Budget Issues: Budget Enforcement Compliance Report (14-JUN-02,
GAO-02-794).
The Balanced Budget and Emergency Deficit Control Act of 1985
requires that Office of Management and Budget (OMB) and the
Congressional Budget Office (CBO) issue a sequestration reports
annually to Congress. Overall, GAO found that OMB and CBO
substantially complied with the act in fiscal year 2002. However,
as in previous years, some of the required OMB and CBO reports
were issued late. Further, GAO identified a total of 19 items
where differences of over $500 million existed between CBO's and
OMB's scoring of discretionary budget authority and/or outlays
for enacted laws.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-02-794
ACCNO: A03624
TITLE: Budget Issues: Budget Enforcement Compliance Report
DATE: 06/14/2002
SUBJECT: Noncompliance
Reporting requirements
Budget scorekeeping
Budget administration
Airport and Airway Trust Fund
******************************************************************
** This file contains an ASCII representation of the text of a **
** GAO Product. **
** **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced. Tables are included, but **
** may not resemble those in the printed version. **
** **
** Please see the PDF (Portable Document Format) file, when **
** available, for a complete electronic file of the printed **
** document's contents. **
** **
******************************************************************
GAO-02-794
A
Report to the Chairman, Committee on the Budget, House of Representatives
June 2002 BUDGET ISSUES Budget Enforcement Compliance Report
GAO- 02- 794
Letter 1 Results in Brief 2 The Future of Budget Enforcement 6
Appendixes
Appendix I: Background and Scope and Methodology 7 Discretionary Spending
Limits 8 PAYGO Enforcement 11 Scope and Methodology 12
Appendix II: Implementation Issues 14 Although There Are Many Discretionary
Scorekeeping Differences,
Neither OMB Nor CBO Call for Sequestration 14 Scoring Differences 15 PAYGO
Scoring Issues 21 Cap Adjustments 31
Appendix III: Future of Budget Enforcement Rules 33 Recent History of Budget
Enforcement Rules 33 Trends in Adherence to the Discretionary Spending Caps
and
PAYGO Constraints 34 Principles for a Budget Process 37 Alternatives for
Improving the Budget Process 39 Extending Caps on Discretionary Spending 39
Miscellaneous Discretionary Challenges: Leases and User Fees 42 Extending
and Refining PAYGO 43 Improving the Recognition of Long- Term Commitments 46
Dealing with the Uncertainty of Projections 48 Conclusion 49
Appendix IV: GAO Contact and Staff Acknowledgments 51 GAO Contact 51
Acknowledgments 51
Tables Table 1: Sequestration Reports and Due Dates 2 Table 2: Discretionary
Spending Categories by Fiscal Year 9
Table 3: CBO and OMB Estimates of Fiscal Year 2002 Appropriations Compared
to End- of- Session Discretionary Caps 15 Table 4: Provisions with More than
$500 Million Difference
between OMB and CBO Estimates 16
Table 5: Comparison of OMB and CBO PAYGO Scoring for the Air Transportation
Safety and System Stabilization Act 22 Table 6: Comparison of OMB and CBO
PAYGO Scoring for the
Insurance Provisions of the Air Transportation Safety and System
Stabilization Act 23 Table 7: Comparison of OMB and CBO PAYGO Scoring for
the Tax
Payment Extension Provision of the Air Transportation Safety and System
Stabilization Act 24 Table 8: Comparison of OMB and CBO PAYGO Scoring for
the
Victim Compensation Provision of the Air Transportation Safety and System
Stabilization Act 25 Table 9: Comparison of OMB and CBO PAYGO Scoring for
the
Investor and Capital Markets Fee Relief Act 26 Table 10: Comparison of OMB
and CBO PAYGO Scoring for the
National Defense Authorization Act for Fiscal Year 2002 27 Table 11:
Comparison of OMB and CBO PAYGO Scoring for the
Medical Care Provision of the National Defense Authorization Act for Fiscal
Year 2002 28 Table 12: Comparison of OMB and CBO PAYGO Scoring for the
Economic Growth and Tax Relief Reconciliation Act of 2001 29 Table 13:
Comparison of OMB and CBO PAYGO Scoring for Title I,
the Individual Income Rate Reductions Provisions of the Economic Growth and
Tax Relief Reconciliation Act of 2001 30 Table 14: Comparison of OMB and CBO
PAYGO Scoring for Title V, the Estate, Gift, and Generation- Skipping
Transfer Tax
Provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001
31 Table 15: Comparison of OMB and CBO PAYGO Scoring for the Title
II, Tax Benefits Relating to Children of the Economic Growth and Tax Relief
Reconciliation Act of 2001 31
Figure Figure 1: Discretionary Outlay Caps and Enacted Appropriations 35
Letter
June 14, 2002 The Honorable Jim Nussle Chairman Committee on the Budget
House of Representatives
Dear Mr. Chairman: This report responds to your request that we assess
compliance by the Office of Management and Budget (OMB) and the
Congressional Budget Office (CBO) with the requirements of the Balanced
Budget and Emergency Deficit Control Act of 1985 (DCA), as amended. 1 Our
assessment covers OMB and CBO reports issued for legislation enacted during
the 1st session of the 107th Congress, which ended on December 20, 2001.
According to CBO?s final sequestration report issued on January 15, 2002,
fiscal year 2002 discretionary outlays for all spending categories combined
are estimated to fall beneath the adjusted spending limits. OMB?s final
sequestration report, issued on January 31, 2002, also estimated that no
sequestration of discretionary spending would be required for fiscal year
2002. Both OMB and CBO estimated about $130 billion in net pay- as- yougo
(PAYGO) costs for 2001 and 2002 combined, which would have required a PAYGO
sequestration. However, the Department of Defense and
Emergency Supplemental Appropriations Act for Recovery from and Response to
Terrorist Attacks on the United States, 2002 (P. L. 107- 117) required OMB
to reset the 2001 and 2002 PAYGO balances to zero, thereby avoiding a PAYGO
sequester. Nevertheless, OMB estimates in its 2002 final report that a total
PAYGO scorecard balance of $505.8 billion remains for fiscal years 2003
through 2006. To assess compliance with the DCA, we reviewed OMB and CBO
sequestration reports issued under the act to determine if they complied
with all of the act?s requirements. In addition we reviewed the
1 The Balanced Budget and Emergency Deficit Control Act of 1985 as amended
by the Budget Enforcement Act of 1990 (BEA), the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93), and the Budget Enforcement Act of 1997
(BEA- 97). In addition to being known as DCA, it is sometimes called Gramm-
Rudman- Hollings or GRH. It is also referred to as BEA since that
legislation amended GRH in 1990 by adding the current discretionary spending
caps and PAYGO procedures.
scorekeeping reports issued by OMB and CBO to (1) identify major scoring
differences and (2) determine the timeliness of the reports. Appendix I
contains greater detail on our scope and methodology, as well as background
information on DCA.
Our work was conducted in Washington, D. C. from August 2001 through May
2002 in accordance with generally accepted government auditing standards. We
provided a draft of this report to OMB and CBO officials for their review
and comment. OMB and CBO officials agreed with our presentation of their
views and the facts as presented. We incorporated their comments where
appropriate.
Results in Brief Overall, we found that OMB and CBO substantially complied
with the act. However, as in previous years, some of the required OMB and
CBO reports
were issued late. The DCA sets a specific timetable for issuance of OMB and
CBO sequestration reports, as shown in table 1. Table 1: Sequestration
Reports and Due Dates
Due date Report
CBO OMB
Preview report 5 days before President?s President?s budget budget
submission submission
Update report August 15 August 20 Final report 10 days after end of
15 days after end of congressional session congressional session
Although OMB met the timing requirement for the sequestration preview
report, the update report was issued 2 days late on August 22, 2001, and the
final report was issued 27 days late on January 31, 2002. CBO?s preview and
update reports were issued on time, but the final report was issued on
January 15, 2002, 16 days late.
As has been the case for the past 5 fiscal years, OMB issued most of its
fiscal year 2002 scorekeeping reports late, with over 80 percent of the
reports issued late. For fiscal year 2002, OMB issued a total of 5
discretionary scorekeeping reports (covering 15 pieces of enacted
legislation) and 21 PAYGO reports. 2 Of this total of 26 scorekeeping
reports, only 6 of the PAYGO reports were issued on time. All of the
discretionary reports and 15 of the 21 PAYGO reports were issued later than
the legal requirement of 7 working days after enactment of the relevant
piece of legislation. The average tardiness for fiscal year 2002
discretionary spending and PAYGO reports (for legislation with significant
budgetary impact) was 17 working days late. In comparison, the 4 fiscal year
2001 discretionary reports were issued an average of 23 days late and the 51
PAYGO reports (for legislation with significant budgetary impact) were
issued an average of 9 days late.
While CBO does not have a timing requirement for its PAYGO or discretionary
scoring reports, DCA requires CBO to issue estimates ?as soon as
practicable? after Congress completes action. On average, CBO issued both
its fiscal year 2002 appropriations scoring reports and its PAYGO reports
about 11 working days after congressional action was completed.
As you requested, we also looked beyond compliance to some implementation
issues. In appendix II, we further discuss the major appropriations and
PAYGO scoring differences between CBO and OMB, including a difference caused
by OMB changing its baseline for receipts to the Airport and Airway Trust
Fund while CBO did not. DCA does not specifically address whether or not
this is permissible.
We identified a total of 19 items where differences of over $500 million
existed between CBO?s and OMB?s scoring of discretionary budget authority
and/ or outlays for enacted laws. Of the 15 outlay differences greater than
$500 million, 13 were due to differences in outlay rates and 2 were due to
differences in how funds were allocated to accounts. The 4 remaining
differences relate to the treatment of budget authority by OMB and CBO in P.
L. 107- 38, the Emergency Supplemental Appropriations Act
2 Although CBO issued scorekeeping reports on 47 PAYGO bills enacted during
this session of Congress, OMB no longer issues PAYGO scorekeeping reports
for legislation where OMB and CBO estimate zero or negligible budgetary
impact.
for Recovery from and Response to Terrorist Attacks on the United States,
2001. These items are discussed in greater detail in appendix II. CBO and
OMB differed substantially in PAYGO scoring for four pieces of
enacted legislation. First, the Air Transportation Safety and System
Stabilization Act (P. L. 107- 42) provides compensation to the victims of
the terrorist attacks of September 11 and contains several provisions to
stabilize the air transportation industry. The total net difference over the
period 2001 through 2006 was $470 million. This difference occurs in the
scoring of the provision that provides assistance to airlines for their
insurance costs. 3 There were significant differences (ranging from $600
million to $1,133 million) in individual years due to differences in
estimates for the tax deadline extension provision and the outlay rates for
the victim compensation provision; however, these differences completely
offset each other over the 2001 through 2006 period. In addition there was a
difference of $1,000 million in cost estimates for the loan guarantee
subsidy provision of the law, but since this was considered emergency
funding it was not subject to PAYGO procedures.
Second, the Investor and Capital Markets Fee Relief Act (P. L. 107- 123)
adjusted the fees and assessments that the Securities and Exchange
Commission (SEC) is authorized to collect for transactions, registrations,
and mergers of securities. OMB estimates for this law exceeded CBO?s by
$1,203 million over the 2002 through 2006 period. This difference resulted
from the different economic and technical assumptions in the models used by
each agency.
Third, the National Defense Authorization Act for Fiscal Year 2002 (P. L.
107- 107) contains numerous provisions that either increased or decreased
outlays from direct spending, including provisions affecting health care for
certain retirees of the uniformed services. The CBO and OMB cost estimates
for P. L. 107- 107 not only differed by $1,159 million over the 2002 through
2006 period but also disagreed as to whether the bill saved money or cost
money. In that period, OMB estimated that the act would save $883 million
while CBO estimated a cost of $276 million. Almost all ($ 1,060 million) of
the total net difference is due to scoring of sections 701 and 707
3 CBO estimates $663 million more in spending for this provision (and this
legislation) over the period 2002 through 2006, but for purposes of
assessing cost estimate differences between CBO and OMB, the scoring reports
show estimates over the 6- year period, 2001 through 2006.
of the law, which require the Department of Defense (DOD) to change the way
it administers and pays for its skilled nursing and home health care
benefits. CBO scored only $294 million in savings over the 2002 through 2006
period for these provisions, while OMB scored a savings of $1,354 million.
OMB?s savings for this provision were large enough to offset the costs from
the other provisions affecting direct spending in P. L. 107- 107, while
CBO?s savings estimates were less than the costs of the remaining
provisions.
