    [Analytical Perspectives]
    [Budget Reform Proposals]
    [15. Budget Reform Proposals]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 213]]

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

                             BUDGET REFORM PROPOSALS

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

    [[Page 215]]

                           15. BUDGET REFORM PROPOSALS

      The budget process should be transparent, accountable, and orderly.
    The current budget process needs reforms to achieve these goals. No one
    change can fix the budget process, and process alone cannot address
    important fiscal issues. Nevertheless, process changes can be a key
    factor in the effort to control spending. Starting with A Blueprint for
    New Beginnings and continuing with subsequent budgets, this
    Administration has consistently proposed changes to the budget process,
    as well as an extension with changes to key provisions of the Budget
    Enforcement Act (BEA) of 1990, as amended, that are designed to improve
    budget decisions and outcomes. This chapter updates the Administration's
    previous proposals and describes additional reforms proposed by the
    Administration.

              Controlling Entitlements and Other Mandatory Spending

       Mandatory Spending Control.--The Administration proposes to require
    that all legislation that changes mandatory spending, in total, does not
    increase the deficit. The five-year impact of any proposals affecting
    mandatory spending would continue to be scored. Legislation that
    increases the current year and the budget year deficit would trigger a
    sequester of direct spending programs. The proposal does not apply to
    changes in taxes and does not permit mandatory spending increases to be
    offset by tax increases. This proposal effectively applies a pay-as-you-
    go requirement to mandatory spending. Table 15-1 displays the
    President's mandatory spending proposals that would be subject to this
    requirement.

       Long-term Unfunded Obligations.--The Administration proposes new
    measures to address the long-term unfunded obligations of Federal
    entitlement programs. As discussed in Chapter 13 of this volume,
    ``Stewardship,'' spending by the Government's major entitlement
    programs, particularly Social Security and Medicare, is projected to
    rise in the next few decades to levels that cannot be sustained, either
    by those program's own dedicated financing or by general revenues. The
    Administration's proposed measures are designed to begin addressing
    these challenges.
      In the Medicare Modernization Act (MMA) of 2003, Congress provided for
    a more comprehensive review of the Medicare program's finances and
    required the Medicare trustees to issue a warning when general revenue
    Medicare funding is projected to exceed 45 percent of Medicare's total
    expenditures. The President's Budget proposes to build on this reform by
    requiring an automatic reduction in the rate of Medicare growth if the
    MMA threshold is exceeded. The Medicare funding warning was triggered in
    the 2007 Medicare Trustees' Report because, for the second year in a
    row, general revenue expenditures are projected to exceed the threshold
    within the next six years. If action is not taken to keep this threshold
    from being exceeded, the reduction would begin as a four-tenths of a
    percent reduction to all payments to providers in the year the threshold
    is exceeded, and would grow by four-tenths of a percent every year the
    shortfall continued to occur. This provision is designed to encourage
    the President and the Congress to reach agreement on reforms to slow
    Medicare spending and bring it back into line with the threshold
    established by the MMA.
      Social Security's Disability Insurance (DI) program provides
    disability insurance coverage and benefits to America's workers. DI
    outlays have grown as a percentage of all Federal budget outlays from
    about 2.0 percent in 1990 to an estimated 3.7 percent in 2008. The
    Budget projects DI outlays will continue to increase as a

                                                        Table 15-1.  MANDATORY PROPOSALS SUBJECT TO PAYGO
                                                            (Cost/Savings (-) in millions of dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                     Proposals                                      2008       2009       2010       2011       2012       2013     2008-13
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Medicare...................................................................  .........    -12,437    -26,875    -39,798    -45,741    -53,384   -178,235
    State Children's Health Insurance Program..................................  .........      2,260      3,005      4,010      4,680      5,315     19,270
    Medicaid...................................................................        140     -1,767     -2,924     -3,758     -4,305     -4,671    -17,285
    Pension Benefit Guaranty Corporation premiums..............................  .........       -380     -2,217     -2,093     -2,127     -2,056     -8,873
    Outlay effects of tax proposals \1\........................................  .........        -37      3,082      2,570      1,973      1,249      8,837
    Social Services Block Grant................................................  .........  .........     -1,445     -1,683     -1,700     -1,700     -6,528
    Federal student aid programs...............................................  .........     -2,763       -775       -801       -885       -859     -6,083
    Arctic National Wildlife Refuge leasing....................................  .........  .........     -3,502         -2       -503         -3     -4,010
    Other proposals............................................................       -148     -1,140     -1,807       -920       -660     -1,809     -6,484
                                                                                ----------------------------------------------------------------------------
      Total....................................................................         -8    -16,263    -33,458    -42,475    -49,268    -57,918   -199,391
                                                                                ----------------------------------------------------------------------------
        Total, 2008 and 2009...................................................  .........    -16,271  .........  .........  .........  .........  .........
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Affects both receipts and outlays. Only the outlay effect is shown here. For receipt effects, see Table S-7 in the Budget volume.

    Note: A more detailed list of the Administration's mandatory proposals can be found in Table S-6 of the Budget volume.

    [[Page 216]]

    percentage of the Federal budget, along with escalating annual cash
    deficits. The President's Budget proposes a Funding Warning to highlight
    the escalating and persistent fiscal problems facing DI. If SSA's
    actuaries project a negative DI cash flow that is more than 10 percent
    of program cost for four consecutive years in the upcoming 10 years, the
    Board of Trustees will issue the warning in the annual Trustees Report.
      In addition to this Medicare-specific control mechanism and DI Funding
    Warning, the President's Budget proposes to establish a broader
    enforcement measure to analyze the long-term impact of legislation on
    the unfunded obligations of major entitlement programs and to make it
    more difficult to enact legislation that would expand the unfunded
    obligations of these programs over the long-run. These measures would
    highlight proposed legislative changes that appear to cost little in the
    short run but result in large increases in the spending burdens passed
    on to future generations.
      First, the Administration proposes a point of order against
    legislation that worsens the long-term unfunded obligation of major
    entitlements. The specific programs covered would be those programs with
    long term actuarial projections, including Social Security, Medicare,
    Federal civilian and military retirement, veterans disability
    compensation, and Supplemental Security Income. Additional programs
    would be added once it becomes feasible to make long-term actuarial
    estimates for those programs.
      Second, the Administration proposes new reporting requirements to
    highlight legislative actions worsening unfunded obligations. Under
    these requirements, the Administration would report on any enacted
    legislation in the past year that worsens the unfunded obligations of
    the specified programs
      Budget Discipline for Agency Administrative Actions.--A significant
    amount of Federal policy is made via administrative action, which can
    increase Federal spending, often on the order of tens of billions of
    dollars in entitlement programs such as Medicare or Medicaid. Although
    known costs are incorporated into the budget baselines of various
    programs, agencies frequently initiate unplanned for and costly
    proposals. Often, these costs are not reflected in the baseline, or are
    not accompanied by other actions that would pay for the proposed change.
    This results in increased spending and deficits.
      Controlling these costs is integral to the Administration's commitment
    to reducing the deficit and enforcing fiscal discipline. Toward that
    end, the Director of the Office of Management and Budget issued on May
    23, 2005 a memorandum to all Executive Branch agencies implementing a
    budget-neutrality requirement on agency administrative actions affecting
    mandatory spending. Discretionary administrative actions in entitlement
    programs, including regulations, program memoranda, demonstrations,
    guidance to States or contractors, and other similar changes to
    entitlement programs are generally required to be fully offset. This
    effectively establishes a pay-as-you-go requirement for discretionary
    administrative actions involving mandatory spending programs. Exceptions
    to this requirement are only provided in extraordinary or compelling
    circumstances.

