I

104TH CONGRESS

2D SESSION H. R. 4142

To amend the Congressional Budget Act of 1974.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 24, 1996

Mr. BARTON of Texas (for himself and Mr. STENHOLM) introduced the following bill; which was referred to the Committee on Budget, and in addition

to the Committees on Government Reform and Oversight, 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 amend the Congressional Budget Act of 1974.

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 AND TABLE OF CONTENTS.

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

5 ‘‘Save Our Savings Act of 1996’’.

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title and table of contents.

Sec. 2. Definitions.

TITLE I—CAP ENTITLEMENTS AND OTHER MANDATORY

SPENDING

Sec. 101. Timetable.

Sec. 102. Direct spending caps.
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Sec. 103. Economic assumptions.

Sec. 104. Revisions to the caps for entitlements and other mandatory spending.

TITLE II—ENFORCEMENT PROVISIONS

Sec. 201. Reporting excess spending.

Sec. 202. Enforcing direct spending caps.

Sec. 203. Enforcing direct spending limits.

Sec. 204. Exempt programs and activities.

Sec. 205. Special rules.

Sec. 206. The current law baseline.

1 SEC. 2. DEFINITIONS.

2 For purposes of this Act:

3 (1) ELIGIBLE POPULATION.—The term ‘‘eligible

4 population’’ shall mean those individuals to whom

5 the United States is obligated to make a payment

6 under the provisions of a law creating entitlement

7 authority. Such term shall not include States, local8 ities, corporations or other nonliving entities.

9 (2) SEQUESTER AND SEQUESTRATION.—The

10 terms ‘‘sequester’’ and ‘‘sequestration’’ refer to or

11 mean the cancellation of budgetary resources pro12 vided by discretionary appropriations or direct

13 spending law.

14 (3) BREACH.—The term ‘‘breach’’ means, for

15 any fiscal year, the amount (if any) by which outlays

16 for that year (within a category of direct spending)

17 is above that category’s direct spending cap for that

18 year.

19 (4) BASELINE.—The term ‘‘baseline’’ means

20 the projection (described in section 206) of current
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1 levels of new budget authority, outlays, receipts, and

2 the surplus or deficit into the budget year and the

3 outyears.

4 (5) BUDGETARY RESOURCES.—The term

5 ‘‘budgetary resources’’ means new budget authority,

6 unobligated balances, direct spending authority, and

7 obligation limitations.

8 (6) DISCRETIONARY APPROPRIATIONS.—The

9 term ‘‘discretionary appropriations’’ means budg10 etary resources (except to fund direct spending pro11 grams) provided in appropriation Acts. If an appro12 priation Act alters the level of direct spending or off13 setting collections, that effect shall be treated as di14 rect spending. Classifications of new accounts or ac15 tivities and changes in classifications shall be made

16 in consultation with the Committees on Appropria17 tions and the Budget of the House of Representa18 tives and the Senate and with CBO and OMB.

19 (7) DIRECT SPENDING.—The term ‘‘direct

20 spending’’ means—

21 (A) budget authority provided by law other

22 than appropriation Acts, including entitlement

23 authority;

24 (B) entitlement authority; and

25 (C) the food stamp program.
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1 If a law other than an appropriation Act alters the

2 level of discretionary appropriations or offsetting col3 lections, that effect shall be treated as direct spend4 ing.

5 (8) ENTITLEMENT AUTHORITY.—The term ‘‘en6 titlement authority’’ means authority (whether tem7 porary or permanent) to make payments (including

8 loans and grants), the budget authority for which is

9 not provided for in advance by appropriation Acts,

10 to any person or government if, under the provisions

11 of the law containing such authority, the United

12 States is obligated to make such payments to per13 sons or governments who meet the requirements es14 tablished by such law.

15 (9) CURRENT.—The term ‘‘current’’ means,

16 with respect to OMB estimates included with a

17 budget submission under section 1105(a) of title 31

18 U.S.C., the estimates consistent with the economic

19 and technical assumptions underlying that budget.

20 (10) ACCOUNT.—The term ‘‘account’’ means an

21 item for which there is a designated budget account

22 designation number in the President’s budget.

23 (11) BUDGET YEAR.—The term ‘‘budget year’’

24 means the fiscal year of the Government that starts

25 on the next October 1.
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1 (12) CURRENT YEAR.—The term ‘‘current

2 year’’ means, with respect to a budget year, the fis3 cal year that immediately precedes that budget year.

4 (13) OUTYEAR.—The term ‘‘outyear’’ means,

5 with respect to a budget year, any of the fiscal years

6 that follow the budget year.

7 (14) OMB.—The term ‘‘OMB’’ means the Di8 rector of the Office of Management and Budget.

9 (15) CBO.—The term ‘‘CBO’’ means the Di10 rector of the Congressional Budget Office.

11 (16) BUDGET OUTLAYS AND OUTLAYS.—The

12 terms ‘‘budget outlays’’ and ‘‘outlays’’ mean, with

13 respect to any fiscal year, expenditures of funds

14 under budget authority during such year.

15 (17) BUDGET AUTHORITY AND NEW BUDGET

16 AUTHORITY.—The terms ‘‘budget authority’’ and

17 ‘‘new budget authority’’ have the meanings given to

18 them in section 3 of the Congressional Budget and

19 Impoundment Control Act of 1974.

20 (18) TAX EXPENDITURES.—The term ‘‘tax ex21 penditures’’ means those revenue losses attributable

22 to provisions of the Federal tax laws which allow a

23 special exclusion, exemption, or deduction from gross

24 income or which provide a special credit, a pref25 erential rate of tax, or a deferral of tax liability.
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1 (19) TAX EXPENDITURES BUDGET.—The term

2 ‘‘tax expenditures budget’’ means an enumeration of

3 such tax expenditures.

