Hearing of the
Subcommittee on Legislative and Budget Process

Biennial Budgeting

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TESTIMONY | TRANSCRIPT

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TIME: 10:00 AM

ROOM: H-313 The Capitol

WITNESSES

Panel I:

 

Committee on Appropriations:

 

Panel II:

Panel III:

PURPOSE OF THE HEARING

The purpose of this hearing is to examine legislative proposals to establish a two-year budget and appropriations cycle in an effort to develop consensus legislation that will streamline the budget process, enhance programmatic oversight, strengthen the management of government programs and bureaucracies, and reform Congress.

Under biennial budgeting, during the first session of a Congress, the President would be required to submit a two-year budget resolution and Congress would consider a two-year budget resolution and 13 appropriations bills (either for a single two-year period or two one-year periods). The second session of the Congress would be devoted to consideration of authorization bills and the programmatic oversight of government agencies.

Last Congress, Rules Committee Chairman Dreier garnered support from 245 cosponsors (200 Republican, 44 Democrat and 1 Independent) on H.Res. 396, a resolution expressing the Sense of Congress that a biennial budget and appropriations process should be enacted during the second session of the 106th Congress. The House did not ultimately report a biennial budget proposal in the 106th Congress, although it considered biennial budgeting as an amendment to a budget process reform package. This hearing builds upon the momentum from last year and provides another opportunity to examine the concept of biennial budgeting.

The Rules Committee's efforts reflect the bipartisan interest among Members of the House and the Senate to streamline and consolidate the annual budget process, reduce the number of duplicative votes and allow more time for programmatic oversight and management to determine whether taxpayers' resources are being put to their best use. Interest in biennial budgeting extends beyond the Congress, to include the Administration and a range of outside groups.

 

BACKGROUND AND LEGISLATIVE HISTORY

The Case for Biennial Budgeting

Since its inception with the Congressional Budget and Impoundment Act of 1974, the Congressional budget process has revolved around an annual ritual of development of a non-statutory budget resolution and subsequent enactment of appropriation bills. In some years, mandatory spending and revenue changes have also been pursued through reconciliation, driven by the budget resolution.

The process of Congressional review of the programs and agencies that comprise the federal government is designed to function in distinct stages meeting specific deadlines, including: the submission of a budget by the President at the beginning of a session of Congress; development of the budget resolution by Congress in early spring; passage of 13 appropriation bills by both Houses of Congress before September 30; and, if required in a given year, completion of reconciliation legislation to effectuate changes in mandatory spending programs and revenues. The process also envisions that authorizing committees will conduct rigorous, ongoing oversight of federal programs embodied in completion of annual or multi-year authorizations.

The reality in recent years, however, has been much less methodical or organized. During the 27-year history of the Budget Act, the deadline for completion of the budget resolution has been met only four times. Since 1950, the requirement for enactment of 13 appropriation bills prior to the beginning of the new fiscal year has been met only three times (1988, 1994 and 1996). As the calendar has wound down each year toward the September 30 deadline, legislation has been cobbled together to ensure funding for agencies and programs at a frantic pace that has crowded the legislative schedule, preventing orderly consideration of authorization measures and sowing mistrust and confusion among the public.

Likewise, the annual process of developing budgets and justifications has kept federal agencies on a perpetual budget cycle treadmill, leaving little time to step back and review the management and effectiveness of the programs they run. Executing an annual budget requires nearly three years of combined effort by the Congress and the Administration. The federal government expends an enormous effort to prepare, review, submit and ultimately legislate the budget. The process begins with the President's budget submission, a document that comprises six volumes and more than 2,000 pages. This budget is in turn supported by individual budget justifications for each agency and program, which adds exponentially to the sheer weight and magnitude of the paperwork associated with the budget. For example, the civil works program of the Army Corps of Engineers has a budget of roughly $3.7 billion, which makes up only 0.2 percent of the total federal budget. The annual budget justification for the Corps alone makes up eight volumes of more than 2000 pages.

With regard to the competition for Members' time and attention, as well as floor time, the annual budget process places great constraints on the workings of Congress and its committees. As a result, the authorization process has suffered, leaving large portions of the discretionary federal budget unauthorized each year. This means that programs which receive taxpayers' dollars to function each year are not receiving the careful scrutiny they should get from the committees in Congress with the greatest expertise. Every year the Congressional Budget Office (CBO) generates a thick report identifying the programs that are operating without current authorization. In fiscal year 2001, $112 billion in appropriations were provided for 112 federal programs whose authorizations had expired.

Whereas most of the uncertainty in the federal budget lies in the area of mandatory spending and revenues, the discretionary accounts for most agencies and programs are actually remarkably stable from year to year. A 2000 CBO analysis indicates that only 5.1 percent of discretionary spending in FY 2000 ($30 billion of the $584 billion appropriated) actually required annual funding as a result of unpredictable funding patterns.

