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Franklin D. Raines - April 23, 1997

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S. 261, the "Biennial Budgeting and Appropriations Act"

April 23, 1997

Mr. Chairman, and Members of the Committee, I am pleased to be here this morning to discuss S. 261, the "Biennial Budgeting and Appropriations Act" introduced by Senators Domenici, Ford, and Thomas.

This Administration has strongly supported numerous initiatives to improve the efficiency and effectiveness of the Federal government. Beginning with the Vice President's National Performance Review in 1993, the Administration has sought to reinvent our government, so that it will work better and cost less.

We have already seen numerous successes. Since President Clinton took office in January 1993, the number of Federal, executive branch civilian employees has already dropped by nearly 300,000 -- the lowest level in more than 30 years. And we have made substantial progress towards putting our financial house in order, with a 63 percent reduction in actual Federal deficits since the President took office in 1993, and a 90 percent reduction in projected deficits through 2002. I hope that in the coming weeks, the Administration can reach a bipartisan agreement with the Congress to put policies in place this year which will enable us to reach a balanced budget in 2002.

Biennial budgeting offers the potential to contribute to the enhanced performance of our government. This Administration has on several occasions expressed interest in the potential advantages of biennial budgeting. In 1993, Vice President Gore's Report of the National Performance Review" proposed moving to biennial budgeting; the following month, in testimony before the House Committee on Government Operations, President Clinton's first OMB Director -- and former House Budget Committee Chairman -- Leon Panetta expressed support for biennial budgeting; and the President's FY 1995 budget also discussed the potential benefits of budgeting for two years.

I'd like to begin our discussion of S. 261, by taking a few minutes to summarize the Administration's understanding of how the budget process would operate under this legislation, followed by some observations about the potential benefits, as well as complexities, of biennial budgeting.

Summary of Legislation

S. 261 would apply a biennial cycle to the President's budget, the congressional budget resolution, the 13 regular appropriations bills, and the Government Performance and Results Act (GPRA) reporting schedule. The first two-year fiscal period (biennium) would begin October 1, 1999 (i.e. fiscal year 2000).

President's Budget. S. 261 would require the President to submit a two-year budget at the beginning of the first session of a Congress. The President's budget would cover both years in the biennium and planning levels for four out-years. The current Mid- session Review would be converted into a "Mid-biennium Review," which the President would submit by February 15 of the second session of each Congress.

Congressional Budget Resolution. On the congressional side, S. 261 would require the Congress to adopt a two-year budget resolution during the first session of each Congress. Instead of enforcing the first fiscal year and the sum of the five years as under current law, the budget resolution would establish binding levels for both years of the biennium and the sum of the six-year period. The bill would also modify the time frames in the Senate's 10-year pay-as-you-go point of order to provide that legislation could not increase the deficit for the biennium, the sum of the first six years, and the sum of the last four years.

Appropriations. Following adoption of the two-year budget resolution, S. 261 would require the Congress to enact two-year appropriations during the first session of Congress. The budget resolution allocations to the appropriations and authorizing committees -- referred to by budgeteers as 302(a) and 602(a) allocations -- would include allocations for both fiscal years in the biennium. The bill also provides two measures designed to avoid the continuation of annual appropriations: (1) the bill would establish a new majority point of order against appropriations bills that fail to cover two years; and (2) if an appropriations bill were enacted that failed to appropriate money for the second year of the biennium, funding would be automatically appropriated for the second year at the first year's level. We have some concerns about this latter provision, which I will comment on later.

Second Year: Authorization legislation and enhanced oversight. S. 261 seeks to make budgeting and appropriating a priority for the first session of Congress, and authorizing legislation and oversight the second year priority. In order to accomplish this, S. 261 would establish a majority point of order against consideration of authorization and revenue legislation until the completion of the biennial budget resolution, reconciliation legislation (if any) and the 13 biennial appropriations bills. In addition, the bill provides a majority point of order against authorizing and revenue legislation that cover less than two years, except those measures limited to temporary programs or activities lasting less than two years. The bill also requires the General Accounting Office, during the second session of each Congress, to give priority to requests from Congress for audits and evaluations of Government programs and activities.

