2018 Legislative and Regulatory Outlook

Introduction

As Washington launches into an interesting midterm election year, President Trump will meet with Senate Majority Leader Mitch McConnell (R-KY) and Speaker of the House Paul Ryan (R-WI) this weekend to map out the 2018 legislative agenda.

The president hopes to build on his successes of 2017: the first major overhaul of the tax code since 1986; significant progress on a deregulatory agenda; and a handful of major judicial confirmations, including Supreme Court Justice Neil Gorsuch.

It remains to be seen how Speaker Ryan and Majority Leader McConnell negotiate their differences over priorities for the 2018 legislative agenda. As we will discuss further below, Speaker Ryan has his sights set on entitlement reform, while Majority Leader McConnell, recognizing the razor thin majority his party has in the Senate, is towing a bipartisan infrastructure line. President Trump has expressed an interest in what he is calling “welfare reform,” and he is also expected to unveil a long-awaited infrastructure blueprint next week.

But first, Congress has a lengthy to-do list that has become a proverbial snowball. The first items on the agenda will be a government spending deal and budget caps deal; immigration, including DACA and border security; and the expiring Foreign Intelligence Surveillance Act (FISA). Congress may also try to include in an initial package some combination of a multi-billion dollar disaster relief package to aid areas still suffering the impacts of last hurricane season and recent wildfires, a long-term solution for the Children’s Health Insurance Program (CHIP) and veterans’ health care, a debt limit increase, and extensions of expired tax credits.

With the November elections in mind, Congress and the Administration must quickly get to work addressing the growing list, as Washington asks: how many more times can we kick the can down the road? We’re running out of roads.

Top Issues for the Start of the Year

Budget/Appropriations

As one of its first orders of business, Congress is expected to prioritize completing the Fiscal Year (FY) 2018 appropriations cycle. This was evidenced by the first order of business this week, a meeting on federal spending between Senate Majority Leader McConnell, Senate Democratic Leader Chuck Schumer (D-NY), House Speaker Ryan, House Democratic Leader Nancy Pelosi (D-CA), Office of Management and Budget (OMB) Director Mick Mulvaney, and White House Director of Legislative Affairs Marc Short. While progress was reported from this meeting, much works remains to be done.

With government funding set to expire again on January 19, the central focus of talks is on reaching an agreement to lift budget caps, although that could expand into a broader discussion on other provisions that could potentially hitch a ride on the legislative vehicle funding the government. During ongoing negotiations, Republicans are expected to continue to advocate for increased defense spending, a top priority for the president, while Democrats seek to hold the line on ensuring parity in sequestration relief for defense and non-defense spending.

Regardless, a budget deal will be needed before an omnibus can be prepared for the remainder of FY18. As it typically takes appropriators 4-5 weeks to prepare an omnibus once consensus is achieved on a topline number, in all likelihood, a fourth continuing resolution (CR) will be needed to ensure stopgap FY18 funding for government operations. While the situation remains fluid, there is some speculation the next CR could butt up against the President’s Day recess in February.

This timeline could put the FY18 appropriations on a crash course with the submission of the president’s FY19 budget. While current law requires the president to submit the budget between the first Monday in January and the first Monday in February, in recent times, the president’s budget has come to be expected the first week in February. It is unclear if the Trump Administration will adhere to this timeline. However, like the president’s FY18 budget request, the FY19 budget will likely be viewed as “dead on arrival” in Congress.

Disaster Relief

Beyond routine appropriations, Congress has also committed to passing additional disaster relief funding as Texas, Florida, and Puerto Rico continue to grapple with hurricane recovery and as California responds to recent wildfires.

Just prior to recessing for the holidays, the House passed an $81 billion supplemental disaster relief bill, nearly double the administration’s $44 billion proposal, by a vote of 251-169. However, Democratic Leader Schumer did not allow the bill to advance in the Senate, calling for bipartisan efforts to improve the legislation. According to Democratic Leader Schumer, the disaster relief bill should ensure fair treatment for California, Puerto Rico, and the U.S. Virgin Islands, incorporate tax provisions to benefit Puerto Rico, and provide additional health care provisions to support hurricane recovery in Puerto Rico, such as increased cost-sharing lenience and more Medicaid funding.

