Hearing of the
Subcommittee on Legislative and Budget Process

on Biennial Budgeting

Statement of Robert L. Bixby,
Executive Director, The Concord Coalition

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I. Background

Madam Chairman and members of the Subcommittee, thank you for inviting me to appear today to discuss biennial budgeting for the federal government. I am here representing the Concord Coalition, a nationwide, grassroots nonpartisan organization dedicated to strengthening the nation's long-term economic prospects through prudent fiscal policy.

Concord's co-chairs are former senators, Warren Rudman (R-NH) and Sam Nunn (D-GA). They, along with our approximately 200,000 members who hail from every state, have worked for nine years since the organization's founding by Paul Tsongas, Warren Rudman, and Peter G. Peterson in 1992 to help build a political climate that encourages elected officials to make the tough choices required to:

 

Given these objectives, The Concord Coalition is greatly heartened by the dramatic improvement in the federal government's fiscal condition over the past several years. When the 1990s began the nation was mired in large and growing deficits. The budget process was primarily aimed at reining in and ultimately eliminating the deficit. The Budget Enforcement Act of 1990 (BEA) established caps on discretionary spending, and a pay-as-you-go limitation on mandatory spending and revenues. By helping to constrain spending, these budget enforcement mechanisms made a direct contribution to the more favorable fiscal position we now enjoy.

The lesson to be learned from the overall success of the BEA is that budget process reform, while not everything, can be an important tool in achieving strategic long-term goals.

The Concord Coalition has always advocated a long-term perspective. Our primary goal has never been to achieve a balanced budget for two, three, or even four years, but to help bring about fiscal policies which can be sustained over the long-term in a much changed demographic climate. In that regard, there is much work remaining to be done. Unfortunately, today's prosperity, welcomed as it is, has not repealed the coming age wave. Nor has it erased the projected growth in age-related entitlement programs such as Medicare, Social Security, and Medicaid. Nor does it signal an end to the need for fiscal discipline and careful scrutiny of the manner in which taxpayers' dollars are spent.

As the General Accounting Office and the Congressional Budget Office continually remind us all, the challenges of an aging society include fiscal pressures which cannot be remedied simply by assuming that projected budget surpluses will bail us out. The inevitable growth in spending on age-related entitlement programs will put pressure on discretionary spending, revenues, and public debt. Unless we are prepared to accept a permanent level of government spending and revenues as a percentage of the economy (GDP) that we have not experienced, other than temporarily in times of war, tough choices will need to be made to avoid burgeoning public debt in the future.

Given this set of concerns, it should be readily apparent why the Concord Coalition is interested in establishing tight fiscal discipline procedures and observing them scrupulously. While no amount of process reform can substitute for the hard policy choices you face as the demographic tidal wave approaches, The Concord Coalition believes that moving the budget to a biennial cycle would help shift the emphasis from the immediate, and often repetitious, year-to-year battles over budget resolutions and appropriations bills to the broader questions of strategic planning, oversight, and reform.

Just as the budget process was reformed to respond to the deficit challenges of the late 1980s and 1990s it is now appropriate to consider new reforms which will help you prepare for the difficult challenges ahead—wise management of our surpluses, a thorough examination of the role and scope of the federal government and careful scrutiny of the programs deemed worthy of a commitment of taxpayer dollars.

II. Biennial Budgeting Fits the Two-year Congressional Cycle

The Concord Coalition has always favored moving to a two-year budget process. Putting the President's Budget, the Congressional Budget Resolution, appropriations and oversight on a two-year cycle that coincides with sessions of Congress makes excellent sense for a number of reasons.

To begin with, the Congressional Budget Resolution is as much a political statement as a management tool (the same is true, of course, with the President's budget.) As such, it makes sense for each 2-year Congress to adopt a single such statement, use it for guidance throughout the remainder of the session and change it only if economic or political events make it completely unworkable. Overall decisions on how much defense and non-defense spending to permit, how much entitlement expansion or reduction to permit, and how tax policy should be changed are matters that should not alter much within any given session of Congress. And, with budget deficits at least temporarily erased, there is no longer the need for an annual reconciliation bill, or for a Congressional Budget Resolution requiring it.

Indeed, from Concord's perspective, one of the most attractive features of biennial budgeting is that it would lessen the opportunities for fiscal irresponsibility. Some traditional opponents of biennial budgeting have contended that by moving from an annual to a biennial process, policy makers would relinquish half their opportunities to enact reconciliation bills and reduce the deficit. Now that we appear to be entering a period of budget surpluses, the reverse argument can be made in support of biennial budgeting: with a two-year process, policy makers will have only half as many opportunities to reduce the surplus. That's desirable.

