[Senate Report 105-170]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 330
105th Congress                                                   Report
                                SENATE

 2d Session                                                     105-170
_______________________________________________________________________


 
               CONCURRENT RESOLUTION ON THE BUDGET FY 1999

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                          UNITED STATES SENATE

                              to accompany

                            S. Con. Res. 86

                             together with

                     ADDITIONAL AND MINORITY VIEWS





Setting forth the congressional budget for the United States Government 
  for fiscal years 1999, 2000, 2001, 2002, and 2003 and revising the 
        concurrent resolution on the budget for fiscal year 1998

                 March 20, 1998.--Ordered to be printed


                        COMMITTEE ON THE BUDGET

                 PETE V. DOMENICI, New Mexico, Chairman
CHARLES E. GRASSLEY, Iowa            FRANK R. LAUTENBERG, New Jersey
DON NICKLES, Oklahoma                ERNEST F. HOLLINGS, South Carolina
PHIL GRAMM, Texas                    KENT CONRAD, North Dakota
CHRISTOPHER S. BOND, Missouri        PAUL S. SARBANES, Maryland
SLADE GORTON, Washington             BARBARA BOXER, California
JUDD GREGG, New Hampshire            PATTY MURRAY, Washington
OLYMPIA J. SNOWE, Maine              RON WYDEN, Oregon
SPENCER ABRAHAM, Michigan            RUSSELL D. FEINGOLD, Wisconsin
BILL FRIST, Tennessee                TIM JOHNSON, South Dakota
ROD GRAMS, Minnesota                 RICHARD J. DURBIN, Illinois
GORDON SMITH, Oregon
                  G. William Hoagland, Staff Director
              Bruce King, Staff Director for the Minority


                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Introduction and Overview........................................1
 II. Economics........................................................9
III. Spending and Revenues...........................................13
        Baseline.................................................    13
            A. Spending by Function..............................    15
            B. Revenues..........................................    52
 IV. Summary Tables..................................................66
  V. Budget Resolutions: Enforcement and Other Provisions............71
 VI. Committee Views and Estimates...................................77
VII. Committee Votes................................................225
VIII.Additional and Minority Views..................................231


                                                       Calendar No. 330
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-170
_______________________________________________________________________


              CONCURRENT RESOLUTION ON THE BUDGET FY 1999

                                _______
                                

                 March 20, 1998.--Ordered to be printed

_______________________________________________________________________


Mr. Domenici, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                     [To accompany S. Con. Res. 86]

                      I. Introduction and Overview

       the concurrent resolution on the budget: fiscal year 1999

    ``The Balanced Budget, Medicare and Social Security Preservation 
                              Resolution''

    The Committee-reported resolution abides by the Balanced 
Budget Act of 1997 reached eleven months ago between the 
Administration and the Congress. The resolution balances the 
unified federal budget in 1999 and maintains balance 
thereafter.
    The unified federal budget surplus is estimated to be $8 
billion in 1999; $1 billion in 2000; $13 billion in 2001; $67 
billion in 2002; and $59 billion in 2003. Cumulative surpluses 
total $148.6 billion over the next five years.
    Excluding social security and other off-budget programs, 
the on-budget deficit totals $108 billion in 1999 and decreases 
slightly to $93 billion in 2003. Cumulative on-budget deficits 
total $523 billion over the next five years.
    The off-budget surplus--social security surplus--increases 
from $117 billion in 1999 to $151 billion in 2003. Cumulative 
off-budget surpluses total $670 billion over the next five 
years.
    The Committee-reported resolution would permit federal 
spending to increase from $1.672 trillion in 1998 to $1.730 
trillion in 1999--a 3.5 percent annual increase. Reflecting the 
underlying CBO economic projections of continued economic 
growth, the Committee-reported resolution assumes federal 
revenues will increase from $1.680 trillion in 1998 to $1.739 
trillion in 1999--a 3.5 percent annual increase.
    The Committee-reported resolution abides by the 
discretionary spending caps established in the Balanced Budget 
Act (BBA) of 1997.
    Discretionary spending for National Defense (050) is set at 
the BBA spending cap level for 1999: $271.6 billion in BA and 
$266.6 billion in outlays. BBA levels are assumed for 2000-2002 
and growth for inflation in 2003.
    The Committee-reported resolution does not assume a 
continuation of the spending firewalls between defense and 
nondefense discretionary beyond their statutory requirement in 
1999.
    The Committee-reported resolution assumes discretionary 
spending for nondefense functions set at the BBA spending cap 
level: $261.3 billion in BA and $294.6 billion in outlays. 
Total discretionary spending is set at spending cap levels for 
2000-2002 and growth for inflation allowed in 2003.
    The Violent Crime Reduction Trust Fund (VCRTF) is fully 
funded at authorized levels within the discretionary spending 
caps--$5.8 billion in budget authority for 1999.
    Protected functions from the BBA are funded at levels 
assumed in that agreement, with adjustments for Transportation 
(described below). Protected functions include: (1) 
International Affairs, (2) Natural Resources and Environment, 
(3) Education, Training, Employment, and Social Services, and 
(4) Administration of Justice.
    Similar to the President's budget, the Committee-reported 
resolution assumes the allocation of $1.8 billion in 1999 and 
similar amounts for years beyond 1999 for unexpected emergency 
spending that could be accommodated within the statutory 
spending caps.
    Funding for highways and mass transit has been increased 
beyond levels agreed to in the BBA--$25.9 billion in contract 
authority for highways, $18.5 billion outlays for highways, and 
$5.0 billion BA for mass transit--would be offset with 
reductions in direct spending programs allocated to the 
Appropriations Committee to fund these commitments.
    Identified, specified, and reserved mandatory spending 
reductions are allocated to the Appropriations Committee to 
offset $18.5 billion in outlays for highways and $5.0 billion 
in BA for mass transit over the next five years.
    Identified mandatory offsets include: (1) repeal of VA 
General Counsel decision to classify smoking-related illnesses 
as ``service-connected disabilities,'' as proposed by the 
President--$10.5 billion, (2) Medicaid administrative cost 
reforms, as proposed by the President--$1.9 billion, (3) 
reduction in social services block grants as proposed by the 
President--$3.1 billion, (4) terminate Federal Crop Insurance 
for tobacco producers, cap mandatory computer CCC costs, and 
end CCC Market Access Program--$0.6 billion, (5) Food stamp 
administrative cost reforms as proposed by the President--$1.7 
billion, (6) Ginnie Mae premium fee increase of 3 basis 
points--$0.2 billion, and (7) Alternative proposals in FHA 
insurance programs with savings ranging from $1.1 billion to 
$1.3 billion over the next five years.
    The Committee-reported resolution, includes additional 
discretionary spending increases assumed funded within spending 
caps as follows: (1) National Institutes of Health--$15.5 
billion BA and $11.2 billion in outlays, (2) Teen Smoking 
Cessation programs--$825 million BA and $623 million outlays, 
(3) IDEA education programs--$2.5 billion in BA and $1.9 
billion in outlays, (4) additional funding for Child Care Block 
Grant--$5.0 billion in BA, (5) 2000 Census--$1.4 billion in BA 
and outlays, (6) Berlin and Beijing embassies--$0.5 billion in 
BA and outlays.
    The Committee-reported resolution would fund the 
President's requested levels for: (1)Export-Import Bank, (2) 
Antiterrorism, non-proliferation, (3) National Science Foundation, (4) 
National Parks operations expenses, and (5) Bureau of the Census. The 
Committee-reported resolution rejects the President's significant 
reductions in the Corps of Engineer's construction programs and 
establishes a mechanism for funding the Endangered Species Act now 
being considered in the Senate.
    The Committee-reported resolution identifies possible tax 
reductions totaling more than $30 billion over the next five 
years from: (1) extension of the R&E tax credit, (2) extension 
of the Generalized System of Preferences (GSP), (3) IRS reform, 
(4) technical adjustments to the Taxpayer Relief Act of 1997 to 
simplify identified complexities, (5) reform of the marriage 
penalty, and (6) child care tax relief. These or any additional 
tax reductions could be accommodated within the Committee-
reported resolution levels if offset with revenue raisers and/
or mandatory spending reductions not already reserved for the 
Appropriations Committee to offset transportation funding.
    The Committee-reported resolution contains several language 
provisions. Some of these that will facilitate enforcement of 
its budgetary goals including the following:
    A ``tobacco reserve fund'' is established to reserve any 
such receipts from possible tobacco legislation in the 105th 
Congress to the Medicare Part A Trust Fund.
    Language in the resolution, as in past resolutions, would 
establish a tax cut reserve fund.
    Language consistent with 1998 Budget Resolution relating to 
the treatment of Superfund reform legislation, receipts, and 
spending.
    The Committee-reported resolution also includes Sense of 
Congress language concerning reserving unified budget surpluses 
for social security reforms.

                    A BUDGET RESOLUTION: WHAT IS IT?

    A budget resolution is a fiscal blueprint, a guide, a road 
map, that the Congress develops to direct the course of federal 
tax and spending legislation. It is a set of aggregate spending 
and revenue numbers covering the twenty broad functional areas 
of the government, over a long-term fiscal horizon. It is less 
than substantive law, but is much more than a sense of the 
Congress resolution. It is a tool for Congress. A budget 
resolution does not require the President's signature and does 
not become law.
    Nevertheless, a budget resolution can require congressional 
action leading to changes in substantive law that require 
Presidential approval. Conversely, substantive law can affect 
the construction of a budget resolution. For example, 
substantive law changes enacted last year specify parameters 
that the Committee must follow in the 1999 Budget Resolution. 
The resolution is enforceable on Congress and it penalizes 
committees that violate its guidelines. A budget resolution is 
not a line-item detail document, but conversely line-item 
assumptions are often required to construct the resolutions' 
aggregate numbers.

The concurrent resolution on the budget for 1999

    Title III of the Congressional Budget Act of 1974 requires 
the Congress to complete action on a concurrent resolution on 
or before April 15 of each calendar year for the fiscal year 
that begins on October 1. Unlike recent past budget 
resolutions, the 1999 Budget Resolution should represent a 
continuum in carrying out the Bipartisan Budget Agreement 
announced by President Clinton and the Congressional leadership 
eleven months ago on May 7, 1997.
    That continuum includes the Senate Budget Committee's 
reporting on May 19, 1997, by a vote of 17-4, a 1998 Budget 
Resolution implementing the BBA, ultimately leading to the 
enactment of the Balanced Budget Act of 1997 and the Taxpayer 
Relief Act of 1997 on August 5, 1997, and thirteen individual 
appropriation bills.
    The Balanced Budget Act (BBA) of 1997 extended 
discretionary spending limits and pay-as-you-go through 2002. 
These procedures were first enacted in the 1990 Budget 
Enforcement Act. As the Congress goes on to consider and adopt 
the 1999 Budget Resolution and subsequent spending bills--
unlike previous years--fiscal guideposts for discretionary 
spending have already been established for the Administration 
and Congress. Revisions to those guideposts usually require 
changes to substantive law, and therefore, agreed on changes to 
the historic agreement reached last year.
    The President's 1999 budget submitted to Congress in 
February, as reestimated by the Congressional Budget Office, 
was found to have violated the BBA by proposing to spend nearly 
$12 billion over the agreed on spending caps in 1999, and 
nearly $68 billion more than was agreed to over the period 
through 2002. Law binds the Senate Budget Committee, however, 
not to report a budget resolution that exceeds the spending 
limits established in last year's agreement.
    This section provides a brief, but broad historical 
perspective of the federal budget--deficits/surpluses, 
spending, entitlements, and revenues by major components. 
Deficits and surpluses are presented within the framework of a 
unified federal budget.1 Highlights of the 
Committee-reported resolution come after the historical review.
---------------------------------------------------------------------------
    \1\ The Committee's resolution, like past reported budget 
resolutions, complies with the Budget Enforcement Act, Subtitle C, 
Social Security, Section 13301, which requires the exclusion of 
receipts and disbursements of the Federal Old-Age and Survivors 
Insurance Trust Fund and the Federal Disability Insurance Trust Fund 
from the budget totals.
---------------------------------------------------------------------------
    A critical component required to construct any budget 
resolution are the underlying economic assumptions used over 
the fiscal horizon of the resolution. Included in this section 
is a description of the current economic assumptions used to 
construct and develop the baseline spending and revenue paths. 
A description of the baseline used for the 1999 Budget 
Resolution follows.

A brief on the Federal budget

    The federal budget is: (1) a plan for how the federal 
government disburses and allocates taxpayers' dollars among 
various competing public functions, (2) a plan for how the 
federal government collects revenues, (3) a plan for how the 
federal government will finance any deficit spending by 
borrowing from the public, and (4) a tool for formulating macro 
fiscal policy.
    Chart 1 that follows presents the history and the current 
CBO baseline projection of the federal deficit through early in 
the next century. After reaching a peak of $290 billion in 1992 
(4.7 percent of GDP), the unified budget deficit has declined 
to where the CBO now projects a slight surplus in the current 
fiscal year of nearly $8 billion. Current laws and policies 
left unchanged, and real economic growth averaging 2.2 percent 
annually, the unified budget surplus is projected to grow to 
$67 billion by 2002 (0.7 percent of GDP) and nearly $138 
billion by 2008 (1.1 percent of GDP).
    The on-budget deficit excludes spending and revenues of the 
two Social Security trust funds and the net transactions of the 
Postal Service. The on-budget deficit remains largely unchanged 
throughout the period--$92 billion in 1998 (1.1 percent of 
GDP), increasing to $117 billion in 2001 (1.2 percent of GDP), 
and then declining to $60 billion by 2008 (0.5 percent of GDP).





    The federal budget consists of more than 1,060 spending 
accounts that fund an estimated 113,000 programs, projects, and 
activities. The federal budget and a Congressional budget 
resolution collapse these accounts into twenty budget 
functions. The bulk of this report describes each of these 
areas, with further clarification between those programs 
subject to annual appropriations and those defined as mandatory 
spending--not controlled by annual appropriations.
    A further simplification of federal spending is depicted in 
Chart 2. This chart categorizes all federal spending (outlays) 
into four major components: (1) entitlements and mandatories, 
(2) defense discretionary, (3) nondefense discretionary, and 
(4) net interest on our public debt. (Note: Offsetting receipts 
are excluded from this chart.) Offsetting receipts are 
represented in the federal accounts as negative BA and outlays. 
In 1997 offsetting receipts totaled nearly $87 billion and 
consisted primarily of intergovernmental receipts from agencies 
contributions for federal workers' retirement, and Medicare 
premium payments.
    Clearly federal spending has increased dramatically over 
the last twenty years and left unchanged will continue to grow 
into the future. Entitlement and mandatory programs which 
represented 35 percent of all federal spending in 1970 will 
exceed 56 percent in 1998. Including net interest payments on 
federal borrowing over the years, the percentage of the federal 
budget today that is either an entitlement or a mandatory 
payment reaches nearly 72 percent.





    Discretionary appropriated accounts that represented 25 
percent of total spending in 1970 have grown to about 33 
percent in 1998. Between 1981 and 1998, all discretionary 
spending, both defense and nondefense, in constant dollars 
(adjusted for inflation) has increased less than 0.2 percent 
annually. Over this period, where there has been growth in 
nondefense spending after accounting for inflation, that growth 
has been targeted in a few specific areas:
          An increase of 140 percent in federal crime fighting 
        activities,
          More than a 30 percent increase for space and a 75 
        percent increase for science programs, and
          An increase of 127 percent for housing programs.
    Other nondefense spending has seen significant reductions: 
energy programs down 67 percent, international affairs down 24 
percent, commerce programs down 57 percent, and transportation 
funding basically flat.
    Annual discretionary defense spending--in constant 
dollars--has declined a total of 17 percent since 1983. On the 
other hand, annual nondefense discretionary spending has 
increased 4 percent since 1983 in constant dollars.
    Total entitlement and mandatory spending growth is shown in 
Chart 3. In 1995, 72 percent of all mandatory spending fell 
into three programs: Social Security, Medicare, and Medicaid. 
Spending 
for mandatory programs as a whole has more than doubled during 
the past decade, rising faster than both nominal growth in the 
economy and the rate of inflation. These programs are expected 
to continue growing in the future, but growth in caseload will 
account for only about one-fifth of the growth. Automatic 
increases in benefits will account for more than one-third of 
the growth and increased medical service utilization nearly 40 
percent.





     Finally, total federal revenues in 1998 will reach nearly 
$1.7 trillion. Social insurance taxes contributed 35 percent of 
total revenues, up from 25 percent less than a quarter of a 
century ago. The share of revenues collected from individual 
income taxes has remained steady at nearly 45 percent over the 
years, while the proportion from corporate and excise taxes has 
declined from 25 percent in 1970 to 15 percent today.





                        II. Economic Assumptions

    The Committee-reported resolution baseline is built upon 
CBO's latest multi-year economic assumptions. CBO compiles 
economic forecasts for 1998 and 1999, which reflect the current 
state of the economy and relative position in the business 
cycle. CBO's out year projections are based upon longer-term 
trends in the economy.

                               COMMITTEE-REPORTED RESOLUTION ECONOMIC PROJECTIONS                               
                                                 [Calendar years]                                               
----------------------------------------------------------------------------------------------------------------
                                                     1997     1998     1999     2000     2001     2002     2003 
----------------------------------------------------------------------------------------------------------------
Nominal GDP (billions)...........................    8,081    9,461    8,818    9,195    9,605   10,046   10,529
Percent change (year over year):                                                                                
    Real GDP growth..............................      3.7      2.7      2.0      1.9      2.0      2.1      2.3
    Consumer price index.........................      2.3      2.2      2.5      2.7      2.8      2.8      2.8
    GDP price deflator...........................      2.0      2.0      2.2      2.3      2.4      2.4      2.5
Annual rate:                                                                                                    
    Unemployment.................................      5.0      4.8      5.1      5.4      5.6      5.8      5.9
    Three-month T-bill...........................      5.1      5.3      5.2      4.8      4.7      4.7      4.7
    Ten-year T-note..............................      6.4      6.0      6.1      6.0      5.9      5.9      5.9
----------------------------------------------------------------------------------------------------------------

Overview

    The economy was exceptionally strong in 1997--real GDP grew 
by 3.8 percent while the unemployment rate dropped to 4.7 
percent by year-end. Despite above-trend growth, inflation fell 
slightly from its 1996 pace. This performance is even more 
noteworthy, given the fact that it occurred seven years into 
the present expansion. The more favorable economic backdrop 
accounts for roughly one-third of the drop in the 1999-2003 
cumulative deficit from CBO's September 1997 baseline to their 
March 1998 estimate.
    Looking ahead there are an unusual number of uncertainties 
on the horizon, most notably the fall out from the Asian 
financial crisis. When coupled with the maturity of the current 
expansion, the present economic backdrop argues for caution in 
preparing budget estimates. This caution is reflected in the 
CBO economic assumptions used to prepare the Committee-reported 
resolution.

Summary of CBO economic forecasts

    The CBO economic forecast is similar to OMB and Blue Chip 
overall and is within the range of error on these forecasts.
    Growth. CBO looks for the economy to slow from 1997's 
torrid pace. Real growth should remain below-trend over much of 
the 1999-2003 budget window, induced partly by the spillover 
effects of the Asian crisis on U.S. net exports. CBO expects 
average annualized real GDP growth of 2.1 percent over the 
budget window.
    Inflation. While inflation was very subdued in 1997, CBO 
believes that this is the result of a series of temporary 
factors--namely, lower import prices due to the strong dollar, 
sharp declines in computer prices and slower growth of medical 
costs. As these factors fade, CBO expects CPI growth to pick up 
over the budget window.
    Both OMB and CBO assume that ongoing technical changes by 
the BLS will shave roughly 0.4 percentage points from CPI 
growth during the budget window. Largely, these adjustments 
were previously incorporated into the BBA baselines of last 
year, and continued this year.
    Unemployment. In keeping with an expected period of below-
trend growth, CBO looks for the unemployment rate to rise 
gradually over the budget window.

Revenue strength

    In the last four years, revenue growth has outstripped GDP 
growth by more than 2 percent, boosting the ratio of federal 
revenues to GDP to a post-1945 record of 19.8 percent.
    Revenue growth was particularly strong in 1997, with actual 
revenues roughly $70 billion above both CBO's and OMB's January 
1997 projections. According to CBO's analysis, 85 percent of 
this $70 billion was accounted for by higher than expected 
individual income tax receipts. The strength in 1997 individual 
income tax receipts likely derived from three sources: (1) 
stronger than expected growth in personal income due to the 
robust economy, (2) unusually high capital gains realizations, 
and (3) a rise in the effective tax rate. The latter two 
factors caused individual receipts to rise at twice the rate as 
personal income growth.
    Based on continued economic strength and the likely 
persistence of some technical factors, both CBO and OMB largely 
extrapolated 1997's revenue strength into 1998 and 1999. Beyond 
1999, both made at least partial extrapolation of the final 
1997 outcome. CBO's and OMB's current services revenue 
projections are now essentially identical.

Sensitivity to economic changes

    Last year's experience showed the sensitivity of the 
deficit to economic and technical changes. While 1997's outcome 
was favorable, it could just as easily have been a negative 
surprise. CBO notes that seeing a 2 percent swing in any one 
year from projections of both revenue and outlays is not 
uncommon. Should revenues fall short by 2 percent and outlays 
run ahead by the same amount, this could produce a $60 billion 
increase in the deficit.
    The onset of recession would have an even larger effect. 
CBO notes that a ``typical'' recession could increase the 
deficit by more than $100 billion. While no one expects a near-
term US recession, a further worsening of the Asian crisis 
could bring such fears into view.
    Remembering the maturity of the current economic expansion 
is also important. Now into its eighth year, it will be the 
longest peacetime expansion if it lasts until the end of 1998. 
If it lasts until the end of the budget window, it will be the 
longest expansion on record. CBO attempts to account for 
recession risks by having the economy operate at slightly below 
its level of potential GDP in the out years. Yet, should a 
recession hit within the five-year budget window, budget 
outcomes would be much worse than current estimates. This 
argues for cautious 1999 budgeting.

Long-term outlook

    CBO's long-term fiscal analysis shows that the BBA has 
improved the long-term outlook. Yet, it does not prevent an 
eventual explosion in our debt/GNP ratio once the baby-
boomers'' retirement costs mount early in the next century. To 
solve the U.S.' long-term fiscal problems, CBO finds that the 
government would need to cut either spending or raise taxes by 
1.6 percent of GDP permanently.





