Federal Budget Process Reform: Analysis of Five Reform Issues
Released: 2002-07-01T00:00:00

Introduction

The budget has become a central issue in American politics because it reflects decisionsconcerning how big the federal government should be and priorities for what the government shoulddo. How those decisions should be made, by whom and under what constraints has also become apart of the modern political dialog. Although the basic framework for budgeting has remainedrelatively stable in recent years, there has been a recurring reexamination of the budget process todetermine if it works to meet the changing demands of government. (1)

In an earlier era of government reform, William F. Willoughby, the director of the Institutefor Government Research, wrote that:

Among the specific problems of public administrationnone exceeds in importance that of the establishment of an orderly and efficient system for thehandling of the financial affairs of the government. (2)

Arguably, this is no less true today than it was then, and its salience is illustrated by thenumber and variety of proposals made to change one or more aspects of the budget process in recentyears.

This report includes five reform issues on which Congress has consistently demonstrated ahigh level of interest, focused on specifically defined reform proposals. Some of these issues, suchas biennial budgeting, have extensive legislative histories. These proposals represent just a part ofthe total spectrum of proposals that have been discussed, both inside and outside of Congress. Thisreport does not include those reform issues that are primarily conceptual in nature. Such issuesreflect a level of dissatisfaction with the current process, but they generally are not focused on aspecific single reform option. Examples of these include:

authorization/appropriations issues , which concern the relationship betweenauthorizations and appropriations, including timing and sequencing issues;

reconciliation process issues , which concern the amount of time available forconsidering reconciliation bills, the specificity allowed for reconciliation instructions, whetherreconciliation may be used only to create budgetary savings, and the application of the Byrd Ruleprohibiting extraneous provisions in reconciliation bills in the Senate;

impoundment reform issues , which concern amended deferral rules or anexpedited rescission process; and

budget presentation and structure issues , which concern separate presentationsfor regulatory, capital, or tax expenditure budgets, as well as other issues related to the timing orcontents of the President's budget or mid-session review.

This report also does not include proposals to reform the budgetary mechanisms for specificprograms, such as instituting off-budget status for trust funds or establishing a lock-box mechanismas part of Social Security and Medicare reform proposals.

Finally, this report does not include reform proposals based on amending the U.S.Constitution, such as presidential item veto authority, a limitation on the authority of the federalgovernment to raise taxes, or a balanced budget requirement. (3)

For a more comprehensive accounting of current budget process reform measures and theirlegislative history, see CRS Report RL31479(pdf) , Federal Budget Process Reform: Proposals andLegislative Actions in the 107th Congress , by [author name scrubbed]

The Basic Framework of the Budget Process

Although the Constitution requires that "All Bills for raising Revenue shall originate in theHouse of Representatives," it is otherwise silent regarding specific guidelines for the considerationof revenue or spending legislation. (4) The Constitution, however, does provide Congress authority "Tolay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the commonDefence and general Welfare of the United States" (5) and requires that "No Money shall be drawn from the Treasury, butin Consequence of Appropriations made by Law." (6) Through these provisions, the Constitution grants Congress the"power of the purse." This general authority has been subsequently fleshed out through a numberof laws and congressional rules that underpin the federal budget process. (7) Two statutes in particularprovide much of the basic legal framework.

The first key statute is the Budget and Accounting Act of 1921 (P.L. 13, 67th Congress, 42Stat. 20-27). Now codified in title 31 of the United States Code , this Act established the statutorybasis for an executive budget process. It gives the President responsibility for submitting toCongress a proposed budget for the entire federal government at the beginning of each year. It alsocreated the Bureau of the Budget (reorganized as the Office of Management and Budget (OMB) in1970) to assist him in carrying out his responsibilities, and the General Accounting Office (GAO)to assist Congress as the principal auditing agency of the federal government.

The second key statute is the Congressional Budget and Impoundment Control Act of 1974( P.L. 93-344 , 88 Stat. 297-339). The provisions of this Act have been modified on a number ofoccasions, but it remains the statutory basis for the congressional budget process. The Act providesfor the annual adoption of a concurrent resolution on the budget as a mechanism for coordinatingand facilitating congressional budgetary decision making. It also established the House and SenateBudget Committees with jurisdiction over the annual budget resolution, and created theCongressional Budget Office (CBO) to provide budgetary information and analysis to Congressindependent of the executive branch.

In addition, the Balanced Budget and Emergency Deficit Control Act of 1985, as amended(Title II of P.L. 99-177 , 99 Stat. 1038-1101), has had significant impact on budgetary procedures andoutcomes by creating additional control mechanisms. This Act established the sequester mechanismas a means to enforce statutory budget requirements. Currently, there are separate mechanisms tocontrol direct spending and revenues (the pay-as-you-go, or PAYGO, process) and discretionaryspending (spending caps). (8) The budgetary impact of all legislation is scored by OMB, and reported three times each year (apreview with the President's budget submission, an update with the mid-session review of thebudget, and a final report within 15 days after Congress adjourns). If the final report for either thePAYGO or spending caps indicates that the statutory requirements of that mechanism have beenbreached, the President is required to issue an order making across-the-board cuts of nonexemptspending programs subject to that control mechanism.

The Budget Cycle

The President is required to submit to Congress a proposed budget by the first Monday inFebruary. Although this budget does not have the force of law, it is a comprehensive examinationof federal revenues and spending, including any initiatives recommended by the President, and is thestart of extensive interaction with Congress.

The President's budget submission is itself the result of a process that typically began 10months earlier. During this stage, federal agencies prepare budget requests under a variety of internalprocedures. OMB plays a coordinating role in this process through communications, circulars, andbulletins providing instructions, schedules, and other materials to ensure that budget requests adhereto standardized conventions and formats.

Agency budget requests are subsequently reviewed by OMB, and the agencies notified of theOMB director's recommendations for changes through a "passback" in the fall prior to the President'ssubmission. Agencies may appeal these recommendations to the director, and in some cases, directlyto the President. Once final decisions on the budget requests are made, agencies revise their requestsaccordingly, and prepare supporting materials for inclusion in the President's budget submission.

The President's budget submission does not complete administration action. Agency officialstestify at congressional hearings and provide written budget justifications. In addition, the Presidentis required to submit a formal mid-session review of the budget by July 15 of each year, (9) and may also submit additionalbudgetary requests during the year.

Within 6 weeks of the President's budget submission, congressional committees are requiredto submit their "views and estimates" of spending and revenues within their respective jurisdictionsto the House and Senate Budget Committees. These views and estimates, along with informationgleaned from hearings testimony, CBO reports, and other sources, are then used by each BudgetCommittee in drafting and reporting a concurrent resolution on the budget to its respective house.

Although it does not have the force of law, the budget resolution is a central part of thebudget process in Congress. As a concurrent resolution, if adopted in the same form by each house,it represents an agreement between the House and Senate that establishes congressional budgetpriorities, and defines the parameters for all subsequent budgetary actions. (10) The spending, revenue,and public debt limit laws necessary to implement decisions agreed to in the budget resolutionsubsequently are enacted separately. Discretionary spending, which is enacted through theappropriations process, involves annual actions that must be completed before the beginning of anew fiscal year on October 1. The reconciliation process may be used to change laws affecting directspending or revenues. Reconciliation typically follows a timetable established in the budgetresolution for that year. Other budgetary legislation, such as changes in direct spending or revenuelaws separate from the reconciliation process, changes in the public debt limit, or authorizinglegislation, are not tied directly to the annual budget cycle. However, such legislation could be anecessary part of budgetary actions in any given year.

After appropriations and other budgetary legislation become law, the executive branch againbecomes the focus of the budget process. After the end of the congressional session, the Presidentis required to determine if a sequester is necessary to remedy any breach of the limits establishedunder the Balanced Budget and Emergency Deficit Control Act.

The executive branch is also responsible for the execution of spending laws. Funds providedin statutes are apportioned to the appropriate agencies and programs in accordance with theAntideficiency Acts (31 U.S.C. 1341-42; 1511-1519), which prohibit agencies from obligating fundsin excess of levels provided in law.

