The Sequestration Process and Across-the-Board Spending Cuts for FY2000

The Sequestration Process and Across-the-Board Spending Cuts for FY2000

Order Code RL30363
CRS Report for Congress
Received through the CRS Web
The Sequestration Process and
Across-the-Board Spending Cuts for FY2000
Updated September 22, 2000
Robert Keith
Specialist in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

The Sequestration Process and
Across-the-Board Spending Cuts for FY2000
Summary
The sequestration process, which involves automatic, largely across-the-board
spending reductions made toward the beginning of the fiscal year, was established
under the Balanced Budget and Emergency Deficit Control Act of 1985 as a means
of enforcing deficit targets. The Budget Enforcement Act of 1990 amended the 1985
act to supersede the deficit targets with two new enforcement mechanisms—limits on
discretionary spending (i.e., spending controlled through the annual appropriations
process) and a “pay-as-you go” (PAYGO) requirement applicable to legislation
affecting direct spending (i.e., spending controlled outside of the annual
appropriations process) and revenues. The discretionary spending limits and PAYGO
requirement were revised and extended (affecting legislation enacted through
FY2002) most recently by the Budget Enforcement Act of 1997 and the
Transportation Equity Act for the 21st Century.
As a general rule, the enforcement procedures for the discretionary spending
limits, on the one hand, and the PAYGO requirement, on the other, are separated by
a “firewall.” Violations of the discretionary spending limits are remedied by
reductions only in discretionary programs; PAYGO violations are corrected by
reductions solely in direct spending programs. Further, savings made on one side of
the firewall generally cannot be used to the advantage of programs on the other side.
The current sequestration procedures are automatic and are triggered by a report
from the OMB director. For sequestration purposes generally, there is only one
triggering report issued each year (just after the end of the congressional session), but
a “within-session sequester” may occur in the following session (e.g., if the enactment
of one or more supplemental appropriations measures causes a breach in the limits).
Spending for many programs is exempt from sequestration and reductions in certain
programs are limited under “special rules.”
During the 15 years that sequestration has been in effect, sequesters have been
triggered five times. The first three sequesters occurred during the 5-year period
when deficit targets were in effect, covering FY1986-1990. During the remaining 10
years, sequestration applied to the enforcement of the discretionary spending limits
and PAYGO requirement. Two sequesters under the discretionary spending limits
occurred for FY1991 and no PAYGO sequester has ever occurred. Initial outlay
savings associated with the three deficit target sequesters ranged from $11.7 billion
to $20.0 billion, but some of these savings were reduced or rescinded later.
In the fall of 1999, as Congress completed action on the regular appropriations
acts for FY2000 and other budgetary legislation, there was some concern that a
sequester for that fiscal year might be triggered at the end of the session. In January
2000, the OMB director indicated that no sequester was required following the end
of the 1999 session. Toward the middle of 2000, Congress and the President enacted
supplemental appropriations that breached the limits by $2.4 billion in budget
authority and $6.8 billion in outlays, but the legislation included a provision barring
a within-session sequester for FY2000 (or a reduction in the limits for FY2001).

Contents
Origin and Development of the Sequestration Process . . . . . . . . . . . . . . . . 1
1985 Balanced Budget Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1987 Balanced Budget Reaffirmation Act . . . . . . . . . . . . . . . . . . . . . . 2
Budget Enforcement Act of 1990 and Related Legislation . . . . . . . . . 2
Description of the Sequestration Process . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Discretionary Spending Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
“Pay-As-You-Go” (PAYGO) Requirement . . . . . . . . . . . . . . . . . . . . 6
Sequestration Reports and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
History of Sequesters: FY1986-1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Deficit Target Sequesters (FY1986-1990) . . . . . . . . . . . . . . . . . . . . 10
Discretionary Spending Limit Sequesters (FY1991-1999) . . . . . . . . . 12
Sequestration for FY2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Discretionary Spending Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PAYGO Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Tables
Table 1. Summary of Sequesters: FY1986-1999 . . . . . . . . . . . . . . . . . . . . . . . 9
Table 2. Enacted Levels of Discretionary Spending for FY2000 Compared to Limits:
End of 1999 Session . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 3. Enacted Levels of “Other Discretionary” Spending
for FY2000 Compared to Limits: Middle of 2000 Session
(amounts in billions of dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

The Sequestration Process and
Across-the-Board Spending Cuts for FY2000
Origin and Development of the Sequestration Process
Twenty-five years ago, Congress established its current budget process under the
Congressional Budget and Impoundment Control Act of 1974.1 Implementation of
the 1974 Congressional Budget Act focuses on the annual adoption of a concurrent
resolution on the budget.2 The annual budget resolution serves as a guide for House
and Senate action each session on revenue legislation, measures increasing the debt
limit, annual appropriations acts, and other spending measures. As originally framed,
budget resolutions were not developed within any predetermined constraints, such as
the allowable size of the deficit. Instead, the House and Senate determined
appropriate budgetary levels each year through its action on budget resolutions.
Budget resolution policies were enforced primarily by means of points of order that
could be raised during the consideration of legislation.
1985 Balanced Budget Act. After a decade of experience under the
congressional budget process, burgeoning deficit estimates (exceeding $200 billion),
deeply rooted impasses between Congress and President Reagan over major budget
policies, and extensive legislative gridlock impelled Congress and the President to
strengthen budget enforcement procedures. In December 1985, President Reagan
signed into law the Balanced Budget and Emergency Deficit Control Act of 1985,
commonly known at that time as the Gramm-Rudman-Hollings Act.3
The chief purpose of the 1985 Balanced Budget Act was to gradually eliminate
the deficit by requiring adherence to a series of fixed deficit targets, beginning at
1The 1974 Congressional Budget Act was enacted on July 12, 1974, as P.L. 93-344. It has
been amended extensively over the years and is codified at 2 U.S.C. 621 et. seq.
2The 1974 Congressional Budget Act originally required House and Senate action on two
budget resolutions each year. Beginning with FY1983, Congress abandoned the practice of
adopting more than one budget resolution each year. For more information on this topic, see:
U.S. Library of Congress, Congressional Research Service, Congressional Budget
Resolutions: Selected Statistics and Information Guide, by Bill Heniff Jr., CRS report
RL30297 (Washington: September 2, 1999), 37 pages.
3The 1985 Balanced Budget Act was enacted on December 12, 1985, as Title II of P.L. 99-
177, a measure raising the public debt limit. It has been amended extensively over the years
and is codified at 2 U.S.C. 901 et. seq. The common title derived from the names of the act’s
three key sponsors, Senators Phil Gramm, Warren Rudman, and Ernest Hollings.

