With a little less than a year to go until the 2014 mid-term elections, Congress has a number of big decisions looming. Here is a quick look into where we are today, and what we see in front of us over the next year.
On October 16th, the Federal government shutdown came to a close when leadership in the House of Representatives and the Senate were able to reach an agreement with President Obama to reopen the Federal government.
The legislation does the following:
- Funds the federal government at current sequester levels through January 15, 2014;
- Suspends the nation’s debt limit through February 4, 2014;
- Provides retroactive pay to approximately 800,000 federal workers who were furloughed during the shutdown; and
- Requires income verification for individuals receiving health insurance subsidies under the Affordable Care Act.
An additional provision within the agreement creates a Congressional Budget Conference Committee made up of members of the House and Senate to reconcile the differences existing between FY 2014 budget resolutions enacted by each chamber earlier this year. The law compels this Committee to reach such an agreement no later than December 15.
Of primary concern to members of the Committee is establishing the FY 2014 discretionary spending level (funds that must be appropriated). In its Budget Resolution, the Senate provided $1.058 trillion, whereas the House provided $967 billion. A deeper look at the proposals reveal deeper divides, with the House bill proposing greater cuts to domestic spending, and the Senate proposing tax increases to offset some reductions in the mandatory sequester spending cuts.
Bottom-line: The shutdown changed nothing other than kicking the can to January 15, 2014 on spending levels and forcing a bi-cameral budget conversation and “decision” by December 15, 2013.
Fiscal 2014 Prognostications
As we reflect on this agreement one month later, it is clear that while the compromise reached ended the shut down and postponed concerns about a default on the nation’s debt, it does very little to provide any certainty for the private sector about how the government will conduct itself in 2014.
Because 2014 is an election year, there is strong motivation by Members of Congress in both parties to reach an agreement that funds the government for the remainder of the year and removes the possibility of another shutdown until after the election. As a result, the ongoing work by the Budget Conference Committee is critical. If it is able to agree on a framework that allows members in the House and Senate to support a funding bill for the remainder of FY 2014, the chances of a replay of last month’s shutdown will be greatly diminished. If the Committee emerges from their Conference on December 15th to reveal that they were unable to agree to a deal, however, Congress could again be facing a last-minute negotiation to prevent a shutdown.
In addition to being important to stave off another such shut down event, the negotiations in the Budget Committee are critical because the paralysis in Congress over fiscal issues has hindered the ability of Members to work on other issues that are absolutely critical to the energy sector in the United States. Below is information on some of the pending issues that Congress must address in the near term.
Bottom-line: Congress faces yet another series of rapidly approaching deadlines, centered around the January 15, 2014 deadline for funding the government, which could result in yet another Senate driven deal extending funding and the debt ceiling beyond the election (more likely), or revisit government shutdown drama.
Under existing law, dozens of temporary tax provisions, including the Renewable Energy Production Tax Credit (PTC) are scheduled to expire at the end of 2013.
Earlier this year, there was hope that these credits would be included within a broader package of tax reform measures that could have provided certainty–beyond one-to-two year extensions–for the renewable energy sector. Many sources claim that both Chairman of the House Ways and Means Committee Dave Camp and Senate Finance Committee Chairman Max Baucus will release drafts early next year (the House may release a draft as early as late November of this year) outlining some kind of package between a comprehensive tax reform, and “mini reform” often discussed within the beltway. With Baucus retiring and Camp termed out as Chairman, both men have every incentive to get something done next year. But–barring a political miracle–we’re likely to find ourselves in tax extenders mode, with the slight possibility of some reform measures in that package in Committee early to mid next year. The full House and Senate would likely move those measures following the 2014 in the lame duck session.
Bottom-line: Expect more drama around tax reform over the next six months, but don’t expect any deal beyond Committee level votes on extending tax provisions that expire December 31, 2013.
In addition to expiring provisions within the tax code, there are several key pieces of legislation that Congress has yet to pass but that we anticipate will be on the agenda before the end of the year.
The Farm Bill
Negotiations over this landmark piece of legislation have stalled between the House and Senate. The key obstacle centers on funding for the Supplemental Nutrition Assistance Program (“SNAP”), the nation’s food stamp program. The Senate bill reduces funding for the program by about $4.5 billion over ten years; the House bill reduces it by $40 billion over the same period. Also, the Senate bill includes almost $1 billion over five years for energy programs, whereas the House version includes no funding. Despite this gulf, leaders in the House and Senate are working behind the scenes to craft a compromise that can pass in both chambers before year’s end.
National Defense Authorization Act
This legislation sets funding level for defense agencies. The House of Representatives passed their bill in June with 315 votes. The Senate is expected to consider the measure in December.
Immigration, energy efficiency (Shaheen-Portman specifically), among other non-pressing pieces of legislation could receive attention as well, although chances of movement on these bills remains remote.
Bottom-line: Congress always funds the Defense Department, and that will continue. Farm Bill, see your Magic 8 Ball.
The team at 38 North Solutions is monitoring these issues closely and will gladly provide you with up-to-date information. If you have questions or would like additional information about specific interest areas, please do not hesitate to contact a member of our team.