Fiscal period. Finally, the bill would require OMB to submit a report to the Budget Committees, within six months of enactment, analyzing the impact and feasibility of changing the current fiscal year, to a two-year fiscal period.

Biennial budgeting should be comprehensive

Let me say, before going any further, that I commend the authors of the bill for making this legislation comprehensive. For biennial budgeting to be feasible, it is essential that each phase of the budget process -- the President's budget, the congressional budget resolution, and appropriations -- be conducted on a two-year basis.

In this regard, it might be helpful to consider a concrete example of what can happen if the approach is not comprehensive. As you know, the Department of Defense (DOD) has been submitting a biennial budget request to the Congress, as required by PL 99-145 (the 1986 Defense Authorization Bill). Nevertheless, the Congress has continued to enact appropriations for DOD on an annual basis. As a result of continuing annual appropriations, the authorizers resumed enacting annual authorization bills for DOD after the first, and only, two-year authorization expired. As a result, DOD is proposing legislation this year to repeal the biennial budgeting requirement for defense. (The biennial budgeting requirement for the Coast Guard was repealed for similar reasons in 1991.) What this demonstrates is that for biennial budgeting to work, there must be biennial appropriations -- in addition to a biennial request from the Administration and biennial authorizations.

Potential Benefits of S. 261

I'd like to take a few minutes now to address the potential advantages of biennial budgeting.

Greater stability and predictability in the budget process. One of the more compelling advantages of biennial appropriations is that it could provide greater stability and predictability for those who are served by government programs -- be they individuals receiving government assistance or states and non-profits receiving government grants. Under the current annual budget process, individuals and organizations receiving government benefits or paying government fees, may not know from year to year exactly what level of resources will be available to them. A biennial budget offers the possibility of more budgetary certainty which would enable better long-term planning. The potential for more stability in funding would depend, of course, on the extent to which two-year appropriations are actually enacted, and whether the second year appropriations remain unchanged by supplemental bills. That is a question on which I would defer to the Members of this Committee.

Better use of time. Another often-cited benefit of biennial budgeting is the potential for Congress and the Executive Branch to better utilize time and resources. Consider what happens every year during the months of September and October: the Congress and the Administration are typically negotiating final appropriations levels for the new fiscal year, and simultaneously the agencies and departments of the Executive Branch are expending great amounts of time developing their budget requests for the subsequent fiscal year.

This annual ritual of completing one budget and simultaneously developing the next budget may be unnecessary for many programs. The reality is that changes from one year to the next in many of the budget accounts are relatively small and predictable. S. 261, by establishing two-year appropriations, could save time for both the Congress and the Executive Branch.

Some have suggested that biennial budgeting will inevitably increase the number of supplemental appropriations -- nullifying any potential time-saving effects. While biennial budgeting could lead to a greater need for supplementals, I think we can safely predict that the overall expenditure of time and resources on budgeting could be at least somewhat reduced in comparison to annual budgeting.

More time for oversight and program management. It has also been suggested that biennial budgeting, by concentrating budget decisions in the first year of each biennium, would free up time for additional congressional oversight and agency management initiatives. I would defer to the Members of this Committee to assess the adequacy of current congressional oversight. From the vantage point of the Executive Branch, there already appears to be a significant amount of oversight by the authorizing committees, as well as the oversight that naturally occurs as part of annual appropriations hearings.

With regard to agency management, it is plausible to expect that moving from annual budget preparation to a biennial cycle would free up some time in the second year of the biennium for program managers to increase their efforts on management and long- range planning. At the same time, it is probably also true that the task of preparing precise budget numbers for two years, instead of one, would somewhat intensify the budget preparation process for the first year of each biennium.

Timing of the President's Budget S. 261 would provide an incoming President with additional time (until the first Monday in April) to present a budget. This provision addresses a time crunch which all new Presidents face. In our judgement, this would be a sensible and realistic amendment to our current budget deadlines -- whether or not we move to a biennial cycle.

