Order Code RS21752
Updated July 8, 2004
CRS Report for Congress
Received through the CRS Web
Federal Budget Process Reform:
A Brief Overview
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division
Robert Keith
Specialist in American National Government
Government and Finance Division
Summary
In 2004, during the second session of the 108th Congress, the House and Senate
face a wide array of budget process reform proposals, pertaining to such matters as
restoration of the statutory discretionary spending limits and PAYGO requirement,
modifications to budget resolution and reconciliation procedures, biennial budgeting,
and constitutional amendments. (The House defeated one budget process reform
measure, H.R. 4663, the Spending Control Act of 2004, on June 24 by a vote of 146-
268.) The House and Senate may pursue budget process reform in various ways,
including modifications to each chamber’s rules and practices, the enactment of
freestanding legislation, or the inclusion of budget process changes in other budgetary
legislation, such as a reconciliation or debt-limit measure. This report provides a
context for congressional actions in this area and briefly discusses selected proposals to
illustrate the diversity of issues involved. The report will be updated.
Congress and the President regularly propose and make changes to the federal budget
process. This year, projected deficits in the unified budget in each of the next several
fiscal years have increased congressional interest in various budget process reform
proposals.1 This report briefly discusses the context in which federal budget process
1 The Office of Management and Budget (OMB) projects that under President Bush’s proposals
the FY2004 unified budget deficit will be $521 billion, with deficits continuing but declining
through FY2009. The Congressional Budget Office (CBO) projects, under its baseline budget
projections (which do not assume any changes in policy), that the FY2004 unified budget deficit
will be $477 billion, with a surplus not returning until FY2014. For further information on the
current budget deficit projections, see OMB, Budget of the U.S. Government, Fiscal Year 2005
(Washington: 2004), Table S-14, p. 388; and CBO, The Budget and Economic Outlook: Fiscal
(continued...)
Congressional Research Service ˜ The Library of Congress

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changes are made and identifies selected reform proposals by major category. The
identification of reform proposals in this report is not intended to be comprehensive; other
CRS reports discuss different aspects of budget process reform in more detail.2
The Context of Budget Process Reform
The federal budget process is rooted in constitutional mandates, statutory
requirements, House and Senate rules and practices, and administrative directives.3 Thus,
there are several avenues through which Congress and the President can change the
various elements of the budget process. (This report addresses only changes made
through legislative action.)
In some years, comprehensive changes were made in the budget process through
statutes enacted by Congress and the President. The Budget and Accounting Act of 1921
established the executive budget process, the Congressional Budget Act of 1974 created
the congressional budget process, and the Balanced Budget and Emergency Deficit
Control Act of 1985 and the Budget Enforcement Act (BEA) of 1990 imposed additional
budget controls on a temporary basis.4 In other years, such as 1987, 1993, and 1997,
existing budget process statutes were modified in a less comprehensive fashion and
extended for limited periods. At other times, Congress and the President enacted statutes
changing selected aspects of the budget process; the Line Item Veto Act (of 1996) is one
example. Finally, in every Congress, the House and Senate have modified existing rules
and practices in the budget process and sometimes instituted new ones.5
Because nearly every committee of the House and Senate has jurisdiction over
legislation with a budgetary impact, interest in the budget process and proposals to change
it radiates throughout both chambers. Although jurisdiction over executive and
congressional budget procedures generally resides with the Budget, Government Reform,
and Rules Committees in the House, and with the Budget, Governmental Affairs, and
1 (...continued)
Years 2005-2014, Jan. 2004, Table 1.1, p. 1.
2 For example, see (1) CRS Report RL31478, Federal Budget Process Reform: Analysis of Five
Reform Issues, by James V. Saturno and Bill Heniff Jr.; (2) CRS Report RL30550, Biennial
Budgeting: Issues and Options, by James V. Saturno; (3) CRS Report RL30339, Preventing
Federal Government Shutdowns: Proposals for an Automatic Continuing Resolution, by Robert
Keith; and (4) CRS Issue Brief IB89148, Item Veto and Expanded Impoundment Proposals, by
Virginia A. McMurtry.
