Congress, White House reach federal budget deal

President Trump and Congressional leaders reached a federal budget deal last night, with the announcement coming via a Presidential tweet. The agreement, which still needs to pass Congress, comes days before Congress is set to leave town for its August recess.

One key feature of the deal is that it calls for raising limits on federal discretionary spending by $320 billion. Only about $77 billion of the new spending authorized by the deal would be offset by spending cuts, less than the $150 billion in spending cuts the White House had called for earlier. Under the package, both defense spending and non-defense spending, including spending for education programs, would increase.

Another key feature of the deal is that it calls for suspending the federal debt ceiling until after the 2020 elections. Without a deal, Treasury officials have warned the U.S. could run out of cash to pay its bills by September, setting up the potential for default on the federal debt.

The two-year deal should prevent a government shutdown—like the one that occurred last January. Such a shutdown could have been triggered when current federal funding expires on Sept. 30, but now appears highly unlikely. Still, to ensure no shutdown occurs lawmakers will have to pass separate appropriations bills before the Sept. 30 deadline to fund specific federal programs (see below).

UPDATE: The House approved the deal on Thursday, which provides an aggregate $57 billion increase for non-defense programs, including education, for fiscal years 2020 and 2021. The Senate is expected to approve the deal next week.

The deal takes a couple of contentious political issues off the table, avoiding the risk that the federal government would default on federal borrowing (along with the negative effects that might have on the economy) as well as the risk that future spending bills might include so-called “poison pills”–controversial items that could derail those spending bills. It is not clear, however, how the latter provision will be enforced.

The deal would also take off the table caps on federal spending that were negotiated in 2011 during the Obama administration as part of the bipartisan Budget Control Act. The 10-year spending caps specified by that Act were to be enforced through automatic spending cuts known as sequestration. However, since 2014, a series of budget deals have waived those caps. The new deal not only lifts them again but would allow the whole Budget Control Act to expire in 2021.  Absent a deal, significant sequestration cuts, including cuts to federal education programs, would have taken effect in January.  Instead, appropriators will now have at least some additional overall funding to allocate for education programs, including  ESSA Title I, IDEA Part B and other significant formula accounts.

This likely means that following months of delays, the Senate Appropriations Committee to begin making significant progress on the fiscal year 2020 during September and October.  Capitol observers had noted that the U.S. House, where Democrats control for the first time in 10 years, has advanced 2020 spending bills that call for significant increases in education funding, largely ignoring spending limits under the Budget Control Act.  Meanwhile, in the Republican-controlled U.S. Senate appropriations bills for education programs in 2020 have been stalled while lawmakers waited to see what spending limits would apply.

It should be noted that many federal education programs are “forward funded.” This means much of the federal spending for education allocated in federal fiscal year 2020 will mainly impact the 2020-21 school year. So, for example, Title I funding for disadvantaged students provided in fiscal year 2020 will primarily impact the 2020-21 school year.

While the impact of yesterday’s budget deal remains to be seen, some observers predict it will likely pave the way for increases in federal education programs that will at least match inflation.