Order Code IB10096
CRS Issue Brief for Congress
Received through the CRS Web
Congressional Budget Actions in 2002
Updated February 25, 2002
Bill Heniff Jr.
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Overview of the Congressional Budget Process
Budget Resolution
Reconciliation Legislation
Revenue and Debt-Limit Legislation
Appropriations and Other Spending Legislation
Budget Enforcement and Sequestration
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
CHRONOLOGY
FOR ADDITIONAL READING

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Congressional Budget Actions in 2002
SUMMARY
During the second session of the 107th
the President for his signature and thus does
Congress, the House and Senate will consider
not become law. Instead, it is an agreement
many different budgetary measures. Most of
between the House and Senate on a congres-
these measures will pertain to FY2003 (which
sional budget plan, providing a framework for
will begin on October 1, 2002) and beyond,
subsequent budgetary legislation during a
but some may make adjustments to the budget
congressional session.
for FY2002. As the congressional session
progresses, this issue brief will describe House
Budget resolution policies are imple-
and Senate action on major budgetary legisla-
mented through the enactment of reconcilia-
tion within the framework of the congressional
tion bills, revenue and debt-limit legislation,
budget process and other procedural require-
and appropriations and other spending mea-
ments.
sures, and enforced by points of order that
may be raised when legislation is pending on
Congress begins its annual budget pro-
the House and Senate floor.
cess once the President submits his budget.
President Bush submitted his FY2003 budget
Budget legislation also is constrained by
to Congress on February 4, 2002.
limits on discretionary spending and a “pay-as-
you-go” (PAYGO) requirement for direct
In preparation for congressional action on
spending and revenue legislation established
the budget, the CBO Director, Dan L.
under the Budget Enforcement Act of 1990, as
Crippen, presented CBO’s baseline budget
amended.
projections for FY2003-FY2012 during sepa-
rate testimony to the House and Senate Bud-
Currently, adjustable discretionary spend-
get Committees on January 23, 2002. Among
ing limits exist for the following categories:
other things, Crippen testified that CBO pro-
highway and mass transit spending for
jects the total budget will show a small deficit
FY2002-FY2003; conservation spending
for both fiscal years 2002 and 2003, if current
(divided into six subcategories) for FY2002-
policies remain the same and the economy
FY2006; and other discretionary spending,
performs as CBO forecasts. On January 31,
also called general purpose discretionary
2002, CBO released its annual report on
spending, for FY2002. However, the seques-
budget baseline projections, The Budget and
tration process established to enforce the
Economic Outlook: Fiscal Years 2003-2012.
discretionary spending limits expires at the end
of FY2002 (i.e., September 30, 2002), and it
The Congressional Budget Act of 1974
is not yet clear whether Congress and the
established the congressional budget process.
President will extend it.
The process is centered on the adoption of an
annual concurrent resolution on the budget.
The PAYGO requirement also expires at
The budget resolution sets forth aggregate
the end of FY2002, but the PAYGO seques-
spending and revenue levels, and spending
tration process covers the net effects through
levels by major functional area, for at least 5
FY2006 of new direct spending and revenue
fiscal years. Because the budget resolution is
legislation enacted before the end of FY2002.
a concurrent resolution, it is not presented to
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MOST RECENT DEVELOPMENTS
On February 14, 2002, the House adopted an amended version of a Senate-approved
bill (H.R. 622) to provide temporary extended unemployment compensation. The House-
amended version includes an extension of unemployment compensation as well as tax
provisions similar to those included in a broader economic stimulus bill (H.R. 3529) adopted
by the House in December 2001. Subsequently, the Senate adopted by unanimous consent
a second stand-alone provision extending unemployment compensation as an amendment
to H.R. 3090, an economic stimulus bill passed by the House in October 2001.
These actions followed Senate adoption of a stand-alone provision extending
unemployment compensation as an amendment to H.R. 622, a House-passed revenue bill
dealing with adoption tax credits that became law as part of other legislation last year, on
February 6. The legislation was adopted by unanimous consent after two cloture motions
failed to get the required three-fifths vote to end debate on two separate amendments that
included broader economic stimulus provisions.
