Budget Issues: Compliance Report Required by the Budget Enforcement Act
of 1990 (Letter Report, 02/16/96, GAO/AIMD-96-41).
As required by the Budget Enforcement Act of 1990, this compliance
report covers budget sequestration reports issued by the Office of
Management and Budget (OMB) and the Congressional Budget Office (CBO).
In GAO's opinion, the OMB and CBO reports substantially complied with
the act. GAO does raise some implementation issues that are not, in
GAO's judgment, compliance issues. They relate to (1) a change in OMB's
methodology for calculating inflation for discretionary spending limits,
(2) OMB's reestimate of enacted emergency legislation, and (3)
differences in OMB and CBO spending estimates of appropriation acts and
direct spending legislation.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-96-41
TITLE: Budget Issues: Compliance Report Required by the Budget
Enforcement Act of 1990
DATE: 02/16/96
SUBJECT: Reporting requirements
Budget deficit
Spending legislation
Budget authority
Budget outlays
Supplemental appropriations
Inflation
Deficit reduction
Future budget projections
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Cover
================================================================ COVER
Report to the President and the Congress
February 1996
BUDGET ISSUES - COMPLIANCE REPORT
REQUIRED BY THE BUDGET ENFORCEMENT
ACT OF 1990
GAO/AIMD-96-41
Budget Enforcement Act Compliance
(935171)
Abbreviations
=============================================================== ABBREV
BEA - Budget Enforcement Act of 1990, as amended
CBO - Congressional Budget Office
DOD - Department of Defense
DOT - Department of Transportation
FEMA - Federal Emergency Management Agency
FHWA - Federal Highway Administration
FTA - Federal Transit Administration
FAA - Federal Aviation Administration
OBRA 90 - Omnibus Budget Reconciliation Act of 1990
OBRA 93 - Omnibus Budget Reconciliation Act of 1993
OMB - Office of Management and Budget
PAYGO - pay-as-you-go
VCRTF - Violent Crime Reduction Trust Fund
Letter
=============================================================== LETTER
B-265898
February 16, 1996
The President
The President of the Senate
The Speaker of the House of Representatives
As required by the Budget Enforcement Act of 1990,\1 which amended
the Balanced Budget and Emergency Deficit Control Act of 1985, we
hereby submit our compliance report covering reports issued by the
Office of Management and Budget (OMB) and the Congressional Budget
Office (CBO) during the session of the Congress ending January 3,
1996. We are required to issue this compliance report 45 days after
the end of a session of the Congress.
To determine compliance with the Budget Enforcement Act, we reviewed
OMB and CBO reports issued under the act to determine if they
reflected all of the act's requirements. We interviewed OMB and CBO
officials to obtain explanations for differences between reports.
Background information on the various reports required by the act and
details concerning our objectives, scope, and methodology are in
appendix I.
In our opinion, the OMB and CBO reports substantially complied with
the act. We discuss in appendix II some implementation issues which
are not, in our judgement, compliance issues. They are related to
(1) a change in OMB's methodology for calculating inflation for
discretionary spending limits, (2) OMB's reestimate of enacted
emergency legislation, and (3) differences in OMB and CBO spending
estimates of appropriation acts and direct spending legislation.
Appendix III lists regular appropriations, supplemental
appropriations, and continuing resolutions enacted, to date, in the
104th Congress.
We provided a draft of this report to OMB and CBO officials for their
review. They agreed with our presentation of their views and the
facts as presented. We incorporated their comments where
appropriate.
We are sending copies of this report to the Director of the Office of
Management and Budget, the Director of the Congressional Budget
Office, and the Members of the Congress. Copies will be made
available to other interested parties on request.
This report was prepared under the direction of Susan J. Irving,
Associate Director, Budget Issues, who may be reached at (202)
512-9142 if you or your staffs have any questions. Major
contributors to this report are listed in appendix IV.
Charles A. Bowsher
Comptroller General
of the United States
--------------------
\1 The Budget Enforcement Act of 1990, as amended by the Omnibus
Budget Reconciliation Act of 1993, is referred to in this report as
BEA.
BACKGROUND AND OBJECTIVES, SCOPE,
AND METHODOLOGY
=========================================================== Appendix I
BACKGROUND
The Budget Enforcement Act (BEA) of 1990 changed the budget process
by establishing three major points of control--dollar limits on
discretionary spending, a pay-as-you-go (PAYGO)\1 requirement for
direct spending\2 and receipts legislation, and adjustable maximum
deficit targets for fiscal years 1991 through 1995. The act requires
OMB and CBO to issue Preview, Update, and Final Sequestration reports
at various times during the year. Each report is to include a
discretionary sequestration report and a PAYGO sequestration report.
Reports in years previous to this were required to specify the amount
of the adjusted maximum deficit for the coming fiscal year. That
requirement is no longer in effect because the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93) extended the discretionary and
PAYGO provisions through fiscal year 1998 but did not extend the
sequestration provision for enforcing the deficit targets beyond
fiscal year 1995.
In their final sequestration reports, both OMB and CBO calculate
whether a sequester is necessary. However, the OMB report is the
sole basis for determining whether any end-of-session sequestration
is required. If OMB determines that a sequester is required, the
President must issue an order implementing it. For fiscal year 1996,
neither CBO's report, issued January 11, 1996, nor OMB's report,
issued January 18, 1996, called for a sequestration.