Finally, CBO and OMB differed substantially in both their outlay and revenue
estimates of the Economic Growth and Tax Relief Reconciliation Act of 2001
(P. L. 107- 16). Almost all of the cost estimates for this legislation were
provided to CBO by the Joint Committee on Taxation and to OMB by the
Department of Treasury. Over the 2001 through 2006 period, CBO estimated
outlays of $40,308 million while OMB estimated outlays of $28,085 million- a
difference of $12,223 million. For this same period, CBO estimated revenue
costs of $510,815 million while OMB estimated $502,074 million in revenue
costs- a difference of $8,741 million. The net difference in estimates for
this law was $20,964 million. Since these estimates come from elaborate
models consisting of different economic and technical assumptions, neither
agency identified specific reasons for estimated
differences. The one exception is the outlay scoring differences in 2001
that result from the advance refund mechanism. Additionally, we found the
provisions with the largest differences were those that reduce individual
income tax rates; provide for a phased reduction of the current estate,
gift, and generation- skipping taxes; and increase the child tax credit. 4
These PAYGO scoring differences are discussed in greater detail in appendix
II.
In addition, our analysis of required cap adjustments made by OMB and CBO
found significant differences between the estimates of the final fiscal year
2002 outlay spending caps for the Overall Discretionary category. The OMB
2002 final sequestration report shows spending limit differences between OMB
and CBO of $3,375 million in outlays for 2002. As described in detail in
appendix II, this difference results largely from differences by CBO and OMB
in their outlay rate estimates of, and therefore the cap adjustments for,
the $22.2 billion in emergency appropriations enacted this year. 4 This is a
general, not comprehensive, description of the provisions found in Titles I,
II, and
V of P. L. 107- 16.
The Future of Budget BEA was designed to ensure lower deficits with the goal
of a balanced
Enforcement budget, and there is widespread agreement that for much of the
past
decade it was successful in restraining fiscal action by Congress and the
President. Given the forthcoming expiration of the BEA enforcement regime,
Congress and the President need a new overall framework upon which a process
and interim targets can be based. A budget process that is part of a broader
fiscal framework can help policymakers make wise fiscal choices and meet
upcoming challenges. Recognizing the need to manage the budgetary challenges
the country faces both in the short and long term,
now is an important time to comment on the future of budget enforcement
mechanisms. We discuss this more in appendix III and in our recent
testimony. 5
We are sending copies of this report to The Honorable Mitchell E. Daniels,
Jr., Director, Office of Management and Budget; The Honorable Dan L.
Crippen, Director, Congressional Budget Office; Representative John
Spratt, Representative C. W. Bill Young, Representative David R. Obey,
Senator Kent Conrad, Senator Pete V. Domenici, Senator Robert C. Byrd, and
Senator Ted Stevens in their capacities as Chair or Ranking Member of
appropriate Senate and House Committees on Budget and Appropriations. Copies
will be made available to other interested parties on request. Please
contact me at (202) 512- 9142 if you or your staff have any questions. Major
contributors to this report are listed in appendix IV.
Sincerely yours, Susan J. Irving Director, Federal Budget Analysis
5 U. S. General Accounting Office, Budget Process: Extending Budget
Controls, GAO- 02- 682T (Washington, D. C.: Apr. 25, 2002).
Appendi Appendi xes x I
Background and Scope and Methodology The Balanced Budget and Emergency
Deficit Control Act of 1985 (DCA), as amended, 6 established statutory
limits on federal government spending for fiscal years 1991 through 2002 by
creating annual adjustable dollar limits (spending caps) on discretionary
spending funded through the regular appropriations process, a pay- as-
you- go (PAYGO) 7 requirement for direct spending 8 and receipts
legislation, and a sequestration 9 procedure to be triggered if (1)
aggregate discretionary appropriations enacted for a fiscal year exceed the
fiscal year?s discretionary spending caps or (2) aggregate PAYGO legislation
is
estimated to increase the combined current and budget year deficits. To
track progress against the budget enforcement requirements and to implement
any needed sequestration, DCA requires the Congressional Budget Office (CBO)
and the Office of Management and Budget (OMB) to score (estimate) the
budgetary effects of each appropriation action and each piece of PAYGO
legislation. As soon as practicable after Congress completes action on an
appropriation or on PAYGO legislation, CBO is required to report to OMB the
estimated amount of new budget authority and outlays provided by the
legislation. Within 7 working days after an appropriation or PAYGO
legislation is enacted, OMB must report its estimates for these amounts,
using the same economic and technical assumptions underlying the most recent
budget submission. It must also 6 DCA was amended by the Budget Enforcement
Act of 1990 (BEA), the Omnibus Budget
Reconciliation Act of 1993 (OBRA 93), and the Budget Enforcement Act of 1997
(BEA- 97). In addition to being known as DCA, it is sometimes called Gramm-
Rudman- Hollings or GRH. It is also referred to as BEA since that
legislation amended GRH in 1990 by adding the current discretionary spending
caps and PAYGO procedures.
7 DCA requires that the aggregate effect of new legislation that increases
direct spending or decreases receipts be deficit neutral (that is, not
increase the deficit). Such legislation is often referred to as PAYGO
legislation. OMB and CBO have interpreted the PAYGO
requirement as applying to surpluses as well; the aggregate effect of new
legislation must not decrease the surplus. 8 Direct spending (commonly
referred to as mandatory spending) means entitlement authority, the food
stamp program, and any budget authority provided by laws other than
appropriation acts.
9 Sequestration is the cancellation of budgetary resources.
include the CBO estimates and explain any differences between the two sets
of estimates. If there are significant differences between the OMB and CBO
estimates, OMB is required to consult with the budget committees prior to
issuing its scoring report.
DCA also requires CBO and OMB to submit a series of three sequestration
reports at specified times during each year, as shown in table 1 in the
letter. CBO and OMB reports include a discretionary sequestration report
that
adjusts the discretionary spending caps and a PAYGO sequestration report
that displays the net decrease or increase in the deficit or surplus for
enacted PAYGO legislation. Because OMB?s reports control for purposes of
sequestration, CBO uses estimates from OMB?s most recent previous
sequestration report as the starting point for each of its reports.
Discretionary Spending Annual discretionary spending limits for budget
authority and outlays are
Limits set forth in DCA. The Budget Enforcement Act of 1997 amended DCA to
establish three separate categories of discretionary spending for 1998 and
1999: (1) Defense, (2) Nondefense excluding Violent Crime Reduction
spending, and (3) Violent Crime Reduction spending. For fiscal year 2000,
Defense and Nondefense were combined resulting in two categories- Violent
Crime Reduction spending and Other Discretionary spending. 10 The Violent
Crime Reduction category was eliminated for fiscal years 2001 and 2002 and
associated appropriations were included in the Other
Discretionary category. The spending cap structure was altered again in the
Transportation Equity Act for the 21st Century (TEA- 21). Two new outlay
caps that apply separately to highway and mass transit programs were
established for 1999 through 2003. 11 Because these programs previously had
been included under the Nondefense cap, both the Nondefense cap for 1999 and
the Other Discretionary caps for 2000, 2001, and 2002 were reduced. Since
the new caps on highway and mass transit outlays exceeded the reductions in
the other caps by about $15.4 billion, the amount of total discretionary
outlays
10 CBO refers to the spending category that encompasses all other
discretionary spending as Overall Discretionary while OMB refers to it as
Other Discretionary. 11 Title VIII of TEA- 21 (P. L. 105- 178, enacted June
9, 1998) amended DCA to add these two new caps. These caps continue for 2003
even though DCA caps only exist through 2002.
permitted under all of the caps was increased for each year from 1999
through 2002. The ?Conservation spending? category was established by The
Department of the Interior and Related Agencies Appropriations Act for
Fiscal Year 2001 (P. L. 106- 291). The new spending limits were established
for fiscal years 2002 through 2006 even though the DCA caps expire after
2002. The law also established six distinct subcategories under the
Conservation category. The subcategories are (1) federal land and state land
water conservation fund, (2) state and other conservation, (3) urban and
historic preservation, (4) payments in lieu of taxes, (5) federal deferred
maintenance, and (6) coastal assistance. Table 2 summarizes the various caps
for fiscal years 1998 through 2002.
Table 2: Discretionary Spending Categories by Fiscal Year 1998 1999 2000
2001 2002 2003
Violent Crime Violent Crime Violent Crime Reduction Reduction Reduction
Defense Defense Other Discretionary Other Discretionary Other Discretionary
Nondefense Nondefense
Highway Highway Highway Highway Highway Mass Transit Mass Transit Mass
Transit Mass Transit Mass Transit
Conservation Conservation Note: The Highway and Mass Transit categories were
formerly included in the Nondefense category. Similarly, spending in the
Conservation category was formerly included in the Other Discretionary
category.
In addition to creating categories of spending and establishing spending
limits, provisions in these laws define certain required adjustments to the
spending limits. DCA directs that adjustments be made to the discretionary
limits for (1) changes in concepts and definitions, (2) emergency
appropriations, (3) funding for continuing disability reviews, (4) funding
for International Monetary Fund increases, (5) international arrearages
funding through fiscal year 2000, (6) the earned income tax credit
compliance initiative, (7) adoption incentive payments, and (8) a special
outlay allowance to cover technical scoring differences between OMB and CBO.
TEA- 21 added adjustments for the two transportation caps (Highway and Mass
Transit). The Highway caps were set at specific annual funding levels on the
basis of projected receipts to the Highway Trust Fund. OMB is required to
revise the Highway spending limits in each year?s sequestration preview
report for changes in actual receipts and revised projections of trust fund
revenue, relative to the receipt levels assumed in TEA- 21. 12 TEA- 21 also
requires that both transportation caps be adjusted each year to
reflect any changes in technical estimates of the outlays that will result
from the TEA- 21 funding levels. Finally, the law establishing the
Conservation category specified that the amount, if any, by which
appropriations for this category for a given fiscal year fall below the
limit
for that year will be added to the limit for the following year. 13 In
addition to the standard adjustments described above, the Department of
Defense Appropriations Act for Fiscal Year 2002 (P. L. 107- 117) raised the
budget authority limit for fiscal year 2002 to $681.4 billion and the fiscal
year 2002 outlay limit to $670. 2 billion for the Overall Discretionary
spending category, increases of $134.5 billion and $132.8 billion,
respectively. In addition, this legislation raised the cap on Conservation
outlays by $241 million. These adjustments were at a level sufficient to
cover all enacted appropriations in 2002. In fiscal year 2001, a similar
adjustment was included in the Military Construction Appropriations Act for
2001 (P. L. 106- 246). P. L. 107- 117 also allowed OMB to adjust the 2002
limit on budget authority upward by amounts in excess of the spending
limits, up to a limit of .12 percent. In response, OMB increased the Other
Discretionary budget authority limits by $308 million. 14 Appendix II
describes these adjustments in more detail.
The spending limits are to be enforced by sequestration should budget
authority or outlays exceed the statutory limits. CBO estimated in its
fiscal year 2002 final sequestration report that total discretionary outlays
for all
categories combined are below the adjusted caps for 2002 and thus concluded
that no discretionary sequestration was required. OMB?s final sequestration
report drew the same conclusion.
12 If actual and estimated tax receipts exceed the levels assumed in TEA-
21, the spending limits are increased. If the receipts are below the levels
assumed, the spending limits are revised downward.
13 This adjustment applies to the six subcategories as well. 14 CBO made
this adjustment in its 2003 sequestration preview report.
In addition, the law specifies that for a fiscal year in progress, if an
appropriation enacted between end- of- session adjournment and July 1 of
that fiscal year causes any of the spending limits for the year in progress
to
be exceeded, CBO and OMB must issue within- session sequestration reports 10
and 15 days, respectively, after enactment. On the same day as the OMB
report, the President must issue an order implementing any
sequestration set forth in the OMB report. If appropriations causing a
breach within any category for the fiscal year in progress are made after
June 30, the limits in that category for the next fiscal year will be
reduced by the amount of the breach. On July 24, 2001, the President signed
P. L. 107- 20, the Supplemental Appropriations Act, 2001. OMB estimated $6.5
billion in budget authority and $4.9 billion in outlays in 2001 for this
bill. Even with this additional spending, total budget authority and outlays
for 2001 fell under the adjusted spending limits. The President requested
supplemental appropriations for fiscal year 2002 on March 21, 2002. The
President designated his request as an emergency requirement, and the
resulting cap adjustment will be for the amount of any emergency
appropriations actually enacted. Any additional non- emergency spending over
$2 million will exceed the caps.
PAYGO Enforcement PAYGO enforcement covers all direct spending (also known
as mandatory spending) and receipts legislation. CBO and OMB maintain a
?scorecard?
showing the cumulative deficit/ surplus effect of PAYGO legislation to track
progress against the PAYGO requirements. If, at the end of a congressional
session, cumulative legislated changes enacted in direct spending and
receipts result in a net cost, a sequester of nonexempt direct spending
programs is required to offset the cost. In determining the need for
sequestration the estimates for the budget year and any for the current year
that were not included in the current year?s final sequestration report are
combined. Effective on its enactment, BEA- 97 set the scorecard balance to
zero for the then- current year and for each subsequent year through fiscal
year 2002. This prevented any net savings achieved by legislation enacted
prior to the enactment of BEA- 97 from being used to offset
deficitincreasing legislation enacted through 2002. Although BEA expires in
2002, the sequestration procedure applies through 2006 to eliminate any
projected net costs stemming from PAYGO legislation enacted through fiscal
year 2002.
