Congressional Budget Actions in 2002

Report for Congress
Congressional Budget Actions in 2002
March 19, 2003
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division

Congressional Research Service ˜ The Library of Congress

Congressional Budget Actions in 2002
Summary
During 2002, Congress considered many different budgetary measures. Most
measures pertained to FY2003 (which began on October 1, 2002) and beyond. A
supplemental appropriations measure for FY2002 (which began on October 1, 2001,
and ended on September 30, 2002) also was enacted during 2002. This report
describes House and Senate actions on major budgetary legislation within the
framework of the congressional budget process and other procedural requirements.
Congress begins its annual budget process once the President submits his
budget. President George W. Bush submitted his FY2003 budget to Congress on
February 4, 2002.
The congressional budget process is centered around the adoption of an annual
concurrent resolution on the budget. The House adopted its version of the FY2003
budget resolution, H.Con.Res. 353, on March 20. In the absence of an agreement
with the Senate, the House adopted a resolution “deeming” its budget resolution to
have been adopted by Congress for budget enforcement purposes. The Senate
Budget Committee reported its version of the FY2003 budget resolution, S.Con.Res.
100, on March 22, but did not consider it on the Senate floor. Budget resolution
policies are implemented through the enactment of revenue and debt-limit legislation,
appropriations and other spending measures, and, if required by the budget
resolution, one or more reconciliation bills.
On October 23, President Bush signed into law the first two FY2003 regular
appropriations acts: the Defense Appropriations Act, 2003 (P.L. 107-248) and the
Military Construction Appropriations Act, 2003 (P.L. 107-249). In the absence of
final action on the remaining 11 regular appropriations acts, Congress and President
Bush provided temporary appropriations to the federal government agencies and
programs normally funded in these acts through eight successive continuing
resolutions (five in 2002 and three in 2003).
On February 13, 2003, the House and Senate agreed to the conference report to
the Consolidated Appropriations Resolution, 2003 (H.J.Res. 2), which contains the
remaining 11 of the 13 regular appropriations acts for FY2003. On February 20,
President Bush signed the measure into law (P.L. 108-7), thereby bringing action on
the FY2003 regular appropriations acts to a close.
The statutory limits on discretionary spending and the “pay-as-you-go”
(PAYGO) requirement for direct spending and revenue legislation established under
the Budget Enforcement Act of 1990, as amended, expired on September 30, 2002.^th
At the end of the end of the 107 Congress, Congress passed and President Bush
signed legislation (H.R. 5708, P.L. 107-312) that reduced the positive balances on
the PAYGO scorecard to zero, thereby preventing any future PAYGO sequestration
due to projected increases in the deficit as a result of direct spending and revenue
legislation enacted prior to the end of FY2002.
This report will not be updated.

Contents
Concluding Actions................................................1
In troduction ......................................................1
Overview of the Congressional Budget Process..........................2
Budget Resolution.................................................5
Reconciliation Legislation...........................................7
Revenue and Debt-Limit Legislation...................................8
Appropriations and Other Spending Legislation.........................10
Budget Enforcement and Sequestration................................13
Legislation ......................................................16
Chronology ......................................................17
For Additional Reading............................................17
Congressional Hearings, Reports, and Documents...................17
CRS Products................................................18
List of Tables
Table 1. The Congressional Budget Process Timetable....................3
Table 2. Timetable for Sequestration Actions..........................15
Table 3. Estimated PAYGO Scorecard Balances at theEnd of FY2002.......16

Congressional Budget Actions in 2002
Concluding Actions
On November 22, 2002, Congress adjourned sine die. Before ending the
session, Congress and President George W. Bush completed action on two of the 13
fiscal year (FY) 2003 regular appropriations acts: the Defense Appropriations Act,

2003 (P.L. 107-248) and the Military Construction Appropriations Act, 2003 (P.L.

107-249) on October 23. In the absence of final action on the remaining 11 regular
appropriations acts, Congress and President Bush provided temporary appropriations
to the federal government agencies and programs normally funded in these acts
through eight successive continuing resolutions (five in 2002 and three in 2003).
On February 13, 2003, the House and Senate agreed to the conference report to
the Consolidated Appropriations Resolution, 2003 (H.J.Res. 2), which contains the
remaining 11 of the 13 regular appropriations acts for FY2003. On February 20,
President Bush signed the measure into law (P.L. 108-7), thereby bringing action on
the FY2003 regular appropriations acts to a close. For further information on actions
taken in 2003, see CRS Report RL31754, Congressional Budget Actions in 2003.
Introduction
During the second session of the 107^th Congress, the House and Senate
considered many different budgetary measures. Most measures pertained to FY2003
(which began on October 1, 2002) and beyond. A supplemental appropriations
measure for FY2002 (which began on October 1, 2001, and ended on September 30,
2002) also was enacted during 2002. This report describes House and Senate actions
on major budgetary legislation within the framework of the congressional budget
process and other procedural requirements.
In 2002, Congress faced a significantly different procedural and budget
environment than it had in the previous few years. Not only were key enforcement
procedures under the Budget Enforcement Act (Title XIII of P.L. 101-508) scheduled
to expire at the end of FY2002 (i.e., September 30, 2002), but the current and long-
term budget outlook also had changed considerably from the year before. At the
beginning of 2001, the Congressional Budget Office (CBO) projected federal
surpluses in each fiscal year through FY2011 and a cumulative surplus of $5.6
trillion for FY2002 through FY2011, under policies existing at that time.¹ In
contrast, CBO Director Dan L. Crippen testified before the House and Senate Budget

¹Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2002-2011
(Washington: Jan. 2001).

