Hearing of the Committee on Rules
"Biennial Budgeting: A Tool for Improving Government Fiscal Management and Oversight"
Director, the Congressional Budget Office
1. "How would a biennial budget process impact upon the work done by CBO? What changes would need to be made in order to ensure that CBO could provide proper support to Congress in a biennial process?"
In general, a biennial budget cycle is unlikely to have a major effect on CBO's duties, responsibilities, or workload. CBO's work is closely tied to that of the Congress; as long as the Congress continues to meet and consider legislation annually, our workload would not change appreciably. For example, CBO would continue each year to prepare its annual budget and economic outlook report and would continue to update that report in the summer. CBO would also continue to prepare cost estimates on all reported legislation, scorekeeping reports of legislative action affecting the budget, and analyses of various budget and program issues as requested.
Moreover, although the Congress would adopt a budget resolution only in the first session, it would probably consider revisions or adjustments to the resolution during the second session that could require substantial assistance from CBO. CBO would also continue to review and evaluate the Administration's budget submissions, including any midcourse budget proposals or reestimates.
In sum, it does not appear that a biennial budget process would necessitate any changes at CBO to ensure that the agency continued to support the Congress in its budgetary deliberations.
2. "Taking your point about the potential difficulty in separating budget and non-budget issues to fit the cycles of a biennial budget process, what specific criteria and enforcement mechanisms would you suggest should be adopted to ensure that a biennial system could be made to work in practice?"
If most lawmakers were firmly committed to a biennial budget process, additional rules to ensure that it worked would not be necessary. One potential benefit of a biennial budget cycle is that it could help smooth the appropriation process by providing additional time for lawmakers to consider separately and enact the authorizing legislation and other matters that have sometimes delayed consideration of major budget legislation, especially appropriation bills. If lawmakers choose not to use a biennial budget process in that way, additional rules seem unlikely to force that separation or to make the legislative process smoother.
3. "Some critics of biennial budgeting have suggested an interim step of applying the two-year process to only certain agencies or programs as a sort of ‘pilot' project. Do you see any value in taking this incremental approach? What would be the pros and cons of implementing biennial budgeting on a case-by-case basis?"
A pilot-project approach to biennial budgeting is unlikely to yield the benefits sought from a complete conversion to a two-year budget cycle. If the budget process remains on an annual cycle generally, then two-year appropriations for certain programs would essentially provide regular appropriations for the first year and advance appropriations for the second year. Lawmakers would continue to consider budget and appropriation legislation for most other activities on an annual basis.
Such an experiment might garner useful information from executive branch agencies about the advance planning needed under a two-year system. But it might not give the Congress the additional time it is seeking for program oversight and review.
4. "There has been concern expressed that a biennial budget process would yield more and larger supplemental spending bills in the non-budget years, as Congress and the Administration sought to make corrections or changes to the budget laid out in the prior year. Do you share this concern? What if any procedural/technical provisions should we be considering to ensure that the supplemental spending process does not spiral out of control?"
Whether lengthening the budget cycle to two years would cause greater reliance on supplemental appropriations is not clear. On the one hand, appropriating for two years at a time increases the chances that unforeseen events and demands on spending from other sources will overtake appropriations enacted over a year earlier. Those factors make supplemental appropriations a routine part of the annual appropriation process and are likely to be even more prevalent in a longer budget cycle. On the other hand, a two-year appropriations cycle might improve the ability to plan and to manage resources, thereby enhancing efficiency and spending control.
There are other factors unrelated to the length of the budget cycle that may also create conditions that give rise to supplemental appropriations. For example, in recent years the size of supplemental appropriation acts may have been influenced by the relatively restrictive limits on total discretionary appropriations set forth under the Balanced Budget Act of 1997. Those limits have prompted lawmakers to rely increasingly on emergency appropriations, which are effectively exempt from the limits, to maintain higher levels of total appropriations than the limits would have allowed. Substantial amounts of those emergency appropriations have been included in supplemental appropriation laws.
In making procedural changes to control supplemental appropriations, whether in a biennial cycle or in the current annual process, lawmakers should be careful to balance the need to respond quickly to genuine emergencies or other unexpected events with the need to control spending. One possible method for controlling such appropriations would be to create a strict statutory definition of "emergency" that could be used to certify the types of provisions that may be deemed emergencies. Of course, that change could be implemented in either a biennial or an annual cycle of appropriations.
5. "Some people consider the issue of biennial budgeting to be one of institutional concern, arguing that by giving up annual action on appropriations the Congress would be ceding power to the Executive branch. What is your assessment? Do you think agencies would be less responsive to Congress under a biennial budget process?"
