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


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                         BUDGET ENFORCEMENT ACT

                             PREVIEW REPORT

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                           13. PREVIEW REPORT

  The Budget Enforcement Act of 1990 (BEA) was enacted as part of the 
Omnibus Budget Reconciliation Act of 1990. The BEA established, through 
1995, annual limits, or ``caps,'' on discretionary spending, and a pay-
as-you-go (PAYGO) requirement that legislation affecting direct spending 
or receipts not result in a net cost. An across-the-board reduction of 
non-exempt spending, known as ``sequestration,'' enforces compliance 
with these constraints. The BEA has been extended several times, most 
recently by the Balanced Budget Act of 1997 (BBA), which extended the 
caps and PAYGO requirements through 2002.
  The BEA requires that OMB issue a report on the impact of each piece 
of enacted legislation. It requires three additional reports throughout 
the year on the overall status of discretionary and PAYGO legislation. 
This Preview Report, the first of the three required overall status 
reports, provides the status of discretionary appropriations and PAYGO 
legislation based on laws enacted as of the end of the first session of 
the 106th Congress. In addition, it explains the differences between the 
OMB and CBO estimates of the discretionary caps. The Consolidated 
Appropriations Act, 2000, eliminated the PAYGO balances for all years as 
of January 3, 2000.
  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.

         The President's Budget Proposals and the Budget Process

                                   Changes to the Budget Enforcement Act

  Since 1993 when President Clinton took office, one of the 
Administration's highest priorities has been to reverse record budget 
deficits as part of a plan to build the economy and restore prosperity. 
The passage of the Omnibus Budget and Reconciliation Act of 1993 
established a deficit reduction plan and a framework for budget 
discipline--relying on the BEA--intended to cut the deficit in half in 
five years. The BBA finished the job and returned the budget to surplus 
ahead of schedule in 1998.
  Budget deficits have been eliminated, but the Administration's 
emphasis on BEA budget restraint and discipline will continue, through 
an extension of caps and PAYGO. The return to budget surplus means that 
we must consider how the surplus should be allocated to complement BEA 
restraints. The Administration's 2001 Budget proposes that the following 
new framework be the basis for consideration of 2001 and future budgets.
  The budget proposes that Social Security be protected and the solvency 
of the Social Security and Medicare trust funds extended. With enactment 
of these reforms, as well as the strengthening of Medicare, additional 
resources would be made available for national needs, including health 
care initiatives and a tax cut.
  Social Security. The Administration proposes a Social Security 
Solvency Lockbox to ensure that Social Security surpluses are not used 
for other purposes. The President's plan will ensure that the off-budget 
surplus is locked away for Social Security. In addition, the solvency of 
Social Security would be extended by allocating, beginning in 2011, 
general funds to Social Security from the on-budget surplus to reflect 
savings in interest costs resulting from reduction in Federal debt held 
by the public, and by investing a limited share of the general funds 
transferred to Social Security in corporate equities to earn a higher 
return.
  Medicare. The framework would provide additional resources to extend 
the solvency of the Hospital Insurance trust fund by ten years, from 
2015 to 2025. In addition, the budget would allocate a portion of the 
on-budget surplus to a new reserve for catastrophic prescription drug 
coverage. These reserves would make up a new budget category parallel to 
the existing on-budget and off-budget categories, the Medicare Solvency 
debt reduction reserve. Amounts in this category would not be available 
for spending under the budget resolution or on the PAYGO scorecard. This 
reserve would be available only for debt reduction, pending its use for 
Medicare or a catastrophic prescription drug program.
  The framework would provide a new prescription drug benefit that would 
modernize Medicare, increase the efficiency of the overall health care 
system, and relieve a significant out-of-pocket burden on much of the 
senior population.
  Debt reduction. The Administration's budget framework reserves the 
off-budget surplus for Social Security through a lockbox mechanism that 
ensures that the off-budget surplus is used to reduce publicly-held 
debt. Transfers of a part of the on-budget surplus for Medicare solvency 
and the reserve for catastrophic prescription drug coverage will 
contribute to further reduction in the public debt, as will the 
remainder of the on-budget surplus. Reducing publicly-held debt reduces 
future interest costs on that debt. Reducing interest payments creates 
on-budget resources that can be transferred to Social Security to extend 
its solvency.
  Other Uses of the On-budget Surplus. Once Social Security and Medicare 
are strengthened and protected, the budget allocates the on-budget 
surpluses to other

