[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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[[Page 243]]
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 legislation that affects spending or receipts. 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 second session of the 106th Congress. In addition,
it explains the differences between the OMB and Congressional Budget
Office (CBO) estimates of the discretionary caps.
OMB estimates use the economic and technical assumptions underlying
the President's 2002 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 be revised only to reflect laws enacted after
the Preview Report.
The President's Budget Proposals
Discretionary Caps and PAYGO
With the arrival of budget surpluses in 1998, Congress and the
previous Administration began to skirt the budget enforcement
mechanisms. In 2001 alone, appropriations exceeded the discretionary
spending levels set in the BEA, requiring a $95.5 billion increase in
the cap for that year to accommodate the increase. In 2001, PAYGO
requirements for $17 billion in spending were also waived.
Beginning in 2002, the Administration proposes to raise and extend the
discretionary spending caps through 2005 to maintain their viability as
a tool for fiscal discipline. This will allow for the continued
reduction of the national debt, and at the same time provide enough
growth for discretionary programs to keep pace with inflation over the
next five years. The budget also proposes to change the scoring rules
for advance appropriations and includes an allowance for a national
emergency reserve. These changes will restore discipline to the budget
process by making it more difficult to skirt the discretionary caps.
Table 13-1 shows the Administration's proposals for discretionary
spending limits through 2005. The budget also proposes to extend the
PAYGO requirement for entitlement spending and tax legislation.
National Emergency Reserve
The budget includes a national emergency reserve allowance to ensure
adequate funding for emergencies in the annual budget and appropriations
process to respond to natural disasters. By setting aside a reserve for
emergency needs, emergency supplementals should be limited to extremely
rare events.
Four programs make up a large part of the Government's response to
natural disasters: the Federal Emergency Management Agency's disaster
relief fund; the Department of Agriculture's fire fighting program; the
Department of the Interior's fire fighting program; and the Small
Business Administration's disaster loan program. The budget requests
appropriations to provide adequate funding for these programs, based on
historical funding levels and unobligated balances of appropriations
provided in previous years. In addition, the budget includes an
emergency reserve allowance (not a specific appropriation request) of
budget authority and outlays, for 2002 and each year thereafter, based
on the average annual spending over the last five years for
extraordinarily large events, such as Hurricane Georges and the Midwest
floods. In 2002, the reserve is $5.6 billion. It grows with inflation
thereafter.
To implement this proposal, the Budget Committees are asked to
establish a reserve in the budget resolution. The reserve would be
allocated to the appropriations committees upon a Presidential request
designating the proposed funding as an emergency and the Committees'
determination that the following criteria have been met: funding is for
events that are sudden, urgent, unforseen, and not permanent; and,
adequate funding for a normal year has been provided for the applicable
program by the Appropriations Committees.
The reserve could be used for programs other than the four listed
above if the same criteria are met. If the reserve is not all allocated
in a given year, the following year's emergency reserve would be
increased by the unused amount.
Advance Appropriations
An advance appropriation becomes available one year or more beyond the
year for which the appropriations act is passed. From 1993 to 1999, an
average of $2.3 billion in discretionary budget authority was advance
appropriated each year. In 1999, advance appropriations funding totaled
$8.9 billion, an increase of $5.8
[[Page 244]]
Table 13-1. PROPOSED SPENDING LIMITS BY CATEGORY
(In billions of dollars)
----------------------------------------------------------------------------------------------------------------
2001 \1\ 2002 2003 2004 2005 2006
----------------------------------------------------------------------------------------------------------------
Original Balanced Budget Act Limits
BA............................................... 542.0 552.8 1.9 2.1 2.2 2.4
OL............................................... 595.8 594.7 35.9 2.0 2.2 2.4
Spending in Excess of Original Caps
BA............................................... 92.9 107.8 ........ ........ ........ ........
OL............................................... 53.6 97.0 ........ ........ ........ ........
Proposed Discretionary Spending Limits
BA............................................... 634.9 660.6 685.1 702.7 720.1 737.9
OL............................................... 649.4 691.7 711.8 731.2 754.5 770.4
----------------------------------------------------------------------------------------------------------------
\1\ Data for 2001 is a current estimate and is not a proposed discretionary spending limit.
billion from the previous year. In 2000, advance appropriations
increased by $14.6 billion to over $23.4 billion. Increases in advance
appropriations from the previous year included the following: Department
of Education ($6.2 billion); Department of Housing and Urban Development
($4.2 billion); Department of Labor ($2.5 billion); and Department of
Health and Human Services ($1.4 billion).
