1789 U.S. Constitution, Art. I, Sec. 7, revenue bills originate in House (and appropriations, by

Transcription

1 CHRONOLOGY OF FEDERAL BUDGETING, From the Constitution through the Eighteenth Century 1789 U.S. Constitution, Art. I, Sec. 7, revenue bills originate in House (and appropriations, by custom); Art. I, Sec. 9, appropriation needed for expenditure and public receipts and expenditures 1789 An Act to Establish the Treasury Department (I Stat. 12). Established elements underlying federal financial system including disbursements, accounting, and reporting; and offices of Secretary of the Treasury, Comptroller, and Auditor 1791 First internal tax on distilled spirits passed by Congress 1802 Ways and Means Committee established as standing committee 1816 Senate Committee on Finance established 1819 In McCulloch v. Maryland, the U.S. Supreme Court established federal government s immunity from state taxation 1835 Federal debt stood at zero under President Andrew Jackson but soon grows quickly 1837 House Rule XXI. Unauthorized appropriations and appropriations in legislation barred 1850 Senate Rule XV. Unauthorized appropriations barred by the first Senate rule requiring that appropriations carry out existing law 1865 House Appropriations Committee established 1867 House Appropriations Committee created 1871 First Civil Service Commission ( ) created through rider to appropriations bill 1894 Dockery Act. Established fiscal accounting practices

2 Anti-deficiency Act (31 U.S.C et seq.) initiated apportionment of funds (amended in 1950 to allow budgetary reserves and in 1974 to restrict budgetary reserves) and Act prohibits federal agencies from obligating or expending federal funds in advance or in excess of an appropriation or apportionment 1912 Report of the (Taft) Commission on Economy and Efficiency. Expressed need for national budget and executive budget 1913 U.S. Constitution, Amendment Act XVI. Congress fully empowered to tax income 1913 Federal Reserve Act. Established institutions and system for national monetary policy; for the first time Congress delegated considerable power over the federal budget and national economy 1917 Liberty Bond Acts. Authorized Treasury to pay debts and borrow on U.S. credit to specified amount ( debt ceiling ) 1921 Budget and Accounting Act (31 U.S.C et seq.). Established executive budget system, Bureau of the Budget, and General Accounting Office 1933 Congress created independent public corporation, Tennessee Valley Authority (TVA) 1935 Social Security program established 1937 Report of the President s Committee on Administrative Management (Brownlow Committee). Expressed president s managerial role in executive branch and need for powers and staff 1938 Creation of Fanny Mae as mortgage intermediary 1939 Reorganization Plan No. I (Executive Order 8284) transferred Bureau of the Budget with expanded role to new Executive Office of the President

3 Government Corporation Control Act. First attempt to regularize and control government corporations financial activities 1946 Employment Act of Established Council of Economic Advisors and Economic Report of the President 1946 Administrative Procedure Act. Standardized administrative practices among agencies 1946 Legislative Reorganization Act. Established legislative budget (discarded in 1949) 1949 Concluding Report of the Commissions on Organization of the Executive branch of the Government (first Hoover Commission). Emphasized presidential role in executive management and management movement, made recommendations for reorganization of the executive branch, and called for performance budgeting The 1950s 1950 Budget and Accounting Procedures Act. Aimed at control and accountability in executive agencies funds, established requirements for budgeting, accounting, financial reporting, and auditing, and mandated performance budgeting 1950 Omnibus Appropriations Act. All regular spending in a single appropriation bill for first time (but return to separate bills in 1951) Second Hoover Commission. Recommended limiting government activities that compete with private sector and other recommendations on budgetary and financial practices The 1960s 1961 Planning programming budgeting system (PPBS) adopted in Department of Defense 1962 Executive Order Unionization of federal employees encouraged 1965 Bureau of the Budget s bulletin no Provided for PPBS in executive departments