The President also may propose adjustments in spending laws under the provisions of theImpoundment Control Act of 1974 (Title X of P.L. 93-344 ). The Act defines two types ofimpoundments: deferrals and rescissions. Deferrals delay the spending of funds, while rescissionspermanently cancel budgetary resources. Deferrals remain in effect unless overturned by Congress,but rescissions require the approval of Congress through the enactment of a law. The President mustreport both deferrals and rescissions to Congress. If Congress does not enact legislation approvingthe President's rescission proposals within 45 days of continuous session, the President must makethe funds available for obligation.

The Budget Resolution and Reconciliation

The budget resolution represents an agreement between the House and Senate concerning theoverall size of the federal budget, and the general composition of the budget in terms of functionalcategories. The amounts in functional categories are translated into allocations to each committeewith jurisdiction over spending in a process called "crosswalking" under Section 302(a) of theCongressional Budget Act. Legislation considered by the House and Senate must be consistent withthese allocations, as well as with the aggregate levels of spending and revenues. Both the allocationsand aggregates are enforceable through points of order. These allocations are supplemented bynon-binding programmatic assumptions often included in the reports from the Budget Committeesthat accompany the budget resolution in each house.

In some years, the budget resolution includes reconciliation instructions. Reconciliationinstructions direct specified committees to recommend changes in laws affecting revenues or directspending programs within their jurisdiction in order to implement budget resolution policies. Allcommittees receiving such instructions must submit legislative language to the Budget Committeein their respective chamber, which packages them as an omnibus measure and reports the measurewithout substantive revision. In some cases, a single committee may be instructed to reportreconciliation legislation directly. A reconciliation bill would then be considered, and possiblyamended, by the full House or Senate. In the House, reconciliation bills are typically consideredunder the terms of a special rule. In the Senate, reconciliation bills are considered under limitationsimposed by Sections 305, 310, and 313 of the Congressional Budget Act. These sections limitdebate on a reconciliation bill to 20 hours and limit the types of amendments that may be considered.

The Appropriations Process

The annual appropriations process provides funding for discretionary spending programsthrough 13 regular appropriations bills. Congress must enact these measures prior to the beginningof each fiscal year (October 1) or provide interim funding for the affected programs through a"continuing resolution." By custom, appropriations bills originate in the House, but may be amendedby the Senate, with any differences negotiated by a conference committee. Congress may also enactsupplemental appropriations measures during the course of a fiscal year to provide funding foradditional or unanticipated purposes. (11)

The House and Senate Appropriations Committees are organized into 13 subcommittees,each of which is responsible for developing one of the 13 regular appropriations bills. Each bill issubsequently considered by the full committee. Appropriations bills are constrained in terms of boththeir purpose and the amount of funding they provide. Appropriations are constrained in terms ofpurpose because the rules of both the House (Rule XXI) and the Senate (Rule XVI) generally requireauthorizations prior to consideration of appropriations for an agency or program. Authorizations arelegislation that establish, continue, or modify an agency or program, and explicitly or implicitlyauthorize the enactment of appropriations for that purpose. Authorizations may be temporary orpermanent, and their provisions may be general or specific, but they do not themselves providefunding. Although House and Senate rules generally prohibit unauthorized appropriations, bothprovide exceptions in their respective rules and the prohibition itself may be waived.

Constraints in terms of the amount of funding exist on several levels. For individual itemsor programs, funding might be limited to the level recommended in authorizing legislation. Totalspending for a fiscal year (including both direct and discretionary spending) is limited to the levelestablished in the budget resolution under Section 311 of the Budget Act. Also, since FY1991, thelevel of discretionary spending provided in appropriations acts has been limited by discretionaryspending caps. These spending caps are described below. Finally, the allocations from the budgetresolution made to the Appropriations Committees under Section 302(a) of the Budget Act providelimits that may be enforced procedurally through points of order in the House and Senate duringconsideration of the legislation. These allocations must be consistent with the discretionary spendingcaps.

Section 302(b) of the Budget Act further requires the House and Senate AppropriationsCommittees to subdivide the amounts allocated to them under the budget resolution among theirsubcommittees. These suballocations are required to be made as soon as practicable after aconcurrent resolution on the budget is agreed to. Because each subcommittee is responsible forformulating a single general appropriations bill, the process of making suballocations effectivelydetermines the spending level for each of the 13 regular appropriations bills. Legislation (oramendments) that would cause the suballocations made under 302(b) to be exceeded is subject toa point of order. The Appropriations Committees usually issue revised subdivisions over the courseof appropriations actions to reflect changes in spending priorities effected during floor considerationor in conference.

Budget Enforcement and Sequestration

Budget enforcement procedures were first adopted as part of the Balanced Budget andEmergency Deficit Control Act of 1985. As amended by the Budget Enforcement Act of 1990, theAct provides two separate mechanisms: spending caps in Section 251, designed to limitdiscretionary spending to a designated level; and the PAYGO process in Section 252, designed tolimit changes in the level of revenues and direct spending by new legislation. In both cases, themechanism is enforced both during congressional consideration of budgetary legislation and by apresidential sequester order after the end of a congressional session. If legislation is enacted thatwould violate the discretionary spending caps or the PAYGO requirement, the President is requiredto issue an order for an across-the-board spending cut of nonexempt spending programs within thatcategory. Although ultimate enforcement of these mechanisms is through a presidential order, byenforcing the allocations and aggregates for spending and revenues provided in the budget resolutionthat are consistent with these limits, Congress may also use points of order to enforce them duringconsideration of budgetary legislation.

Discretionary Spending Caps. The controlmechanism applied to discretionary spending programs is straightforward: the level of discretionaryspending has been subject to statutory spending limits from FY1991 through FY2002. These limitswere extended generally on two occasions. (The extension and modification of this mechanism isone of the options discussed in this report.) Currently, adjustments may occur automatically underprocedures provided in the Act (e.g., to reflect amounts designated as emergency spending orchanging concepts and definitions). The spending caps may also be adjusted through specificlegislative action.

In some years, discretionary spending has been divided into multiple categories. InFY1991-FY1993, discretionary spending was divided among defense, international, and domesticspending. In FY1994-FY1997 there was a single category for discretionary spending generally. Aseparate category for violent crime reduction was established for FY1995-FY2000. (12) When discretionaryspending caps were extended in Budget Enforcement Act of 1997 to cover FY1998-FY2002,separate categories were established for defense and nondefense spending for FY1998 and 1999 (inaddition to that for violent crime reduction for FY1998-FY2000), with a single general discretionaryspending limit for FY2000-FY2002. Further categories were subsequently established for highway,mass transit, and conservation spending. (13)

Discretionary spending limits are enforced through a presidential sequester order. Enactingspending legislation that would cause a spending cap to be exceeded would subject all nonexemptspending within that category to an across-the-board cut sufficient to reduce spending to the levelof the limit. Currently, there are no general discretionary spending limits for fiscal years beyondFY2002. Also, because Section 275 of the Balanced Budget and Emergency Deficit Control Actprovides a sunset for the sequester mechanism, there is no means to enforce spending limits forspecial categories beyond FY2002.

Pay-As-You-Go. The PAYGO process is notbased on achieving a specific level of deficit or surplus, but instead focuses on the net impact oflegislation. Under the PAYGO process, Congress is not prohibited from enacting legislationincreasing direct spending or decreasing revenues. Instead, the budgetary impact of all legislationchanging direct spending or revenues is tracked by OMB for inclusion in its sequestration reportson a PAYGO scorecard. Amounts on the PAYGO scorecard reflect spending and revenue changesfor a fiscal year based on legislation enacted in prior years as well as the current year. All suchchanges must be offset so that there is not a net balance remaining on the PAYGO scorecard for anyfiscal year. If the net effect of all such legislation is to cause a positive balance for a fiscal year onthe PAYGO scorecard, the President must issue a sequester order to reduce spending in allnonexempt direct spending accounts to eliminate the balance.

The PAYGO provisions currently apply only to legislation enacted before October 1, 2002,but the enforcement process is scheduled to remain in effect through September 30, 2006, to capturethe budgetary effects of such legislation in the outyears.

Reforming the Process

While the general framework of the budget process has remained relatively stable in recentyears, Congress has continued to examine the question of how budgetary decisions should be made,by whom, and under what constraints.

