Hearings of the
Subcommittee on Legislative and Budget Process
The Rescissions Process After the Line Item Veto: Tools for Controlling Spending
TIME: 9:30 AM
ROOM: H-313 The Capitol
WITNESSES
Panel 1:
- Sylvia Mathews, Deputy Director, OMB
- Dan Crippen, Director, CBO
- Gary Kepplinger, Associate General Counsel, GAO
Panel 2:
- Louis Fisher, Congressional Research Service, Library of Congress
- Phillip Joyce, Professor of Public Administration, George Washington University
- Allen Schick, Visiting Fellow, Brookings Institution
PURPOSE OF THE HEARING
The purpose of this hearing is to assess the existing rescissions process – its history, mechanics and effectiveness – specifically as a tool for promoting accountability and fiscal discipline. In addition, the hearing will explore proposals for strengthening the rescissions process.
This hearing is framed in the context of the Supreme Court decision last summer to strike down the Line Item Veto Act, providing certain parameters within which Congress may consider legislative changes to the current rescissions process. At that time, members of the Rules Committee who were involved in the development and enactment of the Line Item Veto Act announced their commitment to "going back to the drawing board" to examine ways in which to improve the rescissions process to achieve the goals of the Line Item Veto Act, without crossing the lines of Constitutional permissibility established by the Court.
This Subcommittee hearing provides the first step in that effort, which could result in legislative recommendations by the Committee.
The existing rescissions process was born with the enactment of the Congressional Budget and Impoundment Control Act of 1974. Title X of that Act comprised the Impoundment Control Act (ICA), which designated two categories of impoundments: deferrals and rescissions. This legislation was enacted in response to increasing conflict between the Legislative and Executive branches regarding the ability of the President to withhold funds that had previously been appropriated by Congress for specific programs or policies.
With the enactment of the ICA, parameters were set for the President to temporarily delay funding availability (deferrals) or propose that funding be permanently canceled (rescissions). A series of court rulings and subsequent legislation has effectively curtailed the deferral authority to prevent deferrals for policy reasons, while leaving the rescissions authority intact.
The ICA required the President to inform Congress by special message when he sought to make use of either tool, established specific Congressional procedures for review and control over these actions, and charged the Comptroller General of the General Accounting Office (GAO) with overseeing verification of actions taken by the President under the law.
Under the terms of the ICA, funds properly identified by the President for rescission must be made available to be spent within 45 days of continuous session (which do not include recesses of more than three days), unless both Houses of Congress affirm the rescission. If both Houses attempt and fail to approve the President's proposal, then the funds could be made available prior to the expiration of the 45-day period. If one or both Houses fails to act upon a Presidential rescission proposal within the allotted time, then the money may be spent as if there had been no rescission proposal in the first place.
There is no requirement within the ICA that Congress take any action in response to a Presidential rescission proposal. Further, if Congress should act, there is no restriction upon the type of action that may be taken. The Congress could accept the proposal, reject it in its entirety, accept some part of it, or act instead on a rescission package of its own within the 45-day period or at any later time (although doing so would not qualify for the procedures established by the ICA).
Because the law provided no requirement for Congressional action, some Presidents sought to ensure that funds were not spent by repeatedly submitting the same rescissions package, effectively delaying the release of funds for certain programs well beyond the 45 days envisioned by the ICA. In response to this, the ICA was modified in 1987 to clarify the intent of Congress that the President could not resubmit the same exact package of rescission proposals within the current appropriation window.
Since lack of action on the part of Congress ensures that funding will be available as if no rescission proposal had been made, Congress often does not take action on Presidential rescissions. The GAO maintains a detailed accounting of numbers and dollar amounts of rescissions proposed by Presidents, actions taken on them by Congress, and rescissions initiated by the Congress since the enactment of the ICA. The 25-year history of that law suggests that use of the tool has evolved since its inception, with the share of enacted rescissions proposed by the President declining while the share of enacted rescissions proposed by the Congress has increased.
The Line Item Veto Act
In 1984, President Reagan used his State of the Union message to call on Congress to pass a line item veto statute, granting the President the authority to cancel individual items from large spending bills. In subsequent years, Presidents Reagan, Bush and Clinton all sought such authority from the Congress.
Proponents of enhancing the power of the Executive with the type of authority to cancel specific elements of funding bills that 43 state governors have argued that the existing rescissions process, which is based upon an approval model, should be modified to a disapproval process, thus shifting the bias away from spending. By placing the burden of action upon the Congress in order to retain funding that has been "line item vetoed" by the President, this authority sought to force the Congress to deal with Presidential efforts to eliminate spending.
After several years of failed attempts by proponents to grant the President line item veto authority by statute, on April 9, 1996 the Line Item Veto Act was signed into law by President Clinton. This legislation – relying on a model known to many as "enhanced rescission" – established a new process by which the President could single out dollar amounts of budget authority, limited tax benefits or items of new direct spending from massive bills sent to him for signature and, after signing the legislation into law, could propose cancellation of those individual items. The Line Item Veto Act provided that funds for those items would be canceled unless legislation disapproving the President's action was enacted (with the assumption being that this would have to occur over the President's veto, and thus by a 2/3 vote of both Houses of Congress).
The new law established expedited procedures for consideration by the Congress of a disapproval resolution, and it provided that funds from canceled items would be placed in a lockbox and could not be used for additional spending. The Line Item Veto Act, in implementing a disapproval process, reversed the burden of action from those seeking to cut spending to those seeking to restore canceled funds. The new authority for the President comprised a new Part C of Title X of the Congressional Budget Act (ICA) and offered an alternative to, not a replacement for, the existing rescissions process. As a result, the President had both tools at his disposal and could choose to rescind funds through the existing process or wield the new cancellation authority, at his discretion.
