Debt Ceiling Agreement - What You Need to Know

On June 1, Congress passed an agreement to suspend the debt ceiling and avert a Federal default existing loan payments. The Fiscal Responsibility Act of 2023 was developed over weeks of negotiations with President Biden and House Speaker Kevin McCarthy. In exchange for suspending the debt ceiling for two years (until January 1, 2025), the bill includes spending caps for fiscal years 2024 and 2025 and other Republican priorities.

Ahead of passage, AASA sent a letter to Congress expressing our support for Congressional action to raise the debt ceiling. While our official preference was for a clean debt ceiling vote, we know that policy is not derived in a vacuum, and we commend Congressional and White House leaders for stepping up to the plate to avoid breaching the debt ceiling.

There are two key provisions that educators should be aware of:

1. Rescission of COVID-19 funds: Includes a “clawback” of COVID-19 relief funds. Most notably, it rescinds “unobligated balances” from the Education Stabilization Funds (ESF), which include Elementary and Secondary School Emergency Relief (ESSER) funds, the Governor’s Emergency Education Relief Fund (GEER), and Higher Education Emergency Relief Fund (HEEFR). However, this only includes funds that are still with the U.S. Treasury, that were not yet allocated or made available to the Department of Education. School districts will not lose access to their ESSER funds. According to the Administration’s analysis, the total available for ESF “clawback” is $391 million.

    

2. Spending Caps: Provides spending caps for fiscal years 2024 and 2025. For FY24, the spending cap for non-defense discretionary spending is $703 billion. When factoring in agreed upon appropriations adjustments, FY24 will be roughly flat with FY23 levels. For FY25, the spending cap allows for 1% growth from FY24, coming in at $710 billion.

What does this mean for education funding?  The last time there were tight non-defense spending caps (FY’s 2013-2021) education funding was cut and then took 6 years to return to the 2011 level in nominal dollars. Congress raised the caps every two years, generally providing a boost the first year and then flat funding the second year, and education funding went down the second year each time. This past is a useful guide for what may lie ahead for appropriations for FY 2024 and FY 2025. 

The bill also included other provisions to increase the age for work requirements of SNAP, end the student loan payment pause, and expedite certain energy projects. For more details on the full package, see here.