In the final sequestration reports, OMB and CBO calculate the net change in
the deficit or surplus due to PAYGO legislation. However, the OMB report is
the sole basis for determining whether an end- of- session
sequestration is required. If OMB determines that sequestration is required,
the President must issue an order implementing it. OMB estimated that the
cumulative effect of legislation subject to PAYGO procedures enacted through
the end of the first session of the 107th Congress totaled $130.3 billion.
Similarly, CBO?s estimate of net costs was $129.1 billion. However, Congress
included a provision in the Department of Defense and Emergency Supplemental
Appropriations Act for Recovery from and Response to Terrorist Attacks on
the United States, 2002 (P. L. 107- 117) that required OMB to remove from
the PAYGO scorecard any balances for fiscal years 2001 and 2002, thus
eliminating the need for a PAYGO
sequester for fiscal year 2002. A similar provision was used last year to
prevent a PAYGO sequester. Absent this year?s requirement to reset the
scorecard to zero, a sequester of $130. 3 billion would have been required.
September 30, 2002, will be the last day for which the estimated budgetary
effects of mandatory legislation will be recorded on the PAYGO scorecard.
Any balances remaining for 2003 through 2006 that increase the deficit (or
reduce the surplus) could lead to a PAYGO sequester through 2006. OMB
estimates in its 2002 final report that the total PAYGO scorecard balance
for fiscal years 2003 through 2006 is $505.8 billion. CBO estimates a $499.2
billion balance for the same time frame. Scope and
To determine whether the OMB and CBO reports complied with the Methodology
requirements of DCA as amended by BEA and other legislation, we reviewed the
OMB and CBO preview, update, and final sequestration reports to determine if
they reflected all of the technical requirements specified in DCA, such as
(1) estimates of the discretionary spending limits, (2) explanations of any
adjustments to the limits, (3) estimates of the
amount of net deficit increase or decrease, and (4) the sequestration
percentages necessary to achieve the required reduction in the event of a
sequester.
We reviewed all applicable OMB and CBO appropriations scoring reports for
regular, emergency, and supplemental appropriations enacted since OMB?s 2001
final sequestration report and issued as of January 23, 2002. We also
examined the OMB and CBO PAYGO scoring reports for mandatory spending and
receipts legislation enacted during the first session of the 107th Congress.
We compared each OMB and CBO report and obtained explanations for
differences of $500 million or more in estimates for the PAYGO reports. For
discretionary spending, we compared OMB and CBO scoring reports and obtained
explanations for any differences of $500
million or more in budget authority or outlay estimates. We examined OMB and
CBO adjustments to the discretionary spending limits for the preview,
update, and final sequestration reports. During the course of our work, we
also interviewed OMB and CBO officials. Our work was performed in
Washington, D. C. from August 2001 through May 2002 in accordance with
generally accepted government auditing standards. We provided a draft of
this report to OMB and CBO officials for their review and comment. OMB and
CBO officials agreed with our presentation of their views and the facts as
presented. We incorporated their comments where appropriate.
Appendi x II
Implementation Issues We examined three areas in which the Office of
Management and Budget (OMB) and the Congressional Budget Office (CBO) often
have differed in the past: (1) discretionary scoring, (2) pay- as- you- go
(PAYGO) scoring, and (3) discretionary spending cap adjustments. We compared
OMB and CBO discretionary and PAYGO scoring reports and obtained
explanations for estimates of individual items or report totals that
differed by $500 million or more. Additionally, we examined OMB and CBO
adjustments to the discretionary spending limits for the preview, update,
and final sequestration reports.
Although There Are The CBO and OMB final sequestration reports agreed that
there was no Many Discretionary
need for discretionary sequestration in fiscal year 2002. As shown in table
3, OMB and CBO estimated budget authority in all categories and outlays in
Scorekeeping
all categories as below or meeting the caps. The overall difference
Differences, Neither between the CBO and OMB estimates is accounted for by
many
OMB Nor CBO Call for scorekeeping differences; the largest of these are
detailed in the following discussion.
Sequestration
Table 3: CBO and OMB Estimates of Fiscal Year 2002 Appropriations Compared
to End- of- Session Discretionary Caps Dollars in millions
OMB CBO Budget
Budget authority Outlays authority Outlays
Overall Discretionary
Enacted appropriations $704, 548 $692,752 $704, 240 $688, 064 End- of-
session caps 704, 548 696,092 704, 240 692, 717
Difference $0 -$ 3, 340 $0 -$ 4,653 Highway
Total enacted appropriations n. a. $28, 489 n. a. $28, 489 End- of- session
caps n. a. 28, 489 n. a. 28, 489
Difference n. a. $0 n. a. $0 Mass Transit
Total enacted appropriations n. a. $5,272 n. a. $5, 275 End- of- session
caps n. a. 5,275 n. a. 5, 275
Difference n. a. -$ 3 n. a. $0 Conservation
Total enacted appropriations $1, 758 $1,473 $1, 758 $1, 392 End- of- session
caps 1, 760 1, 473 1, 760 1, 473
Difference -$ 2 $0 -$ 2 -$ 81 Total for all spending categories
Total enacted appropriations $706, 306 $727,986 $705, 998 $723, 220 End- of-
session caps 706, 308 731,329 706, 000 727, 954
Difference -$ 2 -$ 3, 343 -$ 2 -$ 4,734
Note: Highway and Mass Transit categories were created by TEA- 21 and
include outlay caps only. Source: OMB and CBO 2002 final sequestration
reports.
Scoring Differences Although there were many discretionary scorekeeping
differences between OMB and CBO, most were relatively small. In the
discretionary
scorekeeping reports issued by OMB and CBO, we identified 19 differences
that were greater than $500 million- 4 in budget authority and 15 in
outlays.
The four differences in budget authority all are in P. L. 107- 38, the
Emergency Supplemental Appropriations Act for Recovery from and Response to
Terrorist Attacks on the United States, 2001. Of the 15 outlay
differences greater than $500 million, 13 stem from different outlay rates
and 2 reflect differences in the allocation of outlays for violent crime
reduction. A separate spending limit for budget authority and outlays was
first
established for the Violent Crime Reduction Trust Fund (VCRTF) by the
Violent Crime Control and Law Enforcement Act of 1994 (P. L. 103- 322) and
was continued by the Budget Enforcement Act of 1997. The acts provided that
specified amounts of budget authority be transferred to the trust fund from
the general fund in each fiscal year from 1995 through 2000. Since the
VCRTF?s authorization expired at the end of fiscal year 2000, the account
used to track those programs funded by the VCRTF has not had new
appropriations since the fiscal year 2000 Commerce, Justice, and State, the
Judiciary, and Related Agencies Appropriations Act. CBO continues to score
outlays from prior- year authority in this account and estimated $922
million in outlays for 2002. In contrast, OMB includes the outlays from
violent crime reduction programs in what they consider the ?parent
accounts,? primarily the state and local law enforcement assistance account
and to a lesser extent the community oriented policing services
(COPS) account. OMB describes this as a way to avoid unnecessary
administrative issues. The effect is the appearance of a significant
difference between OMB and CBO estimates in the violent crime reduction and
parent accounts, when in actuality the funds are merely accounted for in
different locations and the differences nearly offset each other. The
provisions with the remaining 17 largest differences in budget
authority or outlays are shown in table 4.
Table 4: Provisions with More than $500 Million Difference between OMB and
CBO Estimates a
Dollars in millions
Difference between OMB and CBO estimates (OMB- CBO) Fiscal year 2001 Fiscal
year 2002
Budget Budget Act Provision authority Outlays authority Outlays
Differences in Outlay Rates
Supplemental Appropriations Act, 2001 Defense Health Program 0 $1, 010 0 -$
842 (P. L. 107- 20) Supplemental Appropriations Act, 2001
Operations and Maintenance, Navy 0 $679 0 -$ 546 (P. L. 107- 20)
(Continued From Previous Page)
Dollars in millions
Difference between OMB and CBO estimates (OMB- CBO) Fiscal year 2001 Fiscal
year 2002
Budget Budget Act Provision authority Outlays authority Outlays
Department of Defense Appropriations Act, Defense Health Program b b 0 $568
2002 (P. L. 107- 117) Department of Defense Appropriations Act,
Operations and Maintenance, Army b b 0 -$ 654 2002 (P. L. 107- 117) 2001
Emergency Supplemental Department of Defense- Operations 0 $20 0 -$ 1, 095
Appropriations Act for Recovery from and and Maintenance, Defense Response
to Terrorist Attacks on the United
Emergency Response Fund States (P. L. 107- 38) Emergency Supplemental
Appropriations Act
Department of Health and Human b b 0 $751
for Recovery from and Response to Terrorist Services- General departmental
Attacks on the United States, 2002
management (P. L. 107- 117)
Emergency Supplemental Appropriations Act Federal Emergency Management
b b 0 $1,525 for Recovery from and Response to Terrorist
Agency- Disaster Relief Attacks on the United States, 2002 (P. L. 107- 117)
Departments of Veterans Affairs and Housing Federal Emergency Management b b
0 $525
and Urban Development, and Independent Agency- Disaster Relief, contingent
Agencies Appropriations Act, 2002 (P. L. 107 emergency 73)
Departments of Labor, Health and Human Department of Health and Human
b b 0 $840 Services, Education, and Related Agencies
Services- National Institutes of Health Appropriations Act, 2002 (P. L. 107-
116)
Departments of Labor, Health and Human Department of Labor- Employment
b b 0 $1,008 Services, Education, and Related Agencies
and Training Administration, Training Appropriations Act, 2002 (P. L. 107-
116)
and Employment Services Department of Transportation and Related
Adjustment for TEA- 21 b b 0 -$ 1, 279 Agencies Appropriations Act, 2002 (P.
L. 10787)
Differences in Budget Authority
2001 Emergency Supplemental Department of Defense- Operations -$ 9,456 0 0 0
Appropriations Act for Recovery from and
and Maintenance, Defense Response to Terrorist Attacks on the United
Emergency Response Fund States (P. L. 107- 38)
2001 Emergency Supplemental Department of Housing and Urban -$ 700 0 0 0
Appropriations Act for Recovery from and
Development- Community Planning Response to Terrorist Attacks on the United
and Development, Community States (P. L. 107- 38)
Development Block Grants
(Continued From Previous Page)
Dollars in millions
Difference between OMB and CBO estimates (OMB- CBO) Fiscal year 2001 Fiscal
year 2002
Budget Budget Act Provision authority Outlays authority Outlays
2001 Emergency Supplemental Executive Office of the President, $12,358 0 0 0
Appropriations Act for Recovery from and
Emergency Response Fund Response to Terrorist Attacks on the United States
(P. L. 107- 38) 2001 Emergency Supplemental International Security
Assistance, -$ 600 0 0 0 Appropriations Act for Recovery from and
Economic Support Fund Response to Terrorist Attacks on the United States (P.
L. 107- 38)
Note: Positive numbers indicate provisions where CBO estimates were lower
than OMB estimates. Negative numbers indicate provisions where CBO estimates
were higher than OMB estimates. a Differences due to account allocation are
not included. b Only fiscal year 2002 budgetary impacts were reported.
For these provisions, the differences between the OMB and CBO estimates can
be grouped into the following categories:
Different outlay rate estimates: Outlay estimate differences greater than
$500 million existed in two programs, the Defense Health Program and
Operations and Maintenance, Navy, funded in the 2001 Supplemental
Appropriations Act (P. L. 107- 20). Since P. L. 107- 20 was enacted in late
July 2001, CBO lowered its first- year outlay rates because it estimated
that few outlays
would occur before the end of the fiscal year. OMB did not reduce outlay
rates because it believed the need for these funds was identified well in
advance of the appropriation. Both of these programs also received funding
in the Department of Defense Appropriations Act, 2002 (P. L. 107- 117). Here
again, we found significant outlay differences for the Defense Health
Program. Both OMB and CBO estimated outlay rates of roughly 79 percent for
new budget authority. However, OMB had a higher total estimate of outlays
resulting from higher outlay rate estimates for prior- year budget authority
balances, based on Department of Defense (DOD) reports.
The $654 million difference in the $22.3 billion Operations and Maintenance,
Army account results primarily from a difference in firstyear outlay rates.
CBO has a rate of 73 percent while OMB has a 69
percent rate. Similarly, for fiscal year 2002, the $1,095 million difference
in outlays in the DOD, Defense Emergency Response Fund results because CBO
used an outlay rate of about 74 percent and OMB used a rate of roughly 68
percent for the $13.7 billion provision. In both these cases, the large
budget authority amounts mean that an outlay
rate difference of 6 percent or less leads to significant differences in the
estimates.
The general departmental management account of the Department of Health and
Human Services (HHS) received $2.64 billion in supplemental appropriations
in P. L. 107- 117. CBO explained that HHS used these funds for various
activities intended to respond to the events of September 11, such as
purchasing smallpox vaccines and upgrading security measures at the Centers
for Disease Control and Prevention. For these activities, on which there is
no historical
evidence to base outlay rate estimates, OMB estimates $751 million more in
fiscal year 2002 outlays than does CBO.
