title i—deficit reduction procedures
Sec. 102. Automatic Trigger for Fiscal Years 1988 Through 1993: OMB and CBO Reports; Presidential Order; Computation of Budget Base: Sequestration Rules for Fiscal Years 1988 through 1993.
(a) In General.—Sections 251 and 252 of the Act are amended to read as follows:
“sec. 251. reporting of excess deficits.
* * * * * * *
“(d) Sequestration of Defense Programs.—
“(1) Determination of uniform percentage.—The total amount of reductions in outlays under defense programs required for a fiscal year under subsection (a)(3)(B) shall be calculated as a percentage of the total amount of outlays for the fiscal year estimated to result from new budget authority and unobligated balances for defense programs.
“(2) Sequestration of new budget authority and unobligated balances.—
“(A) Sequestration to achieve the required reduction in outlays under defense programs shall be made by reducing new budget authority and unobligated balances (if any) in each program, project, or activity under accounts within defense programs by the percentage determined under paragraph (1), computed on the basis of the combined outlay rate for new budget authority and unobligated balances for such program, project, or activity determined under subparagraph (B).
“(B) If the outlay rate for unobligated balances is not available for any program, project1 or activity, the outlay rate used shall be the outlay rate for new budget authority.
(3) Flexibility with respect to military personnel accounts.—
“(A) Notwithstanding paragraphs (1) and (2), with respect to a fiscal year the President may, with respect to any military personnel account—
“(i) exempt any program, project, or activity within such account from the order;
“(ii) provide for a lower uniform percentage to be applied to reduce any program, project, or activity within such account than would otherwise apply; or
“(iii) take actions described in both clauses (i) and (ii).
“(B) If the President uses the authority under subparagraph (A), the total amount by which outlays are not reduced for such fiscal year in military personnel accounts by reason of the use of such authority shall be determined. Additional reductions in outlays under defense programs in such total amount shall be achieved by a uniform percentage sequestration of new budget authority and unobligated balances in each program, project, and activity within each account within major functional category 050 other than those military personnel accounts for which the authority provided under subparagraph (A) has been exercised, computed on the basis of the outlay rate for each such program, project, and activity determined under paragraphs (1) and (2).
“(C) The President may not use the authority provided by subparagraph (A) unless he notifies the Congress on or before October 10, 1987, in the case of fiscal year 1988, or August 15 of the calendar year in which the fiscal year begins in the case of any subsequent fiscal year, of the manner in which such authority will be exercised. The Directors shall reflect the results of authority exercised under this paragraph in the reports required under section 251(a)(2).
Joint Explanatory Statement (BBEDCRA 1987)
The Joint Explanatory Statement of the Managers of Conference on the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 included this description:
7. Flexibility With Respect to National Defense
In the application of the FY 1986 sequestration, the 1985 Balanced Budget Act granted the President certain flexibility not provided in subsequent fiscal years. First, in the determination of the defense budget base subject to sequestration, the President was permitted to fully or partially exempt military personnel accounts. The uniform percentage reduction made in remaining defense programs, projects, and activities (PPAs) was increased accordingly so that the total required defense outlay reduction would not change. Second, for FY 1986, the President was given the discretion to partially or fully exempt any defense program, project, or activity from sequestration provided each defense budget account was reduced by the uniform percentage. Budget authority for other defense programs, projects, and activities within the same account could be reduced by up to two times more than the uniform percentage to compensate for the savings not generated from protected programs. In exercising this flexibility, the President was not allowed to increase funding for programs, projects, or activities above base level amounts; terminate any program, project, or activity; close any military base; or reduce funding for certain “congressional interest items” by a percentage larger than the uniform percentage.
Third, in all fiscal years, FY 1986-1991, the President is permitted to achieve some or all of the required defense outlay savings by terminating or modifying existing defense contracts provided there is no net loss to the Government as a result of specified penalties and no legal obligations are violated.
While the President made use of the first two options, he did not terminate or modify any contracts in the FY 1986 sequestration. The President was not required to issue a sequestration order for FY 1987.