3 For a comprehensive overview of the federal budget process, see CRS Report 98-721,
Introduction to the Federal Budget Process, by Robert Keith and Allen Schick.
4 A comprehensive listing and description of major budget process laws enacted over the past
century (and full legal citations to them) is provided in CRS Report RL30795, General
Management Laws: A Compendium, by Clinton T. Brass.
5 For example, at the beginning of the 108th Congress, the House made several changes to its
standing rules that affect the budget process. See CRS Report RL31728, House Rules Changes
Affecting the Congressional Budget Process in the 108th Congress (H.Res. 5), by Bill Heniff Jr.

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Rules and Administration Committees in the Senate, other House and Senate committees
may exert influence over budget process changes affecting their legislative interests.
Changes in the budget process may take the form of freestanding legislation (e.g.,
the Line Item Veto Act) or may be incorporated into other budgetary legislation, such as
acts raising the debt limit (e.g., the 1985 Balanced Budget Act) or implementing
reconciliation instructions (e.g., the BEA of 1990). Budget process changes also may be
included in the annual budget resolution or other House and Senate resolutions.
Selected Budget Process Reform Proposals
Among the various budget process reform proposals currently under discussion,
many pertain to categories such as the restoration of the statutory discretionary spending
limits and the “pay-as-you-go” (PAYGO) requirement, the congressional budget
resolution and reconciliation, the annual appropriations process, and budget concepts.
These and other categories of reform are discussed separately below.
Restoration of Discretionary Spending Limits and PAYGO Requirement.
For FY1991 through FY2002, federal budget legislation was constrained by statutory
limits on discretionary spending and a PAYGO requirement for direct spending
(sometimes referred to as mandatory spending) and revenue legislation. Both of these
budget constraints were established by the BEA of 1990, which amended the Balanced
Budget and Emergency Deficit Control Act of 1985. The discretionary spending limits
and the PAYGO requirement were enforced by sequestration, a process by which
violations were remedied by automatic, across-the-board spending cuts. These statutory
budget constraints were extended in 1993 and 1997, but effectively expired at the end of
FY2002 (i.e., September 30, 2002).
For the last several years, there has been considerable interest in restoring the BEA
procedures beyond FY2002, possibly with significant modification. Many Members of
Congress, as well as outside observers, agree that the budget enforcement mechanisms
associated with the BEA promoted fiscal discipline throughout the 1990s, and contributed
to the federal government achieving a unified budget surplus in FY1998 — the first in
almost 30 years. With the return of deficits, some have argued for restoring such fiscal
discipline mechanisms.
Two of the major issues in this area are the duration of any new discretionary
spending limits and whether the PAYGO requirement should apply to both revenue and
direct spending legislation, or instead be confined to just direct spending legislation. In
the past, the discretionary spending limits covered a five-year time frame and were
adjusted from time to time. Eventually, the limits became quite out of sync with actual
spending policy, so much so that they were regarded as “unrealistic,” leading to practices
which undermined enforcement. Some argue that restricting the renewal of the
discretionary spending limits to a shorter time frame, such as two years, would be more
likely to yield realistic, workable enforcement. President Bush recommended a two-year
extension of discretionary spending limits in his FY2004 budget and a five-year extension

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in his FY2005 budget.6 In addition, he recommended that the PAYGO requirement be
reestablished, but that it apply only to direct spending legislation and not revenue
legislation. Some have countered that restricting the PAYGO requirement to the spending
side of the budget could hamper overall efforts to contend with projected large deficits.
On March 19, 2004, the House Budget Committee reported H.R. 3973 (H.Rept. 108-
442), the Spending Control Act of 2004, a measure restoring discretionary spending limits
and a PAYGO requirement (applicable only to direct spending) for FY2005-FY2009. The
House considered H.R. 4663, a revised version of H.R. 3973, on June 24, defeating it by
a vote of 146-268. Amendments dealing with various topics in budget process reform
were considered; two were agreed to and the remainder were rejected or withdrawn.