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high priority national needs: an expansion of health coverage, the farm 
safety net, and a tax cut.
  Discretionary Caps. Beginning in 2001, the Administration proposes to 
revise the discretionary caps to reflect the cost of maintaining the 
operation of the Federal Government at currently enacted levels into the 
future. The framework provides for raising and extending the 
discretionary spending caps through 2010, to maintain their viability as 
a tool for fiscal discipline. The existing highway and transit caps 
would expire as provided in current law, but there would be a new 
separate cap for the Lands Legacy initiative. The proposed changes would 
increase discretionary spending at about the same pace as inflation. The 
proposals would also reinstate the adjustment included in the original 
BEA of 1990 for changes in inflation estimates, so that higher-than-
expected inflation cannot be used as a reason to abandon the caps in the 
future. In addition, the Administration proposes a new technical cap 
adjustment for section 8 housing contract renewals, consistent with the 
existing BEA adjustment to the discretionary baseline.
  Table 1 shows the expansion of discretionary spending enacted over the 
past three years and the Administration's proposals for discretionary 
spending caps through 2010 necessary to maintain the existing operations 
of government.

                                                                       Table 13-1.  PROPOSED DISCRETIONARY SPENDING LIMITS
                                                                                    (In millions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      2000      2001      2002      2003      2004      2005      2006      2007      2008      2009      2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Original Balanced Budget Act Limits:
  BA..........................................................   526,857   532,999   537,193   542,032   551,074  ........  ........  ........  ........  ........  ........  ........  ........
  OL..........................................................   553,268   559,321   564,265   564,396   560,799  ........  ........  ........  ........  ........  ........  ........  ........
Spending Funded by Alternative Mechanisms:
  BA..........................................................     8,455    37,014    49,290  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
  OL..........................................................     3,611    19,186    29,750  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
Adjustments for Changes in Concepts and Definitions: \1\
  BA..........................................................    -1,110     1,456     5,060  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
  OL..........................................................    -2,188    -3,407    23,554  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
Current Services: \2\
  BA..........................................................   534,202   571,469   591,543   606,983   625,040   640,939   657,091   673,692   690,397   709,171   727,167   745,249   763,777
  OL..........................................................   554,691   575,100   617,569   635,491   648,414   665,380   682,750   698,846   712,234   729,896   748,053   765,833   784,582
Proposed Discretionary Limits By Category:
  Other Discretionary:
    BA........................................................  ........  ........   584,843   612,942   624,080   634,118   648,636   663,936   681,614   699,638   718,146   737,046   756,026
    OL........................................................  ........  ........   573,113   593,863   614,222   628,126   677,292   697,697   707,567   721,455   741,629   759,922   778,493
  Lands Legacy: \3\
    BA........................................................  ........  ........     [727]     1,400     1,400     1,416     1,451     1,484     1,522     1,560     1,599     1,641     1,684
    OL........................................................  ........  ........     [603]     1,004     1,227     1,375     1,410     1,457     1,493     1,533     1,569     1,609     1,652
  Violent Crime Reduction:
    BA........................................................  ........  ........     4,500  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
    OL........................................................  ........  ........     6,344  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
  Highway Category:
    BA........................................................  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
    OL........................................................  ........  ........    24,574    26,956    27,994    27,817  ........  ........  ........  ........  ........  ........  ........
  Mass Transit Category:
    BA........................................................  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
    OL........................................................  ........  ........     4,117     4,595     5,431     5,933  ........  ........  ........  ........  ........  ........  ........
  Total Discretionary:
    BA........................................................  ........  ........   589,343   614,342   625,480   635,534   650,087   665,420   683,136   701,198   719,745   738,687   757,710
    OL........................................................  ........  ........   608,148   626,418   648,874   663,251   678,702   699,154   709,060   722,988   743,198   761,531   780,145
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This line includes reestimates, the second and third year effects of emergency appropriations, and changes in concepts and definitions that are not included in the original BBA limits, or
  in the alternative funding mechanisms.

\2\ Enacted program levels are shown for 1998, 1999, and 2000; current services for 2001-2010.

\3\ This category is proposed for 2001. Amounts shown in 2000 are for comparability purposes only.

  Restoring Budgetary Conventions. The Administration proposes to 
replace 2001 advance appropriations, where such appropriations departed 
from budgetary conventions, with full, up-front funding in 2000. This 
proposal would not affect advance appropriations that were enacted for 
programmatic reasons, such as the advance appropriations for the 
Corporation for Public Broadcasting or those funding multi-year 
construction programs. The Administration is also proposing to reverse a 
number of obligation delays and timing shifts and thereby restore 
traditional budgetary treatment of these items.
  PAYGO Enforcement. The budget also proposes to extend the PAYGO 
enforcement system to 2010.