Committees on January 23, 2002, that CBO projected that both fiscal years 2002 and
2003 would show small deficits, if current policies remained the same and the
economy performed as CBO forecasted. Further, the projected cumulative surplus
for FY2002 through FY2011 dropped by $4.0 trillion to $1.6 trillion. The new
environment undoubtedly had a significant effect on congressional budget actions
during the session.
Overview of the Congressional Budget Process
The congressional budget process consists of the consideration and adoption of
spending, revenue, and debt-limit legislation within the framework of an annual
concurrent resolution on the budget. Additionally, prior to September 30, 2002,
congressional action on budget legislation was constrained by limits on discretionary
spending and a “pay-as-you-go” (PAYGO) requirement for direct spending and
revenue legislation.
Congress begins its budget process once the President submits his budget. The
President is required by law to submit a comprehensive federal budget no later than
the first Monday in February. The President’s budget includes estimates of direct
spending and revenues under existing laws, as well as requests for discretionary
spending (i.e., funds provided through the appropriations process) for the upcoming
fiscal year. In addition, the President frequently proposes new initiatives in his
budget submission to Congress. Although Congress is not bound by the President’s
budget, congressional action on spending and revenue legislation often is influenced
by his recommendations, as well as subsequent budgetary activities by the President
during the year. The Office of Management and Budget (OMB) assists the President
in formulating and coordinating his budget policies and activities.
On February 4, 2002, President Bush submitted his FY2003 budget to Congress.
Following the usual practice, the President’s budget was submitted as a multi-volume
set consisting of a main document, which includes the President’s budget message
and information on his FY2003 proposals (Budget), and supplementary documents,
which provide special budgetary analyses (Analytical Perspectives), historical budget
information (Historical Tables), and detailed account and program level information
(Appendix), among other things. On July 15, President Bush submitted his Mid-
Session Review to Congress. This report contains revised estimates of the budget
deficit/surplus, receipts, outlays, and budget authority for FY2002 through FY2007,
reflecting changed economic conditions and assumptions and congressional actions.²
The Congressional Budget Act (CBA) of 1974 (Titles I-IX of P.L. 93-344)
established the congressional budget process, including a timetable for congressional
action on budget legislation (see Table 1). The process is centered on the adoption
of an annual concurrent resolution on the budget. The budget resolution sets forth
aggregate spending and revenue levels, and spending levels by major functional area,
for at least 5 fiscal years. Because the budget resolution is a concurrent resolution,

²Presidential budget documents are available from the Government Printing Office or on
OMB’s Web site at [http://www.whitehouse.gov/omb], visited on Dec. 31, 2002.

it is not presented to the President for his signature and thus does not become law.
Instead, it is an agreement between the House and Senate on a congressional budget
plan, providing a framework for subsequent legislative action on the budget during
each congressional session.
Table 1. The Congressional Budget Process Timetable
^Date^Acti^on^{to b}^e^com^p^l^e^ted
^Fir^s^{t Mo}ⁿ^d^ayⁱⁿ^Feb^r^u^a^r^y^P^r^esid^en^{t su}^b^m^{its b}^u^d^g^{et to}^Coⁿ^g^r^ess.
^Febru^a^ry¹⁵^C^oⁿ^g^r^es^sⁱ^on^{al B}^u^dg^{et Of}^fⁱ^{ce s}^u^bm^its^econ^o^mⁱ^{c an}^{d bu}^dg^et
^ou^t^l^ook^report^t^o^Bu^dg^et^C^o^m^mⁱ^t^t^ees^.
^Six^w^eek^s^af^{ter P}^r^es^iden^t^C^o^m^m^ittees^s^u^bm^{it v}ⁱ^ew^s^an^{d es}^tim^ates^{to B}^u^dg^{et C}^o^m^m^ittees^.
^s^u^bmⁱ^t^s^bu^dg^et
^A^p^{ril 1}^S^en^{ate B}^u^dg^{et C}^o^m^m^{ittee reports}^bu^dg^{et res}^o^lu^tion^.
^A^p^r^{il 1}⁵^Coⁿ^g^r^{ess co}^m^p^{letes actio}ⁿ^oⁿ^b^u^d^g^{et r}^e^so^lu^tioⁿ^.
^M^a^y¹⁵^A^nnua^{l a}^p^p^r^o^p^r^ia^tio^{ns b}^{ills m}^a^y^b^e^c^o^nsid^e^r^e^d^{in the}^Ho^use^,
^ev^en^if^actioⁿ^oⁿ^b^u^d^g^{et r}^e^so^lu^tioⁿ^h^a^{s n}^o^{t b}^een^co^m^p^leted^.
^J^une¹⁰^H^o^use^A^p^p^r^o^p^rⁱ^a^tⁱ^o^{ns Co}^m^mⁱ^t^t^e^e^r^e^p^o^r^t^s^l^a^st^a^nnua^l
^ap^p^r^o^p^r^iatioⁿ^s^b^ill.
^J^uⁿ^e¹⁵^Ho^u^s^{e co}^m^p^{letes actio}ⁿ^oⁿ^r^ecoⁿ^c^iliatioⁿ^legⁱ^slatioⁿ⁽ⁱ^f
^requⁱ^r^{ed by}^bu^dg^et^res^o^l^u^tⁱ^oⁿ⁾^.
^J^une³⁰^Ho^use^c^o^m^p^le^te^{s a}^c^tio^{n o}ⁿ^a^nnua^{l a}^p^p^r^o^p^r^ia^tio^{ns b}^ills.
^Ju^l^y¹⁵^Presⁱ^d^en^t^s^u^bmⁱ^t^s^mⁱ^d-^s^e^s^sⁱ^on^revⁱ^ew^of^hⁱ^s^bu^dg^et^t^o
^Co^ngr^e^ss.
^{October 1}^F^is^{cal y}^{ear beg}ⁱⁿ^s^.
^S^o^u^rce:^Se^c^{tion 300 of}^the^C^ong^r^e^s^sⁱ^ona^{l B}^udg^e^t^A^c^{t of}^{1974, a}^s^a^m^e^nde^{d (}^P^.L^{. 93-}^{344, 88 Sta}^t^{. 297)}^.
^Note:^Dat^e^{s serve as gu}ⁱ^d^elⁱⁿ^es,^excep^t^t^h^{e f}ⁱ^rst^an^d^l^a^st^,^w^hⁱ^c^h^{are req}^uⁱ^red^b^y^l^a^w^.
Budget resolution policies are implemented through the enactment of revenue
and debt-limit legislation, appropriations and other spending measures, and, if
required by the budget resolution, one or more reconciliation bills. Congress
enforces budget resolution policies through points of order on the floor of each
chamber and the reconciliation process. For example, any legislation that would
cause the aggregate spending and revenue levels to be violated is prohibited from
being considered. Further, the total budget authority and outlays set forth in the
budget resolution are allocated among the House and Senate committees having
jurisdiction over specific spending legislation. Any legislation, or amendment, that
would cause these committee allocations to be exceeded is prohibited. Finally, the
House and Senate Appropriations Committees subdivide their allocations among
their respective 13 subcommittees. A point of order may be raised against any
appropriations act, or amendment, that would cause one of these subdivisions to be

