[Analytical Perspectives]
[Budget Enforcement Act Preview Report]
[13. Preview Report]
[From the U.S. Government Publishing Office, www.gpo.gov]


                                     

[[Page 273]]


                                     

========================================================================

                         BUDGET ENFORCEMENT ACT
                             PREVIEW REPORT

========================================================================

[[Page 275]]

 
                           13. PREVIEW REPORT

   The Budget Enforcement Act of 1990 (BEA of 1990) was enacted as part 
of the Omnibus Budget Reconciliation Act of 1990. The BEA of 1990 
established, through fiscal year 1995, annual limits, or ``caps,'' on 
discretionary spending, and a pay-as-you-go requirement that legislation 
affecting direct spending or receipts not increase the deficit. An 
across-the-board reduction of non-exempt spending, known as 
``sequestration,'' enforces compliance with these constraints. The 
Budget Enforcement Act of 1997 (BEA of 1997), which was enacted as part 
of the Balanced Budget Act of 1997 (BBA of 1997), extended, through 
2002, BEA limits on discretionary spending and requirements for pay-as-
you-go legislation. The Transportation Equity Act for the 21st Century 
(TEA-21) further modified the discretionary caps by creating new caps 
for highway and mass transit outlays.
   The BEA requires that OMB issue a report on the impact of each piece 
of legislation seven days after enactment. Three additional reports 
throughout the year are required on the overall status of discretionary 
and pay-as-you-go legislation. This Preview Report, the first of the 
three required overall status reports, provides the status of 
discretionary appropriations and pay-as-you-go legislation based on laws 
enacted as of the end of the 105th Congress. In addition, it explains 
the differences between the OMB and CBO estimates of the discretionary 
caps.
   The OMB estimates use the economic and technical assumptions 
underlying the President's budget submission, as required by the BEA. 
The OMB Update Report that will be issued in August, and the Final 
Report that will be issued after the end of the Congressional session, 
must also use these economic and technical assumptions. Estimates in the 
Update Report and the Final Report will only be revised to reflect laws 
enacted after the Preview Report.

                   Discretionary Sequestration Report

   Discretionary programs are funded annually through the appropriations 
process. The scorekeeping guidelines accompanying the Budget Enforcement 
Act of 1990, as amended by the Omnibus Budget and Reconciliation Act of 
1993 (OBRA) and the Budget Enforcement Act of 1997, identify accounts 
with discretionary resources. The BEA of 1997, as modified by the 
Transportation Equity Act for the 21st Century (TEA-21) limits budget 
authority and outlays available for discretionary programs each year 
through 2002. For 1999, there are five separate categories of 
discretionary spending: defense, non-defense (excluding violent crime 
reduction spending), violent crime reduction spending, and highway and 
mass transit outlays.
   For 2000, the law divides discretionary spending into four 
categories: violent crime reduction spending, highway outlays, mass 
transit outlays, and all other discretionary spending. For 2001 and 
2002, the violent crime reduction category is eliminated. TEA-21 
established highway and transit outlay caps through 2003. OMB monitors 
compliance with the discretionary spending limits throughout the fiscal 
year. Appropriations that cause a breach in the budget authority or 
outlay caps trigger a sequester to eliminate that breach.
   Adjustments to discretionary limits.--The BEA permits certain 
adjustments to the discretionary limits--also known as caps. On December 
10, 1998, the Office of Management and Budget submitted the Final 
Sequestration Report for 1999 required by the BEA. That report described 
adjustments permitted by the BEA as of the time the report was issued. 
The caps resulting from these adjustments are the starting points for 
this Preview Report. Included in this report are cap adjustments for 
changes in concepts and definitions, and estimates of emergency 
spending, which the BEA permits to be made at this time. Table 1 
summarizes changes to the caps since 1990.
   Several cap adjustments represent changes in concepts and definitions 
resulting from legislative action that reclassified certain programs. 
These actions shifted programs between the mandatory (i.e., direct 
spending) category and the discretionary category. For instance, several 
1999 appropriations bills included provisions that modified mandatory 
programs. Since funding controlled by appropriations action is 
considered discretionary, the effects of these provisions are recorded 
as adjustments to the caps. Several 1999 authorizing bills included 
provisions that modified appropriated spending levels. The caps have 
been adjusted for these provisions as well.
   After consultation with the Congress and the Congressional Budget 
Office, OMB has reclassified several programs beginning in 2000. The net 
effect of these reclassifications increase the budget authority and 
outlay caps by approximately $700 million in 2000, 2001 and 2002. The 
following programs were reclassified from mandatory to discretionary: 
the non-basic State grant portion of Education's rehabilitation services 
and disability research account, the Health and Human Services's injury 
compensation program and Treasury's small airports customs fees. The 
following programs were reclassified from discretionary to mandatory: 
the National Oceanic and Atmospheric Administration's (NOAA) damage 
assessment revolving fund for Prince William Sound restoration, NOAA's 
corp officers' retirement benefits, Defense's contributions for 
burdensharing account, and the receipts for the Federal Hous 

[[Page 276]]



                                       Table 13-1.  HISTORICAL SUMMARY OF CHANGES TO DISCRETIONARY SPENDING LIMITS
                                                                (In billions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         1991    1992    1993    1994    1995    1996    1997    1998    1999    2000    2001     2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
         TOTAL DISCRETIONARY
 
