LEGISLATIVE BULLETIN | March 20, 2007

S. Con. Res. 21, the Fiscal Year 2008 Budget Resolution

Summary 

S. Con. Res. 21, the Fiscal Year 2008 Senate Budget Resolution, outlines the proposed federal budget for next year, as well as proposed budget levels for Fiscal Years 2009 through 2012. The Budget Resolution, which provides a fiscally responsible budget plan for our country, funds critical national priorities and reaches balance without raising taxes. While no single budget resolution can solve all of our budget challenges, this plan will begin to put the nation back on a sound fiscal path.

 

Restores Fiscal Responsibility

As an important first step in restoring our nation’s fiscal security, the Fiscal Year 2008 Senate Budget Resolution brings the budget back into balance –reaching a surplus of $132 billion by 2012. Gross debt as a share of gross domestic product will begin to fall after 2009. And spending as a share of gross domestic product will decline in every year after 2008. The plan also restores crucial budget enforcement provisions such as a strong paygo rule and allowing reconciliation for deficit reduction only.

 

Funds Defense

TheFiscal Year 2008 Senate Budget Resolution fully funds the President’s core defense budget and the President’s request for additional war funding in 2007, 2008, and 2009.

 

Supports Domestic Priorities

TheFiscal Year 2008 Senate Budget Resolution rejects the President’s proposals to once again cut domestic priorities, and provides badly needed resources in key areas that have been underfunded by the Bush Administration, including:

 

Kids’ Health - SCHIP

TheFiscal Year 2008 Senate Budget Resolution recognizes that providing for our children’s health care should be one of our nation’s most important priorities. The Budget Resolution rejects the inadequate funding level proposed by the President and instead provides up to $50 billion for the reauthorization of the State Children’s Health Insurance Program (SCHIP). These additional SCHIP funds will expand coverage of the estimated six million children eligible but not enrolled in either SCHIP or Medicaid, and maintain coverage for all currently enrolled children.

 

Education

TheFiscal Year 2008 Senate Budget Resolution rejects the President’s proposed cuts in education and training and adds significant new resources for Head Start, the Individuals with Disabilities Education Act (IDEA), No Child Left Behind Act, and Pell grants. It provides an increase for discretionary funding for the Department of Education of $6.1 billion (including $2 billion in additional 2009 advance appropriations) above the President’s request.

 

Veterans

The mistreatment of wounded soldiers at the Walter ReedArmy MedicalCenter has highlighted the Bush administration’s lack of focus on the well-being of our nation’s veterans and military personnel. The Fiscal Year 2008 Senate Budget Resolution provides critical resources to ensure that our nation’s veterans get the high-quality health care they deserve. In total, the resolution provides $43.1 billion for veterans in 2008, representing 98 percent of the level requested in the Independent Budget, a plan developed by four leading veterans groups. This funding level is $3.5 billion more than the President. The resolution also rejects the President’s proposals to raise TRICARE co-payments and to impose new fees and higherco-payments on certain veterans, which would result in more than 100,000 veterans leaving the Department of Veterans Affairs (VA) health care system.

 

Addresses Long-Term Fiscal Challenges

To address the long-term fiscal challenges we face with the coming retirement of the baby boom generation, the Fiscal Year 2008 Senate Budget Resolutionincludes a “comparative effectiveness” reserve fund. This reserve fund is designed to jumpstart a new initiative to bring down spiraling health care costs, which is the largest factor driving up the cost of our health care entitlement programs. The plan also includes a new point of order against measures that increase the long-term deficit.

 

Protects Middle-Class Taxpayers

TheFiscal Year 2008 Senate Budget Resolution protects middle-class taxpayers by providing Alternative Minimum Tax (AMT) relief for 2007 and 2008 –one year more than the President – preventing millions of middle-class taxpayers from being subjected to the AMT. The Senate Budget Resolution includes no tax increase, but does allow for new tax cuts and the extension of expiring tax provisions, provided the cost of these measures is offset. The Budget Resolution calls for strong new measures to close the tax gap, shut down tax scams, and address offshore tax havens. The resolution also sets the stage for tax simplification and reform.

 

Major Provisions

Discretionary Spending

 

S. Con. Res. 21provides $948.8 billion in budget authority and $1,026.4 billion in outlays for discretionary programs in 2008, excluding emergency and war funding. Over the five-year period, this spending will fall from 7.2 percent of GDP in 2008 to 6.3 percent in 2012. These totals exclude emergency and war funding. 

The Budget Resolution enhances fiscal responsibility by establishing discretionary spending limits on budget authority and outlays for 2007 and 2008. For 2007, it provides a cap of $951.1 billion in budget authority and $1,029.5 billion in outlays. For 2008, it provides a cap of $942.3 billion in budget authority and $1,021.4 billion in outlays. For 2008, the Budget Resolution permits adjustments to this cap for certain program integrity efforts and wildfire suppression activities. These adjustments would bring funding, excluding emergency and war funding, up to the level assumed in the resolution.