In 2002, the Federal Emergency Management Agency (FEMA) disaster relief
account received $8.5 billion in total appropriations from three bills: $4.3
billion from P. L. 107- 117, $2 billion from P. L. 107- 38, and $2.2 billion
from P. L. 107- 73 (the VA/ HUD appropriation act). 15 Significant
differences in outlay estimates for this account in P. L. 107- 117 and P. L.
107- 73 stem from different assumptions about which of the funds will be
used first. OMB assumed a 35 percent outlay rate for all three of these
funding sources. CBO, however, estimated that none of the $4.3 billion in
budget authority in P. L. 107- 117 would be spent until 2003 because it
believes that the funding from the other two sources will be spent first.
Thus, OMB estimates $1, 525 million more in outlays for P. L. 107- 117 than
does CBO. In the VA/ HUD bill, the $2.2 billion in funding was divided into
$1.5 billion in contingent emergency funds and $661 million in non-
emergency funds for disaster relief. CBO believed that large prior- year
balances in budget authority would be spent before any new budget authority
and therefore approximated there would be no outlays of the emergency budget
authority in 2002. OMB?s assumption of a 35 percent outlay rate for both
emergency and non- emergency funding resulted in $525 million more in
emergency outlays for 2002 than did CBO. However, its estimate of non-
emergency outlays was
15 The Departments of Veterans Affairs and Housing and Urban Development,
and Independent Agencies Appropriations Act, 2002 (P. L. 107- 73).
$373 million lower than was CBO?s. Because these differences partially
offset each other, the aggregate outlay difference for emergency and non-
emergency outlays for FEMA disaster relief funding in the VA/ HUD bill was
only $152 million.
Differences in the estimates for the National Institutes of Health (NIH) and
the Employment and Training Administration result largely from differences
in estimates of prior- year balances. For the NIH, OMB estimated $505
million more in outlays from prior- year budget authority than CBO and $335
million more in outlays from new authority. CBO reasoned that the large
increases in budget authority received by NIH in 2001 and 2002 would result
in slower outlay rates for two reasons. First, since 80 percent of NIH?s
obligations are extramural grants paid
on a quarterly basis, the large increases in budget authority received in
2001 and 2002 might cause a slower outlay rate as the grant administration
burden increases. Second, in both those years appropriations were delayed,
pushing spending to later in the fiscal year. In the Employment and Training
Administration account, OMB estimated $753 million more in outlays from
prior- year authority and $255 million more in outlays from new authority.
In this case, CBO reported that its rates reflect the lower than expected
outlay rates over the past several years for programs funded by the
Workforce Investment Act, the primary authorization for this account. OMB
did not adjust its estimates to reflect this recent actual experience.
Pursuant to DCA, any outlays in the Highway and Mass Transit
categories exceeding the levels established in TEA- 21 are considered part
of the Overall Discretionary category. In both our 2000 and 2001 Budget
Enforcement Compliance reports, we reported significant differences between
CBO and OMB for outlay estimates in the Highway and Mass Transit categories.
In 2002, CBO again estimated higher outlays than OMB, most of this from
estimates of outlays for the
Highway category. Differences in budget authority: The OMB and CBO
scorekeeping reports for the 2001 Emergency Supplemental Appropriations Act
for Recovery from and Response to Terrorist Attacks on the United States (P.
L. 107- 38) contain four significant differences in scoring of budget
authority. All four stem from different treatment of funds appropriated to
the Emergency Response Fund (ERF). P. L. 107- 38 was signed by the President
on
September 18, 2001, and appropriated $20 billion to ERF. For its estimate,
CBO subtracted from the $20 billion ERF any budget authority that had been
released to a receiving account after the bill was signed into law and
scored it as budget authority in that receiving account. In its January 23,
2002, report, OMB scored those funds transferred or obligated from the ERF
to receiving accounts by the end of fiscal year 2001 the same way. However,
budget authority transferred or obligated after that point was scored as
transfers of unobligated balances, not as budget authority; the result was
that only the outlay effects of those transfers were apparent in the
receiving account.
PAYGO Scoring Issues In its final sequestration report, CBO reported that
balances on the PAYGO scorecard are $76.4 billion for 2001 and $52.7 billion
for 2002- a total of
$129.1 billion. OMB estimates in its final sequestration report net PAYGO
costs of $75.3 billion in 2001 and $55.0 billion in 2002- a total of $130.3
billion. The majority of these costs are a result of the Economic Growth and
Tax Relief Reconciliation Act of 2001. In accordance with BEA, the PAYGO
balances for 2001 and 2002 are to be combined to determine whether a PAYGO
sequestration is necessary for 2002. However, the Department of Defense and
Emergency Supplemental Appropriations Act for 2002 requires OMB to reset the
total PAYGO balances for 2001 and 2002 to zero, thereby avoiding a PAYGO
sequestration. 16
During its first session, the 107th Congress enacted 23 pieces of PAYGO
legislation with estimated budgetary impact greater than $500, 000. 17 We
analyzed those scorekeeping reports for which OMB and CBO estimates
differed by $500 million or more either in any single year or over the 5-
year period 2002 through 2006. Four pieces of legislation met this
criterion: (1) the Air Transportation Safety and System Stabilization Act
(Public Law 107-
16 Department of Defense and Emergency Supplemental Appropriations Act for
Recovery from and Response to Terrorist Attacks on the United States, Public
Law 107- 117, Division C, section 102, 115 STAT. 2230, 2342 (2002).
17 OMB announced in its 2000 sequestration preview report that it was no
longer issuing PAYGO reports on legislation where OMB and CBO estimate zero
or negligible budget impact, i. e., less than $500,000. During the first
session of the 107th Congress, OMB issued 21 PAYGO reports. CBO issued 23
reports for legislation estimated to have impacts greater than $500,000. For
two laws that did not provide new funding but merely changed the timing or
purpose of expenditures, CBO issued PAYGO reports while OMB did not.
42), (2) the Investor and Capital Markets Fee Relief Act (Public Law
107123), (3) the National Defense Authorization Act for Fiscal Year 2002
(Public Law 107- 107), and (4) the Economic Growth and Tax Relief
Reconciliation Act of 2001 (Public Law 107- 16). They are discussed below.
Air Transportation Safety
This law, enacted September 22, 2001, contains several provisions to and
System Stabilization Act
respond to the terrorist events of September 11, 2001, and is designed to
stabilize the air transportation industry and to provide compensation to the
victims of the terrorist attacks. It provides insurance assistance to
airlines, establishes a fund to compensate victims of the terrorist attacks,
and makes changes in the timing of excise, payroll- related, and withheld
income tax payments by airlines. The costs of these provisions are
included on the PAYGO scorecard. The act also provides $5 billion in grants
and $10 billion in loan guarantees to air carriers. Since both of these
provisions are designated as emergency spending their costs are exempt from
the PAYGO scorecard. Table 5 illustrates CBO and OMB?s estimates for the
PAYGO costs of this law over the 2001 through 2006 period. 18 OMB scores a
PAYGO cost of $6,130 million while CBO scores a cost of $6,600 million. The
difference over 6 years is $470 million with the largest individual year
difference, $1,463 million, occurring in 2002.
Table 5: Comparison of OMB and CBO PAYGO Scoring for the Air Transportation
Safety and System Stabilization Act
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB $267 $1,063 $3, 000 $1,800 $0 $0 $6, 130
CBO 1, 400 -400 2,400 2, 400 800 0 6,600 Difference
-$ 1,133 $1,463 $600 -$ 600 -$ 800 $0 -$ 470 (OMB- CBO) The difference in
these estimates is a result of differences in how each
agency scored individual provisions of the act. These individual provisions,
18 The breakdown for this law is provided over a 6- year period, showing a
net difference of $470 million between CBO and OMB estimates. Over the 5-
year period, 2002- 2006, the differences net to $663 million, so GAO
considers it significant. A 6- year period is shown because there is a
significant difference in estimates in 2001.
their estimated costs by each agency, and an explanation of the differences
in estimates are discussed below.
CBO and OMB PAYGO costs for the insurance provisions differed by $470
million over 6 years; CBO estimated a cost of $600 million while OMB
estimated a cost of $130 million. Table 6 provides a breakdown of the
differences for these provisions. OMB estimated lower insurance costs than
CBO because OMB officials were aware of policy decisions to provide
insurance benefits to airlines over a shorter time period than assumed by
CBO. The act provided insurance assistance to air carriers through two
measures. First, the government reimburses carriers for the cost of the
surcharge imposed by private insurers to cover liabilities for risks
associated with terrorism or war. A second measure allows the government to
provide the airlines with additional insurance above the $50 million
available from private insurers to cover liabilities to third parties for
damages due to acts of terrorism or war. OMB estimated that the first
measure would cost $62 million while CBO assumed expenditures of about $200
million. OMB assumed the additional insurance permitted by the second
measure would cost $68 million while CBO assumed a cost of $400 million. OMB
assumed 1 month of surcharge payments and 2 months of insurance coverage,
while CBO assumed 6 months of surcharge payments and 1 year of insurance
coverage.
Table 6: Comparison of OMB and CBO PAYGO Scoring for the Insurance
Provisions of the Air Transportation Safety and System Stabilization Act
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB $0 $130 $0 $0 $0 $0 $130
CBO 0 600 0 0 0 0 600 Difference (OMB- CBO) $0 -$ 470 $0 $0 $0 $0 -$ 470
Both CBO and OMB estimated that the provision that extends by 180 days the
deadline for certain tax payments by airlines will have no cost over the
2001 through 2006 period. However, as shown in table 7, they differed in the
amount of tax receipts to be shifted from 2001 to 2002. Because the
legislation was enacted on September 22, 2001, both CBO and OMB show a shift
of receipts from 2001 to 2002. OMB shows $267 million in receipts shifting
from 2001 to 2002 while CBO shows a shift of $1.4 billion.
Although the act pushes back the deadline for collection of excise taxes,
payroll- related taxes, and withheld income taxes, OMB estimated a shift of
excise tax revenue only. OMB stated that the shift for the payroll- related
and withheld income taxes was already assumed in its baseline because the
Internal Revenue Service already had issued regulations allowing the delay
in payment of these taxes, leaving only the excise taxes to be included in
its estimate. CBO shifted all three types of taxes in its estimate.
OMB also changed its baseline estimates of excise tax receipts to the
Airport and Airway Trust Fund to take into account the effect on air travel
of the September 11 terrorist attacks, including the order by the government
to ground all air traffic. Because CBO did not make any adjustments to its
baseline to account for anticipated changes in air travel that might result
from these attacks, its estimate of the act?s effect on the timing and
volume of receipts differs from OMB?s. DCA does not specifically address on-
going changes to the baseline. According to OMB and CBO officials, OMB and
CBO have, on occasion, made changes to their baselines.
Table 7: Comparison of OMB and CBO PAYGO Scoring for the Tax Payment
Extension Provision of the Air Transportation Safety and System
Stabilization Act
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB $267 -$ 267 $0 $0 $0 $0 $0
CBO 1, 400 -1,400 0 0 0 0 0 Difference (OMB- CBO) -$ 1,133 $1,133 $0 $0 $0
$0 $0
OMB and CBO also differed in their estimates of the government?s payment
rate for the victims compensation fund. This fund provides monetary
compensation for the economic and non- economic losses (including pain,
suffering, and loss of companionship) of individuals who were injured and
the families of those killed in the attacks of September 11, 2001. As table
8 shows, OMB assumes a quicker payout rate, but the overall total for both
agencies is the same--$ 6,000 million. 19 OMB assumed that most claims filed
19 Both OMB and CBO revised their estimated totals to $5,400 million as a
result of revised fatality estimates available in December 2001.
between December and May would be paid in fiscal year 2002 and that fiscal
year 2002 outlays would be 20 percent of the total. As of early March, the
Department of Justice (DOJ) had received 352 claims, about 10 percent of the
estimated total, and OMB believed it reasonable to expect that at
least 20 percent of all claims would be received by the end of May. OMB
based this assumption on the fact that DOJ program regulations were designed
to facilitate the prompt filing, review, and payment of claims and the
belief that the Special Master?s public comments had consistently urged
victims to take advantage of the program?s expedited process, particularly
the ?advance payments? on potential awards. CBO?s estimate took into account
its judgment that victims? families would delay collecting from the fund
because they would want to assess the possibility of compensation through
civil litigation.
Table 8: Comparison of OMB and CBO PAYGO Scoring for the Victim Compensation
Provision of the Air Transportation Safety and System Stabilization Act
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB $0 $1, 200 $3,000 $1,800 $0 $0 $6, 000
CBO 0 400 2, 400 2,400 800 0 6,000 Difference (OMB- CBO) $0 $800 $600 -$ 600
-$ 800 $0 $0
Investor and Capital This law adjusts the fees and assessments that the
Securities and Exchange Markets Fee Relief Act
Commission (SEC) is authorized to collect for transactions, registrations,
and mergers of securities. Previously, SEC fees were collected and,
depending on the type of fee, recorded in the budget either as revenues or
as offsetting collections credited against discretionary appropriations for
the SEC. In fiscal year 2000, SEC collected fees that far exceeded its
operating costs. Under this act, all SEC fees and assessments are
reclassified as offsetting collections and the fee rates are lowered. CBO
and OMB estimates for this act differed increasingly from 2003 through 2006.
