FDA and the Threat of Sequester
There are only eight legislative days remaining before the beginning of the August recess. Senate Majority Leader Schumer has eleven items he wants to advance during this period (see here). The House schedule is equally full.
During this period, we expect the appropriations process to move forward, BUT no resolution or progress on the most fundamental issue—the nearly $120 billion gap between the House and Senate on how much money is available to be spent in FY 24. Even September may not be that promising: House leadership is considering a July vote on a Continuing Resolution (CR) that would take effect October 1 and avoid a government shutdown if Congress is deadlocked.
All of this is a harbinger of a more complicated appropriations endgame than in years past. As a result of the Fiscal Responsibility Act of 2023 (FRA), Congress is under additional pressure to fund the government through appropriations bills rather than CR’s and to do so by December 31 or earlier.
The worst case—particularly for a federal agency like FDA, whose mission is expanding—is that Congress cannot agree on funding bills and adopts a year-long CR (at the FY 23 funding level) for FY 24. That would hurt FDA in several ways:
no growth in program funding despite increased responsibilities and growing program demands (including implementation of new laws on cosmetics safety and ALS treatment development);
all parts of FDA would have to absorb the $105 million in mandatory pay increases;
if there is a CR for the first quarter of FY 24, there are both direct and indirect costs that come from delays in program and personnel planning
if Congress fails to adopt all twelve appropriations bills by December 31, then FDA has to plan for a 1% sequester of all funds based on its FY 23 funding level. This could be as much as $60 million or more if the sequester is imposed on both BA programs and medical product user fees, as it was in 2013.
With regard to the sequester, it will not actually be implemented until May 1 of next year. That provides Congress with more time to pass the twelve appropriations bills and negate the sequester but has the consequence of forcing agencies to absorb the entire cost of the cutback in the last five months of the fiscal year. It also risks delaying the submission and consideration of the President’s FY 2025 budget request.
The automatic reduction in funds would be imposed equally on defense and nondefense funds. That puts political forces into play that are larger than FDA and make a sequester far less likely.
Specifically, the Pentagon is counting on having the monies allocated to defense under FRA for FY 24. That number enjoys widespread Hill support and represents a substantial increase over FY 23. If there is a FY 24 CR at FY 23 spending levels, then DOD would not receive that increase and would also be subject to a 1% sequester. That would put DOD many billions of dollars below the FY 24 spending levels that most of Congress supports.
From the perspective of July (2023), it is hard to see how Congress will resolve the huge gap in funding between current House and Senate positions on FY 24. However, the pressures to find a solution will be enormous after Labor Day and will build into December if nothing has been settled.
A sequester—even the threat of a sequester—has a substantial impact on FDA. The FDA needs this to be resolved sooner than later.
Editorial Note:
The Analysis and Commentary section is written by Steven Grossman, Executive Director of the Alliance for a Stronger FDA.