March 8, 2019

The White House is scheduled to release most of its budget request for fiscal year 2020 on the morning of Monday, March 11, 2019. We appear to be about to repeat much of the experiences of the President Trump’s first budget request, two years ago (fiscal year 2018).

The first Trump budget was released in two parts – the main overview document and summary tables were released March 16, 2017, and the rest of the budgetary documents were released on May 23, 2017. This time, we are also going to get two tranches of budgetary information, but hopefully, we will get more than just the overview and summary tables on Monday (at least, we hope, the Appendix that contains all the proposed appropriations language will come out next week). But at lot of detail will have to wait at least one more week this time as well.

And, like the 2018 budget, the President is expected to propose an overall total for non-defense spending that is far below what Congress, on a bipartisan basis, is willing to accept. Choosing an unreasonably low overall total then forces agencies to make propose sweeping cuts in their own discretionary accounts.

Like FY18, we are going into this budget cycle without a deal to increase the statutory Budget Control Act caps on defense and non-defense spending. The caps for FY 2020 are $576.0 billion for defense and $542.5 billion for non-defense, which are decreases of $71.0 billion and $54.5 billion, respectively, from the spending levels enacted into law last month in the omnibus FY 2019 appropriations act and previous acts.

There is one big work-around for the caps, Overseas Contingency Operations, which was originally just supposed to pay for Iraq/Afghanistan/GWOT activities but which has since morphed into a larger budgetary work-around. A little of the OCO amount ($8 billion in FY19) is non-defense, for State Department and other civilian foreign activities, but most of it ($69 billion in 2019) is defense. In order to get a full picture of the defense budget, you have to add the defense cap number and the defense OCO number.

In the 2018 budget, President Trump proposed total non-defense spending (cap + OCO) that was $101.5 billion less than what a Republican-majority House and Republican-majority Senate wound up agreeing to. And Trump’s proposed defense total was $27 billion less than what Congress eventually agreed to. This was all part of the February 2018 bipartisan budget deal that increased the FY 2018 and FY 2019 spending caps by a total of $295 billion.

No such cap increase deal has been negotiated yet (much less enacted into law, which has to happen because the caps are automatically enforced by another round of across-the-board budget sequestration if the law is not changed). According to news reports, President Trump’s 2020 budget is expected to propose adherence to the $542.5 billion non-defense cap level (plus an undetermined amount of State Department OCO, which we are assuming will be around the $8 billion used last year). But he is expected to propose a defense OCO blowout of $174 billion, getting the overall defense total up to $750 billion. The table below shows the numbers.

Out of that $605 billion in FY19 non-defense spending, $26.5 billion went to the Department of Transportation. Reducing $605 billion down to somewhere around $550 billion will translate into shaving several billion dollars from the DOT total. Likely candidates for significant proposed cuts in the FY 2020 budget include:

• The general fund discretionary “top-off” funding for highway formula grants ($3.25 billion in FY19), mass transit formula grants ($700 million in FY19), and airport grants ($500 million in FY19). These top-offs did not exist before the two-year budget deal in February 2018 flooded the system with money.
• BUILD grants, which the Administration proposed to kill in FY 2018 and again in FY 2019, which received $900 million in FY 2019.
• Mass transit Capital Investment Grants, which the Trump Administration proposed to cut to $1.0 billion in FY 2019 (the bare minimum necessary to pay for ongoing projects) and which received $2.55 billion in FY 2019.
• The three new discretionary rail service grant programs created by the FAST Act in December 2015, which the Trump Administration proposed to zero out in FY 2019 but which instead received total appropriations of $660 million.
• Amtrak, the subsidies for which the Trump Administration proposed to cut by over 60 percent in FY 2019, but which maintained a final appropriation level of $1.94 billion.

It seems likely that most, if not all, of the proposed cuts in discretionary transportation funding in the forthcoming budget will be restored by Congress, but that all hinges on the success of negotiations to increase the budget caps, and it now appears that those negotiations won’t be concluded until well after the House and Senate Appropriations Committees have to start drafting FY 2020 bills.

So the totals towards which the appropriators start drafting the appropriations bills later this year may not be particularly close to the totals that are finally negotiated later this year.

On the mandatory side of the budget, both the Trump 2018 and 2019 budget proposals contained a placeholder with a one-time slug of $200 billion in mandatory budget authority to support a leveraged, trillion-dollar infrastructure initiative. The FY 2020 budget is likely to contain such a placeholder as well, but we are not sure how much detail we will be given this year (or when) as to how the $200 billion will suballocated between proposed programs. Given how badly last year’s details on the infrastructure plan went down with Congress, the proposed allocation of that $200 billion placeholder may change…