The Line Item Veto Act became effective on January 1, 1997. Beginning with the Taxpayer Relief Act of 1997, President Clinton applied his new authority to 82 separate provisions of 11 different laws for a total estimated savings $1.9 billion. The President's action drew both applause and criticism, and set the stage for a highly anticipated court challenge to the new law.
The Court's Decision
While the debate on the Line Item Veto Act raged for years prior to its enactment in 1996 with deep divisions among proponents and opponents, one thing all sides seemed to agree upon was the eventual need for the Supreme Court to weigh in on the constitutional questions raised by this type of delegation of authority to the President by the Congress.
The journey to the high Court took several detours before the constitutional merits of the new law were heard. Prior to the first application of the new authority, a court challenge was filed in June of 1997 by Senator Robert Byrd (D-WV). That challenge was set aside by the Supreme Court without a ruling on the merits of the case, with the Court determining that the plaintiffs did not have standing to sue since the new authority had not yet been used.
The first challenge to the new law to occur after the President first employed it resulted in a settlement in January of 1998, when the Administration agreed to restore a provision of the FY'98 Treasury, Postal Appropriations Act canceled by the President in October, 1997. The Administration acknowledged having improperly applied the Line Item Veto authority in canceling a provision allowing employees to switch their retirement benefit enrollment from one program to another. In another instance, the Congress successfully overrode the President's October, 1997 decision to cancel 38 military construction projects from the FY'98 Military Construction Appropriations Act.
Ultimately, in two cases filed as a result of the President's decisions to cancel a Medicaid provision affecting the State of New York and a limited tax benefit affecting farmers' cooperatives, the Supreme Court agreed to consider an appeal of a February 12, 1998 U.S. District Court ruling that the Line Item Veto Act was unconstitutional. (Clinton v. City of New York, 1998)
The consolidated case was argued on April 27, 1998 and, on June 25, 1998, the Court struck down the Line Item Veto Act in a 6-3 decision. In writing for the majority, Justice Stevens wrote:
"If the Line Item Veto Act were valid, it would authorize the President to create a different law – one whose text was not voted on by either House of Congress or presented to the President for signature. . . . If there is to be a new procedure in which the President will play a different role in determining the final text of what may ‘become a law,' such a change must come not by legislation, but through the amendment procedures set forth in Article V of the Constitution."
In his dissent, Justice Scalia wrote:
"Insofar as the degree of political, ‘law-making' power conferred upon the Executive is concerned, there is not a dime's worth of difference between Congress's authorizing the President to cancel a spending item, and Congress's authorizing money to be spent on a particular item at the President's discretion. And the latter has been done since the Founding of the Nation."
Scalia concluded by noting that the title of the new law may have been misleading in that the statute did not actually grant a true Line Item Veto to the President:
"The title of the Line Item Veto Act, which was perhaps designed to simplify for public comprehension, or perhaps merely to comply with the terms of a campaign pledge, has succeeded in faking out the Supreme Court. The President's action it authorizes in fact is not a line-item veto and thus does not offend Article I, section 7; and insofar as the substance of that action is concerned, it is no different from what Congress has permitted the President to do since the formation of the Union."
After the Court reached its decision, proponents of the Line Item Veto pledged to seek alternative statutory means to achieve the goals of the Line Item Veto Act, within the parameters of the Court's ruling.
Current Legislative Proposals
Throughout the legislative process in developing and enacting the Line Item Veto, alternative means to achieve the twin goals of increased accountability and fiscal discipline within the spending process were considered.
Proponents of the Line Item Veto, believing a statutory model could be crafted that would pass constitutional muster, focused on enacting the toughest possible disapproval-based process and generating a ruling by the Supreme Court. As that process evolved, efforts to enact a weaker approval-based model to tighten the rescissions process were rejected.
In the aftermath of the Court's ruling on the Line Item Veto Act, however, discussion has focused anew on alternate means for achieving the goals of that landmark legislation. Most agree that, given the view of the majority of the Court, a constitutional amendment is necessary to grant the President true Line Item Veto authority. In the interim, statutory measures to strengthen the President's hand in excising unnecessary or wasteful spending and to enhance the accountability of both the Congress and the President have again been proposed.
The most frequently proposed model for strengthening the existing process involves expedited rescission, which maintains the current approval-based model of the ICA, but incorporates procedures to require action by Congress when the President proposes rescissions. In this way, proponents argue, the Congress would at least have to consider and act upon rescissions – thus bolstering accountability and increasing the likelihood that spending identified by the President for cancellation would actually beg canceled.
In the 105th and 106th Congress several versions of expedited rescission were introduced in response to the Supreme Court's ruling on the Line Item Veto Act. On October 9, 1997, H.R. 2650 was introduced by Rep. Skaggs and a companion bill was introduced in the Senate as S. 1319 by Senators Byrd and Moynihan. On the same day as the Court issued its ruling, two similar versions of expedited rescission were introduced: H.R. 4174 by Rep. Kasich and S. 2220 by Senator Johnson.
In an effort to develop a means whereby the President could in fact use his veto pen to strike individual items from large spending bills as the Line Item Veto concept envisions, some have proposed over the years a procedure known as separate enrollment. Under this model, large spending measures, once passed by Congress, would be broken up into a series of mini-bills, each comprising a single item, that could then be signed or vetoed by the President. During the development of the Line Item Veto Act in the 104th Congress, the Senate adopted this approach, but the model was later rejected by the conference committee as too cumbersome.
Separate enrollment is the basis for current legislation pending in the Senate as S. 100 and S. 139 by Senator McCain and Senators Robb and Hollings, respectively.