exceeded.³ Congress also may use reconciliation legislation (discussed further
below) to enforce direct spending, revenue, and debt-limit provisions of a budget
resolution.
In addition to the enforcement procedures associated with the budget resolution,
budget legislation was constrained by statutory limits on discretionary spending and
a PAYGO requirement for direct spending and revenue legislation, both established
by the Budget Enforcement Act (BEA) of 1990 (Title XIII of P.L. 101-508), which
amended the Balanced Budget and Emergency Deficit Control Act of 1985 (Title II
of P.L. 99-177).
As consideration of the FY2003 budget began, adjustable discretionary spending
limits existed for the following categories: highway and mass transit spending for
FY2002-FY2003; conservation spending (divided into six subcategories) for
FY2002-FY2006; and other discretionary spending, also called general purpose
discretionary spending, for FY2002. PAYGO generally required that projected
increases in direct spending or decreases in revenues due to legislative action were
offset so that the net effects of the new legislation did not increase the deficit or
reduce the surplus. The PAYGO requirement applied to legislation enacted through
FY2002, but it covered the effects of such legislation through FY2006.
The discretionary spending limits and PAYGO requirement were enforced
primarily by sequestration, which involves automatic, largely across-the-board
spending cuts in non-exempt programs. Sequestration was triggered if the director
of the Office of Management and Budget estimated in the final sequestration report
after the end of a session that one or more of the discretionary spending limits had
been exceeded or the PAYGO requirement had been violated. A within-session
sequestration was possible if a supplemental appropriations bill caused the spending
levels of the current fiscal year to exceed the statutory limit for a particular category.
The discretionary spending limits, as well as a PAYGO requirement similar to the
statutory one, also could have been enforced through points of order while legislation
was considered on the Senate floor.
The sequestration process established to enforce the discretionary spending
limits expired at the end of FY2002 (September 30, 2002). The PAYGO
sequestration process continues until the end of FY2006 for the projected increases
in the deficit as a result of direct spending and revenue legislation enacted prior to the
end of FY2002. However, Congress passed and President Bush signed legislation
(H.R. 5708, P.L. 107-312) that reduced the positive balances on the PAYGO
scorecard through FY2006 to zero, thereby preventing any PAYGO sequestration
through FY2006 for the projected increases in the deficit as a result of direct
spending and revenue legislation enacted prior to the end of FY2002.

³For more detailed information on these points of order and their application, see CRS
Report 97-865, Points of Order in the Congressional Budget Process, by James V. Saturno.

Budget Resolution
The Congressional Budget Act, as amended, establishes the concurrent
resolution on the budget as the centerpiece of the congressional budget process. The
budget resolution sets forth aggregate spending and revenue levels, and spending
levels by major functional area, for at least 5 fiscal years. Once adopted, it provides
the framework for subsequent action on budget-related legislation.
The congressional budget process timetable sets April 15 as a target date for
final adoption of the budget resolution. The CBA prohibits the consideration of
spending, revenue, or debt-limit legislation for the upcoming year until the budget
resolution has been adopted, unless the rule is waived or set aside.
Following the submission of the President’s budget early in the year, Congress
begins formulating the budget resolution. The House and Senate Budget Committees
are responsible for developing and reporting the budget resolution. In formulating
the budget resolution, the Budget Committees hold hearings and receive testimony
from Members of Congress and representatives from federal departments and
agencies, the general public, and national organizations. Three regular hearings
include separate testimony from the Director of the Congressional Budget Office
(CBO), the Chair of the Federal Reserve Board, and the Director of OMB.⁴
The congressional budget resolution, as well as the President’s budget, is based
on budget baselines. The budget baseline is a projection of federal revenue,
spending, and deficit or surplus levels based upon current policies, assuming certain
economic assumptions. The President’s budget baseline, referred to as current
services estimates, usually differs from CBO’s baseline, referred to as baseline
budget projections, often due to different economic and technical assumptions.
Baseline projections provide a benchmark for measuring the budgetary effects of
proposed policy changes. On January 31, 2002, CBO released its annual report on
budget baseline projections, The Budget and Economic Outlook: Fiscal Years 2003-
2012. On March 6, CBO released its Analysis of the President’s Budgetary
Proposals for Fiscal Year 2003. This report contains estimates of the President’s
proposals using CBO’s economic and technical assumptions. In addition, the report
incorporates CBO’s new technical assumptions and revised economic forecast, as
well as updates its budget baseline projections. On August 27, CBO released its
budget update report, The Budget and Economic Outlook: An Update, containing⁵

revised budget projections.
⁴The CBO Director, Dan L. Crippen, presented separate, but identical, testimony before the
Senate and House Budget Committees on Jan. 23, 2002. The testimony is available on
CBO’s Web site at [http://www.cbo.gov], visited on Dec. 31, 2002. Federal Reserve Board
Chairman Alan Greenspan testified before the Senate Budget Committee on Jan. 24, 2002.
OMB Director Mitchell E. Daniels, Jr., presented separate, but identical, testimony before
the Senate and House Budget Committees on Feb. 5, 2002. The latter two testimonies are
available on the Senate Budget Committee’s Web site at [http://www.senate.gov/~budget],
visited on Dec. 31, 2002.
⁵CBO reports are available on its Web site at [http://www.cbo.gov].

Another source of input comes from the “views and estimates” of congressional
committees with jurisdiction over spending and revenues. Within 6 weeks after the
President’s budget submission, House and Senate committees are required to submit
views and estimates of budget matters under their jurisdiction to their respective
Budget Committees. These views and estimates, frequently submitted in the form
of a letter to the Chair and Ranking Member of the Budget Committee, typically
include comments on the President’s budget proposals and estimates of the budgetary
impact of any legislation likely to be considered during the current session of
Congress. The Budget Committees are not bound by these recommendations. The
views and estimates of Senate committees are printed in the committee report
accompanying the Budget Committee-reported budget resolution (S.Rept. 107-141,
pp. 72-164). The views and estimates of House committees are printed in a separate
House Budget Committee print (Serial No. CP-2).
The budget resolution was designed to provide a framework to make budget
decisions, leaving specific program determinations to House and Senate
Appropriations Committees and other committees with spending and revenue
jurisdiction. In many instances, however, particular program changes are considered
when formulating the budget resolution. Program assumptions sometimes are
referred to in the reports of the House and Senate Budget Committees and usually are
discussed during floor action. Although these program changes are not binding,
committees may be strongly influenced by these recommendations when formulating
appropriations bills, reconciliation measures, or other budgetary legislation.
On March 15, the House Budget Committee reported its version of the FY2003
budget resolution (H.Con.Res. 353, H.Rept. 107-376), after a mark up on March 13.
The Senate Budget Committee marked up its version (S.Con.Res. 100, S.Rept. 107-

141) on March 21, and reported it to the full Senate the next day (March 22).

