The resolution of the year-long standoff between the President and Congress over the budget began to take form this week as Congressional Democrats reluctantly agreed to reduce their budget to the President's overall discretionary spending level of $933 billion, $22 billion below the funding level for domestic programs they originally sought. Democrats were forced to reduce the overall spending for domestic programs to the President's level as they have been unable to secure enough Republican votes to overturn a Presidential veto.

Congressional Democrats began the week expecting to move forward with a "split the difference" bill which would cut their proposed $22 billion increase in half to $11 billion above the Presidents request level. However, a veto threat from the White House and the Congressional Republican leadership opposition to this plan resulted in Democrats pulling the proposal from consideration before even sharing it with their Democratic and Republican colleagues.

Democrats were then forced to choose between a long-term continuing resolution to keep the government in operation at current levels or to decrease discretionary spending back to the President's overall request level. The Democratic leadership chose on Wednesday to reduce their overall spending to the President's level in order to maintain control over the appropriations process and ensure that at least some of their key priorities were addressed.

The White House has continually refused to negotiate with Congressional Democrats over the budget and has threatened to veto any bill over the President's $933 billion request level. USA Works! met with White House Chief of Staff Josh Bolten on Wednesday who indicated that they believe they've won the budget fight and will not accept any deal over the President's request level. Bolten also expected to veto the bill if it includes policy riders objectionable to the Administration. He believed that the budget fight provided a key means to reestablish the Republican brand as the party of fiscal discipline.

While congressional Democrats do not have any formal agreement yet on the budget, they have outlined the key components of this deal. It will include a $933 billion funding level, an additional $3.7 billion in contingent spending on behalf of veterans health care, and a 1.6% cut to all subcommittee funding allocations below the "split the difference" funding level. Each subcommittee can choose to either do an across-the-board cut or program by program funding reduction in order to reach their reduced funding allocation. They hope to complete the outline of this deal by Sunday evening and bring the bill to the House floor next week, perhaps as early as Monday.

The Labor HHS subcommittee must cut an additional $2 billion below the "split the difference" funding level and has chosen to move forward with program by program reductions to bridge its funding gap. We believe that the "split the difference" bill protected our WIA FY 08 formula funding streams at current levels, but may have included a larger WIA rescission than in the previous bill. However, now that the bill must reduce overall spending by an additional $2 billion our FY 08 formula funding baseline will also be in jeopardy of reductions as each Department in the bill will have to take further cuts.

This bill still has the potential to be vetoed by the White House. The House leadership is expressing its opposition to including $3.7 billion in additional veterans health care funding as an emergency rather than on budget and he White House is carefully examining policy riders. However, we expect that a budget agreement will be reached before the end of next week.

Remember to mark your calendar and attend the 7th Annual NWA Legislative Conference in Tampa, FL. Act now and mark your calendar for November 29 to December 2, 2008!