Proponents of biennial budgeting cite all of these trends and facts as overwhelming arguments in favor of making a fundamental change in the way the federal budget is developed and implemented. Members on both sides of the aisle, in both Houses of Congress, have concluded that the year-end "train wrecks" and gamesmanship that have characterized nearly every September and October in recent memory are damaging to the nation and the institution and are unnecessary.

On the other hand, those who do not support biennial budgeting have argued that no process change will alleviate these problems. Further, some have expressed concern that biennial budgeting could actually weaken Congress' control over and oversight of federal agencies. In addition, the argument has been made that biennial budgeting would disadvantage Members of the House with respect to their colleagues in the Senate, providing House Members with only "one bite at the apple" of allocating federal funds during their two-year terms. Finally, some are concerned about the ability to accurately predict economic conditions for two years, raising the possibility that the current annual process will simply be replaced by a biennial process in name only, as additional supplementals and budget revisions will be necessary during the second year of the biennium.

Legislative History

Ever since the enactment of the Budget Act, biennial budgeting proposals have surfaced. The first actual legislative proposal was introduced in 1977 by then Representative Leon Panetta of California (H.R. 9077). Since then, more than 50 different variations have been introduced, seven such provisions have passed either chamber and four have been enacted into law. The four that were enacted during the 1980's included directions for submission of plans for implementation of biennial budgeting and an effort to try biennial budgeting in certain areas of the budget like the Department of Defense and the Internal Revenue Service. In addition, Congress has adopted two-year funding cycles for committee funding resolutions - the Senate in 1990 and the House in 1995.

More than 40 Congressional or Special Committee hearings have addressed the topic of biennial budgeting, which has over the years been endorsed by or received recommendations for further study by the CBO, OMB and at least five different special task forces or committees. Biennial budgeting was also a key recommendation of the 1993 Joint Committee on the Organization of Congress and the Vice President's National Performance Review in 1993.

In the 106th Congress, several variations were offered including: H.R. 232 by Representative Ralph Regula (R-OH); H.R. 493 by Representative Cliff Stearns (R-FL); H.R. 2985 by Representative Charles Bass (R-NH) and H.R. 3586 by Representative Callahan (R-AL). In addition, Senate Budget Committee Chairman Pete Domenici (R-NM) introduced S. 92, which was discharged by the Senate Budget Committee and reported by the Senate Governmental Affairs Committee.

In late 1999, Committee Chairman David Dreier (R-CA) garnered 245 cosponsors (200 Republican, 44 Democrat and 1 Independent) on H.Res. 396, a resolution expressing the Sense of Congress that a biennial budget and appropriations process should be enacted during the second session of the 106th Congress. On February 16, March 10, and March 16, 2000, the Rules Committee held a series of hearings to examine proposals from various Members of Congress, the Executive Branch, and outside experts on establishing a two-year budget and appropriations cycle in an effort to develop consensus legislation that would streamline the budget process, enhance programmatic oversight, strengthen the management of government programs and bureaucracies, and reform Congress. The Committee received testimony from Members of Congress, representatives of the Office of Management and Budget, the Congressional Budget Office, the General Accounting Office, the Congressional Research Service and noted budget experts from academia. These hearings laid the groundwork for the Dreier amendment, which was offered to H.R. 853, the Comprehensive Budget Process Reform Act. The amendment sought to establish a biennial budget process under which the President would submit a two-year budget, and Congress would consider a two-year budget resolution and 13 two-year appropriations bills during the first session of a Congress. The second session of the Congress would then be devoted to consideration of authorization bills and for oversight of government agencies. The amendment was defeated on May 16, 2000, by a vote of 201 to 217. The entire bill was subsequently defeated by a floor vote of 166 to 250.

President Clinton recommended biennial budgeting in his FY 2001 budget submission:

The Administration anticipates that Congress will continue efforts to reform the budget process during the coming months and urges Congress to consider two budget process changes in particular – biennial budgeting and expedited rescission authority. Reaching agreement on budget priorities for two years would provide greater predictability and planning certainty for program administrators and beneficiaries. Making appropriations that cover two fiscal years would also permit congressional committees to perform their oversight functions in the off-year with less distractions.

President Bush also recommends biennial budgeting in the FY 2002 budget submission:

Because Congress must enact 13 appropriations bills each year, it cannot devote the time necessary to provide oversight and resolve problems in other programs. The preoccupation with these annual appropriations bills frequently precludes review and action on the growing portion of the budget that is permanently funded under entitlement laws. In contrast, a biennial budget would allow lawmakers to devote more time every other year to ensuring that taxpayers' money is spent wisely and efficiently. In addition, Government agencies would receive more stable funding, which would facilitate longer range planning and improved fiscal management.

