The Statutory Pay-As-You-Go Act of 2010:
Summary and Legislative History

Robert Keith
Specialist in American National Government
June 8, 2010
Congressional Research Service
7-5700
www.crs.gov
R41157
CRS Report for Congress
P
repared for Members and Committees of Congress

The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Summary
On February 12, 2010, President Barack Obama signed H.J.Res. 45 into law, as P.L. 111-139. In
addition to an increase in the statutory limit on the public debt to $14.294 trillion, the act contains
two titles dealing with budgetary matters. Title I, referred to as the Statutory Pay-As-You-Go Act
of 2010, establishes a new budget enforcement mechanism generally requiring that direct
spending and revenue legislation enacted into law not increase the deficit. Title II, which contains
only a single section, pertains to routine investigations by the Comptroller General aimed at
eliminating duplicative and wasteful spending. This report provides a summary and legislative
history of P.L. 111-139, focusing on the features of the Statutory Pay-As-You-Go Act of 2010.
The Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO Act) establishes a process
intended, as Section 2 of the act states, “to enforce a rule of budget neutrality on new revenue and
direct spending legislation.” The budgetary effects of revenue and direct spending provisions
enacted into law, including both costs and savings, are recorded by the Office of Management and
Budget (OMB) on two PAYGO scorecards covering rolling five-year and 10-year periods (i.e., in
each new session, the periods covered by the scorecards roll forward one fiscal year). The
budgetary effects of PAYGO measures are determined by statements inserted into the
Congressional Record by the chairmen of the House and Senate Budget Committees and
referenced in the measures. As a general matter, the statements are expected to reflect cost
estimates prepared by the Congressional Budget Office (CBO). If this procedure is not followed
for a PAYGO measure, then the budgetary effects of the measure are determined by OMB.
Shortly after a congressional session ends, OMB finalizes the two PAYGO scorecards and
determines whether a violation of the PAYGO requirement has occurred (i.e., if a debit has been
recorded for the budget year on either scorecard). If so, the President issues a sequestration order
that implements largely across-the-board cuts in nonexempt direct spending programs sufficient
to remedy the violation by eliminating the debit. Many direct spending programs and activities
are exempt from sequestration. If no PAYGO violation is found, no further action occurs and the
process is repeated during the next session.
The new statutory PAYGO process was created on a permanent basis; there are no expiration
dates in the act. The process became effective upon enactment.
As a budget enforcement tool, the new statutory PAYGO process is aimed at preventing, or at
least discouraging, net deficit increases arising from the enactment of direct spending and revenue
legislation. Any costs designated as emergencies are excluded from the scorecards, and
significant costs associated with four specified categories of legislation may be excluded as well.
In addition, significant savings stemming from the Community Living Assistance Services and
Supports (CLASS) Act, establishing an insurance program for long-term care, are excluded from
the scorecards. Finally, debt service costs are excluded as well.
The statutory PAYGO process does not address deficit increases, stemming from changes in
direct spending or revenue levels, that are projected to occur under existing law. Other budget
enforcement procedures, such as the reconciliation process under the Congressional Budget Act
(CBA) of 1974, may be used to reduce deficit levels projected under existing law. Further, the
statutory PAYGO process does not apply to discretionary spending, which is provided in annual
appropriations acts.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Contents
Background ................................................................................................................................ 1
Legislative History...................................................................................................................... 3
House Action on H.R. 2920 in 2009 ...................................................................................... 3
House Action on Other Measures in 2009.............................................................................. 4
Medicare Physician Payment Reform (H.R. 3961)........................................................... 4
Estate Tax Relief (H.R. 4154).......................................................................................... 4
“Jobs for Main Street Act” (H.R. 2847) ........................................................................... 5
House and Senate Action on H.J.Res. 45 ............................................................................... 5
Initial House Action (2009) ............................................................................................. 5
Initial Senate Action (2010)............................................................................................. 6
Final House Action (2010) .............................................................................................. 7
Approval by President Obama......................................................................................... 8
Summary of the Act .................................................................................................................... 8
Overview .............................................................................................................................. 8
Definition of PAYGO Legislation........................................................................................ 10
Assessing the Budgetary Effects of PAYGO Legislation ...................................................... 11
Scoring Rules................................................................................................................ 11
Legislative Procedures Regarding CBO Cost Estimates................................................. 13
PAYGO Scorecards ............................................................................................................. 14
Annual PAYGO Report and Sequestration Order ................................................................. 15
Coverage and Exemptions................................................................................................... 16
Sequestration Calculations .................................................................................................. 18
Limitation on Changes to the Social Security Act ................................................................ 19

Figures
Figure 1. Issuance of the Annual PAYGO Report and Sequestration Order................................. 17

Tables
Table 1. Contents Listing of P.L. 111-139 .................................................................................. 20
Table 2. Hypothetical Example of Recording a Cost Estimate for a PAYGO Act on the
PAYGO Scorecards ................................................................................................................ 22
Table 3. Hypothetical Example of Sequestration Calculations for a Fiscal Year.......................... 23

Contacts
Author Contact Information ...................................................................................................... 23

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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

n February 12, 2010, President Barack Obama signed H.J.Res. 45 into law, as P.L. 111-
139. In addition to an increase in the statutory limit on the public debt to $14.294 trillion,
O the act contains two titles dealing with budgetary matters. Title I, referred to as the
Statutory Pay-As-You-Go Act of 2010, establishes a new budget enforcement mechanism
generally requiring that direct spending and revenue legislation enacted into law not increase the
deficit. Title II, which contains only a single section, pertains to routine investigations by the
Comptroller General aimed at eliminating duplicative and wasteful spending.1 This report
provides a summary and legislative history of the P.L. 111-139, focusing on the features of the
Statutory Pay-As-You-Go Act of 2010.
Background
The congressional budget process was established by the enactment of the Congressional Budget
and Impoundment Control Act of 1974 (P.L. 93-344), which created the House and Senate Budget
Committees and the Congressional Budget Office, and required the annual adoption by Congress
of a concurrent resolution on the budget.2 After a decade’s experience with the budget resolution
process, Congress and the President enacted the Balanced Budget and Emergency Deficit Control
Act (BBEDCA) of 1985 (Title II of P.L. 99-177), in large part to establish the goal of achieving a
balanced budget in the near term and to bolster budget enforcement. The central feature of the
1985 act, in Part C, was a series of declining deficit targets, expected to lead to a balanced budget
by FY1991. The deficit targets were enforced by sequestration, a process involving largely
across-the-board spending cuts triggered automatically if a deficit target was not met.
Congress and the President were not successful in meeting the deficit targets and, after five years,
they established a “pay-as-you-go” (PAYGO) process and limits on discretionary spending under
the Budget Enforcement Act of 1990 (Title XIII of P.L. 101-508).3 These changes took the form
of amendments to Part C of BBEDCA of 1985.
The two new mechanisms effectively superseded the deficit targets, but sequestration was
retained as the means of enforcing them. The statutory PAYGO process applied to direct spending
and revenue legislation, while the discretionary spending limits applied to annual appropriations
acts. Direct spending, also referred to as mandatory spending, is provided for the most part in
substantive laws under the jurisdiction of the House and Senate legislative committees. Direct
spending principally funds entitlement programs, such as Social Security, Medicare, federal
employee retirement, and unemployment compensation, but it also funds programs of a
mandatory nature that are not entitlements. Discretionary spending, on the other hand, is provided
in annual appropriations acts under the jurisdiction of the House and Senate Appropriations
Committees. Discretionary spending for the most part funds the routine operations of federal

