Budget Enforcement for FY2002: An Overview of Procedural Developments
CRS Report for Congress
Budget Enforcement for FY2002:
An Overview of Procedural Developments
Specialist in American National Government
Government and Finance
Congressional action on budgetary legislation for FY2002 is subject to constraints
imposed by the 1974 Congressional Budget Act and the 1985 Balanced Budget Act, as
amended. The 1974 act requires that spending and revenue legislation adhere to policies
set forth in the annual budget resolution, while the 1985 act imposes limits on
discretionary spending and a “pay-as-you-go” (PAYGO) requirement on direct spending
and revenue legislation. Budget resolution policies are enforced by points of order and
reconciliation; the discretionary spending limits and PAYGO requirement are enforced
by sequestration, which involves automatic, largely across-the-board spending cuts.
The FY2002 budget resolution called for over $100 billion more discretionary
spending than the then-existing limits would have allowed, as well as large tax cuts and
significant increases in direct spending that would have caused a PAYGO violation in
excess of $100 billion. Budget resolution policies assumed that legislation increasing
the discretionary spending limits and preventing a PAYGO sequester for FY2002 would
be enacted later in the 2001 session. In late December 2001, the Defense Appropriations
Act for FY2002 was enacted (P.L. 107-117), which raised the discretionary spending
limits and set balances on the PAYGO scorecard for FY2001-2002 to zero, thereby
preventing sequesters. According to the Final Sequestration Report for FY2002, issued
by the OMB director on January 31, 2002, the revisions required by P.L. 107-117,
together with other required adjustments, yielded a new budget authority limit of $706.3
billion and an outlay limit of $731.3 billion for all FY2002 discretionary spending.
The House and Senate are considering supplemental appropriations for FY2002
during the 2002 session, but techniques such as emergency designations and offsets are
expect to be used to prevent a sequester from occurring. Further, the FY2002 effects of
any revenue or direct spending legislation enacted through September 30 will be
included in the calculations for any PAYGO sequester for FY2003, but a PAYGO
sequester likely will be avoided through directed scorekeeping, as has been done in past
years. This report will be updated as developments warrant.
Budget Enforcement Procedures
Congressional Research Service ˜ The Library of Congress
Federal budget policies are enforced under two major statutes—the Congressional
Budget Act of 1974 and the Balanced Budget and Emergency Deficit Control Act of
1985, as amended. Budget enforcement procedures under the 1974 Congressional Budget
Act are, for the most part, permanent and ongoing, whereas budget enforcement
procedures under the 1985 Balanced Budget Act apply to legislation enacted through the
end of FY2002. In his budgets for FY2002 and FY2003, President Bush proposed
extending procedures under the 1985 act or pursuing other procedural alternatives1
The 1974 Congressional Budget Act provides for the adoption by Congress of an
annual concurrent resolution on the budget. The budget resolution recommends the total
level of revenues, spending, the surplus or deficit, and the public debt for each year
covering at least a 5-year period. Total spending is allocated to each of the House and
Senate committees with jurisdiction over discretionary or direct spending; the House and
Senate Appropriations Committees subdivide their spending allocations by subcommittee.
If the House and Senate wish to compel their committees to develop legislation
conforming existing revenue, direct spending, or debt-limit law to budget resolution
policies, they may include reconciliation directives in the budget resolution so instructing
the appropriate committees. Reconciliation submissions from committees usually are
consolidated into an omnibus bill that is considered under expedited procedures.
Enforcement of budget resolution policies occurs as individual revenue and spending
measures, including any required reconciliation legislation, are considered. Points of
order established in different provisions of the 1974 Congressional Budget Act allow
Members to object to legislation that would violate budget resolution policies, unless the
points of order are waived or set aside.
The 1985 Balanced Budget Act, as amended in 1990 and later years, establishes
adjustable limits on discretionary spending and subjects direct spending and revenue
legislation to a “pay-as-you-go” (PAYGO) requirement. Under the PAYGO requirement,
direct spending and revenue legislation enacted for a fiscal year may not, in the net, incur
a positive balance on a multiyear PAYGO “scorecard.” While these procedures apply to
legislation enacted through the end of FY2002, the PAYGO effects of such legislation are
reflected on the PAYGO scorecard and subject to sequester through FY2006.
