Reserve Funds in the FY2002 Budget Resolution

CRS Report for Congress
Received through the CRS Web
Reserve Funds in
the FY2002 Budget Resolution
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division
Summary
The Congressional Budget Act of 1974, as amended, establishes a mechanism by
which the substantive provisions of the annual budget resolution are enforced through
points of order. Beginning in 1983, budget resolutions often have included “reserve
funds” that provide some legislative flexibility within such constraints. Reserve fund
provisions grant the chairs of the House and Senate Budget Committees the authority to
revise the committee spending allocations and other budget levels, after a budget
resolution has been adopted, if certain legislation is reported by the appropriate
committee or other conditions are met.
The FY2002 budget resolution includes nine reserve funds. Six apply to both
chambers; one applies only in the Senate; and two apply only in the House. Unlike most
reserve funds in the past, the FY2002 reserve funds do not require that any spending
increases be offset with other spending reductions, revenue increases, or a combination
of the two. Instead, with the exception of the Medicare reform reserve fund, the FY2002
reserve funds require that the cost of any applicable legislation, when combined with
previously-enacted legislation, not reduce the on-budget surplus below the amount of the
Medicare Hospital Insurance Trust Fund surplus in any given year through FY2011.
This report will be updated as developments warrant.
Background
The annual budget resolution establishes the congressional budget for the upcoming
fiscal year and at least four ensuing years, providing the framework for consideration of
subsequent budget-related legislation, such as direct spending bills, appropriations bills,
and revenue measures. It sets forth overall levels of spending and revenues, and spending
amounts for each of the major functional categories, for each year. The overall spending¹
amounts are allocated to the committees with jurisdiction over spending. The House and

¹ The committee allocations usually are included in the joint explanatory statement accompanying
(continued...)
Congressional Research Service ˜ The Library of Congress

Senate Appropriations Committees further subdivide their spending allocations among
their subcommittees.²
Congress may enforce the substantive provisions of the budget resolution through the
use of points of order.³ Generally, these points of order prohibit the consideration of any
legislation, or amendment, that would cause a violation of the overall levels, the committee
allocations, or the appropriations committees’ subdivisions. For example, if the estimated
cost of legislation, or an amendment, would cause a committee’s allocation to be
exceeded, a member may raise a point of order against its consideration. Thus, legislation
not assumed in the budget resolution generally would be subject to a point of order.
Beginning in 1983, budget resolutions have often included “reserve funds” that
provide some legislative flexibility within these constraints.⁴ Reserve fund provisions grant
the chairs of the House and Senate Budget Committees the authority to revise the
committee spending allocations and other budget levels, after a budget resolution has been
adopted, if certain legislation is reported by the appropriate committee or other conditions
are met.⁵
An example of a reserve fund provision from the FY2002 budget resolution is
provided in the box below. Most often in the past, they have applied only in the Senate,
and generally have been used to allow for the consideration of deficit-neutral legislation
that otherwise would be subject to points of order. More recently, reserve fund provisions
usually have applied in both chambers, and generally have been used to allow for the
consideration of legislation that would use a portion of the on-budget surplus.

¹ (...continued)
the budget resolution conference report.
² Each appropriations committee must report the subcommittee allocations to its respective
chamber before any appropriations bill may be considered on the floor. The committees may revise
their subcommittee allocations at any time, as long as the sum of the subdivisions does not exceed
the total amount allocated to them.
³ For 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.

⁴ Reserve fund provisions may be included in a budget resolution under the authority provided by
Section 301(b)(4), the so-called “elastic clause,” of the Congressional Budget Act of 1974. This
section gives Congress the option to include in a budget resolution other matters and procedures
consistent with the purposes of the Budget Act.
⁵ In some cases, the budget resolution overall spending or revenue levels, as well as the
discretionary spending limits for enforcement purposes in the Senate, also may be adjusted.

Example of a Reserve Fund Provision:
FY2002 Budget Resolution (H.Con.Res. 83 (107^th Congress))
SEC. 212. RESERVE FUND FOR FAMILY OPPORTUNITY ACT.
(a) IN GENERAL- Subject to subsection (b), if the Committee on Finance of the Senate or the
Committee on Energy and Commerce of the House of Representatives reports a bill or joint
resolution, or if an amendment thereto is offered or a conference report thereon is submitted, that
provides States with the opportunity to expand Medicaid coverage for children with special needs,
allowing families of disabled children with the opportunity to purchase coverage under the
Medicaid Program for such children (commonly referred to as the %Family Opportunity Act of
200&), the appropriate chairman of the Committee on the Budget may revise committee allocations
for that committee and other appropriate budgetary aggregates and allocations of new budget
authority (and the outlays resulting therefrom) in this resolution by the amount provided by that
measure for that purpose, but not to exceed $227,000,000 in new budget authority and
$180,000,000 in outlays for fiscal year 2002, $3,035,000,000 in new budget authority and
$2,724,000,000 in outlays for the period of fiscal years 2002 through 2006, and $8,337,000,000 in
new budget authority and $7,867,000,000 in outlays for the period of fiscal years 2002 through

2011.