 

Defense and War Costs

With defense of the nation as its number one priority, the Budget Resolution fully funds the President’s core defense budget request over the five-year period. It also fully funds the President’s request for $295 billion in additional war funding for 2007 through 2009. The Budget Resolution provides for a three percent pay raise for military personnel and rejects the President’s proposals for new TRICARE enrollment fees and deductibles for military retirees under the age of 65.

 

Domestic Discretionary Spending

The Budget Resolution provides $410.7 billion for overall domestic discretionary funding in 2008 (excluding emergencies). Specifically, the Budget Resolution provides for more funding than the President’s budget in key areas including veterans care, education, Head Start, Community Oriented Policing Services, homeland security, Community Development Block Grants, LIHEAP, Amtrak, community health centers, energy efficiency and research and development programs, environmental protection, and small businesses.

 

Mandatory Spending

S. Con. Res. 21 follows the paygo, or pay-as-you-go, principle for mandatory spending, with any new spending done in a deficit-neutral manner.

Kids’ Health - SCHIP

The Budget Resolution rejects the funding level proposed by the President for reauthorization of the State Children’s Health Insurance Program (SCHIP). The President proposes to provide a net increase of $2 billion over five years ($5.5 billion over five years, excluding Medicaid interactions), which would not cover the funding shortfalls facing SCHIP. The Congressional Budget Office (CBO) estimates that $7.9 billion ($13.4 billion, excluding Medicaid interactions) over five years will be needed to cover state shortfalls. The Budget Resolution provides for up to $50 billion for SCHIP – including up to $35 billion in a deficit-neutral reserve fund – to expand coverage of the estimated six million children eligible but not enrolled in either SCHIP or Medicaid, and maintain coverage for all currently-enrolled children.

 

Education and Training

The Budget Resolution provides a deficit-neutral reserve fund to facilitate enactment of the reauthorization of the Higher Education Act and improvements in education tax credits and deductions. These initiatives aim to improve college affordability, reduce the indebtedness of student borrowers, and ensure that qualified students can obtain a post-secondary education. The Budget Resolution rejects the proposal in the President’s budget to cut the Social Services Block Grant program.

 

Veterans

The Budget Resolution rejects the President’s proposal to impose three additional mandatory fees on priority level 7 and 8 veterans. These are veterans without compensable service-connected disabilities, who have incomes as low as $27,790. Instead of using the money to offset the VA discretionary spending he proposes, the President directs the fees into the general Treasury. Specifically, the Budget Resolution rejects the President’s proposed increase in the pharmacy co-payment from $8 to $15, rejects the creation of a tiered annual enrollment fee based on a veteran’s family income, and rejects billing veterans for treatment of non-service connected disabilities for their entire co-payments. The VA estimates that if the enrollment fee and the increase in pharmacy co-payments are enacted in 2008, over 111,000 veterans would leave the VA health care system.

 

Energy

The Budget Resolution includes a deficit-neutral reserve fund for energy legislation that would reduce our nation’s dependence on foreign sources of energy, expand production and use of alternative fuels and alternative fuel vehicles, promote renewable energy development, improve electricity transmission, encourage responsible development of domestic oil and natural gas resources, and reward conservation and efficiency. Such legislation may include tax incentives. This reserve fund will provide committees increased flexibility in finding offsets for legislation that addresses the energy challenges facing our nation. The Budget Resolution rejects the President’s proposal to increase the interest rates Power Marketing Administrations pay when they borrow funds from the Treasury, which could lead to higher rates for rural power customers. The resolution also rejects the proposal to accelerate the Bonneville Power Administration’s (BPA’s) debt repayment. The BPA proposal could lead to higher electricity rates for power customers in the Northwest and circumvent the regional decision making process.

 

Farm Bill

With the 2002 Farm Bill expiring this year, the Budget Resolution provides a deficit-neutral reserve fund for the reauthorization of agricultural programs. To address the needs of rural Americaand promote new sources of renewable energy from U.S. farm products, it would allow for a $15 billion increase in mandatory agriculture funding between 2008 and 2012. The reauthorization of the Farm Bill will provide an economic safety net for agricultural producers, enhance the stewardship of our natural resources, address domestic nutrition needs, increase agricultural research, and improve our export competitiveness.

 

Arctic National Wildlife Refuge and Land Sales

The Budget Resolution rejects the President’s proposal to permit oil and gas leasing in the Arctic National Wildlife Refuge (ANWR) and does not assume savings from the proposal. The Budget Resolution also does not assume any savings from the President’s proposal to sell federal lands.