The Senate, also on February 14, rejected by voice vote a joint resolution (S.J.Res. 31)
suspending budget enforcement procedures due to low economic growth. The automatic
suspension resolution was triggered by a CBO “low-growth” report issued on January 30,
informing Congress that real economic growth was less than 1% for the last two quarters.
BACKGROUND AND ANALYSIS
During the second session of the 107th Congress, the House and Senate will consider
many different budgetary measures. Most of these measures will pertain to FY2003 (which
will begin on October 1, 2002) and beyond, but some may make adjustments to the budget
for FY2002. As the congressional session progresses, this issue brief will describe House and
Senate action on major budgetary legislation within the framework of the congressional
budget process and other procedural requirements.
This year, Congress faces a significantly different procedural and budget environment
than in recent years. Not only are key enforcement procedures under the Budget
Enforcement Act (Title XIII of P.L. 101-508) set to expire at the end of FY2002 (i.e.,
September 30, 2002), the current and long-term budget outlook has changed considerably
from a year ago. Last year, CBO projected federal surpluses in each fiscal year through
FY2011 and a cumulative surplus of $5.6 trillion for FY2002-FY2011, under policies existing
at that time.1 In contrast, CBO Director Dan L. Crippen testified before the House and
Senate Budget Committees on January 23, 2002, that CBO now is projecting that both fiscal
years 2002 and 2003 will show small deficits, if current policies remain the same and the
economy performs as CBO forecasts. Further, the projected cumulative surplus for FY2002
1 Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011
(Washington: January 2001).
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through FY2011 has dropped by $4.0 trillion to $1.6 trillion. The new environment
undoubtedly will have a significant effect on congressional budget actions during this session.
Overview of the Congressional Budget Process
The congressional budget process consists of the consideration and adoption of
spending, revenue, and debt-limit legislation within the framework of an annual concurrent
resolution on the budget. Additionally, congressional action on budget legislation is
constrained by limits on discretionary spending and a “pay-as-you-go” (PAYGO) requirement
for direct spending and revenue legislation.
Congress begins its budget process once the President submits his budget. The President
is required by law to submit a comprehensive federal budget no later than the first Monday
in February. The President’s budget includes estimates of direct spending and revenues under
existing laws, as well as requests for discretionary spending (i.e., funds provided through the
appropriations process) for the upcoming fiscal year. In addition, the President frequently
proposes new initiatives in his budget submission to Congress. Although Congress is not
bound by the President’s budget, congressional action on spending and revenue legislation
often is influenced by his recommendations, as well as subsequent budgetary activities by the
President during the year. The Office of Management and Budget (OMB) assists the
President in formulating and coordinating his budget policies and activities.
On February 4, 2002, President Bush submitted his FY2003 budget to Congress.
Following the usual practice, the President’s budget was submitted as a multi-volume set
consisting of a main document, which includes the President’s budget message and
information on his 2003 proposals (Budget), and supplementary documents, which provide
special budgetary analyses (Analytical Perspectives), historical budget information (Historical
Tables), and detailed account and program level information (Appendix), among other things.
These documents are available from the Government Printing Office or on OMB’s Web site
at [http://www.whitehouse.gov/omb].
The Congressional Budget Act (CBA) of 1974 (Titles I-IX of P.L. 93-344) established
the congressional budget process, including a timetable for congressional action on budget
legislation (see Table 1). The process is centered on the adoption of an annual concurrent
resolution on the budget. The budget resolution sets forth aggregate spending and revenue
levels, and spending levels by major functional area, for at least 5 fiscal years. Because the
budget resolution is a concurrent resolution, it is not presented to the President for his
signature and thus does not become law. Instead, it is an agreement between the House and
Senate on a congressional budget plan, providing a framework for subsequent legislative
action on the budget during each congressional session.
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Table 1. The Congressional Budget Process Timetable
On or before
Action to be completed
First Monday in February
President submits budget to Congress.
February 15
Congressional Budget Office submits economic and
budget outlook report to Budget Committees.
6 weeks after President
Committees submit views and estimates to Budget
submits budget
Committees.
April 1
Senate Budget Committee reports budget resolution.
April 15
Congress completes action on budget resolution.
May 15
Annual appropriations bills may be considered in the
House, even if action on budget resolution has not been
completed.
June 10
House Appropriations Committee reports last annual
appropriations bill.
