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Budget Process Changes in the FY 2019 House Budget

The Fiscal Year 2019 House budget resolution contains a number of interesting budget process proposals. The budget passed out of committee last month but has yet to be filed with the floor. The process reforms in the House budget are particularly important to pay attention to given the role of House Budget Committee Chairman Steve Womack (R-AR) as the Co-Chair of the Joint Select Committee on Budget and Appropriations Process Reform (JSC).

Fair-Value Accounting

The House budget continues rules regarding "fair-value" estimates of government credit programs. Specifically, it provides for supplemental analysis from the Congressional Budget Office (CBO) at the request of the Chair of the Budget Committee and allows the Chair to use this supplemental estimate as the official score for budget enforcement. Finally, it requests that CBO provides estimates of these subject programs under both fair-value and a credit reform basis.

Re-stating ”CUTGO”

This budget restates the long-term version of the House's “CUTGO” rule, in place so that mandatory spending increases would need to be offset by spending cuts rather than revenue increases. This CUTGO rule is enforced on legislation that increases mandatory spending by more than $5 billion in any of the four decades after the end of the budget window. This is similar to the Senate’s long-term deficit point of order and actually at a higher amount than the prior CUTGO point of order agreed to in the FY 2018 budget. CUTGO, if enforced, would restrain spending but would not restrain tax cuts nor allow spending increases to be paid for with revenue. As a pure deficit-restraining measure, it is inferior to PAYGO, which simply requires that legislation not increase deficits.

Scoring the Cost of Interest

The budget resolution again allows for the Chair of the Budget Committee to request supplemental information from CBO on the interest costs of non-appropriations bills, which is a positive step since any bill with deficit effects will also affect interest costs. We previously suggested scoring the cost of interest in our recommendations of process reforms for the JSC.

Adjusting 302(a) Allocations for Converting Mandatory Spending to Discretionary Spending

The budget allows House legislation to convert mandatory spending to discretionary spending without subjecting that spending to the old 302(a) allocations, which set an overall limit on discretionary spending. This makes some sense as such changes would be budget neutral, but a budget resolution does not have the force of law to override the discretionary spending caps established in the Budget Control Act. Changes to that law would be required to convert mandatory programs to discretionary spending.

CHIMPs

The budget attempts to limit phony savings from Changes in Mandatory Programs (CHIMPs) used to pay for real increases in discretionary spending. These limits are set at $17 billion for FY 2019 and $15 billion for FY 2020. The FY 2018 omnibus had $17 billion of these phony CHIMPs. Unfortunately, these limits are actually higher than the original limitations put in place in the FY 2016 budget resolution of $15 billion for FY 2019. CHIMPs that do not produce legitimate savings are a budget gimmick and should be curtailed. We proposed additional ways to limit CHIMPs gimmicks in Playing by the (Budget) Rules: Understanding and Preventing Budget Gimmicks.

Budgeting for OCO

An important re-inclusion in the budget is a process for explicitly budgeting for Overseas Contingency Operations (OCO) funding, which is for the wars overseas. OCO funds are exempt for the Budget Control Act’s caps on discretionary spending. The budget calls for assigning a specific 302(a) allocation for this type of spending in the conference report. This likely does not go far enough in actually determining the appropriate amount of OCO funding or ensuring that OCO funds go to true war funding expenses. These sorts of measures are important to make sure that OCO is not used as a budget gimmick.

Reserve Fund for More Tax Cuts

Unfortunately, the budget contains a reserve fund – a way of letting the Chair reopen and adjust the budget – with the explicit goal of extending expiring provisions in the 2017 tax law. This reserve fund is constructed in a way that would allow more deficit-increasing tax cuts. All additional tax cuts should be paid for, and this reserve fund should be adjusted to be either a deficit-neutral or deficit-reducing reserve fund. While a reserve fund is not technically a process change, it does create ways for the budget resolution to change after the fact.

Guarantee Fee Offsets

The budget resolution contains a prohibition on scoring Fannie Mae/Freddie Mac mortgage guarantee fees as an offset. This was included in the last budget resolution.

General Fund Transfers to the Highway Trust Fund

Prior budgets have included a rule that, in the House, a general fund transfer to the Highway Trust Fund would count as a cost that would need to be offset. Under normal scorekeeping rules, general revenue transfers to the HTF are not scored with a cost even though the transfer would increase the amount of spending allowed from the HTF.

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Importantly, all of these budget process changes would require the budget to pass to take effect. The House should do its duty and bring its budget to the floor. At the same time, any budget and its process changes are only as good as the willingness to enforce them. Because many important bills come to the House floor under a special rule, previously established enforcement rules, such as those contained in a budget resolution, can be made irrelevant. The budget is an important part of budget process reform. For more idea on budget and appropriations process reform, see our recommendations to the JSC.