This report provides basic information on sequesters generally. The report assumes a basic familiarity with the congressional budget process. For more information on the congressional budget process, see CRS Report R46240, Introduction to the Federal Budget Process, by James V. Saturno.
This report focuses on general processes associated with sequesters. Readers with questions about how a potential future sequester might affect a specific program or agency, or how an actual sequester is affecting a specific program or agency, should contact CRS subject matter experts by calling [phone number scrubbed] or visiting http://www.crs.gov.
A sequester provides for the automatic cancellation of previously enacted spending, making largely across-the-board reductions to nonexempt programs, activities, and accounts. A sequester is implemented through a sequestration order issued by the President as required by law.
The purpose of a sequester is to enforce certain statutory budget requirements, such as enforcing statutory limits on discretionary spending or ensuring that new revenue and mandatory spending laws do not have the net effect of increasing the deficit. Generally, sequesters have been used as an enforcement mechanism that would either discourage Congress from enacting legislation violating a specific budgetary goal or encourage Congress to enact legislation that would fulfill a specific budgetary goal. One of the authors of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; also known as the Gramm-Rudman-Hollings Act; P.L. 99-177), the law that first employed the sequester as an enforcement mechanism (discussed below), stated, "It was never the objective of Gramm-Rudman to trigger the sequester; the objective of Gramm-Rudman was to have the threat of the sequester force compromise and action."1
Sequestration is currently employed as the enforcement mechanism for three budgetary policies.
As noted above, several budgetary policies are enforced by sequester and timing varies for each.
The statutory requirements for the sequester process are prescribed by the BBEDCA, as amended. Sequesters are implemented initially by an order issued by the President that must follow the specified statutory requirements. First, the total dollar amount of necessary spending reductions must be established by OMB, which must also determine what accounts are not exempt from the sequester, creating a "sequestrable base." OMB must then calculate the uniform percentage by which nonexempt budgetary resources must be reduced to achieve the total necessary reduction.5 Budgetary resources, as defined in Section 250(c)(6) of the BBEDCA, include new budget authority, unobligated balances, direct spending authority, and obligation limitations. Once this uniform percentage is determined, it is applied to all programs, projects, and activities (PPAs) within a budget account. PPAs are delineated in different ways: For accounts included in appropriations acts, PPAs within each budget account are delineated in those acts or accompanying reports, and for accounts not included in appropriations acts, PPAs are delineated in the most recently submitted President's budget.6
Thereafter, as executive branch agencies implement the sequestration order, they may take various actions after the cancellation of budget authority with regard to specific spending. These actions, many of which are subject to statutory limitations, may include the following:
Many programs are exempt from sequestration, such as Social Security and Medicaid. In addition, special rules govern the sequestration of certain programs, such as Medicare.11 These exemptions and special rules are found in Sections 255 and 256 of the BBEDCA, as amended, respectively.
It may also be helpful to review OMB sequester reports detailing programs that have been subject to sequester. To see a list of both discretionary and direct spending programs subject to the FY2013 sequester, see the OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013.12 To see a list of direct spending programs subject to the most recent sequester, see the annual OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2025.13
Sequestration was first used as an enforcement mechanism in the BBEDCA of 1985 (as described above). The BBEDCA created annual statutory deficit limits and a sequester mechanism to enforce the limits. These limits were replaced by the Budget Enforcement Act of 1990 (BEA; P.L. 101-508), which established pay-as-you-go procedures to control new mandatory spending and revenue legislation and discretionary spending limits to control the level of discretionary spending. These two procedures, in effect until 2002, both used sequestration as the enforcement mechanism. For more information on the use of sequestration in Gramm-Rudman-Hollings and the BEA, see CRS Report R41901, Statutory Budget Controls in Effect Between 1985 and 2002, by Megan S. Lynch.
Sequestration was also used to enforce discretionary spending limits established by the BCA for FY2012-FY2021. For more information, see CRS Report R46752, Expiration of the Discretionary Spending Limits: Frequently Asked Questions, by Megan S. Lynch and Grant A. Driessen; and CRS Report R44874, The Budget Control Act: Frequently Asked Questions, by Grant A. Driessen and Megan S. Lynch.
1. |
Oral and written testimony of the Honorable Phil Gramm, former Member of the House of Representatives from 1979-1985 and U.S. Senator from 1985-2002, before the Senate Finance Committee at the hearing on Budget Enforcement Mechanisms, May 4, 2011, http://finance.senate.gov/hearings/hearing/?id=f47f0466-5056-a032-526c-15196aea18d1. |
2. |
For more information, see CRS Insight IN12168, Discretionary Spending Caps in the Fiscal Responsibility Act of 2023, by Grant A. Driessen and Megan S. Lynch. |
3. |
In addition to an end of the session sequester, a separate sequester may be triggered if supplemental appropriations cause a breach in the discretionary limits during the second and third quarter of the fiscal year. In such an event, sequestration would take place 15 days after the enactment of the appropriation. |
4. |
For more information, see CRS Insight IN12183, The FRA's Discretionary Spending Caps Under a CR: FAQs, by Drew C. Aherne and Megan S. Lynch. |
5. |
In this way, OMB creates a percentage by which all accounts will be equally reduced, with category distinctions and special rules taken into account. |
6. |
BBEDCA, Section 256(k)(2). |
7. |
See CRS Report R47019, The Executive Budget Process: An Overview, by Dominick A. Fiorentino and Taylor N. Riccard. |
8. |
Ibid. |
9. |
See CRS Legal Sidebar LSB10243, How a Government Shutdown Affects Government Contracts, by David H. Carpenter; and CRS Report R42469, Government Procurement in Times of Fiscal Uncertainty, by Kate M. Manuel and Erika K. Lunder (available to congressional clients upon request). |
10. |
For relevant frequently asked questions, see U.S. Office of Personnel Management, Guidance for Administrative Furloughs, March 2017, http://www.opm.gov/policy-data-oversight/pay-leave/furlough-guidance/#url=Administrative-Furlough. |
11. |
For more information, see CRS Report R45106, Medicare and Budget Sequestration, by Ryan J. Rosso. |
12. |
OMB, OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013, March 1, 2013, https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/legislative_reports/fy13ombjcsequestrationreport.pdf. |
13. |
OMB, OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2025, March 11, 2024, https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf. |