4 (20) APPROPRIATION ACT.—The term ‘‘appro5 priation Act’’ means an Act referred to in section

6 105 of title 1 of the United States Code.

7 (21) DEFICIT.—The term ‘‘deficit’’ means, with

8 respect to a fiscal year, the amount by which outlays

9 exceed receipts during that year.

10 (22) SURPLUS.—The term ‘‘surplus’’ means,

11 with respect to a fiscal year, the amount by which

12 receipts exceed outlays during that year.

13 (23) GOVERNMENT-SPONSORED ENTERPRISE.—

14 The term ‘‘government-sponsored enterprise’’ means

15 a corporate entity created by a law of the United

16 States that—

17 (A) has a Federal charter authorized by

18 law;

19 (B) is privately owned, as evidenced by

20 capital stock owned by private entities or indi21 viduals;

22 (C) is under the direction of a board of di23 rectors, a majority of which is elected by private

24 owners;
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1 (D) is a financial institution with power

2 to—

3 (i) make loans or loan guarantees for

4 limited purposes such as to provide credit

5 for specific borrowers or one sector; and

6 (ii) raise funds by borrowing (which

7 does not carry the full faith and credit of

8 the Federal Government) or to guarantee

9 the debt of others in unlimited amounts;

10 (iii) does not exercise powers that are

11 reserved to the Government as sovereign

12 (such as the power to tax or to regulate

13 interstate commerce);

14 (iv) does not have the power to com15 mit the Government financially (but it may

16 be a recipient of a loan guarantee commit17 ment made by the Government); and

18 (v) has employees whose salaries and

19 expenses are paid by the enterprise and

20 are not Federal employees subject to title

21 5 of the United States Code.

22 (23) SALE OF AN ASSET.—The term ‘‘sale of an

23 asset’’ means the sale to the public of any physical

24 asset owned in whole or in part by the United

25 States.
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1 (24) DIRECT SPENDING CAPS.—The term ‘‘di2 rect spending caps’’ means the nominal dollar limits

3 for entitlements and other mandatory spending pur4 suant to section 102 (as modified by any revisions

5 provided for in this Act).

6 SEC. 101. TIMETABLE.

On or before: Action to be completed:

January 15 .................................... CBO economic and budget update.

First Monday in February ............ President’s budget. Includes sequestration update based on new assumptions.

July l ............................................. Cut off for in-session sequester.

August l ......................................... Baseline update—OMB and CBO.

August l5 ....................................... Preview report.

October l ........................................ Start of new fiscal year.

December l5 ................................... OMB issues final (look back) report

for prior year and preview for current year.

December 15 .................................. Presidential sequester order.

7 SEC. 102. DIRECT SPENDING CAPS.

8 Effective upon the date of enactment of this Act, the

9 following direct spending caps shall apply to all entitle10 ment authority except for undistributed offsetting receipts

11 and net interest outlays.

[Fiscal years—$ in millions]

1997 1998 1999 2000 2001 2002

Medicaid .......................... $106,505 $113,524 $120,576 $128,327 $135,318 $144,758

Food stamps .................... 26,001 25,763 26,963 28,282 29,513 30,715

Supplemental security income ............................. 25,944 25,457 27,011 31,737 28,844 33,910

Family support ................ 19,673 20,189 20,832 21,319 21,701 21,791

Earned income tax credit 19,746 20,438 21,228 22,106 22,919 23,642

Social security ................. 365,403 383,402 402,351 422,412 444,081 466,767

Medicare .......................... 188,684 204,807 217,543 232,051 248,109 266,981

Federal retirement:

Civilian/other ............... 46,030 48,448 51,044 53,8888 56,689 59,680

Military ........................ 29,848 30,881 31,949 33,022 34,122 35,259

Unemployment compensation ............................... 25,555 26,613 27,644 28,698 29,814 30,989

Veterans’ benefits ............ 20,179 20,499 20,644 22,243 19,643 21,131
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[Fiscal years—$ in millions]

1997 1998 1999 2000 2001 2002

Other entitlements and

mandatory spending .... 26,421 36,887 34,352 36,269 36,760 36,524

Total entitlements

and other mandatory spending ....... 899,989 956,908 1,002,137 1,060,311 1,107,470 1,172,285

1 SEC. 103. ECONOMIC ASSUMPTIONS.

2 Subject to periodic reestimation based on changed

3 economic conditions or changes in eligible population, de4 terminations of the direct spending caps under section

5 102, any breaches of such caps, and actions necessary to

6 remedy such breaches shall be based on the following eco7 nomic assumptions (Fiscal Years).