Key enforcement procedures under the Budget Enforcement Act of 1990 (i.e., discretionaryspending caps and PAYGO) expire at the end of FY2002. Whether Congress should extend eitheror both of these mechanisms, in what form and for how long, are questions that could be addressedin the 107th Congress. Other proposed reforms would add new mechanisms or procedures to thecurrent process. There is no unifying theme for this diverse group of proposals, no single "problem"that they are all intended to "correct." Rather, they address diverse viewpoints concerning the currentprocess. Some proposals have been directed toward improving management of the congressionalbudgetary workload; some have been directed toward promoting better cooperation betweenCongress and the President; and others have been directed toward providing greater enforcement forcongressional rules or decisions.

The options discussed in this report are five specific options on which Congress consistentlyhas expressed a high level of interest. They are as follows:

extending the duration of budgetary control mechanisms, in order to retain thebudgetary discipline that has been in place since 1990;

establishing a joint budget resolution that would require the President'ssignature, thereby formally and directly involving the President and Congress in deliberations on thebudget early in the process;

establishing an emergency reserve fund, in order to change the way Congressand the President budget for emergencies and other unanticipated situations;

creating an automatic continuing resolution to provide an automatic source offunding for discretionary activities and prevent a federal government shutdown;and

changing to a biennial budget, lengthening the budget cycle to 2 years from oneyear as a way of promoting better management of both Congress's and the administration's budgetaryworkload.

Extension of Budget Enforcement Mechanisms

Most of the budget enforcement mechanisms under the Congressional Budget Act arepermanent. (14) Incontrast, key enforcement procedures first established by the Budget Enforcement Act (BEA, TitleXIII of P.L. 101-508 , the Omnibus Budget Reconciliation Act of 1990) expire at the end of FY2002(i.e., September 30, 2002). Under the BEA, budget legislation is constrained by statutory limits ondiscretionary spending and a "pay-as-you-go" (PAYGO) requirement for direct spending and revenuelegislation. The spending caps and PAYGO requirement are enforced by sequestration--whichinvolves automatic, largely across-the-board spending cuts--and by points of order while legislationis considered on the Senate floor. The discretionary spending sequestration process and the Senatepoints of order expire at the end of FY2002. The PAYGO requirement also expires at the end ofFY2002, but the PAYGO sequestration process covers the net effects, through FY2006, of newdirect spending and revenue legislation enacted before the end of FY2002. In his FY2002 budget,President Bush proposed to extend the BEA enforcement procedures for several years. In hisFY2003 budget, however, President Bush did not explicitly advocate an extension of theseprocedures, but indicated that his "Administration will work with Congress ... to develop budgetenforcement mechanisms," including extending the BEA procedures. (15)

Background

The Budget Enforcement Act was enacted to modify the budget enforcement proceduresestablished in 1985 by the Balanced Budget and Emergency Deficit Control Act (Title II of P.L.99-177 ), commonly known as the Gramm-Rudman-Hollings Act. The Balanced Budget Act createda sequestration process tied to annual maximum deficit targets established in law, declining to zeroby FY1991. (16) If thebudget deficit exceeded those target levels (plus a margin-of-error amount in some years), automaticacross-the-board spending cuts would be triggered to bring the deficit to within the allowable level. The process was intended to provide an incentive to Congress and the President to reduce the deficitthrough legislative action to avoid an automatic sequestration. The Budget Enforcement Act of 1990changed the focus of the sequestration process. Instead of maximum deficit targets, the BEA tiedsequestration to new statutory limits on discretionary spending and a "pay-as-you-go" (PAYGO)requirement for new direct spending and revenue legislation. The change was intended to holdCongress and the President accountable for projected budget outcomes that would result from newlegislation, rather than the level of the deficit, which could be affected by factors beyond their directcontrol, such as economic growth, inflation, and demographic changes. The BEA procedures wereextended in 1993 and 1997. (17)

Currently, adjustable discretionary spending limits exist for the following categories:highway and mass transit spending for FY2002-FY2003; conservation spending (divided into sixsubcategories) for FY2002-FY2006; and other discretionary spending, also called general purposediscretionary spending, for FY2002. (18) Under the PAYGO requirement, the net effect of new directspending and revenue legislation enacted for a fiscal year may not cause a positive balance(reflecting an increase in the on-budget deficit or a reduction in the on-budget surplus) on a multiyearPAYGO "scorecard." For each fiscal year, this scorecard maintains the balances of the accumulatedbudgetary effects of laws enacted during the session and prior years. The PAYGO requirementapplies to legislation enacted through FY2002, but it covers the effects of such legislation throughFY2006.

The discretionary spending limits and PAYGO requirement are enforced primarily bysequestration, which involves automatic, largely across-the-board spending cuts in non-exemptprograms. Sequestration is triggered if the OMB director estimates in the final sequestration reportthat one or more of the discretionary spending limits will be exceeded or the PAYGO requirementwill be violated. The President is required to issue a sequestration order cancelling budgetaryresources in non-exempt programs within the applicable spending category by the amount of anyspending limit breach or PAYGO violation. A within-session sequestration is possible if asupplemental appropriations bill causes the spending levels of the current fiscal year to exceed thestatutory limit for a particular category. If a supplemental appropriations act causes a discretionaryspending limit to be exceeded in the last quarter of a fiscal year (i.e., July 1 through September 30),the spending limit for the applicable category for the following fiscal year must be reduced by theamount of the violation. (19)

The discretionary spending limits, as well as a PAYGO requirement similar to the statutoryone, also may be enforced through points of order while legislation is being considered on the Senatefloor. First, Section 312(b) of the 1974 CBA prohibits the consideration of legislation that wouldcause any of the spending limits to be exceeded. Second, Section 207 of the FY2000 budgetresolution (H.Con.Res. 68, 106th Congress), like similar provisions in previous budget resolutions,provides a point of order against any direct spending or revenue legislation that would increase orcause an on-budget deficit for the first fiscal year, the period of the first 5 fiscal years, or thefollowing 5 fiscal years, covered by the most recently adopted budget resolution. Both of thesepoints of order may be waived by a vote of three-fifths of Senators, or set aside by unanimousconsent. Both of these points of order expire at the end of FY2002.

Options and Discussion

Many Members of Congress, as well as outside observers, agree that the budget enforcementmechanisms associated with the BEA promoted fiscal discipline throughout the 1990s, andcontributed to the federal government achieving a unified budget surplus in FY1998--the first inalmost 30 years. Some have argued that such fiscal discipline mechanisms are necessary even intimes of surpluses and that the BEA should be extended for this purpose. The return of budgetdeficits, at least in the short term, has further increased the interest in some form of budgetenforcement procedures beyond FY2002. (20)

The success of the 1990 BEA, and its extensions in 1993 and 1997, is generally attributedto the fact that the procedures were used to enforce multiyear agreements on budget policies. Thus,a consensus on budget policies was a prelude to the creation and previous extensions of the BEAprocedures. Presumably, then, an agreement on budget policies would be critical to the success ofany extension beyond FY2002. An extension of the BEA by itself is not likely to create a consensuson budget policies where none exists.

If Congress and the President decide that these budget enforcement mechanisms should beextended, they will need to decide whether the BEA procedures should be extended in their currentform or modified. Possible questions Congress might consider include: (21)

What time frame should the extension cover? The initial BEA of 1990 and itsextensions in 1993 and 1997 each covered 5 fiscal years. (22) Congress might want to base the time frame on the number offiscal years determined to be necessary to achieve a specific budget goal (e.g., an on-budget balance). For instance, the 1997 extension was intended to produce a unified balanced budget at the end of the5 fiscal years. However, the initial 1990 BEA and the 1993 extension were not intended to achievea specific budget goal at the end of their 5 fiscal years, other than a certain amount of deficitreduction.

Should one overall discretionary spending cap be established, or shouldseparate caps for different categories of discretionary spending be established? Under an overalldiscretionary cap, any breach would result in a sequester in all non-exempt discretionary programs. Under separate caps, any breach of one or more of the caps would result in a sequester only innon-exempt programs within the violating category. Therefore, an advantage of separate caps is thatthey ensure a violation and subsequent sequester in one category would not harm programs in othercategories. In addition, they would prevent spending cuts in one category from being used toincrease spending in another category. A disadvantage of separate caps is that they would reducethe flexibility of Congress and the President by limiting the ability to make tradeoffs betweenprograms in different categories.

