One of the important reasons accounting for uncontrollability of! expenditures in any given year is the extent of obligational authority provided in earlier years. Unexpended balances of authority enacted in prior years to be carried over to the end of the fiscal year 1973, for example, are estimated in the 1973 budget at $290 billion (of which $155 billion represents Federal funds). A summary of obligated and unobligated balances as estimated for the end of fiscal year 1973 is in Appendix Table 8. Much of this total is earmarked for specific uses and is not available for new programs or discretionary use either by the executive department or by the Congress. Of the $290 billion of yearend balances, $108 billion are obligated for specific purposes. The $182 billion not so obligated represent $63 billion of Federal funds and $119 billion of trust funds. The social insurance trust funds and Civil Service retirement and related funds account for $94 billion of this $119 billion. In the case of the Federal funds, the largest unobligated balances are for guaranteed loans and loan insurance (standby, back-up and reserves for losses and debt redemption) and construction and land programs. These two categories account for $43 billion of the $63 billion of unobligated Federal funds from prior years. The presence of large balances of funds which were committed in prior years in whole, or in part, together with provision for ongoing programs which depend upon claims made upon the Government, make it increasingly difficult for either the executive or the Congress to control budgetary totals. This has suggested to the Joint Study Committee that while it probably is desirable to limit expenditures in any given year it also is desirable to limit new obligational authority because of the ongoing nature of program commitments. It is only through limitations on the latter authority that it is possible to increase the control over the budget in future years. F. Lack of Coordination Between Tax and Expenditure Policies While expenditures have been rising rapidly in recent years, revenues have been increasing at a much more modest rate. To a substantial extent this is because taxes in recent years have on several occasions been reduced, in order to stimulate economic growth. This was true of the reductions made in 1962, 1964 and 1971. In the 1969 Act, the purpose was more to relieve the very low income groups of tax burdens which had become quite heavy in their cases. Appendix Table 9 suggests that reductions which have occurred since 1962 have reduced revenues below the level they otherwise would be by approximately $51 billion. This, of course, ignores the impact of the tax reductions in stimulating economic growth. Nevertheless, it is clear that tax revenues have not increased to the same extent as would be true in the absence of these reductions. A comparison of adjusted gross incomes to the tax on taxable returns, as shown in Appendix Table 10, indicates that from 1952 through 1971 taxes have remained within the range of 12 to 14 percent of adjusted gross income. Thus, the effect of tax reductions has been to approximately offset the higher percentage taxes which otherwise would have occurred because of rising income levels. A similar type of relationship is shown in Appendix Table 11 which shows that from 1951 through 1971 individual income tax collections have represented from 10 percent to 12 percent of personal income for most of the years shown. This again demonstrates that the tax as a percentage of in comes has remained fairly constant during a period when expenditures have been increasing at a faster rate. Had tax and expenditure policies been considered together throughout this period, it might well be that a greater relationship would have been considered desirable and would have been provided. The review by Congress of tax and expenditure policies on an overall basis is one of the factors the Joint Committee believes is essential. This, of course, is not intended to imply that a balanced budget policy is needed at all times but rather that when a deficit or surplus occurs, it should, to the extent possible, be the result of a planned rather than an unplanned congressional policy. G. Relation of Authorization Process to Appropriation Process Under the rules of both Houses of Congress, appropriations may not be approved until the Congress has passed a bill authorizing the expenditure and the level of operation of the program. The period of time for which authorizations are valid may be one year or may be for an indefinite number of years. In recent years, there has been an increase in the amount of programs that have been made subject to authorization on a one-year-ata-time basis. One effect of this has been to delay action on appropriations bills since they must await action on authorizations. This has been an important factor in delaying action on appropriations bills, often until after the start of the fiscal year involved and sometimes until after the end of the session of Congress. Appendix Table 12 shows that 9 of the present 13 annual appropriations bills are affected at least in part by the requirement of annual authorizing legislation. This table also shows that for the 9 bills which required some annual authorization, during the period 1968 through 1971, the dates of passage for the authorizations generally occurred later in the year. On the other hand, as indicated in the table, action on the appropriations bills has been completed in relatively short periods of time after completion of authorization. Pressure to increase spending also has come as a result of the annual authorization process. Program levels are being authorized at higher levels, and although the level of funds made available in the appropriation bills also has increased, the funds made available through appropriations have increased at a slower rate than authorizations. The summary of authorizations and appropriations for 169 Federal grant-in-aid programs shown in Appendix Table 13, indicates that both the absolute and percentage difference between the two has increased in the five-year period covering fiscal years 1966-1970. H. Budgetary Control Through Establishment of Ceilings Although the establishment of some form of ceiling appears to be the only practical mechanism for Congress to integrate and coordinate its budgetary actions, establish priorities, and maintain effective control, it must be realized that significant problems would be involved in the establishment of an