Congressional Budget Process Carole McGuire March 23, 2007

Federal Budget Overview Federal budget for FY 2008 is $2.9 trillion Federal budget for FY 2008 is $2.9 trillion Consists of entitlement and mandatory spending (Social Security, Medicare, interest, etc.) representing two-thirds of the federal budget Consists of entitlement and mandatory spending (Social Security, Medicare, interest, etc.) representing two-thirds of the federal budget Consists of discretionary spending for appropriated programs representing one-third of the federal budget Consists of discretionary spending for appropriated programs representing one-third of the federal budget

Mandatory and Entitlement Programs Considered “uncontrollable” spending since such programs are authorized by law to provide benefits or payments based on eligibility criteria Considered “uncontrollable” spending since such programs are authorized by law to provide benefits or payments based on eligibility criteria Largest program is Social Security at about $550 billion, followed by Medicare at about $350 billion, and Medicaid at about $200 billion Largest program is Social Security at about $550 billion, followed by Medicare at about $350 billion, and Medicaid at about $200 billion Other programs include veterans benefits, farm price supports, foods stamps, child nutrition, etc. Other programs include veterans benefits, farm price supports, foods stamps, child nutrition, etc. Programs can be changed only by enacting a new law Programs can be changed only by enacting a new law

Discretionary Programs Discretionary programs are “controllable” programs in that Congress sets funding levels each year in appropriations bills Discretionary programs are “controllable” programs in that Congress sets funding levels each year in appropriations bills Programs include education, scientific R&D, housing, transportation, energy, environmental protection, defense, homeland security, law enforcement, foreign aid, etc. Programs include education, scientific R&D, housing, transportation, energy, environmental protection, defense, homeland security, law enforcement, foreign aid, etc. This one-third of the budget is split with slightly more than half going to defense and the remainder to non-defense programs This one-third of the budget is split with slightly more than half going to defense and the remainder to non-defense programs

Revenues Revenues – important component of the budget because they finance government operations (spending) Revenues – important component of the budget because they finance government operations (spending) Federal Government will collect about $2.7 trillion in revenue in FY 2008 Federal Government will collect about $2.7 trillion in revenue in FY 2008 Difference between revenues (inflow) and spending (outflow) is about $240 billion, or the annual federal deficit Difference between revenues (inflow) and spending (outflow) is about $240 billion, or the annual federal deficit We provide most of the revenues as individual taxpayers – about $1.25 trillion, followed by social insurance and other receipts ($927 billion), corporate taxes ($315 billion), and other taxes and receipts ($250 billion) We provide most of the revenues as individual taxpayers – about $1.25 trillion, followed by social insurance and other receipts ($927 billion), corporate taxes ($315 billion), and other taxes and receipts ($250 billion)

Budget Process Congressional budget process established in 1974 with enactment of Congressional Budget and Impoundment Control Act Congressional budget process established in 1974 with enactment of Congressional Budget and Impoundment Control Act Enacted largely as a response to actions by then President Nixon to “impound” or refuse to spend congressionally appropriated funding – power of the purse issue Enacted largely as a response to actions by then President Nixon to “impound” or refuse to spend congressionally appropriated funding – power of the purse issue Also response to old adage – “President proposes, Congress disposes” but Congress had no way to track final action on the federal budget and it had little concentrated expertise in budget matters Also response to old adage – “President proposes, Congress disposes” but Congress had no way to track final action on the federal budget and it had little concentrated expertise in budget matters

Congressional Budget Act Budget Act set up Budget Committees in both the House and Senate Budget Act set up Budget Committees in both the House and Senate Budget Act created the Congressional Budget Office (CBO) to be a non-partisan “scorekeeper” for Congress on the budget Budget Act created the Congressional Budget Office (CBO) to be a non-partisan “scorekeeper” for Congress on the budget Budget Act created specific procedures for considering a budget resolution Budget Act created specific procedures for considering a budget resolution Budget Act created mechanisms to reign in the Presidential impoundment or deferral of funding Budget Act created mechanisms to reign in the Presidential impoundment or deferral of funding

