Advocates of biennial budgeting often point to the experience of individual states. In looking to the states it is necessary to disaggregate them into several categories. First, 8 states have biennial legislative cycles and hence necessarily have biennial budget cycles. Second, as the table below shows, the 42 states with annual legislative cycles present a mixed picture in terms of budget cycles: 27 describe their budget cycles as annual, 12 describe their budget cycles as biennial and 3 describe their budget cycles as mixed. The National Association of State Budget Officers (NASBO) reports that those states that describe their system as “mixed” have divided the budget into two categories: that for which budgeting is annual and that for which it is biennial. Connecticut has changed its budget cycle from biennial to annual and back to biennial. In the last 3 decades, 17 other states have changed their budget cycles: 11 from biennial to annual, 3 from annual to mixed, and 3 from annual to biennial. Translating state budget laws, practices, and experiences to the federal level is always difficult. As we noted in our review of state balanced budget practices, state budgets fill a different role, may be sensitive to different outside pressures, and are otherwise not directly comparable. In addition, governors often have more unilateral power over spending than the President does. However, even with those caveats, the state experience may offer some insights for your deliberations. Perhaps significant is the fact that most states that describe their budget cycles as biennial or mixed are small and medium sized. Of the 10 largest states in terms of general fund expenditures, Ohio is the only one with an annual legislative cycle and a biennial budget. According to a State of Ohio official, every biennium two annual budgets are enacted, and agencies are prohibited from moving funds across years. In addition, the Ohio legislature typically passes a “budget corrections bill.” A few preliminary observations can be made from looking at the explicit design of those states which describe their budget cycle as “mixed” and the practice of those which describe their budget cycle as “biennial.” Different items are treated differently. For example, in Missouri the operating budget is on an annual cycle while the capital budget is biennial. In Arizona “major budget units”—the agencies with the largest budgets—submit annual requests; these budgets are also the most volatile and the most dependent on federal funding. In Kansas the 20 agencies that are on a biennial cycle are typically small, single-program or regulatory-type agencies that are funded by fees rather than general fund revenues. In general, budgeting for those items which are predictable is different than for those items subject to great volatility whether due to the economy or changes in federal policy. S. 1434, like a number of previous bills, proposes that the entire budget cycle be shifted from annual to biennial. Under this system, the President would submit budgets every 2 years. Authorizations would be for 2 years or longer. Budget resolutions would be adopted, and appropriations enacted, every 2 years. We believe that this need not be seen as an all-or-nothing proposal. Budget agreements, authorizations, budget resolutions, and appropriations need not cover the same time period. Multiyear fiscal policy agreements and multiyear authorizations make a great deal of sense, but they do not require changing the appropriations decision cycle from annual to biennial. While biennial appropriations could save time for agencies, they would result in a shift in congressional control and oversight. Proposals to change the process should be viewed partly in the context of their effect on the relative balance of power in this debate. We have previously supported the use of multiyear authorizations for federal programs. There seems to be little reason to reexamine and reauthorize programs more often than they might actually be changed. Furthermore, multiyear authorizations help both the Congress and the executive branch by providing a longer term perspective within which a program may operate and appropriations can be determined. This is the normal practice for most of the nondefense portion of the budget. We also agree that a 2-year budget resolution is worth considering. Especially in an era of multiyear spending caps and multiyear reconciliation instructions, a 2-year budget resolution may not be a major change. However, a way would have to be found to update the Congressional Budget Office’s (CBO) forecast and baseline against which legislative action is “scored.” As you know, CBO scores legislation on the economic assumptions in effect at the time of the budget resolution. Even under the current system there are years when this practice presents problems: in 1990 the economic slowdown was evident during the year, but consistent practice meant that bills reported in compliance with reconciliation instructions were scored on the assumptions in the budget resolution. If budget resolutions were biennial, this problem of outdated assumptions would be greater—some sort of update in the “off year” would be necessary. We have also said that we believe that at a time when