text: Background Spending Authority and Permanent Appropriations “Backdoor Authority” or “Backdoor Spending” These are similar but not identical terms for spending authority and permanent appropriations. Backdoor authority and backdoor spending are colloquial phrases for budget authority that Congress has provided in laws other than appropriations acts. This includes contract authority and borrowing authority, as well as entitlement authority. Entitlement authority is a type of permanent appropriation. It refers to the authority to make payments for which budget authority is not provided in advance by appropriation acts to any person or government if, under the provisions of law containing such authority, the U.S. government is legally required to make such payments. The terms backdoor authority and backdoor spending refer to the process by which federal money “goes out the door.” Annual appropriations are said to go out the “front door” as the annual appropriations cycle provides a regularly- scheduled forum where Congress may exercise oversight over spending. Other appropriations are said to go out the “back door” as they do not go through the annual appropriations process. For the purposes of this report, our definition of spending authority and permanent appropriations includes the five types of budget authority described in figure 1. We are defining spending authority as budget authority made available through laws other than annual appropriation acts. Also, we are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. We are including both in our inventory based on the intent of the request for developing our inventory. For some accounts, Congress provides spending authority and permanent appropriations to allow agencies the flexibility to spend fee revenue without further legislative action. Specifically, Congress has authorized some agencies to establish working capital funds—a type of intragovernmental revolving fund—in which an agency may deposit fees from federal, and sometimes nonfederal, customers for performing administrative services, or the sale of government products, within their statutory authority. For example, in addition to appropriations and reimbursements from federal agencies, the Department of Energy (DOE) has a working capital fund with the authority to collect funds. Those collections are then made available for DOE expenses necessary for the maintenance and operation of common administrative services for economy and efficiency, such as office space and communication services. This and other working capital funds operate as a self- supporting entity conducting business-like activities for the agency. Spending authority and permanent appropriations may be subject to further restrictions from Congress. For example, in one or more annual appropriations acts, Congress could restrict the use of some or all of the budget authority, thereby using the annual appropriations process to control the use of spending authority and permanent appropriations. For example, the U.S. Department of Agriculture (USDA) has a permanent appropriation which states that 10 percent of all receipts from the use and occupancy of national forest system lands during each fiscal year are available for maintaining roads and trails within the national forests. In past annual appropriations acts, Congress has limited that permanent appropriation by transferring all funds made available for that fiscal year to the General Fund of the Treasury. Those funds are then unavailable for obligation unless appropriated once again. Trends in Federal Spending In fiscal year 2017, the federal government’s total outlays were almost $4 trillion of which about $2.5 trillion was in outlays for mandatory spending. Mandatory spending, also known as direct spending, refers to budget authority provided in laws other than appropriations acts and the outlays that result from such budget authority. Medicare is an example of a program that is funded by mandatory spending. Discretionary spending, on the other hand, refers to budget authority that is provided in and controlled by appropriations acts. During the annual appropriations process, Congress may choose to appropriate the amount in the President’s budget request, increase or decrease those levels, eliminate proposals, or add other programs. For example, most defense and education programs are funded with discretionary spending. As shown in figure 2, mandatory spending as a share of all federal spending grew from about 51 percent in fiscal year 1997 to about 63 percent in fiscal year 2017. Another form of federal spending is net interest, which is primarily interest paid on debt held by the public. While the majority of the accounts in our inventory have mandatory budget authority, not all mandatory spending fits our definition of spending authority and permanent appropriations. For example, while annually appropriated entitlement programs—such as the Supplemental Nutrition Assistance Program—are provided for in annual appropriations acts, they are treated as mandatory spending because the authorizing legislation entitles beneficiaries to receive payment or otherwise obligates the government to make a payment. As annually appropriated entitlements are subject to the annual appropriations process, they did not meet our definition of spending authority and permanent appropriations. Conversely, not all spending authority and permanent appropriations are mandatory spending. For example, our inventory includes permanent appropriations made available in annual appropriations acts. The increase in mandatory spending, and corresponding increase in spending authority and permanent appropriations, has long-term implications for the nation’s fiscal outlook overall, including the growing federal debt. The growth in mandatory spending drove federal spending that outpaced revenue growth in fiscal year 2017 and, absent policy change, is projected to continue to do so in the future given the aging population and rising health care costs and their relation to large federal budget accounts funding programs, such as Social Security and Medicare. Spending Limits and Sequestration Sequestration—cancellation of budgetary resources under a presidential order—was first established in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) to control the deficit. BBEDCA, as amended, requires OMB to calculate the reduction to budgetary resources required each year to reduce the deficit by at least an additional $1.2 trillion, over a 10 year period. A percentage reduction, or sequestration rate (calculated by OMB), is applied to nonexempt (subject to sequestration) accounts to achieve the total reduction amount required for the fiscal year. The sequestration rate varies from year to year based on a formula outlined in BBEDCA. The annual reduction amount OMB calculates is split evenly between the defense and nondefense functions. The calculated amount is then allocated between discretionary appropriations and mandatory spending in each function in proportion to the share of total spending within the function. Prior to BBEDCA, the Congressional Budget and Impoundment Control Act of 1974 (CBA) attempted to limit the creation of new contract authority and authority to borrow. In 1990, Congress further sought to limit spending authority by establishing controls over discretionary spending and a system of controls over legislative changes in mandatory spending. The Budget Enforcement Act of 1990 (BEA) amended both CBA and BBEDCA. In addition to establishing dollar limits for total annual appropriations, BEA contained a “pay-as-you-go” provision requiring that any legislation that reduced taxes or expanded mandatory spending programs be offset by mandatory spending cuts or