Order Code RL34300
Pay-As-You-Go Procedures
for Budget Enforcement
December 31, 2007
Robert Keith
Specialist in American National Government
Government and Finance Division

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Pay-As-You-Go Procedures for Budget Enforcement
Summary
“Pay-as-you-go” (PAYGO) procedures play an important role in enforcing
budget policies with respect to the consideration of revenue and direct spending
legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent
the enactment of legislation that would cause, or increase, a deficit or reduce a
surplus. PAYGO procedures are not a comprehensive means of budget enforcement
because they do not apply to discretionary spending, which is provided in annual
appropriations acts; such spending is subject to other budget enforcement procedures.
Further, PAYGO rules deal only with the budgetary impact of legislation considered
during a session; they do not address changes in direct spending and revenue levels
under current law stemming from changes in the economy, demographic trends, and
other factors.
Over the years, several different PAYGO procedures have been used for budget
enforcement purposes. The PAYGO procedures have been based in statute as well
as congressional rules. Statutory and rules-based PAYGO procedures have been in
effect simultaneously at times, while at other times only one form of PAYGO
procedures was in effect. The scope and effect of PAYGO procedures have varied
depending on their form.
At present, the House and Senate each have their own PAYGO rules, but the
statutory procedures that existed for more than a decade effectively were terminated
in late 2002. Efforts to restore the statutory PAYGO procedures so far have been
unsuccessful, but new calls to restore them have been made in the 110th Congress.
The Senate has had its own PAYGO rule since 1993, while the House did not
adopt its own PAYGO rule until 2007. The House PAYGO rule, which is Clause 10
of Rule XXI, was adopted on January 5, 2007 as part of the “opening-day” rules
package (H.Res. 6). The Senate revised its PAYGO rule on May 17, 2007 as part of
the conference agreement on the FY2008 budget Resolution (Section 201 of
S.Con.Res. 21).
Although there are differences in the two rules, they essentially are the same in
their fundamental purpose — to discourage the consideration and enactment during
a session of direct spending and revenue legislation that is not deficit neutral. Both
rules prohibit the consideration of direct spending or revenue legislation that would
cause or increase a deficit in either of two time periods: (1) a six-year period
consisting of the current fiscal year, the budget year, and the four ensuing fiscal
years; and (2) an 11-year period consisting of the current year, the budget year, and
the ensuing nine fiscal years. Determinations regarding the cost of legislation for
purposes of enforcing the PAYGO rule are made by the respective Budget
Committee.

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Contents
Statutory PAYGO Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rules-Based PAYGO Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Senate PAYGO Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The House PAYGO Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. Comparison of Current House and Senate PAYGO Rules . . . . . . . . . . . 5

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Pay-As-You-Go Procedures
for Budget Enforcement
“Pay-as-you-go” (PAYGO) procedures play an important role in enforcing
budget policies with respect to the consideration of revenue and direct spending
legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent
the enactment of legislation that would cause, or increase, a deficit or reduce a
surplus. PAYGO procedures are not a comprehensive means of budget enforcement
because they do not apply to discretionary spending, which is provided in annual
appropriations acts; such spending is subject to other budget enforcement procedures.
Further, PAYGO rules deal only with the budgetary impact of legislation considered
during a session; they do not address changes in direct spending and revenue levels
under current law stemming from changes in the economy, demographic trends, and
other factors.
Over the years, several different PAYGO procedures have been used for budget
enforcement purposes. The PAYGO procedures have been based in statute as well
as congressional rules. Statutory and rules-based PAYGO procedures have been in
effect simultaneously at times, while at other times only one form of PAYGO
procedures was in effect. The scope and effect of PAYGO procedures have varied
depending on their form.
At present, the House and Senate each have their own PAYGO rules, but the
statutory procedures that existed for more than a decade effectively were terminated
in late 2002. Efforts to restore the statutory PAYGO procedures so far have been
unsuccessful, but new calls to restore them have been made in the 110th Congress.
Statutory PAYGO Procedures
The statutory PAYGO requirement was put into place by the Budget
Enforcement Act (BEA) of 1990, which amended an underlying law, the Balanced
Budget and Emergency Deficit Control Act of 1985; the PAYGO requirement was
established as Section 252 of the 1985 Act.1 Under the requirement, legislation
proposing new direct spending or decreasing revenues for a fiscal year could not
result in a net cost for that year. The PAYGO requirement generally was intended
to preserve the sizeable deficit reduction that had been achieved by the Omnibus
Budget Reconciliation Act of 1990, and to keep an on-budget deficit from being
increased or an on-budget surplus from being reduced.
1 The BEA of 1990 was Title XIII of the Omnibus Budget Reconciliation Act of 1990 (P.L.
101-508; November 5, 1990; see 104 Stat. 1388-573 through 630).