Too often in recent years advance appropriations have been used to
hide true funding levels by crediting certain appropriations to other
years. This budget practice distorts the debate over Government spending
and misleads the public about spending levels in specific accounts.
The 2001 Congressional Budget Resolution attempted to address this
misuse of advance funding by including a cap on advance appropriations
equal to the amount advanced in the previous year. In order to expand
discretionary spending in 2001, certain advance appropriations were
reduced and other advances were increased. This did not change the total
amount that was advance funded, but did allow for growth in 2001.
The Administration proposes to reverse the misleading budget practice
of using advance appropriations simply to avoid spending limitations.
However, this proposal would not affect advance appropriations enacted
for programmatic reasons. The budget proposes reforms where such
appropriations were made in 2001 for 2002.
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, or caps, 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 Equity Act for the 21st
Century (TEA-21) (P.L. 105-178) established two additional categories
for highway and mass transit outlays for 1999 through 2003. The Interior
and Related Agencies Appropriations Act, 2001, (P.L. 106-291) added a
new category for conservation spending with limits on budget authority
and outlays for 2002-2006. In addition to specifying overall limits for
the conservation category, the Act also specifies levels of spending for
six subcategories
OMB monitors compliance with the discretionary spending limits
throughout the fiscal year. Appropriations that cause a breach in the
budget authority or outlay limits trigger a sequester to eliminate that
breach. The law does not require that Congress appropriate the full
amount available under the discretionary limits, although it generally
has appropriated at least the full amount. In recent years various
means, such as emergency designations and advance appropriations, have
been used to skirt the discretionary limits.
Table 13-2 summarizes changes to the caps since 1990, and includes the
new limits established for 2002-2006 by P.L. 106-291.
Adjustments to discretionary limits.--The BEA permits certain
adjustments to the discretionary limits. On January 16, 2001, OMB
submitted the Final Sequestration Report for 2001 required by the BEA.
This report describes adjustments permitted by the BEA as of the time
the report was issued. The limits resulting from these adjustments are
the starting points for this Preview Report. Included in the Preview
Report are adjustments for changes in concepts and definitions,
estimates of emergency spending released subsequent to the Final
Sequestration Report, and adjustments to the highway and mass transit
categories. Table 13-2 summarizes changes to the caps since 1990. Table
13-3 shows the adjustments made in this Preview Report.
[[Page 245]]
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 491.7 503.4 511.5 510.8 517.7 519.1 528.1 530.6 533.0 537.2 542.0 551.1
1990, OBRA 1993, and 1997
Bipartisan Budget Agreement..
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
Adjustment to 1998 OBRA BA ....... ....... ....... ....... ....... ....... ....... -6.9 ....... ....... ....... .......
limits to reach
discretionary spending
limits included in the 1997
Bipartisan Budget Agreement
OL ....... ....... ....... ....... ....... ....... ....... 6.8 ....... ....... ....... .......
Adjustments for changes in BA ....... 7.7 8.2 8.2 8.8 -0.6 -0.4 3.1 -0.2 2.8 -0.1 -3.3
concepts and definitions.
OL ....... 1.0 2.4 2.3 3.0 -0.5 -2.6 -2.8 -0.3 0.1 -0.1 -3.3
Adjustments for changes in BA ....... -0.5 -5.1 -9.5 -11.8 3.0 2.6 0.0 ....... ....... ....... .......
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 1.0 19.4 1.0 0.6 .......
reestimates, IRS funding,
debt forgiveness,
Arrearages, EITC, IMF, and
CDRs.......................
OL 0.3 0.3 0.8 0.8 0.9 0.1 0.3 0.6 1.1 0.7 1.2 0.2
Adjustments for emergency BA 0.9 8.3 4.6 12.2 7.7 5.1 9.3 5.7 31.9 43.6 0.0 0.0
requirements...............
OL 1.1 1.8 5.4 9.0 10.1 6.4 8.1 7.0 22.9 35.8 19.8 6.0
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 ....... ....... ....... 1.2 ....... 0.8 ....... .......
Subtotal, adjustments BA 1.1 19.3 23.6 14.3 -6.7 7.5 11.6 2.9 51.1 47.4 0.5 -3.3
excluding Desert Shield/
Desert Storm...........
OL 3.9 5.9 8.8 10.0 6.8 5.4 6.3 12.3 23.7 37.3 20.9 3.0
Adjustments for Operation BA 44.2 14.0 0.6 * * ....... ....... ....... ....... ....... ....... .......