                       Controlling Discretionary Spending

      Discretionary Caps.--The Administration proposes to set limits for
    2008 through 2013 on net discretionary budget authority and outlays
    equal to the levels proposed in the 2009 Budget. Legislation that
    exceeds the discretionary caps would trigger a sequester of non-exempt
    discretionary programs. Table 15-2 displays the total levels of
    discretionary budget authority and outlays proposed for 2008 through
    2013. This approach would put in place a budget framework for the next
    five years that ensures constrained, but reasonable growth in
    discretionary programs. For 2008 through 2010, separate defense
    (Function 050) and nondefense categories would be enforced. For 2011-
    2013, there would be a single cap for all discretionary spending.
      These discretionary levels do not reflect the Administration's
    proposal to replace aviation taxes that are currently recorded as
    governmental receipts with FAA user fees that would be recorded as
    offsetting collections. If this proposal is enacted, the Administration
    would adjust discretionary spending levels downward for 2010-2013 by the
    amount of the proposal. In addition, a separate category for
    transportation outlays financed by dedicated revenues would be
    established for 2009. The Administration would support expanding the
    defense category to include all security programs and a corresponding
    change to create a non-security category to ensure resources are devoted
    to security programs and are not diverted for other purposes.
      Program Integrity Cap Adjustments.--An improper payment occurs when
    Federal funds go to the wrong recipient, the recipient receives an
    incorrect amount of funds, or the recipient uses the funds in an
    improper manner. Approximately 85 percent of improper payments are
    overpayments. The Administration has made the elimination of improper
    payments a major focus. Federal agencies have aggressively reviewed
    Federal programs to evaluate the risk of improper payments and have
    developed measures to assess the extent of improper payments. Processes
    and internal control improvements have been initiated to enhance the
    accuracy and integrity of payments and to report the results of these
    efforts, pursuant to the Improper Payments Information Act of 2002 (Pub.
    L. No. 107-300).
      The results of the agencies' assessments have been aggregated into a
    Government-wide report entitled Improving the Accuracy and Integrity of
    Federal Payments. (The report can be found at www.whitehouse.gov/omb/
    financial/fia--improper.html.) In 2007, the agencies reported a total of
    $55 billion in improper payments. This represents a 3.5 percent improper
    payment rate. Over 51 percent of those improper payments are in four
    programs: Medicare, Earned Income Tax Credit, Old-Age, Survivors, and
    Disability Insurance, and Unemployment Insurance. This program integrity
    cap adjustment initiative also captures IRS efforts to improve tax com

    [[Page 217]]

                                     Table 15-2.  DISCRETIONARY CAPS AND ADJUSTMENTS
                                            (Amounts in billions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                          2008 \1\    2009      2010      2011      2012      2013
    ----------------------------------------------------------------------------------------------------------------
    Proposed Discretionary Spending Categories:

      Defense Category (Function 050):
        Budget authority................................     500.2     536.8     545.4        NA        NA        NA
        Outlays.........................................     577.1     576.0     545.4        NA        NA        NA

      Nondefense Category:
        Budget authority................................     441.2     449.8     451.3        NA        NA        NA
        Outlays.........................................     484.5     487.3     518.2        NA        NA        NA

      Discretionary Category:
        Budget authority................................        NA        NA        NA   1,004.5   1,017.5   1,029.5
        Outlays.........................................        NA        NA        NA   1,056.3   1,060.8   1,068.8

      Proposed Cap Adjustments:
        SSA Continuing Disability Reviews:
          Budget authority..............................        NA       0.2       0.5       0.5        NA        NA
          Outlays.......................................        NA       0.2       0.5       0.5        NA        NA
        IRS Tax Enforcement:
          Budget authority..............................        NA       0.5       0.7       1.0        NA        NA
          Outlays.......................................        NA       0.5       0.7       1.0        NA        NA
        Health Care Fraud and Abuse Control:
          Budget authority..............................        NA       0.2       0.2       0.2        NA        NA
          Outlays.......................................        NA       0.2       0.2       0.2        NA        NA
        Unemployment Insurance Improper Payments:
          Budget authority..............................        NA      0.04      0.04      0.04        NA        NA
          Outlays.......................................        NA      0.04      0.04      0.04        NA        NA

      Subtotal, Nondefense Category with Adjustments:
        Budget authority................................     441.2     450.8     452.8        NA        NA        NA
        Outlays.........................................     484.5     488.2     519.7        NA        NA        NA

      Highway Category:
        Outlays.........................................      38.5      40.0        NA        NA        NA        NA

      Mass Transit Category: \2\
        Outlays.........................................       8.7       9.4        NA        NA        NA        NA

    Total, All Discretionary Categories:
      Budget authority..................................     941.4     987.6     998.2   1,006.2   1,017.5   1,029.5
      Outlays...........................................   1,108.8   1,113.6   1,065.1   1,058.0   1,060.8   1,068.8

    Project BioShield Category:
      Budget authority..................................  ........       2.2  ........  ........  ........  ........