                       Other 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 changes in particular--biennial budg

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eting and expedited rescission authority--for the reasons given below.
    Biennial budgeting. Reaching agreement on budget priorities for two 
    years would provide greater predictability and planning certainty to 
    program administrators and beneficiaries. Making appropriations that 
    cover two fiscal years would also permit congressional committees to 
        perform their oversight functions in the off-year with less 
                                distraction.
    Expedited rescission authority. The Supreme Court has 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 rescissions of spending to the Congress. Some 
      members of Congress have proposed to strengthen this rescission 
      process, 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.
  Budgeting for insurance. The Congress has drafted legislation that 
would reform the way the Government budgets for insurance. Part of this 
proposal involves budgeting for insurance programs on an accrual basis. 
The Administration supports the objective, but more time is needed to 
develop a satisfactory framework for moving to budgeting for insurance 
on an accrual basis.

                   Discretionary Sequestration Report

  Discretionary programs are funded annually through the appropriations 
process. The scorekeeping guidelines accompanying the BEA identify 
accounts with discretionary resources. The BEA limits budget authority 
and outlays available for discretionary programs each year through 2002. 
For 2000, the BEA divided discretionary spending into two categories: 
violent crime reduction spending and all other discretionary spending. 
For 2001 and 2002, the BEA specified a single category for all 
discretionary spending. The Transportation Act for the 21st Century 
(TEA-21) established two additional categories for highway and mass 
transit outlays for 1999 through 2003.
  OMB monitors compliance with the discretionary spending caps 
throughout the year. Appropriations that cause a breach in the budget 
authority or outlay caps trigger an across-the-board reduction 
(sequester) in discretionary spending to eliminate that breach. The BEA, 
however, does not require that Congress appropriate the full amount 
available under the discretionary caps.

  Adjustments to discretionary caps.--The BEA permits certain 
adjustments to the discretionary caps. On January 25, 2000, OMB 
submitted the Final Sequestration Report for 2000. The report describes 
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 adjustments for changes 
in concepts and definitions, estimates of emergency spending, and 
adjustments to the highway and mass transit categories. Table 2 
summarizes changes to the caps since 1990. Table 3 shows the adjustments 
made in this Preview Report.

                                       Table 13-2.  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      BA           491.7    503.4    511.5    510.8    517.7    519.1    528.1    530.6  .......  .......  .......  .......
 1990 and OBRA 1993..............
                                   OL           514.4    524.9    534.0    534.8    540.8    547.3    547.3    547.9  .......  .......  .......  .......
  Adjustments for changes in       BA          ......      7.7      8.2      8.2      8.8     -0.6     -0.4      3.1  .......  .......  .......  .......
   concepts and definitions......
                                   OL          ......      1.0      2.4      2.3      3.0     -0.5     -2.6     -2.8  .......  .......  .......  .......
  Adjustments for changes in       BA          ......     -0.5     -5.1     -9.5    -11.8      3.0      2.6  .......  .......  .......  .......  .......
   inflation.....................
                                   OL          ......     -0.3     -2.5     -5.8     -8.8      1.8      2.3      0.9  .......  .......  .......  .......
  Adjustments for credit           BA             0.2      0.2     13.0      0.6      0.7      0.1      0.2      0.1  .......  .......  .......  .......
   reestimates, IRS funding, debt
   forgiveness, IMF, and CDRs....
                                   OL             0.3      0.3      0.8      0.8      0.9      0.1      0.3      0.1  .......  .......  .......  .......
  Adjustments for emergency        BA             0.9      8.3      4.6     12.2      7.7      5.1      1.6  .......  .......  .......  .......  .......
   requirements..................
                                   OL             1.1      1.8      5.4      9.0     10.1      6.4      5.4      1.7  .......  .......  .......  .......
  Adjustment pursuant to Sec.      BA          ......  .......  .......  .......    -15.0     -0.1     -0.1  .......  .......  .......  .......  .......
   2003 of P.L. 104-19 \1\.......
                                   OL          ......  .......  .......  .......     -1.1     -3.5     -2.4     -1.5  .......  .......  .......  .......
   Adjustments for special
   allowances:
     Discretionary new budget      BA          ......      3.5      2.9      2.9      2.9  .......  .......  .......  .......  .......  .......  .......
     authority.
                                   OL          ......      1.4      2.2      2.6      2.7      1.1      0.5      0.1  .......  .......  .......  .......
     Outlay allowance............  BA          ......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......
                                   OL             2.6      1.7      0.5      1.0  .......  .......  .......  .......  .......  .......  .......  .......
                                  ----------------------------------------------------------------------------------------------------------------------
      Subtotal, adjustments        BA             1.1     19.2     23.6     14.3     -6.7      7.5      4.0      3.1  .......  .......  .......  .......
       excluding Desert Shield/
       Desert Storm..............
                                   OL             3.9      5.9      8.8     10.0      6.8      5.5      3.7     -1.5  .......  .......  .......  .......