revenue increases. This provision was to be enforced through sequestration of nonexempt mandatory spending programs at the end of the congressional session. Both the discretionary limit and “pay-as-you-go” rules were extended through fiscal year 2002 and were not subsequently reauthorized. In 2010, the Statutory Pay-As-You-Go Act of 2010 reinstated a version of the “pay-as-you-go” requirement. The act provided that if the net effect of mandatory spending and revenue legislation enacted in a year increases the deficit, then a sequestration of nonexempt mandatory spending will occur to eliminate the increase. The Budget Control Act of 2011 (BCA) further amended BBEDCA and revived sequestration as a budgetary enforcement mechanism to reduce the deficit. BCA established the Joint Select Committee on Deficit Reduction (Joint Committee). The Joint Committee was tasked with proposing legislation to reduce the deficit. Such legislation was not proposed or enacted, which triggered the sequestration process provided in section 251A of BBEDCA, known as the Joint Committee sequestration. BBEDCA currently requires a sequestration of mandatory spending in each year through fiscal year 2027 and a reduction of discretionary spending limits in fiscal years 2020 and 2021. A sequestration of discretionary spending could still occur in any year through fiscal year 2021 if Congress and the President enact appropriations that exceed discretionary spending limits established by BBEDCA. As of September 2018, the President has ordered the sequestration of mandatory spending in each year since fiscal year 2013, and the sequestration of discretionary appropriations in fiscal year 2013. Reported Use of Spending Authority and Permanent Appropriations Has Increased Government-Wide, and Agencies Using the Authorities Have Changed Reported Budget Authority Amount Was Higher for Three of the Five Authority Types in Fiscal Year 2015, as Compared to Fiscal Year 1994 The amount of spending authority and permanent appropriations reported government-wide grew 88 percent, from fiscal years 1994 through 2015 adjusted for inflation. Specifically, in fiscal year 2015, approximately $3.2 trillion was reported, compared with approximately $1.2 trillion in fiscal year 1994 ($1.7 trillion in fiscal year 2015 dollars, see figure 3). Although the total reported amount of spending authority and permanent appropriations increased over time, the changes for each authority type varied when comparing fiscal years 1994 to 2015 (see figure 4). Reported budget authority grew for three of the five authority types—permanent appropriations, offsetting collections, and contract authority—in fiscal year 2015, as compared to fiscal year 1994. For example, about $2.6 trillion permanent appropriations were reported in fiscal year 2015, up from approximately $982.5 billion in fiscal year 1994 ($1.5 trillion adjusted for inflation to 2015 dollars). Generally, the reported amount of permanent appropriations increased gradually, with the biggest growth occurring in fiscal year 2008. Borrowing authority decreased, and agencies reported no use of monetary credits or bartering at any time during fiscal years 1995 through 2015. Table 1 provides comparisons between reported budget authority in fiscal years 1994 and 2015 for all authority types. The amount of budget authority is not necessarily indicative of the prevalence of spending authority and permanent appropriations since the amount of budget authority in different accounts can vary by billions of dollars. From fiscal years 1995 through 2015, agencies had 1,089 authorities in 902 budget accounts. We previously reported on the use of 670 authorities in 540 budget accounts in fiscal year 1994. In comparing fiscal years 1994 to 2015, we found that the number of accounts with permanent appropriations and offsetting collections increased while contract and borrowing authority decreased. Figure 5 summarizes the number of accounts with each type of authority over the years. The overall growth in spending authority and permanent appropriations is driven primarily by permanent appropriations growth. Entitlement programs, such as Medicare and the Social Security Administration’s (SSA) Old-Age and Survivors Insurance and Disability Insurance programs, are funded through permanent appropriations, and are a significant proportion of budget authority in our inventory, as discussed below. Since many spending authorities and permanent appropriations provide agencies budget authority based on program use and eligibility, demographic and program demand changes can affect the amount of budget authority. For example, since the Old-Age and Survivors Insurance and Disability Insurance programs administer benefits based on eligibility requirements and statutory formulas, the amount of budget authority used for the programs increases as more people become entitled. Higher income levels result in higher average benefit amounts and cost of living adjustments increase monthly benefit amounts for current beneficiaries. Other factors affected the growth in the use of spending authority and permanent appropriations to a lesser extent. Enactment of new authorities. From 1995 to 2015, 329 new authorities for spending authority and permanent appropriations were enacted. For example, the Housing and Economic Recovery Act of 2008 granted the Department of the Treasury (Treasury) the authority to purchase any obligations and other securities issued by government-sponsored enterprises, such as Fannie Mae. According to the act, Treasury was authorized to use this authority until December 31, 2009, with certain actions permitted after that date. This authority resulted in $200 billion in permanent appropriations reported in both fiscal years 2008 and 2009, and another $46 billion in fiscal year 2013. Amendment of existing authorities. Some existing authorities were amended to allow for increased use—permanently or temporarily. Some authorities have amounts specified by statute—such as maximum amounts the agency can use or set amounts that the agency can charge users. For these authorities, increases in the use of an authority may be attributed to enacted increases in the specified amounts. For example, the National Flood Insurance Fund reported an increase of $878 million in offsetting collections in 2012 after legislation increased the annual limitation on premium increases for certain insurance premiums. Increased use of spending authority and permanent appropriations, at agency’s discretion. Other authorities did not experience statutory changes, but agencies increased the use of the authorities at their discretion to meet program needs. When no maximum amount is specified as a limit on the agency’s authority, variation in use is due to agency discretion in response to circumstances. For example, the Federal Deposit Insurance Corporation’s (FDIC) Deposit Insurance Fund account began reporting increased offsetting collections for amounts assessed against depository institutions insured by FDIC, in fiscal years 2009 and 2010. The reported collections increased to highs of $26.5 billion in fiscal year 2009 and $57.3 billion in fiscal year 2010, after reported budget authority levels of $2.2 billion in fiscal year 2006. According to an agency official and as stated in the FDIC’s 2009 Annual Report, this increase primarily resulted from its adoption of the Deposit Insurance Fund Restoration Plan and the prepayment of future risk-based deposit insurance assessments by depository institutions to provide FDIC with the necessary liquidity to resolve failed depository institutions during the financial crisis. A FDIC official stated that the Deposit Insurance Fund Restoration Plan addressed the need to return the Deposit