Budget Process in the FY 2016 Congressional Budget Resolution

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.

CHIMPs

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.

OCO

The budget conference report drops the Senate budget's provision creating a 60-vote point of order against limiting the amount of spending that can be designated as Overseas Contingency Operations (OCO) for purposes of enforcing the statutory caps in the Budget Control Act in FY 2016 and 2017 to $58 and $59.5 billion, respectively. Dropping this point of order now allows Congress to exempt the full $96 billion in the budget resolution for OCO – $38 billion more than the President requested – from the statutory spending caps, effectively utilizing OCO as a slush fund for normal defense operations. These decisions represent a clear abuse of the OCO designation meant to evade the spending caps both parties agreed to abide by or offset under current law. For more on using OCO as a gimmick, see our recent blogs.

Limiting Trust Fund Transfers

The conference agreement maintains a provision from the House’s budget requiring CBO to score a general revenue transfer to the Highway Trust Fund (HTF) as a cost subject to budget rules requiring offsets. This rule would only apply in the House. Under normal scorekeeping rules, general revenue transfers to the HTF are not scored with a cost even though the transfer would increase the amount of spending allowed from the HTF. This change is significant given that the HTF is running out of money and is the next Fiscal Speed Bump we're set to hit at the end of May. The expectation is that Congress will rely on this type of general revenue transfer to shore up the trust fund. For all the upcoming speed bumps, see our newly updated blog.

SSDI Insolvency

The budget incorporates the rule that the House enacted at the beginning of the 114th Congress which prohibits the consideration of legislation that reduces the balance of the Social Security Old Age and Survivors' Insurance (OASI) trust fund by at least 0.01 percent of payroll unless the legislation improves the combined Social Security trust fund's balance. The practical effect of the rule is to apply it to the consideration of legislation that shifts payroll tax revenue from OASI to the Disability Insurance (DI) trust fund to avert the latter fund's pending insolvency in late 2016 unless it is accompanied by reforms to improve solvency of the combined Social Security trust fund. The rule affects the House only.

Long-Term Deficits

The budget continues a point of order in the Senate against increasing deficits by more than $5 billion in any of the four decades after the 10-year window and establishes a point of order in the House against similar increases in future mandatory spending. However, somewhat discouragingly, the agreement includes a loophole in the Senate for legislation “growing the economy” (e.g., tax reform) and a loophole in the House for changes related to the Affordable Care Act.

Long-Term Estimates

The budget requires supplemental long-term estimates for legislation with major outlay effects as well as an advisory long-term score for legislation regarding the Highway Trust Fund or discretionary spending caps. It also requires the inclusion of projections of spending, revenues, and deficits over the next 30 years in CBO's 10-year Budget and Economic Outlook.

The Conrad Rule

While this budget’s reconciliation instructions require deficit reduction, the budget also includes a potentially dangerous provision from the Senate budget repealing the "Conrad Rule," which restricts reconciliation legislation from increasing the deficit in the first 10 years. Because the rule's repeal will remain in effect in Senate rules unless the rule is readopted, future reconciliation instructions could increase the deficit in the first 10 years without being subject to a point of order. The rules around reconciliation legislation are intended to make it easier for Congress to enact the difficult policy changes to reduce the deficit and should not be used to further facilitate increasing the deficit. For more on the Conrad Rule, see our paper "Budget Process in the FY 2016 Budget Resolutions."

CBO Scoring

The conference report established uniform rules for the House and Senate about providing dynamic and fair-value estimates of legislation. However, the conference report indicated that while both dynamic and fair-value estimates can be used as official estimates in the House, they will be only be used for informational purposes in the Senate.

Timing Shifts

The Senate’s budget originally contained a prohibition on scoring timing shifts that artificially brought savings into or pushed costs outside of the 10-year budget window. These timing shifts have been a common gimmick lawmakers have used to skirt budget rules. This provision was unfortunately dropped from the final agreement. For more on timing shift see chart 6 in "Everything You Need to Know About Budget Gimmicks in 8 Charts".

Guarantee Fee Offsets

The budget resolution from the Senate contained a prohibition on scoring mortgage guarantee fees as an offset in bills. This was adopted for both chambers in the conferenced budget.

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For all of our coverage of the FY 2016 budget conference and budget resolutions, see our blog. For our in-depth dive into budget process provisions in the original House and Senate resolutions, see our paper "Budget Process in the FY 2016 Budget Resolutions."