REQUIREMENT OF ANNUAL APPROPRIATIONS

(From Government and General Research Division, Library of Congress, Charles W. Harris, Division Chief; Research by Allen Schick)

JANUARY 9, 1973

Title V of S. 3984, introduced in the 92nd Congress by Senator Brock, would bar the appropriation of funds for a period of more than one fiscal year. If adopted, the ban would put an end to permanent appropriations, including trust fund appropriations. The only exceptions would be for interest on the public debt and tax refunds. However, the provision would not "preclude the appropriation of funds for a fiscal year with the stipulation that such funds remain available until expended."

The problem of permanent appropriations has plagued Congress for well over a quarter of a century. Such appropriations bypass the regular appropriations processes, including the Appropriations Committees, and are difficult to control. The Legislative Reorganization Act of 1946 (60 Stat. 812) authorized and directed the two Appropriations Committees

to make a study of (1) existing permanent appropriations with a view to limiting the number of permanent appropriations and to recommend to their respective Houses what permanent appropriations, if any, should be discontinued. A similar position was taken by the Second Hoover Commission which recommended in 1955

that legislation committing the Government to continuing ex-
penditures for special programs which are not susceptible to
the usual budgetary control ordinarily be enacted for a
limited term in order to require periodic congressional
review of their usefulness.

The plea for a curb on permanent appropriations was renewed in Section 353 of the Legislative Reorganization Act of 1970 which urged congressional committees to "endeavor to insure" that

to the extent consistent with the nature, requirements, and
objectives of those programs and activities, appropriations
... will be made annually.

This provision was based on recommendations of the Joint Committee on the Organization of the Congress which reported in 1966:

We have made a number of recommendations for the improvement of the annual appropriations process because we strongly believe that an annual appropriations review is the best means of insuring that Federal spending receives adequate congressional attention. For this reason, each legislative committee should make every effort to analyze existing programs and to design new ones with a view toward making them subject to annual appropriations review. (Final Report, Senate Report No. 1414, July 28, 1966, p. 36.)

The statements of the 1946 and 1970 Reorganization Acts and the Hoover Report were exhortatory; they did nothing to curtail the use

of permanent authorizations but they urged that action be taken to reduce or eliminate this practice.

Judging from the prevalence of permanent appropriations, it appears that these plans have fallen on deaf ears. The volume of such appropriations is much greater than it was in 1945 and these permanent obligations are rising at a much faster rate than Federal spending as a whole. In 1971, Congress enacted regular, deficiency, supplemental, and other appropriations totalling $165 billion. In the same year, permanent appropriations reached the $100 billion level. Four out of every ten dollars appropriated by the Federal Government do not require annual or periodic action by Congress but are made automatically under existing laws. Moreover, these permanent appropriations continue to rise steeply; in fiscal 1973, they will amount to an estimated $109 billion, an increase of nine billion dollars in a single year.

Table I is derived from statements compiled by the Senate and House Appropriation Committees and shows the continuing appropriations in effect for the 92nd Congress, first Session. It indicates that three-fourths of the permanent appropriations are for trust funds such as social security, civil service retirement, and highway trust funds. These and other permanent appropriations probably are subject to considerably less controllability than other programs in the budget. Thus there is considerable overlap between the list of permanent appropriations and the "Controlability of Budget Outlays" statement published in the Federal budget. The President's budget estiinates that approximately 70 percent of total outlays ($174 billion of the $246 billion originally requested for fiscal 1973) are "relatively uncontrollable under current law." Well over half of the uncontrollable items are spent under permanent appropriations. These include social security ($46 billion), medicare ($9.9 billion) interest on the public debt ($21.2 billion), and unemployment compensation ($6.1 billion.) These data strongly suggest that the pervasiveness of permanent appropriations accounts in substantial measure for the weakening of congressional control of expenditures.

The same conclusion emerges from a comparison of permanent appropriations and the carryover balances reported in the budget. At the end of fiscal 1973, total carryover balances (both obligated and unobligated) will reach $290 billion, more than is spent at current rates in a single year. The unused balances are largest for those programs and agencies operating under permanent appropriation. Social security and civil service retirement carryovers alone add up to $80 billion and additional billions of used balances are available in the highway trust fund, the Railroad Retirement Board, the Veterans Administration, and the Postal Service. Probably the only significant. permanent appropriation which does not have substantial carryover balances is interest on the public debt for which outlays tend to be made at the time the money is automatically appropriated.

In sum, permanent appropriations are associated with two conditions which injure Congress's ability to control spending. These are open-ended commitments which are not reviewed periodically and for which total spending is determined by factors not immediately within the purview of Congress and the availability of balances from previous years for which outlays can be incurred without further action by Con

gress.

NO-YEAR APPROPRIATIONS

A condition related to permanent appropriations is the appropriation of a specific sum of money without limit of time. Such moneys are available until expended and they need not be obligated in the year of appropriation. They generally are designated as no-year funds.

S. 3984 seems to exempt no-year appropriations from its ban on permanent appropriations. Section 501 (b) declares that the requirement of annual appropriations "shall not preclude the appropriation of funds for a fiscal year with the stipulation that such funds remain available until expended." The term "available until expended” ordinarily is interpreted to mean that the funds do not lapse if they are not obligated prior to the end of the fiscal year; this is the case with no-year appropriations described above. A more limiting interpretation might be that the funds must be appropriated for a single year and obligated during that year but that obligated balances may carryover until expended. If the latter interpretation is intended, its effect would be to continue the practice of making appropriations for obligational authority rather than for expenditures. Over time, this provision would spell an end to unobligated balances which amount to $181 billion in fiscal 1973 but would allow the continuation of obligated balances which at the present time are at a $108 billion level. Inasmuch as two variant interpretations are possible, it would seem desirable to clarify the language and intent of the bill.

