I

104TH CONGRESS

1ST SESSION H. R. 2060

To promote freedom, fairness, and economic opportunity for families by

reducing the power and reach of the Federal establishment.

IN THE HOUSE OF REPRESENTATIVES

JULY 19, 1995

Mr. ARMEY introduced the following bill; which was referred to the Committee

on Ways and Means, and in addition to the Committees on Government

Reform and Oversight, the Budget, and Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such

provisions as fall within the jurisdiction of the committee concerned

A BILL

To promote freedom, fairness, and economic opportunity for

families by reducing the power and reach of the Federal

establishment.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Freedom and Fairness Restoration Act of 1995’’.

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title.

TITLE I—TAX REDUCTION AND SIMPLIFICATION;

SUPERMAJORITY REQUIRED FOR TAX CHANGES
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Subtitle A—Tax Reduction and Simplification

Sec. 101. Individual income tax.

Sec. 102. Tax on business activities.

Sec. 103. Simplification of rules relating to qualified retirement plans.

Sec. 104. Repeal of alternative minimum tax.

Sec. 105. Repeal of credits.

Sec. 106. Repeal of estate and gift taxes and obsolete income tax provisions.

Sec. 107. Effective date.

Subtitle B—Supermajority Required for Tax Changes

Sec. 111. Supermajority required.

TITLE II—SPENDING RESTRAINT AND BUDGET PROCESS

REFORM

Subtitle A—Joint Budget Resolution

Sec. 201. Joint budget resolution.

Subtitle B—Zero Based Budgeting and Decennial Sunsetting

Sec. 211. Reauthorization of discretionary programs and unearned entitlements.

Sec. 212. Point of order.

Sec. 213. Decennial sunsetting.

Subtitle C—Spending Caps on the Growth of Entitlements for Fiscal Years

1996 Through 2002

Sec. 221. Spending caps on growth of entitlements and mandatories.

Sec. 222. Exempt programs and activities.

Sec. 223. Exceptions, limitations, and special rules.

Sec. 224. Point of order.

Subtitle D—Balanced Budget by Fiscal Year 2002

Sec. 231. Maximum spending amounts.

Sec. 232. Enforcing maximum spending sequestration.

Sec. 233. Total spending point of order.
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1 TITLE I—TAX REDUCTION AND

2 SIMPLIFICATION;

3 SUPERMAJORITY REQUIRED

4 FOR TAX CHANGES

5 Subtitle A—Tax Reduction and

6 Simplification

7 SEC. 101. INDIVIDUAL INCOME TAX.

8 (a) IN GENERAL.—Section 1 of the Internal Revenue

9 Code of 1986 is amended to read as follows:

10 ‘‘SECTION 1. TAX IMPOSED.

11 ‘‘There is hereby imposed on the taxable income of

12 every individual a tax equal to 20 percent (17 percent in

13 the case of taxable years beginning after December 31,

14 1997) of the taxable income of such individual for such

15 taxable year.’’

16 (b) TAXABLE INCOME.—Section 63 of such Code is

17 amended to read as follows:

18 ‘‘SEC. 63. TAXABLE INCOME.

19 ‘‘(a) IN GENERAL.—For purposes of this subtitle, the

20 term ‘taxable income’ means the excess of—

21 ‘‘(1) the sum of—

22 ‘‘(A) wages (as defined in section 3121(a)

23 without regard to paragraph (1) thereof) which

24 are paid in cash and which are received during
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1 the taxable year for services performed in the

2 United States,

3 ‘‘(B) retirement distributions which are in4 cludible in gross income for such taxable year,

5 plus

6 ‘‘(C) amounts received under any law of

7 the United States or of any State which is in

8 the nature of unemployment compensation, over

9 ‘‘(2) the standard deduction.

10 ‘‘(b) STANDARD DEDUCTION.—

11 ‘‘(1) IN GENERAL.—For purposes of this sub12 title, the term ‘standard deduction’ means the sum

13 of—

14 ‘‘(A) the basic standard deduction, plus

15 ‘‘(B) the additional standard deduction.

16 ‘‘(2) BASIC STANDARD DEDUCTION.—For pur17 poses of paragraph (1), the basic standard deduction

18 is—

19 ‘‘(A) $21,400 in the case of—

20 ‘‘(i) a joint return, or

21 ‘‘(ii) a surviving spouse (as defined in

22 section 2(a)),

23 ‘‘(B) $14,000 in the case of a head of

24 household (as defined in section 2(b)), and
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1 ‘‘(C) $10,700 in the case of an individ2 ual—

3 ‘‘(i) who is not married and who is

4 not a surviving spouse or head of house5 hold, or

6 ‘‘(ii) who is a married individual filing

7 a separate return.

8 ‘‘(3) ADDITIONAL STANDARD DEDUCTION.—For

9 purposes of paragraph (1), the additional standard

10 deduction is $5,000 for each dependent (as defined

11 in section 152) who is described in section 151(c)(1)

12 for the taxable year and who is not required to file

13 a return for such taxable year.

14 ‘‘(c) RETIREMENT DISTRIBUTIONS.—For purposes of

15 subsection (a), the term ‘retirement distribution’ means

16 any distribution from—

17 ‘‘(1) a plan described in section 401(a) which

18 includes a trust exempt from tax under section

19 501(a),

20 ‘‘(2) an annuity plan described in section

21 403(a),

22 ‘‘(3) an annuity contract described in section

23 403(b),

24 ‘‘(4) an individual retirement account described

25 in section 408(a),
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1 ‘‘(5) an individual retirement annuity described

2 in section 408(b),

3 ‘‘(6) an eligible deferred compensation plan (as

4 defined in section 457);

5 ‘‘(7) a governmental plan (as defined in section

6 414(d)); or

7 ‘‘(8) a trust described in section 501(c)(18).

8 Such term includes any plan, contract, account, annuity,

9 or trust which, at any time, has been determined by the

10 Secretary to be such a plan, contract, account, annuity,

11 or trust.

12 ‘‘(d) INCOME OF CERTAIN CHILDREN.—For purposes

13 of this subtitle—

14 ‘‘(1) an individual’s taxable income shall include

15 the taxable income of each dependent child of such

16 individual who has not attained age 14 as of the

17 close of such taxable year, and

18 ‘‘(2) such dependent child shall have no liability

19 for tax imposed by section 1 with respect to such in20 come and shall not be required to file a return for

21 such taxable year.

22 ‘‘(e) INFLATION ADJUSTMENT.—

23 ‘‘(1) IN GENERAL.—In the case of any taxable

24 year beginning in a calendar year after 1996, each

25 dollar amount contained in subsection (b) shall be
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1 increased by an amount determined by the Secretary

2 to be equal to—

3 ‘‘(A) such dollar amount, multiplied by

4 ‘‘(B) the cost-of-living adjustment for such

5 calendar year.

6 ‘‘(2) COST-OF-LIVING ADJUSTMENT.—For pur7 poses of paragraph (1), the cost-of-living adjustment

8 for any calendar year is the percentage (if any) by

9 which—

10 ‘‘(A) the CPI for the preceding calendar

11 year, exceeds

12 ‘‘(B) the CPI for the calendar year 1995.

13 ‘‘(3) CPI FOR ANY CALENDAR YEAR.—For pur14 poses of paragraph (2), the CPI for any calendar

15 year is the average of the Consumer Price Index as

16 of the close of the 12-month period ending on Au17 gust 31 of such calendar year.

18 ‘‘(4) CONSUMER PRICE INDEX.—For purposes

19 of paragraph (3), the term ‘Consumer Price Index’

20 means the last Consumer Price Index for all-urban

21 consumers published by the Department of Labor.

22 For purposes of the preceding sentence, the revision

23 of the Consumer Price Index which is most consist24 ent with the Consumer Price Index for calendar year

25 1986 shall be used.
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1 ‘‘(5) ROUNDING.—If any increase determined

2 under paragraph (1) is not a multiple of $10, such

3 increase shall be rounded to the next highest mul4 tiple of $10.

5 ‘‘(f) MARITAL STATUS.—For purposes of this section,

6 marital status shall be determined under section 7703.’’

7 SEC. 102. TAX ON BUSINESS ACTIVITIES.

8 (a) IN GENERAL.—Section 11 of the Internal Reve9 nue Code of 1986 (relating to tax imposed on corpora10 tions) is amended to read as follows:

11 ‘‘SEC. 11. TAX IMPOSED ON BUSINESS ACTIVITIES.