Insurance Fund to its mandated minimum reserve ratio of 1.15 percent of estimated insured deposits. Events other than legislative or agency actions. Programs may experience increased fee revenue, penalty payment, or use of the authority for circumstances that do not involve legislative or agency action. For example, the United States Coast Guard’s Maritime Oil Spill Programs account reported $743 million in permanent appropriations in fiscal year 2010 after receiving transfers from the Oil Spill Liability Trust Fund to assist with cleanup after the 2010 Deepwater Horizon oil spill. Amounts from the Oil Spill Liability Trust Fund are available to fund federal response activities in the event of an oil spill or imminent threat of an oil spill on navigable waters of the United States. In the case of the 2010 Deepwater Horizon oil spill, the Coast Guard was authorized to obtain one or more advances from the Oil Spill Liability Trust Fund, as needed to address costs associated with federal activities in response to the oil spill, with up to a maximum of $100 million for each advance. As a result of the growth of spending authority and permanent appropriations from fiscal years 1994 through 2015, more budget authority is available to agencies that does not require them to await congressional action to incur obligations. For example, USDA has the authority to use its portion of the fee for Agricultural Quarantine Inspection without congressional action. Agencies Reporting the Largest Amount of Spending Authority and Permanent Appropriations in Fiscal Year 2015 Have Changed, as Compared to Fiscal Year 1994 The majority of spending authority and permanent appropriations reported in fiscal year 2015 was concentrated in large agencies and budget accounts that fund entitlement programs such as Social Security and Medicare. The Department of Health and Human Services (HHS) reported the highest use of spending authority and permanent appropriations. HHS also had the most accounts in the list of top 10 accounts in fiscal year 2015. This is a change since fiscal year 1994 when SSA reported using the most spending authority and permanent appropriations. Together, in fiscal year 2015, the top three agencies— HHS, SSA, and Treasury—comprised three quarters of the total government-wide spending authority and permanent appropriations (see figure 6). HHS reported the largest amount of spending authority and permanent appropriations in fiscal year 2015 with about $979 billion, or about 30 percent. (See appendix III for a list of budget authority use by agency for fiscal year 2015.) HHS’s largest three accounts in our inventory all fund Medicare. SSA, which oversees the Old-Age and Survivors Insurance program, the Disability Insurance and Supplemental Security Income programs, as well as the Special Benefits for Certain World War II Veterans program, reported about $920 billion or about 28 percent of total spending authority and permanent appropriations. Programs administered by HHS and SSA continue to show spending increases largely as a result of the aging of the population and increasing health care costs. Treasury reported the third highest amount of spending authority and permanent appropriations, about $542 billion, the majority of which is for interest on debt held by the public and intragovernmental debt. These agency usage patterns are echoed when analyzing spending authority and permanent appropriations by account. The 10 largest accounts represented about 72 percent of spending authority and permanent appropriations in fiscal year 2015, as shown in table 2. All of these are permanent appropriations, except for the Postal Service’s Postal Service Fund account which is an offsetting collection that includes revenue for mail services. Seven of the 10 accounts fund entitlement programs. Similar to the fiscal year 2015 data for all spending authority and permanent appropriations, HHS, SSA, and Treasury reported the greatest use of permanent appropriations in fiscal years 2015, 2005, and 1994 (see figure 7). HHS reported the highest dollar amount of permanent appropriations for the first time in fiscal year 2006, likely due to rising health care costs. Permanent Appropriations Budget authority to incur obligations and make payments that is available permanently by law without further legislative action. Contract authority is concentrated, with only five agencies having this authority from fiscal years 1995 through 2015. Four of these agencies used the authority, while one agency—the Judicial Branch; Courts of Appeals, District Courts, and Other Judicial Services—has the authority, but did not use it. The Department of Defense (DOD) and the Department of Transportation (DOT) were the two agencies that reported the largest percentages of dollar amounts of contract authority in fiscal years 1994 and 2015, as well as 2005 (see figure 8). This figure shows three of the four agencies that reported contract authority in our timeframe. One other agency, the Department of Housing and Urban Development, used contract authority in fiscal year 2007. Contract Authority Authority to incur obligations in advance of appropriations, including collections sufficient to liquidate the obligation or receipts. It is unfunded, and a subsequent appropriation or offsetting collection is needed to liquidate the obligations. From fiscal years 1994 through 2015, 15 agencies reported the use of borrowing authority of varying amounts and an additional two agencies had unused borrowing authority. Since 1995, seven accounts reported receiving new borrowing authority across five different agencies including the Department of Commerce and DOT. USDA reported the largest dollar amount of borrowing authority in most years, including fiscal years 1994, 2005, and 2015, which represented 73 percent, 82 percent, and 60 percent of each fiscal years’ total borrowing authority, respectively (see figure 9). USDA’s large share of the total borrowing authority, and most of the overall variability in our borrowing authority data throughout our timeframe, is for the Commodity Credit Corporation Fund. The fund reported about $7.8 billion or 60 percent of government-wide borrowing authority in fiscal year 2015. The Commodity Credit Corporation has authority to borrow funds to carry out its programs, which include providing income and price support to agricultural producers, payments for conservation practices on farms, assistance in the development of international agricultural markets, and international feeding programs. Some of the primary drivers of its borrowing authority variability are legislation, changes in commodity yields and price, weather disasters, and market conditions, according to a USDA official. The Railroad Retirement Board (RRB)—which administers a retirement benefit program similar to Social Security for railroad workers and their families—began reporting borrowing authority in fiscal year 1996 and reported the second largest borrowing authority amount in fiscal year 2015. The Railroad Social Security Equivalent Benefit account reported between about $3 billion and $4 billion per year through 2015. The Tennessee Valley Authority reported borrowing authority periodically during our time frame, reporting a high of $3.1 billion in fiscal year 2003. For more information on the top five accounts for the use of borrowing authority, see appendix IV. The text box below provides additional information on the Tennessee Valley Authority account and a Department of Commerce account. Examples of Different Accounts with and Uses of Borrowing Authority Tennessee Valley Authority, Tennessee Valley Authority Fund. The Tennessee Valley Authority is a corporate agency that provides electricity for business customers and local