Congressional Budget Congressional Budget ProcessProcess

Carole McGuireCarole McGuire

March 23, 2007March 23, 2007

Federal Budget OverviewFederal Budget Overview

Federal budget for FY 2008 is $2.9 trillionFederal budget for FY 2008 is $2.9 trillion Consists of entitlement and mandatory Consists of entitlement and mandatory

spending (Social Security, Medicare, spending (Social Security, Medicare, interest, etc.) representing two-thirds of the interest, etc.) representing two-thirds of the federal budget federal budget

Consists of discretionary spending for Consists of discretionary spending for appropriated programs representing one-appropriated programs representing one-third of the federal budgetthird of the federal budget

Mandatory and Mandatory and Entitlement ProgramsEntitlement Programs

Considered “uncontrollable” spending since such Considered “uncontrollable” spending since such programs are authorized by law to provide programs are authorized by law to provide benefits or payments based on eligibility criteriabenefits or payments based on eligibility criteria

Largest program is Social Security at about $550 Largest program is Social Security at about $550 billion, followed by Medicare at about $350 billion, followed by Medicare at about $350 billion, and Medicaid at about $200 billionbillion, and Medicaid at about $200 billion

Other programs include veterans benefits, farm Other programs include veterans benefits, farm price supports, foods stamps, child nutrition, etc.price supports, foods stamps, child nutrition, etc.

Programs can be changed only by enacting a new Programs can be changed only by enacting a new lawlaw

Discretionary ProgramsDiscretionary Programs

Discretionary programs are “controllable” Discretionary programs are “controllable” programs in that Congress sets funding levels programs in that Congress sets funding levels each year in appropriations billseach year in appropriations bills

Programs include education, scientific R&D, Programs include education, scientific R&D, housing, transportation, energy, housing, transportation, energy, environmental protection, defense, homeland environmental protection, defense, homeland security, law enforcement, foreign aid, etc.security, law enforcement, foreign aid, etc.

This one-third of the budget is split with This one-third of the budget is split with slightly more than half going to defense and slightly more than half going to defense and the remainder to non-defense programsthe remainder to non-defense programs

RevenuesRevenues

Revenues – important component of the budget Revenues – important component of the budget because they finance government operations because they finance government operations (spending)(spending)

Federal Government will collect about $2.7 trillion in Federal Government will collect about $2.7 trillion in revenue in FY 2008revenue in FY 2008

Difference between revenues (inflow) and spending Difference between revenues (inflow) and spending (outflow) is about $240 billion, or the annual federal (outflow) is about $240 billion, or the annual federal deficitdeficit

We provide most of the revenues as individual We provide most of the revenues as individual taxpayers – about $1.25 trillion, followed by social taxpayers – about $1.25 trillion, followed by social insurance and other receipts ($927 billion), corporate insurance and other receipts ($927 billion), corporate taxes ($315 billion), and other taxes and receipts taxes ($315 billion), and other taxes and receipts ($250 billion)($250 billion)

Budget ProcessBudget Process

Congressional budget process established in 1974 Congressional budget process established in 1974 with enactment of Congressional Budget and with enactment of Congressional Budget and Impoundment Control ActImpoundment Control Act

Enacted largely as a response to actions by then Enacted largely as a response to actions by then President Nixon to “impound” or refuse to spend President Nixon to “impound” or refuse to spend congressionally appropriated funding – power of congressionally appropriated funding – power of the purse issuethe purse issue

Also response to old adage – “President proposes, Also response to old adage – “President proposes, Congress disposes” but Congress had no way to Congress disposes” but Congress had no way to track final action on the federal budget and it had track final action on the federal budget and it had little concentrated expertise in budget matterslittle concentrated expertise in budget matters

Congressional Budget ActCongressional Budget Act

Budget Act set up Budget Committees in both Budget Act set up Budget Committees in both the House and Senatethe House and Senate

Budget Act created the Congressional Budget Budget Act created the Congressional Budget Office (CBO) to be a non-partisan Office (CBO) to be a non-partisan “scorekeeper” for Congress on the budget“scorekeeper” for Congress on the budget

Budget Act created specific procedures for Budget Act created specific procedures for considering a budget resolutionconsidering a budget resolution