Congressional Budget Resolution and Reconciliation. The Congressional
Budget Act of 1974 requires the House and Senate to adopt a budget resolution each year,
setting forth aggregate spending and revenue levels, and spending levels by major
functional categories, for at least five fiscal years. The budget resolution, which is a
concurrent resolution and therefore does not become law, provides an overall budget plan
that guides congressional action on individual spending, revenue, and debt-limit
measures. The 1974 act includes an optional reconciliation procedure that provides for
the development and consideration of revenue, spending, and debt-limit legislation to
carry out budget resolution policies; enforcement of budget resolution policies also occurs
by means of various points of order that may be raised on the floor. Budget resolutions
and reconciliation measures are considered under expedited procedures in both chambers.
Some Members of Congress, as well as the President, have argued that the budget
resolution would be more effective in enforcing budget policy by making it a joint
resolution requiring the President’s approval. A joint budget resolution would directly
involve the President in congressional actions on the budget early in the process. If the
President and Congress reach an impasse on a joint budget resolution, however, some are
concerned that action on spending and revenue bills may be significantly delayed.
The expedited features applicable to the consideration of budget resolutions and
reconciliation measures are a particular concern in the Senate, which often operates under
“extended debate,” where legislation may be considered without constraints on debate
time or the offering of nongermane amendments. Limits on debate time sometimes lead
to a situation referred to as “vote-arama,” where the Senate considers and disposes of
many amendments after official debate time has expired. Some Senators have proposed
various solutions to the “vote-arama” problem so that they have better opportunities to
understand the content of amendments and to debate them adequately.
The Senate also expedites reconciliation legislation by a device known as the Byrd
rule (which is Section 313 of the 1974 act). Under the Byrd rule, which prohibits the
inclusion of extraneous matter in reconciliation legislation, a Senator may raise a point
of order against a provision that meets any of the six definitions of extraneous matter
specified in the 1974 act. While the Byrd rule has been very effective in excluding
6 President Bush’s proposals in this regard, and on other budget process matters, are set forth in
the Budget of the United States Government, Fiscal Year 2005, Analytical Perspectives, Chapter
14, pp. 215-219.

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extraneous matter from reconciliation measures, some assert that the rule unduly limits
the flexibility needed to formulate effective legislative policies and disadvantages the
House in conference negotiations with the Senate on such legislation.7
As mentioned, Congress enforces budget resolution policies through points of order
on the floor of each chamber during the consideration of budget legislation. Points of
order, however, are not self-enforcing; a Member must raise a point of order on the floor.
In addition, points of order under the 1974 act may be waived or set aside by unanimous
consent. In the Senate, a motion to waive most Budget Act points of order requires a
three-fifths vote (60 Senators if no seats are vacant). In the House, points of order may
be waived by a special rule reported by the Rules Committee. Therefore, points of order
under the 1974 act may be waived by a simple majority. Some argue that a super-majority
vote should be required to waive Budget Act points of order in the House, to make it more
difficult to consider legislation that would violate the policies set forth in the budget
resolution. Others, however, argue that a super-majority threshold to waive Budget Act
points of order would obstruct the will of the majority in the House.
Annual Appropriations Process. Discretionary spending, which amounts to
about one-third of federal spending, is provided each year in regular, supplemental, and
continuing appropriations acts. Discretionary spending funds most of the routine
operations of federal agencies.
When a regular appropriations act or a continuing resolution is not in place after the
start of the fiscal year on October 1, an agency does not have the legal authority to incur
obligations in order to function and must shut down, resulting in the furlough of federal
employees and disruptions in service. To prevent a government shutdown (or the threat
of one) due to the expiration of funding, some Members have proposed establishing an
automatic continuing resolution. An automatic continuing resolution would provide an
uninterrupted source of funding for discretionary activities in the event one or more
regular appropriations acts are not enacted by the start of a new fiscal year. While such
a device could eliminate or reduce employee furloughs and service disruptions, some view
an automatic continuing resolution as substituting a formulaic response for deliberate and
informed decision-making.
