Module/Week 6 Discussion: The Politics of Budget Implementation

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7 Budget Execution: The Politics of Adaptation

Numerous provisions of the legislation purport to condition the authority of officers to spend or reallocate funds on the approval of congressional committees. These are impermissible forms of legislative aggrandizement in the execution of the laws other than by enactment of statutes…. [Executive] spending decisions shall not be treated as dependent on the approval of congressional committees.

—President Barack Obama, March 11, 2009

… [A]lthough the President may treat committee vetoes as having no legal force or effect, agencies have a different attitude. They have to live with their review committees, year after year, and have a much greater incentive to make accommodations and stick by them.

—Louis Fisher, Congressional Research Service, 1993

A budget is passed at the end of a long period of analysis, debate, disagreement, and compromise. As a result, it often seems to be the end point of the budgetary process, but because of a changing economy, poor predictions of revenues and expenditures, continuing political battles, changed leadership, and the altered salience of public problems, the budget may change after it is passed. When the environment changes in the middle of the year, the budget must be flexible enough to adapt. Making changes because of unavoidable circumstances, while ensuring that the policy agreements underlying the budget are observed, is the task of budget implementation.

The emphasis in budget execution is on carrying out the budget exactly as it was enacted, which makes budget execution seem highly technical, the proper sphere of administrators and accountants, devoid of political content. In reality, budget execution is also political, because changes during the year are inevitable and some of them are likely to be policy related.

Budget actors may tentatively resolve an issue, expressing the result in the formal budget that is passed in public view, but later back off from the agreement, bringing about new negotiations. Sometimes actors distort information to get an agreement that will pass but end up with an unworkable budget and have to modify it later. A certain amount of flexibility and change during the budget year is both necessary and desirable, but once the door is open to changes, some of them may be inappropriate and may undo the agreements reached in public or challenge constitutional balance of powers.

How is this tension between adaptability and accountability resolved? First, budgets are generally implemented as passed. The requirement to do so is taken seriously, so that consideration of important policy issues that arise during the year is often delayed until the next full, open budget process. Second, the legislative bodies carefully monitor budget implementation to ensure that important policy decisions are not slipped in among the routine adaptations.

Policy-related budget decisions may be allowed during the year under particular conditions. When new presidents are elected, they may be given fairly broad discretion to reshape the existing budget to fit their policies. Or Congress may design and implement new programs for relief of farmers in the middle of a drought or to help the unemployed during a deep recession. These decisions are made in the normal way, by the usual committees; what is unusual about them is that they feed into the budget in the middle of the year and they may be made in haste. In these cases, the changes have high visibility and widespread public acceptance. They do not threaten accountability.

Despite the care with which budgets are normally implemented, deviations from the budget that are not routine and minor sometimes occur. These may be of two kinds: The first is a violation of fiscal control, resulting in overspending or waste, fraud, or abuse. The second is a violation of policy control, in which someone in the executive branch makes policy changes in the budget without going through the whole formal, public business of lawmaking. If the consequences are serious enough, irritating enough, or embarrassing enough, the chief executive or the legislature may increase control over budget implementation to prevent a recurrence. The legislature may increase its control over the executive; the chief executive may increase control over the agencies. The result may be an increase in the number and severity of constraints over budget implementation.

Tools for Changing the Budget

Budgets can only be changed in specific ways after the budget year has begun. These include supplemental appropriations and rescissions, deferrals and other holdbacks, transfers between accounts or funds, and reprogramming—shifting money between programs or projects within accounts or funds. (State and local governments use funds as the point of control while the national government uses accounts, but they function similarly.)

A supplemental appropriation is a budget law that adds money to some existing function or new purpose during the year. The money can come from fund balances, unexpected revenue increases, or contingency accounts, or it can come from rescissions—that is, withdrawals of previously granted legal authorization to spend money. In some cases, however, there may be a supplemental appropriation without extra funds to pay for it. In such cases, supplemental appropriations are paid for by borrowing and contribute to deficits.

A deferral, a term used at the federal level, occurs when the executive delays spending money that has been appropriated for a specific project or program. At the state or local level, a chief executive may ask for a holdback, usually a fixed and small percentage of the approved budget of all or nearly all agencies, that agencies are prohibited from spending. Alternatively—or in addition—capital projects may be frozen or personnel lines left unfilled. Holdbacks can be insurance against fluctuating revenues or unexpected expenditures, or they can be used to create a pool of funds to spend for special, politically favored projects.

Interfund transfers take money from one appropriation account or fund for a designated purpose and spend it in a different fund or appropriation account, presumably for a related purpose. Such transfers normally go back to the legislative body for approval; they represent a sort of budget amendment and reprioritization. Reprogrammings, by contrast, are transfers that occur within funds or accounts, often within the same administrative unit. They may shift money from one line in the budget to another, from one project to another, or from one category of spending, such as capital improvements, to another, such as supplies or contractual services. Rules typically govern the allowable amounts of such shifts and sometimes govern where the money can come from. At the federal level, some reprogrammings require advance notice to congressional committees, while others only require after-the-fact reporting. Without those reports, Congress could lose control of budget implementation and have little idea how the money legislators approved had actually been spent.

Supplemental Appropriations, Rescissions, and Deferrals

Supplemental appropriations and rescissions are most common at the national level as tools for reshaping the budget midyear. Both are laws, passed in the normal manner. They may be initiated by the president or by Congress, and if initiated by the president, they may be raised, lowered, or denied by Congress.

Supplemental appropriations were used extensively in the 1970s and most of the 1980s. Figure 7.1 shows the amounts of supplemental appropriations compared to the size of deficits and the size of the total budget through 2010. Supplementals contributed directly to the deficits, because many of them were treated as emergency spending; budget rules do not require any additional revenue or spending reductions to offset emergency expenditures.