(b) SURPLUS- Legislation described in subsection (a) may not, when taken together with all
other previously-enacted legislation (except for legislation enacted pursuant to section 211), reduce
the on-budget surplus below the level of the Medicare Hospital Insurance Trust Fund surplus in any
fiscal year covered by this resolution.
Although the reserve fund provisions provide the authority to revise the appropriate
committee allocation and other budgetary levels if certain conditions are met, they do not
require the chairs of the respective budget committees to make the revisions.⁶ The chairs
have the discretion to use this authority or not. If a chair does not make any adjustments,
then legislation or an amendment violating the existing overall, committee allocation, or
appropriations committees’ subdivision levels still may be considered on the House or
Senate floor by waiving the applicable points of order. In the House, this may be done by
a special rule reported by the House Rules Committee. In the Senate, this may be done
by a waiver motion under Section 904 of the Congressional Budget Act of 1974, as
amended, which would require the approval of 60 Senators.⁷
Since 1983, Congress has included one or more reserve funds in the budget resolution⁸
each year, except in 1984 for FY1985 and in 1985 for FY1986. Out of the 83 reserve

⁶ The only exception was the Internal Revenue Service (IRS) compliance initiative reserve fund in
the FY1995 budget resolution. This reserve fund provision required the chairs of the respective
budget committees to adjust budget levels to reflect additional spending for IRS compliance
initiative activities in any fiscal year.
⁷ These are the methods most often used by Congress. Other ways of avoiding the points of order
include designating legislation as an emergency requirement, or by suspending the budget
enforcement procedures with the enactment of a declaration of war or a joint resolution declaring
low economic growth.
⁸ This does not include the FY1999 budget resolution, which did not receive final approval by
Congress in 1998. The Senate version of the FY1999 budget resolution included four reserve
(continued...)

funds included in budget resolutions since 1983, 42 applied only in the Senate, six applied
only in the House, and 35 applied in both chambers. The FY1995 budget resolution
adopted in 1994 included the most reserve funds, 13, with 11 of them applied only in the
Senate. About two-thirds, or 55, of the reserve funds since 1983 did not specify the
amount of any revisions to the committee allocations. However, in most of these cases,
the reserve fund provision required that the legislation not cause an increase in the deficit.
Thus, for example, any increase in spending had to be offset by a reduction in other
spending, an increase in revenues, or a combination of the two. The remaining 28 limited
any revisions to a specific amount, as in the case of the example reserve fund presented in
the box above.
Although the reserve funds have been available to revise the committee spending
allocations and other budgetary levels, Congress seldom has used them. In the Senate, out
of the 77 reserve funds available, only six were used. In the House, out of the 41 reserve
funds available, only four were used.⁹
Reserve Funds in the FY2002 Budget Resolution
The FY2002 budget resolution includes nine reserve funds (see Table 1). Six apply
to both chambers; one applies only in the Senate; and two apply only in the House. Most
reserve funds are for a single purpose or specific legislation, but the two that apply only
in the House provide for multiple purposes. Further, most reserve funds specify an
amount which the adjustments may not exceed. Two out of the three reserve funds that
do not specify an amount, however, are not open-ended. First, the Senate reserve fund
for additional defense spending ties the adjustments to the recommendations of the¹⁰
President’s National Defense Review. Second, the additional tax cuts and debt reduction
reserve fund in the House ties the adjustments to any additional on-budget surplus
estimated by the Congressional Budget Office (CBO) in its budget and economic outlook
update that exceeds the on-budget surplus amount estimated in its January 2001 budget¹¹
and economic outlook report.
Unlike most reserve funds in the past, the FY2002 reserve funds do not require that
any spending increases be offset with other spending reductions, revenue increases, or a
combination of the two. Instead, with the exception of the Medicare reform reserve fund,
the FY2002 reserve funds require that the cost of any applicable legislation, when

