Report text available as:

  • TXT
  • PDF   (PDF provides a complete and accurate display of this text.) Tip ?

104th Congress                                                  Report
                               SENATE         
 2d Session                                                     104-271
_______________________________________________________________________

                                                       Calendar No. 405

 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                              To accompany

                            S. Con. Res. 57

                             together with

                     ADDITIONAL AND MINORITY VIEWS




Setting forth the congressional budget for the United States Government 
        for fiscal years 1997, 1998, 1999, 2000, 2001, and 2002

                  May 13, 1996.--Ordered to be printed



                        COMMITTEE ON THE BUDGET

  PETE V. DOMENICI, New Mexico, 
             Chairman
J. JAMES EXON, Nebraska              CHARLES E. GRASSLEY, Iowa
ERNEST F. HOLLINGS, South Carolina   DON NICKLES, Oklahoma
J. BENNETT JOHNSTON, Louisiana       PHIL GRAMM, Texas
FRANK R. LAUTENBERG, New Jersey      CHRISTOPHER S. BOND, Missouri
PAUL SIMON, Illinois                 TRENT LOTT, Mississippi
KENT CONRAD, North Dakota            HANK BROWN, Colorado
CHRISTOPHER J. DODD, Connecticut     SLADE GORTON, Washington
PAUL S. SARBANES, Maryland           JUDD GREGG, New Hampshire
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
PATTY MURRAY, Washington             SPENCER ABRAHAM, Michigan
RON WYDEN, Oregon                    BILL FRIST, Tennessee
                                     ROD GRAMS, Minnesota
    G. William Hoagland, Staff 
             Director
  William G. Dauster, Democratic 
 Chief of Staff and Chief Counsel



                            C O N T E N T S

                              ----------                              
                                                                   Page
  I. Introduction and Overview........................................1
 II. Economics........................................................5
III. Spending and Revenues...........................................24
          A.  Baseline...........................................    24
          B.  President's FY 1997 Budget.........................    25
          C.  Committee Recommendation...........................    36
 IV. Summary Tables..................................................68
  V. Budget Resolutions: Enforcement, Reconciliation and Other Issues82
              Contents of Budget Resolution......................    82
              Enforcement........................................    86
              Reconciliation.....................................    90
              Other Issues.......................................    92
 VI. Procedural and Miscellaneous Provisions.........................93
              Budgetary Restraints and Rulemaking................    93
              Sense of Congress and Senate.......................    96
VII. Committees Views and Estimates..................................96
VIII.Committee Votes................................................194

 IX. Additional and Minority Views..................................202



                                                       Calendar No. 405
104th Congress                                                   Report
                                 SENATE

 2d Session                                                     104-271
_______________________________________________________________________


        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997

                                _______


                  May 13, 1996.--Ordered to be printed

_______________________________________________________________________


Mr. Domenici, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                     [To accompany S. Con. Res. 57]

    The Committee on the Budget submits the following report, 
accompanying the Concurrent Resolution on the Budget and 
setting forth the congressional budget for the United States 
Government for fiscal years 1997, 1998, 1999, 2000, 2001, and 
2002 pursuant to the Congressional Budget and Impoundment 
Control Act of 1974 (Public Law 93-344).

