Testimony

Biennial Budgeting: A Tool for Improving Government Fiscal Management and Oversight

Thomas E. Mann

Mr. Chairman, I appreciate the opportunity to testify before your committee this morning on “Biennial Budgeting: A Tool for Improving Government Fiscal Management and Oversight.” Over the years I have had the good fortune of working with you on a number of aspects of congressional reform, and I have long admired your commitment to improving the operation and defending the institutional integrity of the House.

However, I would be less than candid if I failed to convey my disappointment with the procedural change in the budget process under consideration by this committee. I am aware that biennial budgeting has attracted broad bipartisan support from Members of Congress and from the President and his key budget officials. And I have no doubt that a wide array of outside experts will offer strong support for the argument that biennial budgeting will improve fiscal management and oversight in the federal government. Indeed, this proverbial chestnut has been pulled from the fire in so many debates on budget reform that it might make sense to give it a try for a few budget cycles and see if its reputed benefits are realized. I am sure the Republic would survive an experiment in biennial budgeting, especially if it is authorized with an explicit sunset provision.

Nonetheless, the energy being devoted to the adoption of this proposal strikes me as misplaced as that devoted in years past to the balanced budget amendment and the line-item veto. The latter two procedural reforms were touted as essential steps in shrinking huge budget deficits and restraining the growth in federal spending. Yet although the first was never enacted and the second was ruled unconstitutional, those deficits have turned into surpluses and federal spending as a share of the national economy is on a downward track. To be sure, less ambitious changes in the budget process, most importantly the discretionary spending ceilings and pay-as-you-go (PAYGO) rules included in the Budget Enforcement Act, played a constructive role in helping to implement political agreements on changes in fiscal policy. But to the extent that policy was a contributing factor to these favorable developments – and I believe the deficit reduction packages of 1990, 1993 and to a lesser extent 1997 made significant contributions – the credit should go to those who forged the difficult political agreements. Much the same will be required in the future. No procedural fix can substitute for the tough substantive policy decisions that Congress will perforce make as the baby boomer retirement moves the budget back into deficit.

Today, a prime motivation in shifting to a two-year budget and appropriations cycle is the mounting frustration over year-end appropriations train wrecks and the political gamesmanship that has become so prominent a feature of divided government. We are all learning that the politics of surplus is at least as difficult and risky as the politics of deficit. I sympathize with that frustration but I am deeply skeptical that biennial budgeting will provide any relief. Half as many formal budget and appropriations cycles may appear to reduce the opportunities for partisan and ideological conflict, but we all know how easy it is for other legislative vehicles, including supplemental appropriations and authorizing legislation, to fill the void in the off-year. If the President or Congress, the Democrats or Republicans, believe they can gain political advantage by picking a fight on the budget, they will find the means to do so, whether we have a one or two-year cycle.

If you believe that biennial budgeting will relieve these partisan and political conflicts, I believe you will be sorely disappointed. And so too will be those members of the public whose expectations are raised by the promise of this budget reform.

Of course, there is a less political, more traditional administrative rationale for biennial budgeting. The case is familiar and, at first blush, compelling. Compared with the present system driven by annual budget resolutions, appropriations, and (oftentimes) authorizations, a comprehensive biennial cycle is seen as encouraging long-term planning and evaluation over incremental budgeting; promoting greater predictability and efficiency in federal programs; eliminating excessive duplication and delay in congressional decision making; ensuring more vigorous congressional oversight of federal programs; reducing the enormous amount of busy work associated with the preparation of annual budgets in the executive branch and their review in the legislative branch; and discouraging congressional micromanagement through line items, earmarks, and other restrictions in appropriations bills.