power companies in parts of seven southeastern states. The agency is authorized to issue and sell up to $30 billion of bonds, notes, and other debt instruments at any one time to assist in financing its power program. The proceeds from these bonds are authorized for the construction, acquisition, enlargement, improvement, or replacement of electrical power facilities and other purposes authorized by the Tennessee Valley Authority Act of 1933. Department of Commerce, Public Safety Trust Fund. The Middle Class Tax Relief and Job Creation Act of 2012 (the Act) created the First Responder Network Authority (FirstNet), an independent authority within the Department of Commerce’s National Telecommunications and Information Administration (NTIA) and required it to establish a nationwide, interoperable public-safety broadband network. In order to provide initial funding for FirstNet, NTIA was authorized to borrow up to $2 billion from the Treasury to implement the program. The Act required NTIA to reimburse Treasury, without interest, from funds deposited into the Public Safety Trust Fund.47 U.S.C. § 1427. A couple of accounts had temporary spikes in the use of borrowing authority from fiscal years 1994 through 2015. Specifically, the Department of Labor’s Unemployment Trust Fund had several years of increased use of borrowing authority, with a high of $26.2 billion in fiscal year 2010. As we have reported, the recession that occurred during 2007 through 2009 sharply increased the number and duration of claims for unemployment benefits. The National Credit Union Administration’s Central Liquidity Facility, which was created to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions experiencing unusual or unexpected liquidity shortfalls, reported borrowing authority for the first time in our inventory in the amount of $19.4 billion in fiscal year 2009. The Central Liquidity Facility is authorized by statute to borrow, from any source, an amount not to exceed 12 times its subscribed capital stock and surplus. Offsetting Collections Authority is Widespread among Agencies The majority of agencies had offsetting collections authority. Offsetting collections authority generally authorizes agencies to collect fines, charge fees, or charge for permits among other uses. These functions have a number of applications across the government. Since fiscal year 1995, 129 accounts received new offsetting collections authority. We did not rank the top agencies that used offsetting collections because we, and the agencies when asked, were unable to reliably subtract collections from federal sources or refunds of prior paid obligations. The text box below provides examples of accounts with offsetting collections authority. Examples of Different Accounts with and Uses of Offsetting Collections Department of Transportation (DOT), Motor Carrier Safety Operations and Programs. The Unified Carrier Registration Act of 2005 tasked DOT with establishing and implementing the Unified Carrier Registration System to serve as a repository of information on, and identification of, all foreign and domestic motor carriers, motor private carriers, brokers, freight forwarders, and others required to register with DOT. DOT is authorized to collect fees associated with the system, including registration and filing fees, and may use collected funds for these activities without further appropriation. Environmental Protection Agency, Damage Assessment and Restoration Revolving Fund. Under the Oil Pollution Act, responsible parties for a vessel or a facility from which oil is discharged are liable for, among other things, damages for injury to, destruction of, loss of, or loss of use of, natural resources. The Oil Pollution Act authorizes certain departments and agencies, such as the Department of the Interior, designated by executive order as a “trustee for natural resource damages” to recover such damages, and retain and use the funds without further appropriation to reimburse or pay costs incurred by the trustee with respect to the damaged natural resources. For the limited purpose of the Deepwater Horizon Oil Spill, the Environmental Protection Agency was also designated a trustee. The premiums are placed into a revolving fund, which is available without further appropriation, to pay claims. Department of Defense (DOD), Working Capital Fund, Defense Wide. DOD’s working capital fund is used to charge for goods and services provided to the military services and other customers. In addition to any funds appropriated to the working capital fund, the working capital fund may also collect funds from providing services or procuring supplies, or through the sale and disposal of DOD property. Funds are available without further appropriation. 33 U.S.C. § 2706(f); see also, 33 U.S.C. § 2702; 40 C.F.R. § 300.600. Six Agencies with Authority for Monetary Credits or Bartering Did Not Report Using It Six agencies have the authority to use monetary credits or bartering, but none of these agencies reported using this authority from fiscal years 1995 through 2015. These are the same agencies that we reported in 1996—the Departments of the Interior and State, DOE, DOD, USDA, and the Tennessee Valley Authority. OMB staff said that monetary credits are used infrequently government-wide, and that agencies are not required to record this type of authority separately in the budget. When we asked, no other agencies reported having monetary credits or bartering authority. The text box below provides examples of accounts that are authorized to use monetary credits or bartering. Monetary Credits or Bartering Monetary credits or bartering are used by agencies having the authority to make purchases by giving the seller credits or something other than money in dollar amounts reflecting the purchase price. The holder of credits may apply them later to reduce an amount owed to the government in other transactions. Examples of Different Accounts with Monetary Credits or Bartering Authority Department of State, Embassy Security, Construction, and Maintenance. The Department of State is authorized to exchange property or property interest for the use of diplomatic and consular establishments in foreign countries or in the United States. The Department of State is authorized to receive payment in any form, or in kind, to cover damage to or destruction of diplomatic or consular property abroad. Department of Defense (DOD), Operations and Maintenance, Army National Guard. DOD is authorized to acquire logistic support, supplies and services for the armed forces deployed outside the United States from specified governments and international organizations. Supplies or services of equal value may be exchanged to facilitate these transactions. 