After budgetary balance was achieved in 1998, the pressure to limit emergency supplementals was reduced, and they began to grow again. Items that were not clearly emergencies or unpredictable crept into the emergency supplementals, where they did not have to be offset by new revenues or budget cuts elsewhere. Perhaps the most glaring example was the funding of the 2000 census with emergency supplemental funding, which is to say, by deficit spending. Elected officials could not argue that the census was not anticipated well in advance or represented an emergency.

Figure 7.1 Supplemental Spending as a Percentage of the Deficit and Budget Authority, 2000–2010

Source: For the supplemental appropriations, Congressional Budget Office, “Supplemental Appropriations 2000–2010,” http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/66xx/doc6630/suppapprops.pdf; budget authority and deficit data are from the Office of Management and Budget, “Budget of the U.S. Government,” Historical Tables, 2012, Tables 1–1 and 5–2.

Note: The figure for the deficit includes both on-budget and off-budget; the on-budget figure alone would be considerably higher.

After 2002, when the Budget Enforcement Act lapsed and the response to September 11, 2001, increased in spending for antiterrorist activities and war, spending through supplementals soared, as did the deficit. The wars in Afghanistan and in Iraq were funded through emergency supplementals until 2008, even though many of the expenses could have been anticipated in the regular budget. The effect was to swell the deficit.

Why fund wars with supplemental appropriations? By leaving a huge chunk of spending out of the regular budget and funding it later during the year, the president made the deficit look smaller when he submitted his annual budget proposal. If the real size of the deficit were widely advertised, there might have been more pressure to curtail it and hence to limit the tax reductions that were the cornerstone of the George W. Bush administration. Second, emergency supplementals for war are nearly impossible to vote against; they receive very little congressional scrutiny and provide maximum flexibility to the Department of Defense in spending the funds. Third, when the administration borrows to pay for a war, present voters do not have to pay for it, and hence they are less likely to oppose the policy that launched the war. The costs of the war are obscured.

The Obama administration vowed to end the funding of the wars through emergency supplemental appropriations, because much of the need for war spending could be estimated in advance. In fact, he did reduce the level of supplementals. During his administration, war costs were anticipated in the budget, but much of that spending was taken “off budget” in the Overseas Contingency Operations (OCO) fund. Because the OCO was off budget, its outlays did not have to be offset with additional revenues or spending cuts and hence added to the deficit just as the supplementals had. There were no supplemental appropriations in 2011 or 2012. For 2013, supplemental appropriations cost $50.5 billion, mostly for relief for Hurricane Sandy destruction, with almost no defense spending; for 2014, the levels were down again to a modest $225 million.1 There were no emergency supplementals in 2015 or 2016. In 2017, Congress passed an emergency supplemental appropriation of $15.25 billion for disaster relief; none of it was for war.

While emergency supplementals do not have to be offset, sometimes they are, and nonemergency supplementals have routinely been offset. Rescinding or legally withdrawing permission to spend money for some program is one way of funding (offsetting) a supplemental appropriation. Paying for particular supplementary spending through selective rescissions has become less common in recent years, but rescissions that cut many programs by a single percentage have become more common. “The total amount of budget authority reduced pursuant to the FY2013 across-the-board rescissions was in excess of $2.3 billion.” This kind of rescission is a way of enforcing agreements on budget totals.2

Sometimes, however, rescissions occur independently of supplemental appropriations; they must be passed by both houses of Congress and signed by the president. At the national level, rescissions were used extensively by presidents until 2000, but the George W. Bush and the Obama administrations did not use them much. Congress continued to use rescissions, cutting over $80 billion during the eight years of the Bush administration and another $40 billion during the first four Obama years.

Most rescissions are technical, based on money that need not be spent, and are not policy related. For example, between 2011 and 2017, $42.8 billion were rescinded from the Child Health Insurance Program. The appropriations for the program were in a fund set aside to give bonuses to states that expanded Medicaid for poor children, another insurance program that could protect poor children, but the states generally did not make the shift or earn the bonus, so the funds were rescinded.3

During the Trump administration, Congress continued to use rescissions. In the appropriations for 2017, one can see glimmers of what look like policy choices in some of these rescissions. For example, rescissions in the Department of Defense explicitly excluded the OCO for wars and antiterrorist activities, but money was rescinded from research in NOAA (National Oceanic and Atmospheric Agency), an agency that has explored evidence of global warming. The Trump administration policy was to ignore climate change, and the president pulled the country out of an agreement to reduce carbon emissions to help minimize the effects of climate change. In the Justice Department, there was a rescission in the budget of the Office on Violence Against Women, Prevention and Prosecution Programs. President Trump had boasted about his ability to grope women. In addition, $51 million was cut from the salaries of the FBI. The FBI was under attack from Trump and his supporters for continuing to investigate the relationship between President Trump’s entourage and the Russians during the presidential election.

Presidential rescissions came back into the news in 2018, though it was not immediately clear if Congress would go along. To break a deadlock on the budget in 2018, Democrats and Republicans in Congress agreed to a deal in which both defense and domestic spending were increased, exceeding the spending caps in both areas. Conservatives complained bitterly. The president initially threatened to veto the measure, but he did sign it, while expressing his displeasure with it. Shortly after it was signed, he stated his desire to rescind—cancel—the social spending increases. He cannot do this without congressional consent. While some conservative members of the House supported this effort, some Senators objected, arguing that if the deal was unwound, it would be nearly impossible to get future bipartisan agreement.4

Rescissions are common at the state level. Because states are forbidden to run deficits, when revenues drop unexpectedly during the year, the state may have to rescind spending authority granted to its agencies in the annual budget. In anticipation of such rescissions, agencies sometimes hold back some of their budget rather than spend at the normal rate, to have some money on hand to cut if a rescission occurs. New hires may be delayed until it is clear that a rescission will not take place or will not be large enough to prevent new hires. Capital projects may be delayed, with the idea that money set aside for them need not be spent this fiscal year and can be applied for again in later years. It is difficult or impossible to cut in a rational manner to cope with rescissions that occur during the year; what is cut is what has not yet been committed. If rescissions become common, agencies are likely to organize their expenditures so there will be resources to cut midyear. They may change the ratio of permanent to temporary employees, for example, so that there will be enough temporary staff to cut, if necessary, on short notice. The later in the year a rescission occurs, the harder it is to implement. An 11 percent rescission that occurs in the last half of the fiscal year effectively cuts 22 percent of the remaining revenues for the year. In some states, the legislature grants the governor power to cut the budget midyear up to a given percentage without coming back for legislative approval. These are called midyear cuts rather than rescissions, because rescissions by definition have to be approved by the legislature and signed by the governor.