    CBO's projections may well err on the optimistic side. CBO 
uses population projections formulated by the Social Security 
Administration. The Advisory Council on Social Security and 
many private demographers believe that median life expectancies 
have increased more than SSA assumes, which would worsen CBO's 
long-term fiscal projections. Thus, the Committee-reported 
resolution does not assume spending or reductions in taxes from 
any near-term projected surplus. Instead, the near-term 
reprieve in fiscal outlook is an opportunity to undertake 
meaningful dialogue and reform of entitlement programs like 
Medicare and Social Security. Only through such action, will 
there be a truly favorable fiscal outlook overall.

                       III. Spending and Revenues

                          BASELINE ASSUMPTIONS

    The ``baseline''--the starting point required to construct 
any budget resolution--is another important element in the 
development of any budget resolution. Alternative baselines can 
be constructed. The Budget Resolution baseline for this 
resolution was developed by the Committee Staff with the 
assistance of the Congressional Budget Office (CBO) and is 
called the ``Freeze baseline''.
    The Freeze baseline is calculated in the general manner 
proscribed by the BEA, except that discretionary appropriated 
accounts are ``frozen'' at the 1998 enacted level and include 
no increase for inflation. This is the same as CBO's updated 
February WODI (without discretionary inflation) baseline, with 
several adjustments to discretionary spending.
    The baseline incorporates the effects of the Military 
Construction veto override that passed the Senate on February 
25, 1998. The measure passed too late to be included in CBO's 
revised baseline. No assumptions have been made regarding the 
1998 supplemental.
    The baseline is adjusted downward to reflect discretionary 
funding that is outside the caps, pursuant to Section 251 of 
the Balanced Budget and Emergency Deficit Control Act (Gramm-
Rudman) and Section 314 of the Congressional Budget Act. These 
adjustments include: arrearages for international 
organizations, peacekeeping, and multilateral development 
banks; continuing disability reviews (CDRs); and an IRS 
initiative to improve EITC compliance.
    The baseline for highway and mass transit programs reflect 
the assumptions in last year's BBA, adjusted for congressional 
action, to maintain the baseline for the ISTEA Reauthorization.
    Estimates for direct spending, which is all spending 
authority provided by law other than appropriations acts, 
assume full funding of current law, including cost-of-living 
adjustments. Direct spending includes entitlements and other 
mandatory programs such as social security, medicare, and 
federal retirement, where spending levels are controlled by 
eligibility rules, benefit calculations, participation levels, 
and other non-discretionary cost factors. The baseline assumes 
that all programs greater than $50 million a year will 
continue, even if their authorization expires. Net interest 
spending, which is another subset of direct spending, is driven 
by the size of the annual and cumulative cash deficits and 
interest rates and is rarely affected directly by Congressional 
action.
    Likewise, baseline revenue estimates assume no change in 
current tax law. Excise taxes dedicated to a trust fund are 
assumed to continue if their expiration occurs during the 
baseline period. However, other expiring provisions of tax law, 
whether increasing or decreasing revenues, are not extended in 
the baseline.
    The following section of the report provides more 
information on the Committee-reported resolution for each of 
the 20 functional areas of the budget. Each function discussion 
begins with an overview of the major programs and activities 
funded in the function, baseline trends, and the assumptions in 
last year's BBA. Each section also contains a table comparing 
the Committee-reportedresolution with last year's BBA 
assumptions and the Freeze Baseline. The BBA assumptions were 
constructed by taking the BBA discretionary spending levels, including 
levels for protected functions, and CBO's most recent estimates for 
mandatory spending and revenues. This is basically last year's 1998 
Budget Resolution (which incorporated the BBA) updated for legislation, 
economics, and technical revisions. Highlights from the reported 
resolution follow the comparison table.
    For all data in the functional sections, please note the 
following:
    All years are fiscal years unless otherwise noted.
    Details may not add to totals due to rounding.
    An asterisk (*) indicates less than $50 million.

                        a. spending by function

                     Function 050: NATIONAL DEFENSE

                            function summary

    The National Defense budget function includes the 
Department of Defense (DOD), Atomic Energy Defense Activities 
of the Department of Energy (DOE), and other defense activities 
in the Federal Emergency Management Agency, the Selective 
Service, the General Services Administration, and other 
agencies. DOD spending is about 96 percent of all National 
Defense spending; DOE defense spending is about 4 percent.
    The Committee-reported resolution fully funds the amount 
agreed to in the 1997 BBA. Accordingly, it sets discretionary 
BA at $271.6 billion and outlays at $266.6 billion. 
Furthermore, based on current CBO estimates of the 1999 
inflation ``dividend'' and the President's request for an 
emergency budget amendment, the Committee-reported resolution 
would fund an additional $3.6 billion in BA and $2.7 billion in 
outlays in 1999 compared with last year's expectations.
    The funding levels of the BBA incorporated in the 
Committee-reported resolution were specifically endorsed by 
Congress, the President, and the Department of Defense in 1997. 
These levels were based on the higher spending levels in the 
1997 Budget Resolution for 1998-1999 and the President's higher 
1998 Budget for 2000-2002. Consequently, the five-year total 
spending in the BBA and Committee-reported resolution is higher 
than proposed last year by either Congress or the President.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............     267.7     270.5     274.3     280.8     288.6     296.8
                                    OT..............     268.1     265.5     268.0     269.7     272.1     279.8
BBA...............................  BA..............     267.7     270.5     274.3     280.8     288.6     296.8
                                    OT..............     268.1     265.5     268.0     269.7     272.1     279.8
Freeze baseline...................  BA..............     267.7     267.8     267.8     267.8     267.9     267.9
                                    OT..............     268.1     267.2     268.8     263.8     266.1     266.3
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........  ........  ........  ........  ........  ........
                                    OT..............  ........  ........  ........  ........  ........  ........
    Freeze baseline...............  BA..............  ........      +2.7      +6.5     +13.0     +20.8     +28.9
                                    OT..............  ........      -1.6      -0.9      +5.8      +6.0     +13.5
----------------------------------------------------------------------------------------------------------------

              description of committee-reported resolution

    The Committee-reported resolution is the BBA. For 1999-
2003, the proposed resolution exceeds the Freeze Baseline by 
$71.9 billion in BA and $22.9 billion in outlays.
    The Committee-reported resolution assumes an increase in 
discretionary BA between 1998 and 1999 for this function. 
Appropriations would increase from $268.9 billion to $271.6 
billion. In addition, as provided by the BBA, ``firewalls'' 
would be discontinued after 1999.
    In 1999 there is a difference of $3.7 billion in outlays 
between the Committee-reported resolution and the President's 
request. This difference results from the undercount of outlays 
performed by the Department of Defense and OMB in their 
estimate of the President's budget. There is a continuing 
history of such outlay undercounts by DoD and OMB. For 1997, 
CBO's initial estimate was $2.1 billion higher than OMB's; for 
1998, CBO was $5.6 billion higher. Based on the Treasury 
Department's tabulation of actual outlays for 1997, even the 
higher CBO estimate for that year was $2.6 billion too low. 
According to CBO's preliminary analysis of actual 1998 outlays, 
the initial CBO estimate for 1998 may have again been low. 
Despite CBO being higher than OMB, CBO's outlay estimates for 
the recent past have been conservative, if anything. The 1999 
outlay undercount has been corrected by CBO's re-estimate. As a 
result, the President's budget request for Function 050 exceeds 
the BBA; the Committee-reported resolution complies with the 
BBA outlay cap for FY 1999.
    While the $3.7 billion outlay shortage for 1999 presents 
serious management and budgetary challenges to Congress, the 
Committee believes that there are opportunities to address the 
problem. The Committee believes that it is not appropriate for 
DoD and OMB to recommend to Congress an outlay estimate 
methodology that consistently underestimates the outlays needed 
to execute the budget authority program contained in 
Presidential defense budget requests. TheCommittee notes that 
non-defense discretionary outlays have also been re-estimated upward by 
CBO.
    Title 10 U.S.C. 226 requires an annual CBO/OMB report to 
the House and Senate Budget Committees, among others, not later 
than December 15 of each year. The report is intended to 
identify the outlay rates and other technical assumptions used 
in preparing budget estimates. No such letter has been 
submitted for the 1999 budget as of the date of this 
resolution. The failure of OMB to conform to more historically 
accurate outlay rates and the tardy preparation of this letter 
has seriously complicated the Committee's work. The Committee 
urges that the statutory requirement for this letter be 
observed.
    To address the issues inherent in the 1999 050 Budget 
Function, the Committee-reported resolution assumes the 
following:
     CBO scoring will be used for the 1999 Budget 
Resolution.
     DoD will exercise available flexibility to adjust 
to its own--and OMB's--undercounting of outlays. The 1999 
outlay shortfall occurs in new outlays, rather than outlays 
from prior years. Thus, there is potential flexibility to 
manage future programs and expenditures to reduce the scope of 
the problem.
     National Defense will retain this year's inflation 
``dividend.'' According to CBO calculations, DOD's inflation 
``dividend'' adds $1.7 billion in BA and $0.8 billion in 
outlays for 1999 and $13.2 billion in BA and $10.3 billion in 
outlays over 1999-2003.
     The Administration's request for an ``emergency'' 
$1.9 billion budget amendment for 1999 to pay for U.S. military 
operations in Bosnia will be enacted.
     The intelligence budget portion of Function 050, 
publicly estimated at $25-30 billion, has never been 
comprehensively audited by GAO. Such a comprehensive and 
independent audit might yield excess unobligated balances 
similar to the approximate $3 billion divulged by the National 
Reconnaissance Office in 1996.
     The Committee-reported resolution assumes the 
defense activities of the Department of Energy at the level of 
the President's request of $12.3 billion in BA and $11.9 
billion in outlays. These amounts include the President's 
request of $2.2 billion in BA and full funding of the requisite 
outlays for the Stockpile Stewardship Program. The Committee 
notes with favor that for 1999 there was no significant 
undercounting of outlays for the defense activities of the 
Department of Energy.
    During its deliberations, the Committee debated an 
amendment offered by Senator Wyden to set aside in Function 920 
the 1999 inflation ``dividend.'' This ``dividend'' has been 
calculated by CBO to be $1.7 billion in BA and $0.8 billion in 
outlays for Function 050 and $1.8 billion in BA and $0.6 
billion in nondefense discretionary spending for 1999. The 
Committee believes that both the defense and the non-defense 
inflation ``dividends'' should remain within their respective 
budget functions for 1999, and that the agreed on spending caps 
of the BBA should remain unchanged.

                  Function 150: INTERNATIONAL AFFAIRS

                            FUNCTION SUMMARY

    Function 150 includes operation of the foreign affairs 
establishment including embassies and other diplomatic missions 
abroad, foreign aid loan and technical assistance activities in 
developing countries, security assistance to foreign 
governments, activities of the Foreign Military Sales Trust 
Fund, U.S. contributions to international financial 
institutions, Export-Import Bank and other trade promotion 
activities, and refugee assistance.
    In 1998, spending for Function 150 was $15.2 billion in BA 
and $14.1 billion in outlays. Discretionary spending in 1998 
was $19.1 billion in BA and $18.7 billion in outlays, which was 
a 6 percent increase over the 1997 spending level of $18.0 
billion in BA.
    Funding for the Department of State, Foreign Military 
financing, the Economic Support Fund, international 
organizations, and the Export-Import Bank account for most of 
this discretionary spending. Funding for Department of State 
programs in 1998 totaled approximately $2.5 billion. Historical 
levels of funding for the Middle East were funded through 
Foreign Military Financing and the Economic Support Fund. 
International organizations (including the United Nations) were 
funded at a level of $1.5 billion and the Export-Import Bank 
was funded at a level of $696 million.
    As reflected in the spending summary table, under the 
freeze baseline, Function 150 will increase by 6 percent from 
1998 to 2003. This is due primarily to changes in mandatory 
programs, including the phase-out of pre-Credit Reform and 
economic assistance loan repayments and lower receipts in the 
Foreign Military Sales trust fund.
    The BBA designated Function 150 as a protected function and 
specified $18.6 billion in BA and $18.8 billion in outlays as 
the discretionary level for 1999. The BBA levels drop to $18.2 
billion in BA and $18.4 billion in outlays by 2002. The 
functional levels in the BBA do not include arrears to the 
United Nations and multilateral development banks, or funding 
for the International Monetary Fund. Section 314(b)(3) of the 
Congressional Budget Act, as amended by the BBA, addresses 
funding for these programs. The agreement provides an 
adjustment to the discretionary spending caps, committee 
allocations, and the budgetary aggregates as these programs are 
funded, up to $1.884 billion for arrearages and an unspecified 
amount for contributions to the IMF.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      15.2      14.6      14.3      15.1      15.2      15.2
                                    OT..............      14.1      14.2      14.7      14.5      14.5      14.4
BBA...............................  BA..............      15.2      14.3      14.5      15.2      15.3      15.9
                                    OT..............      14.1      14.5      14.8      14.6      14.6      15.2
Freeze baseline \1\...............  BA..............      15.2      14.4      14.6      15.5      15.7      15.8
                                    OT..............      14.1      14.1      14.7      14.6      14.7      14.8
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +0.3      -0.2      -0.1      -0.1     -.0.7
                                    OT..............  ........      -0.2    -(\1\)    -(\1\)      -0.1      -0.8
    Freeze baseline...............  BA..............  ........      +0.3      -0.3      -0.4      -0.5      -0.6
                                    OT..............  ........      +0.2      +0.1      -0.1      -0.2      -0.3
----------------------------------------------------------------------------------------------------------------
\1\ Totals exclude arrears to the United Nations and other organizations.                                       

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution proposes discretionary 
spending of $18.9 billion in BA and $18.6 billion in outlays. 
The BBA-protected levels for Function 150 in 1999 are $18.6 
billion in BA and $18.8 billion in outlays. The 1999 Committee-
reported resolution is $0.3 billion above the BBA levels in BA 
and $0.2 billion below the BBA levels in outlays, $0.3 billion 
in BA and $0.2 billion in outlays above the 1998 freeze levels, 
and $0.9 billion in BA and $0.3 billion in outlays below the 
President's 1999 request.
    These levels exclude arrears to the United Nations, 
international organizations and multilateral development banks 
(MDBs) and funding for the International Monetary Fund's (IMF) 
New Arrangements to Borrow and US quota subscription, as 
referred to in Section 314(b)(3) of the Congressional Budget 
Act (CBA).
    The Committee-reported resolution proposes increases in the 
following programs:
    The resolution assumes $641 million in BA for the State 
Department Security and Maintenance of US Missions account, 
full funding of the President's Request for 1999 and a 61 
percent increase from a 1998 freeze level. This funding level 
includes increases for embassies in Beijing and Berlin.
    Assumed in the resolution is the President's requested 
level of $825 million in BA for the Export Import Bank, a $128 
million increase from a 1998 freeze level. This funding will 
partially address an anticipated budget shortfall for 1998 
expected to be carried over to 1999.
    The resolution assumes the President's requested level of 
$118 million in BA for the State Department's Capital 
Investment Fund, a 37 percent increase from a 1998 freeze 
level. This funding increase is to allow the State Department 
to continue updating its information technology infrastructure.
    Assumed in the Reported Resolution is the President's 
requested level of $216 million in BA for the Non-
proliferation, Antiterrorism, Demining and Related Programs 
account, a 37 percent increase from a 1998 freeze level. This 
funding increase includes $29 million for the Comprehensive 
Test Ban Treaty preparatory commission used in part to develop 
and install an international monitoring system (IMS) to detect 
nuclear explosions.
    The resolution assumes the President's requested levels for 
the Treasury's Debt Reduction Program at a level of $72 million 
in 1999, a $45 million increase from 1998. This increase is to 
cover the cost of forgiving debt owed to the US and 
international financial institutions. The increase partly 
covers the debt of African nations, giving emphasis to 
countries pursuing economic reforms.

1998 supplemental request

    The Committee-reported resolution assumes and supports 
enactment of the three supplemental requests for 1998: the 
arrearage payments to the United Nations and other 
international organizations and the IMF's New Arrangements to 
Borrow and US quota subscription. The President asks for 
advance appropriations of $475 million in 1999 and $446 million 
in 2000 for US arrears to the United Nations. The President 
requested for 1998 approximately $14.5 billion for the US quota 
subscription to the IMF and $3.5 billion for the IMF's New 
Arrangements to Borrow.

Section 314(b)(3) adjustments

    The functional levels in the BBA do not include arrears to 
the United Nations and multilateral development banks, or 
funding for the International Monetary Fund. Section 314(b)(3) 
of the Congressional Budget Act, as amended by the BBA, 
addresses funding for these programs. The agreement provides an 
adjustment to the discretionary spending caps, committee 
allocations, and the budgetary aggregates as these programs are 
funded, up to $1.884 billion for arrearages and an unspecified 
amount for contributions to the IMF.
    The Committee-reported resolution assumes adjustments of 
$1.884 billion in total asassumed in the BBA, $460 million 
enacted in 1998, $842 million in 1999 and $582 million in 2000 as shown 
below. All funding was requested by the President.

                                     TABLE 2. SECTION 314(b)(3) ASSUMPTIONS                                     
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                                   Committee-reported resolution assumptions--  
                                                               -------------------------------------------------
                                                                  1998      1999      2000     Totals      BBA  
----------------------------------------------------------------------------------------------------------------
United Nations, CIO and CIPA..................................       100       475       446     1,021     1,021
International Development Association.........................       235         0         0       235       235
Global Environmental Facility.................................         0       140         0       140       140
Multilateral Investment Fund..................................        30        50        99       179       179
Asian Development Bank........................................        50       150        37       237       237
African Development Fund......................................        45         5         0        50        50
InterAmerican Development Bank................................         0        22         0        22        22
                                                               -------------------------------------------------
      Total...................................................       460       842       582     1,884     1,884
----------------------------------------------------------------------------------------------------------------

    The Administration assumes additional arrears for the 
Global Environment Facility (an additional $43 million) and the 
African Development Bank (an additional $83 million) in 1999 
above levels assumed in the BBA. The President's request does 
not address the budgetary treatment of arrears requested in 
2000 for the United Nations, the Asian Development Bank, and 
the InterAmerican Bank's Multilateral Investment Fund.
    The Committee believes that the U.S. must fulfil our 
arrears to the United Nations, the Asian Development Bank, and 
the InterAmerican Bank's Multilateral Investment Fund first, 
before we begin considering arrears created after the BBA was 
enacted.

           Function 250: GENERAL SCIENCE, SPACE & TECHNOLOGY

                            FUNCTION SUMMARY

    Function 250 includes the National Aeronautics and Space 
Administration (NASA) civilian spaceflight, research, and 
support activities and basic research programs of the National 
Science Foundation (NSF) and Department of Energy (DOE).
    In 1998, spending for Function 250 was $18.0 billion in BA 
and $17.7 billion in outlays, which is essentially the same as 
the 1997 spending level. Discretionary spending represents 
nearly 100 percent of total spending in the function.
    As reflected in the spending summary table, under the 
freeze baseline, Function 250 BA would be frozen at $18.0 
billion through 2000, falling to $17.9 billion from 2001 
through 2003.
    One technical baseline change has occurred since passage of 
the BBA that increases Function 250 by $1.3 billion in 1998. 
Energy Supply and Science accounts previously shown in Function 
270 (Energy) are now displayed in this function. The change is 
incorporated into both the freeze baseline and the President's 
request.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      18.0      18.3      17.8      17.7      17.3      17.0
                                    OT..............      17.7      17.9      17.9      17.6      17.4      17.0
BBA \1\...........................  BA..............      18.0      16.2      16.0      15.8      15.6      16.0
                                    OT..............      17.7      16.5      16.0      15.9      15.7      16.1
Freeze baseline...................  BA..............      18.0      18.0      18.0      17.9      17.9      17.9
                                    OT..............      17.7      17.8      17.9      17.9      17.9      17.9
Committee-reported resolution                                                                                   
 compared to:.                                                                                                  
    BBA...........................  BA..............  ........      +2.0      +1.9      +1.9      +1.7      +0.9
                                    OT..............  ........      +1.4      +1.9      +1.7      +1.7      +0.9
    Freeze baseline...............  BA..............  ........      +0.3      -0.1      -0.3      -0.6      -1.0
                                    OT..............  ........      +0.1      -0.0      -0.3      -0.5      -0.8
----------------------------------------------------------------------------------------------------------------
\1\ The Committee-reported resolution levels are higher than the Balanced Budget Agreement (BBA) in part due to 
  an accounting change in 1997 that shifted $1.3 billion in Department of Energy (DOE) science funding from     
  Function 270, Energy, to Function 250.                                                                        

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution proposes discretionary 
spending of $18.2 billion in BA and $17.9 billion in outlays 
for 1999. This represents an increase of $0.3 billion in BA and 
$0.2 billion in outlays over 1998. Over the next five years, 
the resolution would increase discretionary levels by $1.9 
billion in BA and $1.1 billion in outlays over the levels 
assumed in the BBA.
    The resolution assumes an increase for the National Science 
Foundation (NSF) above the BBA for NSF Research and Related 
Activities. The resolution continues strong funding for basic 
research programs and activities of the federal government, 
especially those activities within NSF and the Department of 
Energy.
    For NASA activities within this function, the resolution 
assumes the President's request for the international space 
station, while also assuming the President's requested 
reductions to NASA Human Spaceflight activities beginning in 
the year 2000.
    Since before the Second World War, the Department of 
Energy's (DOE) research complex as a whole has been the primary 
provider of the basic research upon which our larger pursuit of 
innovation has been based. This larger endeavor it produces has 
been, in turn, the basisof our nation's competitive edge and 
the vehicle for achieving our unrivaled standard of living.
    A number of DOE science programs urgently await additional 
funding, such as the Spallation Neutron Source (SNS) which 
represents an integral and necessary next step in the 
Department of Energy's basic research and scientific endeavor. 
It is in support of this larger national endeavor that the 
Committee supports construction of the Spallation Neutron 
Source at Oak Ridge National Laboratory and encourages the 
appropriate committees to consider funding this initiative.

