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Appendix IX

CALCULATING UNIFORM PERCENTAGE REDUCTIONS

Gramm-Rudman-Hollings requires-under certain circumstances-uniform percentage reductions to defense and non-defense programs, projects, and activities. Following is an explanation of how such uniform percentage reductions would be calculated.

The first step in calculating a required uniform percentage reduction is to determine the total amount of outlays available for reduction. In the case of both defense and non-defense programs, outlays from obligations incurred in prior years are not available for sequestration. In the case of defense programs, outlays that result from new budget authority and unobligated balances of prior-year budget authority are available for sequestration. In the case of non-defense programs, outlays that result from new budget authority, new loan guarantee commitments, new direct loan obligations, obligation limitations, and entitlement and other spending authority are available for sequestration (unless specifically exempted). Notice that for non-defense programs, outlays resulting from unobligated balances are not available for sequestration.

The second step is to calculate the required uniform percentage reductions by dividing the amount of outlays required to be sequestered (see "Deficit Reduction Formula" on page 7) by the amount of outlays available for sequestration. This calculation is done separately for defense programs and non-defense programs. Because of the application of special rules and because the base for sequestration will not be the same in both cases, the uniform reduction percentages for defense and non-defense programs are likely to be different.

The final step in calculating uniform percentage reductions is to apply the percentages to the programs. In the case of defense programs, new budget authority and unobligated balances (if any) would be reduced by the uniform percentage reduction calculated for defense programs. In the case of non-defense programs, new budget authority, new loan guarantee commitments, new direct loan obligations, obligation limitations, and entitlement and other spending authority would be reduced by the uniform percentage reduction for non-defense programs. For both defense and non-defense programs that receive annual appropriations, the uniform reductions would be applied below the account level to programs, projects, and activities where such detail is specified in appropriation acts or Appropriations Committee reports. Where such detail is not provided, the uniform percentage reductions would be applied to budget accounts. In the case of programs not annually appropriated, the uniform percentage reductions would be applied to budget account activities as specified in the President's budget for that fiscal year.

If a short-term continuing resolution is in effect when a sequester order is issued, then for each account, the sequester amount, as determined by the sequester order, is pro-rated for the period covered by the continuing resolution. These funds are withheld, but not permanently cancelled. Subsequent short-term continuing resolutions during the year, if enacted, are subject to the same pro-rated sequestration procedure. The total amount withheld under short-term continuing resolutions shall apply toward the total amount sequestered once a full-year appropriations measure is enacted. If the full-year appropriations measure appropriates at a level lower than the budget baseline for an individual account, then the amount sequestered for that account is reduced by the amount by which that appropriation is below the budget baseline. This means that the final amount of funds available for an individual account, following enactment of a full-year appropriation (including a full-year continuing resolution) and implementation of the sequester, shall not be, as a result of the sequester, less than the budget baseline amount minus the sequester amount for that account as specified in the final order.

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Appendix XI

TERMS USED IN THE CONGRESSIONAL BUDGET PROCESS

Note: This is intended to be a glossary of only the most common terms used in the congressional budget process. For a complete glossary, see "A Glossary of Terms Used in the Federal Budget Process" published by the U.S. General Accounting Office.

Aggregate Required Outlay Reductions

The total amount of outlays to be sequestered in a given fiscal year.

Appropriation Act

A statute, under the jurisdiction of the House and Senate Appropriations Committees, that generally provides authority for Federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. An appropriation act is the most common means of providing budget authority. Currently there are 13 regular appropriation acts for each fiscal year. From time to time, Congress also enacts supplemental appropriation acts. (See "Appropriations" under Budget Authority; Continuing Resolution; Supplemental Appropriation.)

Authorizing Committee

A committee of the House or Senate with legislative jurisdiction over laws that set up or continue the operations of Federal programs and provide the legal basis for making appropriations for those programs. Authorizing committees also have direct control over spending for entitlement programs since the Government's obligation to make payments for such programs is contained in the authorizing legislation. (See Entitlements.)

Authorizing Legislation

Legislation enacted by Congress that sets up or continues the operation of a Federal program or agency indefinitely or for a specific period of time. Authorizing legislation may place a cap on the amount of budget authority which can be appropriated for a program or may authorize the appropriation of “such sums as are necessary." (See Budget Authority; Entitlements.)

Budget Authority

The authority Congress gives to Government agencies, permitting them to enter into obligations which will result in immediate or future outlays, except that budget authority does not include authority to insure the repayment of loans held by another person or government.

Budget authority may be classified in several ways. It may be classified by the form it takes: appropriations, borrowing authority, or contract authority. Budget authority may also be classified by the determination of amount: definite authority or indefinite authority. Finally, budget authority may be classified by the period of availability: 1-year authority, multi-year authority, or no-year authority (available until used).

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Forms of Budget Authority

APPROPRIATIONS.-An act of Congress that permits Federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. An appropriations act is the most common means of providing budget authority.

BORROWING AUTHORITY.-Statutory authority that permits a Federal agency to incur obligations and to make payments for specified purposes out of money borrowed from the Treasury, the Federal Financing Bank, or the public. The Budget Act in most cases requires that new authority to borrow must be approved in advance in an appropriation act.

CONTRACT AUTHORITY.-Statutory authority that permits a Federal agency to enter into contracts in advance of appropriations. Under the Budget Act, most new authority to contract must be approved in advance in an appropriation act.

Determination of Amount

DEFINITE AUTHORITY.—The dollar amount of budget authority is contained in the law.

INDEFINITE AUTHORITY.-The dollar amount of budget authority is not contained in the law; instead the law would provide "such sums as may be necessary."

Period of Availability

ONE-YEAR AUTHORITY.-Budget authority that is available for obligation only during a specified fiscal year.

MULTI-YEAR AUTHORITY.—Budget authority that is available for a specified period of time in excess of 1 fiscal year.

NO-YEAR AUTHORITY.-Budget authority that remains available for obligations for an indefinite period of time (until the objectives for which the authority was made available are attained).

Budget Baseline

Projected Federal spending, revenue and deficit levels based on the assumption that current policies will continue unchanged for the upcoming fiscal year. In determining the budget baseline under Gramm-Rudman-Hollings, the Directors of OMB and CBO shall estimate revenue levels and spending levels for entitlement programs based on continuation of current laws. For estimating discretionary spending amounts (both defense and non-defense), the Directors shall assume an adjustment for inflation (GNP deflator) added to the previous year's discretionary spending levels. The baseline should include sufficient appropriations to cover a Federal pay raise (without absorption). These estimates are used to determine whether required annual deficit reduction has been achieved and, if it has not been achieved, the amount and percentage by which defense and non-defense outlays must be cut to meet the annual deficit reduction level.

Budget Deficit

The amount by which the Government's outlays exceed its revenues for a given fiscal year. (See Outlays; Revenues.)

Budget Resolution

A resolution passed by both chambers of Congress setting forth, reaffirming, or revising the congressional budget for the U.S. Government for a fiscal year. A budget resolution is a concurrent resolution of Congress. Concurrent resolutions do not require a presidential signature because they are not laws. Budget resolutions do not need to be laws because they are a legislative device for the Congress to regulate itself as it works on spending and revenue bills.

The budget resolution for the upcoming fiscal year is to be adopted by the Congress by April 15. Additional concurrent resolutions revising the previously established budget levels may be adopted by Congress at any time before the end of the fiscal year. It is the usual practice for Congress to revise budget levels for the current fiscal year as part of the budget resolution for the upcoming fiscal year.

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