Chairman Dreier, Representative Moakley and Members of the Committee:

Good morning. I am pleased to be here today to offer my views on proposals to move the federal government from an annual to a biennial budgeting process. After discussing some of the reasons that supporters propose making this change, my testimony will make the following specific points:

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• Biennial budget submissions and appropriations could potentially pay dividends for executive branch agencies and free up Congressional time for other activities, particularly in the Senate. This would only be true to the extent that routine large supplemental appropriations did not become the norm. If they did, this occurrence itself could contribute to increased spending. It seems unlikely, however, that the additional time created by biennial budgeting would be used for detailed oversight of federal programs.

   

• If the Congress goes ahead with the proposal for biennial budgeting, there are certain technical aspects of the legislation that would be worth paying attention to. These, in particular, concern the timing of the activities in the biennium, such as the President's budget and various reports under the Government Performance and Results Act.

Why Biennial Budgeting?

As members of this committee know, the idea of moving the federal government from an annual to a biennial process is not a new one. Representive Leon Panetta (D-CA) introduced the first bill proposing such a change in 1977, and the proposal has been more or less an annual entry in the budget reform sweepstakes since then. Perhaps the high water mark for biennial budgeting was in 1993, when both the Joint Committee on the Organization of Congress (co-chaired by the Chairman of this Committee, Mr. Dreier) and Vice-President Gore's National Performance Review recommended that the federal government adopt a new biennial timetable for the process. Despite this long history of support, however, no bill to create a biennial process has ever passed either the House or Senate.

What are the arguments in favor of a biennial budget? First, proponents argue that the current annual process features repetitive votes on many fiscal issues that eat up valuable committee and floor time. For example, there may be three votes on the defense number—one associated with the budget resolution, one associated with the annual defense authorization bill, and one on the annual defense appropriations bill. Second, and related, supporters note that time spent on budgeting cannot be spent on other activities, particularly detailed oversight of federal programs. In particular, these advocates of a biennial process indicate that the need for the Congress to review agency performance under the Government Performance and Results Act necessitates that more time be spent on such detailed oversight. Third, supporters point to the dismal record of the Congress and the President in enacting appropriation bills prior to the start of the fiscal year. Finally, executive branch officials decry the time consuming nature of the annual process from their perspective. The process of developing an agency budget request, reviewing that budget by the Office of Management and Budget and the President, and justifying the budget to the Congress is continuous in an annual process.

Should we Have Biennial Budget Resolutions?

The budget resolution is a creation of the Congressional Budget and Impoundment Control Act of 1974. It was a specific response to a specific problem—the tendency of the Congress to deal with the budget only in a piecemeal fashion. The solution of this problem was to create a device—the budget resolution--that forced the Congress to deal with the whole budget at an early stage of the process, and forced committees to live within the overall constraints offered by the budget resolution. The budget resolution was considered to be particularly important because of the increasing percentage of the overall budget that was consumed by mandatory spending, and was thus not constrained by the annual appropriations process.

In my view, the budget resolution, judged against its original aims, must be judged as a success. The Congress does look at the total budget, and look at the future implications of federal policy, in a way that it did not prior to 1974. Further, I would credit the reconciliation process (which is inexorably related to the budget resolution) for much of the credit for promoting the legislative changes since 1990 that have brought the federal government from deficit to surplus. I say this because it is reconciliation that forced Congressional committees to make changes—often painful ones—to raise taxes and cut mandatory spending. These are changes that I believe it is likely would not have been made without such a centralizing mechanism.

My overall enthusiasm for the budget resolution, of course, does not mean that I view it as necessary that it be produced annually. In fact, the Congress has already been moving down the path of setting overall fiscal policy on a multi-year basis. The simple adoption of multi-year deficit reduction packages in 1990, 1993, 1995, and 1997 is itself an indication of fiscal policy being set on a multi-year basis.⁽¹⁾ In fact, it has been typical for the year following the adoption of these packages to feature a simple ratification of the previous year's path, as adopted by the previous year's budget resolution. As further evidence, for fiscal year 1999 the Congress was unable to adopt a budget resolution at all.

I used to think that biennial budget resolutions were inadvisable because they removed the possibility of using the budget process for deficit reduction, since the reconciliation process was only available to the Congress and the President every other year. This seemed an inadvisable additional hurdle to place in the way of an already difficult task. This argument is clearly not as compelling in a world where we have annual surpluses, compared to a process where there are annual deficits.