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The PAYGO balances for each fiscal year were maintained on a rolling PAYGO
“scorecard” that accumulated the budgetary effects of laws enacted during the session
and in prior years. The threshold test for a PAYGO sequester dealt with how
legislation affected the net cost for a fiscal year on the PAYGO scorecard, not how
it changed the surplus or deficit for that fiscal year in the federal budget.
The sequestration process, established by the 1985 Balanced Budget Act and
initially used to enforce the act’s annual deficit targets, was retained by the BEA of
1990 as the means of enforcing the PAYGO requirement (as well as the discretionary
spending limits in Section 251 of the 1985 Balanced Budget Act).2 Under the
sequestration process, the director of the Office of Management and Budget (OMB)
issued a sequestration report at the time the President’s budget was submitted to
Congress (the preview report), midway through the congressional session (the update
report), and within 15 days after the end of the session (the final report).
If the OMB director’s final sequestration report indicated that enacted direct
spending and revenue levels had incurred a net cost for the fiscal year beginning on
October 1 (the “budget year”) on the PAYGO scorecard, then the President was
required to immediately issue a sequestration order to remedy the violation through
automatic, largely across-the-board spending reductions. If a sequester under this
process was required, it had to occur within 15 calendar days after Congress
adjourned at the end of a session and on the same day as any sequestration tied to
enforcement of the discretionary spending limits. The sequester had to eliminate any
net positive balance on the PAYGO scorecard, for the budget year and the prior fiscal
year (the “current year”) combined, caused by the enactment of legislation during the
session and in prior years. The purpose behind adding in the balance for the current
year was to fully capture the budgetary effects of any direct spending and revenue
legislation enacted into law after the final sequestration report for a fiscal year had
been issued but before the next congressional session got underway, thereby closing
any enforcement loophole.
As extended in 1993 and 1997, the PAYGO requirement applied to legislation
enacted through the end of FY2002, but it covered the effects of such legislation
through FY2006.3 The PAYGO requirement effectively was terminated in December
2002 by the enactment of P.L. 107-312, which set all remaining balances on the
PAYGO scorecard to zero.4
The OMB director issued 12 final sequestration reports under the PAYGO
process, for FY1992-FY2003. The final combined balances on the PAYGO
2 For a more detailed discussion of the sequestration process, see CRS Report RL31137,
Sequestration Procedures Under the 1985 Balanced Budget Act, by Robert Keith.
3 The PAYGO requirement was extended through FY1998 by the Omnibus Budget
Reconciliation Act (OBRA) of 1993 and through FY2002 by the Budget Enforcement Act
(BEA) of 1997. OBRA of 1993 is P.L. 103-66 (August 10, 1993); see Title XIV at 107 Stat.
683-685. The BEA of 1997 is Title X of P.L. 105-33 (August 5, 1997), the Balanced Budget
Act of 1997; see 111 Stat. 677-712.
4 For more information on this topic, see CRS Report RS21378, Termination of the “Pay-
As-You-Go” (PAYGO) Requirement for FY2003 and Later Years, by Robert Keith.

