Appendix VIII

SPECIAL RULES FOR TREATMENT OF PROGRAMS

(For additional explanation of special rules, see the conference report on Gramm-Rudman-Hollings, House Report 99-433, pp. 4859, 85-95 and the conference report on the 1987 Reaffirmation Act, House Report 100-313)

Special Rules by Program

Social Security and Railroad Retirement Tier I

-Social security and railroad retirement tier I benefits and cost-of-living adjustments are exempt from reduction under Gramm-Rudman-Hollings.

-Social security revenues and outlays are excluded from the President's and Congress' budget totals. However, social security revenues and outlays are figured into the total budget figures for fiscal years 1986 through 1991 for purposes of calculating the deficits under Gramm-Rudman-Hollings.

Medicare

-Reductions in the medicare program are achieved through reductions in payments for covered services. No changes in co-insurance or deductibles are made, and covered services are unaffected under a presidential reduction order.

-Under a presidential reduction order, each payment made under the medicare program would be reduced by a maximum of 2 percent. If the excess deficit is small enough so that the uniform reduction is less than 2 percent, all nonexempt non-defense programs are reduced by that uniform percentage.

Community Health Centers; Migrant Health Centers; Indian Health Facilities; Indian Health Services; Veterans Medical Care

Reductions in these health programs are limited to 2 percent below the levels they would otherwise receive in any fiscal year.

Commodity Credit Corporation

-Payments and loan eligibility under any contract entered into after a presidential reduction order has been issued for a fiscal year are subject to a percentage reduction.

-Outlay reductions in the following year that are the result of contract adjustments in the reduction year are counted toward overall outlay reduction required in the reduction year.

-Appropriations for CCC net realized losses are not subject to reduction.

Guaranteed Student Loans

Two changes to the guaranteed student loan program are to occur automatically under a presidential reduction order. First, the special statutory allowance factor

28

for lenders is to be reduced by 0.40 percent, but not below 3.00 percent, in the first year of the loan. Second, a student's origination fee is to increase by 0.50 percent. In both cases, the reduction is to affect only loans made during the applicable fiscal year after the order is issued.

Child Support Enforcement

Outlays for the child support enforcement program are available for reduction only by reducing the Federal matching rate for State administrative expenses.

Foster Care and Adoption Assistance Programs

The amounts available for reduction in the foster care and adoption assistance programs are limited to increases in foster care maintenance payment rates or adoption assistance payment rates and only to the extent that the reduction can be made by reducing Federal matching payments by a uniform percentage.

Unemployment Programs

Regular State unemployment benefits, the State share of extended unemployment benefits, benefits paid for former Federal employees and former members of the armed services, and loans and advances to the State and Federal unemployment accounts are not available for reduction. However, the Federal share of extended benefits and federally paid benefits and administrative expenses are fully available for reduction.

Mine Worker Disability

Increases in black lung benefits and special benefits for disabled coal miners are treated in the same manner as automatic spending increases.

Federal Pay

-Rates of pay for civilian employees (and rates of basic pay, basic subsistence allowances and basic quarters allowances for members of the uniformed services) may not be reduced by a presidential reduction order.

-A scheduled pay increase may not be reduced by a presidential reduction order.

Federal Administrative Expenses

-Administrative or operating expenses of all the departments and agencies, including self-financed programs, are subject to reduction, unless specifically exempted.

-Payments made to reimburse administrative costs incurred by State or local governments (such as for AFDC and Medicaid) are not considered Federal administrative expenses; however, State administrative costs for a program may be reduced to the extent the program is reduced.

Deferrals

Deferrals proposed between October 1 of a fiscal year and October 15 of such fiscal year are not to be taken into account in determining the budget base.

Automatic Spending Increases Subject to Reduction

Any automatic spending increases that would be first paid between October 1 and October 15 of an applicable fiscal year are suspended until October 15 of such fiscal year. If the October 15 presidential order provides for elimination of the increases, the suspended increases will be canceled. If the increases are only partially reduced, the suspended increases will be restored to the allowed amount and lump-sum reimbursements will be made, to the extent necessary.

Prior Legal Obligations Exempt From Sequestration

Gramm-Rudman-Hollings provides that obligated balances are not subject to reduction under a presidential reduction order.

29

Exempt Programs

(Except for administrative or operating expenses, the following programs are exempt from reduction under Gramm-Rudman-Hollings. Programs are identified by the designated budget account identification code numbers set forth in the Budget of the United States, 1986-Appendix):

Social security benefits and tier I railroad retirement benefits.

Veterans' compensation (36-0153-0-1-701).

Veterans' pensions (36-0154-0-1-701).

National Service Life Insurance Fund (36-8132-0-7-701).

Service-Disabled Veterans Insurance Fund (36-4012-0-3-701).

Veterans Special Life Insurance Fund (36-8455-0-8-701).

Veterans Reopened Insurance Fund (36-4010-0-3-701).

United States Government Life Insurance Fund (36-8150-0-7-701).

Veterans Insurance and Indemnity (36-0120-0-1-701).

Special Therapeutic and Rehabilitation Activities Fund (36-4048-0-3-703).

Veterans' Canteen Service Revolving Fund (36-4014-0-3-705).

Benefits under chapter 21 of title 38, United States Code, relating to specially adapted housing and mortgage-protection life insurance for certain veterans with service-connected disabilities (36-0137-0-1-702).

Benefits under section 907 of title 38, United States Code, relating to burial benefits for veterans who die as a result of service-connected disability (36-0155-0-1701).

