S-PAYGO Section-by-Section (Congressional Record)
sec. 4. PAYGO ESTIMATES AND PAYGO SCORECARDS.
The Statutory Pay-As-You-Go Act of 2010 (Pub. L. 111-139) does not have a formal report for it. Senator Kent Conrad (D-ND) inserted a section-by-section in the Congressional Record, which summarized this section:
Section 4. PAYGO Estimates and PAYGO Scorecards: Section 4 establishes procedures for determining the budgetary effects of legislation subject to PAYGO. These budgetary effects are entered by OMB on the PAYGO scorecards, as defined in section 4(d), and are used to determine whether a sequestration order must be issued.
Estimates of budgetary effects are made either by Congress or OMB.
Subsection (a) establishes the procedures Congress must follow in order for its estimate of budgetary effects of legislation to be used for PAYGO enforcement. If Congress follows these procedures, the Congressional estimate of budgetary effects shall be used by OMB. If Congress does not follow these procedures, the budgetary effects of legislation subject to PAYGO shall be estimated by OMB.
Subsection (b) establishes the procedures by which the House and Senate Budget Committees obtain estimates from CBO, and the procedures to be used by CBO for making estimates. Subsection (c) outlines the additional procedures to be followed by CBO or OMB, as applicable, when adjusting the estimates of budgetary effects for legislation that qualifies for a “current policy” adjustment under section 7 of this Act.
Subsections (d)-(f) relate to procedures used by OMB for PAYGO estimates and enforcement.
Subsection (g) addresses procedures for legislation designated as an emergency for the purpose of statutory PAYGO.
(a) PAYGO Estimates. Congress can establish the budgetary effects of PAYGO legislation by following a two-step process. First, the text of PAYGO legislation must include one of the statements prescribed in paragraphs (1)(A), (B), or (C). Second, the Chairman of the relevant Budget Committee must submit for printing in the Congressional Record a statement of the budgetary effects of the legislation, also referred to as the “cost estimate” or “score.” A Congressional estimate must satisfy both of these requirements to be valid. If Congress fails to follow this procedure for legislation that is subsequently enrolled and signed by the President, or chooses not to provide an estimate of budgetary effects, the OMB estimate of a PAYGO Act’s budgetary effects is used for PAYGO enforcement.
The statements prescribed in paragraphs (1)(A), (B), or (C) establish a reference in the legislative text of PAYGO legislation to an estimate of budgetary effects to be submitted for printing in the Congressional Report before a vote on passage. The statement may be included in the original text of the legislation, or by amendment as may be allowed under the regular procedures in either House. The estimate need only be submitted for printing in the Congressional Record before a vote on passage. The actual estimate of budgetary effects is never inserted into the legislative text of PAYGO legislation. This process avoids the need to amend PAYGO legislation to include an updated estimate of budgetary effects if amendments are adopted.
The Chairmen of the Budget Committees in each House are responsible for submitting estimates of budgetary effects for printing in the Congressional Record. Printing the statement in the Congressional Record ensures that the estimate of budgetary effects is, at the time of the vote on the bill that is enacted into law, unambiguous, fixed, and knowable, for Members, for OMB, and for the public.
This two-step process avoids the Constitutional concerns identified in Bowsher v. Synar, 479 U.S. 714 (1986) and Immigration and Naturalization Service v. Chadha, 462 U.S. 919 (1983) because Congress will establish the budgetary effects of the PAYGO Act through the legislative process, not after enactment. An unambiguous and fixed estimate available prior to a vote is incorporated by reference in the PAYGO legislation. Matters incorporated by reference are binding on the executive branch. See Hershey Foods v. USDA, 158 F. Supp. 2d 37, 41 (D.D.C. 2001), aff’d on other grounds, 293 F.3d 520 (D.C. Cir. 2002); see also United States v. Sharpnack, 355 U.S. 286, 293 (1958).
- Required Designation in PAYGO Acts: One of three statements must be included in legislation subject to PAYGO for the Congressional estimate to be entered by OMB on the PAYGO scorecard. The statements provide the basis in the legislative text for incorporating the Congressional estimate by reference into the PAYGO Act.
The three statements address three possible scenarios under which a PAYGO Act may be signed by the President:
(1) legislation is originated by the House and passed without amendment by the Senate;
(2) legislation is originated by the Senate and passed without amendment by the House; and
(3) legislation is agreed upon by both Houses after differences are resolved by a conference committee or by amendments between the Houses.