    Memorandum: 2008 Enacted Emergencies
      Budget authority..................................     104.4
    ----------------------------------------------------------------------------------------------------------------
    \1\ The combined amounts of discretionary emergency budget authority provided in 2008 Appropriations Acts and
      Continuing Resolutions are displayed separately to display the proposed year-to-year growth in base
      discretionary budget authority.
    \2\ Includes outlays from discretionary budget authority.

    pliance. While not technically improper payments, the challenges of tax
    compliance are similar to those of the improper payments programs.
      In the context of the Administration's efforts to eliminate improper
    payments, the Administration is proposing adjustments for spending above
    a base level of funding within the discretionary levels for several
    program integrity initiatives, specifically for continuing disability
    reviews (CDRs), redeterminations of eligibility, and potentially two
    additional activities if they are as cost-effective as redeterminations
    in the Social Security Administration (SSA), Internal Revenue Service
    (IRS) tax enforcement, the Health Care Fraud and Abuse Control Program
    (HCFAC) in the Centers for Medicare and Medicaid Services and
    Unemployment Insurance improper payments in the Department of Labor.
    These cap adjustments provide an effective way to ensure that limited
    resources are applied to activities that reduce errors and generate
    program savings.
      In the past decade, there have been a variety of successful statutory
    efforts to ensure dedicated resources for program integrity efforts.
    These efforts include cap adjustment funding for Social Security
    continuing disability reviews and integrity efforts associated with the
    Earned Income Tax Credit (EITC). These initiatives have led to increased
    savings for the Social Security and Supplemental Security Income
    programs and an increase in enforcement efforts in EITC. The
    Administration's proposed adjustments for program integrity activities
    will total $968 million in budget authority in 2009, $1,466 million in
    budget authority in 2010 and $1,777 million in budget authority in 2011.
      The Administration continues to support a cap adjustment mechanism to
    promote spending on program integrity efforts. However, statutory cap
    adjustments

    [[Page 218]]

    do not work well when the President and the Congress do not have a cap
    or binding agreement on the top-line for discretionary budget authority.
    Therefore, the Administration is also asking that the Budget Committees
    consider one of several alternative approaches to protecting program
    integrity funding in the Congressional budget resolution.
      One approach would be to adopt a scoring rule in the budget resolution
    for specific program integrity activities. Such a rule would demonstrate
    an agreement between the Budget Committees, would expressly delineate
    the programs and activities encompassed by the rule and would be applied
    only for activities which have accurate and independently validated
    savings estimates. For example, the rule could prescribe a score of
    ``zero'' for the costs of specific program integrity activities where
    the savings are documented. This approach would avoid the issue raised
    by scorekeeping rule 3, which prohibits scoring of changes in mandatory
    outlays unless the authorizing language is modified or appropriations
    language substantively changes the program statute, and that is a
    particular barrier in the context of IRS enforcement.
      Another option would be for the Congressional budget resolution to
    include a reserve fund (or funds) for specific program integrity
    activities with documented savings. Such a fund would hold the
    Appropriations Committee harmless from the cost of the program integrity
    funds requested by providing savings only to offset the discretionary
    cost of such program integrity efforts. If the Appropriations Committees
    did not provide funding for these program integrity activities, the
    discretionary offset would disappear, leaving the top-line unchanged.

      For the Social Security Administration, the $240 million cap
    adjustment would allow SSA to conduct at least an additional 140,000
    Continuing Disability Reviews (CDRs) and at least an additional 635,000
    SSI redeterminations of eligibility in 2009. In addition, up to $74
    million of the cap adjustment funding may be available for initiatives
    to improve the disability process and initiatives to improve the asset
    verification process. The funding could only be used for these
    initiatives if they are as cost-effective as redeterminations of
    eligibility. If this criterion is not met, the funding would be used for
    additional Continuing Disability Reviews and SSI redeterminations. One
    promising activity is an asset verification initiative, currently in
    place in two states, which automatically verifies bank assets for SSI
    applicants through an electronic system. If this initiative is assessed
    and found to be as cost-effective as redeterminations of eligibility,
    some of the cap adjustment funding could be used for a national roll-out
    of the initiative. As a result of the cap adjustment funding, SSA would
    recoup over $2.6 billion in savings

                                 Table 15-3.  PROGRAM INTEGRITY BASE AND CAP ADJUSTMENTS
                                        (Budget authority in millions of dollars)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                 Proposed
                                                       2006       2007       2008   --------------------------------
                                                      Actual     Actual    Enacted      2009       2010       2011
    ----------------------------------------------------------------------------------------------------------------
    SSA Program Integrity:
      Enforcement Base \1\........................        224        141        264        264        264        264
      Cap Adjustments:
        BA........................................         NA         NA         NA        240        485        518
        Outlays...................................         NA         NA         NA        240        485        518

    IRS Tax Enforcement:
      Enforcement Base............................      6,378      6,822      6,997      6,997      6,997      6,997
      Cap Adjustments:
        BA........................................        446         NA         NA        490        730        992
        Outlays...................................        415         NA         NA        462        688        963

    Health Care Fraud and Abuse Control Program:
      Enforcement Base (Mandatory)................      1,187      1,112      1,132      1,156      1,176      1,176
      Cap Adjustments:
        BA........................................         NA         NA         NA        198        211        227
        Outlays...................................         NA         NA         NA        198        211        227

    Unemployment Insurance Improper Payments:
      Enforcement Base............................         10         10         10         10         10         10
      Cap Adjustments:
        BA........................................         NA         NA         NA         40         40         40
        Outlays...................................         NA         NA         NA         40         40         40

    TOTAL:
      Enforcement Base............................      7,799      8,085      8,403      8,427      8,447      8,447
      Cap Adjustments:
        BA........................................        446         NA         NA        968      1,466      1,777
        Outlays...................................        415         NA         NA        940      1,424      1,748
    ----------------------------------------------------------------------------------------------------------------
    \1\ The numbers for 2006 and 2007 for SSA reflect spending on Continuing Disability Reviews (CDRs). For 2008 and
      2009-2011, numbers reflect spending on CDRs and SSI redeterminations. Limited funding in the 2009-2011 cap
      adjustments may also be available for asset verification or disability improvement processes, provided the
      activities are as cost-effective as SSI redeterminations.