Statutory Caps as set in OBRA 1990,
 OBRA 1993, 1997 BBA................  BA                 491.7   503.4   511.5   510.8   517.7   519.1   528.1   530.6   533.0   537.2   542.0     551.1
                                      OL                 514.4   524.9   534.0   534.8   540.8   547.3   547.3   547.9   559.3   564.3   564.4     560.8
Adjustments:
  Changes in Concepts and             BA                ......     7.7     8.2     8.2     8.8    -0.6    -0.4     3.1    -0.2    -0.1     0.2       0.2
   Definitions.
                                      OL                ......     1.0     2.4     2.3     3.0    -0.5    -2.6    -2.8    -0.3     0.1    -0.1      -0.2
  Emergency Requirements............  BA                   0.9     8.3     4.6    12.2     7.7     5.1     9.3     5.7    15.0     0.1  ......  ........
                                      OL                   1.1     1.8     5.4     9.0    10.1     6.4     8.1     7.0    14.8     3.8     1.8       0.9
  Changes in Inflation..............  BA                ......    -0.5    -5.1    -9.5   -11.8     3.0     2.6     0.0     N/A     N/A     N/A       N/A
                                      OL                ......    -0.3    -2.5    -5.8    -8.8     1.8     2.3     0.9     N/A     N/A     N/A       N/A
  Credit Reestimates, IRS Funding,
   Debt Forgiveness, IMF, CDRs,
   International Organization
   Arrearages.......................  BA                   0.2     0.2    13.0     0.6     0.7     0.1     0.2     0.9    19.4  ......  ......  ........
                                      OL                   0.3     0.3     0.8     0.8     0.9     0.1     0.3     0.6     1.1     0.2     0.1       0.2
  Adjustment pursuant to Sec. 2003    BA                ......  ......  ......  ......   -15.0    -0.1    -0.1     N/A     N/A     N/A     N/A
   of P.L. 104-19 \1\.
                                      OL                ......  ......  ......  ......    -1.1    -3.5    -2.4    -1.5     N/A     N/A     N/A       N/A
  Special Allowances:
    Discretionary new budget          BA                ......     3.5     2.9     2.9     2.9  ......  ......  ......     N/A     N/A     N/A       N/A
     authority.
                                      OL                ......     1.4     2.2     2.6     2.7     1.1     0.5     0.1     N/A     N/A     N/A       N/A
    Outlay allowance................  BA                ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ......  ........
                                      OL                   2.6     1.7     0.5     1.0  ......  ......  ......     1.2  ......  ......  ......  ........
  Operation Desert Shield/Desert      BA                  44.2    14.0     0.6       *       *  ......  ......  ......     N/A     N/A     N/A       N/A
   Storm.
                                      OL                  33.3    14.9     7.6     2.8     1.1  ......  ......  ......     N/A     N/A     N/A       N/A
  Adjustment to reach discretionary
   spending limits included in the
   1997 Bipartisan Budget Agreement.  BA                   N/A     N/A     N/A     N/A     N/A     N/A     N/A    -6.9     N/A     N/A     N/A       N/A
                                      OL                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     6.9     N/A     N/A     N/A       N/A
  TEA-21 Adjustment (Net) \2\.......  BA                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A    -0.9    -0.9    -0.9      -0.9
                                      OL                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     1.1     3.2     5.1       6.0
  Adjustments Pursuant to TEA-21:
   \3\
    Mass Transit Category Outlays...  BA                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A  ......  ......  ........
                                      OL                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A    -0.6    -0.3      -0.3
    Highway Category Outlays........  BA                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A  ......  ......  ........
                                      OL                   N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     N/A     0.1    -0.0      -0.3
                                                       -------------------------------------------------------------------------------------------------
    Total, Adjustments..............  BA                  45.4    33.2    24.2    14.3    -6.7     7.5    11.7     2.8    33.4    -0.9    -0.7      -0.7
                                      OL                  37.2    20.8    16.4    12.8     7.8     5.5     6.3    12.4    16.8     6.7     6.7       6.2
                                                       -------------------------------------------------------------------------------------------------
Preview Report Spending Limits \4\..  BA                 537.1   536.6   535.7   525.1   511.0   526.7   539.7   533.5   566.4   536.3   541.3     550.4
                                      OL                 551.6   545.7   550.4   547.6   548.6   552.7   553.7   560.2   576.1   570.9   571.0     567.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Less than $50 million.
 
\1\ P.L. 104-19, Emergency Supplemental Appropriations for Additional Disaster Assistance, for Anti-Terrorism Initiatives, for Assistance in the
  Recovery from the Tragedy that occurred at Oklahoma City, and Rescissions Act 1995, was signed into law on July 27, 1995. Section 2003 of that bill
  directed the Director of OMB to make a downward adjustment in the discretionary spending limits for 1995-1998 by the aggregate estimate by the amount
  of reductions in new budget authority and outlays for discretionary programs resulting from the provisions of the bill, other than emergencies
  appropriations.
 
\2\ Sec. 8101(a) of P.L. 105-178, the Transportation Equity Act for the 21st Century (TEA-21), which was signed by the President on June 6, 1998,
  established two new discretionary spending categories: Highway and Mass Transit. Sec. 810(b) of TEA-21 provided for an offsetting adjustment in the
  existing discretionary spending limits.
 
\3\ Sec. 8101(d) of P.L. 105-178 requires OMB to make an adjustment to the Highway and Mass Transit Category caps based on actual receipts data (Highway
  category only) and revised technical assumptions.
 
\4\ Reflects combined Defense Discretionary, Non-Defense Discretionary (Excluding Crime), Violent Crime Reduction, Highway Category, and Mass Transit
  Category, and Mass Transit Category spending limits.

ing Administration's mutual mortgage insurance program.
   The caps have also been adjusted upward for contingent emergency 
appropriations (i.e., funding for amounts that the President designates 
as ``emergency requirements'' and that Congress so designates in law) 
that have been released since the transmittal of the End of Session 
Sequestration Report. These included funds for the Corps of Engineers 
that will help repair damage caused by Hurricane Georges, which resulted 
in navigational problems in Alabama, Louisiana, Florida, Mississippi, 
Puerto Rico and the Virgin Islands. Contingent emergency funds were also 
released to a number of Federal agencies to support efforts to make 
Federal information technology systems Year 2000 compliant and for 
outreach to non-Federal entities in support of the Year 2000 Conversion 
Council.
   The Transportation Equity Act for the 21st Century (TEA-21) requires 
two adjustments to the Highway and Transit category discretionary outlay 
caps based upon changes in receipts to the Highway Trust Fund and 
changing technical assumptions for outlays. The outlay cap for the 
Highway category increases because of additional budgetary resources 
resulting from revised Highway Trust Fund receipts. The spending limits 
for both categories decrease in outlays due to revised technical 
assumptions. Table 2 shows the impact upon the discretionary spending 
limits of the adjustments being made in this Preview Report.