In addition, as soon as practical after the Congress completes action
on any appropriation involving discretionary spending, CBO is
required to report to OMB the estimated amount of new budget
authority and outlays provided by the legislation. Five days after
an appropriation is enacted, OMB must report its estimates for these
amounts, using the same economic and technical assumptions underlying
the administration's most recent budget submission. It also must
include the CBO estimates and an explanation of any differences
between the two sets of estimates. OMB and CBO have requirements
similar to those described above to report their estimates for any
direct spending or receipts legislation.
Further, for any appropriation enacted after the Congress adjourns to
end a session for that budget year but before July 1 of that fiscal
year, CBO and OMB must issue Within-Session Sequestration Reports 10
and 15 days, respectively, after enactment if that appropriation
causes the spending limits for the year in progress to be exceeded.
On the same day that the OMB report is issued, the President must
issue an order implementing any sequestrations set forth in that OMB
report. This year no Within-Session Sequestration Reports were
required.
The Violent Crime Control and Law Enforcement Act of 1994 (Public Law
103-322) established the Violent Crime Reduction Trust Fund (VCRTF).
The act provided that specified amounts of budget authority be
transferred to the trust fund from the general fund in each fiscal
year from 1995 through 2000. The act further provided that
appropriations from the trust fund not be counted in determining
compliance with the discretionary spending limits of BEA. Thus, the
act established a special category of discretionary spending. Total
discretionary spending limits are now composed of two
categories--general purpose appropriations and the crime trust fund.
The crime trust fund is subject to sequestration if estimated outlays
from the fund exceed annual spending limits specified in the Violent
Crime Control and Law Enforcement Act.
OBJECTIVES, SCOPE, AND METHODOLOGY
The objective of our review was to determine whether the OMB and CBO
reports complied with the requirements of BEA. To accomplish this,
we reviewed the OMB and CBO Preview, Update, and Final Sequestration
reports to determine if they complied with all of the technical
requirements specified in BEA, such as (1) estimates of the
discretionary spending limits, (2) explanations of any adjustments to
the limits, (3) estimates of the amount of net deficit increase or
decrease, and (4) in the event of a sequester, the sequestration
percentages necessary to achieve the required reduction.
We reviewed BEA, its accompanying Joint Statement of Managers, OBRA
90, and OBRA 93. We also reviewed the pertinent appropriations acts
and their related Conference Reports. We examined the OMB and CBO
reports on the 7 regular appropriations bills enacted for fiscal year
1996, the 2 supplemental appropriations acts passed in 1995, the 4
continuing resolutions passed in 1995, and the 20 pay-as-you-go
reports on direct spending and receipts legislation enacted during
the first session of the 104th Congress. We compared each OMB and
CBO report and obtained explanations for differences of $100 million
or more in total bill estimates for the appropriation and PAYGO
reports.
During the course of our work, we interviewed OMB and CBO officials.
Our work was conducted in Washington, D.C., from July 1995 through
January 1996. We provided a draft of this report to OMB and CBO
officials for their review. They agreed with our presentation of
their views and the facts as presented. We incorporated their
comments where appropriate.
--------------------
\1 The Budget Enforcement Act, as amended, requires that any
legislation that increases direct spending or decreases receipts be
deficit neutral (that is, not increase the deficit) in the aggregate
within any fiscal year from fiscal year 1992 through fiscal year
1998.
\2 Direct spending (commonly referred to as mandatory spending) means
entitlement authority, the food stamp program, and any budget
authority provided by law other than in appropriations acts. For
definitions of budget terms see A Glossary of Terms Used in the
Federal Budget Process (GAO/AFMD-2.1.1, January 1993).
IMPLEMENTATION ISSUES
========================================================== Appendix II
We identified several implementation issues in which OMB and CBO
differed in making (1) adjustments to the discretionary spending
limits, or caps, (2) estimates of discretionary appropriations, and
(3) estimates of PAYGO legislation. These are discussed in the
following sections.
DISCRETIONARY SPENDING LIMIT
ADJUSTMENTS
Implementation issues related to differences between OMB and CBO
discretionary spending limit adjustments include (1) the methodology
used to make inflation adjustments, (2) what was included in the
discretionary spending base that was adjusted, and (3) adjustments
related to emergency legislation.
OMB AND CBO DIFFERED IN
ADJUSTING DISCRETIONARY
SPENDING LIMITS FOR
INFLATION
------------------------------------------------------ Appendix II:0.1
In its Preview Sequestration Report, OMB's estimates for the
discretionary spending limits were $4.5 billion higher in budget
authority and $2.7 billion higher in outlays than CBO was for fiscal
year 1996. About $4.4 billion of the $4.5 billion difference in
budget authority estimates was due to differing interpretations of an
amendment to BEA governing how discretionary spending limits should
be adjusted for inflation. About $2.4 billion of the $2.7 billion
difference in outlay estimates was due to the different OMB and CBO
adjustments for inflation.
BEA originally established discretionary spending limits for fiscal
years 1991 through 1995 based on assumed levels of inflation (for
fiscal years 1990 through 1993). If the actual rate of inflation for
those fiscal years differed from the assumed rates, BEA required OMB
to adjust the spending limits to account for the difference.\1
In practice, this involved using the actual inflation rate for the
most recently completed fiscal year, comparing that rate to the
assumed rate in BEA, and making the appropriate adjustment. For
example, when the administration submitted its fiscal year 1995
budget to the Congress in February 1994, the most recently completed
fiscal year was 1993 (which ended September 30, 1993). The
administration then adjusted the discretionary spending limits for
fiscal year 1995 based on the difference between the actual rate of
inflation for fiscal year 1993 and the rate assumed in BEA for fiscal
year 1993.
