A Tale of Two(ish) Budgets: Congressional Budget Negotiations in 2024
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With discretionary funding caps set by the Fiscal Responsibility Act (FRA) and a number of “side agreements” looming over budget negotiations for the current fiscal year (FY2024), there are various ways the funding fights could play out. This blog reviews several scenarios along with an overview of the supplemental emergency spending requests that the Biden administration recently submitted to Congress.
The Current State of Play
There are 12 regular appropriations bills Congress is tasked with passing by October 1, the beginning of the fiscal year. These bills fund a variety of government agencies and programs, from the U.S. military to schools, and represent 30% of annual federal spending (the rest being mandatory spending programs and interest payments).
Earlier this year, bipartisan negotiations over the debt limit culminated in passage of the FRA. The legislation cuts discretionary spending in FY2024 relative to CBO projections and restricts discretionary spending growth to 1% in FY2025, slower than the projected rate of inflation. The FRA limits base discretionary spending to $1.59 trillion for FY2024. Of this amount, base defense spending is limited to $886 billion, a 3% increase from FY2023, and nondefense spending is capped at $704 billion, a 9% decrease from FY2023.
In late September, having failed to enact any appropriations bills before the beginning of this fiscal year, Congress adopted a continuing resolution (CR) to fund the government through November 17 at the prior fiscal year’s level.
Failing again to adopt any appropriations bills by November 17, Congress passed an additional two-step CR, with four of 12 appropriations bills expiring January 19 and the remaining eight expiring February 2. While this buys Congress time to discuss appropriation levels, it also creates a series of funding deadlines that, if not met, will shut down parts of the government.
| Appropriations Bill |
CR Funding Amount
(Budget Authority, Annualized Basis) |
Expires |
| Agriculture and Food and Drug Administration (FDA) | $26 billion | January 19 |
| Energy and Water Development | $56 billion | January 19 |
| Military Construction and Veterans Affairs | $171 billion | January 19 |
| Transportation, Housing and Urban Development | $95 billion | January 19 |
| Commerce, Justice, Science | $83 billion | February 2 |
| Defense | $799 billion | February 2 |
| Financial Services and General Government | $27 billion | February 2 |
| Homeland Security | $61 billion | February 2 |
| Interior and Environment | $44 billion | February 2 |
| Labor, Health and Human Services, and Education | $208 billion | February 2 |
| Legislative Branch | $7 billion | February 2 |
| State and Foreign Operations | $60 billion | February 2 |
Source: Congressional Budget Office
Scenario 1: Long-Term (or Full-Year) CR
If negotiators cannot reach agreement on full-year funding by the January and February deadlines, Congress could enact another CR. If they take this path and a CR is in place after April 30, the FRA’s across-the-board cuts to discretionary spending would go into effect beginning May 1.
These limits could cut government spending by $4 billion compared to the spending caps agreed to in the FRA and by $114 billion relative to the Congressional Budget Office’s baseline scenario before the FRA became law, making across-the-board cuts appeal to some lawmakers concerned about government spending.
CRs that extend months into the fiscal year can have a negative impact on federal agencies, though, forcing them to continue spending on priorities from the prior year rather than matching funding allocations to present needs. CRs also come with an opportunity cost, requiring federal employees to plan for associated unique circumstances and limitations. For example, CRs can slow federal hiring, travel, and grant-making, according to a 2022 report from the Government Accountability Office. Even so, enacting another CR would hardly be unprecedented: Congress has enacted 201 CRs over the last 48 years (FY1977 to FY2024).
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Source: Congressional Research Service; BPC
The 131 CRs between FY1998 and FY2022 lasted a total of 3,566 days, meaning that the average CR is short-term: 27 days. Thus, a CR lasting more than a month, and past the April 30 deadline, would be longer than average.
Scenario 2: Full-Year Funding at FRA Levels, With Side Agreements
The Senate has passed bipartisan appropriations bills at FRA-negotiated spending levels, and Democratic members of the House are also generally in favor of this approach. Previously, House Appropriations Committee Republicans had adopted lower limits—a nearly $120 billion difference—though House Republicans may be moving towards adopting FY2024 appropriations at FRA levels rather than below them.