While it can be politically challenging for members to vote against emergency appropriations for disaster relief, fiscally conservative Republicans have become increasingly vocal about their discomfort voting for additional supplemental funds without offsets. This means Democratic votes will likely be needed for final passage of further disaster relief that does not include pay-fors. At the moment, it is unclear if these supplemental appropriations will move independently or as part of the next CR.

Debt Limit

With the end-of-the-year focus largely on tax reform, it seemed to go unnoticed that the debt limit was reinstated on December 9. The Treasury Department has once again employed accounting techniques known as extraordinary measures to avoid breaching the debt limit. However, OMB has estimated that funding available via extraordinary measures will run out by late March or early April. At this point, the U.S. Government would be unable to settle all incoming bills on time, potentially creating a scenario where the Treasury Department would need to choose between paying federal employee salaries, Social Security benefits, or interest on the national debt.

Congress will likely act, as it has during past fiscal showdowns, to avert the monetary crisis that would accompany a breach in the debt ceiling, although the timing is unclear. Some third party think tanks, such as the Bipartisan Policy Center, estimate the debt ceiling could be reached earlier in March, potentially ramping up urgency for Congress to act. Additionally, the possibility of legislative activity on tax reform technical corrections, FY18 appropriations, and supplemental disaster relief funds could expedite how quickly the Treasury Department expends extraordinary measures, triggering the need for swifter action on the debt ceiling.

Politically, the tactics of raising or suspending the debt ceiling have become contentious, particularly among Republicans members of the House Freedom Caucus seeking to slow the rate of federal spending. This means Democratic votes will likely be needed for a debt ceiling solution, leading some to believe that an increase in the debt limit would have to ride on some other “must-pass” legislation.

Alternatively, President Trump has advocated for permanently removing the requirement for Congress to repeatedly raise the debt ceiling. Aligning with congressional Democrats during the most recent debt limit negotiations in early September, President Trump and Democratic Leader Schumer allegedly reached a “gentleman’s agreement” to work on a legislative plan to achieve this objective. However, it remains unclear if any progress has been on this proposal. Vice President Mike Pence has also suggested new methods for managing the debt limit, recommending changes in line with the parliamentary “Gephardt Rule,” which would make it easier to tie raising the debt limit to the congressional budget process.

Health Care

Congressional Republicans were successful in including a repeal of the individual mandate in the tax bill they passed just before the end of the year. While the Trump Administration joined congressional Republicans in chipping away at the Affordable Care Act (ACA) last year, public support for the ACA has increased to its highest level in years, including surprisingly strong enrollment for the coming year, and its fate may hinge on the outcome of the 2018 midterm elections. If Democrats win a majority in either legislative chamber this November, Obamacare would likely be protected; if not, additional repeal attempts may continue.

In exchange for supporting the tax bill, Majority Leader McConnell promised Senator Susan Collins (R-ME) a vote on her reinsurance bill and the Alexander-Murray bill funding cost-sharing reductions. She did not receive either in December, and is likely to look for both to be part of the must-pass funding bill this month.

While they do not want to take repeal off the table entirely, congressional Republican leadership also is not incredibly interested in repeating 2017’s fruitless use of time and capital on repealing the ACA. In the meantime, the party does not have the votes to either repeal or stabilize the law. President Trump has declared Obamacare “over,” but he has not made clear his plan going forward. He speaks favorably both about legislation that would turn Obamacare into state block grants and legislation that would strengthen the markets by restoring cost-sharing subsidies that he halted.

The party is also split over what other health and social program reforms they should prioritize in the coming year, including Medicare and Medicaid. Additionally, several other health issues are included on the priority list for both parties in 2018. Democrats and Republicans have both promised to quickly renew funding for the Children’s Health Insurance Program (CHIP), though they could only agree to a short-term patch late last year. There also appears to be bipartisan interest in delaying several ACA taxes scheduled to take effect this year. And Congress and the Administration both have expressed the rising need to address the opioid crisis. Telemedicine presents another area for potential bipartisan collaboration this year.

