Congress passes deal to raise debt limit and constrain spending

UPDATE: June 2, 2023: Late on the night of June 1, the U.S. Senate passed the Fiscal Responsibility Act by a vote of 63-36, about 24 hours after the House passed the bill with a bipartisan vote of 314-117. The President is expected to sign the bill into law today.

On May 31, the House passed the Fiscal Responsibility Act (HR 3746) which raises the federal debt limit for two years, imposes spending limits for FY 2024 and FY 2025, rescinds $28 billion in unobligated COVID-relief funds, enacts several new requirements on food stamps and Temporary Assistance for Needy Families (TANF), among other provisions. The bill comes after Speaker Kevin McCarthy (R-Calif.) and President Joe Biden reached an agreement last weekend that was the basis of the bill. The Senate is expected to pass the compromise legislation this week, with the president then able to sign the bill into law in early June. The Treasury Department estimates the debt limit needs to be raised by June 5 to prevent the government from defaulting on financial commitments.

While a full section by section summary of the bill can be found here, there are several provisions that could impact federal support for afterschool and summer learning programs directly:

Discretionary spending levels under the debt ceiling deal – There are lots of conflicting reports about what the agreement means for discretionary spending, due to different interpretations of the bill’s impact. There is a total amount of funding allowed under the new spending caps set in the bill, but there is a different total amount of spending when taking into account various allowable adjustments. The same is true when making comparisons to the fiscal year (FY) 2023 level. As a result, Republicans say the deal imposes a cut to FY 2024 non-defense discretionary funding (comparing the unadjusted FY 2024 total to the comparable FY 2023 base level), while Democrats describe the bill as holding non-defense funding roughly even with the FY 2023 level when compared to the FY 2024 total, and accounting for the adjustments. The levels of the base (non-adjusted) discretionary funding are laid out in Table 2 of the Congressional Budget Office (CBO) score here. Those levels will not be the levels that the Appropriations Committees will discuss when they mark up their spending bills; the Committees will use a net number including all the allowable adjustments (some that lower the score, and some that raise it). In addition to the FY 2024 spending levels, the discretionary total for FY 2025 will rise by 1 percent for both defense and for non-defense discretionary funding. Under the bill, if Congress does not pass a spending bill for FY 2024 by January 1, 2024, a 1 percent across the board cut will be imposed. The bottom line for education funding, including afterschool and summer programs supported through the 21^st Century Community Learning Center program, is that significant increases in funding are unlikely, and funding level with last year, or close to level with last year, is likely. Advocates are encouraged to continue to make the case for the importance of federal education funding.

Rescissions. The bill also rescinds some unobligated (not unspent) federal COVID-relief funds from the American Rescue Plan Act (ARPA) and other pandemic relief legislation. “Unobligated” means the funds not awarded to state and local governments. It applies to funds that are still sitting in the US Treasury that were not allocated or available to the U.S. Department of Education for the administration and management of the accounts. It does not apply to the funds that the federal agency has already awarded or “obligated” to state educational agencies and the flow-through awards to districts. These rescissions will go into effect as soon as the bill is signed into law.

• Remaining unobligated Education Stabilization Funds, including ESSER III funds from the American Rescue Plan Act (ARPA) – According to the Administration’s analysis, the total amount to be rescinded of “unobligated balances” from the Education Stabilization Funds (including the Elementary and Secondary School Emergency Relief Fund (ESSER), the Governor’s Emergency Education Relief Fund (GEER), and Higher Education Emergency Relief Fund (HEEFR)) is $391 million. This represents an estimated one-quarter of one percent of total ESSER funds.
• Remaining CNCS/AmeriCorps funds for increased living allowances for participants that have not yet been obligated.
• Remaining Child Care and Development Block Grant funding in ARPA and FY2021 appropriations – although this rescission appears to only affect federal administrative funds.
• State and Local Fiscal Recovery Funds are NOT rescinded and remain available through 2026 as stated in the American Rescue Plan Act.
• Several other education programs with smaller rescissions are also included in the bill, including $46 million from ED’s Institute of Education Sciences, $26 million from School Improvement Programs, $9 million from Student Aid Administration, $7 million from Indian Education, a total of $12 million from program administration, and $2 million from the Institute of Museum and Library Services.

The bill also includes the following provisions:

• Work Requirements: The proposed measure includes several changes related to the Temporary Assistance for Needy Families (TANF) program and the Supplemental Nutrition Assistance Program (SNAP). Regarding TANF, the measure would change the base year used to determine the required work participation rate for TANF recipients from 2005 to 2015, starting on October 1, 2025. It would also require the Health and Human Services Department (HHS) to carry out a pilot program in up to five states to negotiate performance benchmarks for work and family outcomes for TANF recipients. States failing to meet the benchmarks for two consecutive fiscal years would need to enter into a plan with HHS to improve performance. As for SNAP, the measure would expand work requirements for "able-bodied adults without dependents" to individuals up to the ages of 51, 53, and 55 in fiscal years 2023, 2024, and 2025, respectively. It would exempt certain groups, such as homeless individuals, veterans, and certain individuals in foster care, from the work rules. States would need to apply the work requirement provisions to initial certification or recertification applications after 90 days from the bill's enactment.
• Student Loans: The proposed measure states that regulations regarding extensions of federal student loan payment suspensions and waivers of interest on those loans, which were initially provided under the 2020 COVID-19 aid package, would be canceled sixty days after June 30.

With the debt ceiling issue addressed, Congress will now focus in earnest on the FY 2024 appropriations process. The House Appropriations Committee is expected to work at the subcommittee and full committee levels this month to pass all 12 spending bills, including the Labor, HHS, and Education spending bill. The Senate will likely work to pass bills this summer as well. While top level funding limits will be based on the Financial Responsibility Act, it is still vital for friends of afterschool to make the case in support of federal funding for out of school time programs through the 21^st Century Community Learning Centers programs.