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



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                         BUDGET REFORM PROPOSALS

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                       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.



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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

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                                 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

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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.


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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

[[Page 221]]

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

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          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.