May 16, 2011
For programs funded through annual appropriations (which are called “discretionary” programs), CBO uses the funding provided for the current fiscal year as the starting point for its baseline budget projections for the coming decade. Specifically, appropriations for those programs are generally assumed to grow each year with inflation.
In March 2011, when CBO prepared its most recent baseline spanning fiscal years 2011 to 2021, it based its projections of discretionary spending on the continuing resolution that was in effect through March 18 (Public Law 112-4). Subsequently, on April 15, full-year appropriations for 2011 were enacted in the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10). CBO has been asked how a 10-year projection of the enacted appropriations would differ from the amounts shown in its baseline projections.
CBO has not prepared new baseline projections incorporating the effects of P.L. 112-10; it will next update its baseline, as usual, in August. But in response to requests from Congressional staff, it has extrapolated through 2021 the full-year amounts of discretionary budget authority provided in P.L. 112-10 and compared the results with its March baseline projections. (Budget authority, also referred to here as “funding,” is the authority provided by law to incur financial obligations that will result in immediate or future outlays of federal government funds.) For that comparison, CBO did not update the factors that it uses to estimate discretionary outlays—the rates at which appropriations are spent, the balances left from appropriations provided in previous years, and other parameters normally revised during the preparation of a new baseline.
Relative to the March baseline, P.L. 112-10 reduced discretionary budget authority for 2011 by $23 billion. Nondefense funding was decreased by nearly $25 billion, whereas funding for defense programs was increased by $2.4 billion. Other reductions in that law applied to mandatory programs (which are governed by permanent law) or were already reflected in CBO’s baseline projections.
Total discretionary outlays in 2011 will be $3.2 billion higher as a result of the legislation, CBO estimates—an increase of $7.5 billion for defense programs, partially offset by a net reduction of $4.4 billion in other spending. (Part of the reason that total outlays will increase this year is that some defense funding was shifted from slower-spending to faster-spending activities.) CBO had previously estimated that the full-year appropriation act will yield a net reduction of $0.4 billion in nonemergency outlays in 2011. (Look here for additional information about CBO’s estimates of enacted 2011 appropriations.) The comparison issued today is different: It includes emergency appropriations, excludes the effects of changes in mandatory programs, and incorporates adjustments to various estimating parameters that were applied to the appropriation act to make them consistent with the March 2011 baseline.
If the full-year funding provided for 2011 grew at the rate of inflation in each of the next 10 years—the assumption underlying baseline projections—total discretionary budget authority over the 2012–2021 period would be $183 billion less than the cumulative amount in CBO’s baseline. The outlays resulting from that budget authority would be $122 billion lower over that period than in the March baseline. Like other CBO estimates of the budgetary effects of legislation, these estimates do not include effects on future interest payments on federal debt held by the public.