FISA Reauthorization

As part of the CR passed in December, Congress also passed a temporary extension of Section 702 of FISA, which authorizes warrantless surveillance of non-Americans located outside the U.S. This extension expires on January 19. While the Trump Administration has advocated for a long-term, clean extension of FISA, arguing that such tools are critical to foiling terrorist plots, reauthorization efforts have drawn battle lines between reform-seeking privacy advocates and national security hawks in Congress.

While it remains to be seen what long-term FISA legislation capable of reaching the president’s desk looks like, there are a number of bills that will serve as the foundation for ongoing talks on a FISA solution. In October, by a vote of 12-3, the Senate Intelligence Committee reported a bill extending Section 702 through 2025, while requiring the Federal Bureau of Investigation (FBI) to submit 702 data queries regarding U.S. persons to the Foreign Intelligence Surveillance Court (FISC) for review and establishing new procedures for collecting communications about, rather than to or from, targets (known as “abouts” collection).

In the House, the Intelligence and Judiciary Committees have seen a turf battle over the FISA reauthorization bill. The Intelligence Committee passed a controversial bill in December by a vote of 13-8. Notably, this bill includes extensive oversight provisions related to the unmasking of Americans whose communications are incidentally collected under FISA. These provisions have become politicized due to concerns related to the possible naming of Trump officials in intelligence collected on foreign targets. This bill also creates a pathway that would allow the FBI to use information collected on U.S. persons in criminal cases. A House vote on this version of the bill could come as soon as next week.

However, the House Judiciary Committee reported its own FISA reauthorization bill by a vote of 27-8 in November. Of all of the FISA bills, this legislation seems to go the furthest in protecting civil liberties by, in most cases, requiring government agencies to obtain a probable cause-based order to view the communications of U.S. persons in investigation of a crime. This bill also includes a prohibition on “abouts” collection for six years and increases penalties for leaking classified information.

Flood Insurance

After short-term extensions last year, Congress failed to finalize a long-term reauthorization of the National Flood Insurance Program (NFIP) despite months of work in both the House and Senate.

The House passed its flood insurance reauthorization bill (H.R. 2874) in November. However, the upper chamber continues to disagree over how far Congress should reduce barriers for private insurers that want to compete with NFIP. The program expires again January 19, and some senators are hopeful that they can finalize a set of proposals before then.

Deferred Action for Childhood Arrivals (DACA)

In early September, President Trump announced the end of the DACA program, challenging Congress to find a legislative solution for dreamers within an arbitrary six-month window. Following the president’s announcement, the Department of Homeland Security (DHS) set March 5 as the date for DACA permits to begin expiring. Of course, if Congress cannot pass legislation by March 5, the president may choose to extend the arbitrary deadline for extending DACA. While President Trump initially indicated some openness to supporting DACA legislation, his stance has since hardened, with the president recently insisting there will be no DACA without the border wall and the end of chain migration and the Diversity Visa Lottery program.

Finding a solution to protect the 800,000 immigrants who came to the U.S. under the age of 16 from deportation is a priority for congressional Democrats, who are coming under increasing pressure to vote against legislation to fund the government that does not include a DACA fix. Earlier this week, House Democratic Leader Pelosi sent a letter to members of the House Democratic caucus expressing leadership’s commitment to passage of the Dream Act, which would allow individuals currently protected under DACA to remain in the U.S. as lawful permanent residents.

In December, a group of 34 Republicans wrote to Speaker Ryan expressing support for DACA fix. House Republicans are now pushing leadership to address DACA as soon as possible in order to separate immigration from the debate on federal spending. On December 19, President Trump hosted key House Republicans, including Homeland Security Committee Chairman Michael McCaul (R-TX), Judiciary Committee Chairman Bob Goodlatte (R-VA), House Freedom Caucus Chairman Mark Meadows (R-NC), and Representatives Raul Labrador (R-ID) and Martha McSally (R-AZ) at the White House for a meeting on DACA. Since this meeting, Representatives McCaul, Goodlatte, Labrador, and McSally have been working on legislation that extends deferred action in exchange for the border wall, increases the number immigration agents, reforms policies pertaining to asylum and unaccompanied minors, and institutes stricter limitations on family migration. This proposal is unlikely to garner enough Democratic votes to pass the Senate.