Budget Act created mechanisms to reign in Budget Act created mechanisms to reign in the Presidential impoundment or deferral of the Presidential impoundment or deferral of fundingfunding

Congressional Budget Congressional Budget TimetableTimetable

President submits his budget the first President submits his budget the first Monday in FebruaryMonday in February

Congressional Committees review details of Congressional Committees review details of the budget request and begin hearingsthe budget request and begin hearings

CBO gets to work re-estimating President’s CBO gets to work re-estimating President’s budget based on its economic projections budget based on its economic projections and baseline assumptionsand baseline assumptions

Budget Committees request views and Budget Committees request views and estimates from other committees on estimates from other committees on President’s budget and anticipated President’s budget and anticipated legislative agenda legislative agenda

Budget ResolutionBudget Resolution

House and Senate Budget Committees prepare the House and Senate Budget Committees prepare the FY 2008 budget resolution – usually in MarchFY 2008 budget resolution – usually in March

Budget resolution is fiscal blueprint for subsequent Budget resolution is fiscal blueprint for subsequent legislative action by authorizing, appropriations, legislative action by authorizing, appropriations, and tax-writing committeesand tax-writing committees

Both committees make own assumptions in drafting Both committees make own assumptions in drafting the budget resolution, using CBO estimatesthe budget resolution, using CBO estimates

CBO baseline is foundation upon which the CBO baseline is foundation upon which the resolution is constructed and the benchmark resolution is constructed and the benchmark against which all congressional spending and tax against which all congressional spending and tax legislation is measuredlegislation is measured

Budget TimetableBudget Timetable

House and Senate pass own budget resolutions under House and Senate pass own budget resolutions under procedures laid out in the Budget Actprocedures laid out in the Budget Act

Debate is limited to 50 hours; cannot be filibustered; Debate is limited to 50 hours; cannot be filibustered; vote-a-ramavote-a-rama

Conference to resolve differences and complete Conference to resolve differences and complete budget resolution by April 15; does not go to the budget resolution by April 15; does not go to the PresidentPresident

House may consider appropriations bills beginning House may consider appropriations bills beginning May 15 even if a final budget resolution is not in placeMay 15 even if a final budget resolution is not in place

House targets reporting last bill by June 10 and House targets reporting last bill by June 10 and passing the bills by June 30passing the bills by June 30

Budget TimetableBudget Timetable

Federal fiscal year begins October 1, and all Federal fiscal year begins October 1, and all appropriations bills should be completedappropriations bills should be completed

Deadlines are usually missed – number of reasonsDeadlines are usually missed – number of reasons New Democratic Majority is committed to meeting New Democratic Majority is committed to meeting

the deadlines for the budget resolution and for the deadlines for the budget resolution and for completing appropriations bills on timecompleting appropriations bills on time

Stumbling block is likely the Senate with its Stumbling block is likely the Senate with its unlimited debate and 50-49 narrow Democratic unlimited debate and 50-49 narrow Democratic majority (Senator Tim Johnson absent due to majority (Senator Tim Johnson absent due to illness)illness)

What is a Budget What is a Budget Resolution?Resolution?

It is a lot of numbers! Usually spans 5 yearsIt is a lot of numbers! Usually spans 5 years It has aggregate levels for revenues, BA, It has aggregate levels for revenues, BA,

outlays, deficits, Social Security, and major outlays, deficits, Social Security, and major functional categoriesfunctional categories

There are 20 budget functions for federal There are 20 budget functions for federal programs/activities. Include defense, programs/activities. Include defense, international affairs, education, health, international affairs, education, health, energy, transportation, law enforcement, etc.energy, transportation, law enforcement, etc.

Budget Resolution and Budget Resolution and AppropriationsAppropriations

Each function has a BA and outlay total for each of 5 Each function has a BA and outlay total for each of 5 years with assumptions underlying the numbers.years with assumptions underlying the numbers.

Committees usually start with the CBO baseline and Committees usually start with the CBO baseline and add or subtract for policy assumptions ex. ACIadd or subtract for policy assumptions ex. ACI

IMPORTANT POINT - Assumptions are not binding on IMPORTANT POINT - Assumptions are not binding on Appropriations Committees for discretionary programs.Appropriations Committees for discretionary programs.

