Republicans prep controversial measure to avert government shutdown

House Republicans are setting up a bitter partisan fight for their return to the Capitol next week over what exactly will be included as part of a continuing resolution that would keep the government open past Sept. 30, when current spending is set to expire.

Work on that has already begun. Speaker of the House Mike Johnson, R-La., held a call early Wednesday among fellow House Republicans on what to include in the bill that is being coupled to the Safeguard American Voter Eligibility Act, a bill introduced by another Louisiana Republican, Rep. Clay Higgins. That bill would require proof of citizenship before registering to vote in a federal election.

"That's clearly a non-starter in the Senate and in the White House so it appears like we're on the verge of some brinkmanship here heading into middle and late September and into election season," said Brett Bolton, vice president of federal legislative and regulatory policy at the Bond Dealers of America. "That'll be interesting how that plays out."

Bolton said that he would bet against an actual shutdown ahead of a presidential election, given the obvious opportunity for finger pointing, but doesn't rule out the possibility. "If this Congress has proved anything, it's that all options are on the table," he said.

Part of the coupling of the continuing resolution and the SAVE Act is a political move to sew some division among Democrats. So far Democrats have made it clear that they want a unified front in opposition to the SAVE Act, a bill that when introduced in July received five votes from Democrats. But the remainder of the election season, as well as other measures such as additional funding for the Federal Emergency Management Agency's disaster relief fund, so far included in the CR, hang in the balance.

"Municipals, like most bonds, are biding their time waiting for the debate, the Fed, the Congressional CR, and the election, in chronological order," a Municipal Market Analytics market update said. "The other thing needing help via a CR is FEMA, whose Disaster Relief Fund is depleted after another year of heavy costs: a drag on aid to states to rebuild disaster-damaged public infrastructure," MMA said.

FEMA has so far this year declared 115 disasters through August, which have been mostly used for wildfires and other natural disasters. Questions about the future of FEMA's mandate and its role in responding to crises also persist, and will likely continue in the upcoming debates.

But one of the most significant aspects of the continuing resolution bill will be how long the stopgap funding measure is extended, with the current duration being six months. That would kick it down the road until after the new Congress takes over, which could give Republicans an extra edge if they make gains this election season in the Senate.

But so far, Democrats have stated their intention to shorten it to three months, which would set up another funding battle for the end of the year. The outcome of that will likely be the most consequential for the remainder of this Congress and for muni market, whose long held goals of including provisions such as advance refunding in upcoming tax legislation has been slated for early 2025.

"If they punt it to early next year, I do think that could throw a wrench into the early tax negotiations," Bolton said. "That's definitely something I'm looking out for in the next week or so to see what time frame they're going to end up on."