[[Page 277]]

                                     

                                                                           Table 13-2.  DISCRETIONARY SPENDING LIMITS
                                                                                    (In millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         1998        1999        2000        2001        2002
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                    NON-DEFENSE DISCRETIONARY SPENDING, EXCLUDING SPECIAL CATEGORIES
 
End-of-Session Report Spending Limits..................................................................  BA                              256,148     284,090         N/A         N/A         N/A
                                                                                                         OL                              286,325     273,999         N/A         N/A         N/A
 
Adjustments:
  Contingent Emergency Appropriations Released.........................................................  BA                           ..........         443         N/A         N/A         N/A
                                                                                                         OL                           ..........         325         N/A         N/A         N/A
 
                                                                                                         ...........................                              Note: Outyear outlay effect
                                                                                                                                                                    included under ``Other
                                                                                                                                                                    Discretionary'' below.
 
                                                                                                                                     -----------------------------------------------------------
    Subtotal, Adjustments for the Preview Report.......................................................  BA                           ..........         443         N/A         N/A         N/A
                                                                                                         OL                           ..........         325         N/A         N/A         N/A
                                                                                                                                     -----------------------------------------------------------
Preview Report Spending Limits.........................................................................  BA                              256,148     284,533         N/A         N/A         N/A
                                                                                                         OL                              286,325     274,324         N/A         N/A         N/A
 
Anticipated Other Adjustments:
  Contingent Emergency Releases and Other Emergencies:
    Natural disasters and other emergencies............................................................  BA                           ..........       3,250         N/A         N/A         N/A
                                                                                                         OL                           ..........         861         N/A         N/A         N/A
    Expected release of contingent disaster emergency funding provided in P.L. 105-277.................  BA                           ..........       1,007         N/A         N/A         N/A
                                                                                                         OL                           ..........         395         N/A         N/A         N/A
    Emergency funding for Wye River Memorandum.........................................................  BA                           ..........         900         N/A         N/A         N/A
                                                                                                         OL                           ..........         621         N/A         N/A         N/A
 
                                                                                                         ...........................                              Note: Outyear outlay effect
                                                                                                                                                                    included under ``Other
                                                                                                                                                                    Discretionary'' below.
 
                                                                                                                                     -----------------------------------------------------------
  Subtotal, Anticipated Other Adjustments..............................................................  BA                           ..........       5,157         N/A         N/A         N/A
                                                                                                         OL                           ..........       1,877         N/A         N/A         N/A
                                                                                                                                     -----------------------------------------------------------
Preview Report Spending Limits, Including Anticipated Other Adjustments................................  BA                              256,148     289,690         N/A         N/A         N/A
                                                                                                         OL                              286,325     276,201         N/A         N/A         N/A
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                     DEFENSE DISCRETIONARY SPENDING
 
End-of-Session Report Spending Limits..................................................................  BA                              271,832     275,651         N/A         N/A         N/A
                                                                                                         OL                              269,079     270,206         N/A         N/A         N/A
Adjustments:
    Contingent Emergency Appropriations Released.......................................................  BA                           ..........         396         N/A         N/A         N/A
                                                                                                         OL                           ..........         214         N/A         N/A         N/A
 
                                                                                                         ...........................                              Note: Outyear outlay effect
                                                                                                                                                                    included under ``Other
                                                                                                                                                                    Discretionary'' below.
 
                                                                                                                                     -----------------------------------------------------------
  Subtotal, Adjustments for the Preview Report.........................................................  BA                           ..........         396         N/A         N/A         N/A
                                                                                                         OL                           ..........         214         N/A         N/A         N/A
Preview Report Spending Limits.........................................................................  BA                              271,832     276,047         N/A         N/A         N/A
                                                                                                         OL                              269,079     270,420         N/A         N/A         N/A
Anticipated Other Adjustments:
  Contingent Emergency Releases and Other Emergencies:
     Expected release of contingent emergency funding..................................................  BA                           ..........       3,320         N/A         N/A         N/A
                                                                                                         OL                           ..........       1,862         N/A         N/A         N/A
    Expected release of contingent funding provided in P.L. 105-277 for uranium purchase and plutonium
     disposition.......................................................................................  BA                           ..........         525         N/A         N/A         N/A
                                                                                                         OL                           ..........         345         N/A         N/A         N/A
 
                                                                                                         ...........................                              Note: Outyear outlay effect
                                                                                                                                                                    included under ``Other
                                                                                                                                                                    Discretionary'' below.
 
Preview Report Spending Limits, Including Further Adjustments..........................................  BA                              271,832     279,892         N/A         N/A         N/A
                                                                                                         OL                              269,079     272,627         N/A         N/A         N/A
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
                                    VIOLENT CRIME REDUCTION SPENDING
 
End-of-Session Spending Limits.........................................................................  BA                                5,500       5,800       4,500         N/A         N/A
                                                                                                         OL                                4,833       4,953       5,554         N/A         N/A
Adjustments:
  No Adjustments.......................................................................................  BA                           ..........  ..........  ..........         N/A         N/A
                                                                                                         OL                           ..........  ..........  ..........         N/A         N/A

[[Page 278]]

 
Preview Report Spending Limits.........................................................................  BA                                5,500       5,800       4,500         N/A         N/A
                                                                                                         OL                                4,833       4,953       5,554         N/A         N/A
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                            HIGHWAY CATEGORY
 
