By Erlinda Doherty
The Congressional Budget Office (CBO) issued a report last week finding that across-the-board (ATB) sequestration measures set forth in the Budget Control Act (BCA) of 2011 would not be required because fiscal year (FY) 2019 appropriations do not exceed statutory caps on discretionary funding.
But with the lack of any agreement to relax those caps—like those executed in Bipartisan Budget Act (BBA) for FYs 2014-2018—restrictions for FY 2020 could kick back in.
Let’s revisit the BCA—and potential measures that could impact spending limits—to understand the overall implications.
Back to the BCA
The BCA was enacted in 2011 to lower federal budget deficits over 10 years through strict spending restrictions on defense and non-defense discretionary spending. In total, this non-mandatory spending represented about one-third of the total federal budget and targeted cuts to these areas were considered austere. As a result, BBAs for the last six years—with the most recent allowing $647 billion in defense and $597 billion in non-defense discretionary spending—relaxed these limits in two-year increments.
Fast Forward to FY 2020
With the BBA of 2018 set to expire in FY 2020, federal government spending in these discretionary areas would have to revert to original BCA FY 2011 levels.
President Donald Trump’s newly-released budget blueprint imposes its own “caps” by cutting 5 percent from all non-defense spending but allows for increases in defense spending through cap-exempt Overseas Contingency Operations (OCO) funding. This amounts to an overall increase in defense spending of 5 percent over FY 2019 levels or $750 billion. Agreements over the future of the caps are not expected to be reached until later this year, and even then the process will likely be protracted.
Back Again to Sequestration?
If neither a deal to increase the caps nor a budget that spends below the caps passes, statutorily-mandated sequestration still looms as the most austere scenario. The Office of Management and Budget must enforce across the board reductions to agencies, with varying effects on states.
Congress and the president can still pass a budget that remains below the FY 2011 cap levels, but this would necessitate an estimated $89 billion reduction in discretionary spending. Ultimately, there is pressure to address both the caps and the debt ceiling, which has been used as leverage in past budget deliberations and must also be addressed this year.
But much uncertainty remains as the appropriations process has just started and both the president and Congress have set forth conflicting priorities.
Need a spoon for all this federal budget alphabet soup? Check out NCSL’s federal budget information and updates.
Erlinda Doherty is the Budgets and Revenue committee director in NCSL's Washington, D.C., office.