                      I. Introduction and Overview

    The Committee's reported Concurrent Resolution on the 
Budget achieves a balanced budget in the year 2002 (including 
the social security outlays and social security receipts) as 
was proposed and enacted by Congress and vetoed by the 
President last year. This Budget reduces the federal unified 
deficit from $144 billion in 1996 to balance in the unified 
budget in 2002. (Excluding the social security surplus in 
2002--estimated to be approximately $100 billion--the on-budget 
deficit would total $100 billion.)
    The Committee's recommendation would reduce total spending 
by nearly $441 billion over the next six years. Over 85 percent 
of the spending restraint ($375 billion) would be targeted on 
mandatory spending programs. Discretionary spending would be 
reduced $64 billion. Even with this needed restraint to achieve 
balance, total federal spending still grows from $1.575 
trillion this year to over $1.846 trillion in 2002, a 2.7 
percent annual rate of increase. Total discretionary spending 
would reach nearly $3.2 trillion over the next six years.
    Under the assumptions of the Committee's recommendations, 
total discretionary spending for FY 1997 equal to $494.2 
billion in BA and $535.7 billion in outlays. In the aggregate, 
discretionary spending in 1997 represents essentially a freeze 
at the 1996 current appropriated levels. Relative to the FY 
1997 assumptions in last year's budget resolution and the 
vetoed BBA, this represents nearly $12 billion an increase in 
outlays for 1997 and a $7 billion increase in BA. Relative to 
last year's vetoed BBA, over the next six years, total 
nondefense discretionary spending would increase $31.5 billion 
in BA and $55 billion in outlays.
    Under the assumptions of the Committee's recommendations, 
the Appropriations Committee will allocate the discretionary 
spending level among its Subcommittees in a manner that will 
remain within the overall allocation provided by the budget 
resolution (602a).
    The Committee reported Budget Resolution assumes an 
illustrative way in which particular programs may or may not 
benefit from such an aggregate level of funding. As an example:
          Assumes increased funding for National Science 
        Foundation research and related activities and 
        increased funding for NASA. The proposal would provide 
        more funding for NASA than is proposed in President 
        Clinton's 1997 budget request.
          Assumes increased funding of nearly $900 million in 
        1997 for a reformed Superfund program ($6.3 billion in 
        BA over the next six years). These monies would not be 
        allocated to the Appropriations Committee unless 
        authorization reforms of the program, including 
        extension of Suprerfund taxes, were enacted.
          Assumes $200 million increased funding in 1997 for 
        Safe Drinking Water programs.
          Assumes full funding of the Violent Crime Trust Fund 
        and related crime fighting programs. Funding for 
        Administration of Justice programs would increase 
        nearly 10 percent over the 1996 funding levels.
          Assumes $2.7 billion funding for the decennial census 
        over next six years.
          Assumes no reductions in NIH funded health research 
        programs.
          Assumes $1.3 billion increased funding for education 
        programs in 1997 relative to pre-OCRA 1996. Total 
        education discretionary funding would exceed $36.2 
        billion in 1997 and nearly $215 billion over the next 
        six years. There would be no reduction in education 
        funding in 1997, and over the period 1997 to 2002, the 
        resolution provides increased funding totaling $3.1 
        billion relative to the CBO freeze baseline.
          Assumes $2.3 billion increased funding for the WIC 
        nutrition program over the next six years.
          Assumes the President's proposed reductions in REA 
        funding, reduced clean coal R&D;, reduced funding for 
        NOAA, a reduction in conservation operations to the 
        President's request, reduction in transit and AMTRAK 
        operating subsidies, termination of essential air 
        service funding, phase out of EDA, reductions in CDBG, 
        completion of GAO 25% funding program, repeal of Davis 
        Bacon, reduction in the number of political appointees, 
        and other personnel reforms.
          Other nondefense discretionary programs were assumed 
        to be frozen at their 1996 appropriated level for six 
        years, or reduced below a freeze.
          Assumes discretionary defense spending at the 1996 
        Budget Resolution level adjusted for changes in 
        inflation since the 1996 Budget Resolution defense 
        spending levels were adopted. Relative to 1996 defense 
        spending levels, this adjustment would reduce defense 
        BA by about $14.3 billion over the next six years.
    Under the assumptions of the Committee's recommendations, 
reformed programs providing assistance to low income Americans 
would continue to grow from about $90 billion this year to over 
$105 billion in 2002, a 3.7 percent annual rate of increase. 
The Committee's recommendation assumes welfare reform savings 
of $53 billion over next six years based on the Bipartisan 
National Governors Association proposal of this winter.
    Under the assumptions of the Committee's recommendations, a 
reformed Medicaid program would grow from $96 billion this year 
to nearly $140 billion in 2002, a 6.4 percent annual rate of 
increase. The Committee's recommendation assumes Medicaid 
reform savings of $72 billion over next six years again based 
on major provisions of the Bipartisan National Governors 
Association proposal of last winter. Total federal Medicaid 
spending would exceed $730 billion over the next six years.
    Under the assumptions of the Committee's recommendations, a 
reformed Medicare program would grow from $196 billion this 
year to nearly $280 billion in 2002, while Part A solvency 
would be insured for a decade. The reformed Medicare program 
will increase at an annual rate of nearly 6.1 percent and total 
expenditures will exceed $1.459 trillion over the next six 
years. Assumes a net Medicare savings of $158 billion over next 
six years, based on a package of reform provisions contained in 
the vetoed BBA, with modifications. Emphasis would remain on 
choice. The Committee's recommendations also assumes a new 
spending program for Graduate Medical Education totaling $10 
billion over the next five years.
    Under the assumptions of the Committee's recommendations, 
Earned Income Credit (EIC) program would be reformed to save 
$17 billion over the next six years. Total EIC outlays will 
exceed $121 billion over the same period.
    Additional entitlement savings are similar to those in the 
vetoed BBA of last year: including veterans, civil service 
reform, student loans, and other privatization proposals 
included in the BBA.
    The Committee's recommendation would provide tax relief to 
American families totaling $122 billion. The Committee's 
recommendation provides the opportunity for tax reform, with 
emphasis on one particular policy--a permanent, nonrefundable, 
nonindexed tax credit of $500 per child under the age of 18, 
phased out for unmarried individuals with incomes over $75,000 
and couples with incomes over $110,000.
    The Committee's recommendation would accommodate further 
tax reform or tax reductions to be offset by the extension of 
expired tax provisions or corporate and business tax reforms. 
Should the tax writing committees choose to raise additional 
revenues through these or other sources, such receipts could be 
used to offset other tax reform proposals such as estate tax 
reform, economic growth, fuel excise taxes, or other policies 
on a deficit neutral basis.
    Implementation of the 1997 Budget Resolution would entail a 
three-step reconciliation process:
          Step 1: Reconciled savings from Medicaid/welfare 
        reform would be reported to the Budget Committees by 
        June 14. Senate/House final action would be complete by 
        June 28. Legislation would be transmitted to the 
        President for signature or veto after 4th of July 
        recess.
          Step 2: Reconciliation of remaining entitlement 
        savings in budget resolution would be reported to the 
        Budget Committees by July 12. If President vetoes 
        Medicaid/welfare--decision could be made at this time 
        as to whether to proceed with Step 2 and 3. If 
        President signs Medicaid/welfare reform, a goal would 
        be to complete remaining reconciliation items by August 
        2.
          Step 3: If both the first and second bills are 
        enacted into law, then a final reconciliation of tax 
        reductions would follow the August recess--assuming 
        completion of Steps 1 and 2. Tax writing committees 
        would report directly to their respective chambers, no 
        requirement to report to Budget Committees.