1 Section 201 states: “The Comptroller General of the Government Accountability Office shall conduct routine
investigations to identify programs, agencies, offices, and initiatives with duplicative goals and activities within
Departments and governmentwide and report annually to Congress on the findings, including the cost of such
duplication and with recommendations for consolidation and elimination to reduce duplication identifying specific
rescissions.”
2 For a detailed explanation of the congressional budget process, see CRS Report 98-721, Introduction to the Federal
Budget Process
, by Robert Keith, and CRS Report RL30297, Congressional Budget Resolutions: Historical
Information
, by Bill Heniff Jr. and Justin Murray.
3 The statutory PAYGO process established in 1990 is explained in CRS Report R41005, The Statutory PAYGO
Process for Budget Enforcement: 1991-2002
, by Robert Keith.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

departments and agencies. In some instances, such as for Medicaid, a direct spending program
lacks its own funding mechanism and relies on funding provided in an annual appropriations act
(but funding for such “appropriated entitlements” is not regarded as discretionary spending).
The statutory PAYGO process and discretionary spending limits were extended by the Omnibus
Budget Reconciliation Act of 1993 (P.L. 103-66) and by the Budget Enforcement Act of 1997
(Title X of P.L. 105-33); in all, they operated from calendar years 1991 through late 2002. The
discretionary spending limits expired on September 30, 2002, and the statutory PAYGO process
effectively was terminated on December 2, 2002, with the enactment of P.L. 107-312, which
fixed the balances for the remaining years on the PAYGO scorecard (FY2003-FY2006) at zero.4
The remaining provisions of Part C of BBEDCA of 1985 expired on September 30, 2006; Part C
was not repealed, however, so it has remained in the U.S. Code for several years as obsolete law.
Beginning in 2003, proposals were made from time to time to restore the statutory PAYGO
process, but disagreements 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 PAYGO process for direct spending
legislation but not for revenue legislation; in addition, the proposal would have restored the
discretionary spending limits. 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 was 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, stated: “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.” A similar provision was included, as Section 515, in the FY2009
budget resolution (S.Con.Res. 70).
In addition to the statutory PAYGO process, the House and Senate have relied upon their own,
internal PAYGO rules.6 The Senate established its PAYGO rule in 1993 and revised it several
times over the years.7 The House adopted a PAYGO rule in 2007 and revised it in 2009.8 The
Senate revised its PAYGO rule in 2007 so that the rules of the two chambers would operate in a
similar manner; both rules currently are in effect.

4 For more information on the termination of the statutory PAYGO process, see CRS Report RS21378, Termination of
the "Pay-As-You-Go" (PAYGO) Requirement for FY2003 and Later Years
, by Robert Keith.
5 The House Budget Committee held a hearing on the matter, “Perspectives on Renewing Statutory PAYGO,” on July
25, 2007.
6 The prior statutory PAYGO process and the House and Senate PAYGO rules are discussed in CRS Report RL34300,
Pay-As-You-Go Procedures for Budget Enforcement, by Robert Keith.
7 The Senate PAYGO rule is explained in CRS Report RL31943, Budget Enforcement Procedures: Senate Pay-As-You-
Go (PAYGO) Rule
, by Bill Heniff Jr.
8 The House PAYGO rule is explained 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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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

The Senate, but not the House, also has established aggregate limits on discretionary spending,
subject to a point of order, as part of the annual budget resolution. Proposals have been offered in
each chamber, as well, to restore the statutory discretionary spending limits.
Legislative History
On June 9, 2009, President Obama announced that he would submit a PAYGO proposal to
Congress, the Statutory Pay-As-You-Go Act of 2009, that would restore a process applying to
both direct spending and revenue legislation.9 The House responded to the President’s proposal
first, passing a bill the following month and incorporating it into several other measures toward
the end of the session. In January 2010, the Senate added a statutory PAYGO proposal to a
measure increasing the debt limit; the House concluded action on the measure in early February,
and President Obama signed it into law shortly thereafter.
House Action on H.R. 2920 in 2009
House Majority Leader Steny Hoyer introduced President Obama’s proposal on June 17 as H.R.
2920, the Statutory Pay-As-You-Go Act of 2009.
On June 25, the House Budget Committee held a hearing on the proposal, receiving testimony
from OMB Director Peter Orszag, among others.10
On July 22, the House considered and passed H.R. 2920, the Statutory Pay-As-You-Go Act of
2009. The bill differed in significant respects from the proposal submitted by President Obama.11
Prior to action on the bill, the House, by a vote of 243-182, considered and agreed to a special
rule, H.Res. 665, providing for the bill’s consideration. A modified substitute amendment was
incorporated into the bill automatically under a “self-executing” provision in the rule, and a
substitute amendment offered by Representative Paul Ryan, the ranking minority member of the
House Budget Committee, was defeated, by a vote of 196-234.12 Following the defeat of a motion

9 The legislative text of the proposal, along with a section-by-section summary and related documentation, is provided
on the OMB website at http://www.whitehouse.gov/omb/news_060909_paygo/.
10 The hearing testimony is accessible on the House Budget Committee website at http://budget.house.gov/
hearings2009.aspx#06182009.
11 On July 14, 2009, the Congressional Budget Office issued a document, An Analysis of H.R. 2920, the Statutory Pay-
As-You-Go Act of 2009,
as an attachment to a letter from Director Douglas Elmendorf to Representative Paul Ryan, the
ranking minority member of the House Budget Committee. The document is available on the CBO website at
http://www.cbo.gov/ftpdocs/104xx/doc10434/07-14-PAYGO.pdf.
In addition, CBO issued on July 22, 2009, a letter from the director to Representative Steny Hoyer, the House Majority
Leader, on the substitute amendment proposed to H.R. 2920. The document is available on the CBO website at
http://www.cbo.gov/ftpdocs/104xx/doc10466/hr2920.pdf.
12 The substitute amendment made in order under H.Res. 665 was printed in Part A (pp. 3-18) of the report of the
House Rules Committee (H.Rept. 111-217, July 21, 2009); the modification to the substitute amendment was printed in
Part B (p. 18) and the Ryan-submitted amendment was printed in Part C (pp. 18-26). The three amendments were
summarized on pp. 2 and 3 of the report.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

to recommit with instructions offered by Representative Ryan, by a vote of 196-234, the House
passed the bill, by a vote of 265-166.13
House Action on Other Measures in 2009
Section 421 of the budget resolution for FY2010 (S.Con.Res. 13) set forth a procedure, applicable
only in the House, effectively exempting from the House PAYGO rule and other budget
enforcement procedures the costs of legislation in four policy areas: (1) payments to physicians
under Medicare (“Doc Fix”), (2) middle class tax reform; (3) reform of the alternative minimum
tax (AMT), and (4) reform of the estate and gift tax. In each case, a limitation on the amount of
costs subject to exemption was specified in Section 421.14
In response to concerns regarding the need for strengthened fiscal discipline, the House
leadership agreed to incorporate the House-passed text of H.R. 2920 into other measures dealing
with the four policy areas identified in Section 421 of the FY2010 budget resolution or further
economic stimulus initiatives. During the last two months of the 2009 session, the text of H.R.
2920, as passed by the House, was incorporated into three different measures.
Medicare Physician Payment Reform (H.R. 3961)
In the first instance, the House considered a “Doc Fix” measure, H.R. 3961 (the Medicare
Physician Payment Reform Act of 2009), on November 19, 2009, passing it by a vote of 243-183.
Under the terms of the special rule governing consideration of the bill, H.Res. 903, the text of the
Statutory Pay-As-You-Go Act of 2009, as passed earlier by the House, was added to the
engrossed version of H.R. 3961, as Division B.15
Estate Tax Relief (H.R. 4154)
In the second instance, the House considered a measure dealing with the estate tax, H.R. 4154
(the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009), on
December 3, 2009, passing it by a vote of 225-200. Under the terms of the special rule governing
consideration of the bill, H.Res. 941, the text of the Statutory Pay-As-You-Go Act of 2009, as
passed earlier by the House, was added to the engrossed version of H.R. 4154, as Division B.16