The House and Senate consider the budget resolution under procedures
generally intended to expedite final action. In the House, the budget resolution
usually is considered under a special rule, limiting the time of debate and allowing
only a few amendments, as substitutes to the entire resolution. On March 20
(legislative day, March 19), the Rules Committee reported a special rule (H.Res. 372,
H.Rept. 107-380) which allowed only a self-executing amendment in the nature of
a substitute and allowed 3 hours of general debate. After adopting the rule by a vote
of 222-206, the House considered and adopted H.Con.Res. 353 by a 221-209 vote,
on March 20. In the absence of an agreement on a FY2003 budget resolution with
the Senate, the House adopted a so-called “deeming resolution.” The special rule
(H.Res. 428) governing the initial consideration of the emergency supplemental
appropriations act (H.R. 4775) included a provision “deeming” the House-adopted
budget resolution to have been agreed to by Congress. The House adopted this
special rule by a 216-209 vote on May 22. Under the deeming resolution, the
enforcement procedures of the Congressional Budget Act, such as the limits on
spending in the annual appropriations acts, are effective in the House.⁶

⁶The special rule also required the House Budget Committee chairman to submit for printing
in the Congressional Record the committee allocations, referred to as the 302(a) allocations,
(continued...)

The Senate considers the budget resolution under the procedures set forth in the
CBA, unless superseded by a unanimous consent agreement. Debate on the initial
consideration of the budget resolution, and all amendments, debatable motions, and
appeals, is limited to 50 hours. Amendments, motions, and appeals may be
considered beyond this time limit, but without debate. Consideration of the
conference report is limited to 10 hours. The Senate did not consider the Senate
Budget Committee-reported budget resolution on the floor.⁷
Reconciliation Legislation
Congress may implement changes to existing law related to direct spending,
revenues, or the debt limit through the reconciliation process, under Section 310 of
the CBA. The reconciliation process has two stages. First, Congress includes
reconciliation instructions in a budget resolution directing one or more committees
to recommend changes in statute to achieve the levels of spending, revenues, and
debt limit agreed to in the budget resolution. Second, the legislative language
recommended by committees is packaged “without substantive revision” into one or
more reconciliation bills, as set forth in the budget resolution, by the House and
Senate Budget Committees. In some instances, a committee may be required to
report its legislative recommendations directly to its chamber.
Once reconciliation legislation is reported, consideration is governed by special
procedures. These special rules serve to limit what may be included in reconciliation
legislation, to prohibit certain amendments, and to encourage its completion in a
timely fashion. In the House, as with the budget resolution, reconciliation legislation
usually is considered under a special rule, establishing the time allotted for debate
and what amendments will be in order. In the Senate, debate on a budget
reconciliation bill, all amendments, debatable motions, and appeals is limited to not
more than 20 hours. After the 20 hours of debate has been reached, consideration of
amendments, motions, and appeals may continue, but without debate.
In both chambers, the CBA requires that amendments to reconciliation
legislation be deficit neutral and germane. Also, the CBA prohibits the consideration
of reconciliation legislation, or any amendment to a reconciliation bill,
recommending changes to the Social Security program. Finally, in the Senate,

⁶ (...continued)
associated with the House-adopted budget resolution spending levels. House Budget
Committee Chairman Jim Nussle submitted the allocations on May 22, 2002. See
Congressional Record, daily edition, vol. 148, May 22, 2002, pp. H2929-H2930. With the
House-adopted budget resolution deemed to have been passed by Congress, a point of order
may be raised against legislation that would cause these allocations to be exceeded. For
further information on “deeming resolutions,” see CRS Report RL31443, The “Deeming
Resolution”: A Budget Enforcement Tool, by Robert Keith.
⁷On June 5, during the consideration of the Emergency Supplemental Appropriations Act
(H.R. 4775), Sen. Rick Santorum offered an amendment (no. 3765) that contained the text
of S.Con.Res. 100, but the amendment was tabled by a 96-0 vote. See Congressional
Record, daily edition, vol. 148, June 5, 2002, pp. S5018-S5021.

Section 313 of the CBA, commonly referred to as the Byrd rule, prohibits extraneous
matter in a reconciliation bill or any amendment.
Although Congress did not complete action on a FY2003 budget resolution,
neither the House or Senate version of the FY2003 budget resolution (H.Con.Res.

353 and S.Con.Res. 100, respectively) contained reconciliation instructions.

Consequently, Congress did not anticipate considering reconciliation legislation in

2002.

Revenue and Debt-Limit Legislation
Congress may adopt revenue and debt-limit legislation individually. Revenue
and debt-limit legislation is under the jurisdiction of the House Ways and Means
Committee and the Senate Finance Committee. Article I, Section 7, of the U.S.
Constitution, requires revenue legislation originate in the House of Representatives,
but the Senate may amend a revenue bill as it chooses.
Most of the laws establishing the federal government’s revenue sources are
permanent and continue year after year without any additional legislative action.
Congress, however, typically enacts revenue legislation, changing some portion of
the existing tax system, every year. Revenue legislation may include changes to
individual and corporate income taxes, social insurance taxes, excise taxes, or tariffs
and duties.
Revenue legislation is not automatically considered in the congressional budget
process on an annual basis. Frequently, however, the President proposes and
Congress considers changes in the rates of taxation or the distribution of the tax
burden. An initial step in the congressional budget process is the publication of
revenue estimates of the President’s budget by CBO. These revenue estimates
usually differ from the President’s since they are based on different economic and
technical assumptions (e.g., growth of the economy and change in the inflation rate).
Estimates of any congressional revenue-policy proposals are prepared by CBO, based
on Joint Committee on Taxation revenue estimates, and are published in committee
reports or the Congressional Record.
The budget resolution includes baseline estimates of federal government receipts
based on the continuation of existing laws and any proposed policy changes. The
revenue levels in the budget resolution provide the framework for any action on
revenue measures during the session. A point of order may be raised against the
consideration of legislation that causes revenues to fall below the agreed upon levels
for the first fiscal year or the total for all fiscal years in the budget resolution. This
point of order may be set aside by unanimous consent, or waived by a special rule in
the House or by a three-fifths vote in the Senate.
A Senate PAYGO point of order, under Section 207 of the FY2000 budget
resolution (H.Con.Res. 68, 106^th Congress), also may be raised against any revenue
legislation that would increase or cause an on-budget deficit for the first fiscal year,
the period of the first 5 fiscal years, or the following 5 fiscal years, covered by the