OBRA 93 extended the discretionary spending limits through fiscal
year 1998. It also amendment BEA to extend the inflation adjustments
to be made to the caps for fiscal years 1996 through 1998. The
amendment states: "For a budget submitted for budget year 1996,
1997, or 1998, the adjustments shall be those necessary to reflect
changes in inflation estimates since those of March 31, 1993, set
forth on page 46 of House Conference Report 103-48."\2
OMB interpreted the OBRA 93 amendment to alter the way it adjusted
the discretionary spending caps for inflation. When OMB submitted
the fiscal year 1996 budget, instead of comparing the actual rate of
inflation for fiscal year 1994 (the most recently completed fiscal
year) with the rate assumed for fiscal year 1994 in House Conference
Report 103-48, OMB compared its current projections of inflation for
1996, 1997, and 1998 with the rates assumed for those years in the
conference report. OMB then adjusted the discretionary spending
limits upward because OMB's assumed inflation rates were higher than
those estimated in the conference report for fiscal years 1996
through 1998.\3
Because the actual rate of inflation for fiscal year 1994 was lower
than the rate assumed for fiscal year 1994 in the conference report
(2.0 percent versus 2.4 percent), CBO adjusted the discretionary
spending limits for fiscal year 1996 downward in its Preview
Sequestration Report. Since CBO lowered the limits and OMB adjusted
them upward, the different inflation adjustments explain most of the
difference between OMB's and CBO's estimates of the discretionary
spending limits. As shown in table II.1, because of the different
inflation adjustments, OMB's estimates for the spending caps were
$4.4 billion higher in budget authority and $2.4 billion higher in
outlays than CBO's estimates for fiscal year 1996.
Table II.1
OMB and CBO Adjustments to the
Discretionary Spending Limits Due to
Different Inflation Assumptions
(Dollars in billions)
Budget Budget Budget Budget
Fiscal authorit Outlay authorit Outlay authorit Outlay authorit Outlay
year y s y s y s y s
-------- -------- ------ -------- ------ -------- ------ -------- ------
OMB $3.0 $1.8 $7.2 $5.1 $11.5 $8.9 $21.7 $15.8
adjustm
ent
CBO -1.4 -.6 -1.4 -1.0 -1.5 -1.3 -4.3 -2.9
adjustm
ent
Differen $4.4 $2.4 $8.6 $6.1 $13.0 $10.2 $26.0 $18.7
ce
--------------------------------------------------------------------------------
As shown in table II.1, in fiscal year 1997, the difference in how
the caps were adjusted for inflation meant that OMB's estimates for
the spending caps were $8.6 billion higher in budget authority and
$6.1 billion higher in outlays than CBO's. In fiscal year 1998, the
inflation adjustment difference made OMB's estimates for the spending
caps $13.0 billion higher in budget authority and $10.2 billion
higher in outlays than CBO's estimate. The total effect of the
opposite inflation adjustments on the spending limits for fiscal
years 1996 through 1998 was approximately $26 billion in budget
authority and $18.7 billion in outlays.
According to OMB, the language in OBRA 93 concerning the inflation
adjustments for the 1996 through 1998 budgets contains no specific
guidance on how these adjustments should be made other than that they
should adjust for changes in estimates and that the adjustment should
be made from the inflation estimates contained in the House
Conference Report on the 1994 Budget Resolution. CBO, however,
believed that the OBRA 93 amendment did not change the method
specified in BEA for adjusting the discretionary spending limits for
changes in inflation, but merely specified the assumed inflation
rates for additional years. CBO believed that the approach used to
adjust the caps for inflation for fiscal years 1992 through 1995 was
to be continued for fiscal years 1996 through 1998. A CBO official
told us that CBO relied on language in the statement of managers
accompanying OBRA 93 which stated that the Senate amendment (which
was incorporated in the final legislation) "retains, with minor
technical and conforming changes, the current law's procedures for
periodically adjusting the discretionary spending limits."
When the Congress amended BEA with the OBRA 93 amendments, it did not
simply insert budget years 1996, 1997, or 1998 into the existing
statutory provision governing the adjustment of discretionary
spending to account for changes in inflation. Instead, the Congress
added a separate subsection governing inflation adjustments in budget
years 1996, 1997, and 1998. Thus, at least structurally, the statute
suggests a different treatment for estimates in 1996 through 1998
than in 1992 through 1995. More substantively, however, is that the
provision relating to budget years 1992 through 1995 clearly states
that the inflation adjustment is that of the "level of year-over-year
inflation measured for the fiscal year most recently completed and
(emphasis added) the applicable estimated level" specifically set
forth in 2 U.S.C. 901(b)(1)(B)(ii). The language for years 1996
through 1998 only requires inflation adjustments to reflect changes
"in inflation estimates" (emphasis added) from those estimates found
in House Conference Report 103-48 rather than compared to any actual
inflation measures. Although the statement of managers in OBRA 93
indicates that no change to the procedure for adjusting discretionary
spending limits for inflation was expected, OMB'S inflation
adjustment tracks the literal language of the OBRA 93 amendments.
--------------------
\1 Section 251(b)(1)(B)(ii) of the Balanced Budget and Emergency
Deficit Control Act of 1985, as amended, specifies how discretionary
spending limits were to be adjusted for changes in inflation in the
budgets submitted for fiscal years 1992 through 1995. The
adjustments were to be based on differences between the actual rate
of inflation for the most recently completed fiscal year and the rate
assumed when the discretionary spending limits were established:
actual rate = adjustment rate assumed rate
\2 Section 251(b)(1)(B)(iii) of the Balanced Budget and Emergency
Deficit Control Act of 1985, as amended.