June 15
House completes action on reconciliation legislation (if
required by budget resolution).
June 30
House completes action on annual appropriations bills.
July 15
President submits mid-session review of his budget to
Congress.
October 1
Fiscal year begins.
Because the budget resolution does not become law, budget policies are implemented
through the enactment of reconciliation bills, revenue and debt-limit legislation, and
appropriations and other spending measures. Congress enforces budget resolution policies
through points of order on the floor of each chamber and the reconciliation process. For
example, any legislation that would cause the aggregate levels to be violated is prohibited
from being considered. Further, the total budget authority and outlays set forth in the budget
resolution are allocated among the House and Senate committees having jurisdiction over
specific spending legislation. Any legislation, or amendment, that would cause these
committee allocations to be exceeded is prohibited. Finally, the House and Senate
Appropriations Committees subdivide their allocations among their respective 13
subcommittees. A point of order may be raised against any appropriations act, or
amendment, that would cause one of these subdivisions to be exceeded.2 Congress also may
use reconciliation legislation (discussed further below) to enforce direct spending, revenue,
and debt-limit provisions of a budget resolution.
2 For more detailed information on these points of order and their application, see CRS Report 97-865,
Points of Order in the Congressional Budget Process, by James V. Saturno.
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In addition to the enforcement procedures associated with the budget resolution, budget
legislation is constrained by statutory limits on discretionary spending and a PAYGO
requirement for direct spending and revenue legislation, both established by the Budget
Enforcement Act (BEA) of 1990 (Title XIII of P.L. 101-508), which amended the Balanced
Budget and Emergency Deficit Control Act of 1985 (Title II of P.L. 99-177).
Currently, adjustable discretionary spending limits exist for the following categories:
highway and mass transit spending for FY2002-FY2003; conservation spending (divided into
six subcategories) for FY2002-FY2006; and other discretionary spending, also called general
purpose discretionary spending, for FY2002. PAYGO generally requires that increases in
direct spending or decreases in revenues due to legislative action are offset so that the net
effects of new legislation do not incur a positive balance on the PAYGO scorecard. The
PAYGO requirement applies to legislation enacted through FY2002, but it covers the effects
of such legislation through FY2006.
The discretionary spending limits and PAYGO requirement are enforced primarily by
sequestration, which involves automatic, largely across-the-board spending cuts in non-
exempt programs. Sequestration is triggered if the director of the Office of Management and
Budget estimates in the final sequestration report at the end of a session that one or more of
the discretionary spending limits will be exceeded or the PAYGO requirement will be
violated. A within-session sequestration is possible if a supplemental appropriations bill
causes the spending levels of the current fiscal year to exceed the statutory limit for a
particular category. The discretionary spending limits, as well as a PAYGO requirement
similar to the statutory one, also may be enforced through points of order while legislation
is being considered on the Senate floor.
The sequestration process established to enforce the discretionary spending limits expires
at the end of FY2002 (i.e., September 30, 2002). The PAYGO sequestration process
continues until the end of FY2006, but only applies to the net effects of legislation enacted
before the end of FY2002.
Budget Resolution
The Congressional Budget Act, as amended, establishes the concurrent resolution on the
budget as the centerpiece of the congressional budget process. The budget resolution sets
forth aggregate spending and revenue levels, and spending levels by major functional area, for
at least 5 fiscal years. Once adopted, it provides the framework for subsequent action on
budget-related legislation.
