Legislative Update: Congress Averts Shutdown, Faces Competing Visions for Fiscal Year Funding

Congress Averts Shutdown, But Lack of Disaster Supplemental Threatens to Force Congress to Come Back

The House and Senate passed a bill on September 25 to avert a government shutdown, extending the budget deadline to December 20. The continuing resolution (CR) keeps federal agencies funded at current levels.   With a 341-82 vote, House Speaker Mike Johnson (R-LA) had to rely on Democratic support, as many Republicans voted against the bill. To achieve this support, Johnson had to drop a conservative-backed push for stricter proof-of-citizenship requirements for voting.  The Senate passed the measure that evening (78-18) after agreeing to fast-track it through the chamber.

With the government shutdown averted, lawmakers will have an 80-day window to reach a comprehensive spending deal for the remainder of the fiscal year.   Lawmakers have now left for home ahead of the Nov. 5 elections, due to return on November 12.   When they return, the political landscape will likely be very different, with a possible shift in the balance of power in Congress and the White House and facing contentious debates over funding levels, particularly for defense and domestic programs.  Appropriators from both parties are pushing to finalize the fiscal 2025 budget before the year ends to avoid leaving complex issues for the next administration and Congress to handle.

Notably, the CR was passed without supplemental disaster money as Hurricane Helene caused widespread destruction across four states in the East.  FEMA has already depleted its disaster relief fund and other federal disaster programs, with a nearly $2 billion deficit at the end of September. The agency projects that money from the CR will last only through January and that the fund will still face a $3 billion deficit by February.  President Biden has suggested that he may ask Congress to return to pass a supplemental bill to fund hurricane relief efforts when there is a better assessment of the damages and costs of the historic storm. Several bipartisan lawmakers have also expressed wanting Congress to reconvene early to take up an aid package.

A FEMA spokesperson said the agency is in a “good position” at the moment.  The agency lifted the “immediate needs funding” (INF) status, diverting available funds to only the highest-priority activities. Under the stopgap funding package, the agency received nearly $20.3 billion on Oct. 1, the first day of fiscal 2025. Still, there are concerns that this amount will not be sufficient to cover FEMA’s disaster relief fund until the lame-duck session.

Congress Faces Competing Visions for Fiscal Year Funding

As Congress approaches the end of the fiscal year, lawmakers are preparing for a complex spending battle during the upcoming lame-duck session. Both chambers are operating under different assumptions about what can be achieved before the December 20 deadline in the stopgap funding bill. While House Republicans, confident in their electoral prospects, are pushing for another short-term resolution to avoid a large spending package during the Christmas season, Senate Democrats are pushing for a full-year spending deal to avoid leaving unresolved issues for the incoming administration.

House Speaker Mike Johnson has firmly rejected the idea of large omnibus or minibus spending bills, preferring to defer major spending decisions until after the elections. He initially proposed a continuing resolution running through March 2025, but Republican opposition forced him to agree to move the date to December 20. Johnson’s position reflects broader GOP concerns about being forced to vote on a large, rushed package before the holidays. At the same time, House Appropriations Chairman Kevin Hern (R-OK) has emphasized the difficulties of negotiating under time pressure.

In contrast, Senate Democrats, led by Appropriations Chair Patty Murray (D-WA), are advocating for a bipartisan agreement to complete full-year funding bills before the new Congress convenes. With polls suggesting a potential Republican takeover of the Senate, Senate Majority Leader Chuck Schumer (D-NY) is motivated to accomplish as much as possible under Democratic leadership. There is also bipartisan support from some Republicans, such as House Appropriations Chairman Tom Cole (R-OK), who believe that leaving a funding crisis for the next administration would be irresponsible.

However, substantial policy and funding disagreements remain between the chambers, including a nearly $90 billion gap in discretionary spending. Additionally, numerous unresolved funding priorities, such as veterans’ health care, disaster relief, and Social Security, complicate the outlook. With limited time in session after the November elections and competing legislative priorities, including the farm bill and defense policy measure, the path to a full-year agreement remains uncertain.