10 U.S.C. § 2344; see also 10 U.S.C. § 2341. The Percentage of Spending Authority and Permanent Appropriations Authorities Subject to Sequestration in Fiscal Year 2015 Decreased Compared to Fiscal Year 1994 The majority of spending authority and permanent appropriations authorities were exempt from sequestration in fiscal year 2015. This is a reversal from fiscal year 1994, when the majority of spending authority and permanent appropriations authorities were subject to sequestration. Congress first established exemptions to sequestration in the 1980s when BBEDCA was enacted and has amended them since then. To determine the requisite percentage reduction to nonexempt budgetary resources pursuant to BBEDCA, OMB must define the sequestrable base, which is the total of nonexempt budgetary resources within each function. BBEDCA directs OMB to calculate a sequestration consistent with special rules and exemptions described by law. OMB provides guidance to agencies for implementing sequestration, and is also required under BBEDCA to report to Congress its calculations and other estimates at various stages. We worked with OMB to classify by OMB’s sequestration designation the agencies’ spending authority and permanent appropriations authorities that were in our inventory, as shown in table 3. Each authority in our inventory is assigned a designation, which defines how the authority is treated when sequestration is in effect. As shown in table 4, in fiscal year 2015, 57 percent of spending authority and permanent appropriations authorities were exempt from sequestration, and therefore were not subject to this budgetary enforcement mechanism for helping to control the deficit. This is a 20 percentage point increase since fiscal year 1994. Correspondingly, the proportion of spending authority and permanent appropriations authorities that were subject to sequestration decreased 35 percentage points from fiscal year 1994 to fiscal year 2015. The proportion of authorities that was partially subject to sequestration increased from 4 percent in fiscal year 1994 to 11 percent in 2015. Designations were not available for 11 percent of the authorities in our inventory, due to methodological differences with OMB data explained in appendix I. None of the authorities in our inventory were classified as optionally sequestrable and two were classified as sequestrable/906. The sequestration procedures established under BBEDCA were designed to serve as a budget enforcement mechanism and thereby reduce the federal budget deficit. Under current law, sequestration applies to mandatory spending through fiscal year 2027. Our finding that the majority of the agencies’ spending authority and permanent appropriations authorities in our inventory are exempt from sequestration is consistent with our prior work on mandatory sequestration. In 2016, we reported that the majority of mandatory spending authority was exempt from sequestration. Since spending authority and permanent appropriations permit agencies to obligate budget authority without further congressional action, when these authorities are exempt from sequestration, agencies can continue to use these authorities without reductions when sequestration is in effect. Agency Comments We provided a draft of this report and the online dataset to the Director of OMB for review and comment. OMB staff provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to interested congressional committees, the Director of the Office of Management and Budget, the secretaries and agency heads of the departments and agencies in our review, and other interested parties. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov. If you or your staff have any questions about this report, please contact Tranchau (Kris) T. Nguyen at (202) 512-6806 or nguyentt@gao.gov, or Julia C. Matta at (202) 512-4023 or mattaj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix V. Appendix I: Objectives, Scope, and Methodology Our objectives were to (1) identify and analyze federal budget accounts with spending authority and permanent appropriations, including the statutory references for the authorities, changes in the number of accounts and dollar amounts since fiscal year 1994, and other relevant information; and (2) describe whether the identified accounts are subject to or exempt from sequestration or subject to any special sequestration rules or limitations. This report is an update to our previous report that covered spending authority and permanent appropriations using financial data from fiscal years 1985 through 1994. For this report, we analyzed data from fiscal years 1995 through 2015, the most recent year for which data were available when we began our work. We are also providing an online dataset of our inventory of accounts with spending authority and permanent appropriations on our public website at https://www.gao.gov/products/GAO-19-36. For the purposes of this report, we are defining spending authority as budget authority made available through laws other than annual appropriations acts. We are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. A similar but not identical term for spending authority and permanent appropriations is “backdoor authority”—a colloquial phrase for budget authority that Congress provided in laws other than annual appropriations acts. This includes contract authority and borrowing authority, as well as entitlement authority and the outlays that result from that budget authority. The term “spending authority and permanent appropriations” indicates the authority to make obligations and expenditures without further action from Congress. For purposes of this report, spending authority and permanent appropriations include five types of budget authority: contract authority, authority to borrow, monetary credits or bartering, permanent appropriations, and offsetting collections. For more detail on the definitions and the inclusions and exclusions for our inventory of accounts and our reasoning, see appendix II. Data Sources To identify and analyze accounts that used spending authority and permanent appropriations during this time frame, we used the Office of Management and Budget’s (OMB) MAX A-11 Data Entry system (MAX). MAX is a computer system used to collect and process most of the information required for preparing the President’s budget for the federal government. Agencies develop their budget information and enter the data into MAX. The data undergo rigorous review by OMB. MAX contains numerous edit checks to help ensure data consistency. Thus, we found the data to be sufficiently reliable for our purposes of identifying our initial inventory of accounts. We used the Program and Financing Schedule’s Budgetary Resources line number descriptions in OMB Circular A-11—OMB’s guidance to agencies for preparing and submitting budget information—to select line numbers in MAX that align with our definition of spending authority and permanent appropriations. We reviewed each line number’s description to confirm it met the definition of spending authority and permanent appropriations. We also confirmed with OMB staff our understanding of changes to the line numbers over the years, as well as our approach to implementing exclusions. MAX does not have specific line numbers for monetary credits or bartering—agencies report use of monetary credits as cash equivalents in the budget. This is a broader category than just monetary credits. OMB staff said that agencies are not required to report monetary credits elsewhere. Therefore, we are unable to identify agencies’ use of monetary credits in MAX data. The table below summarizes the line numbers we analyzed while building our inventory of accounts by authority type. To avoid double counting, we did not include lines that represent totals. For example, line 6300 was not in our scope for fiscal years 1995 through 1998 because it represented total appropriations. However, line 6300 is in our scope for years when it represented reappropriations, which is a form of permanent appropriations that would be included in our scope. For offsetting collections, we included line numbers labeled in MAX as discretionary or mandatory. Although discretionary spending generally refers to outlays from budget authority that is provided in and controlled by appropriations acts—which would not be spending authority and permanent appropriations—OMB staff said this distinction does not always apply in MAX data. This is partly because, prior to fiscal year 1999, the Program and Financing Schedule did not distinguish between mandatory and discretionary offsetting collections. Although distinct line numbers for mandatory and discretionary collections were added, the designation in MAX is not always correct, according to OMB staff. For