Order Code RS21752
Updated May 11, 2005
CRS Report for Congress
Received through the CRS Web
Federal Budget Process Reform:
A Brief Overview
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division
Robert Keith
Specialist in American National Government
Government and Finance Division
Summary
In 2005, during the first session of the 109th Congress, the House and Senate face
a wide array of budget process reform proposals, pertaining to such matters as
restoration of the statutory discretionary spending limits and PAYGO requirement,
modifications to budget resolution, reconciliation, and appropriations processes, and
item veto/expanded rescission authority for the President. The House and Senate may
pursue budget process reform in various ways, including modifications to each
chamber’s rules and practices, the enactment of freestanding legislation, or the inclusion
of budget process changes in other budgetary legislation, such as a reconciliation or
debt-limit measure. This report provides a context for congressional actions in this area
and briefly discusses selected actions or proposals to illustrate the diversity of issues
involved. The report will be updated.
Congress and the President regularly propose and make changes to the federal budget
process in order to achieve certain budgetary objectives. Projected deficits in the unified
budget in each of the next several fiscal years, in particular, have increased congressional
interest in various budget process reform proposals.1 This report briefly discusses the
context in which federal budget process changes are made and identifies selected reform
1 The Office of Management and Budget (OMB) projects that under President Bush’s proposals
the FY2005 unified budget deficit will be $427 billion, with deficits continuing but declining
through FY2010. The Congressional Budget Office (CBO) projects, under its baseline budget
projections (which do not assume any changes in policy), that the FY2005 unified budget deficit
will be $368 billion, with a surplus returning in FY2012. For further information on the current
budget deficit projections, see OMB,
Budget of the U.S. Government, Fiscal Year 2006
(Washington: GPO, 2005), Table S-1, p. 343; and CBO,
The Budget and Economic Outlook:
Fiscal Years 2006-2015, Jan. 2005, Summary Table 1, p. xiv.
Congressional Research Service {
The Library of Congress
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proposals by major category. The identification of reform proposals in this report is not
intended to be comprehensive; other CRS reports discuss different aspects of budget
process reform in more detail.2
The Context of Budget Process Reform
The federal budget process is rooted in constitutional mandates, statutory
requirements, House and Senate rules and practices, and administrative directives.3 Thus,
there are several avenues through which Congress and the President can change the
various elements of the budget process. (This report addresses only changes made
through legislative action.)
In some years, comprehensive changes were made in the budget process through
statutes enacted by Congress and the President. The Budget and Accounting Act of 1921
established the executive budget process, the Congressional Budget Act of 1974 created
the congressional budget process, and the Balanced Budget and Emergency Deficit
Control Act of 1985 and the Budget Enforcement Act (BEA) of 1990 imposed additional
budget controls on a temporary basis.4 In other years, such as 1987, 1993, and 1997,
existing budget process statutes were modified in a less comprehensive fashion and
extended for limited periods. At other times, Congress and the President enacted statutes
changing selected aspects of the budget process; the Line Item Veto Act (of 1996) is one
example. Finally, in every Congress, the House and Senate have modified existing rules
and practices in the budget process and sometimes instituted new ones.5
Because nearly every committee of the House and Senate has jurisdiction over
legislation with a budgetary impact, interest in the budget process and proposals to change
it radiates throughout both chambers. Although jurisdiction over executive and
congressional budget procedures generally resides with the Budget, Government Reform,
and Rules Committees in the House, and with the Budget, Homeland Security and
Governmental Affairs, and Rules and Administration Committees in the Senate, other
House and Senate committees may exert influence over budget process changes affecting
their legislative interests.
Changes in the budget process may take the form of freestanding legislation (e.g.,
the Line Item Veto Act) or may be incorporated into other budgetary legislation, such as
2 For example, see (1) CRS Report RL32835,
PAYGO Rules for Budget Enforcement in the
House and Senate, by Robert Keith and Bill Heniff Jr.; (2) CRS Report RL31478,
Federal
Budget Process Reform: Analysis of Five Reform Issues, by James V. Saturno and Bill Heniff Jr.;
and (3) CRS Report RL30550,
Biennial Budgeting: Issues and Options, by James V. Saturno.
