Democrats were prepping a counteroffer on a fiscal 2023 omnibus framework Thursday, as negotiators contended with a range of divisive issues, such as how to treat veterans medical care spending and the military’s requirement for servicemembers to be fully vaccinated against COVID-19.

There were no imminent signs of a breakthrough, and no high-level bipartisan meetings were yet planned. But Senate Appropriations ranking member Richard C. Shelby, R-Ala., said “serious discussions” were underway.

“I don’t think we’re gonna resolve anything today. Maybe tomorrow,” Shelby said. “I think there are a lot of people on both sides of the aisle that see this is the right thing to do, to get it done.”

He and Senate Minority Leader Mitch McConnell of Kentucky are leading negotiations for Republicans. House Minority Leader Kevin McCarthy, R-Calif., who is in a tough fight to secure the speaker’s gavel in January, is a “hard no” on the omnibus, his spokesman said. Most other House Republicans are expected to be in that camp too.

Top Democrats huddled in Speaker Nancy Pelosi’s office Wednesday night to discuss a GOP proposal that would adhere to President Joe Biden’s topline funding request of roughly $1.65 trillion in fiscal 2023 discretionary spending, or about 9 percent above the prior fiscal year.

But the GOP’s preferred mix of funds would tilt more heavily towards defense-related accounts, a roughly 10 percent increase if in line with the emerging defense policy bill agreement, versus 8 percent more for domestic and foreign aid accounts.

Take out veterans health care, which eats up a big chunk at $119 billion — 22 percent more than last year — and the remainder of nondefense spending would rise just 6 percent, barely keeping pace with inflation.

Veterans health care

Accordingly, Senate Democrats over the summer proposed spending bills that exceeded the White House request by $20 billion, so they could provide more for the Pentagon and get closer to the GOP’s demands while still supporting a roughly 10 percent boost for non-VA medical, nondefense accounts.

And Democrats in both chambers proposed to separate VA health care from the rest of the nondefense budget, treating it as its own category to protect it from competing demands. That proposal is now gumming up the talks because Republicans view it as a way for Democrats to squeeze in more domestic and foreign aid spending above the overall spending ceiling.

Senate Military Construction-VA Appropriations Subcommittee ranking member John Boozman said there was “ongoing talk” about the issue. If Republicans prevail, it would mean either less money for the VA — which would be difficult politically for both sides — or less for all other nondefense programs.

“We have to honor our commitment to veterans, and there’s been a 119 percent increase in health care costs, and we cannot continue to take that out of the nondefense discretionary spending,” House Appropriation Chair Rosa DeLauro, D-Conn., said Thursday. “So that’s the nature of the conversation, there’s no final solution yet.”

But there’s a danger for Democrats even if veterans health care is walled off into a third category: that would ensure, from their perspective, an insufficient amount for the rest of the nondefense budget if they meet the National Defense Authorization Act target within the president’s overall spending ceiling.

A solution to that problem would be increasing the overall topline above the Biden request, as Senate Democrats proposed earlier this year. And so far that’s been a nonstarter for Republicans.

Vaccine mandate

At the same time, sticky policy issues have yet to be worked out. And one that’s cropped up this week with a vengeance is the Defense Department’s mandate for all servicemembers to be fully vaccinated or be discharged.

A number of top Republicans, including McCarthy, sought to include a rider in the NDAA blocking the Pentagon from enforcing the vaccine requirement. But it doesn’t appear that provision will make it into the authorization bill, despite a last-minute push from a sizable group of GOP senators led by Rand Paul of Kentucky that he said has 20 supporters.

McCarthy brought the matter up with Biden at the White House earlier this week, where top congressional leaders met with the president and Vice President Kamala Harris to discuss the year-end agenda. He reiterated his view in a Wednesday evening tweet.

“The Covid vaccine mandate in the military is wrong. Our heroes have been fired. Our country is less safe,” McCarthy wrote. “I told the President directly—it’s time to end the mandate and rehire our service members.”

Paul and his allies in a letter to Senate GOP leaders cited Defense Department data showing some 3,400 military servicemembers had been fired for refusing to get vaccinated as of April 2022.

If the provision doesn’t make it into the NDAA, as expected, that makes the omnibus an attractive vehicle for Republicans to try to insert the provision — which is certain to gum up prospects for a deal.

But it’s unclear how involved McCarthy will be in the omnibus talks, given he plans to vote against whatever other negotiators produce. McCarthy’s fighting for votes to become speaker in January when the GOP claims control of the House, and conservatives are watching him warily for signs of caving into any Democratic demands or signing off on a massive spending bill.

“I’m not going to sit back and let some bill pass in the middle of the night. I’m not going to let them continue to do this runaway spending,” McCarthy said after this week’s White House meeting.

Meanwhile, top Democrats continue to threaten a full-year continuing resolution if there’s no omnibus deal in the lame duck, rather than kicking the can into early next year to let Republicans shape the measure.

Pelosi told reporters Thursday that if there’s no agreement, “we have no choice but to keep government open with a yearlong CR. We’ve made that very clear in the White House meeting the other day and in our conversations with our colleagues on the subject.” She said a yearlong stopgap would be a “last resort.”

Federal agencies would have to operate largely with flat funding levels under a full-year stopgap, and thousands of home-state earmarks would be scrubbed from the package.

She wouldn’t comment on the state of play on funding levels or other sticking points, deferring to DeLauro.

“I won’t be negotiating the bill right here, but we certainly have needs in our country that must be addressed in the legislation, including the defense of our country, to protect and defend,” Pelosi said. “And the strength of our country needs to be measured not only in our military might, as important as that is, but in the health and well-being of the American people.”

Peter Cohn contributed to this report.