End-of-Session Report Spending Limits..................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A      21,991      24,478      26,230      26,992
Adjustments:
  Revised Technical Assumptions........................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A  ..........        -297        -608        -562
  Revised Trust Fund Revenue Assumptions...............................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A  ..........         393         597         233
Preview Report Spending Limits.........................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A      21,991      24,574      26,219      26,663
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                         MASS TRANSIT CATEGORY
 
End-of-Session Report Spending Limits..................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A       4,401       4,761       5,190       5,709
Adjustments:
  Revised Technical Assumptions........................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A  ..........        -644        -302        -325
 Preview Report Spending Limits........................................................................  BA                                  N/A  ..........  ..........  ..........  ..........
                                                                                                         OL                                  N/A       4,401       4,117       4,888       5,384
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                      OTHER DISCRETIONARY SPENDING
 
End-of-Session Report Other Discretionary Spending Limits..............................................  BA                                  N/A         N/A     531,694     540,951     549,981
                                                                                                         OL                                  N/A         N/A     536,073     538,970     534,081
Adjustments:
  Changes in Concepts and Definitions:
    Reclassification of accounts agreed to by ``scorekeepers''.........................................  BA                                  N/A         N/A         677         691         706
                                                                                                         OL                                  N/A         N/A         675         688         703
    Statutory and Other Shifts Between Categories......................................................  BA                                  N/A         N/A        -657        -398        -390
                                                                                                         OL                                  N/A         N/A        -281        -374        -498
    Changes in appropriated spending contained in PAYGO bills..........................................  BA                                  N/A         N/A          57          80          85
                                                                                                         OL                                  N/A         N/A          75          87          85
    Contingent Emergency Appropriations Released.......................................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A         180          50          35
    Reestimate of Emergency Spending...................................................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A         -22         519         566
                                                                                                                                     -----------------------------------------------------------
    Subtotal, Adjustments for the Preview Report.......................................................  BA                                  N/A         N/A          77         373         401
                                                                                                         OL                                  N/A         N/A         627         970         891
                                                                                                                                     -----------------------------------------------------------
Preview Report Spending Limits.........................................................................  BA                                  N/A         N/A     531,771     541,324     550,382
                                                                                                         OL                                  N/A         N/A     536,700     539,940     534,972
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
Anticipated Other Adjustments:
  EITC Tax Compliance Initiative.......................................................................  BA                                  N/A         N/A         144         145         146
                                                                                                         OL                                  N/A         N/A         144         145         146
  Continuing Disability Reviews (CDRs).................................................................  BA                                  N/A         N/A         405         405         405
                                                                                                         OL                                  N/A         N/A         373         405         405
  International Organizations Arrearage Payments.......................................................  BA                                  N/A         N/A         409  ..........  ..........
                                                                                                         OL                                  N/A         N/A  ..........         409  ..........
   Adoption Incentive Payments.........................................................................  BA                                  N/A         N/A          20          20          20
                                                                                                         OL                                  N/A         N/A           2          13          20
  Contingent Emergency Releases and Other Emergencies:
     Natural disasters and other emergencies...........................................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A       1,365         699         325
    Expected release of contingent disaster emergency funding..........................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A       1,408         385         167
    Emergency funding for Wye River Memorandum.........................................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A          92          95          42
    Expected release of contingent funding provided in P.L. 105-277 for uranium purchase and plutonium
     disposition.......................................................................................  BA                                  N/A         N/A  ..........  ..........  ..........
                                                                                                         OL                                  N/A         N/A          30         100          50
                                                                                                                                     -----------------------------------------------------------
  Subtotal, Anticipated Other Adjustments..............................................................  BA                                  N/A         N/A         978         570         571
                                                                                                         OL                                  N/A         N/A       3,414       2,251       1,155
                                                                                                                                     -----------------------------------------------------------

[[Page 279]]

 
Preview Report Spending Limits, Including Anticipated Other Adjustments................................  BA                                  N/A         N/A     532,749     541,894     550,953
                                                                                                         OL                                  N/A         N/A     540,114     542,191     536,127
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
                                      TOTAL DISCRETIONARY SPENDING
 
End-of-Session Total Discretionary Spending Limits.....................................................  BA                              533,480     565,541     536,194     540,951     549,981
                                                                                                         OL                              560,237     575,550     570,866     570,390     566,782
 Preview Report Total Discretionary Spending Limits....................................................  BA                              533,480     566,380     536,271     541,324     550,382
                                                                                                         OL                              560,237     576,089     570,945     571,047     567,019
Preview Report Total Discretionary Spending Limits, Including Anticipated Other Adjustments............  BA                              533,480     575,382     537,249     541,894     550,953
                                                                                                         OL                              560,237     580,173     574,359     573,298    568,174
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The Bipartisan Budget Agreement of 1997 included: separate spending limits for Non-Defense Discretionary (Excluding Violent Crime Reduction) Spending, Violent Crime Reduction Spending,
  and Defense Discretionary Spending for 1998 and 1999; separate spending limits for Discretionary (Excluding Violent Crime Reduction) Spending, Violent Crime Reduction Spending, and Defense
  Discretionary Spending for 1998 and 1999; separate spending limits for Discretionary (Excluding Violent Crime Reduction) Spending and Violent Crime Reduction Spending for 2000; and, a single
  spending limit for Total Discretionary Spending for 2001 and 2002.

  The Administration has included several proposals in the budget that 
would result in cap adjustments upon their enactment. They are described 
below.