12 ‘‘(a) TAX IMPOSED.—There is hereby imposed on

13 every person engaged in a business activity a tax equal

14 to 20 percent (17 percent in the case of taxable years be15 ginning after December 31, 1997) of the business taxable

16 income of such person.

17 ‘‘(b) LIABILITY FOR TAX.—The tax imposed by this

18 section shall be paid by the person engaged in the business

19 activity, whether such person is an individual, partnership,

20 corporation, or otherwise.

21 ‘‘(c) BUSINESS TAXABLE INCOME.—For purposes of

22 this section—

23 ‘‘(1) IN GENERAL.—The term ‘business taxable

24 income’ means gross active income reduced by the

25 deductions specified in subsection (d).
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1 ‘‘(2) GROSS ACTIVE INCOME.—

2 ‘‘(A) IN GENERAL.—For purposes of para3 graph (1), the term ‘gross active income’ means

4 gross receipts from—

5 ‘‘(i) the sale or exchange of property

6 or services in the United States by any

7 person in connection with a business activ8 ity, and

9 ‘‘(ii) the export of property or services

10 from the United States in connection with

11 a business activity.

12 ‘‘(B) EXCHANGES.—For purposes of this

13 section, the amount treated as gross receipts

14 from the exchange of property or services is the

15 fair market value of the property or services re16 ceived, plus any money received.

17 ‘‘(C) COORDINATION WITH SPECIAL RULES

18 FOR FINANCIAL SERVICES, ETC.—Except as

19 provided in subsection (e)—

20 ‘‘(i) the term ‘property’ does not in21 clude money or any financial instrument,

22 and

23 ‘‘(ii) the term ‘services’ does not in24 clude financial services.
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1 ‘‘(3) EXEMPTION FROM TAX FOR ACTIVITIES OF

2 GOVERNMENTAL ENTITIES AND TAX-EXEMPT ORGA3 NIZATIONS.—For purposes of this section, the term

4 ‘business activity’ does not include any activity of a

5 governmental entity or of any other organization

6 which is exempt from tax under this chapter.

7 ‘‘(d) DEDUCTIONS.—

8 ‘‘(1) IN GENERAL.—The deductions specified in

9 this subsection are—

10 ‘‘(A) the cost of business inputs for the

11 business activity,

12 ‘‘(B) wages (as defined in section 3121(a)

13 without regard to paragraph (1) thereof) which

14 are paid in cash for services performed in the

15 United States as an employee, and

16 ‘‘(C) retirement contributions to or under

17 any plan or arrangement which makes retire18 ment distributions (as defined in section 63(c))

19 for the benefit of such employees to the extent

20 such contributions are allowed as a deduction

21 under section 404.

22 ‘‘(2) BUSINESS INPUTS.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (1), the term ‘cost of business inputs’

25 means—
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1 ‘‘(i) the amount paid for property sold

2 or used in connection with a business ac3 tivity,

4 ‘‘(ii) the amount paid for services

5 (other than for the services of employees,

6 including fringe benefits paid by reason of

7 such services) in connection with a busi8 ness activity, and

9 ‘‘(iii) any excise tax, sales tax, cus10 toms duty, or other separately stated levy

11 imposed by a Federal, State, or local gov12 ernment on the purchase of property or

13 services which are for use in connection

14 with a business activity.

15 Such term shall not include any tax imposed by

16 chapter 2 or 21.

17 ‘‘(B) EXCEPTIONS.—Such term shall not

18 include—

19 ‘‘(i) items described in subparagraphs

20 (B) and (C) of paragraph (1), and

21 ‘‘(ii) items for personal use not in

22 connection with any business activity.

23 ‘‘(C) EXCHANGES.—For purposes of this

24 section, the amount treated as paid in connec25 tion with the exchange of property or services
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1 is the fair market value of the property or serv2 ices exchanged, plus any money paid.

3 ‘‘(e) SPECIAL RULES FOR FINANCIAL INTER4 MEDIATION SERVICE ACTIVITIES.—In the case of the

5 business activity of providing financial intermediation

6 services, the taxable income from such activity shall be

7 equal to the value of the intermediation services provided

8 in such activity.

9 ‘‘(f) EXCEPTION FOR SERVICES PERFORMED AS EM10 PLOYEE.—For purposes of this section, the term ‘business

11 activity’ does not include the performance of services by

12 an employee for the employee’s employer.

13 ‘‘(g) CARRYOVER OF EXCESS DEDUCTIONS.—

14 ‘‘(1) IN GENERAL.—If the aggregate deductions

15 for any taxable year exceed the gross active income

16 for such taxable year, the amount of the deductions

17 specified in subsection (d) for the succeeding taxable

18 year (determined without regard to this subsection)

19 shall be increased by the sum of—

20 ‘‘(A) such excess, plus

21 ‘‘(B) the product of such excess and the 3-

22 month Treasury rate for the last month of such

23 taxable year.

24 ‘‘(2) 3-MONTH TREASURY RATE.—For purposes

25 of paragraph (1), the 3-month Treasury rate is the
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1 rate determined by the Secretary based on the aver2 age market yield (during any 1-month period se3 lected by the Secretary and ending in the calendar

4 month in which the determination is made) on out5 standing marketable obligations of the United States

6 with remaining periods to maturity of 3 months or

7 less.’’

8 (b) TAX ON TAX-EXEMPT ENTITIES PROVIDING

9 NONCASH COMPENSATION TO EMPLOYEES.—Section

10 4977 of such Code is amended to read as follows:

11 ‘‘SEC. 4977. TAX ON NONCASH COMPENSATION PROVIDED

12 TO EMPLOYEES NOT ENGAGED IN BUSINESS

13 ACTIVITY.

14 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

15 a tax equal to 20 percent (17 percent in the case of cal16 endar years beginning after December 31, 1997) of the

17 value of excludable compensation provided during the cal18 endar year by an employer for the benefit of employees

19 to whom this section applies.

20 ‘‘(b) LIABILITY FOR TAX.—The tax imposed by this

21 section shall be paid by the employer.

22 ‘‘(c) EXCLUDABLE COMPENSATION.—For purposes

23 of subsection (a), the term ‘excludable compensation’

24 means any remuneration for services performed as an em25 ployee other than—
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1 ‘‘(1) wages (as defined in section 3121(a) with2 out regard to paragraph (1) thereof) which are paid

3 in cash,

4 ‘‘(2) remuneration for services performed out5 side the United States, and

6 ‘‘(3) retirement contributions to or under any

7 plan or arrangement which makes retirement dis8 tributions (as defined in section 63(c)).

9 ‘‘(d) EMPLOYEES TO WHOM SECTION APPLIES.—

10 This section shall apply to an employee who is employed

11 in any activity by—

12 ‘‘(1) any organization which is exempt from

13 taxation under this chapter, or

14 ‘‘(2) any agency or instrumentality of the

15 United States, any State or political subdivision of

16 a State, or the District of Columbia.’’

17 SEC. 103. SIMPLIFICATION OF RULES RELATING TO QUALI18 FIED RETIREMENT PLANS.

19 (a) IN GENERAL.—The following provisions of the In20 ternal Revenue Code of 1986 are hereby repealed:

21 (1) NONDISCRIMINATION RULES.—

22 (A) Paragraphs (4) and (5) of section

23 401(a) (relating to nondiscrimination require24 ments).
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1 (B) Sections 401(a)(10)(B) and 416 (re2 lating to top heavy plans).

3 (C) Section 401(a)(17) (relating to com4 pensation limit).

5 (D) Sections 401(a)(26) and 410(b) (relat6 ing to minimum participation and coverage re7 quirements).

8 (E) Sections 401(k)(3), 401(k)(8), and

9 4979 (relating to actual deferral percentage).

10 (F) Section 401(l) (relating to permitted

11 disparity in plan contributions or benefits).

12 (G) Section 401(m) (relating to non13 discrimination test for matching contributions

14 and employee contributions).

15 (H) Paragraphs (1)(D) and (12) of section

16 403(b) (relating to nondiscrimination require17 ments).

18 (I) Paragraph (3) of section 408(k) and

19 paragraph (6) (other than subparagraph (A)(i))

20 of such section (relating to simplified employee

21 pensions).

22 (2) CONTRIBUTION LIMITS.—

23 (A) Sections 401(a)(16), 403(b) (2) and

24 (3), and 415 (relating to limitations on benefits

25 and contributions under qualified plans).
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1 (B) Sections 401(a)(30) and 402(g) (relat2 ing to limitation on exclusion for elective defer3 rals).

