Work has begun on FY’25 budgeting even as government contractors await passage of FY’24 spending bills to fund 80% of all discretionary spending.  Here are three takeaways contractors need to know about what all of this action means for them:

1.  Congress appears close to being ready to pass 5 of the 6 remaining FY’24 appropriations bills.  The good news is that the DOD spending measure seems to be nearing agreement.  The bad news is that the DHS bill is stuck and at least some appropriators are wondering if the gulf between Democrats and Republicans can be bridged.  If not, it’s looking more and more possible that DHS would operate under a full year CR for the rest of FY’24 and also for the start of FY’25.

2. Contractors shouldn’t read too much into the president’s FY’25 budget submitted to Congress this week.  It’s more of an act of fantasy than a blueprint for possible spending.  Not only are increased revenue projections highly unlikely, but the amount of money also proposed for DOD is widely seen as way too low to meet current threat levels.  Indeed, the House Budget Committee took the unusual step of passing its own FY’25 Budget Resolution before the president even submitted his budget request.  Expect FY’25 appropriations measures to have only a tenuous relationship to what the president put forth.

3.  The November elections could change everything.  The bottom line is that it may very well be the next Congress that passes final FY’25 spending bills.  What happens in the November election, therefore, could have a huge impact on what the federal market looks like in calendar year 2025.  The country has traditionally been very divided, making opposition-proof spending measures highly unlikely from either party.  Still, should President Biden be reelected, and his party retain control of at least one chamber, it is likely that he would claim a mandate for change, pressing Congress to give him more than what he can get today.  Stay very tuned