Desert Shield/Desert Storm.
OL 33.3 14.9 7.6 2.8 1.1 ....... ....... ....... ....... ....... ....... .......
Rounding Adjustment......... BA ....... ....... ....... ....... ....... ....... ....... ....... ....... 1.1 3.2 .......
OL ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......
TEA-21 Adjustment (Net) \2\. BA ....... ....... ....... ....... ....... ....... ....... ....... -0.9 -0.9 -0.9 -0.9
OL ....... ....... ....... ....... ....... ....... ....... ....... 1.1 2.6 5.2 7.1
Adjustment to reach spending BA ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... 95.9 .......
limits mandated in P.L. 106-
429 \3\....................
OL ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... 58.6 .......
Adjustment for conservation BA ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... 1.8
limits established by P.L.
106-291 \4\................
OL ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... 1.2
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Total adjustments......... BA 45.3 33.2 24.2 14.3 -6.7 7.5 11.6 2.9 50.2 47.6 98.8 -2.4
OL 37.2 20.8 16.4 12.8 7.9 5.4 6.3 12.3 24.9 40.0 84.7 11.3
-------------------------------------------------------------------------------------------------------------------------
Preview Report spending limits BA 537.0 536.6 535.7 525.1 511.0 526.6 539.7 533.5 583.2 584.8 640.8 548.7
\5\.
OL 551.6 545.7 550.4 547.6 548.7 552.7 553.6 560.2 584.2 604.2 649.1 572.1
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* $50 million or less.
\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 equal to the aggregate amount of
reductions in new budget authority and outlays for discretionary programs resulting from the provisions of the bill, other than emergency
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. 8101(b) of TEA-21 provided for an offsetting adjustment in the
existing discretionary spending limits.
\3\ Sec. 701 of P.L. 106-429, the Foreign Operations and Related Agencies Appropriations Act, FY 2001, included revised budget authority and outlay caps
for FY 2001. In addition, this section provided for a budget authority rounding adjustment of 0.5 percent, and also prohibited OMB from making
adjustments in the Final Sequestration Report for emergency requirements.
\4\ Title VIII of of P.L. 106-291, the Interior and Related Agencies Appropriations Act, FY 2001, created a new conservation category with limits on
budget authority and outlays for FY 2002-FY 2006.
\5\ Reflects combined Defense Discretionary, Non-Defense Discretionary, Violent Crime Reduction, Highway Category, Mass Transit Category, and
Conservation Category spending limits.
[[Page 246]]
Table 13-3. DISCRETIONARY SPENDING LIMITS
(In millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2000 2001 2002
--------------------------------------------------------------------------------------------------------------------------------------------------------
VIOLENT CRIME REDUCTION SPENDING
Final Sequestration Report Violent Crime Reduction 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 Highway Category Spending Limits.................................... BA .......... .......... ..........
OL 24,574 26,920 27,925
Adjustments for the Preview Report:
Technical outlay adjustment................................................................. BA .......... .......... ..........
OL .......... .......... -663
Adjustment for revenue aligned budget authority............................................. BA .......... .......... ..........
OL .......... .......... 1,227
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................... BA .......... .......... ..........
OL .......... .......... 564
--------------------------------------------------------
Preview Report Highway Category Spending Limits................................................ BA .......... .......... ..........
OL 24,574 26,920 28,489
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MASS TRANSIT CATEGORY
Final Sequestration Report Mass Transit Category Spending Limits............................... BA .......... .......... ..........
OL 4,117 4,639 5,419
Adjustments for the Preview Report:
Technical outlay adjustment................................................................. BA .......... .......... ..........
OL .......... .......... -144
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................... BA .......... .......... ..........
OL .......... .......... -144
--------------------------------------------------------
Preview Report Mass Transit Category Spending Limits........................................... BA .......... .......... ..........
OL 4,117 4,639 5,275
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CONSERVATION CATEGORY
Final Sequestration Report Conservation Category Spending Limits............................... BA .......... .......... 1,760
OL .......... .......... 1,232
Federal and State Land and Water Conservation Fund subcategory............................... BA .......... .......... 540
OL .......... .......... ..........
State and Other Conservation subcategory..................................................... BA .......... .......... 300
OL .......... .......... ..........
Urban and Historic Preservation subcategory.................................................. BA .......... .......... 160
OL .......... .......... ..........
Payments in Lieu of Taxes subcategory........................................................ BA .......... .......... 50
OL .......... .......... ..........