Dynamic Scoring. In recent years, there has been controversy over whether
budgetary legislation, especially tax measures, would be scored more accurately using
“dynamic” rather than “static” estimates, as well as whether dynamic estimating is
feasible. At the beginning of the 108th Congress, the House adopted a rule (House Rule
XIII, Clause 3(h)(2)) to require the inclusion of dynamic revenue estimates in reports of
the Ways and Means Committee accompanying revenue legislation. Neither the new rule
nor the 1974 act requires the Budget Committee to use these estimates for budget
enforcement purposes; accordingly, some have proposed that the use of such estimates
be required and that a similar requirement be imposed in the Senate.
7 For example, see the explanations of the modifications to the Byrd rule proposed by H.R. 853,
the Comprehensive Budget Process Reform Act of 1999, which was introduced and defeated in
the 106th Congress: Comprehensive Budget Process Reform Act of 1999, report to accompany
H.R. 853, H.Rept. 106-198 (August 5, 1999), part 2 (House Budget Committee) and part 3
(House Rules Committee).

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Biennial Budgeting. While most authorizations are enacted on a multiyear cycle,
Congress acts on budget resolutions and appropriations acts annually. Biennial budgeting
proposals would change the cycle under which Congress acts on budget resolutions and
appropriations acts (and annual authorization acts) to two years. Biennial budgeting
proposals are intended to reduce the amount of time Congress spends on budgetary
legislation, to allow more time for congressional oversight of federal agencies and
programs, and generally to provide for more efficient budget decision-making. In the
view of some, a biennial approach could impair Congress’s ability to respond to changing
economic and budgetary circumstances.
Constitutional Amendments. Over the years, constitutional amendments have
been proposed to change the budget process in various ways, including requiring a
balanced budget, providing for a line-item veto, and limiting tax increases. First,
balanced budget amendment proposals generally would require that total federal spending
not exceed total federal revenues.8 Second, line-item veto amendment proposals would
provide the President the constitutional authority to disapprove items contained in
budgetary legislation signed into law. In 1996, Congress and the President enacted the
Line Item Veto Act, which provided the President statutory authority to cancel any dollar
amount of discretionary budget authority, any item of new direct spending, or any limited
tax benefit. In 1998, however, the U.S. Supreme Court found that this statutory authority
was unconstitutional. Third, tax limitation amendment proposals would require a super-
majority vote in each chamber to pass legislation that would increase revenues.9
Advocates of these budget reforms argue that the changes must be incorporated into
the Constitution in order to be enforced effectively, while critics maintain that they would
impede the ability to respond to compelling budget circumstances and would diminish
Congress’s “power of the purse” by delegating too much power to the President.
Budget Concepts. The federal budget reflects an amalgam of numerous concepts
and conventions developed over many years. Conceptual deficiencies, according to some,
may adversely affect policy-making (for example, some assert that budget scoring
concepts may lead to distortions in policy merely to comply with budget rules). A
comprehensive approach to evaluating federal budget concepts and conventions,
particularly with regard to the basic structure of the budget (e.g., how to group related
activities conducted by different agencies for purposes of budgetary analysis and
presentation, and how to account for long-term obligations of the government) has been
suggested by some inside and outside Congress. One proposal in this area would create
a new commission modeled after the 1967 President’s Commission on Budget Concepts.10
8 For a more comprehensive discussion of balanced budget constitutional amendment proposals,
see CRS Report 98-671, A Balanced Budget Constitutional Amendment: Procedural Issues and
Legislative History, by James V. Saturno.
9 For more information, see CRS Report 98-368, A Tax Limitation Constitutional Amendment:
Issues and Options Concerning a Super-Majority Requirement, by James V. Saturno.
10 U.S. Congress, House Committee on the Budget, Federal Budget Process: Structural Reform,
hearing, 107th Cong., 1st sess., July 19, 2001 (Washington: GPO, 2002), pp. 78-84.

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