13 CQ Today, “Pay-as-You-Go Plan Passes House,” by David Clarke, July 22, 2009. See also: BNA’s Daily Report for
Executives
, “Conrad Reiterates His Opposition to House Pay-As-You-Go Bill; Floor Action Seen July 22,” by Jonathan
Nicholson, July 22, 2009, 138 DER G-3; and CongressNow, “House PAYGO Bill Faces Steep Senate Climb,” by Geof
Koss, July 22, 2009.
14 The limitations under Section 421 were modified by Section 2 of H.Res. 665, the rule providing for the consideration
of H.R. 2920, the Statutory Pay-As-You-Go Act of 2009, as they applied to the “Doc Fix” and “AMT” exemptions.
15 See pages 14-53 of the printed bill, as passed by the House and placed on the Senate calendar (Jan. 20, 2010). In
subsequent action on H.R. 3961, the Senate replaced the “Doc Fix” and PAYGO language with one-year extensions of
expiring provisions of the USA PATRIOT Improvement and Reauthorization Act of 2005 and the Intelligence Reform
and Terrorism Prevention Act of 2004. President Obama signed the measure into law on February 27, 2010, as P.L.
111-141.
16 See pages 4-43 of the printed bill, as passed by the House and placed on the Senate calendar (Jan. 20, 2010). As of
this writing, the Senate has not taken any further action on H.R. 4154.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

“Jobs for Main Street Act” (H.R. 2847)
Finally, in the third instance, the House considered a package of measures under a strategy to
bring the 2009 session to a close. On December 16, 2009, the House Rules Committee reported a
special rule, H.Res. 976, providing for the consideration of H.R. 3326, the Defense
Appropriations Act for FY2010, as well as several other measures, including H.J.Res. 64, a
further continuing resolution for FY2010; H.R. 4314, a measure increasing the limit on the public
debt; and H.R. 2847, a measure that originated as the Commerce-Justice-Science Appropriations
Act for FY2010 but that was being used as a “shell” for other legislation.17 The special rule
provided for the consideration of a House amendment to the Senate amendment to the House-
passed version of H.R. 2847 that would incorporate into the bill, as a substitute, the text of the
“Jobs for Main Street Act, 2010.” Further, Section 5 of the special rule required that in the
engrossment of the House amendment, the text of the Statutory Pay-As-You-Go Act of 2009, as
passed earlier by the House, be added thereto. The House agreed to H.Res. 976 on December 16,
2009, by a vote of 228-201.
Later on December 16, by a vote of 217-212, the House agreed to the motion offered by
Representative David Obey, chairman of the House Appropriations Committee, that the House
agree to the amendment to the Senate amendment to H.R. 2847. Pursuant to the special rule, the
text of the statutory PAYGO act was incorporated into H.R. 2847, as Division B.18
House and Senate Action on H.J.Res. 45
The House originated H.J.Res. 45 in April 2009 as a measure solely providing an increase in the
limit on the public debt. In January 2010, the Senate considered and passed the measure,
modifying the debt-limit increase, adding revised language establishing a statutory PAYGO
process, and incorporating another budget-related provision. In early February, the House
accepted the Senate’s modifications and cleared the measure for the President.
Initial House Action (2009)
House Joint Resolution 45 originated on April 29, 2009, when the House and Senate reached final
agreement on S.Con.Res. 13, the FY2010 budget resolution.
Under House Rule XXVIII (commonly referred to as the “Gephardt Rule”), whenever the two
chambers reach final agreement on a budget resolution, the Clerk of the House automatically
engrosses and transmits to the Senate a joint resolution changing the limit on the public debt to
the level set forth in the budget resolution.19 The rule provides that the joint resolution is deemed

17 The regular appropriations for Commerce-Justice-Science programs for FY2010 were provided instead in another
act, the Consolidated Appropriations Act, 2010. For further information on this act, see CRS Report R41000,
Consolidated Appropriations Act for FY2010 (P.L. 111-117): An Overview, by Robert Keith.
18 See pages 120-153 of the printed bill, incorporating the House amendment to the Senate amendment to the House-
passed bill (Dec. 16, 2009). The amendment exchange between the House and Senate on H.R. 2847 continued into
2010, but the statutory PAYGO text was removed from the bill.
19 For additional information on debt-limit adjustment procedures, see CRS Report RL31913, Developing Debt-Limit
Legislation: The House’s “Gephardt Rule”
, by Bill Heniff Jr.; and CRS Report RS21519, Legislative Procedures for
Adjusting the Public Debt Limit: A Brief Overview
, by Bill Heniff Jr.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

to have passed the House by the same vote by which the House adopted the conference report on
the budget resolution.
As deemed passed by the House on April 29, H.J.Res. 45 provided for an increase in the debt
limit to $13.029 trillion, an increase of $925 billion from the limit of $12.104 trillion set in
Section 1604 (123 Stat. 366) of the American Reinvestment and Recovery Act of 2009 (P.L. 111-
5; February 17, 2009). The measure was transmitted to the Senate on April 30 and referred to the
Senate Finance Committee.
As the House and Senate worked to bring the 2009 session to a close, another increase in the limit
on the public debt was enacted. Representative Charles Rangel, the chairman of the House Ways
and Means Committee, introduced H.R. 4314 on December 15. The bill provided for an increase
in the debt limit of $290 billion, from $12.104 trillion to $12.394 trillion. The House passed the
bill without amendment on December 16, by a vote of 218-214, and the Senate passed it without
amendment on December 24, by a vote of 60-39 (under a unanimous consent agreement entered
into on December 22, the amendment had to secure at least 60 votes to be adopted). On
December 28, 2009, President Obama signed H.R. 4314 into law, as P.L. 111-123.
Initial Senate Action (2010)
On December 22, 2009, the Senate entered into a unanimous consent agreement providing for the
consideration of H.J.Res. 45 early in the following session, on January 20, 2010. Several of the
amendments made in order under the agreement pertained to budget enforcement issues,
including an amendment to be offered by Senate Majority Leader Harry Reid on “pay go.”20 All
of the amendments were subject to a 60-vote threshold for passage.
The Senate considered H.J.Res. 45 during six days over the period covering January 20 through
January 28. On January 20, the measure was discharged from the Senate Finance Committee and
taken up by the Senate by unanimous consent. Senate Amendment 3299, a substitute for the
measure developed by Senate Majority Leader Harry Reid, became the underlying vehicle to
which the other amendments were offered. The amendment changed the limit on the public debt
proposed by the House, $13.029 trillion, to a level expected to suffice for the remainder of 2010,
$14.294 trillion.
The Senate agreed to three amendments to Senate Amendment 3299. The most extensive
amendment, Senate Amendment 3305, was offered by Majority Leader Reid and set forth the
Statutory Pay-As-You-Go Act of 2010. The Senate agreed to the amendment on January 28, by a
vote of 60-40, and ultimately it was incorporated into H.J.Res. 45 as Title I.
The second amendment, Senate Amendment 3300, was offered by Senator Max Baucus, the
chairman of the Finance Committee, and was intended to protect Social Security. It proposed to
do so by establishing a point of order in the House and Senate against the consideration of “any
bill or resolution pursuant to any expedited procedure to consider the recommendations of a Task
Force for Responsible Fiscal Action or other commission that contains recommendations with
respect to” the Social Security program. The Senate agreed to the amendment, as modified, on
January 26, by a vote of 97-0, and ultimately it was incorporated into H.J.Res. 45 at the end of
Title I, as Section 13.

