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  • Congressional Fights Over Federal Spending Continue After Debt Ceiling Deal

    By Manish Naik

    Director of Legislative Services

    Since the beginning of this year, Democrats and Republicans in the 118th Congress have been engaged in a showdown about lifting the debt ceiling. Republicans, particularly in the House, insisted on significant spending cuts as a condition for raising the debt ceiling, and narrowly passed legislation in their chamber to do just that. That bill was not considered in the Senate, with a Democratic majority and the White House insisting the debt limit should be raised without conditions.

    The two sides eventually negotiated, came to an agreement in early June, and were able to get the agreement passed in both the House and Senate. The President signed the legislation before the nation defaulted on its loans.

    The agreement includes minimal funding cuts in the first year (federal FY 2024) and a 1% limit on spending increases in the following year (federal FY 2025). The agreement also includes redirecting $20 billion from the Internal Revenue Service (IRS) to other agencies, enacting some additional requirements on food stamps and Temporary Assistance for Needy Families (TANF), and rescinding $28 billion in unobligated COVID-19 relief funds.

    The bill does not rescind any of the state or local Elementary and Secondary School Emergency Relief (ESSER) funds, regardless of whether a school district’s ESSER funding is unspent or unobligated. There is a reference in the legislation to rescinding “unobligated balances” from the American Rescue Plan’s ESSER funding (as well as the Emergency Assistance to Nonpublic Schools and Higher Education Emergency Relief programs), but those rescissions affect the funds that remain unobligated at the federal level only. This interpretation was confirmed in a letter from the U.S. Department of Education after the bill was signed into law.

    There are issues in the debt ceiling bill for school districts, chiefly the potential for flat funding or cuts over the next two federal fiscal years, specifically the 2024-25 and 2025-26 school years. But all of that is speculation at the moment because while the debt ceiling agreement includes broad parameters on spending, congressional appropriators will have the discretion to invest the money towards their priorities. Efforts to increase funding for defense, homeland security, and other programs, however, will only reduce the amount available in education and other domestic areas.

    A further wrinkle for education funding came after the debt ceiling agreement, when House Republican leaders announced they would cap federal FY2024 appropriations bills $119 billion below the level set in law by the debt limit deal. Senate appropriators meanwhile have said they intend to produce bipartisan spending bills that match the funding levels set by the debt ceiling agreement, likely resulting in significant differences between the House and Senate appropriations bills. This sets the stage for a showdown over federal funding later in the year, with a potential government shutdown and possible cuts to education and other non-defense domestic programs if the Senate relents to the House demands in the end-of-year negotiations.

    School districts came out of the debt ceiling fight okay considering the decade-long stagnation in federal funding that followed similar negotiations in 2011 or the spending cuts proposed in this year’s House Republican debt ceiling bill. But with the battle over federal spending far from over in the 118th Congress, education advocates also must not relent in making the case for sustained investment in the schools and students with the greatest needs to ensure that recovery from the COVID-19 pandemic can continue.