8

Preliminary 1

1996

Forecast

1997 1998 1999– 2000 2001 2002

Nominal GDP (billions of dollars) .... 7,491 7,853 8,225 8,627 9,047 9,489 9,952

Nominal GDP (percentage change) 4.3 4.8 4.7 4.9 4.9 4.9 4.9

Real GDP 2 (percentage change) ....... 1.8 2.0 2.0 2.1 2.1 2.1 2.1

Chain-type GDP price:

Index (percent change) .............. 2.6 2.8 2.7 2.7 2.7 2.7 2.7

CPI-U 3 (percentage change) ..... 2.7 3.1 3.1 2.9 2.9 2.9 3.0

Unemployment rate (percent) ........... 5.7 6.0 6.0 6.0 6.0 6.0 6.0

20 Three-month Treasury bill

rate (percent) ................................. 5.0 4.8 4.8 4.8 4.8 4.8 4.8

Ten-year Treasury note rate (percent) ............................................... 6.0 6.3 6.4 6.4 6.4 6.4 6.4

Tax bases (billions of dollars):

Corporate profits ....................... 595 609 618 618 626 643 665

Other taxable income ................. 1,578 1,643 1,731 1,834 1,933 2,033 2,132

Wage and salary disbursements 3,548 3,719 3,889 4,076 4,272 4,475 4,688

Total ................................... 5,721 5,972 6,237 6,529 6,831 7,151 7,485

Tax bases (percentage of GDP):

Corporate profits ....................... 7.9 7.8 7.5 7.2 6.0 6.9 6.8

Other taxable income ................. 21.1 20.9 21.0 21.3 21.4 21.4 21.4

Wage and salary disbursements 47.4 47.4 47.3 47.3 47.2 47.2 47.1

Total ........................... 76.4 76.0 75.8 75.7 75.5 75.4 75.2

Source: The Congressional Budget Office. The Economic and Budget Outlook: Fiscal Year 1997–

2006, p. 15. 1Consistent with the first official estimate for 1995 published on March 5, 1996.

2 Based on chained (1992) dollars.

3CPI-U is the Consumer Price Index for all Urban Consumers.
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1 SEC. 104. REVISIONS TO THE CAPS FOR ENTITLEMENTS

2 AND OTHER MANDATORY SPENDING

3 (a) AUTOMATIC ADJUSTMENTS TO CAPS FOR ENTI4 TLEMENTS AND OTHER MANDATORY SPENDING.—When

5 the President submits the budget under section 1105(a)

6 of title 31, United States Code, for any year, OMB shall

7 calculate (in the order set forth below), and the budget

8 and reports shall include, adjustments to the direct spend9 ing caps (and those limits as cumulatively adjusted) for

10 the current year, the budget year, and each outyear, to

11 reflect the following:

12 (1) CHANGES IN CONCEPTS AND DEFINI13 TIONS.—The adjustments produced by changes in

14 concepts and definitions shall equal the baseline lev15 els of new budget authority and outlays using up-to16 date concepts and definitions minus those levels

17 using the concepts and definitions in effect before

18 such changes. Such changes in concepts and defini19 tions may only be made in consultation with the

20 Committees on Appropriations, the Budget, and

21 Government Reform and Oversight and Govern22 mental Affairs of the House of Representatives and

23 the Senate.

24 (2) CHANGES IN NET OUTLAYS.—Changes in

25 net outlays for all programs and activities exempt

26 from sequestration under section 204.
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1 (3) CHANGES IN INFLATION.—Inflation adjust2 ment factors shall equal the ratio between the level

3 of year-over-year inflation measured for the fiscal

4 year most recently completed and the applicable esti5 mated level for that year as set forth in the table at

6 section 103 (Economic Assumptions). Inflation shall

7 be measured as follows: for indexed programs, infla8 tion shall be measured by the changes in the index

9 specified in law; for programs providing health care,

10 inflation shall be measured by changes in the

11 consumer price index for all urban consumers for

12 medical care components (CPI-U medical care); and

13 for all other programs, inflation shall be measured

14 by changes in the consumer price index for all urban

15 consumers (CPI-U). The baseline and the direct

16 spending caps shall be adjusted to reflect those

17 changes.

18 (4) CHANGES IN ELIGIBLE POPULATIONS.—

19 Changes in the projection of the number of eligible

20 beneficiaries from the projections in the calculation

21 of CBO’s Estimates of the President’s Budgetary

22 Proposals contained in The Economic and Budget

23 Outlook: Fiscal Years 1997–2006.

24 (5) INTRA-BUDGETARY PAYMENTS.—From dis25 cretionary accounts to mandatory accounts. The
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1 baseline and the discretionary spending caps shall be

2 adjusted to reflect those changes.

3 (b) PERMISSIBLE REVISIONS TO DIRECT SPENDING

4 CAPS.—Direct spending caps as enacted pursuant to sec5 tion 102 may be revised as follows: Except as required

6 pursuant to section 104(a), direct spending caps may only

7 be amended by recorded vote. It shall be a matter of high8 est privilege in the House of Representatives and the Sen9 ate for a Member of the House of Representatives or the

10 Senate to insist on a recorded vote solely on the question

11 of amending such caps. It shall not be in order for the

12 Committee on Rules of the House of Representatives to

13 report a resolution waiving the provisions of this sub14 section. This subsection may be waived in the Senate only

15 by an affirmative vote of three-fifths of the Members duly

16 chosen and sworn.

17 TITLE II—ENFORCEMENT

18 PROVISIONS

19 SEC. 201. REPORTING EXCESS SPENDING.

20 (a) ANALYSIS OF ACTUAL SPENDING LEVELS.—Fol21 lowing the end of any fiscal year OMB shall compile a

22 statement of actual direct spending for that year. The

23 statement shall identify such spending by categories con24 tained in section 102.
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1 (b) ESTIMATE OF NECESSARY SPENDING REDUC2 TION.—Based on the statement provided under subsection

3 (a), the OMB shall issue a report to the President and

4 the Congress on December 15 of any year in which such

5 statement identifies actual or projected spending in the

6 current or immediately preceding fiscal years in excess of

7 the applicable total direct spending caps in section 102,

8 as adjusted pursuant to section 104, by more than one

9 percent of the applicable total direct spending caps for

10 such year. The report shall include:

11 (1) All instances in which actual direct spend12 ing has exceeded the applicable direct spending cap.

