[House Prints, 105th Congress]
[From the U.S. Government Publishing Office]
105th Congress COMMITTEE PRINT 1st Session
_______________________________________________________________________
THE CONGRESSIONAL BUDGET PROCESS
September 26, 1997 Briefing
and
Selected Printed Materials
__________
SUBCOMMITTEE ON LEGISLATIVE AND BUDGET PROCESS
of the
COMMITTEE ON RULES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Printed for the Use of the Committee on Rules
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U.S. GOVERNMENT PRINTING OFFICE
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__________________________________________________________________________
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COMMITTE ON RULES
GERALD B.H. SOLOMON, New York, Chairman
DAVID DREIER, California JOHN JOSEPH MOAKLEY, Massachusetts
PORTER GOSS, Florida MARTIN FROST, Texas
JOHN LINDER, Georgia TONY P. HALL, Ohio
DEBORAH PRYCE, Ohio LOUISE M. SLAUGHTER, New York
LINCOLN DIAZ-BALART, Florida
SCOTT McINNIS, Colorado
DOC HASTINGS, Washington
SUE MYRICK, North Carolina
William D. Crosby, Chief Counsel
Daniel J. Keniry, Staff Director
George C. Crawford, Minority Staff Director
Bryan H. Roth, Office and Systems Manager
______
Subcommittee on Legislative and Budget Process
PORTER GOSS, Florida, Chairman
JOHN LINDER, Georgia MARTIN FROST, Texas
DEBORAH PRYCE, Ohio JOHN JOSEPH MOAKLEY, Massachusetts
DOC HASTINGS, Washington
GERALD B.H. SOLOMON, New York
Wendy Selig, Counsel
Kristi Walseth, Minority Staff Director
______
Subcommittee on Rules and Organization of the House
DAVID DREIER, California, Chairman
LINCOLN DIAZ-BALART, Florida TONY P. HALL, Ohio
SCOTT McINNIS, Colorado LOUISE M. SLAUGHTER, New York
SUE MYRICK, North Carolina
GERALD B.H. SOLOMON, New York
Vincent Randazzo, Counsel
Michael Gessel, Minority Staff Director
(ii)
C O N T E N T S
__________
Page
September 26, 1997
Opening statement of Hon. Porter J. Goss, chairman of the
Subcommittee on Legislative and Budget Process 02
Statement of:
Keith, Robert, Specialist in American National Government,
Government Division, Congressional Research Service........ 03
Saturno, James V., Specialist on the Congress, Government
Division, Congressional Research Services.................. 11
Irving, Sue, Associate Director for Federal Budget Issues,
General Accounting Office.................................. 14
Horney, James R., Chief of the Projections Unit, Budget
Analysis Division, Congressional Budget Office............. 18
Additional Information:
Accompanying Slide Presentation.............................. 27
CRS Report One: A Brief Introduction to the Federal Budget
Process.................................................... 50
CRS Report Two: Budget Enforcement Act of 1997: Summary and
Legislative History........................................ 83
CRS Report Three: Points of Order in the Congressional Budget
Process.................................................... 111
CRS Report Four: The Appropriations Process and the
Congressional Budget Act................................... 125
CRS Report Five: The Line Item Veto Act...................... 135
CRS Report Six: The Line Item Veto Act: Procedural Issues.... 141
CRS Report Seven: Deficit-Reduction Lockbox Proposals:
Summary and Legislative History............................ 147
CRS Report Eight: Proposals for an Automatic Continuing
Resolution................................................. 159
CRS Report Nine: The Senate's Byrd Rule Against Extraneous
Matter in Reconciliation Measures.......................... 165
Excerpt of: Fiscal Year 1996 Agency Spending by Budget
Function. United States General Accounting Office Report to
the Honorable Richard K. Armey, Majority Leader, House of
Representatives............................................ 199
Biographies of Briefers...................................... 210
(iii)
BRIEFING - BUDGET ENFORCEMENT PROCEDURES IN THE HOUSE
----------
Friday, September 26, 1997
House of Representatives,
Subcommittee on Legislative and Budget Process,
Committee on Rules,
Washington, D.C.
The subcommittee met, pursuant to call, at 9:30 a.m. in
Room H-313, The Capitol, Hon. Porter J. Goss [chairman of the
subcommittee] presiding.
Present: Representatives Goss, Linder, Pryce, Hastings and
Solomon.Also Present: Representative Dreier.
Mr. Goss. The briefing will come to order.
I thank Members for being here this morning.
This is a continuation of our series on understanding and
awareness about our budget process for preparation for further
reform. Simplification and accountability, I think, are areas
that we are very interested in. Enforcement is another subject
that has been suggested recently on the House floor. I know
Members have busy schedules, and I am grateful that they have
taken the time, the fact that we have this many members of the
committee--and I understand others may come in as we go on--
shows our commitment to what we are about.
We are very grateful for the folks who are going to be with
us this morning. I have to make one administrative
announcement, to put Chairman Solomon at ease. The picture of
Richard Bolling is safely ensconced in the Chairman's office.
It will return. We needed the space.
Mr. Dreier. We just wanted to see the Solomon portrait up
there.
The Chairman. I do not want to get involved in the taking
down of portraits.
Mr. Goss. I know that sometimes it gets to be an issue in
this room. So I wanted to be sure that everybody knew exactly
what was going on. There was no political agenda involved in
this thing at all.
I have a brief statement.
Mr. Dreier. Explain why it was taken down.
Mr. Goss. Why it was taken down was so that we would have
the opportunity for technical display, which I hope we will be
able to have.
Mr. Dreier. Which we are not going to have, apparently.
Mr. Goss. I read in a note that apparently that may not
happen, but also that is not a hidden agenda.
Mr. Dreier. So should we go and get Bolling's portrait
right now?
Mr. Goss. Perhaps we should, if anybody is uncomfortable.
Otherwise, we will proceed. I am going to read a brief
statement for the record.
First of all, I do thank Members and our briefers for being
here. I think everybody knows this is unfinished business, the
question of the budget process. Going back to the outset of the
104th Congress, the committee under Chairman Solomon's
leadership began a comprehensive review of the congressional
budget process, particularly the procedures that fall directly
within our oversight purview.
In 1995, we held three joint subcommittee hearings with
Chairman Dreier, Chairman Solomon, and myself, and throughout
1995 and 1996 we worked long and hard on the line-item veto and
the deficit reduction lockbox, two specific budget process
measures which we are all familiar with. All the while, we have
attempted to work with our colleagues on both sides of the
aisle with specific concerns with existing procedures and
offered a variety of proposals for some reform.
Our subcommittee is sponsoring today's seminar because I
believe we have an obligation to the House to better inform
ourselves on the nuts and bolts of the congressional budget
process because we have got more work to do, and this would be
a good foundation for it.
As Members recall, we recently went through floor
consideration of a bipartisan proposal to rewrite the budget
process known as the Barton-Stenholm bill. At that time it was
clear that many Members of the House do not fully understand
the complexities and details of the process. It is also clear
that there is strong sentiment about the excessive confusion
and lack of accountability offered by current procedures.
Frankly, our colleagues look to this committee for guidance,
for advancement of responsible reform ideas, and we have had a
number of requests to get on with this job.
Chairman Solomon and I have committed to developing a
proposal before the end of this Congress, and of course,
Chairman Dreier was involved in extensive hearings in the
previous Congress on the same subject.
I would like to introduce our briefers for today and point
out that Members have already received biographical information
on each of them. It is a fairly unique event this morning that
involves the best budget process minds of three separate
agencies. Each agency has expertise and we expect it will be a
case where the whole will be greater than the sum of its parts.
In addition, we are going to experiment with bringing the Rules
committee into the 20th century and offer Members and staff
some basic presentation--however, apparently we are going back
to the 19th century, because the 20th century plug didn't work
or something. What happened?
The Clerk. We are missing the necessary equipment.
The Chairman. Back to reality.
Mr. Goss. Chairman Solomon prevails.
Thank you all for taking the time to be here today. We will
begin with Bob Keith of CRS, who will be followed by Jim
Saturno of CRS, then Sue Irving of GAO, and then Mr. Horney of
CBO.
Obviously, I would like to thank Stan Bach and John Kelley
of CRS; Bob Sexton, Chris Bonham, and John Mingus of GAO; and
Sandy Davis of CBO for the help of pulling this together, as
well as our own staff who has worked extensively and
excessively on this.