                                        TABLE 1.--AGGREGATE BUDGET TOTALS                                       
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
On-budget:                                                                                                      
    Budget authority......................   1,266.8   1,318.5   1,361.7   1,392.5   1,433.6   1,453.9   1,499.1
    Outlays...............................   1,277.0   1,314.9   1,353.6   1,382.5   1,415.7   1,433.0   1,467.4
    Revenues..............................   1,062.5   1,086.2   1,129.9   1,176.1   1,229.9   1,289.6   1,359.1
    Deficit...............................    -214.5    -228.7    -223.7    -206.4    -185.8    -143.4    -108.3
Off-budget:                                                                                                     
    Budget authority......................     310.2     318.5     335.3     347.6     358.2     376.5     388.7
    Outlays...............................     297.7     311.1     324.5     334.2     348.7     365.0     378.9
    Revenues..............................     365.2     385.0     402.3     423.4     445.1     465.2     487.3
    Surplus...............................      67.5      73.9      77.8      89.2      96.4     100.2     108.4
Unified budget:                                                                                                 
    Budget authority......................   1,577.0   1,637.0   1,697.0   1,740.1   1,791.8   1,830.4   1,887.8
    Outlays...............................   1,574.7   1,626.0   1,678.1   1,716.7   1,764.4   1,798.0   1,846.3
    Revenues..............................   1,427.7   1,471.2   1,532.2   1,599.5   1,675.0   1,754.8   1,846.4
    Deficit/surplus.......................    -147.0    -154.8    -145.9    -117.2     -89.4     -43.2       0.1
Debt subject to limit.....................   5,159.0   5,445.3   5,719.1   5,971.6   6,204.3   6,395.1   6,547.0
----------------------------------------------------------------------------------------------------------------


                             TABLE 2.--COMMITTEE RECOMMENDATION BY SPENDING CATEGORY                            
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                          6-year
                                            1996     1997     1998     1999     2000     2001     2002    total 
----------------------------------------------------------------------------------------------------------------
Discretionary:                                                                                                  
    Defense.............................      265      265      263      266      269      268      268    1,599
    Nondefense..........................      271      271      264      260      256      250      249    1,551
                                         -----------------------------------------------------------------------
      Subtotal discretionary............      536      536      527      526      526      518      516    3,150
Mandatory:                                                                                                      
    Social Security.....................      348      365      383      402      422      444      467    2,484
    Medicare............................      196      209      224      236      249      263      279    1,459
    Medicaid............................       96      105      111      117      126      133      139      731
    Welfare programs....................       83       89       89       92      100       98      106      573
    EITC (outlays)......................       16       18       18       19       20       20       21      116
    Other mandatory.....................       59       62       82       81       83       84       82      474
Net interest............................      240      242      244      243      240      238      236    1,444
                                         -----------------------------------------------------------------------
      Total outlays.....................    1,575    1,626    1,678    1,717    1,764    1,798    1,846   10,430
Revenues................................    1,428    1,471    1,532    1,600    1,675    1,755    1,846    9,879
                                         -----------------------------------------------------------------------
      Resulting deficit/surplus.........     -147     -155     -146     -117      -89      -43        0  .......
----------------------------------------------------------------------------------------------------------------
Note.--Details may not add to totals due to rounding. All totals shown on a unified budget basis.               


                             TABLE 3.--COMMITTEE RECOMMENDATION COMPARED TO BASELINE                            
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                                                                          6-year
                                            1996     1997     1998     1999     2000     2001     2002    total 
----------------------------------------------------------------------------------------------------------------
Freeze baseline deficits \1\............      146      158      164      155      147      125      121  .......
                                         =======================================================================
Discretionary:                                                                                                  
    Defense.............................  .......       -1       -1        1        3        7        5       13
    Nondefense..........................  .......       -3       -7      -11      -14      -20      -22      -77
Mandatory:                                                                                                      
    Social Security.....................  .......  .......  .......  .......  .......  .......  .......  .......
    Medicare: \2\.......................                                                                        
        Part A solvency.................  .......       -5      -10      -16      -23      -30      -39     -123
        Part B President's proposals....  .......       -2       -2       -6       -9      -12      -14      -44
    Medicaid............................  .......       -0       -4       -9      -12      -19      -27      -72
    Welfare programs....................  .......       -1       -7       -9      -11      -11      -13      -53
    EITC................................       -0       -2       -3       -3       -3       -3       -3      -17
    Other mandatory.....................  .......       -4       -3       -6       -8       -9      -12      -42
Revenues:                                                                                                       
    Tax relief..........................        1       15       20       24       23       23       16      122
                                         -----------------------------------------------------------------------
      Total policy changes..............        1       -3      -17      -36      -53      -74     -109     -293
Debt service............................        0       -0       -1       -2       -4       -7      -12      -26
                                         -----------------------------------------------------------------------
      Total deficit reduction...........        1       -3      -18      -37      -58      -82     -121     -319
                                         =======================================================================
Resulting deficit/surplus...............      147      155      146      117       89       43       -0  .......
----------------------------------------------------------------------------------------------------------------
\1\ Budget resolution baseline includes adjustments for OCRA, subsidized housing, students loans, etc.          
\2\ Excludes $10 billion reserved for Graduate Medical Education included in ``other'' mandatory spending.      
                                                                                                                
Note.--Details may not add to totals due to rounding. All totals shown on a unified budget basis. Revenue       
  reduction shown as positive because it increases the deficit. Welfare programs include: Food stamps, SSI,     
  family support, child nutrition, and foster care.                                                             

                              II Economics

    The Committee's baseline is built upon multi-year economic 
assumptions, which reflect the expected benefit from balancing 
the budget by 2002. These economic projections were developed 
by the Congress Budget Office (CBO) an are listed in Table III. 
The forecasts for 1996 and 1997 reflect CBO's assessment of 
short-run trends and the economy's cyclical position, while out 
year figures are based upon long-run economic trends.