major efforts are under way to reduce the deficit, there should be some way to look back and track progress against any multiyear fiscal policy plan. Such a formal “lookback” would be even more critical under a biennial budget resolution. Traditionally, biennial budgeting has been advocated as a way to advance several objectives: (1) to shift the allocation of agency officials’ time from the preparation of budgets and justifications to improved financial management and analysis of program effectiveness, (2) to reduce the time Members of the Congress must spend on seemingly repetitive votes, and hence permit increased oversight, and (3) to reduce uncertainty about longer-term funding levels and allocations and hence improve program management and results. However, shifting the entire cycle—authorizations, budget resolutions, and appropriations—to a biennial one may not be necessary to achieve these objectives. As I noted earlier, biennial appropriations can be considered separate from biennial budget resolutions because the two raise quite different questions. Let me turn now specifically to that issue. In considering whether the federal government should shift to a biennial budget, it is important to recognize the critical distinction between how often budget decisions are made and how long the money provided for agency use is available. That is the difference between the periodicity of decisions and the periodicity of funds. Biennial budgeting proposals seek to change the frequency with which decisions are made—from annual to biennial budget decisions. Too often, however, the idea is discussed as though it were necessary to change the frequency of decisions in order to change the length of time funds are available. However, as you know, this is a misconception. The federal budget today is not composed entirely of annually enacted appropriations of 1-year moneys. Not all funds expire on September 30 of each year. First, because budget decisions about mandatory programs and entitlements—which constitute nearly two-thirds of federal spending—are not made annually, the debate about annual versus biennial appropriations deals with less than half of the budget. Annually enacted appropriations apply to that portion of the budget known as discretionary spending—about 36 percent of federal outlays in fiscal year 1995. Even within that 36 percent of the budget on an annual appropriation cycle, not all appropriations were for 1-year funds. The Congress has routinely provided multiple-year or no-year appropriations for accounts or for projects within accounts when it seemed to make sense to do so. Indeed, about two-thirds of the accounts on an annual appropriation cycle contained some multiple-year or no-year funds. For these accounts, some prior year and/or current year authority was available for obligation beyond September 30, 1995, without further congressional action. To the extent that biennial budgeting is proposed as a way to ease a budget execution problem, the Congress has shown itself willing and able to meet that need under the current annual cycle. The federal government has had some experience with biennial budgets. The 1986 Defense Authorization Act directed the Department of Defense (DOD) to submit a biennial budget for fiscal years 1988 and 1989 and every 2 years thereafter. DOD submitted 2-year budgets for a number of fiscal years. However, the authorization committees have not approved a full 2-year budget, and thus the appropriation committees have not provided appropriations for the second year. We have previously reported that if the Congress decides to implement a 2-year budget at the appropriation account level, it should proceed cautiously by testing it on a limited basis. Good candidates for a limited test would be organizations or programs which are relatively stable and for which there are no obvious impediments. Impediments would be activities that hamper the forecasting of budgetary needs for the 2-year period, such as a major reorganization, major changes in financial management or IRM systems, or major changes in mission. In its efforts to bring the budget into balance, the Congress is currently considering major changes in the scope and methods of delivering government services. The very magnitude of these changes raises questions about whether a shift to biennial appropriations could or should be made at the same time. For agency officials—both agency budget officers and program managers—the arguments for biennial budgeting may seem quite strong. Currently, agency budget officers spend several months every year preparing a “from-the-ground-up” budget with voluminous written justifications. Much of this work is repetitious. In contrast, requests for supplemental appropriations are handled on an exception basis. Only those agencies requesting supplemental appropriations prepare and present justifications, and those justifications are less complex than for the annual budget. If, under a biennial appropriations process, the “off-year” updates, amendments, or adjustments were treated like supplemental appropriations, the savings in agency time could be significant, even if the Congress required—as seems reasonable—that agencies submit audited financial and spending reports every year.