most recently adopted budget resolution. The point of order may be waived by a vote
of three-fifths of Senators, or set aside by unanimous consent. The Senate PAYGO
point of order expired on September 30, 2002. On October 16, however, the Senate
agreed by unanimous consent to S.Res. 304, as amended, to restore and extend the
point of order through April 15, 2003.⁸
After months of floor consideration of several variations of economic stimulus
legislation, the House and Senate agreed to H.R. 3090, which contained a scaled-
down economic recovery package of business-related tax cuts and an extension of
unemployment compensation, by votes of 417-3 on March 7 and 85-9 on March 8,
respectively. President Bush signed H.R. 3090, the Job Creation and Worker
Assistance Act of 2002, into law (P.L. 107-147) on March 9.
Federal debt consists of debt held by the public plus debt held by government
accounts. Almost all of the federal debt is subject to a statutory debt limit. The debt
held by the public represents the total net amount borrowed from the public to cover
the federal government’s budget deficits. By contrast, the debt held by government
accounts represents the total net amount of federal debt issued to specialized federal
accounts, primarily trust funds (e.g., Social Security). Trust fund surpluses by law
must be invested in special federal government securities and thus are held in the
form of federal debt. Because the statutory limit applies to the combination of both
types of debt, budget deficits or trust fund surpluses may contribute to the federal
government reaching the existing debt limit. So long as federal budget policy results
in an increase in the federal debt, Congress periodically must enact increases to the
debt limit.
The most recent prior increase in the statutory debt limit was included in the
Balanced Budget Act of 1997 (P.L. 105-33). At the time of passage, the increase to
$5.95 trillion was considered sufficient to meet the federal government’s financial
needs through mid-December 1999. The federal government’s surpluses over the last
4 years contributed to the fact that the statutory debt limit has been sufficient beyond
this date. However, Treasury Secretary Paul O’Neill first indicated in a December
11, 2001, letter to congressional leaders that the existing debt limit might begin to
interfere with the federal government’s financial responsibilities “as early as February
2002.”⁹ Therefore, he requested that Congress raise the debt limit by $750 billion to
$6.7 trillion.
On June 11, 2002, the Senate adopted S. 2578, legislation to increase the public-
debt limit by $450 billion, by a 68-29 vote. On June 27, the House adopted S. 2578
by a 215-214 vote. President Bush signed the legislation into law (P.L. 107-199) on

⁸The resolution also restored and extended the three-fifths vote requirement for certain
waivers of the Congressional Budget Act of 1974, through Apr. 15, 2003.
⁹Bud Newman, “Debt Ceiling Hike Not on House Agenda Before Adjournment, DeLay,
Thomas Say,” BNA Daily Report for Executives, no. 238, Dec. 13, 2001, p. G-3. Also, for
more information on the current need to raise the debt limit, see CRS Report RS21111, The
Debt Limit: The Need to Raise It After Four Years of Surpluses, by Philip D. Winters.

June 28. The $450 billion increase was considered to be sufficient to meet the
federal government’s financial needs through early 2003.¹⁰
Appropriations and Other Spending Legislation
Federal spending is categorized as one of two different types: discretionary or
direct spending. Discretionary spending is controlled through the annual
appropriations acts, while direct spending (which consists mostly of entitlement
programs) is determined by existing law.
Discretionary spending is under the jurisdiction of the House and Senate
Appropriations Committees. Direct spending is under the jurisdiction of the various
legislative committees of the House and Senate. Some entitlement programs, such
as Medicaid and certain veterans’ programs, are funded in annual appropriations acts,
but such spending is not considered discretionary and is not controlled through the
annual appropriations process.
The President’s budget includes recommendations for the annual appropriations;
account and program level detail about these recommendations are included in the
Appendix volume of the President’s budget documents. In addition, agencies submit
justification materials to the House and Senate Appropriations Committees. The
budget justifications provide more detailed information about an agency’s program
activities than is contained in the President’s budget documents and are used in
support of agency testimony during Appropriations subcommittee hearings on the
President’s budget request.
Congress passes three main types of appropriations measures. Regular
appropriations acts provide budget authority for the next fiscal year, beginning on
October 1. The 13 subcommittees of the Appropriations Committees of the House
and Senate are each responsible for one of the 13 regular appropriations acts.
Supplemental appropriations acts provide additional funding for unexpected needs
while the fiscal year is in progress. Continuing appropriations acts, commonly
referred to as continuing resolutions (CRs), provide stop-gap funding for agencies
that have not received a regular appropriations by the start of the fiscal year.
Spending allocations to the Appropriations Committees and other committees
accompany the conference report on the budget resolution. Soon after it is adopted,
the House and Senate Appropriations Committees subdivide their spending
allocations among their subcommittees and formally report these suballocations to
their respective chambers. On June 25, 2002, the House Appropriations Committee
reported its initial suballocations to the House (H.Rept. 107-529) and revised its
suballocations four times (H.Rept. 107-566, H.Rept. 107-567, H.Rept. 107-656, and
H.Rept. 107-738). Although there was no official allocation made, Senator Robert
Byrd, chair of the Senate Appropriations Committee (SAC), submitted for printing

¹⁰Bud Newman, “House Passes, Sends to President Bush Bill Hiking Debt Ceiling by $450
Billion,” BNA Daily Report for Executives, no. 126, July 1, 2002, p. G-4.