It seems unlikely that agencies would be less responsive to the Congress simply because they would be requesting regular appropriations every other year. Also, a biennial budget cycle, by setting aside time for Congressional action on oversight and authorizing legislation, might relieve the appropriation process of time-consuming debates on substantive policy issues, which could actually improve Congressional control of spending.
6. "As a budget technician, you are in a good position to judge whether there would be tangible savings in terms of time and effort on the part of the people whose job it is to put together budgets and implement them. Do you subscribe to the view that biennial budgeting would save significant time and resources which then could be applied to better program management and long-term efficiency?"
Yes, savings of time and resources are likely under a biennial budget process, although the extent of those savings is unclear. Although the duties of CBO are unlikely to change significantly, the resources used for budget preparation in the Executive branch could be reduced dramatically. Those savings would be partially offset by the need to monitor spending, revise budget estimates, and modify budget proposals and laws as conditions change during the two-year cycle. However, if a two-year budget cycle enabled program managers to devote more attention to reviewing and evaluating federal programs, programmatic cost savings or other efficiencies could also be achieved.
7. "In your prepared testimony you raised the issue of updating a two year budget for changing economic and budget conditions. You suggest that the problem could be alleviated by including procedures in the budget resolution that would allow budget totals and allocations to be updated automatically for changing conditions. Would you elaborate more on what type of procedures you are suggesting?"
Such procedures could be patterned after the so-called reserve fund provisions now used to revise the budget resolution under specified circumstances. In general, reserve fund provisions empower the Chairmen of the House and Senate Budget Committees to revise budget resolution totals and spending allocations to committees under certain conditions—for example, when legislation is reported in a particular policy area or for updated budget projections. In some cases, the extent to which the Congress may consider certain spending or tax initiatives is contingent on those reserve fund adjustments. Such a process might be useful for updating a two-year budget resolution for new budget estimates or other changes.
8. "As you know, the current budget process only accounts for changes in mandatory spending and revenues that result from legislative action. OMB and CBO hold the budget harmless for changes in spending or revenue levels caused by administrative, economic or technical changes. Do you think it would be possible and advisable to utilize this existing mechanism (or a modification thereof) as a way of handling such changes in the budget under a biennial budget process?"
A biennial budget cycle could be meshed with the current mechanisms and practices for ensuring that budget legislation is consistent with the budget levels and other requirements that are enforced in the budget process. However, in a biennial budget cycle, it might be advisable to allow the underlying baseline used for budget enforcement to be adjusted for current economic and technical data in the second year of the cycle. Otherwise, spending or revenue legislation considered in the second session of a Congress would be based on less timely information and estimates of the legislation's budgetary effects could be less accurate.
How long of a ramp up period do you think is necessary to ensure that both the executive and legislative branches are ready to implement this new process? Specifically, how long will it take agencies to obtain the ability to prepare, propose and manage two year budgets? Would you suggest that biennial budgeting be phased in over some set period with certain portions of the budget moving to a biennial schedule one year followed by others? If not, would you advocate not moving any budget submissions to a biennial schedule until the entire budget is ready to proceed in that direction? If so, would the Department of Defense by the most likely first candidate for such a transition?"
The major proposals for biennial budgeting call for the President to submit a budget and for lawmakers to act on budget legislation during the first session of each Congress. If a biennial budget process were to become law at the end of the 106th Congress, it might be advisable to use the 107th to phase in the new cycle, delaying its full implementation until the beginning of the 108th. During the 107th Congress, agencies could begin preparing budgets, especially appropriation requests, for two-year periods. (For example, they could include second-year requests for planning purposes in the budget submitted during the second session of the 107th Congress.) At the same time, Congressional committees could begin to identify any problems or issues involved in fully implementing two-year budgets and appropriations and start to modify the cycle of expiring authorization laws to make them conform to a two-year budget cycle that would begin with each new Congress.
10. "What role would you envision reconciliation playing under a biennial process specifically in the off year?"
All of the major proposals for a biennial budget call for any reconciliation legislation to be enacted in the first session of each Congress. Because such legislation is a major vehicle for carrying out the policies reflected in the Congressional budget resolution, it would seem to make sense to consider reconciliation legislation as soon as possible after the resolution is adopted. However, if Congressional action on reconciliation legislation was pushed back into the second session to spread out the budget workload facing the Congress—or if it was simply delayed until that time—the budget baseline and the budget resolution levels, amounts, and reconciliation instructions would need to be adjusted for current economic and technical budget data.