What, if any, adjustments to the spending caps should be allowed? Manywould agree that some adjustments, or "safety valves," are necessary to make the spending capsrealistic and secure their compliance. This may be especially important at this time because of theuncertainty of future demands on federal resources for the war on terrorism and homeland security. An adjustment for such purposes may be desirable in any extension of discretionary caps. Whileother existing adjustments may be reexamined, the adjustment for spending designated as anemergency requirement, in particular, has been criticized by many in Congress as a costly loophole,which has been used to circumvent the statutory spending caps rather than respond to trueemergencies. (23) Criticshave proposed eliminating the emergency designation adjustment, assuming a certain level ofemergency spending within the new caps, specifying criteria in statute regarding what constitutes anemergency, or a combination of these. Proponents of an emergency spending adjustment argue thatrealistic discretionary spending caps would prevent the misuse of the emergency designation. Formore on this issue, see the discussion of budgeting for emergencies later in thisreport.

Should the PAYGO requirement for new direct spending and revenuelegislation be modified to permit direct spending increases or tax cuts as long as no on-budgetdeficit results? Under the existing PAYGO requirement, any on-budget surplus cannot be used fordirect spending increases or tax cuts. (24) Opponents of the current requirement argue that this should bechanged to apply only to new direct spending or revenue legislation that would increase theon-budget deficit or cause an on-budget deficit, similar to the current PAYGO point of order in theSenate. (25) Proponentsof the existing requirement argue that any on-budget surplus should be used for debt reduction, orto extend the solvency of the Social Security and Medicare trust funds, instead of direct spendingincreases or tax cuts.

Legislative History

For at least the last 2 years, there has been congressional interest in modifying and possiblyextending the BEA procedures beyond FY2002. The emergence of budget surpluses contributed toincreased fiscal demands (i.e., for spending increases and tax cuts), which arguably made existingbudget enforcement constraints inappropriate. (26) Nevertheless, a consensus began to emerge that some ongoingconstraints on budget policy were necessary even in times of surpluses, but different ones than thosecreated in times of deficits.

In the last few years, Congress and the President have made ad hoc modifications to the BEAto avoid a sequester for the upcoming fiscal year or to reduce the likelihood of a sequester in futurefiscal years. (27) Mostrecently, the Defense Appropriations Act for FY2002 ( P.L. 107-117 ) included provisions increasingcertain discretionary spending limits for FY2002 and changing the PAYGO scorecard balance tozero for FY2001 and FY2002. Such modifications to the discretionary spending limits and PAYGOscorecard effectively prevented an end-of-the-session sequester for FY2002. (28)

A more comprehensive description of congressional actions on this issue appears in the CRS Report RL31479(pdf) , Federal Budget Process Reform: Proposals and Legislative Actions in the 107thCongress .

Joint Budget Resolution

Conflict is inherent in budgeting because decisions are made regarding who receives benefitsand who does not, and who pays and who does not. By itself the process in which these decisionsare made cannot eliminate substantive differences in budgetary goals within Congress or betweenCongress and the President. A structure for consideration of budgetary decisions, however, cansometimes reduce or exacerbate budgetary conflict. Some Members of Congress argue that theannual adoption of the congressional budget in the form of a concurrent resolution, without theformal involvement of the President, discourages cooperation between Congress and the Presidentearly in the process. They argue that this contributes to the recurring inability of Congress and thePresident to enact spending and tax legislation by the beginning of the fiscal year. Some Membersof Congress, as well as President Bush, (29) have proposed to transform the annual congressional budget froma concurrent resolution to a joint resolution, and thereby formally and directly involve the Presidentin congressional deliberations on the budget early in the process. Like bills, joint resolutions are alegislative form used to make law.

Background

Prior to the Congressional Budget Act (CBA) of 1974 (Titles I-IX of P.L. 93-344 ), Congressdid not adopt an overall budget plan, but rather considered authorization, revenue, and appropriationslegislation separately. There was no formal mechanism in place to develop, consider, and approvea comprehensive congressional budget plan. The 1974 CBA established the annual concurrentresolution on the budget as the centerpiece of the congressional budget process. The budgetresolution sets forth aggregate spending and revenue levels, and spending levels by major functionalarea, for at least 5 fiscal years. The budget resolution also may contain reconciliation instructionsdirecting one or more committees to recommend legislative changes to achieve the levels of directspending, revenues, and the debt limit agreed to in the budget resolution. Because the budgetresolution is in the legislative form of a concurrent resolution, it is not presented to the President forhis signature, and thus does not become law. Instead, if adopted with the same language by both theHouse and Senate, it constitutes an agreement between the House and Senate on a congressionalbudget plan, providing a framework for subsequent legislative action on budgetary legislation duringa session of Congress.

During the development and consideration of the Congressional Budget Act, Congressintentionally decided to express its overall budget plan in the form of a concurrent resolution in orderto create a budget process "independent of the President and dependent solely on congressionalaction" under which Congress would be "unconstrained by presidential preferences." (30) The concurrent budgetresolution provides Congress with its own statement of budget policy, generally as a response to thePresident's budget. Critics argue that this process highlights, and may even encourage, the conflictbetween the two branches during the initial formulation of budget policies each year. They furtherargue that this process makes it more difficult for the two branches to cooperate later in the processwhen substantive spending and revenue measures require the President's signature. In particular,critics claim that this disincentive for early cooperation in the process contributes to the recurringinability of Congress and the President to enact the regular appropriations acts by the beginning ofthe fiscal year on October 1. In the 27 years since the creation of the budget resolution in 1974, allregular appropriations bills were enacted by the start of the fiscal year only four times, in 1976, 1988,1994, and 1996.

Options and Discussion

Some Members of Congress have proposed transforming the concurrent resolution on thebudget into a joint resolution, requiring the President's signature. They argue that a joint budgetresolution would be more effective in guiding budget policy by formally and directly involving thePresident in congressional deliberations on the budget early in the process. According to proponents,this early involvement would foster cooperation between the two branches, leading to less conflictwhen spending and tax legislation implementing budget resolution policies are finalized later in thesession.

Proponents of a joint budget resolution point to the apparent success of budget summits,where congressional leaders and the President have negotiated an agreement on an overall budgetplan and then implemented that agreement with the subsequent enactment of legislation. A recentexample is the inter-branch negotiations that led to the 1997 bipartisan budget agreement. (31) A joint budget resolution,advocates argue, would formalize these negotiations, effectively requiring Congress and thePresident to begin negotiations on the budget early in the process each year. They claim that earlynegotiations and the requirement that the President sign the budget resolution would increase thelikelihood of the two branches reaching an agreement over broad budget policies. If an earlyagreement is not reached, proponents argue that at the very least the formal process would forceCongress and the President to confront the disagreements early in the process, instead of at the endwhen there is a rush to enact all the appropriations measures by the start of the new fiscal year inorder to avoid a government shutdown.

Critics of a joint budget resolution counter that formalizing early negotiations betweenCongress and the President would not guarantee agreement on budget policies. They contend thatinterbranch negotiations and any subsequent agreement largely depend on the degree of consensuson budget policy, rather than budget procedures. Opponents further argue that requiring thePresident to sign the budget resolution may even make an agreement more difficult to reach byaggregating the budget disputes into one piece of legislation and thereby raising the political stakes.

Opponents also argue that agreement on broad budget policies would not preventdisagreements from arising over details in subsequent legislation implementing those policies. Thus,they contend that transforming the concurrent budget resolution into a joint resolution would notitself result in more timely enactment of budgetary legislation, as intended by its supporters. The1997 bipartisan budget agreement is cited as an illustrative example. Even though Congress and thePresident agreed to a broad 5-year plan to balance the budget by FY2002 in late spring 1997, finalaction on budgetary legislation implementing the agreement did not occur until well after the startof the new fiscal year. Only one regular appropriations measure for FY1998 was enacted by October1, and the final two regular appropriations measures for FY1998 were not enacted until November26 (i.e., 57 days late). (32)

Finally, critics claim that a joint budget resolution would result in a cession of power to thePresident. They argue that, by providing the President an opportunity to veto the budget resolution,Congress would be giving up its independence to formulate and adopt its own overall budget plan,as the President does with his annual budget submission to Congress. Proponents, however, counterthat a joint budget resolution would not provide the President with any more power than he alreadyexercises under the existing budget process. They point to the fact that the President's signature isrequired on the spending and revenue legislation implementing the budget resolution policies; thus,a joint budget resolution would simply entail obtaining the President's approval at the beginning ofthe process instead of only at the end.