                          Function 270: ENERGY

                            function summary

    Function 270 includes civilian activities of the Department 
of Energy, the Rural Utilities Service, the power programs of 
the Tennessee Valley Authority (TVA), and the Nuclear 
Regulatory Commission (NRC). In 1998, total spending for 
Function 270 will be $540 million in BA and $1.0 billion in 
outlays. Mandatory spending in this function contains large 
levels of offsetting receipts, resulting in net mandatory 
spending of -$2.3 billion in BA and -$2.9 billion in outlays. 
Congress provided $2.8 billion in discretionary BA for this 
function in 1998. While this is a decrease of $1.4 billion, 
most of it is attributed to shifting $1.3 billion in science 
funding from this function to Function 250, General Science, 
Space, and Technology.
    As reflected in the spending summary table, Function 270 
outlays under the freeze baseline will fall to -$81 million in 
2003. This is a result of both declining discretionary outlays 
and rising mandatory offsetting receipts in this function.
    This function was not a priority function in the BBA. For 
mandatory spending, the BBA assumed the lease of excess storage 
capacity at the strategic petroleum reserve to foreign 
countries. This proposal was enacted as part of the BBA.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............       0.5       0.6       0.6       0.5       0.4       0.4
                                    OT..............       1.0       0.3    -(\1\)      -0.2      -0.4      -0.4
BBA \1\...........................  BA..............       0.5       2.7       2.5       2.2       2.0       2.2
                                    OT..............       1.0       2.0       1.9       1.6       1.3       1.5
Freeze baseline...................  BA..............       0.5       0.8       0.9       0.8       0.8       0.8
                                    OT..............       1.0       0.3       0.2     (\1\)    -(\1\)      -0.1
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -2.1      -1.9      -1.9      -1.6      -1.8
                                    OT..............  ........      -1.8      -1.9      -1.8      -1.7      -1.9
    Freeze baseline...............  BA..............  ........      -0.1      -0.3      -0.3      -0.4      -0.4
                                    OT..............  ........      -0.1      -0.2      -0.3      -0.3      -0.4
----------------------------------------------------------------------------------------------------------------
\1\ The Balanced Budget Agreement (BBA) levels are lower than the Committee-reported resolution primarily as a  
  result of an accounting change in 1997 that shifted $1.3 billion in Department of Energy (DOE) science funding
  from this Function to Function 250, General Science, Space, and Technology.                                   

            description of the committee-reported resolution

    The Committee-reported resolution adopts the President's 
proposed reductions in spending for this function. The 
President's budget includes reductions in discretionary 
spending that would reduce spending by $133 million in BA and 
$72 million in outlays in 1999 compared with the baseline. Over 
the five-year period, the President's proposals would reduce 
spending by $1.5 billion in BA and $1.2 billion in outlays as 
compared with the freeze baseline.
    More specifically, the resolution adopts the following 
proposals from the President's budget for this function. The 
resolution would reduce Naval Petroleum Reserve (NPR) 
operations by $84 million or 79 percent in 1999 because of the 
sale of the Elk Hills reserve in California on February 5, 
1997. The resolution assumes a $35 million reduction in 1999 
for DOE nondefense environmental management activities. Alaska 
Power Administration operations would be reduced by $14 
million, because of the sale of these facilities (anticipated 
being completed by July 15, 1998). The Committee recommendation 
adopts the President's out-year reductions for fossil energy 
research and development, decreasing BA by a total of $310 
million for 2000-2003.
    While the Committee does not assume the increases in energy 
technology funding and assistance as requested by the 
President, the reported resolution would provide a total of 
$9.7 billion in outlays for these activities over the next five 
years.
    The most significant increase in the President's budget for 
this function was for the President's Climate Control 
Technology Initiative (CCTI), which is designed to provide part 
of the reduction necessary to meet the U.S. greenhouse 
emissions levels the Administration agreed to in the Kyoto 
Protocol. Since the President has not submitted a treaty or a 
plan to implement the reductions called for in the agreement, 
providing additional funding for these technology programs in 
the 1999 budget is premature. As a result, the resolution 
assumes last year's levels of $730 million for these technology 
programs and does not provide the increases requested by the 
President.

  Function 300: NATURAL RESOURCES AND THE ENVIRONMENT FUNCTION SUMMARY

    Function 300 includes funding for water resources 
conservation and land management, recreational resources and 
pollution control and abatement. Agencies with major programs 
in this function include the Army Corps of Engineers (CORP), 
Bureau of Reclamation (BOR), Forest Service (USFS), Bureau of 
Land Management (BLM), Fish and Wildlife Service (USFWS), the 
National Park Service (NPS), Environmental Protection Agency 
(EPA), National Oceanic and Atmospheric Administration (NOAA), 
and the U.S. Geological Survey (USGS).
    In 1998, spending for Function 300 was $24.2 billion in BA 
and $23.0 billion in outlays, an increase of 4.8 percent over 
the 1997 spending level. Discretionary spending represents 95.7 
percent of total spending in the function.
    For discretionary spending in the function, the BBA set 
funding levels for 1999 at $22.2 billion in BA and $21.7 
billion in outlays.
    As reflected in the spending summary table, under the 
freeze baseline, Function 300 will decrease by 3.4 percent from 
1998 to 2003. This is due mostly to lower projected spending 
for the conservation reserve program.
    The BBA accommodated new spending for orphan shares at 
Superfund hazardous waste cleanup sites, contingent on reform 
of the program. (Orphan shares are portions of financial 
liability at Superfund sites allocated to non-Federal parties 
with limited or no ability to pay.) The 1998 budget resolution 
provided an allowance of $200 million annually through the year 
2002. The availability of these funds was dependent on 
reauthorization of the Superfund excise and corporate income 
taxes and reforms of the Superfund program. Neither of these 
requirements has yet occurred.
    The BBA provided up to $700 million to complete priority 
Federal land acquisition and exchanges in 1998. Congress 
provided $699 million in 1998 for these acquisitions and 
exchanges. The President's priorities were the acquisition of 
northern California's Headwaters Forest for $250 million and 
the purchase of Crown Butte, Inc.'s interest in the New World 
Mine adjacent to Yellowstone National Park for $65 million.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      24.2      23.4      23.3      23.0      22.9      22.9
                                    OT..............      23.0      23.4      23.5      23.4      23.0      22.9
BBA...............................  BA..............      24.2      22.8      22.2      21.6      21.5      22.1
                                    OT..............      23.0      22.4      22.6      22.3      21.7      22.4
Freeze baseline...................  BA..............      24.2      23.8      23.9      23.6      23.6      23.6
                                    DOT.............      23.0      23.5      23.9      24.0      23.6      23.5
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +0.6      +1.1      +1.4      +1.5      +0.9
                                    OT..............  ........      +0.9      +1.0      +1.1      +1.2      +0.5
    Freeze baseline...............  BA..............  ........      -0.4      -0.6      -0.6      -0.6      -0.6
                                    OT..............  ........      -0.1      -0.4      -0.6      -0.6      -0.5
----------------------------------------------------------------------------------------------------------------

            DESCRIPTION OF THE COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution proposes discretionary 
spending of $22.6 billion in BA and $22.5 billion in outlays. 
This resolution exceeds discretionary BA specified in the BBA 
by $0.4 billion and outlays by $0.8 billion. This is a solid 
mark for Function 300, which not only meets, but exceeds the 
spending levels for this function set in the BBA.
    Both the Senate and the House are currently working on 
Superfund legislation. In its Views and Estimates letter (March 
6, 1998) to the Budget Committee, the Senate Environment and 
Public Works Committee noted, ``Superfund is a seriously flawed 
program that needs significant legislative improvement before 
any increase in funding is appropriate. Several peer-reviewed 
EPA studies have found Superfund sites, at best, represent a 
mid-range threat to human health and the environment as 
compared to other more pressing threats.''
    Furthermore, as the General Accounting Office stated in its 
September 1997 report (Superfund: Trends in Spending for Site 
Cleanups), while the percentage of Superfund spending going to 
contractor cleanup work has increased from only 37% in fiscal 
year 1987, EPA was still spending slightly under half (49%) of 
the program funds on actual cleanup work in FY 1996.
    Recognizing these significant concerns, the resolution 
assumes, contingent upon the enactment of Superfund program 
reform, additional spending of $200 million in each year 1999 
through 2003 for the program. Section 203 of the resolution 
establishes an allocation procedure to enable the Senate to 
consider Superfund reform legislation this year. (This 
procedure is discussed in the committee report's section 
titled, ``Budget Resolution: Enforcement and Other 
Provisions.'')
    The resolution does not assume the President's proposed 
47.4 percent reduction for the Army Corps of Engineers's 
``construction, general'' account. Rather, it assumes full 
funding at the freeze baseline of $1.4 billion in BA and $1.2 
billion in outlays, or $ 0.7 billion above the President's 
request in BA and $0.3 billion above in outlays. The resolution 
also assumes full funding at the freeze baseline for all other 
Corps programs within Function 300. A number of Corps projects 
urgently await additional funding, such as the Portland Harbor 
Project in Maine, where concerted effort by a broad-based 
coalition of state, local, not-for-profit agencies and the 
private sector, working with federal agencies, has secured the 
required environmental permits ahead of schedule to enable the 
harbor dredging to begin if given adequate funding.
    The resolution assumes $1.3 billion in BA and $1.2 billion 
in outlays for operation of the National Park System, full 
funding of the President's request.
    The resolution assumes that resource management programs of 
the Fish and Wildlife Service will be funded at $595 million in 
BA and $594 million in outlays for 1999.
    The resolution rejects the President's proposed 10 percent 
reduction ($2.7 billion savings, FY 1999-2003) in the EPA's 
State and Tribal Assistance grants.
    The resolution assumes $47 million in BA and $9 million in 
outlays in discretionary spending from the interest earned on 
the Environmental Improvement and Restoration Fund.
    The resolution assumes that the landowner incentive program 
of the Endangered Species Recovery Act will be enacted. (The 
landowner incentive program includes habitat reserve 
agreements, safe harbor agreements, habitat conservation plans, 
and recovery plan implementation agreements within the Act.) 
This spending would be made available from the gross receipts 
realized in the sales of excess BLM land, provided that BLM has 
sufficient administrative funds to conduct such sales.
    The resolution accepts the President's reduction of $699 
million for priority Federal land acquisitions. (This 
assumption reflects the fulfillment of the 1997 BBA, which 
provided for up to $700 million for major land acquisitions. 
Congress provided for this spending in 1998.)
    The resolution assumes full funding of the President's 
request for the National Oceanic and Atmospheric 
Administration, providing $2.3 billion in BA and $2.1 billion 
outlays for 1999.

                       Function 350: AGRICULTURE

                            FUNCTION SUMMARY

    Function 350 includes funding for federal programs intended 
to promote the economic stability of agriculture, provide 
regulatory, inspection and reporting services for food and 
fiber markets, and promote research and education in 
agriculture and nutrition. Programs in this function include 
direct assistance and loans to food and fiber producers, market 
information and agricultural research.
    Price support programs operated by the Commodity Credit 
Corporation (CCC) make up most of the spending in this 
function. Agriculture spending has varied widely over the last 
25 years; CCC spending has ranged from $0.6 billion in 1975 to 
a record $26 billion in 1986.
    As reflected in the spending summary table, Function 350 
under the freeze baseline will decrease from $11.8 billion in 
1998 to $10.8 billion in 2003. This is due primarily to reduced 
spending on CCC programs. Over the same period, spending on CCC 
programs will decrease by $1.83 billion reflecting the success 
of implementing the reforms enacted under the Federal 
Agriculture Improvement and Reform (FAIR) Act of 1996.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      11.8      12.0      11.6      10.3      10.2      10.4
                                    OT..............      10.8      10.5       9.9       8.7       8.5       8.8
BBA...............................  BA..............      11.8      11.9      11.5      10.2      10.0      10.4
                                    OT..............      10.8      10.3       9.8       8.7       8.4       8.8
Freeze Baseline...................  BA..............      11.8      12.2      11.9      10.7      10.6      10.8
                                    OT..............      10.8      10.6      10.2       9.1       8.9       9.2
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +0.1      +0.1      +0.2      +0.1      -0.1
                                    OT..............  ........      +0.2      +0.1      +0.1      +0.1      -0.1
    Freeze baseline...............  BA..............  ........      -0.2      -0.3      -0.4      -0.4      -0.5
                                    OT..............  ........      -0.1      -0.3      -0.4      -0.4      -0.5
----------------------------------------------------------------------------------------------------------------

            DESCRIPTION OF THE COMMITTEE-REPORTED RESOLUTION

    Discretionary spending for this function in 1999 would 
decrease by $0.2 billion in BA and $0.1 billion in outlays 
below the freeze baseline, to $4.1 billion in BA and $4.2 
billion in outlays. The Committee-reported resolution assumes 
total discretionary spending of $19.6 billion in BA and $19.9 
billion in outlays over the five-year period, a decrease of 
$1.8 billion in BA and $1.7 billion in outlays below the freeze 
baseline.
    The Committee-reported resolution is $0.1 billion in BA and 
$0.2 billion in outlays above the BBA levels. The resolution 
assumes discretionary spending for 1999 and over the next five 
years to be slightly higher than the President's request. 
Discretionary program reductions proposed in the President's 
budget that are assumed in the Mark include:
    A reduction of $97 million in BA and $53 million in outlays 
under the freeze baseline for the PL 480 Program and Ocean 
Freight Grants in 1999. Over the five-year period the 
Committee-reported resolution assumes a reduction of $0.5 
billion in BA and $0.4 billion in outlays below the freeze 
baseline.
    A reduction of $114 million in BA and $55 million in 
outlays below the freeze baseline in 1999 for buildings and 
facilities, salaries and expenses, and various programs under 
the Agriculture Research Service (ARS), the Animal and Plant 
Health Inspection Service (APHIS), the Grain Inspection, 
Packers and Stockyards Administration (GIPSA), the Economic 
Research Service (ERS), and the National Agricultural 
Statistics Service (NASS). Over the five-year period, the 
Committee-reported resolution assumes a reduction of $1.4 
billion in BA and $1.2 billion in outlays below the freeze 
baseline.
    Over the five-year period mandatory spending decreases from 
$7.9 billion in BA and $6.2 billion in outlays for 1999 to $6.6 
billion in BA and $4.9 billion in outlays for 2003. The 
Committee-reported resolution assumes total mandatory spending 
of $34.8 billion in BA and $26.5 billion in outlays for the 
five-year period.

               Function 370: COMMERCE AND HOUSING CREDIT

                            function summary

    Function 370 includes discretionary housing programs, such 
as subsidies for single and multifamily housing in rural areas 
and mortgage insurance provided by the Federal Housing 
Administration; net spending by the Postal Service; 
discretionary funding for commerce programs, such as 
international trade and exports, science and technology, the 
census, and small business; and spending for deposit insurance 
activities related to banks, savings and loans, and credit 
unions.
    In 1998, spending for Function 370 is $7.9 billion in BA 
and $1.3 billion in outlays, a dramatic change from the 
corresponding 1997 levels of $8.1 billion and $14.6 billion. 
Discretionary spending represents the stable portion (compared 
with the mandatory programs) of the function totals, amounting 
to $3.1 billion in BA and $3.0 billion in outlays in 1998.
    As reflected in the spending summary table, under the 
freeze baseline, total outlays in Function 370 will increase by 
$2.0 billion to a level of $3.3 billion in 1999, with 
subsequent increases producing $8.9 billion in outlays in 2000, 
and $12.3 billion by 2003. Baseline features of volatile (such 
as deposit insurance) or rapidly expanding mandatory programs 
account for the changes in the function totals over time. The 
Postal Service, for instance, runs cyclical surpluses and 
deficits and is responsible for part of the drop in BA from 
1998 to 1999 ($7.9 billion to $4.3 billion). The rest of the 
change in budget authority results from recording an automatic 
loan subsidy appropriation of $3.3 billion in 1998 to reflect 
unpaid bids for certain spectrum auctions (Block C); no similar 
appropriation appears in 1999 or subsequent years. In the other 
direction, the Universal Service Fund (USF) is expected to 
increase from $2.6 billion in 1998 to $5.6 billion in 1999, and 
then to $9.4 billion in 2000, with smaller increases after 
that. Note, however, that while the USF records outlays related 
to government-mandated subsidies for telecommunications 
services, payments into the fund that cover those costs appear 
on the revenue side of the budget and exactly offset the 
outlays. Thus, the USF has no net budgetary impact.
    The key assumption enacted from the BBA for this function 
produced savings of $0.7 billion over five years by allowing 
the Federal Housing Administration (FHA) the tools to require 
mortgage lenders (whose loans the FHA insures) to be more 
active in dealing with delinquent or defaulted borrowers.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............       7.9       4.2      15.5      14.6      15.6      14.9
                                    OT..............       1.3       3.2      10.4      10.4      11.8      11.7
BBA...............................  BA..............       7.9       4.8      15.9      15.0      16.0      15.5
                                    OT..............       1.3       3.7      10.4      10.9      12.1      12.1
Freeze baseline...................  BA..............       7.9       4.3      14.0      15.1      16.2      15.6
                                    OT..............       1.3       3.3       8.9      10.7      12.4      12.3
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -0.6      -0.4      -0.4      -0.5      -0.6
                                    OT..............  ........      -0.6      -(*)      -0.5      -0.2      -0.3
    Freeze baseline...............  BA..............  ........      -0.1      +1.5      -0.5      -0.6      -0.6
                                    OT..............  ........      -0.1      +1.5      -0.3      -0.6      -0.6
----------------------------------------------------------------------------------------------------------------

              description of committee-reported resolution

    The Committee-reported resolution proposes a total 1999 
level of $4.2 billion in BA and$3.2 billion in outlays for 
Function 370, which is below a freeze by $0.1 billion in BA and 
outlays.

                         Discretionary Spending

    For discretionary spending only, the Committee-reported 
resolution reflects a 1999 level of $3.0 billion in BA and $2.8 
billion in outlays, the same as the 1998 level, but a decrease 
of $0.1 billion below a freeze resulting from one-time savings 
of $0.4 billion the President proposes to achieve by improving 
the way FHA deals with foreclosed property. Specific 
assumptions for 1999 compared with a freeze include the 
following items.
    The resolution assumes an additional $0.5 billion in BA and 
$0.4 billion in outlays in 1999 for final preparations for the 
decennial census, and then $1.7 billion in BA and outlays in 
2000 to conduct it.
    Also assumed are the reductions included in the President's 
budget for rural housing loans, FHA insurance, Small Business 
Administration loans and salaries and expenses, and certain 
salaries and expenses accounts in the Department of Commerce.

                           Mandatory Spending

    The Committee-reported resolution includes assumptions 
affecting the mortgage insurance activities of HUD. Because the 
savings from these assumptions would be used to offset 
increased highway spending, the assumptions are discussed in 
Function 920.
    In its views and estimates letter, the Committee on 
Banking, Housing, and Urban requested necessary accommodation 
in the budget resolution to allow for a proposal, S. 1405, to 
pay interest to banks on required reserves held by the Federal 
Reserve. The CBO estimates that this proposal would cost $0.7 
billion in foregone revenues (the surplus of the Federal 
Reserve is transmitted to the Treasury as a revenue) over the 
next five years. While the Committee-reported resolution does 
not reflect this assumption (because the Banking Committee does 
not receive a revenue allocation and would still have to 
include an offset in the legislation to comply with pay-as-you-
go requirements), the Budget Committee intends to work with the 
Banking Committee, if it decides to advance the legislation, to 
negotiate the parliamentary hurdles faced by the bill.

                      Function 400: TRANSPORTATION

                            function summary

    Function 400 includes all modes of transportation 
including: ground transportation programs, such as the federal-
aid highway program; mass transit operating and capital 
assistance; rail transportation through the National Rail 
Passenger Corporation (Amtrak) and rail safety programs; air 
transportation through the Federal Aviation Administration 
(FAA) airport improvement program, facilities and equipment 
program, and operation of the air traffic control system; water 
transportation through the Coast Guard and Maritime 
Administration; the Surface Transportation Board; and related 
transportation support activities.
    In 1998, spending for Function 400 was $46.0 billion in BA 
and $40.8 billion in outlays. Discretionary spending, including 
obligation limitations placed on transportation programs by the 
Appropriations Committee, represents nearly all spending in the 
function.
    As reflected in the spending summary table, compared to the 
freeze baseline, budget authority would be $46.0 billion in 
1999, rising to $46.2 billion by 2003. Outlays would rise from 
$41.8 billion in 1999 to $43.1 billion in 2003.
    Discretionary spending in Function 400 was designated as a 
protected function under the BBA last year.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      46.0      51.5      51.8      52.1      51.4      52.0
                                    OT..............      42.5      42.8      44.7      45.7      45.8      46.9
BBA...............................  BA..............      46.0      47.3      47.1      47.4      47.2      48.2
                                    OT..............      40.8      41.3      41.5      41.3      40.7      42.3
Freeze baseline...................  BA..............      46.0      46.0      46.1      46.1      45.6      46.2
                                    OT..............      42.5      41.8      41.9      42.1      42.1      43.1
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +4.2      +4.8      +4.7      +4.3      +3.9
                                    OT..............  ........      +1.5      +3.2      +4.4      +5.1      +4.6
    Freeze baseline...............  BA..............  ........      +5.5      +5.8      +6.0      +5.9      +5.9
                                    OT..............  ........      +1.0      +2.8      +3.6      +3.7      +3.8
----------------------------------------------------------------------------------------------------------------

              description of committee-reported resolution

    The Committee-reported resolution proposes discretionary 
spending of $13.9 billion inBA and $40.4 billion in outlays in 
1999. This represents an increase of $0.2 billion in BA and $0.4 
billion in outlays more than 1998.
    Over the next five years, the resolution would increase 
discretionary outlays by $18.8 billion over the discretionary 
levels assumed in the BBA.
    The resolution incorporates the Senate-passed increases and 
proposed offsets for the reauthorization of the Intermodal 
Surface Transportation Efficiency Act (ISTEA). Specifically, 
this agreement calls for increases of $25.9 billion in contract 
authority for highway and highway safety programs above the 
levels agreed to in last year's BBA.
    Spending this additional contract authority requires $18.5 
billion in outlays. Identified offsets for this increased 
discretionary spending are contained in Function 920, 
Allowances.
    The resolution assumes increased spending of $2.7 billion 
in outlays over the next five years for mass transit programs.
    The resolution assumes the President's proposed reductions 
to other non-ISTEA transportation programs such as the Coast 
Guard, the Federal Railroad Administration, (FRA), Appalachian 
Highway Development funding (consistent with the Senate-passed 
ISTEA bill), the Maritime Administration, NASA Aeronautics, and 
other programs.
    The resolution rejects the President's budget proposal to 
redefine obligation limitations set by the Appropriations 
Committee for federal-aid highway, highway safety, mass 
transit, and Airport Improvement Program (AIP) contract 
authority programs as discretionary budget authority.