Congressional Budget Timetable President submits his budget the first Monday in February President submits his budget the first Monday in February Congressional Committees review details of the budget request and begin hearings Congressional Committees review details of the budget request and begin hearings CBO gets to work re-estimating President’s budget based on its economic projections and baseline assumptions CBO gets to work re-estimating President’s budget based on its economic projections and baseline assumptions Budget Committees request views and estimates from other committees on President’s budget and anticipated legislative agenda Budget Committees request views and estimates from other committees on President’s budget and anticipated legislative agenda

Budget Resolution House and Senate Budget Committees prepare the FY 2008 budget resolution – usually in March House and Senate Budget Committees prepare the FY 2008 budget resolution – usually in March Budget resolution is fiscal blueprint for subsequent legislative action by authorizing, appropriations, and tax- writing committees Budget resolution is fiscal blueprint for subsequent legislative action by authorizing, appropriations, and tax- writing committees Both committees make own assumptions in drafting the budget resolution, using CBO estimates Both committees make own assumptions in drafting the budget resolution, using CBO estimates CBO baseline is foundation upon which the resolution is constructed and the benchmark against which all congressional spending and tax legislation is measured CBO baseline is foundation upon which the resolution is constructed and the benchmark against which all congressional spending and tax legislation is measured

Budget Timetable House and Senate pass own budget resolutions under procedures laid out in the Budget Act House and Senate pass own budget resolutions under procedures laid out in the Budget Act Debate is limited to 50 hours; cannot be filibustered; vote-a-rama Debate is limited to 50 hours; cannot be filibustered; vote-a-rama Conference to resolve differences and complete budget resolution by April 15; does not go to the President Conference to resolve differences and complete budget resolution by April 15; does not go to the President House may consider appropriations bills beginning May 15 even if a final budget resolution is not in place House may consider appropriations bills beginning May 15 even if a final budget resolution is not in place House targets reporting last bill by June 10 and passing the bills by June 30 House targets reporting last bill by June 10 and passing the bills by June 30

Budget Timetable Federal fiscal year begins October 1, and all appropriations bills should be completed Federal fiscal year begins October 1, and all appropriations bills should be completed Deadlines are usually missed – number of reasons Deadlines are usually missed – number of reasons New Democratic Majority is committed to meeting the deadlines for the budget resolution and for completing appropriations bills on time New Democratic Majority is committed to meeting the deadlines for the budget resolution and for completing appropriations bills on time Stumbling block is likely the Senate with its unlimited debate and narrow Democratic majority (Senator Tim Johnson absent due to illness) Stumbling block is likely the Senate with its unlimited debate and narrow Democratic majority (Senator Tim Johnson absent due to illness)

What is a Budget Resolution? It is a lot of numbers! Usually spans 5 years It is a lot of numbers! Usually spans 5 years It has aggregate levels for revenues, BA, outlays, deficits, Social Security, and major functional categories It has aggregate levels for revenues, BA, outlays, deficits, Social Security, and major functional categories There are 20 budget functions for federal programs/activities. Include defense, international affairs, education, health, energy, transportation, law enforcement, etc. There are 20 budget functions for federal programs/activities. Include defense, international affairs, education, health, energy, transportation, law enforcement, etc.

Budget Resolution and Appropriations Each function has a BA and outlay total for each of 5 years with assumptions underlying the numbers. Each function has a BA and outlay total for each of 5 years with assumptions underlying the numbers. Committees usually start with the CBO baseline and add or subtract for policy assumptions ex. ACI Committees usually start with the CBO baseline and add or subtract for policy assumptions ex. ACI IMPORTANT POINT - Assumptions are not binding on Appropriations Committees for discretionary programs. IMPORTANT POINT - Assumptions are not binding on Appropriations Committees for discretionary programs. Once budget resolution completed, Appropriations Committees receive an aggregate allocation for both BA and outlays-302 (a) allocation-within which to write bills Once budget resolution completed, Appropriations Committees receive an aggregate allocation for both BA and outlays-302 (a) allocation-within which to write bills Appropriations Committees makes allocations to each of the 12 subcommittees (302(b)s) within overall 302(a) Appropriations Committees makes allocations to each of the 12 subcommittees (302(b)s) within overall 302(a)