Federal Deferred Maintenance subcategory..................................................... BA .......... .......... 150
OL .......... .......... ..........
Coastal Assistance subcategory............................................................... BA .......... .......... 440
OL .......... .......... ..........
Unallocated.................................................................................. BA .......... .......... 120
OL .......... .......... ..........
Adjustments for the Preview Report:
No Adjustments............................................................................... BA .......... .......... ..........
OL .......... .......... ..........
Preview Report Conservation Category Spending Limits........................................... BA .......... .......... 1,760
OL .......... .......... 1,232
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[[Page 247]]
OTHER DISCRETIONARY SPENDING
Final Sequestration Report Other Discretionary Spending Limits................................. BA 580,289 640,803 550,333
OL 569,224 613,247 539,513
Adjustments for the Preview Report:
Changes in concepts and definitions.......................................................... BA .......... .......... -2,359
OL .......... 275 -2,064
Discretionary changes in mandatory accounts.................................................. BA .......... .......... -1,029
OL .......... .......... -889
Release of contingent emergency appropriations............................................... BA .......... .......... ..........
OL .......... 3,985 531
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................... BA .......... .......... -3,388
OL .......... 4,260 -2,422
--------------------------------------------------------
Preview Report Other Discretionary Spending Limits............................................. BA 580,289 640,803 546,945
OL 569,224 617,507 537,091
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TOTAL DISCRETIONARY SPENDING
Final Sequestration Report Total Discretionary Spending Limits................................. BA 584,789 640,803 552,093
OL 604,259 644,806 574,089
Adjustments for the Preview Report............................................................. BA .......... .......... -3,388
OL .......... 4,260 -2,002
Preview Report Total Discretionary Spending Limits............................................. BA 584,789 640,803 548,705
OL 604,259 649,066 572,087
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After consultation with the Congressional Budget Committees and CBO,
OMB has agreed to several changes to budget classification of spending.
First, OMB and CBO have agreed to reclassify the negative subsidy
receipts generated by the Federal Housing Administration's mutual
mortgage insurance program and pipeline safety fees collected by the
Department of Transportation as discretionary. In addition, the
administrative expenses of the national flood insurance program and the
flood mitigation fund within the Federal Emergency Management Agency
have also been reclassified as discretionary. In addition, certain
benefit payments to severely disabled military personnel have been
reclassified as mandatory.
These reclassifications increase the outlay limits in 2001 by $0.3
billion and decrease the budget authority limits by $2.4 billion and the
outlay limits by $2.1 billion in 2002. In addition, OMB has changed its
scoring of outlays for contingent emergency appropriations, to be
consistent with Congressional scoring practices. OMB used to score
outlays from contingent emergency appropriations when the President
designated them as ``emergency requirements.'' OMB now scores emergency
budget authority and outlays against appropriations acts that include
contingent emergency funds. Since the actual outlays flowing from the
use of contingent emergency funding is dependent upon a Presidential
request, OMB will review the original estimates each year and may make
subsequent adjustments based on the most up-to-date information.
Table 13-3 includes a downward adjustment of $1.0 billion in budget
authority and $0.9 billion in outlays in 2002, for the second year
effect of provisions in the 2001 appropriations bills that modified
mandatory programs. Under the BEA, the discretionary limits are adjusted
by the amount of the savings or costs of these modifications.
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 Final Sequestration
Report. This adjustment totals $4.0 billion in outlays in 2001 and $0.5
billion in outlays in 2002. Funds designated as an emergency requirement
include crop loss payments and costs associated with an above average
fire season in the southwestern United States.
TEA-21 requires two adjustments to the discretionary limits based
upon changes in outlays within the highway and transit categories.
Outlays within the highway category have been adjusted upward by $1.2
billion in 2002 because of higher-than-anticipated receipts in 2000 and
in 2002. This increase is partly offset by a downward adjustment of $0.7
billion as a result of changes in technical assumptions. The mass
transit category outlays have been adjusted downward due to revised
technical assumptions. Table 13-4 shows how the adjustments to the
highway and transit categories have been calculated.
[[Page 248]]
Table 13-4. 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 Limitation Assumed in FY 2001 Preview Report............................................................. 30,216 27,767 28,233
Adjustments:
Difference Between Current and Previous Estimate of FY 2002
Highway Tax Receipts......................................................................................... .......... 2,760 ..........
Difference Between FY 2000 Actual and Estimated Highway Tax Receipts......................................... .......... 1,783 ..........