4 (C) Paragraphs (3) and (7) of section

5 404(a) (relating to percentage of compensation

6 limits).

7 (D) Section 404(l) (relating to limit on in8 cludible compensation).

9 (3) RESTRICTIONS ON DISTRIBUTIONS.—

10 (A) Section 72(t) (relating to 10-percent

11 additional tax on early distributions from quali12 fied retirement plans).

13 (B) Sections 401(a)(9), 403(b)(10), and

14 4974 (relating to minimum distribution rules).

15 (C) Section 402(d) (relating to tax on

16 lump sum distributions).

17 (D) Section 402(e)(4) (relating to net un18 realized appreciation).

19 (E) Section 4980A (relating to tax on ex20 cess distributions from qualified retirement

21 plans).

22 (4) SPECIAL REQUIREMENTS FOR PLAN BENE23 FITING SELF-EMPLOYED INDIVIDUALS.—Subsections

24 (a)(10)(A) and (d) of section 401.
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1 (5) PROHIBITION OF TAX-EXEMPT ORGANIZA2 TIONS AND GOVERNMENTS FROM HAVING QUALIFIED

3 CASH OR DEFERRED ARRANGEMENTS.—Section

4 401(k)(4)(B).

5 (b) EMPLOYER REVERSIONS OF EXCESS PENSION

6 ASSETS PERMITTED SUBJECT ONLY TO INCOME INCLU7 SION.—

8 (1) REPEAL OF TAX ON EMPLOYER REVER9 SIONS.—Section 4980 of such Code is hereby re10 pealed.

11 (2) EMPLOYER REVERSIONS PERMITTED WITH12 OUT PLAN TERMINATION.—Section 420 of such

13 Code is amended to read as follows:

14 ‘‘SEC. 420. TRANSFERS OF EXCESS PENSION ASSETS.

15 ‘‘(a) IN GENERAL.—If there is a qualified transfer

16 of any excess pension assets of a defined benefit plan

17 (other than a multiemployer plan) to an employer—

18 ‘‘(1) a trust which is part of such plan shall not

19 be treated as failing to meet the requirements of sec20 tion 401(a) or any other provision of law solely by

21 reason of such transfer (or any other action author22 ized under this section), and

23 ‘‘(2) such transfer shall not be treated as a pro24 hibited transaction for purposes of section 4975.
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1 The gross income of the employer shall include the amount

2 of any qualified transfer made during the taxable year.

3 ‘‘(b) QUALIFIED TRANSFER.—For purposes of this

4 section—

5 ‘‘(1) IN GENERAL.—The term ‘qualified trans6 fer’ means a transfer—

7 ‘‘(A) of excess pension assets of a defined

8 benefit plan to the employer, and

9 ‘‘(B) with respect to which the vesting re10 quirements of subsection (c) are met in connec11 tion with the plan.

12 ‘‘(2) ONLY 1 TRANSFER PER YEAR.—No more

13 than 1 transfer with respect to any plan during a

14 taxable year may be treated as a qualified transfer

15 for purposes of this section.

16 ‘‘(c) VESTING REQUIREMENTS OF PLANS TRANSFER17 RING ASSETS.—The vesting requirements of this sub18 section are met if the plan provides that the accrued pen19 sion benefits of any participant or beneficiary under the

20 plan become nonforfeitable in the same manner which

21 would be required if the plan had terminated immediately

22 before the qualified transfer (or in the case of a partici23 pant who separated during the 1-year period ending on

24 the date of the transfer, immediately before such separa25 tion).
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1 ‘‘(d) DEFINITION AND SPECIAL RULE.—For pur2 poses of this section—

3 ‘‘(1) EXCESS PENSION ASSETS.—The term ‘ex4 cess pension assets’ means the excess (if any) of—

5 ‘‘(A) the amount determined under section

6 412(c)(7)(A)(ii), over

7 ‘‘(B) the greater of—

8 ‘‘(i) the amount determined under

9 section 412(c)(7)(A)(i), or

10 ‘‘(ii) 125 percent of current liability

11 (as defined in section 412(c)(7)(B)).

12 The determination under this paragraph shall be

13 made as of the most recent valuation date of the

14 plan preceding the qualified transfer.

15 ‘‘(2) COORDINATION WITH SECTION 412.—In

16 the case of a qualified transfer—

17 ‘‘(A) any assets transferred in a plan year

18 on or before the valuation date for such year

19 (and any income allocable thereto) shall, for

20 purposes of section 412, be treated as assets in

21 the plan as of the valuation date for such year,

22 and

23 ‘‘(B) the plan shall be treated as having a

24 net experience loss under section

25 412(b)(2)(B)(iv) in an amount equal to the
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1 amount of such transfer and for which amorti2 zation charges begin for the first plan year

3 after the plan year in which such transfer oc4 curs, except that such section shall be applied

5 to such amount by substituting ‘10 plan years’

6 for ‘5 plan years’.’’

7 SEC. 104. REPEAL OF ALTERNATIVE MINIMUM TAX.

8 Part VI of subchapter A of chapter 1 of the Internal

9 Revenue Code of 1986 is hereby repealed.

10 SEC. 105. REPEAL OF CREDITS.

11 Part IV of subchapter A of chapter 1 of the Internal

12 Revenue Code of 1986 is hereby repealed.

13 SEC. 106. REPEAL OF ESTATE AND GIFT TAXES AND OBSO14 LETE INCOME TAX PROVISIONS.

15 (a) REPEAL OF ESTATE AND GIFT TAXES.—

16 (1) IN GENERAL.—Subtitle B of the Internal

17 Revenue Code of 1986 is hereby repealed.

18 (2) EFFECTIVE DATE.—The repeal made by

19 paragraph (1) shall apply to the estates of decedents

20 dying, and gifts and generation-skipping transfers

21 made, after December 31, 1995.

22 (b) REPEAL OF OBSOLETE INCOME TAX PROVI23 SIONS.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), chapter 1 of the Internal Revenue Code

3 of 1986 is hereby repealed.

4 (2) EXCEPTIONS.—Paragraph (1) shall not

5 apply to—

6 (A) sections 1, 11, and 63 of such Code,

7 as amended by this Act,

8 (B) those provisions of chapter 1 of such

9 Code which are necessary for determining

10 whether or not—

11 (i) retirement distributions are includ12 ible in the gross income of employees, or

13 (ii) an organization is exempt from

14 tax under such chapter, and

15 (C) subchapter D of such chapter 1 (relat16 ing to deferred compensation).

17 SEC. 107. EFFECTIVE DATE.

18 Except as otherwise provided in this subtitle, the

19 amendments made by this subtitle shall apply to taxable

20 years beginning after December 31, 1995.

21 Subtitle B—Supermajority

22 Required for Tax Changes

23 SEC. 111. SUPERMAJORITY REQUIRED.

24 (a) IN GENERAL.—It shall not be in order in the

25 House of Representatives or the Senate to consider any
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1 bill, joint resolution, amendment thereto, or conference re2 port thereon that includes any provision that—

3 (1) increases any Federal income tax rate,

4 (2) creates any additional Federal income tax

5 rate,

6 (3) reduces the standard deduction, or

7 (4) provides any exclusion, deduction, credit or

8 other benefit which results in a reduction in Federal

9 revenues.

10 (b) WAIVER OR SUSPENSION.—This section may be

11 waived or suspended in the House of Representatives or

12 the Senate only by the affirmative vote of three-fifths of

13 the Members, duly chosen and sworn.

14 TITLE II—SPENDING RESTRAINT

15 AND BUDGET PROCESS REFORM

16 Subtitle A—Joint Budget

17 Resolution

18 SEC. 201. JOINT BUDGET RESOLUTION.

19 (a) DEFINITIONS.—Paragraph (4) of section 3 of the

20 Congressional Budget Act of 1974 is amended to read as

21 follows:

22 ‘‘(4) the term ‘joint resolution on the budget’

23 means—

24 ‘‘(A) a joint resolution setting forth the

25 congressional budget for the United States Gov-
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1 ernment for a fiscal year as provided in section

2 301; and

3 ‘‘(B) any other joint resolution revising the

4 congressional budget for the United States Gov5 ernment for a fiscal year as described in section

6 304.’’.

7 (b) JOINT RESOLUTION ON THE BUDGET.—(1) Sec8 tion 300 is amended by striking ‘‘concurrent resolution’’

9 each place it appears and inserting ‘‘joint resolution’’.