Deferrals, unlike rescissions, are not based on formal legislation passed by the legislature and signed by the executive. The executive decides to delay (defer) some expenditure, presumably for technical reasons, such as a project not being ready to begin. In the past, however, presidents have found it tempting to use deferrals in somewhat the same way as governors use line-item vetoes—to take out of the budget legislative add-ons to executive budget proposals. All a president had to do was delay indefinitely any expenditure of which he or she disapproved. Such policy-based delays violated the constitutionally required balance of powers, as the presidents ignored congressional decisions with which they disagreed. In response, Congress included in the 1974 Congressional Budget Reform Act a requirement that the president propose deferrals to Congress; if Congress did not disapprove, the spending could be deferred. This procedure was declared unconstitutional in 1983 in the INS v. Chadha case, because under the 1974 Congressional Budget Reform Act, one house rather than both houses could veto a presidential proposal. From then on, so-called legislative vetoes were considered illegal.

Congress responded to the elimination of its veto power over deferrals by putting its rejections of them into supplemental appropriations and passing them as they would other laws. In 1986 when Ronald Reagan deferred some $10 billion that he did not want spent, “Congress’s response was to insert a provision in that year’s supplemental appropriation bill nullifying most of the policy deferrals.”5 If the president wanted the supplemental appropriation, he had to sign the bill including the rejections of his deferrals.

Congress questioned the president’s legal ability to defer funds for policy purposes. In 1987 the U.S. Court of Appeals for the District of Columbia agreed with Congress, barring any kind of policy-based deferral.6 Nevertheless, such deferrals still occur. (See the following minicase “Policy Deferrals in the Department of State.”)

“Deferrals” is a term applied to the federal budget. At the state and local level, the related mechanism is called a “holdback.” Most holdbacks at the state level are not policy related. They are a tool used to rebalance the budget during the year, if revenues are inadequate to fund the budget that was passed and signed into law. Because governors usually have line-item vetoes and sometimes have amendatory vetoes, normally it is not necessary for them to withhold spending on projects that the legislature might add to their budget requests; they can just line out or veto those parts of the budget bill.

Though the intent is to give the governor power to reduce spending during the year to rebalance the budget if revenues fail to meet projections, the governor’s holdback authority can be used to simply not spend the money that the legislature has added or added back to the governor’s budget proposal. The aggressive use of this tool has generated many lawsuits by those whose budgets have been cut in this fashion.

For example, in 2010 Governor Paterson in New York withheld hundreds of millions of dollars in school and local government funding, prompting a lawsuit against him by the teachers’ union, the school boards, and others. The legislature had rejected the governor’s budget cutting plan, which included cuts to the schools. The governor signed the budget approved by the legislature and then proceeded to withhold the spending. The lawsuit charged the governor with violating the constitutional separation of powers and the constitutional mandate to fund education.7 The funds were paid after the lawsuit was filed, but the lawsuit continued. Then for a second time during the year, the governor delayed payments to the schools, saying he would pay them two months later if cash was available at that time; later he argued that cash was insufficient to make the payment by the stipulated time. This second delay prompted a second lawsuit.

Two earlier cases in Connecticut by cities and school districts established that when revenues were insufficient to pay the budgeted amounts, the governor’s power to withhold funds that had been legally appropriated and signed by the governor did not extend to aid to cities and school districts. The governor’s powers to withhold budgeted funds applied only to the budgets of state agencies.8

Governors’ holdbacks can be for technical reasons, a requirement imposed by the need to balance the budget. But they can also be used to try to impose a gubernatorial policy over a legislative one. (See the minicase “Using Holdbacks to Change Legislative Priorities—Maryland” on page 252 for an example.)

Minicase Policy Deferrals in the Department of State

Policy deferrals, having been abused, were made illegal and have not occurred in a long time. But in 2017 and 2018, the Department of State refused to spend money authorized by Congress to oppose terrorist propaganda and respond to election interference by foreign countries. Prior to 2016, the program’s mission was limited to countering terrorists’ propaganda, but considering the evidence of Russian meddling in the 2016 election, Congress expanded the program’s role to include battling such interference. The administration refused to spend the money Congress allocated, offering excuses for inaction—such as that the program was part of an ongoing policy review, the money would be wasted, and the task was difficult—and promising action that was then inexplicably delayed. While the task is undoubtedly difficult, the likely reasons for the refusal to spend the appropriation were the administration’s reluctance to acknowledge Russian interference in the election on the one hand, and unwillingness to aggravate Russia on the other.

Although sponsors of the legislation have complained loudly, the deferral has continued for many months, without the administration following the legal procedure of notifying Congress. Without that notification, Congress has few tools to force the administration to spend the money. The normal threat to reduce the budget for failure to comply with congressional intent would be completely useless in light of the administration’s proposals to gut the State Department’s budget and the congressional goal of getting the state department to actually spend the money. Oddly, the Government Accountability Office, which has responsibility for overseeing the rescission and deferral process, has not offered a legal opinion on the missing notice of intention to defer spending. Congressional committee chairs (and other legislators) can ask the General Accounting Office (GAO) to act on the matter, but they do not seem to have done so. Congress could threaten the budget of some project the president values highly, but it has not done that either. The lack of force from Congress has made at least one seasoned observer question whether the Republican-dominated Congress is really interested in countering Russian influence in the election.