Legislative History

Early congressional interest in converting the concurrent resolution on the budget into a jointresolution coincided with the practice of negotiating budget agreements between congressionalleaders and the President, commonly referred to as budget summits, beginning in the late1980s. (33) Since then,a joint budget resolution has been a perennial component of budget process reform proposals inCongress. Between 1989 and 2000, at least 26 bills were introduced that would have converted theconcurrent budget resolution into a joint budget resolution. On March 31, 1998, the Task Force onBudget Process of the House Budget Committee held the first hearing specifically concerned withthe question of whether the concurrent budget resolution should be converted into a jointresolution. (34) Thishearing, along with other hearings on the subject of budget process reform by the task force, led tothe introduction in the House of a comprehensive budget process reform bill containing a jointresolution component, during the 105th Congress ( H.R. 4837 , the ComprehensiveBudget Process Reform Act of 1998).

No action was taken in the 105th Congress, but the legislation was reintroduced in the 106thCongress with virtually identical language as H.R. 853 , the Comprehensive BudgetProcess Reform Act of 1999. Title I of H.R. 853 provided an annual joint resolution on the budgetto replace the concurrent budget resolution. (35) Hearings on the bill were held by the House Rules Committeeon May 12 and 13, 1999, (36) and by the House Budget Committee on May 20, 1999. (37) Subsequently,H.R. 853was ordered reported (amended) by the House Budget Committee ( H.Rept. 106-198 , part 2) on June17, 1999, and by the House Rules Committee ( H.Rept. 106-198 , part 3) on June 23, 1999. (38) The legislation, however,was defeated on the House floor by a vote of 166-250 on May 16, 2000. (39)

Budgeting for Emergencies

In recent years, some Members of Congress have shown an interest in changing the wayCongress and the executive budget for emergencies or unanticipated situations. Currently, Congressprovides additional funds during the fiscal year, usually in supplemental appropriations, to respondto specific natural disasters and other emergency, or unanticipated, situations. Congress and thePresident usually designate the additional spending as an "emergency requirement," effectivelyexempting it from budget constraints established under the Budget Enforcement Act (BEA) of 1990,as amended. (40) SomeMembers of Congress, as well as President George W. Bush, (41) have proposed to changethis practice by creating a reserve fund for emergencies, with the appropriation of such funds tiedto meeting specific criteria regarding what constitutes an emergency.

Background

Natural disasters and other emergency situations often lead to demands on Congress and thePresident to provide additional federal spending after the regular appropriations acts for the currentfiscal year have been enacted into law. (42) The sudden or unpredictable nature of such emergencies makesspending requirements difficult to anticipate so that the additional spending often is considered inan environment of urgency, with little or no comprehensive analysis of the appropriate level of suchfederal spending. Some believe this practice of budgeting for emergencies might lead to unnecessaryor wasteful spending. In addition, some believe that the existing budgetary treatment of emergencyspending provides an incentive to designate non-emergency spending as an emergency requirementin order to circumvent the constraints of the BEA.

Prior to the Congressional Budget Act (CBA) of 1974 (Titles I-IX of P.L. 93-344 ), there wasno formal mechanism in place to develop, consider, and approve an overall congressional budgetplan. Consequently, there was no formal mechanism in Congress to budget for unanticipatedspending. The 1974 CBA established the annual budget resolution as a means for Congress topropose an overall budget plan, providing a framework for subsequent spending and revenuelegislation. With the annual budget resolution, Congress could budget for emergency situations byincluding spending amounts for such expected but unpredictable purposes in its overall budget plan. In fact, Section 301(a)(2) of the original act required that the budget resolution include a separatespending allocation "for contingencies" out of the total spending amount. However, no budgetresolution has included a separate allocation for contingencies, and the requirement for contingencyspending was removed from the CBA by the Balanced Budget and Emergency Deficit Control Actof 1985 (Title II of P.L. 99-177 ).

The current budgetary treatment of emergency spending has its roots in the 1987 and 1989budget summit agreements between congressional leaders and the President. (43) In both agreements,Congress and the President agreed to limits on the overall level of appropriations provided in theannual 13 regular appropriations acts and also that neither the Congress nor the President would"initiate supplementals except in the case of dire emergency." (44) This exception to theagreed-upon spending caps was intended to provide a "safety valve" for spending that both Congressand the President could agree was a dire emergency. Neither agreement included a definition ofwhat constituted a dire emergency, but instead relied on the normal legislative process to ensure amutual agreement on supplemental appropriations.

In 1990, Congress and the President established new statutory procedures to enforce amulti-year budget agreement. The Budget Enforcement Act of 1990 created statutory limits ondiscretionary spending and a "pay-as-you-go" (PAYGO) requirement for new direct spending andrevenue legislation. The discretionary spending limits and PAYGO requirement would be enforcedby sequestration, which involves automatic, largely across-the-board spending cuts in non-exemptprograms. These enforcement mechanisms were modified and extended in 1993 and 1997, andgenerally expire at the end of FY2002 (i.e., September 30, 2002). (45)

The 1990 BEA also formalized the limitation on budgeting for emergencies embodied in theprevious budget summit agreements. The act effectively exempts from the statutory caps alldiscretionary spending the President designates as "emergency requirements" and that Congress sodesignates in statute. (46) In addition, provisions in new direct spending and revenue legislation designated as emergencyrequirements by the President and Congress are exempt from the PAYGO requirement. (47) The emergencydesignation also effectively exempts such spending, or tax cuts, from congressional budgetconstraints, such as the aggregate levels established in the budget resolution, when legislation isconsidered on the House and Senate floor.

As with the previous budget summit agreements, the BEA does not define what constitutesan emergency requirement. According to the law, an emergency requirement is whatever Congressand the President agree to designate as such. In 1991, responding to a congressional directive toreport on the unfunded costs of dire emergencies, the Office of Management and Budget (OMB)developed the following five criteria the President would use to determine whether a spendingprovision would qualify as an emergency requirement: (48)

necessary expenditure--an essential or vital expenditure, not one that is merelyuseful or beneficial;

sudden--quickly coming into being, not building up overtime;

urgent--pressing and compelling need requiring immediateaction;

unforeseen--not predictable or seen beforehand as a coming need;and

not permanent--the need is temporary in nature.

In addition to these non-binding criteria, the House and Senate have adopted rules todiscourage the use of the emergency designation. In the House, clause 2(e) was added to Rule XXIin 1995 to prevent non-emergency spending from being reported in, or offered as an amendment to,an appropriations bill that contains an emergency designation. In the Senate, Section 205 of theFY2001 budget resolution ( H.Con.Res. 290 , 106th Congress) prohibits an emergencydesignation for any provision of legislation, except for defense discretionary appropriations. Therule may be waived by a three-fifths vote or set aside by unanimous consent. (49) The rule includes theOMB criteria as guidelines for designating provisions of legislation as emergency requirements, butdoes not require emergency designations meet these criteria.

Notwithstanding the OMB guidelines and congressional budget rules, critics have argued thatthe emergency designation has been used for non-emergency spending in order to circumvent budgetconstraints. As evidence, critics point to the increase in emergency-designated spending in recentyears. For instance, emergency-designated spending for FY1999 was more than three times theannual average for the preceding 7-year period (see Table 1 ). (50) Emergency-designatedspending for FY2000 was more than four times that annual average. (51)

Table 1. Spending Designated as Emergency Requirements,FY1991-FY2002

(millions of dollars of budget authority)

Source: Congressional Budget Office. Data are current as of April 25, 2002.

Options and Discussion

Proposals to reform the existing process of budgeting for emergencies largely involveestablishing a reserve fund for emergencies, with the appropriation of such funds tied to meetingspecific criteria concerning what constitutes an emergency.

