| Printer-Friendly | Search

Hearing of the Committee on Rules

"Biennial Budgeting: A Tool for Improving Government Fiscal Management and Oversight"

Statement of Louis Fisher,
Congressional Research Service

Mr. Chairman, thank you for inviting me to testify on biennial budgeting. My statement focuses on three issues: the likely transfer of legislative power to the President, the efficiencies that might accompany biennial budgeting, and whether this reform will produce more and better congressional oversight.

Biennial budgeting bills typically require Congress, in the first year, to pass a two-year budget resolution and enact two-year appropriations. The second year would be devoted to multi-year authorizations and congressional oversight. A budget reform that promises to reduce workload in both branches and eliminate repetitive votes in Congress has understandable appeal. Members of Congress are often frustrated by the time absorbed by annual votes on budget-related measures.

What will be the impact of biennial budgeting? What seems most clear is that Congress would cede some of its power of the purse to the President and executive agencies. With two years of money, agencies will be operating with a longer leash. Will biennial budgeting compensate for this potential shift of power by producing efficiencies and closer oversight of the executive branch? This is the most difficult part to read. Some oversight will be lost as Congress abandons the important oversight performed each year on the appropriations bills. Biennial budgeting might stimulate other forms of oversight to make up for this loss, yet that part of the picture is far from clear.

Advocates of biennial budgeting often look to state practices for support. There is, however, little analogy between federal budgeting and state budgeting. Many state legislatures did indeed rely on biennial budgeting, but they did so because they met only every other year. As state legislatures moved toward annual meetings, they shifted to annual budgeting. Congress has been in session every year since 1789. Moreover, state budgeting has little application to federal budgeting with its unique responsibilities of grants to the states, transfer payments to individuals (as with social security), duties for stabilizing the national economy, military operations, and international responsibilities. See the appendix for further comments on the state model.

For reasons explained in this statement, it appears that biennial budgeting will give some of the power of the purse to the executive branch and bring modest, if any, workload relief to Congress. It could usher in a variety of new problems, some of them quite serious. Given these uncertainties, Congress may want to apply biennial budgeting to carefully selected areas before attempting full-scale implementation.

Constitutional Spending Powers

Recent Presidents, including Reagan, Bush, and Clinton, have urged Congress to adopt biennial budgeting. We would expect that. Presidents do not like to come to Congress each year to seek statutory authority to spend money. The less frequent the visits the better. As one study remarked: "The Pentagon's top managers hoped that biennial budgeting would lead to less congressional micromanagement. Their not-too-hidden agenda for biennial budgeting was to get Congress off their backs."(1)

Congress maximizes its constitutional power by keeping executive agencies on a short leash. Extending appropriations from one year to two years would increase executive power and decrease legislative power. There seems little disagreement about that. Gerald H. Miller, executive director of the National Association of State Budget Officers, acknowledged that biennial budgeting "tends to give the executive more power, more influence . . . ."(2) Annual appropriations, as noted by a former CBO analyst, "encourage the president to implement the budget in good faith."(3)

A recent study, generally favorable toward biennial budgeting, concedes that biennial budgeting "entails some loss of . . . legislative control."(4) The leverage of Congress with one-year funding was well expressed in a 1987 study by the Congressional Budget Office:

The "must-pass" character of appropriations requires the Executive Branch to negotiate in good faith and to conform to previously enacted law. Therefore, forgoing annual appropriations would mean that the Congress would periodically do without its most coercive tool. In the absence of annual appropriation controls, the Congress might respond by writing legislation more restrictively for agencies it did not trust. By eliminating agencies' flexibility, these "micromanagement" provisions would force them to act inefficiently. Yet, since it would often be difficult for the Congress to anticipate future conditions, agencies would probably be left with greater discretion than they currently enjoy.(5)

The problem of agency bad-faith actions is a perennial one. Agency careerists who are in regular touch with review committees are usually interested in maintaining and fostering healthy relations. They have a stake in keeping their word. That is less so with political appointees, whose allegiance is often directed more toward the President and less toward compliance with statutes. As we move toward agencies dominated by short-term political appointees, with careerists playing an increasingly subordinate role, the risk of bad-faith actions may increase. Add the availability of two-year money and the likelihood of bad-faith actions increases even more.

