Deep Dive: Fiscal Responsibility Act of 2023

Written and updated by Patrick Firth & Lulu Geller

Chief negotiators worked over the weekend to put together a debt ceiling agreement to take to Congress for consideration by legislators. While a deal was announced around 9pm EST Saturday evening, the legislative text of the Fiscal Responsibility Act was only published on Sunday evening.

The Speaker acknowledged that he had to give in to some Democratic demands, but the White House certainly is not getting the 'clean' debt ceiling deal it was insistent on in February/March.

President Biden put out this statement after the agreement was announced.

According to the current draft of legislative text, negotiators have agreed to a two-year deal until January 1, 2025. The bill separates spending caps into defense and non-defense programs.

Constitution Partners reviewed the legislative proposal and has the following analysis: 

Funding Provisions

The measure would cap non-defense spending in fiscal 2024 at $703.7 billion and $710.7 billion in fiscal 2025. The proposal would keep fiscal 2024 non-defense spending roughly the same as 2023 levels when accounting for appropriations adjustments, according to the White House.

The proposal would cap topline fiscal 2024 discretionary spending for defense programs at $886.3 billion, roughly a 3.3% increase from the fiscal 2023 level, as proposed by Biden in his budget request. It would cap fiscal 2025 defense spending at $895.2 billion.

If a continuing resolution is in effect on or after Jan. 1, 2024, the discretionary spending limits for fiscal 2024 would be reduced to be 1% less than the fiscal 2023 base funding amounts. Similar requirements would apply if a continuing resolution is in effect on or after Jan. 1, 2025.

Rescission Funds

COVID-19 Emergency

•  The measure would rescind unspent money provided under various laws enacted in 2020 for Covid-19 relief, as well as Democrats’ 2021 reconciliation package. 

IRS Investments

• The measure would rescind $1.39 billion of the $80 billion in funding provided to the IRS under Democrats’ tax, health care, and climate change law, also known as the Inflation Reduction Act.

• White House officials said during a May 28 background press call with reporters that the Biden-McCarthy agreement would redirect $20 billion of the IRS funding over the next two years to other non-defense spending

Student Loans

• Sixty days after June 30, the measure would cancel regulations covering extensions of federal student loan payment suspensions, including waivers of interest on such loans that were first provided under the 2020 Covid-19 aid package. The suspension was extended multiple times, most recently on Nov. 22, 2022. 

Work Requirements

Temporary Assistance for Needy Families (TANF)

• The measure would change to 2015, from 2005, the base year used to determine a state’s required work participation rate for Temporary Assistance for Needy Families (TANF) recipients. The change would take effect on Oct. 1, 2025.

TANF Pilot Program

• The measure would require the Health and Human Services Department (HHS) to carry out a pilot program in which it could choose as many as five states that receive a state family assistance grant to negotiate performance benchmarks for work and family outcomes for TANF recipients.

• The program would be in effect for six fiscal years, with one year to establish benchmark data and negotiate targets, and five years to measure performance against the targets.

Supplemental Nutrition Assistance Program (SNAP)

• The measure would expand work requirements for “able-bodied adults without dependents” under SNAP to individuals up to the age of 51 starting in fiscal 2023, 53 starting in fiscal 2024, and 55 starting in fiscal 2025. Under current rules, individuals ages 18 through 49 can’t receive SNAP benefits for more than three months in three years if they don’t meet additional work requirements.

• Individuals experiencing homelessness, veterans, or individuals in foster care would be exempt from the rules that apply to able bodied adults without dependents. 

• The requirement changes would sunset on Oct. 1, 2030.

• The number of exemptions would also be modified so that state agencies can ensure the average number of exemptions does not exceed 8% of all covered recipients beginning FY2024, down from 12%. 

Energy Provisions

Permitting Reform

• The President secured a verbal commitment from Speaker McCarthy to continue exploring more comprehensive permitting reform in future legislative proposals.

• The measure would modify the National Environmental Policy Act (NEPA) to streamline environmental review processes. 

• The measure would set timelines for completing environmental reviews and establish responsibilities for lead agencies during the review process, codifying elements of the Trump administration’s “one federal decision” policy. 

Review Timelines

• The lead agency would have to complete an environmental impact statement within two years or an environmental assessment within one year, unless a deadline extension is agreed to by the project sponsor. 

Agency Responsibilities 

• If a proposed action involves more than one federal agency, the agencies would have to evaluate the proposal in a single environmental document.

• If there are two or more federal agencies involved in a proposed action, the agencies would be required to determine, by letter or memorandum, which agency would act as lead agency. The decision would be based on several factors, including the extent and duration of an agency’s involvement and expertise related to the action’s environmental effects. Agencies could appoint federal, state, tribal, or local agencies as joint lead or cooperating agencies.

Transmission Study 

• The Electric Reliability Organization would have to conduct a study of “total transfer capability” — the amount of electric power that can be moved from one area to another through transmission lines — between transmission planning regions. The study would have to include recommendations on prudent additions to total transfer capability between planning regions that would strengthen reliability. 

Energy Storage Permitting

• Energy storage projects would be added to the list of covered projects for the purposes of streamlined permitting processes under the 2015 FAST Act. 

Mountain Valley Pipeline  

• Approval for the Mountain Valley Pipeline, a roughly 300 mile natural gas pipeline project stretching across parts of Virginia and West Virginia. 

• All necessary permits required to complete the project would have to be issued within 21 days of enactment. The measure would prevent judicial review of any agency action to approve construction and initial operation. It would also give the US Court of Appeals for the D.C. Circuit exclusive jurisdiction over future litigation of the project.
  

Congressional Reaction

Reactions across Capitol Hill have varied or not yet been reported. Legislators have been waiting for a deal for quite some time - and the delay has eaten up precious time on the legislative calendar for critical congressional priorities, such as the 2023 Farm Bill, PHMSA Reauthorization, and - of course - the FY 2024 appropriations process.

“It’s very frustrating,” said Rep. Frank Lucas (R-OK-03), about some of the House’s delayed priorities. “But until you know how much money you have to work with,” he added, referring to potential spending cuts in a debt deal, “you can’t do these things.”

While there is discontent on both sides of the aisle and in both chambers, it seems the necessity to avoid the U.S defaulting on its debt. Many in the House Rules Committee hearing yesterday - which approved the measure in a 7-6 vote - noted that no one was happy, which probably means it's a good compromise.

While leadership remains confident that they will have the votes for a bipartisan solution, passage is not certain in either body. The House aims to pass the bill on Wednesday, May 31. The Senate will then have a short window to pass the measure and send it to the President's desk before the June 5-8 anticipated date of default.

Constitution Partners will continue providing updates as they materialize, but please do not hesitate to reach out with any questions.