Congress Passes and President Signs Bill to End Shutdown, Lift Debt Ceiling

October 17, 2013

Last night on October 16, Congress voted to pass a bill to fund the federal government through January 15, 2014 and suspend the debt ceiling until February 7, 2014. The Treasury Department will likely be able to take extraordinary measures to continue borrowing past February 7. The Senate passed the measure by a vote of 81-18, and the House followed by approving the measure by a vote of 285-144. The bill was signed into law by President Obama shortly after midnight, ending a 16-day long government shutdown and extending the Treasury Department’s ability to borrow to help pay for federal expenses. The Office of Management and Budget issued a memo early this morning directing federal agencies to reopen and furloughed federal employees to return to work.

The bill, reflecting an agreement reached by the Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY) that was announced yesterday, funds government operations at fiscal 2013 post-sequestration spending levels. The bill also establishes a bicameral budget committee to negotiate a broader fiscal 2014 budget deal, with instructions to complete a conference report by December 13 to allow lawmakers time to draft and pass appropriations before stopgap funding expires in mid-January. The measure makes only one minor change to the Affordable Care Act by providing for stricter income verification requirements for individuals applying for health care exchange subsidies. The full text of the bill is available here.

State Reimbursements and Other Key Bill Provisions

Of particular note to states, Section 116 of the bill includes explicit language asserting that states that “used state funds to continue carrying out a Federal program” or furloughed federally-funded employees “shall be reimbursed for any expenses that would have been paid by the Federal Government during such period had appropriations been available, including the cost of compensating furloughed state employees.” The legislation stipulates that this provision applies only to federal programs that states were carrying out prior to the shutdown. Also importantly, under Section 118 of the bill, fiscal 2014 appropriations are retroactively dated to begin on October 1, 2013, which should help ensure federal grants to states are made whole and do not see any reductions as a result of the shutdown. Section 115 of the measure provides for retroactive pay for federal employees, as well as District of Columbia employees, who were furloughed during the shutdown. NASBO will continue to provide additional analysis and information about aspects of the bill that are relevant for states.

Negotiations Ahead

As mentioned above, the legislation leaves fiscal 2013 post-sequestration levels in place through January 15. As the House and Senate prepare to launch formal budget negotiations through a bicameral budget committee, Democrats are expected to push for replacement of the sequester as part of any budget deal. Many Republicans have expressed a preference for leaving sequester levels in place but providing additional flexibility to federal agencies in implementing the reductions. Democrats have opposed additional flexibility for federal agencies, viewing this change as a mechanism to ensure the cuts remain in place. In addition to sequestration and overall spending levels, changes to entitlement programs, health care reform, and tax reform are all expected to be part of the contentious budget debate in the weeks and months ahead.