                           ECONOMIC OVERVIEW

    GDP growth slowed in 1995 to 2.0 percent, in what many 
termed a growth recession within the current 5 year recovery. 
This slowing is consistent with the Federal Reserve's `soft 
landing' strategy, whereby growth is targeted at its potential 
rate of 2.0 percent--the rate of growth which sees full 
utilization of resources with no capacity strains. Although 
some believe that 2.0 percent is too low, trend growth is not 
determined by the Fed. Long-run growth is fueled by 
productivity gains and growth of the labor force, issues which 
are influenced by fiscal policy. The Fed's goal is to keep the 
economy close to its current potential, thus smoothing out 
sharp and unwanted fluctuations in growth.
    Although two administrations have presided over this 
recovery, the credit for its longevity goes to the Federal 
Reserve. By keeping inflation under 3 percent for the last 5 
years (as shown in Chart 1), the Fed fostered a sharp decline 
in 30 year interest rates from over 9.0 percent in 1990 to lows 
near 5.8 percent in late 1993.


    This led to a multi-year boom in interest rate sensitive 
sectors like housing and consumer durable purchases, and 
sustained growth overall. In order to head off the type of 
inflationary pressures which have cut short previous 
recoveries, the Fed tightened policy preemptively in 1994 
before relaxing policy again in mid 1995. Given the roughly one 
year lag in monetary policy, 1995's slowdown in interest rate 
sensitive sectors is seen as a response to 1994's rate hike.

            TABLE I.--SOURCES OF YEARLY GROWTH (PERCENT) DURING PRESENT RECOVERY: MARCH 1991-PRESENT            
----------------------------------------------------------------------------------------------------------------
                                                        Consumer    Consumer    Producer                        
                                             Overall    durable   non-durable   durables  Residential   Exports 
                                              growth   purchases   purchases   equipment   investment           
----------------------------------------------------------------------------------------------------------------
1992......................................        2.7        5.7          1.6        6.1         16.6        6.6
1993......................................        2.2        7.3          2.0       10.0          7.6        3.3
1994......................................        3.5        7.2          3.1       13.2         10.8        8.3
1995......................................        2.0        3.4          2.3       10.5         -2.3        8.3
----------------------------------------------------------------------------------------------------------------

    1995's slowdown prompted an unwanted rise in business 
inventories, which prompted firms to scale back production in 
order to limit further inventory buildup. This can be seen in 
Chart 2. This capped overall GDP growth. If one looks at final 
sales instead of overall GDP (which strips out the effect of 
inventories), 1995 growth rose 2.4 percent.


    This inventory adjustment hurt the manufacturing sector 
acutely, leading the loss of 165,000 jobs there over the course 
of 1995. When coupled with previous years' investment surge, 
manufacturing capacity usage fell sharply from January's 84.6 
percent level to December's 81.8 percent, assuaging inflation 
concerns. Continued strength in US exports did provide a 
partial safety valve for US producers despite the domestic 
slowdown.

              1997 BUDGET RESOLUTION ECONOMIC ASSUMPTIONS

Fiscal dividend:

    This year's economic projections differ in a fundamental 
way from those made last spring--they build in the beneficial 
impact from balancing the budget and are thus termed `post-
policy' economic forecasts. With a balanced budget assumption, 
trend GDP growth is boosted by 0.1 percent out to 2002 and 
interest rates are 110 basis points lower. These more favorable 
economic forecasts combine to reduce the deficit by a 
cumulative $254.1 billion out to 2002, $75.0 billion in 2002 
alone.
    In last spring's reports, the economic forecasts themselves 
did not incorporate the economic benefits of a balanced budget. 
Rather, CBO used what it termed `present policy' economics and 
allocated a fiscal `dividend' for balancing the budget as an 
add-on once policies had been formulated to achieve credible 
balance in 2002.
    Whether incorporated in the economic forecasts or added on 
as an explicit dividend, the same amount of budgetary savings 
is achieved. This savings stems from the fact that a balanced 
budget will lead to lower government borrowing costs, higher 
revenues, and reduced outlays on unemployment claims. The 
catalyst for this savings is lower interest rates which arise 
as decreased public borrowing frees up domestic savings. This 
then leads to increased investment, boosting productivity and 
growth. While this may sound like an antiseptic chain of 
events, there are direct and visible benefits to individuals as 
well--consider a reduction in a fixed rate, 30 year mortgage 
from 8.0 percent to 6.9 percent as long-term interest rates 
fall.
    The size of the anticipated fiscal dividend changed over 
the course of the year. March 1995's fiscal dividend was 
estimated at $170 billion and was presented as a budgetary add-
on. In CBO's December 1995 update, the estimated fiscal 
dividend grew to $282 billion over the seven year period. This 
increase stemmed from CBO's inclusion of an expected boost in 
corporate income tax receipts from the drop in interest rates--
lower rates reduce businesses' borrowing costs, raising profits 
and hence taxes paid. This savings was built into the `post-
policy' economic assumptions.
    In its most recent report in March 1996, CBO estimated the 
fiscal dividend at $254.1 billion. Changes in `pre-policy' 
economic assumptions are a large reason why this most recent 
estimate is lower than December's $282.2 billion total. 
However, the March 1996 dividend did receive a small boost from 
the inclusion of lower interest rate servicing in student 
loans. There is an additional item in the March 1996 fiscal 
dividend which appears to inflate its total on paper--debt 
service savings on the fiscal dividend itself. This is merely a 
change in the way the dividend is presented. It is prompted by 
the fact that the fiscal dividend is assumed to reduce the 
current policy baseline deficit before policy changes are made, 
resulting in debt service savings on the fiscal dividend 
itself. Previously, the fiscal dividend was presumed to replace 
a portion of the policy savings which led to a balanced budget, 
so no additional debt service was attributed to the dividend.