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$171.9 billion for FY1986 and declining to zero by FY1991.4 Sequestration, a
process involving automatic spending cuts, was established as the means by which the
deficit targets would be enforced. Under sequestration, across-the-board spending
cuts would be made automatically around the beginning of the fiscal year if needed
to keep the estimated deficit within the allowed limits.5 As implementation of a
required sequester was automatic under these procedures, and perceived to be drastic
action, many regarded it as providing a strong incentive for Congress and the
President to reach agreement on established budgetary goals through the regular
legislative process.
1987 Balanced Budget Reaffirmation Act. Several lawsuits contesting the
constitutionality of the 1985 Balanced Budget Act were filed immediately upon its
enactment. In February 1986, a special three-judge panel of the U.S. District Court
declared that the procedure for triggering sequestration under the act was
unconstitutional on the ground that it vested executive power in an officer removable
by Congress (sequestration would have been triggered pursuant to a report prepared
by the comptroller general, head of the General Accounting Office). The Supreme
Court heard arguments in the case, Bowsher v. Synar (478 U.S. 714), and issued its
ruling on July 7, 1986, affirming the ruling of the District Court by a vote of 7 to 2.
Invalidation by the courts of the automatic triggering mechanism for
sequestration, and the size of the estimated deficit excess for FY1988—more than $50
billion above the applicable deficit target, according to the Congressional Budget
Office (CBO), prompted calls for revision of the 1985 Balanced Budget Act. In
September 1987, President Reagan signed into law the Balanced Budget and
Emergency Deficit Control Reaffirmation Act of 1987.6 The main purposes of the
1987 act were to restore the automatic triggering feature of sequestration in a
constitutionally acceptable manner, which it did by vesting that authority in the
director of the Office of Management and Budget (OMB), and to extend the time
frame for achieving a balanced budget by two years, until FY1993.
Budget Enforcement Act of 1990 and Related Legislation. Continuing
difficulties associated with the use of deficit targets prompted Congress and the
President to enact the Budget Enforcement Act (BEA) of 1990, which fundamentally
revised the procedures under the 1985 Balanced Budget Act. Although the BEA of
1990 extended the deficit targets through FY1995, it effectively replaced them with
statutory limits on discretionary spending (i.e., spending controlled through the annual
appropriations process) and a “pay-as-you-go” (PAYGO) requirement applicable to
4A discussion of the origin and features of the 1985 Balanced Budget Act (and the 1987
Balanced Budget Reaffirmation Act, discussed below) is presented in: U.S. Library of
Congress, Congressional Research Service, General Management Laws: A Selective
Compendium, Ronald C. Moe (project coordinator), CRS report RL30267 (Washington: July
28, 1999), pages 91-96.
5For some fiscal years, a margin-of-error amount (e.g., $10 billion) was added to the deficit
target to determine the amount that would trigger a sequester.
6The 1987 Balanced Budget Reaffirmation Act was enacted on September 29, 1987, as Title
I of P.L. 100-119, a measure raising the public debt limit.

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legislation affecting direct spending (i.e., spending controlled outside of the annual
appropriations process) and revenues.7
Sequestration was retained as the means of enforcing the discretionary spending
limits and the PAYGO requirement. The main purpose of these enforcement
procedures was to preserve the roughly $500 billion in deficit savings, covering
FY1991-1995, reached in an agreement between President Bush and Congress and
implemented in reconciliation and other budgetary legislation.
The discretionary spending limits and PAYGO requirement under the BEA of
1990 have been extended several times and the attendant sequestration procedures
have been modified, principally in conjunction with legislation to implement major
budget agreements between President Clinton and Congress in 1993 and 1997.
In 1993, the enforcement procedures were extended for three more fiscal years,
through FY1998, as part of the Omnibus Budget Reconciliation Act of 1993 (P.L
103-66). In 1994, separate sequestration procedures for programs funded by the
Violent Crime Reduction Trust Fund were added to the 1985 act by Title XXXI of
the Violent Crime Control and Law Enforcement Act of 1994 (P.L. 103-322).
The most significant modifications to the sequestration process, following the
BEA of 1990, were made by the Budget Enforcement Act (BEA) of 1997, which was
included in one of two reconciliation measures enacted into law that year.8 The BEA
of 1997 extended the discretionary spending limits and PAYGO requirement through
FY2002, modified their application, and made various “housekeeping” and technical
changes.
In 1998, the discretionary spending limits and associated sequestration
procedures were changed again, in this instance by the Transportation Equity Act for
the 21st Century (P.L. 105-178), commonly referred to as TEA-21, in order to
establish separate discretionary spending limits for highway and mass transit
programs.
Description of the Sequestration Process
The sequestration process was established in 1985 as a means of enforcing
compliance with a series of annual deficit targets leading to a balanced budget. If the
estimate of the deficit made around the beginning of a fiscal year exceeded the
allowed level, sequestration was triggered automatically, resulting in largely across-
the-board spending reductions in nonexempt appropriations and budget accounts.
Appropriations and other forms of budgetary resources were required to be reduced
by amounts sufficient to achieve the necessary outlay savings. Half of the spending
7The BEA of 1990 was enacted on November 5, 1990, as Title XIII of P.L. 101-508, the
Omnibus Budget Reconciliation Act of 1990. See General Management Laws, op. cit., pages
97-102, for a discussion of the origin and features of the BEA of 1990 (and related legislation,
discussed below).
8The BEA of 1997 was enacted on August 5, 1997, as Title X of P.L. 105-33, the Balanced
Budget Act of 1997.

