[Analytical Perspectives]
[Budget Enforcement Act Preview Report]
[14. Preview Report]
[From the U.S. Government Publishing Office, www.gpo.gov]
[[Page 281]]
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BUDGET ENFORCEMENT ACT
PREVIEW REPORT
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[[Page 283]]
14. 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. While the overall spending
caps have expired, category caps still exist for transportation and
environmental conservation activities. This report includes a
presentation of those category limits in FY 2003, though it does not
propose new overall discretionary caps beyond FY 2002.
The BEA requires that OMB issue a report on the impact of each piece
of enacted 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 BEA-required 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 107th Congress. In addition,
it explains the differences between the OMB and Congressional Budget
Office (CBO) estimates of the remaining subcategory discretionary caps.
OMB estimates use the economic and technical assumptions underlying
the President's FY 2003 Budget submission, as required by the BEA. The
remaining two BEA-required status reports, the 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 same 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.
I. THE PRESIDENT'S BUDGET PROPOSALS
In the first session of the 107th Congress, the President proposed and
the Congress chose to enact 2002 appropriations well above the
discretionary spending levels originally set by the BEA. Although the
1997 statutory spending limits provided an effective incentive to slow
the growth of government spending during a time of deficits, the growth
in discretionary spending with the arrival of budget surpluses in 1998
made these caps unrealistic. The Administration will work with the
Congress during the next session to develop budget enforcement
mechanisms, including future discretionary spending limits and a PAYGO
requirement for entitlement spending and tax legislation that are
consistent with the needs of the country.
Budget Process Reform
The 2003 budget is being proposed during a time when our Armed Forces
are fighting the War on Terrorism abroad and increased funding is needed
to prevent future terrorist attacks at home; the economy is suffering
the effects of the slowdown that was worsened by the terrorist attacks
on September 11, 2001; budget surpluses for the short term have
disappeared; and the general purpose discretionary caps and PAYGO
requirements of BEA no longer apply. From the perspective of developing
a 2003 budget, these are waters that have not been charted for many
years, and prudent action will be required to avoid years of excess
spending and deficits. A number of process reforms would enhance the
Nation's ability to meet these challenges in a fiscally responsible
manner.
A Joint Budget Resolution, Discretionary Caps, and PAYGO
The Budget Enforcement Act's mechanisms for limiting discretionary
spending and for constraining expansions in mandatory programs and
reductions in tax receipts expire at the end of 2002, for most programs.
The President's 2003 budget provides the funding necessary to win the
War on Terrorism, stimulate the economy, and meet the Nation's ongoing
public requirements.
The Administration proposes a joint budget resolution to give the
budget resolution the force of law. A joint budget resolution would set
the overall levels for discretionary spending, mandatory spending,
receipts, and debt in a simple document that would have the force of
law. Under the current process, the Congress annually adopts a
``concurrent resolution,'' which does not require the President's
signature and does not have the force of law.
A joint budget resolution could be enforced by sequesters requiring
automatic across-the-board cuts by category to offset any excess
spending, similar to the BEA. It would bring the President into the
process at an early stage, require the President and the Congress to
reach agreement on overall fiscal policy before individual tax and
spending bills are enacted, and avoid
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the ``train wrecks'' at the end of the year that frequently occur under
the current process.
Alternatively, enforcement could involve extension of the BEA
enforcement mechanisms. If the BEA is extended, the Administration would
support discretionary caps that are consistent with the discretionary
levels proposed in the 2003 budget and PAYGO requirements that would
carry out the 2003 budget's proposals for mandatory spending and
receipts.
Reserve for Fully Accruing Federal Employees Retirement
The President's 2003 Budget corrects a long-standing understatement of
the true cost of literally thousands of government programs. For some
time, the accruing charge of the Federal Employee retirement system
(FERS) and military retirement system (MRS) costs and a portion of the
old Civil Service retirement system (CSRS) costs has been properly
allocated to the affected salary and expense accounts, but the remainder
(a portion of CSRS, other small retirement systems, and all civilian and
military retiree health benefits) has been charged to central accounts.
The full cost of accruing benefits should be allocated to the affected
salary and expense accounts, so that budget choices for program managers
and budget decision makers are not distorted by inaccurate, understated
cost information.
The Budget presents the amounts associated with shifting this cost
from central accounts to affected program accounts, starting in 2003.