10 (2) Section 301(a) of the Congressional Budget Act

11 of 1974 is amended by striking ‘‘concurrent resolution’’

12 each place it appears including in the caption and insert13 ing ‘‘joint resolution’’.

14 (3) Section 301(b) is amended by striking ‘‘concur15 rent resolution’’ each place it appears including in the cap16 tion and inserting ‘‘joint resolution’’.

17 (4) Section 301(c) is amended by striking ‘‘concur18 rent resolution’’ each place it appears and inserting ‘‘joint

19 resolution’’.

20 (5) Section 301(e) is amended by striking ‘‘concur21 rent resolution’’ each place it appears and inserting ‘‘joint

22 resolution’’.

23 (6) Section 301(f) is amended by striking ‘‘concur24 rent resolution’’ each place it appears and inserting ‘‘joint

25 resolution’’.
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1 (7) Section 301(g) is amended by striking ‘‘concur2 rent resolution’’ each place it appears and inserting ‘‘joint

3 resolution’’.

4 (8) Section 301(h) is amended by striking ‘‘concur5 rent resolution’’ and inserting ‘‘joint resolution’’.

6 (9) Section 301(i) is amended by striking ‘‘concur7 rent resolution’’ each place it appears and inserting ‘‘joint

8 resolution’’.

9 (10) The section heading of section 301 is amended

10 by striking ‘‘ANNUAL ADOPTION OF CONCURRENT’’

11 and inserting ‘‘ANNUAL ADOPTION OF JOINT’’.

12 (11) The table of contents set forth in section 1(b)

13 of the Congressional Budget and Impoundment Control

14 Act of 1974 is amended by striking ‘‘Annual adoption of

15 the concurrent’’ in the item relating to section 301 and

16 inserting ‘‘Annual adoption of the joint’’.

17 (12) Section 302 is amended by striking ‘‘concurrent

18 resolution’’ each place it appears and inserting ‘‘joint reso19 lution’’.

20 (13) Section 303, including the heading, is amended

21 by striking ‘‘concurrent resolution’’ each place it appears

22 and inserting ‘‘joint resolution’’.

23 (14) The table of contents set forth in section 1(b)

24 of the Congressional Budget and Impoundment Control
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1 Act of 1974 is amended by striking ‘‘Concurrent’’ in the

2 item relating to section 303 and inserting ‘‘Joint’’.

3 (15) Section 304 is amended by striking ‘‘concurrent

4 resolution’’, including in the heading, each place it appears

5 and inserting ‘‘joint resolution’’.

6 (16) The table of contents set forth in section 1(b)

7 of the Congressional Budget and Impoundment Control

8 Act of 1974 is amended by striking ‘‘Concurrent’’ in the

9 item relating to section 304 and inserting ‘‘Joint’’.

10 (17) Section 305 is amended by striking ‘‘concurrent

11 resolution’’, including in the heading, each place it appears

12 and inserting ‘‘joint resolution’’.

13 (18) Section 308 is amended by striking ‘‘concurrent

14 resolution’’ each place it appears and inserting ‘‘joint reso15 lution’’.

16 (19) Section 310 is amended by striking ‘‘concurrent

17 resolution’’ each place it appears and inserting ‘‘joint reso18 lution’’.

19 (20) Section 311 is amended by striking ‘‘concurrent

20 resolution’’ each place it appears and inserting ‘‘joint reso21 lution’’.
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1 Subtitle B—Zero Based Budgeting

2 and Decennial Sunsetting

3 SEC. 211. REAUTHORIZATION OF DISCRETIONARY PRO4 GRAMS AND UNEARNED ENTITLEMENTS.

5 (a) FISCAL YEAR 1996.—Effective October 1, 1995,

6 spending authority for each unearned entitlement and

7 high-cost discretionary spending program is terminated

8 unless such spending authority is reauthorized after the

9 date of enactment of this Act.

10 (b) FISCAL YEAR 1997.—Effective October 1, 1996,

11 spending authority for each discretionary spending pro12 gram (not including high-cost discretionary spending pro13 grams) is terminated unless such spending authority is re14 authorized after the date of enactment of this Act.

15 (c) DEFINITIONS.—For purposes of this subtitle—

16 (1) the term ‘‘unearned entitlement’’ means an

17 entitlement not earned by service or paid for in total

18 or in part by assessments or contributions such as

19 Social Security, veterans’ benefits, retirement pro20 grams, and medicare; and

21 (2) the term ‘‘high-cost discretionary program’’

22 means the most expensive one-third of discretionary

23 program within each budget function account.
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1 SEC. 212. POINT OF ORDER.

2 (a) IN GENERAL.—It shall not be in order in the

3 House of Representatives or the Senate to consider any

4 bill, joint resolution, amendment, or conference report that

5 includes any provision that appropriates funds unless such

6 appropriation has been previously authorized by law.

7 (b) WAIVER OR SUSPENSION.—This section may be

8 waived or suspended in the House of Representatives or

9 the Senate only by the affirmative vote of three-fifths of

10 the Members, duly chosen and sworn.

11 SEC. 213. DECENNIAL SUNSETTING.

12 (a) FIRST DECENNIAL CENSUS YEAR.—Effective on

13 the first day of the fiscal year beginning in the first decen14 nial census year after the year 2001 and each 10 years

15 thereafter, the spending authority described in section

16 211(a) is terminated unless such spending authority is re17 authorized after the last date the spending authority was

18 required to be reauthorized under this subtitle.

19 (b) FIRST DECENNIAL CENSUS YEAR.—Effective on

20 the first day of the fiscal year beginning in the year after

21 the first decennial census year after the year 2001 and

22 each 10 years thereafter, the spending authority described

23 in section 211(b) is terminated unless such spending au24 thority is reauthorized after the last date the spending au25 thority was required to be reauthorized under this subtitle.
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1 Subtitle C—Spending Caps on the

2 Growth of Entitlements for Fis3 cal Years 1996 Through 2002

4 SEC. 221. SPENDING CAPS ON GROWTH OF ENTITLEMENTS

5 AND MANDATORIES.

6 (a) CAP ON GROWTH OF ENTITLEMENTS.—Effective

7 for each of the fiscal years 1996 through 2002, the total

8 level of entitlement and mandatory spending, excluding

9 Social Security, shall not exceed the total level for the pre10 vious fiscal year increased by the consumer price index,

11 and the growth in eligible population.

12 (b) SEQUESTRATION.—Within 15 days after Con13 gress adjourns to end a session, and on the same day as

14 a sequestration (if any) under section 253 of the Balanced

15 Budget and Emergency Deficit Control Act of 1985, there

16 shall be a sequestration to reduce the amount of entitle17 ment and mandatory spending for the fiscal year begin18 ning in the year the Congress adjourns by any amount

19 necessary to reduce such spending to the level set forth

20 in subsection (a) unless that amount is less than

21 $250,000,000.

22 (c) UNIFORM REDUCTIONS; LIMITATIONS.—The

23 amount required to be sequestered for the fiscal year

24 under subsection (a) shall be obtained from nonexempt di-
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•HR 2060 IH

1 rect spending accounts by actions taken in the following

2 order:

3 (1) FIRST.—The reductions in the programs

4 specified in section 223(a) (National Wool Act and

5 special milk), section 223(b) (guaranteed student

6 loans), and section 223(c) (foster care and adoption

7 assistance) shall be made.

8 (2) SECOND.—Any additional reductions that

9 may be required shall be achieved by reducing each

10 remaining nonexempt direct spending account by the

11 uniform percentage necessary to achieve those addi12 tional reductions, except that—

13 (A) the low-income programs specified in

14 section 223(d) shall not be reduced by more

15 than 1 percent;

16 (B) the retirement and veterans benefits

17 specified in section 223(e) shall not be reduced

18 by more than 2 percent in the manner specified

19 in that section; and

20 (C) the medicare programs shall not be re21 duced by more than 4 percent in the manner

22 specified in section 223(f).

23 The limitations set forth in subparagraphs (A), (B),

24 and (C) shall be applied iteratively, and after each

25 iteration the uniform percentage applicable to all
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1 other programs under this paragraph shall be in2 creased (if necessary) to a level sufficient to achieve

3 the reductions required by this paragraph.

4 SEC. 222. EXEMPT PROGRAMS AND ACTIVITIES.

5 (a) DESCRIPTIONS AND LISTS.—Except as provided

6 in subsection (b), the following budget accounts or activi7 ties shall be exempt from sequestration:

8 (1) Net interest.