\3 House Conference Report 103-48 had assumed inflation rates of 2.3
percent, 2.2 percent, and 2.2 percent, respectively, for fiscal years
1996, 1997, and 1998. OMB's 1996 budget assumed inflation rates of
2.9 percent, 3.0 percent, and 3.0 percent, respectively, for fiscal
years 1996 through 1998.
OMB AND CBO MADE INFLATION
ADJUSTMENTS TO DIFFERENT
BASES
------------------------------------------------------ Appendix II:0.2
In addition to using different inflation adjustments, OMB and CBO
applied their different inflation adjustments to different bases, or
starting points. OMB applied its inflation adjustment to a larger
discretionary spending limit base than CBO because it included
personnel costs and the Violent Crime Reduction Trust Fund in its
base while CBO did not.
In contrast to previous years, OMB's inflation adjustment for the
fiscal year 1996 discretionary spending limits included personnel
costs. This inclusion, which we have advocated in past compliance
reports,\4 increased the base to which OMB's upward inflation
adjustment was applied, resulting in a higher discretionary spending
limit than if OMB had followed its past practice of excluding
personnel in its base.
In our BEA compliance report for fiscal year 1994, we concluded, and
CBO agreed, that properly adjusted discretionary spending limits
should cover inflation in personnel costs. In previous fiscal years
covered by BEA, OMB did not agree and did not adjust personnel costs
for inflation. In those years, such an adjustment would have lowered
the discretionary spending limits. In estimating the adjustment for
inflation for the fiscal year 1996 budget, CBO used the method OMB
adopted in its 1993 Preview Sequestration Report issued in January
1992. That method entailed adjusting only nonpersonnel costs instead
of adjusting all discretionary spending. CBO did this because
although, as noted earlier, it disagreed with OMB's interpretation of
the inflation adjustment provision in BEA, OMB's cap adjustments are
controlling. Therefore, CBO followed OMB's past methodology in its
1996 Preview Sequestration Report.
OMB's inflation adjustment for the fiscal year 1996 discretionary
spending limits also included the Violent Crime Reduction Trust Fund.
Spending from the VCRTF was excluded from the discretionary spending
limits by the Violent Crime Control and Law Enforcement Act of 1994.
The act provided that specified amounts of budget authority and
outlays be deducted from the discretionary spending limits in each
fiscal year from 1995 through 2000 to create a separate spending
limit for the VCRTF. By establishing this special category of
discretionary spending, the act created two categories of
discretionary spending--general purpose discretionary spending and
VCRTF. In fiscal year 1996, the VCRTF spending limits were set at
$4.3 billion in budget authority and $2.3 billion in outlays, and the
discretionary spending limits were reduced by those amounts. The
VCRTF totals represent less than l percent of the total discretionary
spending limits.\5
When OMB made its inflation adjustments to the fiscal year 1996
discretionary spending limits it included both the general purpose
discretionary spending and VCRTF in its discretionary spending limit
base. However, CBO only included general purpose discretionary
spending in its base. According to a CBO official, CBO believed that
the Violent Crime Reduction and Law Enforcement Act excluded the
VCRTF from BEA rules governing discretionary spending limit
adjustments and so they did not include the crime trust fund in their
discretionary spending limit base. OMB told us that BEA requires
that the inflation adjustment be applied to the entire discretionary
spending limit base, which includes both general purpose
discretionary spending and the VCRTF.
Based on our review of the Violent Crime Control and Law Enforcement
Act and BEA, we believe that OMB's position is better supported by
the crime law than CBO's. In commenting on a draft of this report,
CBO officials disagreed with this conclusion. We do believe that, at
least conceptually, general purpose discretionary spending limits
should not benefit from the inflation increase that results from
inflating a larger base.\6 Because the VCRTF represents such a small
percentage of the total discretionary spending limit base, the
increase in the spending limits for general purpose discretionary
spending is minimal.
--------------------
\4 Budget Issues: Compliance With the Budget Enforcement Act of 1990
(GAO/AFMD-93-38, November 23, 1992) and Budget Issues: Compliance
Report Required by the Budget Enforcement Act of 1990
(GAO/AIMD-94-66, January 10, 1994).
\5 CBO's Preview Sequestration Report for fiscal year 1996 set
discretionary spending limits at $517 billion in budget authority and
$549 billion in outlays. The VCRTF deduction of $4.3 billion in
budget authority and $2.3 billion in outlays from the spending limits
in fiscal year 1996 represented 0.8 percent and 0.4 percent,
respectively, of total discretionary spending limit budget authority
and outlays.
\6 Because specific amounts of budget authority and outlays were set
in the crime law for the VCRTF, adjusting the total discretionary
spending limits has the effect of increasing the amount available for
general purpose discretionary spending.
OMB AND CBO DIFFERED IN
REESTIMATES OF ENACTED
EMERGENCY LEGISLATION
------------------------------------------------------ Appendix II:0.3
OMB and CBO disagreed over whether BEA allows for reestimates of
previously enacted emergency legislation in order to adjust the
discretionary spending limits. OMB's Preview Sequestration Report
discretionary spending limits reflected outlay increases of $171
million in fiscal year 1996, $62 million in 1997, and $259 million in
1998 as a result of reestimates of enacted emergency legislation.
