January 25, 2018

Spending Patch Buys Time to Reach Long-term Budget Deal

Nearly three days into a government shutdown, a bipartisan group of senators on Monday arrived at a hasty deal to temporarily renew federal spending authority.  In exchange for supporting the stopgap funding measure, Democrats received assurances from Senate Majority Leader Mitch McConnell (R-KY) that the upper chamber will take up an immigration package that includes legal protections for children of undocumented individuals who arrived in the United States before age 16.  Despite the majority leader’s pledge, it remains unclear if an immigration bill will pass the Senate, let alone the House.

In the end, the short-term Continuing Resolution (CR) – which keeps federal agencies operational through February 8 – was cleared by the Senate on an 81-18 vote.  The bill (HR 195) subsequently passed the House (266-150) and was signed into law by President Trump.

It should be noted that Senators Dianne Feinstein and Kamala Harris were among the 18 members of the upper chamber who voted against the CR.  In explaining their opposition, both senators made clear their frustration that the legislation did not include language protecting Deferred Action for Childhood Arrivals (DACA) program recipients from the threat of deportation.  The senators’ sentiments were shared by a number of progressive groups who harshly criticized members – Republicans and Democrats alike – who supported HR 195 absent the DACA language.

Looking ahead, lawmakers will have little time to negotiate an immigration package, which, based on Majority Leader McConnell’s statements, will be brought to the floor before February 8.  While many Republicans support a DACA fix, they – along with President Trump – are insisting that any immigration deal include assurances that Congress will appropriate money for a border wall.

Similarly, congressional leaders are under pressure to negotiate new topline spending numbers for the fiscal year 2018 (and perhaps 2019) budget year.  Assuming a bipartisan deal to lift the Budget Control Act’s spending caps is reached, appropriators will need to write a catch-all omnibus budget measure that provides line-by-line funds for every federal program.  The enormity of the task makes it likely that at least one more short-term CR will be needed before the current stopgap spending legislation expires on February 8.

Major Policy Riders Added to CR

Children’s Health Insurance Program

Although the CR did not include a DACA fix, the bill did contain several major policy riders that ordinarily would not be found in a spending package.  For starters, the legislation provides a six-year reauthorization of the Children’s Health Insurance Program (CHIP).

Notably, and consistent with the long-term CHIP reauthorization measures that had been pending in the House and Senate, the CR phases down the Affordable Care Act’s (ACA) enhanced federal matching rate for CHIP coverage.  Specifically, and while HR 195 retains the ACA’s 88 percent federal contribution for California through fiscal year 2019, the rate will be reduced to 76.5 percent in fiscal year 2020.  Beginning in fiscal year 2021, the rate will return to its pre-ACA level of 65 percent.

ACA Tax on High-Cost Health Insurance Plans

The final CR temporarily delays the ACA’s 40 percent excise tax on high-cost health insurance plans.  The so-called “Cadillac Tax,” which was slated to take effect in 2020, will now be postponed until 2022.  Many public employers, including counties, offer high-value health plans that will be impacted by the tax.  With the excise tax costs expected to rise over the years as health care expenses increase, the burden on county budgets could be significant.

Trump Administration’s Infrastructure Principles Leaked

This past week, a leaked copy of the Trump administration’s infrastructure plan was making its way around Capitol Hill.  The six-page document, which remains in draft form, provides some level of detail regarding the White House’s plans for infrastructure but falls far short of any sort of comprehensive legislative proposal.

Among other things, the draft proposes to create a new “Infrastructure Incentives Initiative” to encourage state, local, and private investment in core infrastructure.  All told, the program would comprise 50 percent of the total federal appropriation being recommended by the administration (the White House has called for spending $200 billion in federal funding over ten years in order to leverage $800 billion in state, local, and private investment).

Under the program, federal agencies would solicit grant applications every six months for a broad array of infrastructure projects, including surface transportation, aviation, rail, waterways, and water resources. States, local governments, Metropolitan Planning Organizations, and other entities would be eligible to apply for funding.  It should be noted that federal grant awards could not exceed 20 percent of the total project cost.

The Trump plan also calls for a “Rural Infrastructure Program,” which would comprise 25 percent of the total federal appropriation.  In addition to transportation and water projects, broadband and other high-speed data conduits could be financed under the initiative.  Pursuant to the draft, 80 percent of program funds would be provided to the governor of each state based on a formula that takes into account rural lane miles and relative population.  The remaining 20 percent of funds would be reserved for rural performance grants.

Other initiatives of the Trump infrastructure plan include: Transformative Projects Program (a competitive grant program accounting for 10 percent of the total appropriation); Federal Credit Programs (7.05 percent of appropriation); Federal Capital Financing Fund (5 percent of appropriation); and, several other policy initiatives, including an expansion of the use of Private Activity Bonds.  

Looking ahead, several different committees in both the House and Senate will have jurisdiction over components of any large-scale infrastructure bill and will therefore be responsible for drafting their respective portions of the legislation.  Although there continues to be bipartisan agreement that Congress should consider an infrastructure bill in 2018, there does not appear to be any sort of consensus regarding how Congress should pay for the new investment.