The agenda I believe Members have shows an overview of 20
minutes that Bob Keith will do, and then we go to Jim Saturno's
piece and so forth, and they are all identified by subject
matter. And I would also, rather than reading it, I will put in
the record the backgrounds on our briefers, the bios. Members
who wish to take a look at that during the course of the day,
please do.
There is also a memo I think all Members have of how we got
where we are. There is a pretty complete package so we are not
jumping in totally cold on this thing. We will make sure that
the record is provided with all of those materials, and we will
begin with Bob Keith.
STATEMENT OF BOB KEITH, CONGRESSIONAL RESEARCH SERVICE
Mr. Keith. Thank you, Mr. Chairman, Mr. Goss.
On behalf of the panel, let me just express our gratitude
in being asked here today to discuss this important issue. The
topic of budget enforcement in the House of Representatives is
potentially a very broad one. The authorities that underpin
enforcement encompass not only rulemaking provisions in statute
and other statutory provisions, the standing rules of the
House, standing unanimous consent agreements, committee rules,
and party conference and caucus guidelines, but also practices,
conventions, and norms as well. Enforcement applies to many
different types of issues, such as substantive budget policies,
the timing of legislative actions, and the separation of
distinct budget processes, among others.
For purposes of this briefing, we have been asked to focus
on the aspects of budget enforcement that are most important to
the activities of this committee. Consequently, we will discuss
mainly those procedures that stem from the rules of the House
and affect legislative activity, principally rulemaking
provisions in the two major budget process statutes.
Further, the discussion will center on the enforcement of
substantive budgetary policies and budgetary timing
requirements. Other issues, such as the enforcement of the
boundaries between the authorization and the appropriation
processes under Rule XXI, can be taken up at a later time.
In this instance, substantive budgetary policies may
involve fairly broad matters, such as the appropriate level of
discretionary spending; more specific matters, such as the
appropriate level of spending under the control of a particular
committee; and more specific matters still, down to the level
of the line item.
Budget enforcement thus deals with such diverse questions
as: Are the costs of the pending legislation consistent with
the overall spending levels established in the budget
resolution? Does the spending recommended in this legislation
constitute an unfunded mandate? Is this legislation being
considered in a timely manner as prescribed in the budget
process timetable?
I will provide a brief overview of these budget enforcement
rules and procedures, and my colleagues will explain them, and
illustrate their use, in more detail.
As we all painfully are aware, budget enforcement is an
exceedingly complex topic and this complexity often leads to
confusion. We had prepared a number of visual aids for use in
this presentation--you should have hard copies--and I want to
thank John Mingus of GAO in preparing these for us.
Unfortunately, it appears that our projection equipment is
surplus from the MIR space station, so we will have to send it
back.
In this overview, I will identify and summarize key budget
enforcement procedures, discuss the role of this committee in
the enforcement process, and comment on some recent trends.
Budget enforcement occurs principally along a dual track
involving procedures under the Congressional Budget Act of
1974, which established a congressional budget process, and the
Balanced Budget and Emergency Deficit Control Act of 1985,
which established the sequestration process. The latter measure
is more commonly known as the Gramm-Rudman-Hollings (GRH) act.
Both acts have been amended substantially several times.
Most recently, they were both amended by the Budget Enforcement
Act of 1997. That was title X of the first of two
reconciliation acts just passed.
Sequestration is an executive rather than a legislative
process, and the Rules Committee is not involved in its basic
operation. However, its central purpose is to force the
President and Congress to reach agreement on budgetary measures
through the regular legislative process in order to avoid the
automatic, across-the-board cuts of a sequester. Consequently,
the House and Senate have shaped their budget enforcement
procedures to give themselves every opportunity to avoid a
sequester, and the congressional budget process uses some of
the same terms and concepts that are used in the sequestration
process.
Every time the House and Senate act on a budgetary measure,
they must be mindful of the implications down the road for the
sequestration process. In some ways, this has complicated the
task of keeping the differences between these two enforcement
tracks straight. So, although you are generally familiar with
the features of both acts, it might be helpful at this point to
briefly compare and contrast them from the perspective of
budget enforcement.
If you turn to your visual aids, we will look at the first
one, labeled "Dual Enforcement Tracks," and you see two
columns. The one on the left covers the congressional budget
process and the column on the right covers the sequestration
process.
As I mentioned, the authority underpinning the
congressional budget process is the Congressional Budget Act of
1974, and the sequestration process stems from the Balanced
Budget and Emergency Deficit Control Act of 1985.
Both processes apply to all types of measures, but the
enforcement level differs. In the case of the congressional
budget process, these decisions are enforced for revenues,
spending, and the debt limit--full components of the Federal
budget. In the case of sequestration, violations are enforced
solely on the spending side.
Enforcement under the congressional budget process occurs
throughout the session during the consideration of individual
measures. It is a legislative enforcement process. The
executive enforcement process under sequestration, however,
only occurs after a session of Congress has ended. The GRH act
requires OMB to issue a sequestration report within 15 days
after the session of Congress ends, and the President is
required to issue an order in strict conformity with that
report and must do so immediately.
There is one situation where a sequester could occur during
the session, and that is within the context of action on a
supplemental appropriations bill. But generally speaking, we
think of a sequester occurring after the end of the session,
taking into account legislative action.
Under the congressional budget process, Social Security and
the Postal Service are exempt. They are off-budget entities.
Although I must say Social Security is such a large program,
its effects cannot be ignored, and information about Social
Security arises all of the time in the congressional budget
process. But it is not included in the overall numbers that
both chambers use for enforcement.
To make the matter more complex, the Senate does stick into
the budget resolution some numbers relating to Social Security,
but that is for purposes of the enforcement of a freestanding
provision in the law that the Senate uses, not for enforcement
of the budget process generally.
In the sequestration process, Social Security and the
Postal Service are exempt, but so are many other programs--
relatively few on the discretionary side, but quite a few on
the mandatory side.
The congressional budget process relies on points of order
based on the budget resolution; sequestration relies on the
sequestration order from the President, based on an OMB report.
Finally, the principal enforcement mechanisms that we are
concerned with today under the congressional budget process are
spending suballocations and reconciliation, and under the
sequestration process, the discretionary spending limits and
the pay-as-you-go requirement. This deserves fuller discussion.
With regard to the last comments on the slide, it is
apparent that the dichotomy between discretionary spending on
the one hand, and direct spending and revenues on the other, is
very important for budget enforcement. The dichotomy reflects
different procedures for fundamentally different components of
the budget involving different types of budgetary transactions,
committee relationships, programmatic characteristics and so
on.
Generally speaking, discretionary spending is provided in
annual appropriation acts, except for that portion that covers
appropriated entitlements, such as Medicaid. Discretionary
spending finances the routine operations of the Federal
Government. Legislation providing discretionary spending falls
under the jurisdiction of the Appropriations Committees and
must be acted on every year.
Direct spending, which sometimes is called mandatory
spending, is spending that falls outside the control of the
annual appropriations process. For the most part, direct
spending funds permanent entitlement programs such as Medicare
and Federal employees' retirement. The food stamp program is
specifically identified in law as a direct spending program.
Laws providing direct spending fall under the jurisdiction of
the legislative committees, especially the House Ways and Means
and Senate Finance Committees. Usually legislation affecting
direct spending programs is acted on only if the committee of
jurisdiction chooses to initiate those changes or is complying
with a reconciliation instruction.
Under the recent budget agreement, direct spending is
expected to grow by about $300 billion from fiscal year 1998 to
fiscal year 2002, increasing from $1.6 trillion to $1.9
trillion during that period. This is in contrast to
discretionary spending, which holds roughly steady at about
$560 billion during this period.
Mr. Goss. What is the period again?
Mr. Keith. Fiscal year 1998 through 2002, the standard 5-
year interval.
Except for a period of several years in the 1980s when
defense spending was increased markedly, direct spending and
interest have been the engines of growth in the Federal budget.
In the congressional budget process, there are various
mechanisms to control discretionary and direct spending. The
chief enforcement tool for discretionary spending is the
suballocation of spending in the budget resolution to each of
the appropriations subcommittees. For direct spending, as well
as revenues, it is the reconciliation process.
In the sequestration process, discretionary spending is
controlled by limits on budget authority and outlays for
different categories. Direct spending is controlled under the
pay-as-you-go, or PAYGO process, which requires that direct
spending and revenue legislation enacted for a fiscal year not
increase the deficit in the net. In other words, that it be
deficit neutral. These procedures, which were first put into
place in 1990, superseded the deficit targets originally
established in the Gramm-Rudman-Hollings act.
