Federal Budget Outlook: Moving Beyond the Border Wall Standoff


The border wall stand-off triggered a record 35-day partial government shutdown. What got lost in that political debate was how the impasse affects federal agency operations and spending priorities for the remainder of FY19.

David Taylor, Founder and CEO of Federal Budget IQ® (FBIQ), a customized market intelligence service for public sector business executives, offered some insight during his keynote address at the Comstor Executive Federal Summit.

“75 percent of the U.S. government, including the Departments of Defense, Energy, Labor, and Veterans Affairs were insulated from this manufactured political crisis and exempt from the partial government shutdown,” Taylor explained. “Now that a funding agreement is in place for the remaining federal agencies, they face a compressed FY19 procurement cycle.”

Taylor’s analysis showed that federal agency budgets are likely to decline in FY20 because of a looming $126 billion FY20 sequester (scheduled to take effect in October), and stark differences between the budget priorities outlined in President Trump’s FY20 Budget and the budget likely to pass the House of Representatives. Despite those policy and funding disagreements, Taylor outlined several growth areas in the federal public sector market that should benefit IT resellers over the next 2-3 years. Cybersecurity, IT modernization, cloud, AI, the 2020 Decennial Census, and 21st Century Border Security topped Taylors’s list.

The surprise in the FY19 border funding plan that Congress approved was a larger-than-expected increase in funding for border security technologies, particularly at ports of entry. In FY18, procurement funding for Customs and Border Patrol (CBP) increased almost 200% to $2 billion.

That total included $1.6 billion in border barrier construction funding. The final FY19 spending deal approved earlier this month provides CBP an additional $1.4 billion for physical barriers and large increases for procurements in its trade and travel infrastructure, watercraft, and facility improvement accounts. Examples include non-intrusive imaging at ports of entry, remote video surveillance along the borders, and opioid detection technology (both field labs and at ports of entry). Combined, the border agreement provides $2.5 billion for CBP procurement, a 10.3% increase over FY18 and 36.6% more than President Trump’s initial FY19 funding plan.

FBIQ’s forecast factors in the 2018 election results, the border wall impasse and the 35-day partial government shutdown that delayed the start of the FY20 Budget process. The forecast also accounts for key differences between President Trump’s FY20 Budget priorities and those outlined in the budget that’s likely to pass the House, strongly suggesting that reaching a bipartisan agreement on spending priories will be difficult.

That leaves federal agency managers with a pressing problem as they develop contingency plans for operations beginning October 1. Taylor said, “The silver lining for federal agency managers is that the political fallout from the recent government shutdown dramatically reduced support in Congress for another shutdown in October.”

In FBIQ’s latest forecast, those prospects dropped from 25% to less than 10%. The challenge is that reducing or eliminating the FY20 sequester requires a change in law and a bipartisan agreement between President Trump and Congress.

According to Taylor, “Getting there in gridlocked Washington will be a bumpy ride that takes time, drags into FY20 and creates funding and policy uncertainty for federal agencies in the second half of FY19.” Under FBIQ’s forecast, the result should reduce, but not eliminate the FY20 sequester.

Read more from FBIQ here and here.


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