13 (2) The difference between the amount of

14 spending available under the direct spending caps

15 for the current year and estimated actual spending

16 for the categories associated with such caps.

17 (3) The amounts by which direct spending must

18 be reduced in the current fiscal year so that total ac19 tual and estimated direct spending for all cap cat20 egories for the current and immediately preceding

21 fiscal years shall not exceed the amounts available

22 under the direct spending caps for such fiscal years.

23 (4) The amount of excess spending attributable

24 solely to changes in inflation or eligible populations.

25 (c) TIMETABLE.—
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Date: Actions to be completed:

January 15 .................................... CBO economic and budget update.

First Monday in February ............ President’s budget (includes sequestration update based on new assumptions.

August 1 ........................................ CBO and OMB updates.

August 15 ...................................... Preview report.

December 15 .................................. OMB issues final (look back) report

for prior year and preview for current year.

December 15 .................................. Presidential sequester order.

1 SEC. 202. ENFORCING DIRECT SPENDING CAPS.

2 (a) GENERAL STATEMENT ON SPENDING CAPS.—

3 This title provides enforcement of the direct spending caps

4 on categories of spending established pursuant to section

5 102. This section shall apply for any fiscal year in which

6 direct spending exceeds the applicable direct spending cap.

7 (b) OVERALL RULES.—

8 (1) ELIMINATING A BREACH.—Each non-ex9 empt account within a category shall be reduced by

10 a dollar amount calculated by multiplying the base11 line level of sequestrable budgetary resources in that

12 account at that time by the uniform percentage nec13 essary to eliminate a breach within that category.

14 (2) PROGRAMS, PROJECTS, OR ACTIVITIES.—

15 Except as otherwise provided, the same percentage

16 sequestration shall apply to all programs, projects

17 and activities within a budget account (with pro18 grams, projects and activities as delineated in the

19 appropriation Act or accompanying report for the

20 relevant fiscal year covering that account, or for
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1 amounts not included in appropriation Acts, as iden2 tified in the section ‘‘Federal Programs by Agency

3 and Account’’ as it appears in the Analytical Per4 spectives to the President’s FY 1997 Budget Pro5 posal beginning at page 383.

6 (3) ADMINISTRATIVE EXPENSES ASSOCIATED

7 WITH CERTAIN PROGRAMS.—Notwithstanding any

8 exemption, general rule or special rule in this Act,

9 administrative expenses associated with all programs

10 shall be fully subject to sequestration under this sec11 tion.

12 (4) INDEFINITE AUTHORITY.—Except as other13 wise provided, sequestration in accounts for which

14 obligations are indefinite shall be taken in a manner

15 to ensure that obligations in the fiscal year of a se16 questration and succeeding fiscal years are reduced,

17 from the level that would actually have occurred, by

18 the applicable sequestration percentage or percent19 ages.

20 (5) CANCELLATION OF BUDGETARY RE21 SOURCES.—Budgetary resources sequestered from

22 any account other than an entitlement trust, special

23 or revolving fund account shall revert to the Treas24 ury and be permanently canceled or repealed.
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1 (6) IMPLEMENTING REGULATIONS.—Adminis2 trative regulations or similar actions implementing

3 the sequestration of a program or activity shall be

4 made within 30 days of the effective date of the se5 questration of that program or activity.

6 SEC. 203. ENFORCING DIRECT SPENDING LIMITS.

7 (a) IN GENERAL.—All direct spending (except mat8 ters exempted from the caps under section 204) shall be

9 subject to caps on total direct spending outlays for each

10 fiscal year. Consistent with the cap on total outlays, sepa11 rate caps are established for—

12 (1) any program (named in the table at section

13 102,

14 (2) such other program or groups of programs

15 for which additional caps shall be established in sub16 sequent legislation, and

17 (3) the remainder of direct spending programs,

18 except that the separate caps in section 102, plus any ad19 ditional direct spending under such additional separate

20 caps as shall be established in subsequent legislation, shall

21 not exceed the cap for total direct spending in section 102,

22 as adjusted in accordance with section 104.

23 (b) GENERAL RULES.—For programs subject to di24 rect spending caps:
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1 (1) TRIGGERING OF SEQUESTRATION.—Seques2 tration is triggered if total direct spending subject to

3 the caps exceeds or is projected to exceed the aggre4 gate cap for direct spending for the current or im5 mediately preceding fiscal year.

6 (2) CALCULATION OF REDUCTIONS.—Seques7 tration shall reduce spending under each separate

8 direct spending cap in proportion to the amounts

9 each category of direct spending contributes or con10 tributed to the overage.

11 (3) UNIFORM PERCENTAGES.—In calculating

12 the uniform percentage applicable to the sequestra13 tion of all spending programs or activities within

14 each category, or the uniform percentage applicable

15 to the sequestration of nonexempt direct spending

16 programs or activities, the sequestrable base for di17 rect spending programs and activities is the total

18 level of outlays for the fiscal year for those programs

19 or activities in the current law baseline.

20 (4) PERMANENT SEQUESTRATION OF DIRECT

21 SPENDING.—Obligations in sequestered direct spend22 ing accounts shall be reduced in the fiscal year in

23 which a sequestration occurs and in all succeeding

24 fiscal years. Notwithstanding any other provision of

25 this section, after the first direct spending seques-
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1 tration, any later sequestration shall reduce direct

2 spending by an amount in addition to, rather than

3 in lieu of, the reduction in direct spending in place

4 under the existing sequestration or sequestrations.