The PAYGO process does not address enforcement of the
"base" of direct spending. For example, estimates of
entitlement spending can increase during the session due to
changing assumptions about the number of beneficiaries and no
procedural consequences will ensue. The PAYGO process only
deals with the budgetary consequences of legislative action.
The reconciliation process, in contrast, enables Congress to
affect the direct spending base by reaching in and revising the
legislation that established entitlement programs.
The Budget Enforcement Act, or BEA, of 1997, made a number
of changes in both the sequestration process and the
congressional budget process. The chief purpose of these
changes is to ensure that the budgetary savings achieved in the
two reconciliation bills is preserved over the next 5 years.
First, the discretionary spending limits and PAYGO process,
which were slated to expire at the end of fiscal year 1998,
were extended through fiscal year 2002. In the case of the
PAYGO process, the procedures remain in effect for another
several years after that, through fiscal year 2006, to deal
with the long-term consequences of any revenue or direct
spending legislation enacted through 2002.
In the case of the discretionary spending limits, new
categories were instituted. For the first two of these five
years, they distinguish between defense and nondefense
spending. Also, for the first three years of this period,
spending for violent crime reduction pro-
grams is separated out. Toward the end of the process, all
discretionary spending is lumped together into one category.
In 1990, some temporary changes in procedure were put into
a new Title VI of the 1974 Congressional Budget Act. The BEA of
1997 repealed Title VI. It made some of the temporary changes
permanent and it dispersed these new permanent provisions to
other sections of the act. Perhaps most importantly, the
temporary requirement that the budget resolution cover a
minimum of five fiscal years instead of three was made
permanent. So we are fixed on a 5-year cycle now.
Expanding the time horizon of the budget resolution is an
important element of enforcement because it provides an
incentive for more deliberate restructuring of programs to save
costs and a disincentive to use budget gimmicks, such as
shifting costs to a later fiscal year not covered by the budget
resolution.
Title VI also made temporary changes in the process of
making and enforcing allocations and suballocations of spending
under a budget resolution. The BEA of 1997 made these temporary
requirements permanent and restored them back to Title III. Now
that everyone has become accustomed to calling them Section
602(b) suballocations, we have to revert back to calling them
Section 302(b) suballocations.
As a general matter, the commonalities of budget
enforcement between the House and Senate are very strong. The
two bodies reach concurrence on a budget plan each year and
rely principally on reconciliation and spending allocation
procedures to ensure compliance. However, there is also
considerable divergence between the two bodies in enforcement
procedures.
The Senate has developed its own approach and methods of
enforcement in some areas. For example, the Senate has the so-
called Byrd Rule, incorporated into the 1974 Budget Act as
Section 313, to bar extraneous matter from reconciliation
bills, and it also has a special pay-as-you-go point of order
that deals with the impact of revenue and direct spending
legislation over a 10-year timeframe.
Just like other areas of legislative procedure, the fact
that the Senate has a different way of doing things can raise
important, even difficult, implications for the House. Although
the House may have no comparable rule on a particular matter,
it may be compelled at times to enforce a comparable approach
to avoid legislative deadlock with the Senate.
Many observers cite the Byrd Rule as the prime example in
recent years of a source of procedural friction between the two
bodies. The House also has had to wrestle with the problem of
extraneous matter in reconciliation bills, and the existence of
the Senate's complicated and stringent rule on the matter
undoubtedly has had some effect on the House's response. Over
the years, the responsibility for dealing with extraneous
matter in the House has fallen largely to the Rules Committee,
which has had to craft special rules on reconciliation bills
making in order amendments to strike such matter or to deal
with it in some other fashion.
The BEA of 1997 continues the pattern of diverging House
and Senate practices. For example, it incorporates into the
1974 act two Senate procedures, established previously in
budget resolutions, sanctioning the use of so-called reserve
funds and providing for a point of order against a budget
resolution or spending legislation that violates the
discretionary spending limits.
Let's focus now on the role of the Rules Committee in
enforcement.
The Rules Committee plays a pivotal role in the operation
of budget enforcement procedure in the House. It does so
chiefly in two ways. First, as mentioned previously, it crafts
special rules providing for the consideration of budgetary
measures. Second, as a matter of original jurisdiction, it
shares responsibility with the Budget Committee (and the
Government Reform and Oversight Committee) for oversight and
reform of the congressional budget process. We will discuss
this in more detail in a moment.
The House Budget Committee, of course, also has a key role
in terms of budget enforcement, and it is important to
distinguish its role from that of the Rules Committee. The
Budget Committee's principal role is to enforce substantive
budget policies as reflected in the budget resolution. To a
considerable degree, this means that the Budget Committee is
the guardian of the numbers. Undoubtedly, the Budget
Committee's concerns go far beyond merely enforcing the
numbers, but this is a fundamental aspect of its role.
In order to carry out this role, the Budget Committee
necessarily has a close relationship with the Congressional
Budget Office (CBO)--probably a closer relationship than any
other House committee. Two of CBO's main functions, preparing
cost estimates on legislation and scorekeeping reports, are
vital to enforcing budget numbers.
Additionally, the Budget Committee must have close ties
with each committee that reports budgetary legislation. Three-
way consulting--between the Budget Committee, CBO, and the
other committees--allows potential violations of substantive
budget policies to be identified and, in many cases, to be
corrected before legislation is reported. Part of the Budget
Committee's role in this regard sometimes is to educate
committees as to particular procedural requirements and how
potential violations may be rectified. How the Budget Committee
performs its role, therefore, can have a considerable impact on
the nature and extent of the enforcement problems faced by the
Rules Committee.
Finally, the Budget Committee must consult closely with the
Rules Committee regarding its position on enforcement problems
associated with reported legislation and possible amendments.
Thus, the Budget Committee serves as an advisor to the Rules
Committee, exercising most of its enforcement duties in
sequence before the Rules Committee becomes engaged. During
floor action on measures, however, the Budget Committee
supplies the Chair with any budget estimates that are needed to
determine whether legislation violates the Budget Act.
While the Budget Committee is the guardian of the numbers,
the Rules Committee's role on budget enforcement is different.
In crafting a special rule, the committee shapes the
legislative options by recommending which, if any, points of
order should be waived against the consideration of a measure,
amendments to it, or a conference report on it. Enormous
procedural and political complexities may lie under the surface
of these seemingly simple choices.
Some waivers may involve substantive enforcement, allowing
the House to consider proposals that deviate materially from
the budget plan and otherwise could not be considered. Other
waivers may involve only technical matters, where substantive
enforcement is not an issue. Waivers may be needed to
counteract undue rigidity in the rules, to deal with unforeseen
situations, or to resolve the unintended consequences of the
rules.
While the Budget Committee carries out its enforcement
activities primarily with the intent of preserving the budget
levels and the major policy assumptions embedded in the
resolution, the Rules Committee must address other concerns as
well. These may include the impact of enforcement decisions on
legislative operations and the flow of legislation; ensuring
fair representation in the political process to divergent
views; promoting a reasonable balance between budget control
and other contending values; moderating jurisdictional
conflicts between committees; and preserving the prerogatives
of the House.
The two committees also influence enforcement activities by
pursuing changes in the congressional budget process, as
evidenced most recently by the BEA of 1997. While both
committees have been involved in the budget process changes
made over the years by rulemaking and other provisions in
statute, they pursue other routes of reform as well. The Budget
Committee may take advantage of the so-called elastic clause in
Section 301 of the Budget Act to modify budget resolution
content and associated procedures. The Rules Committee
sometimes makes changes in House budget procedures in the rules
package adopted at the beginning of each Congress. Section
301(d) of the Budget Act triggers a sequential referral to the
Rules Committee if any changes recommended in the resolution by
the Budget Committee would have the effect of changing House
rules.
What are the recent trends in budget enforcement in the
House? This is a very difficult question to answer. Certainly
the overall budgetary picture, especially with regard to the
deficit, is brighter now than it has been in decades. It seems
reasonable to give budget enforcement procedures a share of the
credit, along with favorable economic developments and other
factors. Congress displays a certain satisfaction with current
enforcement procedures, having just extended them for another 5
years in the BEA of 1997.
Yet, concerns about budget enforcement remain in the
forefront. Members seem to be especially bothered by continuing
difficulties in controlling the base of direct spending. The
solution for this problem apparently is not readily at hand in
view of the recent rejection by the House of legislation to
establish entitlement caps.