CBO, however, believed that BEA did not allow adjustments for
reestimates of the costs of emergency legislation and did not include
any in its January 1995 Preview Sequestration Report estimate of the
discretionary spending limits. According to an OMB official, OMB
believes it has authority under BEA to reestimate enacted emergency
legislation\7 and has traditionally reestimated enacted emergency
legislation because doing so allows OMB to provide a better estimate
of the true outlay rate of the legislation. While this issue is not
specifically addressed in BEA, we believe that OMB had a reasonable
basis for its adjustments to the spending caps due to emergency
appropriations.
DISCRETIONARY SPENDING ESTIMATES
Implementation issues related to the discretionary spending estimates
of OMB and CBO for fiscal year 1996 appropriations include (1)
different outlay estimates for the seven enacted general purpose
appropriations, (2) different budget authority and outlay estimates
for the two enacted supplemental appropriations, and (3) estimates
for continuing resolutions.
--------------------
\7 Section 251(b)(2)(D) of the Balanced Budget and Emergency Deficit
Control Act of 1985, as amended.
OMB AND CBO HAD SOME
DIFFERENCES IN OUTLAY
ESTIMATES FOR APPROPRIATION
ACTS
------------------------------------------------------ Appendix II:0.4
OMB and CBO estimates of budget authority did not differ
significantly for any enacted regular appropriation. However, as
shown in table II.2, the differences in outlay estimates between OMB
and CBO for the seven enacted appropriations varied somewhat. The
overall net difference--relevant to whether there would be a
difference in conclusions about breaching the spending caps--was only
$87 million.\8 OMB and CBO had differences in outlay estimates
greater than $100 million for three of the seven enacted
appropriations--those funding the Departments of Agriculture,
Defense, and Transportation. While these differences represented a
relatively small percentage of the total bill estimates (1.8 percent,
0.1 percent, and 1.5 percent respectively), we examined the OMB and
CBO reasoning behind the different numbers to ensure that no systemic
tendencies to over- or underestimate outlays were involved.
As of the end of the first session of the 104th Congress, 7 of the 13
regular appropriation bills for fiscal year 1996 were enacted. The
enacted appropriations covered funding for the Departments of
Agriculture, Defense (including military construction),
Transportation, and Treasury; the legislative branch; the Postal
Service; and, energy and water construction. Among the six regular
appropriation bills not enacted, the President vetoed three,
including those funding the Departments of Commerce, Justice, State,
Interior, Veterans Affairs, Housing and Community Development, and
the judiciary. The remaining three appropriation bills--covering the
Departments of Labor, Health and Human Services, and Education;
District of Columbia finances; and foreign operations--did not
receive final congressional action during the first session of the
104th Congress.
Table II.2
Comparison of OMB and CBO Scoring of
General Purpose Appropriations in Fiscal
Year 1996
(Dollars in millions)
Percent
Differen differen
Appropriation act OMB CBO ce\a ce\b
------------------------------ -------- -------- -------- --------
Agriculture $13,827 $13,581 $246 1.78
Commerce bill not enacted
----------------------------------------------------------------------
Defense 242,965\ 242,727 238 0.10
c
District of Columbia bill not enacted
----------------------------------------------------------------------
Energy/Water 19,736 19,712 24 0.12
Foreign Operations bill not enacted
----------------------------------------------------------------------
Interior bill not enacted
----------------------------------------------------------------------
Labor/HHS/Education bill not enacted
----------------------------------------------------------------------
Legislative Branch 2,208 2,180 28 1.27
Military Construction 9,597 9,621 -24 -0.25
Transportation 36,200\c 36,754 -554 -1.53
Treasury/Postal 11,445\c 11,490 -45 -0.39
VA/HUD/Independent bill not enacted Agencies
----------------------------------------------------------------------
======================================================================
Total Enacted $335,978 $336,065 $-87 -0.03
----------------------------------------------------------------------
\a A positive number means that OMB's estimate was higher than CBO's.
\b Percent difference is calculated by dividing the difference by
OMB's estimate of outlays.
\c OMB's scoring included outlays from emergency appropriations for
1996, enacted or released since the February budget.
As shown in table II.2, OMB estimated $246 million more in outlays
for the Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act than CBO. Most of the
difference in the outlay estimates for this appropriation was
attributable to different OMB and CBO methodologies for estimating
outlays resulting from budget authority provided in prior years for
accounts covering the Food and Drug Administration, the Foreign
Agricultural Service, and the Rural Housing and Community Development
Service, among others. Other differences in the outlay estimates
were attributable to OMB and CBO having different estimates of the
impact of freezing the food stamp standard deduction at the fiscal
year 1995 level.
In the Department of Defense (DOD) Appropriations Act, OMB estimated
$238 million more in outlays for fiscal year 1996 than CBO. This
occurred, in part, because OMB included $425 million in its estimate
of DOD's regular appropriation for fiscal year 1996 outlays to
reflect emergency spending contained in Public Law 104-6, the
Emergency Supplemental Appropriations and Rescissions for the
Department of Defense to Preserve and Enhance Military Readiness Act
of 1995, enacted on April 10, 1995. This adjustment was made in
anticipation of a commensurate increase in the discretionary spending
caps to reflect emergency spending. While CBO agrees that this
adjustment was appropriate given OMB's responsibilities under BEA,
CBO did not include this amount in its estimate because it felt it
was appropriate to wait for OMB to formally adjust the caps.