Work on a DACA solution has been more bipartisan in the Senate. In exchange for his vote for the tax reform bill in December, Senator Jeff Flake (R-AZ) reportedly received a commitment from Majority Leader McConnell to hold a vote on immigration legislation in January. Senator Flake, along with Senate Democratic Whip Dick Durbin (D-IL), has been leading a bipartisan group comprised of Senators Michael Bennet (D-CO), Lindsey Graham (R-SC), Thom Tillis (R-NC), James Lankford (R-OK), and Cory Gardner (R-CO), working on immigration legislation. While it seemed as though the group had been making progress towards legislation that includes a legislative fix for DACA while also beefing up border security and seeking to mitigate some of the president’s concerns about chain migration and unfairness in visa lotteries, negotiations have hit a bit of snag due to a lack of clarity regarding the president’s border security demands. President Trump met with a group of Republican senators on January 4 to discuss a border security framework, but no final agreement was reached.

Farm Bill

While the farm bill has not been completed on time since 1990, the House and Senate Agriculture Committees have already made some progress in preparing for the 2018 reauthorization process to take place before the current law expires on September 30th. The House has reportedly written most of its bill, which is being held close to the vest until it is released sometime in the early part of this year. House Agriculture Committee Chairman Mike Conaway (R-TX) is eyeing an early markup, with the hope of finishing the farm bill before campaigning for the midterm elections picks up this summer.

The Senate Agriculture Committee has not been as focused on the farm bill, due in some part to Ranking Member Debbie Stabenow’s (D-MI) efforts to legislate on agricultural policy on the supplemental disaster relief bill. While the House bill-passed disaster assistance bill included provisions to make cotton farmers eligible for the Price Loss Coverage program and changes to the Margin Protection Program (MPP) that lift the $20 million cap on insurance policies on livestock for dairy farmers, Senator Stabenow continues to make the case these provisions do not go far enough. Coming under additional fire for not being germane to the underlying bill, these issues may ultimately be punted to the broader farm bill debate.

As is common with the farm bill, the Supplemental Nutrition Assistance Program (SNAP), which accounted for roughly 80 percent of spending in the last farm bill, is likely to be targeted for reform. Republicans are looking to decrease outlays on SNAP, for example by reforming work requirements to reduce the number of SNAP recipients and by mandating the launch of a clearinghouse to provide oversight and reduce duplicative administration of SNAP benefits. Meanwhile, Democrats are coalescing to resist cuts or structural changes to SNAP and to advocate for increased benefits.

Should President Trump decide to withdraw from the North American Free Trade Agreement (NAFTA), this may also lead to a scramble to ramp up protections currently afforded to U.S. farmers under NAFTA as part of the farm bill process.

Trade

Throughout 2017, President Trump has talked tough on trade. In the early part of 2018, he will be forced to produce policy actions to back that rhetoric, all while Republicans in Congress seem divided on trade policy between those who support free trade and others pressing the president to withdraw from free trade agreements and institute new tariffs. 

While NAFTA negotiations with Canada and Mexico have been in focus for the past several months, the sixth round of talks scheduled to take place in Montreal later in January could increase tensions as the parties seek to address automobile rules of origin and dispute settlement provisions. While there is no hard and fast deadline for the conclusion of NAFTA negotiations, Secretary of Commerce Wilbur Ross has previously stated that if talks drag past March, the political calendar could increase the difficulty of finalizing a deal.

Beyond NAFTA, this month the Trump Administration kicked off dialogue with South Korea regarding potential amendments to the U.S.-Korea Free Trade Agreement (KORUS). The Commerce Department is also approaching deadlines this month to submit reports required by Section 232 of the Trade Expansion Act of 1962 describing how imports of steel and aluminum threaten U.S. national security. Throughout the year, President Trump is also likely to continue to come under pressure to impose penalties against China for intellectual property (IP) violations.

Infrastructure Package

After talk of an infrastructure package all 2017, it appears this year may provide the window for bipartisan action on infrastructure. An issue that crosses numerous committee jurisdictions, from the Senate Committees on Environment and Public Works (EPW), Finance, Commerce, Banking, and Energy, to the House Committees on Transportation and Infrastructure (T&I), Ways and Means, and Energy and Commerce, crafting modern infrastructure policy will necessitate the input of many different parties.

