106th Congress: Key Issues and Early Agenda II

CONTENTS FOR THIS SECTION

The Federal Budget Process

The President's Budget and the Budget Resolution
Implementation of the Budget

Reconciliation Legislation
Annual Appropriations Acts

Budget Resolution Enforcement and Sequestration

Agriculture: Farm Income Issues
Budget Process Reform

The Budget Enforcement Act and a Surplus
Budget Process Reforms Considered in the 105^th Congress
Other Budget Process Reform Issues

The Federal Budget Process

Many of the key issues that Congress faces each year are addressed through budgetary legislation or legislation that has important budgetary components. As a consequence, the legislative agenda is closely tied to the requirements and constraints of the federal budget process. During the first session of the 106^th Congress, the House and Senate will focus on developing the budget for FY2000, which begins on October 1, 1999 (see the timetable in Box 1). In addition, the House and Senate may make some budgetary adjustments for the current fiscal year, especially through the enactment of supplemental appropriations and rescissions.

The President's Budget and the Budget Resolution. Following many months of development by the Office of Management and Budget (OMB) and the executive agencies, the budget will be submitted by President Clinton to Congress early in the session, shortly after his State of the Union Address on January 19. Under current law, the deadline for the budget submission is Monday, February 1. Congress will consider the President's budget recommendations through a decentralized committee system that involves multiple budget processes.

Before Congress acts on individual spending and revenue legislation to implement budget policies, it is required (by the Congressional Budget Act of 1974, as amended) to fashion its own budget plan in the form of a concurrent resolution. The budget resolution, under the jurisdiction of House and Senate Budget Committees, is not sent to the President for approval or veto. Instead, it is enforced through the rules and procedures of each chamber.

The budget resolution sets overall fiscal and budgetary policy; specific programmatic decisions are left to the revenue and spending committees. Final House and Senate action on the budget resolution is scheduled for completion by April 15. While the House and Senate often complete initial action by this date, final action usually is not completed until weeks, or even months, later. (In 1998, Congress did not complete final action on the budget resolution at all; budgetary legislation that year was considered largely within the framework of a multi-year budget summit agreement reached between President Clinton and congressional leaders in 1997.)

Implementation of the Budget. Revenue and borrowing decisions fall within the jurisdiction of the House Ways and Means Committee and the Senate Finance Committee. Spending decisions are decided along two tracks. Discretionary spending, which is under the jurisdiction of the House and Senate Appropriations Committees, is provided annually in regular, supplemental, and continuing appropriations acts. Direct spending, which largely involves entitlement and other mandatory programs (such as Social Security, Medicare, federal retirement, and unemployment insurance), is under the jurisdiction of the Ways and Means and Finance Committees, as well as other House and Senate legislative committees, and is provided in substantive legislation. For the most part, revenues and direct spending flow automatically each year without any legislative action. Congress, however, usually decide each year to make some changes in revenue and direct spending laws.

Reconciliation Legislation. Since 1980, Congress has used an optional reconciliation process in conjunction with the budget resolution. The process allows the House and Senate to instruct committees, in the budget resolution, to develop legislation by a particular deadline that conforms existing revenue and direct spending law to budget resolution policies. The legislative recommendations of the instructed committees usually are consolidated into an omnibus bill in each chamber, which is considered under expedited procedures.

Reconciliation has been used 11 times since 1980, resulting in e enactment of 14 separate reconciliation bills. For many years, the reconciliation process was used primarily to reduce the deficit (often through a combination of spending cuts and revenue increases) and, in some instances, to increase the debt limit. Recently, reconciliation also has been used to reduce revenues and to increase spending for some programs. Two reconciliation bills, one dealing principally with revenue matters and the other with direct spending, were enacted in 1997 to implement the 1997 budget summit agreement. In view of the many changes in budget policy expected to be considered in 1999, the House and Senate may well use the reconciliation process again.