The State Experience

While the nature of the federal budget is considerably different than that of state budgets, the experience of state governments can be informative in this area. In 1940, forty-four states practiced biennial budgeting. In 1987, nineteen states practiced biennial budgeting. Twenty-three states currently use a biennial budget cycle, including two that employ a combination of biennial and annual cycles (Kansas and Missouri). The twenty-three states include Arizona, Arkansas, Connecticut, Hawaii, Indiana, Kansas, Kentucky, Maine, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, North Carolina, North Dakota, Ohio, Oregon, Texas, Virginia, Washington, Wisconsin and Wyoming. Nebraska and Connecticut adopted two-year budgeting in 1987 and 1991, respectively, and the idea has recently been under consideration more recently in Michigan, California and New Jersey.

Of the 23 biennial budget states, including most recently Arizona, 13 have legislatures that meet every year. In these states, the legislature may open the budget for review and revision in the non-budget year. Twelve states have a biennial enactment of two annual budgets: Arizona, Arkansas, Connecticut, Hawaii, Kentucky, Maine, Montana, Nebraska, Nevada, Ohio, Virginia, and Wisconsin. Nine states have a biennial enactment of one biennial budget: Indiana, Minnesota, New Hampshire, North Carolina, North Dakota, Oregon, Texas, Washington, and Wyoming. Kansas enacts an annual budget but budgets biennially through two annual budgets for 20 regulatory agencies. Missouri has an annual operating budget and a biennial capital budget. Twenty of the twenty-three biennial budget states allow for some form of rainy day or emergency contingency fund. Only Arkansas, Kansas and Montana do not. The average number of appropriation bills states use ranges from one bill in about a third of the states to 500 bills in Arkansas. Ten states have either two or three individual bills.

Since World War II, many states have shifted from biennial budgeting as their legislatures transformed from biennial to annual sessions. Furthermore, states have also moved away from biennial budgeting due to the unpredictability of federal funding for many programs that are joint ventures between state and federal budgets. However, over the last 10 years states have again begun to examine shifts to biennial budgeting.

The Defense Department Experiment

The Defense Authorization Act for Fiscal Year 1987 mandated that the President submit a biennial defense budget for fiscal years 1988-1989 and that the Secretary of Defense report "on the implications of moving to a two-year budget." At the time, a two-year budget cycle – authorization and appropriation – for the Pentagon was endorsed by Secretary of Defense Caspar Weinberger, the Congressional Budget Office, leading research institutions, and Senators Sam Nunn, Ted Stevens and Dan Quayle, as well as Representatives Les Aspin and Ike Skelton. The Congress and the President both favored the change, albeit for different reasons. The major issues that prompted support for biennial budgeting were the large amount of time consumed by the annual budget process, the perceived redundancy in the defense authorization and appropriation processes, the perceived lack of general defense policy review, and the perceived need for more effective oversight of Department of Defense programs.

As required, the Reagan Administration submitted a biennial defense budget in 1987. However, despite the support of both branches, Congress subsequently authorized only part of the two-year budget and appropriated only one year of it. The two year budget that the Pentagon submitted in January 1987 became enmeshed in a partisan struggle between the Democratic Congress and the Republican President over national priorities. This struggle led to a budget summit in the fall of 1987 which led to the single-year defense appropriation bill for fiscal year 1988.

While Congress did not avail itself of the opportunity to experiment with the implications of a biennial defense budget, the Pentagon did prepare and submit a two year budget. Dr. Robert J. Art, Herter Professor of International Relations at Brandeis University and a research associate at Harvard's Center for International Affairs, has produced the only academic evaluation of the federal experiment with biennial budgeting and its adoption in the Defense Department ("The Pentagon: The Case for Biennial Budgeting," Political Science Quarterly, 1989). Dr. Art called this experiment a "half success." Since Congress refused to authorize and appropriate funds on a biennial basis, agency stability was not enhanced. Nevertheless, Pentagon comptrollers and service programmers unanimously agreed that biennial budget preparation was beneficial. Dr. Art found that the two-year schedule reduced problems associated with overlapping budget cycles and enabled the introduction of analyses, evaluations, and plans widely viewed as having improved agency operations. He wrote that biennial budgeting allowed Department of Defense officials time, "to do things they should have been doing but never could do because of the rat race of annual budgeting."

Dr. Art further contended that, although specifying dollar amounts in a biennial plan is difficult, gains associated with better evaluation and planning are not trivial. Biennial budgeting's procurement savings are much more easily calculated - per unit savings could be 50 percent or greater for some weapon systems. In his view, better-quality decisions and more efficient resource utilization are the ultimate benefits of biennial budgeting.

House Committee on Rules
H-312 The Capitol
Washington, DC 20515
202-225-9091

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