                                   TABLE II.--EVOLUTION OF THE FISCAL DIVIDEND                                  
----------------------------------------------------------------------------------------------------------------
                                                                                                         7-year 
                                           1996     1997     1998     1999     2000     2001     2002     total 
----------------------------------------------------------------------------------------------------------------
March 1996:                                                                                                     
    Interest...........................     -0.2     -3.2    -10.8    -21.9    -32.0    -38.3    -43.2    -149.6
    Debt Service.......................     -0.0     -0.2     -0.9     -2.2     -4.2     -6.9    -10.1     -24.4
    Revenues...........................     -0.0     -2.1     -7.3    -12.7    -16.3    -18.6    -21.1     -78.1
    Student Loans......................      0.4     -0.0     -0.3     -0.5     -0.5     -0.6     -0.6      -1.0
                                        ------------------------------------------------------------------------
      Total............................      0.2     -5.5    -19.3    -37.3    -53.0    -64.4    -75.0    -254.1
                                        ========================================================================
December 1996:                                                                                                  
    Interest...........................     -1.5     -7.5    -16.2    -25.6    -33.9    -37.6    -39.7    -162.0
    Debt Service.......................      0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0
    Revenues...........................     -5.5    -13.5    -19.4    -21.0    -20.4    -20.0    -20.5    -120.3
    Student Loans......................      0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0
                                        ------------------------------------------------------------------------
      Total............................     -7.0    -21.0    -35.6    -46.5    -54.2    -57.6    -60.2    -282.2
                                        ========================================================================
March 1995:                                                                                                     
    Interest...........................     -2.0     -6.0    -12.0    -20.0    -28.0    -36.0    -42.0    -146.0
    Debt Service.......................      0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0
    Revenues...........................     -1.0     -1.0     -2.0     -3.0     -4.0     -5.0     -8.0     -24.0
    Student Loans......................      0.0      0.0      0.0      0.0      0.0      0.0      0.0       0.0
                                        ------------------------------------------------------------------------
      Total............................     -3.0     -7.0    -14.0    -23.0    -32.0    -41.0    -50.0    -170.0
----------------------------------------------------------------------------------------------------------------

Economic forecasts

    Current GDP forecasts are done on a chain-weighted basis, 
following the switch in measurement techniques by the Commerce 
Department at the end of 1995. Previously GDP growth had been 
measured on a fixed weight basis using relative prices of goods 
from a certain base year when calculating subsequent year's 
growth. While this method is fine if relative prices are fairly 
steady, distortions arise when items undergo marked price 
swings. Given the sharp fall in computer prices, fixed-weight 
measures of GDP were overstated in recent years. This 
overstatement was corrected by the shift to chain-weights, 
which uses weights from adjacent years on a rolling basis 
instead of fixed weights. This permits shifts in relative 
prices and output composition to be reflected.
    Inflation is expected to remain at or below 3.0 percent out 
to 2002, given assumed Fed vigilance. These forecasts include 
two, upcoming technical changes in BLS' calculation of CPI. (1) 
Roughly every 10 years, the BLS updates the consumption basket 
used to calculate CPI. This will occur next in 1998, using 
weights based on consumer expenditures in 1993-1995. Since this 
updated survey will reflect consumer shifts to declining price 
goods, this is expected to shave 0.2 percent off CPI initially, 
before an upward bias creeps back in the further one gets from 
the base period. CBO has already assumed this update. (2) The 
BLS stated recently that it will eliminate the remaining 0.1 
percent of sample rotation bias from CPI as of July 1996. CBO 
had assumed that BLS would eliminate this bias and had priced 
this adjustment into their forecasts already. However, they had 
looked for a 0.16 percent correction, meaning the inflation 
forecasts used in the baseline projections are slightly under-
estimated. Given the small size of change, however, this would 
only boost the deficit by no more than $12 billion cumulatively 
out to 2002.
    Unemployment is expected to edge slightly higher toward 6.0 
percent from its current 5.6 percent level, resting just above 
the assumed NAIRU (non-accelerating inflation rate of 
unemployment).

                                 TABLE III.--CALENDAR YEAR ECONOMIC PROJECTIONS                                 
----------------------------------------------------------------------------------------------------------------
                                                   1995    1996    1997    1998    1999    2000    2001    2002 
----------------------------------------------------------------------------------------------------------------
Percent change, year over year:                                                                                 
    Nominal GDP:                                                                                                
        CBO.....................................     4.6     4.6     4.8     4.9     4.9     4.9     4.9     4.9
        Administration..........................     4.6     5.1     5.1     5.1     5.1     5.1     5.1     5.1
        Blue Chip...............................     4.6     4.2     4.6     4.4     4.5     4.9     4.7     4.8
    Real GDP (chained 1992 dollars):                                                                            
        CBO.....................................     2.0     2.0     2.0     2.1     2.2     2.2     2.2     2.2
        Administration..........................     2.0     2.2     2.3     2.3     2.3     2.3     2.3     2.3
        Blue Chip...............................     2.0     1.9     2.1     1.9     2.0     2.4     2.3     2.3
    Chained GDP deflator:                                                                                       
        CBO.....................................     2.5     2.6     2.8     2.7     2.7     2.7     2.7     2.7
        Administration..........................     2.5     2.8     2.7     2.7     2.7     2.7     2.7     2.7
        Blue Chip...............................     2.5     2.3     2.4     2.4     2.5     2.5     2.4     2.5
    CPI-U:                                                                                                      
        CBO.....................................     2.8     2.8     3.1     3.0     2.9     2.9     2.9     3.0
        Administration..........................     2.8     2.8     3.0     2.8     2.8     2.8     2.8     2.8
        Blue Chip...............................     2.8     2.7     2.8     2.9     2.8     2.9     2.8     2.8
Percent, annual:                                                                                                
    Unemployment rate:                                                                                          
        CBO.....................................     5.6     5.8     6.0     6.0     6.0     6.0     6.0     6.0
        Administration..........................     5.6     5.7     5.7     5.7     5.7     5.7     5.7     5.7
        Blue Chip...............................     5.6     5.7     5.8     6.3     6.3     6.1     6.1     6.0
    Three-month treasury bill:                                                                                  
        CBO.....................................     5.5     4.9     4.8     4.3     3.9     3.7     3.7     3.7
        Administration..........................     5.5     4.9     4.5     4.3     4.2     4.0     4.0     4.0
        Blue Chip...............................     5.5     4.9     4.9     5.2     5.1     5.0     4.9     4.9
    Ten-year treasury yield                                                                                     
        CBO.....................................     6.6     5.7     5.5     5.3     5.3     5.3     5.3     5.3
        Administration..........................     6.6     5.6     5.3     5.0     5.0     5.0     5.0     5.0
        Blue Chip...............................     6.6     6.0     6.1     6.4     6.3     6.3     6.2     6.2
----------------------------------------------------------------------------------------------------------------
Note: CBO March 1996 projections; Administration March 1996 projections; Blue Chip March/April 1996 projections.