This mix of ingredients could jeopardize congressional control. To maintain control, much time would be consumed by legislative hearings and investigations to determine what liberties an agency may have taken with its longer leash. The leverage of Congress at that point—after appropriations have been enacted—would be much less than it is when Congress decides to appropriate or withhold funds. Oversight would be done, but not the kind of broad scrutiny of why a program exists and whether it should continue.

Efficiency for Congress

With biennial budgeting, a newly elected President would have to put together a two-year budget after a few months in office—at a time when there is the least capacity in the administration to do the job. For example, if this proposal were in effect for the 107th Congress, a President elected in November 2000 would have to submit a two-year budget in April 2001 and basically live with those choices for two years. There would be only one other major opportunity in the President's four-year term to present a budget: in February 2003. For the years 2002 and 2004, presumably only modest adjustments would be permitted.

Multi-year authorization bills would be enacted in 2002 and 2004. That means that the new Congress elected in those years would face legislative decisions made by the outgoing Congress, even if the election called for new budget priorities. Of course one Congress cannot control the next. If Congress had been operating under biennial budgeting in 1995, the newly-elected Republican Congress would have tried to pass authorization bills to fulfill the Contract With America. If a new Congress decided to pass authorizations at the same time that it passed appropriations, some of the anticipated efficiency of biennial budgeting would be lost.

Budget estimates are inescapably flawed and conjectural even for one-year budgeting. Inaccuracies would multiply with two-year budgeting. Because of these built-in limitations, the second year of biennial budgeting would require legislative adjustments. Members of Congress would have to attend to supplemental bills, budget amendments, reprogramming and transfer requests from the agencies, rescissions, and other budget adjustments. In the second year—set aside for oversight—legislators, executive officials, and lobbyists may try to take advantage of whatever is moving through Congress (such as the supplemental appropriations bill) to satisfy "emergency" interests. The temptation would be great to use the second-year supplemental as an all-purpose legislative vehicle to meet a variety of needs.

These comments assume that the economy is relatively stable and prosperous, as it has been for a number of years. If there is a downturn or recession, Congress would be under pressure to make major corrective changes in response to the changed economy.

Struggling with imperfect or misleading budget estimates and projections, Congress would enact a two-year commitment in the first year of biennial budgeting possibly to discover toward the end of that year and into the next that budget aggregates and program spending have veered off the path. It would then be necessary for Congress, in the second year, to rework appropriations accounts by rescinding funds for programs and agencies that had been overfunded, and providing additional funds for accounts that needed money. To tighten legislative control, committees may decide to shift some reprogramming actions from simple notification by the agencies to prior-approval by the committees of jurisdiction. The executive branch, from its standpoint, might seek additional flexibility by requesting authority to transfer funds from Year 1 to Year 2.

The pressure to cut accounts the second year would be fueled by (1) unanticipated changes, (2) statutory caps on outlays, (3) a consequent need to find savings, and (4) a search for money to supplement some programs. It could be expected that many appropriations accounts would have to be adjusted upward during the second year, either because of inadequate budget projections, unexpected events, or "emergencies" (however defined). Working within a fixed ceiling on budget authority and outlays, upward adjustments in some accounts would require cuts in others. It is unlikely that a reduction in one account would fully pay for an increase in another account. For every account that had to be moved upward, it might be necessary to take funds from two to three other accounts.

The report of the National Performance Review (the Gore report) claimed that agency officials inflate their estimates, "driving budget numbers higher and higher," and one budget director claimed that many budget directors "regularly ask for 90 percent more than they eventually receive" (pp. 15-16). Even if this scenario were true, biennial budgeting would not improve matters. Compelled to estimate spending for an additional year, agencies might hedge their bets by including additional funds to cover unforeseen expenses. The problem of padding is likely to increase under biennial budgeting.