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Adjustments for Operation Desert   BA            44.2     14.0      0.6        *        *  .......  .......  .......  .......  .......  .......  .......
 Shield/Desert Storm.............
                                   OL            33.3     14.9      7.6      2.8      1.1  .......  .......  .......  .......  .......  .......  .......
                                  ----------------------------------------------------------------------------------------------------------------------
     Total adjustments...........  BA            45.4     33.2     24.2     14.3     -6.7      7.5      4.0      3.1  .......  .......  .......  .......
                                   OL            37.2     20.8     16.4     12.8      7.8      5.5      3.7     -1.5  .......  .......  .......  .......
                                  ----------------------------------------------------------------------------------------------------------------------
Spending limits as of 2/6/97 \2\.  BA           537.1    536.6    535.7    525.1    511.0    526.7    532.0    533.8  .......  .......  .......  .......
                                   OL           551.6    545.7    550.4    547.6    548.6    552.7    551.0    546.4  .......  .......  .......  .......
  Adjustment to reach              BA          ......  .......  .......  .......  .......  .......  .......     -6.9  .......  .......  .......  .......
   discretionary spending limits
   included in the 1997
   Bipartisan Budget Agreement...
                                   OL          ......  .......  .......  .......  .......  .......  .......      6.9  .......  .......  .......  .......
Statutory Caps as set in 1997      BA          ......  .......  .......  .......  .......  .......  .......    526.9    533.0    537.2    542.0    551.1
 Bipartisan Budget Agreement \3\.
                                   OL          ......  .......  .......  .......  .......  .......  .......    553.3    559.3    564.3    564.4    560.8
  Adjustments for changes in       BA          ......  .......  .......  .......  .......  .......  .......  .......     -0.2      2.8     -0.1      0.1
   concepts and definitions......
                                   OL          ......  .......  .......  .......  .......  .......  .......  .......     -0.3      0.1     -0.4     -0.3
   Adjustments for emergency       BA          ......  .......  .......  .......  .......  .......      7.7      5.7     31.9     29.8  .......  .......
   requirements.
                                   OL          ......  .......  .......  .......  .......  .......      2.7      5.2     22.9     31.5      9.0      3.2
   Adjustments for CDRs,           BA          ......  .......  .......  .......  .......  .......  .......      0.9     19.4      1.0  .......  .......
   Arrearages, EITC.
                                   OL          ......  .......  .......  .......  .......  .......  .......      0.5      1.1      0.7      0.6      0.2
   Adjustments for special
   allowances:
     Adjustment for rounding.....  BA          ......  .......  .......  .......  .......  .......  .......  .......  .......      1.1  .......  .......
                                   OL          ......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......
     Outlay adjustment...........  BA          ......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......  .......
                                   OL          ......  .......  .......  .......  .......  .......  .......      1.2  .......      0.8  .......  .......
   TEA-21 Adjustment (Net).......  BA          ......  .......  .......  .......  .......  .......  .......  .......     -0.9     -0.9     -0.9     -0.9
                                   OL          ......  .......  .......  .......  .......  .......  .......  .......      1.1      2.6      5.2      6.7
                                  ----------------------------------------------------------------------------------------------------------------------
Final Sequestration Report         BA           537.1    536.6    535.7    525.1    511.0    526.7    539.7    533.5    583.2    571.0    541.0    550.3
 spending limits \3\.
                                   OL           551.6    545.7    550.4    547.6    548.6    552.7    553.7    560.2    584.1    599.9    578.8    570.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Less than $50 million.

** 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. 8101(b) of TEA-21 provided for an offsetting adjustment in the
  existing discretionary spending limits.

\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\ Reflects combined General Purpose Discretionary and Violent Crime Reduction Discretionary spending limits.


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                                        Table 13-3.  PREVIEW REPORT ADJUSTMENTS TO DISCRETIONARY SPENDING LIMITS
                                                                (In millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         2000        2001        2002
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                            VIOLENT CRIME REDUCTION SPENDING

Final Sequestration Report Spending Limits.....................................................  BA                        4,500  ..........  ..........
                                                                                                 OL                        6,344  ..........  ..........
Adjustments for the Preview Report:
  No Adjustments...............................................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........  ..........  ..........
Preview Report Spending Limits.................................................................  BA                        4,500  ..........  ..........
                                                                                                 OL                        6,344  ..........  ..........
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                    HIGHWAY CATEGORY

Final Sequestration Report Spending Limits.....................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                       24,574      26,219      26,663
Adjustments for the Preview Report:
  Technical Outlay Adjustment..................................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........        -125           8
  Adjustment for Revenue Alligned Budget Authority.............................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........         826       1,254
                                                                                                --------------------------------------------------------
    Subtotal, Adjustments for the Preview Report...............................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........         701       1,262
Preview Report Spending Limits.................................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                       24,574      26,920      27,925
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                  MASS TRANSIT CATEGORY

