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19 November 2024

The Topline: Steptoe Appropriations Newsletter

SJ
Steptoe LLP

Contributor

In more than 100 years of practice, Steptoe has earned an international reputation for vigorous representation of clients before governmental agencies, successful advocacy in litigation and arbitration, and creative and practical advice in structuring business transactions. Steptoe has more than 500 lawyers and professional staff across the US, Europe and Asia.
Anything happen while we were out? In the time between our last Topline newsletter and today, the political landscape has changed drastically, with former President Donald Trump winning the presidential election and Republicans taking control of the Senate and holding onto the House.
United States Government, Public Sector

While We Were Out: Anything happen while we were out? In the time between our last Topline newsletter and today, the political landscape has changed drastically, with former President Donald Trump winning the presidential election and Republicans taking control of the Senate and holding onto the House. Thus, after a brief spell of divided government, one party will once again have a trifecta.

These results, of course, have vast implications for the appropriations state-of-play, committee leadership, and policy decisions for the next two years. We spell out some of those changes later in this newsletter, but first...

FY25 Isn't Over Yet! As we officially head into the lame duck, Congress still needs to address federal spending for fiscal year (FY) 2025 before the current Continuing Resolution (CR) expires in December. The House has passed all 12 of its FY25 appropriations bills out of committee and five have passed the full House, while the Senate has passed 11 of the 12 FY25 appropriations bills out of committee and none have passed the full Senate.

This week, Senate Democrats posted their Homeland Security appropriations bill – the final remaining bill in FY25. While the first 11 bills were reported out of the full committee on a bipartisan (and nearly unanimous) basis, the Homeland Security bill was immediately characterized by incoming Chair Susan Collins (R-ME) as a partisan measure. Sen. Collins raised concerns that the move undercuts efforts to reach bipartisan consensus and restore regular order.

While this certainly casts a shadow on FY25, there is still some hope that a deal will come together before the CR expires on December 20th. Lawmakers will likely need a topline deal before leaving for Thanksgiving in order to pass an omnibus in December. Additionally, we expect many Republicans will be motivated to wrap up FY25 before the new year given Trump's aggressive 100-day agenda, which will include a tax bill, the presentation of an FY26 budget to Congress, addressing the debt ceiling, and possible spending caps. This will leave little time to focus on leftover FY25 appropriations bills. Ultimately, congressional Republicans will be reluctant to act until President-elect Trump makes his wishes known.

Appropriations staff are also currently focused on a disaster supplemental. Next Wednesday, the Senate will hold a full committee hearing with top officials from key agencies to discuss disaster relief needs following Hurricanes Milton and Helene. We expect disaster funding to be added to any year-end deal – CR or otherwise.

FY26 Plan: Despite ongoing FY25 negotiations, FY26 preparations are already underway at the agency level. It is certainly possible that Congress will begin FY26 appropriations hearings while still working to finalize FY25 – as was the case in 2017 during Trump 1.0.

You can be sure of a few things for FY26: First, in order to move on any reconciliation package (which is likely with a Republican trifecta), Congress will need to pass a FY26 budget resolution with reconciliation instructions. Second, Congress needs to address the debt limit, which is waived until January 1, 2025 but will operate under Treasury's extraordinary measures for the first part of the year. Third, Congress will likely enact caps on discretionary spending for two years (or more) in exchange for a debt limit increase. Fourth, we would expect these caps to be at, or below, current federal spending. And, finally, we wouldn't be surprised if appropriators consider a large rescission package during this timeline to claw back unspent funding issued during the Biden Administration.

As you can see by the FY26 items on the horizon, it is never too early to start assessing your appropriations needs, especially during what promises to be a busy year with a new administration. If you would like help in reviewing your priorities and requests, please contact us.

Shuffling the Deck: As with any election, the aftermath is characterized by shifting positions atop each party and within each committee. This week, Sen. John Thune (R-SD) was elected Senate Republican Leader after Leader McConnell (R-KY) announced he would not seek another term. This move allows Sen. McConnell to return to the Senate Appropriations Committee. Having the most seniority on the Committee, he could challenge Sen. Collins for the top position. Most, however, think he will instead assume the chair of the Defense Appropriations Subcommittee, leaving the full committee chair to Sen. Collins. With the change in party control, Sen. Patty Murray (D-WA) will become ranking member.

As for the House Appropriations Committee, Chair Tom Cole (R-OK) and Ranking Member Rosa DeLauro (D-CT) will remain in their positions. There are other changes to membership and cardinal/ranking positions as some members have either retired, resigned, or lost reelection. Several shifts among House appropriators include the following:

  • Rep. Jerry Carl (R-AL) lost his primary and will not be returning to Congress.
  • Rep. Mike Garcia (R-CA) lost his reelection bid.
  • Rep. Jake LaTurner (R-KS) will retire at the end of this year.
  • Rep. Barbara Lee (D-CA), Ranking Member of SFOPS, resigned to run for the Senate.
  • Rep. Dutch Ruppersberger (D-MD) will retire at the end of this year.
  • Rep. Derek Kilmer (D-WA) will retire at the end of this year.
  • Rep. Matt Cartwright (D-PA), Ranking Member of CJS, lost his reelection bid.
  • Rep. Jennifer Wexton (D-VA) will retire at the end of this year.
  • Rep. David Trone (D-MD) resigned to run for the Senate.
  • Rep. Marcy Kaptur (D-OH), Ranking Member of Energy and Water, is locked in a tight race for reelection, which remains uncalled.

Similarly, the Senate Appropriations Committee is expected to undergo membership changes in the new Congress:

  • Sen. Jon Tester (D-MT), Chair of the Defense Subcommittee, lost his reelection bid.
  • Sen. Joe Manchin (D-WV) will retire at the end of this year.
  • Sen. Kyrsten Sinema (I-AZ), Chair of MilCon VA, will retire at the end of this year.
  • Sen. Marco Rubio (R-FL) has been nominated to serve as Secretary of State in the Trump administration, leaving another vacancy on the committee if he is confirmed.

Finally, the size of the Republican majority in the Senate may impact committee ratios. Current Senate committee ratios are closely aligned with the Democrats' slim 51-49 margin in the upper chamber, leading to a commensurate slim majority on committees. With Republicans currently on track to hold a 53-47 majority, the majority party will have more seats on each committee in the 119thCongress.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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