4 4 and agencies (until abandoned in 1971) 1965 Amendment to Social Security Act created Medicare 1966 BOB circular A-76. Implemented government policy to use private suppliers competitive on a cost comparison basis; expanded in President s Commission on Budget Concepts. Unified budget adopted The 1970s 1970 Legislative Reorganization Act. Expanded role of General Accounting Office (program evaluation) and provided for five-year budget projections 1970 Reorganization Plan No. 2. Reconstituted Bureau of the Budget as Office of Management and Budget (OMB) and re-emphasized management role 1970 Creation of Freddie Mac 1971 Requirements for PPBS formally voided 1972 Nixon administration made use of unprecedented, massive rescissions and impoundments in domestic programs 1972 State and Local Fiscal Assistance Act (P. L ). Established general revenue sharing and inaugurated new federalism. Terminated in General Accounting Office issued comprehensive statement of standards for governmental audits 1972 Joint Study Committee on Budget Control established. With significant modifications, report to emerge as 1974 budget act 1973 Comprehensive Employment and Training Act (CETA). Created financial assistance to state and local governments for training and employment 1974 Congressional Budget and Impoundment Control Act. (P. L ). Established

5 5 congressional budget process and timetable. House and Senate Budget Committees, Congressional Budget Office, and procedures for reviewing recessions and deferrals 1974 Automatic cost-of-living adjustments (COLAs) added by amendment to Social Security Act 1977 Office of Management and Budget s bulletin no Zero-base budgeting introduced into executive departments and agencies (and officially terminated in 1981) 1978 Full Employment and Balanced Growth Act (Humphrey-Hawkins Act). Congress authorized president to propose and initiate action with respect to production, prices, and employment 1978 Inspector General Act. Created independent units in major domestic agencies to conduct audits and investigations to reduce fraud, waste, and abuse The 1980s 1980 Reconciliation process. First use as part of first budget resolution after change allowing use at beginning of congressional budget process 1981 Reagan administration abandoned zero-base budgeting through OMB circular A Omnibus Reconciliation Act. Use of reconciliation in first resolution 1981 Economic Recovery Tax Act. ERTA introduced major tax cuts, including reducing highest individual tax bracket 1981 Executive Order required new, major regulations with annual economic impact of $100 million or more be subjected to cost-benefit analysis 1982 Balanced budget amendment approved in Senate but not in House 1982 Immigration and Naturalization Service v. Chadha, U.S. Supreme Court undermined legislative veto

6 Federal Managers Financial Integrity Act (31 U.S.C. 3512) is intended to reduce fraud, waste, and abuse in agency operations by requiring assessment and reporting annually on internal controls and accounting systems 1982 Tax Equity and Fiscal Responsibility Act (TEFRA). TEFRA instituted significant changes in medical and casualty deductions and pensions and retirement plans 1982 OMB stipulated guidelines for evaluating internal controls in accordance with OMB Circular A Alternative Minimum Tax (AMT) enacted to prevent wealthy taxpayers from escaping income taxation because of their heavy use of tax breaks; revised in 1986 tax reform act 1983 Comptroller General issued standards for internal controls in federal agencies 1984 Report of the President s Private Sector Survey on Cost Control (Grace Commission). Emphasizing efficiency and savings, issued forty-seven reports including almost 2500 recommendations and concluded that federal reporting and accounting systems are inadequate 1984 Single Audit Act. Streamlined intergovernmental financial system by establishing uniform requirements for comprehensive, single audit of federal grant recipients 1984 Federal Capital Investment Program Act. As of 1985, the president s annual budget submission is required to highlight capital investment expenditures within the unified budget 1985 Balanced Budget and Emergency Deficit Control Act (GRH, P.L , the Gramm- Rudman-Hollings Act). Provided for annual reductions in the budget deficit from fiscal 1986 to zero in fiscal 1991 (balanced budget) through mandatory sequestration (canceled budget resources) if projected deficit exceeded target; legislative vehicle was debt limit