    [[Page 219]]

    over a ten-year period, with additional savings after the ten-year
    period, as estimated by SSA's Office of the Actuary. The savings from
    one year of program integrity activities are realized over multiple
    years because some CDRs identify that the beneficiary has medically
    improved and is capable of working, which may mean that they are no
    longer eligible to receive Disability Insurance (DI) or Supplemental
    Security Income (SSI) benefits. This may also result in savings in
    Medicare and Medicaid, since eligibility for these programs is linked to
    DI and SSI. Overpayments of SSI benefits identified by a redetermination
    are not always recovered in the same year that the redetermination is
    conducted.
      SSA is required by law to conduct CDRs for all beneficiaries who are
    receiving Disability Insurance benefits, as well as all children under
    18 who are receiving Supplemental Security Income. SSI redeterminations
    are also required by law, but the frequency is not specified in statute.
    The baseline assumes a more likely scenario for program integrity
    funding, and the President's Budget shows the savings which will result
    from the program integrity cap adjustment proposal.
      The return on investment (ROI) for CDRs is approximately 10 to 1 in
    lifetime program savings. The ROI for redeterminations is approximately
    7 to 1. Redeterminations focus on an individual's eligibility for the
    means-tested SSI program and generally result in a revision to the
    individual's benefit level. However, the schedule of savings resulting
    from redeterminations will be different for the base and the cap
    adjustment. This is due to the fact that redeterminations of eligibility
    can uncover underpayment errors as well as overpayment errors. SSI
    recipients are more likely to initiate a redetermination of eligibility
    if they believe there is an underpayment error, and these recipient-
    initiated redeterminations are included in the base. In addition,
    corrections for underpayment errors are realized more quickly than
    corrections for overpayment errors.

      For the IRS, the $490 million cap adjustment covers cost increases
    (+$132 million) for the $7.0 billion base IRS enforcement program plus
    new investments in expanding staff and improving the efficiency of the
    IRS' enforcement programs (+$358 million). As a result of these efforts,
    the IRS will collect an estimated $55 billion in 2009 in direct
    enforcement revenue. The IRS succeeded in increasing this figure by 75
    percent between 2002 and 2007. The IRS estimates that work completed by
    the proposed new staff in 2009 will eventually yield another $769
    million (including $3 million collected after 2018). Once these new
    staff are trained and become more experienced, the enforcement revenue
    impact of the work they complete each year will rise to $2,001 million.
    However, this ROI estimate is understated because much of the new
    investment is directed towards efforts to improve the performance of the
    exist-

                                                                Table 15-4.  DIRECT SAVINGS ESTIMATED FROM 2009 PROGRAM INTEGRITY FUNDING
                                                                                (Budget authority in millions of dollars)
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     2009                                                    Direct Savings Estimates
                                                                   Program  ------------------------------------------------------------------------------------------------------------------------
                                                                  Integrity
                                                                    Funding     2009       2010       2011       2012       2013       2014       2015       2016       2017       2018      Total
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    SSA Program Integrity \1\
      Enforcement Base..........................................       264        508       -474       -357       -193       -193       -177       -163       -155       -135       -119     -1,458
      Cap Adjustment............................................       240       -123       -795       -469       -209       -214       -195       -179       -172       -146       -125     -2,627

    IRS Tax Enforcement \2\
      Enforcement Base..........................................     6,997    -55,200   .........  .........  .........  .........  .........  .........  .........  .........  .........   -55,200
      Cap Adjustment \3\........................................       490       -154       -425        -86        -36        -26        -13         -8         -7         -3         -8       -766

    Health Care Fraud and Abuse Control Program
      Cap Adjustments \4\.......................................       198       -350   .........  .........  .........  .........  .........  .........  .........  .........  .........      -350

    Unemployment Insurance Improper Payments \5\
      Enforcement Base..........................................        10        -40   .........  .........  .........  .........  .........  .........  .........  .........  .........       -40
      Cap Adjustments...........................................        40        -78        -77   .........  .........  .........  .........  .........  .........  .........  .........      -155
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ This is based on SSA's Office of the Actuary estimates of savings. In the first year, the enforcement base shows a positive outlay. This is due to the fact that redeterminations of
      eligibility can uncover underpayment errors as well as overpayment errors. SSI recipients are more likely to initiate a redetermination if they believe there is an underpayment, and SSA
      completes these beneficiary-initiated redeterminations in the enforcement base. In addition, corrections for underpayments are realized more quickly than corrections for overpayment. The cap
      adjustment does not show an outlay in the first year because SSA would target their cap adjustment redetermination dollars to cases where an overpayment is suspected.

    \2\ Savings for IRS are revenue increases rather than spending reductions. They are shown as negatives for consistency in presentation.

    \3\ The Internal Revenue Service (IRS) cap adjustment funds cost increases for the base program (+$132 million) and new initiatives (+$358 million). The IRS collects $55.2 billion per year
      (2009 estimate) in direct enforcement revenue, and its enforcement program helps maintain the more than $2 trillion in taxes voluntarily paid each year. The cost increases will help maintain
      the base revenue. The 2009 initiatives will yield an estimated $769 million in new enforcement revenue over ten years (including $3 million collected after 2018), fund research to help the
      IRS better target its enforcement resources, and help deter tax cheating. This deterrence impact is not directly measured. However, research suggests it is at least three times as large as
      the direct impact on revenue.

    \4\ These data are based on estimates from the HHS Office of the Actuary for return on investment from program integrity activities.

    \5\ The maximum UI benefit period is typically 26 weeks. As a result, preventing an ineligible individual from collecting UI benefits would save at most a half year of benefits. The two years
      of savings reflect the fact that reemployment and eligibility assessments conducted late in the year affect individuals whose benefits would have continued into the subsequent fiscal year.

    [[Page 220]]

    ing staff (such as new computers and better research) that are not
    reflected in the IRS' ROI calculation. More importantly, the ROI is
    understated because it does not reflect the impact enhanced enforcement
    has on deterring non-compliance that helps to ensure the continued
    payment of more than $2 trillion in taxes voluntarily paid each year.
    The impact of increased IRS enforcement on improving voluntary
    compliance is not directly measured. However, research suggests it is at
    least three times as large as the direct impact on revenue.
      The discretionary cap adjustment of $198 million for the Centers for
    Medicare and Medicaid Services' HCFAC program is designed to provide
    additional resources to identify and reduce improper payments in the
    Medicare prescription drug benefit and Medicare Advantage programs. The
    funding would be allocated among CMS, the Health and Human Services
    Office of Inspector General, the Federal Bureau of Investigation, and
    Department of Justice to safeguard these programs as well as Medicaid
    against fraud and abuse. This $198 million would generate approximately
    $350 million in savings in 2009, which would reflect recouping improper
    payments made to providers.
      The 2009 Budget proposes a discretionary cap adjustment of $40 million
    for the Department of Labor's (DOL) Unemployment Insurance (UI) State
    administrative grants program to reduce UI improper payments, a top
    management challenge identified by GAO and DOL's Inspector General. The
    proposal would expand a $10 million Reemployment and Eligibility
    Assessment initiative begun in 2005 to finance in-person interviews at
    One-Stop Career Centers to assess UI beneficiaries' need for job-finding
    services and their continued eligibility for benefits. The current $10
    million effort results in a savings in UI benefit payments of $40
    million. The maximum UI benefit period is typically 26 weeks. As a
    result, preventing an ineligible individual from collecting UI benefits
    would save at most a half year of benefits. The two years of savings
    from the additional $40 million, totaling $78 million in 2009 and $77
    million in 2010, reflect the fact that reemployment and eligibility
    assessments conducted late in the year affect individuals whose benefits
    would have continued into the subsequent fiscal year.