The discretionary spending limits and PAYGO requirement are enforced by
sequestration, a procedure involving largely across-the-board spending cuts in nonexempt
programs.2 Sequestration is triggered shortly after the end of a congressional session if
the director of the Office of Management and Budget (OMB) estimates in a sequestration
report that one or more of the discretionary spending categories will be breached or the
PAYGO requirement will be violated. A “within-session” sequester may be triggered
during the following session if the enactment of a supplemental appropriations act causes
1 See the Analytical Perspectives volume (page 243 for FY2002 and pages 283-284 for
FY2003). The House Budget Committee held hearings on this matter on June 27, 2001; the
testimony is available at [http://www.house.gov/budget/hearingstatements.htm].
2 A more detailed explanation of sequestration is presented in CRS Report RL31137,
Sequestration Procedures Under the 1985 Balanced Budget Act, by Robert Keith.
a breach of the limits. Section 254 of the 1985 act requires the President to issue a
sequestration order carrying out any spending reductions identified by the OMB director
as being necessary to eliminate a spending limit breach or a PAYGO violation. In recent
years, Congress and the President have enacted legislation including procedural features
that have prevented a sequester from occurring.3
Budget Policies for FY2002
The initial policies for FY2002 regarding discretionary spending, direct spending,
and revenues were established by the submission of the President George W. Bush’s
budget on April 9, 2001, and the adoption by the House and Senate of the annual budget
resolution (H.Con.Res. 83) on May 10. With regard to discretionary spending, both
President Bush and Congress recommended spending levels well above the existing
limits. The initial approach taken by the President and Congress for FY2002 mirrored
actions taken the year before by President Clinton and Congress when the discretionary
spending limits for FY2001 were raised by nearly $100 billion.4
For FY2002, President Bush proposed a revised budget authority limit of $661
billion and a revised outlay limit of $692 billion for discretionary spending. The
President’s request was $112 billion higher than the existing limit on budget authority
($549 billion) and $120 billion higher than the existing limit on outlays ($572 billion).
The President reserved $841 billion over 10 years, covering FY2002-2011, for
“contingencies,” which was expected to include, among other things, additional
discretionary spending stemming from a review of defense needs and other factors.
Discretionary spending for FY2002 assumed in the budget resolution amounted to
$661.3 billion in budget authority and $682.776 billion in outlays.5 House procedures
under the 1974 Congressional Budget Act allow it to consider annual appropriations bills
at variance with the statutory discretionary spending limits as long as the budget
resolution levels are not violated (or any violations are waived by a simple majority vote).
Accordingly, the House planned to consider regular appropriations acts for FY2002
compatible with the budget resolution policy and expected that the statutory limits would
be revised later in the session so that no sequester would occur.
The Senate was faced with a more difficult procedural situation because of the point
of order provided in Section 312(b) against Senate consideration of any appropriation
measure violating the statutory discretionary spending limits. Further, waivers of the
point of order could be obtained only with a three-fifths vote.
3 The enactment of such techniques is examined in depth in CRS Report RL31155, Techniques
for Preventing a Budget Sequester, by Robert Keith.
4 These actions are discussed in detail in CRS Report RL30696, Discretionary Spending Limits
for FY2001: A Procedural Assessment, by Robert Keith. See also the companion report, CRS
Report RL30706, Pay-As-You-Go Requirement for FY2001: A Procedural Assessment, by
5 See the conference report on H.Con.Res. 83, H. Rept. 107-60 (May 8, 2001), page 48.
Section 203 of the budget resolution provided a mechanism for the Senate to begin
consideration of the regular appropriations acts for FY2002 without the statutory limits
having first been increased. Section 203(a)(2) stated that the functional totals in the
budget resolution envisioned $659.540 billion in budget authority and $647.780 billion
in outlays for the single discretionary spending category in FY2002. In addition, $28.489
billion and $5.275 billion in highway and mass transit outlays were envisioned, as well
as $1.760 billion in budget authority and $1.232 billion in outlays for the conservation
category. Section 206(a)(3) reflected Senate anticipation of the need to raise the statutory
limits for FY2001 in order to accommodate these spending levels. Further, Section
203(b) provided for the necessary adjustments under the budget resolution, including
increased allocations to the Appropriations Committees, whenever legislation raising the
statutory limits became law.