The Senate amendment extends flexibility with respect to national defense programs to all fiscal years covered by the revised timeframe, FY 1988-1992. First, the President is permitted in all fiscal years to fully or partially exempt military personnel accounts from sequestration as provided by the 1985 Balanced Budget Act for FY 1986. Second, the Persident [sic] may propose an alternative defense plan that includes reductions or increases in funding for specific defense programs, projects, or activities provided that the total required defense outlay reduction is achieved. Any defense program, project, or activity (except military personnel) could be reduced or terminated to make up for the savings not generated from protected programs. No domestic military bases could be closed.
The President’s proposal would not take effect without congressional approval. Both Houses of Congress would consider the President’s proposed changes to the sequestration order with respect to national defense under expedited procedures in the form of a joint resolution that could be amended.
Further, the Senate amendment eliminates the President’s option to modify or terminate existing defense contracts.
The conference agreement restores flexibility with respect to national defense programs. First, the President is permitted in all fiscal years covered by the revised timeframe, FY 1988-1993, to fully or partially exempt military personnel accounts from the defense budget base subject to sequestration. The effect of this provision would be to increase the uniform percentage reduction made in all remaining defense accounts so that the total required defense outlay reduction would not change.
The President may not use this option without notifying Congress on or before August 15 (October 10 in the case of FY 1988) of the manner in which he intends to exercise it, and the initial and final sequestration reports prepared by the Directors of CBO and OMB shall reflect the President’s use of this option.
Second, the President is granted discretion to propose further reductions in defense programs, projects, and activities (other than those in military personnel accounts) beyond those provided for in the final sequestration order. To the extent that the President chooses to exercise this option, he may propose lesser reductions in budgetary resources for other defense programs, projects, and activities, as long as (1) the resulting outlay increases do not exceed the additional outlay reductions made and (2) no funding for a program, project, or activity is increased above the level actually made available by law in appropriations acts (before taking sequestration into account). In making calculations under this procedure, the President must use the account and PPA outlay rates used by the OMB Director in the revised sequestration report.
The President may not use this option to close or realign any domestic military bases or to eliminate any program, project, or activity.
In addition, the President may not exercise the authority provided by this option unless he first submits to Congress, before November 25, 1987 for FY 1988, and, for subsequent fiscal years, October 20 of such fiscal year, a report specifying the changes proposed, and Congress enacts into law a joint resolution affirming or modifying the changes. The conference agreement establishes expedited procedures for House and Senate consideration of the joint resolution, which must be introduced by the Majority Leaders of both Houses within 5 days after the President submits the report. The joint resolution is referred to the Appropriations Committee of each House, subject to an automatic discharge procedure, and is subject to amendment in either House.
If the report is not timely submitted, it may still be considered, but under normal procedures, without the protection of expedited consideration.
Finally, the conference agreement eliminates procedures to modify or terminate existing defense contracts.
4. Baseline Spending, Revenue, and Deficit Estimates
* * * * * * *
Budgetary resources, in the case of defense programs, include new budget authority and unobligated balances of budget authority provided in previous years; obligated balances may be sequestered only if the President uses the special authority provided to cancel or modify defense contracts. In the case of nondefense programs, budgetary resources include new budget authority, new direct loan obligations, new loan guarantee commitments, obligation limitations, and spending authority defined in Section 401(c)(2) of the 1974 Budget Act (which includes all permanent appropriations and mandatory current appropriations, including entitlements).
* * * * * * *
2. Sequestration “Trigger” Mechanism and Issuance of Presidential Order
The 1985 Balanced Budget Act originally provided for an automatic sequestration procedure. As originally framed in the Act, an initial or final presidential sequestration order would be triggered by a report issued by the Comptroller General estimating a deficit in excess of the amount allowed. The Comptroller General would give due regard in his report to an earlier joint sequestration report of the OMB and CBO Directors. This triggering procedure was invalidated by rulings of a special three-judge panel of the U.S. District Court, on February 7, 1986, and of the Supreme Court, on July 7, 1986. It was determined that the Comptroller General is an employee of the Legislative Branch, and so could not compel an Executive Branch action.