7 7 extension 1985 Executive Order established OMB s clearance of regulations, including agencies regulatory policy and proposals 1985 General revenue sharing for local governments not reauthorized in reconciliation bill for fiscal Bowsher v. Synar (106 S.Ct. 3181), Supreme Court invalidated GRH s automatic trigger mechanism for sequestration as violation of separation of powers 1986 Tax Reform Act (P.L ). Introduced the Internal Revenue Code of 1986 with major overhaul of tax system including reduced individual tax rates and number of brackets, elimination of many tax deductions and preferences, reinstatement of standard deduction ( ), and revision of alternative minimum tax 1986 Amendment to Defense Authorization Act for fiscal 1987 (P.L , Sec. 1405). Congress mandated that president submit first biennial defense budget for fiscal 1988 and Balanced budget amendment fails by one vote in Senate 1987 Following stock market s plunge in October, successful executive legislative negotiations led to two-year budget agreement 1987 Balanced Budget and Emergency Deficit Control Reaffirmation Act (P.L ). Amended 1985 GRH to reset deficit reduction targets and postpone balanced budget to 1993; automatic sequestration trigger restored and responsibility assigned to OMB; legislative vehicle was debt limit extension 1988 Accepting Republican nomination, George Bush promised no tax increases in his read my lips pledge

8 South Carolina v. Baker. Upholding sec. 310(b)(I) of 1982 TEFRA, Supreme Court found that there is no constitutional entitlement not to pay taxes on income earned from state and local bonds 1989 In effort to reduce pork-barrel politics, independent commission was established by law to recommend closing or downsizing obsolete military bases Deficit exceeded GRH deficit targets each fiscal year The 1990s 1990 President Bush s submitted budget included proposal for constitutional amendment on balanced budget, item veto authority, biennial budgeting, and more 1990 For second time in history, House considered a balanced budget amendment to the Constitution and it fell seven votes short of requisite two-thirds majority; Senate Judiciary Committee reported balanced budget amendment 1990 Federal employees temporarily furloughed during budget impasse 1990 Federal Credit Reform Act changed budgetary treatment of loans and loan guarantees through government-owned and government-sponsored corporations to subsidize cost of loans for which funds must be budgeted and appropriated 1990 Chief Financial Officers (CFO) Act assigned responsibility for federal financial management to OMB s deputy director for management and the Office of Federal Financial Management; provided for appointing CFOs in 23 major departments and CFO council; effort to establish integrated financial management systems linking budgeting and accounting and monitoring budgetary execution; requires agencies prepare auditable financial statements 1990 OMB, Treasury, and GAO establish Federal Accounting Standards Advisory Board

9 9 (FASAB) to develop uniform accounting standards 1990 Omnibus Budgeting Reconciliation Act (P.L ) for fiscal 1991 raised income tax rates for high-income earners, incorporated five-year spending reduction aimed at saving approximately $500 billion, and effectively repealed GRH; subsequent appropriations passed, many without final legislative text in hand 1990 Budget Enforcement Act of 1990 (BEA; Title XIII of 1990 OBRA) made major changes in GRH and 1974 Congressional Budget Act; shifted focus from fixed deficit limits to spending control; created new deficit controls based on variable deficit targets extended through fiscal 1995; established caps on discretionary spending and the pay-as-you-go rule (deficit neutral) for revenues and direct spending; and revised sequestration procedures (mini-sequesters) 1992 Multiple versions of balanced budget amendments proposed but fail to pass Congress 1993 President Clinton s deficit reduction package increased the marginal tax rate for highincome earners 1993 OMB revised its 1984 circular A-127, Financial Management Systems, and required that each agency create a single, integrated system of financial management 1993 National Performance Review (NPR) included budgetary and financial management recommendations, including increased managerial discretion (e.g., lapses, staffing ceilings, restrictive itemization) and biennial budget cycle 1993 Executive Order instructed agencies to cut employment by 5 percent or about 100,000 employees from 1993 to Government Performance and Results Act of 1993 (GPRA; P.L ). On an eightyear implementation schedule, required federal agencies to set annual performance

