NSAC's Blog

FY 2020 Budget Update – What’s at Stake?

May 10, 2019

Congress has until the end of September to reach a deal on appropriations or it will be forced to extend funding or face a shutdown. Photo credit: USDA

Congress is back from their April recess with an extensive to-do list of urgent items to be addressed. Several agenda items are tied to the annual appropriations process for fiscal year (FY) 2020, including coming to agreement on a new budget deal (no small feat!). Whether or not Congress is able to come together to get budget and appropriations decisions made in a timely manner will have major implications for sustainable agriculture, and for countless other industries as well.

Considering the timeline that the House Appropriations Committee appears to be on (moving ahead to release and mark-up individual spending bills this month), things seem to be right on track for the FY 2020 appropriations process – at least on the surface. A FY 2020 appropriations deal must be in place before September 30, 2019, after which point FY 2019 funding will expire and Congress will be forced to extend funding temporarily or face a government shutdown.

Despite the House’s progress, however, major hurdles remain to finalizing individual spending bills before the September deadline. The main challenge will be the negotiation of an overall budget deal, which is needed in order to set overall discretionary funding levels.  In this post, the National Sustainable Agriculture Coalition (NSAC) outlines key questions and answers to help unpack the complexities of the budget and appropriations process, with an eye towards what’s at stake for sustainable agriculture.

Why do we need a new budget deal?

In 2011, Congress passed the Budget Control Act (BCA), which set overall discretionary spending caps for both defense and non-defense discretionary spending for ten years. These caps are highly restrictive, making it extremely difficult for congressional appropriators to finalize and pass appropriations legislation. In an effort to smooth the path for appropriations legislation, Congress has raised the caps above those levels mandated in BCA a number of times. The last time the caps were raised was two years ago, which increased overall spending levels for FY 2018 and FY 2019.

Without a new budget deal in place for FY 2020 and FY 2021 (the final two years under the BCA), Congress would be forced to write funding bills for defense and non-defense programs at levels tens of billions of dollars below previous years. Non-defense discretionary (NDD) spending, which includes agriculture, would be cut by nearly $55 billion (before adjusting for inflation) below FY 2019 levels if a deal to raise the caps is not put in place. This would amount to a $70 billion, or 11 percent (after adjusting for inflation), cut to NDD spending. Such an extreme cut would be disastrous for sustainable agriculture programs that rely on discretionary funding, including research, food safety, local and regional food systems, conservation assistance, outreach and technical assistance for beginning and socially disadvantaged farmers, and farm loan programs.

What happens if there is no deal to increase the budget caps?

If Congress and the President fail to reach a deal to increase the budget caps, the repercussions for discretionary spending would be severe. In order to deter the enactment of legislation that violates the spending limits, the BCA included a mechanism called sequestration. Under sequestration, automatic cuts to previously enacted spending are applied, making (largely) across-the-board reductions to non-exempt programs, activities, and accounts. Programs susceptible to cuts from sequestration include many of those critical to the sustainable food and farming system.

What are 302a and 302b allocations, and how do they relate to the budget deal?

As Congress moves forward with the FY 2020 funding process, you may hear discussion of the 302a and 302b allocations as they relate to the total amount of funding available for key priorities. The 302a allocation is the total level of discretionary funding available for a given fiscal year. Ideally, this would be set and agreed upon by both the House and Senate, before the appropriations process can move forward.  The Chairs of each Appropriations Subcommittee, under the direction of Appropriations Committee leadership, divide the 302a allocation among the 12 subcommittees. Once they have their 302b allocations, the subcommittees further divide that funding up among the programs within their individual spending bills. If we think about the total funding “pie” available – the 302a allocation represents the size of the whole funding pie, and the 302b allocations are each equivalent to the size of one of the 12 slices of that pie.

If there’s no budget deal yet, then what numbers are House appropriators using to draft their bills?

The House Appropriations Committee recently released the 302bs for all of their FY 2020 spending bills, including agriculture. The House Agriculture Appropriation Subcommittee’s allocation was announced to be $24.3 billion, which is nearly 6 percent above the enacted FY 2019 level. The House is writing their bills to assume topline numbers of $773 billion in defense spending, and $631 billion in non-defense spending.

House Democratic leadership put forward these topline numbers, though never actually got the bill to lift the spending caps to the floor due to opposition from the Progressive Caucus, who wanted to see higher numbers for non-defense spending. House Republicans also opposed the higher spending levels, citing the concern that they have yet to agree to topline levels with the (Republican-controlled) Senate. They therefore assert that any bills written to the House levels will need to be renegotiated.

So what does the overall increase provided in the House’s agriculture spending bill mean?