Once budget resolution completed, Appropriations Once budget resolution completed, Appropriations Committees receive an aggregate allocation for both Committees receive an aggregate allocation for both BA and outlays-302 (a) allocation-within which to write BA and outlays-302 (a) allocation-within which to write billsbills

Appropriations Committees makes allocations to each Appropriations Committees makes allocations to each of the 12 subcommittees (302(b)s) within overall of the 12 subcommittees (302(b)s) within overall 302(a)302(a)

Budget Resolution and Budget Resolution and AuthorizersAuthorizers

Authorizing Committees also receive Authorizing Committees also receive allocations when budget resolution is allocations when budget resolution is completed – for mandatory spending and completed – for mandatory spending and entitlementsentitlements

Hope budget resolution will assume (make Hope budget resolution will assume (make room) for new legislative initiatives with a room) for new legislative initiatives with a budget impact (ex. SCHIP)budget impact (ex. SCHIP)

Deficit neutral reserve funds also lay a marker Deficit neutral reserve funds also lay a marker for future legislative action, but cost of new for future legislative action, but cost of new legislation must be offset (paid for)legislation must be offset (paid for)

Reserve FundsReserve Funds

Senate budget resolution has 21 reserve funds to Senate budget resolution has 21 reserve funds to allow legislation, including the Higher Education allow legislation, including the Higher Education Act, wounded service members, energy, Farm Act, wounded service members, energy, Farm Bill; tax relief, Medicare, affordable housing, Bill; tax relief, Medicare, affordable housing, terrorism risk insurance, and othersterrorism risk insurance, and others

More reserve funds may be added on the floorMore reserve funds may be added on the floor House budget resolution started with 12 reserve House budget resolution started with 12 reserve

funds – most similar to those in Senate resolution funds – most similar to those in Senate resolution The reserve funds are a placeholder for The reserve funds are a placeholder for

committees to report spending legislation that is committees to report spending legislation that is deficit neutral, or paid fordeficit neutral, or paid for

Budget EnforcementBudget Enforcement

Budget resolutions also include enforcement Budget resolutions also include enforcement provisions – generally limitations or points of provisions – generally limitations or points of orderorder

Most important is restoring paygo point of Most important is restoring paygo point of order requiring any new entitlement or order requiring any new entitlement or mandatory spending or tax cuts to be paid for. mandatory spending or tax cuts to be paid for. If not, there is 60-vote (super majority) point If not, there is 60-vote (super majority) point of orderof order

Has been a big issue as Republicans Has been a big issue as Republicans exempted Bush tax cuts from paygo disciplineexempted Bush tax cuts from paygo discipline

ReconciliationReconciliation

Reconciliation is a process intended to have Reconciliation is a process intended to have Congress reconcile its “fiscal” actions with the Congress reconcile its “fiscal” actions with the budget resolution at the end of the fiscal yearbudget resolution at the end of the fiscal year

Reconciliation has become the mechanism for Reconciliation has become the mechanism for Congress to do deficit reduction legislationCongress to do deficit reduction legislation

Applies only to mandatory/entitlement and tax or Applies only to mandatory/entitlement and tax or receipt legislation – not to appropriationsreceipt legislation – not to appropriations

There is no reconciliation in the Senate budget There is no reconciliation in the Senate budget resolution; the House has reconciliation for resolution; the House has reconciliation for education as part of an initiative to make college education as part of an initiative to make college more affordable, saving a net of $75 million over more affordable, saving a net of $75 million over five yearsfive years

Reconciliation ProcessReconciliation Process

Under reconciliation, Budget Committees Under reconciliation, Budget Committees can instruct authorizing and tax committees can instruct authorizing and tax committees to make a certain level of savings (deficit to make a certain level of savings (deficit reduction) over 5 yearsreduction) over 5 years

Committees then must report legislation to Committees then must report legislation to the Budget Committees by a specified date.the Budget Committees by a specified date.