To date, only the Senate EPW and House T&I committees have seriously begun their infrastructure efforts. The EPW majority is rumored to be mostly settled on its first draft of core infrastructure legislation, including language that focuses on highways, drinking water, waste water, and environmental streamlining. Early last year, committee Democrats placed a marker in the sand with the Schumer and Senate Democratic blueprint. And with House T&I Chairman Bill Shuster (R-PA) term limited, retiring, and thinking about his legacy, he may very well turn to a bipartisan infrastructure plan, particularly if the Federal Aviation Administration reauthorization is stalled and congressional leadership moves first to entitlement reform.

Details about the Trump Administration’s trillion dollar infrastructure plan remain vague, though a high-level blueprint is expected in the coming days. Last year’s six-page fact sheet, which was tucked into President Trump’s fiscal year 2018 budget request, calls for spending $200 billion in direct federal dollars over the next decade to upgrade roads, bridges, tunnels, airports, and other transportation networks, along with broadband, schools, and hospitals. The administration envisions the federal funding, along with incentives for states, cities, and private investors and a significant focus on reducing regulatory burdens and hastening the licensing and permitting process, as spurring additional private investment to the tune of $800 billion. White House staffers leading the infrastructure effort have reportedly agreed on a set of six principles with retiring Senate Finance Chairman Orrin Hatch (R-UT). We expect the document to include mention of creative financing, including via public private partnerships (P3s); funding for transformative projects; infrastructure worker training programs; significant permitting reform; infrastructure loan program reform and funding; and funding for rural issues, including rural broadband.

Senate Majority Leader McConnell has indicated the upper chamber might be best served by addressing infrastructure on a bipartisan basis first, as he admits that his Democratic colleagues do not have an appetite for entitlement reform. On the other side of the Hill, Speaker Ryan has indicated a preference for moving entitlement reform first. In the meantime, President Trump vacillates between the two agenda items. With his top welfare reform adviser recently departing the White House, outside advisers have urged the president to encourage Congress to take up infrastructure first, particularly given the looming 2018 midterm elections. The three leaders are attempting to settle on their agenda this weekend at Camp David.

Entitlement Reform

House Speaker Ryan has repeatedly expressed a desire to overhaul in 2018 the country’s entitlement programs – Medicare, Medicaid, and welfare programs. But his plan faces a critical fault: members of his own party are not similarly on board, especially in an election year in which leadership in both chambers could flip.

Additionally, last year, Speaker Ryan promised members of the Republican Study Committee a vote on deficit reduction legislation, including potentially enacting work requirements for food stamps and other programs for low-income people, as well as Medicare changes to reduce spending. Yet some centrist Republican House members fear cuts to welfare and entitlement programs could cost them their seats in the midterm election, and expressed opposition to such efforts when House Budget Committee Chairman Diane Black (R-TN) proposed cutting $200 billion from such programs in her fiscal blueprint. Speaker Ryan is likely to run into similar resistance this year.

If Speaker Ryan ultimately decides to proceed with his entitlement reform efforts, the House would need to come up with the votes to pass reductions or reforms to the Temporary Assistance for Needy Facilities and the Supplemental Nutrition Program, disability insurance, Medicare, and Social Security, some of which President Trump previously promised to retain. While some senators would welcome the idea of taking up entitlement reform, the chance that any of it would be successful remains incredibly slim. Senate Majority Leader McConnell has nearly ruled out the idea of attempting entitlement reform, saying that given the razor thin Republican majority in the upper chamber, he does not expect to see entitlement changes on the agenda this year. He has particularly noted that, unless it is accomplished under reconciliation, such an effort would require a bipartisan agreement that his Democratic colleagues are uninterested in pursuing. Instead, Senator McConnell has indicated his preference for pursuing bipartisan legislation this year, such as an infrastructure bill. Additionally, Republicans may want to use reconciliation to make technical corrections to the tax bill, if such a move is permitted, or even take another pass at healthcare reform. Congressional Republicans will attempt to iron out their strategy at their annual retreat later this month.

Regulatory Reform

OMB’s Office of Information and Regulatory Affairs (OIRA), along with the U.S. General Services Administration’s (GSA) Regulatory Information Service Center and the 60 Cabinet, Executive, and Independent agencies across the Federal Government, released mid-December the Trump Administration’s semi-annual Current Regulatory Plan and the Unified Agenda of Regulatory and Deregulatory Actions.