10 10 targets; OMB to submit government-wide performance plan budget beginning for fiscal the discretionary spending limits and the PAYGO rules for mandatory spending in the 1990 Budget Enforcement Act are extended through fiscal year President Clinton adjusted maximum deficit amount under BEA when budget was submitted 1994 In his budget message for fiscal 1995, President Clinton claimed cuts in approximately 340 discretionary programs in 1994 and proposed cuts in approximately 300 non-defense programs, including termination of more than 100 programs 1994 Federal Acquisition Streamlining Act updated and simplified procurement procedures 1994 Contract with America signed by 376 Republican candidates, including many congressional candidates; with accent on accountability and reduced governmental role, proposals encompassed independent, comprehensive audit of Congress; supermajority for passing tax increases; zero-baseline budgeting; balanced budget and tax limit amendment; line-item veto; regulatory reform including use of risk assessment and costbenefit analysis; and unfunded mandate reform 1994 OMB s circular A-34, Instructions on Budget Execution, revised to account for changes in laws and practices since last major revision in OMB s circular A-11, Preparation and Submission of Budget Estimates, revised to account for Government Performance and Results Act of Line-item veto and balanced budget amendment again defeated 1995 Unfunded Mandates Reform Act (P.L ). With emphasis on disclosure and accountability, required that CBO provide cost estimates to authorizing committee for

11 11 government mandates over $50 million threshold ($100 million for private sector mandates), excluding categories such as constitutionally guaranteed civil rights; created point of order against considering a bill without CBO s cost estimate and against unfunded mandate with aggregate cost in excess of threshold; in effect, Congress must go on record as endorsing the mandate 1995 Under federal legislation, a financial oversight entity (control board) is established for Washington, D.C OMB issued final revisions to circular A-87, Cost Principles for States, Local and Tribal Governments, thereby setting costing standards for grants, reimbursements, and contracts 1995 Bills introduced to require use of risk assessment and cost-benefit analysis in federal agencies enlivened, but left unsettled, methodological issues in budgeting and policy making 1995 Moratorium on regulatory rule making passed House and Senate 1995 Congress moved to terminate as entitlements and devolve program responsibility to states Aid to Families with Dependent Children, food stamps, and Medicaid by approving dollar caps on block grants to states 1995 Debt ceiling held hostage (at $4.9 trillion) in budget standoff between president and Congress; federal agencies closed, and 800,000 nonessential employees temporarily furloughed in November 1995 More than one-half of states budgets use effectiveness and/or productivity measures for new or revised programs, revise productivity measures when funding levels change, discuss productivity in budget narrative, and include effectiveness and/or productivity

12 12 measures in budget document of some or most agencies 1996 On July 18, House of Representatives passes (by vote of 256 to 170) its budget reconciliation package, H.R. 3734, containing a modified version of the Personal Responsibility and Work Opportunity Act of 1996, H.R The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) (Pub. L ), as amended, is the welfare reform law that established the Temporary Assistance for Needy Families (TANF) program. TANF is a block grant program designed to make dramatic reforms to the welfare system by moving recipients into work and turning welfare into a program of temporary assistance. TANF replaced the national welfare program known as Aid to Families with Dependent Children (AFDC) and the related programs known as the Job Opportunities and Basic Skills Training (JOBS) program and the Emergency Assistance (EA) program 1996 Line Item Veto Act of 1996 (P.L ) authorized the president to cancel discretionary budget authority, new entitlements, and limited tax benefits 1996 Congress fails to override President Clinton s veto of the defense authorization, thereby making the entire defense appropriation unauthorized 1997 Budget Enforcement Act (1997 BEA) again extended the discretionary spending caps and the PAYGO rules for mandatory spending through 2002 and required OMB to issue an end-of- session report after Congress adjourns sine die to determine whether or not a sequester is required 1997 Government Performance and Results Act requires federal agencies to prepare strategic plans starting with fiscal year Political battle over highway bill, Transportation Equity Act for the 21st Century (P.L.