3 For a comprehensive overview of the federal budget process, see CRS Report 98-721,
Introduction to the Federal Budget Process, by Robert Keith and Allen Schick.
4 A comprehensive listing and description of major budget process laws enacted over the past
century (and full legal citations to them) is provided in CRS Report RL30795,
General
Management Laws: A Compendium, Clinton T. Brass (coordinator).
5 For example, at the beginning of the 109th Congress, the House made rules changes that affect
the budget process. See CRS Report RS22021,
House Rules Changes Affecting the
Congressional Budget Process in the 109th Congress (H.Res. 5), by Bill Heniff Jr.
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acts raising the debt limit (e.g., the 1985 Balanced Budget Act) or implementing
reconciliation instructions (e.g., the BEA of 1990). Budget process changes also may be
included in the annual budget resolution or other House and Senate resolutions.
Selected Budget Process Reform Proposals
Among the various budget process reform proposals currently under discussion,
many pertain to categories such as the restoration of the statutory discretionary spending
limits and the “pay-as-you-go” (PAYGO) requirement, the congressional budget
resolution and reconciliation, the annual appropriations process, and item veto/expanded
rescission authority. These and other categories of reform are discussed separately below.
Restoration of Discretionary Spending Limits and PAYGO Requirement.
For FY1991 through FY2002, federal budget legislation was constrained by statutory
limits on discretionary spending and a PAYGO requirement for direct spending
(sometimes referred to as mandatory spending) and revenue legislation. Both of these
budget constraints were established by the BEA of 1990, which amended the Balanced
Budget and Emergency Deficit Control Act of 1985. The discretionary spending limits
and the PAYGO requirement were enforced by sequestration, a process by which
violations were remedied by automatic, across-the-board spending cuts. These statutory
budget constraints were extended in 1993 and 1997, but effectively expired at the end of
FY2002 on September 30, 2002.
For the last several years, there has been considerable interest in restoring and
possibly making significant modification to the BEA procedures beyond FY2002. Many
Members of Congress and some outside observers agree that the budget enforcement
mechanisms associated with the BEA promoted fiscal discipline throughout the 1990s,
and contributed to the federal government achieving a unified budget surplus in FY1998
— the first in almost 30 years. With the return of deficits, some have argued for restoring
such fiscal discipline mechanisms.
Two of the major issues in this area are the duration of any new discretionary
spending limits and whether the PAYGO requirement should apply to both revenue and
direct spending legislation, or instead be confined to just direct spending legislation. In
the past, the discretionary spending limits covered a five-year time frame and were
adjusted from time to time. Eventually, the limits became quite out of sync with actual
spending policy, so much so that they were regarded as “unrealistic,” leading to practices
which undermined enforcement. Some argue that restricting the renewal of the
discretionary spending limits to a shorter time frame, such as two years, would be more
likely to yield realistic, workable enforcement. President Bush recommended a two-year
extension of discretionary spending limits in his FY2004 budget and five-year extensions
in his FY2005 and FY2006 budgets.6 In addition, he recommended that the PAYGO
requirement be reestablished, but that it apply only to direct spending legislation and not
revenue legislation. Some have countered that restricting the PAYGO requirement to the
6 President Bush’s proposals in this regard, and on other budget process matters, are set forth in
the
Budget of the United States Government, Fiscal Year 2006, Analytical Perspectives, Chapter
15, pp. 235-242.
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spending side of the budget could hamper overall efforts to contend with projected large
deficits.
On March 19, 2004, the House Budget Committee reported H.R. 3973 (H.Rept. 108-
442), the Spending Control Act of 2004, a measure restoring discretionary spending limits
and a PAYGO requirement (applicable only to direct spending) for FY2005-FY2009. The
House considered H.R. 4663, a revised version of H.R. 3973, on June 24, defeating it by
a vote of 146-268. Amendments dealing with various topics in budget process reform
were considered; two were agreed to and the remainder were rejected or withdrawn.