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reductions was to come from defense accounts, and the other half was to come from
domestic accounts. Some of the reductions in direct spending accounts, such as
Medicare, were to be made under “special rules” that determined the amounts to be
cut and limited their size or application; the remaining domestic spending programs
and all of the defense spending programs were to be cut by uniform reduction
percentages (the domestic and defense percentages could differ from each other).
Further, the required reductions for each account were to be applied uniformly to
programs, projects, and activities within that account.
Initially, the authority to trigger a sequester was lodged with the comptroller
general, who was required to issue initial and final sequestration reports based on
initial and final sequestration reports prepared jointly by OMB and CBO. In
anticipation of a constitutional challenge to this arrangement, the 1985 act included
“fallback procedures” under which the necessary reductions could be implemented
through the enactment of a joint resolution reported by a Temporary Joint Committee
on Deficit Reduction (consisting of the membership of the House and Senate Budget
Committees). Whenever a sequester was triggered, the President was required to
issue immediately a sequestration order in strict conformity with the requirements of
the sequestration report (or joint resolution). As discussed previously, the authority
to trigger a sequester eventually was placed solely in the hands of the OMB director.
Under current law, sequestration is used to enforce statutory limits on
discretionary spending and a “pay-as-you-go” (PAYGO) requirement that applies to
legislation affecting revenues and direct spending.
As a general rule, the enforcement procedures for the discretionary spending
limits, on the one hand, and the PAYGO requirement, on the other, are separated by
a “firewall.” Violations of the discretionary spending limits are remedied by
reductions only in discretionary spending programs; violations of the PAYGO
requirement are corrected by reductions solely in direct spending programs. Further,
savings made on one side of the firewall cannot be used to the advantage of programs
on the other side. For example, the cost of tax-cut legislation could not be offset by
reductions in annual appropriations acts in order to avoid a PAYGO sequester.
Some flexibility in these procedures is provided by “scorekeeping rule number
three.”9 The rule provides that changes in direct spending made in an annual
appropriations act be counted under the discretionary spending limits. Accordingly,
a reduction in direct spending made in an annual appropriations act would be treated
as an offset to an equivalent increase in discretionary spending; such changes in direct
spending are referred to as “mandatory offsets.” In addition, “directed scorekeeping”
provisions have been included in legislation from time to time that have instructed the
9The joint explanatory statement accompanying the conference report on the BEA of 1990 set
forth several scorekeeping rules to be used in scoring legislation under these enforcement
procedures. The scorekeeping rules were revised under the BEA of 1997. They are presented
as an addendum at the end of OMB Circular A-11, which deals with budget formulation, and
may be found on OMB’s web site at http:// www.whitehouse.gov/omb.

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OMB director not to score the direct spending or revenue impact of a measure for
purposes of the PAYGO requirement.10
Like the earlier deficit sequestration procedures, the current sequestration
procedures are automatic and are triggered by a report from the OMB director. For
sequestration purposes generally, there is only one triggering report issued each year
(just after the end of the congressional session). However, OMB reports triggering
a sequester in one or more categories of discretionary spending may be issued during
the following session if legislative developments so warrant (i.e., the enactment of a
supplemental appropriations measure that violates the limit for one or more
discretionary spending categories).
Spending for the Social Security program, except for administrative expenses,
is exempt from sequestration, as are many other programs. Reductions in certain
programs are made under “special rules.” For example, one special rule limits any
reductions in Medicare spending to 4%.
Discretionary Spending Limits. Federal spending that is controlled through
the annual appropriations process is referred to as discretionary spending. This type
of spending, which is expected to exceed $600 billion for FY2000, generally provides
funding for the routine operations of federal agencies. Discretionary spending is
distinguished from direct spending, which stems from substantive law rather than
annual appropriations acts and funds entitlement and other mandatory programs.
Enforcement of the discretionary spending limits applies to different categories
of discretionary spending. In the past, discretionary spending sometimes was divided
into two or more broad categories, such as defense and nondefense, but these
categories were merged into a single “other discretionary” category for FY2000.11
In addition, separate categories exist for spending from the Violent Crime Reduction
Trust Fund, highway spending, and mass-transit spending. Within these categories,
separate limits exist for budget authority and outlays, except for the highway and
mass-transit categories (which have outlay limits only).
10 For example, see Section 1001(b) of P.L. 106-113 (113 Stat. 1536), the Consolidated
Appropriations Act for Fiscal Year 2000. Provisions changing direct spending or revenue
levels in Medicare and other mandatory programs were incorporated into the omnibus
appropriations act.
11For FY1991 through FY1993, separate limits were set for new budget authority and outlays
for three different categories—defense, international, and domestic. For fiscal years 1994-
1995, the limits on new budget authority and outlays were established for a single
category—total discretionary spending. The Omnibus Budget Reconciliation Act of 1993
retained the existing limits for FY1994 and FY1995 without change, and added new limits on
total discretionary spending for FY1996-1998. In 1994, the Violent Crime Control Act
established separate sequestration procedures for spending from the Violent Crime Reduction
Trust Fund through FY2000. The BEA of 1997 revised the discretionary spending limits
again and extended them through FY2002. New categories were established for defense and
nondefense spending for FY1998 and FY1999; for FY2000-2002, all discretionary spending
was merged into a single category (except for the separate Violent Crime Reduction category
in effect through FY2000). In 1998, TEA-21 established separate outlay limits for two new
categories, highways and mass transit.

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Any violation of the discretionary spending limits is enforced only in the category
in which the violation occurs, except that breaches of the highway and mass-transit
outlay limits are counted toward the single discretionary category.
The discretionary spending limits are adjusted from time to time by the OMB
director. Adjustments may be made for several factors specified in law, including
changes in budgetary concepts, the enactment of measures containing spending
designated by the President and Congress as an emergency requirement, and the
enactment of legislation meeting certain predetermined criteria (i.e., spending for
continuing disability reviews, adoption incentive payments, the earned income tax
credit compliance initiative, and international arrearages).12
A sequester under the discretionary spending limits is triggered by a
sequestration report prepared by the OMB director, generally within 15 days after the
end of a congressional session. If a sequester under this process is required at the end
of a session, it must occur on the same day as any sequestration tied to enforcement
of the PAYGO procedures. During the following session, a “within-session
sequester” could occur prior to July 1 if Congress and the President enacted
legislation (e.g., a supplemental appropriations act) causing a violation of one or more
of the discretionary spending limits for the ongoing fiscal year. Any breaches of the
limits that occur during the final quarter of the ongoing fiscal year (i.e., July 1-
September 30) would result in a lowering of the applicable limits for the following
fiscal year rather than a within-session sequester.
These enforcement procedures also are linked to the congressional budget
process. The annual budget resolution sets forth discretionary spending levels
consistent with the statutory limits; these levels also are adjusted for the same factors
that cause the statutory limits to be adjusted. While OMB is responsible for scoring
the effects of budgetary legislation to determine whether a sequester is necessary,
CBO (under the direction of the House and Senate Budget Committees) is responsible
for scoring legislation for purposes of enforcement in the congressional budget
process.
“Pay-As-You-Go” (PAYGO) Requirement. Under the PAYGO process,
legislation proposing new direct spending, or legislation decreasing revenues, must
be offset so that the net surplus for a fiscal year is not reduced (or the net deficit
increased). Direct spending stems from substantive law rather than annual
appropriations acts and funds entitlement and other mandatory programs such as
Medicare, Medicaid, federal employee retirement, and unemployment compensation.
The PAYGO balances for each fiscal year are maintained on a rolling PAYGO
“scorecard” that accumulates the budgetary effects of laws enacted during the session
and in prior years (beginning with FY1991).13 The threshold test for a PAYGO
12Factors upon which adjustments are based have changed from time to time. For example,
the BEA of 1990 provided for adjustments due to changes in inflation, but this was removed
by the BEA of 1997.
13On several occasions, PAYGO balances have been reset to zero or otherwise modified
(continued...)