If agencies are unable to prepare reliable two-year budgets, how will Congress respond? One option: fund programs at minimal levels over a two-year period, forcing agencies to return to Congress for supplemental funds the second year. That system would maximize congressional control but also maximize congressional work. If the initial two-year budget from the executive branch were poorly conceived, agencies would need budget amendments the second year to correct for mistakes. The budget workload for Congress the second year could be substantial.

Another legislative option would be to fund programs at generous levels over a two-year period to minimize the need to pass supplemental appropriations and remedial legislation. However, that could create a costly side-effect of biennial budgeting. Spending would be harder to control and so would the agencies.

I'm not sure how tax bills and reconciliation bills fit into biennial budgeting. I suppose reconciliation instructions would flow from the budget resolution adopted the first year, but the actual reconciliation bill—depending on its complexity—might not be enacted until the next year. Also, I would imagine that Congress would want to pass tax bills whenever it likes, as the House did most recently with the marriage tax penalty bill.

Whatever time is spent now on annual appropriations bills, congressional debate could be considerably lengthened as legislators consider funding agencies for a two-year period. The issues are likely to be more contentious, require greater attention, and probably make it more difficult to reach a consensus within Congress and between Congress and the President. If Congress finds the schedule so tight now that it is nearly impossible to pass appropriations bills each year, would it be able to pass two-year appropriations bills? That question is especially apt for the congressional session that follows a presidential election, because under biennial budgeting the President's budget is scheduled to be submitted in early April (two months later than the current schedule).

Through great stress and strain, Congress manages to enact appropriations bills by October or November. The job is wrapped up because Congress faces another presidential budget by early February the next year. Under biennial budgeting there would be no such deadline to force legislative action. As a result, the congressional schedule might relax and push the debate on the two-year budget into the early months of the second year. If that were to happen, Congress would have to complete the appropriations bills in the second year that is supposedly devoted to oversight.

Efficiency for Agencies

Instead of agencies receiving a guaranteed two years of money, to be allocated prudently by agency officials, everyone would be on notice that many accounts would be vulnerable to reductions the second year. In anticipation of cuts, some agencies might decide to shelter accounts from cutbacks by prematurely, and wastefully, obligating funds. Under these conditions, the values of predictability and efficiency for biennial budgeting would be undermined.

Another argument for the efficiency of biennial budgeting is the belief that agency managers, relieved of the annual chore of preparing and defending budgets, would be able to concentrate on long-term planning. But under biennial budgeting, congressional committees would still hold hearings every year and conduct informal meetings and authorize staff investigations to "see how things are going."

It is unlikely that agencies would have much more time under biennial budgeting to devote to management. Congress and OMB would continue to intervene and ask for reports. Instructions for OMB's basic data system already require several updates during the course of a year. The need for updates would increase if more than a year were involved. Congressional inquiries would be necessary to assure that agencies were not spinning out of control.

In most federal agencies, a major factor forcing many top appointees to make management decisions (often unpleasant) is the annual budget process. Without the deadlines and the discipline of that process, top-level officials might postpone many critical decisions. The annual budgeting process provides a helpful hammer to drive agency action.

Biennial budgeting would place new demands on agencies. At the present time, political appointees join an administration in the first year of a four-year cycle and must put together a budget for the next year. Only after a year or two are these appointees sufficiently expert and experienced to do the job well, but by that time a number of them have left government. According to Obstacle Course, a report of the Twentieth Century Fund Task Force in 1996, the average appointee "now stays on the job for only slightly longer than two years" (p. 44). How much more difficult it would be to come in the first year and assemble a two-year budget. The risk is high that the job would be done with inadequate care and knowledge, requiring many budget amendments the second year.