This upward adjustment was partially offset by a $279 million
downward adjustment made by OMB due to its assumption regarding how
quickly DOD would spend the emergency supplemental funds provided in
Public Law 104-6. CBO assumed that since DOD received the money
half-way through fiscal year 1995, it would spend about half the
money by the end of the fiscal year and spend the other half during
fiscal year 1996. However, after OMB discussions with DOD officials,
OMB assumed that DOD would spend more of its regular fiscal year 1995
budget earlier in the fiscal year than it otherwise would have, in
anticipation of the additional funds provided through the
supplemental appropriation. Because of this assumption, OMB then
assumed a more rapid spend out of the supplemental appropriation than
did CBO. The total outlay estimates were the same over the 2-year
period.
In the Department of Transportation and Related Agencies (DOT)
Appropriations Act, OMB estimated $554 million less in outlays for
fiscal year 1996 than CBO. Most of the difference in the outlay
estimates was attributable to different OMB and CBO methodologies for
estimating outlays resulting from budget authority provided in prior
years. Three of OMB's outlay estimates for DOT agencies differed
from CBO by more than $100 million. These included outlay estimates
for the Federal Highway Administration (FHWA), the Federal Transit
Administration (FTA), and the Federal Aviation Administration (FAA).
CBO estimated $198 million, $118 million, and $178 million more,
respectively, in outlays for these agencies than OMB for fiscal year
1996.
An OMB analyst noted that each of these agencies funds large
construction projects spanning several years, and that relatively
small percent differences between OMB and CBO regarding the rate of
expenditures in these accounts can cumulatively result in relatively
large dollar differences. For example, budget authority in the
Federal Highway Aid account, the largest account within FHWA, creates
outlays for the next 9 fiscal years, and small differences in OMB and
CBO spend out rates can result in different estimates of outlays
flowing into subsequent budget years from this account. The analyst
noted that over time, OMB and CBO estimates of outlays will balance
out. However, given different spend out assumptions of multi-year
budget authority, outlay estimates year-to-year will vary.
--------------------
\8 Outlay estimates are based on CBO's scorekeeping reports prepared
after the completion of congressional action and OMB's "5-day"
scorekeeping reports issued after enactment of the appropriation.
OMB AND CBO DIFFERED IN
ESTIMATES OF SUPPLEMENTAL
APPROPRIATIONS
------------------------------------------------------ Appendix II:0.5
Two supplemental appropriations were enacted in the first session of
the 104th Congress. The first supplemental appropriation, Public Law
104-6, was enacted on April 10, 1995. The act rescinded fiscal year
1995 budget authority for several agencies and provided an emergency
supplemental appropriation to replenish DOD and Coast Guard accounts
to cover the costs of contingency operations in the Persian Gulf,
Somalia, Rwanda, Haiti and elsewhere, and to enhance military
readiness. The second supplemental appropriation, the Emergency
Supplemental Appropriations for Additional Disaster Assistance, for
Anti-Terrorism Initiatives, for Assistance in the Recovery from the
Tragedy that Occurred at Oklahoma City, and Rescissions Act, 1995
(Public Law 104-19), was enacted on July 27, 1995. This act
rescinded additional fiscal year 1995 budget authority and provided
emergency spending for disaster relief for the bombing in Oklahoma
City and for other additional disaster assistance.
As shown in table II.3, OMB and CBO had differences in the budget
authority and outlay estimates of discretionary spending rescinded in
the two supplemental appropriations.
Table II.3
Comparison of OMB and CBO Scoring of
General Purpose Discretionary Spending
in Supplemental Appropriations Enacted
in the First Session of the 104th
Congress
(Dollars in millions)
Budget Budget Budget
author Outlay author Outlay author Outlay
Act ity s ity s ity s
---------------------- ------ ------ ------ ------ ------ ------
P.L. 104-6
OMB estimate - -$50 - - $873
CBO estimate $551 $1,585 -100 $712 $601 243
Difference\a -911 -51 50 294 - 630
360 1,636 - 1,011
1,006 410
P.L. 104-19
OMB estimate - - -71 - - -
CBO estimate 14,949 1,112 22 3,456 15,020 4,568
Difference - -593 -93 - - -
15,251 -519 3,133 15,229 3,726
302 -323 209 -842
----------------------------------------------------------------------
\a A positive number means that CBO estimated a larger rescission
amount than OMB.
As shown in table II.3, for fiscal years 1995 and 1996, CBO estimated
$410 million more in rescinded budget authority for Public Law 104-6
than OMB. This difference was attributable to different OMB and CBO
scoring of funds to be received, as a result of Public Law 104-6, as
reimbursements for DOD operations from foreign governments and
foreign entities. Language in the act required that funds received
as reimbursements for DOD operations be deposited in the Treasury
instead of a DOD account. Thus, under the new law, DOD could not
spend the reimbursements. CBO assumed that $360 million would be
received in fiscal year 1995 and $50 million would be received in
fiscal year 1996 for reimbursements and scored those as reductions in
budget authority under Public Law 104-6. OMB did not score this
provision of the act as having budget authority savings because the
administration's budget had assumed no reimbursements would be
received. As discussed earlier, outlay differences between OMB and
CBO for Public Law 104-6 were attributable to different OMB and CBO
assumptions regarding how quickly DOD would spend the supplemental
funds.
As shown in table II.3, for fiscal year 1995, CBO estimated $302
million more in rescinded budget authority than OMB for Public Law
104-19. This difference is largely attributable to a scoring
difference between OMB and CBO regarding rescinded funds for the Job
Opportunities and Basic Skills program of the Department of Health
and Human Services. CBO assumed that the act's language made a
substantive change to this mandatory program and scored the $330
million as savings for BEA purposes. OMB concluded that because,
under current law, the budget authority in this program is decreased
by the amount that is unused, the legislation did not change the
program and thus BEA scoring rules did not allow savings to be
recognized. Based on our review of Public Law 104-19, we concluded
that the rescission only decreased the amount deemed unnecessary to
pay state claims--the amount that would be unused anyway. Since the
claims are already under a legal limitation of available funds, the
substantive ceiling of $1.3 billion in budget authority was
specifically left the same for claims purposes. Therefore, we concur
with OMB's decision not to score the savings for BEA purposes.
