Implementing the Statutory Limits on Discretionary Funding for Fiscal Year 2024

The Congressional Budget Office is providing information concerning implementation of the caps on most discretionary funding for fiscal year 2024 as established by the Fiscal Responsibility Act of 2023 (FRA; Public Law 118-5). The FRA sets separate caps (in law they are called limits) on defense funding (in law, revised security, which is budget function 050) and on nondefense funding (revised nonsecurity, which covers all other budget functions).

This letter provides CBO’s assessment of the effects of the caps on discretionary funding in fiscal year 2024. Those effects will depend on the nature and timing of appropriation legislation and on decisions by the Office of Management and Budget (OMB). If necessary, the caps will be enforced by OMB through sequestration, the process by which across-the-board reductions are applied to budgetary resources.

The discussion here uses the example of discretionary funding under the current continuing resolution (the Further Continuing Appropriations and Other Extensions Act, 2024; P.L. 118-22), which provides funding for fiscal year 2024. In the scenarios CBO examined, if enacted funding equaled the annualized amount of funding under the continuing resolution, sequestration would be required and would result in across-the-board reductions ranging from 5 percent to 9 percent for nondefense funding and from zero to 1 percent for defense funding, depending on when appropriations were enacted and what form they took.

Because CBO’s budget projections can differ from those of OMB and because changes to budgetary resources could occur between the time of this writing and the point at which sequestration was required, the sequestration percentages could differ from those estimated for this letter. The ultimate authority to decide those percentages rests with OMB. Lawmakers (that is, the Congress and the President) could affect the outcomes—whether there is a sequestration and how large it would be—by enacting legislation that would provide different amounts of funding than assumed in this letter, cancel budget authority that had been provided previously (which can create more room under the caps), waive or alter the caps, or specify how much funding qualifies for adjustments to the caps.