Statement (1)(A) refers to an estimate provided by the House Budget Committee Chairman. This statement would be included in legislation originated in the House of Representatives. If the House Budget Committee Chairman submits a statement of budgetary effects for printing in the Congressional Record before the vote on passage in the House, the budgetary effects of that legislation will have been set by the House. If the Senate then passes the House bill without amendment, the House PAYGO estimate will be placed on the PAYGO scorecard by OMB. Similarly, if the Senate originates and passes PAYGO legislation with the statement prescribed in (1)(B), and the Chairman of the Senate Budget Committee submits a statement of budgetary effects for printing in the Congressional Record before the Senate votes, the House of Representatives will have accepted the Senate estimate as controlling if it passes the Senate bill without amendment.
One House may strike the statement inserted in the legislative text by the other House and replace it with the statement referring to the estimate submitted by the Chairman of its Budget Committee. In doing so, the second House has rejected the first House’s estimate. A disagreement between the Houses on the estimate of budgetary effects becomes a matter in dispute between the Houses to be resolved by the House and Senate Budget Committees.
The statement in (1)(C) refers to an estimate of budgetary effects jointly submitted to the Congressional Record by the Chairman of the House and Senate Budget Committees. This statement must be included in a conference report, or amendments between the Houses, when the Houses resolve the differences in their budgetary estimates. Where differences between the Houses are to be resolved in a process of amendments between the Houses, the requirement of a joint statement prevents the House acting first from having an advantage in negotiations. The joint statement also underscores that different estimates of the budgetary effects of legislation must be resolved to the satisfaction of the Chairmen of both Budget Committees if Congress wants a Congressional estimate to be placed on the PAYGO scorecard.
Presumably not all PAYGO legislation will contain a Congressional estimate of budgetary effects. For example, the budgetary effects of a particular PAYGO Act may be so small that Congress chooses not to complete an estimate. It is also possible that the Houses cannot come to an agreement on an estimate of budgetary effects. Absent a designation pursuant to section 4(a)(1) and estimate submitted pursuant to section 4(a)(2), the estimate made by OMB post-enactment will be entered on the PAYGO scorecards.
In some cases, one piece of PAYGO legislation could have multiple designations and estimates throughout the legislative process–the first by the originating House, the second by the second House acting upon the legislation, and a third by the conference committee. For the purpose of directing OMB as to what amounts are to be entered on the PAYGO scorecards, the only estimate that matters is the one contained in the version of the legislation passed by both Houses and presented to the President for signature. Conversely, the omission by one or both Houses of a designation and estimate earlier in the legislative process, for whatever reason, has no bearing on the validity of an otherwise valid estimate appropriately referenced in a PAYGO Act signed by the President.
- Determination of Budgetary Effects of PAYGO Acts: In order for Congress’s estimate of budgetary effects to bind OMB, a valid statement must be submitted for printing in the Congressional Record by a Chairman of the Budget Committee, or by the Chairmen jointly, as applicable. However, the Chairmen are not obligated to submit a statement. The statement, if submitted, must be titled “Budgetary Effects of PAYGO Legislation.”
The Chairmen of the Budget Committees retain full discretion over the Congressional estimate of budgetary effects for the purposes of enforcing this Act, consistent with Section 312 of the Congressional Budget Act. The Congressional Budget Office will continue to provide estimates to the Budget Committees.
It is the responsibility of the Budget Committee Chairmen to ensure that statements of budgetary effects are submitted for the Congressional Record in a timely manner, and that they identify with specificity any previously submitted statement for the same legislation that it supersedes. A previous statement is no longer valid and is superseded when that House adopts an amendment to a PAYGO Act after the statement has been submitted. Any subsequent amendment, regardless of its budgetary effects, will invalidate a previously submitted estimate.
In the case of a conference report, a statement of budgetary effects is not valid if it is first submitted for printing in the Congressional Record after one House passes the report. It is incumbent on both Houses to ensure that prior to a vote in either House on PAYGO legislation leading to enrollment and presentation to the President, there is an unambiguous, fixed, and knowable statement of budgetary effects.