 

Revenues

S. Con. Res. 21 balances the budget without a tax increase. The Budget Resolution also provides middle-class tax relief by ensuring that the Alternative Minimum Tax (AMT) does not hit more taxpayers over the next two years. At the same time, the resolution raises enough revenue to meet the nation’s most urgent needs and put the budget on a more sustainable long-term fiscal path. And it sets the stage for tax simplification and reform.

 

AMT Relief for the Middle-Class

The Budget Resolution provides Alternative Minimum Tax relief for 2007 and 2008 –one year more than the President – giving Congress and the administration time to come up with a permanent solution. Under the resolution, the number of taxpayers subject to the AMT would not be allowed to increase – protecting some 20 million middle-class taxpayers from being subjected to the AMT in those years. The cost of providing this relief is fully offset. 

 

No Tax Increase

The revenue levels in the Budget Resolution assume that Congress will take steps to counter the effects of the expiration of tax cuts in 2010 in a manner that does not add to the nation’s debt burden. The resulting revenue levels are only three percent above revenues in the President’s budget over the next five years as estimated by the CBO. This additional revenue can be achieved without raising taxes by closing the tax gap, shutting down illegal tax shelters, addressing tax havens, and simplifying the tax code.

 

Reserve Fund For Tax Relief

The Budget Resolution provides a reserve fund allowing for new tax relief and the extension of expiring provisions, but only if the cost of these measures is offset. Failure to offset those tax cuts would severely damage our nation’s finances just as we are trying to grapple with the retirement of the baby boom generation.

 

Closing the Tax Gap, Shutting Down Tax Shelters, and Addressing Offshore Tax Havens

The Budget Resolution calls for collecting taxes that are already due, while at the same time improving taxpayer services for honest citizens who need help complying with the code. The Budget Resolution assumes that Congress will take aggressive steps to close the tax gap, the amount of taxes owed under current law but not collected. According to the IRS’s latest estimate, the tax gap in 2001 was $345 billion. In the years since 2001, it is likely that the tax gap has grown even larger. And this total does not even include the billions of tax dollars lost to illegal tax shelters and offshore tax havens.

 

Setting the Stage for Tax Simplification and Reform

The Budget Resolution provides a reserve fund allowing for new tax relief and the extension of expiring provisions, but only if the cost of these measures is offset. The Budget Resolution reflects the belief that Congress will adopt tax simplification. By requiring that tax changes be deficit neutral, it sets up the right incentives for bipartisan tax simplification and reform.

 

Long-Term Fiscal Challenges

With the coming retirement of the baby boom generation, our nation faces a significant long-term imbalance between revenues and spending. While the Budget Resolution takes the important near-term step of returning the budget to balance by 2012, this represents only a first step in the difficult path of restoring our long-term fiscal security.

The Budget Resolution therefore also includes a number of measures to address our long-term fiscal challenges, including:

 

Comparative Effectiveness Reserve Fund

To better control health care costs by providing health care providers and patients with objective, transparent, and rigorous analysis about the comparative effectiveness of alternative technologies, devices, procedures, and pharmaceuticals, the Budget Resolution includes a Comparative Effectiveness Reserve Fund. This deficit-neutral reserve fund would allow for legislation to establish a new federal or public-private initiative for comparative effectiveness research to evaluate technologies, devices, procedures, and pharmaceuticals for both effectiveness and value.

 

Medicare Savings

The Budget Resolution assumes $384.6 billion in mandatory budget authority and $384.7 billion in mandatory outlays for Medicare in 2008. As a down payment to reign in excessive growth in health care costs, the Budget Resolution provides $15 billion in Medicare savings over five years by reducing certain overpayments to health care providers. The Budget Resolution rejects the President’s proposal for additional across-the-board provider payment cuts if general revenue financing exceeds 45 percent of Medicare costs in the future. The primary consequence of most of the President’s Medicare proposals would simply be to shift existing health care costs to seniors, health care providers, and the private health sector and would do little to address the real problem of health care cost growth in the overall health care system.

 

Point of Order Against Long-Term Deficit Increases

The Budget Resolution would create a point of order against legislation that increases the deficit over the long term – specifically in the four decades beyond the next ten years (2018-2027, 2028-2037, 2038-2047, and 2048-2057). Under the Budget Resolution, the long-term point of order will apply against any net deficit increases in excess of $5 billion (including changes in revenues and mandatory spending, but excluding debt service) in any of the four ten-year periods. The provision sunsets at the end of fiscal year 2017, and effectively repeals the previous version of the point of order in Section 407 of H. Con. Res. 95, the Fiscal Year 2006 Budget Resolution conference report.

