Appropriations and Sequester – Laying Down Markers

King & Spalding

With no budget framework in place, the House and the Senate are both marching to their own drummers and producing appropriations bills based on spending levels detailed in their respective budget outlines. What they have in common is their blatant ignoring of the spending levels contained in the Budget Control Act of August 2011 (BCA). Under that agreement, for FY 2014 and beyond, discretionary spending was segregated into two pots--defense and non-defense. Each have their own cap and appropriations are supposed to fall below those caps. Failure to do so will trigger a round of sequester within those budget categories. For example, if defense spending exceeds the established cap, at the end of the year a sequester will take place within defense to bring spending down to the levels contemplated in the BCA.

In the House, the overall spending is in conformance with the top-line FY 2014 requirement but they have decided to breach the cap on defense discretionary, leaving smaller amounts for non-defense spending. However, this should be seen as a negotiating tactic as, under the BCA, if that level of defense spending were left in place and became law, a sequester would be triggered that would fall on defense spending to bring it back underneath the 2011 established caps unless the sequester is turned off. The lack of allocation for non-defense discretionary spending will most likely prevent most of those bills from ever being considered by the House.

In the Senate, the overall spending levels for both defense and non-defense spending exceed the caps in the 2011 Act. Senate Republicans oppose this approach and argue that any spending bills must conform to the limits established in the BCA.

By ignoring the ceilings in the BCA, both the House and the Senate seem to be lining up for a breach of the caps at the end of the day. Most likely is a scenario where both sides get increased money for defense and non-defense activities and the sequester mechanism contained in the BCA is deactivated. The question that remains is how much the caps will be exceeded.

George C. Crawford

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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