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sequester deals with how legislation changes the surplus or deficit for a fiscal year on
the PAYGO scorecard, not the surplus or deficit for that fiscal year in the federal
budget generally.
Recently, as the budget has moved from an overall deficit to an overall surplus,
and as the prospect of an on-budget surplus has emerged, there has been some
confusion regarding whether the PAYGO requirement would continue to apply. The
concern arises from the fact that the stated purpose of the PAYGO requirement (in
Section 252(a) of the 1985 Balanced Budget Act) refers only to legislation “that
increases the deficit.” In the report accompanying the FY2000 budget resolution, the
House Budget Committee stated:
The law is somewhat unclear whether PAYGO lapses when there is an on-budget
surplus. OMB has hinted that PAYGO would indeed lapse if the budget was in
balance without counting excess Social Security receipts.14
In response to this concern, OMB Director Jacob Lew issued a statement
indicating that such a position was not correct, stating “we believe that PAYGO does
apply when there is an on-budget surplus.”15 The controlling factor, as stated
previously, is how legislation changes the balance on the PAYGO scorecard.
Enforcement of the PAYGO process, like the discretionary spending limits, also
is accomplished through a special sequestration procedure. If a sequester under this
process is required, it must occur within 15 calendar days after Congress adjourns at
the end of a session and on the same day as any sequestration tied to enforcement of
the discretionary spending limits. The sequester would offset any net negative balance
on the PAYGO scorecard, for that fiscal year and the prior fiscal year combined,
caused by the enactment of legislation during the session and in prior years. Any
required reductions would be made in non-exempt direct spending programs.
Emergency direct spending and revenue legislation, so designated by the
President and in statute, is not covered by the PAYGO sequestration process. As
mentioned previously, spending for the Social Security program, except for
administrative expenses, is exempt from sequestration.
Sequestration Reports and Orders. OMB and CBO must each prepare
annually three different types of sequestration reports, as discussed below. The CBO
reports, which are advisory only, precede the OMB reports by several days. In all
three types of reports, OMB must explain any differences between its estimates and
those of CBO.
13(...continued)
pursuant to law, primarily to prevent the sizeable savings from reconciliation legislation from
being used as offsets to subsequent direct spending increases.
14See the report of the House Budget Committee to accompany H.Con.Res. 68 (H.Rept. 106-
73), March 23, 1999, at page 87.
15Letter of April 6, 1999, from OMB Director Jacob Lew to the Honorable John Spratt,
ranking minority member of the House Budget Committee.

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If the President must issue a sequestration order in any year, the order is issued
on the same day that the final OMB sequestration report is issued and the order must
implement without change all of the reductions identified in the OMB report.
Two preliminary sequestration reports are issued before the final sequestration
report, in order to give the President and Congress advance warning of any possible
sequester. Early in the session, OMB and CBO issue sequestration preview reports.
The reports provide estimates of the discretionary spending limits, with the
adjustments prescribed by law. Also, the reports provide estimates of any net change
in the balances on the PAYGO scorecard caused by the enactment of direct spending
or revenue legislation subject to the PAYGO process. The OMB preview report
contains the same information as the CBO preview report and explains any differences
between its estimates and those of CBO.
In August, OMB and CBO issue sequestration update reports to reflect the
impact of legislation enacted in the interim.
Finally, OMB and CBO issue final sequestration reports shortly after Congress
adjourns to end the session. Both reports must reflect any pertinent legislation
enacted since the update reports were issued. The final reports must indicate the
baseline amount of budgetary resources and the amount and percentage of the
reduction for each account subject to sequestration. Further sequestration reports are
issued if a “within-session sequester” is required.
In preparing its update and final sequestration reports, OMB must use the
economic and technical assumptions that were used in the earlier preview report.
(Previously, OMB could determine in late summer the economic and technical
assumptions that it would use for sequestration in October.)
During the course of the session, OMB must provide Congress with cost
estimates of budgetary legislation within seven days of its enactment, so that
compliance with the discretionary spending limits and PAYGO requirements can be
monitored. The cost estimates must be based on the economic and technical
assumptions used in the President’s most recent budget, and must include similar cost
estimates prepared by CBO together with an explanation of any differences between
the two sets of estimates.
History of Sequesters: FY1986-1999
During the 14 years that sequestration was in effect prior to the FY2000 budget
cycle, sequesters were triggered five times (see Table 1). One sequester occurred
each year for FY1986, 1988, and 1990, and two sequesters occurred for FY1991. No
sequester was triggered during the eight fiscal years covering FY1992-1999.

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Table 1. Summary of Sequesters: FY1986-1999
(outlays in billions of dollars)
Initial
Fiscal
Congress/
outlay
year
session
savings
Subsequent outcome
Enforcement of deficit targets a
1986
99/2
11.7
Full savings achieved.b
1987
99/2
None
[No sequester was required]
1988
100/1
20.0
Reductions superseded by budget agreement.c
1989
100/2
None
[No sequester was required]
1990
101/1
16.1
Reduced to $4.55 billion by subsequent law.d
Enforcement of discretionary spending limits and PAYGO requirement a
1991
101/2
0.2
Reduced to $0.0014 billion by subsequent law.e
1992
102/1
None
[No sequester was required]
1993
102/2
None
[No sequester was required]
1994
103/1
None
[No sequester was required]
1995
103/2
None
[No sequester was required]
1996
104/1
None
[No sequester was required]
1997
104/2
None
[No sequester was required]
1998
105/1
None
[No sequester was required]
1999
105/2
None
[No sequester was required]
a The Balanced Budget and Emergency Deficit Control Act of 1985, as amended, established
sequestration to enforce deficit targets leading to a balanced budget by FY1993. The Budget
Enforcement Act of 1990 amended the 1985 act, effectively replacing the deficit targets with
statutory limits on discretionary spending and a “pay-as-you-go” (PAYGO) requirement for
revenue and direct spending legislation. Accordingly, the sequestration process was used to
enforce deficit targets for FY1986-1990 and discretionary spending limits and the PAYGO
requirement for FY1991-1999.
b Outlay reductions under the FY1986 sequester were limited by the 1985 Balanced Budget Act to
this amount.
c The FY1988 sequester was in effect from October 20 until December 22, 1987, when legislation
implementing a budget summit agreement of November 20 was enacted. Outlay reductions
of $20.0 billion were expected to occur had the sequester been in effect for the full fiscal year.
d The required outlay reduction of $16.1 billion was reduced to $5.75 billion by Section 11002 of the
Omnibus Budget Reconciliation Act of 1989 and a new sequestration order, consistent with
the lower amount, was issued. CBO estimated that the application of the “crediting rule”
under Section 252(f) of the 1985 Balanced Budget Act would reduce the savings from $5.75
billion to $4.55 billion.
e Two sequesters under the discretionary spending limits occurred for FY1991. On November 9,
1990, $395 million in budget authority was sequestered in the international category, leading
to estimated outlay savings of $191 million; the sequester was rescinded on April 10, 1991,