Final Sequestration Report Spending Limits.....................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                        4,117       4,888       5,384
Adjustments for the Preview Report:
  Technical Outlay Adjustment..................................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........        -249          35
                                                                                                --------------------------------------------------------
    Subtotal, Adjustments for the Preview Report...............................................  BA                   ..........  ..........  ..........
                                                                                                 OL                   ..........        -249          35
Preview Report Spending Limits.................................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                        4,117       4,639       5,419
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                              OTHER DISCRETIONARY SPENDING

Final Sequestration Report Spending Limits.....................................................  BA                      563,603     541,324     550,382
                                                                                                 OL                      564,870     547,522     537,279
Adjustments for the Preview Report:
  Changes in Concepts and Definitions..........................................................  BA                        2,859         -59         -59
                                                                                                 OL                   ..........         -59         -59
  Discretionary Changes in Mandatory Programs..................................................  BA                   ..........        -180  ..........
                                                                                                 OL                   ..........        -206           1
  Contingent Emergency Appropriations Released.................................................  BA                           10          10          10
                                                                                                 OL                           43          22          10
                                                                                                --------------------------------------------------------
    Subtotal, Adjustments for the Preview Report...............................................  BA                        2,869        -229         -49
                                                                                                 OL                           43        -243         -48
                                                                                                --------------------------------------------------------
Preview Report Spending Limits.................................................................  BA                      566,472     541,095     550,333
                                                                                                 OL                      564,913     547,279     537,231
--------------------------------------------------------------------------------------------------------------------------------------------------------

Anticipated Other Adjustments:
  Adjustment for Repealing FY 2000 Pay Delay...................................................  BA                   ..........  ..........  ..........
                                                                                                 OL                        4,297  ..........  ..........
  Adjustment for Repealing FY 2000 Obligation Delays...........................................  BA                   ..........  ..........  ..........
                                                                                                 OL                        1,749  ..........  ..........
  Adjustment for Repealing Certain Advance Appropriations......................................  BA                       14,385  ..........  ..........
                                                                                                 OL                   ..........  ..........  ..........
  Kosovo, Plan Colombia, and Other Emergency Supplemental Requests.............................  BA                        3,986  ..........  ..........
                                                                                                 OL                        2,154         979         309
                                                                                                --------------------------------------------------------


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    Subtotal, Anticipated Other Adjustments....................................................  BA                       18,371  ..........  ..........
                                                                                                 OL                        8,200         979         309
                                                                                                --------------------------------------------------------
Preview Report Spending Limits, Including Anticipated Adjustments..............................  BA                      584,843     541,095     550,333
                                                                                                 OL                      573,113     548,258     537,540
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                              TOTAL DISCRETIONARY SPENDING

Update Report Total Discretionary Spending Limits..............................................  BA                      536,271     541,324     550,382
                                                                                                 OL                      570,945     571,047     567,019

Final Sequestration Report Spending Limits.....................................................  BA                      568,103     541,324     550,382
                                                                                                 OL                      599,905     578,629     569,326

Preview Report Spending Limits.................................................................  BA                      570,972     541,095     550,333
                                                                                                 OL                      599,948     578,838     570,575

 Preview Report Including Anticipated Adjustments..............................................  BA                      589,343     541,095     550,333
                                                                                                 OL                      608,148     579,817     570,884
--------------------------------------------------------------------------------------------------------------------------------------------------------

  After consultation with the Congressional Budget Committees and the 
Congressional Budget Office, OMB has agreed to make two changes to 
budget scoring and to adjust the discretionary caps accordingly. First, 
receipts from purchase power and wheeling activities associated with the 
Department of Energy's Power Marketing Administrations have been 
reclassified as discretionary. Since these receipts reduce net 
discretionary budget authority and outlays, the caps are reduced by 
approximately $60 million in 2001 and 2002. Second, OMB has changed its 
scoring of budget authority for contingent emergency appropriations 
(funding for amounts that the President and the Congress designate as 
``emergency requirements''), to be consistent with congressional scoring 
practice. In prior years, OMB waited to score contingent emergency 
appropriations until the President designated them as ``emergency 
requirements,'' and then increased the discretionary caps by the budget 
authority made available and the estimated outlays. Beginning with 2000, 
OMB will score emergency budget authority in its seven-day cost estimate 
of the bill. OMB will estimate outlays when the funds are actually 
released by the President, and will reflect the estimates in the 
subsequent sequestration report. Table 4 shows the effect of this change 
on OMB's scoring of the 2000 appropriations acts. 

