Discretionary Spending Caps in the Fiscal Responsibility Act of 2023

Discretionary Spending Caps in the Fiscal Responsibility Act of 2023

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INSIGHTi

Discretionary Spending Caps in the Fiscal
Responsibility Act of 2023
Updated June 28, 2023
The Fiscal Responsibility Act (FRA, P.L. 118-5), enacted in June 2023, includes provisions that would
establish enforceable discretionary spending limits (caps) for FY2024 and FY2025. This Insight provides
information on those limits, exemptions to the limits, and discretionary spending levels in future years.
Discretionary Caps for FY2024 and FY2025
Table 1 shows the discretionary caps imposed by the FRA for FY2024 and FY2025. If discretionary
appropriations are enacted that exceed these statutory limits for the fiscal year, a sequester would be
triggered making across-the-board reductions of nonexempt spending within the applicable category
(defense and/or nondefense) to eliminate the excess spending. Such a sequester order would be issued by
the President within 15 calendar days after the end of a session of Congress.
Table 1. FRA Discretionary Limits on Budget Authority, FY2024-FY2025
In Billions of Nominal Dollars
Fiscal Year
Defense Discretionary
Nondefense Discretionary
FY2024
$886.35
$703.65
FY2025
$895.21
$710.69
Source: FRA as passed by the House on May 31, 2023.
As with previous discretionary spending limits, the FRA would designate certain spending as effectively
exempt from these limits. Spending designated as an emergency requirement would be exempt up to any
amount, while funding for certain purposes—such as program integrity initiatives, disaster funding, and
reemployment services—would be exempt up to specified amounts.
The Congressional Budget Office (CBO) estimated that the discretionary caps for FY2024 and FY2025
would reduce budget authority by a combined $246 billion relative to baseline projections. Reductions in
nondefense budget authority account for nearly all of that total reduction (a combined $236 billion, or
96% of the total change), with defense budget authority reduced by the remaining 4% ($9 billion). Budget
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authority changes are split more equally between the two years, with 45% of the changes to FY2024
budget authority and 55% of the changes to FY2025 budget authority.
Adjustments to the Discretionary Caps for FY2024 and FY2025 in the Case of a CR
The FRA includes a provision described as incentivizing Members to enact regular full-year
appropriations legislation. The FRA states that in the event that a continuing resolution (CR) is in effect
on January 1 of 2024 or 2025 for any budget account, the discretionary spending limits for that fiscal year
are automatically revised to the levels shown below in Table 2. The revision would result in an increase
in nondefense discretionary budget authority and a decrease for defense discretionary spending levels
when compared with the original levels in Table 1. Under such a scenario, a sequester order would be
issued on April 30 of either 2024 or 2025. The FRA states that the revised limits would revert to the
original FRA limits if full-year appropriations were enacted before April 30.
Table 2. FRA Revised Discretionary Limits on Budget Authority, FY2024-FY2025
In Billions of Nominal Dollars
Fiscal Year
Defense Discretionary
Nondefense Discretionary
FY2024
$849.78
$736.45
FY2025
$849.78
$736.45
Source: FRA as passed the House on May 31, 2023.
In a scenario with revised discretionary limits, CBO estimated that FY2024 and FY2025 budget authority
would be reduced by a combined $269 billion relative to current-law projections. Reductions in
nondefense budget authority account for roughly two-thirds of that reduction (a combined $178 billion, or
66% of the total change), with defense budget authority reduced by the remaining 34% ($91 billion).
FY2024 budget authority changes would represent 42% of the total, while 58% of the changes would be
to budget authority in FY2025.
Discretionary Spending in Future Years
The FRA would not create statutory limits for any year beyond FY2025. It would, however, specify that if
a budget resolution has not been adopted by Congress by April 15, the House Budget Committee chair
may submit to the House a spending allocation for the House Appropriations Committee that is consistent
with the following levels: for FY2026, $1.622 trillion; for FY2027, $1.638 trillion; for FY2028, $1.655
trillion; and for FY2029, $1.671 trillion.
For fiscal years in which statutory discretionary spending limits are in effect, the CBO’s baseline
projections for discretionary spending are calculated by (1) assuming levels of discretionary funding
consistent with the spending levels permitted under the statutory limits; and (2) for types of spending that
are essentially exempt from the limits (such as spending designated as an emergency), assuming a
continuation of the amounts provided in the previous fiscal year, adjusted for inflation.
For years in which no statutory discretionary spending limits are in effect, CBO’s baseline projections for
discretionary spending are calculated using the methodology required by law. Generally, the projections
assume that discretionary funding increases with inflation.
Recent Context
Legislative discussion around the FRA has included comparisons to the Budget Control Act (BCA; P.L.
112-25), which also imposed enforceable discretionary spending caps and modified the statutory debt

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limit. Table 3 compares actual discretionary outlays in FY2011-FY2013 as a percentage of gross
domestic product to FY2023-FY2025 projections with FRA enactment.
Table 3. Actual Outlays Under the Budget Control Act (BCA) and Projected Outlays Under
the FRA, Selected Years
As a Percentage of Annual Gross Domestic Product
BCA Discretionary Caps in FY2012-
Proposed FRA Discretionary Caps in

FY2013
FY2024-FY2025
Category
FY
Actual Outlays
FY
Projected Outlays
Last Uncapped Year
FY2011
8.7%
FY2023
6.5%
First Capped Year
FY2012
7.9%
FY2024
6.5%
Second Capped Year
FY2013
7.2%
FY2025
6.4%
Source: OMB Historical Tables, May 2023 CBO Baseline, and FRA as passed by the House on May 31, 2023. Calculations
performed by CRS.
Notes: FY2024-FY2025 outlays represent projections with discretionary caps not adjusted for the presence of a CR.
Totals include discretionary outlays both subject and not subject to caps.
The reduction in discretionary spending following the BCA was much more pronounced than that
projected under the FRA. This was due both to the winding down of Great Recession stimulus programs
in FY2012 and FY2013 and to larger discretionary changes imposed by the BCA. Discretionary outlay
projections under the FRA are projected to produce a relatively flat FY2023-FY2025 trajectory, though
real outlays under current law are well below those experienced prior to enactment of the BCA.

Author Information

Grant A. Driessen
Megan S. Lynch
Specialist in Public Finance
Specialist on Congress and the Legislative Process

Disclaimer
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