaign, which was a top priority for the Biden administration.
Freezes Most Discretionary Spending
The Fiscal Responsibility Act would provide an inflation-adjusted reduction in spending on most domestic discretionary programs. Specifically, it would cut fiscal year 2024 spending by roughly $1 billion from current (FY 23) levels; however, the legislation would mitigate a portion of the reductions by redirecting unspent funds from other areas, including the Internal Revenue Service (IRS). The final agreement essentially keeps non-defense funding flat for the fiscal year that begins on October 1, at about $637 billion.
With regard to defense programs, the deal caps military spending at President Biden’s budget request of $886 billion, or a roughly 3.5 percent increase over fiscal year 2023 levels. Veterans’ medical care also would mirror the president’s budget request, at $121 billion beginning in fiscal year 2024.
With regard to fiscal year 2025, non-defense discretionary spending would increase by one percent, followed by years of non-enforceable funding targets. The deal also includes language that requires Congress to pass all 12 of the annual funding bills by the end of January or face a stopgap funding patch that cuts spending by one percent across the board.
It should be noted that H.R. 3746 is a far cry from the spending reductions that were approved by the House earlier this year as part of the GOP’s Limit, Save, Grow Act of 2023 (H.R. 2811). Specifically, the House-passed bill included provisions that would have frozen non-defense discretionary spending at fiscal year 2022 levels – a 22 percent cut in spending (or a reduction of approximately $130 billion). The legislation also would have limited the growth of spending over the next decade to one percent annually.
Rescission of Unspent COVID-19 and IRS Funding
H.R. 3746 would rescind roughly $30 billion in unobligated funds from the various coronavirus relief packages that Congress passed in response to the COVID-19 pandemic. Rescissions include unspent funds that were authorized by the American Rescue Plan Act (P.L. 117-2), including funding under the Public Health and Social Services Emergency Fund, which supports the United States’ ability to prepare for, respond to, and recover from medical and public health threats. In addition, the agreement would cancel unspent COVID-19 funds that were directed to the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH).
The legislation also would rescind a number of other unspent funds that were aimed at supporting public health investments, including funding for community health centers, behavioral health workforce education and training, and pediatric mental health care access. Additionally, the bill includes provisions that would allow the federal government to claw back unobligated funds that were aimed at emergency assistance to families through home visiting programs and the Child Care and Development Block Grant.
It should be noted that H.R. 3746 does not include language targeting any unobligated funds within the U.S. Department of the Treasury’s Coronavirus State and Local Fiscal Recovery Funds, as well as the Local Assistance and Tribal Consistency Fund.
With regard to the IRS, the Fiscal Responsibility Act would shift roughly $20 billion in agency funding to other non-defense areas. According to Republicans, the funds, which were approved under the Inflation Reduction Act, were slated to be used by the Biden administration to hire new IRS agents.
New Work Requirements
The debt limit deal includes provisions that would tighten restrictions for the Supplemental Nutrition Assistance Program (SNAP/CalFresh). Specifically, the legislation would expand existing work requirements on a certain subset of single adults who receive food through the program. Under existing law, adults up to 49 years of age who do not have children must meet work requirements to continue to receive SNAP benefits after a certain time period. The debt limit agreement would raise that age limit to 54, phased in over time, with expanded limits slated to sunset in 2030.
According to the Congressional Budget Office (CBO), an estimated 275,000 low-income Americans are at risk of losing their SNAP benefits due to the age increase. The Center on Budget and Policy Priorities has estimated that about 136,000 Californians could be at risk of losing SNAP benefits over time.
On a related matter, the bill would increase access to food aid for veterans, persons experiencing homelessness, and youth transitioning from foster care by exempting them from the single individual work requirements.
The agreement also narrows exemptions for current work participation ratios that families must complete in order to receive cash assistance under the Temporary Assistance for Needy Families (TANF/CalWORKs) program. Notably, the provisions are not as stringent as in the House-passed debt limit legislation. H.R. 3746 would reset the base year (from 2005 to 2015) for the caseload reduction credit that states use to demonstrate that they are making progress in putting individuals back to work. The measure also increases the minimum amount of monthly TANF cash benefits (from $10 to $35) states would have to provide to a SNAP beneficiary in order to include that individual as one who meets and gets credit for the TANF work participation rate requirements. Finally, the bill creates demonstration pilots for states electing to create a new process for measuring employment outcomes for persons leaving TANF.
Finally, H.R. 3746 does not include provisions that would impose new work requirements on Medicaid beneficiaries. The House-passed Republican debt limit bill included a rule that would have required certain recipients between the ages of 19 and 56 to meet income or work thresholds. Among other things, the bill would have required beneficiaries to work 80 hours per month or complete 80 hours of community service per month (with certain exemptions, including for those who are pregnant or caring for young children).
NEPA Reform
The debt limit deal includes a number of provisions aimed at streamlining the federal environmental review process under the National Environmental Policy Act (NEPA). For their part, congressional Republicans had sought a more comprehensive NEPA overall as part of the negotiations. Many Democrats, on the other hand, strenuously object to the inclusion of any changes to the nation’s bedrock environmental law within the context of the debt ceiling. In the end, the final agreement includes a number of reforms that are intended to address permitting delays that affect both fossil fuel and renewable energy projects, including the following:
- The bill would codify provisions from NEPA regulations that were promulgated by the Trump administration, including modifications to the definition of “major federal action.” This change in law has the effect of limiting the types of projects and actions that trigger NEPA review.
- The legislation also would codify the Trump administration’s regulatory standards for categorical exclusions (CEs). Projects with a CE designation are not required to undergo a detailed environmental review under NEPA and are historically reserved for projects that do not have significant environmental impacts. The Trump-era regulations removed previous references to “cumulative effects” and allow CEs for projects that may cause significant effects if an agency determines they would not “normally” cause those impacts.
- The bill would allow project sponsors, including private sector applicants, to write their own environmental reviews.
- The legislation mandates a lead federal agency to conduct environmental reviews and requires that all reviews be consolidated in a single environmental document. Under H.R. 3746, the lead federal agency would have the authority to establish deadlines for other agencies to complete any federal permits or approvals for a project.
- The bill sets strict deadlines for environmental reviews, including two years for an Environmental Impact Statement (EIS) and one year for an Environmental Assessment (EA).
- The measure sets page limits for environmental reviews – 75 pages for an EA and 150-300 pages for an EIS.
- The bill allows project sponsors to seek judicial intervention if environmental review deadlines are not met by federal agencies.
- The legislation establishes new reporting requirements. If deadlines for completing an environmental review will be missed, federal agencies will need to report to Congress.
- The measure eliminates provisions of current law that require the identification of irreversible and irretrievable commitments of state, local, or tribal resources involved in a proposed action. Instead, agencies would only have to identify federal resources that are affected.