Quick Hit – July 2, 2015

FY 16 Authorizations and Appropriations
— not yet on the same pageWe’re likely to see a compromise end game sometime in November that offers some sequester relief, but that also requires DoD to find as much as 19B (worst case) in cuts from what the President requested for FY16.
 The non-security segments of government will feel some relief from sequester caps as well, but will face across the board cuts that bring the budget topline below what the President’s Budget had initially requested.Your customer PM likely doesn’t know how much this will hurt yet, and is trying to figure out how to contain the damage. PMs are being asked to work up options and you are likely to be asked to help them find alternatives to your spend profile.If you are not communicating regularly with your government customer, your program could be in jeopardy. Arming your customer with your most current facts regarding performance, cost and business concerns is your best defense. Don’t let your PM be forced to make a decision with less than your best input.Additional Details

The FY16 National Defense Authorization Act (NDAA) is on a fast track to completion by the end of July. The topline number would authorize to the number requested by President Obama, but includes a work-around of the Budget Control Act Sequester Caps. The President has threatened repeatedly that he will veto the bill as presently marked by the House and Senate because of the work-around.

Why? The House and Senate marked their bill to the President’s requested topline, which had ignored the Budget Control Act (BCA) Sequester caps (written into law in 2012). In order to technically comply with the BCA sequester caps AND get to the Presidents requested level, the HASC and SASC made up the difference by adding 38B to the Overseas Contingency Operations (OCO) account. President Obama and most Democrats want the sequester caps removed, and want the non-defense portion of the budget to receive the same type of relief as proposed by the 38B OCO relief – but they prefer that the relief be in the base budget, not an off-budget mechanism like OCO.

Appropriations were moving along at a similarly brisk pace with spending bills moving swiftly through the House floor and sent to the Senate. Senate Democrats threatened to filibuster all appropriations bills until an across the board deal was agreed. Senate Republican Leader McConnell called the bluff and attempted to put the Defense Appropriations bill on the floor before the July 4th recess – essentially daring the Senate Democrats to vote against defense. They did and the bill couldn’t survive the procedural vote to bring Defense appropriations to the Senate floor.

Now what? We will likely have an approved authorization bill authorizing program spending in excess of what is actually likely to be funded. Remember you can’t spend an authorization, only an appropriation. Senate Democrats insist they will block every appropriations bill until Republicans come to the negotiating table on across-the-board BCA sequester cap relief.

Senate Democrats hope to force some form of “Ryan-Murray 2.0” negotiation. Next week we’ll see Senate Republican Leader McConnell make another attempt at passing a different spending bill (likely Commerce, Justice, Science). This move will again test the will of Senate Democrats to block another spending bill. Expect another blocking move and expect Congress to state a need to “hear from voters” during the upcoming August break before coming to the negotiating table.

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