Sources: Gardiner Harris, “State Dept. Was Granted $120 Million to Fight Russian Meddling. It has spent $0,” New York Times, March 4, 2018, https://www.nytimes.com/2018/03/04/world/europe/state-department-russia-global-engagement-center.html;

Stan Collender, “GOP Congress Is Complicit in State Department Not Spending Russian Investigation Dollars,” Forbes, March 11, 2018, https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/stancollender/2018/03/11/gop-congress-is-complicit-in-state-department-not-spending-russian-investigation-dollars/&refURL=https://www.google.com/&referrer=https://www.google.com/.

Minicase Using Holdbacks to Change Legislative Priorities—Maryland

Governor Hogan in 2015 held back $68 million that the legislature granted to pay for an education equalization formula. He wanted to spend the money on the pension fund instead, since the legislative budget took money due to the pension fund to spend on other programs. Hogan also planned to use the $68 million to fund a one-time increase in public employees’ wages and to restore cuts he had made to Medicaid and mental health programs. Overruling the legislature’s decision, the governor roused much opposition from affected local government officials. Despite opposition, he did not back down, so the legislature passed a bill that required the governor to fund the education program in the future. The governor said he would allow the bill to become law without his signature, as he did not have the votes to prevent an override if he vetoed the measure.

Source: Len Lazarick, “Hogan Rejects Pressure for School Aid, But Surrenders in the Long Term,” The Maryland Reporter, May 14, 2015, http://marylandreporter.com/2015/05/14/hogan-rejects-pressure-for-school-aid-but-surrenders-in-the-long-term/.

Reprogramming

Reprogramming is taking some or all of the money that has been budgeted to one program or project and transferring it to another in the same account or fund during the fiscal year. Reprogramming may make good managerial sense if the money cannot be appropriately spent as budgeted and other urgent needs for the money occur during the year.

Reprogramming can help an agency adapt to unexpected contingencies without requiring a supplemental appropriation. Some agencies intentionally underspend to create a pool of funds that can be spent elsewhere. However, extensive reprogramming can alter the approved budget and change the legislative priorities reflected in the appropriations. To monitor changes taking place and prevent changes that threaten legislative policies, the legislative body may set guidelines for reprogramming, limiting the total amount that can be shifted, reducing the size of the units within which flexible choices can be exercised (say, from accounts to subaccounts), requiring advance notice and explanation of reprogramming, or requiring extensive quarterly reporting after the reprogramming has taken place. Another approach is to prohibit large year-end carryover budgets or other possible sources of reprogramming funds.

Reprogramming does take place at the state and local levels and sometimes becomes controversial, but it has been a more visible issue at the national level. Congress has tried to maintain agencies’ ability to adapt to changing situations, while preventing them from using reprogramming to thwart its will. It does this by issuing guidelines to control rather than prevent reprogramming. Guidelines often include wording such as, “Reprogramming may be used for unforeseen events but only if delay until the next budget cycle would result in excessive costs or damage.” Prohibitions include any projects for which Congress has already denied funding and reprogramming into areas where Congress has just cut the budget. These guidelines may appear in committee report language (without the force of law) or appropriation legislation (with the force of law). Committees often ask the agencies to report in advance reprogrammings above a given dollar amount, which gives the committee members a chance to object if the reprogramming has policy implications or is otherwise questionable.

Overall, Congress’s experience in controlling reprogramming has been successful. The number of requests for reprogramming has been moderate, and there have been few abuses. Nevertheless, in recent years, reprogramming has become controversial. Efforts to balance the budget and reduce spending, especially in the discretionary portion of the budget, have resulted in renewed interest in reprogramming. War and the antiterrorism campaign have also seemed to require more budgetary flexibility. Presidents claimed broad discretion to move money around within accounts, but Congress fought back, worried that legislative priorities might be tampered with if reprogramming authority was broadened.

Conflict over reprogramming may be a function of the relationship between an agency and a congressional committee, but it can also indicate policy disputes between the president and Congress. At the federal level, appropriations legislation awards each agency a total amount of money, broken into separate accounts for different purposes. These accounts are generally very large, with many different things inside. Those totals for each account are fixed in law and may not be exceeded; transfers between accounts are carefully controlled and monitored. But inside these broad appropriation accounts, the administration theoretically has discretion to spend the money according to need. At the federal level, appropriations are not passed with detailed subaccounts or even more detailed line items that force the executive to spend money as Congress directs. By writing the legislation for broad accounts with firm controls only on the totals, Congress grants the administration considerable discretion to adjust the budget within accounts according to need, but members worry about how that discretion will be used and whether items or policies of particular concern to legislators will be ignored or overturned.

The congressional appropriations committees are divided into twelve subcommittees, each of which deals with a particular set of departments and agencies. Each executive branch agency presents to its appropriations subcommittee in Congress a budget justification, outlining how it intends to spend the money it requests from Congress. These justifications are the subject of appropriations hearings. At these hearings, members discuss the proposals and express their intentions about how the money should or should not be spent. They further spell out their concerns and give directions in committee reports that accompany the appropriations legislation. These reports do not have the force of law, but agency administrators generally comply with what they know their congressional budgeters want them to do.

Congressional committees expect agencies to spend their budgets in accordance with the information presented in these budget justifications, sometimes down to details of organizational structure and number of authorized positions. They expect agencies not to make major changes during the year without at least notifying the relevant committees.

To balance legitimate executive branch needs for discretion with congressional need for control, Congress has established reprogramming guidelines. These guidelines tell agencies the circumstances under which changes are and are not permissible, when agency officials must inform congressional committees of changes, and what kind of changes must be reported. Some subcommittees require agencies to get advance permission to make substantial changes in the budget.

Congressional committees provide flexibility to the executive branch, with the condition that if members disagree with how that discretion has been or is going to be used, they can invite a discussion, negotiate, suggest alternatives, or “veto” or otherwise prevent the action. Congress’s ability to influence executive branch choices about how the money will be spent encourages members to grant broader discretion to the administration.