20 See the remarks of Senator Reid in the Congressional Record (daily ed.) of December 22, 2009, at p. S13747.
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The final amendment agreed to by the Senate was one of four divisions of Senate Amendment
3303, offered by Senator Tom Coburn. The amendment, which proposed to rescind $120 billion
in duplicative and wasteful spending, was modified (by striking Sections 17 and 18) and divided
into four divisions by unanimous consent. On January 26, the Senate agreed to Division I of the
amendment, consisting of Section 1, by a vote of 94-0, and ultimately it was incorporated into
H.J.Res. 45 as Title II.
In addition to the amendments to Senate Amendment 3299 that were agreed to, the Senate
considered several other amendments that failed to garner the minimum of 60 votes that was
required by the earlier unanimous consent agreement:
• Senate Amendment 3301, offered by Senator John Thune, would have terminated
authority under the Troubled Asset Relief Program (TARP); on January 21, it
failed by a vote of 53-45 and was withdrawn;
• Senate Amendment 3302, offered by Senator Kent Conrad, chairman of the
Senate Budget Committee, would have established a Bipartisan Task Force for
Responsible Fiscal Action; on January 26, it failed by a vote of 53-46 and was
withdrawn;
• Senate Amendment 3303, offered by Senator Tom Coburn, as indicated
previously, was divided into four divisions and one was agreed to; on January 26,
each of the remaining three divisions failed (Division II, by a vote of 46-48,
Division III, by a vote of 33-61, and Division IV, by a vote of 37-57) and were
withdrawn;
• Senate Amendment 3306, offered by Senator Max Baucus, would have
established a Bipartisan Task Force for Responsible Fiscal Action; on January 26,
the amendment was withdrawn;
• Senate Amendment 3308, offered by Senator Jeff Sessions, would have added a
new section to the Congressional Budget Act of 1974 establishing discretionary
spending limits for FY2010-FY2014; on January 28, it failed by a vote of 56-44
and was withdrawn; and
• Senate Amendment 3309, offered by Senator Sam Brownback, would have
established a Commission on Congressional Budgetary Accountability and
Review of Federal Agencies; on January 28 it failed by a vote of 51-49 and was
withdrawn.
During Senate consideration of the measure, motions to invoke cloture on Senate Amendment
3299, Senate Amendment 3305, and the measure itself, H.J.Res. 45, were presented but later
withdrawn.
On January 28, the Senate agreed to Senate Amendment 3299, as amended, by a vote of 60-40,
and then passed H.J.Res. 45, as amended, by a vote of 60-39.
Final House Action (2010)
The House completed congressional action on H.J.Res. 45 on February 4, 2010, when it agreed to
the Senate amendment to the House-passed measure by a vote of 233-187.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

The House first agreed to a special rule, H.Res. 1065, providing for the consideration of the
Senate amendment, by a vote of 217-212.21 During consideration of H.Res. 1065 in the House
Rules Committee the day before, a motion by Representative Pete Sessions to make in order an
amendment proposed by Representative Randy Neugebauer was defeated by a vote of 4-7. The
Neugebauer amendment would have established limits on discretionary spending and a
requirement that expansions of direct spending be offset by reductions in other direct spending.
Pursuant to H.Res. 1065, the motion to agree to the Senate amendment was divided into two
portions. The first portion, adopting the debt-limit increase (“the matter preceding Title I of the
Senate amendment”), went into effect automatically upon agreement to the special rule. The
second portion, adopting the remainder of the Senate amendment (Titles I and II), was agreed to
by a vote of 233-187.
Approval by President Obama
On February 12, 2010, President Barack Obama signed H.J.Res. 45 into law, as P.L. 111-139 (124
Stat. 8-30). A one-line press statement was issued that day, followed the next day by a short
discussion of the “restoration of pay-as-you-go” by President Obama in his weekly radio
address.22
Summary of the Act
Following a brief overview of the act, the main features of the statutory PAYGO process are
discussed in more detail below by major topic. Detailed explanations of the act were prepared by
the House and Senate Budget Committees and by OMB.23
Overview
The Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO Act) establishes a process
intended, as Section 2 of the act states, “to enforce a rule of budget neutrality on new revenue and
direct spending legislation.” The budgetary effects of revenue and direct spending provisions
enacted into law, including both costs and savings, are recorded by the Office of Management and
Budget (OMB) on two PAYGO scorecards covering rolling five-year and 10-year periods (i.e., in
each new session, the periods covered by the scorecards roll forward one fiscal year). The
budgetary effects of PAYGO measures are determined by statements inserted into the
Congressional Record by the chairmen of the House and Senate Budget Committees and
referenced in the measures. As a general matter, the statements are expected to reflect cost

21 See the report of the House Rules Committee to accompany H.Res. 1065, H.Rept. 111-411 (February 3, 2010).
22 The press statement is available at http://www.whitehouse.gov/the-press-office/statement-press-secretary-hj-res-45;
the weekly radio address is available at http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-
praises-restoration-pay-you-go.
23 The chairmen of the House and Senate Budget Committees inserted largely identical documents, Section-by-Section
Analysis of the Statutory Pay-As-You-Go Act of 2010
, into the Congressional Record (daily ed.); see the remarks of
Senator Kent Conrad, January 28, 2010, pp. S291-S295, and the remarks of Representative John Spratt, February 4,
2010, pp. H581-H585. A document prepared by OMB, The Statutory Pay-As-You-Go Act of 2010: A Description, is
available on the agency’s website at http://www.whitehouse.gov/omb/paygo_description/. The document prepared by
the House Budget Committee also is available on the OMB website.
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estimates prepared by the Congressional Budget Office (CBO). If this procedure is not followed
for a PAYGO measure, then the budgetary effects of the measure are determined by OMB.
Shortly after a congressional session ends, OMB finalizes the two PAYGO scorecards and
determines whether a violation of the PAYGO requirement has occurred (i.e., if a debit has been
recorded for the budget year on either scorecard).24 If so, the President issues a sequestration
order that implements largely across-the-board cuts in nonexempt direct spending programs
sufficient to remedy the violation by eliminating the debit. Many direct spending programs and
activities are exempt from sequestration. If no PAYGO violation is found, no further action occurs
and the process is repeated during the next session.
The new statutory PAYGO process was created on a permanent basis; there are no expiration
dates in the act. The process became effective upon enactment.
As a budget enforcement tool, the new statutory PAYGO process is aimed at preventing, or at
least discouraging, net deficit increases arising from the enactment of direct spending and revenue
legislation. Any costs designated as emergencies are excluded from the scorecards, and
significant costs associated with four specified categories of legislation may be excluded as well.
In addition, significant savings stemming from the Community Living Assistance Services and
Supports (CLASS) Act, establishing an insurance program for long-term care, are excluded from
the scorecards. Finally, debt service costs are excluded as well.
The statutory PAYGO process does not address deficit increases, stemming from changes in
direct spending or revenue levels, that are projected to occur under existing law. Other budget
enforcement procedures, such as the reconciliation process under the Congressional Budget Act
(CBA) of 1974, may be used to reduce deficit levels projected under existing law. Further, the
statutory PAYGO process does not apply to discretionary spending, which is provided in annual
appropriations acts.
The Statutory PAYGO Act consists of 13 sections, as shown in Table 1, at the end of the report.
The act blends together new, freestanding law with amendments or references to sections in the
CBA of 1974 and the Balanced Budget and Emergency Deficit Control Act (BBEDCA) of 1985.
In the case of the CBA of 1974, Section 3, which sets forth definitions used in the congressional
budget process, is made applicable to the new statutory PAYGO process, and Section 308, which
pertains to CBO cost estimates and other reports on budgetary legislation, is amended.
The following sections of BBEDCA of 1985 are made applicable to the new statutory PAYGO
process, in some cases with modification:
• Section 250 (Table of Contents; Statement of Budget Enforcement Through
Sequestration; Definitions);
• Section 255 (Exempt Programs and Activities);
• Section 256 (General and Special Sequestration Rules);

24 Section 250(c)(8) of BBEDCA of 1985 defines the term budget year as “with respect to a session of Congress, the
fiscal year of the Government that starts on October 1 of the calendar year in which that session begins.” The fiscal
year runs from October 1 to September 30 and is named for the calendar year in which it ends (e.g., FY2011 will end
on September 30, 2011). The current year is the fiscal year before the budget year, and an outyear is a fiscal year after
the budget year.
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• Section 257 (The Baseline); and
• Section 274 (Judicial Review).25
The core procedural elements of the Statutory PAYGO Act are set forth as new, freestanding law,
particularly in Section 4 (PAYGO Estimates and PAYGO Scorecards), Section 5 (Annual Report
and Sequestration Order), Section 6 (Calculating a Sequestration), and Section 7 (Adjustment for
Current Policies).26
Definition of PAYGO Legislation
The Statutory PAYGO Act defines the term PAYGO legislation (and a PAYGO Act) as “a bill or
joint resolution that affects direct spending or revenues relative to the baseline” (Section 3(7)).
Under this definition, several types of measures fall within the purview of the statutory PAYGO
process: (1) revenue measures; (2) direct spending measures; (3) hybrid measures, which
combine revenue and direct spending provisions; and (4) annual appropriations acts that include
direct spending provisions (with effects after the budget year), revenue provisions, or both. In
short, any measure that affects direct spending or revenues is PAYGO legislation for purposes of
the Statutory PAYGO Act.
Revenue measures principally are under the jurisdiction of the House Ways and Means
Committee and the Senate Finance Committee. Revenue legislation may amend the Internal
Revenue Code of 1986 (Title 26 of the United States Code); the revenue portions of laws
governing programs such as Social Security and Medicare; laws dealing with tariffs and trade
agreements with other countries; and other laws. In some instances, other House and Senate
committees have jurisdiction over legislation affecting fines, certain user fees, or other
transactions that are treated as revenues, but such legislation usually affects a very small portion
of total revenues.
Many legislative committees in the House and Senate exercise jurisdiction over direct spending
legislation. Most direct spending involves entitlement programs that are funded automatically by
means of permanent appropriations in substantive law; legislative action may occur to modify
such programs, notwithstanding their permanent funding status. In other instances, direct
spending is provided through legislative action that occurs on a regular cycle, such as for the
periodic farm bill or highway bill, or on an irregular basis, such as for extensions of
unemployment compensation during economic downturns.
Hybrid measures may fall within the jurisdiction of a single committee in a chamber (generally
the House Ways and Means or Senate Finance Committees), such as in the case of measures
affecting Medicare revenues and spending, or fall within the jurisdiction of two or more
committees, such as in the case of measures affecting the revenues and spending of transportation
trust funds.