Benefits under chapter 39 of title 38, United States Code, relating to automobiles and adaptive equipment for certain disabled veterans and members of the Armed Forces (36-0137-0-1-702).

Net interest.

Earned income tax credit.

Offsetting receipts and collections.

Aid to families with dependent children (75-0412-0-1-609).

Child nutrition (12-3539-0-1-605).

Commodity Supplemental Food Program (12-3512-0-1-605).

Food stamps (12-3505-0-1-605 and 12-3550-0-1-605).

Grants to States for medicaid (75-0512-0-1-551).

Supplemental security income (75-0406-0-1-609).

Women, infants, and children program (12-3510-0-1-605).

Activities resulting from private donations, bequests, or voluntary contributions to the Government.

Administration of Territories, Northern Mariana Islands Covenant grants (140412-0-1-806).

Thrift Savings Fund (26-8141-0-7-602).

Alaska Power Administration, operations and maintenance (89-0304-0-1-271).

Appropriations for the District of Columbia (to the extent they are appropriations of locally raised funds).

30

Bonneville Power Administration fund and borrowing authority established pursuant to section 13 of Public Law 93-454 (1974), as amended (89-4045-0-3-271).

Bureau of Indian Affairs, miscellaneous payments to Indians (14-2303-0-1-452). Bureau of Indian Affairs miscellaneous trust funds, tribal trust funds (14-9973-07-999).

Claims, defense (97-0102-0-1-051).

Claims, judgments, and relief acts (20-1895-0-1-806).

Coinage profit fund (20-5811-0-2-803).

Compensation of the President (11-0001-0-1-802).

Comptroller of the Currency.

Customs Service, miscellaneous permanent appropriations (20-9922-0-2-852).

Dual benefits payments account (60-0111-0-1-601).

Eastern Indian land claims settlement fund (14-2202-0-1-806).

Exchange stabilization fund (20-4444-0-3-155).

Federal Deposit Insurance Corporation.

Federal Home Loan Bank Board.

Federal Savings and Loan Insurance Corporation.

Federal payment to the railroad retirement account (60-0113-0-1-601).

Foreign military sales trust fund (11-8242-0-7-155).

Health professions graduate student loan insurance fund (health education assistance loan program) (75-4305-0-3-553).

Higher education facilities loans and insurance (91-0240-0-1-502).

Internal Revenue Collections for Puerto Rico (20-5737-0-2-852).

Intragovernmental funds, including those from which the outlays are derived primarily from resources paid in from other government accounts, except to the extent such funds are augmented by direct appropriations for the fiscal year during which an order is in effect.

Medical facilities guarantee and loan fund, Federal interest subsidies for medical facilities (75-4430-0-3-551).

National Credit Union Administration, its central liquidity facility, and its credit union share insurance fund.

Panama Canal Commission, operating expenses (95-5190-0-2-403), and Panama Canal Commission, capital outlay (95-5190-0-2-403).

Payment of Vietnam and USS Pueblo prisoner-of-war claims (15-0104-0-1-153). Payment to civil service retirement and disability fund (24-0200-0-1-805).

Payments to copyright owners (03-5175-0-2-376).

Payments to health care trust funds (75-0580-0-1-572).

Payments to military retirement fund (97-0040-0-1-054).

Compact of Free Association, economic assistance pursuant to Public Law 99-658 (14-0415-0-1-806).

Payments to social security trust funds (75-0404-0-1-571).

Payments to State and local government fiscal assistance trust fund (20-2111-0-1

851).

31

Payments to the foreign service retirement and disability fund (11-1036-0-1-153 and 19-0540-0-1-153).

Payments to trust funds from excise taxes or other receipts properly creditable to such trust funds.

Payments to the United States territories, fiscal assistance (14-0418-0-1-852). Payments to widows and heirs of deceased Members of Congress (00-0215-0-1801).

Postal service fund (18-4020-0-3-372).

Salaries of Article III judges.

Soldiers and Airmen's Home, payment of claims (84-8930-0-7-705).

Southeastern Power Administration, operations and maintenance (89–0302–0–1–

271).

Southwestern Power Administration, operations and maintenance (89-0303–0–1–

271).

Tennessee Valley Authority fund, except non-power programs and activities (644110-0-3-999).

Washington Metropolitan Area Transit Authority, interest payments (40-0300-01-401).

Western Area Power Administration, construction, rehabilitation, operations, and maintenance (89-5068-0-2-271).

Western Area Power Administration, Colorado River basins power marketing fund (89-4452-0-3-271).

Black lung benefits (20-8144-0-7-601).

Central Intelligence Agency retirement and disability system fund (56–3400-0-1054).

Civil service retirement and disability fund (24-8135-0-7-602).

Comptrollers general retirement system (05-0107-0-1-801).

Foreign service retirement and disability fund (19-8186-0-7-602).

Judicial survivors' annuities fund (10-8110-0-7-602).

Longshoremen's and harborworkers' compensation benefits (16-9971–0–7–601).

Military retirement fund (97-8097-0-7-602).

National Oceanic and Atmospheric Administration retirement (13-1450-0-1-306).

Pensions for former Presidents (47-0105-0-1-802).

Retirement pay and medical benefits for commissioned officers, Public Health Service (75-0379-0-1-551).

Special benefits, Federal Employees' Compensation Act (16-1521-0-1-600).

Special benefits for disabled coal miners (75-0409-0-1-601).

Tax Court judges survivors annuity fund (23-8115-0-7-602).