Budget Committees package legislation into Budget Committees package legislation into an omnibus bill and take to flooran omnibus bill and take to floor

Reconciliation ProcessReconciliation Process

Reconciliation bill is debated under specific procedures, and Reconciliation bill is debated under specific procedures, and is protected against filibuster. Amendments must meet the is protected against filibuster. Amendments must meet the test of the Byrd rule which limits the type of amendments test of the Byrd rule which limits the type of amendments that can be offeredthat can be offered

Bill moves through the regular legislative process to Bill moves through the regular legislative process to completion and is sent to the Presidentcompletion and is sent to the President

Senate budget resolution includes a new 60-vote point of Senate budget resolution includes a new 60-vote point of order against reconciliation measures that add to the deficit order against reconciliation measures that add to the deficit or reduce a surplus – target is tax cut legislationor reduce a surplus – target is tax cut legislation

There are other points of order established in the budget There are other points of order established in the budget resolution, such as one allowing a challenge to emergency resolution, such as one allowing a challenge to emergency designations, which allows spending above the overall designations, which allows spending above the overall spending allocationsspending allocations

What does this all mean?What does this all mean?

The budget resolution lays out the fiscal blueprint The budget resolution lays out the fiscal blueprint or framework for congressional action on or framework for congressional action on spending and tax legislationspending and tax legislation

For discretionary spending, it means the For discretionary spending, it means the Appropriations Committees will have to live within Appropriations Committees will have to live within an overall “cap” of approximately $950 billion in an overall “cap” of approximately $950 billion in FY 2008, over half of which will go to defense FY 2008, over half of which will go to defense (excludes emergency war spending);(excludes emergency war spending);

Senate budget resolution adds $18 billion to Senate budget resolution adds $18 billion to President’s request for appropriated programs. President’s request for appropriated programs. House adds about $22 billion.House adds about $22 billion.

How to make it all fit?How to make it all fit?

Increase sounds promising, and budget resolutions assume Increase sounds promising, and budget resolutions assume increases for important programs, such as education, increases for important programs, such as education, energy, science, veterans, etc.energy, science, veterans, etc.

Appropriators have tall order because President’s budget Appropriators have tall order because President’s budget proposes significant reductions to make room for initiativesproposes significant reductions to make room for initiatives

President proposes terminations or reductions to 141 President proposes terminations or reductions to 141 discretionary programs to reduce spending by $12 billion in discretionary programs to reduce spending by $12 billion in FY 2008FY 2008

Congress is not likely to accept many of these proposals Congress is not likely to accept many of these proposals making it harder to fund initiatives – it is always tight for the making it harder to fund initiatives – it is always tight for the appropriatorsappropriators

““Dear Colleague” letters on behalf of innovation and Dear Colleague” letters on behalf of innovation and competitiveness funding, STEM education, etc. are attempts competitiveness funding, STEM education, etc. are attempts to influence appropriators to fund priority programsto influence appropriators to fund priority programs

InnovationInnovation

Both House and Senate budget resolutions Both House and Senate budget resolutions recognize the priority of innovation and recognize the priority of innovation and competitiveness and assume President’s level for competitiveness and assume President’s level for ACI agenciesACI agencies

Sense of the House language highlights amount Sense of the House language highlights amount above the President’s level for innovation above the President’s level for innovation assumed for Function 250, 270, and others, and assumed for Function 250, 270, and others, and language on STEM educationlanguage on STEM education

For all the focus, community must continue to For all the focus, community must continue to advocate to turn statements into investments advocate to turn statements into investments through the appropriations processthrough the appropriations process

Final ThoughtsFinal Thoughts

While the budget resolution does not directly enact While the budget resolution does not directly enact legislation, it begins the debate on priorities for the fiscal legislation, it begins the debate on priorities for the fiscal year and lays out a fiscal blueprint for the nationyear and lays out a fiscal blueprint for the nation

Completion of the budget resolution sets the level of Completion of the budget resolution sets the level of spending authority allocated to the authorizing, spending authority allocated to the authorizing, appropriations, and tax-writing committees so they can appropriations, and tax-writing committees so they can write legislationwrite legislation

Budget Committees then focus on the enforcement of the Budget Committees then focus on the enforcement of the budget resolution by monitoring legislation as it moves budget resolution by monitoring legislation as it moves through Congressthrough Congress

The good news is that Congress is moving forward in The good news is that Congress is moving forward in “regular order”“regular order”