By Laura Walling, Vice President of Government Affairs, Goodwill Industries International
After weeks of negotiations between President Biden and Speaker McCarthy, Congress passed the Fiscal Responsibility Act days before the June 5 deadline for defaulting on the US debt limit. As with all negotiations there are winners and losers, and the bipartisan bill did not get support from the conservative Freedom Caucus or the liberal Congressional Progressive Caucus. Moderates who support the final bill largely felt the concessions made were better than defaulting on the debt.
Fiscal Year 2024 and 2025
The bill suspends the debt ceiling through Jan. 1, 2025 and institutes spending caps for FY24 and FY25, with voluntary caps the following four years. Topline FY24 funding levels for programs of interest to Goodwill will be essentially the same as current levels and FY25 funding will increase by just 1%. During this period of significant inflation, some programs will be cut to increase funding for higher priorities.
Agreement on spending levels increases the chances of successfully completing the appropriations process this year thus avoiding a government shutdown. Furthermore, the bill requires all 12 appropriation bills to be completed before the end of the calendar year. If any of these bills remains unfinished, all appropriation bills will receive a 1% reduction below FY23 levels until the remaining appropriation bill or bills are completed.
Rescission of COVID Funds
More than 100 programs are subject to the cancellation of the “unobligated balances” at federal agencies as of the date of enactment of the bill. This includes American Rescue Plan Act money still in federal agencies that had been provided for vaccination research, mental health among health care professionals, home visitation program emergency assistance, enhanced AmeriCorps funding, and emergency assistance to non-public schools among others. In total, the bill rescinds over $28 billion in funds appropriated during the pandemic. Of note, the State and Local Fiscal Relief Funds program is not in jeopardy.
Labor
The bill rescinds $1 billion from the Department of Labor’s (DOL) Unemployment Insurance modernization effort. DOL received $2 billion as part of the American Rescue Plan to ramp up fraud protection efforts and improve outdated state infrastructure. Only $500 million has been awarded to states to date.
Education
The Department of Education will incur a $392 million rescission from its Education Stabilization Fund designed to help states, institutions, and students during the pandemic. This rescission is relatively minor in comparison to the $263 billion that was allocated to the ESF and does not impact current programming.
The bill requires student loan repayments and interest to restart before the end of August. It does not impede an Administration from making further pauses in future crises. The Administration already planned to restart repayments on September 1st. The deal does not affect the separate plan to forgive as much as $20,000 in student debt per borrower. That plan remains in limbo at the Supreme Court, which is expected to rule in the coming weeks on whether it can proceed. Congress passed a separate measure related to repealing student loan forgiveness, which President Biden plans to veto. There does not seem to be enough support to override the expected veto.
Supplemental Nutrition Assistance Program (SNAP)
The deal increases the age limit from 49 to 54 for able bodied SNAP recipients to be eligible to receive assistance without working 80 hours per month or be engaged in job training. It also tightened state exemptions of work requirements for able bodied adults from 12% down to 8% in FY23 and would sunset the exemption in 2030. In exchange, the bill exempts veterans, homeless, and people aging out of foster care from these work requirements. Some provider organizations are concerned that hurdles to prove exemptions will be cumbersome for some individuals. Issues pertaining to SNAP could come up in future negotiations over the Farm Bill which is due for reauthorization.
Temporary Assistance for Needy Families (TANF)
Changes to the workforce provisions in TANF include a recalculation of the caseload reduction credit, utilizing a new base comparison year of 2015. Since state caseloads have declined from 2005, this can increase the share of the caseload that states will need to have in work participation activities. The agreement also changes data reporting on work outcomes effective beginning in October 2024, requiring states to report the share of participants with employment/earnings two quarters after leaving TANF and, for those with earnings in the second quarter to report on employment four quarters after leaving – employment measures utilized in the implementation of the Workforce Innovation and Opportunity Act. Finally, the agreement includes a new work outcomes pilot for up to five states to test new approaches and strategies for achieving TANF goals utilizing pay for success principles.
Internal Revenue Service
Negotiators agreed to cut $21.4 billion from an $80 billion boost to the IRS which passed last year. The rescinded funding will be used to fund other domestics programs that could have been subject to more significant cuts.
Pay-As-You-Go Limits on Executive Actions
The bill applies Congress’ “pay as you go” rule — which requires new spending to be offset by savings elsewhere — to executive actions. That would mean presidential actions like additional student loan forgiveness could require a huge offset. However, the White House Office of Management and Budget (OMB) could waive the requirements if “necessary for the delivery of essential services” or “necessary for effective program delivery” and OMB’s decisions would not be subject to legal challenges. The provision would expire at the end of 2024.
With the debt ceiling crisis behind them, Congress will next turn their attention to the appropriations bills, the Farm Bill, and the National Defense Authorization Act all of which may find bipartisan agreement difficult to come by.