25 Sections of BBEDCA of 1985 not cited in this list include Sections 251 and 253, which pertained to discretionary
spending limits and deficit targets, respectively, and are not relevant to the PAYGO process; and Sections 252 and 254,
which established the original PAYGO procedures and requirements for sequestration reports and orders, respectively,
and were replaced by new sections in the 2010 act.
26 The new provisions of law in the Statutory PAYGO Act are codified at 2 U.S.C. 931-939. Amendments to existing
law in Part C of BBEDCA of 1985 affect 2 U.S.C. 900 and 905-906; amendments to the CBA of 1974 affect 2 U.S.C.
639.
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Finally, annual appropriations acts, including regular, supplemental, and continuing
appropriations measures, provide discretionary spending and are under the jurisdiction of the
House and Senate Appropriations Committees. Discretionary spending is not subject to the
statutory PAYGO process, but is controlled by other budget enforcement procedures. Some
annual appropriations acts, however, may serve as a vehicle for revenue or direct spending
provisions under the jurisdiction of other House and Senate Committees. Section 3(4)(C) of the
act provides that provisions in annual appropriations acts that “make outyear modifications to
substantive law” (except those in which the outlay effects net to zero over a six-year period,
including the current year) are covered under the statutory PAYGO process. A provision in an
annual appropriations act that affected direct spending only in the current year or the budget year
would not be subject to the statutory PAYGO process.27
Assessing the Budgetary Effects of PAYGO Legislation
The budgetary effects of PAYGO legislation are defined in the act as “the amount by which
PAYGO legislation changes outlays flowing from direct spending or revenues relative to the
baseline” (Section 3(4)(A)). There are two types of budgetary effects—costs, which involve
outlay increases or revenue decreases, and savings, which involve outlay decreases or revenue
increases. Two elements in assessing the budgetary effects of PAYGO legislation, scoring rules
and legislative procedures regarding CBO cost estimates, are addressed separately below.
Scoring Rules
In scoring PAYGO legislation, several rules must be followed. First, the statutory PAYGO process
addresses only those budgetary effects that are on budget; the budgetary effects of off-budget
entities are not counted (Section 3(4)(B)). A program is given off-budget status only through a
specific designation in law. At present, the off-budget entities are the Old-Age and Survivors
Insurance Trust Fund and the Disability Insurance Trust Fund under Social Security, and the
Postal Service Fund. These programs also are accorded off-budget status in the congressional
budget process and in the President’s budget.
Second, the direct spending and revenue impacts of provisions in legislation that are designated
as emergency requirements under the act are not counted as budgetary effects (Section 4(g)(4)).
Section 4 of the act sets forth procedures for the House and Senate to deal with the issue of
designating provisions as emergency requirements. In the House, the chair must “put the question
of consideration” prior to the chamber taking any action on a measure including an emergency
PAYGO designation. If the House votes affirmatively on the question, then it may proceed to
consider the measure. The House also uses the question of consideration as the means of
enforcing its internal PAYGO rule. In the Senate, an emergency PAYGO designation may be
stricken from a measure by a point of order. To waive the point of order, or to sustain the appeal
of the ruling of the chair on a point of order, the affirmative vote of three-fifths of the Members,
duly chosen and sworn (60 Senators, if no seats are vacant), must be obtained.28 In this case, the

27 The exclusion from the statutory PAYGO process applies to any provision in an annual appropriations act that
changes budget authority for direct spending in the current year or the budget year, even if the outlays flowing from the
changes occur in the outyears.
28 See, for example, Senate consideration on March 25, 2010, of H.R. 4872, the Health Care and Education
Reconciliation Act of 2010, during which several motions to waive Section 4(g) of the Statutory PAYGO Act were
rejected.
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point of order can be applied in a manner so that if successful, the offending provision is stricken
but the consideration of the measure (or the conference report thereon) is not defeated.
Third, debt service costs explicitly are excluded from the definition of budget effects provided in
the act (Section 3(4)(A)).
Fourth, timing shifts are prohibited to curb possible evasions of enforcement. The prohibition
applies to shifts at the end of the 10-year “window,” involving the last year covered by the
process (the ninth outyear) and the first year not covered by the process (the tenth outyear).
Section 3(8) of the act defines a timing shift as:
a delay of the date on which outlays flowing from direct spending would otherwise occur
from the ninth outyear to the tenth outyear or an acceleration of the date on which revenues
would otherwise occur from the tenth outyear to the ninth outyear.
Thus, costs cannot be shifted out of the window, nor can savings be shifted into the window, as a
way of evading enforcement. The prohibition is incorporated into Section 308 of the CBA of
1974, pertaining to CBO cost estimates, as amended by the act (Section 4(b)(1)).
Finally, costs associated with legislation dealing with “current policy” in four specified areas—
Medicare physicians’ payments, the estate and gift tax, the alternative minimum tax (AMT), and
certain income tax cuts for the middle-class enacted in 2001 and 2003—may be excluded within
constraints set forth in the act. Section 4(c) of the act sets forth procedures for adjusting the
estimates of budgetary effects of legislation in the four specified areas, and Section 7 of the act
sets forth specific criteria that must be met so that the adjustments can be made.29 In general, the
authority to make adjustments is provided so that Congress can enact legislation extending
current policies in these areas for defined periods without having to offset the significant costs of
doing so; the current policies either expired at the end of 2009 or will expire by the end of 2010.
The authority to make adjustments remains in effect through December 31, 2011.
The period for which the current policies can be extended with adjustments made for statutory
PAYGO purposes varies, from two years for the estate and gift tax and the AMT, to five years for
Medicare physicians’ payments, to permanently for the middle-class tax cuts. In addition, the act
includes provisions intended to ensure that the adjustments are not used to provide for more
generous policies over a shorter time period, or that savings achieved by not making the full
adjustments allowed are not used to offset initiatives in other policy areas. As explained by the
Senate Budget Committee:
The cost of continuing these policies over the specified period is larger than the cost of
letting them expire, as would happen under current law. The adjustment allows Congress to
address these policies without having the cost added to the PAYGO scorecard. The
difference between these two estimated costs is the maximum adjustment that may be used to
offset the cost of legislation addressing each specified policy for the purposes of PAYGO
enforcement. If the estimate of the legislation has a greater budgetary effect than the
maximum amount of the adjustment, then the adjustment can be used to offset a portion of
its cost. The additional cost would be counted for statutory PAYGO purposes. If a less costly
policy is enacted, any remaining amount in the adjustment cannot be used to offset the cost
of policies in other areas (as specified in Section 4(c)(3) of the PAYGO statute).