9 (2) All payments to trust funds from excise

10 taxes or other receipts or collections properly cred11 itable to those trust funds.

12 (3) All payments from one Federal direct

13 spending budget account to another Federal budget

14 account; and all intragovernmental funds including

15 those from which funding is derived primarily from

16 other Government accounts, except to the extent

17 that such funds are augmented by direct appropria18 tions for the fiscal year for which the order is in ef19 fect.

20 (4) Activities resulting from private donations,

21 bequests, or voluntary contributions to the Govern22 ment.

23 (5) Payments from any revolving fund or trust24 revolving fund (or similar activity) that provides de25 posit insurance or other Government insurance, Gov-
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1 ernment guarantees, or any other form of contingent

2 liability, to the extent those payments result from

3 contractual or other legally binding commitments of

4 the Government at the time of any sequestration.

5 (6) Credit liquidating and financing accounts.

6 (7) The following accounts, which largely fulfill

7 requirements of the Constitution or otherwise make

8 payments to which the Government is committed—

9 Administration of Territories, Northern

10 Mariana Islands Covenant grants (14–0412–0–

11 1–806);

12 Bureau of Indian Affairs, miscellaneous

13 payments to Indians (14–2303–0–1–452);

14 Bureau of Indian Affairs, miscellaneous

15 trust funds, tribal trust funds (14–9973–0–7–

16 999);

17 Claims, defense;

18 Claims, judgments, and relief act (20–

19 1895–0–1–806);

20 Compact of Free Association, economic as21 sistance pursuant to Public Law 99–658 (14–

22 0415–0–1–806);

23 Compensation of the President (11–0001–

24 0–1–802);
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•HR 2060 IH

1 Customs Service, miscellaneous permanent

2 appropriations (20–9992–0–2–852);

3 Eastern Indian land claims settlement

4 fund (14–2202–0–1–806);

5 Farm Credit System Financial Assistance

6 Corporation, interest payments (20–1850–0–1–

7 351);

8 Internal Revenue collections of Puerto Rico

9 (20–5737–0–2–852);

10 Panama Canal Commission, operating ex11 penses and capital outlay (95–5190–0–2–403);

12 Payments of Vietnam and USS Pueblo

13 prisoner-of-war claims (15–0104–0–1–153);

14 Payments to copyright owners (03–5175–

15 0–2–376);

16 Payments to the United States territories,

17 fiscal assistance (14–0418–0–1–801);

18 Payments to widows and heirs of deceased

19 Members of Congress (00–0215–0–1–801);

20 Salaries of Article III judges;

21 Soldier’s and Airmen’s Home, payment of

22 claims (84–8930–0–7–705);

23 Washington Metropolitan Area Transit Au24 thority, interest payments (46–0300–0–1–401).
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•HR 2060 IH

1 (8) The following noncredit special, revolv2 ing, or trust-revolving funds—

3 Coinage profit fund (20–5811–0–2–803);

4 Comptroller of the Currency;

5 Director of the Office of Thrift Super6 vision;

7 Exchange Stabilization Fund (20–4444–0–

8 3–155);

9 Federal Housing Finance Board;

10 Foreign Military Sales trust fund (11–

11 82232–0–7–155).

12 (9) Thrift Savings Fund.

13 (10) Appropriations for the District of Colum14 bia to the extent they are appropriations of locally

15 raised funds.

16 (11)(A) Any amount paid as regular unemploy17 ment compensation by a State from its account in

18 the Unemployment Trust Fund (established by sec19 tion 904(a) of the Social Security Act).

20 (B) Any advance made to a State from the

21 Federal unemployment account (established by sec22 tion 904(g) of such Act) under title XII of such Act

23 and any advance appropriated to the Federal unem24 ployment account pursuant to section 1203 of such

25 Act.
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1 (C) Any payment made from the Federal Em2 ployees Compensation Account (as established under

3 section 909 of such Act) for the purpose of carrying

4 out chapter 85 of title 5, United States Code, and

5 funds appropriated or transferred to or otherwise

6 deposited in such Account.

7 (12) The earned income tax credit (payments to

8 individuals pursuant to section 32 of the Internal

9 Revenue Code of 1986).

10 (b) FEDERAL ADMINISTRATIVE EXPENSES.—

11 (1) Notwithstanding any provision of law other

12 than paragraph (3), administrative expenses in13 curred by the departments and agencies, including

14 independent agencies, of the Federal Government in

15 connection with any program, project, activity, or ac16 count shall be subject to reduction pursuant to any

17 sequestration order, without regard to any exemp18 tion, exception, limitation, or special rule otherwise

19 applicable with respect to such program, project, ac20 tivity, or account, and regardless of whether the pro21 gram, project, activity, or account is self-supporting

22 and does not receive appropriations.

23 (2) Payments made by the Federal Government

24 to reimburse or match administrative costs incurred

25 by a State or political subdivision under or in con-
35

•HR 2060 IH

1 nection with any program, project, activity, or ac2 count shall not be considered administrative ex3 penses of the Federal Government for purposes of

4 this section, and shall be subject to sequestration to

5 the extent (and only to the extent) that other pay6 ments made by the Federal Government under or in

7 connection with that program, project, activity, or

8 account are subject to that reduction or sequestra9 tion; except that Federal payments made to a State

10 as reimbursement of administrative costs incurred

11 by that State under or in connection with the unem12 ployment compensation programs specified in sub13 section (a)(11) shall be subject to reduction or se14 questration under this part notwithstanding the ex15 emption otherwise granted to such programs under

16 that subsection.

17 (3) Notwithstanding any other provision of law,

18 the administrative expenses of the following pro19 grams shall be exempt from sequestration:

20 (A) Comptroller of the Currency.

21 (B) Federal Deposit Insurance Corpora22 tion.

23 (C) Office of Thrift Supervision.

24 (D) National Credit Union Administration.
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•HR 2060 IH

1 (E) National Credit Union Administration,

2 central liquidity facility.

3 (F) Federal Retirement Thrift Investment

4 Board.

5 (G) Resolution Funding Corporation.

6 (H) Resolution Trust Corporation.

7 (I) Board of Governors of the Federal Re8 serve System.

9 SEC. 223. EXCEPTIONS, LIMITATIONS, AND SPECIAL RULES.

10 (a) NATIONAL WOOL ACT AND THE SPECIAL MILK

11 PROGRAM.—Automatic spending increases are increases

12 in outlays due to changes in indexes in the following pro13 grams:

14 (1) National Wool Act; and

15 (2) Special milk program.

16 In those programs all amounts other than the automatic

17 spending increases shall be exempt from reduction under

18 any sequestration order.

19 (b) THE GUARANTEED STUDENT LOAN PROGRAM.—

20 (1) Any reductions which are required to be achieved from

21 the student loan programs operated pursuant to part B

22 of title IV of the Higher Education Act of 1965 under

23 any sequestration order shall be achieved only from loans

24 described in paragraphs (2) and (3) by the application of

25 the measures described in such paragraphs.
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1 (2) For any loan made during the period beginning

2 on the date that a sequestration order takes effect with

3 respect to a fiscal year, the rate used in computing the

4 special allowance payment pursuant to section

5 438(b)(2)(A)(iii) of such Act for each of the first four spe6 cial allowance payments for such loan shall be adjusted

7 by reducing such rate by the lesser of—

8 (A) 0.40 percent, or

9 (B) the percentage by which the rate specified

10 in such section exceeds 3 percent.

11 (3) For any loan made during the period beginning

12 on the date that a sequestration order takes effect with

13 respect to a fiscal year, the origination fee which is author14 ized to be collected pursuant to section 438(c)(2) of such

15 Act shall be increased by 0.50 percent.

16 (c) FOSTER CARE AND ADOPTION ASSISTANCE PRO17 GRAMS.—Any sequestration order shall make the reduc18 tion otherwise required under the foster care and adoption

19 assistance programs (established by part E of title IV of

20 the Social Security Act) only with respect to payments and

21 expenditures made by States in which increases in foster

22 care maintenance payment rates or adoption assistance

23 payment rates (or both) are to take effect during the fiscal

24 year involved, and only to the extent that the required re25 duction can be accomplished by applying a uniform per-
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•HR 2060 IH

1 centage reduction to the Federal matching payments that

2 each such State would otherwise receive under section 474

3 of that Act (for such fiscal year) for that portion of the

4 State’s payments attributable to the increases taking ef5 fect during that year. No State’s matching payments from

6 the Federal Government for foster care maintenance pay7 ments or for adoption assistance maintenance payments

8 may be reduced by a percentage exceeding the applicable

9 domestic sequestration percentage. No State may, after

10 the date of the enactment of this Act, make any change

11 in the timetable for making payments under a State plan

12 approved under part E of title IV of the Social Security

13 Act which has the effect of changing the fiscal year in

14 which expenditures under such part are made.

