Quick Hit – November 6, 2017

What It Means

There is movement and a general sense of optimism that an omnibus appropriation will pass before the end of the year. It would not be without a few challenges along the way. Here’s the streamlined recap below:

  • The President’s FY 2018 request for defense spending was $640B, well above theBudget Control Act (BCA) cap of $549B
  • The FY18 Budget Resolution, agreed upon on 10/26/17, calls for $640B for defense along with $77B for Overseas Contingency Operation (OCO) funding.  Recall the Budget Resolution is a non-binding document. It is not legislation; the President does not sign it.  Think of it as bipartisan political guidance.
  • The FY18 National Defense Authorization Act (NDAA) is in the final phase of conference between the House and Senate versions. The Senate version calls for $631B base defense and $60B for OCO. The House version calls for $640B base defense and $60B for OCO.  Look for conference to complete this week.
  • The Senate Appropriations Committee’s Defense Subcommittee has not released the FY18 Defense Appropriations Bill, the bill that actually spends. (SAC-D). The FY18 House version of the same bill calls for $584B in base defense and $74B for OCO.
  • It is clear all defense bills released to date suggest the BCA cap ($549B) will once again be ignored.  Recall that OCO is considered “off budget.”  In recent years, OCO funding has funded items with little relevance to overseas contingencies. Look for Democrats to use these facts as leverage in vying for increases in non-defense categories of the eventual omnibus appropriation.

Tax Reform and the Impact on Appropriations

House Ways and Means Chairman Brady has been the most prominent spokesman for his committee’s version of the Tax bill.

The House GOP plan for a renewed tax code was released this past week, calling for $1.51 trillionadded to deficits over the next decade. Corporate rates and individual rates will see the most substantial cuts in the House version. Certain politically debated clauses, like mortgage interest and property taxes, were combined into a single, more vague provision that should produce $1.2 trillion windfall in the coming years. The provision calling for the elimination of state and local tax deductions was not well received by all, and will be a point of contention going forward that could stall progress.

The markup period for a Tax bill has historically been one week, but with the number of highly charged provisions that remain unresolved, the markup phase will likely go longer. The House hopes to pass the bill on to the Senate before the Thanksgiving recess.

President Trump has made clear he firmly believes a Tax bill can be completed before Christmas.  The outcome of the markup phase of the Tax bill will directly impact the movement of an Omnibus appropriation.

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