            Function 450: COMMUNITY AND REGIONAL DEVELOPMENT

                            FUNCTION SUMMARY

    Function 450 includes funding for community and regional 
development and disaster relief. The major programs are 
administered through several agencies including the Department 
of Housing and Urban Development (HUD), the Appalachian 
Regional Commission (ARC), the Tennessee Valley Authority 
(TVA), the Economic Development Administration (EDA), the 
Bureau of Indian Affairs (BIA), the Federal Emergency 
Management Agency (FEMA), and the Department of Agriculture 
(USDA).
    In 1998, spending for Function 450 will total $8.7 billion 
in BA and $11.2 billion in outlays, which is a 2 percent 
increase from the 1997 outlays level. Discretionary spending 
represents 99 percent of total spending in this function. 
Community Development Block Grantsaccount for about 57 percent 
of this discretionary funding, or $4.7 billion in 1998. Disaster 
spending is about 34 percent of discretionary outlays, or about $3.8 
billion in 1998. As reflected in the spending summary table, under the 
freeze baseline, Function 450 will increase by 2.2 percent from 1998 to 
2003.
    Last year's BBA presumed discretionary savings of $4.5 
billion over 1999-2003 compared with the 1998 level. It assumed 
savings would be achieved by reducing discretionary spending 
for Community Development Block Grants and the Appalachian 
Regional Commission, among other programs.
    Function 450 contains numerous programs designed to 
increase economic development and employment. Some economists, 
however, believe that many of these programs reduce national 
income by reallocating resources and jobs from efficient areas 
of production to inefficient areas. In 1995, the GAO found that 
the fragmentation of federal community development programs 
across at least 12 federal departments and agencies imposed a 
significant burden on distressed communities seeking 
assistance. Overall, GAO counted 342 separate economic 
development programs in 1994. Historically, GAO has found 
little coordination among agencies, which have been protective 
of their own resources and separate organizational missions. 
The National Performance Review noted that while many community 
development programs made sense when considered individually, 
collectively they often worked against their intended purposes. 
Finally, in a 1996 report, GAO could not find a strong causal 
linkage between a positive economic effect and the economic 
development assistance provided by the ARC or the EDA.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............       8.7       8.7       7.9       7.6       7.6       7.6
                                    OT..............      11.2      10.9       9.7       8.9       8.1       8.1
BBA...............................  BA..............       8.7       8.6       8.0       7.9       7.9       8.0
                                    OT..............      11.2      10.8      10.8      11.2       8.2       8.6
Freeze baseline...................  BA..............       8.7       9.1       9.1       9.0       8.9       8.9
                                    OT..............      11.2      10.9       9.8       9.4       9.1       9.3
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +(*)      -(*)      -0.2      -0.3      -0.4
                                    OT..............  ........      +0.1      -1.1      -2.2      -(*)      -0.5
    Freeze baseline...............  BA..............  ........      -0.4      -1.1      -1.3      -1.4      -1.3
                                    OT..............  ........      -(*)      -0.1      -0.5      -1.0      -1.2
----------------------------------------------------------------------------------------------------------------

            DESCRIPTION OF THE COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution proposes discretionary 
spending in 1999 of $8.2 billion in BA and $11.0 billion in 
outlays. Compared with 1998, this represents a decrease of $0.4 
billion in BA, or 4 percent, and $0.4 billion in outlays, or 3 
percent. Overall, the reported resolution proposes to spend 
$1.0 billion less over five years compared with the BBA, and 
$5.5 billion less over five years compared with a freeze. In 
order to meet the discretionary spending limits, savings will 
be required from programs in this function. These savings will 
be determined by the Appropriations Committees. While savings 
are needed overall, the federal government still must fund 
national responsibilities at a reasonable level.
    The resolution assumes $166 million in 1999 for the 
construction of Indian schools, double the President's request. 
The Bureau of Indian Affairs operates one of only two 
federally-operated school systems, clearly making Indian 
schools a national obligation. GAO has estimated that the cost 
of repairing BIA schools is $754 million.
    The resolution assumes $4.7 billion in 1999 for Community 
Development Block Grants, an increase of 1 percent compared 
with a freeze. If Congressional ``set-asides'' were reduced 
from the appropriation, the discretionary funding available to 
communities could increase by up to 12 percent over a freeze. 
Over five years, the resolution assumes a reduction in CDBGs of 
$2.7 billion compared with a freeze, the same amount requested 
by the President. Savings could also be achieved by limiting 
funding to the least-needy jurisdictions. In 1993, 15 of the 20 
counties with the highest per capita income in the nation 
received funds from the CDBG program.
    The resolution assumes $67 million in 1999 for the 
Appalachian Regional Commission, a reduction of 61 percent 
compared with a freeze. Over five years, the resolution reduces 
the ARC by $0.5 billion compared with a freeze, the same amount 
requested by the President. These savings are achieved 
primarily because the Appalachian highway construction funding 
will come from the Highway Trust Fund under the Senate-passed 
ISTEA bill.
    The resolution assumes a phase-out of the Economic 
Development Administration by 2001, saving $1.4 billion over 
1999-2003. Lacking sufficient Congressional support, the EDA 
has not been authorized since 1982. The effectiveness of EDA 
programs has been questioned.
    The resolution does not accept the President's proposal to 
raise the maximum interest rate charged on the Small Business 
Administration's Disaster Loans from 4 percent to 6 percent. 
Savings from other programs should be utilized before disaster 
victims are asked to pay more.

   Function 500: EDUCATION, TRAINING, EMPLOYMENT AND SOCIAL SERVICES

                            FUNCTION SUMMARY

    Function 500 includes funding for elementary and secondary, 
vocational, and higher education; job training; children and 
family services programs; adoption and foster care assistance; 
statistical analysis and research relating to these areas; and 
funding for the arts and humanities.
    In 1998, spending for Function 500 was $61.3 billion in BA 
and $56.1 billion in outlays, which was a 2 percent increase 
over the 1997 spending level. Discretionary spending represents 
76 percent of total spending in this function.
    As reflected in the spending summary table, under the 
freeze baseline, Function 500 will increase by 5.9 percent in 
BA and 15.1 percent in outlays from 1998 to 2003.
    Function 500 is a protected function under the BBA. The BBA 
intended that discretionary funding for priority functions be 
protected at specified levels through 2002. For Function 500, 
this level was $47.0 billion in BA for 1999, an increase of 
$294 million above the 1998 level, growing to $49.2 billion in 
BA in 2002.
    Additionally, the BBA included savings of $1.8 billion from 
the 1998-2002 period for student loan programs.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      61.3      63.0      63.3      64.5      64.9      68.4
                                    OT..............      56.1      61.0      62.7      63.8      63.7      67.1
BBA...............................  BA..............      61.3      63.0      63.3      64.5      64.9      68.4
                                    OT..............      56.1      61.0      62.7      63.8      63.7      67.1
Freeze baseline...................  BA..............      61.3      63.0      62.5      63.1      62.8      64.9
                                    OT..............      56.1      61.2      62.7      63.4      62.5      64.6
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............        --        --        --        --        --        --
                                    OT..............        --        --        --        --        --        --
    Freeze baseline...............  BA..............        --        --      +0.8      +1.4      +2.1      +3.5
                                    OT..............        --      -0.2        --      +.04      +1.2      +2.6
----------------------------------------------------------------------------------------------------------------

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

Discretionary spending

    The Committee-reported resolution provides for 
discretionary spending increases as agreed to in the BBA. For 
FY 1999, $47.0 billion in BA and $46.1 billion in outlays are 
assumed. Over the next five years, discretionary funding would 
total $243.1 billion in BA and $239.4 billion in outlays.
    Within the discretionary spending levels agreed to in the 
BBA, the Committee-reported resolution does not assume 
enactment of the President's new entitlement education 
initiatives but rather the resolution assumes increased funding 
at authorized levels in current programs, while consolidating 
existing programs to achieve greater efficiencies in the use of 
federal funds for education programs. The Committee-reported 
resolution does not assume all the President's decreases such 
as cuts to Impact Aid of $565 million over five years.
    The Committee-reported resolution would increase funding 
for Special Education in order to continue working toward the 
current statutory federal goal of providing 40 percent of the 
national average per-pupil expenditure per disabled child. The 
Committee-reported resolution assumes a $2.5 billion increase 
over the next 5 years in the existing education program--
Individuals with Disabilities Education Act (IDEA).
    The Committee-reported resolution assumes an increase in 
funding of $522 million in 1999 and $6.3 billion over the next 
five years for the Innovative Program Strategies State Grant 
program. This currently existing program would be reformed to 
allow states and localities greater flexibility to experiment 
with innovative reforms in teaching and learning while 
expecting states to demonstrate positive results. For FY 1999 
the Committee-reported resolution assumes total funding for 
this program of nearly $900 million. The President's budget 
proposes this program be terminated.
    This initiative is in response to the work of the General 
Accounting Office (GAO), presented before the Committee's 
Education Task Force. The GAO has found that 30 federal 
agencies administer hundreds of education programs. 
Specifically, GAO has identified 127 at-risk and delinquent 
youth programs in 15 departments and agencies; 86 teacher 
training programs in nine federal agencies and offices; and 
over 90 early childhood programs in 11 federal agenciesand 20 
offices and the fact that for most of these programs, little data 
exists whether these programs are successful. The Committee-reported 
resolution reflects the recommendations of the Committee's Education 
Task Force to begin the process of eliminating this acknowledged 
duplication and inefficiency.
    Based on total 1998 funding for elementary and secondary 
education, the Committee-reported resolution assumes an overall 
increase for inflation of an additional $6.6 billion in BA and 
$4.1 billion in outlays over the next five years. The funding 
increases intended for elementary and secondary education do 
not mean that the resolution assumes the status quo. The 
Committee-reported resolution urges greater oversight and 
evaluation of education programs, further consolidation of 
education programs and increased flexibility for states and 
localities in use of education dollars to advance education 
reform and foster parental choice and involvement.
    The Committee-reported resolution adopts the President's 
reductions in One Stop Career Centers for a five-year savings 
of $303 million in BA and $183 million in outlays.
    The Committee-reported resolution assumes continued funding 
for Higher Education programs that ensure access to 
postsecondary opportunities for those in need. Unlike the 
President's budget, the Committee-reported resolution assumes 
no terminations of higher education programs.

Mandatory spending

    Mandatory spending under the Committee-reported resolution 
would be $14.9 billion in 1998 growing to $16.2 billion in 
2003, a $1.3 billion increase over the next five years.
    The Committee-reported resolution does not adopt the 
President's Class Size Reduction Initiative entitlement to be 
funded at $7.3 billion over the next five years. Existing 
federal education program funding, program consolidation, and 
reform can achieve the stated goal without creating another new 
federal program.
    The Committee-reported resolution does not depart from the 
agreement reached last year in the BBA for student loans. The 
BBA assumed a five year savings $1.8 billion from student loan 
program reforms. Therefore, the Committee-reported resolution 
does not recommend the President's additional $4.1 billion in 
reductions.
    The Committee-reported resolution acknowledges that House 
and Senate authorizing committees are considering changes to 
student loan programs to avoid an impending crisis in the 
guaranteed student loan program brought about by the 1993 
legislation that attempted to eliminate the guaranteed student 
loan program and replace it with a Department of Education bank 
lending program. Beginning July 1, 1998, the index used to set 
interest rates on student loans will change from the current 
91-day bill plus 3.1 percent to the 10-year note plus 1 
percent. This policy was enacted in 1993 to go into effect this 
July. Under current interest rate estimates, students would in 
the short-term appear to fare better under the new formula. 
However, many respected financial analysts, including those at 
the Congressional Research Service and the Treasury Department 
agree that lender returns would be cut so severely as to drive 
many lenders from the program, jeopardizing private lending to 
students this fall which makes up 70 percent of all student 
lending today.
    Carrying out current law would likely create significant 
student loan access problems. The Department of Education has 
acknowledged they would be unable to meet the increased demand 
for loans through the Direct Loan program, which now 
administers less than 30 percent of student loan volume.
    A sense of the Senate amendment offered by Senator Snowe 
and adopted unanimously in Committee makes clear that the 
intent of the Committee-reported resolution is that any 
resolution of the 1998 interest rate issue should not result in 
harm to students because of the withdrawal of lenders from the 
guaranteed loan program.
    One aspect of this 1998 interest rate issue which could 
unintentionally complicate a resolution of the 1998 interest 
rate issue is an estimating change for student loans which has 
been implemented by the Congressional Budget Office (CBO). In 
their report on the ``Economic and Budget Outlook: Fiscal Years 
1999-2008'' CBO describes changes in their methodology for 
measuring the true subsidy costs of student loans. CBO explains 
that because student loan program costs are driven by interest 
rate fluctuations and that students'' interest rate costs are 
capped at a specified level in law, they have adopted an 
estimating methodology which can capture the probable interest 
rate fluctuations around this cap and thus more fully represent 
the true subsidy costs for this program. Hence, we use the term 
``probabilistic scoring.''
    The Committee-reported resolution endorses efforts to fully 
measure all costs to the government for student loans and it is 
for this same reason that the Committee continues to hope that 
the Office of Management and Budget will adopt the assessment 
of CBO that the scoring of both direct and guaranteed student 
loan administrative costs should be classified on a net present 
value basis.
    With respect to probabilistic scoring however, the 
Committee-reported resolution recognizes the particular 
challenges Congress faces as a result of this change. This 
estimating change is being implemented in the middle of the 
105th Congress and carries with it significant budgetary 
affects. Specifically, the application of probabilistic scoring 
to student loans will result in increases in the baseline for 
student loans of $1 billion per year through 2003. 
Additionally, the Committee has observed that CBO has further 
refined their estimating approach since its unveiling.
    The Administration has recently proposed to return to the 
91-day bill as an index on which to base student loans. This 
proposal was not included in their budget submission in 
February. However, the Administration's proposal is expected to 
provide a much lower yield to private lenders and therefore it 
is questionable whether the guaranteed loan program would 
continue. Additionally, the Administration's bill is not budget 
neutral, according to CBO. It will cost $2 billion over the 
next ten years and is not offset in any way.
    At this time, the Committee-reported resolution assumes no 
changes to student loan policy. The Committee-reported 
resolution acknowledges the Senate Labor and Human Resources 
Committee efforts to work with the Budget Committee on 
technical scorekeeping issues, their House counterparts, and 
the Administration toward a resolution of the 1998 interest 
rate issue, with the long term goal of making the program 
market-based and urges all parties to be cognizant of the 
following:
    The Committee is continuing to study the new estimating 
methodology adopted by CBO and encourages OMB to study the 
methodology as well and provide comment on the appropriateness 
of its application.
    The Committee urges all parties to avoid entitlement 
expansions. If Congress were to enact the full interest rate 
relief projected for students under the new rate there will be 
one of two results. There would be either significant loan 
access problems for students or unacceptable entitlement 
expansions to be borne by taxpayers. It is possible to provide 
some interest rate relief for students without deficit spending 
and without destabilizing the guaranteed loan program.
    The Committee would prefer that no further reductions occur 
to the student loan programs. However, while acknowledging the 
authorizing Committee's need to respond to this impending 
crisis, the Committee wants to remind the authorizers of the 
spirit of the BBA, namely, reductions were equitably divided 
between the guaranteed and direct loan programs. This is a 
student loan access problem, not solely a guaranteed loan 
problem and no component of the programs should be ignored in 
developing a solution.
    The Committee urges Committees of jurisdiction to more 
seriously explore a long-term solution to the interest rate 
problem, namely, moving toward a student loan program where the 
marketplace, not Congress, sets the interest rate for loans.

                          Function 550: HEALTH

                            FUNCTION SUMMARY

    Function 550 covers all health spending except that for 
Medicare, military health, and veterans'' health. The major 
programs include Medicaid, the State Children's Health 
Insurance Program, health benefits for federal workers and 
retirees, the National Institutes of Health, the Food and Drug 
Administration, the Health Resources and Services 
Administration, Indian Health Services, the Centers for Disease 
Control and Prevention, and the Substance Abuse and Mental 
Health Services Administration.
    Under the freeze baseline, 1999 outlays in this Function 
are $10.9 billion higher than 1998 outlays, an increase of 8.2 
percent. Over the period 1998 to 2003, spending will increase 
at an average annual rate of 6.1 percent in the freeze 
baseline.
    Mandatory spending represents 81 percent of all spending 
for Function 550 and is dominated by the Medicaid program. 
Under the baseline, Medicaid is expected to grow from $101 
billion in 1998 to $141 billion in 2003, for an average annual 
growth rate of 6.9 percent. Medicaid accounts for $40 billion, 
or 90 percent, of the additional spending in this function in 
2003 compared with 1998.
    In 1998, discretionary spending in this Function totals 
$26.4 billion in BA and $25.3 billion in outlays. About one-
half of the discretionary spending is for the National 
Institutes of Health ($13.6 billion in BA in 1998). NIH 
received a significant funding increase in 1998, from $12.8 
billion in BA to $13.6 billion, a 7 percent increase.
    Function 550 was not a protected function in the BBA. On 
the mandatory side, the BBA included several provisions to 
reduce Medicaid spending and start a children's health 
insurance initiative. In the BBA, Medicaid spending (excluding 
the Medicaid portion of children's health) was reduced by $10.9 
billion over the period 1998 to 2002. The children's health 
initiative provisions in the BBA cost $23.9 billion over the 
1998 to 2002 period.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Reported resolution...............  BA..............     136.2     145.8     152.6     161.5     170.1     181.2
                                    OT..............     132.0     143.7     151.6     160.4     169.9     181.1
BBA...............................  BA..............     136.2     142.5     149.4     157.1     164.3     175.1
                                    OT..............     132.0     141.5     149.3     156.9     165.2     176.0
Freeze baseline...................  BA..............     136.2     144.1     151.1     159.0     166.5     176.6
                                    OT..............     132.0     142.8     150.7     158.7     167.3     177.4
Reported resolution compared to:                                                                                
    BBA...........................  BA..............  ........      +3.4      +3.2      +4.4      +5.8      +6.1
                                    OT..............  ........      +2.2      +2.3      +3.5      +4.7      +5.1
    Freeze baseline...............  BA..............  ........      +1.7      +1.5      +2.5      +3.6      +4.6
                                    OT..............  ........      +0.9      +0.9      +1.7      +2.6      +3.7
----------------------------------------------------------------------------------------------------------------

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution assumes a modified 
version of the President's proposal to coordinate 
administrative expenses across welfare programs, including 
Medicaid. The savings from this proposal are reflected in 
function 920. No other savings are assumed in the resolution 
for mandatory spending in Function 550.
    The Committee-reported resolution assumes discretionary 
spending of $28.1 billion in BA and $27.0 billion in outlays in 
1999. This represents an increase of $1.7 billion in BA and 
$1.8 billion in outlays over 1998 funding, a 6.6 percent and 
6.9 percent increase, respectively.
    The Committee-resolution assumes funding for the National 
Institutes of Health in 1999 of $15.1 billion in BA and $13.9 
billion in outlays. This funding level represents an 11 percent 
increase in 1999, on top of the 7 percent increase provided in 
1998. Over the period 1999 to 2003, the resolution assumes 
providing NIH with $15.5 billion in BA and $11.2 billion in 
outlays above a freeze baseline. The increased funding for 
medical research is assumed to provide funding for research and 
development of assistive technology for the disabled and for 
pediatric research and education.
    The Committee-reported resolution assumes $125 million in 
BA and $38 million in outlays in 1999 for a teen smoking 
prevention and cessation initiative. Over five years, the mark 
assumes $0.8 billion in BA and $0.6 billion in outlays for this 
initiative. The protocol negotiated last year by the States 
Attorney's General assumed a similar level of federal funding 
for teen smoking prevention.
    The resolution assumes funding for a relief fund for 
hemophiliacs who contracted HIV/AIDS through the blood supply 
in the 1980s and an increase in the children's health insurance 
allocation for Puerto Rico in 1999.
    The Committee notes that the President's request for Indian 
Health Services falls short of what is necessary to provide 
staffing for current and new facilities, and efforts will be 
made to find resources to make up this shortfall.
    The Committee-reported resolution assumes reductions below 
the freeze baseline in a number of discretionary spending 
programs. The resolution assumes the President's proposal to 
terminate funding for health facilities construction under the 
Health Resources and Services Administration (HRSA), except 
that projects related to women's health facilities are assumed 
to be completed in 1999. The President's proposed termination 
would reduce spending by $28 million in BA and $14 million in 
outlays in 1999 compared to a freeze.
    The Committee-reported resolution also assumes the 
President's proposed reduction for the Office of Inspector 
General (OIG), saving $3 million in BA and $2 million in 
outlays in 1999 compared to freeze.
    The Committee-reported resolution assumes combining 
numerous Public Health Service programs into a consolidated 
State Public Health Block Grant program. The block grant would 
give states substantial flexibility to improve public health by 
allocating their block grant resources to meet their particular 
needs. The block grant could include any number of different 
programs, including existing formula block grants and other 
direct grant programs, from the Health Resources and Services 
Administration, the Substance Abuse and Mental Health Services 
Administration, and the Centers for Disease Control. The 
resolution assumes 1999 savings from consolidation of $0.3 
billion in BA and $0.1 billion in outlays below a freeze 
baseline.
    The Committee-reported resolution assumes consolidation of 
health professions programs, reduction and consolidation of 
research associated with occupational safety and health, and 
reduction in HHS overhead expenses, saving $0.3 billion in BA 
and $0.2 billion in outlays in 1999 compared to a freeze.
    The Committee-reported resolution does not assume the 
President's significant expansion of user fees to offset 
spending for the Food Safety and Inspection Service and the 
Food and Drug Administration.