Following the submission of the President’s budget early in the year, Congress begins
formulating the budget resolution. The House and Senate Budget Committees are responsible
for developing and reporting the budget resolution. In formulating the budget resolution, the
Budget Committees hold hearings and receive testimony from Members of Congress and
representatives from federal departments and agencies, the general public, and national
organizations. Three regular hearings include separate testimony from the Director of the
Congressional Budget Office (CBO), the Chair of the Federal Reserve Board, and the
Director of OMB. On January 23, 2002, the CBO Director, Dan L. Crippen, presented
CBO’s baseline budget projections for FY2003-FY2012 during separate testimony to the
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House and Senate Budget Committees.3 Among other things, he testified that CBO projects
the total budget will show a small deficit for both fiscal years 2002 and 2003, if current
policies remain the same and the economy performs as CBO forecasts. On January 24,
Federal Reserve Board Chairman Alan Greenspan testified before the Senate Budget
Committee that the economy was showing signs of recovery from the recession of the past
year; that he had doubts about the need for stimulus legislation; and that he supports an
extension of the discretionary spending limits and PAYGO requirement.4 On February 5,
OMB Director Mitchell E. Daniels, Jr. elaborated on the three priorities of the President’s
FY2003 budget–homeland security, war on terrorism abroad, and economic recovery–in
separate testimony to the House and Senate Budget Committees.5
The congressional budget resolution, as well as the President’s budget, is based on
budget baselines. The budget baseline is a projection of federal revenue, spending, and deficit
or surplus levels based upon current policies, assuming certain economic assumptions. The
President’s budget baseline, referred to as current services estimates, usually differs from
CBO’s baseline, referred to as baseline budget projections, often due to different economic
and technical assumptions. Baseline projections provide a benchmark for measuring the
budgetary effects of proposed policy changes. On January 31, 2002, CBO released its annual
report on budget baseline projections, The Budget and Economic Outlook: Fiscal Years
2003-2012. The report is available on CBO’s Web site at [http://www.cbo.gov].
Another source of input comes from the “views and estimates” of congressional
committees with jurisdiction over spending and revenues. Within 6 weeks after the
President's budget submission, House and Senate committees are required to submit views
and estimates of budget matters under their jurisdiction to their respective Budget
Committees. These views and estimates, frequently submitted in the form of a letter to the
Chair and Ranking Member of the Budget Committee, typically include comments on the
President's budget proposals and estimates of the budgetary impact of any legislation likely
to be considered during the current session of Congress. The Budget Committees are not
bound by these recommendations. The views and estimates often are printed in the committee
report accompanying the budget resolution in the Senate or compiled as a separate committee
print in the House.
The budget resolution was designed to provide a framework to make budget decisions,
leaving specific program determinations to House and Senate Appropriations Committees and
other committees with spending and revenue jurisdiction. In many instances, however,
particular program changes are considered when formulating the budget resolution. Program
assumptions sometimes are referred to in the reports of the House and Senate Budget
Committees and usually are discussed during floor action. Although these program changes
3 Dan L. Crippen, Testimony before the Senate Budget Committee, January 23, 2002. Identical
testimony was given to the House Budget Committee on the same date. The testimony is available on
CBO’s Web site at [http://www.cbo.gov].
4 Alan Greenspan, Testimony before the Senate Budget Committee, January 24, 2002. The testimony
is available on the Senate Budget Committee’s Web site at [http://www.senate.gov/~budget].
5 Mitchell E. Daniels, Jr., Testimony before the Senate Budget Committee, February 5, 2002. The
testimony is available on the Senate Budget Committee’s Web site at [http://www.senate.gov/~budget].
Identical testimony was given to the House Budget Committee on the same date.
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are not binding, committees may be strongly influenced by these recommendations when
formulating appropriations bills, reconciliation measures, or other budgetary legislation.
The congressional budget process timetable sets April 15 as a target date for final
adoption of the budget resolution. The CBA prohibits the consideration of spending,
revenue, or debt-limit legislation for the upcoming year until the budget resolution has been
adopted, unless the rule is waived or set aside. The House and Senate consider the budget
resolution under procedures generally intended to expedite final action. In the House, the
budget resolution usually is considered under a special rule, limiting the time of debate and
allowing only a few amendments, as substitutes to the entire resolution. The Senate considers
the budget resolution under the procedures set forth in the CBA, unless superseded by a
unanimous consent agreement. Debate on the initial consideration of the budget resolution,
and all amendments, debatable motions, and appeals, is limited to 50 hours. Amendments,
motions, and appeals may be considered beyond this time limit, but without debate.
Consideration of the conference report is limited to 10 hours in the Senate.
Reconciliation Legislation
Congress may implement changes to existing law related to direct spending, revenues,
or the debt limit through the reconciliation process, under Section 310 of the CBA. The
reconciliation process has two stages. First, Congress includes reconciliation instructions in
a budget resolution directing one or more committees to recommend changes in statute to
achieve the levels of spending, revenues, and debt limit agreed to in the budget resolution.