in the Congressional Record the SAC-approved FY2003 subcommittee allocations
on June 28 and revised allocations on July 26.¹¹
The House and Senate appropriations subcommittees begin holding extensive
hearings on appropriations requests shortly after the President’s budget is submitted.
By custom, appropriations measures originate in the House. In recent years, the
Senate Appropriations Committee has begun to adopt and report original Senate
appropriations measures, allowing the Senate to consider appropriations measures
without having to wait for the House to adopt its version. Under this practice, the
Senate version is considered and amended on the floor, and then inserted into the
House-adopted version, when available, as a substitute amendment, thereby retaining
the House-numbered bill for final action.
In addition to the 13 regular appropriations acts, Congress typically acts on at
least one supplemental appropriations measure during a session. Congress also often
adopts one or more continuing resolutions each year because of recurring delays in
the appropriations process. In 2001, for example, Congress passed the 13 regular
appropriations measures individually, two supplementals, and eight continuing
resolutions. In some years, such as in each of the three prior to 2001 (1998-2000),
instead of adopting all of the regular appropriations acts individually, Congress
combines several of them into an omnibus appropriations measure either at the time
of initial floor consideration or at the time they are reported from conference.
On March 21, 2002, President Bush submitted a $27.1 billion emergency
supplemental appropriations request for FY2002 to provide additional resources for
the war on terrorism, homeland security, and economic recovery.¹² On May 21,
2002, President Bush submitted a second FY2002 emergency supplemental
appropriations request for $1.1 billion.¹³
On May 20, 2002, in response to the President’s request, the House
Appropriations Committee reported H.R. 4775, making supplemental appropriations
for FY2002 (H.Rept. 107-480). The House considered H.R. 4775 first under an open
rule (H.Res. 428) and subsequently under a closed rule (H.Res. 431) on May 22, 23,
and 24. H.R. 4775 was adopted by the House on May 24 on a 280-138 vote. In the
Senate, the Senate Appropriations Committee reported a FY2002 supplemental
appropriations act (S. 2551, S.Rept. 107-156) on May 22. After incorporating S.
2551 in H.R. 4775 as an amendment, the Senate began consideration of the
supplemental appropriations measure on June 3. During consideration of H.R. 4775,

¹¹Congressional Record, daily edition, vol. 148, June 28, 2002, p. S6323, and Congressional
Record, daily edition, vol. 148, July 26, 2002, p. S7417. These subcommittee allocations,
however, were not enforceable under the Congressional Budget Act in the Senate because
Congress had not adopted a budget resolution for FY2003 nor had the Senate, in the absence
of a budget resolution, passed a “deeming resolution.”
¹²The text of the President’s request to Congress is available on the Internet at
[http://w3.access.gpo.gov/usbudget/fy2003/pdf/5usattack.pdf], visited on Dec. 31, 2002.
¹³The text of the President’s request to Congress is available on the Internet at
[http://w3.access.gpo.gov/usbudget/fy2003/pdf/10va_doi.pdf], visited on Dec. 31, 2002.

the Senate invoked cloture by a 87-10 vote on June 6. The next day (June 7) the
Senate passed H.R. 4775, as amended, by a vote of 71-22.
House and Senate conferees resolved the differences between the two versions
of the FY2002 supplemental appropriations measure and filed a conference report
(H.Rept. 107-593) on July 19. The House agreed to the conference report on H.R.
4775 on July 23 and the Senate agreed to it on the next day by votes of 397-32 and
92-7, respectively. President Bush signed the supplemental appropriations measure
into law (P.L. 107-206) on August 8.
Most of the $28.9 billion provided in H.R. 4775 was designated an “emergency
requirement” and effectively was exempt from budget policy controls during
consideration on the floor of each chamber and after being enacted into law. About
$5.1 billion, however, was provided for obligation only if the President designated
this entire amount an “emergency requirement” within 30 days of enactment (Section
1404 of P.L. 107-206). On August 13, President Bush announced that he would not
do so, effectively reducing the overall amount of the supplemental appropriations
measure to about $23.8 billion.¹⁴
The House and Senate began consideration of the regular appropriations bills
for FY2003 during the week of June 24 and July 15, respectively. By the start of
FY2003 on October 1, the House had adopted five of the 13 regular appropriations
measures, and the Senate had adopted three.¹⁵
In the absence of any regular appropriations acts enacted by October 1, Congress
passed and President Bush signed into law a continuing resolution (H.J.Res. 111, P.L.
107-229). The measure provided temporary appropriations for FY2003 through
October 4 for federal government agencies and programs funded in the 13 regular
appropriations bills. Subsequently, Congress and President Bush extended the
temporary funding through October 11 (H.J.Res. 112, P.L. 107-235), October 18
(H.J. Res. 122, P.L. 107-240), November 22 (H.J.Res. 123, P.L. 107-244), and
January 11, 2003 (H.J.Res. 124, P.L. 107-294).
On October 23, President Bush signed into law the first two FY2003 regular
appropriations acts: the Defense Appropriations Act, 2003 (P.L. 107-248) and the
Military Construction Appropriations Act, 2003 (P.L. 107-249). As Congress
adjourned sine die on November 22, the federal government agencies and programs
funded in the remaining 11 regular appropriations acts were provided temporary
funding through January 11, 2003, by the last continuing resolution (H.J.Res. 124)
adopted during the second session of the 107^th Congress. President Bush signed this
continuing resolution into law (P.L. 107-294) on November 23.
Early in 2003, Congress adopted and President Bush signed three additional
CRs to provide temporary FY2003 appropriations through January 31 (P.L. 108-2),

¹⁴Adam Wasch,”Bush Rejects ‘Extra’ Spending in FY2002 Supplemental Package,” BNA
Daily Report for Executives, no. 157, Aug. 14, 2002, p. A-13.
¹⁵For information on congressional action on the FY2003 appropriations bills, see the CRS
Appropriations Web site at [http://www.crs.gov/products/appropriations/apppage.shtml].