       Table 15-5.  TRANSPORTATION CATEGORY FOR HIGHWAYS AND MASS TRANSIT
                                    SPENDING
                        (Amounts in millions of dollars)
    ------------------------------------------------------------------------
                                                            2008      2009
    ------------------------------------------------------------------------

    Transportation Category:
      Highways: \1\
        Obligation Limitations..........................    42,457    40,792
        Outlays.........................................    38,504    40,040

      Mass Transit:
        Obligation Limitations..........................     7,768     8,361
        Outlays \2\.....................................     8,650     9,401

    Memorandum:
      Discretionary budget authority for Mass Transit
       included in the Nondefense Category:
        Budget authority................................     1,723     1,775
    ------------------------------------------------------------------------
    \1\ The 2009 level includes $122 million for the National Highway
      Traffic Safety Administration. The proposal is to fund NHTSA
      completely from the Highway Trust Fund instead of a portion from the
      General Fund, as authorized in SAFETEA-LU.

    \2\ Includes outlays from discretionary budget authority.

      Transportation Category.--The Administration's proposal for
    discretionary caps includes separate outlay categories for spending on
    Federal Highway and Mass Transit programs. The transportation levels
    will be financed by dedicated revenues through 2009. Table 15-5 shows
    the levels, including the revenue aligned budget authority (RABA)
    adjustment as authorized in the Safe, Accountable, Flexible, Efficient,
    Transportation Equity Act: A Legacy for Users (SAFETEA-LU) for 2008 and
    2009. The RABA adjustment is calculated based on changes in estimated
    Highway Trust Fund receipts, and results in either an increase or
    decrease in the Highway Category funding level enacted in SAFETEA-LU.
    The amounts shown for 2008 reflect the levels provided by the
    Consolidated Appropriations Act (Pub. L. No. 110-161), which included
    the 2008 RABA adjustment authorized in SAFETEA-LU. For 2009, the RABA
    adjustment authorized in SAFETEA-LU is a reduction of $1,001 million.
    The Administration does not propose to make changes to this authorized
    reduction in 2009. The total level for 2009 includes the final
    installment of the $286.4 billion in highway, transit, and safety
    spending agreed upon in SAFETEA-LU.
      Advance Appropriations.--An advance appropriation becomes available
    one or more years beyond the year for which its appropriations act is
    passed. Budget au

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    thority is recorded in the year the funds become available and not in
    the year of enactment. 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 budget
    authority freed up under the budget year discretionary cap to other
    programs. The effect of these advance appropriations is to limit the
    amount of discretionary budget authority available in subsequent years
    under the discretionary caps, thereby reducing future funding options
    available to both Congress and the President. From 1993 to 1998, an
    average of $2.3 billion in discretionary budget authority was advance
    appropriated each year. In 1999, advance appropriations totaled $8.9
    billion and increased to $23.5 billion in 2000. Between 2001 and 2007,
    advance appropriations remained relatively constant. In 2008, advance
    appropriations were again increased by $2 billion to $25.6 billion. The
    additional advance appropriations were added for Education programs in
    Pub. L. No. 110-161, the FY 2008 Consolidated Appropriations Act.
      Because this budget practice distorts the debate over Government
    spending and misleads the public about spending levels in specific
    accounts, the 2001 Congressional Budget Resolution and this
    Administration's budget proposals have capped advance appropriations at
    the amount advanced in the previous year. By capping advance
    appropriations, increases in these and other programs can be budgeted
    and reflected in the year of their enactment. For 2010, the
    Administration proposes a cap on advance appropriations of $25,552
    million, which includes the already enacted advance appropriation for
    the Corporation for Public Broadcasting.
      In addition, the Administration proposes to score the second-year
    effect of appropriations language that delays obligations of mandatory
    budget authority as advance appropriations that count against the
    discretionary caps. Appropriations acts often include provisions that
    delay obligations of mandatory BA from one year to the next. The first
    year is appropriately scored as a discretionary savings because it is
    included in an appropriations act and it reduces spending in that year.
    However, this is usually a temporary delay, and the funds become
    available for spending in the second year. Under this proposal, the
    second-year impact would be treated as an advance appropriation and
    scored against the discretionary caps. This would correct an
    inconsistency in the current practice where savings are scored in the
    first year, but the second-year impact is reclassified in the subsequent
    budget as mandatory and not scored against the discretionary caps.
      To enforce the level of advance appropriations, the discretionary cap
    proposal provides that total funding for advance appropriations
    (including obligation delays) provided for 2010 in an appropriations act
    that is in excess of the Administration's limit on advance
    appropriations of $25,552 million in 2010 will count against the
    discretionary cap in the year enacted, not against the year the funds
    first become available.
      For more information on individual accounts with advance
    appropriations, please see the chapter on this subject in the Budget
    Appendix.
      Federal Pell Grants.--To ensure funding shortfalls do not accumulate
    in the Pell Grant program in future years, the 2006 Congressional Budget
    Resolution adopted the Administration's proposal to score appropriations
    at the amount needed to fully fund the award level set in appropriations
    acts, beginning with the 2006-2007 school year, if the amount
    appropriated is insufficient to fully fund all awards. The
    Administration proposes to continue this scoring rule. Under this rule,
    the amount scored would be increased to cover any cumulative funding
    shortfalls from previous years and reduced by any surpluses carried over
    from previous years, beginning with any shortfalls or surpluses from the
    2006-2007 school year. If the amount appropriated in previous years
    exceeds the estimated full cost, the amount appropriated would be scored
    against that year, and the surplus would carry over as a credit against
    the following year's cost estimate. In the 2009 Budget, the Department
    of Education estimates that a cumulative $732 million shortfall will be
    carried into the 2009-2010 academic year. For scoring purposes, the
    funding needed to fully fund all awards for 2009-2010 is increased by
    the amount of this shortfall.
      Project BioShield Category.--The Administration proposes a separate
    BEA category for budget authority for Project BioShield, which received
    an advance appropriation for 2009 of $2.2 billion in Pub. L. No. 108-90,
    the 2004 Department of Homeland Security Appropriations Act. Because the
    success of this program in providing for the development of vaccines and
    medications for biodefense depends on an assured funding availability,
    it is critical that this funding not be diverted to other purposes. The
    Administration's proposal to create a separate category will help ensure
    that funding for this program is not reduced and used as an offset for
    other discretionary spending.