Second, the legislative language recommended by committees is packaged “without
substantive revision” into one or more reconciliation bills, as set forth in the budget
resolution, by the House and Senate Budget Committees. In some instances, a committee
may be required to report its legislative recommendations directly to its chamber.
Once reconciliation legislation is reported, consideration is governed by special
procedures. These special rules serve to limit what may be included in reconciliation
legislation, to prohibit certain amendments, and to encourage its completion in a timely
fashion. In the House, as with the budget resolution, reconciliation legislation usually is
considered under a special rule, establishing the time allotted for debate and what amendments
will be in order. In the Senate, debate on a budget reconciliation bill, all amendments,
debatable motions, and appeals is limited to not more than 20 hours. After the 20 hours of
debate has been reached, consideration of amendments, motions, and appeals may continue,
but without debate.
In both chambers, the CBA requires that amendments to reconciliation legislation be
deficit neutral and germane. Also, the CBA prohibits the consideration of reconciliation
legislation, or any amendment to a reconciliation bill, recommending changes to the Social
Security program. Finally, in the Senate, Section 313 of the CBA, commonly referred to as
the Byrd rule, prohibits extraneous matter in a reconciliation bill.
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Revenue and Debt-Limit Legislation
Congress may adopt revenue and debt-limit legislation individually. Revenue and debt-
limit legislation is under the jurisdiction of the House Ways and Means Committee and the
Senate Finance Committee. Article I, Section 7, of the U.S. Constitution, requires revenue
legislation originate in the House of Representatives, but the Senate may amend a revenue bill
as it chooses.
Most of the laws establishing the federal government's revenue sources are permanent
and continue year after year without any additional legislative action. Congress, however,
typically enacts revenue legislation, changing some portion of the existing tax system, every
year. Revenue legislation may include changes to individual and corporate income taxes,
social insurance taxes, excise taxes, or tariffs and duties.
Revenue legislation is not automatically considered in the congressional budget process
on an annual basis. Frequently, however, the President proposes and Congress considers
changes in the rates of taxation or the distribution of the tax burden. An initial step in the
congressional budget process is the publication of revenue estimates of the President's budget
by CBO. These revenue estimates usually differ from the President's since they are based on
different economic and technical assumptions (e.g., growth of the economy and change in the
inflation rate). Estimates of any congressional revenue-policy proposals are prepared by
CBO, based on Joint Committee on Taxation revenue estimates, and are published in
committee reports or the Congressional Record.
The budget resolution includes baseline estimates of federal government receipts based
on the continuation of existing laws and any proposed policy changes. The revenue levels in
the budget resolution provide the framework for any action on revenue measures during the
session. A point of order may be raised against the consideration of legislation that causes
revenues to fall below the agreed upon levels for the first fiscal year or the total for all fiscal
years in the budget resolution. This point of order may be set aside by unanimous consent,
or waived by a special rule in the House or by a three-fifths vote in the Senate.
A Senate PAYGO point of order, under Section 207 of the FY2000 budget resolution
(H.Con.Res. 68, 106th Congress), also may be raised against any revenue legislation that
would increase or cause an on-budget deficit for the first fiscal year, the period of the first 5
fiscal years, or the following 5 fiscal years, covered by the most recently adopted budget
resolution. The point of order may be waived by a vote of three-fifths of Senators, or set
aside by unanimous consent.
On January 23, 2002, the Senate began consideration of a scaled-down economic
recovery package that included tax-related provisions and an extension of unemployment
benefits, among other things. The House last year approved two economic stimulus packages
(H.R. 3090 and H.R. 3529) upon which the Senate did not vote. The scaled-down package
was introduced by Senator Daschle as an amendment in the nature of a substitute to H.R.
622, a House-passed revenue bill dealing with adoption tax credits that became law as part
of other legislation last year. On February 6, after two cloture motions failed to get the
required three-fifths vote to end debate on the scaled-down recovery package and a separate
amendment, the Senate instead adopted by unanimous consent a stand-alone amendment to
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H.R. 622 to provide temporary extended unemployment compensation. The unemployment
compensation extension legislation now returns to the House for further action.
Federal debt consists of debt held by the public plus debt held by government accounts.