In anticipation of possible invalidation by the courts of the Comptroller General’s role in the triggering procedure, Congress included “fallback” procedures in the Act, enabling Congress to trigger an initial or final presidential sequestration order by the enactment of a joint resolution setting forth the contents of the OMB/CBO joint report.
The Act directs the President to issue .a sequestration order, upon the enactment of a joint resolution under the fallback procedures, that is consistent with the joint resolution in all respects. The order must provide for reductions in accounts as specified in the joint resolution and must provide for uniform reductions within accounts for each program, project, and activity (for programs funded by annual appropriations) or each budget activity (for programs funded by other means).
Further, the Act requires the President to submit a detailed message to Congress regarding an initial order at the time the order is issued. Also, he must issue a final order even if the deficit excess has been eliminated (the order would so state), releasing any amounts withheld under the initial order. Presidential sequestration orders have been placed in the Federal Register, even though this is not required explicitly by the Act.
The Senate amendment reinstates an automatic sequestration trigger for the period covering FY 1988-1992. Under the revised mechanism, a presidential sequestration order would be triggered by a report from the OMB Director. The OMB Director’s report would give due regard to a sequestration report issued earlier by the Comptroller General, which in turn would be based on a review of an earlier joint sequestration report of the OMB/CBO Directors.
The conference agreement reinstates automatic triggering for FY 1988-1993. During these years, a presidential sequestration order would be triggered automatically by a report from the OMB Director. The OMB Director’s report would give due regard to a report issued earlier by the CBO Director. Unlike the Senate amendment, the conference agreement does not provide a role for the Comptroller General in the preparation and issuance of sequestration reports.
Because the FY 1988 sequestration process would begin after the start of the fiscal year, the conference agreement includes a special rule to assure that the correct amount of reduction takes place in the Medicare program.
Additionally, the conference agreement establishes a procedure to ensure that the amount of deficit reduction required to be accomplished in an appropriations account through a sequestration order is achieved in the situation where a short-term continuing resolution is in effect when the sequestration order is issued and, subsequently, a full-year continuing resolution or a regular appropriations bill is enacted into law. Section 252(f)(2)(B) of the 1985 Balanced Budget Act, as amended by this Act, requires that the sequestration be automatically carried out when such a situation occurs. While supplementals are not affected by this provision, appropriations measures continue to be constrained by the various points of order in the 1974 Budget Act, particularly involving the spending ceilings created by the Section 302 allocation process.
If a short-term continuing resolution is in effect when a sequester order is issued, then for each account, the sequester amount, as determined by the sequester order, is pro-rated for the period covered by the continuing resolution. These funds are withheld, but not permanently cancelled. Subsequent short-term continuing resolutions during the year, if enacted, are subject to the same prorated sequestration procedure. The total amount withheld under short-term continuing resolutions shall apply toward the total amount sequestered once a full-year appropriations measure is enacted. If the full-year appropriations measure appropriates at a level lower than the budget baseline for an individual account, then the amount sequestered for that account is reduced by the amount by which that appropriation is below the budget baseline. The final amount of funds available for an individual account, following enactment of a full-year appropriation (including a full-year continuing resolution) and implementation of the sequester, shall not be, as a result of the sequester, less than the budget baseline amount minus the sequester amount for that account as specified in the final order.
In the event the automatic triggering procedures for FY 19881993 are invalidated by court ruling, the conference agreement provides that a presidential sequestration order may be triggered under fallback procedures involving the enactment of a joint resolution based on the sequestration report issued by the CBO Director.
With regard to the issuance of an order, the conference agreement makes clear that the President must issue an initial sequestration order even if the triggering procedures indicate that no reductions are required (the order would so state). Such a requirement already applies in the case of a final order.
The President must also issue a detailed message, as a single document, to accompany a final order. Such a requirement already applies in the case of an initial order. The message accompanying an initial or final order must be submitted to Congress within 15 days after the order is issued.
Finally, the conference agreement provides that presidential sequestration orders, as well as sequestration reports issued by OMB and CBO, shall be submitted to the Federal Register on the day they are issued and printed on the following day.
U.S. House of Representatives, Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987: Conference Report to Accompany H. J. Res. 324, House Ways and Means Committee (H. Rept. 100-313) September 21, 1987.