13 ) 1998 In Clinton v. City of New York, 524 U.S. 417 (1998), the U.S. Supreme Court declared the Line-Item Veto Act of 1996 in violation of Article I, Section 7, Clause 2 of the Constitution 1998 The first surplus since 1969 is reported for the federal budget 1999 Government Performance and Results Act of 1993 requires federal agencies to prepare annual performance plans starting with fiscal year 1999 The Twenty-First Century 2000 Government Performance and Results Act requires federal agencies to submit to the president and Congress an annual program performance report comparing actual performance with their plans beginning in fiscal year Economy entered official recession in March 2001 On September 11, four hijacked airplanes are used in an attack of international terrorism at World Trade Center, the Pentagon and Shankesville, Pennsylvania; immediate budgetary ramifications include federal aid to New York City; rebuilding the Pentagon; $40 billion aid to airlines and insurance bailouts; and economic losses to New York City and the travel, tourist and other industries 2001 Three days after the attack, Congress, at request of President Bush, votes $40 billion in emergency funds 2001 U.S. forces go into Afghanistan on October When Enron collapsed and is declared bankrupt in December, it had about $5 billion in outstanding prepays that were virtually unknown to the company s creditors, investors and business associates; report of Senate Governmental Affairs Committee s Permanent

14 14 Subcommittee on Investigations found that the board had failed in its fiduciary duty to protect Enron shareholders and that it shares responsibility for Enron s deceptions and its bankruptcy 2001 Economic Growth and Tax Relief Reconciliation Act (EGTRRA, P.L ) reduces marginal income tax rates, creates a 10 percent bracket, increases child credit, partially relieves the marriage penalty, increases the standard deduction, expands education and pension contribution options, and phases out the estate tax (so-called death tax); changes set to expire (sunset) in Texas jury finds the audit firm of Arthur Andersen guilty of obstruction of justice for destroying documents during Security and Exchange Commission s investigation of Enron 2002 Sarbanes-Oxley Act is signed into law in July in response to numerous accounting scandals that led to bankruptcy filings of Enron, WorldCom and Global Crossing; corporate responsibility legislation provides tougher penalties for fraud and holds executives personally responsible for their corporate financial statements BEA s discretionary spending cap and PAYGO requirement for mandatory spending expire, and Congress continues to use the concurrent resolution on the budget to establish and enforce congressional budgetary limits 2002 In March, the White House promotes proposed pension changes and partial privatization of Social Security as part of an overhaul of retirement financing 2002 Senate voted to authorize the use of U.S. armed forces in Iraq on October On November 25, President Bush signed the Homeland Security Act of 2002 that restructures the executive branch to meet the threat posed by terrorism by creating the

15 15 cabinet-level Department of Homeland Security 2002 Budget Enforcement Act (BEA) expired on September 30 and the pay-as-you-go (PAYGO) requirement expired at the end of the year 2002 The budget deficit in FY 2002 is the first since budgetary balance in Aimed at economic stimulation, Jobs and Growth Tax Relief Reconciliation Act (JGTRRA, P.L ) accelerates implementation of certain tax reductions originally enacted as part of EGTRRA enacted in U.S. forces invaded Iraq on March Medicare reform bill, Medicare Modernization Act (MMA) includes a new prescription drug benefit and requires the Medicare trustees to issue a warning when general revenue Medicare funding is projected to exceed 45 percent of Medicare s total expenditures 2004 OMB revised Circular A The GAO Human Capital Reform Act of 2004, Pub. L , 118 Stat. 811 (2004), changed the GAO s legal name to the Government Accountability Office, decoupled GAO employees from the federal employee pay system and established a performance-based compensation system 2004 Working Families Tax Relief Act (WFTRA) increases the child tax credit, ends marriage penalty by increasing the standard deduction for married filing jointly, and increases a alternative minimum tax (AMT) exemption 2005 President s Advisory Panel on Tax Reform issues report but there is little interest in Congress and the White House to advance its recommendations 2005 Deficit Reduction Act reauthorizes the Temporary Assistance for Needy Families (TANF) program administered by HHS Administration for Children and Families (ACF) 2005 OMB issues a memorandum to executive branch agencies that imposes a budget-