Almost all of the federal debt is subject to a statutory debt limit. The debt held by the public
represents the total net amount borrowed from the public to cover the federal government's
budget deficits. By contrast, the debt held by government accounts represents the total net
amount of federal debt issued to specialized federal accounts, primarily trust funds (e.g.,
Social Security). Trust fund surpluses by law must be invested in special federal government
securities and thus are held in the form of federal debt. Because the statutory limit applies to
the combination of both types of debt, budget deficits or trust fund surpluses may contribute
to the federal government reaching the existing debt limit. So long as federal budget policy
results in an increase in the federal debt, Congress periodically must enact increases to the
debt limit.
The most recent increase in the statutory debt limit was enacted in the Balanced Budget
Act of 1997 (P.L. 105-33). At the time of passage, the increase to $5.95 trillion was
considered sufficient to meet the federal government’s financial needs through mid-December
1999. The federal government’s surpluses over the last 4 years contributed to the fact that
the statutory debt limit has been sufficient beyond this date. However, Treasury Secretary
Paul O’Neill reportedly indicated in a December 11, 2001, letter to congressional leaders that
the existing debt limit may begin to interfere with the federal government’s financial
responsibilities “as early as February 2002.”6 Therefore, he requested that Congress raise the
debt limit by $750 billion to $6.7 trillion.
Appropriations and Other Spending Legislation
Federal spending is categorized into two different types: discretionary or direct spending.
Discretionary spending is controlled through the annual appropriations acts, while direct
spending (which consists mostly of entitlement programs) is determined by existing law.
Discretionary spending is under the jurisdiction of the House and Senate Appropriations
Committees. Direct spending is under the jurisdiction of the various legislative committees
of the House and Senate. Some entitlement programs, such as Medicaid and certain veterans’
programs, are funded in annual appropriations acts, but such spending is not considered
discretionary and is not controlled through the annual appropriations process.
The President’s budget includes recommendations for the annual appropriations; account
and program level detail about these recommendations are included in the Appendix volume
of the President’s budget documents. In addition, agencies submit justification materials to
the House and Senate Appropriations Committees. The budget justifications provide more
detailed information about an agency’s program activities than is contained in the President’s
6 Bud Newman,“Debt Ceiling Hike Not on House Agenda Before Adjournment, DeLay, Thomas Say,”
BNA Daily Report for Executives, no. 238, December 13, 2001, p. G-3. Also, for more information
on the current need to raise the debt limit, see CRS Report RS21111, The Debt Limit: The Need to
Raise It After Four Years of Surpluses, by Philip D. Winters.
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budget documents and are used in support of agency testimony during Appropriations
subcommittee hearings on the President’s budget request.
Congress passes three main types of appropriations measures. Regular appropriations
acts provide budget authority for the next fiscal year, beginning on October 1. The 13
subcommittees of the Appropriations Committees of the House and Senate are each
responsible for one of the 13 regular appropriations acts. Supplemental appropriations acts
provide additional funding for unexpected needs while the fiscal year is in progress.
Continuing appropriations acts, commonly referred to as continuing resolutions, provide
stop-gap funding for agencies that have not received a regular appropriations by the start of
the fiscal year.
In addition to the 13 regular appropriations acts, Congress typically acts on at least two
supplemental appropriations measures during a session. As well, because of recurring delays
in the appropriations process, Congress often adopts one or more continuing resolutions each
year. In 2001, for example, Congress passed the 13 regular appropriations measures
individually, two supplementals, and eight continuing resolutions. In some years, such as in
each of the three prior to 2001 (1998-2000), instead of adopting all of the regular
appropriations acts individually, Congress combines several of them into an omnibus
appropriations measure.
Spending allocations to the Appropriations Committees and other committees
accompany the conference report on the budget resolution. Soon after it is adopted, the
House and Senate Appropriations Committees subdivide their spending allocations among
their subcommittees and formally report these suballocations to their respective chambers.
During the appropriations process, these suballocations usually are revised several times.
The House and Senate appropriations subcommittees begin holding extensive hearings
on appropriations requests shortly after the President’s budget is submitted. By custom,
appropriations measures originate in the House. In recent years, the Senate Appropriations
Committee has adopted and reported original Senate appropriations measures, allowing the
Senate to consider appropriations measures without having to wait for the House to adopt
its version. Under this practice, the Senate version is considered and amended on the floor,
and then inserted into the House-adopted version, when available, as a substitute amendment,
thereby retaining the House-numbered bill for final action.