An important factor that stymies any evaluation of budget
enforcement procedures is that principally they present a
deterrent effect, and deterrence is a hard thing to quantify.
How many potential violations of the budget were not attempted
because of the existence of effective procedures?
One observation that can be made with certainty is that
change in budget enforcement procedures is a perennial feature
of the legislative process. Some of this drive for change is
born of failure; for example the deficit targets did not work
in the late 1980s, so new forms of control took their place.
Recent changes, over the past decade or so, reflect new
approaches to enforcement, and I will briefly finish by
commenting on three.
First, the House and Senate have placed a greater reliance
on the President and automatic mechanisms. The establishment of
the sequestration process and the recent line-item veto
procedures give evidence to this trend. It suggests a growing
doubt on the part of Congress in its ability to police its own
actions.
Second, the House and Senate have increased the scope and
number of congressional rules. This second trend seemingly
contradicts the first. As the House and Senate have chosen to
shift more authority to the executive or to formulaic
approaches, it simultaneously has chosen to strengthen and
enlarge its own enforcement efforts. The supermajority
requirement for votes on tax rate increases and new procedures
for controlling unfunded mandates testify to this trend.
Third, and finally, the House and Senate have taken actions
to streamline and simplify many aspects of budget enforcement.
This third trend is a natural reaction to the second. As
enforcement rules proliferate in scope and number, unwanted
complexity and workload grows too.
In 1990, Congress established discretionary spending
limits, but made them adjustable for a number of factors so
that a sequester, or a threat of one, would not arise
unnecessarily. The House and the Senate have applied this type
of streamlining to its own rules too. For example, the BEA of
1997 adds Section 314 to the 1974 Budget Act to adjust the
appropriate budget resolution levels for certain legislation
when similar adjustments are made in the discretionary spending
limits. These adjustments would pertain to such things as
emergency legislation, continuing disability reviews, the IMF,
and international arrearages. There is a small category of
them. By determining in advance the set conditions under which
particular budgetary constraints will be allowed to flex, the
House and Senate sidestep the need to deal with these
enforcement issues later on.
In this regard, one of the changes made by the BEA of 1997
is particularly important for the activities of the Rules
Committee. It adds a new Section 315 to the 1974 Budget Act,
making it unnecessary to waive the act when the source of the
violation in the reported bill is removed under the terms of a
special rule--an example, if you will, of demand management.
Jim Saturno will now address particular points of order
under the 1974 Budget Act.
Mr. Goss. Thank you very much, Mr. Keith, for what is a
good presentation of the landscape and some of the more
prominent features in it.
Anybody who wants questions at any time, that is sort of
the general wrap-up, and now I think we are going to get a
little more specific, if I am not mistaken. Anybody who has a
question to ask at any time, please do.
Mr. Goss. Go ahead Mr. Saturno.
STATEMENT OF JAMES SATURNO, CONGRESSIONAL RESEARCH SERVICE
Mr. Saturno. Before we move on to really talking about the
specific points of order, one of the things that I wanted to
address was the volume of points of order, because the number
of points of order, the number of prohibitions that appear in
the Budget Act, have been one of the things that contribute to
the idea that the budget process is overly complex and
difficult to understand. And when you look at, I believe, one
of the handouts, that seems to be born out. There are, in fact,
a lot of points of order that are established by the Budget
Act.
Mr. Goss. That is Pages five and six?
Mr. Saturno. Yes, I believe so. Let me note that there is a
lot of double counting among the various categories I have used
because some of the points of order that apply to discretionary
spending also apply to mandatory spending, some of the points
of order that are directed at the issue of timing of
legislation are also counted under discretionary or mandatory
spending, and so forth. But no matter how you count them, there
are a lot of provisions in the Budget Act that at least
potentially give rise to points of order.
One way to sort of get a handle on the process is to look
at which provisions are, in fact, applicable in the House, and
in that circumstance, the number of potential points of order
drops dramatically. In particular, points of order concerning
the budget resolution drop from about seven to only one. The
rest of these points of order apply to the Senate, and were
created to address problems that could arise because of the way
the Senate considers the budget resolution versus the way the
House considers the budget resolution.
When the House considers amendments to the budget
resolution, they typically consider complete substitutes, so
problems like making sure there is one set of economic
assumptions or making sure that the numbers in the budget
resolution remain consistent at the end do not raise
difficulties; whereas individual amendments to individual
portions of the budget resolution on the Senate side do at
least potentially give rise to those problems.
So the number of points of order that actually apply in the
House is substantially smaller than the total number of points
of order, and I will try to confine my remarks to these.
It should be noted, however, that points of order do not
represent the only requirements established by the Budget Act.
There are other requirements that are not typically considered
to be points of order, such as the prohibition in section 305,
against motions to recommit on the budget resolution, or
section 308, which requires cost estimates when available.
So points of order do not tell the entire part of the
budget process, but the process does become understandable when
looking at the points of order and the specific sets of
requirements that they establish.
Which points of order are the ones most frequently waived
is also, in part, a look at what the most difficult parts of
the Budget Act to comply with are. Section 302(f) applies to
legislation or amendments which would cause allocations to be
exceeded. It has, over the course of a long number of years,
been the primary point of order that has been the subject of
waivers, frequently for authorizing legislation that includes
some direct spending provisions.
In the last Congress, section 308, which concerned the
number of reports issued to include cost estimates was waived a
number of times. As I mentioned earlier, that previously wasn't
typically considered to be a point of order, and so I am not
sure whether there is any sort of strong basis of comparison
for the increased use of that waiver in the last Congress. Not
counting blanket waivers, there has rarely been more than two
or three waivers of any single point of order in the past
several Congresses.
Deadlines and other requirements also exist in the Budget
Act, but these are also not typically subject to points of
order. April 15th, as the deadline for completion of action on
the budget resolution, is rarely achieved, but there is no
sanction against this, no point of order that can be applied or
that needs to be waived. Likewise, the target dates and
deadlines that are included in section 300 of the Budget Act
that apply to the appropriations process reflect the pace of,
and practice of, the appropriations process in the House and do
not readily admit to having any sort of point of order applied.
I should also mention one change that was made this year
regarding how points of order apply in the House. As now
provided in Section 315 of the Budget Act, for cases in which a
measure is considered pursuant to a special rule, a point of
order which would ordinarily lie against a bill "as reported"
would instead apply to a substitute made in order by the rule.
In this way no point of order would apply, and no waiver would
be necessary, if the substitute resolved the problem. So with
that said, I would like to look at the points of order related
to discretionary spending.
Section 302(c) and section 303(a) and section 309 are three
provisions which deal with the timing of legislation. In
particular, 302(c) prohibits the consideration of measures
within the jurisdiction of the Appropriations Committee until
they have made the suballocations that are required under
302(b).
Similarly, 303(a) prohibits the consideration of
legislation which provides new budget authority, as well as
changes in revenues or changes in the public debt until the
budget resolution for a fiscal year has been agreed to.
In both of those cases, the rule is put into place
specifically to require that a plan be adopted before the
individual pieces be allowed to proceed through the legislative
process; that Congress be allowed to see how the pieces should
fit together before they are required to look at any of the
pieces separately.
Section 309, the other provision dealing with timing,
prohibits the House from considering an adjournment resolution
of more than 3 calendar days during the month of July until the
House has approved all regular appropriations bills for the
upcoming fiscal year. In that case, it is intended at least to
act as an enforcement for the typical calendar that the House
appropriations process operates under. That is, for the House
to finish appropriations before the August recess.
It has rarely been waived because the House typically does
not attempt to take a long recess in July, and so it is a point
of order that has not come into play very much since its
inception as a part of the Budget Act.
More important for the purposes of understanding how the
appropriations process and the Congressional Budget Act work
together is to look at the allocation system under 302(a) and
302(b). 302(a) reflects the amounts of money that is allocated
to each committee for any spending within their jurisdiction,
including the Appropriations Committee; 302(b) reflects the
suballocations that essentially tell you how much money has
been allocated by the Appropriations Committee to each of the
thirteen general appropriations bills.
Both the suballocation and the total committee allocation
are enforced through section 302(f).
In past practice, the suballocation ceiling served as a bar
against a significant number of amendments to appropriations
bills when they were considered on the House floor. The
Appropriations Committee typically reports legislation which
includes budget authority up to the amount which has been
allocated to that subcommittee for that particular spending
bill. This is certainly not an unexpected, or necessarily an
undesirable, action by the Appropriations Committee. However,
points of order under 302(f) would prevent consideration of any
amendments to appropriations bills which would cause, even
temporarily, the allocation to that bill to be breached.