     Table 13-4.  ADJUSTMENTS TO SCORING OF FY 2000 APPROPRIATIONS ACTION FOR CHANGES IN SCORING CONVENTIONS
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                              BA        Outlays
----------------------------------------------------------------------------------------------------------------
                                   OTHER DISCRETIONARY

Total Enacted...........................................................................     562,045     561,407
Change in Treatment of Contingent Emergency Spending \1\................................       2,870  ..........
                                                                                         -----------------------
Total Enacted, Adjusted for Changes in Treatment of Contingent Emergency Spending.......     564,915     561,407
Final Sequestration Report Other Discretionary Limits \1\...............................     566,461     563,602
                                                                                         -----------------------
CONGRESSIONAL ACTION OVER/UNDER(-) LIMITS...............................................      -1,546      -2,195
----------------------------------------------------------------------------------------------------------------
                                 VIOLENT CRIME REDUCTION

Total Enacted...........................................................................       4,500       6,344
Final Sequestration Report Violent Crime Reduction Limits...............................       4,500       6,344
                                                                                         -----------------------
CONGRESSIONAL ACTION OVER/UNDER(-) LIMITS...............................................  ..........  ..........
----------------------------------------------------------------------------------------------------------------
                                    HIGHWAY CATEGORY

Total Enacted...........................................................................  ..........      24,574
Final Sequestration Report Highway Category Limits......................................  ..........      24,574
                                                                                         -----------------------
CONGRESSIONAL ACTION OVER/UNDER(-) LIMITS...............................................  ..........  ..........
----------------------------------------------------------------------------------------------------------------
                                  MASS TRANSIT CATEGORY

Total Enacted...........................................................................  ..........       4,117
Final Sequestration Report Mass Transit Category Limits.................................  ..........       4,117
                                                                                         -----------------------
CONGRESSIONAL ACTION OVER/UNDER(-) LIMITS...............................................  ..........  ..........
----------------------------------------------------------------------------------------------------------------
                      TOTAL DISCRETIONARY SPENDING--ALL CATEGORIES

Total Enacted Discretionary Spending....................................................     569,415     596,442
Final Sequestration Report Discretionary Limits.........................................     570,961     598,637
                                                                                         -----------------------
CONGRESSIONAL ACTION OVER/UNDER(-) LIMITS...............................................      -1,546      -2,195
----------------------------------------------------------------------------------------------------------------
\1\ Beginning with FY 2000 Appropriations Acts, OMB will change its scoring of contingent emergency
  appropriations. When appropriations acts include contingent emergency funds, OMB will score budget authrority
  with that act. Outlays will be estimated when the funds are actually released by the President, and will be
  reflected in the next sequestration report. This table shows the effect of scoring, as emergency
  appropriations, the remaining unreleased FY 2000 contingent emergency appropriations.

  Included in the adjustment for changes in concepts and definitions is 
a reduction of $180 million in budget authority and $206 million in 
outlays in 2001, for the second year effect of provisions in the 2000 
appropriations bills that modified mandatory programs. Under the BEA, 
the discretionary caps are adjusted by the amount of the savings or 
costs of these modifications.
  The outlay caps have also been increased for contingent emergency 
appropriations that have been released since the transmittal of the 
Final Sequestration Report. This adjustment includes funds for the Low 
Income Home Energy Assistance Program, which will help address the needs 
of Alaska and 10 New England and Mid-Atlantic States experiencing recent 
increases in home heating fuel costs.
   In addition, TEA-21 requires two adjustments to the discretionary 
outlay caps for the highway and transit categories. The outlay cap for 
highways has been increased by $826 million in 2001 because of higher 
than anticipated receipts in 1999 and higher estimated receipts in 2001. 
A downward adjustment of $125 million has also been made to reflect 
changes in technical assumptions since last year's Preview Report. 
Adjustments for the same reasons have been made in 2002 and 2003. The 
mass transit outlay caps have been decreased due to revised technical 
assumptions. Table 5 shows how the adjustments to the highway and 
transit categories have been calculated.
  In addition to the adjustments outlined above, the Administration has 
included several proposals in the budget that would result in cap 
adjustments upon their enactment. They are described below.