29 These features of the Statutory PAYGO Act are explained in detail in Senator Kent Conrad, Section-by-Section
Analysis of the Statutory Pay-As-You-Go Act of 2010
, op. cit.
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In addition, the adjustments in each policy area are further limited to prevent using the full
amount of the available adjustment to offset the cost of a more generous policy for a shorter
period. Under this limitation, the amount of the adjustment is estimated consistent with the
time period covered by the eligible policy action.30
Legislative Procedures Regarding CBO Cost Estimates
The budgetary effects of PAYGO legislation to be recorded on the PAYGO scorecards may be
determined either by Congress or by OMB. Congress may determine the budgetary effects of a
measure by following legislative procedures specified in Section 4 of the act. If Congress does
not follow these procedures, then OMB determines the budgetary effects of the measure.
The procedures by which Congress would determine the budgetary effects of legislation for
statutory PAYGO purposes generally would operate in the following manner. First, the chairman
of the House or Senate Budget Committee, as applicable, would request a “CBO PAYGO
estimate” for a measure. Prior to the vote on passage of the measure in the House or Senate, the
chairman of the respective Budget Committee would insert into the Congressional Record a
statement titled “Budgetary Effects of PAYGO Legislation” providing the necessary information
on the costs of the measure and any current policy adjustments made under Section 7 of the act.31
In cases involving a conference agreement or an amendment between the two chambers, the two
chairmen would jointly insert a statement into the Congressional Record.32
In addition, the text of the measure would include a reference to the statement using language set
forth in the act: “The budgetary effects of this Act, for the purpose of complying with the
Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement
titled ‘Budgetary Effects of PAYGO Legislation’ for this act, ..., provided that such statement has
been submitted prior to the vote on passage....” The portions omitted from the quoted language
would address: (1) whether the statement had been submitted by the chairman of the House
Budget Committee or Senate Budget Committee (or jointly, in the case of a conference agreement
or amendments between the Houses); and (2) the nature of the vote on passage.33
As the legislative process unfolds in both chambers, multiple statements may be generated. A
new, valid statement supersedes a previous statement. For the budgetary effects in the statement
to be recorded by OMB on the PAYGO scorecards, the measure enrolled and signed into law by

30 Ibid, p. S294.
31 See, for example, the remarks of Representative John Spratt in the Congressional Record (daily ed.) of February 25,
2010, at p. H930 (regarding H.R. 4691, the Temporary Extension Act of 2010, which the House passed later that day),
and the remarks of Senator Kent Conrad in the Congressional Record (daily ed.) of May 7, 2010, at p. S3431
(regarding an amendment in the nature of a substitute to H.R. 3619, the Coast Guard Authorization Act for Fiscal Year
2010 and 2011, which the Senate passed later that day).
32 See, for example, the remarks of Representative John Spratt in the Congressional Record (daily ed.) of May 28,
2010, at p. H4211 (regarding the House amendment to the Senate amendment to H.R. 4213, the American Jobs and
Closing Tax Loopholes Act, which the House agreed to later that day).
33 For an example of the required reference, see Section 562 (PAYGO Compliance) of P.L. 111-147, the Hiring
Incentives to Restore Employment Act, at 124 Stat. 117-118, which reads: “The budgetary effects of this Act, for
purposes of complying with the Statutory Pay-As-You-Go-Act of 2010, shall be determined by reference to the latest
statement titled ‘‘Budgetary Effects of PAYGO Legislation’’ for this Act, jointly submitted for printing in the
Congressional Record by the Chairman of the House and Senate Budget Committees, provided that such statement has
been submitted prior to the vote on passage in the House acting first on this conference report or amendments between
the Houses.”
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the President must contain a proper reference in the text to a valid statement. Violations of the
prescribed procedures (e.g., deviating from the required text of a legislative reference or failing to
insert a statement into the Congressional Record before a vote on final passage) could invalidate
the congressional determination of a measure’s budget effects, and the effects would be
determined in that case by OMB. Congressional determinations of the budgetary effects of
PAYGO measures in enacted form may reflect a determination made by one chamber and
unchanged by the other, made by one chamber but changed by the other, or made by both
chambers in a compromise at the stage of resolving differences.
The Statutory PAYGO Act reaffirms the authority of the House and Senate Budget Committees to
make final determinations of the budgetary effects of legislation under Section 312 of the CBA of
1974 (Section 12).
PAYGO Scorecards
OMB is required to maintain two PAYGO scorecards, a 5-Year Scorecard and a 10-Year
Scorecard, on which the budgetary effects of PAYGO legislation are recorded (Section 4(d)). For
each PAYGO act, OMB must use the budgetary effects included by reference in the measure. In
general, the budgetary effects are estimated by CBO in accordance with the baseline methodology
set forth in Section 257 of BBEDCA of 1985. If a valid reference is not included in the PAYGO
act, then OMB must determine the measure’s budgetary effects, using the same economic and
technical assumptions that underlie the President’s most recent budget submission.
OMB must display on the scorecards the budgetary effects of PAYGO legislation in each year
over the 5-year and 10-year periods, beginning with the budget year. In recording the budgetary
effects of a PAYGO act on the scorecards, OMB must adhere to the following rules:
Look Back—the budgetary effects for the current year of a PAYGO measure
enacted during a session are combined with the budgetary effects for the budget
year, thereby closing a potential enforcement loophole (Section 4(e));
Averaging—for the 5-Year Scorecard, an average is derived for the cumulative
budgetary effects of a PAYGO measure over the five fiscal years (with the
budgetary effects for the current year added to the effects for the budget year),
and entered for each of the five years on the scorecard; the same process is
followed for the 10-Year Scorecard with regard to the cumulative budgetary
effects of the measure over ten years, plus the current year (Section 4(f));
Emergency Legislation—the amounts of new budget authority, outlays, or
revenue that result from a provision designated as an emergency in a PAYGO
measure are not included in the estimates made by CBO or OMB of the
measure’s budgetary effects, and therefore are not recorded on the PAYGO
scorecards (Section 4(g)); and
CLASS Act Savings—the scorecards must exclude the net savings from
legislation titled the “Community Living Assistance Services and Supports Act,”
which establishes a Federal insurance program for long-term care, if enacted or
subsequently amended after enactment of the Statutory PAYGO Act (Section
4(d)(6)). (The CLASS Act was enacted into law on March 23, 2010, as Title VIII
of P.L. 111-148, the Patient Protection and Affordable Care Act.)
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OMB is required to update the scorecards continuously and to make them publicly available.
OMB has made the scorecards available on its website at http://www.whitehouse.gov/omb/
paygo_default/.
Table 2, at the end of the report, shows a hypothetical example of how the data from a CBO cost
estimate on a PAYGO act would be recorded by OMB on the 5-Year and 10-Year Scorecards for
the FY2011 budget cycle. In this example, CBO has estimated a cost of $25 billion for the budget
year (FY2011) and $10 billion for the first outyear (FY2012), but escalating savings amounting to
$35 billion for the next three outyears. Over the five-year period covering FY2011-FY2015, the
costs and savings exactly offset, yielding a deficit-neutral estimate. The estimate also shows a
cost of $15 billion for the current year (FY2010), however, which must be included under the
look-back feature. Consequently, the cumulative budgetary effect of the PAYGO measure, for
purposes of the 5-Year Scorecard, is a cost of $15 billion. The $15 billion cost is averaged over
the five-year period, yielding a $3 billion cost to be entered for each of the five years on the
scorecard.
In this example, the CBO cost estimate shows annual savings of $5 billion for each of the five
remaining outyears (FY2016-FY2020) of the 10-year period. For purposes of the 10-Year
Scorecard, the cumulative budgetary effect of the PAYGO measure over the 10-year period
covering FY2011-FY2020, taking into account the budgetary effects for the current year as
required by the look-back feature, is a savings of $10 billion. The $10 billion saving is averaged
over the 10-year period, yielding a $1 billion saving to be entered for each of the ten years on the
scorecard.
Annual PAYGO Report and Sequestration Order
The OMB must issue an annual PAYGO report not later than 14 days (excluding weekends and
holidays) after Congress adjourns to end a session (Section 5(a)). In addition to information
regarding any sequestration that may be required, as discussed below, the report must include the
following matters:
• an up-to-date document containing the 5-Year and 10-Year PAYGO scorecards;
• a description of any current policy adjustments made under Section 4(c);
• information about emergency legislation (if any) designated under Section 4(g);
and
• other data and explanations that enhance public understanding of the act and the
actions taken thereunder.
The annual PAYGO report must be printed in the Federal Register and made publicly available
by OMB.
If the annual PAYGO report indicates that no PAYGO violation has occurred, then no further
action must be taken. However, if the report indicates that a PAYGO violation has occurred, by
showing a debit (i.e., the “net total amount” by which costs exceed savings) for the budget year
on either scorecard, then the President must issue a sequestration order to offset the debit (Section
5(b)). If there is a debit on both scorecards, then the sequestration order must fully offset the
larger of the two debits.
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To offset a debit for the budget year, a sequestration order reduces the budgetary resources of
direct spending programs for that year. The resulting outlay savings in the budget year and the
subsequent fiscal year must together be sufficient to offset the debit.
In the hypothetical example provided in Table 2, if the single PAYGO measure used in the
example were the only PAYGO measure to be enacted during the 2010 session and reflected in
OMB’s annual PAYGO report for FY2011, then a sequester would be required to offset the $3
billion debit for FY2011 recorded on the 5-Year Scorecard. The 10-Year Scorecard would be
irrelevant in this instance because it would show a savings (of $1 billion) for FY2011.
If a sequester is required, then OMB must prepare the sequestration order for the President and
include it in the annual PAYGO report; both the order and the report must be transmitted to the
House and Senate. In this instance, the annual PAYGO report must include, for each budget
account to be sequestered:
• estimates of the baseline level of budgetary resources subject to sequestration;
• the amount of the budgetary resources to be sequestered; and
• the outlay reductions that will occur in the budget year and the subsequent fiscal
year because of the sequester.
A sequestration order issued by the President takes effect immediately.
Figure 1 illustrates the requirements pertaining to the issuance of the annual PAYGO report by
OMB and the issuance of a sequestration order by the President, if required.
Coverage and Exemptions
The Statutory PAYGO Act applies generally to provisions in legislation that affect the direct
spending and revenues of on-budget entities. As mentioned previously, the direct spending and
revenues of off-budget entities (consisting of the Social Security trust funds and the Postal
Service Fund) are excluded from the statutory PAYGO process.
Coverage under the process may be viewed from the perspective of (1) how programs are treated
with respect to estimating their budgetary effects; and (2) whether they are covered or exempted
from a sequestration order or subject to special rules that limit any reduction made under an order.
As discussed previously, direct spending and revenue amounts in the following instances are
excluded from the assessment of the budgetary effects of PAYGO legislation: (1) provisions
designated as emergency requirements; (2) debt service costs; (3) timing shifts; and (4) net
savings from the CLASS Act. In addition, costs associated with four specified categories of
legislation (Medicare physicians’ payments, the estate and gift tax, the alternative minimum tax,
and certain “middle-class” tax cuts) may be excluded within limits set forth in the act.
Section 255 of BBEDCA of 1985 lists mandatory programs and activities that are exempt from
reduction under any sequestration order issued by the President. The section is amended by
Section 11 of the Statutory PAYGO Act to update the existing list for changes in account structure
and headings and other changes, to add new accounts and programs (such as the Children’s
Health Insurance Program and economic recovery programs), and to clarify the treatment of
certain transportation programs subject to obligation limitations in annual appropriations acts.
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Figure 1. Issuance of the Annual PAYGO Report and Sequestration Order