The amounts associated with the proposal are shown on a comparable basis
for program accounts in 2001 and 2002. Agencies will also, for the first
time, be charged for the accruing cost of retiree health care benefits
for all civilian employees. These are also shown on a comparable basis
for 2001 and 2002. For military retirees health benefits, current law
requires agencies to be charged for the accruing cost for over-age 64
military retirees, and the budget proposes to extend this to under-age
65 military retirees in 2004. These amounts are shown in the Budget,
beginning in 2004.
The proposal does not increase or lower total budget outlays or alter
the surplus/deficit since the higher payments will be offset by receipts
in the pension and health funds. The shift will reduce reported costs
from central mandatory accounts and increase reported costs in the
affected discretionary accounts. Consequently, these costs will be
properly reported in the budget for the first time and considered as an
annual cost of managing these programs, as they should be.
The Administration will oppose any attempt to divert the additional
funding from the intended purpose and instead use it to fund
programmatic increases. Therefore, the Administration proposes that the
additional funding be fenced or held in a reserve and only be made
available to the committees of jurisdiction for the specific purpose of
adjusting for the understatement of costs.
This change in treatment of costs is the first in a series of steps
that will be taken to ensure that the full annual cost of resources used
including support services, capital assets and hazardous waste is
charged properly in the budget presentation.
Reviewing Mandatory Spending
While the budget currently classifies spending that is subject to the
annual appropriations process as ``discretionary'' and spending that is
provided through permanent law as ``mandatory,'' the Constitution makes
clear that all funding is at the discretion of Congress and the
President through their power to make law. The terms ``discretionary''
and ``mandatory'' describe the process by which Congress provides
funding and not the necessity of the spending.
For example, the salaries and expenses for the President and the Vice
President's offices, the two highest offices in the land, are subject to
the appropriations process and classified as ``discretionary,'' while
funding for a few selected federal agencies' administrative expenses is
provided under permanent law and classified as ``mandatory.''
Except for interest on the national debt, virtually all federal
spending was subject to the annual appropriations process until the New
Deal entitlement programs, including Social Security and agriculture
subsidies, were created. Medicare and Medicaid, launched in the 1960s,
lifted the share of mandatory spending to more than half of overall
outlays by 1975. This year, sixty-four cents of every federal dollar
will be not be subject to Congress' discretion under the annual
appropriations process.
Each time a program is added to the mandatory side of the budget, the
Congress loses some of the flexibility necessary to respond to new
priorities. During previous wars, when most of the budget was subject to
the annual appropriations process, presidents had greater flexibility to
adjust spending levels to meet the new demands of a war. Both Presidents
Roosevelt and Truman reduced spending in other areas to meet the demands
of World War II and the Korean War.
With such a large portion of the budget exempt from the annual
appropriations process, the 107th Congress and the President do not have
the same flexibility. They must meet the new demands of a new war
against terrorism in the annual appropriations process with much more
limited options.
Based on a review, the Office of Management and Budget identified a
limited list of programs that Congress may want to put back under its
annual review and control. This budget proposes to reclassify three of
those programs. Several others that the Congress may wish to consider
reclassifying are listed below. In total, these programs amount to only
$8 billion, less than one percent of federal spending. If Congress
shifted these or other programs from the mandatory to discretionary
category, it would provide greater scrutiny and greater flexibility in
meeting national needs.
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Programs proposed to be reclassified from mandatory to discretionary
in the President's 2003 Budget:
Federal Direct Student Loan Fund Program, administrative
expenses;
Corps of Engineers, Power Marketing receipts, offset to
discretionary spending; and
FEMA Flood Insurance Premiums, offset to discretionary
administrative expenses.
Administrative expenses classified as mandatory:
Student loan subsidy for consolidation loan administration;
Black Lung Disability Fund;
Energy Employees Occupational Illness Compensation Fund;
Pension Guaranty Benefit Corporation;
Civil Service Retirement Disability Fund; and
Social Security Administration, Benefits to Disabled Coal
Miners.
Non-entitlement programs classified as mandatory:
Maritime Administration Ocean Freight Differential;
Vocational Rehabilitation Program;
Child Care Entitlement to States; and
Social Services Block Grant.