                      RECENT DEFICIT DEVELOPMENTS

    Five years of economic growth, the consequent benefit to 
the thrift clean-up, and a large tax hike were the main drivers 
behind the deficit's decline from $290 billion in 1992 to 
1995's $164 billion level. Unfortunately, almost none of the 
reduction stems from entitlement spending cuts. This backdrop 
warns that recent deficit progress may be transitory unless 
more structural action is taken on the deficit.
    A common way to distinguish causes of deficit reduction is 
to strip out the changes in the deficit (increases or 
decreases) that are attributable to the economy. This measure, 
the standardized-employment deficit, allows one to discern the 
amount of structural--or real--progress made in reducing the 
deficit. When one also strips out the impact of the thrift 
crisis, CBO has calculated that only $48 billion of the recent 
$126 billion reduction results from policy action taken by the 
Clinton Administration. And most of the policy action came in 
the form of tax increases.
    Another way to assess the source of the recent deficit 
reduction is to compare CBO's projection of the 1995 deficit in 
January 1993, when President Clinton entered the White House, 
to the actual 1995 deficit. At that time, CBO projected the 
1995 deficit at $284 billion--the actual was $164 billion. Of 
the $120 billion difference between actual and projected 
deficits, only $46 billion stems from policy changes--virtually 
all of which comes from OBRA 93 tax hikes and user fee 
increases. (See Chart 3).
    The remaining $73 billion in deficit reduction came from 
(1) economic growth and (2) technical factors like an 
unexpected slowdown in Medicare and Medicaid growth rates and 
thrift resolution (decreased outlays and recently profits from 
asset sales). These are factors for which President Clinton can 
not take direct credit.


    Both measures of deficit reduction composition tell the 
same story: most of the deficit drop has been the consequence 
of cyclical factors, resolution of the thrift savings crisis, 
and tax hikes--not legislated entitlement restraints. In fact, 
an April 1995 GAO study acknowledged that ``OBRA 93 did not 
fundamentally alter the growth of the major entitlement 
programs and their potential fiscal effects.'' \1\
---------------------------------------------------------------------------
    \1\ General Accounting Office, The Deficit and the Economy: An 
Update of Long-Term Simulations, April 1995.
---------------------------------------------------------------------------

                            CHALLENGES AHEAD

    Without efforts to control the entitlement explosion, the 
deficit picture beyond 2020 deteriorates markedly. CBO has 
warned recently that the publicly held debt to GDP ratio will 
soar to well over 100 percent at such time without substantive 
action. This compares with the present 52 percent ratio. Use of 
generational accounting suggests that future generations will 
face an effective tax rate of 84 percent under such a scenario.
    The Bipartisan Commission on Entitlement and Tax Reform 
estimated that the entitlement expenditures to GDP ratio will 
reach 20 percent of GDP by 2030, and totally consume federal 
revenues. (Chart 4). This compares with the present 11.6 
percent entitlement to GDP ratio today and only a 7 percent 
level in 1962.


    This shift toward greater entitlement spending is 
discouraging since it diverts an increasing share of government 
outlays from productive investments and directs it toward 
groups with a high propensity to consume. With relatively low 
national savings rates already, this bias will further 
constrain US productivity and hence living standards.
    A look at specific programs is even less encouraging. The 
Bipartisan Commission on Entitlement and Tax Reform looks for 
Medicare expenditures to triple to 11 percent of GDP by 2030. 
To cover Medicare HI outlays alone, payroll taxes would have to 
rise from the current 2.9 percent to over 8.0 percent by 2030. 
In a similar vein, the Social Security Trust Fund is projected 
to run out of money by 2029. To cover Social Security outlays, 
payroll taxes would have to rise from the current 12.4 percent 
to 16.5 percent by 2030. Cutting only discretionary outlays 
will not solve the problem--if discretionary spending was 
frozen at 1996 levels and post-policy economics are employed, 
the federal deficit would still be $120 billion in 2002.\2\
---------------------------------------------------------------------------
    \2\ The Congressional Budget Office, The Economic and Budget 
Outlook, Fiscal Years 1997-2006: A Preliminary Report, March 28, 1996; 
Senate Budget Committee.
---------------------------------------------------------------------------