Source: Prepared by the Congressional Research Service.
Note: The procedures reflected in the figure are set forth in Section 5 of the Statutory Pay-As-You-Go Act of
2010 (P.L. 111-139). “OMB” refers to the Office of Management and Budget.
The programs and activities exempt from sequestration under Section 255, as amended, include
Social Security and Tier I Railroad Retirement benefits; federal employee retirement and
disability programs; veterans’ programs; net interest; refundable income tax credits; Medicaid,
CHIP, SNAP, SSI, TANF, and certain other low-income programs; and unemployment
compensation, among others.
Finally, sequestration rules set forth in Section 256 of BBEDCA of 1985 (as amended by Section
10 of the Statutory PAYGO Act) and in Section 6 of the act, limit the size of the reduction that can
be made under a sequestration order in spending for Medicare. The reduction limit, which is 4%,
effectively exempts most Medicare spending from a sequestration order.34

34 In addition, Section 256(e) of BBEDCA of 1985, as amended by the Statutory PAYGO Act, limits a reduction under
a sequestration order to 2% for accounts funding community health centers, migrant health centers, Indian health
facilities, Indian health services, and veterans’ medical care. Nearly all of the spending associated with these items,
however, is discretionary; the Indian health services account, at this time, has $150 million in direct spending for
FY2011, but none for subsequent fiscal years. In view of the relatively negligible amount available for reduction under
a sequestration order (a maximum of about $3 million), the 2% limitation is not addressed in the remainder of this
report.
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Sequestration Calculations
If it is determined by OMB that a PAYGO violation has occurred and that a sequester must occur
to eliminate a debit for the budget year on the appropriate PAYGO scorecard, then OMB
calculates the uniform reduction percentage by which the budgetary resources for accounts must
be reduced to eliminate the debit. Budgetary resources, as defined in Section 250(c)(6) of
BBEDCA of 1985, include new budget authority, unobligated balances, direct spending authority,
and obligation limitations (the latter category, obligation limitations, does not apply to direct
spending and therefore is not relevant for purposes of the PAYGO process). Sequestration
calculations are made pursuant to rules set forth in Section 6 of the Statutory PAYGO Act and
Section 256 of BBEDCA of 1985, as amended by the act.
The first step is to determine the size of the sequestrable base, that is, the total amount of
budgetary resources for direct spending programs subject to sequestration. In the next step, the
total amount of budgetary resources that must be reduced to yield the required outlay savings in
the budget year and the subsequent fiscal year is determined. A uniform reduction percentage
applicable to all nonexempt accounts then is calculated by dividing the total amount of budgetary
resources to be reduced by the total amount of budgetary resources in the sequestrable base.
If the uniform reduction percentage is less than 4%, then the reduction is applied to all nonexempt
accounts. If the percentage is greater than 4%, then a 4% reduction is made in Medicare spending
(the maximum reduction allowed for that program), and the uniform reduction percentage for the
remaining programs is recalculated and increased by the amount necessary to achieve the
reductions required to eliminate the debit.
Table 3, at the end of the report, illustrates sequestration calculations under an hypothetical
example. While total direct spending amounts to well over $2 trillion in budgetary resources,
most is exempt from the statutory PAYGO process. Consequently, the sequestrable base in this
hypothetical example is set at $640 billion. The total consists of $575 billion attributable to
Medicare and the rest attributable to all other nonexempt programs.
For purposes of this example, it is assumed that a $30 billion debit must be eliminated from one
of the two PAYGO scorecards maintained by OMB, and that a reduction in the budget year of $30
billion in budgetary resources will be required.
Under the rules used for calculating a sequester, the reduction to Medicare spending is limited to
4%, which in this case is $23 billion. An additional reduction of $7 billion in budgetary resources
is required to be made in the other nonexempt programs. Dividing the reduction amount ($7
billion) into the sequestrable base for the other programs ($65 billion) results in a uniform
reduction percentage of 10.77%.
Under these procedures, a required $30 billion reduction in budgetary resources for the budget
year was made by reducing Medicare spending by the maximum 4% ($23 billion) and the
remaining nonexempt programs by 10.77% ($7 billion), resulting in the outlay savings ($30
billion) in the budget year and the subsequent fiscal year needed to eliminate the debit.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Limitation on Changes to the Social Security Act
Section 13 of the Statutory PAYGO Act establishes a point of order in the House and Senate
against the consideration pursuant to any expedited procedures of legislation setting forth
proposals of a Task Force for Responsible Fiscal Action or other commission, if those proposals
contain recommendations regarding Social Security spending or revenues. In particular, the
limitation applies to recommendations:
... with respect to the old-age, survivors, and disability insurance program established under
title II of the Social Security Act, or the taxes received under subchapter A of chapter 9; the
taxes imposed by subchapter E of chapter 1; and the taxes collected under section 86 of part
II of subchapter B of chapter 1 of the Internal Revenue Code.
In the Senate, an affirmative vote of three-fifths of the Members, duly chosen and sworn (60
votes, if no seats are vacant), is required to waive the point of order or to sustain an appeal of the
ruling of the Chair on the point of order.
The limitation is comparable to a restriction in Section 310(g) of the CBA of 1974 that bars the
consideration in the House and Senate of reconciliation legislation which contains
recommendations with respect to Social Security.35
Section 13 originated as a Senate floor amendment (S.Amdt. 3300, offered by Senator Max
Baucus) that was agreed to on January 26, 2010, as discussed previously.
The Senate also considered two amendments that day that proposed to establish a Bipartisan Task
Force on Responsible Fiscal Action. The first one, S.Amdt. 3302, offered by Senator Kent
Conrad, in part set forth expedited procedures in the House and Senate for the consideration of a
measure embodying the Task Force’s recommendations; it was defeated by a vote of 53-46
(having failed to secure the minimum 60 votes required by a unanimous consent agreement). The
second one, S.Amdt. 3306, offered by Senator Baucus, also would have established a Task Force,
but it did not set forth any expedited procedures for House and Senate consideration of its
legislative recommendations; the amendment was withdrawn.
Had the Conrad amendment (3302) been adopted, the Baucus amendment (3300) that became
Section 13 of the act would have excluded recommendations regarding Social Security spending
or revenues from any Task Force recommendations considered under expedited procedures in the
House and Senate.
In the wake of unsuccessful action in the Senate to create a task force, President Barack Obama
created the National Commission on Fiscal Responsibility and Reform by executive order (E.O.
13531) on February 18, 2010.36 The executive order requires that the commission vote on
approval of a final report on December 1, 2010, but it does not provide for expedited
consideration by the House or Senate of the Commission’s recommendations.