Budget Resolution and Authorizers Authorizing Committees also receive allocations when budget resolution is completed – for mandatory spending and entitlements Authorizing Committees also receive allocations when budget resolution is completed – for mandatory spending and entitlements Hope budget resolution will assume (make room) for new legislative initiatives with a budget impact (ex. SCHIP) Hope budget resolution will assume (make room) for new legislative initiatives with a budget impact (ex. SCHIP) Deficit neutral reserve funds also lay a marker for future legislative action, but cost of new legislation must be offset (paid for) Deficit neutral reserve funds also lay a marker for future legislative action, but cost of new legislation must be offset (paid for)

Reserve Funds Senate budget resolution has 21 reserve funds to allow legislation, including the Higher Education Act, wounded service members, energy, Farm Bill; tax relief, Medicare, affordable housing, terrorism risk insurance, and others Senate budget resolution has 21 reserve funds to allow legislation, including the Higher Education Act, wounded service members, energy, Farm Bill; tax relief, Medicare, affordable housing, terrorism risk insurance, and others More reserve funds may be added on the floor More reserve funds may be added on the floor House budget resolution started with 12 reserve funds – most similar to those in Senate resolution House budget resolution started with 12 reserve funds – most similar to those in Senate resolution The reserve funds are a placeholder for committees to report spending legislation that is deficit neutral, or paid for The reserve funds are a placeholder for committees to report spending legislation that is deficit neutral, or paid for

Budget Enforcement Budget resolutions also include enforcement provisions – generally limitations or points of order Budget resolutions also include enforcement provisions – generally limitations or points of order Most important is restoring paygo point of order requiring any new entitlement or mandatory spending or tax cuts to be paid for. If not, there is 60-vote (super majority) point of order Most important is restoring paygo point of order requiring any new entitlement or mandatory spending or tax cuts to be paid for. If not, there is 60-vote (super majority) point of order Has been a big issue as Republicans exempted Bush tax cuts from paygo discipline Has been a big issue as Republicans exempted Bush tax cuts from paygo discipline

Reconciliation Reconciliation is a process intended to have Congress reconcile its “fiscal” actions with the budget resolution at the end of the fiscal year Reconciliation is a process intended to have Congress reconcile its “fiscal” actions with the budget resolution at the end of the fiscal year Reconciliation has become the mechanism for Congress to do deficit reduction legislation Reconciliation has become the mechanism for Congress to do deficit reduction legislation Applies only to mandatory/entitlement and tax or receipt legislation – not to appropriations Applies only to mandatory/entitlement and tax or receipt legislation – not to appropriations There is no reconciliation in the Senate budget resolution; the House has reconciliation for education as part of an initiative to make college more affordable, saving a net of $75 million over five years There is no reconciliation in the Senate budget resolution; the House has reconciliation for education as part of an initiative to make college more affordable, saving a net of $75 million over five years

Reconciliation Process Under reconciliation, Budget Committees can instruct authorizing and tax committees to make a certain level of savings (deficit reduction) over 5 years Under reconciliation, Budget Committees can instruct authorizing and tax committees to make a certain level of savings (deficit reduction) over 5 years Committees then must report legislation to the Budget Committees by a specified date. Committees then must report legislation to the Budget Committees by a specified date. Budget Committees package legislation into an omnibus bill and take to floor Budget Committees package legislation into an omnibus bill and take to floor