5 (5) SPECIAL RULE.—For any direct spending

6 program in which—

7 (A) outlays pay for entitlement benefits;

8 (B) a current-year sequestration takes ef9 fect after the 1st day of the budget year;

10 (C) that delay reduces the amount of enti11 tlement authority that is subject to sequestra12 tion in the budget; and

13 (D) the uniform percentage otherwise ap14 plicable to the budget-year sequestration of a

15 program or activity is increased due to the

16 delay;

17 then it shall revert to the uniform percentage cal18 culated under paragraph (3) when the budget year

19 is completed.

20 (6) INDEXED BENEFIT PAYMENTS.—If, under

21 any entitlement program—

22 (A) benefit payments are made to persons

23 or governments more frequently than once a

24 year; and
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1 (B) the amount of entitlement authority is

2 periodically adjusted under existing law to re3 flect changes in a price index (commonly called

4 ‘‘cost of living adjustments’’);

5 sequestration shall first be applied to the cost of liv6 ing adjustment before reductions are made to the

7 base benefit. For the first fiscal year to which a se8 questration order applies, the benefit payment re9 ductions in such programs accomplished by the

10 order shall take effect starting with the payment

11 made at the beginning of January following a final

12 sequester order. For the purposes of this subsection

13 Veterans Compensation shall be considered a pro14 gram that meets the conditions of the preceding sen15 tence.

16 (7) LOAN PROGRAMS.—For all loans made, ex17 tended or otherwise modified on or after the date of

18 sequestration, under loan programs subject to direct

19 spending caps—

20 (A) the sequestrable base shall be total

21 fees associated with all loans made extended or

22 otherwise modified on or after the date of se23 questration; and

24 (B) the fees paid by borrowers shall be in25 creased by a uniform percentage sufficient to
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1 produce the dollar savings in such loan pro2 grams for the fiscal year or years of the seques3 trations required by this section.

4 Notwithstanding any other provision of law, in any

5 year in which a sequester is in effect, all subsequent

6 fees shall be increased by the uniform percentage

7 and all proceeds from such fees shall be paid into

8 the general fund of the Treasury.

9 (8) INSURANCE PROGRAMS.—Any sequestration

10 in a Federal program that sells insurance contracts

11 to the public (including the Federal Crop Insurance

12 Fund, the National Insurance Development Fund,

13 the National Flood Insurance fund, insurance activi14 ties of the Overseas Private Insurance Corporation,

15 and Veterans’ Life insurance programs) shall be ac16 complished by increasing premiums on contracts en17 tered into extended or otherwise modified, after the

18 date a sequestration order takes effect by the uni19 form sequestration percentage. Notwithstanding any

20 other provision of law, for any year in which a se21 quester affecting such programs is in effect, subse22 quent premiums shall be increased by the uniform

23 percentage and all proceeds from the premium in24 crease shall be paid from the insurance fund or ac25 count to the general fund of the Treasury.
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1 (9) STATE GRANT FORMULAS.—For all State

2 grant programs subject to direct spending caps—

3 (A) the total amount of funds available for

4 all states shall be reduced by the amount re5 quired to be sequestered; and

6 (B) if in the absence of caps states would

7 receive increased funding in the budget year

8 compared to the immediately preceding fiscal

9 year, sequestration shall first be applied to the

10 estimated increases before reductions are made

11 compared to actual payments to states in the

12 previous year—

13 (i) the reductions shall be applied first

14 to the total estimated increases for all

15 states; then

16 (ii) the uniform reduction shall be

17 made from each state’s grant; and

18 (iii) the uniform reduction shall apply

19 to the base funding levels available to

20 states in the immediately preceding fiscal

21 year only to the extent necessary to elimi22 nate any remaining excess over the appli23 cable direct spending cap.

24 (10) SPECIAL RULE FOR CERTAIN PRO25 GRAMS.—Except matters exempted under sec-
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1 tion 204 and programs subject to special rules

2 set forth under section 205 and notwithstand3 ing any other provisions of law, any sequestra4 tion required under this Act shall reduce benefit

5 levels by an amount sufficient to eliminate all

6 excess spending identified in the report issued

7 pursuant to section 201, while maintaining the

8 same uniform percentage reduction in the mon9 etary value of benefits subject to reduction

10 under this subsection.

11 (c) WITHIN SESSION SEQUESTER.—If a bill or reso12 lution providing direct spending for a fiscal year in

13 progress is enacted before July 1 of that fiscal year and

14 causes a breach within a direct spending cap or caps for

15 that fiscal year, 15 days later there shall be a sequestra16 tion to eliminate that breach within that cap or caps fol17 lowing the procedures set forth in subsection (a).