-----------------------------------
Subtotal, Obligation Limitation Adjustment................................................................. .......... 4,543 ..........
FY 2002 Preview Report Obligation Limitation........................................................................ 30,216 32,310 28,233
Outlay Limits in FY 2001 Preview Report............................................................................. 26,920 27,925 27,621
Adjustments:
Increase in FY 2002 Obligation Limitation...................................................................... .......... 1,227 1,863
Changes in Technical Assumptions:
Reestimate of Outlays from Obligation Limitation level, Adjusted to Include Outlays from change in Obligation .......... 28,489 29,100
Limitation.....................................................................................................
Reestimate of Outlays from Obligation Limitation level, Adjusted to Includes Outlays from change in Obligation .......... 29,152 29,484
Limitation.....................................................................................................
-----------------------------------
Adjustment for Changes in Technical Assumptions.................................................................. .......... -663 -384
Total Adjustments................................................................................................... .......... 564 1,479
-----------------------------------
Outlay Limits in FY 2002 Preview Report............................................................................. 26,920 28,489 29,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
MASS TRANSIT CATEGORY
Outlay Limits in FY 2001 Preview Report............................................................................. 4,639 5,419 5,910
Adjustment:
Changes in Technical Assumptions:
Reestimate of Outlays from Obligation Limitation Using Current Technical Assumptions......................... .......... 5,275 5,531
FY 2001 Preview Report Outlays............................................................................... .......... 5,419 5,910
-----------------------------------
Adjustment for Changes in Technical Assumptions................................................................ .......... -144 -379
Outlay Limits in FY 2002 Preview Report............................................................................. 4,639 5,275 5,531
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Administration has included several proposals in the budget that
would result in cap adjustments upon their enactment. These adjustments
are assumed in the proposed limits in Table 13-1 and are described
below.
Adjustments Included in Proposed Limits That Would be Made Under
Existing Authority:
Continuing Disability Reviews.--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 the BBA.
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 budget includes a request of $433 million
for CDRs in 2002.
Earned Income Tax Credit (EITC) Compliance Initiative.--
Funding for EITC compliance initiatives, including the
detection and enforcement of EITC eligibility rules in order
to reduce EITC overclaims. Adjustments are limited to the
budget authority and outlay estimates authorized in the BBA.
The budget includes a request of $146 million for EITC
compliance in 2002.
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. The Act
provides for a discretionary cap adjustment for appropriations
up to $20 million annually for 1999 through 2003. It is
assumed that the cost of adoption bonuses will be offset by
reductions in mandatory foster care costs. The budget includes
a request of $20 million for adoption incentive payments in
2002.
Comparison of OMB and CBO discretionary limits.--Section 254(d)(5) of
the BEA requires this report to explain the differences between OMB and
CBO estimates for discretionary spending limits. Table 13-5 compares OMB
and CBO limits for 2000-2002. CBO uses the discretionary limits from
OMB's sequestration update report as a starting point for adjustments in
its end-of-session sequestration report.
[[Page 249]]
Table 13-5. COMPARISON OF OMB AND CBO DISCRETIONARY SPENDING LIMITS
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Violent Crime Reduction
CBO Preview Report limits:
BA........................................................................... 4,500 ......... .........
OL........................................................................... 6,344 ......... .........
OMB Preview Report limits:
BA........................................................................... 4,500 ......... .........
OL........................................................................... 6,344 ......... .........
Difference:
BA........................................................................... ......... ......... .........
OL........................................................................... ......... ......... .........
----------------------------------------------------------------------------------------------------------------
Highway Category
CBO Preview Report limits:
BA........................................................................... ......... ......... .........
OL........................................................................... 24,574 26,920 28,889
OMB Preview Report limits:
BA........................................................................... ......... ......... .........
OL........................................................................... 24,574 26,920 28,489
Difference:
BA........................................................................... ......... ......... .........
OL........................................................................... ......... ......... -400
----------------------------------------------------------------------------------------------------------------
Mass Transit Category
CBO Preview Report limits:
BA........................................................................... ......... ......... .........
OL........................................................................... 4,117 4,639 5,490
OMB Preview Report limits:
BA........................................................................... ......... ......... .........
OL........................................................................... 4,117 4,639 5,275
Difference:
BA........................................................................... ......... ......... .........