                         Function 570: MEDICARE

                            FUNCTION SUMMARY

    Function 570 includes only the Medicare program. Medicare 
pays for medical services for 38.6 million retired and disabled 
workers and certain family members and persons with end-stage 
renal disease (ESRD). Medicare is administered by the Health 
Care Financing Administration, part of the Department of Health 
and Human Services.
    Function 570 outlays will grow from $199.7 billion in 1998 
to $273.7 billion in 2003, for an average annual growth rate of 
6.5 percent. Medicare is the second largest entitlement program 
behind Social Security--98.5 percent of spending in this 
function is mandatory. Discretionary spending is almost 
entirely for program management activities.
    The number of Medicare beneficiaries is expected to 
increase from 38.6 million in 1998 to 41.0 million in 2003, for 
an average annual growth rate of 1.2 percent. Spending per 
beneficiary will increase from $5,175 in 1998 to $6,675 in 
2003, for an average annual growth rate of 5.2 percent.
    Function 570 discretionary spending was not protected under 
the BBA. The BBA included substantial changes in the Medicare 
program, reducing spending by $115.1 billion over the period 
1998 to 2002 and $385.5 billion over the period 1998 to 2007.
    The BBA also created a 17-member National Bipartisan 
Commission on the Future of Medicare. The Commission is to make 
recommendations to the President and Congress by March 1, 1999, 
regarding long-term Medicare reform.

                                                SPENDING SUMMARY                                                
                                            (In billions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Reported resolution...............  BA..............     199.2     210.3     221.8     239.4     251.2     273.4
                                    OT..............     199.7     210.9     221.1     242.3     248.8     273.6
BBA...............................  BA..............     199.2     210.4     221.8     239.5     251.2     273.4
                                    OT..............     199.7     210.8     221.2     242.3     248.8     273.6
Freeze baseline...................  BA..............     199.2     210.4     221.9     239.5     251.3     273.5
                                    OT..............     199.7     211.0     221.2     242.4     248.9     273.7
Reported Resolution compared to:                                                                                
    BBA...........................  BA..............  ........      -0.1      -(*)      -(*)      -(*)      -(*)
                                    OT..............  ........      +0.1      -0.1      -(*)      -(*)      -0.1
    Freeze baseline...............  BA..............  ........      -0.1      -0.1      -0.1      -0.1      -0.1
                                    OT..............  ........      -0.1      -0.1      -0.1      -0.1      -0.1
----------------------------------------------------------------------------------------------------------------

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution assumes 1999 
discretionary spending of $2.6 billion in BA and $2.7 billion 
in outlays in Function 570, as requested by the President. This 
represents a decrease of $0.1 billion in BA and outlays below 
the 1998 level.
    The Committee-reported resolution assumes no changes in 
mandatory spending for the Medicare program. The Committee 
assumes the National Bipartisan Commission on the Future of 
Medicare will provide Congress with recommendations to improve 
the long-term solvency of the Medicare program in a report due 
March 1, 1999.

                     Function 600: INCOME SECURITY

                            FUNCTION SUMMARY

    Function 600 contains the major cash and in-kind means-
tested mandatory programs, general retirement, disability and 
pension programs excluding Social Security and Veteran's 
compensation programs, federal and military retirement 
programs, unemployment compensation, low-income housing 
programs and other low-income support programs. Function 600 is 
the fourth largest functional category after Social Security, 
defense, and interest on the federal debt.
    In 1998, spending for Function 600 was $232.7 billion in BA 
and $239.2 billion in outlays. Discretionary spending 
represents 17 percent of total spending in the function. 
Funding for Housing programs accounts for 70 percent or $28.5 
billion of total discretionary spending. Special programs for 
low-income individuals including the WIC feeding program, the 
Child Care and Development Block Grant and the Low Income Home 
Energy Assistance Program received a combined $5.9 billion. 
Also administrative funds for the Unemployment Insurance system 
and the Supplemental Security Income (SSI) program are funded 
with discretionary spending totaling $4.8 billion in 1998.
    As reflected in the spending summary table, under the 
freeze baseline, Function 600 will increase by 21 percent from 
1998 to 2003. This is due primarily to increases in federal 
retirement costs and growth in the Supplemental Security Income 
and food stamps programs.
    The BBA contained a net $15 billion in additional spending 
for Function 600 mandatory programs. This total included: $1.5 
billion for additional food stamp work slots for able-bodied, 
18-50 year-olds with no dependents, $2.7 billion for a new 
welfare to work block grant program, and $11.5 billion to 
restore SSI benefits for certain disabled and elderly legal 
immigrants. The BBA also generated more than $600 million in 
savings from raising the covered wages ceiling for unemployment 
benefits that postponed a planned distribution to states of 
excess unemployment trust fund balances.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............     229.5     243.3     257.3     268.5     279.2     289.8
                                    OT..............     234.7     248.1     259.4     266.7     274.2     282.4
BBA...............................  BA..............     229.5     246.4     259.1     269.8     279.9     290.2
                                    OT..............     234.7     247.9     258.8     269.1     278.8     289.2
Freeze baseline...................  BA..............     229.5     243.5     254.2     263.7     273.0     282.2
                                    OT..............     234.7     248.0     259.7     267.2     274.9     283.6
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -3.2      -1.9      -1.3      -0.7      -0.4
                                    OT..............  ........      +0.2      +0.6      -2.4      -4.6      -6.8
    Freeze baseline...............  BA..............  ........      -0.2      +3.1      +4.8      +6.1      +7.6
                                    OT..............  ........      +0.1      -0.3      -0.5      -0.8      -1.1
----------------------------------------------------------------------------------------------------------------

            DESCRIPTION OF THE COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution proposes discretionary 
spending of $32.5 billion in BA and $41.8 billion in outlays 
for 1999. This represents an increase of $0.3 billion in BA and 
$1.2 billion in outlays, a 1.1 percent and 2.9 percent 
increase, respectively, over 1998.

Discretionary initiatives

    The Committee-reported resolution assumes increases in 
funds for child care programs. In conjunction with assumed 
expanded dependent care tax credits and marriage penalty 
relief, the Committee-reported resolution doubles the size of 
the Child Care and Development Block Grant (CCDBG) by adding $5 
billion in new funds. The new funds increase every year and 
provides an extra $1.2 billion in 2002--an 120 percent increase 
in child care spending. The proposal assumes that states must 
use all currently available funds before they access the new 
funds. The President's proposal includes a match on all new 
funds.
    These new funds can be used to provide the working poor 
with additional assistance, increase the supply and quality of 
child care, provide training for child care workers, increase 
funds for early childhood development, and expand services for 
disabled and other special needs children.
    The resolution assumes an increase of $80 million in 1999 
for the Special Supplemental Feeding Program for Women, Infants 
and Children (WIC). This additional funding will maintain the 
current program level.

Discretionary spending

    The Committee-reported resolution assumes some of the 
reductions proposed in housing programs in the President's 
budget. The resolution accepts the President's level of 
spending for several low-income support programs including 
LIHEAP, Refugee and Entrant Assistance. The Nutrition Education 
and Training program is assumed to be part of the education 
consolidation discussed in Function 500.

Mandatory programs

    The Committee-reported resolution provides for a budget 
neutral tax cut financed by increased revenues or mandatory 
savings. One possible savings proposal could come from 
reforming child support enforcement. These reforms could 
include requiring all states to make collections on at least 50 
percent of their caseload before receiving bonus incentive 
payments--either states will achieve higher collections which 
are shared with the federal government or lose incentive 
funding--and requiring non-TANF recipients to pay a modest fee 
when states make a child support collection.

                     Function 650: SOCIAL SECURITY

                            FUNCTION SUMMARY

    Function 650--the largest in terms of outlays in the 
federal budget--includes Social Security benefits and 
administrative expenses. Social Security is the largest 
entitlement program provided by the federal government. 
Benefits are paid to retirees, disabled workers, survivors, 
spouses, and dependents from the Old Age, Survivors, and 
Disability Insurance (OASDI) trust funds. Social Security is 
financed primarily through payroll taxes. For purposes of the 
Budget Enforcement Act, the Social Security trust funds are 
off-budget and do not count toward deficit projections. 
However, the administrative expenses of the Social Security 
Administration (SSA) are on-budget and remain within the caps 
on discretionary spending.
    Administrative expenses for SSA are paid from the 
Limitation on Administrative Expenses (LAE) account, which is 
partially funded from Function 650. Nearly one-half of LAE 
spending is reflected in other functions (Medicare, Function 
570, and Income Security, Function 600). Overall, LAE budget 
authority is $6.4 billion in 1998 with outlays of $6.5 billion.
    Up to $520 million in LAE funding in 1999 could be exempt 
from the discretionary caps. Congress authorized this exemption 
in the Contract with America Advancement Act and the Personal 
Responsibility Act to accommodate higher spending on Continuing 
Disability Reviews (CDRs). CBO estimated that the additional 
CDRs funded by these exempt appropriations would reduce benefit 
expenditures by $3.5 billion over the period 1996 to 2002, 
which is already reflected in the freeze baseline estimates.
    Under the freeze baseline estimates, Social Security 
outlays increase at an average annual rate of 4.6 percent over 
the period 1998 to 2003. CBO projects the Social Security trust 
funds will run a surplus of $100.6 billion in 1998, growing to 
$147.6 billion in 2003.
    The freeze baseline assumes an increase in the number of 
Social Security beneficiaries from an average of 44.0 million 
in 1998 to 46.9 million in 2003, for an average annual growth 
rate of 1.3 percent. The baseline assumes a cost-of-living 
increase of 2.4 percent in January 1999.
    The BBA made no changes in the Social Security program. 
Function 650 discretionary was not a protected function under 
the BBA.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............     379.0     394.7     412.0     430.9     451.9     474.4
                                    OT..............     379.1     394.9     412.0     430.9     451.9     474.4
BBA...............................  BA..............     379.0     394.7     411.9     430.9     451.8     474.4
                                    OT..............     379.1     394.8     412.0     430.9     451.8     474.4
Freeze baseline...................  BA..............     379.0     394.7     412.0     430.9     451.9     474.4
                                    OT..............     379.1     394.9     412.0     430.9     451.9     474.4
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -(*)      +(*)      +(*)      +0.1      -(*)
                                    OT..............  ........      +0.1      -(*)      +(*)      +0.1      -(*)
    Freeze baseline...............  BA..............  ........      -(*)      -(*)      -(*)      -(*)      -(*)
                                    OT..............  ........      -(*)      -(*)      -(*)      -(*)      -(*)
----------------------------------------------------------------------------------------------------------------

              DESCRIPTION OF COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution assumes no changes to 
Social Security benefits.
    The Committee-reported resolution assumes discretionary 
spending in Function 650 of $3.2 billion in BA and $3.4 billion 
in outlays. This level of funding assumes the President's 
proposal to institute a new fee on representatives of Social 
Security and Supplemental Security Income claimants to cover 
the cost of processing attorney fee arrangements. The new fees 
will total $4 million in 1999 and $72 million over the period 
1999 to 2003.

                     Function 700: VETERAN AFFAIRS

                            FUNCTION SUMMARY

    Function 700 includes programs directed toward veterans of 
the armed forces. Income security needs of disabled veterans, 
indigent veterans and the survivors of deceased veterans are 
addressed through compensation benefits, pensions, and life 
insurance programs. Education, training, and rehabilitation and 
readjustment programs to veterans include the Montgomery GI 
Bill, the Veterans Educational Assistance Program, and the 
Vocational Rehabilitation and Counseling Program. Veterans are 
also able to receive guarantees on home loans and farm loans. 
Roughly half of all spending on veterans is for the Veterans 
Health Administration, which consists of more than 700 
hospitals, nursing homes, domiciliaries, and outpatient 
clinics.
    In 1998, spending for Function 700 was $42.8 billion in BA 
and $43.1 billion in outlays,which was a 9.7 percent increase 
over the 1997 spending level of $39.3 billion. Discretionary spending 
represents $19.0 billion or 44 percent of total spending in the 
function. Funding for the medical care and medical research in the VA 
hospital system accounts for most of this discretionary spending. 
Spending for Medical Care in 1998 will total $17.7 billion, which 
includes about $560 million in third party payments and other payments 
to help fund veteran health services. Appropriated spending on medical 
care accounts for more than 90 percent of total discretionary spending. 
General Operating Expenses for the Department of Veteran Affairs will 
total $780 million in 1998 or 4 percent of total spending. The 
remainder of spending goes to construction spending for the medical 
care system, state veteran cemeteries, and other minor benefits and 
services.
    As reflected in the spending summary table, under the 
freeze baseline, Function 700 spending will increase by 16 
percent from 1998 to 2003. This is due primarily to growth in 
the veterans' compensation and pension programs. A large part 
of the increase, $10 billion in spending over the next five 
years, is the result of a May, 1997 Veteran Affairs General 
Counsel ruling that veterans with smoking-related diseases who 
smoked while in the military and their survivors are eligible 
for disability compensation cash payments.
    The BBA contained $1.6 billion in savings from extending 
certain expiring provisions of law, including a pension 
limitation on veterans in Medicaid-paid nursing homes, 
prescription drug co-pays and in-hospital per diems and fees 
for VA housing loans. In addition to the savings, VA hospitals 
were allowed to retain receipts collected into the Medical Care 
Cost Recovery (MCCR) fund. Retaining the MCCR offsetting 
receipts increases spending on veteran hospitals by $3.2 
billion from 1998 to 2002. Discretionary spending according to 
the BBA will decrease from $18.5 billion in 1998 to $18.0 
billion in 2002.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      42.6      42.8      43.4      44.8      46.2      48.2
                                    OT..............      42.5      43.3      44.0      45.2      46.7      48.6
BBA...............................  BA..............      42.6      42.1      43.2      44.5      45.7      48.2
                                    OT..............      42.5      42.4      43.4      44.7      45.9      48.5
Freeze baseline...................  BA..............      42.6      42.8      43.9      45.4      46.8      49.1
                                    OT..............      42.5      43.3      44.2      45.6      47.1      49.4
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +0.7      +0.2      +0.3      +0.5  ........
                                    OT..............  ........      +0.9      +0.6      +0.5      +0.8      +0.1
    Freeze baseline...............  BA..............  ........  ........      -0.5      -0.6      -0.6      -0.9
                                    OT..............  ........  ........      -0.2      -0.4      -0.5      -0.9
----------------------------------------------------------------------------------------------------------------

            description of the committee-reported resolution

    The Committee-reported resolution for the 1999 budget 
resolution proposes discretionary spending of $19.1 billion in 
BA and $19.6 billion in outlays. This amount represents level 
funding in BA but an increase of $0.5 billion in outlays 
compared to 1998. The resolution also assumes $560 million in 
spending from offsetting receipts from the Medical Care Cost 
Recovery fund, which is 10 percent higher than projected during 
last year's BBA.
    Over the next five years the resolution assumes spending 
$3.0 billion more than assumed in the BBA for both mandatory 
and discretionary programs over the next five years. Compared 
with the freeze baseline, the resolution would spend $2.0 
billion less than baseline projections over the next five 
years.

Discretionary spending

    The Committee-reported resolution assumes $93.0 billion in 
BA and $94.2 billion in outlays over the next five years for 
discretionary spending. This level will be supplemented by 
receipts into the Medical Care Cost Recovery fund which are 
currently estimated to be about $3.5 billion over the next five 
years. The resolution assumes:
          The President's level of spending on VA medical care 
        system of over $90 billion in total spending over the 
        next five years. The veteran population has started 
        declining, and starting in 1999 the over age 65 veteran 
        population--those who use medical facilities the most--
        will begin to decline;
          No new construction of facilities after 1999, but 
        over $1.0 billion in new funds will be available for 
        renovation, conversion of existing facilities, major 
        repairs, and other minor construction which is the same 
        level of spending assumed in the President's Budget;
          Starting in 2000, after the over 65 veteran 
        population starts declining the General Operating 
        Expenses (GOE) will decrease at one-half the rate of 
        decline in the veteran population, saving $80 million 
        over four years; and
          The President's proposals, based on an advisory 
        committee recommendation, to halt construction for 
        state extended care facility grants saving $74 million. 
        Funds are still available for repair and renovation of 
        facilities.

Mandatory spending

    The Committee-reported resolution assumes the President's 
proposal reversing the VA General Counsel opinion extending 
compensation to veterans with smoking related disabilities. 
This assumption is discussed in Function 920.

                Function 750: ADMINISTRATION OF JUSTICE

                            function summary

    Function 750 includes funding for the Department of 
Justice, the Judiciary, and federal law enforcement activities, 
including criminal investigations by the Federal Bureau of 
Investigation (FBI) and the Drug Enforcement Administration 
(DEA), border enforcement and the control of illegal 
immigration by the Customs Service and Immigration and 
Naturalization Service (INS), and also funding for prison 
construction, drug treatment, and crime prevention programs.
    In 1998, spending for Function 750 was $25.1 billion in BA 
and $22.5 billion in outlays, which was a 5.2 percent increase 
over the 1997 spending level. Discretionary spending represents 
96.3 percent of total spending in the function. The 
discretionary function total for 1998 includes $5.4 billion in 
BA and $3.9 billion in outlays for the Violent Crime Reduction 
Trust Fund (VCRTF) authorized by the 1994 Crime bill. Funding 
for the major law enforcement agencies, federal prisons and the 
Judiciary accounts for most of this discretionary spending. In 
1998, funding for the FBI was $3.4 billion, $3.8 billion for 
INS, $2.2 billion for the Customs Service, and $1.2 billion for 
the DEA. The Office of Justice Programs received $5.2 billion 
and the Federal Prison System received $3.1 billion.
    As reflected in the spending summary table, under the 
freeze baseline, Function 750 will decrease slightly in budget 
authority between 1998 and 2003 but outlays would increase by 8 
percent over the same period. The outlay increase is due 
primarily to increases in State Prison grants, drug assistance 
programs, and numerous violent crime reduction programs. The 
Balanced Budget Agreement establishes Function 750 as a 
protected function in the budget. The Community Policing 
Services (Cops on the Beat) was a protected program in the 1998 
budget.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............      25.1      25.8      24.5      24.5      24.7      25.0
                                    OT..............      22.5      24.6      24.9      24.8      24.3      24.2
BBA...............................  BA..............      25.1      25.4      24.3      24.5      25.0      25.6
                                    OT..............      22.5      24.8      25.4      26.0      25.0      25.5
Freeze baseline...................  BA..............      25.1      25.0      24.8      24.7      24.6      24.6
                                    OT..............      22.5      24.0      24.6      24.8      24.7      24.4
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      +0.4      +0.2  ........      -0.3      -0.6
                                    OT..............  ........      -0.2      -0.5      -1.2      -0.7      -1.3
    Freeze baseline...............  BA..............  ........      +0.8      -0.3      -0.2      +0.1      +0.4
                                    OT..............  ........      +0.6      +0.3  ........      -0.4      -0.2
----------------------------------------------------------------------------------------------------------------

              description of committee-reported resolution

    For discretionary spending the Committee-reported 
resolution assumes $25.2 billion in budget authority and $24.0 
billion in outlays for 1999. This represents an increase of 
$1.0 billion in budget authority and $2.4 billion in outlays, a 
4.0 percent and an 11.3 percent increase respectively over 
1998. The discretionary spending increase includes $5.8 billion 
in budget authority and $5.4 billion in outlays for the Violent 
Crime Reduction Trust Fund (VCRTF) programs. Compared to 1998, 
this funding represents a 5 percent increase in budget 
authority and an 8 percent increase in outlays for VCRTF. The 
1999 Committee-reported resolution is $0.4 billion in budget 
authority above and $0.2 billion in outlays below the BBA. It 
is $0.8 billion in budget authority and $0.6 billion in outlays 
above the freeze. The Committee resolution assumes the 
following policy options to achieve the recommended funding 
levels.
    The resolution fully funds the VCRTF with $5.8 billion in 
budget authority and $5.4 billion in outlays. It assumes 
current policy funding for the Local Law Enforcement Block 
Grants, which were terminated under the President's proposal, 
and it assumes $1.4 billion will be available for completion of 
the Community Oriented Policing Services program (Cops on the 
Beat). The President assumes the program will have fulfilled 
its objectives in 1999 and requests no additional funds beyond 
next year. The Committee also recommends increased funding over 
the baseline for juvenile crime reduction programs by $100 
million in 1999, a 43 percent increase over 1998, for a total 
increase of $1.5 billion in budget authority over five years.
    In addition to funds provided in the VCRTF, the Committees-
reported resolution assumes an increase for the Immigration and 
Naturalization Service (INS) of $93 million in budget authority 
and $79 million in outlays to support efforts to advance border 
control, improve illegal alien detention and deportation 
efforts, and provide assistance to local law enforcement 
officials. These funds may also be used for increasing the 
number of Border Patrol agents. The committee also notes that 
overall immigration staffing in the northern Border Patrol and 
Customs areas have declined, and that adequate staffing is 
needed at the Northern border both to facilitate the explosive 
growth in legitimate cross-border trade and traffic and to 
ensure the apprehension of illegal immigrants, drug 
traffickers, or terrorists who may attempt entry into the 
United States. In order to assure the most efficient use of 
additional resources provided relating to theapprehension, 
detention and removal of criminal and other illegal aliens, it is 
important that sufficient resources be devoted to each stage of the 
immigration enforcement process, including inspections, border patrol, 
detention and deportation.
    In addition to funds provided in the VCRTF, the Committee-
reported resolution also assumes increases over the freeze 
baseline for the Federal Bureau of Investigation (FBI) of $40 
million in budget authority and $34 million in outlays; $16 
million in budget authority and $14 million in outlays for the 
Drug Enforcement Administration; $67 million in budget 
authority and $57 in outlays for the U.S. Customs; $35 million 
in budget authority and $30 million in outlays for the U.S. 
Attorneys; $17 million in budget authority and $14 million in 
outlays for the U.S. Marshals; and $15 million in budget 
authority and $13 million in outlays for the Secret Service.
    The Committee-reported resolution assumes an increase of 
$105 million in budget authority and $89 million in outlays 
over the freeze baseline for the Federal Prison System, which 
will provide additional funds for needed prison space as well 
as assistance for salaries, operations, and maintenance of 
correctional and penal institutions. Finally, the Committee 
assumes $25 million in budget authority for the 
Telecommunications Carrier Compliance Fund for reimbursement to 
the telecommunications industry for eligible Communications 
Assistance for Law Enforcement Act (CALEA) activities.
    The resolution assumes mandatory spending levels at the 
current policy level of $619 million in budget authority and 
$617 million in outlays in 1999, for total spending in the 
1999-2003 period of $1.9 billion in budget authority and $1.7 
billion in outlays.