- Procedure in the Senate: It is in order in the Senate for the Legislative Clerk to read the statement of budgetary effects into the record of proceedings once it has been submitted by the Chairman of the Senate Budget Committee. This reading provides an added assurance that all Senators have been given notice of the Congressional estimate of the budgetary effects prior to a vote on passage of legislation. Notice to Senators will also be provided by printing the estimate in the Congressional Record. As a practical matter, votes on some legislation subject to PAYGO may be taken after the statement has been submitted for the Congressional Record, but before it has been printed. If the vote will be taken after the statement has been printed, the Senate may waive the reading of the estimate by unanimous consent.
- Jurisdiction of the Budget Committees: When Congress follows the procedure set forth in this section, the designated legislation is not subject to a point of order under section 306 of the Congressional Budget Act. (Section 306 generally bars the consideration of legislation dealing with matters within the jurisdiction of the Budget Committee unless it has been reported by the committee, or the committee has been discharged from further consideration.) The inclusion of the statements specified in (1)(A), (B), and (C)–without modification–in legislation subject to PAYGO avoids a point of order under section 306. If different language is used, for example, or if an authorizing committee includes some other budgetary provision, a point of order under section 306 would be in order. This is consistent with Senate precedent that “directed scoring” language in legislation is within the jurisdiction of the Budget Committees.
(b) CBO PAYGO Estimates. Subsection (b) amends Section 308 of the Congressional Budget Act of 1974 to establish a procedure by which Congress may request that CBO estimate the budgetary effects of PAYGO legislation. Consistent with section 312 of the Congressional Budget Act, and existing Congressional practice and procedure, the Chairmen of the Budget Committees are responsible for requesting estimates from the Congressional Budget Office. CBO shall prepare its estimates consistent with section 257 of BBEDCA, but shall not count timing shifts as those are defined in section 3(8) of this Act. CBO estimates shall also be scored in accordance with the scorekeeping guidelines determined under section 252(d)(5) of BBEDCA.
(c) Current Policy Adjustments for Certain Legislation. Section 4(c) establishes procedures for making adjustments to the estimates of budgetary effects for legislation in four policy areas:
(1) physician payments under section 1848 of the Social Security Act;
(2) the Estate and Gift Tax;
(3) the Alternative Minimum Tax; and (4) certain middle class tax cuts provided in EGTRRA and JGTRRA. The criteria for determining whether legislation, or provisions of legislation, qualify for current policy adjustments are set forth in section 7.
- In General: If the Chairman of either Budget Committee determines that legislation meets the criteria set forth in section 7 of this Act, that Chairman shall request that CBO adjust its estimate of budgetary effects. If OMB estimates the budgetary effects of legislation that meets the criteria of section 7 because Congress has not provided a valid estimate, then OMB shall adjust its estimate of budgetary effects.
- Adjustments: For qualifying legislation or provisions of legislation, CBO or OMB, as applicable, shall exclude from the estimate of budgetary effects no more than the amount of the budgetary effects of that legislation or provision as allowed in the applicable part of section 7. The amount that may be excluded is determined with reference to the amounts previously excluded pursuant to the same subsection of section 7. In other words, if the cost of a particular provision, when added to the costs or savings of all other provisions that previously qualified for an adjustment under that subsection of section 7 exceeds the maximum amount allowable for the subsection, the excess costs shall not be excluded from the estimate of budgetary effects. In implementing these adjustments, CBO shall use CBO’s baseline estimates; this requirement is not intended to apply to estimates prepared by OMB. If CBO makes an adjustment, its estimate shall state the unadjusted and adjusted costs, and an updated total of all costs previously excluded under the same provisions of section 7.
- Limitation on Availability of Excess Savings: The intent of the current policy adjustment is to give Congress flexibility to extend certain current policies with budgetary effects over specified periods of time. Savings from the extension of current policies with budgetary effects less than allowed under section 7–in other words extensions that generate savings in comparison with the extension of current policy–cannot be used to offset costs of other legislation. This paragraph establishes two rules that reinforce the prohibition on the fungibility of savings relative to the current policy extensions.
- Excess savings cannot be used to offset the budgetary effects of PAYGO legislation that would not otherwise qualify for a current policy exemption under section 7. For example, if Congress were to enact only a one-year fix for the Alternative Minimum Tax, the difference in revenue generated by a two-year and one-year fix of the AMT cannot be used to offset the cost of a new entitlement program.