Therefore, any amendment which would add money could only be
offered after an amendment, and separate from, an amendment
which would reduce money.
As I said, this was a significant bar to amendments, which
would add money to appropriations bills. In the last Congress,
however, a new provision was added to rule XXI, clause (2)(f),
which provides what is essentially an exception for the
application of 302(f). This new rule effectively allows for the
amendment process on the floor of the House to skirt a lot of
problems which could be caused by 302(f). That is, Members are
allowed to offer amendments en bloc which are deficit neutral.
Therefore when two or more amendments taken together do not add
any additional budget authority to an appropriations bill, they
can be voted on as though they were a single amendment.
These amendments are in order to be offered when the first
effected provision in the bill comes up, whether that is a
provision that cuts money or whether that is a provision that
adds money. And further, these en bloc amendments are not
subject to a demand for division on the floor. That way, the
House can not find itself in a situation where it is voting on
adding money when it intended to simply make deficit neutral
changes in the priorities within the spending bill. This is a
significant change in the way in which the House does business,
and in part reflects the desire to have Members outside of the
committee have influence on the structure of appropriations
bills, and have influence on the individual provisions in the
appropriations bill.
And it certainly seems to have had that effect as shown by
the number of amendments to appropriations bills that were
considered during the 104th Congress.
Another requirement established by the Budget Act is that
consideration of legislation that would cause budget authority
or out-
lays to exceed the total level set forth in the budget
resolution is not allowed. In the House, however, section
311(a) allows the measure to be considered as long as it the
would not cause the committee's allocation to be exceeded.
Under the exception, the so-called Fazio exception, there is no
sanction, the total amount of budget authority being exceeded.
Now, in most circumstances, you would expect that as long
as pieces remain within their preestablished limits, that the
total would not be exceeded, but because of the way spending is
structured, that is not always the case. For example, if the
projected cost of entitlement spending in the jurisdiction of a
single committee increased above their allocation, every other
committee would face a potential point of order against
spending legislation in their jurisdiction. Therefore, the
House has decided that as long as committees remain true to the
requirements placed upon them individually, that they do not,
individually, remain responsible for the total level of
spending.
Mr. Goss. The sins of one committee cannot entirely be
transmitted to another committee; only partially?
Mr. Saturno. That is right. In fact, one of the issues
which my colleagues may address more fully is that there are
scorekeeping conventions that exist outside of the explicit
text of the Budget Act that make committees less responsible
for the actions of other committees. For example, one
scorekeeping convention provides that increases in mandatory
spending included in an appropriations bill is counted against
the Appropriations Committee's allocation, not the allocation
of the committee with jurisdiction over the program.
So, points of order against appropriations bills are
directed towards one of two things: making them fit into the
calendar, that is making sure appropriations bills fit into the
plan and come after the plan; and, more importantly, making
them fit in within their allocations so that the budgetary
outcomes that are agreed to in the budget resolution are
achieved.
And now my colleague from GAO will talk about how points of
order apply to mandatory spending.
Mr. Goss. Hold on just for a second. Apparently, I am
advised that the 20th century does exist in this committee and
we could get equipment that could work. Do you want to plug it
in?
Ms. Irving. It is certainly up to you.
Mr. Goss. I am comfortable this way, but if you feel
hampered we could pause.
Ms. Irving. I would have liked it better the other way from
the beginning.
Mr. Goss. Do we have anybody on staff who feels strongly
about it? Then we will just go on. I have been able to follow
it well so far.
STATEMENT OF SUE IRVING, GENERAL ACCOUNTING OFFICE
Ms. Irving.I need to make one correction on my hard copy
"slide." The first budget section should say 303(a) not 303(c).
Usually we in GAO are here talking more about broader
process issues than the rules, but we are pleased to be asked
to join the people who live with you in a nitty-gritty, day-to-
day world.
As Bob Keith said, the side of the budget that is
euphemistically referred to as "mandatories" or archaically
referred to as "direct spending" has tended to drive the
substantive results. That often leads to people complaining
that the process does not work. As I have testified before, it
is not that the process does not work; it is that its reach was
limited.
As Jim pointed out when he discussed the discretionary
arena, fundamentally the rules fall into a couple of
categories. There are rules that have to do with timing; these
are the rules that seek to require starting with an overall
plan, and then moving to the specific bills. That is what
303(a) does.
There is, as you know, what used to be called the after-
May-15th-everybody-is-home-free-rule exception. But
fundamentally, the idea is that Congress reaches agreement on
the plan and then moves to the specific bills.
There remains a prohibition on adjournment in July until
you have completed reconciliation, but since any budget
resolution containing reconciliation instructions usually
specifies a date, that usually supersedes the rule. So this
rule is more a default-option rule.
Then, and I have listed these on Page 14, there are a set
of rules that seek to enforce the agreed upon plan. These rules
say do not erode the fiscal plan. If you have changed your mind
on the plan, then change it explicitly. So analogous to the
requirement in 302(f) that the allocations on the
appropriations side be recognized, there is a similar one on
the mandatory side, which is, excuse me, you had a deal here,
stick to it.
There is an important exception for PAYGO, which says if
you would be neutral overall you are okay. The basics of the
PAYGO rule are if you want to change the allocation a little,
it is o.k. as long as you are deficit neutral.
Section 310 requires amendments to reconciliation to be
deficit-neutral. You can come to the floor with an amendment
that says, "I would rather increase this more than that," or "I
would rather cut this tax more than that tax," but you cannot
come to the floor with an amendment that merely makes the
result worse--even if on its own it would be a wonderful idea.
Section 311 says you need to stick to the targets in
reconciliation for taxes and spending. In the House, the PAYGO
rule, the deficit-neutral rule, applies for one and for five
years. Here, however is a case where, as Bob mentioned, the
other body's rules are something that you need to pay attention
to because the Senate has a second five year window.
Those of you who remember the fight over the GATT, will
remember that in this House it was resolved about year one and
the first five years and then suddenly there was this little
tiny amount of money hanging out there in the second five
years. The ratio of effort to try to find that much money may
have outweighed the impact of it, but implementing legislation
on GATT couldn't have gone through the Senate without it.
Section 401 is almost a remnant. It was an attempt to limit
what in the old days we used to call back-door spending. But
BEA really has superseded it. It is a section that everyone has
a hard time writing and rewriting and everyone has a hard time
interpreting. But if you think about it, credit reform meant
that anyone creating or expanding a loan program, has to ask
for budget authority for the subsidy amount. So that back door
spending is covered. And anything that is going to show up as
mandatory is going to get scored on a PAYGO scorecard. So the
fact that 401 is almost incomprehensible for people is not
practically important. It may clutter up the rules but it
doesn't seem to affect your life very much.
There are a group of rules focusing on Social Security: do
not back into Social Security reconciliation, and furthermore,
even on its own, you cannot change the 75-year solvency.
The House has a rule against considering legislation which
would provide for a net increase in Social Security benefits or
decrease in taxes in excess of 0.02 percent of the present
value of future taxable payroll.
Basically, the rule is if you wish to deal with Social
Security, either have a separate Social Security bill or be
sure there are reconciliation instructions specifically for it.
Social Security has its own set of rules and it cannot be used
to solve some other problem.
Finally on the tax side of the ledger, in rule XXI, the
House has added a number of specific rules pertaining to the
consideration of tax legislation. One protects the jurisdiction
of the Ways and Means Committee, one says you need a three-
fifths vote for a rate increase, and one prohibits retroactive
increases, so you would need a waiver for any of those.
For the most part, rules dealing with the PAYGO side in
their own way become something the committees with jurisdiction
are very aware of, and they consult constantly with CBO to
avoid a point of order problem. They do not always succeed and
some of them will come to you.
So to summarize, there are several broad categories of
rules. One is get your plan in place before you do the details.
That applies to both appropriations and PAYGO. Second is once
you get the plan in place, try and make all of the provisions
that come in match that plan, stick to your allocations, and
don't run in here with amendments to reconciliation that
unravel the bottom line. And third, if you want to change
anything in Social Security, think about how you structure it
and where you bring it in because it is not the same kind of
amendment. Finally, there are separate tax rules about free
standing tax legislation.