         Include Stricter Standard For Emergency Designation in the BEA

      When the BEA was enacted in 1990, it provided a ``safety valve'' to
    ensure that the fiscal constraint envisioned by the BEA would not
    prevent the enactment of legislation to respond to unforeseen disasters
    and emergencies such as Operation Desert Storm, the terrorist attacks of
    September 11, 2001, or Hurricane Katrina. If the President and the
    Congress separately designated a spending or tax item as an emergency
    requirement, the BEA held these items harmless from its enforcement
    mechanisms. Initially, this safety valve was used judiciously, but in
    later years its application was expanded to circumvent the discretionary
    caps by declaring spending for ongoing programs as ``emergencies.''
      The Administration proposes to include in the BEA a definition of
    ``emergency requirement'' that will ensure high standards are met before
    an event is deemed an ``emergency'' and therefore exempt. This
    definition

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    should include the following elements: the requirement is a necessary
    expenditure that is sudden, urgent, unforeseen, and not permanent. These
    elements, all of which would be used for defining something as an
    emergency, are defined as follows:
        necessary expenditure--an essential or vital expenditure,
              not one that is merely useful or beneficial;
        sudden--quickly coming into being, not building up over
              time;
        urgent--pressing and compelling, requiring immediate action;
        unforeseen--not predictable or seen beforehand as a coming
              need (an emergency that is part of the average annual level of
              disaster assistance funding would not be ``unforeseen''); and
        not permanent--the need is temporary in nature.
      This definition codifies the criteria for an emergency that have been
    the standard for a number of years. It is designed to preclude funds
    from being declared an emergency for events that occur on an annual or
    recurring basis. For example, even though it is not possible to predict
    the specific occurrence of fires, tornados, hurricanes, and other
    domestic disasters, it is reasonable to assume that a combination of
    domestic disasters will occur in any given year that require funding
    equal to a multi-year average for disaster relief. Funding at an
    average, therefore, should not be considered an emergency under this
    definition. On the other hand, an average level of funding for domestic
    disasters will not accommodate the level necessary to address a large
    and relatively infrequent domestic disaster, such as Hurricane Katrina.
    Under this definition for emergencies, spending for extraordinary events
    could be classified as emergency funding. In the end, classification of
    certain spending as an emergency depends on common sense judgment, made
    on a case-by-case basis, about whether the totality of facts and
    circumstances indicate a true emergency.
      In addition, the Administration proposes that the definition of an
    emergency requirement also encompass contingency operations that are
    national security related. Contingency operations that are national
    security related include both defense operations and foreign assistance.
    Military operations and foreign aid with costs that are incurred
    regularly should be a part of base funding and, as such, are not covered
    under this definition.
      The Administration proposal also would require that the President and
    Congress concur in designating an emergency for each spending proposal
    covered by a designation. This would protect against the ``bundling'' of
    non-emergency items with true emergency spending. If the President
    determines that specific proposed emergency designations do not meet
    this definition, he would not concur in the emergency designation and no
    discretionary cap adjustment or mandatory spending control exemption
    would apply.

                                    Baseline

      The Administration supports the extension of section 257 of the BEA
    governing baseline calculations with the changes discussed below. The
    baseline estimates presented in the Current Services chapter of this
    volume reflect these proposed changes.
        Assume extension of all expiring tax provisions in the
              Economic Growth and Tax Relief Reconciliation Act of 2001 and
              certain provisions in the Jobs and Growth Tax Relief
              Reconciliation Act of 2003. This proposal is consistent with
              the BEA baseline rules for expiring mandatory spending and for
              excise taxes dedicated to a trust fund. Except for a few
              relatively small mandatory programs, the BEA assumes that
              mandatory spending and excise taxes dedicated to a trust fund
              will be reauthorized and extends them in the baseline. The
              2001 Act and 2003 Act provisions were not intended to be
              temporary, and not extending them in the baseline raises
              inappropriate procedural road blocks to extending them at
              current rates.
        Add a provision to exclude discretionary funding for
              emergencies from the baseline. Instead, the baseline would
              include emergency funding only for the year in which it was
              enacted. The current requirement is for the discretionary
              baseline estimates for the budget year and the outyears to
              assume the current year appropriated level, adjusted for
              inflation. This is reasonable for ongoing programs, where the
              need is expected to continue into the future. For emergencies,
              since the need should be for a short duration, the baseline
              rules build unnecessary funding into the baseline estimates
              for the years after the need has been addressed and passed. In
              effect, the current rule biases the baseline in favor of
              higher discretionary spending.
        Correct the overcompensation of baseline budgetary resources
              for pay raise-related costs due to the way in which these
              costs are inflated. The current requirement, which provides a
              full year's funding for pay raises in the budget year and
              beyond, was written when Federal pay raises were scheduled to
              take effect on October 1, at the start of each fiscal year.
              However, this requirement is now inappropriate because the
              effective date for pay raises is now permanently set by law as
              the first pay period in January. By treating pay raises that
              begin on January 1 as if they take effect for the entire
              fiscal year, the baseline overstates the cost of providing a
              constant level of services.
        Eliminate the adjustments for expiring housing contracts and
              social insurance administrative expenses. Most multi-year
              housing contracts have expired or have been addressed since
              the BEA was first enacted in 1990, so the adjustment is no
              longer needed. The adjustment for social insurance
              administrative expenses is inconsistent with the baseline
              rules for other accounts that fund

    [[Page 223]]

              the costs of administration. These programs should not be
              singled out for preferential treatment.