On September 20, 2001, the chairmen and ranking minority members of the House
and Senate Appropriations Committees, with the concurrence of House and Senate
leaders, jointly proposed to the Bush Administration an increase in total discretionary
spending for FY2002 beyond the levels envisioned in the budget resolution. With regard
to budget authority, the proposal involved an increase of about $25 billion, from $661.3
billion to $686 billion. The increase was intended to accommodate President Bush’s
request for an additional $18.4 billion in budget authority for defense spending, as well
as additional budget authority for education ($4 billion) and emergency appropriations for
Hurricane Allison, Western forest fires, and other natural disasters.6
Following negotiations between OMB Director Mitch Daniels and the
Appropriations Committee leaders, an agreement was reached on October 2 to limit
discretionary spending for FY2002 to $686 billion.7 Although some House and Senate
Members had asked that President Bush submit a formal budget request for the full $25
billion increase, they accepted his request in the form of a letter. In his letter, President
Bush cited the “strong bipartisan effort” that led to the agreement but noted that in the
course of implementing the agreement he would review “the policy and program content
of legislation before agreeing to sign it.”
With regard to “PAYGO measures” (that is, measures affecting direct spending,
revenues, or both), the budget resolution assumed large tax cuts and significant increases
in direct spending that would have caused a PAYGO violation in excess of $100 billion.
Budget resolution policies reflected the assumption that legislation preventing a PAYGO
sequester for FY2002, as well as increasing the discretionary spending limits for that year,
and would be enacted later in the 2001 session.
6 The President’s request for $18.4 billion in additional defense funding was intended to meet
needs “consistent with the early results of Secretary Rumsfeld’s strategy review.” See the letter
from President George Bush to the Honorable Richard A. Gephardt, Democratic Leader, House
of Representatives, June 27, 2001, which accompanied Estimate #9, accessible through the OMB
7 See: “White House, Appropriators Agree On Discretionary Spending of $686 Billion,” by
Cheryl Bolen, BNA Daily Report for Executives, No. 190, Wednesday, October 3, 2001, page
Implementation of the FY2002 Policies
Discretionary Spending Limits. For most of the remainder of the 2001 session
following adoption of the budget resolution in May, the House and Senate considered the
regular appropriations acts for FY2002 (which began on October 1, 2001) without
enacting the necessary revisions in the discretionary spending limits for that year. On
October 11, the House Budget Committee ordered reported H.R. 3084, the Interim Budget
Control and Enforcement Act of 2001, which would have increased the statutory limit on
budget authority for FY2002 to an amount sufficient to accommodate the $686 billion
spending level agreed upon earlier. Senator Pete Domenici, the ranking minority member
of the Senate Budget Committee, introduced similar legislation (S. 1575) on October 25.
Neither chamber acted on the legislation.
As action on the regular appropriations acts drew to a close in December, the
Defense Appropriations Act for FY2002, H.R. 3338, became the vehicle for revising the
discretionary spending limits. Section 101(a) in Division C of the act (115 Stat. 2341-
agreed to on October 2 and preventing a sequester. In addition, Section 101(d) provided
for a further increase of 0.12% in the limits on discretionary budget authority if needed
to cover technical estimates made by the OMB director. President George W. Bush
signed the act into law on January 10, 2002 (P.L. 107-117). OMB’s Final Sequestration9
Report for FY2002 was issued on January 31, 2002. According to the report, P.L. 107-
117 increased the discretionary spending limits for FY2002 by $134.5 billion in budget
authority and a comparable amount in outlays. This revision, together with other required
adjustments, yielded a new budget authority limit of $706.308 billion and an outlay limit
of $731.329 billion for all discretionary spending for the fiscal year. The regular
appropriations acts for FY2002 enacted during the 2001 session were under the revised
statutory limits in the aggregate by $2 million in budget authority and $3.343 billion in
A “within-session sequester” could be required during the 2002 session if
supplemental appropriations are enacted in violation of the limits. However, Congress
is expected to use emergency designations, offsets, and other techniques to prevent a
sequester from occurring.