Impact of the East Coast Dockworkers’ Strike on U.S. Trade and Industry 

The recent dockworkers’ strike on the East and Gulf coasts, led by the International Longshoremen’s Association (ILA), is causing significant disruptions to U.S. supply chains and potentially long-lasting effects on domestic and international trade. The strike, which centers on disputes over wages and protections against automation, is expected to stymie the movement of goods, especially as negotiations between the ILA and the U.S. Maritime Alliance (USMX) remain stalled. Republican and some Democratic lawmakers have urged President Biden to invoke the Taft-Hartley Act to force a cooling-off period, but Biden has resisted this move, maintaining that collective bargaining is the most effective way for workers to secure fair compensation.

This strike will likely have profound economic implications, with JP Morgan analysts estimating a potential daily cost to the U.S. economy between $3.8 billion and $5 billion. Ports impacted by the strike handle a majority of the country’s consumer goods imports and exports, making the situation more critical as the holiday season approaches. The ports impacted by the strike account for about 90% of the waterborne chemical shipments that move in and out of the U.S.  These chemicals are used by almost every sector of the economy.

Politically, the strike puts President Biden in a difficult position, especially with an upcoming election. His pro-union stance contrasts with the pressure from business groups and lawmakers who are urging him to intervene. The strike’s impact on inflation and the economy could further influence voter sentiment, with many seeing the economy as the most important issue. However, Biden’s commitment to supporting labor unions may limit his willingness to resort to legal measures such as the Taft-Hartley Act, even as the strike intensifies the economic strain on businesses.

For U.S. companies, the strike introduces significant operational risks, particularly those that depend on timely import and export channels. Industries reliant on the ports, such as pharmaceuticals, automotive, and retail, will face increased costs and delays, which could lead to higher consumer prices. If the strike continues for an extended period, it may also push companies to rethink supply chain strategies, potentially looking for alternatives or more automation-resistant labor arrangements in the future.

D.C. Circuit Judges Question Legality of EPA’s TSCA Confidentiality Rule

In a recent oral argument before the U.S. Court of Appeals for the D.C. Circuit, three judges expressed agreement with industry challenges to the EPA’s Toxic Substances Control Act (TSCA) rule regarding confidential business information (CBI). The chemical industry argues that the EPA does not address a situation where confidential information is published because a downstream user submitted data without knowing it was protected.  The judges voiced concerns that the rule may be illegal in its treatment of “the knowledge issue.” They questioned whether companies should be required to waive secrecy protections for chemicals they use, even when they lack access to the actual trade secrets. Judge Justin Walker notably described the rule as “illegal,” stating that TSCA explicitly prevents the EPA from disclosing chemical identities designated as trade secrets.

However, the judges were less convinced by environmental groups’ arguments that the rule excessively shields data from public disclosure. Specifically, they pushed back on claims that the rule protects information from health and safety studies that TSCA exempts from confidentiality. Judge Florence Pan suggested that the EPA’s interpretation of what constitutes a study was consistent with the statute, focusing on the scientific analysis of chemicals rather than details like the identity of labs. The case highlights ongoing tensions over the EPA’s efforts to consolidate and reform CBI policies in line with the updated TSCA, with both industry and environmental groups raising concerns over how these reforms are implemented.

EPA Praised for Improved Transparency in Allocating WIIN Act Funds

The EPA’s Office of Inspector General (OIG) issued a report praising the agency’s handling of funds allocated by the 2016 Water Infrastructure Improvements for the Nation (WIIN) Act. The report found that the EPA has adhered to nearly all relevant guidance in awarding these funds, which are crucial for small, underserved, and disadvantaged communities, particularly for projects like replacing lead service lines. The OIG commended the EPA for addressing two prior documentation issues and improving oversight and transparency in its funding processes. These changes are expected to positively impact future allocations, including an additional $50 million under Section 2104 and $47 million under Section 2105 of the WIIN Act. Based on the reports highlighted improvements, the OIG did not issue any further recommendations, signaling confidence in the EPA’s updated processes.