Adjustments to the Limits That Would be Made Under Existing Adjustment 
Authority:

     Earned Income Tax Credit (EITC) Compliance Initiative.--The 
          budget contains funding for EITC compliance initiatives, 
          including the detection and enforcement of EITC eligibility in 
          order to reduce the number of erroneous EITC claims. 
          Adjustments are limited to the budget authority and outlay 
          estimates authorized in P.L. 105-33. The 1999 Treasury and 
          General Government Appropriations Act provided $143 million 
          for EITC compliance. The budget proposes $144 million in 
          funding for 2000.
     Continuing Disability Reviews.--The budget includes funding 
          for additional continuing disability reviews (CDRs) under the 
          heading, ``Limitation on Administrative Expenses'' for the 
          Social Security Administration. The law limits adjustments to 
          the budget authority and outlay estimates authorized in P.L. 
          105-33, the Balanced Budget Act of 1997. CDRs are conducted to 
          verify that recipients of Social Security disability insurance 
          benefits and Supplemental Security Income benefits for persons 
          with disabilities continue to meet the definition of 
          disability. The 1999 Labor, Health and Human Services, 
          Education, and Related Agencies Appropriations Act provided 
          $355 million for CDRs in 1999. The budget proposes $405 
          million in funding for 2000 through 2002.
     Allowance for International Organizations Arrearages 
          funding.--The BBA limited the amount of the cap adjustment for 
          funding for arrearages for international organizations, 
          international peacekeeping and multilateral development banks 
          to $1.884 billion for 1998 through 2000. A total of $1,014 
          million was provided for international arrearage payments in 
          the 1999 appropriations acts, and $461 million was provided 
          prior to that. The budget proposes $446 million for U.N. and 
          other international organizations arrearage payments, of which 
          $409 million would be covered by the cap adjustment.
     Adoption Incentive Payments.--The Adoption and Safe 
          Families Act of 1997 authorizes bonus payments to States that 
          increase the number of adoptions from the foster care system. 
          It provides for a discretionary cap adjustment for 
          appropriations up to $20 million annually in each of the years 
          1999 through 2003. It is assumed that the cost of adoption 
          bonuses will be offset by reductions in mandatory foster care 
          costs. $20 million is requested for this program in 2000, 2001 
          and 2002.
     Anticipated Release of Previously Enacted Contingent 
          Emergency Appropriations.--The budget includes allowances for 
          previously enacted contingent emergency appropriations that 
          the Administration expects will be released in 1999. This 
          includes funding that was previously appropriated for the 
          Federal Emergency Management Agency's and the Small Business 
          Administration's disaster relief accounts and funding 
          appropriated to the Department of Energy to reduce the amount 
          of excess weapons-grade uranium and plutonium in Russia.
     Contingent Emergency Supplemental Appropriations.--The 
          budget contains emergency supplemental requests for 
          appropriations in support of the Wye River Memorandum to help 
          restore positive momentum to the Middle East peace process. 
          The $900 million requested, which is offset in budget 
          authority, will help meet the Palestinians' economic 
          development needs in the West Bank and Gaza, and strengthen 
          democratic institutions. The funds will also help Israel 
          offset some of the costs of redeploying its forces and enable 
          it to meet strategic defense requirements, as well as allow 
          Jordan to maintain the operational capabilities of its forces 
          and support further economic development there.
   The actual adjustments to the discretionary spending caps to be 
included in subsequent sequester reports cannot be determined until all 
appropriations have been

[[Page 280]]

enacted. Table 3 compares the President's discretionary proposals to the 
proposed caps for 1999 through 2002. The estimates for 1999 are based on 
BEA scoring of enacted appropriations bills and have been adjusted for 
subsequent emergency releases.

                                                              Table 13-3.  BUDGET PROPOSALS
                                                                (in millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             1999        2000        2001        2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
             Non-Defense Discretionary Spending, Excluding Special Categories
 
Estimated Limits.........................................................................  BA                284,533          NA          NA          NA
                                                                                           OL                274,324          NA          NA          NA
President's Proposals....................................................................  BA                284,371          NA          NA          NA
                                                                                           OL                272,553          NA          NA          NA
President's Proposals Compared to the Limits.............................................  BA                   -162          NA          NA          NA
                                                                                           OL                 -1,771          NA          NA          NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Defense Discretionary
 
Estimated Limits.........................................................................  BA                276,047          NA          NA          NA
                                                                                           OL                270,420          NA          NA          NA
President's Proposals....................................................................  BA                276,041          NA          NA          NA
                                                                                           OL                269,124          NA          NA          NA
President's Proposals Compared to the Limits.............................................  BA                     -6          NA          NA          NA
                                                                                           OL                 -1,296          NA          NA          NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
                             Violent Crime Reduction Spending
 
Estimated Limits.........................................................................  BA                  5,800       4,500          NA          NA
                                                                                           OL                  4,953       5,554          NA          NA
President's Proposals....................................................................  BA                  5,797       4,500          NA          NA
                                                                                           OL                  4,946       5,554          NA          NA
President's Proposals Compared to the Limits.............................................  BA                     -3  ..........  ..........  ..........
                                                                                           OL                     -7  ..........  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                Highway Category Spending
 
Estimated Limits.........................................................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                 21,991      24,574      26,219      26,663
President's Proposals....................................................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                 21,568      24,574      26,219      26,663
President's Proposals Compared to the Limits.............................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                   -423  ..........  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Mass Transit Category Spending
 
Estimated Limits.........................................................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                  4,401       4,117       4,888       5,384
President's Proposals....................................................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                  3,942       4,117       4,888       5,384
President's Proposals Compared to the Limits.............................................  BA             ..........  ..........  ..........  ..........
                                                                                           OL                   -459  ..........  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   Other Discretionary
 
Estimated Limits.........................................................................  BA                     NA     532,749     541,894     550,953
                                                                                           OL                     NA     540,114     542,191     536,127
President's Proposals, Including Offsets to Discretionary Spending and Contingent
 Adjustments if No Social Social Security Reform is Enacted..............................  BA                     NA     532,743     527,306     532,069
                                                                                           OL                     NA     539,547     542,191     536,127
President's Proposals Compared to the Limits.............................................  BA                     NA          -6     -14,588     -18,884
                                                                                           OL                     NA        -567  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                               Total Discretionary Spending
 
Estimated Limits.........................................................................  BA                566,380     537,249     541,894     550,953
                                                                                           OL                576,089     574,359     573,298     568,174
President's Proposals....................................................................  BA                566,209     537,243     527,306     532,069
                                                                                           OL                572,133     573,792     573,298     568,174
President's Proposals Compared to the Limits.............................................  BA                   -171          -6     -14,588     -18,884
                                                                                           OL                 -3,956        -567  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------