18 SEC. 204. EXEMPT PROGRAMS AND ACTIVITIES.

19 The following budget accounts, activities within ac20 counts, or income shall be exempt from sequestration—

21 (1) net interest;

22 (2) all payments to trust funds from excise

23 taxes or other receipts or collections properly cred24 itable to those trust funds;

25 (3) offsetting receipts and collections;
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1 (4) all payments from one Federal direct spend2 ing budget account to another Federal budget ac3 count;

4 (5) all intragovernmental funds including those

5 from which funding is derived primarily from other

6 Government accounts;

7 (6) expenses to the extent they result from pri8 vate donations, bequests, or voluntary contributions

9 to the Government;

10 (7) nonbudgetary activities, including but not

11 limited to—

12 (A) credit liquidating and financing ac13 counts;

14 (B) the Pension Benefit Guarantee Cor15 poration Trust Funds;

16 (C) the Thrift Savings Fund;

17 (D) the Federal Reserve System; and

18 (E) appropriations for the District of Co19 lumbia to the extent they are appropriations of

20 locally raised funds;

21 (8) payments resulting from Government insur22 ance, Government guarantees, or any other form of

23 contingent liability, to the extent those payments re24 sult from contractual or other legally binding com-
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1 mitments of the Government at the time of any se2 questration;

3 (9) the following accounts, which largely fulfill

4 requirements of the Constitution or otherwise make

5 payments to which the Government is committed—

6 Bureau of Indian Affairs, miscellaneous

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

8 999);

9 Claims, defense;

10 Claims, judgments and relief act (20–

11 1895–0–1–806);

12 Compact of Free Association, economic as13 sistance pursuant to Public Law 99-658 (14–

14 0415–0–1–806);

15 Compensation of the President (11–0001–

16 0–1–802);

17 Customs Service, miscellaneous permanent

18 appropriations (20–9992–0–2–852);

19 Eastern Indian land claims settlement

20 fund (14–2202–0–1–806);

21 Farm Credit System Financial Assistance

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

23 351);

24 Internal Revenue collections of Puerto Rico

25 (20–5737–0–2–852);
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1 Payments of Vietnam and USS Pueblo

2 prisoner-of-war claims (15–0104–0–1–153):

3 Payments to copyright owners (03–5175–

4 0–2–376);

5 Salaries of Article III judges (not including

6 cost of living adjustments);

7 Soldier’s and Airman’s Home, payment of

8 claims (84–8930–0–7–705);

9 Washington Metropolitan Area Transit Au10 thority, interest payments (46–0300–0–1–401);

11 (10) the following noncredit special, revolving,

12 or trust-revolving funds—

13 Exchange Stabilization Fund (20–4444–0–

14 3–155); and

15 Foreign Military Sales trust fund (11–

16 82232–0–7–155).

17 (j) OPTIONAL EXEMPTION OF MILITARY PERSON18 NEL.—

19 (1) The President may, with respect to any

20 military personnel account, exempt that account

21 from sequestration or provide for a lower uniform

22 percentage reduction that would otherwise apply.

23 (2) The President may not use the authority

24 provided by paragraph (1) unless he notifies the

25 Congress of the manner in which such authority will
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1 be exercised on or before the initial snapshot date

2 for the budget year.

3 SEC. 205. SPECIAL RULES.

4 (a) CHILD SUPPORT ENFORCEMENT PROGRAM.—

5 Any sequestration order shall accomplish the full amount

6 of any required reduction in payments under sections 455

7 and 458 of the Social Security Act by reducing the Fed8 eral matching rate for State administrative costs under

9 the program, as specified (for the fiscal year involved) in

10 section 455(a) of such Act, to the extent necessary to re11 duce such expenditures by that amount.

12 (b) COMMODITY CREDIT CORPORATION.—

13 (1) EFFECTIVE DATE.—For the Commodity

14 Credit Corporation, the date on which a sequestra15 tion order takes effect in a fiscal year shall vary for

16 each crop of a commodity. In general, the sequestra17 tion order shall take effect when issued, but for each

18 crop of a commodity for which 1-year contracts are

19 issued as an entitlement, the sequestration order

20 shall take effect with the start of the sign-up period

21 for that crop that begins after the sequestration

22 order is issued. Payments for each contract in such

23 a crop shall be reduced under the same terms and

24 conditions.

25 (2) DAIRY PROGRAM.—
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1 (A) As the sole means of achieving any re2 duction in outlays under the milk price-support

3 program, the Secretary of Agriculture shall pro4 vide for a reduction to be made in the price re5 ceived by producers for all milk in the United

6 States and marketed by producers for commer7 cial use.

8 (B) That price reduction (measured in

9 cents per hundred-weight of milk marketed)

10 shall occur under subparagraph (A) of section

11 201(d)(2) of the Agricultural Act of 1949 (7

12 U.S.C. 1446(d)(2)(A)), shall begin on the day

13 any sequestration order is issued, and shall not

14 exceed the aggregate amount of the reduction

15 in outlays under the milk price-support pro16 gram, that otherwise would have been achieved

17 by reducing payments made for the purchase of

18 milk or the products of milk under this sub19 section during that fiscal year.

20 (3) EFFECT OF DELAY.—For purposes of sub21 section (b)(1), the sequestrable base for Commodity

22 Credit Corporation is the current-year level of gross

23 outlays resulting from new budget authority that is

24 subject to reduction under paragraphs (1) and (2).
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1 (4) CERTAIN AUTHORITY NOT TO BE LIM2 ITED.—Nothing in this Act shall restrict the Cor3 poration in the discharge of its authority and re4 sponsibility as a corporation to buy and sell com5 modities in world trade, or limit or reduce in any

6 way any appropriation that provides the Corporation

7 with funds to cover its realized losses.

8 (c) EARNED INCOME TAX CREDIT.—

9 (1) The sequestrable base for earned income

10 tax credit program is the dollar value of all current

11 year benefits to the entire eligible population.

12 (2) In the event sequestration is triggered to re13 duce earned income tax credits, all earned income

14 tax credits shall be reduced, whether or not such

15 credits otherwise would result in cash payments to

16 beneficiaries, by a uniform percentage sufficient to

17 produce the dollar savings required by the sequestra18 tion.