fiscal years 1995 through 1998, lines 6800 to 6885 could represent discretionary or mandatory offsetting collections. Starting with fiscal year 1999, OMB reported discretionary and mandatory collections separately in the Program and Financing Schedule. Discretionary collections were reported on lines 6800 to 6885, and mandatory collections on lines 6900 to 6985. In later years, the numbers changed but the distinction between the two remained. If any dollar amount was reported in MAX on any of the selected lines for any year from fiscal years 1995 through 2015, we included the account in our initial inventory. Many accounts reported budget authority amounts for more than one line number. In other words, they used different types of spending authority and permanent appropriations, or had multiple uses of the same authority. To the extent possible, we implemented the exclusions described in appendix II into the data, resulting in our initial inventory of accounts. We compared the accounts and authorities identified in our 1996 report with our MAX data for our initial inventory of accounts. We found five accounts that were in the 1996 report but not the MAX data, which still had active budget authority reported in the fiscal years 2013, 2014, or 2015 budgets. We reviewed these for potential inclusion in our inventory and included three authorities. Data Collection and Confirmation with Agencies To learn more about the accounts in our initial inventory, we developed a data collection instrument (or worksheet) to send to the agencies. After our review and final agency verification, the results from the worksheets became our final inventory of accounts as shown in our online dataset. We took the following steps for collecting and reviewing agency information. We asked that the agencies review the data for accounts for which they have responsibility. We asked them to confirm or correct account information that we obtained from MAX and, if applicable, from the 1996 report. If information was unavailable from the 1996 report, we asked agencies to provide it. We asked agencies to review the basic account descriptors (e.g., account names and numbers), MAX line number(s), budget authority type (which we determined based on the line number description), source of offsetting collections (if applicable), and a statutory reference and enactment year for each authority. We used our 1996 report to identify accounts that may have authority to use monetary credits or bartering, and asked those agencies to confirm this information. We asked agencies to identify any accounts that have authority to use monetary credits or bartering, and to include the source of the monetary credits or bartered items, and identify their value in dollars. We asked agencies to identify any additional accounts that have spending authority and permanent appropriations that were not presented in the worksheet because they were not identified through MAX. We confirmed or corrected information in each agency’s completed worksheet and updated our inventory accordingly. We excluded accounts from our inventory if we determined that the authority for the account did not meet the definition of spending authority and permanent appropriations. When possible, we reviewed the President’s Budget Appendix to confirm corrections from the agencies. For some authorities, such as certain offsetting collections, we relied on the agency’s description of whether the account included nonfederal sources to make our decision about inclusion in our inventory. We had discussions with agencies, as needed, to agree on the presentation of the account information and statutory references. As described above, to compile our inventory and provide statutory references providing the authorities, we primarily relied on the MAX database and information agencies provided to us. While we made every attempt to confirm the information provided by agencies and provided agencies opportunities to review the information on their accounts, in some cases we included authorities for which neither we nor the agency could determine a statutory reference because we could not rule out the use of spending authority and permanent appropriations. We note that authorities and the statutes providing them can change over time. Our inventory of accounts should therefore not be used as a substitute for original legal research. For some accounts, agencies identified errors in the MAX budget authority or other fields. We updated our inventory if the agency provided documentation, such as a SF-133, Report on Budget Execution and Budgetary Resources. We did not make changes to the budget authority classifications. For some authorities, we reported no budget authority in certain fiscal years, but MAX contained a budget authority amount. If an account had spending authority and permanent appropriations in only certain years, but reported other budget authority on the same lines that did not meet our definition, we only reported dollar amounts for the spending authority and permanent appropriations, when possible. The changes described above were only applied to our inventory data and not to the MAX database. From our final inventory, we selected examples of accounts to highlight in the text boxes in our report. We made these selections based on the following criteria: variety of size of agencies, the authority was used sometime from fiscal years 2013 to 2015 (with exception of monetary credit or bartering authority), different examples of how the budget authority was used, and large or easy to understand programs. Factors that Affect Our Totals for Spending Authority and Permanent Appropriations There are several factors that affect our reported total spending authority and permanent appropriations. In working with agencies, we were unable to parse out the amounts of budget authority that do not meet our definition. Therefore, our reported budget authority amounts likely overstate the amount of spending authority and permanent appropriations used during the time period of our analysis. Although some agencies informed us that certain offsetting collections contained collections from federal sources—which would not be considered spending authority and permanent appropriations—we could not reliably subtract the federal sources from all accounts covered in our inventory. While we excluded any account lines that the agencies reported consisted only of collections from federal sources, we did not exclude account lines for which we and the agencies could not reliably separate collections from federal sources from offsetting collections amounts that meet our definition of spending authority and permanent appropriations. As a result, our total budget authority amount for offsetting collections (and our overall totals) contains budget authority which does not meet our definition of spending authority and permanent appropriations. The budget authority amounts for offsetting collections may also include some amounts that consist of refunds of prior paid obligations. While we excluded any account lines that the agencies reported consisted only of refunds of prior paid obligations, we did not exclude account lines for which we and the agencies could not reliably separate refund amounts from offsetting collections amounts that meet our definition of spending authority and permanent appropriations. Additionally, our budget authority amounts include sequestered and rescinded amounts, which are usually negative in the MAX database. Sequestered and rescinded funds are not generally available to agencies, and therefore do not represent spending authority and permanent appropriations. Some agencies may have reported sequestered amounts in various budget authority lines in MAX, which we