It is not clear that the Chadha case ought to apply to reprogramming constraints. The GAO judged that unofficial processes of control, such as through committee communications and reports accompanying legislation, were not prohibited by Chadha. Moreover, the GAO offered its institutional opinion that Chadha only applied where Congress had made a clear delegation of authority to the executive branch, in which case it could not later withdraw that delegation without further formal legislation. But if there was no grant of discretion or if the grant was ambiguous, then Chadha did not apply.9 According to this interpretation, when Congress passes a law that forbids increasing an account or decreasing an account by more than 10 percent or prohibits reprogramming to fund a project that Congress had denied, requiring an agency to seek congressional permission for an exception, Congress is not violating Chadha, because it did not grant discretion in the first place. The legality of reprogramming guidelines has never been tested in the courts.

Minicase Herbert Hoover and Legislative Vetoes

While some presidents have chafed at legislative interference in what they consider their rightful authority to make changes within an appropriation account, the idea of legislative control (vetoes) over executive discretion was put forward initially by Herbert Hoover (president from 1929 to 1933).1 Hoover believed presidents had usurped too much legislative power and needed to work out ways to restore to Congress its role in budgeting. He wrote, “I felt deeply that the independence of the legislative arm must be respected and strengthened.”2

Congress’s specification of reprogramming rules, including legislative vetoes of executive actions, provided flexibility to the executive and therefore was tolerated for decades, until the Supreme Court declared congressional vetoes unconstitutional in 1983, in INS v. Chadha. The Chadha decision was aimed at congressional vetoes of presidential deferrals, that is, presidential decisions to withhold funds that Congress had granted. The court’s judgment that legislative vetoes of deferrals were unconstitutional was often considered to include all legislative vetoes, including those addressed at executive reprogramming. Despite Chadha, however, reprogramming controls, including legislative vetoes, have survived to the present. Chadha may have strengthened the president’s hand in demanding more discretion, but Congress has by no means given up the battle to control for what purposes that discretion may be used.

1 Louis Fisher, “The Legislative Veto: Invalidated, It Survives,” Law and Contemporary Problems 56, no. 4, Symposium Elected Branch Influences in Constitutional Decisionmaking (Autumn, 1993), pp. 273–292.

2 Herbert Hoover, The Memoirs of Herbert Hoover: The Cabinet and the Presidency 1920–1933 (New York: MacMillan, 1952), www.ecommcode.com/hoover/ebooks/pdf/FULL/B1V2_Full.pdf.

Legal niceties aside, there is the practical reality: If the administration insists too strongly on its freedom to use money in an appropriated account in any way it sees fit or uses its discretion to thwart congressional will, Congress can respond by reducing or cutting an appropriation completely or reducing the amount of discretion it grants to the executive branch. Despite the complaints of some presidents, the system of reprogramming rules, both formal and informal, persists. It serves both sides: The executive gets some discretion, and Congress gets some control over how that discretion is used.

Most congressional committees or subcommittees get around the Chadha prohibition on legislative vetoes by including congressional vetoes only in reports, which do not have the impact of law, or only requiring notice of reprogramming. However, some have continued to insist that departments or agencies obtain committee or subcommittee approval before carrying out a major change of purpose or executive defiance of congressional intent.

This process of Congress granting the executive discretion but monitoring and controlling its use became highly contentious during the George W. Bush administration. As President Bush signed legislation into law, he made statements about what parts of the laws he was signing he considered unconstitutional and was not going to implement. In these signing statements, citing Chadha, he claimed that discretion, once granted, could not be constrained in any way; within a given budget account, the administration could use money as it saw fit.

Bush argued against the requirement for advanced notice to Congress of intent to reprogram, saying that he would inform Congress after the fact and then only as a courtesy, not because he was legally bound to do so. His administration attacked the requirement written into law or included in committee reports that substantial changes required appropriations committee approval before they could take place. He argued in the signing statements that if a reprogramming had to go back to a committee for approval, it was akin to a one house or one committee rejection of a presidential deferral of spending banned under Chadha and therefore was unconstitutional.

President Bush claimed that his role as commander in chief allowed him freedom to start new programs without notifying Congress if warranted by national security. Congress, in contrast, generally prohibited reprogramming to create new programs without congressional approval.

Obama, in an early signing statement in his administration, repeated some of Bush’s arguments about reprogramming. He particularly opposed the advanced permission requirements but was more willing to provide Congress advanced notice of reprogramming. The repetition of the same language in a signing statement in late 2011 demonstrated that this was an intentional statement of policy rather than an unthinking carryover from the Bush era.10

The Trump administration has continued the tradition of resisting congressional restrictions on spending through the use of signing statements. As with Obama, Trump indicated that he would normally inform Congress but that he rejected Congress’s right to control how appropriated funds would be spent.

Numerous provisions authorize congressional committees to veto a particular use of appropriated funds (e.g., Division C, section 8058), or condition the authority of officers to spend or reallocate funds on the approval of congressional committees (e.g., Division A, sections 702, 706, and 717; Division D, sections 101(a) and 201(a); Division G, sections 403 and 409; Division K, sections 188, 222, 405 and 406). These are impermissible forms of congressional aggrandizement in the execution of the laws other than by enactment of statutes.

