Budget Process and Rules
This week, Representatives John Carney (D-DE) and Jim Renacci (R-OH) introduced a bipartisan bill to improve the budget process.
In our recently released plan, The Road to Sustainable Highway Spending, we propose a variety of measures to support the Highway Trust Fund (HTF), including providing fully offset funding for previous commitments, raising the gas tax, making sure we spend within our means in the future, and creating a "fast track" plan for tax reform to provide alternative financing. Additionally, we propose a few new reforms that will fix the inconsistency within the budget process that effectively exempts highway spending from budget discipline.
As we've explained before, the budget has a hybrid system for the HTF that treats contract authority (akin to budget authority in this case) as mandatory spending while treating outlays as discretionary spending. This nuance allows increased HTF spending to bypass both the Budget Control Act (BCA) caps on discretionary budget authority and pay-as-you-go (PAYGO) rules on mandatory outlays, permitting Congress to approve additional infrastructure investment without providing the means to pay for it. In addition, under existing budget rules, the Congressional Budget Office is required to assume that highway spending continues at inflation-adjusted levels in the baseline, even after the trust fund is depleted. As a result, Congress can enact legislation increasing spending for highways without increasing revenues and can make general revenue transfers to cover the inevitable shortfalls in the trust fund without paying for the added costs.
During the consideration of the FY 2016 budget, we continually wrote about the budget process provisions in the major budget resolutions as well as previewing the budget process issues heading into conference. As we noted in our initial analysis of the Good, the Bad and the Ugly in the conference report, the final budget resolution includes some useful budget process and enforcement improvement. Unfortunately, some of the better provisions were dropped or watered down from earlier versions, and some provisions that move budget process in the wrong direction made it into the final conference report.
The budget begins to limit phony savings from Changes in Mandatory Programs (CHIMPs) used to pay for real increases in discretionary spending, although these limits were watered down relative to those in the Senate budget resolution. The conference report freezes the amount of CHIMPs that don't produce real savings at the FY 2015 level of $19 billion for 2016 and 2017, and then it gradually reduces the limit to $15 billion by 2019. The conference report also limits capping spending from the Crime Victim's Fund as an offset. However, a related provision prohibiting the use of mandatory spending rescissions with no outlay savings as an offset was dropped. An appropriations bill that exceeds the new limits on CHIMPs would be subject to a point of order in the House and Senate, with 60 votes required to waive the point of order in the Senate. For more information on CHIMPs, see our recent blog, complete with the requisite use of puns.
With the budget conference complete, it is now up to each chamber of Congress to pass the FY 2016 concurrent budget resolution. We've already written about the House and Senate budgets in detail, and the final budget resolution aims to find compromise between the two.
As CRFB President Maya MacGuineas said in a press release today:
Congress should be commended for actually having a budget this year and for proposing to put the debt on a sharp downward path relative to the economy. Unfortunately, the budget fails to give lawmakers the tools to accomplish this important goal, and in some areas actually facilitates higher deficits.
Below we take a more detailed look at the good, the bad, and the ugly of the final product.
With the House and Senate preparing to go to conference to work out the differences between their budget resolutions, we published a paper Tuesday outlining the various budget process measures contained in the respective resolutions as well as our recommendations about which should be kept. Both budget resolutions contain several items that could help or hurt the process, and we suggest that the conference committee hammer out these differences in line with the recommendations we've made in the Better Budget Process Initiative. We also published a blog and press release containing some recommendations not related to budget process.
Both budgets tackle process reform by enacting provisions to address the lack of accountability, transparency, and long-term focus in current budgeting.
The House and Senate will soon appoint a formal conference committee to iron out differences between their two budgets, even though press reports indicate the Chairmen of the House and Senate Budget Committees have already started negotiating. In addition to agreeing to the total spending levels (by function) within the budget, a number of important issues must be agreed upon. Specifically, the conferees will have to decide how broadly to write reconciliation instructions, whether to limit use of the OCO designation to spend in excess of statutory caps, how to address potential sequester relief, and whether to include other budget enforcement provisions cracking down on budget gimmicks. This blog summarizes these issues and our views on them.
Provide reconciliation instructions broadly
The House budget included instructions for all committees with mandatory spending to produce legislation achieving at least nominal savings in mandatory programs within their jurisdiction. The Senate only had reconciliation instructions for the Finance and Health, Education, Labor, and Pensions (HELP) committees.
Given the very real need to slow the growth of entitlement spending, the budget conference should adopt the House’s approach, providing instructions for every committee with jurisdiction over mandatory programs. Doing so will offer opportunities to enact the mandatory savings assumed in the budget resolution, or at least a smaller set of savings with the potential for broader support.