Limiting Use of Advance Appropriations
An advance appropriation becomes available one year or more beyond the
year for which the appropriations act is passed. Budget authority is
recorded in the year the funds become available, not in the year
enacted. Too often, advance appropriations have been used to expand
spending levels by shifting budget authority from the budget year into
the subsequent year and then appropriating the BA freed up under the
budget year discretionary cap to other programs. From 1993 to 1999, an
average of $2.3 billion in discretionary budget authority was advance
appropriated each year. In 1999, advance appropriations totaled $8.9
billion, an increase of $5.8 billion from the previous year. They
increased to $23.4 billion in 2000 and have essentially remained at this
level.
This budget practice distorts the debate over Government spending and
misleads the public about spending levels in specific accounts. The 2002
Congressional Budget Resolution addressed this misuse of advance funding
by capping advance appropriations at the amount advanced in the previous
year. The Administration proposes that total advance appropriations
continue to be capped in 2003. Accordingly, the 2003 budget freezes all
advance appropriations, except for those that should be reduced or
eliminated for programmatic reasons.
Line-Item Veto
A perennial criticism of the Federal Government is that the annual
budget contains too many special interest spending items. The
persistence of these special interest items erodes citizen confidence in
Government.
Because appropriations bills must be enacted annually to fund the
Government, they attract spending items that could not be enacted on
their own. Particularly at the end of the congressional session, it is
not uncommon for bills to move through the appropriations process
quickly, often with little scrutiny. It is the rare Member who will
challenge questionable spending for fear that provisions important to
him or her will be challenged in return. The result of this logrolling
is that the President is left with an all or nothing proposition. He
must either sign the entire appropriations bill with special interest
projects or veto the entire bill and invite a potential Government
shutdown.
The President proposes that the Congress correct a constitutional flaw
in the Line Item Veto Act enacted in 1996. From the Nation's founding,
Presidents have exercised the authority to decline to spend appropriated
sums. However, this authority was curtailed in 1974 when Congress passed
the Impoundment Control Act, which restricted the President's authority
to decline to spend appropriated sums. The Line Item Veto Act of 1996
attempted to give the President the authority to cancel spending
authority and special interest tax breaks, but the U.S. Supreme Court
found that law unconstitutional.
The President proposes a line-item veto linked to debt reduction. This
proposal would give the President the authority to decline to spend new
appropriations, to decline to approve new mandatory spending, or to
decline to grant new limited tax benefits (to 100 or fewer
beneficiaries) whenever the President determines the spending or tax
benefits are not essential Government functions and will not harm the
national interest. All savings from the line-item veto would be used for
debt reduction.
Biennial Budgeting and Appropriations
Only twice in the last 50 years has the Congress enacted all 13
appropriation bills by the beginning of the fiscal year. According to
the Congressional Budget Office, roughly one-third of domestic
discretionary programs are operating under authorization statutes that
have expired. Because Congress must enact 13 appropriations bills each
year, it cannot devote the time necessary to provide oversight and
resolve problems in other programs. The preoccupation with these annual
appropriations bills frequently precludes review and action on the
growing portion of the budget that is permanently funded under
entitlement laws.
In contrast, a biennial budget would allow lawmakers to devote more
time every other year to ensuring that taxpayers' money is spent wisely
and efficiently. In addition, Government agencies would receive more
stable funding, which would facilitate longer range planning and
improved fiscal management. Under the President's proposal for a
biennial budget, funding decisions would be made in non-election years
to help de-politicize the process. Moreover, lawmakers could devote more
time
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to finishing the appropriation bills on time because the next year would
be free for other legislative business.
Government Shutdown Prevention
For 20 out of the past 21 years, Congress and the President have not
finished their work by the October 1st deadline, the beginning of the
new fiscal year. This past year, none of the 13 appropriations bills was
enacted by the beginning of the year. When Congress and the President
fail to gain enactment of all 13 appropriations bills, the Congress
frequently funds the Government through ``continuing resolutions''
(CRs), which provide temporary funding authority for Government
activities at current levels until the final appropriations bills are
signed into law. This past year, for example, Congress had to enact 7
separate CRs to keep the Government operating.
Congress must pass a CR and it must be signed by the President to
provide funding for agencies. Absent enactment of a CR, the Federal
Government is shut down. In the 1980s and 1990s, the Government
experienced shutdowns. Some Administrations used the threat of a
Government shutdown to extract spending increases from the Congress.
These annual, often cynical rituals were destructive of public
confidence and reflected poorly on all parties to the debate.
