Crunch time for funding on Capitol Hill

Shutdown politics are the new normal on Capitol Hill, but even by this standard, the outlook for fiscal year 2018 appropriations is chaotic and unpredictable.

Congress is coming back Sept. 5 with about 12 working days to pass an appropriations package or continuing resolution to keep the government open after the current funding bills expire. The Treasury has also indicated that an increase on the statutory debt ceiling will be necessary to avoid the federal government from slipping into default. If fiscal year 2018 appropriations pass at the level proposed by House, special legislation to allow spending to bust the caps set under the Budget Control Act will must be passed or sequestration will take effect -- to the tune of $72.4 billion for the defense budget and $3.8 billion for the non-defense category.   

Beyond that, several key programs must be reauthorized or extended, including the Federal Aviation Administration, the Children's Health Insurance and national flood insurance programs, or else they'll expire, and those priorities will pull different Capitol Hill constituencies in different directions.

Add to this mix, recent threats from President Donald Trump to reject any appropriations package that does not include funding for a proposed wall on the U.S.-Mexico border.

"If we have to close down our government, we're building that wall," Trump said to cheers at an Aug. 21 rally in Phoenix.

"You've got so many moving parts right now -- it's hard to even summarize it in a single sentence," said David Berteau, CEO of the Professional Services Council, which represents technology and services contactors.

Berteau isn't that worried about the prospects of a shutdown, in part because he thinks it's more likely than not that Congress will come up with a continuing resolution to punt the appropriations debate into November or December. But he also recognizes that after the 2013 shutdown and the 2015 near miss, agency executives and program managers know how to handle the runup to a possible lapse in appropriations.

Federal agencies last updated their shutdown guidance in 2015. The Office of Management and Budget is required under the law to ask for updates a week before a possible lapse.

But the debt ceiling breach is another matter -- and one that could affect contractors' bottom line if the government is forced to suspend or prioritize payments to creditors.

"We've advised members to submit their invoices in a timely way -- you want to be in the queue [to get paid] when the time comes," Berteau said. "But there's no guidance on how the government would execute a default."

Even a continuing resolution with no shutdown doesn't bode well for the cause of IT modernization, noted Trey Hodgkins, senior vice president, public sector at the Information Technology Alliance for Public Sector.

"The general rule is that if the dollars are not appropriated, you can't initiate new projects. If you've obligated the money you can continue to pay," he said. In the past year, with seven months of continuing resolution and just five months under a new funding deal, there has been a very limited runway to get new projects off the ground.

"The detrimental aspect of this dynamic has been acute this year," he said. "I can't start spending money to plan to migrate to the cloud until I have the appropriation. In a year like this one, five months is not enough time to start planning, put out a request for proposals and find a vendor," Hodgkins said. "That is contributing to the state of IT in the federal government today."

Berteau said he's concerned that uncertain appropriation levels for fiscal year 2018, especially for those agencies that have had big cuts proposed in the president's budget, will inhibit future planning.

"The CR buys you only a little time. Until you get a full year appropriation, you are going to get less for the whole fiscal year," and the prudent move is to cut spending in advance of possible cuts, he said.

Despite the saber-rattling by Trump over the wall funding, congressional leaders are predicting a relatively smooth outcome, even if the ride is bumpy.

Senate Majority Leader Mitch McConnell (R-Ky.) said Aug. 21 that there was "zero chance – no chance – we won't raise the debt ceiling."

On Aug. 23, House Speaker Paul Ryan (R-Wis.) said he expected a continuing resolution while the appropriations process played out. "I don’t think a government shutdown is necessary, and I don’t think most people want to see a government shutdown, ourselves included," Ryan said.

But not everyone is convinced. Goldman Sachs told investors on Aug. 18 that it puts the chances of a shutdown at 50-50 -- and that was before Trump roiled the waters by threatening a lapse in appropriations over wall funding.

"Congress could precipitate a shutdown by not acting, but only the president can precipitate a shutdown by acting -- by vetoing a bill," Berteau said.