Mr. Goss. This may not be a place to interject. Thank you
very much. The Kerry Commission came up with an interesting
report. I presume you all have looked at it. The thing that is
most memorable to take away from that for me is that we are on
unsustainable trend lines. You mentioned Social Security. That
is separate, but some of the other entitlement programs are
not.
Ms. Irving. Yes.
Mr. Goss. One of the things that we have got to figure out
how to do, and one of the problems that this committee is going
to be faced with, is how to deal with the inevitability of
that. It is sort of like death. It is inevitable and so we have
got to deal with it.
The next question that comes to my mind is that we all
agree we should have a plan, and we all agree that we should
more or less stick to it, but if we are going to make changes
and have the deliberative will of the body work its way and
whatever the con-
sequences are, in an open and forthright manner in the sunshine
in response to our constituency and several other democratic
guidelines we all follow very meticulously, the question of how
you do that is elusive.
Ms. Irving. I will go back to what I said at the beginning.
Mr. Goss. The question is not elusive; the answer is--
Ms. Irving. I thought that is what you meant. There is too
easy tendency to say the process failed to control mandatory
spending. The process only tried to control additions and it
succeeded very well in that. But it never tried, as Bob
mentioned, to go to the base.
We, too, have done a lot of projections, and looking
forward, it is clear that the balanced budget agreement
improved the situation. It delayed disaster further, but it did
not eliminate the problem.
There are really, it seems to me, a couple of ways that you
have to think about this. The problem with some mandatory caps
proposals is that applying a flat cap is like trying to change
the fundamental nature of the program without changing the
design of the program. Either someone is magically going to
stop all of us from aging or Social Security costs are going to
go up. Just saying, "you cannot spend more than X" does not get
you there.
To impose a rigid cap you have to do one of two things.
Either you tell the executive branch to do what used to be the
rule in food stamps: when the cap is hit, stop paying benefits.
It did not happen then and it is not likely to happen with
other programs. Or delegate to the Social Security
Administration for example the task of reducing everybody's
benefits so the total comes in under the cap. Not a very
plausible argument, it seems to me, for an elected body.
One other approach that we and former CBO Director
Reischauer have worked on, would be to tighten up the
targeting. Reconciliation instructions could direct the
committee of jurisdiction to come up with plans that will make
a program ten percent less than projected next year--I am
making up the numbers--and five percent less in the year after
that. Then add a look-back provision. Congress would specify
the design of the look-back. Would it be that next year cuts
have to be greater or to cut the COLAs? Of course, in a way
Social Security is the easy one because it is demographics and
dollars. It is not as hard as figuring out the dynamics of
health care.
Fundamentally, there are several questions in the budget
process confronting us. One is whether we can continue along
the path of caps on discretionary spending that in real terms
are very tight without a debate over the role of government.
These caps make across-the-board cuts problematic. The second
big question is what in fact is going to be the design of
programs for the elderly.
Mr. Goss. Well, you have touched on really the big problem.
And we are not going to solve it today. One of the reasons we
are going through this drill is so that we understand what the
tools are to begin to shape some solutions for that. But you
already saw in the Senate and a little bit in the House this
year that provisions like slipping the dates on Social Security
and slipping the copays or premium adjustments and means
testing or something, those are the things that the committees
of jurisdiction can do to meet their number.
But the question is, A, is that good policy and the right
thing to do and/or are we being driven by numbers? Is the world
in the United States about whether we are going to make our
budget targets or is the world in the United States that
government is going to do these things because they are
favorable and this is what we are going to do. That is the game
that we get into.
Ms. Irving. For these programs you cannot use the 5-year
budget window.
Mr. Goss. Jim, let's not mess up the order. I almost did
that. My fault.
Ms. Irving. I like to talk about these things.
STATEMENT OF JIM HORNEY, CONGRESSIONAL BUDGET OFFICE
Mr. Horney. I was amused when I saw the heading of my part
of the talk, which was the application of budget enforcement to
real life. I think there are a lot of people who think there is
nothing about the budget process that has anything to do with
real life.
But what we did want to talk about is how the budget,
points of order which Jim and Bob have talked about, do in fact
affect the day-to-day legislative process. And one of the
really important things to realize is that you cannot judge the
effect of the Budget Act enforcement mechanism simply by seeing
the number of times there have been waivers of points of order,
or points of order have been made on the floor or even the
number of times that the bill has come to the Rules Committee
that has a budget problem and the Rules Committee has somehow
solved that problem.
What is absolutely clear is that proponents of legislation
believe that if they have a Budget Act problem in their
legislation, that makes it less likely that legislation will be
enacted. There are exceptions to that. There are bills that,
for whatever reason, everybody knows are going to go through.
For the vast majority of legislation, the proponents of that
legislation are convinced that they better get rid of the
Budget Act problems or they are going to have a hard time. That
means they start from the very beginning, before legislation is
even introduced. Members who are thinking about legislation,
and staff who are working for them, start calling the
Congressional Budget Office and start calling the Budget
Committee to talk about what they are planning to do, and to
talk about ways to avoid budget problems.
Now, as the other people pointed out, there are a whole lot
of points of order, but a number of them have to do with timing
and with some very specific things, and because CBO doesn't
deal with those sorts of issues very much, what we see is
really concentrated on: Are we going to get into trouble for
violating the 302 allocations? Meaning, the committee that I am
on, the committee this bill has got to go through has an
allocation. Now I want to know whether this bill is going to
exceed that. Or alternatively, if it is a revenue measure, will
it cause a problem under the section 311 floor. So that is what
we primarily are dealing with.
Those points of order apply equally to appropriation
bills--although usually appropriations don't have revenue
effects, but some-
times they do and 311 applies--and to authorizing bills, but
the kinds of concerns are different so I will split it up and
start with appropriations bills.
Appropriations bills in a sense are less complicated in
terms of potential Budget Act problems. Again, the question
primarily is, are we going to be over our 302 allocation? Or is
an amendment offered in the subcommittee or on the floor going
to cause us to exceed that authorization? Normally it is
relatively easy to judge that.
An appropriation bill in large part is a list of numbers.
It says we appropriate $100 million for this purpose, we
appropriate a billion for this purpose, and for the most part
as far as the restriction on budget authority--the allocation
of budget authority--you go through and look at all these
appropriations and you add them up and decide when you add them
up does the total exceed the allocation.
Outlays are a little more complicated, although in the
House technically there is no point of order against exceeding
your outlay allocation. Everybody wants to stay within the
outlay allocation because they realize they will have a problem
on the floor if they do not. The reality is everybody tries to
make sure they stay within.
The outlays are a little more complicated. Unlike the
budget authority that is actually provided by the
Appropriations bill, outlays have to be estimated. If the
appropriators appropriate $100 million for the program, the
question becomes in the fiscal year coming up, fiscal year
1998, how much of that $100 million will turn into outlays in
the first year?
For the most part the committee doesn't have a huge problem
with that because when CBO produces a baseline at the beginning
of the year for all existing programs, we say, here was the
budget authority that was appropriated last year and we then
project that into the future. We also say, what we think the
spend-out rate is. If you appropriate $100 million in this year
how much of that new budget authority do we think will spend
out?
The Appropriations Committee staff knows all of those spend
out rates when they are putting together bills, and when they
are advising Members, they tell them. They say, well, if you
want to add an amendment of $10 million, it has a 50 percent
spend-out rate; that will add $5 million to outlays. That is
something you have to keep up with. Appropriations staff are
experienced with this and usually the Members and everybody
understand what the effects of the legislation would be. And
they work closely with us if there are any questions.
The problems on appropriation bills for the most part arise
when there are last-minute amendments in the committee, on the
floor, or in conference. Again, if they are straightforward--
here is an additional amount of budget authority--for the most
part there is not going to be a huge problem figuring out the
outlays, unless it is money for a new program. Then it may take
some time to figure it out.
But there are a number of things that you could be doing
that are more problematic and harder for the proponents to
understand what the effect of this proposal would be. One of
them is rescissions. We often get in a regular appropriation
bill a rescission of existing funds to use as an offset against
some additional spending. There may be monies out there, $100
million, and they say, let's rescind that existing
appropriation we did last year--I don't think we need it now,
let's rescind that, and I will replace it with $100 million.
Ordinarily that is a net zero. You got rid of $100 million and
you add $100 million.
Sometimes there is a problem. Sometimes there may have been
100 million of money appropriated last year that has not yet
been obligated at the time the President's budget comes out, so
somebody looks at the budget and sees there is 100 million
there. Well, between that time and, say, March or April or May
when the appropriations bill is coming through, some of it may
have been obligated. If it is obligated you cannot rescind it.