February 7 (P.L. 108-4), and February 20 (P.L. 108-5). On February 13, 2003, the
House and Senate agreed to the conference report to the Consolidated Appropriations
Resolution, 2003 (H.J.Res. 2), which contains the 11 of the 13 regular appropriations
acts for fiscal year (FY) 2003. On February 20, President George W. Bush signed the
measure into law (P.L. 108-7), thereby bringing action on the FY2003 regular
appropriations acts to a close.¹⁶
Congress often considers major legislation affecting direct spending programs
as well. On several occasions in the past, Congress has included reserve funds in the
budget resolution to accommodate specific direct spending legislation. Under the
provisions of a reserve fund, the chairmen of the House and Senate Budget
Committees may revise the committee spending allocations and other budget
resolution levels if certain legislation is reported by the appropriate committee.
Without such an adjustment, direct spending legislation might be subject to points
of order if it was not assumed in the budget resolution spending amounts.
The House-adopted FY2003 budget resolution, which was deemed by the House
to have been adopted by Congress, included seven reserve funds, two of which were
related to direct spending legislation. First, Section 202 of H.Con.Res. 353 provided
a reserve fund for legislation reforming the Medicare program, including adding a
prescription drug benefit. Second, Section 212 of H.Con.Res. 353 provided a reserve
fund for legislation subjecting the administrative expenses for student loans to the
annual appropriations process.
On June 27, House Budget Chairman Jim Nussle, under the authority of Section
202 of H.Con.Res. 353, revised the appropriate spending allocations to accommodate
H.R. 4954, the Medicare Modernization and Prescription Drug Act of 2002.¹⁷
Subsequently, the House considered H.R. 4954 under a closed rule (H.Res. 465),
which passed by a vote of 218-213. The rule provided for an amendment in the
nature of a substitute printed in the report (H.Rept. 107-553) accompanying the rule
to be adopted automatically. Subsequently, the House adopted H.R. 4954 by a 221-

208 vote. No further action was taken on this legislation.

Budget Enforcement and Sequestration
The sequestration process was first established in 1985 by the Balanced Budget
and Emergency Deficit Control Act, commonly known as the Gramm-Rudman-
Hollings Act. The law was amended and modified in 1987, 1990, 1993, and 1997.
Most notably, the Budget Enforcement Act (BEA) of 1990 changed the focus of the
sequestration process. Instead of maximum deficit targets, as provided in the 1985
Deficit Control Act, the BEA of 1990 tied sequestration to new statutory limits on
discretionary spending and a PAYGO requirement for new direct spending and
revenue legislation.

¹⁶For further information on actions taken in 2003, see CRS Report RL31754,
Congressional Budget Actions in 2003, by Bill Heniff Jr.
¹⁷See Congressional Record, daily edition, vol. 148, June 27, 2002, p. H4322.

As consideration of the FY2003 budget began, adjustable discretionary spending
limits existed for the following categories: highway and mass transit spending for
FY2002-FY2003; conservation spending (divided into six subcategories) for
FY2002-FY2006; and other discretionary spending, also called general purpose
discretionary spending, for FY2002. Under the PAYGO requirement, the net
projected effect of new direct spending and revenue legislation enacted for a fiscal
year could not cause a positive balance (reflecting an increase in the on-budget deficit
or a reduction in the on-budget surplus) on a multiyear PAYGO “scorecard.” For
each fiscal year, this scorecard maintained the balances of the accumulated budgetary
effects of laws enacted during the session and prior years. The PAYGO requirement
applied to legislation enacted through FY2002, but it covered the effects of such
legislation through FY2006.
The discretionary spending limits and PAYGO requirement were enforced
primarily by sequestration, which involves automatic, largely across-the-board
spending cuts in non-exempt programs. Sequestration was triggered if the director
of the Office of Management and Budget estimated in the final sequestration report
that one or more of the discretionary spending limits would be exceeded or the
PAYGO requirement would be violated. The President then was required to issue
a sequestration order cancelling budgetary resources in non-exempt programs by the
amount of any spending limit breach or PAYGO violation.
The discretionary spending limits, as well as a PAYGO requirement similar to
the statutory one, also could have been enforced through points of order while
legislation was being considered on the Senate floor. First, Section 312(b) of the
1974 CBA prohibited the consideration of legislation that would cause any of the
spending limits to be exceeded. Second, Section 207 of the FY2000 budget
resolution (H.Con.Res. 68, 106^th Congress), like similar provisions in previous
budget resolutions, provided a point of order against any direct spending or revenue
legislation that would increase or cause an on-budget deficit for the first fiscal year,
the period of the first 5 fiscal years, or the following 5 fiscal years, covered by the
most recently adopted budget resolution. Both of these points of order could have
been waived by a vote of three-fifths of Senators. The Senate PAYGO point of order
expired on September 30, 2002. On October 16, however, the Senate agreed by
unanimous consent to S.Res. 304, as amended, to restore and extend the point of
order through April 15, 2003.¹⁸
Table 2 provides the timetable for sequestration actions. As indicated, OMB
and CBO publish preview and update sequestration reports to provide Congress and
the President with advance notice regarding the possibility of a sequester. If one or
both types of sequester were anticipated, these reports could have afforded Congress
and the President enough warning so that they could enact legislation to forestall
them. The utility of these reports in 2002, however, was ultimately informational
only because Congress and the President did not extend the discretionary spending
limits and the PAYGO requirement beyond FY2002. Only an OMB within-session

¹⁸The resolution also restored and extended the three-fifths vote requirement for certain
waivers of the Congressional Budget Act of 1974, through April 15, 2003.

or final sequestration report could have triggered a sequester; the CBO sequestration
reports were advisory only.
Table 2. Timetable for Sequestration Actions
DeadlineAction to be completed
Five days before theCBO sequestration preview report.
President submits budget
Date of the President’sOMB sequestration preview report (as part of the
budget submissionPresident’s budget).
August 10Notification regarding military personnel.
August 15CBO sequestration update report.
August 20OMB sequestration update report.

10 days after end of sessionCBO final sequestration report.

15 days after end of sessionOMB final sequestration report; presidential
sequestration order.
As required, CBO released its sequestration preview report on February 1, 2002,
its sequestration update report on August 15, and its final sequestration report on
December 4.¹⁹ OMB included its sequestration preview report in the Analytical
Perspectives volume of the President’s budget for FY2003, submitted to Congress
on February 2. OMB released its sequestration update report on August 19 and its²⁰
final sequestration report on December 6.
The BEA enforcement procedures, as well as several enforcement procedures
tied to the budget resolution, may have been suspended in the event a declaration of
war was enacted or if Congress enacted a joint resolution triggered by the issuance
of a “low-growth” report by CBO.²¹ With regard to the latter, CBO was required to
notify Congress if actual real economic growth was less than 1% or estimated real
economic growth is projected to be negative for the most recently reported quarter
and the preceding quarter. Upon receiving a low-growth report, the Senate majority
leader was required to introduce a joint resolution suspending the enforcement
procedures, but such action was optional in the House. On January 30, 2002, CBO
issued a low-growth report to Congress (H.Doc. 107-178), and on February 7 the
Senate majority leader subsequently introduced a suspension resolution (S.J.Res. 31).
The Senate rejected by voice vote the suspension resolution on February 14.