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scorecard for all years, as determined by the OMB director, either were negative
amounts (reflecting net savings) or zero. Accordingly, no PAYGO sequester was
required for any fiscal year during this period.
While the OMB director’s final determinations indicated compliance with the
PAYGO requirement in all years, in some cases the balances reflected adjustments
due to emergency requirements, provided for under the process, or directed
scorekeeping provisions in law that intervened in the normal operation of the process
in order to prevent a sequester.
Section 252 of the 1985 Balanced Budget Act provided that any provision of
direct spending or revenue legislation could be designated by the President and
Congress as an “emergency requirement.” The budgetary impact of any provision so
designated was not scored on the PAYGO scorecard. Although the emergency
designation was used often for discretionary spending provisions in annual
appropriations acts, it rarely was used for direct spending or revenue provisions. The
most significant emergency designation under the PAYGO process applied to the Job
Creation and Worker Assistance Act (P.L. 107-147), which removed net costs of
nearly $89 billion from the PAYGO scorecard over the period covering FY2002-
FY2006.
Congress and the President enacted legislation intervening in the operation of
the PAYGO process largely to deal with two different types of problems. First, in
some years, the enactment of deficit-reduction measures would have resulted in large
negative balances on the PAYGO scorecard that were not intended. The savings
reflected in these balances could have been used to offset direct spending increases
or revenue reductions that were not contemplated by the budget resolution. Second,
in more recent years, the budget resolution recommended significant reductions in
revenues, coupled with increases in direct spending, that would have incurred
substantial positive balances (reflecting net costs) on the PAYGO scorecard.
As a result of these two concerns, Congress and the President enacted provisions
in at least seven different laws intervening significantly in the normal operation of
the PAYGO requirement. The interventions involved scorekeeping directions to the
OMB director that prohibited him from counting direct spending or revenue changes
in certain legislation on the PAYGO scorecard, or that instructed him to reduce
balances on the PAYGO scorecard or to set them to zero.
The seven measures containing directed scorekeeping provisions did not make
adjustments in the FY1991-FY1993 balances on the PAYGO scorecard. For
FY1994-FY2000, the net effect of the adjustments each year was to remove savings
balances from the scorecard or to not count savings provisions in legislation. These
nets effects ranged from $13.991 billion (for FY1999) to $140.221 billion (for
FY1998). The cumulative effect of all provisions to remove or not count savings
through FY2006 was $628.980 billion.
For FY2001-FY2006, the net effect of the adjustments each year was to remove
cost balances from the scorecard or to not count cost provisions in legislation. These
net effects ranged from $9.214 billion (for FY2002) to $150.790 billion (for

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FY2004). The cumulative effect of all provisions to remove or not count costs
through FY2006 was $731.527 billion.
Proposals have been made from time to time to restore the statutory PAYGO
requirement, but disagreements have centered on whether it should apply to both
direct spending and revenue legislation (as originally framed and generally favored
by Democrats) or only to direct spending legislation (as generally favored by
Republicans).
In the 108th Congress, President George W. Bush submitted draft legislation to
Congress, the Spending Control Act of 2004, that would have restored the
discretionary spending limits and the PAYGO requirement for direct spending
legislation only. The House Budget Committee reported a bill, H.R. 3973 (H.Rept.
108-442; March 19, 2004), reflecting the President’s proposal; a comparable
measure, H.R. 4663, was considered in the House on June 25, 2004, but failed to pass
by a vote of 146-268.
In the 110th Congress, interest has been renewed in restoring a comprehensive
PAYGO requirement.5 Section 508 (Sense of Congress Regarding Extension of the
Statutory Pay-As-You-Go Rule) of the FY2008 budget resolution, S.Con.Res. 21,
states: “It is the sense of Congress that in order to reduce the deficit Congress should
extend PAYGO consistent with provisions of the Budget Enforcement Act of 1990.”
No action has been taken so far in the 110th Congress on legislation to carry out this
sense-of-Congress statement.
Rules-Based PAYGO Procedures
The Senate has had its own PAYGO rule since 1993, while the House did not
adopt its own PAYGO rule until 2007. Consequently, for the first time since
PAYGO procedures were put into effect, both the House and Senate now have
PAYGO rules. Although there are differences in the two rules, they essentially are
the same in their fundamental purpose — to discourage the consideration and
enactment during a session of direct spending and revenue legislation that is not
deficit neutral. A comparison of the two rules is provided in Table 1 and the two
rules are discussed separately in more detail below.
5 The House Budget Committee held a hearing on the matter, “Perspectives on Renewing
Statutory PAYGO,” on July 25, 2007.