My Administration will notify the relevant committees before taking the specified actions and will accord the recommendations of such committees all appropriate and serious consideration, but it will not treat spending decisions as dependent on the approval of congressional committees.11

Congress has not backed down in the face of these executive branch claims.12 To deal with Chadha’s prohibition on legislative vetoes, appropriations subcommittees that require advance permission for changes within accounts grant little discretion to the administration initially; they therefore are not curtailing an existing grant of discretion without benefit of law. The following language from the Transportation, Housing and Urban Development (THUD) subcommittee in 2003 illustrates how little discretion may be granted:

As in previous years, the Committee reiterates that the Department must limit the reprogramming of funds between the program, projects, and activities within each account to not more than $500,000 without prior written approval of the Committees on Appropriations. Unless otherwise identified in the bill or report, the most detailed allocation of funds presented in the budget justifications is approved, with any deviation from such approved allocation subject to the normal reprogramming requirements.13

The House Appropriations report for THUD for 2015 maintained the advanced approval requirement, stating that such approval must be received from both the House and Senate appropriations committees but granted more discretion, raising the total for triggering a reprogramming to $5 million or 10 percent of an existing program, project, or activity.14 The list of things the agency could not do without advance permission includes creating or terminating a program, increasing funds or personnel for any program previously denied by Congress, redirecting money that had been specified in a report for a given purpose, increasing or decreasing a program or activity by more than 10 percent, or reorganizing offices in a different manner than specified in the budget justification. (Both House and Senate reports for FY 2018 maintained these requirements for advanced approval.) The Department of Interior, Environment and Related Agencies appropriations included reprogramming guidelines that would be triggered for changes over $1 million, a low trigger allowing little discretion. The language for prior approval was a little gentler but reached the same goal. The agencies covered by the appropriation could proceed with their reprogrammings after submission of their request to the appropriate committees, if committee members did not object. Any significant departures from the budget justification, including any change in the organizational structure, required a reprogramming process.15 The congressional committee also monitored closely any effort to create a pool of funds that might later be used for changes in the approved budget.

The 2015 House report for Defense appropriations included detailed instructions for reprogramming by type of expenditure, including requirements for obtaining advanced permission from the committee. The trigger for requiring a formal reprogramming for personnel was $10 million, but significantly, the committee report forbade below the threshold reprogrammings to be used to increase or decrease any items Congress had shown a particular interest in. In other words, DoD was not allowed to use many small reprogrammings, too small individually to report on, to bypass congressional intent on specific items.16

As these examples suggest, how much discretion the executive branch has once the budget has been passed remains a subject of contestation. Agencies can get caught between the executive and legislative policies. When an executive branch agency violates reprogramming guidelines, adhering to the president’s and OMB’s interpretation of the law rather than Congress’s, members of Congress notice and chastise the agency officials and sometimes punish them.

For example, HUD had been pleading for more flexibility but got the following reaction from legislators on its appropriation subcommittee in 2010:

The Committee reiterates that no changes may be made to any program, project, or activity if it is construed to have policy implications, without prior approval of the Committees on Appropriations. The Committee is dismayed that on many occasions the Department has taken action on new initiatives without seeking, or before receiving, formal approval, as required in Section 405 of the appropriations act. For example, the Committee was displeased to learn of the establishment of the Disaster Relief Enhancement Fund (DREF), a diversion of funds to a new initiative without an approved reprogramming request. Examples such as this diminish the Department’s credibility, especially in light of the Department’s recent requests for increased flexibility.17

Congress has been serious about enforcement of reprogramming rules. One method of enforcement has been to require agencies to submit reports within sixty days after budget appropriations are passed, establishing the baselines from which the reprogramming triggers are calculated. If the trigger for a formal reprogramming request is a change of more than 10 percent in a program or activity within an account, Congress wants to know 10 percent of what dollar amount and which programs or activities are affected. Equally important, Congress expects agencies to highlight in these reports items of congressional interest. By requiring that agencies include such items in reports, Congress ensures that agency administrators notice and acknowledge these particular items.

If agencies fail to follow reprogramming guidelines, committees threaten to reduce or eliminate the discretion they have provided. The following excerpt is from the report accompanying the 2013 appropriation for Commerce, Justice, Science and Related Agencies.

The Committee is concerned that, in some instances, the departments or agencies funded within this appropriations act are not adhering to the Committee’s reprogramming guidelines that are clearly set forth in this report and in section 505 of the accompanying bill. The Committee expects that each department and agency funded in the bill will follow these notification policies precisely and will not reallocate resources or reorganize activities prior to submitting the required notifications to the Committee.

The reprogramming process is based on comity between the Appropriations Committee and the executive branch. The Commerce, Justice, Science, and [R]elated [A]gencies appropriations bill provides specific program guidance throughout this report and tables accompanying the bill. The process is intended to provide flexibility to meet changing circumstances and emergency requirements of agencies, if there is agreement between the executive branch and the Congress that such a change is warranted. Reprogramming procedures provide a means to agree on adjustments, if necessary, during a fiscal year, and to ensure that the Committee is kept apprised of instances where nonappropriated resources are used to meet program requirements, such as fee collections and unobligated balances that were not considered in the development of the appropriations legislation.

In the absence of comity and respect for the prerogatives of the Appropriations Committees and Congress in general, the Committee will have no choice but to include specific program limitations and details legislatively. Under these circumstances, programs, projects, and activities become absolutes and the executive branch shall lose the ability to propose changes in the use of appropriated funds through the reprogramming process between programs, projects, and activities without seeking some form of legislative action.18

Subcommittee chairman Frank Wolf, R-Vir., was clearly irritated by a reprogramming violation: “Last year, you disregarded the Committee’s direction and proceeded with an unprecedented $165 million reprogramming to support the purchase of the Thomson prison in Illinois, something that was actively sought as an earmark request by Senator Durbin, but was not included in the President’s budget nor in any appropriations act. In fact, Congress had denied a similar reprogramming in FY11, and subsequently rescinded the funds that had been identified by the Department as a potential source for the Thomson purchase.”19 Reprogramming money for a project that had already been rejected by Congress was clearly in violation of reprogramming guidelines. The chairman concluded that the result would be the loss of administrative flexibility.

Reprogramming usually occurs “under the radar,” that is, it usually attracts little or no attention from interest groups, the press, or the public. A recent exception occurred when the Immigration and Customs Enforcement (ICE), the agency that detains, imprisons, and deports those in the country without appropriate papers, requested reprogramming permission on top of a huge increase in its budget in order to expand its detention facilities further and faster. Detention and deportation of those without papers is a high priority for President Trump and his supporters.