Given the Administration’s focus on deregulatory efforts, and in line with President Trump’s Executive Orders 13771 and 13777, the Regulatory Agenda includes withdrawing and reconsidering numerous regulatory actions, as well as identifying newly anticipated deregulatory actions that emerged from reviews that are underway. Agencies have committed to focusing on the costs and benefits of each regulatory and deregulatory action, while “prioritizing the maximization of net benefits of regulations.”

Already, the Trump Administration has taken its deregulatory efforts to one of the highest levels on record. Agencies have committed to finalizing three deregulatory actions for every new regulatory action in fiscal year 2018, more than the previously announced 2:1 commitment. They have already withdrawn, delayed, and streamlined 1,579 planned regulatory actions. The Administration has reclassified nearly 250 active actions as inactive as well as reclassified 700 active actions as long-term. We anticipate the Trump Administration will continue its deregulatory efforts in 2018, as it also begins to identify whether regulations are “net regulatory” or “deregulatory.”

Tax Reform Technical Corrections

Just before the new year, President Trump signed into law the most comprehensive tax reform measure since 1986. In addition to including a whole host of tax extenders, H.R. 1 moved through Congress so quickly last fall that members and industry are already talking about the need to pass a follow-up technical corrections measure in 2018. Many of the bill’s details were intentionally left vague to allow for the Treasury Department to clarify them through the regulatory process.

As oversights become clearer, we expect that Congress may need to take up a technical fixes bill. It took more than two years for the legislature to pass major technical corrections legislation after the last tax overhaul in the 1980s, and we do not anticipate that it will be any easier this year. In fact, Democrats may be reluctant to help the GOP fix the tax legislation before the midterm elections, similar to the way Republicans steered clear of working with Democrats on technical corrections to the ACA. Regardless, it remains to be seen whether Senate rules will allow the upper chamber to pass such a measure under reconciliation. If they do not, Senate Republicans will have to secure the support of at least nine of their Democratic colleagues, none of whom backed tax reform in 2017.

Additional Issues for Later This Year

National Defense Authorization Act (NDAA)

For the past 56 consecutive years, Congress has passed and the president has signed the NDAA, which sets national defense policy. Because Congress feels a responsibility to provide for members of the armed forces, it is almost certain the FY19 NDAA will be signed into law at some point later this year.

Although it seems the FY18 NDAA process just came to an end, with President Trump signing the bill into law on December 12th, the lengthy process of setting defense policy for FY19 will begin early this year. Typically, personal offices for members who serve on the Armed Services Committees begin soliciting NDAA requests in February for consideration as the committees hold hearings following the release of the president’s budget request. While the House Armed Services Committee tends to move first, both the House and Senate Committees are likely to markup their individual bills sometime around Memorial Day. This year, there will be some heightened urgency for the full House and Senate to pass their bills before campaigning for the midterm elections begins in earnest. Once both bodies pass legislation, a conference committee is formed to reconcile differences between the two NDAAs, most often resulting in final passage of a conference report in November or December.

While the NDAA runs the full gamut of defense policy, the FY19 NDAA is expected to continue advancing defense acquisition reform, improving space talent and capabilities, and building back readiness following years of depleted military budgets under sequestration. As the NDAA has come to be viewed as one of the select few “must-pass” legislative vehicles, it also often becomes a vehicle to carry other un-related policy priorities.

Energy Bill

With a fairly full agenda already on Congress’ plate in a midterm elections year, we are not likely to see significant action on a broad energy bill. However, there are a handful of issues to watch in the energy and environment space in 2018.  First on the priority list will be setting spending levels for the relevant agencies – the Departments of Energy (DOE) and Interior (DOI) and the Environmental Protection Agency (EPA) – which are funded under the CR that expires January 19. The Trump Administration favored severe budget cuts for the agencies in its FY18 budget request, but, to different degrees, members of Congress on both sides of the aisle walked back from the administration’s proposal. In September, the House approved a $31.4 billion version of Interior-EPA Appropriations, while Senate appropriators have unveiled a $32.6 billion package, about $5.3 billion above the administration’s request. We can expect Senate Democrats to take a similar stance in 2018 to their efforts at the end of last year to urge the removal of any anti-environmental riders from spending legislation.