Over the 5- year period shown in table 9, CBO estimated a revenue loss to
the government of $9,518 million. Over the same 5- year period, OMB
estimated a revenue loss of $10,721 million, or $1,203 million more than
CBO.
Table 9: Comparison of OMB and CBO PAYGO Scoring for the Investor and
Capital Markets Fee Relief Act
Dollars in millions
Fiscal year Agency 2002 2003 2004 2005 2006 Total
OMB $1,455 $1, 947 $2, 174 $2,429 $2, 716 $10, 721
CBO 1, 261 1, 804 1, 984 2,152 2, 317 9,518 Difference (OMB- CBO) $194 $143
$190 $277 $399 $1, 203
Neither OMB nor CBO explained these differences. Both said that baseline
estimates for the fees collected are driven by a number of factors including
economic assumptions like gross domestic product (GDP) and interest
rates and technical assumptions like volume growth for the different types
of transactions. The forecast for volume growth takes into account the stock
market activities both on and off exchanges over a number of business
cycles. Because the fee estimates depend on numerous economic variables and
are produced by complex estimating models, OMB and CBO noted that it is
difficult to identify the specific reason( s) for differences in estimates
between them.
National Defense This legislation authorizes fiscal year 2002 appropriations
for Department
Authorization Act for of Defense (DOD) programs, authorizes a military pay
raise and other
Fiscal Year 2002 military benefits, provides for a round of base closures
and realignment in
2005, authorizes closure of the Navy live- fire training facility in
Vieques, Puerto Rico, authorizes fiscal year 2002 appropriations for
Department of Energy national security programs, and makes other
modifications to
national security and related programs. Over the course of the 5- year
period 2002 through 2006, CBO scored a direct spending cost of $276 million.
OMB scored $883 million in savings over the same period, creating a 5- year
difference of $1,159 million. Table 10 provides a breakdown of each agency?s
estimates.
Table 10: Comparison of OMB and CBO PAYGO Scoring for the National Defense
Authorization Act for Fiscal Year 2002
Dollars in millions
Fiscal year Agency 2002 2003 2004 2005 2006 Total
OMB $86 -$ 234 -$ 208 -$ 253 -$ 274 -$ 883
CBO 146 -221 156 92 103 276 Difference (OMBCBO) -$ 60 -$ 13 -$ 364 -$ 345 -$
377 -$ 1, 159
The bulk of the difference in the estimates lies in each agency?s scoring of
the medical care provisions of this law- sections 701 and 707- which affect
the Tricare for Life program. Section 701 requires DOD to
restructure its skilled nursing and home health care benefits such that it
will not pay for skilled nursing unless the beneficiary has been
hospitalized before receiving that care and will not pay for home health
care in excess of the allowable benefit under Medicare. Section 707 requires
DOD to set maximum allowable charges for skilled nursing and home health
care, which will lower the cost of providing those benefits. The estimates
for these provisions are shown in table 11. After a slight increase in
direct spending in 2002 of $3 million, CBO scored savings of $297 million
for 2003 (for a total of $294 million) while OMB scored savings of $1,357
million from 2003 through 2006 (for a total of $1,354 million). The
difference between the two agencies over 5 years is $1,060 million. This
large difference exists because the provisions as included in prior law were
administratively optional but not legally required. Under prior law, DOD had
the authority to make those changes and CBO estimated the agency would do so
by fiscal year 2004 and thus would begin to see savings in direct spending
at that time. However, P. L. 107- 107 mandated that these
changes take effect in fiscal year 2002, roughly 3 months after its
enactment on December 28, 2001. Consequently, CBO estimated that after a
year, as the program approached full participation, direct spending savings
would begin in fiscal year 2003. Since CBO had assumed that DOD, beginning
in fiscal year 2004, would implement the administrative changes described
above, it showed savings only in fiscal year 2003 because savings in
subsequent years would occur without further congressional action.
Alternatively, OMB had not assumed implementation of this option in its
baseline and so included all savings in its scoring of P. L. 107- 107, which
mandated the changes.
Table 11: Comparison of OMB and CBO PAYGO Scoring for the Medical Care
Provision of the National Defense Authorization Act for Fiscal Year 2002
Dollars in millions
Fiscal year Agency 2002 2003 2004 2005 2006 Total
OMB $3 -$ 306 -$ 329 -$ 350 -$ 372 -$ 1,354
CBO 3 -297 0 0 0 -294 Difference (OMB- CBO) $0 -$ 9 -$ 329 -$ 350 -$ 372 -$
1, 060
Economic Growth and Tax This law amends numerous provisions of the tax code
to reduce taxes. It
Relief Reconciliation Act of reduces individual income tax rates, increases
the child tax credit,
2001 eliminates the estate tax, reduces the marriage penalty, expands
education Individual Retirement Accounts (IRAs), and makes several other
changes
to provisions of the tax law. Because of their expertise in revenue
estimating, the Department of Treasury and the Joint Committee on Taxation
provided OMB and CBO, respectively, with almost all of the estimates for the
many provisions in this law. Over the period 2001 through 2006, OMB scored
increased outlays totaling
$28,085 million, while CBO estimated $40,308 million in outlay costs- a
difference of $12,223 million. On the revenue side, OMB estimated $502,074
million in decreased revenues and CBO scored reductions in revenue of
$510,815 million- a difference of $8,741 million. In total, OMB scored
$20,964 million less in net costs to the government than did CBO over the
2001 through 2006 period. Table 12 provides a breakdown of outlay and
revenue costs by agency.
Table 12: Comparison of OMB and CBO PAYGO Scoring for the Economic Growth
and Tax Relief Reconciliation Act of 2001
Dollars in millions
Outlays Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB $0 $4,451 $5, 729 $5, 274 $5,218 $7,413 $28, 085
CBO 3, 600 6,425 6, 599 7, 006 7,081 9, 597 40, 308 Difference (OMB- CBO) -$
3, 600 -$ 1,974 -$ 870 -$ 1, 732 -$ 1,863 -$ 2, 184 -$ 12, 223
Dollars in millions
Revenues Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB -$ 65,501 -$ 31,240 -$ 80,670 -$ 100, 183 -$ 101,112 -$ 123,368 -$ 502,
074
CBO -70, 208 -31,145 -83,736 -100, 415 -100, 021 -125, 290 -510, 815
Difference (OMB- CBO) $4,707 -$ 95 $3,066 $232 -$ 1, 091 $1, 922 $8, 741
In general, OMB and CBO agreed that the scoring differences for this
legislation resulted from (1) different economic assumptions, and (2)
technical estimating differences attributable to the use of different
baselines and estimating models. Since the estimates for almost all of the
provisions depend on numerous economic variables, such as wages and
salaries, corporate profits, and GDP, and are produced by elaborate
estimating models, neither OMB nor CBO could identify the specific reason or
reasons for differences in estimates, with one exception.
The one exception is for the outlay scoring differences in 2001 resulting
from the scoring of the advance refund of the individual income rate
reduction. CBO scored roughly 10 percent of the refund as outlays because it
estimated that this amount would exceed the taxpayers? liability for
calendar year 2001 based on calendar year 2000 liability. Since the taxpayer
will not be required to repay the difference, CBO believed that the
difference represents a payment in excess of liability and should be
classified as an outlay. CBO estimated that 95 percent of the outlays will
be paid in 2001 and the remaining 5 percent will be paid in fiscal year 2002
to
taxpayers who filed their tax returns with an extension. OMB did not believe
this distinction would be crucial so they classified the entire advance
refund as a loss in receipts in 2001 and 2002.
Shown below are the breakdowns of the three titles of the act with the
greatest differences in estimates:
Title I, Individual Income Tax Rate Reductions Provisions Title V,
Estate, Gift, and Generation- Skipping Transfer Tax Provisions Title II,
Tax Benefits Relating to Children Table 13 provides a breakdown of the
estimates for Title I, the individual income tax rate reductions provisions,
which among other things create a regular income tax bracket with a rate of
10 percent and reduce the four highest income tax rates over the 2001
through 2006 period . For these provisions, CBO showed a loss of $391,416
million from 2001 through 2006, while OMB showed a total loss of receipts of
$365,724 million, or $25,692 million less than CBO, over that same period.
Table 13: Comparison of OMB and CBO PAYGO Scoring for Title I, the
Individual Income Rate Reductions Provisions of the Economic Growth and Tax
Relief Reconciliation Act of 2001
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB -$ 38, 995 -$ 49,515 -$ 54,672 -$ 65, 373 -$ 70,310 -$ 86,859 -$ 365,
724
CBO -40, 191 -54,521 -61, 479 -69, 385 -72,975 -92, 865 -391, 416 Difference
(OMB- CBO) $1,196 $5, 006 $6,807 $4, 012 $2,665 $6,006 $25, 692
Table 14 shows a breakdown of the estimates by each agency for the Estate
and Gift Tax provisions. OMB estimated a total loss in receipts of $43,432
million over the 2001 through 2006 period, while CBO estimated a loss of
$24,852 million over the same period. CBO showed $18,580 million less in
lost receipts than OMB for this provision.
Table 14: Comparison of OMB and CBO PAYGO Scoring for Title V, the Estate,
Gift, and Generation- Skipping Transfer Tax Provisions of the Economic
Growth and Tax Relief Reconciliation Act of 2001
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB -$ 89 -$ 3,424 -$ 11, 100 -$ 10,054 -$ 10,951 -$ 7,814 -$ 43, 432
CBO 0 -105 -6, 993 -5,590 -7,594 -4,570 -24,852 Difference (OMB- CBO) -$ 89
-$ 3,319 -$ 4, 107 -$ 4,464 -$ 3,357 -$ 3,244 -$ 18, 580
Table 15 below provides a breakdown of the estimates by OMB and CBO for
Title II, which provided tax benefits relating to children, including:
increasing the child tax credit from $500 to $1, 000 over 10 years;
increasing the portion of the child credit that is refundable; changing the
treatment of personal credits under the alternative minimum tax; and
changing the treatment of adoption tax credits, dependent care tax credits,
and the credit for childcare facilities provided by an employer. OMB
estimated a total of $55,930 million in lost receipts over the 2001 through
2006 period, while CBO estimated a loss of $64,713 million over the same
period, a difference of $8,783 million.
Table 15: Comparison of OMB and CBO PAYGO Scoring for the Title II, Tax
Benefits Relating to Children of the Economic Growth and Tax Relief
Reconciliation Act of 2001
Dollars in millions
Fiscal year Agency 2001 2002 2003 2004 2005 2006 Total
OMB -$ 317 -$ 8,451 -$ 9, 397 -$ 9,804 -$ 11,345 -$ 16,616 -$ 55, 930
CBO -518 -9,390 -10, 562 -11,415 -13,634 -19, 194 -64,713 Difference (OMB-
CBO) $201 $939 $11, 665 $1, 611 $2,289 $2,578 $8, 783
Cap Adjustments Section 251( b)( 2) of the DCA requires specific adjustments
to the spending limits. While both CBO and OMB are required to calculate how
much the
spending limits should be adjusted, OMB?s adjustments control for the
purposes of budget enforcement, such as determining whether enacted
appropriations fall within the spending limits, whether a sequestration is
required, and, if so, how much. CBO?s adjustments are advisory and are
adjusted in each subsequent sequestration report to match the previously
reported OMB limits. In their 2002 final sequestration reports, both CBO and
OMB made adjustments to Overall Discretionary budget authority and outlays
limits for emergency appropriations, continuing disability reviews by the
Social Security Administration, adoption incentive payments, and the earned
income tax credit (EITC) compliance initiative. In addition to these annual
adjustments, Division C of the 2002 Department of Defense
Appropriations Act incorporated two additional ones-- a discretionary budget
authority technical estimating difference adjustment allowance of up to .12
percent and $134.5 billion and $132.8 billion increases in the
spending caps for budget authority and outlays, respectively. The OMB 2002
final sequestration report showed spending limit differences between OMB and
CBO of $308 million in budget authority and $3,375 million in outlays for
2002 for the Overall Discretionary category. There are no differences this
year in the final spending limits for the Highway, Mass Transit, and
Conservation categories.
In its final report, OMB adjusted budget authority limits using a provision
in P. L. 107- 117 that allowed OMB to adjust the 2002 limit on budget
authority for the discretionary category upward by any amounts in excess of
the spending limits, up to .12 percent. This allowance, which was enacted to
account for appropriations act scoring differences between OMB and CBO,
added $308 million to the OMB?s budget authority limits for the Overall
Discretionary category. CBO reflected this adjustment in its sequestration
preview report for fiscal year 2003.