If the provision is intended to permit no-year appropriations, some question might be raised concerning its desirability. Until recently, noyear appropriations were widely used in the Defense Department for procurement and for research, development, test, and evaluation (R.D.T. & E.). This had the effect of building up substantial unobligated carryover balances in the Defense Department. In 1971, Congress ended no-year appropriations and put various Defense programs on multiyear appropriations. (84 Stat. 2037). It would seem unwise to return to a practice that Congress abandoned (for Defense but not for certain public works) a few years. It might be better to allow appropriations for a fixed term of longer than one year than to revert to noyear practices.

MULTIYEAR APPROPRIATIONS

S. 3984 would establish a uniform one-year maximum for all appropriations (except for interest and tax refunds). It thus would bar multiyear appropriations such as shipbuilding which under current practice may be for five years or military R.D.T. & E. which has a two-year maximum. The purpose is to ensure that the Appropriations Committees review each spending program every year. This practice would mesh with the 3-year authorization cycle envisioned in the legislation.

While the objective of annual review is commendable, its attainment is another matter. For one thing, the failure of Congress to act on the long-standing suggestions of the Hoover Commission and its own Legislative Reorganization Acts points to the difficulty of shifting from permanent to short-term appropriations. The reform might stand a better chance if adoption of multiyear appropriations were allowed.

Moreover, such a shift undoubtedly would overload the congressional appropriations process. Only about 20 percent of existing permanent

appropriations would be excepted from annual appropriations. This means that approximately $80 billion would be added to the portions of the budget requiring annual review and action by the Appropriations Committee. One may wonder whether a process which is straining under existing time limitations can give more than perfunctory attention to this new assignment.

Some observers believe that a multiyear appropriations process would lead to more effective and responsible congressional control of expenditures. The recent Brookings study Setting National Priorities: The 1973 Budget takes the position that "the annual budget process is increasingly ill suited to the intelligent setting of national priorities.”

To pretend that a $250 billion federal budget is freshly put together each year is an exercise in self-delusion, for both the Congress and the executive branch.

The Brookings team recommended that "annual appropriations should be converted into three-year appropriations where this is consistent with the nature of the program involved." (p. 466) The same logic has led the legislature of the State of Hawaii, generally acknowledged as one of the most advanced and effective in the country, to shift all appropriations from an annual to a biennial cycle.

While the issue of annual versus longer appropriations is complicated and controversial, some investigation might be productive to determine whether different cycles might be established for various categories of programs.

BACKDOOR SPENDING

The annual process established by S. 3984 would extend only to matters that go through the appropriations process. Backdoor devices which have the effect of obligating the expenditure of funds prior to appropriation would not be covered. Thus multiyear contract authorizations where the appropriation is made to liquidate a contractual obligation could continue on a multiyear basis. The same applies to permanent backdoor procedures such as the authority given to the Defense Department under 41 USC 11 to make contracts or purchases "for clothing, subsistence, forage, fuel, quarters, transportation, or medical or hospital supplies" with appropriation. Consideration might be given to some means of bringing these items which (like permanent appropriations) completely escape review by th Appropriations Committees under an annual or multiyear examination by Congress.

TABLE 1. PERMANENT APPROPRIATIONS, FISCAL YEAR 1972

[From the Congressional Quarterly, vol. 30, Nov. 4, 1972]

SPENDING CEILING: STILL AN ISSUE FOR NIXON AND CONGRESS

Under political pressure from President Nixon, Congress in 1972 laid the groundwork for reforming the way it handles the federal government budget.

The issue, raised during the 1972 presidential election campaign, was how Congress could keep federal spending under control-and whether the President could or should do it himself.

The immediate stakes included the size of the fiscal 1973 budget deficit-threatening to reach $35-billion-and the political blame for tax increases that might be needed to restore the budget to better balance.

At stake in the long run, moreover, was the ability of Congress to manage the government's fiscal affairs, without turning over to the executive branch much of its power of the purse.

If congressional procedures for controlling federal spending are not strengthened, "the inevitable result will be a growing loss of congressional influence on decisions about national priorities," Paul W. McCracken, former chairman of the Council of Economic Advisers, warned in an Oct. 20 article in The Wall Street Journal.

SPENDING CEILING. In what Democrats conceded was a masterful political stroke, President Nixon in July asked Congress for authority to trim federal spending as he saw fit to meet a $250-billion ceiling on fiscal 1973 outlays. Deny him such power, the President warned, and Congress will be to blame if taxes are raised in 1973.

In its final second-session battle, the 92nd Congress denied the President's request. Adamant Senate opposition to conceding such power to the President caused a spending ceiling provision to be deleted from a bill authorizing a temporary increase in the national debt.

In passing the debt-limit legislation, however, Congress acknowledged that its fiscal house was far from in order. Amendments to the bill created a special joint committee to study the congressional appropriations process-and tacitly conceded that the President could overrule the Congress by refusing to spend money previously appropriated.

NIXON ACTIONS. His request denied, the President turned to his existing powers some disputed in Congress-to do exactly what the spending ceiling would have allowed. By vetoing bills and by refusing to spend funds appropriated by enacted legislation, the President would do his best to keep federal spending at $250-billion, administration spokesmen announced.

Moving in that direction after Congress had adjourned, the President vetoed several spending measures, including a second veto of a bill appropriating funds for the Departments of Labor and Health, Education and Welfare.

Citing authority claimed by several presidents, starting with Thomas Jefferson, Secretary of the Treasury George P. Shultz said Nixon also would withhold the spending of funds appropriated by