                    Function 800: GENERAL GOVERNMENT

                            FUNCTION SUMMARY

    Function 800 consists of the activities of the Legislative 
Branch, the Executive Office of the President, U.S. Treasury 
fiscal operations (including the Internal Revenue Service), 
personnel and property management, and general purpose fiscal 
assistance to states, localities, and U.S. territories.
    In 1998, spending for Function 800 will be $14.5 billion in 
BA and $14.3 billion in outlays, which is a 14 percent increase 
over the 1997 spending level. Discretionary spending represents 
86 percent of total spending in this function. About 62 percent 
of discretionary spending, or $7.8 billion in 1998, is for the 
Internal Revenue Service. 16 percent of discretionary spending 
is for the Legislative branch, and 5 percent is for the 
Executive Office of the President. Over half the mandatory 
spending is for the Treasury claims fund, and the remainder is 
primarily payments to states, localities, and Puerto Rico.
    As reflected in the spending summary table, under the 
freeze baseline, Function 800 will increase by 2.9 percent from 
1998 to 2003. Mandatory spending includes $1.5 billion in every 
year over this period for payments to savings and loans 
institutions (S&Ls) out of the Treasury claims fund. Two years 
ago, the Supreme Court ruled that a 1989 federal law broke a 
contract between an S&L and the Federal Savings and Loan 
Insurance Corporation (FSLIC). During the 1980s, the FSLIC 
encouraged healthy S&Ls to buy ailing ones with the promise 
that the buyer could employ a favorable accounting treatment of 
``supervisory goodwill.'' The 1989 law reversed this agreement, 
causing many S&Ls to fail. This ruling could cost the Federal 
government up to $20 billion.
    Last year's BBA assumed discretionary savings of $4.1 
billion over 1999-2003 compared with the 1998 level. Savings 
were assumed to be achieved by reducing discretionary spending 
for the District of Columbia, the IRS, the Federal Buildings 
Fund, and several other bureaus and agencies. Mandatory savings 
of $540 million were achieved from selling Governor's Island 
and the air rights above Union Station.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee reported resolution.....  BA..............      14.5      14.4      13.9      13.6      13.4      13.5
                                    OT..............      14.3      13.4      13.8      13.8      13.6      13.5
BBA...............................  BA..............      14.5      14.7      14.2      13.8      13.7      14.1
                                    OT..............      14.3      14.6      14.9      14.2      13.7      14.1
Freeze baseline...................  BA..............      14.5      14.8      14.8      14.8      14.8      14.8
                                    OT..............      14.3      14.1      14.5      14.5      14.5      14.5
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -0.3      -0.3      -0.2      -0.3      -0.6
                                    OT..............  ........      -1.2      -1.1      -0.4      -0.1      -0.6
    Freeze baseline...............  BA..............  ........      -0.4      -0.9      -1.2      -1.3      -1.3
                                    OT..............  ........      -0.7      -0.7      -0.7      -0.9      -1.0
----------------------------------------------------------------------------------------------------------------

            DESCRIPTION OF THE COMMITTEE-REPORTED RESOLUTION

    The Committee-reported resolution assumes discretionary 
spending in 1999 of $12.0 billion in BA and $11.1 billion in 
outlays. This represents a decrease from 1998 of $0.5 billion 
in BA, or 4 percent, and $1.3 billion in outlays or 10.7 
percent. The resolution does not assume changes in mandatory 
spending, which will total $2.4 billion in 1999. Overall, the 
Committee-reported resolution proposes to spend $1.7 billion 
less over five years compared with the BBA,and $5.1 billion 
less over five years compared with a freeze. In order to meet the 
discretionary spending limits, savings will be required from programs 
in this function. These savings will be determined by the 
Appropriations Committees. While savings are needed overall, the 
federal government still must fund national responsibilities at a 
reasonable level.
    The resolution assumes $457 million in 1999 for the Federal 
Buildings Fund, an increase of $500 million over a freeze. The 
additional money will fund 14 new courthouses, the amount 
recommended by the Judicial Conference in its latest Five Year 
Courthouse Plan. The overall level of the Federal Buildings 
Fund in 1999 will also support the President's request for 
increased repairs and alterations. For 1998, courthouse 
construction was delayed and repairs and alterations were 
scaled back due to an overall shortfall in the Federal 
Buildings Fund.
    The resolution assumes $7.3 billion in 1999 for the IRS, a 
decrease of 6 percent below a freeze. This amount is $240 
million above the 1997 level. IRS funding has increased by 71 
percent in real terms since 1981. In addition, the National 
Commission on Restructuring the IRS has identified ways to save 
money, such as encouraging electronic filing.
    The resolution assumes $631 million in 1999 for the 
District of Columbia, a decrease of 23 percent below a freeze. 
All of this reduction is due to the one-time transition payment 
the District received in 1998 as part of the Federal bailout. 
The resolution accommodates the increased federal 
responsibilities assumed in last year's bailout. As a result of 
this support, the District is now projecting continuing 
surpluses rather than deficits.
    The resolution assumes $15 million in 1999 for the U.S. 
Mint, a decrease of 87 percent below a freeze. This is the same 
amount of funding recommended by the President. The reduction 
is possible because the Mint is expected to make fewer capital 
acquisitions in 1999. Finally, the resolution assumes a repeal 
of the General Services Agency's provision requiring agencies 
to purchase alternative fuel vehicles. This change would save 
$70 million in 1999.

                       Function 900: NET INTEREST

                            function summary

    Function 900 displays net interest, which is a mandatory 
payment. There are no discretionary programs in Function 900. 
Net interest includes interest on the public debt after 
deducting the interest income received by the federal 
government.
    Interest on the public debt, or gross interest, is the cost 
of financing the entire public debt of the U.S. government. 
Gross interest costs, however, are not a comprehensive measure 
of government borrowing costs because the government holds much 
of the debt itself, which generates interest income. In 1997, 
$1.6 trillion (about 30 percent) of the total public debt was 
held by the government, mostly by trust funds such as Social 
Security and federal civilian and military retirement. The 
government both pays and collects interest on these securities, 
resulting in no net cost. In addition, the federal government 
lends money outside the government through credit programs. 
These activities result in real interest income to the federal 
government. Since net interest reflects both the interest paid 
and interest earned by the government, it provides the best 
measure of the costs of federal borrowing.
    In 1998, spending for Function 900 was $245.1 billion in BA 
and outlays, which was a 0.4 percent increase over the 1997 
spending level. As reflected in the spending summary table, 
under the freeze baseline, Function 900 will decrease by 8 
percent from 1998 to 2003. This is primarily due to 
expectations of continuing surpluses and declining interest 
rates.

                                                SPENDING SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  BA..............     245.1     247.2     242.7     236.7     230.5     225.4
                                    OT..............     245.1     247.2     242.7     236.7     230.5     225.4
BBA...............................  BA..............     245.1     247.2     242.8     236.8     230.4     225.1
                                    OT..............     245.1     247.2     242.8     236.8     230.4     225.1
Freeze baseline...................  BA..............     245.1     247.3     242.9     236.9     230.5     225.2
                                    OT..............     245.1     247.3     242.9     236.9     230.5     225.2
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA...........................  BA..............  ........      -0.1      -0.2      -0.2      -(*)      +0.3
                                    OT..............  ........      -0.1      -0.2      -0.2      -(*)      +0.3
    Freeze baseline...............  BA..............  ........      -0.1      -0.2      -0.2      -(*)      +0.3
                                    OT..............  ........      -0.1      -0.2      -0.2      -(*)      +0.3
----------------------------------------------------------------------------------------------------------------

                     committee-reported resolution

    The surpluses under the Committee-reported resolution are 
slightly higher than the surpluses under the BBA and the freeze 
baseline. As a result, the resolution proposes to spend $0.1 
billion less on net interest over five years compared with the 
BBA or a freeze.

                        Function 920: ALLOWANCES

                            function summary

    Function 920 usually displays the future budgetary effects 
of proposals that cannot be easily distributed across other 
budget functions (but no data on actual spending are recorded 
here). In past years, Function 920 has included total savings 
or costs from proposals to change federal employee pay, 
procurement procedures, or overhead in federal agencies.
    The BBA made no assumptions for this function.

                                                                    SPENDING SUMMARY                                                                    
                                                                [In billions of dollars]                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           1998             1999             2000             2001             2002             2003    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Committee-reported resolution....  BA.............  ...............          -0.3             -1.2             -2.7             -3.8             -5.4   
                                   OT.............  ...............          -1.9             -4.6             -3.0             -7.0             -5.0   
BBA..............................  BA.............  ...............  ...............  ...............  ...............  ...............  ...............
                                   OT.............  ...............  ...............  ...............  ...............  ...............  ...............
Freeze baseline..................  BA.............  ...............  ...............  ...............  ...............  ...............  ...............
                                   OT.............  ...............  ...............  ...............  ...............  ...............  ...............
Committee-reported resolution                                                                                                                           
 compared to:                                                                                                                                           
    BBA..........................  BA.............  ...............          -0.3             -1.2             -2.7             -3.8             -5.4   
                                   OT.............  ...............          -1.9             -4.6             -3.0             -7.0             -5.0   
    Freeze baseline..............  BA.............  ...............          -0.3             -1.2             -2.7             -3.8             -5.4   
                                   OT.............  ...............          -1.9             -4.6             -3.0             -7.0             -5.0   
--------------------------------------------------------------------------------------------------------------------------------------------------------

              description of committee-reported resolution

Discretionary spending

    The Committee-reported resolution assumes reductions (that 
would actually occur in most other functions) in discretionary 
spending resulting from:
          Limiting the number of political appointees to 2,300, 
        saving $0.2 billion over the next five years;
          Repealing the Davis-Bacon and the Service Contract 
        Acts beginning in 2000, saving $6.3 billion in BA and 
        $5.0 billion in outlays over the 2000-2003 period.
          In addition, the resolution assumes a reserve 
        totaling $12.1 billion in BA for emergencies over the 
        next five years (similar to the President's budget, 
        except the President only had a reserve for 1999; the 
        resolution assumes roughly $2 billion to $3 billion per 
        year). Typically, Administration and congressional 
        budgets have not made assumptions for emergencies even 
        though supplementals end up being enacted every year 
        that provide funds for emergencies that year.

Mandatory Spending

    The resolution also includes the program reductions assumed 
to offset the increased outlays resulting from the Senate-
passed reauthorization of the Intermodal Surface Transportation 
Efficiency Act (ISTEA). These offsets include the following 
items.
    The President proposed to reverse his VA General Counsel 
decision in 1997 to extend compensation to veterans with 
smoking-related illnesses and dependents of deceased veterans. 
This policy saves $10.5 billion over five years, and greater 
amounts in the future.
    The reform of welfare administrative costs could be 
coordinated between three programs: TANF, Food Stamps, and 
Medicaid. This proposal would save $3.6 billion over 1999 
through 2003. This is similar to the President's proposal for 
Medicaid and Food Stamps administration.
    The President also recommends reducing spending for the 
Social Services Block Grant (Title XX) by $3.1 billion over 
five years. The President's budget notes that some services 
provided by the block grant could be provided directly by State 
or local government or through other federal programs. The 
Committee-reported resolution acknowledges a FY 1998 
Appropriations Committee conclusion that the Administration on 
Children Youth and Families could not provide them with any 
information relating to the effectiveness of the program in 
meeting its stated objectives.
    Several options are available within the FHA program that 
provides mortgage insurance for single-family homes to be 
enacted that would provide more than $1 billion in offsets for 
highway spending over five years. One proposal in the 
President's budget is an increase in the FHA loan ceiling to 
$227,150, which would bring in an additional $1.0 billion in 
fee receipts over five years. While this proposal appears to 
save money under credit reform scoring, the committee is 
concerned that such a large expansion of credit activity could 
increase the government's exposure to losses. Other proposals 
aimed at lowering the cost of potential government losses in 
insuring homes currently eligible for the FHA program could 
produce even more savings, without the additional risk. Raising 
the annual premium by 5 basis points for mortgages with initial 
loan-to-value ratios exceeding 95 percent would yield $0.5 
billion over five years. Combining this proposal with one that 
would end FHA rebates of the up-front premiums paid by 
borrowers would generate total savings of $1.3 billion over the 
next five years.
    The total authorization for the Commodity Credit 
Corporation automated data processing could be set at $0.2 
billion, and the Market Access Program (MAP) could be 
eliminated. Thesetwo proposals would save $0.1 billion in 1999 
and $0.4 billion over five years.
    Increase premiums, currently 6 basis points, charged to 
brokers of Ginnie Mae securities by 3 basis points, allowing 
them to retain 41 basis points in fees, yielding $0.2 billion 
in higher receipts over five years and reducing the excess 
profits of the securities brokers.

            Function 950: UNDISTRIBUTED OFFSETTING RECEIPTS

                            function summary

    Function 950 records offsetting receipts (receipts, not 
federal revenues or taxes, that the budget shows as offsets to 
spending programs) that are too large to record in other budget 
functions. Such receipts are either intrabudgetary (a payment 
from one federal agency to another, such as agency payments to 
the retirement trust funds) or proprietary (a voluntary payment 
from the public to the government, similar to a business 
transaction). The main types of receipts recorded as 
``undistributed'' in this function are: the payments federal 
agencies make to retirement trust funds for their employees, 
payments made by companies for the right to explore and produce 
oil and gas on the Outer Continental Shelf, and payments by 
those who bid for the right to own or use public property or 
resources, such as the electromagnetic spectrum.
    In 1998, offsetting receipts in this function are $43.8 
billion, which is a 12.4 percent decrease in receipts from the 
1997 level.
    As reflected in the summary table, under the freeze 
baseline, offsetting receipts will remain roughly $44 billion 
for the next two years, increase to $46.8 billion in 2001, and 
spike to $54.6 billion in 2002, because of the concentration of 
spectrum auctions that the BBA required the Federal 
Communications Commission to conduct in that year.

                                                                    SPENDING SUMMARY                                                                    
                                                                [In billions of dollars]                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           1998             1999             2000             2001             2002             2003    
--------------------------------------------------------------------------------------------------------------------------------------------------------
Committee reported resolution....  BA.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
                                   OT.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
BBA..............................  BA.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
                                   OT.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
Freeze baseline..................  BA.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
                                   OT.............         -43.8            -43.9            -44.4            -46.8            -54.6            -46.1   
Committee-reported resolution                                                                                                                           
 compared to:                                                                                                                                           
    BBA..........................  BA.............  ...............  ...............  ...............  ...............  ...............  ...............
                                   OT.............  ...............  ...............  ...............  ...............  ...............  ...............
    Freeze baseline..............  BA.............  ...............  ...............  ...............  ...............  ...............  ...............
                                   OT.............  ...............  ...............  ...............  ...............  ...............  ...............
--------------------------------------------------------------------------------------------------------------------------------------------------------

              description of committee reported resolution

    The Committee-reported resolution reflects no change in 
offsetting receipts in Function 950 compared with the freeze 
baseline or the BBA.

                              b. revenues

    Federal revenues are taxes and other collections from the 
public that result from the government's sovereign or 
governmental powers. Federal revenues include individual income 
taxes, corporate income taxes, social insurance taxes, excise 
taxes, estate and gift taxes, custom duties and miscellaneous 
receipts (which include deposits of earnings by the Federal 
Reserve System, fines, penalties, fees for regulatory services, 
and others).

                           historical trends

    The following table shows that revenues are expected to be 
20.1 percent of GDP in 1998. This would be a postwar high and 
close to the World War II peak of 20.9 percent. After 1998, the 
ratio is projected to decline slightly to 19.3 percent by 2003.
    The revenue/GDP ratio will remain historically high during 
the budget window. Over the period 1965 through 1997, revenues 
averaged 18.3 percent of GDP. In only a few years, and then 
only under unusual circumstances, did revenues reach 19 percent 
of GDP during this period. In 1969 and 1970, taxes were hiked 
to help finance the Vietnam War. From 1979 through 1982, high 
inflation pushed up revenues--post 1982, the Reagan 
Administration's tax cut and subsequent indexing of tax 
brackets reduced the tax burden. In 1997, taxes reached 19.8 
percent of GDP.
    There have been some large shifts in the composition of 
revenues over the last three decades. The most visible is the 
government's increased reliance on social insurance taxes and 
its diminished reliance on corporate income and excise taxes. 
Those trends have eased in recent years, however; the social 
insurance tax share and the excise tax share have been 
essentially constant as a percentage of GDP since 1985, while 
corporate income tax collections have gone up. The individual 
income tax share, the largest share of all revenues, has risen 
steadily since 1993.

                                        HISTORICAL AND PROJECTED REVENUES                                       
                                         [Fiscal years, percent of GDP]                                         
----------------------------------------------------------------------------------------------------------------
                                                           CBO March 1998 baseline--                            
                             -----------------------------------------------------------------------------------
                               1965   1975   1985   1995   1996   1997   1998   1999   2000   2001   2002   2003
----------------------------------------------------------------------------------------------------------------
    Total revenues..........   17.0   18.0   17.9   18.8   19.3   19.8   20.1   19.9   19.6   19.4   19.4   19.3
                             -----------------------------------------------------------------------------------
Individual..................    7.1    7.9    8.2    8.2    8.7    9.3    9.4    9.1    8.9    8.8    8.9    8.9
Corporate...................    3.7    2.6    1.5    2.2    2.3    2.3    2.4    2.3    2.2    2.1    2.0    2.0
Social insurance............    3.2    5.4    6.5    6.7    6.8    6.8    6.8    6.9    6.9    6.9    6.8    6.8
Other \1\...................    2.9    2.1    1.8    1.7    1.5    1.5    1.5    1.7    1.6    1.6    1.6    1.6
----------------------------------------------------------------------------------------------------------------
\1\ Includes excise taxes, estate and gift taxes, custom duties and miscellaneous receipts.                     

                        REVENUES IN THE BASELINE

    The baseline projections for revenues assume that current 
tax law remains unchanged. The baseline takes into account that 
some provisions are scheduled to change or expire during the 
1998-2003 period. Overall, the baseline assumes that those 
changes and expirations occur on schedule. One category of 
taxes, excise taxes dedicated to trust funds, is the sole 
exception to this rule. The baseline assumes that those taxes 
will be extended even if they are scheduled to expire, to be 
consistent with the spending assumptions. This year, there are 
three such cases: (1) excise taxes for the Highway Trust Fund 
(expires in 1999) which generates $27 billion in baseline 
revenues in 2008; (2) the Airport and Airway Trust Fund 
(expires in 2007) which generates $15 billion in 2008; and (3) 
the Leaking Underground Storage Tank Trust Fund (expires in 
2005) which generates $0.2 billion in 2008.
    All other expiring revenue provisions were not 
automatically extended in the baseline projections. These 
include five expiring provisions that had been temporarily 
extended last year, and fifteen more that are set to expire 
between 1999 and 2008. Extension of the former would reduce 
2003 revenues by roughly $3.8 billion.

              DESCRIPTION OF COMMITTEE REPORTED RESOLUTION

    The Committee reported resolution assumes that any tax cuts 
will be deficit neutral. This will permit tax cuts if they are 
offset by revenue raisers and/or mandatory spending reductions. 
A tax cut reserve fund will be created to facilitate this 
process. This resolution assumes that revenues will grow from 
$1,679.7 billion in 1998 to $2,007.6 billion in 2003, an 
increase of $327.9 billion over the five-year period.

                                                     SUMMARY                                                    
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Committee-reported resolution.....  REV.............    1679.7    1738.5    1783.5    1846.5    1929.8    2007.6
BBA baseline......................  REV.............    1679.7    1738.5    1783.5    1846.5    1929.8    2007.6
Freeze baseline...................  REV.............    1679.7    1738.5    1783.5    1846.5    1929.8    2007.6
Committee-reported resolution                                                                                   
 compared to:                                                                                                   
    BBA baseline..................  REV.............  ........  ........  ........  ........  ........  ........
    Freeze baseline...............  REV.............  ........  ........  ........  ........  ........  ........
----------------------------------------------------------------------------------------------------------------

1999 committee

           [1999-2003--(5-year total, in billions of dollars]

Committee-reported resolution baseline........................  $9,305.9
-Deficit Impact of Tax Cuts...................................       0.0
                    --------------------------------------------------------------
                    ____________________________________________________

      Committee-reported resolution revenues..................   9,305.9

    This resolution does not assume revenues from a legislated 
tobacco settlement. However, it does provide that should such a 
settlement generate revenues, the Federal share of those 
proceeds would be dedicated to the Medicare Part A trust fund.
    As always, the Ways and Means Committee in the House and 
the Finance Committee in the Senate will determine the specific 
amounts and structure of any statutory tax relief package.The 
tax-writing committees will be required to balance the interests and 
desires of many parties (while protecting the interests of taxpayers 
generally) in crafting the tax cut within the context of the broad 
parameters adopted in the Committee-reported resolution.
    The following measures are an illustration of the type of 
five year tax relief that could be consistent with the 
Committee-reported resolution:
           Some marriage penalty relief--for instance, 
        potentially increasing the standard deduction for joint 
        filers, that could reduce taxes by up to $10.5 billion;
           Further relief for child care expenses for 
        all families of up to $9.0 billion;
           S. 1133, The ``Parent and Student Savings 
        Account Plus'' which would expand the use of Education 
        IRAs and expand the exclusion for employer-provided 
        education by $3.7 billion;
           Extension of the Research and 
        Experimentation (R&E) credit worth $2.0 billion;
           Extension of the Generalized System of 
        Preferences (GSP) worth $1.1 billion;
           Measures to reform the IRS providing roughly 
        $3 billion in relief (this figure could be revised 
        depending on upcoming Senate action);
           Technical adjustments to simplify TRA-97 of 
        just under $1 billion;
           An acceleration of the phase-in for making 
        self-employed health costs fully deductible providing 
        $300 million in relief.
    Roughly $30 billion in revenue raisers and/or mandatory 
spending reductions would offset these gross tax cuts. The 
President has proposed a set of loophole closures and tax 
extensions which would cover this total. The Ways and Means 
Committee and the Finance Committee could elect to use some of 
the President's suggestions and/or compile their own set of 
offsets.
    Other tax cuts are also possible (including the President's 
proposals), providing revenue raisers and/or mandatory spending 
cuts have offset these.