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by Section 401 of P.L. 102-27, a supplemental appropriations act. On April 25, 1991, $2.4
million in budget authority was sequestered in the domestic category, leading to estimated
outlay savings of $1.4 million.
The first three sequesters occurred during the 5-year period when deficit targets
were in effect, covering FY1986-1990.16 During the remaining nine years, covering
FY1991-1999, sequestration applied to the enforcement of the discretionary spending
limits and PAYGO requirement. Two sequesters under the discretionary spending
limits occurred for FY1991 and no PAYGO sequester has ever occurred.
Initial outlay savings associated with the three deficit target sequesters were
substantial, ranging from $11.7 billion for FY1986, to $20.0 billion for FY1988, and
to $16.1 billion for FY1990. While the savings for FY1986 remained intact, the
savings for FY1988 were superseded completely by legislation implementing a budget
summit agreement and the savings for FY1990 were reduced to $4.55 billion by
subsequent legislation. Notwithstanding the implementation of a sequester for each
of these three fiscal years, the deficit targets proved to be ineffective on the whole.
The actual deficit for each of these years exceeded the applicable target by an average
of about $60 billion.
The two sequesters for FY1991 under the discretionary spending limits had a
minuscule impact compared to the earlier deficit target sequesters. Both of the
sequesters were triggered inadvertently and the larger of the two was rescinded
completely.
Each of the five sequesters is discussed in more detail below.
Deficit Target Sequesters (FY1986-1990).
FY1986. Because the 1985 Balanced Budget Act was enacted several months
after FY1986 had begun, sequestration actions for the fiscal year were taken in 1986
under a truncated schedule. On January 15, 1986, the CBO and OMB directors
submitted a joint Sequestration Report for Fiscal Year 1986 to the comptroller
general. Differences in their estimates were averaged, resulting in a deficit estimate
of $220.5 billion. Although the deficit was estimated to exceed the target of $171.9
billion by $48.6 billion, outlay reductions for the fiscal year were capped by the 1985
act at $11.7 billion. Accordingly, the uniform reduction percentages were 4.9% for
defense programs (military personnel accounts were exempted) and 4.3% for
nondefense programs.
In issuing his sequestration report, Budget Reductions for FY 1986, on January
21, the comptroller general generally agreed with the averaged estimates and
calculations made by the CBO and OMB directors. Consequently, President Reagan
issued a sequestration order on February 1.
16As mentioned previously, although the deficit targets were extended through FY1995, they
effectively were superseded by the discretionary spending limits and PAYGO requirement
beginning with FY1991.

CRS-11
As previously discussed, rulings by a U.S. District Court on February 7 and by
the Supreme Court on July 7 invalidated the sequestration order for FY1986, but the
judgments of the courts were stayed to allow Congress to ratify the sequestration
order under “fallback procedures” in the 1985 act. On July 17, the Temporary Joint
Committee on Deficit Reduction reported identical House and Senate joint resolutions
aimed at restoring the sequester. The House and Senate acted on a comparable
measure (H.J.Res. 672), which passed the House and Senate on July 17 and was
signed into law on July 31 as P.L. 99-366.
The actual deficit for fiscal year 1986 amounted to $221.2 billion, almost $50
billion over the deficit target.
FY1988. Under the “fallback procedures,” the CBO and OMB directors
submitted a joint sequestration report for FY1988 to Congress on August 20, 1987.
The averaged deficit estimate of $153.4 billion indicated a deficit excess of $45.4
billion. The House and Senate deferred action on sequester resolutions pending
revision of the 1985 Balanced Budget Act in conjunction with passage of an increase
in the statutory limit on the public debt. The revisions in the sequestration process
and deficit targets made in September by the 1987 Balanced Budget Reaffirmation
Act provided that new sequestration actions for FY1988 be taken under a modified
timetable covering October and November 1987.
The CBO and OMB directors separately issued initial sequestration reports for
FY1988 on October 15 and 20, respectively. The OMB director estimated the deficit
for the fiscal year at $163.0 billion—$19.0 billion above the revised deficit
target—and President Reagan issued an initial sequestration order on October 20.
The two directors issued revised sequestration reports on November 16 and 20,
respectively. Under the revised OMB deficit estimate of $164.0 billion, defense
programs (with military personnel accounts exempted) were reduced uniformly by
10.5% and nondefense programs by 8.5%. President Reagan issued the final
sequestration order on November 20.
Negotiators from the House and Senate leadership and the administration,
participating in a “budget summit,” reached agreement on a compromise plan on
November 20. Although the summit agreement came too late to forestall issuance of
the final sequestration order, the initial and final sequestration orders were canceled
on December 22 upon the enactment of appropriations and reconciliation measures
implementing the agreement. Budgetary resources that had been sequestered were
restored. In total, the compromise plan proposed about $76 billion in savings over
two years—$30 billion for FY1988 and $46 billion for FY1989. According to
estimates made by CBO in February 1987, savings in a full-year continuing resolution
(P.L. 100-202) and the Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203)
amounted to $34 billion, exceeding the goal set in the summit agreement by about $4
billion.
The actual deficit for FY1988 amounted to $155.1 billion, more than $11 billion
above the deficit target.
FY1990. On August 21, 1989, the CBO and OMB directors issued initial
sequestration reports for FY1990 (the OMB report was issued several days ahead of