Congressional Budget Resolution and Reconciliation. The Congressional
Budget Act of 1974 requires the House and Senate to adopt a budget resolution each year,
setting forth aggregate spending and revenue levels, and spending levels by major
functional categories, for at least five fiscal years. The budget resolution, which is a
concurrent resolution and therefore does not become law, provides an overall budget plan
that guides congressional action on individual spending, revenue, and debt-limit
measures. The 1974 act includes an optional reconciliation procedure that provides for
the development and consideration of revenue, spending, and debt-limit legislation to
carry out budget resolution policies; enforcement of budget resolution policies also occurs
by means of various points of order that may be raised on the floor. Budget resolutions
and reconciliation measures are considered under expedited procedures in both chambers.
Some Members of Congress, as well as the President, have argued that the budget
resolution would be more effective in enforcing budget policy by making it a joint
resolution requiring the President’s approval. A joint budget resolution would directly
involve the President in congressional actions on the budget early in the process. If the
President and Congress reach an impasse on a joint budget resolution, however, some are
concerned that action on spending and revenue bills may be significantly delayed.
The expedited features applicable to the consideration of budget resolutions and
reconciliation measures are a particular concern in the Senate, which often operates under
“extended debate,” where legislation may be considered without constraints on debate
time or the offering of nongermane amendments. Limits on debate time sometimes lead
to a situation referred to as “vote-arama,” where the Senate considers and disposes of
many amendments after official debate time has expired. Some Senators have proposed
various solutions to the “vote-arama” problem so that they have better opportunities to
understand the content of amendments and to debate them adequately.
The Senate also expedites reconciliation legislation by a device known as the Byrd
rule (which is Section 313 of the 1974 act). Under the Byrd rule, which prohibits the
inclusion of extraneous matter in reconciliation legislation, a Senator may raise a point
of order against a provision that meets any of the six definitions of extraneous matter
specified in the 1974 act. While the Byrd rule has been very effective in excluding
extraneous matter from reconciliation measures, some assert that the rule unduly limits
the flexibility needed to formulate effective legislative policies and disadvantages the
House in conference negotiations with the Senate on such legislation.7
7 For example, see the explanations of the modifications to the Byrd rule proposed by H.R. 853,
(continued...)
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Congress enforces budget resolution policies through points of order on the floor of
each chamber during the consideration of budget legislation. Points of order, however,
are not self-enforcing; a Member must raise a point of order on the floor. In addition,
points of order under the 1974 act may be waived or set aside by unanimous consent. In
the Senate, a motion to waive most Budget Act points of order requires a three-fifths vote
(60 Senators if no seats are vacant). In the House, points of order may be waived by a
special rule reported by the Rules Committee; consequently, points of order under the
1974 act may be waived by a simple majority. Some argue that a super-majority vote
should be required to waive Budget Act points of order in the House, to make it more
difficult to consider legislation that would violate the policies set forth in the budget
resolution. Others, however, argue that a super-majority threshold to waive Budget Act
points of order would obstruct the will of the majority in the House.
On April 28, 2005, the House adopted a special procedure aimed at bolstering the
enforcement of discretionary spending levels during the remainder of the 109th Congress.8
The procedure affords the House an additional opportunity (at the conclusion of
consideration by the Committee of the Whole) to assess whether an appropriations
measure complies with the spending suballocations made under the budget resolution.
Annual Appropriations Process. Discretionary spending, which amounts to
about one-third of federal spending, is provided each year in regular, supplemental, and
continuing appropriations acts. Discretionary spending funds most of the routine
operations of federal agencies.