                            tax expenditures

    The Congressional Budget Act of 1974 requires a listing of 
tax expenditures in the President's budget submission and in 
reports accompanying congressional budget resolutions. Tax 
expenditures are defined by the Act as ``revenue losses 
attributable to provisions of the Federal tax law which allow a 
special exclusion, exemption, or deduction from gross income or 
which provide a special credit, a preferential rate of tax, or 
a deferral of tax liability.'' Under this definition, the 
concept of tax expenditures refers to revenue losses 
attributable exclusively to corporate and individual income 
taxes.
    The estimates presented here are those of the Joint 
Committee on Taxation and are based on the committee's most 
recent report of December 15, 1997 (Estimates of Federal Tax 
Expenditures for Fiscal Years 1998-2002) (JCS-22-97). The list 
shows the estimated revenue lost from tax expenditure items for 
fiscal years 1998 through 2002. Because of the interaction 
among provisions, the Joint Committee on Taxation warns that it 
is incorrect to assume 
that estimates of separate tax expenditures can be summed to 
calculate a total revenue effect of repeal of a group of tax 
expenditures. The tax expenditures in the following list are 
estimated separately, under the assumption that all other tax 
expenditures remain in the code. If two or more tax 
expenditures were estimated simultaneously, the total change in 
tax liability could be smaller or larger than the sum of the 
amounts shown for each item separately.
    Tables follow:


    


        V. Budget Resolutions: Enforcement and Other Provisions

    A budget resolution does not become law and cannot amend 
law. However, a budget resolution's miscellaneous provisions 
can affect the consideration of legislation to implement and 
enforce the underlying policy assumptions contained in such 
budget resolution. The Committee-reported resolution contains a 
number of provisions which implement policies assumed in this 
resolution while maintaining a balanced budget. No 
reconciliation instructions are contained in this resolution.
    Title II of the Committee-reported resolution contains four 
sections that provide procedures by which the Chairman of the 
Budget Committee may alter the levels in the FY 1999 Budget 
Resolution to accommodate Senate consideration of important 
legislation such as: tax relief, tobacco regulation, Superfund 
reform, and transportation appropriations. Without such 
provisions, the legislation at issue may be subject to 60-vote 
Budget Act points of order even if the associated spending will 
not increase the deficit.
    Title II also contains two additional sections: one 
permitting adjustments to the budget resolution in case the 
Line Item Veto is ruled unconstitutional by the Supreme Court 
and one invoking the standard rulemaking authority granted to 
Congress.
    Tax Cut Reserve Fund. Section 201 of the Committee-reported 
resolution provides a tax cut reserve fund. This section 
permits the Senate to consider legislation providing tax relief 
to the American people in a deficit neutral bill. This 
``reserve fund'' would permit tax relief to be offset by 
reductions in mandatory spending or revenue increases. Such tax 
reductions could include elimination of the marriage penalty, 
support for families in caring for their children, and 
incentives to stimulate savings, investment, job creation and 
economic growth. The FY 1996 and 1997 budget resolutions 
contained similar language.
    Tobacco Reserve Fund. Section 202 of the Committee-reported 
resolution provides a reserve fund for tobacco legislation that 
would dedicate any federal proceeds generated from a tobacco 
settlement to Medicare. This language in no way impedes the 
ability of States to recover funds from the tobacco industry. 
While many members of the Senate and Senate Committees are 
considering tobacco legislation, a consensus has yet to form 
around any particular legislative proposal. Moreover, the 
President has declined to submit any legislative language. In 
the Senate, several committees (including, Commerce, Finance, 
Judiciary, and Labor) have jurisdiction over the issues 
involved in tobacco legislation. The Commerce, Judiciary, and 
Labor committees have held many hearings on the subject since 
the June 1997 announcement by the States' Attorneys-General and 
the tobacco industry that they had reached a settlement.
    As the FY 1999 Budget Resolution is being debated, it is 
unclear what form tobacco legislation, if any, will take in the 
Senate. Consequently, the Committee-reported resolution 
includes this reserve fund. This section reserves federal 
tobacco proceeds for Medicare by permitting the Chairman of the 
Budget Committee to increase the revenue floor for legislation 
that ``reserves federal receipts from tobacco legislation for 
the Medicare Hospital Insurance Trust Fund.'' In addition, 
subsection (c) provides that the receipts generated by tobacco 
legislation shall not be put on the Congressional pay-go 
scorecard. This will prevent the receipts from being used for 
any purpose other than Medicare solvency.
    Separate Environmental Allocation. Section 203 of the 
Committee-reported resolution provides for a special allocation 
to enable the Senate to consider Superfund reform legislation. 
This section provides that if the Committee on Environment and 
Public Works reports Superfund reform legislation that 
appropriates annual spending of up to $200 million through FY 
2003 and is deficit neutral, then the appropriate aggregates 
and allocations will be adjusted. The Resolution assumes, but 
does not require, that the extension of Superfund taxes will 
offset this increased spending. Similar language was included 
in the FY 1998 budget resolution (consistent with the 
Bipartisan Budget Agreement). Section 203 merely extends this 
reserve fund for another year.
    Dedication of Offsets to Transportation.  Section 204 of 
the Committee-reported resolution permits specific reductions 
in certain spending programs to be dedicated to increased 
transportation spending provided in the appropriations process. 
The language provides that the Chairman of the Budget Committee 
may ``reserve'' up to $1.3 billion in outlays for FY 1999 and 
not more than $18.5 billion in outlays for 1999 through 2003 
for discretionary highway programs called for in the 1998 
reauthorization of the Intermodal Surface Transportation 
Efficiency Act (ISTEA). In addition, the Chairman may 
``reserve'' from the general fund up to $1.0 billion in budget 
authority for FY 1999 and not more than $5.0 billion in budget 
authority for FY 1999 through 2003 for discretionary transit 
programs called for in the ISTEA reauthorization. The 
additional outlays for highways would only be credited to the 
Appropriations Transportation bill to the extent that the 
appropriation for federal aid highways exceeds the levels 
contained in the Bipartisan Budget Agreement (as adjusted for 
FY 98 appropriations action).
    The practical effect of section 204 is that if savings set 
out in this section are generated by any committee other than 
the Transportation Subcommittee of the Appropriations 
Committee, such savings would not be scored for purposes of 
enforcing points of order under the Budget Act unless and until 
the Transportation Appropriation bill is considered in the 
Senate. In effect, this prevents these particular savings from 
being used as offsets for any purpose other than highways or 
transit.
    It is the Committee's intent that these specified 
reductions only be used to offset highway or transit funding. 
The Committee is also concerned about the accuracy of the 
direct spending estimate that is the basis of the offset. 
Additional spending on discretionary programs should not result 
in a decrease in the surplus because of estimating errors. 
Therefore, the Committee directs the CBO to examine, to the 
extent possible, whether the savings under this section (if 
implemented) have been achieved and to report to the Committee 
on their findings by August 2000.
    Adjustments for Line Item Veto Litigation. Section 205 of 
the Committee-reported resolution permits the Chairman of the 
Budget Committee to adjust the allocations and aggregates in 
the budget resolution to reflect ``reality'' if the Supreme 
Court rules that the Line Item Veto Act is unconstitutional. 
This is necessary because the FY 1999 Budget Resolution will 
reflect the effects of the President's cancellations. If the 
law is struck down, the spending will occur and the budget 
resolution must reflect this spending. This section does not 
presume any specific outcome of the Supreme Court's ruling.
    Rulemaking Authority.  Section 206 of the Committee-
reported resolution contains language regarding the rulemaking 
authority of each House of Congress.
    Title III of the Committee-reported resolution contains the 
following provisions setting out non-binding language that 
expresses the will or intent of either or both Houses of 
Congress.
    Sense of the Congress on Sunsetting the Internal Revenue 
Code.
    Sense of the Senate on Social Security.
    Sense of the Senate on Accrued Liability of Social Security 
and Medicare.
    Sense of the Senate on IDEA funding.
    Sense of the Senate on balancing the budget without Social 
Security surpluses.
    Sense of the Senate on school-to-work savings and child 
care.
    Sense of the Senate on taxpayers' rights.
    Sense of the Senate on full funding for the National Guard.
    Sense of the Senate on Medicare payments.
    Sense of the Senate on long-term care.
    Sense of the Senate on climate change research.
    Sense of the Senate on additional tax relief and increased 
spending for child care.
    Sense of the Senate on student loans.
    Sense of the Senate on the deductibility of health 
insurance premiums by self-employed.
    Sense of the Senate on the Kyoto protocol.
    Sense of the Senate on a $1.50 per pack increase in 
cigarette prices.





                   VI. Committee Views and Estimates

    Section 301(c) of the Congressional Budget Act requires the 
committees of the Senate to report to the Budget Committees the 
views and estimates of budget requirements for matters within 
their jurisdictions to assist the Budget Committees in 
preparing the budget resolution.
    Following are the views and estimates received from the 
various committees:





                          VII. Committee Votes

    The following are rollcall votes which were taken during 
the Senate Budget Committee mark-up of the FY 1999 Budget 
Resolution.

March 17, 1998

    (1) Hollings Sense of the Senate to balance the budget 
without counting Social Security surpluses and to reform Social 
Security.
    Amendment adopted by a voice vote.

March 18, 1998

    (2) Bond Sense of the Senate that savings in the School-to-
work program should be applied to early childhood development.
    Amendment adopted by voice vote.

    (3) Bond Sense of the Senate regarding taxpayer rights.
    Amendment adopted by voice vote.

    (4) Feingold Sense of the Senate regarding full funding for 
the National Guard.
    Amendment adopted by voice vote.

    (5) Wyden et al. Sense of Senate on Medicare Payment.
    Amendment adopted by voice vote.

    (6) Wyden Sense of the Senate on long-term care.
    Amendment adopted by voice vote.
    (7) Conrad amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent on anti-
tobacco programs instead of being devoted solely to Medicare 
solvency.
    Amendment defeated by:
        YEAS: 10                      NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (8) Conrad amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent on Social 
Security instead of being devoted solely to Medicare solvency.
    Amendment defeated by:
        YEAS: 10                      NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (9) Conrad amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent on 
children's health insurance programs instead of being devoted 
solely to Medicare solvency.
    Amendment defeated by:
        YEAS: 10                      NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (10) Conrad amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent to assist 
tobacco farmers instead of being devoted solely to Medicare 
solvency.
    Amendment defeated by:
        YEAS: 9                       NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Johnson                             Snowe
Durbin                              Abraham
                                    Frist
                                    Grams
                                    Smith
                                    Feingold

    (11) Conrad amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent on a 
comprehensive tobacco program instead of being devoted solely 
to Medicare solvency.
    Amendment defeated by:
        YEAS: 10                      NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (12) Boxer amendment to amend the resolution's tobacco 
reserve fund to allow tobacco revenues to be spent on National 
Institutes of Health instead of being devoted solely to 
Medicare solvency.
    Amendment defeated by:
        YEAS: 10                      NAYS: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (13) Grams amendment to dedicate half of the budget surplus 
to debt reduction and half to tax relief instead of reserving 
it entirely for Social Security reform.
    Amendment defeated by:
        YEA: 2                        NAY: 20
Nickles                             Domenici
Grams                               Grassley
                                    Gramm
                                    Bond
                                    Gorton
                                    Gregg
                                    Snowe
                                    Abraham
                                    Frist
                                    Smith
                                    Lautenberg
                                    Hollings
                                    Conrad
                                    Sarbanes
                                    Boxer
                                    Murray
                                    Wyden
                                    Feingold
                                    Johnson
                                    Durbin

    (14) Grams Sense of the Congress on the Department of 
Energy budget.
    Amendment defeated by voice vote.
    (15) Wyden Sense of the Senate on climate change research 
and other funding.
    Amendment adopted by voice vote.
    (16) Murray amendment to create a reserve fund to allow 
revenue increases for spending on a new mandatory program to 
reduce school class size.
    Amendment defeated by:
        YEA: 10                       NAY: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (17) Murray amendment to create a reserve fund to allow 
revenue increases for additional mandatory spending for child 
care.
    Amendment defeated by:
        YEA: 10                       NAY: 12
Lautenberg                          Domenici
Hollings                            Grassley
Conrad                              Nickles
Sarbanes                            Gramm
Boxer                               Bond
Murray                              Gorton
Wyden                               Gregg
Feingold                            Snowe
Johnson                             Abraham
Durbin                              Frist
                                    Grams
                                    Smith

    (18) Snowe et al. Sense of the Senate on additional tax 
relief and spending increases for child care.
    Amendment adopted by voice vote.

    (19) Snowe Sense of the Senate that legislation should be 
enacted to ensure that lenders do not withdraw from the 
guaranteed student loan program to the detriment of students.
    Amendment adopted by voice vote.

    (20) Durbin et al. Sense of the Senate regarding 
deductibility of health insurance premiums for self employed.
    Amendment adopted by voice vote.

    (21) Grams Sense of Congress that funds should not be 
provided to put into effect the Kyoto Protocol prior to its 
ratification.
    Amendment adopted by voice vote.

    (22) Lautenberg amendment to create a reserve fund to allow 
revenue increases for additional mandatory spending on a new 
Environmental Resources Fund.
    Amendment defeated by:
        YEA: 9                        NAY: 13
Lautenberg                          Domenici
Conrad                              Grassley
Sarbanes                            Nickles
Boxer                               Gramm
Murray                              Bond
Wyden                               Gorton
Feingold                            Gregg
Johnson                             Snowe
Durbin                              Abraham
                                    Frist
                                    Grams
                                    Smith
                                    Hollings

    (23) Lautenberg Sense of the Senate calling for a tax or 
other price increase of at least $1.50 per pack of cigarettes.
    Amendment adopted by:
        YEA: 14                       NAY: 8
Bond                                Domenici
Gorton                              Grassley
Gregg                               Nickles
Snowe                               Gramm
Abraham                             Frist
Smith                               Grams
Lautenberg                          Hollings
Conrad                              Feingold
Sarbanes
Boxer
Murray
Wyden
Johnson
Durbin

    (24) Lautenberg Sense of the Senate that the Food and Drug 
Administration is fully funded and has full authority to 
regulate tobacco (nicotine) as a drug.
    Amendment defeated by:
        YEA: 9                        NAY: 13
Lautenberg                          Domenici
Conrad                              Grassley
Sarbanes                            Nickles
Boxer                               Gramm
Murray                              Bond
Wyden                               Gorton
Feingold                            Gregg
Johnson                             Snowe
Durbin                              Abraham
                                    Frist
                                    Grams
                                    Smith
                                    Hollings

    (25) Lautenberg substitute amendment offering a Democratic 
alternative budget.
    Amendment defeated by:
        YEA: 8                        NAY: 14
Lautenberg                          Domenici
Conrad                              Grassley
Sarbanes                            Nickles
Boxer                               Gramm
Murray                              Bond
Wyden                               Gorton
Johnson                             Gregg
Durbin                              Snowe
                                    Abraham
                                    Frist
                                    Grams
                                    Smith
                                    Hollings
                                    Feingold

    (26) Final Passage
    Measure adopted by:
        YEA: 12                       NAY: 10
Domenici                            Lautenberg
Grassley                            Hollings
Nickles                             Conrad
Gramm                               Sarbanes
Bond                                Boxer
Gorton                              Murray
Gregg                               Wyden
Snowe                               Feingold
Abraham                             Johnson
Frist                               Durbin
Grams
Smith

Amendments offered and withdrawn

    (1) Johnson amendment to create a reserve fund for Indian 
School Construction.

    (2) Wyden amendment regarding Defense inflation.

                  VIII. Additional and Minority Views

                              ----------                              


                  ADDITIONAL VIEWS OF SENATOR ABRAHAM

    Mr. Chairman, now that the Senate Budget Committee has 
reported out a resolution for 1999 that complies with last 
year's budget agreement while providing additional funding for 
health research, child care, and the nation's highways, there 
are several votes that I wanted to discuss further.
    The first of these relates to the potential tobacco 
settlement. As a member of the Commerce Committee, I have not 
pre-judged the specific shape of any agreement. Indeed, if any 
agreement is to be adopted, it will take members working on a 
bipartisan basis to sort out a passable consensus bill--a bill 
flexible enough to move it through the legislative process. 
Hence, while it is legitimate for the budget resolution to 
identify what will happen to any federal receipts realized in a 
comprehensive agreement, neither the budget resolution nor any 
other non germane legislation should seek to lock in the 
specific components of a comprehensive settlement package prior 
to its consideration by the Commerce Committee.
    That said, I would note there are many by-products--as 
opposed to specific components--of the proposed settlement 
which I favor, such as increases in medical research through 
the Institutes of Health and anti-smoking campaigns directed at 
teenagers, which were explicitly provided for in the budget 
resolution adopted by the Committee. These by-products will be 
funded under our budget regardless of whether a comprehensive 
tobacco bill is enacted.
    Other by-products of the tobacco settlement were not 
provided in the resolution. One, such example, is an increase 
in the cost of smoking, which I believe is an important part of 
the plan to reduce teen smoking and demand. Clearly, this type 
of by-product, unlike increased medical research, is not a 
matter which can be substantively addressed in a budget 
resolution. Accordingly, the Budget Committee passed the 
Lautenberg Amendment. Although only a Sense of the Senate 
Amendment, it represents, to me, an expression of support for 
the concept of making the cost of smoking more expensive. The 
Amendment did not in any way specify a means of increasing 
smoking's costs and my vote in its favor neither represents 
support for a specific approach nor a final number regarding 
such an increase. It only reflects support for the 
aforementioned point that as a by-product of any comprehensive 
tobacco settlement we must reduce demand and that increasing 
the cost of smoking must be part of the solution. Thus, I 
reserve the right to be flexible regarding the means of 
affecting these objectives and the nature of the legislation 
within which it is carried out.
    On the other hand, I remain firmly committed to seeing that 
all federal receipts from tobacco legislation are invested in 
Medicare. During the markup, the statement was made that the 
tobacco agreement was a ``windfall'' to be spent, and numerous 
amendments were offered to take these potential receipts away 
from Medicare and spend them instead on new entitlement 
programs--including new payments to tobacco farmers. These 
alternatives are simply unacceptable.
    As was made perfectly clear during debate, no program--
federal or state--has been more harmed by smoking-related 
illnesses than Medicare. The National Center on Addiction and 
Substance Abuse reports that over 80 percent of Medicare 
substance abuse costs are smoking related. Fully 14 percent of 
Medicare spending in 1995--$25 billion--was for tobacco-related 
illnesses. Even if Congress chooses to devote all future 
federal cigarette receipts toward Medicare, this budget would 
cover less than half the smoking-related costs to the trust 
fund over the next ten years.
    Furthermore, attempts to divert tobacco receipts away from 
Medicare endanger the health of millions of seniors. The 
Congressional Budget Office says the Medicare trust fund will 
be exhausted and the program insolvent beginning in 2010. 
Reserving cigarette receipts exclusively for Medicare could 
extend the Trust Fund's solvency for perhaps five additional 
years, whereas proposals to divert cigarette receipts for other 
spending would necessarily shorten the life of Medicare, 
depriving millions of seniors of needed health benefits.
    Mr. Chairman, the other amendment I wanted to discuss was 
the Grams amendment to divide any future surpluses evenly 
between tax cuts and debt reduction. I applaud Senator Grams 
for offering this amendment, and I share his commitment to 
reducing the record tax burden currently shouldered by American 
families. I could not support his amendment, however, because I 
believe it would preclude Congress from using future surpluses 
to enact much needed reforms to Social Security and the tax 
code.
    As a member of a leadership task force looking into Social 
Security reform, I do not believe we should preclude Congress 
from reviewing all options, including reducing the Social 
Security wage tax or creating some new form of retirement 
accounts, such as the recently announced Moynihan plan. In my 
mind, investing the surplus to reduce the massive unfunded 
liabilities of the Social Security system should be a higher 
priority than prematurely repaying the federal debt--much of 
which is owed to foreign investors. I believe pursuing these 
options would have violated the Grams amendment, and so I voted 
against it.

                                                   Spencer Abraham.

                 ADDITIONAL VIEWS OF SENATOR LAUTENBERG

    Earlier this year, President Clinton proposed an ambitious, 
but strictly disciplined, agenda to prepare America for the 
21st Century. While insisting on adherence to last year's 
balanced budget agreement, the President called for a major 
commitment to education and child care, an expansion of 
Medicare, and comprehensive tobacco legislation to reduce teen 
smoking.
    This budget resolution largely abandons that agenda.
    First, if adopted, the resolution could be the death knell 
for comprehensive tobacco legislation. Every major piece of 
tobacco legislation now under consideration calls for using 
tobacco revenue to fight teen smoking. Yet this resolution 
essentially would prohibit the Senate from considering any of 
these bills.
    Under the resolution, it would be out of order to consider 
legislation that uses tobacco revenue to discourage tobacco use 
among the young. Similarly, it would be out of order to 
consider a bill that applies tobacco revenue for medical 
research, smoking cessation programs, or assistance to tobacco 
farmers. Overcoming this procedural obstacle would require a 
supermajority vote, which is unlikely given the controversial 
nature of tobacco legislation.
    The majority argues that tobacco revenues should be 
allocated exclusively to adjusting the balance of the Medicare 
Trust Fund. However, the resolution does not allow funds to be 
used for health care services. Nor does it allow these funds to 
be used for the central goal of tobacco legislation: saving 
lives by preventing people from starting to smoke in the first 
place.
    The resolution assumes that the Appropriations Committee 
will find $125 million for anti-youth smoking and cessation 
programs next year. However, no new money is provided for this 
purpose, so the funding will depend on cuts in other 
appropriated programs. More importantly, the $125 million goal 
is grossly insufficient. To provide some perspective, the 
tobacco industry's original proposed settlement included more 
than $2 billion annually for these programs.
    Every year, tobacco-related illness kills more than 400,000 
Americans. This means that in one year, more Americans die from 
tobacco than all the U.S. soldiers who died in combat in every 
war in the 20th Century--combined.
    Congress needs to respond to this problem. The longer we 
delay, the more people who eventually will be killed by 
tobacco. Unfortunately, this resolution would put a major 
roadblock in our way.
    The resolution also would undermine hope for enacting the 
President's child care proposal. Ordinary families are 
struggling to afford quality care for their children, 
especially those with modest incomes, many of whom have pulled 
themselves up by their bootstraps and moved off of the welfare 
rolls. The President says that we should help them. This 
resolution says ``no.''
    The resolution does claim that funding for child care will 
be available from appropriated accounts. But with the overall 
discretionary caps so tight, that is far from assured. In any 
case, the possibility of discretionary spending falls short of 
the Administration's proposal to make a binding, long-term 
commitment to deal with child care needs.
    The resolution also rejects the President's proposal to 
reduce class sizes for young children. This is another serious 
deficiency. Smaller classes can make a real difference for 
children. Yet the Republican proposal drops the President's 
proposal altogether.
    Similarly, the resolution rejects the President's proposal 
to expand Medicare for individuals aged 55 to 65. This will 
leave many older Americans without health care coverage, and 
with no realistic opportunity to afford private insurance.
    Finally, the resolution includes a provision calling for 
scrapping the entire tax code without a replacement. Many have 
dismissed this as a less-than-serious political gimmick. But 
the risks it poses to our economy are quite serious. It could 
create tremendous uncertainty in the business community, 
undermine the value of homes, and substantially harm our 
economy.
    There is at least one aspect of the budget resolution that 
does deserve praise. The resolution does not violate President 
Clinton's call for Congress to save all surpluses until we 
restore Social Security to long-term fiscal health. Chairman 
Domenici is respecting this principle, and he deserves real 
credit for that.
    Still, on balance, this resolution is flawed in fundamental 
ways. It creates a serious roadblock for tobacco legislation. 
It would kill the President's proposals on child care, 
education and health care. And its call for scrapping the tax 
code could create serious risks for our economy.
    We can do better. And as the resolution moves to the floor, 
I look forward to working with colleagues on both sides of the 
aisle to make needed improvements.