III. Biennial Budgeting Fits the Demand for Improved Oversight

Another advantage of biennial budgeting is that it would enhance the opportunities for congressional oversight. Congress functions in a biennial mode, and conforming the budget cycle to the congressional rhythm is a sensible change that could replace wheel spinning with productive work, including more attention to oversight. Ideally, the first session of each Congress would be spent on setting priorities and establishing funding levels, and the second session would be devoted to long-term planning and oversight.

Granted, the work of oversight is a more painstaking, and perhaps not as immediately rewarding, task than appropriating. And, as others have noted, moving to a biennial cycle would not guarantee that time would be made available for oversight or that oversight would be any more thorough than it is now.

But perfection should not be made the enemy of the good. The key question in this regard is whether biennial budgeting, if successfully implemented, would improve the current situation. Perhaps one of the strongest arguments in favor of biennial budgeting is that so many members of Congress have come to believe that the annual, repetitive, tussle over the budget makes it impossible to engage in any meaningful oversight. Evidence in support of this perception is the fact that according to CBO some $112 billion worth of FY2001 appropriations were made for programs and activities with expired authorizations.

In the final analysis, you are the experts on whether biennial budgeting will free up a meaningful amount of your time. If in your experience you believe that biennial budgeting will give you more time for oversight and planning which may result in improved efficiency, then The Concord Coalition is prepared to take you at your word.

It is also important to note that the potential benefits of biennial budgeting are not limited to congressional oversight. A two-year cycle would improve the efficiency and efficacy of both the Executive and Legislative Branches. Too much time is consumed needlessly in repetitious budget preparation, justification, and appropriation. This energy could be more usefully put to work on improving government performance.

Another relevant consideration, involving both the congressional and executive branches, is how you can best make use of the Government Performance and Results Act of 1993. You will now be receiving a wealth of material to absorb in monitoring the performance of government agencies. Adequate time must be made available to properly integrate the GPRA results into your decision making. In that regard, biennial budgeting makes great sense. It would be far better to free up time to absorb the new information provided under GPRA than to continue the amount of time and energy that now goes into repetitiously renewing or disputing budgetary "decisions" that often have been made "final" only a few months earlier.

IV. Biennial Budgeting Will Help in "Reinventing" Government

Now that the budget process need not be focused exclusively on deficit reduction, you have a window of opportunity to do some weeding out, modernizing, and updating of government programs before the demographic and fiscal pressures of the baby boomers' retirement hit. If there was ever a time to "reinvent" government, now is it. In Concord's 1993 Zero Deficit Plan we suggested that you eliminate:

 

The Comptroller General gave the Congressional Budget Committees a similar list of suggestions in March. And earlier this year, the Congressional Budget Office released its annual Budget Options book containing some 250 spending and revenue options. In short, there is a general recognition that simply achieving a "zero deficit" does not mean that there is no further need for fiscal discipline. It does not mean that we should continue to fund programs that are no longer needed, or that are inefficiently run, or that return little public benefit for the amount of dollars committed to them, or that provide subsides to narrow interest.

If biennial budgeting results in Congress having more time to engage in oversight, then the American people should expect to see a more productive government in which performance counts, and programs are not simply continued from year-to-year simply because no one has the time to ask whether or not they are still needed. Increased oversight could also highlight inefficient programs that could be used as offsets to enhance savings or fund more important priorities competing for funding within the caps in this year's Budget Resolution.

While I have no polling data to back this up, I firmly believe that the American people would support your moving to a biennial cycle. Doing so would send a powerful signal to your constituents that you are at least as interested in monitoring and, if necessary, reforming the way in which taxpayers dollars are spent as you are in simply determining how much is spent.

V. Continuation of a Lengthening Cycle

Moving to a biennial budgeting process would constitute a continuation of the gradual lengthening of the budget cycle that has occurred since adoption of the Congressional Budget process in 1974. When the Congressional budget process was launched in calendar 1975, the process began with two budget resolutions for fiscal 1976. By the next cycle, there were three budget resolutions for fiscal year 1977, enacted on April 29, 1976, September 9, 1976, and March 2, 1977.

For the remainder of the first decade of the Congressional budget process, there were two budget resolutions annually, plus a formal revision of the second budget resolution in the following year. By 1982, the second budget resolution was settling into a pro forma exercise that essentially reaffirmed the figures contained in the first resolution. However, not until Gramm-Rudman was enacted in 1985 was the requirement for a second budget resolution abolished.

Formally converting the annual appropriations process to a two-year cycle would be a significant change, but perhaps not as large as it might seem. Some two-thirds of the budget accounts on the annual appropriations cycle already provide multiple-year or no-year funding. Advance appropriations are already made for programs, such as education, where there is a clear need to have funds immediately available at the beginning of the fiscal year. The Department of Defense already submits a two-year budget, though Congress has yet to authorize or appropriate for defense on a two-year basis.