effective ceiling. The Joint Committee on the Legislative Budget made three un-( successful attempts (1947-1949) to carry out the objectives of section 138 of the Legislative Reorganization Act of 1946 calling for a legislative budget. Only for fiscal year 1949 was a ceiling (on appropriations) actually established, and it proved ineffective, being exceeded by more than $6 billion. Although it appears that most of the problems experienced during this effort could be avoided by organizational and other improvements, an inherent problem is the critical time situation involved. To be effective, ceilings should be established promptly at the outset of the session prior to consideration of other legislative actions affecting the budget. However, the Joint Committee on the Legislative Budget found it difficult to set a spending ceiling and determine program priorities because of the lack of an adequate opportunity to make a detailed review and appraisal of the budget requests. Finding a workable solution to this timing dilemma is one of the major problems facing the Joint Study Committee. A major determination to be made is whether ceilings, to be effective, should be applied to new budget authority, spending, or both. To exercise effective control over ultimate outlays, controls should first be established on the granting of new budget authority. Such authority, the seedbed for all expenditures, is granted by Congress not only in appropriation bills, but also in the numerous legislative bills which bypass the usual appropriation process, including legislation providing permanent appropriations, contract authorities, borrowing authorities, and provisions establishing basic standards or criteria of eligibility and rates of benefits which dictate the amount of budget authority and mandate expenditures. It should be noted that only 60 percent of the 1974 estimate of budget authority requires current action by Congress. A ceiling on spending also is required if the ceiling is to be directly related to estimated receipts for the current year and control is to be exercised over the rate and timing of expenditures by program categories. Estimating and controlling spending involves a materially different process from control of budget authority. Spending in any one fiscal year stems not only in part from budget authorities granted in the current year, but also from various budget authorities granted in prior fiscal years. For example, of the $268.7 billion spending estimate in the budget for fiscal year 1974 only about 44 percent is in the bills pending before the Appropriations Committees. Except for about 14 percent stemming from previously enacted appropriation bills, the balance, 42 percent, stems from permanent budget authority (trust funds, interest on the debt, etc.) and other legislative actions." The complex relationship between budget authorities and expenditure actions, involving a mix of fiscal years, is evident from the following summary prepared from the fiscal year 1974 budget data: 89-900-73- -3 Fiscal year 1974 budget 1. New budget authority recommended: Total new budget authority recommended (includes Billions $173. 9 114. 1 288. 0 2. Estimated outlays-expenditures: (b) Budget authority enacted in prior years to be spent in fiscal (a) New fiscal year 1974 budget authority to be spent in fiscal 173.9 94. 8 Total, budget outlays, fiscal year 1974_. 268. 7 3. Estimated balances of unspent authority to be carried over at the end of fiscal year 1974 for expenditure in future years: (a) Unspent authority enacted prior to fiscal year 1974. 191. 6 114. 1 1 305.7 Total carryover at end of fiscal year 1974---- 1 Most of this carryover of unspent authority is earmarked for special uses (trust funds, insurance and loan guarantee programs, and liquidation of prior obligations) and is not available for new program purposes. It appears that to be most effective and meaningful, ceilings should be placed on both new budget authority and outlays (expenditures and net lending). This would involve determination and control of two different sets of figures for many individual congressional actions affecting the budget. Although it should not be implied that ceiling allocations would have to be applied to each legislative action, the complexity of the control problem is evident from the fact that for fiscal year 1973 approximately 160 legislative actions had a direct or indirect relationship to budget authority and spending. These included 19 appropriation bills; 52 actions (or inactions) on legislative proposals included in the fiscal year 1973 budget; 24 actions on mandatory or backdoor legislation not contemplated in the fiscal year 1973 budget, 56 actions on authorizing legislation contemplated in the 1973 budget involving extension of continuing programs necessary prior to appropriation action; and 9 legislative actions having direct relationship to the budgeted revenues for fiscal year 1973. In addition, there were 82 legislative actions having a potential impact on the fiscal year 1973 budget and/or subsequent years which were subject to funding in appropriation legislation. A summary table with this information and additional supplementary detail is presented in Appendix Table 14. Another major problem in the establishment of ceilings is an accurate determination of allocations to the so-called budgeted outlays which are classified as "relatively uncontrollable" under present law. About 75 percent of the budgeted outlays for fiscal year 1974 are classified in this category and include such major programs as: social insurance trust funds, interest on the national debt, veterans benefits, Medicaid program, public assistance grants, general revenue sharing, military retired pay, outlays from prior year contracts and obligations, etc. Outlays for many of these categories are difficult to accurately estimate in advance, which presents special problems in establishment of meaningful ceilings. It should be noted that during the fiscal years 1969-1971, when overall ceilings were established, the uncontrollables exceeded the estimates included within the ceilings by an average of $5 billion over the 3-year period. The Joint Study Committee does not believe the problems outlined above, and others involved in the ceilings process, are insurmountable, but it is believed that they will require the careful formulation of sound and workable policies, procedures, organization, and staffing to assure the development and maintenance of an effective budgetary control mechanism. |