15 (d) LOW-INCOME ENTITLEMENTS.—(1) Benefit pay16 ments or payments to States or other entities for the pro17 grams listed in paragraph (2) shall not be reduced by

18 more than 1 percent under any sequestration order. When

19 reduced under an end-of-session sequestration order, those

20 benefit reductions shall occur starting with the payment

21 made at the start of January. When reduced under a with22 in-session sequestration order, those benefit reductions

23 shall occur starting with the next periodic payment.

24 (2) The programs referred to in paragraph (1) are

25 the following:
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•HR 2060 IH

1 Aid to families with dependent children (75–

2 0412–0–1–609);

3 Child nutrition (12–3539–0–1–605);

4 Food stamp programs (12–3505–0–1–605) and

5 (12–3550–0–1–605);

6 Grants to States for medicaid (75–0512–0–1–

7 551); and

8 Supplemental security income program (75–

9 0406–0–1–609).

10 (e) FEDERAL RETIREMENT AND VETERANS’ PRO11 GRAMS.—

12 (1) For each of the programs listed in para13 graph (2) and except as provided in paragraph (3),

14 monthly (or other periodic) benefit payments shall

15 be reduced by the uniform percentage applicable to

16 direct spending sequestrations for such programs

17 under section 221(c)(2), which shall in no case ex18 ceed 2 percent under any sequestration order. When

19 reduced under an end-of-session sequestration order,

20 those benefit reductions shall occur starting with the

21 payment made at the start of January or 7 weeks

22 after the order is issued, whichever is later. When

23 reduced under a within-session sequestration order,

24 those benefit reductions shall occur starting with the

25 next periodic payment.
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•HR 2060 IH

1 (2) The programs subject to paragraph (1) are:

2 Benefits payable under sections 3(a),

3 3(f)(3), 4(a), or 4(f) of the Railroad Retirement

4 Act of 1974;

5 Benefits under chapter 21 of title 38,

6 United States Code, relating to specially adapt7 ed housing and mortgage-protection life insur8 ance for certain veterans with service-connected

9 disabilities (36–0137–0–1–702);

10 Benefits under section 907 of title 38,

11 United States Code, relating to burial benefits

12 for veterans who die as a result of service-con13 nected disability (36–0155–0–1–701);

14 Benefits under chapter 39 of title 38,

15 United States Code, relating to automobiles and

16 adaptive equipment for certain disabled veter17 ans and members of the Armed Forces (36–

18 0137–0–1–702);

19 Black lung benefits (20–8144–0–7–601);

20 Central Intelligence Agency retirement and

21 disability system fund (56–3400–0–1–054);

22 Civil service retirement and disability fund

23 (24–8135–0–7–602);

24 Comptrollers general retirement system

25 (05–0107–0–1–801);
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•HR 2060 IH

1 Foreign service retirement and disability

2 fund (19–8186–0–7–602);

3 Judicial survivors’ annuities fund (10–

4 8110–0–7–602);

5 Longshoremen’s and harborworkers’ com6 pensation benefits (16–9971–0–7–601);

7 Military retirement fund (97–8097–0–7–

8 602);

9 National Oceanic and Atmospheric Admin10 istration retirement (13–1450–0–1–306);

11 Pensions for former Presidents (47–0105–

12 0–1–802);

13 Railroad retirement tier II (60–8011–0–7–

14 601);

15 Railroad supplemental annuity pension

16 fund (60–8012–0–7–602);

17 Retired pay, Coast Guard (69–0241–0–1–

18 403);

19 Retirement pay and medical benefits for

20 commissioned officers, Public Health Service

21 (75–0379–0–1–551);

22 Special benefits, Federal Employees’ Com23 pensation Act (16–1521–0–1–600);

24 Special benefits for disabled coal miners

25 (75–0409–0–1–601);
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•HR 2060 IH

1 Tax Court judges survivors annuity fund

2 (23–8115–0–7–602);

3 Veterans’ compensation (36–0153–0–1–

4 701); and

5 Veterans’ pensions (36–0154–0–1–701).

6 (f) MEDICARE PROGRAM.—

7 (1) CALCULATION OF REDUCTION IN INDIVID8 UAL PAYMENT AMOUNTS.—To achieve the total per9 centage reduction in those programs required by sec10 tion 221, the percentage reduction that shall apply

11 to payments under the health insurance programs

12 under title XVIII of the Social Security Act for serv13 ices furnished after any sequestration order is issued

14 shall be such that the reduction made in payments

15 under that order shall achieve the required total per16 centage reduction in those payments for that fiscal

17 year as determined on a 12-month basis.

18 (2) TIMING OF APPLICATION OF REDUC19 TIONS.—

20 (A) IN GENERAL.—Except as provided in

21 subparagraph (B), if a reduction is made under

22 paragraph (1) in payment amounts pursuant to

23 a sequestration order, the reduction shall be ap24 plied to payment for services furnished after the

25 effective date of the order. For purposes of the
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1 previous sentence, in the case of inpatient serv2 ices furnished for an individual, the services

3 shall be considered to be furnished on the date

4 of the individual’s discharge from the inpatient

5 facility.

6 (B) PAYMENT ON THE BASIS OF COST RE7 PORTING PERIODS.—In the case in which pay8 ment for services of a provider of services is

9 made under title XVIII of the Social Security

10 Act on a basis relating to the reasonable cost

11 incurred for the services during a cost reporting

12 period of the provider, if a reduction is made

13 under paragraph (1) in payment amounts pur14 suant to a sequestration order, the reduction

15 shall be applied to payment for costs for such

16 services incurred at any time during each cost

17 reporting period of the provider any part of

18 which occurs after the effective date of the

19 order, but only (for each such cost reporting pe20 riod) in the same proportion as the fraction of

21 the cost reporting period that occurs after the

22 effective date of the order.

23 (3) NO INCREASE IN BENEFICIARY CHARGES IN

24 ASSIGNMENT-RELATED CASES.—If a reduction in

25 payment amounts is made under paragraph (1) for
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1 services for which payment under part B of title

2 XVIII of the Social Security Act is made on the

3 basis of an assignment described in section

4 1842(b)(3)(B)(ii), in accordance with section

5 1842(b)(6)(B), or under the procedure described in

6 section 1870(f)(1) of such Act, the person furnishing

7 the services shall be considered to have accepted

8 payment of the reasonable charge for the services,

9 less any reduction in payment amount made pursu10 ant to a sequestration order, as payment in full.

11 (4) NO EFFECT ON COMPUTATION OF AAPCC.—

12 In computing the adjusted average per capita cost

13 for purposes of section 1876(a)(4) of the Social Se14 curity Act, the Secretary of Health and Human

15 Services shall not take into account any reductions

16 in payment amounts which have been or may be ef17 fected under this subtitle.

18 (g) FEDERAL PAY.—

19 (1) IN GENERAL.—Except as provided in sec20 tion 222(b)(3), new budget authority to pay Federal

21 personnel shall be reduced by the uniform percent22 age calculated under section 221(c), but no seques23 tration order may reduce or have the effect of reduc24 ing the rate of pay to which any individual is enti25 tled under any statutory pay system (as increased by
45

•HR 2060 IH

1 any amount payable under section 5304 of title 5,

2 United States Code, or section 302 of the Federal

3 Employees Pay Comparability Act of 1990) or the

4 rate of any element of military pay to which any in5 dividual is entitled under title 37, United States

6 Code, or any increase in rates of pay which is sched7 uled to take effect under section 5303 of title 5,

8 United States Code, section 1009 of title 37, United

9 States Code, or any other provision of law.

10 (2) DEFINITIONS.—For purposes of this sub11 section:

12 (A) The term ‘‘statutory pay system’’ shall

13 have the meaning given that term in section

14 5302(1) of title 5, United States Code.

15 (B) The term ‘‘elements of military pay’’

16 means—

17 (i) the elements of compensation of

18 members of the uniformed services speci19 fied in section 1009 of title 37, United

20 States Code,

21 (ii) allowances provided members of

22 the uniformed services under sections 403a

23 and 405 of such title, and

24 (iii) cadet pay and midshipman pay

25 under section 203(c) of such title.
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•HR 2060 IH

1 (C) The term ‘‘uniformed services’’ shall

2 have the meaning given that term in section

3 101(3) of title 37, United States Code.

