BLUE SKIES OVER A SEA OF RED: Clouds have lifted over Capitol with the House and Senate passing the budget agreement of 2018. It was not without a little late night/early morning drama courtesy of Senator Rand Paul (R-KY) who delayed a planned evening vote demanding consideration of his amendment to restore budget caps currently being lifted in this budget deal. Given Paul’s use of Senate procedure, the Senate was forced to listen to him for hours leaving 98 Senators fuming at their desks on the Senate floor instead of nestled in their beds at home before voting 71-28 for passage.
The bill was sent over to the House where more drama played out during the final vote with Democrats withholding their crucial votes until the very last minute leaving Speaker Paul Ryan and his confident leadership team to sweat it out knowing all along they would need Democrats for final passage. In the end, the vote breakdown was 240-186: 167 Republicans and 73 Democrats voted for the bill and 67 Republicans and 119 Democrats voted against it. Technically the government remains closed until President Trump signs it – and that should happen momentarily.
The final measure establishes a process and parameters for completing FY2018 appropriations bills by March 23, 2018 with over $300 billion more in spending caps. It also provides for $91 billion in disaster relief (up from $80 billion in the original House bill), renews a number of tax extenders and Medicare extenders, repeals IPAB, and raises the debt ceiling until March 1, 2019. Lest we forget, two new super committees were created. So the functionally dysfunctional U.S. Congress has cleared the decks until the next manufactured crisis.
Scroll down for a summary of the legislation at the end of today’s Capital Brief:
LOSING LEVERAGE, GAINING A VOTE: Now that Congress has decoupled policy priorities (for the foreseeable future) from the budget process, get ready for the DACA debate to begin in earnest next week starting in the Senate where Majority Leader Mitch McConnell has promised floor debate on a measure to begin on Monday or Tuesday. Minority Leader Nancy Pelosi may have lost her leverage but not her voice on immigration and Speaker Ryan will likely follow McConnell’s path in the House with a yet-to-be-determined strategy to consider legislation in the House.
GREEN LIGHTING U.S. SANCTIONS ON VENEZUELAN CRUDE: U.S. Secretary of State Rex Tillerson ended a recent foreign trip through South America this week with notable comments that the U.S. was exploring energy sanctions on Venezuela in response to an upcoming presidential election in April. It was not clear at the time if Tillerson’s comments were simply talking points during a visit through the region or a real change in U.S. policy. It now appears that it is indeed a change in U.S. policy as our energy policy analyst Joe McMonigle reported yesterday in a note that President Trump has given the green light to future oil sanctions on Venezuela. An announcement is likely several weeks away until other details are finalized. Specifically, the scope of sanctions is still being discussed internally about whether sanctions will prohibit U.S. imports of Venezuelan crude or wider sanctions on all Venezuelan crude sales globally.
ABOUT THAT MEMO: Trump has less than 24 hours left on the clock to determine whether or not to release the Intelligence Committee Democratic rebuttal to the Republican memo authored by Chairman Devin Nunes. Get ready for some Friday/weekend tweets...
TODAY AT 10:00 AM | IT'S A MAD, MAD, MAD, MAD WORLD: The global scene is more confusing and jumbled now than we have witnessed in at least half a century. But amidst this bedlam, what are the true geopolitical risks that could impact business investment and operations? General Dan Christman will discuss what he sees as a small group of top risks, and where business leaders need to be vigilant on a broader range of secondary issues. Join us this morning. Dial-in details here.
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Budget Agreement OVERVIEW:
Division A – Honoring Hometown Heroes Act
- This is the underlying bill, H.R. 1892, and will be included as Division A of the legislation.
Division B, Subdivision 1 – Disaster Relief appropriations
- This subdivision appropriates $89.3 billion in budget authority for disaster relief and recovery efforts.
- This includes $23.5 billion for FEMA’s Disaster Relief Fund, $17.4 billion for the Army Corps of Engineers, $28 billion for HUD’s Community Development Fund, and $1.65 billion for the SBA’s disaster loan program.
- The Senate Appropriations Committee has a detailed summary of this subdivision available here.
Division B, Subdivision 2 – Tax/Medicaid re: disasters
- This subdivision includes assistance for California wildfires and hurricanes Harvey, Irma, and Maria.
- For California, these include tax-favored withdrawals from retirement plans, employee retention tax credits for employers, and a temporary suspension of limits on charitable contributions (similar provisions were already enacted for the hurricanes).
- Previous assistance for the hurricanes is modified in Title II of this subdivision.