cannot reliably identify. Therefore to consistently include these amounts, we retained all sequestration-related lines. As a result of this inclusion, our totals are decreased by the negative sequestered amounts. Further, when budget authority amounts were totaled for each agency, some agency totals were negative. These negative values were generally small enough that they did not affect the overall percentages, so we removed them from our rankings of top agency users of permanent appropriations and borrowing authority. Our inventory includes authorities that may have expired or been repealed during the time period of our analysis, even if the account is still active. We also did not examine whether Congress subsequently restricted or rescinded the agency’s ability to use all or a portion of its spending authority and permanent appropriations. We did not review annual appropriations acts or other legislation to identify the extent to which authorities in our inventory were restricted or rescinded. Identification of Statutes Providing the Authorities To note the statutes providing spending authority and permanent appropriations for the identified accounts, we used the worksheets— described above that were provided or corrected by the agencies—to collect and review the statutory references and enactment years for each account and type of authority. We reported only the earliest identifiable year of enactment for the statute providing the authority. There are some instances where budget authority data are reported for years prior to the enactment year for an account’s authority in our data. This may be stemming from a variety of factors, including repeal of earlier enacted authorities coupled with newly enacted authorities, and challenges identifying original enactment dates when sections of the U.S. Code were recodified. In other instances, neither we nor the agency could determine a statutory reference because of the age of the data, because the account or agency no longer exist, or other reasons. These authorities are included in our inventory because we could not rule out the use of spending authority and permanent appropriations. These accounts are categorized in our online dataset as either (1) the agency could not provide this information—we identified a potentially applicable statutory reference—or (2) the statutory reference could not be determined. Sequestration Designation To determine whether the identified accounts are subject to or exempt from sequestration, or subject to any special sequestration rules or limitations, we used datasets provided by OMB to identify the sequestration designation for accounts in our final inventory. Sequestration designations include sequestrable, partially sequestrable, exempt, optionally sequestrable, and sequestrable/906. OMB generates the data annually through a government-wide data collection exercise to calculate the sequestration percentage and reductions by account as part of a report required under the Joint Committee process. For authorities that did not have a sequestration designation in OMB’s data but did report actual budget authority in fiscal years 2013, 2014, or 2015, we asked OMB to provide additional sequestration designation information. Authorities that OMB did not classify, or for which it could not provide additional information, have “None” listed as the sequestration status in our final inventory. The primary dataset we used includes accounts with mandatory budget authority in fiscal year 2015 and the corresponding sequestration designation. However, to identify the sequestration designation for accounts in our final inventory with offsetting collections authority that OMB categorized as discretionary spending, we used the fiscal year 2013 sequestration dataset. The fiscal year 2013 dataset was the most recent available for which sequestration occurred for discretionary spending when we began our work, and we used fiscal year 2015 data to match the end year of our inventory data. We assessed the reliability of the sequestration datasets based on interviews with OMB staff. OMB staff told us that the data must pass a series of automated checks, and are reviewed at several points by OMB staff. Thus, we found the data to be sufficiently reliable for the purpose of identifying the sequestration status of the accounts in our final inventory. We confirmed the definition of each sequestration designation with OMB. In some cases, because of differences in the scope of the data that OMB collected for Joint Committee reports, a sequestration designation was not available. For some of those authorities, OMB provided a designation based on information collected from agencies. We compared the sequestration designation data from our 1996 report to the designations in fiscal year 2015 or 2013, as applicable to analyze changes over time. Combining Data to Develop Our Inventory Dataset We combined data from the worksheets confirmed by the agency into a single dataset to create our final inventory of accounts. We also added the dollar amounts from MAX to create the final dataset we used for analysis in the report. To combine our data, we had to make several decisions to help eliminate double-counting and to simplify the supplemental data that accompanies this report. We have provided a final inventory dataset—which includes the agency accounts and related budget information, statutory references, enactment years, and sequestration designation—online as a supplement to this report. Table 6 lists the variables and definitions used in our online data. We analyzed the final combined dataset for trends and compared it with the 1996 report. In some cases, we adjusted the fiscal year 1994 dollars for inflation. Once the inventory of accounts was finalized and we completed our review, each agency received a statement of facts to review, which summarized the final inventory information for their agency. Agencies that have examples of accounts highlighted in our report received those excerpted examples that are specific to their agencies for review and comment. We provided OMB the draft report and online data for review and comment. We conducted this performance audit from March 2016 to November 2018 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Appendix II: Additional Description of Spending Authority and Permanent Appropriations This appendix provides additional details on how we defined spending authority and permanent appropriations for the purpose of this report and how we applied the definition to decide which accounts to include or exclude from our inventory. We are defining spending authority as budget authority made available through laws other than annual appropriation acts. Also, we are defining a permanent appropriation as budget authority to incur obligations and make payments that is available permanently by law without further legislative action. A permanent appropriation may have been made available through an annual appropriations act or through laws other than the annual appropriations acts. We are including both in our inventory based on the intent of the request for developing our inventory. Spending authority and permanent appropriations permit obligation and expenditures without further action from Congress. These include permanent appropriations, contract authority, borrowing authority, offsetting collections, and monetary credits or bartering, all of which are defined in table 7. In building our inventory of accounts with spending authority and permanent appropriations authority, we made categorical decisions on what to include and exclude. We included authorities that met our definition of spending authority and permanent appropriations, as described above in table 7. A particular type of