   Sequester determinations.--Seven days after enactment of an 
appropriations act, OMB must submit a report to Congress estimating the 
budget authority and outlays provided by the legislation for the current 
year and the budget year. These estimates must be based on the economic 
and technical assumptions used in the

[[Page 281]]

most recent President's budget. In addition, the report must include CBO 
estimates and explain the differences between the OMB and CBO estimates. 
The OMB estimates are used in all subsequent calculations to determine 
whether a breach of any of the budget authority or outlay caps has 
occurred and whether a sequester is required.
   Compliance with the discretionary caps is monitored throughout the 
year. The first determination of whether a sequester is necessary for a 
given fiscal year occurs when OMB issues its Final Sequestration Report 
after Congress adjourns to end a session--near the beginning of the 
fiscal year. The monitoring process continues when Congress reconvenes 
for a new session. Appropriations for the fiscal year in progress that 
cause a breach in the caps would, if enacted before July 1st, trigger a 
sequester. If such a breach is estimated, a ``within-session'' 
sequestration report and Presidential sequestration order would be 
issued. For a breach that results from appropriations enacted on or 
after July 1st, reductions necessary to eliminate the breach are not 
applied to the budgetary resources available in the current year. 
Instead, the corresponding caps for the following fiscal year are 
reduced by the amount of the breach. A within-session sequester can only 
be caused by newly enacted appropriations. Reestimates of budget 
authority and outlays for already enacted funds cannot trigger a 
sequester.
   OMB reported in its Final Sequestration Report to the President and 
the Congress that discretionary appropriations enacted for 1999 were 
within the prescribed spending limits.
   Sequester calculations.--If either the discretionary budget authority 
or outlay caps are exceeded, an across-the-board reduction of 
sequestrable budgetary resources is required to eliminate the breach. 
The percentage reduction for certain special-rule programs is limited to 
two percent. Once this limit is reached, the uniform percentage 
reduction for all other discretionary sequestrable resources is 
increased to a level sufficient to achieve the required reduction. If 
both the budget authority and outlay caps are exceeded, a sequester 
would first be calculated to eliminate the budget authority breach. If 
estimated outlays remain above the cap, after applying the available 
outlay allowance, further reductions in budgetary resources to eliminate 
the outlay breach would be required.
   Comparison of OMB and CBO discretionary limits.--Section 254(d)(5) of 
the BEA requires that this report explain the differences between OMB 
and CBO estimates for discretionary spending limits. Table 4 compares 
OMB and CBO limits for 1999 through 2002. CBO uses the discretionary 
limits from OMB's Final Sequestration Report as a starting point for 
adjustments in its Preview Report. This table excludes Presidential 
proposals.
   CBO included $570 million of contingent emergency funding that was 
released on January 12, 1999 in the Defense Discretionary caps for FY 
1999. Due to timing constraints, OMB included this amount under 
``Anticipated Other Adjustments--Expected release of contingent 
emergency funding.'' Differences in revised technical assumptions 
account for the majority of the outlay difference in both the Highway 
Category and the Mass Transit category. Differences in estimates of the 
effects of discretionary changes to mandatory accounts and changes in 
appropriated spending contained in PAYGO bills, as well as differences 
in the estimates of reclassifications agreed to by the scorekeepers 
account for the differences in the Overall Discretionary, Excluding 
Special Categories limits.

                                     

                      Table 13-4.  COMPARISON OF OMB AND CBO DISCRETIONARY SPENDING LIMITS
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                         1999       2000       2001       2002
----------------------------------------------------------------------------------------------------------------
 
       Non-defense Discretionary, Excluding Special Categories
 
CBO Preview Report limits:
  BA................................................................    284,531        N/A        N/A        N/A
  OL................................................................    274,320        N/A        N/A        N/A
OMB Preview Report limits:
  BA................................................................    284,533        N/A        N/A        N/A
  OL................................................................    274,324        N/A        N/A        N/A
Difference:
  BA................................................................          2        N/A        N/A        N/A
  OL................................................................          4        N/A        N/A        N/A
 
                        Defense Discretionary
 
 CBO Preview Report limits:
  BA................................................................    276,617        N/A        N/A        N/A
  OL................................................................    270,657        N/A        N/A        N/A
 OMB Preview Report limits:
  BA................................................................    276,047        N/A        N/A        N/A
  OL................................................................    270,420        N/A        N/A        N/A
 Difference:
  BA................................................................       -570        N/A        N/A        N/A
  OL................................................................       -237        N/A        N/A        N/A
 

[[Page 282]]

 
                       Violent Crime Reduction
 
 CBO Preview Report limits:
  BA................................................................      5,800      4,500        N/A        N/A
  OL................................................................      4,953      5,554        N/A        N/A
 OMB Preview Report limits:
  BA................................................................      5,800      4,500        N/A        N/A
  OL................................................................      4,953      5,554        N/A        N/A
Difference:
  BA................................................................  .........  .........        N/A        N/A
  OL................................................................  .........  .........        N/A        N/A
 
                              Highways
 
 CBO Preview Report limits:
  BA................................................................  .........  .........  .........  .........
  OL................................................................     21,991     25,325     27,176     27,448
 OMB Preview Report limits:
  BA................................................................  .........  .........  .........  .........
  OL................................................................     21,991     24,574     26,219     26,663
 Difference:
  BA................................................................  .........  .........  .........  .........
  OL................................................................  .........       -751       -957       -785
 
                            Mass Transit
 
 CBO Preview Report limits:
  BA................................................................  .........  .........  .........  .........
  OL................................................................      4,401      4,633      4,965      5,542
 OMB Preview Report limits:
  BA................................................................  .........  .........  .........  .........
  OL................................................................      4,401      4,117      4,888      5,384
Difference:
  BA................................................................  .........  .........  .........  .........
  OL................................................................  .........       -516        -77       -158
 