- Title III of this subdivision includes increased Medicaid funding for Puerto Rico and the U.S. Virgin Islands.
- All costs of this subdivision are designated an emergency requirement under budget rules.
Division B, Subdivision 3 – CR through March 23
- This subdivision is a continuing resolution through March 23, 2018 including several anomalies.
- The CR is in the form of a date change to the previous CR, so provisions of previous CRs would continue if they are tied to the date in the CR.
- A full summary from the Senate Appropriations Committee is available here.
Division C, Title I – Spending caps and other budget provisions
- Raises discretionary spending caps by a total of $296 billion in fiscal years 2018 and 2019.
- This includes $165 billion for defense ($80 billion in fiscal year 2018; $85 billion in 2019) and $131 billion for nondefense ($63 billion in 2018; $68 billion in 2019).
- This title keeps the direct spending reductions (mandatory sequester) in place and extends it two additional years, through fiscal year 2027.
- This title includes deeming language for the House and Senate. The language allows the Budget Committee chair to deem budgetary allocations, aggregates, and levels for the purposes of Senate budget enforcement as if they were included in a concurrent resolution on the budget.
|
FY17 |
FY18 |
FY19 |
|
|
Current law defense cap |
551 |
549 |
562 |
|
Cancel defense sequester |
54 |
54 |
|
|
Security priorities |
26 |
31 |
|
|
New defense cap |
551 |
629 |
647 |
|
OCO/emergency |
83 |
71 |
69 |
|
Defense discretionary total |
634 |
700 |
716 |
|
Current law nondefense cap |
519 |
516 |
529 |
|
Cancel nondefense sequester |
37 |
37 |
|
|
Domestic priorities |
26 |
31 |
|
|
New nondefense cap |
519 |
579 |
597 |
|
OCO |
21 |
12 |
8 |
|
Nondefense discretionary total |
539 |
591 |
605 |
Division C, Title II – Offsets
- Customs User Fees – extends from January 14, 2026, to February 24, 2027, the authority to collect ad valorem fees on merchandise formally entered or released and fees on merchandise informally entered or released under certain conditions. Extends the authority to collect all other customs user fees from September 30, 2025, to September 30, 2027.
- Aviation Security Fees – directs the Department of Transportation to collect aviation security fees to deposit in the general fund of the Treasury $1.64 billion in fiscal year 2026 and $1.68 billion 2027.
- Extension of immigration fees – extends the authority to collect a $10 user fee for using the Electronic System for Travel Authorization to enter the U.S. under the visa waiver program from September 30, 2020, to September 30, 2027. Extends increases of certain application fees for L-1 and H-1B visas from September 30, 2025, to September 30, 2027.
- Strategic Petroleum Reserve Drawdown – the Secretary of Energy is required to sell 30 million barrels of crude oil from the Strategic Petroleum Reserve from fiscal year 2022 to 2025, and 35 million in both fiscal years 2026 and 2027.
- Elimination of Federal Reserve surplus funds – lowers the maximum surplus the Federal Reserve is allowed to retain from $10 billion to $7.5 billion.
- Reemployment services and eligibility assessments – this section allows Department of Labor grants to states to promote reemployment for individuals receiving unemployment assistance.
Division C, Title III – Debt limit suspension
- This title suspends the debt limit through March 1, 2019.
- This takes the same form as previous debt limit suspensions - subsections a, b, and c were included in previous suspensions.
- Once this suspension is over, Treasury will be able to use extraordinary measures to delay the date by which the debt limit must be addressed again.
Division C – Title IV – Joint Select Committees
- This title establishes two joint select committees, one for “solvency of multiemployer pension plans” and another for “budget and appropriations process reform.”
- There is no fast-track consideration process for either committee, but the Senate will vote on a motion to proceed to a bill reported by either committee.
- Both committees terminate on December 31, 2018 or 30 days after submitting its report/legislative recommendations.
Division D – Tax Extenders
- This division would extend through 2017 tax provisions that expired at the end of 2016.
- The Finance Committee section by section summarizing this division is attached.
Division E – Health care provisions, including CHIP extension, Medicare extenders, and other provisions
- Title I—CHIP Extends funding for the Children’s Health Insurance Program for an additional four years, totaling a ten year extension of CHIP when combined with the last CR’s extension.
- Title II--Medicare Extenders. Permanently Repeals Medicare payment cap for therapy services. Extends funding for two years for Geographic Practice Cost Indices floor and outreach and assistance for low-income programs. Extends funding for five years for Medicare-dependent hospital program, Home health rural add-on payment, Ground ambulance add-ons, Increased funding for hospitals with a low volume of discharges.