offsetting collections— collections from nonfederal sources that were enacted for the first time in an appropriations act—does not meet our definition, but nonetheless permits obligation and expenditure without further action from Congress, and therefore falls within the purview of this request. We included these authorities in our inventory and included a variable to identify them in our online dataset. Certain types of budget authority do not meet our definition of spending authority and permanent appropriations, as described in table 8. Appendix III: Spending Authority and Permanent Appropriations Use by Agency and Authority Type, Fiscal Year 2015 Table 9 lists total spending authority and permanent appropriations reported by agency in fiscal year 2015. We listed the 24 agencies in the Chief Financial Officers Act of 1990 as amended, Legislative Branch and Judicial Branch entities, and Executive Office of the President and other entities. We did not include monetary credits or bartering in this table given no agencies reported use of this authority in fiscal year 2015. Appendix IV: Five Largest Permanent Appropriations, Contract, and Borrowing Authority Accounts, Fiscal Year 2015 The tables below list the accounts reporting the largest amounts of budget authority for permanent appropriations, contract authority, and borrowing authority in fiscal year 2015. We did not rank the agencies that reported the largest amounts of offsetting collections because we, and the agencies, when asked, were unable to reliably subtract collections from federal sources or refunds of prior paid obligations. Agencies did not report using monetary credits or bartering in fiscal year 2015. Appendix V: GAO Contacts and Staff Acknowledgements GAO Contacts Staff Acknowledgments In addition to the contacts named above, Janice Latimer (Assistant Director), Lisa Motley (Assistant General Counsel), Lindsay Swenson (Analyst-in-Charge), Michael Bechetti, Shari Brewster, Charles Culverwell, Ann Marie Cortez, Erika Huber, Susan J. Irving, John Mingus Jr., Katherine D. Morris, Cynthia Saunders, Albert Sim, and Stewart Small made key contributions to this report.
target: Congress can provide budget authority to federal agencies and programs through the annual appropriations process. It can also provide budget authority through laws other than annual appropriations acts, or through permanent appropriations that permit the agency to obligate budget authority without further congressional action. Analysis of these authorities helps provide Congress with visibility into spending authority that is not considered during the annual appropriations process. GAO was asked to update its 1996 report that had provided an inventory of accounts with spending authority and permanent appropriations for fiscal years 1985 through 1994. This report discusses (1) federal budget accounts with spending authority and permanent appropriations, including the statutory references for the authorities, changes in the number of accounts and dollar amounts since fiscal year 1994, and other relevant information; and (2) whether the identified accounts are subject to or exempt from sequestration, or subject to any special sequestration rules or limitations. GAO also is providing an online dataset of the inventory of accounts with spending authority and permanent appropriations on GAO's public website at https://www.gao.gov/products/GAO-19-36 . GAO analyzed Office of Management and Budget (OMB) budget data to identify accounts with spending authority and permanent appropriations. GAO reviewed data through fiscal year 2015 because that was the most recent data available when GAO began its work. GAO reviewed agency information to confirm data and statutory authority. Agencies also reviewed and verified the final data for their accounts. For the sequestration designation, GAO analyzed OMB data for fiscal years 2013 and 2015--the most recently completed years for which sequestration occurred and OMB identified designations when GAO began its work. GAO provided a draft of this report and the online dataset to the Director of OMB for review and comment. OMB staff provided technical comments, which GAO incorporated as appropriate. A total of $3.2 trillion in spending authority and permanent appropriations was reported in fiscal year 2015; an increase of 88 percent from fiscal year 1994 adjusted for inflation in fiscal year 2015 dollars. Fiscal year 1994 was the last year included in GAO's prior work. For the purposes of this report, spending authority and permanent appropriations is budget authority provided to agencies through laws other than annual appropriations acts or available permanently by law without further legislation. These authorities include permanent appropriations, contract authority, borrowing authority, offsetting collections, and monetary credits or bartering. Permanent appropriations were the primary driver of the increase in spending authority and permanent appropriations. Offsetting collections authority--which includes certain fees, fines, and penalties--also grew. Agencies reported no use of monetary credits or bartering. a Permanent appropriations fund federal entitlement programs, such as Medicare, administered by the Department of Health and Human Services (HHS), and the Social Security Administration's (SSA) Old-Age, Survivors, and Disability Insurance program. These programs are a significant proportion of reported budget authority in GAO's inventory of accounts in fiscal year 2015. These programs continue to show spending increases largely as a result of the aging population and rising health care costs and are projected to continue to increase in the future. In fiscal year 2015, 7 of the 10 accounts reporting the largest dollar amounts of spending authority and permanent appropriations funded entitlement programs. Three agencies comprised three quarters of the total government-wide spending authority and permanent appropriations in fiscal year 2015. HHS reported the largest amount of spending authority and permanent appropriations with $979 billion, or about 30 percent--mainly from Medicare. HHS overtook SSA and reported the highest dollar amounts of permanent appropriations for the first time in fiscal year 2006. SSA reported $920 billion, or about 28 percent of total spending authority and permanent appropriations--mainly from its Old-Age and Survivor's Insurance program and the Disability Insurance program. The Department of the Treasury reported the third largest amount--$542 billion, or about 17 percent--the majority of which is for interest on debt held by the public and intragovernmental debt. This interest dropped as a percentage of permanent appropriations since fiscal year 1994, due to lower interest rates that allow the government to borrow money more cheaply. However, interest rates are predicted to rise in the long term, which would increase the net interest costs on the debt. The second largest reported budget authority type was offsetting collections--a total of $421 billion in fiscal year 2015, more than double the fiscal year 1994 amount, adjusted for inflation. The Postal Service reported the largest use of offsetting collections authority in fiscal year 2015 in its Postal Service Fund, which includes revenue from mail services. Sequestration--cancellation of budgetary resources under a presidential order--is a process established in statute which helps to enforce spending limits and thereby control the deficit. In fiscal year 2015, 57 percent of spending authority and permanent appropriations authorities were exempt from sequestration, up from 37 percent in fiscal year 1994. This means that fewer of these authorities were subject to this budgetary enforcement mechanism in fiscal year 2015.