Sometimes people try to rescind stuff--we see the amendment and
we see that money has now been obligated and you cannot touch
it.
Even more often we run into the case where there is, in
fact, money that has been unobligated but you don't get outlay
savings from it.
One good example of that that somebody tried earlier this
year was to rescind $6 million the Congress and the President
appropriated in 1997 the cost of a Presidential transition.
Well, that money, obviously, was never obligated. Earlier this
year somebody came along and said, I want to rescind that $6
million. They get credit for $6 million in budget authority. It
hasn't been obligated, but we said, wait a minute, we don't
think this money is going to be spent. There is no Presidential
transition. We said the money is not going to be spent, and
even though last year we said there would be $6 million in
outlays with this, because if there has been a transition it
would be spent, we said, you don't get any savings. Again, that
is the kind of thing that can add complication, making this not
a straightforward calculating process of adding up the numbers.
A second kind of amendment that can be a problem is instead
of providing a specific sum of money, a bill may say, provide
such sums as may be necessary to carry out the program. In that
case, you have to go and say, how much do you think it will
cost to do this? And that takes some time. And again that can
cause problems when this amendment comes up at the last minute.
Another problem which we just ran into recently, and this
one I have to be careful to change the names or obscure the
names to protect the guilty, it actually did get fixed but they
might be embarrassed if you knew about it.
An appropriation bill was in conference. They sent us all
the stuff on the bill. We added it up and everything looked
fine on the bill. A couple of days later we actually saw an
amendment that they were going to include that had never been
sent to us. It had never been sent to us because the staff
assumed that it had no budgetary effect because the amendment
was intended to deal with a potential legal problem about
signing some long-term procurement contracts. It was absolutely
clear that the intent of this amendment was simply to make sure
that there was no legal bar to using the funds appropriated in
the bill to sign these long-term contracts.
However, the way the amendment was written, it said, the
Secretary may enter into contracts to do the following. We
looked at that and said, that language by itself allows the
Secretary to enter into contracts. That is obligating the
United States' money. That is a cost. You may not have meant it
but you just added a couple of billion dollars to this bill.
And they were very unhappy about that. Luckily, they had not
filed the conference report, and in fact they went back and
added very simple language that said the Secretary may enter
into these contracts subject to the availability of
appropriations provided in this bill. That affected how you can
spend the money in the bill, not all of a sudden you have an
extra $2 billion.
It was a perfect example of where very reasonably the staff
thought they were just covering a legal technicality. They
didn't realize what they had said had a very different effect.
Luckily, they did give this to us before they filed the
conference report and before it came to the floor. That is an
example of the kinds of things that we do run into all the time
and an example of how things get fixed. They clearly didn't
want to go $2 billion over their allocation. There are also
amendments that are done in appropriation bills that affect
mandatory programs over and above the appropriation of
mandatory appropriations for appropriated entitlements. That
doesn't have any direct budgetary effect, but there will
actually be a change in the law that affects the mandatory
program. Those can raise all sorts of problems because they can
be tricky to estimate. And again, sometimes people think this
is not going to have an effect, but it does. And as I say, it
can be very complicated. We get an amendment, they are getting
ready to file the conference report that day. Sometimes it
takes us several days to get the information from the
administration, from other people, that we need in order to do
the estimate.
An example of one issue that has come up several times this
year, at least once in the context of an appropriation bill,
although it has also been in this authorizing bills, is an
effort to save money by limiting mandatory administrative
expenses that are paid to the States for administering the food
stamp program. It seems easy because you just say reduce the
amount that goes to the States by X dollars.
The problem in this area is that we pay mandatory
administrative expenses to the States for food stamps, for
Medicaid, for the new temporary assistance to needy families
block grants and for some other mandatory benefit programs, and
essentially the States have a lot of flexibility to decide for
any individual which pot of money that comes out of. And so it
is absolutely clear that if you restrict the food stamp money,
at least some of that is going to pop up over in the Medicaid
costs; that the Federal Medicaid costs will go up because we
have limited the food stamp costs. And it is not a simple
matter trying to figure out how much of that will pop up. It is
not one for one.
And so these things come in, and the Members say, I have
this amendment; it saves $100 million. And we say, no, it
doesn't save 100 million, it may save 25, because 75 of it is
going to show up over here the way you have done it.
Those are the kinds of complications that can appear in
appropriations bills and delay getting the information, which,
of course, makes everybody unhappy. They are trying to get the
bill done and get to the floor on a schedule, but if they want
to know what the cost of it is, they have to wait, and we need
to give it to them.
There also can be problems in appropriation bills when they
do things that affect revenues. Every once in a while there is
something that affects tax rates or something, but that is
extremely rare on appropriations. What is not terribly rare is
that they do something that affects user fees. Some user fees,
in fact, show up on the spending side of the budget as
offsetting receipts or offsetting collections. That is fine. If
they do something that changes those, they get credit for
savings or for additional spending, which shows up on outlays,
and that does, in fact, trade off against their discretionary
appropriations under the current scorekeeping rules and the
laws.
However, there are some user fees, for instance Securities
Exchange Commission fees, some of which are offsetting
receipts, but some of which are classified as revenues. If you
change the law about those fees, that shows up as either an
increase or decrease in revenues.
Well, generally you can not trade them off against
spending. You certainly can't for the discretionary caps for
the Budget Act enforcement. There is a limit on discretionary
spending. And while the appropriators do get credit for changes
they make in mandatory programs, that is one scorekeeping rule,
they do not get credit for changes in revenues against the
discretionary caps. Under some circumstances under the Budget
Act they can, but in general it is very difficult.
So again, if they are trying to increase fees to pay for
additional discretionary spending, and those fees are revenues,
you can run into problems. They can be sailing along and say,
we are going to raise the fees, and that allows us to do the
extra spending, and all of a sudden you have a problem. That is
hard to work out because you cannot automatically change this.
Those are the kinds of issues that come up in the context of
consideration of appropriation bills.
On the authorizing bills, the kinds of things that come up,
and how they get dealt with, depends in large part on whether
it is a bill that was intended to have a budgetary effect or
one that wasn't. The great majority of authorizing bills are
not intended to have any direct budgetary effect. They may deal
with things that just don't affect the budget at all. They may
be naming a post office, they may be dealing with sentencing
guidelines in Federal courts; a whole range of things that
Congress does that, in fact, have no direct effect on the
budget.
They may appear to be bills that do have a lot to do about
money, a regular authorizing bill, a bill that authorizes the
Department of Education. But, in fact, that bill may contain
nothing but authorization of appropriations. Well, that is
budgetary, but it does not get counted as having a direct
effect on the budget because all that bill is doing is telling
the appropriators that they are authorized to do a future
appropriation. The scoring of that spending shows up when the
appropriators actually provide the money. So for most
authorizing bills, most bills that CBO estimates, there is no
budgetary effect. That is exactly what was intended.
Now what happens, of course, is that in many of those bills
where there is not intended to be effect, something ends up in
there that does have a budgetary effect. And a lot of CBO's
time is spent in reading through big massive authorizing bills
to find one little sentence, one paragraph, that, in fact,
either inadvertently or not, would cause some additional direct
spending or have some effect on revenues.
The kinds of things that show up, a bill may be creating a
new Federal commission, and in the process of doing that they
want to say, how much are these people going to be paid? If
they use magic words like "the Chairman shall be paid at the
rate of," that means that if you just put that language in,
once the Chairman is appointed, the Federal Government has got
to pay that Chairman. That is direct spending.
Other things like that may say, "The Secretary shall pay to
a State in order to do the following," and again, that would
cause that money to be spent. So there are a number of things
to be done.
Mr. Goss. Do you treat that as obligated if it shows up in
an authorized bill?
Mr. Horney. If the language simply says this person shall
be paid, then that person, we believe, would be able to--once
they are appointed--
Mr. Goss. Shall be paid subject to the appropriations? Are
those the right words?
Mr. Horney. Those are the magic words, "subject to
appropriations." That is how these things get fixed. We look at
it and say, you forgot those words. Go back. If all they meant
was to say if the person is appointed, and if there is
appropriations, here is how much they get. But that happens all
the time. We run into that.
Mr. Goss. Bob said that we are talking the next time about
the boundaries between the appropriators and the authorizers,
which is a very interesting dance form that we haven't quite
figured the music and the steps to. But go ahead. We have stuff
coming on the floor.