                                               Frank R. Lautenberg.

                   MINORITY VIEWS OF SENATOR HOLLINGS

    The big battle in this year's budget debate is how to spend 
the budget surplus. A fever has swept through the nation's 
capitol. Just this week there appeared in the Washington Post, 
an article by Clay Chandler and John M. Berry, ``What to Do 
With a Budget Surplus?'' The President's budget claims a 
surplus exists and Congress has held hearings to examine the 
question, ``After balance, what next?'' House Speaker Newt 
Gingrich has promised Americans a ``generation of surpluses.'' 
Only in Washington can one borrow money to claim a budget 
surplus.
    Ask any South Carolinian what constitutes a balanced budget 
and he or she will tell you very simply, ``it is to spend no 
more than you take in.'' According to this definition, the way 
in which all families must keep their budgets, the President's 
budget is not balanced. In FY99, the year in which President 
Clinton claims there will be a $9.5 billion surplus, when you 
turn to the President's budget on page 367, his own document 
shows a deficit of $194.5 billion. CBO estimates that the 
President's budget will have a deficit of $189.1 billion in 
FY99. In fact according to CBO, this government will add more 
than $900 billion over the next five years to the deficit. This 
is a far cry from surplus. Yet Congress still continues to 
chase the fool's gold of the surplus.
    In 1993, we held a serious debate in Congress on how to 
reduce the deficit. The Republicans marched daily to the floor 
proclaiming that the Democratic plan would explode the deficit 
and surely trigger a recession. They gleefully boasted that if 
our plan worked they would switch parties. One Republican 
senator said that he'd forfeit his home if the deficit declined 
at all under this plan. Another of my colleagues, predicting 
calamity under this plan, said we'd be hunted down like dogs in 
the streets for voting for the bill. Yet the Democratic budget 
plan passed, with out a Republican vote. As Paul Harvey would 
say, ``now you know the rest of the story.''
    The deficit as a percent of GDP is at a twenty-five year 
low. If the economy continues to grow through the remainder of 
the year, this will be the longest peace-time economic 
expansion in the history of our nation. But we must not rest on 
our laurels. Our ship is not yet righted: the government 
continues to spend too much and borrow to cover the deficit. 
It's time to finish the job and staunch the flow of red ink in 
which the budget is drowning.
    Those who jump with joy over surpluses include in their 
calculations the Social Security reserves. This violates 
section 13.301 of the 1990 Budget Act. Congress must face up to 
our government's debts without masking their size by using 
Social Security and other trust funds. That is why I offered an 
amendment expressing the Sense of the Senate that ``Congress 
and the President should continue to rid our country of debt 
and work to balance the budget without counting Social Security 
trust fund surpluses, and to reform the Social Security system, 
to ensure that it is financially sound over the long term and 
will be available for all future generations.'' My amendment 
passed overwhelmingly by voice vote but the Chairman's mark and 
the Democratic alternative continue to emphasize a ``budget 
surplus.''
    Under both plans the debt will continue to grow. Instead of 
staying the course the debate has strayed to how to spend the 
tobacco settlement. The Republicans advocate tax cuts and 
efforts to save Medicare. Ironically, just three years ago, 
they would have destroyed Medicare. Unfortunately, not only did 
the Budget Chairman's mark ignore the tobacco farmers, it used 
veterans' benefits as an offset to pay for the highway bill. 
And finally, if the Republican proposal to eradicate the IRS 
Tax Code becomes law, then forget staying the course of fiscal 
responsibility, you are looking at economic chaos.
    The Democratic alternative benefits children and education, 
priorities which I have fought for and continue to fight for. 
But the question, ``can we afford $122 billion in new 
spending?'', is one that I wished the Democratic plan would 
have taken into account.
    My preference is to stay the course. The economy is at an 
all-time high and what we need to do is substantially take this 
year's budget for next year. Every Mayor, every Governor that 
couldn't print dollars has done this over the years with 
success. Necessarily, we must take care of the growth demands 
of entitlements like Social Security, Medicare, Medicaid and 
veterans benefits but all we need is a freeze of discretionary 
spending. I put this up last year with little support and of 
course none on the committee this year. Since 1993, the real 
deficit has declined each year for five years from $403.6 
billion to $152.8 billion. Now, under both Republican and 
Democratic plans, we change directions and start increasing the 
deficit by more than $30 billion.

                                                    Fritz Hollings.

                    MINORITY VIEWS OF SENATOR CONRAD

    I opposed the Republican budget resolution for FY 99 
because it contains two glaring flaws. First, it endangers 
enactment of comprehensive tobacco legislation this year. And 
second, it targets agricultural programs for unfair and 
disproportionate cuts.

                    endangering tobacco legislation

    Without a doubt, the Republican budget resolution will make 
it more difficult to enact comprehensive tobacco legislation 
designed to protect children from smoking and improve the 
public health.
    The Republican budget resolution contains a tobacco reserve 
fund that dedicates the federal share of receipts from any 
tobacco legislation to Medicare. I will be the first to say 
that Medicare is an important program that needs to be 
preserved and protected. Some share of tobacco money should be 
dedicated to Medicare. But some share of the receipts must also 
be dedicated to achieving the central goal of tobacco 
legislation--keeping children from becoming addicted to 
nicotine and improving the public health.
    I think it's important to note why we need a reserve fund 
in the budget in the first place. It is so Congress can take up 
significant legislation that affects spending and revenues 
later in the year that is not contemplated in the budget 
resolution. In order to leave our options open, in order to 
move the tobacco process forward, we need a reserve fund that 
will accommodate tobacco legislation.
    During debate in Committee, Chairman Domenici stated that 
he didn't know whose tobacco bill to accommodate. The real 
problem is the tobacco reserve fund in the Chairman's mark does 
not accommodate any of the tobacco bills introduced in Congress 
this year.
    This appears to be a back-door attempt to block tobacco 
legislation by making tobacco bills out of order should they 
come to the floor. We should not be using budgetary maneuvers 
like this to tilt the legislative playing field in favor of the 
tobacco companies and make it harder to protect the public 
health.
    The fact is that until we know what tobacco legislation is 
going to look like, we should not use the budget to try to 
limit the scope of the legislation.
    I and many of my colleagues believe it is appropriate to 
use revenues from comprehensive tobacco legislation to fund 
tobacco control programs--like cessation, prevention and 
counter-advertising; to support health research that can help 
us find a cure for tobacco-related diseases; to fund children's 
health care; to start paying down the national debt--part of 
which is attributable to tobacco-related Federal expenditures; 
and to provide transition assistance to farmers.
    But the Chairman's reserve fund will create supermajority 
points of order against tobacco bills that don't match its 
parameters. And what are those parameters? All Federal money 
must go to Medicare. No resources for teen smoking prevention. 
No resources for cessation programs. No resources for 
children's health care. No resources for tobacco farmers. And 
no resources for health research.
    A properly crafted reserve fund included in this resolution 
would not create supermajority vote hurdles on the floor when 
we consider tobacco legislation. A properly crafted reserve 
fund would pave the way for consideration of a tobacco bill 
later this year, not throw up roadblocks in its path. We should 
have fixed the tobacco reserve fund in the Budget Committee. I 
regret that the resolution that passed did not.

                       unfair cuts in agriculture

    The Republican budget resolution also makes devastating 
cuts to agriculture programs. Up to $2.3 billion is taken from 
critically important agricultural areas including agricultural 
research, crop insurance, overseas agricultural product 
marketing and other agricultural accounts.
    It is disturbing that the Chairman's budget resolution 
would rob agricultural producers of a funding source that the 
full Senate unanimously agreed last fall should fund important 
agricultural research programs. The ``Agricultural Research, 
Education and Extension Act of 1997,'' the 1996 Farm Bill's 
research title, takes an important step toward keeping American 
farmers on the cutting edge of agricultural technology. This 
research helps farmers improve yields, fight crop diseases and 
pests, improve crop quality and identify crop genes important 
to making leaps and bounds in new crop varieties. Quite simply, 
this research helps American farmers remain competitive for 
world commodities markets.
    The agricultural research bill established an important new 
source of funding for competitive grants through the Initiative 
for Future Agriculture and Food Systems. This initiative 
focused on critical emerging needs in areas of future food 
production, environmental protection, farm income and the 
development of new nonfood, non-feed uses for American crops. 
Additionally, a portion of the funding was dedicated to 
correcting a technical error in the rural development grants 
program, the Fund for Rural America, authorizing language that 
prohibited the fund from operating in 1998.
    On October 29, 1997, the full U.S. Senate agreed 
unanimously--including every member of the Budget Committee--
that this money should be spent on ag research programs. As the 
Budget Committee considered the FY 99 resolution, the research 
conference was ongoing between the House and Senate.
    But the 1999 budget resolution may now ``reserve'' the 
funding that was used in the ag research bill for use as an 
offset for other, unrelated legislation. This policy is simply 
wrong, and a highly disturbing intrusion on the jurisdiction of 
the Senate Committee on Agriculture.
    The agricultural economy of North Dakota and surrounding 
regions is facing a crisis rivaled only by the severe credit 
crunch of the 1980's. Farm income is down due to a series of 
natural extremes such as drought, flood, hail, wind, and crop 
disease, whose negative effects are exacerbated by continually 
low market prices. The Federal Reserve's Ninth District fourth 
quarter survey indicates a generally strong agricultural 
economy, but one that has serve weaknesses in certain 
geographic areas. A strong agricultural research effort is key 
to recovery in these areas, especially the search for a cure to 
the horribly devastating crop disease fusarium head blight, 
more commonly known as wheat and barley scab, which caused a 
$1.1 billion loss to North Dakota's economy in 1997 alone and 
more than $3 billion since 1993.
    According to North Dakota State University, the average 
farmer lost about $23,000 last year. Wheat producers, according 
to the same study, lost between $26 and $40 per acre. The total 
value of crops, a figure that accounts for both yield and 
price, shows steep declines for North Dakota's staple crops. 
The total value of the spring wheat crop, for example, is down 
41 percent. Barley is also down 41 percent. Durum wheat is down 
21 percent. Potatoes are down 16 percent, corn for grain down 
13 percent. Oats are down 24 percent and dry edible beans are 
down 19 percent. Overall, the value of North Dakota's crops 
decreased by $742 million, 22 percent, from last year.
    A recent report showed that 500 North Dakota farmers have 
decided that 1997 was their last year as a farmer. And we lost 
2,000 mid-sized farms but saw gains in very small and very 
large farms, which is itself an indication that things are 
troubled. Farmers have either come to rely on off-farm income 
and in turn, reduced their farm to a small, perhaps hobby-type 
operation, or they've been forced to become mega-farms and hope 
that a larger operation will afford them greater return.
    On bank credit conditions, the Fed's survey indicated that 
available funds are about 15 percent below normal--in fact some 
bankers reported that they've turned away farm borrowers due to 
a lack of available funds--and that of total loan repayments, 
about 24 percent are below normal.
    We are facing a significant decline in the conditions of 
our agricultural economy and it is in the nation's interest to 
see that we recover. It was William Jennings Bryan who said, 
``Burn down your cities and leave our farms, and your cities 
will spring up again as if by magic, but destroy our farms and 
the grass will grow in the streets of every city in the 
country.''
    Cutting $2.3 billion from agriculture programs is a 
wrongheaded approach and it stresses once again that the 
majority looks to agriculture not on behalf of the farmers and 
ranchers, but rather as an area to cut in the name of their own 
agenda.

                     maintaining fiscal discipline

    Despite the flaws in the Republican budget resolution, the 
debate over the FY 99 budget is truly historic. The Budget 
Committee debated two alternative budget resolutions, both of 
which were balanced on a unified basis for the first time in 30 
years.
    I ran for the Senate twelve years ago because I felt 
strongly that our nation was on the wrong track with regard to 
its fiscal policy. I feared that unless we got back on track, 
the economic security of our nation and the standard of living 
of future generations would be compromised. We have come a long 
way towards putting our nation's fiscal house in order.
    In 1993, President Clinton put forward an economic plan 
designed to begin the job of getting our deficit under control. 
A Democratic Congress passed that historic deficit reduction 
plan. I supported that package. And five years later, in 1998, 
the Congressional Budget Office is projecting a balanced 
unified federal budget.
    Not only did the 1993 deficit reduction plan succeed in 
reducing the deficit, it allowed the Federal Reserve to pursue 
an accommodative monetary policy. Fiscal restraint and monetary 
policy have created a virtuous cycle in the US economy, as we 
enter the seventh year of the current economic recovery. 
Business investment has boomed. Real GDP growth in 1997 was 
3.8%, the strongest in a decade. Unemployment is at a 24-year 
low, and inflation is crawling at the slowest pace in 30 years.
    With all this good news, one might think there is little 
left to do with regard to maintaining fiscal discipline and 
setting budget priorities. But in fact, now more than ever, it 
is important to build upon the foundation of fiscal discipline 
that has been painstakingly built over the last five years, by 
Democrats and Republicans alike.
    Congress has a unique opportunity this year. If we stay the 
course, we can continue moving towards truly balancing our 
budget--without counting Social Security trust fund surpluses. 
This policy would allow us to begin reducing our nation's $5.5 
trillion national debt, as we debate the policy choices that 
will be necessary to preserve and protect Social Security for 
future generations.
    Even within a framework of fiscal discipline, it is 
important for Congress to provide targeted investments that 
will fuel future economic growth. Over the past few weeks, 
Congress has not hesitated to take action to improve one aspect 
of our nation's infrastructure--transportation. Those 
investments are important.
    We also need to make sure we are adequately investing in 
our nation's defense. Today, as a result of the ongoing stand-
off with Iraq, we have the largest military deployment in the 
Gulf in seven years. We also have a large ongoing commitment in 
Bosnia. To make ends meet in lieu of a supplemental, our armed 
forces have been forced to absorb the multi-billion dollar cost 
of these operations.
    The Congressional Budget Office has indicated that the 
President's defense request is over the caps agreed to in last 
year's bipartisan budget deal. I am committed to working in a 
bipartisan manner to resolve this problem in a way that 
provides the funding our armed forces require, without 
violating last year's bipartisan budget agreement.

                                                       Kent Conrad.

                    MINORITY VIEWS OF SENATOR MURRAY

    This budget document, while claiming to preserve Medicare 
will do little to address the long term financial problems 
facing this important program. It also represents an ironic 
shift in priorities for the Republicans who supported the 
Resolution. It was only three years ago that their Budget 
Resolution for FY96 assumed a cut of almost $262 billion, over 
five years, in Medicare spending in order to pay for a tax cut 
for the most affluent.
    Medicare is a supplemental insurance program that was 
designed to defray the costs of expensive health care treatment 
for senior citizens and the disabled. It was not created as a 
traditional insurance plan, but rather an income security, 
social insurance plan. Over time it has become much more. But, 
it still fails to address the real health care problems of 
Medicare.
    The Medicare program does not focus on prevention. Only 
through an increased emphasis on prevention benefits can the 
long term financial solvency of Medicare be truly addressed. We 
spend billions of dollars treating the effects of osteoporosis, 
yet it was not until this year that Medicare would cover bone 
mass measurement screening. It was less then ten years ago that 
Medicare first started covering, in part, the cost of a 
mammogram. Yet the cost of treating breast cancer was covered.
    If the Majority is truly concerned about saving and 
preserving Medicare, I believe it must use it's new ``piggy 
bank'' from a tobacco settlement to provide greater prevention 
benefits to Medicare beneficiaries. Simply providing 
reimbursement for prescription drugs would significantly 
improve the health of many senior citizens and result in a 
savings for Medicare. Too many beneficiaries cannot afford to 
pay for prescription drugs which results in a condition far 
worse then original diagnosed.
    Medicare's problems cannot be solved with money alone. 
Recent reports from the Inspector General at HHS clearly 
illustrate the need for real reforms. Most beneficiaries that I 
hear from confirm this. I think that it is misleading and 
insincere to call this a Medicare Preservation Budget. If I 
really believed this I would have been one of its strongest 
supporters.
    This is an effort to deny key investments in education and 
early childhood development. It is interesting to note the 
relationship between a strong and sound economy and an 
elimination of the unified budget deficit. It is no surprise 
that a strong economy has improved the fiscal picture for the 
Federal Government. Yet, despite the urgent need to invest in 
our children and our economic future, the Republican Budget 
Resolution proposes only to spend, not invest.
    The Majority opposed efforts to invest in education and 
early childhood development by claiming that these initiatives 
would only redirect tobacco revenues from Medicare and would 
create big new entitlement. What they failed to point out is 
the reserve fund created for additional tax breaks costing more 
than the $30 billion already included in the Resolution. I have 
seen few tax breaks or loopholes closed in my tenure on the 
Budget Committee. I can think of no greater entitlement than a 
politically motivated tax break that takes on a life of it's 
own.
    This budget also falls short on education. The majority has 
ignored, and in fact opposed, a major opportunity to strengthen 
public education in America.
    The majority's only major investments in education, in IDEA 
and Title VI, come at the expense of other critical educational 
services for students. Last year, when we began to hear talk of 
block grants, it was explicitly stated by the majority that 
block grant proposals would not assume cuts to education. 
Although the Chairman's Mark includes $1 billion a year to 
cover expansion for IDEA and Title VI, it assumes savings 
through consolidation and other cuts.
    The Chairman's Mark only increases funding by $600 million, 
resulting in a $400 million cut to current education outlays 
under Function 500. So, the public's view that a block grant 
equals a cut is confirmed, and students again suffer when the 
majority in Washington, D.C. puts a lower priority on education 
than it does on playing politics with our schools.
    It is one thing to increase IDEA funding, because for too 
long, the Congress has ignored its obligation--to pay forty 
percent of the cost of educating disabled students, an 
obligation it made with the passage of IDEA in 1975. I support 
significant increases for IDEA and I here openly criticize 
President Clinton for not including IDEA increase in his budget 
request. But to increase IDEA by $500 million while blocking 
and cutting $400 million in other education services pits every 
disabled child against his or her peers--it is a mean-spirited 
move that ignores the priority American families put on school 
funding.
    My amendment to create a reserve fund in this budget for 
class size reduction failed on party lines. So, as it stands, 
there is no room in the budget to consider class size reduction 
as an idea for inclusion--even if we could work out a 
bipartisan recommendation. This budget ignores the 
Administration's efforts to fund 100,000 new, well-trained 
teachers for America's schools.
    Every September, across this country, there are two 
questions parents ask their children returning from that first 
day of school: ``who is your teacher?'' and ``how many kids are 
in your class?'' This is because after the family, a teacher is 
frequently the most important adult in the child's day to day 
life. And because in the classroom, when the child's hand goes 
up--the teacher should have time to help.
    Study after study shows there are two primary ways to 
improve the quality of teaching and learning in our schools: 
reduce class size and improve teacher training. This budget 
fails miserably on both counts.
    Function 500 should be increased, to reflect the intent of 
the American public that education should be a top priority 
when it comes to funding. Most Americans are shocked when they 
hear that education receives only 1.7 percent of total federal 
outlays. Most Americans would expect us to fund the President's 
education initiatives and Chairman Domenici's level for IDEA, 
since we can do so by cutting other areas by less than one 
percent. Most Americans would want to know why other critical 
programs were under-funded or not included by either the 
President or Chairman Domenici--including Impact Aid, SSIG, 
Perkins Loans and other critical services.
    A nation's budget reflects its priorities better than any 
other document save its constitution. If education doesn't 
matter to the Budget Committee--no one will think it matters to 
America.
    But education does matter. This budget should reflect an 
accurate picture of what the American people discuss around 
their kitchen tables. It should hold up the legacy of the 
American public school. I am a Democrat. But to a greater 
extent I have always been an advocate for American public 
education. A thousand years from now, the strength of the 
American experiment will be measured by the abilities of the 
students from its public schools.
    This Budget is a failure, not just in fiscal policy, but in 
our commitment to our children and their future. This is not 
about planning or preparing for the future, but rather spending 
for today.

                                                      Patty Murray.

                  ADDITIONAL VIEWS OF SENATOR JOHNSON

    Mr. Chairman. I would like to express my opposition to the 
proposal in the FY 99 Budget Resolution that would offset some 
of the increased outlays resulting from the reauthorization of 
the Intermodal Surface Transportation Efficiency Act (ISTEA) by 
reducing veterans' health care coverage. The resolution 
proposes a reversal in the Department of Veterans' Affairs (VA) 
General Counsel's 1993 decision to extend compensation to 
veterans with smoking-related illness and dependents of 
deceased veterans. Although I believe that increasing highway 
funding is important for South Dakota and the nation, I do not 
agree that we should deny veterans' compensation that they are 
so entitled. Many South Dakota veterans already have filed for 
compensation and the VA has estimated that veterans will file 
1.1 million claims over the next ten years with a potential 
cost of tens of billions of dollars.
    I have met with several representatives of South Dakota's 
veterans' organizations who have been extremely critical of 
this proposal, and I agree with them that we owe this 
compensation to our veterans who were encouraged and condoned 
by the military and Congress to use tobacco products during 
their military commitment. During Senate consideration of the 
FY 99 Budget Resolution, I believe we need to find alternative 
means to pay for the additional ISTEA funding without forcing 
veterans to ``ante up'' any of their crucial health benefits. 
Whether this means providing the VA revenue from a tobacco 
settlement or reducing proposed tax cuts as outlined in the FY 
99 Budget Resolution, I remain vigilant in providing adequate 
funding for the VA, and I will continue to live up to my 
obligation to South Dakota's veterans and ensure that they are 
treated with the respect and honor that they so richly deserve.

                                                       Tim Johnson.

                                
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