35 In addition, the Senate’s Byrd rule (Section 313 of the CBA of 1974) prohibits the inclusion of extraneous matter in
reconciliation legislation, which includes recommendations with respect to Social Security.
36 The text of the executive order, which was inserted in the Federal Register of February 23, 2010, may be found at
http://www.gpoaccess.gov/presdocs/2010/DCPD-201000104.pdf.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Table 1. Contents Listing of P.L. 111-139
Statutes-at-
Provision Content Large Citation
Resolving
[increase in the statutory limit on the public debt in 31 U.S.C. 3101 to $14.294
124 Stat. 8
Clause
trillion]
Title I – Statutory Pay-As-You Act of 2010
Sec. 1
Short Title
124 Stat. 8
Sec. 2
Purpose
124 Stat. 8
Sec. 3
Definitions and Applications
124 Stat. 8
Sec. 4
PAYGO Estimates and PAYGO Scorecards
124 Stat. 9
(a) PAYGO Estimates
124 Stat. 9
(b) CBO PAYGO Estimates
124 Stat. 11
(c) Current Policy Adjustments for Certain Legislation
124 Stat. 12
(d) OMB PAYGO Scorecards
124 Stat. 13
(e) Look-Back to Capture Current-Year Effects
124 Stat. 14
(f) Averaging Used to Measure Compliance Over 5-Year and 10-Year Periods
124 Stat. 14
(g) Emergency Legislation
124 Stat. 14
Sec. 5
Annual Report and Sequestration Order
124 Stat. 15
(a) Annual Report
124 Stat. 15
(b) Sequestration Order
124 Stat. 15
Sec. 6
Calculating a Sequestration
124 Stat. 16
(a) Reducing Nonexempt Budgetary Resources by a Uniform Percentage
124 Stat. 16
(b) Outlay Savings
124 Stat. 16
Sec. 7
Adjustment for Current Policies
124 Stat. 16
(a) Purpose
124 Stat. 16
(b) Duration
124 Stat. 17
(c) Medicare Payments to Physicians
124 Stat. 17
(d) Estate and Gift Tax
124 Stat. 17
(e) AMT Relief
124 Stat. 18
(f) Permanent Extension of Middle-Class Tax Cuts
124 Stat. 19
(g) Indexing for Inflation
124 Stat. 20
(h) Guidance on Estimates and Current Policy Adjustments
124 Stat. 21
Sec. 8
Application of BBEDCA
124 Stat. 21
Sec. 9
Technical Corrections
124 Stat. 21
[untitled subsections (a) and (b)]
124 Stat. 21
Sec. 10
Conforming Amendments
124 Stat. 21
[untitled subsections (a) through (d)]
124 Stat. 21
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Statutes-at-
Provision Content Large Citation
Sec. 11
Exempt Programs and Activities
124 Stat. 23
(a) Designations
124 Stat. 23
(b) Social Security, Veterans Programs, Net Interest, and Tax Credits
124 Stat. 23
(c) Other Programs and Activities, Low-Income Programs, and Economic
124 Stat. 23
Recovery Programs
124 Stat. 28
(d) Additional Excluded Programs
Sec. 12
Determinations and Points of Order
124 Stat. 29
Sec. 13
Limitation on Changes to the Social Security Act
124 Stat. 29
(a) Limitation on Changes to the Social Security Act
124 Stat. 29
(b) Waiver
124 Stat. 29
(c) Appeals
124 Stat. 29
Title II – Elimination of Duplicative and Wasteful Programs
Sec. 21
Identification, Consolidation, and Elimination of Duplicative
124 Stat. 29
Government Programs
Source: Prepared by the Congressional Research Service.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Table 2. Hypothetical Example of Recording a Cost Estimate for a PAYGO Act on
the PAYGO Scorecards
(amounts in billions of dollars)
5-
10-
Year
Year

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Total
CBO
15 25 10 -5 -10 -20 -5 -5 -5 -5 -5 15 -10
Cost
Estimate
on a
PAYGO
Act
Averaged
3 3 3 3 3
Entry on
OMB 5-
Year
Scorecard
Averaged
-1 -1 -1 -1 -1 -1 -1 -1 -1 -1
Entry on
OMB 10-
Year
Scorecard
Source: Prepared by the Congressional Research Service.
Notes: “CBO” refers to the Congressional Budget Office and “OMB” refers to the Office of Management and
Budget. The procedures reflected in the figure are set forth in Section 4 of the Statutory Pay-As-You-Go Act of
2010 (P.L. 111-139); the dol ar amounts used in the example are completely hypothetical. In this example, the
CBO cost estimate covers the current year (FY2010), the budget year (FY2011), and nine outyears (FY2012-
FY2020). Under the “look back” feature in Section 4(e) of the Statutory Pay-As-You-Go Act of 2010, OMB must
combine any budgetary effects for the current year with those for the budget year when calculating the entries
for the 5-Year Scorecard and 10-Year Scorecard. Further, under Section 4(f) of the act, the cumulative budgetary
effects for the 5-year and 10-year periods, plus those for the current year, must be averaged over 5 and 10 years
and the averages entered for each year of the scorecard, as appropriate.
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The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History

Table 3. Hypothetical Example of Sequestration Calculations for a Fiscal Year
(amounts in $ billions)
Budgetary
Resources
Sequestrable Base
640
(Nonexempt Direct Spending Programs)
Medicare
575

Al Other Nonexempt Programs
65


To eliminate a debit of $30 billion from the PAYGO scorecard(s), it is assumed in this
example that budgetary resources would have to be reduced under a sequestration order by
$30 billion, as follows:

Medicare (reduction limited to 4% of base)
23

Al Other Nonexempt Programs (reduction made using a uniform
7
percentage)


To achieve a $7 billion reduction from a sequestrable base of $65 billion for “All Other
Nonexempt Programs,” a uniform reduction percentage of 10.77% would be applied to the
budgetary resources for each nonexempt account
Source: Prepared by the Congressional Research Service.
Notes: The dollar amounts used in the example are completely hypothetical. Budgetary resources, as
defined in Section 250(c)(6) of BBEDCA of 1985, include new budget authority, unobligated balances,
direct spending authority, and obligation limitations (the latter category, obligation limitations, does not
apply to direct spending and therefore is not relevant for purposes of the PAYGO process).

Author Contact Information

Robert Keith

Specialist in American National Government
rkeith@crs.loc.gov, 7-8659


Congressional Research Service
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