Budget Enforcement and Sequestration
The sequestration process was first established in 1985 by the Balanced Budget and
Emergency Deficit Control Act, commonly known as the Gramm-Rudman-Hollings Act.
Initially, the sequestration process was tied to annual maximum deficit targets established in
law, declining to zero by FY1991. If the budget deficit exceeded those target levels (plus a
margin-of-error amount in some years), automatic across-the-board spending cuts would be
triggered to bring the deficit to within the allowable level. The process was intended to
provide an incentive to Congress and the President to reduce the deficit through legislative
action to avoid an automatic sequestration. The law was amended and modified in 1987,
1990, 1993, and 1997. Most notably, the Budget Enforcement Act (BEA) of 1990 changed
the focus of the sequestration process. Instead of maximum deficit targets, the BEA of 1990
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tied sequestration to new statutory limits on discretionary spending and a PAYGO
requirement for new direct spending and revenue legislation. The change was intended to
hold Congress and the President accountable for projected budget outcomes that would result
from new legislation, rather than the level of the deficit which could be affected by factors
beyond their direct control, such as economic growth, inflation, and demographic changes.
Currently, adjustable discretionary spending limits exist for the following categories:
highway and mass transit spending for FY2002-FY2003; conservation spending (divided into
six subcategories) for FY2002-FY2006; and other discretionary spending, also called general
purpose discretionary spending, for FY2002. Under the PAYGO requirement, the net effect
of new direct spending and revenue legislation enacted for a fiscal year may not cause a
positive balance (reflecting an increase in the on-budget deficit or a reduction in the on-budget
surplus) on a multiyear PAYGO “scorecard.” For each fiscal year, this scorecard maintains
the balances of the accumulated budgetary effects of laws enacted during the session and prior
years. The PAYGO requirement applies to legislation enacted through FY2002, but it covers
the effects of such legislation through FY2006.
The discretionary spending limits and PAYGO requirement are enforced primarily by
sequestration, which involves automatic, largely across-the-board spending cuts in non-
exempt programs. Sequestration is triggered if the director of the Office of Management and
Budget estimates in the final sequestration report that one or more of the discretionary
spending limits will be exceeded or the PAYGO requirement will be violated. The President
is required to issue a sequestration order cancelling budgetary resources in non-exempt
programs by the amount of any spending limit breach or PAYGO violation. A within-session
sequestration is possible if a supplemental appropriations bill causes the spending levels of the
current fiscal year to exceed the statutory limit for a particular category.7
The discretionary spending limits, as well as a PAYGO requirement similar to the
statutory one, also may be enforced through points of order while legislation is being
considered on the Senate floor. First, Section 312(b) of the 1974 CBA prohibits the
consideration of legislation that would cause any of the spending limits to be exceeded.
Second, Section 207 of the FY2000 budget resolution (H.Con.Res. 68, 106th Congress), like
similar provisions in previous budget resolutions, provides a point of order against any direct
spending or revenue legislation that would increase or cause an on-budget deficit for the first
fiscal year, the period of the first 5 fiscal years, or the following 5 fiscal years, covered by the
most recently adopted budget resolution. Both of these points of order may be waived by a
vote of three-fifths of Senators, or set aside by unanimous consent.
Table 2 provides the timetable for sequestration actions. As indicated, OMB and CBO
publish preview and update sequestration reports to provide Congress and the President with
advance notice regarding the possibility of a sequester. If one or both types of sequester are
anticipated, these reports may afford Congress and the President enough warning so that they
7 Under the BEA, if a supplemental appropriations act causes a discretionary spending limit to be
exceeded in the last quarter of a fiscal year (i.e., July 1 through September 30), the spending limit for
the applicable category for the following fiscal year must be reduced by the amount of the violation.
However, this particular procedure will have no effect this year, unless the discretionary spending
limits are extended beyond FY2002.