Mr. Horney. I will try to go quick. That is easily fixed
if, in fact, the intent was to make it subject to
appropriation. Every once in a while we catch it and say, you
made it a mistake, and you need to add this. And they say,
"Well...," and then bells start going off, and we say, well,
they knew what they were doing.
There are other things where people want to make a change
in policy, but they don't think it is going to have an effect
on direct spending, and their intent clearly is not to affect
direct spending. An example that is facing us right now that we
have been very criticized for by Senator Lautenberg, was a
provision that Senator Lautenberg sponsored first a number of
years ago, and I think it has been done on a 1-year basis for
the last 7 or 8 years, that allows certain residents of the
former Soviet Union and some other countries to more easily
obtain refugee status on the basis that they are likely to be
subject to religious persecution. Clearly the intent of that
was not to affect spending, it was to allow these people to
escape from possible religious persecution.
The problem is that if you come into the United States
under refugee status, you are immediately eligible for food
stamps, Medicaid and a variety of other benefits, which now are
not available to other people who are coming into the United
States without some waiting period. And so, in fact, doing this
change, we believe, has an effect on the number of people
coming in under refugee status, and that has an effect on the
cost to the Federal Government of these programs.
Senator Lautenberg is extremely unhappy about this. Our
position is sorry, but we think it is a policy change. Whether
you intended it to have any effect on the budget, it does, and
if you do this, we will have to estimate a cost of this kind of
legislation.
Mr. Goss. If he came back to you and said, look, the
numbers coming in are within the numbers that have already been
estimated that will be beneficiaries of these programs, would
you be convinced?
Mr. Horney. That is a complication. He has, in fact, argued
that because the refugee numbers are, in fact, negotiated,
there is not in the law a certain set number. We have looked at
history of it, and we believe the history shows that the
additions of these refugees from the Soviet Union, in fact,
caused the numbers that are accepted to come in to be higher.
It is a question, it is not straightforward.
Other kinds of policy changes that also have unintended
budget effects are things like people who want to put a
moratoria on leasing of outer continental shelf oil drilling,
or people who want to give away some Federal property. Well, in
those cases we estimate there can be effects. If we estimate
that leases would have gone out and brought in royalties, then
there is a cost to the moratoria. Similarly, if we think that
this property would have been sold as surplus property under
existing law, then giving it away has a cost.
These are not easy to fix because it is clear in these
cases people want these policies to happen. They want them not
to be subject to future appropriations, but they do end up as
costs to these bills, which may cause some trouble.
Of course, there are other authorizing bills that people
intend to have costs, and in some cases it may not be a
problem. The committee may have an allocation to spend an extra
hundred million, and that is fine. But there are other cases
where the committee may not have allocation at all, and the
committee decides they want to do something that they know will
have a budget effect, but they try to offset it so that there
is no net increase in spending. You can run into problems
there, however, because sometimes they may, in fact, offset the
additional spending over 5 years, but it may be that for the
first year they are over their allocation, and a point of order
applies to either exceeding the allocation in the first year or
the 5-year total.
Other cases can come up where they try to do the offsets by
some revenue change, and that revenue change does not in all
cases offset the increases in spending. A third example that
has happened a number of times is there will be an increase in
direct spending in an authorizing bill, and they will try to
offset it by reducing the discretionary caps and say, well,
there is no net increase in spending.
However, the way that the budget enforcement was set up and
the way that the Budget Act is set up, you cannot claim credit
against additional direct spending by promising that future
appro-
priations will be lower. It just doesn't offset saying 5 years
from now we are going to appropriate less than we thought we
were, and therefore that will count as spending reductions.
That pretty much covers the kinds of examples that I wanted
to give, kinds of things we see, the kinds of problems, what
kinds of ways they can get fixed.
Mr. Goss. Thank you.
Actually timing has worked out fairly well. I actually
thought we would never get to 11 o'clock without a vote. We
pretty nearly made it. And we are going to go now.
You have given us exactly what we asked for here, and you
have done it very well. I have a zillion questions, and I know
that this is going to be a continuing dialogue. I am most
grateful for what I will call combined effort here to educate
us on the committee and to make this material available for all
of us.
Those of us on the subcommittee, and the staff, are
spending a lot of time on this, as I think you know. We really
are going to have to do something because there are some
serious problems out there. I think for the record that the
Government Reform and Oversight Committee is no longer in the
referral chain on budget process, and we haven't talked about
jurisdictional problems here, or the other body--what I will
call--how will I say this, misfits is not what I want to say. I
want to say they don't connect. We don't have smooth junction
points or something. Disconnects is another way to put it
sometimes.
And I found out in my own committee, and I am continuously
surprised by this process, even as I go through working with
the other committees of jurisdiction, and the authorizing side,
and then trying to get the appropriators on board, again, I
discovered that the comparable Senate committee doesn't have
the same portfolio as the comparable House committee. So you
have to leave some stuff over here. It is a nightmare. And if I
hadn't dreamed of a system that would fail of its own weight,
we have come very close to it just in the case of my own
committee. And then, of course, we can never talk about that
because it is all classified anyway. So it makes it very hard
to have a public hearing on it.
The other question that came up from Mr. Dreier, and before
I go I wanted to ask--and, Jim, maybe it was you or maybe it
was Bob that triggered this--he wanted to know about the tax--
when we get to surpluses, assuming that we actually have all of
the success that we are talking about and we have surpluses,
how are we going to treat the tax question? I think his direct
question is: Are we going to still have to have offsets for tax
cuts? When we even have surpluses, are we going to have
problems with tax cuts?
Mr. Horney.The question that is being bandied around is
whether the PAYGO rules still apply when there is a surplus.
There are some who believe that because the introduction of the
pay-as-you-go section talks about reducing the deficit, that it
goes away. There are many others, including most people who
were involved in trying to put together the PAYGO rules
originally and the extensions of it, that believe that that was
shorthand, in a way, for reducing the deficit or increasing the
surplus, and the law doesn't provide any specific mechanism for
turning it off when there is an estimate of a surplus. But that
is something that is going to have to be hashed out, although
right now ultimately it is up to the Office of Management and
Budget to make that decision. They are given authority in the
Budget Enforcement Act to do that.
Mr. Goss. That is obviously the kind of change that we are
going to need to be talking about.
Mr. Horney. I think the Congress needs to decide what they
want to happen.
Ms. Irving. It looks like there are two provisions of law
about which this question arises. One is the line-item veto;
clearly the President only has the authority to reduce the
deficit. The other is whether the PAYGO prohibition on any
increase in the deficit also a;;lies to no reduction in the
surplus.
Mr. Goss. I think this is a problem that is timely for the
exercise that we are doing.
I think that we have all experienced a lot of the points of
order process up here, and we are certainly familiar. We are
never quite sure which one it is, but we have a general idea it
is timing or it is problems between the authorizers and the
appropriators or whatever.
But the other thing that I am concerned about, and I
mentioned the Kerry Commission and unsustainable trends, the
other thing I am concerned about on the discretionary side, in
my case it would come under defense, but I think it is true
with others, is that I don't believe we have a process yet on
the follow-on. I don't think people understand sometimes the
gigantic amount of follow-on costs. Whether it is obligated or
not doesn't matter as much as if you are going to realize your
investment. And you can put a ton of money in something, and if
it doesn't work, you can stop it and say, we are not going to
spend any more. No more good money after bad. But the problem
is it never seems to come out that way.
On the outer continental shelf thing, I can talk to you
about the reduction in revenues, but I can also talk about the
buy-back of the contracts, and it is the follow-on and some of
the things that we get into, whether it is innocently or not--
and I don't have an understanding of how that happens--and I
have seen in some of our technology investments huge amount of
money committed to, you know, a good idea, and I don't know
whether the good idea is going to justify the costs. And I am
not sure whether the people in the cycle that you mentioned,
Bob, when we started out, understand that this is a lot more
than just this 5 years, we could fit numbers and do all kinds
of stuff, but we may be actually obligating ourselves for quite
a bit. That is an area I want to pursue.
If I don't pursue the votes, we are going to be in trouble,
so I thank you all very much.
I would now like to submit for the record, the accompanying
slide presentation as well as nine additional CRS reports and a
GAO report.
[The accompanying slide show follows:]
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[CRS report number one is as follows:]
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[Whereupon, at 11:05 a.m., the subcommittee was adjourned.]