Annual Appropriations Acts. Roughly one-third of all federal spending is discretionary spending provided in annual appropriations acts (some direct spending, such as funding for Medicaid, also is provided in annual appropriations acts, but the levels of such spending effectively are determined by the legislative committees). Although the rules of the House and Senate traditionally have served to separate the consideration of appropriations from legislative matters, policy issues often arise in the appropriations process in the form of legislative "riders." The final appropriation act considered in the 105^th Congress, the Omnibus Consolidated and Emergency Supplemental Appropriations Act for FY1999 (P.L. 105-277), was a massive bill. Although it merged together the full text of eight of the 13 regular appropriations acts, along with emergency supplemental appropriations, well over one-third of its text contained legislative riders, such as the Foreign Affairs Reform and Restructuring Act of 1998, the Chemical Weapons Convention Implementation Act of 1998, and the Internet Tax Freedom Act. In view of the controversy engendered last session by this practice, congressional leaders may consider scaling back the use of riders in 1999.

Due to the prominence of the annual appropriations bills in the budget process, and the inclusion from time to time of important legislative issues in such bills, the Congressional Research Service (CRS) monitors their development and consideration by means of a special, interdivisional research team for each bill. The CRS team coordinators for the FY2000 appropriations cycle are as follows:

Budget Resolution Enforcement and Sequestration. Budget resolution policies are enforced under the 1974 Congressional Budget Act by the reconciliation process and by point-of-order provisions that operate as House and Senate rules. Although enforcement procedures under the 1974 act are extensive, reconciliation potentially is the most important enforcement tool for revenue and direct spending legislation; annual appropriations measures are controlled principally by allocations of spending made to the Appropriations Committees and their subcommittees under Section 302 of the act (the so-called 302 allocations and subdivisions).

Congressional action on budgetary legislation also is influenced by enforcement procedures under the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Enforcement Act (BEA) of 1990 and other laws. Under a sequestration process in the act, automatic spending reductions are made toward the end of the congressional session if, in the judgment of the director of the Office of Management and Budget, certain budgetary goals specified in the law are not met. Discretionary spending is controlled by adjustable discretionary spending limits, while legislation affecting revenues or direct spending is subject to a deficit-neutral, "pay-as-you-go" (PAYGO) requirement. In 1997, these procedures were extended to bills considered through FY2002. The congressional budget process is linked in various ways to the statutory discretionary spending limits and PAYGO requirement.

The President will give Congress a preliminary assessment of the likelihood of a sequester for FY2000 in his sequestration preview report, to be included in his February budget submission, and will update the report mid-way through the session.

At first, sequestration was viewed as giving the President and Congress a strong incentive to reach agreement on budgetary goals, thereby avoiding the legislative deadlock that characterized the early 1980s. With the emergence of a surplus, however, some Members have questioned the need for continuing the BEA procedures. They argue that the BEA procedures should be eliminated, or at least substantially modified, so that Congress and the President can "use" the surplus for tax cuts and other actions otherwise prohibited. This controversial issue may be addressed in 1999, possibly as part of any required reconciliation measure.

Agriculture: Farm Income Issues

Issues relating to declining prices and world markets for U.S. farm commodities are expected to be legislative topics in the 106^th Congress. After almost two years of record highs, prices for several major farm commodities began to fall in 1997. U.S. farm income was further eroded by weather disasters and crop diseases in some parts of the country. The 105^th Congress responded by passing legislation giving commodity program farmers access to all $5.5 billion of their FY1999 contract payments at the beginning of the fiscal year (P.L. 105-228) and by adding a $5.9 billion aid package for farmers to the FY1999 omnibus appropriation bill (P.L. 105-277). Key indicators of the farm sector's economic prospects show little likelihood of rising farm prices and income in the coming year, making the "farm safety net" a likely issue in 1999.

While some would like to re-institute the supply controls and price supports of previous law, many policymakers do not want changes to the 1996 farm law that might lessen its market-driven policy approach or the planting flexibility it gives to farmers. There is interest in various farm risk management alternatives (such as revenue insurance or tax-deferred farm savings accounts) that would provide income protection for farmers when they suffer significant losses. Proposals raising the current cap on marketing loan rates also are likely, particularly among Democrats, who were unable to get as part of the farm aid package passed in 1998.

Nearly all farm policymakers see increased international trade as the best vehicle for improving farm income. For many, a priority will be passage of "fast-track" legislation to give U.S. negotiators greater credibility in the next round of GATT negotiations (scheduled to begin in December 1999). Fast track objections come from those who believe that trade agreements have allowed foreign nations to dump their products in U.S. markets, but mostly have centered on foreign countries' environmental and labor practices.