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Table 1. Comparison of Current House and Senate PAYGO Rules
Feature
House Rule
Senate Rule
Basis of Authority
House Rule XXI, Clause 10.
Section 201 of the FY2008 Budget Resolution (S.Con.Res. 21).
Prohibition under Rule
Not in order to consider legislation having “the net effect of
Not in order to consider legislation “that would increase the on-
increasing the deficit or reducing the surplus.”
budget deficit or cause an on-budget deficit.”
Legislation Subject to Rule
Any bill, joint resolution, amendment, or conference report
Any bill, joint resolution, amendment, motion, or conference
affecting direct spending or revenues.
that affects direct spending (as defined in the 1985 Balanced
Budget Act) or revenues.
Legislation Exempted from
None stated.
(1) budget resolutions, (2) any provision of legislation that
Rule
affects the full funding and continuation of the 1990 deposit
insurance guarantee commitment, and (3) legislation, excluding
reconciliation measures, that is covered by a “prior surplus”
achieved during the calendar year.
Periods of Enforcement
(1) current fiscal year and next five fiscal years; and
(1) current fiscal year and next five fiscal years; and
(2) current fiscal year and next ten fiscal years.
(2) current fiscal year and next ten fiscal years.
Budget Determinations
Made by the House Budget Committee.
Made by the Senate Budget Committee.
Waiver Requirement
None stated, but House rules may be waived by a special rule
Three-fifths of the Members, duly chosen and sworn
reported by the House Rules Committee, usually by a simple
(60 votes, if no seats are vacant).
majority vote, or by other techniques.
Expiration Date
None stated, but the House Rules are adopted,
with
September 30, 2017.
modifications, at the start of each Congress.

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The Senate PAYGO Rule. In 1993, the Senate decided to augment the
statutory PAYGO procedures with a new rule that would constrain the consideration
of revenue and direct spending legislation in the Senate. The original rule, Section
12(c) of the FY1994 budget resolution (H.Con.Res. 64), was intended to prevent the
deficit reduction expected to be achieved in a subsequent reconciliation bill from
being used to offset the costs of any new direct spending or revenue legislation.6
Specifically, it prohibited the consideration of any direct spending and revenue
legislation that would increase the deficit in the FY1994 budget resolution for any
fiscal year through FY1998, or would increase the deficit for any other fiscal year
through FY2003. In this initial form, the Senate’s PAYGO rule had no expiration
date.
Following the establishment of the PAYGO rule in 1993, the Senate modified
the rule several times for different reasons, including establishing and extending an
expiration date, expanding the rule’s application to curtail potential evasion, allowing
on-budget surpluses to be “used” to cover revenue reductions and direct spending
increases, and providing for exemptions to the rule.7
In May 2007, during the first session of the 110th Congress, the Senate revised
its PAYGO rule as part of the FY2008 budget resolution (Section 201 of S.Con.Res.
21).8 In its current form, the Senate PAYGO rule prohibits the consideration of direct
spending or revenue legislation that would cause or increase an on-budget deficit in
either of two time periods: (1) a six-year period consisting of the current fiscal year,
the budget year, and the four ensuing fiscal years; and (2) an 11-year period
consisting of the current year, the budget year, and the ensuing nine fiscal years.
Enforcement of the rule is monitored by the maintenance of a PAYGO “ledger” that
records the budgetary impact of direct spending and revenue legislation considered
during the session. Determinations regarding the cost of legislation for purposes of
enforcing the PAYGO rule are made by the Senate Budget Committee, based on the
baseline used in the most recently agreed to budget resolution.
Waivers of the Senate’s PAYGO rule require the affirmative vote of three-fifths
of the membership (60 votes, if no seats are vacant). The current expiration date of
the rule is September 30, 2017.
The revised Senate PAYGO rule is buttressed by another rule in the FY2008
budget resolution (Section 203 of S.Con.Res. 21) that would prohibit the
6 See the joint explanatory statement in H.Rept. 103-48, p. 47. The reconciliation bill
enacted later that session, P.L. 103-66 (the Omnibus Budget Reconciliation Act of 1993),
was estimated at the time as reducing the deficit by about $500 billion over FY1994-
FY1998.
7 The Senate’s PAYGO rule and its modification over the years is discussed in detail in CRS
Report RL31943, Budget Enforcement Procedures: Senate Pay-As-You-Go (PAYGO) Rule,
by Bill Heniff Jr.
8 See Concurrent Resolution on the Budget for Fiscal Year 2008; conference report to
accompany S.Con.Res. 21 (H.Rept. 110-153; May 16, 2007), pp. 12-13 (legislative text) and
pp. 96-97 and pp. 102-103 (joint explanatory statement). The Senate agreed to the
conference report on S.Con.Res. 21 on May 17, 2007, by a vote of 52-40.