The task of budget preparation would be further complicated by the steady decline in the number of budget professionals in the agencies. Agency careerists are being lost in the 279,000-position reduction in government employees under the reinvention initiative of 1993. Agencies are losing the budgeting skills and institutional memory that would be needed to prepare reliable two-year budgets. There is no evidence that this diminishing capability will be reversed in the near future.

The Gore report recommended biennial budgeting to address concerns about the existing system. The report noted that, under the current system, agencies must estimate what they will need to run programs "in the fiscal year that begins almost 2 years later. This is like asking someone to figure out not only what they will be doing, but how much it will cost 3 years later—since that's when the money will be spent" (p. 15, emphasis in original). If those projections are difficult to make now, the problem would increase under clearly biennial budgeting. Under biennial appropriations, agency officials (and Members of Congress) would have to estimate budget authority three years out and expenditures four years out.

No doubt some programs are relatively stable, year after year, and would be good candidates for biennial budgeting. Entitlements and direct spending, representing a large chunk of the federal budget, may be good prospects for biennial budgeting. Most of those programs are funded by permanent appropriations and need no annual action from Congress. But the practice of passing reconciliation bills almost every year, requiring significant changes to entitlement programs, makes this part of the budget less stable than it would appear.

Congressional Oversight

One goal of biennial budgeting is increased legislative oversight of federal agencies and federal programs. The second year is set aside to permit in-depth congressional hearings and investigations of executive branch performance. Whether that would happen is anyone's guess. As explained earlier, much of the "oversight" in the off-year would likely consist of monitoring agencies to see how they use or misuse their two-year allocation, rather than examine in any depth the overall performance of agency programs.

Biennial budgeting offers little in the way of relief or time to the authorizing committees. They already have a full load. Few of them are responsible for annual authorizations. Most have already shifted to a multi-year cycle (foreign aid, etc.). The multi-year decisions within their jurisdiction appear to fully occupy their time now. How would biennial budgeting free time for additional oversight? There may be savings on the Senate side, because Senators are assigned to both authorizing and appropriating committees. That is not the case in the House.

Two-year budgeting may offer some gains for authorizing committees. By doing their work in the off-year, they would not have to compete as much with the Budget and Appropriations Committees for the limelight. For the same reason, they should have an easier time of gaining access to the floor.

At the present time, only two committees do annual authorizations: the Armed Services and Intelligence Committees. Theoretically, the switch to a two-year authorization cycle should free up time for oversight, but how would this work in practice? Oversight is already done in passing the annual authorization bills. Give a "10" for these efforts, particularly because the bills have a "must" quality, either legally or politically. Now switch to biennial budgeting and give a "10" for the two-year authorization bill. Would the oversight scheduled for the off-year add another "10"? If oversight in the off-year fell short of "must" activity and occurred in the same year that Members are running for election, the score might fall below a ten. Moreover, it is doubtful that the off-year would remain available purely for oversight. The Armed Services and Intelligence Committees might decide that it is necessary to pass supplemental authorization bills to deal with emergency issues.

Whatever oversight is done by authorizing committees under biennial budgeting, that benefit would be partly offset by the loss of oversight that occurs during action on the annual appropriations bills. One of the most effective oversight techniques consists of annual action by the Appropriations Committees on the appropriations bills. Agencies are more apt to take notice of oversight by the appropriators because they have clear sanctions available to penalize wayward administrators. How would all these changes net out? Given the political dynamics of committee activity and the uncertainties that are part of a legislator's life, who can say? There is at least a possibility that congressional oversight under two-year budgeting may be less effective than under one-year budgeting.

Biennial budgeting is tempting because of the bruising battles seen in recent years between Congress and the President, including government shutdowns and last-minute confrontations and concessions. Not a pretty picture, but these struggles are part of the work—some of the most important work—assigned to lawmakers.