4 (h) CHILD SUPPORT ENFORCEMENT PROGRAM.—

5 Any sequestration order shall accomplish the full amount

6 of any required reduction in expenditures under sections

7 455 and 458 of the Social Security Act by reducing the

8 Federal matching rate for State administrative costs

9 under such program, as specified (for the fiscal year in10 volved) in section 455(a) of such Act, to the extent nec11 essary to reduce such expenditures by that amount.

12 (i) EXTENDED UNEMPLOYMENT COMPENSATION.—

13 (1) A State may reduce each weekly benefit payment made

14 under the Federal-State Extended Unemployment Com15 pensation Act of 1970 for any week of unemployment oc16 curring during any period with respect to which payments

17 are reduced under an order issued under this subtitle by

18 a percentage not to exceed the percentage by which the

19 Federal payment to the State under section 204 of such

20 Act is to be reduced for such week as a result of such

21 order.

22 (2) A reduction by a State in accordance with sub23 paragraph (A) shall not be considered as a failure to fulfill

24 the requirements of section 3304(a)(11) of the Internal

25 Revenue Code of 1986.
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1 (j) COMMODITY CREDIT CORPORATION.—

2 (1) POWERS AND AUTHORITIES OF THE COM3 MODITY CREDIT CORPORATION.—This subtitle shall

4 not restrict the Commodity Credit Corporation in

5 the discharge of its authority and responsibility as a

6 corporation to buy and sell commodities in world

7 trade, to use the proceeds as a revolving fund to

8 meet other obligations and otherwise operate as a

9 corporation, the purpose for which it was created.

10 (2) REDUCTION IN PAYMENTS MADE UNDER

11 CONTRACTS.—(A) Payments and loan eligibility

12 under any contract entered into with a person by the

13 Commodity Credit Corporation prior to the time any

14 sequestration order has been issued shall not be re15 duced by an order subsequently issued. Subject to

16 subparagraph (B), after any sequestration order is

17 issued for a fiscal year, any cash payments made by

18 the Commodity Credit Corporation—

19 (i) under the terms of any one-year con20 tract entered into in or after such fiscal year

21 and after the issuance of the order; and

22 (ii) out of an entitlement account,

23 to any person (including any producer, lender, or

24 guarantee entity) shall be subject to reduction under

25 the order.
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•HR 2060 IH

1 (B) Each contract entered into with producers

2 or producer cooperatives with respect to a particular

3 crop of a commodity and subject to reduction under

4 subparagraph (A) shall be reduced in accordance

5 with the same terms and conditions. If some, but

6 not all, contracts applicable to a crop of a commod7 ity have been entered into prior to the issuance of

8 any sequestration order, the order shall provide that

9 the necessary reduction in payments under contracts

10 applicable to the commodity be uniformly applied to

11 all contracts for succeeding crops of the commodity,

12 under the authority provided in paragraph (3).

13 (3) DELAYED REDUCTION IN OUTLAYS PERMIS14 SIBLE.—Notwithstanding any other provision of this

15 subtitle, if any sequestration order is issued with re16 spect to a fiscal year, any reduction under the order

17 applicable to contracts described in paragraph (2)

18 may provide for reductions in outlays for the ac19 count involved to occur in the fiscal years following

20 the fiscal year to which the order applies.

21 (4) UNIFORM PERCENTAGE RATE OF REDUC22 TION AND OTHER LIMITATIONS.—All reductions de23 scribed in paragraph (2) that are required to be

24 made in connection with any sequestration order

25 with respect to a fiscal year—
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•HR 2060 IH

1 (A) shall be made so as to ensure that out2 lays for each program, project, activity, or ac3 count involved are reduced by a percentage rate

4 that is uniform for all such programs, projects,

5 activities, and accounts, and may not be made

6 so as to achieve a percentage rate of reduction

7 in any such item exceeding the rate specified in

8 the order; and

9 (B) with respect to commodity price sup10 port and income protection programs, shall be

11 made in such manner and under such proce12 dures as will attempt to ensure that—

13 (i) uncertainty as to the scope of ben14 efits under any such program is mini15 mized;

16 (ii) any instability in market prices

17 for agricultural commodities resulting from

18 the reduction is minimized; and

19 (iii) normal production and marketing

20 relationships among agricultural commod21 ities (including both contract and non-con22 tract commodities) are not distorted.

23 In meeting the criterion set out in clause (iii)

24 of subparagraph (B) of the preceding sentence,

25 the President shall take into consideration that
50

•HR 2060 IH

1 reductions under an order may apply to pro2 grams for two or more agricultural commodities

3 that use the same type of production or market4 ing resources or that are alternative commod5 ities among which a producer could choose in

6 making annual production decisions.

7 (5) CERTAIN AUTHORITY NOT TO BE LIM8 ITED.—Nothing in this subtitle shall limit or reduce

9 in any way any appropriation that provides the

10 Commodity Credit Corporation with funds to cover

11 the Corporation’s net realized losses.

12 (k) THE JOBS PORTION OF AFDC.—

13 (1) FULL AMOUNT OF SEQUESTRATION RE14 QUIRED.—Any sequestration order shall accomplish

15 the full amount of any required reduction of the job

16 opportunities and basic skills training program

17 under section 402(a)(19), and part F of title VI, of

18 the Social Security Act, in the manner specified in

19 this subsection. Such an order may not reduce any

20 Federal matching rate pursuant to section 403(l) of

21 the Social Security Act.

22 (2) NEW ALLOTMENT FORMULA.—

23 (A) GENERAL RULE.—Notwithstanding

24 section 403(k) of the Social Security Act, each

25 State’s percentage share of the amount avail-
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•HR 2060 IH

1 able after sequestration for direct spending pur2 suant to section 403(l) of such Act shall be

3 equal to that percentage of the total amount

4 paid to the States pursuant to such section

5 403(l) for the prior fiscal year that is rep6 resented by the amount paid to such State pur7 suant to such section 403(l) for the prior fiscal

8 year, except that a State may not be allotted

9 an amount under this subparagraph that ex10 ceeds the amount that would have been allotted

11 to such State pursuant to such section 403(k)

12 had the sequestration not been in effect.

13 (B) REALLOTMENT OF AMOUNTS REMAIN14 ING UNALLOTTED AFTER APPLICATION OF GEN15 ERAL RULE.—Any amount made available after

16 sequestration for direct spending pursuant to

17 section 403(l) of the Social Security Act that

18 remains unallotted as a result of subparagraph

19 (A) of this paragraph shall be allotted among

20 the States in proportion to the absolute dif21 ference between the amount allotted, respec22 tively, to each State as a result of such sub23 paragraph and the amount that would have

24 been allotted to such State pursuant to section

25 403(k) of such Act had the sequestration not
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1 been in effect, except that a State may not be

2 allotted an amount under this subparagraph

3 that results in a total allotment to the State

4 under this paragraph of more than the amount

5 that would have been allotted to such State

6 pursuant to such section 403(k) had the seques7 tration not been in effect.

8 (l) POSTAL SERVICE FUND.—Notwithstanding any

9 other provision of law, any sequestration of the Postal

10 Service Fund shall be accomplished by a payment from

11 that Fund to the General Fund of the Treasury, and the

12 Postmaster General of the United States shall make the

13 full amount of that payment during the fiscal year to

14 which the presidential sequestration order applies.

15 (m) EFFECTS OF SEQUESTRATION.—The effects of

16 sequestration shall be as follows:

17 (1) Budgetary resources sequestered from any

18 account other than an entitlement trust, special, or

19 revolving fund account shall revert to the Treasury

20 and be permanently canceled.

21 (2) Except as otherwise provided, the same per22 centage sequestration shall apply to all programs,

23 projects, and activities within a budget account (with

24 programs, projects, and activities as delineated in

25 the appropriation Act or accompanying report for
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1 the relevant fiscal year covering that account, or for

2 accounts not included in appropriation Acts, as de3 lineated in the most recently submitted President’s

4 budget).

5 (3) Administrative regulations or similar ac6 tions implementing a sequestration shall be made

7 within 120 days of the sequestration order. To the

8 extent that formula allocations differ at different

9 levels of budgetary resources within an account, pro10 gram, project, or activity, the sequestration shall be

11 interpreted as producing a lower total appropriation,

12 with that lower appropriation being obligated as

13 though it had been the pre-sequestration appropria14 tion and no sequestration had occurred.