Important Government functions should not be held hostage simply
because Washington cannot cut through partisan strife to pass temporary
funding bills. In the responsible process the President envisions,
appropriations bills would pass on time as the law requires, but a back-
up plan to avoid the threat of a Government shutdown is a good idea.
Under the President's proposal, if an appropriations bill is not signed
by October 1 of the new fiscal year, funding would be automatically
provided at the lower of the President's Budget or the prior year's
level. The President's proposal would remove incentives for the
President or the congressional leadership to use the leverage of
``shutting down Government'' to achieve spending objectives or to attach
extraneous measures they could not otherwise obtain through the normal
appropriations process.
II. 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. While the limits for overall discretionary spending
expired in 2002, the highway and mass transit categories continue
through 2003, while the conservation category does not expire until
2006. This report examines how appropriations within the 2003 budget
conform with the limits specified in the aforementioned categories.
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, the Congress
and the Administration have used various means, such as emergency
designations and advance appropriations, to circumvent the discretionary
limits.
In 2002, for example, Division C, Section 101 of P.L. 107-117, the
Department of Defense and Emergency Supplemental Appropriations for
Recovery from and Response to Terrorist Attacks on the United States,
2002, legislated an upward adjustment of $134.5 billion in budget
authority and $132.8 billion in outlays to the other discretionary
category to make room for increased spending above the original
statutory limits. The Act also included a special BA adjustment
allowance of up to 0.12 percent of total appropriations.
Table 1 summarizes changes to the caps since 1990 and includes the
limits established by for highways, mass transit, and conservation
spending. It also includes the revised other discretionary limit for
2002 established in P.L. 107-117.
[[Page 287]]
Table 14-1. HISTORICAL SUMMARY OF CHANGES TO DISCRETIONARY SPENDING LIMITS
(In billions of dollars)
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
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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, 1997
Bipartisan Budget Agreement,
and TEA-21.....................
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 34.6
Adjustment to 1998 OBRA limits BA N/A N/A N/A N/A N/A N/A N/A -6.9 N/A N/A N/A N/A N/A
to reach discretionary
spending limits included in
the 1997 Bipartisan Budget
Agreement....................
OL N/A N/A N/A N/A N/A N/A N/A 6.8 N/A N/A N/A N/A N/A
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 N/A
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 N/A
Adjustments for changes in BA ...... -0.5 -5.1 -9.5 -11.8 3.0 2.6 0.0 N/A N/A N/A N/A N/A
inflation....................
OL ...... -0.3 -2.5 -5.8 -8.8 1.8 2.3 0.9 N/A N/A N/A N/A N/A
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 0.6 N/A
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 0.8 N/A
Adjustments for emergency BA 0.9 8.3 4.6 12.2 7.7 5.1 9.3 5.7 31.9 43.6 20.0 22.2 N/A
requirements.................
OL 1.1 1.8 5.4 9.0 10.1 6.4 8.1 7.0 22.9 35.8 20.5 31.7 N/A
Adjustment pursuant to Sec. BA ...... ...... ...... ...... -15.0 -0.1 -0.1 ...... N/A N/A N/A N/A N/A
2003 of P.L. 104-19 \1\......
OL ...... ...... ...... ...... -1.1 -3.5 -2.4 -1.5 N/A N/A N/A N/A N/A
Adjustments for special
allowances:
Discretionary new budget BA ...... 3.5 2.9 2.9 2.9 ...... ...... ...... N/A N/A 3.2 0.3 N/A
authority..................
OL ...... 1.4 2.2 2.6 2.7 1.1 0.5 0.1 N/A N/A N/A N/A N/A
Outlay allowance............ BA ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... N/A
OL 2.6 1.7 0.5 1.0 ...... ...... ...... 1.2 ...... 0.8 2.4 ...... N/A
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Subtotal, adjustments BA 1.1 19.3 23.6 14.3 -6.7 7.5 11.6 2.9 51.1 47.4 23.7 19.8 N/A
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 24.0 29.2 N/A
Adjustments for Operation BA 44.2 14.0 0.6 * * ...... ...... ...... N/A N/A N/A N/A N/A
Desert Shield/Desert Storm...
OL 33.3 14.9 7.6 2.8 1.1 ...... ...... ...... N/A N/A N/A N/A N/A
Rounding Adjustment........... BA N/A N/A N/A N/A N/A N/A ...... ...... ...... 1.1 0.0 ...... ......
