Sequestration Procedures Under the 1085 Balanced Budget Act (CRS Report for Congress)
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| Release Date |
Sept. 27, 2001 |
| Report Number |
RL31137 |
| Report Type |
Report |
| Authors |
Robert Keith, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
The sequestration process, which involves automatic, largely across-the-board spending
reductions
made toward the beginning of the fiscal year, was established under the Balanced Budget and
Emergency Deficit Control Act of 1985 as a means of enforcing deficit targets. The Budget
Enforcement Act of 1990 amended the 1985 act to supersede the deficit targets with two new
enforcement mechanisms--limits on discretionary spending ( i.e. , spending controlled
through the
annual appropriations process) and a "pay-as-you go" (PAYGO) requirement applicable to
legislation affecting direct spending ( i.e. , spending controlled outside of the annual
appropriations
process) and revenues. The discretionary spending limits and PAYGO requirement have been
revised and extended (affecting legislation enacted through FY2002) in recent years by such
measures as the Budget Enforcement Act of 1997, the Transportation Equity Act for the 21st Century
(TEA-21), and the Interior Appropriations Act for FY2001.
As a general rule, the enforcement procedures for the discretionary spending limits, on the one
hand, and the PAYGO requirement, on the other, are separated by a "firewall." Violations of the
discretionary spending limits are remedied by reductions only in discretionary programs; PAYGO
violations are corrected by reductions solely in direct spending programs. Further, savings made on
one side of the firewall generally cannot be used to the advantage of programs on the other side.
The current sequestration procedures are automatic and are triggered by a report from the OMB
director. For sequestration purposes generally, there is only one triggering report issued each year
(just after the end of the congressional session), but a "within-session sequester" may occur in the
following session ( e.g. , if the enactment of one or more supplemental appropriations
measures
causes a breach in the limits). Spending for many programs is exempt from sequestration and
reductions in certain programs are limited under "special rules."
During the 16 years that sequestration has been in effect (prior to the FY2002 budget cycle),
sequesters have been triggered five times. The first three sequesters occurred during the 5-year
period when deficit targets were in effect, covering FY1986-1990. During the remaining 11 years,
sequestration has applied to the enforcement of the discretionary spending limits and PAYGO
requirement. Two sequesters under the discretionary spending limits occurred for FY1991 and no
PAYGO sequester has ever occurred. Initial outlay savings associated with the three deficit target
sequesters ranged from $11.7 billion to $20.0 billion, but some of these savings were reduced or
rescinded later.
During the 2000 session, Congress and the President enacted provisions to prevent a sequester
under the discretionary spending limits for FY2000 and a PAYGO sequester for FY2001. The
FY2000 sequester would have necessitated a reduction in outlays for discretionary spending of $6.8
billion; the FY2001 sequester would have required a cut in direct spending outlays of $10.5 billion.
