Republican efforts to block President Barack Obama's health-care law were at the center of a dispute that caused a 16-day government shutdown in October. A renewed debate over funding for the law would complicate efforts to keep almost all government operations running past the end of current funding.

House and Senate appropriations leaders today held their first face-to-face negotiations since lawmakers returned to the Capitol from a holiday break.

"We're looking at narrowing the differences, looking at what's the negotiation space and how we can compromise without capitulation on both sides," Mikulski of Maryland told reporters in Washington.

Sen. Shelby

Appropriators want to complete the bill in the next few days, "but we will have a better run on where we are after we meet," Senator Richard Shelby, the top Senate Republican in the talks, told reporters.

Staff members worked during the holiday break to pare down differences between the Republican-controlled House and Democratic-run Senate. While there's less appetite among congressional Republicans now to force a shutdown over Obamacare, Republicans remain deeply opposed to the law.

Since Republicans took control of the House three years ago, the government has been funded almost exclusively through a series of stopgap spending measures.

Funding of HHS has been politically contentious. In 2007, three years before the health law and when Democrats controlled both chambers of Congress, President George W. Bush vetoed a funding measure for HHS, education and labor. He said it provided too much money and was loaded with special-interest items.

EPA funding

Lawmakers must decide whether to include House-proposed restrictions that would block Environmental Protection Agency regulations opposed by the coal and agriculture industries.

They also are considering how to balance the Defense Department's need for weapons systems against troop levels, and whether to allow military aid to Egypt after its military deposed former president Mohamed Mursi.

The interior, environment and related agencies portion, which includes EPA funding, is in "conceptually" good shape, said Senator Jack Reed, the Rhode Island Democrat who leads that subcommittee panel.

Senator Susan Collins, a Maine Republican, said the section she works most closely on, funding for transportation and housing programs, is essentially finished.

Committee leaders "have to bless our work," she said, "but we're finished with our recommendations."

Defense funding remains a sticking point, Collins said. One reason is that negotiators must cut between $25 billion and $30 billion even though lawmakers' budget deal late last year provided some relief from automatic spending cuts.

Defense cuts could affect government contractors, including Lockheed Martin Corp., Boeing Co. and General Dynamics Corp., the top three federal contractors for 2012. The top customer for each of the top 10 federal contractors was a unit of the Department of Defense, according to a Bloomberg compilation of contracting records.

Shelby said Republicans and Democrats had "made a lot of progress" on the defense provisions.

With assistance from Caitlin Webber, Roxana Tiron, Heidi Przybyla and James Rowley in Washington. Editors: Laurie Asseo, Jodi Schneider.

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