PAYGO Requirement. Following adoption of the FY2002 budget resolution, the
House and Senate also began consideration of various PAYGO measures. The
centerpiece of congressional action on PAYGO measures during the 2001 session, the
Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16), was signed
into law on June 7. The measure, which was developed in response to the President’s tax-
cut proposals and the reconciliation directives in the FY2002 budget resolution, placed
balances of $69.501 billion and $35.691 billion on the PAYGO scorecard for FY2001 and
FY2002, respectively. (In determining the need for a PAYGO sequester for FY2002, the
FY2001 and FY2002 balances are combined.)
8 The provision originated in the substitute amendment recommended by the Senate
Appropriations Committee (see S.Rpt. 107-109, December 5, 2001, page 232).
9 The Final Sequestration Report for FY2002 is available on the OMB Website [www.omb.gov].
Another major PAYGO measure enacted during the 2001 session was the Crop Year
2001 Agricultural Economic Assistance Act (P.L. 107-25). Although it had no budgetary
impact for FY2002, it added $5.5 billion to the PAYGO balance for FY2001. After the
September 11 terrorist attacks on the United States, Congress and the President enacted
the Air Transportation Safety and System Stabilization Act into law (P.L. 107-42),
incurring over $1 billion in net costs to compensate air carriers for losses due to the
attacks and for related purposes. Section 102 in Division C of the Defense Appropriations
Act for FY2002, as enacted into law, prevented a PAYGO sequester for FY2002 by
requiring the OMB director to set the balances on the PAYGO scorecard for FY2001 and
FY2002 to zero. According to the OMB Final Sequestration Report, the combined
balance for FY2001-2002 on the scorecard before the required adjustment was $130.279
billion. In its earlier sequestration update report, OMB had noted maximum savings
achievable from a PAYGO sequester for FY2002 of $33.3 billion.10 Consequently, had
a full PAYGO sequester (including a 4% cut in Medicare) been implemented, there still
would have been a balance on the scorecard of nearly $100 billion. The remaining
PAYGO balances for FY2003-2006 range from $110 billion to $135 billion a year.
During the 2002 session, the effects of any direct spending or revenue legislation
enacted through September 30 will be recorded on the PAYGO scorecard. The FY2002
effects of any such legislation will be added to the PAYGO scorecard for FY2003 in
determining whether a PAYGO sequester for FY2003 is needed.
Suspension of Budget Enforcement Procedures
Section 258 of the 1985 Balanced Budget Act provides that certain budget
enforcement procedures in that act and the 1974 Congressional Budget Act may be
suspended because of low economic growth or war. In the case of war, enforcement
procedures are suspended automatically upon the enactment of a declaration of war. With
regard to low economic growth, the suspension of procedures occurs only if a suspension
resolution directed toward that purpose is enacted into law.11 The process is triggered by
the issuance of a “low-growth report” by the Congressional Budget Office (CBO).
During the years that these suspension provisions have been available, the United
States has faced sustained low economic growth only twice—in late 1990/early 1991 and
in late 2001/early 2002. CBO issued low-growth reports three times in 1991, but all three
suspension resolutions were defeated in the Senate by a wide margin. The House did not
act on such legislation. More recently, CBO issued low-growth reports on October 31,
2001, and on January 30, 2002. In each instance, the Senate Budget Committee reported
unfavorably a suspension resolution that subsequently was defeated on the floor. The
Senate rejected S.J.Res. 28 on November 13, 2001, by a vote of 1-99, and rejected
S.J.Res. 31 on February 14, 2002, by voice vote; the House did not act on such legislation.
10 U.S. Executive Office of the President, Office of Management and Budget, Budget of the
United States Government, Fiscal Year 2002, Mid-Session Review, Appendix B (Washington:
August 2001), page 67.
11 Low-growth suspension procedures are discussed in CRS Report RL31068, Budget
Enforcement Procedures Suspended During Low Economic Growth, by Robert Keith.