                   ECONOMIC CONSEQUENCES OF INACTION

    The symptoms of persistent US fiscal excess have become 
more and more apparent in recent years. US savings and 
investment ratios have fallen steadily since the 1960s and 
remain low when compared with other industrialized countries. 
(Chart 5). A sparse domestic savings pool constrains 
investment, although some additional investment can be financed 
by borrowing money abroad. This foreign borrowing constitutes 
the current account deficit. A temporary current account 
deficit is not necessarily a negative, if foreign funds are 
used for productive investment which will generate trade and 
current account surpluses down the road. However, deficits are 
problematic when they are persistent. Unfortunately, this is 
true for the US which has been in sustained current account 
deficit since 1982. Persistent reliance on foreign financing 
transformed the US from a creditor to a debtor nation in 1987. 
The situation has only worsened going forward--the US is now 
the world's largest debtor, with liabilities in excess of $650 
billion. The increasing role played by foreign investors can be 
seen in the growing foreign holdings of Treasuries as seen in 
Chart 6.
    Recently, this has been driven by central bank purchases 
via dollar intervention, itself a troubling sign of deficient 
foreign private interest. The danger of increased foreign 
financing is that the US will have to pay out an increasing 
amount of debt service abroad, constituting a net loss for the 
US economy. This problem is highlighted by the fact that the US 
ran its first deficit on interest rate service in 1994, with 
this trend expected to worsen going forward in a vicious 
circle--interest servicing widens the current account deficit, 
necessitating more foreign investment, which boosts subsequent 
interest servicing and so on.
    The desired, remedial boost to US savings will not come on 
its own--indeed, there are many disincentives to savings which 
must be extricated from the US tax code and governmental 
policy. The foremost step is to reduce the federal deficit, 
decrease governmental dissavings and thus boost gross savings 
economy-wide.
    Enhanced savings is not the end goal in and of itself--
rather, it is important because it is the best vehicle for 
raising Americans' living standards. High savings boosts 
investment and thus raises productivity and national income. 
The tight link between productivity growth and compensation has 
been well documented and can be seen in Chart 7.


    After averaging over 2.5 percent in the 1960s, productivity 
has remained at an unsatisfactory 1.1 percent average from 1973 
to present. One direct cause has been the decline in US savings 
and investment--this was exacerbated by the fact that steadily 
greater shares of private savings went to the federal 
government, which in turn devoted an ever increasing share of 
funds toward current consumption' entitlements and away from 
productive, long-term public investment. It is crucial to scale 
back the government intrusion into private savings and to 
affect tax changes which shift the bias toward savings from 
consumption. If the US is successful in achieving a permanently 
balanced budget, CBO estimates that national income would be 
10-15 percent higher by the year 2025 than if current policy 
were left unchanged.\3\
---------------------------------------------------------------------------
    \3\ Statement of June O'Neill, Director, Congressional Budget 
Office, on The Economic and Budget Outlook: Fiscal Years 1997-2006 
before the Committee on the Budget, United States Senate, April 18, 
1996, page 20.
---------------------------------------------------------------------------

                     RISKS TO ECONOMIC ASSUMPTIONS

    While staff economists believe that 2.0 percent growth is 
likely this year, the one main risk stems from the trajectory 
of long-term interest rates. Following signs of economic pick-
up in February/March 1996 and a lack of budget progress, 10 
year bond yields backed up roughly 100 basis points from their 
5.5 percent level in January 1996 to their present 6.5 percent. 
Having seen the impact of 1994's interest rate backup on 1995 
growth, the recent interest rate move is troubling. Interest 
rate sensitive sectors like housing and consumer durables 
remain the most vulnerable. The strong link between interest 
rates and housing can be seen in a plot of the Mortgage Bankers 
Association financing applications versus the 10 year bond 
yield in Chart 8. In order to keep growth on track, it is 
imperative that quick action is taken on balancing the budget 
in order to reassure bond holders and see interest rates edge 
back down.


                               CONCLUSION

    We must ensure that current deficit reduction continues. 
This will require tough decisions since we can't assume that 
technical factors and economic growth will play as large a 
restraining role on the deficit going forward. Our challenge is 
not only to scale back overall government spending, but also to 
shift our remaining spending priorities away from consumption-
oriented entitlements and toward productive, public investment. 
This will be one of the strongest actions Congress can take to 
enhance the growth prospects of the economy and boost standards 
of living. By increasing private savings and lowering interest 
rates, investment and productivity will rise, taking average 
real wages with them. Furthermore, a lessened need for foreign 
funding will help reduce our current account deficit and stop 
the net payout of interest service to foreigners. Lastly and 
most importantly, we will not leave future generations the 
burden of paying for our excesses.

                       III. Spending and Revenues

        A. BASELINE ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    This section of the report contains information on the 
baseline that will be used by the Committee during its 
deliberations on the 1997 Budget Resolution. Later during the 
year, these baseline assumptions underlying the budget 
resolution will be used as the basis for scoring legislative 
action.
    The budget resolution baseline is based largely on the CBO 
Revised Baseline (April) assuming a freeze on discretionary 
spending. These baseline estimates include the economic 
benefits of reaching a balanced budget by 2002 (which is 
referred to as a post-policy baseline). For more information on 
the economic assumptions, see the Economics section of this 
report. Specifically the baseline assumes the following:
          Discretionary spending is frozen at either the 1996 
        enacted or the 9th Continuing Resolution level, 
        adjusted for the incremental budgetary impact of P.L. 
        104-134, the Omnibus Rescissions and Appropriations Act 
        of 1996.
          In addition, the discretionary baseline includes an 
        adjustment to the freeze that would allow current 
        policy funding for Sec. 8 subsidized housing contract 
        renewals. (For a more detailed explanation, see the 
        Function 600 discussion in this report.)
          Entitlements and other mandatory spending consist 
        mainly of benefit programs, such as social security, 
        medicare, and medicaid. Spending for those programs is 
        controlled by setting eligibility rules, benefit 
        levels, and other cost factors, rather than voting 
        annually on funding levels. Estimates for these 
        programs assume full funding of current law, including 
        cost-of-living adjustments. A conceptual change has 
        been made in the estimation of administration costs for 
        the direct student loan program. (For a more detailed 
        explanation, see the Function 500 discussion in this 
        report.)
          Net interest spending is driven by the size of the 
        annual and cumulative deficits and by interest rates 
        and is not directly affected by Congressional action. 
        Net interest reflects both the interest paid and 
        interest earned by the government and provides the best 
        measure of the costs of federal borrowing
          Revenue estimates assume no change in current tax 
        law. Expired provisions, either increasing or 
        decreasing revenues, are not extended in the baseline 
        (i.e., the airline ticket tax).