Conclusions

Because of unresolved questions, no one is in a position to state what will happen if biennial budgeting were applied it to the entire federal budget. As one budget analyst has noted: "Few statements can be made with much certainty about the effects of a conversion to biennial budgeting, except that this would be a radical change from the current process."(6) Instead of adopting biennial budgeting for the entire federal budget, Congress may want to experiment with incremental change.

Certain programs and activities that have characteristics suitable for two-year budgeting could be singled out for biennial budgeting. After assessing the success or failure of these ventures, Congress would be better positioned to decide whether to take further steps toward biennial budgeting. The Appropriations Committees could be asked to identify certain agencies and programs that, from their experience, have a fairly predictable spending pattern to qualify them as candidates for biennial budgeting. Based on this initial step, other agencies and programs could be added if analysis indicated long-term stability.

There would be an advantage in beginning with agencies that are already on a multi-year authorization. Defense spending, with its established annual cycle for authorization and appropriation and the unpredictability of military commitments, seems to me the least likely candidate for biennial budgeting. The Pentagon still submits a two-year budget, but congressional action has been annual.

The Appropriations Committees could be asked to identify one or more appropriations bills that could be shifted to a two-year cycle. The Budget Committees could ask the General Accounting Office and the Congressional Budget Office to identify executive agencies and programs that might qualify for biennial budgeting. Right now we lack sufficient information to adequately gauge the effects of biennial budgeting.

Appendix: The State Model

Part of the support for biennial budgeting comes from the model at the state level, where many legislatures adopt a budget for a two-year cycle. For example, the report of the National Performance Review (the Gore report) in 1993 noted that "Twenty states adopt budgets for 2 years."(7) There are two problems with that statistic. First, some states relied on biennial budgeting because their legislatures met only every other year. This pattern has no application to Congress, which has been in session every year since 1789. Second, if 20 states use biennial budgeting, 30 states do not.

The trend at the state level is clearly away from biennial budgeting and toward annual budgeting, a fact not mentioned in the Gore report. Where almost all of the states (44) used biennial budgeting in 1940, that number has been cut in half. Most state legislatures today are convening every year and hiring professional staff capable of reviewing budgets on an annual basis.

A recent study makes three additional points. In 1940, only four state legislatures held annual sessions. Obviously, the others had no choice but to adopt biennial budgeting. Second, it is an overstatement to say that 20 states use biennial budgeting. Thirteen of those states meet annually and can revisit their budgets. Finally, the states that follow biennial budgeting are generally less populous, suggesting that this method of budgeting may have little application to the national government.(8)

It may be that some states adhere to annual budgeting because that is the federal practice, and that if Congress switched to biennial budgeting those states might follow the same course. However, studies suggest that states moved to annual budgeting because they wanted to exercise closer control over the executive branch and because they had decided to meet in annual legislative sessions.




1.

Robert J. Art, "The Pentagon: The Case for Biennial Budgeting," 104 Pol. Sci. Q. 193, 214 (1989).

2.

Jonathan Rauch, "Biennial Budgeting Taking Root," National Journal, September 27, 1986, at 2319.

3.

Roy T. Meyers, "Biennial Budgeting by the U.S. Congress," 8 Public Budgeting & Finance 21, 29 (Summer 1988).

4.

Charles J. Whalen, "Biennial Budgeting for the Federal Government: Lessons from the States," Policy Studies Review, Vol. 14, No. 3/4, Autumn/Winter 1995/1996, at 11.

5.

Congressional Budget Office, "Biennial Budgeting," Staff Working Paper, November 1987, at 3.

6.

Roy T. Meyers, "Biennial Budgeting by the U.S. Congress," 8 Public Budgeting & Finance 21, 21 (1988).

7.

From Red Tape to Results: Creating a Government that Works Better & Costs Less, Report of the National Performance Review, Vice President Al Gore, September 7, 1993 (Washington, D.C. Government Printing Office), at 17.

8.

Ronald K. Snell, "Annual vs. Biennial Budgeting: No Clear Winner," 68 Spectrum 23, 23 (1995).

Back to Testimony Page