Proponents of an emergency reserve fund argue that the average annual amount of overallemergency spending can be projected based on past experience, even though specific emergenciescannot be predicted. Therefore, they further argue that an expected amount of emergency spendingshould be incorporated into the overall amount of spending in the President's budget and the budgetresolution, as well as any statutory spending limits if they are extended beyond FY2002. Proponentsof an emergency reserve fund suggest that an historical average of actual emergency spending wouldprovide sufficient funds to meet specific emergencies as they arise. For instance, the most recentemergency reserve fund proposal (H.R. 853, 106th Congress, the Comprehensive Budget ProcessReform Act of 1999) required that such a fund be based on a 5-year rolling average of actualemergency spending.

Some critics have questioned whether setting aside funds for unknown emergency situationsis appropriate, particularly when the federal budget shows a deficit. The money set aside for anemergency reserve fund presumably would require limiting, and may even require reducing,spending for ongoing programs and activities. Making such choices at the beginning of the budgetprocess would require Congress to make tradeoffs between specific ongoing programs and generalemergency situations. That is, Congress would be required to make offsetting cuts in ongoingprograms without knowing what specific situation or purpose it was financing, or even if all of thefunding would be needed. In contrast, under the current process, Congress can weigh the merits ofspending for ongoing programs with those of a specific emergency situation. Some may argue thatthis existing process allows Congress to make more rational budgetary tradeoffs. In addition, settingaside a large specified amount of funds may provide an incentive to appropriate more funds thannecessary in order to spend the entire amount in the reserve fund by the end of the fiscal year. Incontrast, the current process does not provide any incentives to spend a specific amount onemergencies, but only an amount determined as emergency situations arise.

Emergency reserve fund proposals also require that appropriations from the reserve fundmeet specific criteria regarding what constitutes an emergency. Proponents often suggest variationsof the OMB criteria issued in 1991. For instance, H.R. 853 (106th Congress) defined an emergencyas a situation that requires new spending "for the prevention or mitigation of, or response to, loss oflife or property, or a threat to national security" and is unanticipated. This proposal defined anunanticipated situation as one that is sudden, urgent, unforeseen, and temporary.

Critics of enacting specific criteria into law often argue that such mechanisms could hinderthe ability of Congress and the President to respond to emergency situations quickly. They maintainthat any specific criteria would not eliminate the subjective nature of the decision-making process. Instead, they argue that a reserve fund mechanism tied to specific criteria would give a few decisionmakers, presumably the chairs of the Budget Committees, effective control over emergency spendingdecisions. Therefore, disagreements over the application of the specific criteria with those inCongress who would be responsible for releasing such funds potentially could cause unnecessarydelays in responding to emergency situations. In addition, a requirement to meet each criterionmight neglect the unique circumstances of any given emergency situation. For instance, the urgencyof a particular situation may outweigh the failure to meet all criteria.

Proponents of an emergency reserve fund mechanism also propose to eliminate theemergency designation process associated with the Budget Enforcement Act. As noted above,spending designated as an emergency by Congress and the President is effectively exempt from thestatutory spending caps. If the BEA procedures are not extended beyond FY2002, the emergencydesignation issue will be irrelevant. If the BEA procedures are extended, proponents argue that newdiscretionary spending limits should assume a certain level of emergency spending, based on anhistorical average, making an adjustment for emergency-designated spending unnecessary. Theymaintain that the emergency designation process is a "costly" loophole, which has been used tocircumvent the statutory spending caps rather than respond to true emergencies. Opponents,however, argue that allowing adjustments for unanticipated spending provide a necessary safetyvalve within the restrictive spending constraints. They claim that this safety valve is essential to theeffectiveness of the spending caps to restrain discretionary spending.

Legislative History

Since the first federal statutory control on emergency spending was established in 1990 underthe BEA, Congress has expressed an interest in the possibility of further limits. Legislation to createa reserve fund for natural disasters and other emergency situations was introduced at least as earlyas the 103rd Congress (1993-1994). (52) On June 23, 1998, the Task Force on Budget Process of theHouse Budget Committee held a hearing on the general subject of the budgetary treatment ofemergencies. (53) Thishearing, along with other hearings on the subject of budget process reform by the task force, led tothe introduction in the House of a comprehensive budget process reform bill containing anemergency reserve fund during the 105th Congress (H.R. 4837, the Comprehensive Budget ProcessReform Act of 1998).

No action was taken on this legislation in the 105th Congress, but the proposal wasreintroduced in the 106th Congress as H.R. 853 , the Comprehensive Budget ProcessReform Act of 1999. Title II of H.R. 853 required the budget resolution to include an emergencyreserve fund and tied the allocation of those funds to whether the spending met specific criteria ofwhat constitutes an emergency. (54) Hearings on the bill were held by the House Rules Committeeon May 12 and 13, 1999, (55) and by the House Budget Committee on May 20, 1999. (56) Subsequently,H.R. 853was ordered reported (amended) by the House Budget Committee ( H.Rept. 106-198 , part 2) on June17, 1999, and by the House Rules Committee ( H.Rept. 106-198 , part 3) on June 23, 1999. (57) The legislation, however,was defeated on the House floor by a vote of 166-250 on May 16, 2000. (58)

Notwithstanding this unsuccessful effort to create an emergency reserve fund, the House andSenate have adopted rules to discourage the use of the emergency designation associated with theBEA, as mentioned above. First, the House added clause 2(e) to Rule XXI in 1995 to preventnon-emergency spending from being reported in, or offered as an amendment to, an appropriationsbill that contains an emergency designation. Second, the Senate created a temporary point of orderin 1999 prohibiting an emergency designation for any provision of legislation, except for defensediscretionary appropriations, and requiring a three-fifths vote to waive it. (59) In 2000, the Senatesubsequently made this point of order permanent in the FY2001 budget resolution (Section 205 of H.Con.Res. 290 , 106th Congress).

Automatic Continuing Resolutions

Delays in the consideration and enactment of appropriations have been a source of chronicdifficulties in the budget process. When delays prevent the enactment of regular appropriationsbefore the start of the fiscal year (October 1), Congress and the President typically enact stop-gapfunding in the form of continuing resolutions (CRs). If neither the regular appropriation for anagency nor a continuing resolution is enacted, funding will lapse for that agency. Such a lapse, orfunding gap, will result in a shutdown of the affected agency. One possible reform of the budgetprocess that has been proposed is to provide for the automatic continuation of appropriations at thestart of a fiscal year in the absence of an agency's regular appropriation, to avert shutdowns. (60)

In some ways, an automatic continuing resolution is an alternative to biennial budgeting asa method for dealing with delays in the consideration and enactment of budgetary legislation. Ratherthan provide a longer, defined period for consideration, an automatic continuing resolution wouldprovide an indefinite period, and alleviate the most dire consequence of failure to enactappropriations in a timely fashion.

Background

Continuing resolutions have been employed to provide temporary funding of federal agenciesand programs since 1876, and have become a regular part of the annual budget cycle. Since the startof the fiscal year was shifted to October 1 beginning with FY1977, there have been only 3 years forwhich no continuing resolutions have been enacted, FY1989, 1995, and 1997. (61) Table 2 (below) showsthe number of regular appropriations bills that were enacted at the beginning of the new fiscal yearsince FY1990.

There are no requirements concerning the duration of continuing resolutions. Some mayprovide funding for a single day, while others may provide funding for several weeks, or eventhrough the end of the fiscal year. (62) Consequently, the number of continuing resolutions enacted canvary independent of the length of time after October 1 required to complete action on appropriations. In addition to regular appropriations bills enacted, Table 2 shows the number of continuingresolutions that have been enacted since FY1990.

Table 2. Regular Appropriations Enacted by October 1 andContinuing Resolutions Enacted, by Fiscal Year, FY1990-FY2002

Source: Calendars of the House of Representatives.

There are also no requirements concerning the form in which appropriations must beprovided in continuing resolutions. Because continuing resolutions are generally written for shortperiods of time they are usually framed in terms of rates of spending (roughly the annual level offunding divided by the duration of the CR) rather than specific amounts of money. Continuingresolutions typically provide funds at some formula-driven rate, such as some percentage of theprevious year's rate, or the rate provided in an appropriations bill passed by the House (or Senate),but not yet ready for transmittal to the President. However, continuing resolutions may also provideexceptions to such formulas, providing more or less funding as deemed necessary for specificagencies or programs. It should also be noted that in most cases, continuing resolutions providefunds only for the continuation of funding for existing agencies and programs, and not for any newspending initiatives.

