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Sequestration Preview Report for Fiscal Year 2003 [i] (February 2002)

handle is hein.congrec/cbo0699 and id is 1 raw text is: Sequestration Preview Report for Fiscal Year 2003 February 1, 2002 Under the Balanced Budget and Emergency Deficit Control Act of 1985 (as amended), the Congressional Budget Office (CBO) issues a sequestration preview report before the President submits his annual budget to the Congress. This report, which fulfills that requirement, provides estimates of the discretionary spending caps for 2002 and 2003 and the pay-as-you-go (PAYGO) scorecard through January 31, 2002. Although limits on certain types of discretionary spending continue after fiscal year 2002, the provisions of law that set and govern those limits (contained in section 251 of the Deficit Control Act) will expire on September 30, 2002. As a result, when section 251 expires, those caps become moot. Nevertheless, for 2002, the limits on discretionary spending apply to four categories: overall discretionary, highway, mass transit, and conservation. Both CBO and the Office of Management and Budget (OMB) estimate that spending resulting from legislative action to date is within the limits for each category. Under current law, caps for the two transportation categories continue through 2003, and caps for conservation spending extend through 2006. Under section 252 of the Deficit Control Act, the estimated budgetary effects of mandatory spending or revenue legislation will no longer be recorded on the PAYGO scorecard after fiscal year 2002, effectively shutting down the PAYGO system for new laws. However, the possibility of a sequestration--or cancellation of budgetary resources--of certain mandatory programs will continue through 2006 as a result of PAYGO legislation enacted before the end of 2002. Although recently enacted legislation eliminated the PAYGO balance for 2002, a balance of $110.7 billion remains for 2003. Overview of Sequestration Procedures The Deficit Control Act, as amended by the Budget Enforcement Act of 1990, has two mechanisms that govern federal spending, both enforced through sequestration. Section 251 set limits on the spending provided through the annual appropriation process. If estimated discretionary spending exceeds those limits, the act prescribes a sequestration to eliminate the excess. Section 252 established a PAYGO scorecard to record the projected five-year budgetary effects of each piece of legislation that affects mandatory spending or revenues. If such legislation is estimated to result in a net increase in the deficit (or reduction in the surplus), the act calls for reductions in mandatory programs (not otherwise exempt) sufficient to offset that change in the deficit (or surplus). Discretionary Sequestration Report In January 2002, CBO and OMB published their final sequestration reports for fiscal year 2002. In

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