Budget Deal Sets Up Three Years of Tough Choices for Congress

For much more on this year's appropriations process--and a look ahead to next year's--check out New America's issue brief, Federal Education Budget Update: Fiscal Year 2014 Appropriations.

House and Senate lawmakers completed an appropriations agreement that will lock in spending for the remainder of fiscal year 2014 and avoid sequestration in this and next fiscal year. But now that they've reached the agreement, budgeting could pose an even greater challenge for years to come. Political gridlock has stymied congressional efforts to appropriate funds – and with three consecutive years of flat overall funding provided under this new budget deal, the coming years will be no different.

After Congress last year voted to kick the can down the road a few more months by reducing the size of the 2013 sequester, we were facing yet another year of—albeit smaller—cuts to federal programs come January 15. But a new spending limit, largely designed by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) in their December 2013 agreement, is written to avert that problem of another year of sequestration in fiscal year 2014, as well as to stockpile a little extra cash for the fiscal year 2015 budget, both paid for with some cuts to other programs. But in doing so, it sets up another problem: three years of essentially flat funding, from FY 2014 through FY 2016.

Under the new deal, and as written into the new budget agreement produced this month, the 2014  appropriations spending would total $1.012 trillion – about $28 billion more than Congress spent last year, more than reversing sequestration. But in 2015, the limit is $1.014 trillion, barely a noticeable uptick. And in 2016, another small increase to $1.016 trillion. After that, the limits start to tick back up, although much more slowly than would have been the case without sequestration (i.e. without the supercommittee failure).

In other words, the Murray-Ryan deal was a bipartisan breakthrough on appropriations limits that have been a major sticking point in the past few years – but it’s not going to be an easy deal for lawmakers to honor.

Advocates for education programs will surely balk as they begin to realize that the Murray-Ryan deal all but locks in flat funding for three years for the Department of Education. Moreover, the Pell Grant program is expected to require a large increase (about $5.8 billion) in its annual appropriation starting in fiscal year 2016. That’s double the increase the Murray-Ryan deal bakes in for the entire appropriations side of the budget.

And most education programs need at least inflationary increases—if not more—or their real value erodes. For example, President Obama requested a $120 million increase in Head Start funding in 2014 over last fiscal year – a nominal increase, but not enough to support an increase in the number of students, although it would mean some would be in higher-quality classroom environments. That’s a nearly 2 percent increase just to maintain essentially current policy. The budget announced this month includes a more than $1 billion increase to the program to fund its expansion, which may be a tough increase for lawmakers to sustain in the coming years.

The appropriations limits under the Murray-Ryan deal also means there’s little extra cash to go around (even an extra $28 billion over last year seems relatively insignificant when you consider it in the context of a more than $1 trillion budget). And that means members of Congress won’t have much impact if they take the easy way out and spread the money to every single program next year. Instead, they’ll be stuck making tough choices about which programs most need the money. If programs like Pell Grants, or even other agencies, eat up the extra cash, there will be little left for even a nominal increase in any other programs.

So now that Congress has reached an agreement on fiscal year 2014 funding, start looking ahead to next year. Recent history (or at least the last few years) says Congress won’t be willing to leave its own bipartisan budget deals alone if it means they’ll be stuck making tough choices in yet another tight budget year. What will come next remains to be seen.

This post was updated on 1/29 with a clarification to the size of the fiscal year 2016 Pell Grant shortfall. It is $5.8 billion, not $5.0 billion.