[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

                             ----------

                    U.S. GOVERNMENT PRINTING OFFICE
 46-986                     WASHINGTON : 1997
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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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    [CRS report number two is as follows:] 
    
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    [CRS report number nine is as follows:] 
    
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    [The GAO report is as follows:] 
    
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    [Whereupon, at 11:05 a.m., the subcommittee was adjourned.]