The Budget Process: The Good, The Bad and The Exceedingly Complicated

This week, President Trump addressed Congress, kicking off the budget discussion for fiscal year 2018 (which starts October 1, 2017).  In keeping with his campaign promise to increase defense spending, it proposes an additional $54 billion additional dollars for defense and pays for it by cutting the same amount from domestic discretionary spending.  That’s roughly the size of the entire Housing and Urban Development Agency and no domestic program is immune from the chopping block-- everything from foreign aid to the Community Development Financial Institutions program are poised for drastic cuts. 


The Good: The Process Is Largely the Same


The process should be pretty straightforward – the President submits a budget request to Congress in early spring.  The House and Senate Budget Committees then pass budget resolutions using the President’s request for guidance. The Appropriations Committees appropriate the funds.  Finally, the House and Senate meet to reconcile the differences of their appropriations bills before sending the finished products to the President to sign into law. Easy, right?


The Bad:  It Doesn’t Really Work That Way


While the above process lays out how it’s supposed to work, history has proven otherwise.  The last time all 12 bills that make up the budget were delivered on time to the President’s desk was in 1996—more than twenty years ago.   


Enter the Continuing Resolution budget strategy.  In order to avoid a government shutdown on the first day of the fiscal year, and in the absence of 12 appropriations bill passing the Congress by October 1, Congress has to pass a short-term Continuing Resolution (CR), which funds the government while the bills are still going through the appropriations process. While a temporary strategy, Congress takes great liberty with this budget mechanism and is still working under the CR passed in Fall 2016. Congressional action will have to be taken by April 28 in order to keep the government funded from then to the end of the current fiscal year on September 30th.  While not expected, any easy out for Congress would be to continue funding the rest of the fiscal year by a CR.  Why?  Because there are no new program “starts” under a CR.  It is an easy way to cut funding without having to negotiate.


The Exceedingly Complicated:  FY17 and 18 All Mixed Into One


The budget process is typically delayed in the first year of an Administration, since the White House is focused on confirming the cabinet and assembling staff. This year will be no exception. We are about to find out if Congress can walk, chew gum and juggle at the same time. Congress must raise the debt ceiling and decide its funding for the rest of FY 17—all beforeengaging on the FY18 budget which is coming soon. AEO has anticipated this flurry of activity, and has been hitting the halls of Congress advocating for our nation’s microbusinesses. 


The House Small Business Committee will hold a hearing on its views and estimates on the Small Business Administration this week.  The Committee says they have not ruled out legislation to improve the WBCs, whom they view as doing duplicative work of SBDCs in that a quarter of their clients are men.  They are very high on the Microloan Program’s near zero default rate and its effectiveness in providing entrepreneurs with the capital to create or expand their small businesses.  They also believe that the size of the Administrator’s staff, rivaling that of the Secretary of Defense and Agriculture, is outrageous, and will be recommending a cut of 10% to the Office of the SBA Administrator. 


What to Watch Out For


All signals point to cuts, cuts, cuts.  Not just small ones – big ones.  Watch out for programs that could be on the chopping block.  News sources have identified the CDFI program as one of those programs.  While it is good news that the House Small Business Committee is recommending the Microloan program as worthy of funding, many other SBA programs AEO supports may not be as lucky.  Now is the time to pay careful attention to the budget.  AEO will provide the leadership to engage and fight for the programs that deserve support.  Our nation’s microbusinesses need the support these programs provide.  We won’t go down without a fight.  Stand with us.


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