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On January 14, bipartisan leaders in Congress <a href="https://www.appropriations.senate.gov/news/majority/murray-releases-text-of-continuing-resolution" target="_blank" rel="noopener">announced plans to re-extend current fiscal year (FY) 2023 funding levels until March 1 and March 8, 2024</a>. If they stick to this plan, Congress would avoid federal shutdowns set for January 19 and February 2. However, leaders are also breaking their own pledges to stop relying on these short-term extensions to keep the government open. Yet another extension would also restrain agencies like the Department of Defense, which faces growing worldwide threats under an outdated funding law. A foreign military aid package backing allies in Ukraine, Israel, and the Indo-Pacific is also stalled in a bitter stalemate over immigration. Despite the strife, stakeholders shouldn’t lose sight of a new funding cycle starting as early as next month.

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What’s extended: <a href="https://conta.cc/48QNOsj" target="_blank" rel="noopener">As covered in our last alert</a>, federal agencies are still running on FY 2023 funding levels even though a new fiscal year started on October 1. Bipartisan congressional leaders last week touted progress in reaching a new FY 2024 agreement, but now concede they will need more time to hammer out details. This new agreement would avoid shutdowns currently set for January 19 and February 2, creating new deadlines:

Agriculture, Food and Drug Administration (FDA)

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Military Construction and Veterans Affairs (MilCon-VA)

Transportation, Housing and Urban Development (T-HUD)

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These appropriations bills would also be extended until March 8:

Financial Services and General Government

Labor, Health and Human Services, Education

The new agreement would extend until March 8 select program maintaining federal funding for community health centers, child welfare programs, certain authorities within Medicaid and Medicaid, the Department of Homeland Security’s counter-drone programs, and the U.S.’s compacts of free association with Micronesia and the Marshall Islands.

What’s next: The Senate’s Democratic majority plans to vote on this latest extension as early as Tuesday, January 16, though the timeline could slip as winter weather and uncooperative Senators slow the process. House Democrats say they also support the new plan to delay a shutdown.

Across the Capitol, House Speaker Mike Johnson (R-LA) said Sunday he intends to support this extension so House Republicans can extract more concessions from Democrats and the White House in a final FY 2024 package. However, <a href="https://twitter.com/freedomcaucus/status/1746711133644279913" target="_blank" rel="noopener">the conservative House Freedom Caucus quickly opposed the extension</a>. If too many House Republicans reject the plan, Johnson will have a tough choice: rely on House Democrats’ support to push the deal through and avoid a shutdown, or try to improvise his own plan which may fail with Democrats. Johnson is already under intense pressure from conservatives who believe <a href="https://conta.cc/48QNOsj" target="_blank" rel="noopener">Johnson’s agreement with Democrats last week to set topline spending levels for FY 2024</a> makes too many concessions and is still too expensive. As conservatives keep pushing Johnson away from compromise, a final FY 2024 agreement may be even more difficult to reach this spring.

What about foreign military aid? Separate from FY 2024 drama, bipartisan Senate negotiators are still drafting a plan to trade new immigration restrictions and enforcement for more than $1 billion in new military aid to allies in Ukraine, Israel, and Taiwan (<a href="https://conta.cc/48QNOsj" target="_blank" rel="noopener">see previous coverage</a>). Senate Minority Leader Mitch McConnell (R-KY), a leading advocate for Ukraine aid, urged Senate Republicans to give the new deal a chance last week. However, Speaker Johnson confirmed to House Republicans on January 14 that he will ignore any bipartisan Senate deal and insist on <a href="https://www.speaker.gov/wp-content/uploads/2023/05/Secure-the-Border-Act-HR2-Section-by-section.pdf" target="_blank" rel="noopener">the Secure the Border Act (H.R. 2</a>), despite the White House’s power to block H.R. 2a from law. This stalemate over immigration, a notoriously difficult issue for lawmakers, appears likely to persist.

Don’t forget FY 2025: The new March 1 and March 8 deadlines for a FY 2024 agreement guarantee a traffic jam for lawmakers: Congress will still be wrapping FY 2024 bills while the FY 2025 (October 1, 2024 – September 30, 2025) process begins.

In mid-February, the White House is likely to release its funding plans for the next fiscal year in the President’s Budget for FY 2025, with <a href="https://www.cbsnews.com/news/biden-2024-state-of-the-union-address-march-7/#:~:text=House%20Speaker%20Mike%20Johnson%20formally,%22looking%20forward%20to%20it.%22" target="_blank" rel="noopener">President Biden pitching the plan to the public during the State of the Union Address on March 7</a>. In March – June, Congress will work from request to develop another round of government-wide funding bills as well as the annual National Defense Authorization Act (NDAA), among other vehicles. The next fiscal cycle will be just as chaotic as this one as we enter an election year, and final agreements are unlikely until the post-election “lame duck” session in late 2024.

Despite all this strife, stakeholders must move in early 2024 to build ties with Congress and continue to push for their priorities in future funding and policy laws to have the best chance of incorporating their priorities into future laws. To learn more about how to succeed in this tricky environment, contact your Michael Best servicing team.

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