Fiscal year 1996 differences in budget authority estimates between
OMB and CBO were attributable to provisions in the act regarding
timber salvage sales. OMB and CBO used different technical
assumptions regarding the price and volume of the salvage timber
sold.
Outlay differences of $842 million between OMB and CBO for Public Law
104-19 are largely attributable to (1) different technical
assumptions regarding across-the-board travel and administrative
reductions, (2) different estimates of timber salvage sales by the
Departments of Agriculture and Interior, (3) different outlay
spend-out rate assumptions regarding reductions in the General
Service Administration's federal building fund, and (4) different
outlay spend-out rate assumptions regarding the Department of Labor's
training and employment services.
In addition, OMB and CBO differed over provisions in Public Law
104-19 that enacted emergency spending. OMB estimated roughly $2.5
billion more in outlays for fiscal year 1996 than did CBO for Public
Law 104-19 for emergency spending. This occurred because OMB used
the historic spendout rate for the Federal Emergency Management
Agency's (FEMA) regular and contingent emergency appropriation, and
estimated that FEMA's outlays would increase $2.5 billion in fiscal
year 1996. According to a CBO official, CBO assumed a slower
spendout rate for these funds because FEMA had large unobligated
balances of budget authority from previous years, and CBO assumed
FEMA would spend this money first, before using the budget authority
from Public Law 104-19. OMB and CBO estimates of budget authority
did not differ for the emergency spending provisions in Public Law
104-19.
UNUSUAL BUDGET YEAR RESULTED
IN OMB AND CBO DIFFERENCES
IN SCORING OF CONTINUING
RESOLUTIONS
------------------------------------------------------ Appendix II:0.6
Four continuing resolutions were enacted during the first session of
the 104th Congress. The first continuing resolution (Public Law
104-31) was enacted September 30, 1995, and covered appropriations
from October 1 until November 13, 1995. The second continuing
resolution (Public Law 104-54) was enacted on November 19, 1995, and
covered appropriations from November 14 until November 20, 1995. The
third continuing resolution (Public Law 104-56) was enacted November
20, 1995, and covered appropriations until December 15, 1995. The
fourth continuing resolution (Public Law 104-69) was enacted December
22, 1995, and provided appropriations for selected activities. While
OMB produced estimates of budget authority and outlays for the first
and third continuing resolutions, CBO did not produce estimates for
any of the continuing resolutions. According to a CBO official, for
BEA purposes, CBO only estimates spending of appropriation bills
covering the entire fiscal year. CBO takes this position because it
assumes that any part-year spending appropriation will subsequently
be subsumed by a full-year measure.
In its Final Sequestration Report, OMB annualized the continuing
resolutions enacted in the second session of the 104th Congress in
order to estimate full-year compliance with the discretionary
spending limits.\9 OMB's estimates were based on the full-year effect
of these continuing resolutions, even though funding expired on
January 26, 1996,\10 for most of the programs covered by the
continuing resolutions. With the estimated full-year impact of the
continuing resolutions, estimated full-year budget authority fell
$32.4 billion under its discretionary spending limit and estimated
full-year outlays fell $17.8 billion under its spending limit. Since
CBO only estimated the seven enacted general purpose appropriations,
plus funds made available through emergency appropriations, it
concluded in its Final Sequestration Report that budget authority and
outlay spending for fiscal year 1996 fell far below the discretionary
spending caps.
DIFFERENCES IN OMB AND CBO
ESTIMATES OF PAYGO LEGISLATION
Twenty pieces of direct spending and receipts legislation were
enacted in the first session of the 104th Congress. As shown in
table II.4, OMB estimated that this legislation increased the fiscal
year 1995 deficit by $187 million, $61 million less than CBO's
estimate. For fiscal year 1996, OMB estimated that this legislation
would increase the deficit by $865 million, $802 million more than
CBO's estimate. The table also shows that OMB and CBO had
differences of over $100 million in their estimates of the deficit
effects of 2 of the 20 laws. These differences accounted for most of
their total estimating difference.
BEA requires that, in total, direct spending and receipts legislation
not increase the deficit in any year through 1998. Net savings
enacted for one fiscal year may be used to offset net increases in
the next year. The PAYGO process requires that OMB maintain a
"scorecard" that shows the cumulative deficit impact of such
legislation, beginning with the 102nd Congress. Through January 3,
1996, OMB reported that enacted PAYGO legislation had, in total,
lowered the deficit by $1.1 billion for 1995 and 1996 combined.
Therefore, even though OMB estimated that PAYGO legislation enacted
in the last session of the Congress increased the deficit somewhat,
no sequestration of direct spending programs is required for fiscal
year 1996.
Table II.4
Comparison of OMB and CBO Scoring of
PAYGO Legislation Enacted in the First
Session of the 104th Congress
(Dollars in millions)
Act 1995 1996
------------------------------ ------------------ ------------------
Self-Employed Health Insurance $147 $74
Act 248 83
OMB estimate -101 -9
CBO estimate
Difference
Medicare Select Policies
OMB estimate 40 900
CBO estimate 0 0
Difference 40 900
All others
OMB estimate 0 -109
CBO estimate 0 -20
Difference 0 -89
Total enacted
OMB estimate $187 $865
CBO estimate 248 63
Difference\a -61 802
----------------------------------------------------------------------
\a A positive number means that OMB's estimate was higher than CBO's.
