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Thanks to new, higher spending caps, the FY19 budget proposal would create similar, but also more winners than FY18’s blueprint

• On February 9, 2018, Congress passed the Bipartisan Budget Act of 2018, a continuing resolution that extended funding at the FY 2017 level through March 23rd. The measure also raised spending caps for FY 2018 and 2019, for both defense and non-defense categories; the caps for defense spending saw a boost of $79.9 billion (14.6%) for 2018 and $85.0 billion (15.1%) for 2019.

• Four days later, the Trump administration released its budget request for FY 2019, including an addendum that increased funding for various agencies in accordance with the newly raised budget caps. Much like last year, the Departments of Defense (+13.2%), Homeland Security (+11.5%), and Veterans Affairs (+11.7%) were proposed to be major beneficiaries. The newly raised spending caps made room for a few non-defense winners, too this time, namely Health & Human Services (HHS), Commerce, and Energy.​

• Although Congress still has a ton of work ahead before the budget proposal turns into actual appropriations, the plan bodes very well for Northern Virginia’s contracting sector, which has flagged in recent years due to budgetary uncertainty and a decline in contract awards. Recent releases from the Department of Defense suggest that cybersecurity and intelligence contracts will be a top priority, translating to contractor growth in the Route 28 South and Toll Road areas, in particular.

• HHS would be the biggest non-defense beneficiary of the FY 2019 budget as proposed, receiving a 10.5% increase. The biggest change within this proposal is an additional $10 billion for combating opioid abuse and treating mental health disorders, a change that could create growth within the Substance Abuse and Mental Health Services Administration headquartered in Rockville, MD, but more likely to fuel grants and growth around the country in areas most impacted by this epidemic.

Source: JLL Research

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