Budget Process Reform

Budget process reform has been a perennial subject for discussion and consideration in Congress during recent years, and the 106^th Congress is not likely to be an exception. During the 105^th Congress, several significant budget process changes were enacted. Most notable was an extension of the Budget Enforcement Act of 1990, but changes were made in the budgetary treatment of transportation funding as well. The Transportation Equity Act for the 21^st Century (P.L. 105-178) created two new categories under the discretionary spending caps (for highways and mass transit), and established annual obligation limits for FY1999 to FY2003. The budgetary treatment of transportation funding was further adjusted in section 108 of Division C of the Omnibus Consolidated and Emergency Supplemental Appropriations Act for FY1999 (P.L. 105-277). Several other budget process reform proposals, identified below, were considered in either the House or Senate and may be revisited in the coming Congress.

The Budget Enforcement Act and a Surplus

The Budget Enforcement Act of 1997 extended special enforcement procedures under the Budget Enforcement Act of 1990 through FY2002, but the appropriateness of retaining them has emerged as an issue. These procedures, including discretionary spending limits and a pay-as-you-go (PAYGO) requirement, restrict the ability of Congress to enact legislation which would have a negative effect on the fiscal balance of the federal government. However, a combination of factors has produced a surplus in the unified budget sooner than was originally expected. The result has been an ongoing discussion of what, if any, changes should be made in the budget process now that the fiscal balance of the federal government means surplus rather than deficit (also see discussion of Budget Policy,). In particular, the PAYGO process continues to require that the sum of all changes in direct spending and revenues have a neutral effect on that balance. If there is sufficient support in the Copngress for a tax cut without offsets in other revenues or direct spending, it may be necessary to modify the Budget Enforcement Act.

Because the surplus over the next several years in the overall federal budget is essentially equal to the surplus of the Social Security trust funds, discussions about how the budget surplus should be used are intertwined with the issue of the budgetary treatment of Social Security, and its relationship to the rest of the federal budget. Transaction of the Social Security trust funds already are "off budget," but some have proposed separating them even more strongly from the rest of the budget.

Budget Process Reforms Considered in the 105^th Congress

At least four budget process issues received floor consideration in the 105^th Congress. A proposal for an automatic continuing resolution was included in a supplemental appropriations bill passed by the House and Senate (H.R. 1469), but subsequently vetoed by President Clinton. The House also adopted a proposal for a deficit reduction "lock box" as an amendment to the Department of the Interior and Related Agencies Appropriations Act for FY1998 (H.R. 2107). However, the provision was dropped in conference. Proposed constitutional amendments to limit Congress' ability to increase taxes were considered by the House on two occasions (H.J.Res. 62 in 1997 and H.J.Res. 111 in 1998), but these both failed to achieve the two-thirds vote necessary for adoption. In 1997, the Senate considered a constitutional amendment to require a balanced federal budget (S.J.Res. 1), but it, too, failed to achieve the necessary two-thirds vote. In addition, the Senate Governmental Affairs Committee reported a bill to establish a biennial budgeting system for the federal government (S. 261), but it was not considered on the floor.

Other Budget Process Reform Issues

Budget process reform also embraces a wide range of other potential issues, many of which were considered during the 105^th Congress either as discrete issues or as part of omnibus budget reform proposals (such as H.R. 4837). A number of issues raised in the 105^th Congress may be considered in the 106^th Congress. These included a statutory budget resolution, restrictions on emergency spending, the budgetary treatment of trust funds, reform of the Senate's "Byrd rule," reform of appropriations procedures in the Senate (such as a non-debatable motion to proceed to consideration of appropriations bills and requiring a three-fifths vote to waive a prohibition against legislation in appropriations bills), and restoration of presidential line-item veto authority following the Supreme Court's invalidation of the Line Item Veto Act.

It should be noted that while budget process reforms may be considered and enacted as discrete issues, in recent years several major budget process reforms have been considered as part of key budget legislation. For example, the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings), the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, the Budget Enforcement Act of 1990, and its extensions in 1993 and 1997, were all enacted as part of reconciliation or debt limit measures.

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