FY24 Budget Update: Deal on Topline Numbers is Good News but the Devil will be in the Details

Update 1/18: The Senate and the House of Representatives passed another two-step continuing resolution today, buying lawmakers more time to come up with a final compromise on specific spending levels. The new CR deadlines are March 1st and March 8th.

Original Post: When we last left the Fiscal Year 2024 (FY24) budget process in November, Congress passed an unusual “laddered” (or “two-step”) stop-gap measure which put the Federal budget on two deadlines, with parts of the government funded until January 19th and the rest funded until February 2nd. News from this weekend is that Congressional leaders have agreed on topline funding numbers for the entire budget, paving the way for work to begin on the details of the individual funding legislation. But questions remain about those details, and any possibly contentious policy riders, both of which could create a legislative logjam and shut down all, or parts, of the government.

So, what is this deal that was just announced? It covers the topline numbers for defense and non-defense spending. Regular readers will recall that the May agreement between President Biden and then Speaker McCarthy, divided up the federal budget in two large pots corresponding to defense accounts and non-defense ones. This follows the pattern of previous budget deals agreed to over the last decade. The May agreement set defense spending to increase by 3.3 percent in FY24, while non-defense spending would be kept “mostly flat.” The weekend agreement on topline numbers keeps those general numbers, with some additional claw backs of COVID-era funding authority and accelerating cuts at the IRS. Essentially, this confirms the May agreement.

Why did the agreement need to be confirmed? Because the House of Representatives is under new leadership, i.e. Speaker Johnson (R-LA), and has been mired in disfunction for the past year. The most conservative parts of the House Republican majority are still balking at compromising on funding. In fact, the Freedom Caucus, which contains some of the most conservative members of the House Republican Caucus and has been at the center of the funding dispute within the party, said in a statement that the weekend deal is a “total failure” and “totally unacceptable.” But because of that disfunction, the House is in a weak negotiating position versus the Senate, which is working in a more bipartisan manner.

Adding to the uncertainty are the lack of specific funding details in this weekend agreement, as well as no firm agreement between Democrats and Republicans on possibly contentious policy riders covering such topics as abortion or immigration issues, to name just a few. Such policy riders would be a means for Speaker Johnson to make any funding deal more acceptable to his caucus. But it runs the risk of making any deal impossible to pass the Democrat controlled Senate. Hanging over all these discussions is emergency appropriations being sought by President Biden for the border, disaster responses, and the Ukraine and Israel-Gaza wars. Those debates will unfold over the next two weeks, as the nation approaches the first funding deadline.

Once again, uncertainty reigns. One possible means of buying more time for negotiations is to pass another CR, moving the January 19th deadline to Feb 2nd. But we’ll have to let things play out more before we have any certainty of what will happen. Please keep checking back for the latest news.

FY24 Budget Update: Deal on Topline Numbers is Good News but the Devil will be in the Details