- Title III—Creating High-Quality Results and Outcomes Necessary to Improve Chronic Care. This is the CHRONIC Care bill, S.870, introduced by Chairman Hatch. The bill passed the Senate on September 26, 2017. The Finance Committee’s section-by-section of the CHRONIC Care bill can be found here.
- TITLE IV—Part B Improvement Act and other Part B Enhancements. Adds a temporary transitional payment for home infusion therapy services. Removes the rental cap for durable medical equipment under Medicare with respect to speech generating devices. Increases the civil and criminal penalties for fraud and abuse in federal health programs. Removes the requirement that meaningful use standards for electronic health records gets more stringent over time.
- Title V—Other Health Care Extenders
- Two year extension of the following: Family-to-Family Health Information Centers, Sexual Risk Avoidance Education Programs, Personal Responsibility Education Program
- Title VI—Child and Family Services and Supports Extenders. Five year extension of Continuing the Maternal, Infant, and Early Childhood Home Visiting (MIECHV) Program. Requires a statewide assessment on home visiting services. Two year extension of the Health Workforce Demonstration Project
- Title VII—Family First Prevention Services Act. This was introduced last Congress by Chairman Hatch as S.3065 and introduced this Congress as H.R.253 in the House. The legislation would permit states to use federal funds on family-services programs to prevent children from being placed in foster care, encourage the placement of children in family settings, allow states to expand services to former foster children, and promote the use of electronic systems for interstate adoptions.
- Title VIII—Supporting Social Impact Partnerships to Pay for Results. This title incorporates the Social Impact Partnerships to Pay for Results Act, which was introduced by Senator Todd Young and had passed the House in the 114th Congress. It would direct the Treasury to request proposals from states and local governments on “social impact partnership projects” that would produce social benefits and fund this program with $100 million.
- Title IX—Public Health Extenders. Extends funding for two years: Community health centers-- $3.8 billion in 2018, $4 billion in 2019. National Health Service Corps,--$310 million for each FY 2018 and 2019. Teaching Health Center Graduate Medicare Education Program--$126.5 million for each FY 2018 and 2019. Special Diabetes Program for Type 1--$150 million for each FY 2018 and 2019. Special Diabetes Program for Indians --$150 million for each FY 2018 and 2019.
- Title X—Miscellaneous Health Care Policies
- Title XI – Protecting Seniors’ Access to Medicare Act. Repeals Obamacare’s Independent Payment Advisory Board (IPAB). This is the 15 member board of appointed officials charged with making Medicare changes should spending exceed a certain target level.
- Title XII—Offsets. Delays the beginning of the Medicaid Disproportionate Share Hospital reductions. Rather than beginning as scheduled in 2018, they will now begin in 2020. The amount of the scheduled reduction has been increased in the later years. Lottery and other winnings qualify as income in determining a beneficiary’s eligibility for Medicaid. Reduces the update to the Physician Fee Schedule for 2019 from 0.5 percent to 0.25 percent. Includes biosimilars in the Medicare Part D coverage gap discount program and requires manufacturers of biosimilars to provide a discount. Increases means-testing for Part B and Part D beneficiaries making more than $500,000 a year ($750,000 for a couple) from 80 percent to 85 percent. Closes the Part D donut hole in 2019, one year sooner than current law. Reduces funding for the Prevention and Public Health Fund (PPHF) by $1.35 billion over the 10 year budget window.
- The Finance Committee section by section summarizing this division is attached.
Division F – Improvements to Agriculture Programs
- This division designates seed cotton as a covered commodity for purposes of the Price Loss Coverage and Agriculture Risk Coverage programs (the main crop insurance programs) starting with the 2018 crop year. Cotton farms that use those programs will no longer be eligible for the Stacked Income Protection Plan starting in the 2019 crop year.
- Reduces premiums and increases coverage for the dairy Margin Protection Program.
- Removes spending limits for pilot programs relating to livestock risk management under the Federal Crop Insurance Corporation.
Division G – Budgetary treatment
- Prevents the budgetary effect of the following portions of the bill from being considered for purposes of statutory PAYGO, Senate PAYGO, and discretionary sequester:
- Division A (Honoring Hometown Heroes Act; underlying bill)
- Division B, subdivision 2 (Tax/Medicaid re: disasters)
- Divisions C through F.
Source: Senate Appropriations
