Congress Works to Pass Debt Limit Deal

May 30, 2023

As has been widely reported, President Biden and House Speaker Kevin McCarthy (R-CA) have agreed to legislation that would extend the federal debt limit to January 2025, paired with a laundry list of Republican priorities including reductions in federal spending achieved through strict budget caps and the clawing back of unobligated COVID relief funds, work requirements on individuals who receive certain federal assistance, IRS funding reductions, NEPA reforms, and other changes sought by negotiators on both sides. The bill text is here and a section-by-section summary is here. 

House leaders hope to vote on the measure — the Fiscal Responsibility Act — tomorrow provided it can survive a procedural hoop later today, and Senate Majority Leader Chuck Schumer (D-NY) has said he will move to consider the bill in the Senate once the House acts. As has also been widely reported, there is significant grumbling from conservative Republicans who think that the bill doesn't go far enough in curbing federal spending and from progressive Democrats who think it goes too far. President Biden, Speaker McCarthy, and their teams are working feverishly to secure the votes necessary to pass the House and Senate before June 5, the date after which Treasury Secretary Janet Yellen says the United States can no longer make federal payments.  

If enacted into law, the measure will impact airports, both through the rescission of some $180 million in unobligated COVID funding that were never put under grant and as lawmakers clamp down on federal spending in accordance with the agreement. Gaining or even maintaining funding for many airport priorities will be difficult in the years ahead both as part of the annual appropriations process and as Congress moves forward to authorize AIP and other programs as part of FAA reauthorization legislation. 

Spending Reductions in FY24 and FY25

The measure establishes caps on discretionary spending — including funding for DOT, FAA, DHS, TSA, CBP, and all federal agencies — in fiscal years 2024 and 2025. In FY24, overall spending is slated to be down slightly from current funding levels, and spending growth for FY25 is limited to only 1 percent. As part of the agreement, the Department of Defense will receive an increase in spending of 3.3 percent, which means the bulk of the overall spending cuts will come from non-defense discretionary programs. The specifics are a difficult to discern given some of the carve-outs and exceptions in the bill, but funding reductions will easily exceed 5 percent for non-defense programs over the next two fiscal years. The measure also proposes to limit overall spending growth to 1 percent in FYs 2026 through 2029, but the mechanism for enforcement is less enforceable in those years. 

The debt ceiling bill also includes provisions aimed at incentivizing the completion of the FY24 and 25 appropriations processes and avoiding the reliance on temporary continuing funding resolutions. Specifically, the measure provides that if all 12 appropriations bills are not enacted by January 1 of the following year (January 1, 2024 and January 1, 2025 respectively), discretionary spending will temporarily be reduced to 99 percent of its current spending level. If all 12 bills aren't enacted by April 30 of the following year, funding in effect at that time will be subject to across-the-board cuts of 1 percent. 

Claw Back of Unobligated COVID Funding

The bill rescinds $28 billion in unobligated pandemic relief, including some $130 million in CARES funding and $50 million in ARPA funds allocated but never put under grant for airports. As we have noted on recent calls and elsewhere, the rescissions do not include CARES or ARPA funds that airports have under grant but have not yet spent. Those funds are considered obligated, and airports will not be affected by provisions in the debt limit bill provided that they are still within the performance window under the terms of an executed grant agreement.  
 
Protecting BIL Funding from Future Cuts 

The debt ceiling bill seeks to protect BIL funding by providing that if this Congress or a future Congress manages to pass a law repealing the BIL funds, the amount of those cuts can't be counted for budget scorekeeping purposes and can't be used to pay for new spending. Effectively, this provision is aimed at limiting any incentive lawmakers might have to target BIL funding since they wouldn't 'save' any money and couldn't be used to offset other spending.
 
PAYGO for Executive Branch 

The legislation would also establish 'PAYGO' requirements for federal agencies, which would prevent any final rule that would increase direct spending by more than $1 billion over 10 years or $100 million in any single year unless an agency submits a plan to reduce direct spending by an equal or grater amount. 
 
NEPA Reforms
 
The measure includes a handful of reforms to the National Environmental Policy Act, including project threshold, interagency coordination and review deadlines to prevent delays, limits on what qualifies as a major federal action, and limits to prevent agencies from missing statutory deadlines. The bill codifies some of the NEPA regulatory reforms that were finalized by the Council on Environmental Quality in 2020 and supported by AAAE. The bill summary notes the following specifics: 
 
Statutory Clarity and Section 102 of NEPA: Amends NEPA to clarify and narrow agency considerations to 'reasonably foreseeable environmental impacts of the proposed agency action,' 'reasonably foreseeable adverse environmental effects,' and 'a reasonable range of alternatives to the proposed action that are technically and economically feasible and meet the purpose and need of the proposed action.'
 
Interagency Coordination and Timely Reviews: Codifies key elements of the One Federal Decision Framework, including development by the lead agency of a joint schedule, procedures to elevate delays or disputes, and, to the extent practicable, preparation of a single environmental document. The legislation also sets reasonable page limits for environmental documents and reasonable time limits of one year for environmental assessments and 2 years for environmental impact statements. The bill provides a right of action to project applicants if statutory deadlines are not met.
 
NEPA Thresholds and Streamlining: Includes threshold considerations for agencies assessing whether NEPA applies to a proposed activity. The bill also includes provisions facilitating agencies adopting categorical exclusions of other agencies through a streamlined process.
 
Project Sponsor Preparation: Permits a project sponsor to assist agencies in conducting environmental reviews to help speed up the process and to resolve issues without taking control or authority away from the lead agency.
 
Major Federal Action: Amends NEPA and clarifies that a major federal action is limited to those which are 'subject to Federal control and responsibility.' It establishes a threshold consideration that is independent of the significance of impacts that may follow. It includes examples of actions that are not 'major Federal actions.'
 
What's Not Included

The White House and congressional Democrats have been warning that the House GOP's initial plan to cut spending to FY22 levels (a reduction of $130 billion) would result in a more than 20 percent cut for non-defense discretionary spending. DOT officials indicated that those proposed cuts could result in the agency furloughing all FAA employees for 22 days, shutting down 125 low activity towers, and shuttering all FAA contract towers. As is noted in White House talking points, the debt ceiling agreement takes those proposed drastic cuts off the table. 
 
Stay tuned for further updates.