Even given this recent movement toward multi-year fiscal policy and the lack of current deficits, however, I think that there are at least two remaining compelling arguments against biennial budget resolutions:

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2. Fiscal policy should be responsive to the changing demands of the political process, which should themselves follow the changing demands of the electorate. The uncertainty in budget projections can itself lead to major changes in the resource environment facing the Congress from one year to the next. In addition, however, the expressed demands of the electorate may change from one year to the next. It seems inadvisable for the Congress to delay the enactment of the budget resolution to a point where it would lag even further behind budget projections and the desires of the electorate. I would note in particular that under most current proposals, the Congress would not be voting on budget and appropriations during election years. This seems an odd development, given that enacting the budget is arguably the most important role of a legislative body.

What About Biennial Appropriations and Presidential Budget Submissions?

There are real advantages, particularly to executive branch agencies, of biennial appropriations and (perhaps particularly) biennial Presidential budgets (I assume that these two reforms go hand in hand; it does not seem to make sense to have biennial budget submissions and annual appropriations, or vice-versa). In fact, the major reason for the proposal for biennial budgeting advocated by Vice-President Gore's National Performance Review in 1993 was that it would provide for more certainty for agencies in funding levels, and would not force agencies to justify their budgets as frequently before OMB and Congressional committees. Proponents of biennial budgeting justified the change by noting that most federal programs have funding that does not change substantially from year to year.

On the Congressional side, the argument for biennial appropriations hinges on the possibility that less frequent budgeting will lead to time being devoted to other matters, particularly oversight. This argument would seem to carry a lot more weight in the Senate than it does in the House. In the Senate, members frequently serve on a great many committees; it is not unusual for a particular Senator to serve on both the Appropriations Committee and one or more authorizing committees. Spending less time on appropriations could necessarily lead to more time being available for other matters. This argument is much harder to make in the House, where members who are on the appropriations committees are, with rare exception, not on other committees. For this reason, presumably authorizing committees in the House do not find the appropriations process to be an impediment of oversight.

In order for these benefits (decreased time on budgeting, more time for oversight) to materialize at all, however, you need to be convinced that a) the biennial process will not become a de facto annual process, and b) that if the biennial process is effective, more time available will equate to more oversight. I do not find either of these arguments to be compelling. Let me consider each of them in turn:

Will the biennial process degenerate into an annual process? The uncertainties associated with budgeting for a $2 trillion enterprise call the sustainability of a biennial appropriations process into question. Already the Congress engages in an annual process of adopting supplemental appropriations, because of the uncertainty of predicting natural disasters and the like. There were 25 separate supplemental appropriate bills between fiscal year 1990 and fiscal year 1998. This tendency will only increase with biennial budgeting, since the ability to predict future demands and funding levels will decrease.

More and larger supplementals could lead to less fiscal discipline. One of the concerns associated with the tendency toward routine, larger supplementals with a biennial process is that these supplemental bills, as "must pass" bills, have a bit of a tendency to become legislative Christmas trees. This means that a biennial process may tend not only to fail to deliver on its promise of "less" budgeting, but may tend to lead to greater levels of spending as well.

Will there be more and better oversight with biennial budgeting? What of the other purported benefit to the legislative branch—the possibility that oversight will increase? Again, this benefit would be primarily expected to occur in the Senate, where members on appropriations committees could spend their precious time on understanding programs under their authorizing jurisdictions. I believe, as supporters of biennial budgeting do, that such an increase in oversight would help the Congress to better discharge its responsibility to review programs, consistent with legislation such as the Government Performance and Results Act.

Whether an increase in oversight will actually materialize is another matter entirely. In order to believe that increased oversight will actually occur, we would have to believe that the primary impediment to its exercise is the lack of time that members have to do it. But I do not believe this to be the case, even in the Senate. I believe that, even if Members of Congress had more time to do oversight, they would not be likely to do it simply because they do not have the incentives to do so.

Understanding more about how federal programs work in great detail is neither sexy nor does it offer any specific benefits in terms of helping Members get reelected. If a Member of Congress had more time available and could choose between a) spending more time in constituent service, b) trying to secure more benefits for the home district, c) trying to raise necessary money for the next political campaign, and d) understanding in great detail how an agency such as the Coast Guard or the U.S. Mint works, I predict that most would choose any of the former three over the latter. In fact, as I have noted, House authorizing committees currently have plenty of time to do oversight. The fact that they do not tend to do very much of it should cause us to question whether they (or their Senate counterparts) will in a world where there are biennial budgets.