Senators John Cornyn (R-TX), Ted Cruz (R-TX), and Chuck Grassley (R-IA), may pursue a grand bargain to address the high price of Renewable Identification Numbers (RINs, biofuel credits) while maintaining the integrity of the Renewable Fuel Standard (RFS). House Energy and Commerce Environment Subcommittee Chairman John Shimkus (R-IL) remains open to RFS reform as part of an energy package he hopes to move forward this year, but admits finalizing an agreement may be difficult.

At the end of 2017, Senate Finance Chairman Hatch unveiled legislation extending or expanding most energy credits, and House Ways and Means Chairman Kevin Brady (R-TX) has promised to consider moving an extenders package this year. It remains to be seen what, if any, of the credits are altered or extended in 2018.

Other items to watch for in 2018 include reform of the Antiquities Act, a Land and Water Conservation Fund bill, a DOE reauthorization package, and Endangered Species Act reform, none of which have significant bipartisan support, and for one reason or another may be difficult lifts. Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) and Ranking Member Maria Cantwell (D-WA) continue to prioritize their bipartisan energy bill (S. 1460), and House Natural Resources Committee Chairman Rob Bishop (R-UT) hopes to move his legislation (H.R. 4239) to the floor this month.

On the administration side, agencies are still staffing up, but deregulatory efforts are going strong, and, as a result, litigation over federal energy and environmental issues is at an all-time high. In the meantime, Interior Secretary Ryan Zinke unveiled a new proposed five-year offshore drilling plan this week, opening nearly all federal coastal waters for oil and gas exploration for 2019-2024. The plan identifies 47 potential lease sales, giving industry access to fields in the Arctic, Atlantic, and Pacific oceans and eastern Gulf of Mexico that have been off limits for decades. Floridian members of Congress on both sides of the aisle have already opposed the plan.

FAA Reauthorization

Another must-pass item already on the legislative calendar is reauthorizing the Federal Aviation Administration (FAA). Congress must reauthorize the FAA before March 31 in order for the agency to continue to collect and spend aviation taxes, but the House and Senate face different battles in advancing their FAA bills.

In the House, T&I Chairman Shuster’s effort to separate air traffic control functions from the FAA and move them to a nonprofit corporation has divided the caucus and gained little Democratic support. As a reminder, President Trump has pointed to this effort as the model for infrastructure streamlining. And in the interim, Representative Shuster, who will be retiring at the end of this Congress, has indicated a shift in focus to infrastructure legislation for 2018.

In the Senate, Democrats have staunchly opposed Commerce Committee Chairman John Thune’s (R-SD) attempt to expand the number of ways pilots can accrue credit for the flight hours necessary to be qualified as a first officer. Congress has not finalized any new aviation policy in the last 18 months, when it passed an FAA measure containing aviation safety provisions responding to crashes in Buffalo and San Francisco. Yet it is increasingly likely another short-term extension will be necessary.

Net Neutrality

On December 14, by a vote of 3-2, the Federal Communications Commission (FCC) approved an order repealing net neutrality. The order removes the Title II common carrier classification and restores the Title I information services classification for wireline and wireless broadband, granting the Federal Trade Commission (FTC) regulatory oversight of internet services. While the FCC voted to eliminate the Wheeler-era rules related to blocking, throttling, and paid prioritization, it maintained the transparency rule requiring Internet service providers (ISPs) to disclose how their networks operate.

Leading up to the FCC vote, congressional offices saw an uptick in constituent outreach on the issue, which has spurred some activity. On December 19, House Energy and Commerce Communications and Technology Subcommittee Chairman Marsha Blackburn (R-TN) introduced net neutrality legislation seeking to codify previous FCC rules prohibiting the blocking or throttling of internet traffic. Notably, Representative Blackburn’s bill does not address the issue of paid prioritization. For this reason, many view Representative Blackburn’s bill as symbolic and simply intended to send the message that it is possible to legislate on net neutrality to protect consumers without too much government intervention.