Other Issues to Consider

Automatic Continuing Resolution. Under S. 261, if an appropriations bill were enacted that failed to appropriate money for the second year of the biennium, funding would be automatically appropriated for the second year at the first year's level. This would, in effect, be an automatic continuing resolution. While I appreciate the objective of ensuring biennial appropriations, I wonder whether this mechanism might actually have the opposite effect. The fact of an automatic continuing resolution for the second year might actually be a disincentive to complete work on the second year of appropriations.

Point of Order against non-biennial appropriations. While I defer to the Members of this Committee on the operation of parliamentary points of order, it has been suggested that the point of order in S. 261 against appropriations bills which provide funds "for a period other than each of the fiscal years of the biennium" may be too restrictive. For example, is it possible that such a point of order might unintentionally prohibit appropriations which provide multiyear or forward funding, or advance appropriations?

Technical corrections. In the process of reviewing the bill, our staff have identified a few provisions which appear to require technical corrections. I have attached a list of proposed technical corrections to my prepared testimony.

S. 261 and the Government Performance and Results Act (GPRA)

In addition to establishing biennial budgeting, S. 261 would also adjust the GPRA timetable to the two-year cycle. We understand the proposed schedule to be the following: strategic plans would be revised every four years, beginning with plans that are due in the year 2000; and the performance plans would cover a two year period, with a preliminary draft sent by the agency to its congressional committees of jurisdiction by March 31 of each even- numbered year. In addition, S. 261 would require the following: a government-wide program performance report to be prepared by OMB; executive summaries (limited to 10 performance goals) for all agency plans and reports; and sections in agency performance reports which identify provisions of law that hinder their ability to carry out the agency's mission, along with recommendations for appropriate legislative changes.

While the Administration supports biennial budgeting, we have concerns about amending GPRA beyond what is minimally necessary to have it conform with the general time-sequence of a biennial budget process. In this respect, we would be happy to work with your staff to define a complete set of changes to current law, beyond those now in the bill, that would accomplish this end.

Our concern with any additional changes at this time are based on the fact that we are just beginning government-wide implementation of this Act. Therefore, it is too soon to be introducing new requirements which may disrupt the progress the agencies and Congress are beginning to make in this area. We will have a much better sense of what, if any, changes to GPRA should be made after we all have experience with its implementation, can assess the usefulness and value of its plans and reports, and are able to determine whether it is helping to improve the government's delivery of programs and services.


In sum, I would like to complement you, Mr. Chairman, for holding these hearings on biennial budgeting, and Senators Domenici, Ford, and Thomas for introducing this legislation. Biennial budgeting presents us with some interesting possibilities for improving the efficiency and effectiveness of the Federal government. S. 261 is a good starting point for developing biennial budget legislation and I look forward to working closely with this Committee and the Budget Committee as you proceed.

Technical Comments on S. 261

Following are some of the technical comments on S. 261 provided by OMB staff. However, this is not intended to be a comprehensive list. As the Governmental Affairs and Budget Committees proceed with consideration of this legislation, OMB would be pleased to provide additional comments and suggestions.

o Page 2, line 8, under "last day of session," "authorizing a new budget authority" should be "authorizing new budget authority"

o Pages 17-18: The bill would amend 31 USC 1106(a) to move the Mid-Session Review from July of each year to February of each second session of Congress, i.e. transforming it into a Mid-Biennium Review. However, the current law requirement in section 31 USC 1106(b) for a July 16 update of changes in BA requested, estimated outlays, and estimated receipts, has not been changed. It is unclear whether it was the intention of the drafters to have both a July update, and a Mid-Biennium Review.

o Page 19, lines 9-16: note that 31 USC 1114 has been repealed.

o Page 24, lines 21-23, incorrectly cites the VA/HUD appropriations bill. Insert the following: "Departments of Veterans Affairs and Housing and Urban Development, and independent agencies."

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