CRS-12
the statutory deadline). The OMB director estimated the deficit at $116.2
billion—$6.2 billion over the triggering threshold. President Bush issued an initial
sequestration order on August 25 directing that the reductions in the OMB report be
made, effective October 1, on a provisional basis.
The CBO and OMB directors issued revised sequestration reports on October
10 and 16, respectively. Due to largely offsetting changes in spending, the OMB
director adjusted his deficit estimate by only $0.1 billion, bringing it down to $116.1
billion. On October 16, President Bush issued a final sequestration order adjusting
slightly and finalizing the reductions made earlier. In order to eliminate the deficit
excess of $16.1 billion, defense programs were cut by 4.3% (military personnel
accounts were not exempted) and nondefense programs were cut by 5.3%.
On December 27, President Bush issued a sequestration order for FY1990 as
required by Section 11002 of the Omnibus Budget Reconciliation Act of 1989 (P.L.
101-239). The new order, which replaced the order of October 16 issued pursuant
to the 1985 Balanced Budget Act, reduced the estimated outlay savings from
sequestration by about two-thirds (to $5.75 billion). Under the “crediting rule” in the
1985 act, the expected outlay savings under the new order were reduced to $4.55
billion. The modified sequestration reductions, together with other savings in the
reconciliation act and other measures, were expected at the time to bring the deficit
estimate down to a point below the $110 billion triggering threshold. However,
several weeks later, in January 1990, OMB revised the deficit estimate for FY1990
upward to $122 billion.
The actual deficit for FY1990 amounted to $220.4 billion, more than $120 billion
above the deficit target.
Avoidance of Sequesters for FY1987 and FY1989. Sequesters under the deficit
targets for FY1987 and FY1989 were avoided. For FY1987, Congress and the
President enacted an omnibus reconciliation measure and other acts that reduced the
estimated deficit to $3 billion below the triggering threshold of $154 billion. For
FY1989, the estimated deficit was $0.5 billion below the triggering threshold of $146
billion. The actual deficits for FY1987 and FY1989 exceeded the targets by about $5
billion and $17 billion, respectively.
Discretionary Spending Limit Sequesters (FY1991-1999). There have been
two sequesters under the discretionary spending limits and both of them applied to
FY1991. The first occurred late in 1990 and the other occurred in the spring of 1991.
During most of 1990, while Congress and the President conducted negotiations
on the budget for FY1991 (and before the BEA of 1990 was enacted), sequestration
procedures keyed to the deficit targets were still in place. The deficit target for the
fiscal year was set at $64 billion. Under the sequestration procedures as they existed
at that time, President Bush issued initial and final sequestration orders—on August
25 and October 15, 1990, respectively—that would have sequestered sufficient
budgetary resources to yield the more than $80 billion in outlay savings necessary to
meet the $64 billion deficit target. The implementation of the orders, however, was
suspended through November 5 by provisions enacted in a series of joint resolutions
providing continuing appropriations.

CRS-13
On November 5, the sequestration process was modified substantially when
President Bush signed the reconciliation act containing the BEA of 1990 into law.
The reconciliation law, which implemented much of the $500 billion in savings over
five years assumed by the budget resolution, also rescinded the sequestration orders
issued on August 25 and October 15.
On November 9, OMB identified in its final sequestration report for FY1991 a
breach of $395 million in the limit on discretionary budget authority for international
programs caused by a drafting error in the Foreign Operations Appropriations Act for
FY1991. President Bush issued a sequestration order that day. The “mini-sequester”
required a 1.9% uniform reduction in covered international programs and was
estimated to yield $191 million in outlay savings.
In 1991, just prior to adjourning for the spring recess, Congress enacted two
measures providing supplemental appropriations for FY1991: H.R. 1281, providing
“dire emergency” supplemental appropriations, and H.R. 1282, providing
supplemental appropriations for Operation Desert Storm. President Bush signed them
into law on April 10, 1991, as P.L.102-27 and P.L. 102-28, respectively. The two
bills together provided about $45.3 billion in new budget authority, but most of the
supplemental appropriations ($44.0 billion) was designated as emergency spending
and did not violate the budget enforcement procedures under the 1985 act.
With regard to non-emergency spending, however, H.R. 1281 provided $512
million in budget authority in the domestic category, causing the limit for that
category to be exceeded by about $2 million. Although $835 million in non-
emergency budget authority was provided in the defense category, it did not cause a
breach. Further, outlay breaches in the international and domestic categories were
covered by special outlay allowances amounting to $1.5 billion and $2.5 billion,
respectively.
Accordingly, on April 25, OMB issued a within-session sequestration report for
FY1991, indicating that budget authority for accounts in the domestic category would
be reduced by 13 ten-thousandths (0.0013) of one percent ($13 for every one million
dollars in an account). The outlay savings associated with the $2.4 million reduction
in budget authority were estimated at $1.4 million. President Bush issued a
sequestration order on the same day.
In his report on compliance with procedures under the BEA for FY1991, the
comptroller general asserted that the April 25 sequester would have been avoided had
OMB properly excluded from its calculations $26 million in previously obligated
funds that were exempted by P.L. 102-27 from new account-closing requirements.17
One of the two supplemental appropriations acts, P.L. 102-27, contained a
provision relating to the sequester of November 9, 1990. Section 401 of the act (105
Stat. 154-155) corrected the drafting error in the Foreign Operations Appropriations
17U.S. General Accounting Office, Budget Enforcement Act Compliance Report, report
number GAO/AFMD-92-43 (Washington: February 14, 1992).