A very long list of advocacy groups urged Congress not to grant ICE’s request, in light of the conditions of existing detention facilities—including deaths of some of the detainees—and the reduced number of illegal border crossers. Advocates for immigrants expected that the increased number of detention facilities meant that ICE was going to go after the Dreamers, young people brought here as children by their parents, and asylum seekers, among others. Despite the plea, language in the House Appropriations Committee report granted the Department of Homeland Security broad permission to reprogram and transfer funds within and into ICE for expansion of its detention facilities. The committee did respond to fears of the opponents to the extent of prohibiting the Department of Homeland Security from continuing contracts with private prison providers who had received two recent evaluations of less than adequate.20

Because most reprogramming is routine, it is not highly visible. By contrast, failure to follow reprogramming guidelines, for whatever reason, is likely to create a public conflict. In one recent case, an administrator for the National Weather Service was discovered to have engaged in unauthorized reprogramming for at least several years, possibly longer. The revelation led to his resignation under pressure. (See the minicase on the National Weather Service.)

Minicase The National Weather Service Reprogramming

In the spring of 2012, a story broke that the National Weather Service (NWS) had been reprogramming out of a technology modernization account into salaries for at least two years—2010 and 2011—without notifying Congress. Agency officials had been wrestling with a structural imbalance for years and apparently ran out of solutions. Taking money from the modernization accounts may have seemed like the only possible option.

One source of the underfunding has been the salary increases for federal employees. Each year, the president proposes and Congress passes or changes a figure for salary increases for federal employees, but Congress typically does not appropriate enough money to pay for the raises. The expectation is that most agencies will be able to fund at least some of their salary increases from vacant personnel lines and savings from turnover when highly paid senior staff retire or leave an agency and younger, less expensive ones replace them. The executive Office of Management and Budget assigns each agency an inflation increase to its budget, which may be more or less than the cost of the salary increase. For the National Weather Service, the OMB inflation increases were often considerably less than the cost of the salary increases.

To pay for the mandated salary increases, the NWS had to reduce the number of staff. However, Congress was unwilling to let the agency reduce its field staff, especially its hurricane warning center, which left only administrative staff at headquarters that could be cut. After several years of this process, any flex in the system was used up. An agency administrator began to move money from technology modernization to salaries, to maintain the size of the field staff. The trouble was that he didn’t notify Congress of this reprogramming in accordance with the guidelines governing the agency.

The formal answer to why the agency didn’t report to Congress as required was that staff had been inadequately trained on the reprogramming guidelines, but it is possible that they believed that they were not bound by the guidelines.

Once the reprogramming was discovered and made public, it could no longer continue without congressional notice. The agency needed to put forward a formal reprogramming notice to a congressional committee angry at the misuse of funds and violation of procedures. The Department of Commerce reprogramming guidelines require only notification, not advanced permission, but both the agency and congressional committees acted as if congressional permission were required. If Congress blocked or delayed the reprogramming, the NWS employees would be forced to take time off without pay (furloughs) to make up the difference during hurricane season.

Some members of the authorizing committee for the weather service were so upset by the implications of the unauthorized reprogramming that they asked the appropriations committee to hold up the agency’s budget until a clearer story could be told and proposals to address the underlying problems, including the underfunding as well as the compliance issues, could be worked out. In the end, the appropriations subcommittees approved the weather service’s request for reprogramming.

The National Weather Service story hints at the complexity of reprogramming controversies. In this case, the administration systematically underfunded the NWS, which was of intense interest to members of Congress. The result was a reprogramming, which went unreported either because of executive branch policy or because of lack of knowledge of the reprogramming procedures. As the story became public, the extent and duration of the underfunding became clearer. Equally intriguing, the advance notice clause in the reprogramming guidelines was treated as if it meant advanced permission was required—this may be one way that Congress gets around Chadha limitations.

Contingency Funds

Contingency funds are sums of money budgeted for unknown and unpredictable purposes. There are some contingency funds—or discretionary funds—at the federal level, but contingency funds are more important at the state and local levels. At the national level, contingencies are generally funded by supplementals, which, if not offset with additional cuts or revenue increases, increase the size of the deficit; at state and local levels, it is generally illegal and decidedly embarrassing to run deficits, so a variety of special funds are set aside for contingencies. At the local level, departmental budget justifications are normally included in the budget, so a detailed plan of how money is to be spent is part of the budget legislation. Most city agencies thus do not have much flexibility regarding how budgeted money will be spent. To create discretion during the year, administrators have to build it into the budget by establishing pools of uncommitted revenue to be allocated during the year.

Cities and states can use their year-end fund balances—money left over from the prior fiscal year—as a kind of emergency kitty, and they can create separate accounts specifically to handle contingencies. The more money there is in contingency funds, the less is needed in the year-end balance and vice versa. A city or state may intentionally not spend all the money that was budgeted to create a pool of money that can be rebudgeted if necessary. Pools of flexible funds can be created by overcutting in response to pessimistic revenue estimates. For example, in a study of Cincinnati during a period of fiscal stress, the city cut back expenditures in line with a worst-case revenue scenario, creating moderate amounts of slack in the retrenchment budget. The council used the slack to add police and fire personnel after the 1976 cuts. In 1980, the manager elicited supplemental requests from departments to use revenues that had exceeded the pessimistic predictions in the budget. The manager then selected those requests that dealt with deferred maintenance, the problem that he saw as the highest priority.21 How such “savings” are used and who will control them are policy-laden issues.

The use of funds built up through conscious overestimation of expenditures or underestimation of revenues also occurs in cities not experiencing cutbacks. The following excerpt from the author’s interview with a city manager indicates that he believes that some cities use their balances to make minor but policy-related changes during the year:

Q. What about year-end balances, how are they used?

A. They are strictly an accounting device. We don’t play any games at all with the statements. I could, because most people don’t read accounting statements. Some managers do use it. They purposely underestimate revenues and overestimate expenditures, so that will happen. The council may ask the manager to find money to fund a project during the year. The manager then can do it. The council thinks it’s magic.

