2018 Midterms Analysis and 116th Congress Overview CAPITOL COUNSEL, LLC | 700 13th Street NW | Washington, DC 20005 202.861.3200 1 Well, we survived another election…. Unlike 2016 when all the polls were wrong, the 2018 midterms turned out mostly as predicted—the House of Representatives flipped to Democratic control, and the Senate remained in Republican hands, with the Republicans likely expanding their majority. There are a number of races that are still too close to call but at the time of this publication: U.S. Senate: 51 Republicans to 45 Democrats 4 Races Outstanding-Montana, Arizona, Florida* and Mississippi (MS run off will occur on November 27) Republicans flipped Democratic seats in North Dakota, Missouri, and Indiana Democrats flipped a Republican seat in Nevada *Florida Senate race may go to a recount U.S. House of Representatives: 220 Democrats to 193 Republicans 20 Races Outstanding Democrats have currently gained 27 seats (they needed 23 to flip the House) Though it is too soon to tell exactly what the divided Congress will mean on every issue and for every committee, this document provides Capitol Counsel’s outlook for the lame duck session as well as a few key issues for next Congress—including Taxes, Health Care and Financial Services. 2 3 Outlook: Lame Duck Though the House has flipped, the Congress returns next week for its lame duck session under current control. There is little time between now and January (when factoring in Thanksgiving and leadership elections), so Congress will likely focus on bills that are must-pass, where there is a statutory deadline. However, with Democrats having won control of the House, there may be some deals on issues where both parties see a benefit in “clearing the decks” for the next Congress. In addition, Senate Majority Leader Mitch McConnell (R-KY) will continue to move as many nominations as possible through the Senate. There are rumors that special counsel Robert S. Mueller will release his report on the Russia investigation in the coming weeks; if this happens, lame duck activity could be impacted depending on the contents of the report. Leadership Elections November will be dominated by party leadership elections and policy negotiations behind closed doors on outstanding issues. House Republican elections are currently expected to take place on November 14. House Democratic elections are currently expected to take place on November 27 and November 28. The dates for both sets of those elections are subject to change. Appropriations The most pressing order of business for the lame duck is appropriations (discussed in more detail starting on p. 24). The Continuing Resolution (CR) funding many government functions is set to expire on December 7. After leadership elections, we expect negotiations on government funding to continue; however, these negotiations will be contentious since President Trump has said he will not sign an appropriations bill without funding for “the wall,” and Democrats have adamantly opposed significant wall funding. Congress may also consider an emergency spending measure to meet needs in hurricane- ravaged areas, and such a bill could carry other spending priorities if they are complete. FY2019 Funding Progress Congress has made significant progress in funding government operations for Fiscal Year 2019 (FY2019). The five FY2019 funding bills completed so far account for approximately 75% of total discretionary spending. Though appropriators appear close to agreement on funding and policy for the remaining 25%, the shift in Congress along with President Trump’s wall funding may make agreement difficult. The seven unfinished FY2019 funding measures are: Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Commerce, Justice, Science, and Related Agencies Financial Services and General Government Homeland Security Interior, Environment, and Related Agencies State, Foreign Operations, and Related Programs Transportation, Housing and Urban Development, and Related Agencies Prior to the conclusion of business for September 2018, legislation was enacted that appropriated full year FY2019 funding for: Defense Energy and Water Development, and Related Agencies 4 Labor, Health and Human Services, Education, and Related Agencies Legislative Branch Military Construction, Veterans Affairs, and Related Agencies FY19 Negotiations/Shutdown Prospects Congress has been negotiating the remaining seven appropriations bills; however, it is unclear if, with new House leadership, they will be able to pass full funding bills or will be forced to pass another Continuing Resolution. It is possible that Congress could pass a CR through early 2019. However, it is also possible that Congress passes regular appropriations bills during the lame duck session - Democrats will have new leverage in the House, but may want to clear the decks for next Congress so they can focus on non-funding related priorities. We understand that negotiations are almost complete on four bills that could potentially be combined into a minibus: Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; Financial Services and General Government; Interior, Environment, and Related Agencies; and Transportation, Housing and Urban Development, and Related Agencies. There are indications that some legislative riders will be included and that a deal was within reach on the discretionary escrow account built into the Financial Services bill known as the “Fund for America’s Kids and Grandkids.” This fund was established in the House-passed Financial Services and General Government Appropriations bill to set aside $585 million as a spending reduction mechanism. Some have speculated that this bill was left unfinished as a vehicle to carry other provisions including a CR or other needed authorizations in an end of year deal. There are also indications that staff negotiations are underway for the three previously un-conferenced bills: Commerce, Justice, Science, and Related Agencies; Homeland Security; and State, Foreign Operations, and Related Programs Even if all the issues within the appropriations bills can be negotiated, President Trump has threatened not to sign any funding bill unless it contains funding for a border wall. Given President Trump’s latest comments on immigration, if Democrats do not agree to even a down payment on border wall funding, it is likely that a shutdown will occur. However, the length of shutdown or path out of the shutdown is unclear. While certain congressional leaders have indicated a path to a negotiated agreement involving wall funding, many Democrats are adamantly opposed to putting any funds into a southern border wall. Democratic Leader Nancy Pelosi (D-CA) has been notably outspoken in opposition to the wall, and Democrats, having taken control of the House, may very well insist on postponing any consideration of Homeland Security funding until the new calendar year. This could prolong the shutdown or give Democrats new leverage in negotiations. There is discussion of providing some level of funding for the wall or border security that would allow all sides to claim a win and the government to remain open. Budget and Appropriations Panel Recommendations House Budget Committee Chairman Steve Womack (R-AR) currently co-chairs the Joint Select Committee on Budget and Appropriations Process Reform with current House Appropriations Committee Ranking Member Nita Lowey (D-NY). The Bipartisan Budget Act of 2018, the law that established spending cap relief for FY2018 and FY2019, also established this panel. The committee was tasked with producing recommendations and legislative language to “significantly reform the budget 5 and appropriations process.” Further, the Bipartisan Budget Act of 2018 requires that the committee produce a report no later than November 30, 2018 to be submitted to the President, Speaker of the House, and leaders in the Senate. There are procedures highlighted in the law that require Senate consideration before the conclusion of the 115th Congress. Requirements for House consideration are not spelled out but would likely be considered under regular order. Rep. Steve Womack has indicated a mid-November timeline for consideration of the panel’s proposals. These proposals, if adopted during lame duck, could give us foresight into the process for FY2020 and the impending budget debate. Types of proposals expected from the panel include regular two-year budgeting and other procedural changes. The legislative language has not yet been released to accompany the panel report. Other Potential Lame Duck Measures Several authorizations are set to expire during the lame duck session and require action from Congress. These include the National Flood Insurance Program (NFIP), which expires on November 30, the Farm Bill, and the Violence Against Women Act (VAWA) reauthorization. Given the flip of House control, clean, short-term extensions may be the most likely path as the new House Democratic majority may choose to fight on more favorable ground next year. Negotiations continue on the Farm Bill, which officially expired at the end of September, but the programs continue to function on existing funding until the end of the calendar year. Despite positive statements from members, the parties remain at odds over farm program funding, work requirements for SNAP recipients, and changes to conservation programs. NFIP is also stuck in deadlocked negotiations, and both programs will likely be extended