Story highlights FEMA considers funding options

Sen. Reid announces a new vote Monday on a revised measure

The Democratic-controlled Senate rejectsa House spending plan

Party leaders disagree over new spending cuts and disaster relief funding

The Democratic-controlled Senate rejected a House GOP temporary spending bill Friday, inching the federal government closer to yet another potential shutdown and risking the loss of sorely needed disaster recovery funds.

Before the measure was even formally presented, senators cast it aside in a 59-36 vote.

Hours earlier, GOP leaders pushed the bill through the Republican-controlled House in a 219-203 vote after adding a series of cuts vehemently opposed by their Democratic counterparts.

Both chambers of Congress must agree on new spending legislation to avoid a partial shutdown after the close of the current fiscal year September 30.

The measure currently under deliberation -- which would keep Washington running through November 18 -- includes critical new disaster funding assistance for states hit hard by Hurricane Irene, Tropical Storm Lee, and a series of recent wildfires and tornadoes.

But Republicans want less disaster aid than their Democratic counterparts, and want to pay for it partly by cutting funding for programs designed to spur clean energy innovation.

The House passed a "common sense measure," House Speaker John Boehner, R-Ohio, told reporters during the Senate vote. "It's time for the Senate to move."

Senate Majority Leader Harry Reid, D-Nevada, announced his intention to push for a new vote Monday on a compromise package incorporating the GOP's lower overall disaster relief spending levels while eliminating any cuts to clean energy programs.

Congressmen and senators need to "cool off for a little bit," Reid said Friday. "There's a compromise here."

"More reasonable heads will prevail," he predicted.

This is the third time the government has been threatened with a shutdown this year alone. Legislators nearly forced Washington to start closing its doors in mid-April and again during the debt ceiling imbroglio in August.

Tea party-backed legislators have used a series of statutory deadlines -- typically dealt with through non-controversial funding extensions -- to push an ideological agenda of spending reductions at sharp odds with priorities in the Obama administration and elsewhere.

The latest standoff in Washington, however, could have far-reaching negative consequences beyond the political arena. Among other things, the new shutdown threat could further damage an already sputtering economy. Global trading partners are increasingly confused by a "political system that looks manifestly broken," Treasury Secretary Tim Geithner warned Thursday.

Meanwhile, the agency responsible for doling out disaster relief money -- the Federal Emergency Management Agency -- could run out of funds as soon as Monday, according to Reid.

"If Congress does allow the balance of the Disaster Relief Fund to reach zero, there are laws that govern federal agency operations in the absence of funding," according to a FEMA statement released Friday. "Under law, FEMA would be forced to temporarily shut down disaster recovery and assistance operations, including financial assistance to individuals until Congress appropriated more funds. This would include all past and current FEMA recovery operations."

FEMA spokeswoman Rachel Racusen told CNN Friday that the agency is exploring other funding options as a way to continue providing disaster relief.

The House GOP legislation includes $3.65 billion in new disaster relief funding -- $1 billion in emergency funds available when the bill is enacted and roughly $2.6 billion to be budgeted for those federal response agencies for the 2012 fiscal year that begins October 1.

One key sticking point is that the House bill requires that the $1 billion in immediate disaster funding be offset with $1.5 billion in cuts to a loan program that helps automakers retool their operations to make more fuel-efficient cars. Another $100 million would be cut from an alternative energy loan program that provided funding for the solar panel firm Solyndra, a company that declared bankruptcy late last month despite receiving a $535 million federal guarantee in 2009.

Last week, the Senate passed a spending bill with bipartisan support that would provide $6.9 billion for FEMA and other federal agencies, to be used both for immediate disaster relief as well as in the new fiscal year. The Senate version required no spending offsets.

Democrats have said they will continue to oppose any offsets to counter the emergency spending for natural disasters.

One senior Senate Democratic leadership aide said Thursday night that the party's caucus is united against Republican-tailored versions of the measure.

"We are looking for a real attempt to compromise, not just an attempt to appease their own people," the aide said.

Forty-eight conservative Republicans initially voted against the GOP measure Wednesday -- an embarrassing setback for Boehner. But they changed their minds when additional alternative energy spending cuts were added to the legislation, according to a GOP aide. In the end, 23 Republicans who initially opposed the bill flipped to support it, giving it enough votes to pass.

JUST WATCHED Keeping them honest: Disaster aid Replay More Videos ... MUST WATCH Keeping them honest: Disaster aid 04:37

JUST WATCHED Obama: We can't afford wasteful spending Replay More Videos ... MUST WATCH Obama: We can't afford wasteful spending 01:51

JUST WATCHED Cheney: Spending was 'a fact of life' Replay More Videos ... MUST WATCH Cheney: Spending was 'a fact of life' 01:51

Boehner's struggle to control an unwieldy House GOP caucus has become an ongoing issue on Capitol Hill this year.

During the debt ceiling debate over the summer, Boehner had to withdraw his own plan for deficit reduction at one point when it became clear he lacked sufficient support within his caucus to get it passed.

This time, the speaker threatened members with pulling them from committee assignments if they failed to support the continuing resolution Wednesday, according to a Republican source who attended the GOP conference meeting.

The source, speaking on condition of not being identified, said Boehner "cracked the whip" at the Wednesday morning meeting and told Republicans bluntly they needed to back the measure or he'd go to the steering committee and start pulling committee assignments for members who didn't vote for it. The Republican steering committee approves member committee assignments.

On Thursday, Boehner shrugged off the defeat as the price of trying to get legislation through the democratic process.

"I have no fear in allowing the House to work its will," he said, adding: "Does it make my life a little more difficult? Yes it does."

Rep. Bill Huizenga of Michigan, a conservative freshman Republican who opposed the resolution, said removing the offset provision -- as Democrats want -- would be "more problematic for me and probably for more of the caucus."

Asked if he was concerned about Boehner's threat to take away committee posts, Huizenga said: "It's far less of a concern than going back home and not being able to explain my vote."

Meanwhile, during House floor debate on the measure, Democrats complained that any kind of offset would be unprecedented for emergency funding to help Americans in need.

"Even if they had the best offset in the world, I still think it's wrong" to require equivalent spending cuts when getting money to disaster victims, said House Minority Leader Nancy Pelosi, D-California.

Conservative Republicans argued that the nation's expanding deficits require as much spending restraint as possible.

"We're trying to effect change in a way that we spend taxpayer dollars. That's what this whole thing is about," Cantor, R-Virginia, said Wednesday night. "No one is denying anyone disaster aid if they need it, and we're trying to be responsible and to do the right thing."