As I write this update, the final days of the 2023 fiscal year are passing and there is no sign of a federal budget on the horizon. As I predicted at the beginning of the year, both before and after the marathon voting for Speaker of the House in January, the disfunction that defines the House Republican Conference is coming to a head with what seems to be an inevitable government shutdown.
The dynamics have been clear for some time. There is a faction, albeit small, of the House that, a. does not like government, b. does not like Speaker McCarthy, and c. does not care if the government shuts down. And to be clear, we are talking about some of the Speaker’s Republican colleagues. They have been steering the appropriations process in the House from the beginning, insisting on cuts to federal spending that do not jibe with the agreement the Speaker made with President Biden to avert a debt default and fund the government (aside from an increase for defense) at FY 2023 levels. They did this knowing the bipartisan Senate and White House would not go along with the cuts they were proposing for FY 2024.
So the question now is, how long will the shutdown last and what will be the political cost of reopening the government. Assuming, which I know is dangerous, the Speaker finally goes along with a majority of his House conference and Senate Republicans, and brings the Senate passed budget to the floor for a bipartisan vote, it will likely pass and there will be an immediate motion by the House rebels to Vacate the Chair. This means a vote on Kevin McCarthy’s tenure as Speaker. Depending on whether the Speaker cuts a deal with Democrats to keep his speakership, which could be costly in itself, it is hard to see him getting 218 (he only has a four seat majority) of his colleagues to support him. That being the case, the other side of the coin is there does not appear to be another Republican in the House that can get 218 votes. It is possible we could see a total shutdown of the House, as without a Speaker the House cannot conduct its business.
I could go on in more detail and spell out more scenario’s but the long and short is the House is a mess and how it is resolved is hard to fathom at this point.
On a brighter note, the AHCIA continues to garner strong bipartisan support and despite the mess that is the appropriations process, there does appear to be support for some kind of tax bill by the end of the year. It could be a result of the budget stalemate, along with the must pass Farm Bill and FAA reauthorization, both of which also expire on September 30th and have yet to be agreed upon between the House and Senate. Whether it is in conjunction with an omnibus bill, a combination of legislative vehicles or just a tax extenders package, the tax writers are in conversation and working on a framework for a tax bill, including LIHTC provisions.
At this time, we are only 24 Republican cosponsors short of reaching a majority of the House (218) in support of the AHCIA. It is the most bipartisan tax bill in either chamber. We need to continue to build support for the bill and thank you for your efforts thus far as 32 members of the CA delegation have signed on.
The other item I wish to highlight is what we believe to be the pending release of new Community Reinvestment Act (CRA) rules. We are anxious about where the regulators landed on a substitute for the Investment Test and hope they heeded the industry’s concerns about any course they might set that would hinder or lessen financial institutions appetite for equity investment in the LIHTC.
There is a lot going on in Washington and we will report back to you as events unfold. In the meantime, thank you for your continued support and advocacy.
David