At the beginning of the 109th Congress, the House and Senate Appropriations
Committees consolidated and realigned their subcommittees in order to streamline the
appropriations process, facilitate the timely enactment of appropriations bills, and
minimize the likelihood of using consolidated appropriations acts.9 Both committees
disbanded their VA-HUD Appropriations Subcommittee, and the House Appropriations
Committee disbanded two others (District of Columbia and Legislative Branch), leaving
12 Senate and 10 House appropriations subcommittees. Some Members have raised
concerns as to whether the reduction in the number of subcommittees (and, hence, in the
number of regular appropriations bills) would be sufficient to make appropriations actions
more timely and Congress less reliant on consolidated appropriations acts.
When a regular appropriations act or a continuing resolution is not in place after the
start of the fiscal year on October 1, an agency does not have the legal authority to incur
obligations in order to function and must shut down, resulting in the furlough of federal
7 (...continued)
the Comprehensive Budget Process Reform Act of 1999, which was introduced and defeated in
the 106th Congress:
Comprehensive Budget Process Reform Act of 1999, report to accompany
H.R. 853, H.Rept. 106-198 (August 5, 1999), part 2 (House Budget Committee) and part 3
(House Rules Committee).
8 The special procedure is set forth in Section 2 of H.Res. 248, the special rule governing
consideration of the conference report on the FY2006 budget resolution (H.Con.Res. 95).
9 For a further discussion on reorganization of the appropriations subcommittees, see CRS Report
RL31572,
Appropriations Subcommittee Structure: History of Changes from 1920-2005, by
James V. Saturno.
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employees and disruptions in service. To prevent a government shutdown (or the threat
of one) due to the expiration of funding, some Members have proposed establishing an
automatic continuing resolution. An automatic continuing resolution would provide an
uninterrupted source of funding for discretionary activities in the event one or more
regular appropriations acts are not enacted by the start of a new fiscal year. While such
a device could eliminate or reduce employee furloughs and service disruptions, some view
an automatic continuing resolution as substituting a formulaic response for deliberate and
informed decision-making.
Biennial Budgeting. While most authorizations are enacted on a multiyear cycle,
Congress acts on budget resolutions and appropriations acts annually. Biennial budgeting
proposals would change the cycle under which Congress acts on budget resolutions and
appropriations acts (and annual authorization acts) to two years. Biennial budgeting
proposals are intended to reduce the amount of time Congress spends on budgetary
legislation, to allow more time for congressional oversight of federal agencies and
programs, and generally to provide for more efficient budget decision-making. In the
view of some, a biennial approach could impair Congress’s ability to respond to changing
economic and budgetary circumstances.
Item Veto/Expanded Rescission Authority. When a spending or revenue act
is sent to the President for his consideration, he must approve or veto the measure in its
entirety. After a spending measure has become law, the President may impound funds
through rescission, which cancels the funding, or deferral, which delays the expenditure
of funds. Congress exercises its responsibilities in this area through procedures
established under the Congressional Budget and Impoundment Control Act of 1974 and
the regular legislative process. Advocates of greater spending control proposed the Line
Item Veto Act, which became law in 1996 (P.L. 104-130) but was struck down by the
Supreme Court on June 25, 1988, in
Clinton v. City of New York, 524 U.S. 417 (1988).
Under this act, the President was authorized to strike individual items of discretionary
spending, mandatory spending, and certain limited tax benefits in any law.
In the years following the Supreme Court decision, various proposals have been
offered in Congress to grant item veto authority to the President in a manner that passes
constitutional muster or to otherwise expand his rescission powers. President Bush, in
his FY2005 and FY2006 budgets, proposed a line-item veto under which savings could
be used only for deficit reduction; he asserts that his proposal would correct the
constitutional flaw in the 1996 act, but the manner in which this would be done is not
specified in either budget.10 While advocates of the item veto or expanded rescission
powers for the President contend that such tools will enhance budgetary discipline, critics
suggest that their usefulness for budgetary discipline is overstated and that they may
adversely affect the balance of power between Congress and the President over budget
decisions.
10 For additional information, see (1) CRS Report RS21991,
A Presidential Item Veto, by Louis
Fisher; and (2) CRS Report RL30223,
Presidential Rescission Authority: Efforts to Modify the
1974 Framework, by Virginia A. McMurtry.