OL........................................................................... ......... ......... -215
----------------------------------------------------------------------------------------------------------------
Conservation Category
CBO Preview Report limits:
BA........................................................................... ......... ......... 1,760
OL........................................................................... ......... ......... 1,232
OMB Preview Report limits:
BA........................................................................... ......... ......... 1,760
OL........................................................................... ......... ......... 1,232
Difference:
BA........................................................................... ......... ......... .........
OL........................................................................... ......... ......... .........
----------------------------------------------------------------------------------------------------------------
Other Discretionary
CBO Preview Report limits:
BA........................................................................... 580,289 640,803 550,035
OL........................................................................... 569,224 613,883 540,353
OMB Preview Report limits:
BA........................................................................... 580,289 640,803 546,945
OL........................................................................... 569,224 617,507 537,091
Difference:
BA........................................................................... ......... ......... -3,090
OL........................................................................... ......... 3,624 -3,262
----------------------------------------------------------------------------------------------------------------
[[Page 250]]
Total Discretionary Spending Limits
CBO Preview Report limits:
BA........................................................................... 584,789 640,803 551,795
OL........................................................................... 604,259 645,442 575,964
OMB Preview Report limits:
BA........................................................................... 584,789 640,803 548,705
OL........................................................................... 604,259 649,066 572,087
Difference:
BA........................................................................... ......... ......... -3,090
OL........................................................................... ......... 3,624 -3,877
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The outlay difference of $3.6 billion in 2001 is due primarily to the
release of contingent emergency spending. CBO estimated $0.6 billion in
outlays associated with the release of over $4.8 billion in contingent
emergency funds provided in 2001 appropriations bills. OMB assumed
outlays of $4.0 billion. In addition, OMB also made an adjustment of
$0.3 billion to reflect the new scoring treatment of unreleased
contingent emergency appropriations.
For 2002, the $3.1 billion difference in budget authority is made up
of several components, the largest of which is changes in concepts and
definitions agreed to by the scorekeepers. The final decisions on
reclassifications were made after CBO issued its report. As a result,
the CBO Preview Report caps do not include the reclassifications of FHA
negative subsidy, pipeline safety fees, flood insurance administrative
expenses, and certain disability benefits for military personnel. OMB
and CBO also have slightly different estimates of the second-year effect
of discretionary changes to mandatory accounts, and of releases of
emergency spending.
The $3.9 billion difference in outlays is due primarily to the timing
issue listed above, but also includes small differences in technical
adjustments made to the highway and mass transit categories.
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 a sequestration to offset any net cost resulting from
legislation enacted before October 1, 2002, that affects direct spending
or receipts.
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 net cost impact of such legislation. This Report shows how
these past actions affect the upcoming fiscal year.
In recent years, the PAYGO constraints have been skirted. In enacting
the 2000 budget, Congress and the previous Administration removed net
costs totaling $12.7 billion over five years from the PAYGO scorecard.
Last year, agricultural direct spending totaling $7.2 billion over five
years was waived from the PAYGO requirement. In total, net costs of
$10.5 billion were removed last year from the PAYGO scorecard for 2001.
Table 13-6 shows OMB estimates for legislation enacted through
December 31, 2000. The balances reflect the removal of $10.5 billion net
costs for 2001 in last year's Final Sequester Report as required by the
Omnibus Consolidated and Emergency Supplemental Appropriations Act,
2001. For legislation enacted this year, the 2001 impact will be added
to the balance for 2002 in the Final Sequester Report that OMB is to
issue after the 1st session of the 107th Congress adjourns sine die. The
current PAYGO scorecard shows net costs of $16.1 billion for 2002 and a
total of $74.5 billion for 2002 through 2005.
The President's budget sets aside the Social Security surplus and
additional on-budget surpluses for debt reduction and contingencies.
These levels ensure the President's tax plan and his Immediate Helping
Hand and Medicare modernization proposals are fully financed by the
surplus. The Administration will work with Congress to ensure that any
unintended sequester of spending does not occur under current law or
from the enactment of any other proposals that meet the President's
objectives to reduce the debt, fund priority initiatives, and grant tax
relief to all income tax paying Americans.
[[Page 251]]
Table 13-6. PAY-AS-YOU-GO SCORECARD
(In millions of dollars)
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Total
2001 2002 2003 2004 2005 2002-2005
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Pay-as-you-go scorecard:
Revenue impact of enacted legislation................ ....... -3,863 -3,920 -3,596 -3,820 -15,199
Outlay impact of enacted legislation................. ....... 12,190 14,545 15,740 16,853 59,328
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Total, net cost impact of enacted legislation...... ....... 16,053 18,465 19,336 20,673 74,527
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