As shown in table II.4, OMB and CBO had different views of the
estimates of reductions in receipts resulting from the
Self-Employment Health Insurance Act (Public Law 104-7). This act
reinstated a 25 percent tax deduction for health insurance premiums
for the self-employed. There is an additional revenue loss in the
act due to the extension of the rule related to the deductibility of
expenses in connection with certain group health plans. However,
revenue losses were offset by several provisions in the act,
including a repeal of Section 1071 of the Internal Revenue Code,
which allows sellers of Federal Communications Commission-licensed
broadcast facilities to defer taxes on gains realized in a sale to
minority ownership.
OMB estimated that the act would result in revenue losses of $147
million in fiscal year 1995 and $74 million in fiscal year 1996. CBO
estimated that the act would result in revenue losses of $248 million
in fiscal year 1995 and $83 million in fiscal year 1996. Most of the
difference between the two estimates for the act can be explained by
different estimates of offsetting revenue gains due to the repeal of
Section 1071. OMB, which receives its estimates of changes in tax
laws from the Treasury Department, estimated that the Section 1071
repeal would result in higher revenue gains than did CBO, which
receives its estimates of changes in tax laws from the Joint
Committee on Taxation.
Other large differences in OMB's and CBO's PAYGO estimates were
attributable to different estimates of the outlay impact of the
Medicare Select Policies Extension (Public Law 104-18). This act
extended the 15-State Medicare Select demonstration project to all
states for 3 years. Under this demonstration project, individuals
can purchase Medigap policies that only pay full supplemental
benefits if covered services are provided through preferred
providers. OMB concluded that while the demonstration project was
intended to reduce health costs, it has cost the government money.
OMB estimated that by extending the demonstration project, the act
would increase the deficit $40 million in fiscal year 1995 and $900
million in fiscal year 1996, while CBO estimated that the act would
have no impact on the deficit. According to OMB, preliminary results
from an evaluation of the demonstration projects sponsored by the
Health Care Financing Administration indicated that they are not
achieving their goal of reducing unnecessary health care utilization
among participating Medicare beneficiaries and thus are not reducing
costs. CBO concluded that this act could result in either costs or
savings to the federal government and that, on balance, these costs
or savings are not likely to be significant.
--------------------
\9 These estimates were based on OMB scoring of the Sixth Continuing
Resolution (P.L. 104-92), the Seventh Continuing Resolution (P.L.
104-91), and the Eighth Continuing Resolution (P.L. 104-94), all of
which were signed by the President on January 6, 1996.
\10 On January 26, 1996, the 9th Continuing Resolution was enacted
that extended funding until March 15, 1996, for most programs whose
regular spending bills have not yet been enacted. The measure
provided full-year funding for programs normally funded by the
foreign operations appropriations bill. See appendix III for a list
of appropriations, including a list of continuing resolutions,
enacted to date in the 104th Congress.
APPROPRIATIONS ENACTED BY THE
104TH CONGRESS
========================================================= Appendix III
REGULAR APPROPRIATIONS
Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act (Public Law 104-37), signed
October 21, 1995.
Energy and Water Development Appropriations Act (Public Law 104-46),
signed November 13, 1995.
Legislative Branch Appropriations Act (Public Law 104-53), signed
November 19, 1995.
Military Construction Appropriations Act (Public Law 104-32), signed
October 3, 1995.
Department of Defense Appropriations Act (Public Law 104-61), signed
December 1, 1995.
Department of Transportation and Related Agencies Appropriations Act
(Public Law 104-50), signed November 15, 1995.
Treasury, Postal Service, and General Government Appropriations Act
(Public Law 104-52), signed November 19, 1995.
SUPPLEMENTAL APPROPRIATIONS
Emergency Supplemental Appropriations and Rescissions for the
Department of Defense to Preserve and Enhance Military Readiness Act
of 1995 (Public Law 104-6), signed April 10, 1995.
Emergency Supplemental Appropriations for Additional Disaster
Assistance, for Anti-Terrorism Initiatives, for Assistance in the
Recovery from the Tragedy that Occurred at Oklahoma City, and
Rescissions Act, 1995 (Public Law 104-19), signed July 27, 1995.
CONTINUING RESOLUTIONS
1st Continuing Resolution (Public Law 104-31), signed September 30,
1995.
2nd Continuing Resolution (Public Law 104-54), signed November 19,
1995.
3rd Continuing Resolution (Public Law 104-56), signed November 20,
1995.
4th Continuing Resolution (Public Law 104-69), signed December 22,
1995.
5th Continuing Resolution (Public Law 104-90), signed January 4,
1996.
6th Continuing Resolution (Public Law 104-92), signed January 6,
1996.
7th Continuing Resolution (Public Law 104-91), signed January 6,
1996.
8th Continuing Resolution (Public Law 104-94), signed January 6,
1996.
9th Continuing Resolution (Public Law 104-99), signed January 26,
1996.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Christine E. Bonham, Assistant Director
Timothy L. Minelli, Evaluator-in-charge
Joseph Heisler, Evaluator
Carol M. Henn, Evaluator
OFFICE OF THE GENERAL COUNSEL
Charles Roney, Assistant General Counsel
Carlos Diz, Attorney-Advisor
*** End of document. ***