For outlay spending limits, OMB estimated $3,375 million more than did CBO,
largely the result of differences in adjustments for emergency outlay
estimates. The emergency appropriations contained in P. L. 107- 117 had
over $3,200 million in outlay scoring differences between OMB and CBO. As
described above, the FEMA disaster relief account in this bill accounted for
$1,525 million of that difference and the general departmental
management account, HHS accounted for another $751 million. OMB also had
higher estimates of emergency outlays in some of the regular appropriations
acts. The higher estimates by OMB are partially offset by an $800 million
higher estimate of emergency outlays by CBO for P. L. 107- 38. As discussed
in detail in the previous section on discretionary scoring differences,
these estimates differ due to different outlay rates used by OMB and CBO.
There were also small differences in outlay estimates for
the EITC compliance initiative, continuing disability reviews, and the
adoption incentive payments adjustments.
Appendi x III
Future of Budget Enforcement Rules The discretionary spending limits and
pay- as- you- go (PAYGO) mechanism established by the Budget Enforcement Act
(BEA) expire this year. 20 While the fiscal year 2001, 2002, and 2003
budgets supported extending the discretionary caps and the PAYGO
enforcement, to date no such legislative action has been taken. There is
widespread agreement that for much of the past decade BEA was successful in
restraining fiscal action by Congress
and the President. However, there is also general acknowledgment both that
the spending caps for the last couple of years were unrealistically tight
when they were set and that the emergence of budget surpluses undermined the
acceptance of BEA enforcement mechanisms that had been designed to reach
budget balance. Given the forthcoming expiration of BEA enforcement regime
and the need to deal with the budgetary challenges the country faces both in
the short and long term, now is an important time to comment on the future
of budget enforcement mechanisms.
Recent History of The Budget Enforcement Act of 1990 (Title XIII of P. L.
101- 508) was
Budget Enforcement designed to constrain future budgetary actions by
Congress and the
President. BEA took a different tack on fiscal restraint than earlier
efforts, Rules
which had focused on annual deficit targets in order to balance the budget.
21 BEA sought to reach budget balance by limiting congressional actions. The
process was designed to enforce a previously reached agreement on the size
of discretionary spending and the budget neutrality of revenue and mandatory
spending legislation (PAYGO). In 1993, the discretionary spending limits and
the PAYGO rules were extended through
fiscal year 1998; the 1997 Budget Enforcement Act (Title X of P. L. 105- 33)
again extended the discretionary spending caps and the PAYGO rules through
2002.
20 Although the Overall Discretionary spending caps expire in 2002, the
Highway and Mass Transit outlay caps established under the Transportation
Equity Act for the 21st Century (TEA- 21) continue through 2003, and the
Conservation caps established as part of the fiscal year 2001 Interior
Appropriations Act were set through 2006. In addition, the sequestration
procedure applies through 2006 to eliminate any projected net costs stemming
from PAYGO legislation enacted through fiscal year 2002.
21 For more on history see U. S. General Accounting Office, Budget Process:
Evolution and Challenges, GAO/ T- AIMD- 96- 129 (Washington, D. C.: July 11,
1996).
Trends in Adherence to In the last several years with budget surpluses,
adjustments to the spending caps were much larger than in most prior years.
22 Figure 1 illustrates the
the Discretionary increasing lack of adherence to the original discretionary
spending caps
Spending Caps and since the advent of surpluses in 1998. The figure shows
the original budget PAYGO Constraints
authority caps as established in 1990 and as extended in 1993 and 1997,
adjustments made to the caps, and the level of enacted appropriations for
fiscal years 1991 through 2002. In fiscal years 1999 and 2000, emergency
spending designations were used by Congress to permit spending above the
discretionary caps. The amounts designated as emergency spending -$ 34.4
billion and $30.8
billion, respectively- were significantly higher than in most past years. 23
In addition to the larger- than- normal amounts, emergency appropriations in
those years also addressed broader purposes than in most prior years. 24 22
The exception was fiscal year 1991, in which most of the large adjustment
was funding for
Operation Desert Storm. 23 See U. S. General Accounting Office, Budget
Issues: Budget Enforcement Compliance Report, GAO/ AIMD- 99- 100
(Washington, D. C.: Apr. 1, 1999); U. S. General Accounting Office,
Budget Issues: Budget Enforcement Compliance Report, GAO/ AIMD- 00- 174
(Washington, D. C.: May 31, 2000); and GAO- 01- 777. 24 Additional
information on issues related to emergency spending can be found in
Congressional Budget Office report Emergency Spending Under the Budget
Enforcement Act, (Washington, D. C.: Dec. 1998); the update to that report
issued in June 1999; the Congressional Budget Office report Supplemental
Appropriations in the 1990s (Washington, D. C.: March 2001); and the U. S.
General Accounting Office reports Budgeting for Emergencies: State Practices
and Federal Implications, GAO/ AIMD- 99- 250 (Washington, D. C.: Sept. 30,
1999), and Emergency Criteria: How Five States Budget for Uncertainty, GAO/
AIMD- 99- 156R (Washington, D. C.: Apr. 20, 1999).
Figure 1: Discretionary Outlay Caps and Enacted Appropriations Billions of
dollars 800
700 600 500 400 300 200 100
0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Fiscal year
Final adjusted caps Original statutory caps Final enacted appropriations
Note: Data for fiscal year 2002 are current as of February 4, 2002; the
final amount after the end of the fiscal year may be higher depending on the
enactment of any supplemental spending.
Source: Office of Management and Budget.
Emergency spending designations have not been the only route to spending
above the discretionary spending caps. In fiscal year 2001 Congress included
a provision in the Foreign Operations Appropriations Act (P. L. 106- 429)
that raised the 2001 budget authority cap by $95.9 billion, a level
assumed to be sufficient to cover all enacted and anticipated
appropriations. In 2002, Congress took similar steps and once again raised
the spending limits to a level sufficient to cover enacted appropriations.
The Department of Defense and Emergency Supplemental Appropriations
Act for 2002 25 adjusted the budget authority caps upward by $134.5 billion.
In addition to the two approaches described above, the Congressional Budget
Office (CBO) has reported that advance appropriations, obligation and
payment delays, and specific legislative direction for scorekeeping have
also been used to boost discretionary spending while allowing technical
compliance with the limits. 26 Advance appropriations have provided a way
for Congress to pass
appropriations that are scored, or counted, in subsequent fiscal years
rather than the year in which they are enacted. The Office of Management and
Budget (OMB) has advocated limiting this type of funding to its use as a way
to fully finance capital projects and ameliorate the problem of budget
spikes caused by funding the entirety of a large capital project in 1 fiscal
year. However, advance appropriations can and have also been used to
avoid spending limitations and/ or to mask true spending levels by crediting
appropriations to other years.
For fiscal year 2000, provisions of law that delayed certain obligations and
payments pushed outlays from certain appropriations into the next year. CBO
reported that while these and the other techniques mentioned are not
new, they were used in different ways or to a greater extent than in past
years. 27 Directed scoring occurs when the budget committees instruct CBO to
use
an estimate for an appropriation action that is different from the one that
25 Department of Defense and Emergency Supplemental Appropriations Act for
Recovery from and Response to Terrorist Attacks on the United States, Public
Law 107- 117, Division C, section 101( a), 115 STAT. 2230, 2341- 2342
(2002).
26 Congressional Budget Office, The Budget and Economic Outlook: Fiscal
Years 2002- 2011
(Washington, D. C.: January 2001). 27 Congressional Budget Office, The
Budget and Economic Outlook: Fiscal Years 2001- 2010 (Washington, D. C.:
January 2000).
CBO would otherwise use. In 2000, CBO reported that the committees directed
it to use such estimates for a wider variety of programs than had been the
case in previous years and that these directions lowered CBO?s estimates of
budget authority by $3 billion and of outlays by about $19 billion.
Nor has PAYGO enforcement been exempt from implementation challenges. The
consolidated appropriations acts for both fiscal years 2000 and 2001
mandated that OMB change the PAYGO scorecard balance to
zero. In fiscal year 2002, a similar instruction in the Department of
Defense and Emergency Supplemental Appropriations Act eliminated $130.3
billion in costs from the PAYGO scorecard. Both OMB and CBO estimated that
without the instructions to change the scorecard, sequesters would have been
required in both 2001 and 2002.
Principles for a Budget On the eve of BEA?s expiration, Congress has myriad
options available for
consideration as it begins crafting a new budget process. In the past, we
Process
have suggested four broad principles or criteria for a budget process. 28
The process should
provide information about the long- term impact of decisions while
recognizing the differences between short- term forecasts, medium- term
projections, and longer- term simulations;
provide information and be structured to focus on important macro trade-
offs;
provide information necessary to make informed trade- offs between
missions and between the different tools of government; and
be enforceable, provide for control and accountability, and be
transparent.
28 For a fuller discussion of these criteria see GAO/ T- AIMD- 96- 129, U.
S. General Accounting Office, Budget Process: History and Future Directions,
GAO/ T- AIMD- 95- 214 (Washington, D. C.: July 13, 1995), and U. S. General
Accounting Office, Budget Process: Comments on
H. R. 853, GAO/ T- AIMD- 99- 188 (Washington, D. C: May 12, 1999).
The lack of adherence to the original BEA spending constraints in recent
years and the expiration of BEA suggest that now may be an opportune time to
think about the direction and purpose of our nation?s fiscal policy. The
surpluses that many worked hard to achieve- with help from the
economy- not only strengthened the economy for the longer term but also put
us in a stronger position to respond to the events of September 11 and to
the economic slowdown than would otherwise have been the case. Going
forward, the nation?s commitment to surpluses will be tested: a
return to surplus will require sustained discipline and difficult choices.
It will be important for Congress and the President to take a hard look at
competing claims on the federal fisc. 29 A fundamental review of existing
programs and operations can create much needed fiscal flexibility to
address emerging needs by weeding out programs that have proven to be
outdated, poorly targeted, or inefficient in their design and management.
Last October, the House and Senate Budget Committees called for a return to
budget surplus as a fiscal goal. 30 This remains an important fiscal goal,
but achieving it will not be easy. Much as the near- term projections have
changed in a year, it is important to remember that even last year the
longterm picture did not look rosy. These long- term fiscal challenges
argued for continuation of some fiscal restraint even in the face of a
decade of projected surpluses. The events of September 11 reminded us of the
benefits fiscal flexibility provides to our nation?s capacity to respond to
urgent and newly emergent needs. Absent substantive changes in entitlement
programs for the elderly, in the long term there will be virtually no room
for any other federal spending priorities- persistent deficits and
escalating debt will overwhelm the budget. 31 While the near- term outlook
has changed, the long- term pressures have not. These long- term budget
29 See U. S. General Accounting Office, Homeland Security: Challenges and
Strategies in Addressing Short- and Long- Term National Needs, GAO- 02- 160T
(Washington, D. C.: Nov. 7, 2001); U. S. General Accounting Office,
Congressional Oversight: Opportunities to Address
Risks, Reduce Costs, and Improve Performance, GAO/ T- AIMD- 00- 96
(Washington, D. C.: Feb. 17, 2000); and U. S. General Accounting Office,
Budget Issues: Effective Oversight and Budget Discipline are Essential- Even
in a Time of Surplus, GAO/ T- AIMD- 00- 73 (Washington, D. C.: Feb. 1,
2000).
30 House and Senate Budget Committees, Revised Budgetary Outlook and
Principles for Economic Stimulus (Oct. 4, 2001). 31 U. S. General Accounting
Office, Budget Issues: Long- Term Fiscal Challenges, GAO- 02- 467T
(Washington, D. C.: Feb. 27, 2002) and U. S. General Accounting Office,
Long- Term Budget Issues: Moving From Balancing the Budget to Balancing
Fiscal Risk, GAO- 01- 385T (Washington, D. C.: Feb. 6, 2001).
challenges driven by demographic trends also serve to emphasize the
importance of the first principle cited above- the need to bring a long-
term perspective to bear on budget debates. Keeping in mind these principles
and concerns, a number of alternatives appear promising.
Alternatives for There is much agreement among experts that there is a need
for the Improving the Budget
continuation of some type of budget process to restrain spending.
Discussions on the future of the budget process have primarily focused on
Process
revamping the current budget process rather than establishing a new one from
scratch. Where the discussion focuses on specific control devices, the two
most frequently discussed are (1) extending the discretionary
spending caps and (2) extending the PAYGO mechanism. In addition, past
discussions have suggested a third element- a set of rules or a ?trigger
device?- that could be included to deal with the uncertainty of budget
projections. Extending Caps on
BEA distinguished between spending controlled by the appropriations
Discretionary Spending
process-? discretionary spending?- and that which flowed directly from
authorizing legislation provisions of law-? direct spending,? sometimes
called ?mandatory.? Caps were placed on discretionary spending- and
Congress? compliance with the caps was relatively easy to measure
because discretionary spending totals flow directly from legislative actions
(i. e., appropriations laws). As noted above, there is broad consensus that,
although the caps have been adjusted, they have served to constrain
appropriations. This consensus, combined with the belief that some
restraints should be continued, has led many to propose that some form of
cap structure be continued as a way of limiting discretionary
appropriations. However, the actions taken to avoid the spending caps in the
last few years have also led many to note that caps can only work if they
are realistic; while caps may be seen as tighter than some would like, they
are not likely to bind if they are seen as totally unreasonable given
current conditions. In the near term, limits on discretionary spending may
be an important tool to prompt reexamination of existing programs as well as
new proposals. Some have proposed that any extension of BEA- type caps be
limited to
caps on budget authority. Outlays are controlled by and flow from budget
authority- although at different rates depending on the nature of the
program. Some argue that the existence of both budget authority and
outlay caps has encouraged provisions such as ?delayed obligations? to be
adopted not for programmatic reasons but as a way of juggling the two caps.