Continuing resolutions are necessary because a lapse in funding for an agency or programwill result in a shutdown of the affected agency. This is because the Antideficiency Act generallyprohibits an agency from entering into any obligation to spend federal funds in the absence ofappropriations. (63) Asa result, in the event of a funding gap, federal agencies are required to shut down all non-emergencyfunctions and activities. The Budget Enforcement Act subsequently provided that the exception foremergencies does not include "ongoing, regular functions of government the suspension of whichwould not imminently threaten the safety of human life or the protection of property." (64)

One factor complicating the consideration of an automatic continuing resolution in recentyears has been how they are regarded under the current system of budgetary control. The currentsystem differentiates between discretionary and direct spending. Although continuing appropriationsare considered discretionary spending, an automatic continuing resolution would be regarded asdirect spending because it would provide legal authority to obligate funds outside of the regularappropriations process. As a result, the cost estimate for H.R. 853 and S. 558 prepared by CBOwould have a significant impact on the PAYGO process. (65) Under current procedures, the consideration of a bill to providean automatic continuing resolution could thus be potentially subject to points of order enforcingPAYGO. The enactment of a measure containing direct spending could also be problematic undercurrent procedures, and could trigger a sequester if it were not offset (by reductions in other directspending, increases in revenues, or some combination of both) or if statutory language was not alsoenacted to make compensatory adjustments to the PAYGO scorecard.

Options and Discussion

The main feature for distinguishing among the possible options for an automatic continuingresolution has been the funding level. Proposals have been discussed that would provide fundingat the level of the previous fiscal year (or the previous fiscal year's level adjusted for inflation); a setpercentage of the level of the previous fiscal year (such as 95% or 98%); the House- (or Senate-)passed level; or even the level recommended in the President's budget.

To some observers, a shutdown of the federal government is a disproportionate consequenceof delays in enacting regular appropriations. They suggest that it would be better to provide for theautomatic continuation of current appropriations, allowing the appropriations process to proceed inan orderly, if not timely, fashion. Without the threat of a government shutdown, Congress and thePresident would be able to enact spending laws without a crisis atmosphere.

Proponents of an automatic continuing resolution also point to the costs of a federalgovernment shutdown. These costs include not only the direct costs to the government of ashutdown, but also pay for federal workers during the period of the shutdown, which has beencustomary even though work is not performed. It also includes less direct costs, such as the coststo beneficiaries of federal programs whose benefits might be delayed, and private sector entitieswhose business with the government is disrupted.

Opponents of an automatic continuing resolution counter by suggesting that an automaticfunding mechanism would be a strong disincentive for lawmakers to reach an agreement on newappropriations. They assert that, while a government shutdown is an undesirable outcome, itprovides all sides with an incentive to reach agreement. Therefore, by eliminating the threat of ashutdown, an automatic continuing resolution could undercut that incentive, and budget agreementmight be more difficult to achieve.

Opponents also argue that by providing a guarantee for a level of funding in the absence ofnew legislation, an automatic continuing resolution could provide an advantage in negotiations tothose who are opposed to the proposed new level of spending, and thus, an incentive not to reachagreement. In such a situation, the level provided for by the automatic continuing resolution wouldbe a critical issue. A level of 98% or 100% of the previous year's funding level could be seen bysome as providing adequate funding, leaving little incentive to negotiate. Proposals to use thePresident's proposal as the fallback level could provide little incentive for the President to negotiatethe level of appropriations. This, opponents argue, would undermine Congress's constitutionalresponsibility to wield the power of the purse since it negates their ability to exercise deliberatechoice in making appropriations.

Legislative History

Although the idea of an automatic continuing resolution has been discussed for a number ofyears, it has received formal consideration by Congress on only a few occasions.

In the 105th Congress, a proposal was considered in both the House and Senate in conjunctionwith a supplemental appropriations measure for FY1997 (S. 672). In that case, the proposal wouldhave provided for an automatic continuation of appropriations, if necessary, for FY1998, but wouldhave had no effect beyond that year. The proposal, as originally formulated, would have continuedfunding in FY1998 at 98% of the FY1997 level. An amendment was offered during Senateconsideration that would have struck the provision from the bill on May 7, 1997. The provision wassubsequently modified by unanimous consent to continue funding at 100% of the FY1997 level. OnMay 8, the amendment was tabled by a vote of 55-45, and the provision was retained in the bill. (66)

In the House, a provision identical to the Senate-passed version was offered as an amendmentto the House version of the FY1997 supplemental appropriation bill (H.R. 1469). The amendmentwas adopted by a vote of 227-197 on May 15, 1997. (67) Accordingly, the provision was included in the bill when it wassent to President Clinton, however, the bill was vetoed on June 7, 1997. Among the reasons citedby the President in his veto message was that the funding level that would be provided in FY1998under the automatic continuing resolution provision was below the level of funding for FY1998already agreed to by the President and Congress. A subsequent supplemental appropriations measurewas later enacted into law without the continuing appropriations provision.

In the 106th Congress, the Senate considered a number of possible budget process reforms. On January 19, 1999, S. 93 , The Budget Enforcement Act of 1999, was introduced bySenator Pete V. Domenici, and referred to the Committee on Governmental Affairs and theCommittee on the Budget, jointly, pursuant to the order of August 4, 1977. The two committees helda joint hearing on budget process reform on January 27, 1999, and the Governmental AffairsCommittee reported the automatic continuing resolution provision in Title IV of S. 93 separately as S. 558 , the Government Shutdown Prevention Act ( S. Rept. 106-15 ). S. 558 wouldhave provided continuing appropriations during FY2000 and FY2001 at the lower of the levelrequested in the President's budget or the prior-year level. The Senate took no further action on theproposal in the 106th Congress.

In the House, H.R. 853 , The Comprehensive Budget Process Act of 1999, wasintroduced by Representatives Jim Nussle and Benjamin Cardin on February 25, 1999, and referredto the Committee on the Budget. (68) It was also referred to the Committee on Rules and theCommittee on Appropriations for consideration of provisions within their respective jurisdictions. Subtitle D of Title VI, providing for a permanent automatic continuing resolution tied to theprior-year level of funding, was referred to the Committee on Appropriations. Hearings on the billwere held by the Rules Committee on May 12 and 13, 1999, and the Budget Committee on May 20,1999. The bill was subsequently reported (amended) adversely by the Appropriations Committee( H.Rept. 106-198 , part 1), and ordered reported (amended) by the Budget Committee ( H.Rept.106-198 , part 2), and the Rules Committee ( H.Rept. 106-198 , part 3).

The adverse report of the Appropriations Committee recommended that the automaticcontinuing resolution provision be dropped from the bill. As reported from the Committees on theBudget and Rules, the provision was modified to exclude funding for one-time increases in responseto emergencies from calculations of the prior-year level. H.R. 853 was subsequentlyconsidered by the House under the terms of H.Res. 499 ( H.Rept. 106-613 ). This specialrule provided for consideration of a base text that did not include a provision for an automaticcontinuing resolution, but allowed for one to be offered as an amendment. On May 16, 2000, theamendment providing for an automatic continuing resolution was rejected 173-236. (69)

Biennial Budgeting

One of the chief congressional complaints about the budget process in recent years has beenthe amount of time it requires. Despite the perceived or actual permanence of much federalspending, the process of formulating, enacting, and executing budgets has remained characteristicallyannual. This annual budget cycle poses a dilemma for Congress. On the one hand, annual reviewof spending legislation can afford Congress the opportunity to maximize its influence concerningthe operation of various programs and policies. On the other hand, annual action on budgetarymatters consumes a significant amount of Congress's time, resulting in a desire by some Membersto reduce the number or frequency of budget measures that need to be considered. One possiblereform that has been proposed to accomplish this is to change the budget cycle to 2 years from oneyear. (70)

Background

The efficient operation of an annual budget cycle is, in many ways, dependent on the timelyenactment of budgetary legislation. Consideration of budget questions in the form of concurrentresolutions on the budget, authorization measures, regular appropriations, supplementalappropriations, continuing resolutions, public debt legislation, revenue measures, and reconciliationbills are often closely linked so that delays in consideration of one measure will have an impact onseveral other budgetary measures. One consequence of this is that budgetary legislation, particularlyfinal action on regular appropriations measures, has significantly contributed to the need forextended congressional sessions. As shown in Table 3 , final action in recent years on the lastregular appropriations bill (either separately or as part of an omnibus measure) has occurred anaverage of 75 days after the start of the fiscal year on October 1. Considering budgetary legislationwith a duration of 2 years might be one way to reduce the likelihood that Congress would need toendure extended sessions as frequently.