16 16 neutrality requirement on discretionary administrative actions (such as regulations and guidance to states or contractors) affecting mandatory spending and, in effect, establishes a PAYGO requirement for administrative actions on entitlement programs 2005 Bankruptcy Prevention and Consumer Protection Act, Public Law No passed 2005 Hurricanes Katrina, Rita, and Wilma cause unprecedented damage 2006 Deficit Reduction Act appropriated $2 billion for certain health care costs related to Hurricane Katrina through Medicaid and the State Children's Health Insurance Program (SCHIP) 2006 Democrats win both houses of Congress, in which committees change leadership 2006 Expiration of rules governing the preparation of CBO s baseline budget as originally required by the Balanced Budget and Emergency Deficit Control Act of Budget Resolution conference report formally incorporates PAYGO rule 2006 August, defaults on subprime mortgages start much earlier in the mortgage process and residential housing market cooling 2007 Using his second veto since taking office, President Bush vetoes war supplemental funding bill over Democrats timetable for withdrawal from Iraq 2007 U.S. Comptroller General issues the 2007 revision of Government Auditing Standards 2007 Medicare funding warning was triggered in the Medicare Trustees Report 2007 Honest Leadership and Open Government Act of imposes new limits on gifts and travel and new disclosure requirements on lobbyists 2007 College Cost Reduction and Access Act increases Pell Grants, allows loan forgiveness for many public service careers, and provides other benefits 2007 Summer, mortgage turmoil surfaces as problems with subprime mortgages spread to

17 17 conventional home loans and severe credit tightening seen 2007 Fall, global freeze in credit markets acknowledged and forecasts of economic growth reduced 2007 December 12, to inject liquidity into credit markets, Federal Reserve creates a Term Auction Facility (TAF) to allow sound financial institutions banks to get Fed funds by pledging collateral 2007 December, U.S. enters recession 2008 February 7, Congress passes economic stimulus with tax rebates averaging $600 $1200 for most taxpayers 2008 Housing and Economic Recovery Act, July, establishes new regulatory agency, Federal Housing Finance Agency (FHFA), with more regulatory authority over Fannie Mae and Freddie Mac and creates the HOPE for Homeowners Program to help borrowers facing foreclosure refinance their homes through the Federal Housing Administration (FHA) 2008 September 7, the federal government takes control of Fannie Mae and Freddie Mac and takes a financial stake in the mortgage giants 2008 September 15, Lehman Brothers becomes the largest firm to declare bankruptcy in U.S. history 2008 September 15, government announces $85 billion emergency loan to AIG (American International Group) in exchange for a nearly 80 percent equity stake in the company 2008 September, the Federal Reserve and several other central banks undertake emergency lending to credit markets and financial institutions 2008 September 22, Bush administration sends unprecedented $700 billion financial bailout legislation to Congress to buy toxic assets from financial institutions, but disagreement

18 18 over executive compensation, government's stake in companies taking bailout money, and court intervention in homeowners' mortgages to avoid foreclosure delays passage 2008 October 1 Senate passes and October 3 House passes $700 billion government bailout of the financial industry and president signs Emergency Economic Stabilization Act that includes $700 billion Troubled Asset Relief Program (TARP) and an increase in the FDIC insurance on bank deposits 2008 October 3, Governor Arnold Swarzenegger announces that California may need to borrow $7 billion in an emergency loan because loans are not available in the credit crunch and funds would pay for public services until tax revenue comes in April 2008 October, European leaders intervene in their financial and banking crises as fears of global financial crisis and recession spread 2008 October, second stage of global financial crisis seen as lenders anticipate credit card losses from rising unemployment and financial pressures 2008 October November, stock market plunges and sets record daily losses and gains in volatile sessions 2008 November 5, exit polls in presidential election show about 60 percent of voters list economy as top issue 2008 Mid-November, U.S. automakers testify to Congress about their need for government aid 2008 December 16, Federal Reserve cuts a key interest rate to the lowest level on record 2008 December 19, President Bush announces $17.4 billion in loans to General Motors and Chrysler to protect the 1.1 million workers in U.S. auto industry and requiring strong restructuring plans 2008 Year ends with debt ceiling at $11.3 trillion