 

Budget Enforcement

While budget process cannot replace a bipartisan commitment to fiscal discipline, there are a number of budget enforcement provisions that can help to put us back on a sound fiscal path. The Budget Resolution would adopt or reinstate the most important of these enforcement provisions.

 

Paygo

The Budget Resolution would restore the strong paygo, or pay-as-you-go, rule in the Senate. The paygorule requires that new mandatory spending and tax cuts be offset or get 60 votes. Paygo does not prohibit new mandatory spending or new tax cuts; the rule simply says that they should be paid for so that the deficit does not increase. Paygoensures that if something is not paid for, it can only pass if it has broad bipartisan support. The Budget Resolution would extend the paygo rule through 2017.

 

Reconciliation for Deficit Reduction Only

Reconciliation is a fast-track process that was intended to be used for deficit reduction. Unfortunately, in recent years the reconciliation process has been abused, as a fast-track means of enacting legislation that has dramatically worsened deficits and increased our debt. The Budget Resolution creates a new 60-vote point of order against reconciliation measures that would cause or increase an on-budget deficit or decrease an on-budget surplus.

 

Discretionary Spending Caps

Currently, there are no discretionary spending limits for any fiscal year. The Budget Resolution would strengthen fiscal responsibility by establishing discretionary spending limits for Fiscal Years 2007 and 2008, and enforce them with a point of order in the Senate that could only be waived with 60 votes. For 2007, the resolution provides a cap of $951.140 billion in budget authority and $1,029.456 billion in outlays. For 2008, it provides a cap of $942.312 billion in budget authority and $1,021.407 billion in outlays.

 

Point of Order Against Emergency Designations

Under the Budget Resolution, all emergency designations would be subject to an emergency designation point of order, which could only be waived with 60 votes.

 

Other Reserve Funds

S. Con. Res. 21 includes a number of other reserve funds not mentioned above. They allow the Chairman to revise committee allocations, budgetary aggregates, and other levels in the resolution for deficit-neutral legislation to address the following priorities:

·Deficit-neutral legislation to provide for improved medical or disability benefits for wounded or disabled military personnel and veterans;

·Deficit-neutral legislation to provide for prescription drug price negotiation under Medicare Part D;

·Deficit-neutral legislation to make improvements to the Medicare Part D benefit, such as changing asset requirements for the low-income subsidy, improving outreach efforts for the low-income subsidy, or providing coverage for certain mental health medicines currently excluded under the Medicare Modernization Act;

·Deficit-neutral legislation to increase the reimbursement rate for physician services under Medicare Part B;

·Deficit-neutral legislation to make insurance coverage more affordable and available to small businesses and their employees;

·Deficit-neutral legislation to provide for the reauthorization of the county payments provided by the SecureRuralSchoolsand Community Self-Determination Act of 2000;

·Deficit-neutral legislation to provide for a continued federal role in ensuring the availability of terrorism insurance after the expiration of the Terrorism Risk Insurance Extension Act;

·Deficit-neutral legislation to establish an affordable housing fund to finance low-income housing investments, financed by contributions from the government-sponsored enterprises;

·Deficit-neutral legislation to prohibit the Bonneville Power Administration from making early payments on its federal bond debt to the United States Treasury in order to prevent a detrimental impact on electricity rates in the Northwest;

·Deficit-neutral legislation to provide a statutory settlement for the Cobellv. Kempthorne litigation involving Indian trust funds management; and

·Deficit-neutral legislation that authorizes the Food and Drug Administration (FDA) to regulate tobacco products and assess user fees on tobacco manufacturers and importers to cover the cost of FDA’s tobacco regulatory activities.

 

Special Parliamentary Procedures 

TheBudget Act of 1974 provides special expedited provisions for Senate consideration of a budget resolution. Debate on a budget resolution is limited to 50 hours, equally divided between the majority and minority leaders or their designees (customarily the Budget Committee Chair and Ranking Member are designated as managers of the resolution). 

Amendments and motions can be offered and voted upon after the 50 hours has expired. However, no debate is permitted at that point. In recent years, the Senate has agreed by unanimous consent to provide time for very brief discussion of amendments or motions immediately prior to votes taking place after time has expired. 

Amendments are subject to strict germaneness requirements. 

 

Legislative History

S. Con. Res. 21was approved by the Budget Committee by a party line vote of 12-11 on Thursday, March 15, 2007, and was reported as an original measure by Budget Committee Chairman Conrad and introduced in the Senate. 

 

Administration Position

As a concurrent resolution –a special legislative vehicle that applies only to the operations of the House and Senate – the Budget Resolution is not presented to the President for signature and does not have the force of law. The budget resolution merely provides a blueprint for later congressional action. Although the resolution does not require the President’s signature, it does help shape legislation that will be sent to the President.

DPC