Each of these objectives has merit, but as countless hearings and reports over the last two decades, including systematic studies of the experience with two-year budget cycles in the states, have made clear, there is no guarantee that they would be byproducts of biennial budgeting. Indeed, many careful students of budgeting have concluded that a switch to a two-year cycle is unlikely by itself either to reduce the workload or to increase the quantity and quality of congressional oversight. For example, fiscal pressure and forecasting errors, to say nothing of the political and policy interests of Members of Congress, could easily transform off-year adjustments through supplemental appropriations into major budgeting exercises. By raising the stakes for Members in the first year, a two-year cycle could boost the amount of time spent and controversy engendered, making the timely completion of budget legislation even less likely. And the loss of annual appropriation controls might well intensify pressure for congressional micromanagement rather than replace it with careful evaluation.

Author

There is little reason to believe that any time freed up by moving to a biennial budget cycle would be invested in more systematic and rigorous congressional oversight of federal programs. Members of Congress with serious policy interests and genuine concerns about the implementation of federal programs now have ample resources and opportunities to investigate how well those programs are operating. A good deal of this activity now occurs on authorizing and appropriations committees in spite of the relatively low level of press and public attention. Indeed, the annual appropriations process constitutes a powerful tool for Congress to examine the expenditure of public funds and get the full attention and cooperation of agency officials. But a primary motivation for conducting congressional oversight and investigation, especially in an era of divided government and sharpened partisan differences, is essentially political. The object is to embarrass one’s political adversaries and to enhance one’s own standing. I say this not with feigned shock that there is “politics” going on in the Congress or to imply that political motivations are inappropriate bases for stimulating congressional oversight. I simply want to remind you that insufficient time is not at the root of any inadequacies in the current pattern of oversight, and freeing up additional time for Members of Congress and their staffs (a questionable byproduct of biennial budgeting) is unlikely to alter that pattern.

In considering a change to a two-year budget cycle, it is important to distinguish the appropriations process, which every major democracy in the world continues to operate on an annual basis, from other features of the budget process. As my colleague Allen Schick, one of the leading authorities on the budget process, has noted, other countries have experimented successfully with inter-year flexibility and multi-year arrangements in which agencies are given discretion to carry funds over from one year to the next or funds sufficient to operate for several years. The lesson from other countries, Schick notes, is that is it possible to reduce the workload of annual appropriations and to lengthen the policy horizon while continuing to make appropriations every year.

We have already moved a distance away from annual budget control. Most of the budget is exempt from annual appropriations and the rest is constrained by multi-year spending caps. A large number of appropriations are made on a no-year basis, with funds available for obligation indefinitely. Most appropriations accounts are not thoroughly reviewed every year; those programs that are technically predictable and politically stable receive de facto multi-year funding. More could be done to provide greater flexibility in management through roll over authority and experiments in performance budgeting.

But there are risks associated with changing a critical process that has operated on an annual basis throughout American history. Setting economic projections 33 months instead of 21 months out will introduce even more error than now exists and invite partisan and ideological mischief. Losing one important annual capacity to adjust budget policy in response to changing economic and political circumstances, mistakes in writing laws, and agency failure to carry out legislative intent is not inconsequential. The power of Congress could be diminished in a biennial process or the workload in the off-year could grow such that the process would be biennial in name only.

I admit there are many uncertainties in forecasting how a two-year budget cycle would work and how the Congress and the executive would adapt to it. One can reasonably argue the only way to reduce those uncertainties is to try the new process and evaluate its benefits and costs in operation. However, I find the case for a biennial budget and appropriations process too weak and the risks too high to recommend such a course of action.

Instead, I suggest you invest your energies on two related steps. First, experiment with a two-year funding cycle for selected policy areas where service demands are very predictable and slowly evolving, and the programs are nonpartisan and uncontroversial (e.g. the FAA, SSA, and Public Health Service). Evaluate whether and how this change improves executive and legislative decision making. Second, explore means of improving coordination on budget matters between the House and Senate. Inter-chamber strains in agreeing to budget resolutions and appropriations bills have complicated your work and compounded frustrations with the budget process. Dealing with this problem may well be more productive than changing to a biennial budget cycle.