¹⁹These sequestration reports are available on CBO’s Web site at [http://www.cbo.gov].
²⁰These sequestration reports are available on OMB’s Web site at
[ h t t p : / / www.whi t e house.go v/ omb] .
²¹For further information on these suspension provisions, see CRS Report RS20182,
Suspension of Budget Enforcement Procedures During Hostilities Abroad; and CRS Report
RL31068, Suspension of Budget Enforcement Procedures During Low Economic Growth,
both by Robert Keith.

At the end of FY2002, the PAYGO scorecard reflected a positive balance for
each year from FY2002 through FY2006. Table 3 provides the estimated balances
on the PAYGO scorecard at the end of FY2002. If no other legislative action was
taken by the Congress and President Bush, a sequestration likely would have been
required. However, on November 14, the House passed by a 366-19 vote H.R. 5708,
which required the OMB director to reduce the balances on the PAYGO scorecard
to zero. The next day the Senate passed the legislation by unanimous consent. On
December 2, President Bush signed H.R. 5708 into law (P.L. 107-312), thereby
preventing any PAYGO sequestration through FY2006 for the projected increases in
the deficit as a result of direct spending and revenue legislation enacted prior to the²²
end of FY2002.
Table 3. Estimated PAYGO Scorecard Balances at the
End of FY2002
(in millions of dollars)
F Y 2002 F Y 2003 F Y 2004 F Y 2005 F Y 2006
Receipt effect-114-87,728-106,935-109,501-127,256
Outlay effect2,20637,33840,00532,12716,483
Net budget cost2,320125,066146,940141,628143,739
OMB balance for
sequester in 2003127,386
^Source:^O^M^B^’^s^W^e^b^sⁱ^t^e^a^t^[^h^t^t^p^:^/^/^www.^whⁱ^t^e^h^o^u^s^e^.^g^o^v^/^o^m^b^/^l^e^gⁱ^s^l^a^tⁱ^v^e^/^p^a^y^g^o^/ⁱⁿ^d^e^x^.^h^t^ml^]^,^vⁱ^sⁱ^t^e^d
^on^N^o^v^.^{13, 2002.}
Legislation
H.Con.Res. 353, H.Rept. 107-376
Concurrent Resolution on the Budget for Fiscal Year 2003. Adopted by the
House on March 20 by a 221-209 vote. Reported by the House Budget Committee
on March 15.
S.Con.Res. 100, S.Rept. 107-141
Concurrent Resolution on the Budget for Fiscal Year 2003. Marked up by the
Senate Budget Committee on March 21, and reported to the full Senate on March 22.

²²For further information on the recent removal of PAYGO balances, see CRS Report
RS21378, Termination of the “Pay-As-You-Go” (PAYGO) Requirement for FY2003 and
Later Years, by Robert Keith.

Chronology
11-23-2002 –President Bush signed into law a fifth continuing resolution for
FY2003 (P.L. 107-294), providing temporary appropriations through
January 11, 2003, for federal government agencies and programs
funded in the 11 regular appropriations acts not yet enacted.
10-23-2002 –President Bush signed into law the first two FY2003 regular
appropriations acts: the Defense Appropriations Act, 2003 (P.L. 107-

248) and the Military Construction Appropriations Act, 2003 (P.L.

107-249).

08-02-2002 –President Bush signed H.R. 4775, FY2002 supplemental
appropriations act, into law (P.L. 107-206), following the adoption of
the legislation by the House (July 23) and the Senate (July 24).
07-28-2002 –President Bush signed S. 2578, an act to increase the public-debt limit
by $450 billion, into law (P.L. 107-199), following the adoption of
the legislation by the Senate (June 11) and the House (June 27).
03-22-2002 –Senate Budget Committee reported its version of the FY2003 budget
resolution (S.Con.Res. 100, S.Rept. 107-141) to the full Senate.
03-21-2002 –President Bush submitted a $27.1 billion emergency supplemental
appropriations request for FY2002 to provide additional resources for
the war on terrorism, homeland security, and economic recovery.
03-20-2002 –House agreed to its version of the FY2003 budget resolution
(H.Con.Res. 353, H.Rept. 107-376) by a 221-209 vote.
03-09-2002 –President Bush signed H.R. 3090, the Job Creation and Worker
Assistance Act of 2002, into law (P.L. 107-147), following the
adoption of the legislation by the House (March 7) and Senate (March

8).

02-04-2002 –President Bush submitted his FY2003 budget to Congress.

For Additional Reading
Congressional Hearings, Reports, and Documents
U.S. Congress. House. Committee on the Budget. Concurrent Resolution on the^th
Budget–Fiscal Year 2003. Report to accompany H.Con.Res. 353. 107
Congress, 2^nd session. H.Rept. 107-376. Washington: GPO, 2002.
U.S. Congress. Senate. Committee on the Budget. Concurrent Resolution on the^th
Budget–Fiscal Year 2003. Report to accompany S.Con.Res. 100. 107
Congress, 2^nd session. S.Rept. 107-141. Washington: GPO, 2002.

Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years

2003-2012. January 2002.

Congressional Budget Office. Analysis of the President’s Budgetary Proposals for
Fiscal Year 2003. March 2002.
Congressional Budget Office. The Budget and Economic Outlook: An Update.
August 2002.
Office of Management and Budget. Budget of the U.S. Government, Fiscal Year

2003. Washington: GPO, 2002.

Office of Management and Budget. Mid-Session Review, Fiscal Year 2003.
Washington: GPO, 2002.
CRS Products
CRS Issue Brief IB10102. The Budget for Fiscal Year 2003, by Philip D. Winters.
CRS Report 97-684. The Congressional Appropriations Process: An Introduction,
by Sandy Streeter.
CRS Report RL30343. Continuing Appropriations Acts: Brief Overview of Recent
Practices, by Sandy Streeter.
CRS Report 98-721. Introduction to the Federal Budget Process, by Robert Keith
and Allen Schick.
CRS Report RS21175. Perspectives on the Fiscal Year 2003 Budget, by Philip D.
Winters.