CRS-14
Act, rescinded the November 9 sequestration order, and restored the sequestered
amounts.
Sequestration for FY2000
As the House and Senate worked in the fall of 1999 to complete action on the
regular appropriations acts for FY2000 and other budgetary legislation, there was
some concern that a sequester for that fiscal year might be triggered at the end of the
session. However, in January 2000 the OMB director issued the OMB Final
Sequestration Report to the President and Congress for Fiscal Year 2000, indicating
that no sequester would be required following the end of the 1999 session.18 Toward
the middle of 2000, Congress and the President enacted supplemental appropriations
that breached the limits by $2.4 billion in budget authority and $6.8 billion in outlays,
but the legislation included a provision barring a within-session sequester for FY2000
(or a reduction in the limits for FY2001). This action brought potential sequestration
actions for FY2000 to a close. These developments are discussed in more detail
below.
Discretionary Spending Limits. On February 1, 1999, in the sequestration
preview report for FY2000, OMB detailed various adjustments made in the
discretionary spending limits since the final sequestration report for FY1999 was
issued.19 At the time OMB prepared its sequestration update report (August 15), the
House and Senate had passed most of the 13 regular appropriations acts for FY2000,
but none of them had been enacted into law.20 Based on House and Senate action
through August 15, on the Section 302(b) spending allocations made under the 1974
Congressional Budget Act (for appropriations measures that had not yet been acted
on), and other factors, OMB concluded that a sequester of between $1.1 billion and
$3.7 billion in budget authority would occur if appropriate offsets were not
developed.
Final congressional action for the session on the FY2000 budget was guided by
the Republican leadership plan to abide by the discretionary spending limits, use a $14
billion on-budget surplus projected by CBO for a variety of budgetary initiatives, and
not spend the Social Security surplus.21 Considerable controversy was generated
regarding the use of various devices, such as “directed scorekeeping,” emergency
spending designations, and shifts in the timing of payments, to adhere to the
18 The report was printed as H.Doc. 106-182 (OMB Final Sequestration Report for Fiscal
Year 2000, January 31, 2000).
19See “Preview Report,” in the Budget of the United States Government, Fiscal Year 2000,
Analytical Perspectives, February 1, 1999, on pages 275-285.
20OMB’s sequestration update report was issued on August 25, 1999, and is available on the
OMB web site referred to above.
21For a discussion on this topic, see: U.S. Library of Congress, Congressional Research
Service, Discretionary Spending Limits and the Social Security Surplus, by Robert Keith,
CRS report RL30353 (Washington: October 27, 1999), 8 pages.

CRS-15
discretionary spending limits.22 At that time, informal estimates as to whether the
discretionary spending limits had been exceeded and whether the Social Security
surplus had been used varied widely, depending on the assumptions upon which the
estimates were based.23
One proposal to keep discretionary spending within the limits involved a 0.97%
across-the-board spending cut included as Section 1001 in Division C of H.R. 3064,
the District of Columbia-Departments of Labor, Health and Human Services, and
Education Appropriations Act for FY2000. The across-the-board cut would have
applied in a manner very similar to a reduction under a discretionary spending limit
sequester. One important modification, however, was that the cut also was made to
apply to salaries of Members of Congress. President Clinton vetoed H.R. 3064 on
November 3, in part because it included the across-the-board cut.
Congressional action on the remaining regular appropriations acts for FY2000
culminated with the passage of the Consolidated Appropriations Act for FY2000
(P.L. 106-113).24 An across-the-board cut also was incorporated into this act, but its
size was reduced considerably from earlier formulations—to 0.38%.25
In his final sequestration report covering the end of the 1999 session, issued
on January 25, 2000, the OMB director indicated that the total levels of budget
authority and outlays enacted for FY2000 fell below the aggregated limits by $1.558
billion and $3.463 billion, respectively (see Table 2). The budget authority limit in
the aggregate was $568.102 billion and the enacted level was $566.545 billion; the
outlay limit in the aggregate was $599.905 billion and the enacted level was $596.442
billion. The enacted levels exactly equaled the limits for the Violent Crime Reduction,
Highway, and Mass Transit categories and fell below the “other discretionary”
category by the amounts indicated above.
22See, for example: (1) “Democrats Keep Attacking ‘Gimmicks,’ Republicans Accuse Dems
of Sabotage” in the Bureau of National Affairs’ Daily Report for Executives, no. 200,
Monday, October 18, 1999, on page A-27; and (2) “Congress Making Greater Use of
Creative Accounting,” by Eric Pianin and George Hager, in the Washington Post of October
16, 1999, on page A15.
23See, for example, letters of October 28, 1999, from CBO Director Dan L. Crippen to
Speaker Hastert and Representative Spratt, posted on the CBO web site at http://www.
cbo.gov.
24 For information on this act, see: U.S. Library of Congress, Congressional Research
Service, FY2000 Consolidated Appropriations Act: Reference Guide, by Robert Keith, CRS
Report RS20403 (Washington: November 30, 1999), 4 pages.
25 The provision is discussed in detail in: U.S. Library of Congress, Congressional Research
Service, The 0.38 Percent Across-the-Board Cut in FY2000 Appropriations, by Robert
Keith, CRS Report RL30443 (Washington: February 25, 2000), 11 pages.

CRS-16
Table 2. Enacted Levels of Discretionary Spending for FY2000
Compared to Limits: End of 1999 Session
(amounts in billions of dollars)
Budget
Category
authority
Outlays
Violent Crime Reduction
Limit
4.500
6.344
Enacted Level
4.500
6.344
Under (-)/Over Limit
-----
-----
Highway
Limit
n/a
24.574
Enacted Level
n/a
24.574
Under (-)/Over Limit
n/a
-----
Mass Transit
Limit
n/a
4.117
Enacted Level
n/a
4.117
Under (-)/Over Limit
n/a
-----
Other Discretionary
Limit
563.602
564.870
Enacted Level
562.045
561.407
Under (-)/Over Limit
-1.558
-3.463
Total
Limit
568.102
599.905
Enacted Level
566.545
596.442
Under (-)/Over Limit
-1.558
-3.463
Source: H.Doc. 106-182 (OMB Final Sequestration Report for Fiscal Year 2000, January
31, 2000.
The discretionary spending limits in the OMB final sequestration report were
increased substantially from the levels set forth in the August update sequestration
report. All but about $2 billion of the nearly $32 billion in budget authority
adjustments was explained by the enactment of designated emergency spending.
Outlay adjustments amounted to about $23 billion, nearly all of which was attributable
to designated emergency spending.