VI. Biennial Budgeting Would Not Be a Fiscal Straightjacket

In considering biennial budgeting, it is fair to ask whether the priorities established in the first year would hold up for two years. And if adjustments were required, how would Congress respond?

On the first question, there is little reason why priorities established at the beginning of each two-year Congress ought not to provide a workable guide for a two-year period, particularly during the current era of peacetime prosperity. While there is always uncertainty in budgetary forecasts, the greatest danger in this regard is in using long-range surplus projections to "pay for" entitlement expansions, or revenue reductions. The existence and size of any such surpluses is far too speculative to serve as a reliable source of financing for new permanent commitments. This danger exists whether we stay with an annual budget cycle or move to a biennial one.

On the discretionary side of the budget, a biennial process would create the need for a mid-session "corrections" bill. But the usual fiscal ups and downs on a year-to-year basis should not be so great as to necessitate major changes. A larger surplus than expected could always be used to reduce the debt, or released for high priority items. A larger deficit than expected could be addressed through rescissions, or if necessary, be absorbed until the next Session.

Should there be substantial and unanticipated changes in the economy, alarming international developments or extraordinarily severe natural disasters, Congress and the White House would unquestionably respond. The point is that moving the discretionary budget to a biennial cycle would not be tantamount to putting the government on autopilot.

VII. Biennial Budgeting Does Not Mean Runaway Supplemental Spending

Moving to a biennial system would mean that some regular mechanism for considering mid-course corrections would need to be established. The machinery for supplementals and rescissions is well developed. The chief challenge therefore would be not whether there could be a timely and appropriate response to new priorities during the two-year period, but rather how to hold to a minimum the number of such extraordinary responses and their dollar level. If "urgent" supplementals for routine and unnecessary increases are permitted to become the commonplace rule rather than the rare exception, the rationale for moving to a two-year budgeting cycle will have been defeated.

A key element of any transition to biennial budgeting would, therefore, be establishing a way to ensure, or at least protect, against the danger of "death-by-supplementals." One potential partial solution would be to withhold allocation to the Appropriations Committee of a small portion of the two-year total until the second year. This specific "pot" of set-aside funds could function as a safety valve to accommodate new, unexpected needs that, while useful and beneficial, do not constitute true emergencies.

It should also be made clear that the primary method of adjusting second-year spending levels would be through one mid-session correction bill, rather than through an ad hoc series of smaller, less scrutinized bills. Bipartisan cooperation at the leadership level (including the Administration) would be required to keep the supplemental process from deteriorating.

While there is always a danger that second year supplementals would get out of hand in a biennial cycle, this need not happen if:

 

These elements would help prevent an avalanche of supplementals; something Concord believes should clearly be avoided.

VIII. Planning for Emergencies

If you decide to move to a two-year budget cycle, the likelihood will increase that necessary, sudden, urgent, unforeseen and temporary needs will arise after the budget plan has been adopted (i.e., emergency spending). It is even more likely that merely desirable, helpful, useful or popular needs for additional spending will increase, particularly as election day nears. The record of the past two years has been dismal in this regard. A legitimate safety valve in the budget process was widened into a huge loophole through which Congress and the White House jointly enabled each other to permit more than $30 billion to leak away each year.

The Concord Coalition agrees with Speaker Hastert and others who have argued that biennial budgeting would encourage Congress and the President to plan ahead for emergencies. Concord favors enacting appropriations in the regular appropriations bills for the principal emergency relief programs at their long-term average levels. Natural disasters-floods, droughts, fires, hurricanes, tornadoes, and earthquakes-occur with regularity. Expenditures in response to these occurrences tend to fall within a predictable range. To budget in anticipation that there will be no disasters is disingenuous.

Others have suggested that a reserve fund be set aside within the annual discretionary caps at amounts equal to the five-year rolling average. This would provide budgetary resources within the discretionary caps in advance of emergency needs and would eliminate the need for most supplemental emergency appropriations. At issue would be how funds would be released from the reserve, under what circumstances, and what to do with unused funds at the end of the fiscal year. If such an advance funding reserve were created, Concord would oppose establishing it as a trust fund or investing reserves in government interest-bearing debt. Instead, we would prefer to see it function as a score-keeping entry in which credit for unused funds could be rolled into future years for possible appropriation should the need arise.

IX. Conclusion

Madam Chairman, it is clear that no amount of process reform will cure all of the perceived problems with the current system. But the fact that perfection will not be achieved should not deter you from trying to reform the system in a positive way that is responsive to the challenges ahead, and that addresses the frustrations so many of you have expressed with the current system. Moving to a two year budget process would help preserve future budget surpluses, improve efficiency, increase oversight, and focus attention on the vital task of preparing for the fiscal challenges ahead. Thank you.

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