OL N/A N/A N/A N/A N/A N/A ...... ...... ...... ...... ...... ...... ......
TEA-21 Adjustment (Net) \2\... BA N/A N/A N/A N/A N/A N/A N/A N/A -0.9 -0.9 -0.9 -0.9 N/A
OL N/A N/A N/A N/A N/A N/A N/A N/A 1.1 2.6 5.2 7.1 -1.0
Adjustment to reach spending BA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 95.9 N/A N/A
limits mandated in P.L. 106-
429 \3\......................
OL N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 58.6 N/A N/A
Adjustment to reach spending BA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 134.5 N/A
limits mandated in P.L. 107-
117 \4\......................
OL N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 133.1 N/A
Adjustment for conservation BA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.8 1.9
limits established by P.L.
106-291 \5\..................
OL N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1.2 1.9
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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 47.6 118.8 155.2 1.9
OL 37.2 20.8 16.4 12.8 7.9 5.4 6.3 12.3 24.9 40.0 87.8 170.5 0.9
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Preview Report spending limits BA 537.0 536.6 535.7 525.1 511.0 526.6 539.7 533.5 583.2 584.8 660.8 706.3 1.9
\6\.
OL 551.6 545.7 550.4 547.6 548.7 552.7 553.6 560.2 584.2 604.2 652.2 731.3 35.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
N/A = Not Applicable.
* $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\ Division C, Section 101 of P.L. 107-117, the Department of Defense Appropriations Act, FY 2002, included revised budget authority and outlay caps
for FY 2002. In addition, this section provided a budget authority technical estimating difference adjustment allowance of up to 0.12 percent of total
appropriations.
\5\ Title VIII of of P.L. 106-291, the Interior and Related Agencies Appropriations Act, FY 2001, created a new conservation cagetory with limits on
budget authority and outlays for FY 2002-FY 2006.
\6\ Reflects combined Defense Discretionary, Non-Defense Discretionary, Violent Crime Reduction, Highway Category, Mass Transit Category, and
Conservation Category spending limits. FY 2003 figures include Highway, Mass Transit, and Conservation Categories only.
[[Page 288]]
Adjustments to discretionary limits.--The BEA permits certain
adjustments to the discretionary limits. The Final Sequestration Report
for 2002 that OMB issued last month 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 to the highway, mass
transit, and conservation categories. Table 2 shows the adjustments made
in this Preview Report.
Table 14-2. DISCRETIONARY SPENDING LIMITS
(In millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2001 2002 2003
--------------------------------------------------------------------------------------------------------------------------------------------------------
HIGHWAY CATEGORY
Final Sequestration Report Highway Category Spending Limits.................................... BA .......... .......... ..........
OL 26,920 28,489 29,100
Adjustments for the Preview Report:
Technical outlay adjustment.................................................................. BA N/A N/A ..........
OL N/A N/A -178
Adjustment for revenue aligned budget authority.............................................. BA N/A N/A ..........
OL N/A N/A -1,341
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................... BA N/A N/A ..........
OL N/A N/A -1,519
--------------------------------------------------------
Preview Report Highway Category Spending Limits................................................ BA .......... .......... ..........
OL 26,920 28,489 27,581
--------------------------------------------------------------------------------------------------------------------------------------------------------
MASS TRANSIT CATEGORY
Final Sequestration Report Mass Transit Category Spending Limits............................... BA .......... .......... ..........
OL 4,639 5,275 5,531
Adjustments for the Preview Report:
Technical outlay adjustment................................................................ BA N/A N/A ..........
OL N/A N/A 499
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................. BA N/A N/A ..........
OL N/A N/A 499
--------------------------------------------------------
Preview Report Mass Transit Category Spending Limits........................................... BA .......... .......... ..........
OL 4,639 5,275 6,030
--------------------------------------------------------------------------------------------------------------------------------------------------------
CONSERVATION CATEGORY
Final Sequestration Report Conservation Category Spending Limits............................... BA N/A 1,760 1,920
OL N/A 1,473 1,872
Federal and State Land and Water Conservation Fund subcategory............................... BA N/A 540 540
State and Other Conservation subcategory..................................................... BA N/A 300 300
Urban and Historic Preservation subcategory.................................................. BA N/A 160 160
Adjustment for the Preview Report.......................................................... BA N/A .......... 13
Preview Report Urban and Historic Preservation subcategory................................. BA N/A 160 173
Payments in Lieu of Taxes subcategory........................................................ BA N/A 50 50
Federal Deferred Maintenance subcategory..................................................... BA N/A 150 150
Coastal Assistance subcategory............................................................... BA N/A 440 480
Adjustment for the Preview Report.......................................................... BA N/A .......... 2
Preview Report Coastal Assistance subcategory.............................................. BA N/A 440 482
Unallocated.................................................................................. BA N/A 120 225
Adjustments for the Preview Report:
Changes in Concepts and Definitions........................................................ BA N/A -25 ..........