Reconciliation Process Reconciliation bill is debated under specific procedures, and is protected against filibuster. Amendments must meet the test of the Byrd rule which limits the type of amendments that can be offered Reconciliation bill is debated under specific procedures, and is protected against filibuster. Amendments must meet the test of the Byrd rule which limits the type of amendments that can be offered Bill moves through the regular legislative process to completion and is sent to the President Bill moves through the regular legislative process to completion and is sent to the President Senate budget resolution includes a new 60-vote point of order against reconciliation measures that add to the deficit or reduce a surplus – target is tax cut legislation Senate budget resolution includes a new 60-vote point of order against reconciliation measures that add to the deficit or reduce a surplus – target is tax cut legislation There are other points of order established in the budget resolution, such as one allowing a challenge to emergency designations, which allows spending above the overall spending allocations There are other points of order established in the budget resolution, such as one allowing a challenge to emergency designations, which allows spending above the overall spending allocations

What does this all mean? The budget resolution lays out the fiscal blueprint or framework for congressional action on spending and tax legislation The budget resolution lays out the fiscal blueprint or framework for congressional action on spending and tax legislation For discretionary spending, it means the Appropriations Committees will have to live within an overall “cap” of approximately $950 billion in FY 2008, over half of which will go to defense (excludes emergency war spending); For discretionary spending, it means the Appropriations Committees will have to live within an overall “cap” of approximately $950 billion in FY 2008, over half of which will go to defense (excludes emergency war spending); Senate budget resolution adds $18 billion to President’s request for appropriated programs. House adds about $22 billion. Senate budget resolution adds $18 billion to President’s request for appropriated programs. House adds about $22 billion.

How to make it all fit? Increase sounds promising, and budget resolutions assume increases for important programs, such as education, energy, science, veterans, etc. Increase sounds promising, and budget resolutions assume increases for important programs, such as education, energy, science, veterans, etc. Appropriators have tall order because President’s budget proposes significant reductions to make room for initiatives Appropriators have tall order because President’s budget proposes significant reductions to make room for initiatives President proposes terminations or reductions to 141 discretionary programs to reduce spending by $12 billion in FY 2008 President proposes terminations or reductions to 141 discretionary programs to reduce spending by $12 billion in FY 2008 Congress is not likely to accept many of these proposals making it harder to fund initiatives – it is always tight for the appropriators Congress is not likely to accept many of these proposals making it harder to fund initiatives – it is always tight for the appropriators “Dear Colleague” letters on behalf of innovation and competitiveness funding, STEM education, etc. are attempts to influence appropriators to fund priority programs “Dear Colleague” letters on behalf of innovation and competitiveness funding, STEM education, etc. are attempts to influence appropriators to fund priority programs

Innovation Both House and Senate budget resolutions recognize the priority of innovation and competitiveness and assume President’s level for ACI agencies Both House and Senate budget resolutions recognize the priority of innovation and competitiveness and assume President’s level for ACI agencies Sense of the House language highlights amount above the President’s level for innovation assumed for Function 250, 270, and others, and language on STEM education Sense of the House language highlights amount above the President’s level for innovation assumed for Function 250, 270, and others, and language on STEM education For all the focus, community must continue to advocate to turn statements into investments through the appropriations process For all the focus, community must continue to advocate to turn statements into investments through the appropriations process

Final Thoughts While the budget resolution does not directly enact legislation, it begins the debate on priorities for the fiscal year and lays out a fiscal blueprint for the nation While the budget resolution does not directly enact legislation, it begins the debate on priorities for the fiscal year and lays out a fiscal blueprint for the nation Completion of the budget resolution sets the level of spending authority allocated to the authorizing, appropriations, and tax- writing committees so they can write legislation Completion of the budget resolution sets the level of spending authority allocated to the authorizing, appropriations, and tax- writing committees so they can write legislation Budget Committees then focus on the enforcement of the budget resolution by monitoring legislation as it moves through Congress Budget Committees then focus on the enforcement of the budget resolution by monitoring legislation as it moves through Congress The good news is that Congress is moving forward in “regular order” The good news is that Congress is moving forward in “regular order”