The existence of two caps may also skew authority from rapid spendout to
slower spend- out programs, thus pushing more outlays to the future and
creating problems in complying with outlay caps in later years. Extending
only the budget authority cap would eliminate the incentive for such actions
and focus decisions on that which Congress is intended to control- budget
authority, which itself controls outlays. This would be consistent with the
original design of BEA. The obvious advantage to focusing decisions on
budget authority rather than outlays is that Congress would not spend its
time trying to control the timing of outlays.
Eliminating the outlay cap would raise several implementation issues- chief
among them being how to address the control of transportation programs for
which no budget authority cap currently exists, and the use of advance
appropriations to skirt budget authority caps. However, agreements about
these issues could be reached. For example, the fiscal
year 2002 budget proposed a revision to the scorekeeping rule on advance
appropriations so that generally they would be scored in the year of
enactment. Such a scoring rule change could eliminate the practice of using
advance appropriations to skirt the caps. The 2002 Congressional Budget
Resolution took another tack; it capped advance appropriations at the amount
advanced in the previous year. This year the administration proposed that
total advance appropriations continue to be capped in 2003
and the President?s budget assumed that all advance appropriations would be
frozen except for those that it said should be reduced or eliminated for
programmatic reasons.
There are other issues to consider in the design of any new caps. For
example, for how long should caps be established? What categories should be
established within or in lieu of an overall cap? While the original BEA
envisioned three categories (Defense, International Affairs, and Domestic),
over time categories were combined and new categories were created. At one
time or another caps for Nondefense, Violent Crime
Reduction, Highways, Mass Transit, and Conservation spending existed- many
with different expiration dates. Should these caps be ceilings, or should
they- as is the case for Highways and Conservation- provide for ?guaranteed?
levels of funding? The selection of categories- and the design of the
applicable caps- is not trivial. Categories define the range of what is
permissible. By design they limit tradeoffs and so constrain both Congress
and the President.
We have previously reported that the BEA process has not facilitated making
decisions on activities intended to promote long- term economic growth. 32
In the past we have suggested consideration of an ?investment component?
within the discretionary caps; this would cover funding for physical
infrastructure, research and development, and education and training
(investment in human capital). Such a structure could help Congress and the
President make more informed decisions about the balance between federal
funding of investment activities and federal funding for other activities.
Because caps are phrased in specific dollar amounts, it is important to
address the question of when and for what reasons the caps should be
adjusted. This is critical for making the caps realistic. For example,
without some provision for emergencies, no caps can be successful. At the
same time, there appears to be some connection between how realistic the
caps are and how flexible the definition of emergency is. As described in
both our 2000 and 2001 compliance reports, the amount and range of
spending considered as ?emergency? has grown in recent years. 33 There have
been a number of approaches suggested to balance the need to respond to
emergencies and the desire to avoid making the ?emergency? label an easy way
to raise caps. The House Budget Resolution for fiscal year 2002 (H. Con.
Res. 83) established a reserve fund of $5.6 billion for emergencies in place
of the current practice of automatically increasing the appropriate levels
in the budget resolution for designated emergencies. It also established two
criteria for defining an emergency. These criteria require an emergency to
be a situation (other than a threat to national security) that (1) requires
new budget authority to prevent the imminent loss of life or property or in
response to the loss of life or property and (2) is unanticipated, meaning
that the situation is sudden, urgent, unforeseen, and temporary. 32 U. S.
General Accounting Office, Budget Structure: Providing an Investment Focus
in the Federal Budget, GAO/ T- AIMD- 95- 178 (Washington, D. C.: June 29,
1995) and GAO/ T- AIMD96-
129. 33 See GAO/ AIMD- 00- 174 and U. S. General Accounting Office, Budget
Issues: Budget Enforcement Compliance Report, GAO- 01- 777 (Washington, D.
C.: June 15, 2001).
In the past others have proposed providing for more emergency spending under
any spending caps- either in the form of a reserve or of a greater
appropriation for the Federal Emergency Management Agency (FEMA). If such an
approach were to be taken, the amounts for either the reserve or the FEMA
disaster relief account would need to be included when determining the level
of the caps. Some have proposed using a 5- or 10- year rolling average of
disaster/ emergency spending as the appropriate reserve amount. Adjustments
to the caps would be limited to spending over and above that reserve or
appropriated level for extraordinary circumstances. Since the events of
September 11- and the necessary responses to those events- would undoubtedly
qualify as such an ?extraordinary circumstance,? consideration of new
approaches for ?emergency? spending should probably focus on what might be
considered ?more usual? emergencies. It has been suggested that with
additional up- front appropriations or a reserve, ?traditional? emergency
spending adjustments could be disallowed. No matter what the provision, only
the commitment of Congress and the President can make any limit on cap
adjustments for emergencies work. States have used this reserve concept for
emergencies, and their experiences indicate that criteria for using
emergency reserve funds may be useful in controlling emergency spending. 34
Agreements over the use of the reserve would also need to be achieved at the
federal level.
This discussion is not exhaustive. There are other issues that would come up
in the design of caps. In the next section, we note two of these issues.
Miscellaneous
If the discretionary caps are to be extended, consideration should be given
Discretionary
to addressing areas where attempts to ?expand? resources under the caps can
lead to distortions: the scoring of operating leases and the expansion of
Challenges: Leases and
user fees as offsets to discretionary spending. User Fees
We have previously reported that existing scoring rules favor leasing when
compared to the cost of various other methods of acquiring assets. 35
Currently, for asset purchases, budget authority for the entire acquisition
cost must be recorded in the budget up front, in the year that the asset
acquisition is approved. In contrast, the scorekeeping rules for operating
34 GAO/ AIMD- 99- 250. 35 U. S. General Accounting Office, Budget Issues:
Budget Scorekeeping for Acquisition of Federal Buildings, GAO/ T- AIMD- 94-
189 (Washington, D. C.: Sept. 20, 1994).
leases often require that only the current year?s lease costs be recognized
and recorded in the budget. This makes the operating lease appear less
costly from an annual budgetary perspective, and uses up less budget
authority under the cap. Alternative scorekeeping rules could be considered
that would treat operating leases used for long- term needs in some other
way to more closely recognize the likely period of use. For example, scoring
up front the present value of lease payments for longterm needs covering the
same time period used to analyze ownership options would permit direct
competition between leases and purchases. The caps could be adjusted
appropriately to accommodate such a change. Many believe that one
unfortunate side effect of the structure of BEA has
been an incentive to create revenues that can be categorized as ?user fees?
and so offset discretionary spending- rather than be counted on the PAYGO
scorecard. The 1967 President?s Commission on Budget Concepts recommended
that receipts from activities which were essentially governmental in nature,
including regulation and general taxation, be reported as receipts, and that
receipts from business- type activities ?offset to the expenditures to which
they relate.? However, these distinctions have been blurred in practice.
Ambiguous classifications combined with budget rules that make certain
designs most advantageous has led to a situation in which there is pressure
to treat fees from the public as offsets to
appropriations under BEA caps, regardless of whether the underlying federal
activity is business or governmental in nature. Consideration should be
given to whether it is possible to come up with and apply consistent
standards- especially if the discretionary caps are to be redesigned. The
administration has stated that it plans to monitor and
review the classification of user fees and other types of collections.
Extending and Refining
The PAYGO requirement prevented legislation that lowered revenue or PAYGO
increased direct spending (e. g., by creating new mandatory programs) from
increasing the deficit by requiring that it be offset by other legislative
actions. As long as the unified budget was in deficit, the provisions of
PAYGO- and its application- were clear. During the nation?s few years of
surpluses, questions were raised about whether the prohibition on increasing
the deficit also applied to reducing the surplus. Although
Congress and the executive branch both concluded that PAYGO did apply in
such a situation- and although the question is moot currently, it would be
worth clarifying the point if PAYGO is extended. In its 2002 budget the
administration proposed- albeit implicitly- special treatment for a tax cut
and for some Medicare provisions. It stated that the President?s tax plan
and Medicare reforms were fully financed by the surplus and that any other
spending or tax legislation would need to be offset by reductions in
spending or increases in receipts. Ultimately, the Department of Defense and
Emergency Supplemental Appropriations Act for 2002 eliminated the need to
offset any of the PAYGO legislation by resetting the 2001 and 2002 scorecard
to zero.
When surpluses return and Congress looks to create a PAYGO process for a
time of surplus, it might wish to consider the kinds of debt targets we
found in other nations. 36 For example, it might wish to permit increased
direct
spending or lower revenues as long as debt held by the public is planned to
be reduced by some set percentage or dollar amount. Such a provision might
prevent PAYGO from becoming as unrealistic as overly tight caps on
discretionary spending. However, the design of such a provision would be
important- how would a debt reduction requirement be specified? How would it
be measured? What should be the relationship between the amount of debt
reduction required and the amount of surplus reduction (i. e., tax cut or
direct spending increase) permitted? What, if any, relationship should there
be between this calculation and the discretionary
caps? While PAYGO constrained the creation or legislative expansion of
direct spending programs and tax cuts, it accepted the existing provisions
of law as given. It was not designed to trigger- and it did not trigger- any
examination of ?the base.? Cost increases in existing mandatory programs are
exempt from control under PAYGO and could be ignored. However, constraining
legislative actions that increase the cost of entitlements and
mandatories is not enough. Our long- term budget simulations show that as
more and more of the baby boom generation enters retirement, spending for
Social Security, Medicare, and Medicaid will demand correspondingly larger
shares of federal revenues. Assuming, for example, that last year?s tax
reductions are made permanent and discretionary spending keeps pace
with the economy, spending for net interest, Social Security, Medicare, and
Medicaid consumes nearly three- quarters of federal revenues by 2030,
leaving little room for other federal priorities, including defense and
education. 36 See U. S. General Accounting Office, Budget Surpluses:
Experiences of Other Nations and
Implications for the United States, GAO/ AIMD- 00- 23 (Washington, D. C.:
Nov. 2, 1999).
The budget process is the one place where we as a nation can conduct a
healthy debate about competing claims and new priorities. However, such a
debate will be needlessly constrained if only new proposals and activities
are on the table. A fundamental review of existing programs and operations
can create much- needed fiscal flexibility to address emerging needs by
weeding out programs that have proven to be outdated, poorly targeted, or
inefficient in their design and management. It is always easier to subject
proposals for new activities or programs to greater scrutiny than that given
to existing ones. It is easy to treat existing activities as ?given? and
force new proposals to compete only with each other. However, such an
approach would move us further from, rather than nearer to, budgetary
surpluses. 37 Previously we suggested some sort of ?lookback? procedure to
at least cause a reexamination of ?the base.? Under such a process Congress
could specify spending targets for PAYGO programs for several years. The
President could be required to report in his budget whether these targets
either had been exceeded in the prior year or were likely to be exceeded in
the current or budget years. He could then be required to recommend whether
any or all of this overage should be recouped- and if so, to propose a way
to do so. Congress could be required to act on the
President?s proposal. While the current budget process contains a similar
point of order against worsening the financial condition of the Social
Security trust funds, 38 it would be possible to link ?tripwires? to
measures related to overall
budgetary flexibility or to specific program measures. For example, if
Congress were concerned about declining budgetary flexibility, it could
design a ?tripwire? tied to the share of the budget devoted to mandatory
spending or to the share devoted to a major program.
Others have suggested variations of this type of ?tripwire? approach. The
1999 Breaux- Frist proposal (S. 1895) for structural and substantive changes
to Medicare financing contained a new concept for measuring ?programmatic
insolvency? and required congressional approval of additional financing if
that point was reached. Other specified actions
37 GAO- 02- 467T. 38 2 U. S. C. 632 (i), and U. S. General Accounting
Office, Medicare Reform: Issues Associated With General Revenue Financing,
GAO/ T- AIMD- 00- 126 (Washington, D. C.: Mar. 27, 2000).
could be coupled with reaching a ?tripwire,? such as requiring Congress or
the President to propose alternatives to address reforms. Or the
congressional budget process could be used to require Congress to deal with
unanticipated cost growth beyond a specified ?tripwire? by establishing a
point of order against a budget resolution with a spending
path exceeding the specified amount. One example of a threshold might be the
percentage of gross domestic product devoted to Medicare. The President
would be brought into the process as it progressed because changes to deal
with the cost growth would require enactment of a law. Improving the
In previous reports we have argued that the nation?s economic future depends
in large part upon today?s budget and investment decisions. 39 In
Recognition of LongTerm fact, in recent years there has been increased
recognition of the long- term Commitments
costs of Social Security and Medicare. 40 While these are the largest and
most important long- term commitments- and the ones that drive the long-
term outlook- they are not the only ones in the budget. Even those programs
too small to drive the long- term outlook affect future budgetary
flexibility. For Congress, the President, and the public to make informed
decisions about these other programs, it is important to understand their
long- term cost implications.