⁸ (...continued)
funds, but the House version included none.
⁹ The number of adjustments related to reserve funds was based on a review of the Congressional
Record. Reserve funds were used from the following budget resolutions: FY1984 (House and
Senate); FY1989 (Senate); FY1993 (Senate); FY1995 (House and Senate); FY1998 (two in the
Senate); and FY2001 (two in the House).
¹⁰ In connection to his National Defense Review, the President submitted a request for an additional
$18.5 billion in budget authority and $11.4 billion in outlays for FY2002, on June 27, 2001.
¹¹ The CBO’s update report estimated on-budget surpluses for all fiscal years during the period
FY2002 through FY2011 substantially less than its estimates in January 2001. See CBO, The
Budget and Economic Outlook: An Update (Washington: August 2001). Therefore, no
adjustments are allowed under the provisions of this reserve fund.

combined with previously-enacted legislation, may not reduce the on-budget surplus below
the amount of the Medicare Hospital Insurance Trust Fund surplus in any given year
through FY2011.¹²
The updated estimates of the on-budget surplus by the Office of Management and
Budget and CBO this summer have raised concerns about whether the on-budget surplus
already has dipped below the amount of the Medicare Hospital Insurance surplus,
effectively preventing any adjustments related to the reserve funds, with the exception of
the Medicare reform reserve fund. However, the House and Senate Budget Committees
historically have used the CBO baseline underlying the budget resolution to make these
determinations, rather than CBO’s updated baseline.¹³ The chairs of the respective budget
committees, as well as Congress as a whole, will need to decide whether the updated on-
budget surplus outlook warrants using the updated baseline in applying the Medicare
Hospital Insurance surplus contingency provision.
On October 3, 2001, in accordance with the authority provided by the agriculture
reserve fund provision in the FY2002 budget resolution, the chair of the House Budget
Committee adjusted the House Agriculture Committee’s spending allocation to
accommodate the Farm Security Act of 2001, H.R. 2646.¹⁴ As of October 2001, the chair
of the Senate Budget Committee has not made any revisions, and the chair of the House
Budget Committee has not made any additional revisions, to committee spending
allocations or other budget levels related to the FY2002 reserve funds.

¹² The revenues and outlays of the Social Security trust funds and the transactions of the U.S.
Postal Service fund are off-budget, and thus are not included for purposes of calculating the on-
budget surplus.
¹³ Usually, the budget resolution baseline would be CBO’s revised baseline published in March of
each year. Since the President’s budget was not submitted until April 2001, CBO did not publish
its revised baseline until May, after the budget resolution was adopted. Therefore, the FY2002
budget resolution was based on CBO’s preliminary baseline published in January. However, the
joint explanatory statement accompanying the conference report to the budget resolution states the
conferees intention that the chairs will enforce the budget resolution with respect to appropriations
measures consistent with CBO’s revised baseline. See U.S. Congress, Committee on Conference,^th^st
Conference Report to Accompany H.Con.Res. 83, H.Rept. 107-60, 107 Congress, 1 session
(Washington: May 8, 2001), p. 86.
¹⁴ The adjustment increased the House Agriculture Committee’s spending allocation by $28.492
billion in additional budget authority and $25.860 billion in additional outlays for the period of
FY2002 through FY2006. See the House Budget Committee chair’s remarks in the Congressional
Record, daily edition, vol. 147, of October 3, 2001, at pp. H6175-H6176 and H6237.

Table 1. Reserve Funds in the FY2002 Budget Resolution
(dollars in billions)
Reserve FundFY2002FY2002-06FY2002-11
Medicare reform, including prescriptionBA)59.100300.000
drug benefitO)59.100300.000
Medicare-home health agenciesBA)4.00013.700
O)4.00013.700
Family Opportunity ActBA0.2273.0358.337
O 0.180 2.724 7.867
Agriculture^aBA ))66.150
O))66.150
Student loans^bBA0.1103.4407.665
O 0.100 2.840 6.590
Health insurance for uninsured^cBA)28.000)
O)28.000)
Defense (Senate only)BA)))
O)))
Additional tax cuts and debt reductionBA)))
(House only)O)))
Strategic reserve fund, including defenseBA)))
(House only)O)))
^Key:^{“BA”=budget authority; “O”=outlays. Where no figures are provided, the FY2002 budget resolution did not}
^{specify any exact amount.}
^{a. In the Senate, adjustments may be made only for the period FY2003-11.}
^{b. Amount in FY2002 column represents adjustments allowed for the period FY2002-03, not just for FY2002.}
^c.^{Adjustments may be made for the period FY2002-04, but may exceed this time frame. Also, adjustments may}
^include^revenues,^or^some^combination^of^spending^and^revenues,^as^long^as^the^sum^of^the^changes^{does not}
^{exceed the amount specified.}