An important and emerging dispute, however, is over a series of “side” or “handshake” agreements reportedly made between the Biden administration and former Speaker Kevin McCarthy (R-CA) as the debt limit deal was completed which include up to $69 billion of additional spending for non-defense programs. Whether House Republicans will support full-year appropriations that include those side agreements is an open question.
Scenario 3: Full-Year Funding at FRA Levels, Without Side Agreements
Should Speaker Mike Johnson (R-LA) and House Republicans balk at including $69 billion in side agreements with either a full-year CR or full-year appropriations, a dispute could emerge between House Republicans and both the Biden administration and congressional Democrats.
Absent the side agreements, non-defense discretionary spending will be much lower in FY2024 than it was in FY2023, which may not be a palatable outcome – particularly for Democrats, many of whom wish to preserve spending on those priorities.
Below, see all three of the above scenarios visualized, plus the caps if there is a CR past April 30:
| Scenario #1: Spending at FY2023 Levels | Spending Caps if CR Past April 30[1] | Scenario #2: Spending Under FRA Caps, With Side Agreements | Scenario #3: Spending Under FRA Caps, Without Side Agreements | |
| Defense | $860 billion | $850 billion | $886 billion | $886 billion |
| Non-Defense | $777 billion | $736 billion | $704 billion | $704 billion |
| Non-Defense
Side Agreements |
N/A | N/A | $69 billion | $0 |
| Total | $1.637 trillion | $1.586 trillion | $1.659 trillion | $1.590 trillion |
Source: Congressional Budget Office, Congressional Research Service, Center for American Progress
And see how each scenario compares to the spending levels in FY2023:
| Scenario #1: Spending at FY2023 Levels | Spending Caps if CR Past April 30 | Scenario #2: Spending Under FRA Caps, With Side Agreements | Scenario #3: Spending Under FRA Caps, Without Side Agreements | |
| Defense | $0 | -$10 billion | +$26 billion | +$26 billion |
| Non-Defense | $0 | -$39 billion | -$4 billion | -$73 billion |
| Total | $0 | -$49 billion | +$22 billion | -$47 billion |
Source: Congressional Budget Office, Congressional Research Service, Center for American Progress
Emergency Spending: $100 Billion-Plus?
Other policy priorities may be included with either a CR or a full-year spending package. A supplemental appropriation is a funding bill passed outside of the regular annual appropriations process when an urgent need for funds cannot wait for the next regular cycle.
The Biden administration has sent Congress two supplemental funding requests: one focused on national security and another on domestic priorities. As the wars in Ukraine and the Middle East continue, the Biden administration has called for $105 billion in supplemental funding to aid U.S. allies’ defense efforts and support humanitarian aid. Of this amount, the administration proposed $61.4 billion in economic and military aid for Ukraine, $14.3 billion in military support for Israel, $13.6 billion for U.S. border security, $9.2 billion in humanitarian assistance for Israel, Gaza, and Ukraine, and $7.4 billion for support of Indo-Pacific allies such as Taiwan.
The White House has also requested $56 billion in supplemental domestic funding: $23.5 billion for disaster relief, $16 billion for child care, $6 billion for internet access among low-income households, $6 billion for software security and energy concerns, and $4.5 billion for other domestic issues such as energy assistance and opioid epidemic response.
It’s highly unlikely that all these supplemental requests will be fulfilled, but several have bipartisan support. The debate over this package will run in parallel to and may impact the annual appropriations negotiations.
These scenarios outline how government funding fights could be resolved in the months ahead. The element certain to any scenario is that bipartisan cooperation will be critical to avoid the worst outcome of the congressional budget process—a costly government shutdown.
[1] These caps represent a 1% cut from base discretionary budget authority for FY2023, as projected by the Congressional Budget Office (CBO) when FY2023 appropriations were enacted in December 2022. Actual base discretionary budget authority for FY2023 came in higher than CBO originally projected, meaning the across-the-board cuts required to bring discretionary spending under the post-April 30 caps will be greater than 1% for non-defense spending in particular.
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