A stopgap budget might be better for some civilian agencies than an appropriation

With the chaos roiling the House of Representatives playing out through the week and the resurgent threat of a government shutdown looming a month away, civilian agencies are left facing a scenario where a continuing resolution may be their best option. 

As the Professional Services Council’s Defense Conference opened Thursday, there seemed a brief glimmer of hope when details emerged of a resolution to allow House Speaker Pro Tempore Patrick McHenry, R-N.C., the power to negotiate another stopgap bill, potentially through December. 

House Republicans shelved that idea by Thursday afternoon, and after a third-failed vote for House Speaker nominee Jim Jordan, R-Ohio, Friday morning, agencies and their contractors are trying to discern how to prepare for both another shutdown threat and potential spending cuts as a result of last spring’s debt ceiling deal. 

“We have never done this before,” said Berteau in opening the conference. “In fact, it’s almost orthogonal to the way we move forward, especially with long CRs in extent. There’s not even a guarantee that we will have full-year appropriations at any point in time. There’s a distinct possibility that a series of continuing resolutions could be enacted that carry us through the entire fiscal year.”

But even that could spark trouble for civilian agencies because of the debt ceiling deal signed into law in May, which calls for 1% cuts in discretionary spending for defense and non-defense agencies if all 12 annual appropriations bills aren’t passed by Jan. 1.

Further, Berteau noted that while the debt ceiling deal included an agreement on the topline level of Defense Department spending, it did not for civilian agencies, and “the differences, in some cases, is 20% to 30%.”

“You actually can’t fire enough people if you wait two months into the fiscal year to save 30% of your budget,” he said. “So it’s basically un-executable at some levels. Where this ends up, I don’t know.”

The result is a fiscal conundrum where a full-year CR at fiscal 2023 levels provides some civilian agencies with a better deal than a full-year appropriation would, while simultaneously giving the DOD a 4.3% budget cut, due to a reduction of the topline coupled with the slash from the debt ceiling deal.

“Quite a number of civilian agencies are actually better off under an FY23 full-year CR than they are under the allocations that have been given to those agencies in the appropriations, either on the House or Senate side,” Berteau said. “This creates a very interesting decision dilemma for the White House. Defense suffers, a number of other agencies are neutral and many agencies suffer more under the deal than they do under a full-year CR.”

The CEO went on to say that contractors should be game-planning what options they are able to provide agencies under all of those scenarios, knowing that they will likely be prepping for both a shutdown and a 1% cut simultaneously.

“Because they will be looking for help,” he said. “’How will I get my work done with all of those layers of uncertainty sitting there?’”

Berteau said that given the multiple rings of dubiety currently circling the budget process, the best-case scenario may be a series of stopgap bills while Congress continues its budget negotiations. 

But given the tumult in the House, the shutdown plans that were penned by agencies in September could very well get dusted off before the current budget deadline of Nov. 17. 

Berteau said that contractors need to be communicating with their customer agencies now to help plan for the myriad of options that remain on the table.