While the budget was not designed to and does not provide complete
information on long- term cost implications stemming from some of the
government?s commitments when they are made, progress can be made on this
front. The enactment of the Federal Credit Reform Act in 1990 represented a
step toward improving both the recognition of long- term costs and the
ability to compare different policy tools. With this law, Congress and the
executive branch changed budgeting for loan and loan guarantee programs.
Prior to the act, loan guarantees looked ?free? in the
budget. Direct loans looked like grant programs because the budget 39 See
GAO/ T- AIMD- 96- 129 and U. S. General Accounting Office, The Deficit and
the Economy: An Update of Long- Term Simulations, GAO/ AIMD/ OCE- 95- 119
(Washington, D. C.: Apr. 26, 1995), among others.
40 Office of Management and Budget, Budget of the United States Government,
Fiscal Year 2002 (Washington, D. C: Apr. 9, 2001); CBO, The Budget and
Economic Outlook: Fiscal Years 2002- 2011; U. S. General Accounting Office,
Medicare: Higher Expected Spending and Call for New Benefit Underscore Need
for Meaningful Reform, GAO- 01- 539T (Washington, D. C.: Mar. 22, 2001); and
GAO- 01- 385T.
ignored loan repayments. The shift to accrual budgeting for subsidy costs
permitted comparison of the costs of credit programs both to each other and
to spending programs in the budget.
Information should be more easily available to Congress and the President
about the long- term cost implications both of existing programs and new
proposals. In 1997 we reported that the current cash- based budget generally
provides incomplete information on the costs of federal insurance programs.
41 The ultimate costs to the federal government may not be apparent up front
because of time lags between the extension of the insurance, the receipt of
premiums, and the payment of claims. While there are significant estimation
and implementation challenges, accrual- based budgeting has the potential to
improve budgetary information and
incentives for these programs by providing more accurate and timely
recognition of the government?s costs and improving the information and
incentives for managing insurance costs. This concept was proposed in the
Comprehensive Budget Process and Reform Act of 1999 (H. R. 853), which would
have shifted budgetary treatment of federal insurance programs from a cash
basis to an accrual basis.
There are other commitments for which the cash and obligation- based budget
does not adequately represent the extent of the federal government?s
commitment. Although detailed budget estimates cannot be made for all
programs with long- term cost implications, better information on the long-
term costs of commitments like employee pension programs, retiree health
benefits, and environmental cleanup could be made available. The President?s
fiscal year 2003 budget took a step in that direction by proposing that
funding be included in agency budgets for the accruing costs of pensions and
retiree health care benefits. While there are various analytical and
implementation challenges to including these costs into budget totals, more
could be done to provide information on the longterm cost implications of
these programs to Congress, the President, and the interested public. At
your request, we are continuing to address this issue.
41 U. S. General Accounting Office, Budget Issues: Budgeting for Federal
Insurance Programs, GAO/ AIMD- 97- 16 (Washington, D. C.: Sept. 30, 1997).
Dealing with the Early last year, given 10- year projections showing fairly
sizable surpluses,
Uncertainty of the budget debate focused on how much of the surplus should
be used for
tax cuts, debt reduction, and spending increases. By the fall of 2001, for a
Projections variety of reasons, the debates of how to use the surpluses had
quickly turned to predictions of short- term deficits and discussions of the
defense and homeland security needs of the country and the forms of
government spending that should be used to help improve the economy. This
quick turnaround in the economic outlook served to highlight the fact that
although budgeting requires forecasts and projections, they can be inexact
even in the short term. As the budgeting horizon expands, the certainty of
error grows. When establishing a new budget process, it makes sense to think
about including a mechanism to deal with the uncertainty of projections,
especially with the expectation of a return to surpluses.
Few forecasters would suggest that 10- year projections are anything but
that- projections of what the world would look like if it continued on a
line from today. And long- term simulations are useful to provide insight as
to direction and order of magnitude of certain trends- not as forecasts.
Nevertheless, baseline projections are necessary for measuring and comparing
proposed changes. Former CBO Director Rudy Penner has suggested that 5- year
and 10- year projections should be used for different purposes: 5- year
projections should once again be used for the budget resolution horizon
while 10- year projections should only be used to identify the budgetary
impact of tax and entitlement phase- ins beyond the 5- year budget window.
He adds that the forecasts would not be used to plan comprehensibly for
total spending, taxes, or the budget balance beyond 5
years. It has been suggested that today the 10- year window is most
misleading since it ends just before the baby boom bulge.
No 10- year projection is likely to be entirely correct; the question
confronting fiscal policymakers is how to deal with the risk that a
projection is materially wrong. Last year some commentators and members of
Congress suggested dealing with this risk by using triggers. Triggers were
part both of Gramm- Rudman- Hollings (GRH) and of BEA.
The GRH triggers were tied to deficit results and generally regarded as a
failure- they were evaded or, when deficits continued to exceed the targets,
the targets were changed. BEA triggers were tied to congressional action
rather than to deficit results, but were still designed mainly to lower
deficits until a balanced budget was attained and did not contemplate the
scenario of a surplus. Sequesters were rarely triggered and when they were,
they were very small. As deficits turned to large surpluses and
debate turned to the need for a tax cut, the discussion of a different type
of trigger mechanism emerged, specifically, a trigger mechanism that would
link the size of the tax cut in future years to budget results in those
years. However, there could be other variations on a trigger: actual surplus
results, actual revenue results (this with the intent of avoiding a
situation in which spending increases can derail a tax cut), or actual debt
results. Some might wish to consider triggers that would cause decision
makers to make proposals to address fiscal results that exceed some specific
target, such as debt or spending as a share of GDP. However, there is little
consensus on the effectiveness of any triggers.
Former CBO Director Robert Reischauer has suggested another way of dealing
with the fact that forecasts/ projections become less certain as they go
further out in time. Under his proposal, a declining percentage of any
projected surplus would be available- either for tax cuts or for spending
increases. Specifically, 80 percent of the surplus would be available to
legislators in years one and two, 70 percent in years three and four, 60
percent in years five and six, until reaching the 40 percent level in years
nine and ten. The consequence of not adhering to these limits would be an
across- the- board sequester. When a new Congress convenes, it would be
given a new budget allowance to spend based on a new set of surplus
projections. Conclusion To affect decision making, the fiscal goals sought
through a budget process
must be accepted as legitimate. For many years the goal of ?zero deficit?-
or the norm of budget balance- was accepted as the right goal for the budget
process. In the absence of the zero deficit goal, policymakers need an
overall framework upon which a process and any targets can be based. When
the deficits turned to surpluses, there was discussion of goals framed in
terms of debt reduction or surpluses to be saved. As difficult as selecting
a fiscal goal in times of surplus is, selecting one today may seem even more
difficult. Congress and the administration must balance the need to
respond not only to those demands that existed last year- demands kept in
abeyance during many years of fighting deficits- but also demands imposed on
us by the events of September 11. At the same time- in part because of the
demographic tidal wave looming over the horizon- the events of September 11
do not argue for abandonment of all controls. Whatever interim targets
Congress and the President agree on, compliance with budget process rules,
in both form and spirit, is more likely if end
goals, interim targets, and enforcement boundaries are both accepted and
realistic.
Enforcement is more successful when it is tied to actions controlled by
Congress and the President. Both BEA spending caps and the PAYGO enforcement
rules were designed to hold Congress and the President accountable for the
costs of the laws enacted each session- not for costs that could be
attributed to economic changes or other factors.
Going forward, new rules and goals will be important to ensure fiscal
discipline and to prompt a focus on the longer- term implications of
decisions. The federal government still needs a decision- making framework
that permits it to evaluate choices against both today?s needs and the
longer- term fiscal future that will be handed to future generations. What
process will enable policymakers to deal with the near term without
ignoring the long term? At the same time, the challenges for any budget
process are the same: what process will enable policymakers to make informed
decisions about both fiscal policy and the allocation of resources within
the budget?
Extending the current BEA without setting realistic caps and addressing
existing mandatory programs is unlikely to be successful for the long term.
The original BEA employed limited actions in aiming for a balanced budget.
It left untouched those programs- direct spending and tax legislation-
already in existence. Today?s situation may argue for an interim step in
extending and modifying BEA. However, going forward with new challenges, we
believe that a new process that prompts Congress to exercise more foresight
in dealing with long- term issues is needed. The budget process appropriate
for the early 21st Century will have to exist as part of a broader framework
for thinking about near- and long- term fiscal goals.
Appendi x IV
GAO Contact and Staff Acknowledgments GAO Contact Christine E. Bonham, (202)
512- 9576 Acknowledgments In addition to the person named above, Brendan
Culley, Carlos E. Diz,
Jennifer A. Eichberger, and David S. Nicholson made key contributions to
this report.
(450052)
GAO?s Mission The General Accounting Office, the investigative arm of
Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve
the performance and accountability of the federal government for the
American people. GAO examines the use of public funds; evaluates federal
programs and policies; and provides analyses, recommendations, and other
assistance to help Congress make informed oversight, policy, and funding
decisions. GAO?s commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of The fastest and easiest way to obtain copies of GAO
documents at no cost is
through the Internet. GAO?s Web site (www. gao. gov) contains abstracts and
fulltext GAO Reports and
files of current reports and testimony and an expanding archive of older
Testimony
products. The Web site features a search engine to help you locate documents
using key words and phrases. You can print these documents in their
entirety, including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as ?Today?s Reports,? on its Web
site daily. The list contains links to the full- text document files. To
have GAO e- mail this
list to you every afternoon, go to www. gao. gov and select ?Subscribe to
daily E- mail alert for newly released products? under the GAO Reports
heading.
Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out to
the Superintendent of Documents. GAO
also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a
single address are discounted 25 percent. Orders should be sent to:
U. S. General Accounting Office 441 G Street NW, Room LM Washington, D. C.
20548
To order by Phone: Voice: (202) 512- 6000 TDD: (202) 512- 2537 Fax: (202)
512- 6061
To Report Fraud, Contact:
Waste, and Abuse in Web site: www. gao. gov/ fraudnet/ fraudnet. htm
E- mail: fraudnet@ gao. gov Federal Programs
Automated answering system: (800) 424- 5454 or (202) 512- 7470 Public
Affairs Jeff Nelligan, managing director, NelliganJ@ gao. gov (202) 512-
4800
U. S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.
C. 20548
a
GAO United States General Accounting Office
Page i GAO- 02- 794 Budget Issues
Contents
Contents
Page ii GAO- 02- 794 Budget Issues
Page 1 GAO- 02- 794 Budget Issues United States General Accounting Office
Washington, D. C. 20548 Page 1 GAO- 02- 794 Budget Issues
A
Page 2 GAO- 02- 794 Budget Issues
Page 3 GAO- 02- 794 Budget Issues
Page 4 GAO- 02- 794 Budget Issues
Page 5 GAO- 02- 794 Budget Issues
Page 6 GAO- 02- 794 Budget Issues
Page 7 GAO- 02- 794 Budget Issues
Appendix I
Appendix I Background and Scope and Methodology
Page 8 GAO- 02- 794 Budget Issues
Appendix I Background and Scope and Methodology
Page 9 GAO- 02- 794 Budget Issues
Appendix I Background and Scope and Methodology
Page 10 GAO- 02- 794 Budget Issues
Appendix I Background and Scope and Methodology
Page 11 GAO- 02- 794 Budget Issues
Appendix I Background and Scope and Methodology
Page 12 GAO- 02- 794 Budget Issues
Appendix I Background and Scope and Methodology
Page 13 GAO- 02- 794 Budget Issues
Page 14 GAO- 02- 794 Budget Issues
Appendix II
Appendix II Implementation Issues
Page 15 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 16 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 17 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 18 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 19 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 20 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 21 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 22 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 23 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 24 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 25 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 26 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 27 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 28 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 29 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 30 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 31 GAO- 02- 794 Budget Issues
Appendix II Implementation Issues
Page 32 GAO- 02- 794 Budget Issues
Page 33 GAO- 02- 794 Budget Issues
Appendix III
Appendix III Future of Budget Enforcement Rules
Page 34 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 35 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 36 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 37 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 38 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 39 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 40 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 41 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 42 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 43 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 44 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 45 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 46 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 47 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 48 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 49 GAO- 02- 794 Budget Issues
Appendix III Future of Budget Enforcement Rules
Page 50 GAO- 02- 794 Budget Issues
Page 51 GAO- 02- 794 Budget Issues
Appendix IV
United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300
Address Service Requested Presorted Standard
Postage & Fees Paid GAO Permit No. GI00
*** End of document. ***