While net neutrality legislation has yet to emerge in the Senate, Commerce Committee Chairman Thune has reportedly held conceptual talks with Ranking Member Bill Nelson (D-FL) and Senator Brian Schatz (D-HI) about enshrining net neutrality principles in law. However, many Democrats seem reluctant to discuss legislation with any specificity, citing a desire to see the expected litigation surrounding the repeal of the Open Internet Order play out before legislating.

In the meantime, some Democrats are attempting to keep the FCC from repealing net neutrality rules by using the Congressional Review Act (CRA). Congress may only act on the CRA resolutions 20 calendar days after the net neutrality repeal order is sent to Congress and published in the Federal Register. In the House, Energy and Commerce Communications and Technology Subcommittee Ranking Member Mike Doyle (D-PA) is championing a net neutrality CRA resolution. Across the capital, Senator Ed Markey (D-MA) said earlier this week he is just one co-sponsor away from the 30 required to force a vote. While Democratic Leader Schumer has expressed support for a vote on the CRA resolution, it is likely to be ineffective. Even if Senators Markey and Schumer somehow manage to muster a Senate majority, perhaps with support for all Democrats and Senator Collins, the CRA is unlikely to pass the House and the president maintains the ability to veto the resolution. Regardless, expect Democrats to attempt to make net neutrality a 2018 campaign issue.

Pensions Fix

Last year’s budget negotiations were nearly upended by a knockout fight over miners’ health care. Now, a similar fight is on the horizon to keep the pension plans of these miners, as well as Teamster truck drivers and food service employees, from collapsing. While Republicans are hesitant to provide what they view as a bailout for union workers, Democrats are vowing to tie support of pension plans to the next vehicle funding the government in order to avert key pension plans covering an estimated 400,000 workers and retirees from becoming insolvent.

Senator Sherrod Brown (D-OH) is leading a proposal that would empower the Treasury Department to make loans to the at-risk pension plans for safe investments to backstop plans in the greatest risk. The price tag of this proposal could preclude its passage, as the at-risk plans are expected to be in need of $25 billion of government assistance over the long term. House Ways and Means Committee Ranking Member Richard Neal (D-MA) has introduced companion legislation in the House, which has recently picked up its first Republican cosponsor in Representative Peter King (D-NY).

In addition, Senators Joe Manchin (D-WV) and Shelly Moore Capito (R-WV), along with Representative David McKinley (R-WV), have expressed interest in working on a bipartisan plan that is an immediate and narrow fix that does not extend to multi-employer pension plans. While both Senate Democratic Leader Schumer and House Democratic Leader Pelosi have included protecting endangered pension plans as a key leverage point for a spending deal, it remains to be seen if and when a fix is achieved.

Nominations

On its last day in session before recessing for the holidays, the Senate confirmed 27 nominees who remained pending. Nominees were confirmed to positions spanning a number of federal agencies, including the Departments of Energy, Labor (DOL), Education, Health and Human Services (HHS), Housing and Urban Development (HUD), State (DOS), and Veterans’ Affairs (VA). The Senate also reached an agreement to hold over approximately 150 of President Trump’s nominees for consideration into 2018, including all Pentagon nominees who have not withdrawn their nominations.

Simultaneously, Democrats blocked roughly 100 other nominees, sending those nominations back to the White House. By means of comparison, President Barack Obama had just eight nominees sent back to the White House during his first year in office and President George W. Bush saw only two nominees not held over. Among the high-profile nominees sent back to the White House were Alex Azar, President Trump’s pick to serve as the new HHS Secretary, and K.T. McFarland, President Trump’s former national security advisor who has been nominated to serve as U.S. Ambassador to Singapore. While the White House can re-nominate those whose nominations were not held over, observers are concerned nominees may choose to withdraw rather than go through the process of updating paperwork. This could potentially prolong vacancies across the executive branch of the federal government.

Due to Senate Republican leadership’s growing frustration with an inability to confirm nominees, it remains possible that Senate Republicans could continue their pursuit of a rule change to limit debate on nominations. On December 19, the Senate Rules Committee held a hearing to consider a resolution introduced by Senator Lankford that would decrease post-cloture debate from 30 hours to eight hours for non-Cabinet nominees and to two hours for district court nominees. A markup of the resolution scheduled before the holidays was canceled, but Chairman Richard Shelby (R-AL) has said he hopes to reschedule the markup in January.