CRS-17
In his final sequestration report, the CBO director indicated that breaches of the
FY2000 discretionary spending limits—aggregating $6.726 billion in budget authority
and $16.567 billion in outlays—occurred in all categories except for Violent Crime
Reduction.26 Had the CBO director’s estimates been controlling instead of advisory,
a sequester of about 4% of budget authority would have occurred in the other
discretionary category.
During the 2000 session, the House and Senate attempted to bring action on the
FY2000 budget to a close by considering supplemental appropriations for the fiscal
year in a single bill (in the House) or as elements incorporated into several regular
appropriations bills for FY2001 (in the Senate). Eventually, the supplemental
appropriations for FY2000 were merged into a single regular appropriations bill, the
Military Construction Appropriations Act for FY2001. The measure was enacted into
law on July 13, 2000, as P.L. 106-246 (114 Stat. 511).
According to OMB estimates, the non-emergency supplemental appropriations
included in P.L. 106-246 caused a breach in the budget authority and outlay limits for
the “other discretionary” category of $2.359 billion and $6.763 billion, respectively
(see Table 3). Levels in the remaining three discretionary spending categories were
not changed by P.L. 106-246. In anticipation that the measure would become law in
late June or early July, Congress inserted into the bill a provision barring a sequester
(which would have been required if enactment occurred in June) or a reduction in the
FY2001 limits (which would have been required because of enactment on or after the
July 1 triggering date). Section 5107 (114 Stat. 582), in Title V of Division B of the
act, stated:
Notwithstanding section 251(a) of the Balanced Budget and Emergency Deficit
Control Act of 1985, as amended, there shall be no sequestration under that section
to eliminate a fiscal year 2000 breach or no reductions in discretionary spending
limits for fiscal year 2001 that might be caused by the appropriations or other
provisions in this Act.
Table 3. Enacted Levels of “Other Discretionary” Spending
for FY2000 Compared to Limits: Middle of 2000 Session
(amounts in billions of dollars)
Budget
Category
authority
Outlays
Limit
580.289
569.224
Enacted Level
582.648
575.987
Under (-)/Over Limit
2.359
6.763
Source: OMB Sequestration Update Report to the President and Congress for Fiscal Year
2001, September 8, 2000, page 8.
26 The CBO Final Sequestration Report for Fiscal Year 2000 was printed as H.Doc. 106-168
(January 27, 2000).

CRS-18
PAYGO Requirement. The sequestration preview report issued by OMB in
February 1999 indicated a credit on the PAYGO scorecard for FY2000 of $2.9
billion.27 President Clinton proposed to use this credit to offset increased spending
for discretionary programs. His proposal would have required a change in budget
enforcement rules, but Congress did not take any action on it.
In the sequestration update report issued in August 1999, OMB indicated that
there was no material change in the PAYGO balance. However, reconciliation
legislation enacted earlier in the session, the Taxpayer Refund and Relief Act of 1999
(H.R. 2488), proposed $792 billion in tax cuts over ten years. Initially, the measure
included a “directed scorekeeping” provision that would have required the OMB
director to not count its impact on the PAYGO scorecard. The provision was
removed from the conference report in order to avoid a point of order under the
Senate’s “Byrd rule,” which bars extraneous matter in reconciliation measures.
Consequently, OMB determined that enactment of the measure would have required
a PAYGO sequester of $4.8 billion in FY2000, including a $4.1 billion reduction in
Medicare spending. President Clinton vetoed H.R. 2488 on September 23, in part
because of his concern regarding a sequester.
As Congress and the President worked to complete action on the FY2000
budget for the session, there was considerable uncertainty regarding the likelihood of
a PAYGO sequester because significant legislation still was pending. Pertinent
measures included, among others, bills extending expiring tax provisions, making tax
cuts (coupled with a proposal to increase the minimum wage), and providing
increased payments to Medicare providers. If the FY2000 costs of such measures
beyond the $2.9 billion credit were not offset, a PAYGO sequester could have
ensued.
Unlike discretionary spending programs, most direct spending programs are
exempt from reductions under a sequester. Social security and deposit insurance
programs are exempt from the process altogether; the revenue and direct spending
impacts of legislative changes in other large entitlement programs, such as Medicaid,
federal employee retirement, and unemployment compensation are recorded on the
PAYGO scorecard, but the programs themselves are exempt from any cuts. Any
required cuts in Medicare spending, the largest entitlement program subject to a
PAYGO sequester, are limited to 4%. Accordingly, only a small portion of direct
spending is required to bear the brunt of a PAYGO sequester.
A sequester of about $200 million for FY2000 would have been absorbed by
vocational rehabilitation, special milk, student loan, and foster care/adoption
assistance programs, which must be cut first under PAYGO rules. If the required
savings were larger, Medicare and the remaining programs would have been cut next.
Under current estimates of Medicare spending, the maximum 4% cut in Medicare
spending would have amounted to between $7 billion and $8 billion. A sequester
greater than this amount, up to a ceiling of about $20 billion, would have reduced or
eliminated completely the remaining direct spending programs subject to a PAYGO
sequester. These programs include, among others, the Commodity Credit
27See Analytical Perspectives, op. cit.

Corporation, social services block grants, child support enforcement, crop insurance,
immigration support, Mineral Leasing Act payments, and veterans’ education and
readjustment benefits.
In his final sequestration report, the OMB director determined that direct
spending and revenue legislation enacted during the session had increased the FY2000
credit on the PAYGO scorecard from $2.9 billion to $3.1 billion. The FY2000 credit,
when combined with a small cost ($58 million) for FY1999, yielded a net credit
($3.014 billion) that eliminated the need for a PAYGO sequester.
Two provisions in the Consolidated Appropriations Act for FY2000 modified
the treatment of direct spending and revenue legislation in the final sequestration
report. Neither of these provisions was necessary to prevent a PAYGO sequester for
FY2000, but they made significant changes in the balances on the PAYGO scorecard
for future years.
First, the Consolidated Appropriations Act enacted several major direct spending
measures by cross-reference. One of these measures, the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 (H.R. 3426), would have added
$1.5 billion in costs for FY2000 and $15.2 billion in costs for FY2000-2004 to the
PAYGO scorecard. Ordinarily, scorekeeping rule number three would have required
that the impact of direct spending provisions included in an annual appropriations act
be counted under the discretionary spending limits. However, Section 1001(a) of the
Consolidated Appropriations Act for FY2000 provided that they not be treated in this
manner; further, Section 1001(b) of the act instructed the OMB director not to count
these costs on the PAYGO scorecard.
Second, the Ticket to Work and Work Incentives Improvement Act (P.L. 106-
170), had modest savings for FY2000 ($80 million), but added nearly $18 billion to
the PAYGO balances for FY2001-2004. Pursuant to Section 1001(c) of the
Consolidated Appropriations Act for FY2000, the balances on the PAYGO scorecard
for FY1999 and succeeding years were reset to zero on January 3, 2000, thereby
eliminating the effects of the Ticket to Work Act.
In his advisory final sequestration report, the CBO director concluded that no
PAYGO sequester was required for FY2000.
Unlike the discretionary spending limits, the PAYGO requirement does not
provide for a within-session sequester during the following session. Accordingly, the
actions at the end of the 1999 session brought the sequestration process for FY2000
to a close.