                                 Earmark Reform

      Earmarks are funds provided by the Congress for projects or programs
    where the congressional direction (in bill or report language)
    circumvents the merit-based or competitive allocation process, or
    specifies the location or recipient, or otherwise curtails the ability
    of the Executive Branch to properly manage funds. Historically, these
    provisions have not been publicly disclosed during the legislative
    process, and often they are special interest projects. A number of
    organizations track earmarks. The Congressional Research Service (CRS)
    and Citizens Against Government Waste (CAGW) have been tracking earmarks
    for over a decade. While they do not use the same definition, their data
    show similar trends. Earmarks have expanded dramatically in recent
    years, with the numbers and costs of earmarks more than tripling since
    the early 1990s. According to CAGW, the Congress added nearly 550
    earmarks at a cost of $3 billion to the budget in 1991. The number of
    earmarks peaked in 2005. CAGW has estimated that earmarks grew to almost
    14 thousand at a cost of $27 billion. CRS data show a similar trend,
    with earmarks reaching more than 16 thousand in 2005 at a cost of $52
    billion. OMB has also been tracking earmarks during recent years, and in
    2007, publicly released its own estimates for 2005, the most recent
    fiscal year for which full data was available. Using the definition
    above, OMB estimates that the number of earmarks grew to over 13
    thousand at a cost of nearly $19 billion in the appropriations bills for
    2005. In 2007, OMB also developed the capability to track earmarks
    during each stage of the legislative process and compare those amounts
    to the 2005 amounts. These estimates are available at
    www.omb.earmarks.gov.
      One major concern about earmarks is the lack of transparency. Most
    earmarks do not appear in statutory language. Instead, they are included
    in committee reports that accompany legislation. According to CRS, more
    than 90 percent of earmarks are in report language. This means that the
    vast majority of earmarks do not appear in the statutory language that
    the Congress actually votes on or that the President signs into law.
    Also, earmarks frequently surface in the last stage of the legislative
    process, in conference committees between the House and the Senate.
      In response to the President's call for earmark reform, changes in the
    House Rules and Senate legislation during the 110th Congress required
    more disclosure for earmarks. The President is pleased that the Congress
    has begun to make progress in bringing greater transparency to the
    earmarking process. Taxpayers should feel confident that their tax
    dollars are being spent wisely. Unfortunately, the large number of
    earmarks and the continuing lack of transparency in the earmarking
    process make it difficult to assure the public that the Government is
    spending the people's money on the Nation's highest priorities. As a
    consequence, earmark reform remains a priority in this Budget.

                                 Line-Item Veto

      A perennial criticism of the Federal Government is that spending and
    tax legislation contain too many provisions that are not fully
    justified, are a low priority, or are earmarked to avoid the discipline
    of competitive or merit-based reviews. These special interest items
    would likely not become law if considered as a stand-alone bill, and
    their persistence diverts resources from higher priority programs and
    erodes the confidence of citizens in Government.
      From the Nation's founding, presidents have exercised the authority to
    not spend appropriated sums. However, Congress sought to curtail this
    authority in 1974 through the Impoundment Control Act, which restricted
    the President's authority to decline to spend appropriated sums.
    Although the Line Item Veto Act of 1996 attempted to give the President
    the authority to cancel spending authority and special interest tax
    breaks, the U.S. Supreme Court found that law unconstitutional.
      In 2006, the President asked that Congress correct this state of
    affairs by providing him and future presidents with a line item veto
    that would withstand constitutional challenge, and the President
    transmitted legislation to the Congress in March 2006 that accomplishes
    this purpose. Under the President's proposal, a President could propose
    legislation to rescind wasteful spending, and the Congress would be
    obligated to vote quickly on that package of rescissions, without
    amendment. All savings from the line-item veto would be used for deficit
    reduction; they could not be applied to augment spending elsewhere.
      The President's proposal received strong support. In June 2006, the
    House of Representatives voted on a bipartisan basis to enact a version
    of the Legislative Line Item Veto. In the Senate, members voted to
    report an amended version of the President's proposal out of the Senate
    Budget Committee for consideration on the floor.
      Forty-three Governors have a line item veto to reduce spending, and
    the President needs similar authority to help control unjustified and
    wasteful spending in the Federal budget. The Administration urges
    continued support for this common-sense provision and will seek its
    enactment in the 110th Congress.

                      Credit Reform and Insurance Proposals

    Credit Reform

      The Federal Credit Reform Act (FCRA), as amended by the Balanced
    Budget Act of 1997, provides the framework for budgetary accounting for
    Federal credit programs. In the coming year, the Administration plans to
    discuss with Congressional Committees, the Congressional Budget Office,
    and the Government and Accountability Office the following issues:
        Scope of the Federal Credit Reform Act;

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        Treatment of administrative costs in credit program cost
              estimates;
        Improvements in methods for making credit subsidy cost
              estimates; and
        Treatment of financial risk insurance programs in the
              budget.
      Scope of the Federal Credit Reform Act.--The Administration proposes
    to explore options to build consensus on FCRA applicability, and reduce
    the potential for budgetary gimmicks based on FCRA scoring. For example,
    budgetary constraints for capital projects can lead agencies and their
    advocates to develop proposals which minimize or eliminate up-front
    costs by relying on third-party financing. Where the Federal Government
    is ultimately responsible for the activity or asset, financing through
    third parties is an inefficient means of accomplishing the policy goal,
    and can ultimately lead to higher taxpayer costs than financing the
    activity directly through the Treasury.
      In some cases, there is disagreement with FCRA applicability. For
    example, since the implementation of FCRA in 1992, it has been the
    position of OMB that the FCRA definition of loan guarantee, which
    includes ``any guarantee, insurance, or other pledge with respect to
    payment of all or part of the principal or interest on any debt
    obligation of a non-Federal borrower to a non-Federal lender'' applies
    to guarantees of non-Federal securities, including those providing
    secondary guarantees on federally-guaranteed loans. Opposing arguments
    have focused on the administrative burden of FCRA implementation or
    stated that FCRA should not apply because risk is primarily borne by the
    primary guarantors.
      Administrative costs.--When credit reform was being formulated some
    argued to include administrative costs in the subsidy cost estimate, as
    the Government clearly has a long term commitment to maintaining the
    credit portfolio while the loans are outstanding. However, when FCRA was
    enacted, Congress maintained administrative expenses on a cash basis,
    consistent with other administrative costs. In some cases, increasing
    loan volumes without sufficient administrative resources may impede the
    agency's ability to effectively manage its credit portfolios if it
    cannot support loan accounting systems or other basic tools necessary
    for effective oversight and management. Ineffective oversight and
    management can lead to increased risk to the taxpayer and potentially
    higher cost.
      Methods to improve credit subsidy cost estimates.--Potential
    improvements the Administration would like to consider include
    discounting to a single point in time, and identifying methods to better
    reflect uncertainty and risks not explicitly captured under the current
    system. Currently, under FCRA and associated guidance, the cost of
    credit programs is based on cash flows discounted to the point of
    disbursement. Some programs disburse over several years. To accurately
    calculate the subsidy costs, agencies have to keep more detailed records
    of cashflows associated with each disbursement, or employ simplified
    methods. The former can be an administrative burden, while the latter
    may make it difficult to understand changes in cost due to borrower
    performance, versus the simplified methods. Also, current methods may
    not fully capture certain risks and uncertainty, such as the total cost
    of variable rate loans or guarantees, or the potential of unexpectedly
    high losses coinciding with periods of economic distress and budgetary
    pressure. The private sector employs methods to reflect these risks in
    their own portfolios which may be useful and will be considered,
    although some methods may not be applicable to Federal programs or may
    be too complex to effectively implement.