OL N/A -4 ..........
Adjusment pursuant to BEA Section 251(b)(2)(H)(i)............................................ BA N/A N/A 2
OL N/A N/A ..........
Preview Report Conservation Category Spending Limits........................................... BA N/A 1,735 1,922
OL N/A 1,469 1,872
--------------------------------------------------------------------------------------------------------------------------------------------------------
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OTHER DISCRETIONARY SPENDING
Final Sequestration Report Other Discretionary Spending Limits................................. BA 660,803 704,548 N/A
OL 620,606 696,092 N/A
Adjustments for the Preview Report:
No Adjustments............................................................................. BA .......... .......... N/A
OL .......... .......... N/A
--------------------------------------------------------
Subtotal, Adjustments for the Preview Report............................................... BA .......... .......... N/A
OL .......... .......... N/A
--------------------------------------------------------
Preview Report Other Discretionary Spending Limits............................................. BA 660,803 704,548 N/A
OL 620,606 696,092 N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL DISCRETIONARY SPENDING
Final Sequestration Report Total Discretionary Spending Limits................................. BA 660,803 706,308 1,922
OL 652,165 731,329 36,503
Adjustments for the Preview Report............................................................. BA .......... -25 ..........
OL .......... -4 -1,020
Preview Report Total Discretionary Spending Limits............................................. BA 660,803 706,283 1,922
OL 652,165 731,325 35,483
--------------------------------------------------------------------------------------------------------------------------------------------------------
N/A = Not Applicable
After consultation with the Congressional Budget Committees and CBO,
OMB has included several changes in account classification in this
year's budget. First, OMB has fixed a classification error and
reclassified receipts generated by the National Defense Stockpile
Transaction Fund as mandatory. Additionally, the Committees, OMB and CBO
agreed to reclassify the Department of the Interior Services Charges,
Receipts, and Forfeitures account as discretionary from mandatory, and
the Department of the Interior Park Police Pensions account as mandatory
from discretionary. Since there are no explicit overall discretionary
caps for FY 2003, no adjustment is required for these reclassifications.
OMB has also decided to consolidate all FY 2002 appropriations in the
State Wildlife Grants account within the conservation spending category.
To properly represent the effects of this consolidation, OMB has
adjusted the FY 2002 enacted levels for conservation spending downward
by $25 million in the budget and made a corresponding reduction of the
same amount to the FY 2002 conservation category spending limits.
Appropriations for conservation spending in FY 2002 fell below the
overall limit for the category by $2 million. Pursuant to BEA section
251(b)(2)(H)(i), the 2003 budget authority limits for conservation
spending have been adjusted upward by that amount. Appropriations within
two of the conservation spending sub-categories for FY 2002 also did not
meet the established limits for those activities. Specifically, the
Coastal Assistance sub-category received $2 million less than its limit
of $440 million, and the Urban and Historic Preservation sub-category
received $13 million less than its limit of $160 million. As a result,
the amounts by which these appropriations fell below the conservation
sub-category caps have been added to the appropriate FY 2003 sub-
category spending limits, as required by the BEA in section
251(b)(2)(H)(ii).
In addition, section 8101 of TEA-21 requires OMB to revise the highway
spending limits for changes in actual and estimated federal gasoline tax
receipts, relative to the receipt levels assumed in TEA-21. For example,
if actual tax receipts exceed the TEA-21 assumed levels, OMB is required
to increase the limit for the budget year. This adjustment permits
funding to be consistent with the level of taxes that are collected and
earmarked for highway spending. OMB has no discretion when making this
adjustment; its role is purely ministerial. The highway category
adjustments in this report are notable in that they break from the
recent pattern of upward revisions to highway category spending limits.
