Assuming the House and Senate are able to pass the budget resolution negotiated by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI), the agreement would signal a return to a budgeting process dominated by the Appropriations Committees rather than Continuing Resolutions (CRs) negotiated by leadership (a return to the normal process). Once passed, the House and Senate will reissue revised subcommittee level appropriations allocations (302(b)) as soon as possible, in order to prepare to pass an omnibus appropriations bill before January 15, 2014, when the current CR expires. Additionally, having an already agreed upon Fiscal Year (FY) 2015 spending level will potentially help the House and Senate to move FY 2015 appropriations bills on a normal schedule, with final bills passed in advance of the end of the fiscal year.

  • Short-term Sequester Relief — The proposed budget agreement amends the Budget Control Act (sequestration) to provide increased spending caps for FY 2014 and FY 2015. The discretionary spending cap is increased from $967 billion in FY 2014 to $1.012 trillion and to $1.014 trillion in FY 2015. The chart below shows the agreed upon spending levels compared to the FY 2013 post-sequestration levels and previous FY 2014 spending cap:

Click here to view table.

  • Program Impacts — Final FY 2014 spending levels are still contingent on the outcomes of the now truncated appropriations process. However, the sequester relief provided in the agreement, for non-defense spending in particular, is dramatic. The agreed upon levels are an increase of 5 percent over FY 2013 post-sequestration levels. While final FY 2014 spending levels for specific programs are contingent on appropriations actions, assuming no major changes, we can expect allocations for most domestic programs to increase by about 5 percent over final FY 2013 post-sequestration levels.
  • Paying for the Deal — The $63 billion in sequester relief provided in the deal over two years is paid for through a number of fee increases, mandatory spending offsets and other provisions. The bill as a whole is projected to reduce the deficit by $20 billion to $23 billion over 10 years. None of the offsets are particularly impactful to local governments, and they don't include the types of major mandatory spending reductions discussed in previous "grand bargain" negotiations. Some of the revenue raisers and spending reductions in the bill include:

Transportation — A streamlining of the transportation security fee for air travel to a flat fee of $5.60 per one way trip, rather than a fee per flight segment. This will result in an increased cost for most travelers.

Medicare — Extends across the board cuts required under the Budget Control Act from 2021 to 2023.

Energy/Natural Resources — A repeal of the $50 million annual Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research Program and rescission of unspent funds. Also, all available funds in the Strategic Petroleum Reserve account would be rescinded; states receiving revenue from mineral lease agreements will now be responsible for defraying a portion of the lease management costs; and the bill approves an agreement with Mexico over shared offshore energy exploration.

Federal Employees — An increase in federal employee retirement contributions and an adjustment to the annual cost of living increases for retired members of the military.

Miscellaneous— Extends increased customs fees through 2023 and increases the premiums that private companies must pay into the Pension Benefit Guaranty Corporation.

  • Next Steps — The House will need to vote to pass the budget agreement before departing for holiday recess on Friday, December 13, 2013, with the Senate expected to finish voting early next week. Next, House and Senate appropriations will receive their revised 302(b) allocations and will begin to assemble their revised appropriations bills for floor action. Appropriators will be on a tight timeline to pass an omnibus spending package. Floor action is unlikely to begin before the House and Senate return from their holiday breaks on January 6, 2014. An omnibus appropriations package or short-term CR extension will need to be passed by January 15, 2014, when the current law expires.