While the House’s overall increase and increase for their Agriculture Appropriations bill provides an enormous opportunity for much-needed increases for sustainable agriculture priorities, major hurdles remain to moving these numbers through the Senate and White House. Unfortunately, the numbers the House is currently using to write their bills are not the same as the actual levels that will move forward in the FY 2020 appropriations process.

Where is the Senate in their efforts to set FY 2020 spending levels?

The Senate has yet to move forward with releasing or marking up any of its FY 2020 appropriations bills. Senators are currently prioritizing an effort to reach a deal on a disaster aid package by the end of the month; however, negotiations on that deal have stalled. Once they clear the disaster aid package, Senate leaders have said that they will try to reach a spending caps deal with the White House.

Like the House, the Senate has also not voted on a budget resolution for FY 2020, but in the Senate they are a few further steps behind. Unlike the House, the Senate’s budget does adhere to the BCA levels for FY 2020 and FY 2021. The Senate Budget Committee Chairman Mike Enzi (R-WY) released a proposal that would adhere to the BCA levels, but at the same time leaves open the possibility that Congress would reach a spending deal to increase the caps to meet the President’s demand for $750 billion in defense funding. While many expected some clarity from the release of the Senate’s proposal, it instead continued to leave the question wide open on where final spending numbers will end up.

Ultimately both chambers and the White House will need to agree on defense and non-defense spending caps, or else the steep cuts from the current fiscal year will take effect. As things stand right now between the two chambers, they are nowhere close to finding a united path forward.

What does the President have to say about an overall deal on increasing the budget caps?

The President has publicly voiced opposition to any deal to increase the caps and avoid discretionary sequestration for the next two fiscal years. If opposition from the White House continues, it will make it impossible for Congress to reach a deal to increase the caps and will make draconian funding cuts through the across-the-board-sequester more likely.

What do the budget caps have to do with mandatory spending and sequestration?

The BCA included two different mechanisms to achieve spending reductions, both of which are commonly referred to as sequestration. The first is the enforcement mechanism of discretionary sequestration – across the board cuts to deter spending legislation that does not abide by the BCA established budget caps.  These “post-sequester” or “austerity level” spending caps constrain total appropriations, rather than reduce funding after enactment. Congress has never allowed the full sequester level cuts to take effect.

Automatic sequestration cuts to all mandatory spending that is not exempt is also required by the BCA, which is funding provided directly by authorizing bills (such as the farm bill). Each year, the Office of Management and Budget calculates the rate for mandatory sequestration, which generally has been between six and seven percent.

As part of the past two budget deals, the lifting of the BCA caps was offset by extending the time period in which mandatory sequestration will remain in place. This means many critical investments in sustainable agriculture from the 2018 Farm Bill will be subject to mandatory sequestration, at least through 2027. The chart below provides a snapshot of the expected cuts to several key farm bill programs, assuming that mandatory sequestration cuts of approximately seven percent remain in effect over the life of the farm bill.

Farm Bill Program Mandatory Sequestration (2020 – 2023)
Agricultural Conservation Easement Program (ACEP) $126,000,000
Conservation Stewardship Program (CSP) $249,830,000
Environmental Quality Incentives Program (EQIP) $519,750,000
Regional Conservation Partnership Program (RCPP) $84,000,000
Local Agriculture Marketing Program (LAMP) $14,000,000
Farming Opportunities Training and Outreach (FOTO) $10,850,000
Specialty Crop Block Grant Program (SCBG) $23,800,000
Specialty Crop Research Initiative (SCRI) $22,400,000
Organic Agriculture Research and Extension Initiative (OREI) $8,750,000

What happens next?

Congress is in session up until the Memorial Day holiday, at which point they’ll head back home for a weeklong recess. It’s possible that the House Agriculture Appropriations Subcommittee will release and mark-up their FY 2020 spending bill either before the upcoming recess or in early June. This will be written to the higher spending levels that the House is currently working with.

If Congress is able to get a disaster package passed this month, it’s likely they’d next shift attention to try and work out a deal between the House, Senate, and White House on lifting the budget caps. So far the President has spoken out against such a deal, and if this continues to be the case, it will be a long and dangerous road towards the end of the fiscal year. In addition to reaching a budget deal, Congress will also need to raise the debt ceiling (the limit on how much the federal government can borrow) to prevent the U.S. Treasury from defaulting on their debt obligations.  Together, these often contentious budget and debt ceiling fights are likely to further complicate the likelihood of getting next year’s funding bills finalized on time.

NSAC will provide continued updates as the FY 2020 budget and appropriations process moves forward. Stay tuned!

Categories: Budget and Appropriations, General Interest

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