Over the past several years, actual and estimated gasoline tax
receipts exceeded the levels assumed in TEA-21. Accordingly, OMB applied
the formula as specified in the legislation and increased the highway
category obligation limitations by $3.1 billion in 2001 and $4.5 billion
in 2002. In 2003, however, the TEA-21 formula is estimated to produce a
nearly -$5.0 billion downward adjustment in the highway obligation
limitation. The resulting FY 2003 highway outlay limit is below the FY
2002 outlay limit by -$0.9 billion. This is due both to actual gasoline
tax receipts being lower than anticipated in 2001 and revised Treasury
projections of gasoline tax receipts for 2003.
The adjustment for the mass transit category captures changes in
technical assumptions about the rate at which mass transit obligations
will be spent. This
[[Page 290]]
report includes an upward adjustment of $0.5 billion dollars to the mass
transit category limits due to these revised technical assumptions.
Table 3 details the adjustments to the highways and mass transit
category limits and how those adjustments have been calculated.
Table 14-3. 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 2002 Preview Report............................................................. 30,216 32,310 28,233
Adjustments:
Difference Between Current and Previous Estimate of FY 2003 Highway Tax Receipts................................. N/A N/A -1,497
Difference Between FY 2001 Actual and Estimated Highway Tax Receipts............................................. N/A N/A -3,468
-----------------------------------
Subtotal, Obligation Limitation Adjustment..................................................................... N/A N/A -4,965
FY 2003 Preview Report Obligation Limitation........................................................................ 30,216 32,310 23,268
Outlay Limits in FY 2002 Preview Report............................................................................. 26,920 28,489 29,100
Adjustments:
Decrease in FY 2003 Obligation Limitation...................................................................... N/A N/A -1,341
Changes in Technical Assumptions:
Reestimate of Outlays from Obligation Limitation level, Adjusted to Include Outlays from change in Obligation N/A N/A 27,581
Limitation.....................................................................................................
Reestimate of Outlays from Obligation Limitation level, Adjusted to Include Outlays from change in Obligation N/A N/A 27,759
Limitation.....................................................................................................
-----------------------------------
Adjustment for Changes in Technical Assumptions.................................................................. N/A N/A -178
Total Adjustments................................................................................................... N/A N/A -1,519
-----------------------------------
Outlay Limits in FY 2003 Preview Report............................................................................. 26,920 28,489 27,581
--------------------------------------------------------------------------------------------------------------------------------------------------------
MASS TRANSIT CATEGORY
Outlay Limits in FY 2002 Preview Report............................................................................. 4,639 5,275 5,531
Adjustment:
Changes in Technical Assumptions:
Reestimate of Outlays from Obligation Limitation Using Current Technical Assumptions......................... N/A N/A 6,030
FY 2001 Preview Report Outlays................................................................................. N/A N/A 5,531
-----------------------------------
Adjustment for Changes in Technical Assumptions.................................................................. N/A N/A 499
Outlay Limits in FY 2003 Preview Report............................................................................. 4,639 5,275 6,030
--------------------------------------------------------------------------------------------------------------------------------------------------------
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. However, CBO was unable
to supply OMB with its FY 2003 discretionary spending limit estimates by
the publication deadline for this document. As a result, no comparison
is included.
III. 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
[[Page 291]]
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. For 2002,
net costs of $130.3 billion were removed from the PAYGO scorecard. Since
1998, net costs totaling $176.2 billion have been either exempted or
removed from the scorecard.
Table 4 shows OMB estimates of current balances on the PAYGO
scorecard. For legislation enacted this year, the 2002 impact will be
added to the balance for 2003 in the Final Sequester Report that OMB is
to issue after the 2nd session of the 107th Congress adjourns sine die.
The current PAYGO scorecard shows net costs of $110.7 billion for 2003
and a total of $505.8 billion for 2003 through 2006.
Table 14-4. PAY-AS-YOU-GO SCORECARD
(In millions of dollars)
----------------------------------------------------------------------------------------------------------------
Total
2002 2003 2004 2005 2006 2003-2006
----------------------------------------------------------------------------------------------------------------
Pay-as-you-go scorecard:........................
Revenue impact of enacted legislation........... ....... -86,866 -106,319 -107,744 -126,474 -427,403
Outlay impact of enacted legislation............ ....... 23,828 23,538 22,827 8,224 78,417
---------------------------------------------------------------
Total, net cost impact of enacted ....... 110,694 129,857 130,571 134,698 505,820
legislation................................
----------------------------------------------------------------------------------------------------------------