  Adjustments Included in Proposed Limits That Would be Made Under 
Existing Authority:
    Earned Income Tax Credit (EITC) Compliance Initiative.--The 
          budget contains funding for EITC compliance initiatives, 
          including the detection and enforcement of EITC eligibility 
          rules 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 2000 Treasury and 
          General Government Appropriations Act provided $144 million 
          for EITC compliance. Funding for these payments in 2001 
          through 2010 is included in the proposed caps in Table 1.
    Continuing Disability Reviews.--The budget includes funding 
          for additional continuing disability reviews (CDRs) under the 
          heading, ``Limitation on Administrative Expenses'' for the 
          Social Security

[[Page 291]]

          Administration. The law limits adjustments to the budget 
          authority and outlay estimates authorized in the BBA of 1997. 
          CDRs are conducted to verify that recipients of Social 
          Security disability insurance benefits and Supplemental 
          Security Income benefits for persons with disabilities are 
          still disabled. The Labor, Health and Human Services, 
          Education, and Related Agencies Appropriations Act for 2000 
          provided $405 million for CDRs. Funding for these payments in 
          2001 through 2010 is included in the proposed caps in Table 1.
    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. Funding 
          for these payments in 2001 through 2010 is included in the 
          proposed caps in Table 1.
    Contingent Emergency Appropriations.--The budget requests 
          over $3 billion in emergency appropriations for several 
          programs that provide assistance to the victims of natural 
          disasters, manage wildland fires, and provide assistance to 
          States with low-income populations who are adversely affected 
          by large increases in home heating/cooling costs. In addition, 
          the budget includes $4 billion in emergency supplemental 
          requests to support peacekeeping activities in Kosovo, anti-
          drug activities in Colombia, and for disaster relief. These 
          amounts are included in the proposed caps in Table 1.

[[Page 292]]

  Comparison of OMB and CBO discretionary caps.--Section 254(d)(5) of 
the BEA requires this report to explain the differences between the OMB 
and CBO estimates of the discretionary spending caps. CBO uses the 
discretionary caps included in OMB's Final Sequestration Report as the 
starting point for the adjustments it publishes in its Preview Report. 
OMB submitted its Final Sequestration Report on January 25th, and CBO 
did not have time to make its adjustments before OMB's Preview Report 
went to print.

                                     

                  Table 13-5.  ADJUSTMENTS TO THE HIGHWAY AND MASS TRANSIT CATEGORIES FOR CHANGES IN RECEIPTS AND TECHNICAL ASSUMPTIONS
                                                                (In millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         2001        2002        2003
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                  HIGHWAY CATEGORY

Obligation Limitations Assumed in FY 2000 Preview Report............................................................      27,158      27,767      28,233
   Adjustments:
     Difference Between Current and Previous Estimate of FY 2001 Highway Tax Receipts...............................       1,196  ..........  ..........
     Difference Between FY 1999 Actual and Estimated Highway Tax Receipts...........................................       1,862  ..........  ..........
                                                                                                                     -----------------------------------
       Subtotal, Obligation Limitation Adjustment...................................................................       3,058  ..........  ..........

FY 2001 Preview Report Obligation Limitation........................................................................      30,216      27,767      28,233

Outlay Limits in FY 2000 Preview Report.............................................................................      26,219      26,663      27,043
   Adjustments:
     Increase in FY 2001 Obligation Limitation......................................................................         826       1,254         489
     Change in Technical Assumptions:
       Reestimate of Outlays from Obligation Limitation, Using Current Technical Assumptions........................      26,920      27,925      27,621
       FY 2000 Preview Report Outlays from Obligation Level, Adjusted to Include Outlays from change in Obligation        27,045      27,917      27,532
       Limitation...................................................................................................
                                                                                                                     -----------------------------------
     Adjustment for Changes in Technical Assumptions................................................................        -125           8          89

 Total Adjustments..................................................................................................         701       1,262         578
Outlay Limits in FY 2001 Preview Report.............................................................................      26,920      27,925      27,621
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                MASS TRANSIT CATEGORY

Outlay Limits in FY 2000 Preview Report.............................................................................       4,888       5,384       6,124
   Adjustment:
     Change in Technical Assumptions:
       Reestimate of Outlays from Obligation Limitation, Using Current Technical Assumptions........................       4,639       5,419       5,910
       FY 2000 Preview Report Outlays...............................................................................       4,888       5,384       6,124
                                                                                                                     -----------------------------------
     Adjustment for Changes in Technical Assumptions................................................................        -249          35        -214

 Total Adjustment...................................................................................................        -249          35        -214

Outlay Limits in FY 2001 Preview Report.............................................................................       4,639       5,419       5,910
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 293]]


                      Table 13-6.  COMPARISON OF OMB AND CBO DISCRETIONARY SPENDING LIMITS
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                              1998       1999       2000       2001       2002
----------------------------------------------------------------------------------------------------------------

                Non-Defense Discretionary

CBO Final Sequestration Report limits:
  BA.....................................................    256,148    290,562        N/A        N/A        N/A
  OL.....................................................    286,325    277,097        N/A        N/A        N/A
OMB Final Sequestration Report limits:
  BA.....................................................    256,148    290,562        N/A        N/A        N/A
  OL.....................................................    286,325    277,097        N/A        N/A        N/A
Difference:
  BA.....................................................  .........  .........        N/A        N/A        N/A
  OL.....................................................  .........  .........        N/A        N/A        N/A
----------------------------------------------------------------------------------------------------------------

