* Twelve Republicans join Democrats to advance budget bill
* McConnell warns debt limit hike will come with conditions
* Lawmakers gear up for follow-on spending bill
By David Lawder
WASHINGTON, Dec 17 (Reuters) - A two-year U.S. budget deal that eases some automatic spending cuts cleared a crucial Senate test vote on Tuesday, all but assuring its passage by a simple majority later this week in the Democratic-controlled Senate.
The Senate voted 67-33 to limit debate and advance the measure, overcoming the opposition of conservative Republicans who objected to increased near-term government spending.
Members of the House and Senate Appropriations committees are not waiting for enactment. They face a Jan. 15 deadline for a new government spending measure and are already starting work to divvy up the money specified by the budget measure among government agencies and programs, congressional aides said.
The Appopriations committees will need to decide on funding for controversial programs such as high-speed rail projects in California, foreign aid and funding for international institutions.
They also will need to deal with policy demands that may be made in the funding measure, such as approval of the Canada-to-Texas Keystone oil pipeline.
But the budget deal makes some decisions easier by restoring overall fiscal 2014 discretionary spending levels to $1.012 trillion, close to the pre-sequester, fiscal 2013 level of $1.028 trillion, limiting the cuts that need to be made.
The measure will likely prevent any government shutdown crises for the next two years.
But shortly after the vote, top Senate Republican Mitch McConnell signaled that storm clouds were brewing over a potential debt limit fight in the spring.
“I doubt if the House or for that matter the Senate is willing to give the president a clean debt ceiling increase,” McConnell told reporters, noting that lawmakers had in the past insisted on adding restrictions on spending.
Senate Majority Leader Harry Reid said he “can’t imagine” that Republicans would want another fight over the debt ceiling after a grueling fall battle over a 16-day government shutdown and an extension of U.S. borrowing authority.
In Tuesday’s procedural vote, 12 Republicans joined 53 Democrats and two independents in voting to advance the budget deal.
These included both moderate and conservative Republicans, including John McCain, Roy Blunt, Lamar Alexander and Ron Johnson.
The Senate, where Democrats have a 55-45 majority, is expected to vote on final passage of the budget measure as early as Wednesday. The House of Representatives passed it by an overwhelming margin last week.
Several conservative Republican senators, including Tea Party supporters Rand Paul and Ted Cruz, had tried to stop the measure in an effort to keep all of the across-the-board “sequester” spending cuts in place.
The budget deal eases some of these cuts, allowing spending to rise by $63 billion over two years in exchange for future savings elsewhere. Among these savings offsets are increased security fees for airline passengers and pension-related cuts for federal employees and military retirees.
The small-scale deal does not increase tax revenue as Democrats wanted or cut federal benefits programs, known as “entitlements,” as Republicans wanted.
“It’s a compromise - and that means neither side got everything they wanted, and both sides had to give a bit,” said Democratic Senator Patty Murray, who negotiated the deal with Republican Representative Paul Ryan.
However, the margin of victory on final passage of the deal is expected to be much narrower, as some Republicans who voted yes on Tuesday’s procedural vote said they would ultimately oppose it.
“I will vote against the budget agreement because it avoids the federal government’s most urgent need: reducing the growth of runaway entitlement spending,” said Alexander, who faces a tough primary re-election challenge in Tennessee.
Blunt, of Missouri, said in a Twitter message that he also will switch his vote to no on final passage.
The measure sets spending levels for everything from the military to national parks at just over $1 trillion for fiscal 2014, which started in October, and fiscal 2015.