The project, for which the council asks midyear support, may be one for which the need developed during the year, or it may be a pet project, with political payoff that could not be funded as part of the regular budget but could be funded midyear without much scrutiny or comparison to other projects.

While the need for contingency funds at the local level is substantial, year-end balances combined with contingency funds seldom exceed 8 percent to 10 percent of the budget in midsized or larger cities. Such balances can be proportionately much larger for smaller cities, villages, or counties, which have limited discretion and small budgets. One of the major purposes of such contingency or emergency funds is to provide money for labor agreements. Contingency funds may be drawn down to fund a particular capital project or to tide the city over in a recession to prevent having to cut the budget during the year. In some cities, at some times, a portion of the contingency funds may be spent for special council projects, with explicit council approval. The budget may thus change somewhat during the year, with negative impact on public accountability, but the amounts involved are normally quite small, maybe 2 percent of the total budget.

Interfund Transfers

Interfund transfers are shifts of money between appropriation accounts or funds. At the federal level, because the amounts of the individual appropriation accounts can be very large, most of the need for transfers can be accommodated within accounts, with minor reprogramming and without fanfare. In cities, however, individual funds (the local analogue to federal appropriation accounts) are sometimes narrow, covering only one function and having only a limited number of dollars. Some of these funds may be spent for related functions, so interfund transfers may be planned and budgeted in advance. Formal transfers occurring during the year are treated as budget amendments and must be approved by the council. Hence, they are not secret and do not bypass the regular budget process.

There should be little reason for unanticipated transfers, and normally there are few of them. Sometimes, however, there is some informal borrowing, especially from cash-rich to cash-poor funds. If the borrowing is not approved by the council or becomes a long-term loan or if a loan is not fully repaid, the implications are policy laden rather than technical. For example, if a general fund borrows from a water fund and does not repay the loan, the water fund may develop deficits.22 The fund showing the deficit will have to cut services or increase user fees or taxes to eliminate it. The result may be raising water fees to pay for police services, a result that is not only inequitable but secret. If the deficits are not eliminated, borrowing costs for the water fund may go up, forcing the city to pay unnecessarily high interest charges on future water projects. This practice is probably not common, but it does sometimes occur, and when it does, there are policy implications.

Summary and Conclusions

For the purposes of accountability to the public and managerial predictability, most of the budget is implemented as passed. Nevertheless, some flexibility must be built into budget implementation, because budgets are open to the environment. Rivers flood, hurricanes knock down trees and houses. The economy waxes and wanes, reducing or increasing revenues beyond expectations and reducing or increasing the number of those eligible for entitlements. If more people commit crimes and are caught and sentenced to prison, there has to be some way to pay for their imprisonment, even if the numbers were not correctly predicted when the budget was put together. Budgets also adapt to the priorities of newly elected officials, who must initially work within the framework of budgets put together by their predecessors.

Budgets adapt through a variety of techniques, including supplemental appropriations, rescissions, deferrals, reprogramming, contingency funds, and interfund transfers. Some techniques are more common at one level of government than another. The federal government can run deficits, so it can borrow to respond to an emergency. State and local governments generally cannot run legal deficits and so have to build up reserve and contingency funds to draw down in emergencies, and they often hold back on spending during the year in case revenues do not materialize. Contingency funds and deferrals of this sort are common at state and local levels, but supplemental appropriations are relatively rare. Interfund transfers are fairly common at the local level; reprogramming within accounts is more important at the national level because accounts are so large that moving money around inside them usually provides sufficient flexibility.

Most of the changes in the budget during implementation are the result of technical changes and adaptation to the environment, but the flexibility that is absolutely necessary to budgeting also allows for some changes because of policy considerations. If Congress adds to the president’s budget, the president may try to rescind or defer that unwanted spending; to bypass the president’s opposition, Congress may package the spending the president disapproves of with supplemental requests that the president urgently needs. Especially where the executive and legislature are from different political parties, executives have been known to alter the legislatively approved budget during budget implementation to spend on priorities they prefer. Governors can often veto spending they don’t like or want, but if there is a veto-proof majority in the legislature, their vetoes can be overridden, so reshaping the budget during the budget year may be a preferred option.

In general, the amount of money spent on policy-related changes during the year is quite limited, and in some cases, as with policy-related deferrals at the national level, it has been reduced to near zero, but the amounts can rise and fall. When policy-based midyear changes become noticeable, conflict may push issues of budget implementation to center stage.

Useful Websites

When signing legislation, the president may object to portions of legislation, with the argument that these portions of the law are unconstitutional and he (or she) has no intention of carrying them out. Some of these signing statements have concerned budget implementation, demonstrating the battle between Congress and the president over budget implementation. To read the presidents’ signing statements, see the American Presidency Project (www.presidency.ucsb.edu/signingstatements.php?year=2011&Submit=DISPLAY#axzz2CDlcsNQX), and for an interpretation of signing statements, see the Congressional Research Service report, Presidential Signing Statements: Constitutional and Institutional Implications, 2012, by Todd Garvey (www.fas.org/sgp/crs/natsec/RL33667.pdf).

A good summary of the history of use of rescissions initiated by the president and/or by Congress was done by the Government Accountability Office: Updated Rescission Statistics, Fiscal Years 1974–2011 (www.gao.gov/assets/600/592874.pdf). The Congressional Budget Office publishes periodic reports on supplemental appropriations.

An intriguing thesis from the Naval Postgraduate School is available (www.dtic.mil/dtic/tr/fulltext/u2/a473540.pdf) in which Chad Roum examines Department of Defense reprogramming requests and congressional responses from 2000 to 2006 in The Nature of DoD Reprogramming, 2007; agencies and departments that reprogram typically leave a paper trail. The District of Columbia posts its quarterly list of approved reprogrammings, including the small ones that did not meet the level required for a formal reprogramming request. To see what they look like and what they were for, see http://cfo.dc.gov/page/reprogramming-reports. Data are quarterly from 2012.

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