                  Defense Discretionary

CBO Final Sequestration Report limits:
  BA.....................................................    271,832    286,850        N/A        N/A        N/A
  OL.....................................................    269,079    275,732        N/A        N/A        N/A
OMB Final Sequestration Report limits:
  BA.....................................................    271,832    286,850        N/A        N/A        N/A
  OL.....................................................    269,079    275,732        N/A        N/A        N/A
Difference:
  BA.....................................................  .........  .........        N/A        N/A        N/A
  OL.....................................................  .........  .........        N/A        N/A        N/A
----------------------------------------------------------------------------------------------------------------

                 Violent Crime Reduction

CBO Final Sequestration Report limits:
  BA.....................................................      5,500      5,800      4,500        N/A        N/A
  OL.....................................................      4,833      4,953      6,344        N/A        N/A
OMB Final Sequestration Report limits:
  BA.....................................................      5,500      5,800      4,500        N/A        N/A
  OL.....................................................      4,833      4,953      6,344        N/A        N/A
Difference:
  BA.....................................................  .........  .........  .........        N/A        N/A
  OL.....................................................  .........  .........  .........        N/A        N/A
----------------------------------------------------------------------------------------------------------------

                     Highway Category

CBO Final Sequestration Report limits:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A     21,991     24,574     26,219     26,663
OMB Final Sequestration Report limits:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A     21,991     24,574     26,920     27,925
Difference:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A  .........  .........        701      1,262
----------------------------------------------------------------------------------------------------------------

                  Mass Transit Category

CBO Final Sequestration Report limits:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A      4,401      4,117      4,888      5,384
OMB Final Sequestration Report limits:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A      4,401      4,117      4,639      5,419
Difference:
  BA.....................................................        N/A  .........  .........  .........  .........
  OL.....................................................        N/A  .........  .........       -249         35
----------------------------------------------------------------------------------------------------------------
                   Other Discretionary

CBO Final Sequestration Report limits:
  BA.....................................................        N/A        N/A    563,602    541,324    550,382
  OL.....................................................        N/A        N/A    564,870    547,522    537,279
OMB Final Sequestration Report limits:
  BA.....................................................        N/A        N/A    566,472    541,095    550,333
  OL.....................................................        N/A        N/A    564,913    547,279    537,231


[[Page 294]]


Difference:
  BA.....................................................        N/A        N/A      2,870       -229        -49
  OL.....................................................        N/A        N/A         43       -243        -48
----------------------------------------------------------------------------------------------------------------

           Total Discretionary Spending Limits

CBO Final Sequestration Report limits:
  BA.....................................................    533,480    583,212    568,102    541,324    550,382
  OL.....................................................    560,237    584,174    599,905    578,629    569,326
OMB Final Sequestration Report limits:
  BA.....................................................    533,480    583,212    570,972    541,095    550,333
  OL.....................................................    560,237    584,174    599,948    578,838    570,575
Difference:
  BA.....................................................  .........  .........      2,870       -229        -49
  OL.....................................................  .........  .........         43        209      1,249
----------------------------------------------------------------------------------------------------------------

                       PAYGO 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 PAYGO 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 results in a net cost will 
trigger an offsetting sequestration.
  Sequester determinations. The BEA requires OMB to submit a report to 
Congress estimating the change in outlays or receipts for the current 
year, the budget year, and the following four fiscal years resulting 
from enactment of PAYGO legislation. The estimates, which must rely on 
the economic and technical assumptions underlying the most recent 
President's budget, determine whether the PAYGO requirement is met. The 
PAYGO process requires OMB to maintain a ``scorecard'' that shows the 
cumulative deficit impact of such legislation. This Report shows how 
these past actions affect the upcoming fiscal year.
  Table 7 shows the OMB PAYGO scorecard as of January 4, 2000. The 
Consolidated Appropriations Act set the scorecard to zero for all years 
as of January 3, 2000.

                                      Table 13-7.  PAY-AS-YOU-GO SCORECARD
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                                                                                                         Total
                                                            2000     2001     2002     2003     2004   2001-2004
----------------------------------------------------------------------------------------------------------------
Pay-as-you-go scorecard as of January 4, 2000: \1\
  Revenue impact of enacted legislation.................       0         0        0        0        0         0
  Outlay impact of enacted legislation..................       0         0        0        0        0         0
                                                         -------------------------------------------------------
  Total deficit impact of enacted legislaiton...........       0         0        0        0        0         0
----------------------------------------------------------------------------------------------------------------
\1\ The Consolidated Appropriations Act set the scorecard to zero for all years on January 3, 2000.

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