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can enact legislation to forestall them. The utility of these reports this year, however, may
depend on whether Congress and the President extend the discretionary spending limits and
the PAYGO requirement beyond FY2002. Only an OMB within-session (noted above) or
final sequestration report can trigger a sequester; the CBO sequestration reports are advisory
only.
Table 2. Timetable for Sequestration Actions
Deadline
Action to be completed
5 days before the President’s
CBO sequestration preview report.
budget submission
Date of the President’s
OMB sequestration preview report (as part of the
budget submission
President’s budget).
August 10
Notification regarding military personnel.
August 15
CBO sequestration update report.
August 20
OMB sequestration update report.
10 days after end of session
CBO final sequestration report.
15 days after end of session
OMB final sequestration report; presidential
sequestration order.
The BEA enforcement procedures, as well as several enforcement procedures tied to the
budget resolution, may be suspended in the event a declaration of war is enacted or if
Congress enacts a joint resolution triggered by the issuance of a “low-growth” report by
CBO.8 With regard to the latter, CBO must notify Congress if actual real economic growth
was less than 1% or estimated real economic growth is projected to be negative for the most
recently reported quarter and the preceding quarter. Upon receiving a low-growth report,
the Senate majority leader is required to introduce a joint resolution suspending the
enforcement procedures, but such action is optional in the House. On January 30, 2002, CBO
issued a low-growth report to Congress (H.Doc. 107-178), and on February 7, the Senate
majority leader subsequently introduced a suspension resolution (S.J.Res. 31). The Senate
rejected by voice vote the suspension resolution on February 14.
In previous years, Congress and the President have enacted statutory provisions to avoid
a sequestration for the upcoming fiscal year or to reduce the likelihood of a sequester in
future fiscal years.9 Most recently, the FY2002 Department of Defense Appropriations Act
(P.L. 107-117) included provisions increasing certain discretionary spending limits for
FY2002 and changing the PAYGO scorecard balance to zero for FY2001 and FY2002.
8 For further information on these suspension provisions, see CRS Report RS20182, Suspension of
Budget Enforcement Procedures During Hostilities Abroad; and CRS Report RL31068, Suspension
of Budget Enforcement Procedures During Low Economic Growth, both by Robert Keith.
9 For detailed information on the several techniques used to avoid a sequester, see CRS Report
RL31155, Techniques for Preventing a Budget Sequester, by Robert Keith.
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Specifically for the discretionary spending limits, Division C, Section 101(a), of P.L. 107-117
increased the budget authority and outlay limits for FY2002 in the general purpose
discretionary category to $681.441 billion and $670.206 billion, respectively, and the outlay
limit for FY2002 in the conservation spending category to $1.473 billion. In addition,
Division C, Section 101(d), of the law authorized an estimating adjustment of 0.12% in the
budget authority limit for all categories for FY2002. Such modifications to the discretionary
spending limits and PAYGO scorecard effectively prevented an end-of-the-session sequester
for FY2002.10
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2003-2012
(Washington: January 2002). The document is available on CBO’s Web site at
[http://www.cbo.gov].
Dan L. Crippen, Testimony before the Senate Budget Committee, January 23, 2002. The
testimony is available on CBO’s Web site at [http://www.cbo.gov]. Identical testimony
was given to the House Budget Committee on the same date.
Mitchell E. Daniels, Jr., Testimony before the Senate Budget Committee, February 5, 2002.
The testimony is available on the Senate Budget Committee’s Web site at
[http://www.senate.gov/~budget]. Identical testimony was given to the House Budget
Committee on the same date.
Alan Greenspan, Testimony before the Senate Budget Committee, January 24, 2002. The
testimony is available on the Senate Budget Committee’s Web site at
[http://www.senate.gov/~budget].
CHRONOLOGY
02-04-2002 – President Bush submitted his FY2003 budget to Congress.
01-31-2002 – CBO released its annual report on budget baseline projections, The Budget
and Economic Outlook: Fiscal Years 2003-2012.
10 See Office of Management and Budget, OMB Final Sequestration Report to the President and
Congress for Fiscal Year 2002 (Washington: January 2002).
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FOR ADDITIONAL READING
CRS Report 97-684. The Congressional Appropriations Process: An Introduction, by Sandy
Streeter.
CRS Report 98-721. Introduction to the Federal Budget Process, by Robert Keith and Allen
Schick.
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