The House budget also included provision allowing the Chairman of the Budget Committee to publish guidelines to supplement the nominal savings instructions currently included, which could be used to provide guidance for reconciliation legislation with a significant amount of mandatory savings. Our hope is that the budget committee and the relevant committees will work together to produce a reconciliation bill with, at minimum, enough savings to offset the spending increases Congress is likely to approve, including costs associated with the Medicare Access and CHIP Reauthorization Act of 2015 and sequester relief. For further reading on reconciliation in the two budgets, see our blog "Reconcila-What?"
We have described at length the fiscal irresponsibility of the Sustainable Growth Rate (SGR) reform bill (H.R. 2) working its way through Congress -- both its significant near-term and long-term costs and its exemption of the cost of the bill from pay-as-you-go (PAYGO) rules. But the PAYGO exemption is not the only way the bill violates budget rules intended to enforce fiscal discipline.
The bill also runs afoul of several points of order (POOs) under the Congressional Budget Act and Senate rules that will require 60 votes to override. The most significant budget points of order that apply to H.R. 2 as passed by the House are:
- Senate PAYGO Point of Order: The Senate provides a point of order against bills that increase deficits over the Congressional Budget Office’s (CBO’s) ten-year budget window. This rule is distinct from the statutory PAYGO rule that would automatically recoup costs that are not offset with a sequester if the bill was not exempted. By contrast, this point of order prohibits consideration of legislation that would increase the deficit unless 60 Senators vote to waive the prohibition.
- Senate Long-Term Deficit Point of Order: Although some advocates of H.R. 2 have suggested that the legislation would be fully offset or even reduce the deficit beyond the ten year window, CBO wrote in its estimate of H.R. 2 that “Taken as a whole, H.R. 2 would raise federal costs (that is, increase budget deficits) relative to current law in the second decade after enactment.” As a result, the bill would be subject to the Senate’s long-term deficit point of order, which prohibits legislation increasing deficits by more than $5 billion in any of the following four decades beyond the ten-year budget window.
The Senate budget by Chairman Mike Enzi (R-WY) contains an important provision to limit a gimmick often used to increase spending using phony savings from CHIMPs, which stands for Changes In Mandatory Programs. While we have written extensively about the abuse of the Overseas Contingency Operations account to allow for defense spending above the caps established by the Budget Control Act, Congress has also relied on CHIMPs to provide non-defense discretionary spending above spending limits. CHIMPs are scored as savings on paper despite often producing no real savings, but are still used to pay for real increases in spending.
What are CHIMPs?
CHIMPs are provisions in appropriation bills making changes in mandatory spending programs, usually to reduce or limit mandatory spending. The savings are then available to be used to offset an increase in discretionary spending. This can be perfectly acceptable when the savings created are real, but it does create the opportunity to game the system.
Now that the Senate and House have passed their respective budget resolutions, a budget conference committee is right around the corner. One aspect of the competing resolutions that will have to be dealt with are provisions related to the budget process. Both budgets include provisions to address issues with the budget process that our Better Budget Process Initiative (BBPI) has identified. While we have previously written on both budgets' treatments of reconciliation instructions, below we’ll go further and highlight some of the other budget process provisions.
The House’s resolution embraces both the dynamic scoring rules put into place at the start of the 114th Congress as well as the rules prohibiting a general fund transfer from the Social Security Old Age and Survivors' Insurance (OASI) trust fund to the Disability Insurance (DI) trust fund that does not also improve overall solvency. In addition, the House’s budget scores general fund transfers to the Highway Trust Fund as new spending. This is significant given the impending insolvency of the Highway Trust Fund on May 31, one of the upcoming fiscal speed bumps.
We have advocated that the budget process should better focus on the long term. The House budget partially addresses this by including a long-term spending point of order.
The House budget also adds rules regarding so called fair-value estimates of government credit programs. Specifically it provides for supplemental analysis from the Congressional Budget Office (CBO) at the request of the Chair or Ranking Member of the Budget Committee. Further, it allows the Chair of the Budget Committee to use this supplemental estimate as the official score for budget enforcement.
Although the numbers in the budget resolution draw a lot of attention, one of the most impactful parts of the resolution deals with budget process, setting up the parameters for legislation later in the year. A key part of this process is reconciliation instructions, which help turn the assumptions in the resolution into reality. Additionally, it provides a bill prepared by a committee filibuster-proof consideration on the floor. This legislation would need to be signed by the President and have the force of law, while the budget resolution does not. Both the Senate and House Budgets provide reconciliation instructions, starting this potentially powerful legislative process.
But what are reconciliation instructions?
Reconciliation instructions are directions to a committee to report legislation that changes existing law to bring spending, revenues, or the debt limit in line with the budget resolution. Reconciliation specifies the committee or committees, the nominal dollar savings needed, and sometimes a deadline for legislation to be reported. A reconciliation bill that comes to the floor cannot be filibustered in the Senate – meaning it does not need 60 votes – and has a 20-hour debate clock in both chambers (unless waived by rule or unanimous consent). Reconciliation's special privileges are important because they are intended to ease the passage of politically difficult (usually) deficit reduction legislation.