15 (4) Except as otherwise provided, obligations in

16 sequestered direct spending accounts shall be re17 duced in the fiscal year in which a sequestration oc18 curs and in all succeeding fiscal years.

19 (5) If an automatic spending increase is seques20 tered, the increase (in the applicable index) that was

21 disregarded as a result of that sequestration shall

22 not be taken into account in any subsequent fiscal

23 year.

24 (6) Except as otherwise provided, sequestration

25 in accounts for which obligations are indefinite shall
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1 be taken in a manner to ensure that obligations in

2 the fiscal year of a sequestration and succeeding fis3 cal years are reduced, from the level that would ac4 tually have occurred, by the applicable sequestration

5 percentage.

6 SEC. 224. POINT OF ORDER.

7 (a) IN GENERAL.—It shall not be in order in the

8 House of Representatives or the Senate to consider any

9 bill, joint resolution, amendment thereto, or conference re10 port thereon that includes any provision that has the effect

11 of modifying the application of this subtitle to any entitle12 ment program subject to sequestration or exempt from se13 questration under this subtitle.

14 (b) WAIVER OR SUSPENSION.—This section may be

15 waived or suspended in the House of Representatives or

16 the Senate only by the affirmative vote of three-fifths of

17 the Members, duly chosen and sworn.

18 Subtitle D—Balanced Budget by

19 Fiscal Year 2002

20 SEC. 231. MAXIMUM SPENDING AMOUNTS.

21 Section 601(a)(1) of the Congressional Budget Act

22 of 1974 is amended to read as follows:

23 ‘‘(1) MAXIMUM SPENDING AMOUNT.—The term

24 ‘maximum spending amount’ means—
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1 ‘‘(A) with respect to fiscal year 1996,

2 $1,561,000,000,000 in outlays;

3 ‘‘(B) with respect to fiscal year 1997,

4 $1,592,000,000,000 in outlays;

5 ‘‘(C) with respect to fiscal year 1998,

6 $1,624,000,000,000 in outlays;

7 ‘‘(D) with respect to fiscal year 1999,

8 $1,657,000,000,000 in outlays;

9 ‘‘(E) with respect to fiscal year 2000,

10 $1,706,000,000,000 in outlays;

11 ‘‘(F) with respect to fiscal year 2001,

12 $1,757,000,000,000 in outlays; and

13 ‘‘(G) with respect to fiscal year 2002,

14 $1,810,000,000,000 in outlays.’’.

15 SEC. 232. ENFORCING MAXIMUM SPENDING SEQUESTRA16 TION.

17 (a) SEQUESTRATION.—Section 253(a) of the Bal18 anced Budget and Emergency Deficit Control Act of 1985

19 is amended to read as follows:

20 ‘‘(a) SEQUESTRATION.—Within 15 days after Con21 gress adjourns to end a session (other than the One Hun22 dred Third Congress), and on the same day as sequestra23 tion (if any) under sections 251 and 252, but after any

24 sequestration required by those sections, there shall be a

25 sequestration (if necessary) to reduce total Federal spend-
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1 ing to the maximum permissible level as set forth in sec2 tion 601(a)(1) of the Congressional Budget Act of 1974.’’.

3 (b) CONFORMING AMENDMENT TO HEADING.—The

4 section heading of section 253 of the Balanced Budget and

5 Emergency Deficit Control Act of 1985 is amended to

6 read as follows:

7 ‘‘SEC. 253. ENFORCING MAXIMUM SPENDING LIMITS.’’.

8 (c) ADDITIONAL CONFORMING AMENDMENTS.—Sec9 tion 253 of the Balanced Budget and Emergency Deficit

10 Control Act of 1985 is amended—

11 (1) by repealing subsections (b), (g), and (h),

12 and by redesignating subsections (c), (d), (e), and

13 (f), as subsections (b), (c), (d), and (e), respectively;

14 (2) in subsection (b) (as redesignated), by

15 amending the first sentence to read as follows: ‘‘To

16 reduce total Federal spending to the maximum per17 missible level for a budget year, 20 percent of the

18 required outlay reductions shall be obtained from

19 non-exempt defense accounts (accounts designated

20 as function 050 in the President’s fiscal year 1996

21 budget submission) and 80 percent from non-ex22 empt, non-defense accounts (all other non-exempt

23 accounts).’’;
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1 (3) in subsection (c) (as redesignated), by strik2 ing ‘‘subsection (c)’’ and inserting ‘‘subsection (b)’’;

3 and

4 (4) in subsection (e) (as redesignated), by strik5 ing ‘‘(b), (c), (d), and (e)’’ and inserting ‘‘(b), (c),

6 and (d)’’ and by striking ‘‘(d) or (e)’’ and inserting

7 ‘‘(c) or ‘‘(d)’’.

8 (d) LOOK-BACK SEQUESTER.—Section 253 of the

9 Balanced Budget and Emergency Deficit Control Act of

10 1985 is amended by adding at the end the following new

11 subsection:

12 ‘‘(f) LOOK-BACK SEQUESTER.—

13 ‘‘(1) IN GENERAL.—On July 1 of each fiscal

14 year, the Director of OMB shall determine if laws

15 effective during the current fiscal year will cause

16 spending to exceed the maximum spending amount

17 for such fiscal year. If the limit is exceeded, there

18 shall be a preliminary sequester on July 1 to elimi19 nate the excess.

20 ‘‘(2) PERMANENT SEQUESTER.—Budget au21 thority sequestered on July 1 pursuant to paragraph

22 (1) shall be permanently canceled on July 15.

23 ‘‘(3) NO MARGIN.—The margin for determining

24 a sequester under this subsection shall be zero.
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1 ‘‘(4) SEQUESTRATION PROCEDURES.—The pro2 vision of subsections (b), (c), and (d) of this section

3 shall apply to a sequester under this subsection.’’.

4 (e) REPORTS.—Section 254 of the Balanced Budget

5 and Emergency Deficit Control Act of 1985 is amended—

6 (1) by striking subsection (c);

7 (2) in subsection (d)(1), by striking ‘‘deficit se8 questration’’ and inserting ‘‘total spending seques9 tration’’;

10 (3) in subsection (d) by repealing paragraph (4)

11 and inserting the following new paragraph:

12 ‘‘(4) TOTAL SPENDING SEQUESTRATION RE13 PORTS.—The preview reports shall set forth for the

14 budget year estimates for each of the following:

15 ‘‘(A) The amount of reductions required

16 from defense accounts and the reductions re17 quired from non-defense accounts.

18 ‘‘(B) The sequestration percentage nec19 essary to achieve the required reduction in de20 fense accounts under section 253(c).

21 ‘‘(C) The reductions required under sec22 tions 253(d)(1) and 253(d)(2).

23 ‘‘(D) The sequestration percentage nec24 essary to achieve the required reduction in non25 defense accounts under section 253(d)(3).’’; and
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1 (4) in subsection (g)(3), by striking ‘‘DEFICIT’’

2 and inserting ‘‘TOTAL SPENDING’’ in the side head3 ing and in the first sentence by striking ‘‘deficit’’

4 and inserting ‘‘total spending’’.

5 (f) CONFORMING AMENDMENT TO TABLE OF CON6 TENTS.—The item relating to section 253 is amended by

7 striking ‘‘Enforcing deficit targets’’ and inserting ‘‘En8 forcing maximum spending limits’’.

9 SEC. 233. TOTAL SPENDING POINT OF ORDER.

10 (a) TOTAL SPENDING POINT OF ORDER.—Section

11 605(b) of the Congressional Budget Act of 1974 is amend12 ed to read as follows:

13 ‘‘(b) TOTAL SPENDING POINT OF ORDER.—

14 ‘‘(1) IN GENERAL.—It shall not be in order in

15 the House of Representatives or the Senate to con16 sider any bill, joint resolution, amendment thereto,

17 or conference report thereon, that includes any pro18 vision that would result in total spending for a fiscal

19 year that exceeds the maximum permissible total

20 spending amount for such fiscal year as set forth in

21 section 601(a)(1).

22 ‘‘(2) WAIVER OR SUSPENSION.—This subsection

23 may be waived or suspended in the House of Rep24 resentatives or the Senate only by the affirmative
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1 vote of three-fifths of its Members, duly chosen and

2 sworn.’’.

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