                         Treatment of Insurance Programs

      Claims associated with a year's insurance policies can pay out over
    years or even decades but the budget currently reflects only the
    payments made within the budget window. However, there are other options
    for the budgetary treatment of Federal insurance programs, including
    presentations on a net-present value basis similar to the treatment of
    credit programs.
      For example, the Pension Benefit Guarantee Corporation suffers claims
    when under-funded plans terminate under financial distress. Under a
    claim, the PBGC incurs an obligation to pay participants benefits for
    their entire retirements, which can last decades. Under cash budgeting
    only the benefit payments within the budget window (usually five years)
    appear. However, the PBGC itself uses accrual accounting in its
    financial statements and in making its management decisions. Under
    accrual budgeting, the budget would record as a cost the amount that
    PBGC financial statements currently view as the cost of a claim: the
    present value of guaranteed benefit payments minus the value of plan
    assets.
      The treatment of insurance programs in the budget is not a new issue.
    When the Congress and the George H.W. Bush Administration enacted the
    Federal Credit Reform Act of 1991, they ordered OMB, CBO, and GAO to
    study the issue, finding that analytical capabilities were not ready to
    implement accrual budgeting for insurance programs. However, since then,
    insurance program agencies have made great strides in developing models
    to project cash flows of insurance programs.
      Indeed, with present accounting methods, measuring the cost of
    insurance programs on an accrual basis is generally not more difficult
    than measuring their cost on a cash basis. The main challenge facing
    insurance agencies is how to project a single set of cash flows for the
    budget given the multiple, and sometimes catastrophic scenarios facing
    their programs; that challenge exists under both cash accounting and net
    present value accounting. Insurance programs use probabilistic modeling
    to collapse such multiple scenarios into one for cash or present value
    budgeting. In some cases cash budgeting involves more steps than accrual
    budgeting; for example when an agency can accurately predict the value
    of a claim but faces uncertainty about the timing of its payouts or
    recoveries.
      Before implementing a change in the treatment of insurance programs,
    the Administration and the Con

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    gress would need to clarify the definition of an ``insurance program.''
    For example, because the programs that are grouped under the label of
    ``social insurance'' do not involve binding obligations and in some
    cases do not resemble typical insurance programs (e.g., the main Social
    Security program), the Administration would not include social insurance
    programs in any such proposal.

                          Other Budget Reform Proposals

      Joint Budget Resolution.--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 to offset any excess spending, similar
    to the BEA. It would bring the President into the process at an early
    stage, encourage the President and the Congress to reach agreement on
    overall fiscal policy before individual tax and spending bills are
    considered, and give the budget resolution the force of law.
      Biennial Budgeting and Appropriations.--Only three times in the last
    26 years have all appropriation bills been enacted by the beginning of
    the fiscal year. Because Congress must enact these bills each year, it
    cannot devote the time necessary to provide oversight and fully address
    problems in Federal programs. The preoccupation with these annual
    appropriations bills frequently precludes review and action on
    authorization legislation and on the growing portion of the budget that
    is permanently funded under entitlement laws. According to the
    Congressional Budget Office, in recent years the Congress appropriated
    between $160 billion and $170 billion for programs and activities whose
    authorizations of appropriations have expired.
      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 odd-numbered years,
    with even numbered years devoted to authorizing legislation.
      Government Shutdown Prevention.--In the 23 out of the past 26 years in
    which Congress has not finished appropriation bills by the October 1st
    deadline, it has funded the Government through ``continuing
    resolutions'' (CRs), which provide temporary funding authority for
    Government activities, usually at current levels, until the final
    appropriations bills are signed into law.
      If Congress does not pass a CR or the President does not sign it, the
    Federal Government must shut down. Important Government functions should
    not be held hostage simply because of an impasse over temporary funding
    bills. There should be a back-up plan to avoid the threat of a
    Government shutdown, although the expectation is that appropriations
    bills still would pass on time as the law requires. Under the
    Administration'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.
      Results and Sunset Commissions.--The Federal Government's ability to
    serve the American people is often hampered by poorly designed programs
    or uncoordinated, overlapping programs trying to achieve the same
    objective. Today, almost 25 percent of assessed programs on which the
    Government spends almost $150 billion a year have been determined to be
    either ineffective or unable to demonstrate results. And the problem of
    overlapping programs exists in many areas where the Government is trying
    to serve.
      From the 1930s through 1984, presidents were permitted to submit plans
    for reorganizing Federal agencies to Congress that would become
    effective unless the plan was disapproved by either House of Congress.
    After the Supreme Court decision in INS v. Chadha (462 U.S. 919), the
    authority granted to presidents for submitting reorganization plans
    under the Reorganization Act (5 U.S.C. 903) was limited by the
    requirement of congressional approval through a joint resolution and by
    the scope of what could be proposed. This authority was no longer
    available to the President after 1984.
      Today, proposals to restructure or consolidate programs or agencies so
    they can perform better require a change in law and often face long odds
    of being enacted due to a cumbersome process that requires approval from
    multiple congressional committees.
      To address this problem, in June 2005 the Administration transmitted
    the Government Reorganization and Program Performance Improvement Act,
    which would establish bipartisan Results Commissions and a Sunset
    Commission. Results Commissions would consider and revise Administration
    proposals to restructure or consolidate programs or agencies to improve
    their performance. The Sunset Commission would consider Presidential
    proposals to retain, restructure, or terminate agencies and programs
    according to a schedule set by the Congress. Agencies and programs would
    automatically terminate according to the schedule unless reauthorized by
    the Congress. The legislation was introduced in the House and Senate,
    but was not enacted.