Deal Includes Significant New Regulatory Provisions

Days ahead of the Treasury Department’s projected default date, the U.S. House and Senate cleared a bipartisan package to raise the debt ceiling, extend the country’s borrowing powers, and offer stability and assurance to global markets. The Fiscal Responsibility Act, P. L. 118-5, passed the House (314-117) and Senate (63-36) with strong support from Democrats and Republicans and reflects compromise among voting blocs of both parties. The legislation is wide-ranging and includes budgetary, policy, and regulatory measures that President Joe Biden signed into law on June 3^rd.

Budgetary

• Temporarily suspends the debt ceiling through January 1, 2025 and establishes statutory caps on discretionary funding for fiscal years 2024 and 2025 that would be enforced by sequestration.
• Sets annual limits on most discretionary funding from fiscal years 2026 through 2029, to be enforced by Congressional procedures for considering budgetary legislation.
• Rescinds roughly $27 billion in unobligated COVID-19 balances appropriated by various laws since 2020.
• Imposes a 1%, across-the-board discretionary spending cut if all 12 appropriations bills are not enacted by year-end and a Continuing Resolution (CR) is in place on January 1, 2024, or January 1, 2025.

Policy

• Rescinds $21 billion in Internal Revenue Service (IRS) funding over fiscal years 2024 and 2025 that previously was provided under the Inflation Reduction Act.
• Modifies work requirements for the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF).
• Appropriates $22 billion for the Nonrecurring Expenses Fund of the Department of Commerce and $45 billion to the Toxic Exposures Fund for veterans’ health care and associated expenses.
• Amends provisions of current law that regulate permitting of certain proposed energy-related projects.
• Terminates the current suspension of payments, interest accrual, and collections on defaulted loans in the student loan program, effective 60 days after June 30, 2023.

Regulatory

Title III, the “Administrative Pay-As-You-Go Act of 2023,” establishes a PAYGO requirement on any executive branch actions that would increase direct spending. Prior to issuing a final regulation that would increase direct spending by more than $1 billion over 10 years or $100 million in any single year, departments and agencies must submit a plan to the Director of the Office of Management and Budget (OMB) that reduces spending by an equal or greater amount. The written document must include an estimate of the budgetary effects of the covered administrative action and the OMB Director shall determine if the proposed spending reductions adequately offset spending increases resulting from the proposed rule or administrative action.

If a department or agency determines that a proposed regulation is mandated by law, it must submit a written opinion to OMB to this effect and identify a least costly implementation option for executive rulemaking. OMB additionally may waive these PAYGO requirements if it concludes that a waiver is necessary for the delivery of essential services or effective program delivery.

Finally, the law exempts this new PAYGO administrative process from judicial review. The U.S. Government Accountability Office (GAO) is required to include in its Congressional Review Act (CRA) reports to Congress an analysis of whether agency rules comply with these administrative PAYGO requirements.

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Enactment of the Fiscal Responsibility Act now provides Congress a critical path forward on fiscal year 2024 appropriations, both in terms of providing clarity on spending limits and an open calendar with adequate floor time to consider other major legislation. Polsinelli’s Federal Public Policy practice will continue to follow these key discussions within Congress and the Administration and is available as a resource.