     Overall Discretionary, Excluding Special Categories Limits
 
 CBO Preview Report limits:
  BA................................................................        N/A    531,778    541,183    550,255
  OL................................................................        N/A    536,858    539,380    534,360
 OMB Preview Report limits:
  BA................................................................        N/A    531,771    541,324    550,382
  OL................................................................        N/A    536,700    539,940    534,972
 Difference:
  BA................................................................        N/A         -7        141        127
  OL................................................................        N/A       -158        560        612
 
                    Total Discretionary Spending
 
 CBO Preview Report limits:
  BA................................................................    566,948    536,278    541,183    550,255
  OL................................................................    576,322    572,370    571,521    567,350
 OMB Preview Report limits:
  BA................................................................    566,380    536,271    541,324    550,382
  OL................................................................    576,089    570,945    571,047    567,019
 Difference:
  BA................................................................       -568         -7        141        127
  OL................................................................       -233     -1,425       -474       -331
----------------------------------------------------------------------------------------------------------------

                   Pay-as-you-go Sequestration Report

   This section of the Preview Report discusses the enforcement 
procedures that apply to direct spending and receipts. The BEA defines 
direct spending as entitlement authority, the food stamp program, and 
budget authority provided by law other than in appropriations acts. The 
following are exempt from pay-as-you-go enforcement: Social Security, 
the Postal Service, legislation specifically designated as an emergency 
requirement, and legislation fully funding the Federal Government's 
commitment to protect insured deposits.
   The BEA requires that any legislation enacted before October 1, 2002, 
affecting direct spending or receipts that increases the deficit will 
trigger an offsetting sequestration.
   Sequester determinations.--Within seven days after the enactment of 
direct spending or receipts legislation,

[[Page 283]]

OMB is to submit a report to Congress estimating the resulting change in 
outlays or receipts for the current year, the budget year, and the 
following four fiscal years. The estimates, which must rely on the 
economic and technical assumptions underlying the most recent 
President's budget, determine whether the pay-as-you-go requirement is 
met. The pay-as-you-go process requires that OMB maintain a 
``scorecard'' that shows the cumulative deficit impact of such 
legislation. This Report shows how these past actions affect the 
upcoming fiscal year.
   OMB no longer issues pay-as-you-go reports on legislation where OMB 
and CBO estimate zero or negligible budget impact. Prior to this change, 
roughly 65% of OMB's pay-as-you-go reports were on bills of this type.
   Table 5 shows OMB estimates for legislation enacted through December 
31, 1998. Pursuant to the BEA, the $872 million of FY 1999 savings as 
shown in the Final Sequester Report for FY 1999 has, in effect, been 
removed from the pay-as-you-go scorecard. The FY 1999 impact of 
legislation enacted this year will be added to the balances of FY 2000 
in the end-of-session report that OMB is to issue 15 days after the 1st 
session of the 106th Congress adjourns sine die. The current pay-as-you-
go scorecard shows savings of $2.9 billion for FY 2000 and a total of 
$5.0 billion for FY 2000-2003. Under current law, these savings could be 
used to finance increases in mandatory programs or tax cuts without 
triggering a sequester. The Administration is proposing to remove the FY 
2000 balances from the scorecard and to use the savings to offset 
defense spending.

     The President's Budget Proposals And The Budget Enforcement Act

   This budget proposes that Social Security be reformed this year, and 
reserves the surplus until Social Security is reformed. Once Social 
Security is reformed, additional resources would be made available for 
Medicare, Universal Savings Accounts, defense and non-defense 
discretionary spending. The budget request for the Department of Defense 
(DOD) provides for substantial program expansion to ensure adequate 
funding levels for national security. Increases in non-DOD programs 
ensure continuity for critical functions of core government and provide 
for the Reserve for Priority Initiatives. The Reserve would provide 
resources for high priority initiatives such as increased funding for 
the National Institutes of Health, investments that raise student 
achievement, and protecting Americans at home and abroad. If Social 
Security reform is not enacted, these additional resources would not be 
available, and defense and non-defense spending levels would have to be 
reduced to be consistent with the discretionary caps.
   No contingent allocation of the surplus begins until 2001. This will 
allow the 2000 appropriations process to proceed while Social Security 
reform is being considered. In 2000, proposed spending for DOD and non-
DOD programs is offset by various specific proposals, such as new or 
increased user fees. Consistent with recently enacted legislation, the 
budget also includes mandatory savings as offsets for discretionary 
spending. Mandatory spending initiatives and revenue initiatives are 
also offset in accordance with the pay-as-you-go provisions of the 
Budget Enforcement Act.
   The 2001-2004 budget projections for discretionary spending, with the 
exceptions of the Department of Defense and some capital intensive long-
term projects and advance appropriations, do not represent a policy 
projection, but an aggregate freeze at the 2000 policy levels. The 
estimates in the aggregate, including a reserve for priority 
initiatives, show the discretionary program levels the Administration 
will support if Social Security is reformed. However, the budget also 
provides levels that would be affordable if Social Security is not 
reformed, in order to reserve the surplus for Social Security

 DOD discretionary spending

   Fiscal year 2000. The request for the DOD assumes substantial program 
expansion in 2000. Expansion is possible in part because of lower 
inflation assumptions, providing full funding through advance 
appropriations for some military construction programs, and proposed 
rescissions of lower priority funding. In addition, the Administration 
proposes two BEA related changes to make increased DOD spending 
possible:
     Transfer of existing PAYGO savings. The Administration 
          proposes to transfer previously enacted savings under the 
          ``pay-as-you-go'' rules of the BEA to the discretionary side 
          of the budget. This would support an increase of $2.9 billion 
          in defense programs.