Finally, I think that it is important to note that biennial appropriations are not likely to be more timely than annual ones. Whatever factors have led to the tendency of the Congress to fail to adopt appropriation bills by the beginning of the fiscal year are likely to be made worse by a biennial process, since the stakes will be higher. It is likely, on the other hand, that this kind of budgetary gridlock would happen half as often. The Congress will have to decide whether it finds the prospect of worse budgetary "train wrecks" that happen half as often more appealing than the status quo.

Technical Considerations

If the Congress moves ahead with biennial budgeting, there are a number of specific technical questions that would have to be addressed in drafting the legislation. These would include the timing of the biennium, what to do in years after new Presidents are elected, how long funds should be made available for spending, and how to most effectively tie the biennial budget timetable into the requirements of the Government Performance and Results Act.

Timing of the Biennium. There are two options available to the Congress in the timing of budgetary actions during the biennium. The first would be to consider budget legislation in the first session of a Congress; the second would be to consider it in the second session. The former seems to me to be the best model. That is, it seems most advisable for the first year of a new Congress to be devoted to considering the budget, and the second year to be devoted to authorizations and oversight. This means that, for example, if biennial budgeting took effect at the beginning of the 107th Congress (January 2001), the first session (2001) would be devoted to producing budget resolutions, appropriations, and other budget changes that covered fiscal years 2002 and 2003. The second session (2002) would be devoted to authorizations and oversight.

Under the alternative approach (where the biennium covered fiscal years 2003 and 2004, for example), there is a greater probability that there would be changes in the budget, since one Congress would essentially be setting budget and appropriations priorities for the next one (as you know, a new Congress is quite likely to have different budget priorities than its predecessor).

A final point on timing is that it is crucial, in my view, that the budget resolution be on the same timetable as the President's budget, so that the budget resolution can live up to its intended goal of allowing the Congress to play an important role of setting fiscal policy. If the President's budget were annual, the Congress should have an annual opportunity to respond.

What to do When New Presidents Are Elected. A down side of the above scenario is that when a new President was elected, he would have to wait almost two full years before presenting his first budget, unless he submitted a new budget soon after taking office. Currently, a "placeholder" budget is submitted by the outgoing President, and the new President submits changes to that budget around April. If the legislative activity associated with a biennium is to proceed as suggested above, it would seem prudent to codify this current practice by enacting a specific provision to permit new Presidents to submit their first budgets on or after April 1.

Availability of Funds. The Congress has two options concerning the availability of funds under biennial budgeting. It can either provide for an appropriation for two fiscal years at once, with funding being available to agencies for one year at a time, or it can provide agencies with a two-year appropriation, meaning that the money is available for two years. The first preserves more control on the part of Congress and probably the Office of Management and Budget, while the latter provides more spending flexibility for agencies. Neither is clearly superior to the other, but depends in large part on how much control the Congress wants to exercise, compared to how much flexibility it desires to provide to the agencies.

The Government Performance and Results Act. As this committee knows, the 1993 Government Performance and Results Act (GRPA) has only recently begun to pay dividends in terms of providing more information to the Congress on the performance of federal programs. The first agency performance reports are only now being released. If the Congress is going to use these performance reports as a basis for oversight in a biennial process, it might consider how the timing of these reports would best facilitate this use. For example, assuming that oversight and authorizations are occurring in the second session of a Congress, the Congress might require that performance reports be submitted in January of even-numbered years to assist oversight committees in framing their agendas.

Conclusion

The goals of biennial budget are laudable ones. In fact, I am very sympathetic to all of the criticisms of the current process that lead people to support biennial budgets. The budget process is not completed in a timely fashion, it is time-consuming for everyone involved, and not enough time is spent on oversight. I do question, however, whether biennial budgeting is the solution to these problems. If the Congress intends to move forward with biennial budgeting, I would suggest proceeding with caution, as you did with the Line Item Veto Act, perhaps by providing for a sunset provision that would enable you to evaluate the full implications of a potentially radical change prior to making that change a permanent part of the budget process.

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