What's the deal with the debt ceiling deal

Major programs for cities are not impacted by the agreement

President Biden and House Speaker McCarthy reached a deal on the nation’s debt limit over Memorial Day weekend — just two days before a potential federal default. Crucially, unused State and Local Fiscal Recovery Funds, as well as clean energy funding and tax credits from the Inflation Reduction Act, are unaffected by the deal.

Under the agreement, funding for the current fiscal year will remain at 2023 levels. Congress can raise non-defense discretionary spending by 1% for fiscal year 2025. There are no budget caps after 2025. 

Senate leadership had to work with some holdouts to pass the deal. In the end, Congressional leadership reserved the right to pass supplemental funding for defense and domestic emergencies, such as wildfires and fentanyl.

The agreement also streamlines the National Environmental Policy Act (NEPA), preserves student loan forgiveness for municipal workers, and expands work requirements for federal welfare programs.

Changes to NEPA include:

• Codifying key elements of the One Federal Decision Framework, which directed federal agencies to reduce the timeline of environmental reviews for major infrastructure projects.
• Setting deadlines for completion of NEPA review at one year for environmental assessments and two years for environmental impact statements unless a deadline extension is agreed to by the project sponsor.
• Establishing page limits for environmental documents and paper reduction measures.

The bill also redefined the scope of environmental reviews to include “reasonably foreseeable environmental effects” of proposed agency actions and a “reasonable range” of alternatives to the proposed agency action.

Modifications allowing more public servants to qualify for Public Service Loan Forgiveness and the Biden Administration’s plan to forgive up to $20,000 in debt for some borrowers both remain intact, pending the outcome of a case before the U.S. Supreme Court. The deal does state that the Administration cannot further extend the pandemic-era freeze on student loan payments.

The deal includes new work requirements for the Supplemental Nutrition Assistance Program (SNAP) — formerly known as food stamps — and the Temporary Assistance for Needy Families (TANF) program, which provides cash assistance to families with children.

Veterans, people experiencing homelessness, people 24 years old or younger, and those aging out of the foster care system are exempt from the new SNAP requirements. Despite this change, the Congressional Budget Office estimates 78,000 new individuals will receive SNAP benefits.

The federal government sends TANF funding directly to states, meaning California could lose out on funding if it does not meet the new requirement.

The overall deal will reduce the federal deficit by $1.5 trillion over the next 10 years according to the Congressional Budget Office.