- Excess savings in one of the policy areas specified in section 7 cannot be used to offset the budgetary effects of a more expensive policy extension in another policy area. For example, if Congress were to enact only a one-year fix for the Alternative Minimum Tax, the difference in revenue generated by a two-year and one-year fix of the AMT cannot be used to offset a reduction in the estate and gift tax that costs more than is otherwise provided in section 7. In other words, savings among the policies in sections 7(c), (d), (e), and (f), and among the subparagraphs of section 7(f)(1), are not fungible.
- Further Guidance on Estimating Budgetary Effects: To determine adjustments for the budgetary effects for qualifying legislation, CBO or OMB, as applicable, shall use the conventions concerning the stacking order of estimates of the interactive effects of AMT relief and extension of the middle class tax cuts set forth section 7(h).
- Inclusion of Statement: Any adjustments for current policy legislation shall be explained by the appropriate Chairman of the Budget Committee in the statement “Budgetary Effects of PAYGO Legislation” submitted for printing in the Congressional Record.
(d) OMB PAYGO Scorecards. The subsection outlines OMB’s responsibilities under statutory PAYGO. OMB will maintain two “PAYGO scorecards,” available to the public, that maintain a running tally of the budgetary effects of enacted legislation subject to PAYGO. In making entries onto the scorecards, OMB will use the “look-back” and “averaging” rules discussed below.
OMB will use the Congressional estimate of the budgetary effects of a PAYGO Act if one was incorporated pursuant to section (4)(a). If not, OMB will enter its own estimates on the scorecards.
The scorekeeping and baseline rules for current policy adjustments are the same as those that apply to CBO and OMB for estimating all legislation subject to PAYGO. OMB estimates must be consistent with the scorekeeping approaches described in section 308 of the Congressional Budget Act, as amended by section 4(b) of this Act, and the current policy adjustments in section 7. In other words, OMB and CBO estimates should be made using the same rules and scorekeeping conventions. However, CBO will use the baseline as defined by section 257 of the Congressional Budget Act, while OMB will use the economic and technical assumptions included in the latest budget submitted by the President.
OMB will maintain two PAYGO scorecards, one covering a five-year period and the other covering a ten-year period beginning in the budget year.
OMB shall not include on either PAYGO scorecard any net savings generated by subsequently enacted legislation titled “Community Living Assistance Services and Supports Act” (CLASS Act). The CLASS Act was included in the Senate- and House- [page S294] passed health care reform bills and would establish a federal insurance program for long-term care. OMB shall also not include any net savings generated by subsequent amendments to that Act, if enacted.
(e) Look-Back to Capture Current Year Effects. To take into account any budgetary effects of PAYGO legislation in the current year (i.e., the year of enactment if before October 1st), a “look back” rule is included. The rule provides that budgetary effects in the current year are to be treated as if they were budgetary effects in the budget year (which is the year subsequent to the current year). This is why the averaging provision described below actually sums eleven years of costs (the current year, the budget year, and the nine outyears) and divides the sum by ten. This look-back provision similarly applies to the five-year scorecard.
(f) Averaging Used to Measure Compliance Over 5-Year and 10-Year Periods. For the budget year and the applicable four or nine outyears, OMB is to enter the annual average budgetary effect associated with PAYGO legislation. For instance, a bill that pays for itself over ten years will have a total, and thus average, score of zero, so zero would be entered in each column of the ten-year PAYGO scorecard. If a bill enacted in FY10 costs a net of $10 billion over FY2010-FY2020, OMB would insert +$1 billion in each of the ten columns on the PAYGO ledger (FY11 through FY20). The same PAYGO legislation could well have different averages over five years and over ten. For example, if a bill enacted this session costs $2 billion through 2015 and $10 billion through 2020, the five-year scorecard would record entries of $0.4 billion for each of 2011 through 2015, while the ten-year scorecard would record entries of $1 billion for each of 2011 through 2020.
(g) Emergency Legislation. If legislation subject to PAYGO contains an emergency designation, the budgetary effects of provisions that are designated as emergencies shall not be placed on the PAYGO scorecards by OMB. The designation should refer to subsection (g)(1) of this Act. The procedure for challenging a statutory emergency designation for PAYGO enforcement reflects the current practices for challenging emergency designations under Congressional budget rules. In the Senate, an emergency designation is subject to a point of order that may be waived upon a vote of 3/5 of the members duly chosen and sworn. If the Senate does not waive this point of order, the emergency designation is struck from the legislation.