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consideration of legislation increasing the deficit by more than $5 billion in any of
the four 10-year periods covering FY2018-FY2057. Both the PAYGO rule and the
long-term deficits rule can be waived only by the affirmative vote of three-fifths of
the membership (60 Senators, if no seats are vacant).
The House PAYGO Rule. The House established its own PAYGO rule in
2007, during the first session of the 110th Congress, following several unsuccessful
attempts to do so in prior years.
On January 4, 2007, the House began consideration of H.Res. 6, a measure
introduced by the House Majority Leader, Representative Steny Hoyer, establishing
the chamber’s rules for the 110th Congress. The measure was considered under the
terms of a special rule, H.Res. 5, introduced by the chair of the House Rules
Committee, Representative Louise Slaughter. The special rule, which had been
agreed to that day by a vote of 235-195, required that each of the five titles of H.Res.
6 be considered separately. Titles I and II of H.Res. 6 were agreed to on January 4,
and the remaining three titles were agreed to on January 5, thus completing action on
the measure.
Title IV (Fiscal Responsibility) sets forth several changes in the budget process,
including a bar against the consideration of a budget resolution containing
reconciliation directives that would increase the deficit or reduce the surplus (Section
402); a requirement that points of order under Title III of the 1974 Congressional
Budget Act apply to measures considered under a special rule even if they have not
been reported by committee (Section 403); and congressional earmark reform
(Section 404). Section 405 sets forth the House’s PAYGO rule, as Clause 10 of Rule
XXI.9 Title IV was agreed to by a vote of 280-152.10
The House’s PAYGO rule, like the Senate’s PAYGO rule, requires that
legislation affecting direct spending or revenues not increase the deficit over a six-
year period, including the current year, the upcoming fiscal year, and the four
following fiscal years, as well as an 11-year period (the previously cited period and
the ensuing five fiscal years).11 Unlike the Senate’s rule, the House’s rule also bars
the consideration of direct spending legislation that would reduce the surplus. The
rule is enforced on the basis of estimates made by the House Budget Committee
relative to the baseline projections made by the Congressional Budget Office under
established procedures.
9 For the consideration of Title IV of H.Res. 6, see the Congressional Record (daily ed.),
vol. 153, no. 2, January 5, 2007, pp. H60-H79, H82-H83.
10 The 280 affirmative votes included 232 Democrats and 48 Republicans; the 152 negative
votes included no Democrats and 152 Republicans.
11 The House’s PAYGO rule is discussed in more detail in CRS Report RL33850, The
House’s “Pay-As-You-Go” (PAYGO) Rule in the 110th Congress: A Brief Overview, by
Robert Keith.

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