                     Table 13-5.  PAY-AS-YOU-GO LEGISLATION ENACTED AS OF DECEMBER 31, 1998
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                                         Total
                                                         1999 \1\    2000     2001     2002     2003   2000-2004
----------------------------------------------------------------------------------------------------------------
Total, Pay-as-you-go legislation enacted:
  Revenue impact of enacted legislation................     (-98)    3,696    1,778      754    1,958     8,186
  Outlay impact of enacted legislation.................    (-774)      769      945      590      866     3,170
                                                        --------------------------------------------------------
  Total deficit impact of enacted legislaiton..........    (-872)   -2,927     -833     -164   -1,092    -5,016
----------------------------------------------------------------------------------------------------------------
\1\ Per section 252 (b)(2)(c) of the BEA, the 1999 balances as shown in the Final Sequester Report for FY 1999
  are no longer available to offset future legislation.


[[Page 284]]

     Scoring rule change to avoid a double count. The 
          Administration proposes to increase military retirement 
          benefits, which would be scored as PAYGO. This would also 
          require increases in accrued retirement benefits from DOD's 
          military personnel accounts to the Military Retirement Trust 
          fund of $5.6 billion through 2004. The additional funding for 
          these increases would be scored as discretionary spending 
          under present rules. However, the discretionary payments do 
          not affect the surplus, because they are offset dollar for 
          dollar by receipts in the trust fund. Therefore, the 
          Administration is proposing a new scoring rule, which would 
          preclude scoring increases in intrabudgetary payments as 
          discretionary, if they result from legislative increases in 
          mandatory spending that have been scored as PAYGO.
   Fiscal years 2001-2004. Defense spending levels in these years 
reflect the proposed policy and assume the enactment of Social Security 
reform.
     If Social Security Reform is enacted, the Administration 
          proposes to allocate additional resources to accommodate an 
          increase in the DOD program level of $63.8 billion over five 
          years, compared to the levels assumed in the 1999 budget.
     If Social Security Reform is not enacted, discretionary 
          spending levels would be reduced to those assumed in the 
          Balanced Budget Act of 1997 for 2001 through 2004.

 Non-DOD discretionary spending

  Fiscal year 2000. The budget includes $17.8 billion of additional 
spending for non-DOD discretionary programs that is offset within the 
caps on discretionary spending. The offsets come from specified 
mandatory spending reductions or revenue increases, reproposals of 
advance appropriations, additional advanced appropriations, and Federal 
tobacco revenues.
   Fiscal years 2001-2004. Non-DOD spending levels in these years, like 
DOD spending levels, depend on the enactment of Social Security reform.
     If Social Security Reform is enacted, the Administration 
          proposes to allocate additional resources to maintain an 
          aggregate funding level that freezes spending at the 2000 
          policy levels and accommodates the outyear funding 
          requirements for the Federal Aviation Administration, the 
          National Aeronautics and Space Administration, and other 
          capital intensive long-term projects. The offsets applied to 
          the 2000 levels would be extended.
     If Social Security Reform is not enacted, discretionary 
          spending levels would be reduced to those assumed in the 
          Balanced Budget Act of 1997 for 2001 through 2004.

 Reserve for Priority Initiatives.

   Fiscal years 2001-2004. The budget proposes a discretionary ``Reserve 
for Priority Initiatives'' that will provide $30 billion in funding over 
five years to meet goals such as increasing funding for the National 
Institutes of Health by nearly 50 percent by 2003, continuing to 
increase essential investments that raise student achievement, and 
protecting Americans at home and abroad. This fund can be accommodated 
only if Social Security is reformed.

   Mandatory Initiatives. The budget proposes mandatory initiatives for 
decreasing class size and providing for child care, improving health 
care, reforming unemployment insurance, extending welfare to work, and 
many others. These initiatives total $21.8 billion over five years. The 
budget proposes to offset these increases with savings in health care 
and student loan programs, and increases in revenue.
   Revenue Initiatives. The budget includes several revenue initiatives, 
all of which are fully offset with other revenue changes. The 
President's plan targets tax relief to provide child-care assistance to 
working families and to provide support to Americans with long-term care 
needs. It provides several initiatives to promote education, including a 
school construction and modernization proposal. In addition, the 
President's plan includes initiatives to promote energy efficiency and 
environmental objectives, incentives to promote retirement savings, and 
extensions of certain expiring tax provisions, such as the welfare-to-
work and work-opportunity tax credits.
   Budget process tools. The Administration anticipates that Congress 
will continue its efforts to reform the budget process during the coming 
months and urges Congress to consider two budget process tools in 
particular--biennial budgeting and expedited rescission authority for 
the reasons given below. The President supports these improvements and 
looks forward to working with the sponsors of such legislation.
   Biennial budgeting. Reaching agreement on budget priorities for two 
years would provide greater predictability and planning certainty to 
program administrators and beneficiaries. An arrangement that required 
the President's budget and the Congressional budget resolution to lock 
in (perhaps through a joint resolution) aggregate levels for each of two 
fiscal years--or more--would essentially codify the current practice of 
making a budget ``deal'' on the aggregates for several years and 
appropriating within those amounts. This arrangement has merit even if 
Congress continued to provide annual appropriations. However, making 
appropriations that cover two fiscal years would increase the 
predictability of funding and would also permit congressional committees 
to perform their oversight functions in the off year with less 
distraction.
   Expedited rescission authority. The Supreme Court last year ruled the 
Line Item Veto Act unconstitutional, thereby eliminating the President's 
authority to cancel wasteful items in spending bills. However, under the 
Impoundment Control Act, the President continues to have authority to 
propose specific rescissions of spending to the Congress and to withhold 
the relevant funds for 45 days while such proposed rescissions are under

[[Page 285]]

consideration. If the Congress does not act on the proposed rescissions 
during the 45 day period, the funds are released. Some Members of 
Congress have proposed to strengthen this rescission process by 
requiring the Congress to vote on all rescission items proposed by the 
President. Such ``expedited rescission'' authority would be a useful 
tool for the President and Congress in their efforts to ensure the 
effective use of taxpayer dollars.