19 (d) REGULAR AND EXTENDED UNEMPLOYMENT

20 COMPENSATION.—

21 (1) A State may reduce each weekly benefit

22 payment made under the regular and extended un23 employment benefit programs for any week of unem24 ployment occurring during any period with respect

25 to which payments are reduced under any sequestra-
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1 tion order by a percentage not to exceed the percent2 age by which the Federal payment to the State is to

3 be reduced for such week as a result of such order.

4 (2) A reduction by a State in accordance with

5 paragraph (1) shall not be considered as a failure to

6 fulfill the requirements of section 3304(a)(11) of the

7 Internal Revenue Code of 1986.

8 (e) FEDERAL EMPLOYEES HEALTH BENEFITS

9 FUND.— For the Federal Employees Health Benefits

10 Fund, a sequestration order shall take effect with the next

11 open season. The sequestration shall be accomplished by

12 annual payments from that Fund to the General Fund of

13 the Treasury. Those annual payments shall be financed

14 solely by charging higher premiums. The sequestrable base

15 for the Fund is the current-year level of gross outlays re16 sulting from claims paid after the sequestration order

17 takes effect.

18 (f) FEDERAL HOUSING FINANCE BOARD.— Any se19 questration of the Federal Housing Board shall be accom20 plished by annual payments (by the end of each fiscal

21 year) from that Board to the general fund of the Treasury,

22 in amounts equal to the uniform sequestration percentage

23 for that year times the gross obligations of the Board in

24 that year.

25 (g) FEDERAL PAY.—
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1 (1) IN GENERAL.— New budget authority to

2 pay Federal personnel from direct spending accounts

3 shall be reduced by the uniform percentage cal4 culated under section 203(c)(3), as applicable, but

5 no sequestration order may reduce or have the effect

6 of reducing the rate of pay to which any individual

7 is entitled under any statutory pay system (as in8 creased by any amount payable under section 5304

9 of title 5, United States Code, or any increase in

10 rates of pay which is scheduled to take effect under

11 section 5303 of title 5, United States Code, section

12 1109 of title 37, United States Code, or any other

13 provision of law.

14 (2) DEFINITIONS.—For purposes of this sub15 section—

16 (A) the term ‘‘statutory pay system’’ shall

17 have the meaning given that term in section

18 5302(1) of title 5, United States Code;

19 (B) the term ‘‘elements of military pay’’

20 means—

21 (i) the elements of compensation of

22 members of the uniformed services speci23 fied in section 1009 of title 37, United

24 States Code;
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1 (ii) allowances provided members of

2 the uniformed services under sections

3 403(a) and 405 of such title; and

4 (iii) cadet pay and midshipman pay

5 under section 203(c) of such title; and

6 (C) the term ‘‘uniformed services’’ shall

7 have the same meaning given that term in sec8 tion 101(3) of title 37, United States Code.

9 (h) MEDICARE.—

10 (1) TIMING OF APPLICATION OF REDUC11 TIONS.—

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

13 subparagraph (B), if a reduction is made in

14 payment amounts pursuant to sequestration

15 order, the reduction shall be applied to payment

16 for services furnished after the effective date of

17 the order. For purposes of the previous sen18 tence, in the case of inpatient services furnished

19 for an individual, the services shall be consid20 ered to be furnished on the date of the individ21 ual’s discharge from the inpatient facility.

22 (B) PAYMENT ON THE BASIS OF COST RE23 PORTING PERIODS.— In the case in which pay24 ment for services of a provider of services is

25 made under title XVIII of the Social Security
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1 Act on a basis relating to the reasonable cost

2 incurred for the services during a cost reporting

3 period of the provider, if a reduction is made in

4 payment amounts pursuant to a sequestration

5 order, the reduction shall be applied to payment

6 for costs for such services incurred at any time

7 during each cost reporting period of the pro8 vider any part of which occurs after the effec9 tive date of order, but only (for each such cost

10 reporting period) in the same proportion as the

11 fraction of the cost reporting period that occurs

12 after the effective date of the order.

13 (2) NO INCREASE IN BENEFICIARY CHARGES IN

14 ASSIGNMENT-RELATED CASES.—If a reduction in

15 payment amounts is made pursuant to a sequestra16 tion order for services for which payment under part

17 B of title XVIII of the Social Security Act is made

18 on the basis of an assignment described in section

19 1842(b)(3)(B)(ii), in accordance with section

20 1842(b)(6)(B), or under the procedure described in

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

22 the services shall be considered to have accepted

23 payment of the reasonable charge for the services,

24 less any reduction in payment amount made pursu25 ant to a sequestration order, as payment in full.
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1 (3) PART B PREMIUMS.—In computing the

2 amount and method of sequestration from part B of

3 title XVIII of the Social Security Act—

4 (A) the amount of sequestration shall be

5 calculated by multiplying the total amount by

6 which Medicare spending exceeds the appro7 priate spending cap by a percentage that re8 flects the ratio of total spending under Part B

9 to total Medicare spending; and

10 (B) sequestration in the Part B program

11 shall be accomplished by increasing premiums

12 to beneficiaries.

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

14 In computing the adjusted average per capita cost

15 for purposes of section 1876(a)(4) of the Social Se16 curity Act, the Secretary of Health and Human

17 Services shall not take into account any reductions

18 in payment amounts which have been or may be ef19 fected under this part.

