February 12, 2018

Something for Everyone: The Budget Agreement Is a Government Contractor and Grantee Smorgasbord

4 min

On Friday morning, Congress and the President agreed to a bipartisan budget package that is a huge win for government contractors and grantees. This deal extends the current continuing resolution (CR) until March 23, 2018, when an omnibus bill should be passed that will replace the continuing resolution merry-go-round with a spending package that will fund the government through the end of fiscal year 2019 (September 30, 2019). Unlike a typical continuing resolution, this bill authorized significant new spending beyond FY2018 for the U.S. Department of Defense (DoD). Although DoD was the big winner, this CR has something for everyone.

First, this agreement gives government contractors stability. This budget deal is designed to run through the current fiscal year and fiscal year 2019—that's almost two full years of budget stability.

Second, this arrangement fully repeals the sequester through September 2019, which will lift the sequester on both defense and non-defense spending. Specifically, the budget agreement repeals the $54 billion sequester cut to defense spending in FY18 and FY19 and the $37 billion sequester cut to civilian agencies in both fiscal years. In addition to removing the sequester cap, the agreement adds, for defense and non-defense spending, respectively:

  • $26 billion above the sequester cap for FY18; and
  • $31 billion above the sequester cap for FY19.

What this means is that both DoD and civilian agencies will have an unexpected cash windfall. There is little doubt that DoD will find use for these funds, but this also amounts to a non-defense funding cap that is $117 billion higher than that requested by the Trump administration for the FY18 budget. Whether the civilian agencies are able to use these new-found funds remains to be seen. Yet, to counter this concern, Congress made a number of specific fiscal commitments, which include:

  • $6 billion to fund the fight against the opioid and mental health crises;
  • $5.8 billion for the bipartisan Child Care Development Block Grant program;
  • $4 billion to rebuild and improve VA hospitals and clinics;
  • $2 billion for important research at NIH (above CURES Act increases);
  • $20 billion for infrastructure, such as surface transportation, rural water and wastewater, clean and safe drinking water, rural broadband, and energy infrastructure; and
  • $4 billion for programs that aid college affordability, including those that help police officers, teachers, and firefighters.

For investments in healthcare:

  • A two-year reauthorization for community health centers, with increased funding and more than $7 billion in total funding;
  • Closing the Medicare Part D "donut hole" for seniors in 2019;
  • Ten years of the Children's Health Insurance Plan (CHIP), increased from six years;
  • $620 million over two years for the National Health Service Corps;
  • $253 million over two years for teaching health centers;
  • Health Extenders, including permanently repealing the therapy cap;
  • Delaying the Medicaid DSH cuts; and
  • Five years of funding for home visiting programs.

For emergency response and resiliency:

  • $23.5 billion for the FEMA Disaster Relief Fund for recovery, repairs, and future mitigation;
  • $28 billion in community development block grants (CDBG) for housing, infrastructure repairs, economic revitalization, and other needs, including $12 billion for mitigation, $2 billion of which will be directed to help Puerto Rico and the U.S. Virgin Islands rebuild and improve their electric grids in a more resilient and energy-efficient way, and flexibility in FEMA funding for rebuilding of the territories' other critical infrastructure;
  • $15 billion for Army Corps mitigation and resiliency projects;
  • $4.9 billion in Medicaid funds for Puerto Rico and USVI, and a 100% federal cost share for Medicaid while they recover from the hurricane disaster; and
  • $2.36 billion to provide disaster assistance for Florida citrus and other major agricultural losses incurred because of the 2017 hurricanes and wildfires.

There can be no question, from the perspective of those who do business with the federal government, that the recent budget agreement is potentially a huge win for grantees and government contractors. Agencies, both defense and civilian alike, will finally be able to move forward with programs and activities that were not previously funded. Accordingly, government contractors and grantees should be keeping their eyes and ears open for opportunities.