Table 3. Dates of Enactment of Last Regular AppropriationsLegislation, FY1996-FY2002

Source: Calendars of the House of Representatives.

One consistent source of support for biennial budgeting has been the presidency. Theadministrations of the past four Presidents have all supported the idea of biennial budgeting. (71) One of the most visibleexamples of this occurred during the Clinton Administration. The 1993 report of the NationalPerformance Review (the Gore report) noted, "Considerable time could be saved--and used moreeffectively--in both the executive and legislative branches of government if budgets andappropriations were moved to a biennial cycle." (72)

Options and Discussion

Because budgeting for the federal government encompasses a number of processes, biennialbudgeting can have several meanings. Biennial budgeting can involve 2-year budget resolutions,2-year appropriations, and multiyear authorizations. In addition, biennial budget proposals typicallyrequire that executive branch planning and performance reviews be revised so that they be based ona 2-year cycle.

Typically, biennial budgeting proposals, such as H.R. 981 (107th Congress, theBudget Responsibility and Efficiency Act of 2001), include all three aspects of congressionalbudgeting, although proposals embracing only one or two are possible options. For example, thebiennial budgeting component of a reform proposal reported by the Senate Rules and AdministrationCommittee in 1994 ( S. 1824 , 103rd Congress, the Legislative Reorganization Act of1994) included 2-year budget resolutions and multiyear authorizations, but not 2-year appropriations. Another significant option concerns the period for which money will be appropriated. One optionwould be to retain the current system of fiscal years, and enact budgetary legislation allocatedbetween two one-year periods. Alternately, biennial appropriations could provide funding for theentire 2-year fiscal period, increasing flexibility for apportioning money over the course of thebiennium.

Advocates of biennial budgeting feel that reducing the number of times that Congress hasto consider budget questions will likewise reduce the amount of time consumed by the process. Supporters project that the benefits of a 2-year cycle would include more time for Congress toconduct agency and program oversight, and more time for budget planning within Congress, as wellas better long-range planning by federal agencies and by state and local governments.

Proposals to convert the federal budget process to a 2-year cycle are also favored by somewho believe that a 2-year cycle provides greater flexibility with regard to deadlines. Without thepressure to enact budgetary legislation every year, there would be greater time available for makingdecisions within the budget cycle, and more efficient coordination of budgetary decisions. This, theyassert, would result in fewer delays and more timely enactment of necessary legislation.

Supporters also point to the multiyear nature of the summit agreements between Congressand the President that have been a part of the budget process for more than a decade as evidence ofthe efficacy of multiyear budgeting, and as a major factor in recent years for promoting moreefficient consideration of budgetary legislation.

Critics of biennial budgeting have countered by arguing that some of the projected benefitscould prove to be illusory. Reducing the number of times that Congress considers budget matters,they suggest, may only raise the stakes, and thereby heighten the possibility for conflict and increaseddelay. In addition, enacting a budget resolution and spending legislation every other year could beeffective in reducing congressional workload or aiding longer-term planning only in the second yearof the cycle. With only a limited ability to anticipate future conditions, critics argue that a 2-yearcycle could require Congress to choose between allowing the President greater latitude for makingbudgetary adjustments, or engaging in mid-cycle corrections to a degree that could nullify anyanticipated time savings or planning advantages. Furthermore, they argue that annual review ofappropriations requests is an important part of oversight that would be lost under a biennial budget,with no guarantee that a separate oversight session would be effective.

Legislative History

Almost from the time that the Congressional Budget Act was enacted in 1974, budget processreform has been a topic of congressional interest, and biennial budgeting was discussed at least asfar back as the 95th Congress (1977-1978). (73) Hearings on the subject of budget process reform have oftenincluded testimony concerning biennial budgeting. In addition, on several occasions both the Houseand the Senate have conducted hearings specifically on the topic of biennial budgeting. (74) In addition to hearings,congressional interest has been demonstrated by survey, (75) and by cosponsorship of those proposals that have beenintroduced. (76)

In the House, jurisdiction over budget process reform generally is currently shared by theCommittees on Rules and the Budget. Both have considered the issue of biennial budgeting. Duringthe 106th Congress, the House Committee on Rules conducted three days of hearings on the subjectof biennial budgeting. (77) The House subsequently considered a biennial budget proposal in the form of an amendment duringconsideration of H.R. 853 , the Comprehensive Budget Process Reform Act. (78) On May 16, 2000, theamendment providing for a biennial budget was rejected, 201-217. (79)

In the 107th Congress, a biennial budgeting proposal was reported and placed on the UnionCalendar for the first time. On March 13, 2001, H.R. 981 , The Budget Responsibilityand Efficiency Act, was introduced in the House by Representative Charles F. Bass, and referred tothe Committee on the Budget for a period ending not later than April 13, 2001, and in addition tothe Committee on Rules and the Committee on Government Reform for a period to be determinedsubsequently by the Speaker. The period of the referrals was extended on several occasions and themeasure was reported with an amendment by the Committee on the Budget on September 5, 2001( H.Rept. 107-200 , part 1). Rather than put the federal budget on a 2-year cycle, the committeeamendment substituted a proposal for the creation of a Commission on Federal Budget Concepts thatwould evaluate and make recommendations on a number of budget process issues. The Committeeon Rules subsequently reported the measure on November 14, 2001 ( H.Rept. 107-200 , part 2), andthe Committee on Government reform was discharged from further consideration on the same day. As reported by the Committee on Rules, H.R. 981 included 2-year budget resolutions,2-year appropriations, and multiyear authorizations.

In the Senate, jurisdiction over the budget process is shared by the Committees onGovernmental Affairs and the Budget under the order of August 4, 1977, which provides that if onecommittee reports a measure, the other has 30 days to report or be discharged from furtherconsideration. Proposals for a 2-year budget cycle have previously been reported by theGovernmental Affairs Committee in 1988 ( S. 2478 , S.Rept. 100-499),1990 ( S. 29 , S.Rept. 101-254), and 1997 ( S. 261 , S.Rept105-72 ). All three of these proposals took a comprehensive approach to biennial budgeting, andincluded 2-year budget resolutions, 2-year appropriations, and multiyear authorizations.

Also, in 1993, both the Senate and House members of the Joint Committee on theOrganization of Congress included proposals for a 2-year budget cycle in their recommendations totheir respective chambers (S.Rept. 103-215, vol. 1, and H.Rept. 103-413, vol. 1). Inthe Senate, these recommendations were subsequently introduced as S. 1824 , referredto the Committee on Rules and Administration, and reported in 1994 (S.Rept. 103-297). As noted above, in contrast to the comprehensive approach to biennial budgeting taken most biennialbudgeting proposals, S. 1824 , as reported, included 2-year budget resolutions andmultiyear authorizations, but not 2-year appropriations.

The most recent biennial budgeting measure to be reported in the Senate is S. 92 (106th Congress). On January 19, 1999, two bills were introduced by Senator Pete V. Domeniciincluding biennial budgeting provisions: S. 93 , The Budget Enforcement Act of 1999,and S. 92, The Biennial Budgeting and Appropriations Act. Both were referred to the Committeeon Governmental Affairs and the Committee on the Budget, jointly. The two committees held a jointhearing on budget process reform on January 27, 1999, including the subject of biennial budgeting. S. 92 was subsequently considered by the Committee on Governmental Affairs on March 4, 1999,and ordered reported with an amendment (a complete substitute making a number of technicalcorrections). A written report was filed on March 10, 1999 ( S.Rept. 106-12 ). The Senate took nofurther action on the proposal in the 106th Congress.