20 (i) POSTAL SERVICE FUND.— Any sequestration of

21 the Postal Service Fund shall be accomplished by annual

22 payments from that Fund to the General Fund of the

23 Treasury, and the Postmaster General of the United

24 States and shall have the duty to make those payments

25 during the first fiscal year to which the sequestration
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1 order applies and each succeeding fiscal year. The amount

2 of each annual payment shall be—

3 (1) the uniform sequestration percentage, times

4 (2) the estimated gross obligations of the Postal

5 Service Fund in that year other than those obliga6 tions financed with an appropriation for revenue for7 gone that year.

8 Any such payment for a fiscal year shall be made as soon

9 as possible during the fiscal year, except that it may be

10 made in installments within that year if the payment

11 schedule is approved by the Secretary of the Treasury.

12 Within 30 days after the sequestration order is issued, the

13 Postmaster General shall submit to the Postal Rate Com14 mission a plan for financing the annual payment for that

15 fiscal year and publish that plan in the Federal Register.

16 The plan may assume efficiencies in the operation of the

17 Postal Service, reductions in capital expenditures, in18 creases in the prices of services, or any combination, but

19 may not assume a lower Fund surplus or higher Fund

20 deficit and must follow the requirements of existing law

21 governing the Postal Service in all other respects. Within

22 30 days of the receipt of that plan, the Postal Rate Com23 mission shall approve the plan or modify it in the manner

24 that modifications are allowed under current law. If the

25 Postal Rate Commission does not respond to the plan
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1 within 30 days, the plan submitted by the Postmaster

2 General shall go into effect. Any plan may be later revised

3 by the submission of a new plan to the Postal Rate Com4 mission, which may approve or modify it.

5 (j) POWER MARKETING ADMINISTRATIONS AND

6 T.V.A.— Any sequestration of the Department of Energy

7 power marketing administration funds or the Tennessee

8 Valley Authority fund shall be accomplished by annual

9 payments from those funds to the General Fund of the

10 Treasury, and the administrators of those funds shall have

11 the duty to make those payments during the fiscal year

12 to which the sequestration order applies and each succeed13 ing fiscal year. The amount of each payment by a fund

14 shall be—

15 (1) the direct spending uniform sequestration

16 percentage, times

17 (2) the estimated gross obligations of the fund

18 in that year other than those obligations financed

19 from discretionary appropriations for that year.

20 Any such payment for a fiscal year shall be made as soon

21 as possible during the fiscal year, except that it may be

22 made in installments within that year if the payment

23 schedule is approved by the Secretary of the Treasury. An24 nual payments by a fund may be financed by reductions

25 in costs required to produce the pre-sequester amount of
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1 power (but those reductions shall not include reductions

2 in the amount of power supplied by the fund), by reduc3 tions in capital expenditures, by increases in tax rates, or

4 by any combination, but may not be financed by a lower

5 fund surplus, a higher fund deficit, additional borrowing,

6 delay in repayment of principal on outstanding debt and

7 must follow the requirements of existing law governing the

8 fund in all other respects. The administrator of a fund

9 or the TVA Board is authorized to take the actions speci10 fied in this subsection in order to make the annual pay11 ments to the Treasury.

12 (k) BUSINESSLIKE TRANSACTIONS.—Notwithstand13 ing any other provision of law, for programs which provide

14 a businesslike service in exchange for a fee, sequestration

15 shall be accomplished through a uniform increase in fees

16 (sufficient to produce the dollar savings in such programs

17 for the fiscal year of the sequestration required by section

18 201(a)(2), all subsequent fees shall be increased by the

19 same percentage, and all proceeds from such fees shall be

20 paid into the general fund of the Treasury, in any year

21 for which a sequester affecting such programs are in ef22 fect.

23 SEC. 206. THE CURRENT LAW BASELINE.

24 (a) DETERMINATION OF THE BUDGET BASELINE.—

25 CBO and OMB shall submit to the President and the Con-
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1 gress reports setting forth the budget baselines for the

2 budget year and at least the subsequent nine fiscal years.

3 The CBO report shall be submitted on or before January

4 15. The OMB report shall accompany the President’s

5 budget.

6 (1) The budget baseline shall be based on the

7 commoneconomic assumptions set forth in section

8 103, adjusted to reflect revisions pursuant to sub9 section (b).

10 (2) The budget baseline shall consist of a pro11 jection of current year levels of budget authority,

12 outlays, revenues and the surplus or deficit into the

13 budget year and the relevant outyears based on cur14 rent enacted laws as of the date of the projection.

15 (b) REVISIONS TO THE BASELINE.—The baseline

16 shall be adjusted for up-to-date economic assumptions

17 when CBO submits its Economic and Budget Update and

18 when OMB submits its Budget Update, and by August

19 1 each year, when CBO and OBM submit their Midyear

20 Reviews.

21 (1) For Discretionary spending items, the base22 line shall be the spending caps in effect pursuant to

23 section 601(a)(2) of the Congressional Budget Act

24 of 1974. For years in which there are no caps, the

25 baseline for discretionary spending shall be the same
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1 as in the last year for which there were statutory

2 caps.

3 (2) For all other expenditures and for revenues,

4 the baseline shall be adjusted by comparing unem5 ployment, inflation, interest rates, growth and other

6 economic indicators-and changes ineligible popu7 lation-for the most recent period for which actual

8 data are available, compared to the assumptions

9 contained in section 103.

10 (3) The budget baseline shall provide the basis

11 for scorekeeping procedures pursuant to title II.

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