                                                BASELINE SUMMARY                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
Outlays:                                                                                                        
    Discretionary:                                                                                              
        Defense...........................     264.5     265.9     264.3     264.7     266.4     261.1     263.0
        Nondefense........................     271.5     273.9     270.8     271.8     270.4     270.2     270.7
          Subtotal discretionary..........     536.0     539.7     535.1     536.6     536.9     531.3     533.7
    Mandatory:                                                                                                  
        Social Security...................     348.2     365.4     383.4     402.4     422.4     444.1     466.8
        Medicare..........................     196.1     215.5     236.4     257.4     279.5     303.2     328.5
        Medicaid..........................      95.8     105.1     115.4     126.4     138.2     151.5     166.4
        Welfare programs\1\...............      85.1      90.3      95.6     111.3     110.3     109.3     118.7
        Other.............................     149.3     170.2     180.8     173.7     191.6     197.6     204.6
          Subtotal mandatory..............     874.4     946.5   1,011.7   1,071.2   1,141.9   1,205.6   1,285.1
Offsetting receipts.......................     -75.5     -84.9     -77.3     -76.3     -78.7     -81.2     -84.6
Net interest..............................     239.7     242.2     244.9     245.3     243.7     245.3     248.5
                                           ---------------------------------------------------------------------
          Total outlays...................   1,574.6   1,643.5   1,714.4   1,776.7   1,843.8   1,901.0   1,982.6
          Revenues........................   1,428.3   1,485.4   1,550.8   1,621.8   1,696.9   1,776.3   1,861.2
                                           ---------------------------------------------------------------------
          Deficits........................     146.3     158.2     163.6     154.9     146.9     124.8     121.3
----------------------------------------------------------------------------------------------------------------
\1\ Welfare programs include: Food stamps, supplemental security income (SSI), family support, child nutrition, 
  and foster care.                                                                                              
                                                                                                                
Note.--Details may not add to totals due to rounding.                                                           

                     B. PRESIDENT'S FY 1997 BUDGET

                              PRESIDENT'S 1997 BUDGET TOTALS (AS ESTIMATED BY CBO)                              
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                     1996     1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Outlays..........................................    1,574    1,632    1,700    1,742    1,796    1,831    1,877
Revenues.........................................    1,428    1,477    1,549    1,619    1,690    1,775    1,877
Deficit w/o triggers.............................      146      156      153      125      109       89       84
Effect of triggers...............................  .......       -1       -2       -2       -2      -33      -84
Deficit with triggers............................      146      155      152      123      106       56        0
----------------------------------------------------------------------------------------------------------------

    The budget aggregates in President Clinton's 1997 budget 
present a far different picture over the next six years than 
did his budget for 1996, in which total annual federal spending 
was expected to exceed $2 trillion by the turn of the century, 
producing annual deficits around $300 billion. Now, the latest 
budget appears to hold spending down to less than $1.9 trillion 
in 2002, just enough to reach balance in that year. However, 
the President has to rely on a ``trigger'' that would reduce 
overall discretionary spending by $67 billion over 2001 and 
2002, without indicating which programs would absorb instant 
cuts of such magnitude. In addition, the President would need 
to sunset his proposed tax cuts after 2000. Without these 
contingencies, the deficit under the President's budget would 
be $84 billion in 2002.

 Entitlement spending

    Spending on entitlement programs and other mandatory 
activities under the President's proposals is expected to grow 
from $0.9 trillion this year to more than $1.2 trillion in 
2002. With these proposed levels, the proportion of total 
spending accounted for by these programs would increase from 56 
percent in 1996 to 65 percent in 2002, giving an indication of 
how much the President relies on reductions in discretionary 
spending levels to reach balance.
    Federal spending on Medicare will grow 7 percent per year, 
and Medicaid will grow at an average annual rate of 7.1 percent 
over the next six years under the President's budget. According 
to the Medicare trustees,\4\ these growth rates are 
unsustainable in the long run. For Medicare, the President 
would slow the growth of spending over six years by $117 
billion below the baseline. For Medicaid, the President would 
slow the growth of spending over the same period by $54 billion 
from the CBO baseline projections. Most of the President's 
savings would come from reforming the Disproportionate Share 
Hospital program; less than one-third of the savings would come 
from slowing the growth of federal Medicaid spending on 
benefits.
---------------------------------------------------------------------------
    \4\ ``Summary of the 1995 Annual Report'', Medicare Trustees, April 
1995.
---------------------------------------------------------------------------
    For welfare reform, the President proposes to save $38 
billion over the next six years (including $0.9 billion in 
increased Medicaid spending). From 1997 to 2002, CBO estimates 
that the major cash and in-kind entitlement programs will cost 
$608 billion, with an average annual growth rate of 5.4 
percent. Under the President's proposal, spending on welfare 
programs would grow at 4.2 percent per year. The President 
would repeal the Aid to Families with Dependent Children 
program and create two new entitlement programs in its place.

 Discretionary spending

    While amounting to 34 percent of total spending in 1996, 
discretionary spending under the President's proposed levels 
would fall to 28 percent of total spending by 2002. Looking at 
the absolute levels, the President's budget would hold total 
discretionary outlays at about $4 billion to $8 billion above 
the 1996 level of $534 billion for each of the next four years. 
Then, in 2001 and 2002, outlays would decline to less than $530 
billion. The President would accomplish this by a ``trigger'' 
that would reduce the overall discretionary caps by $67 billion 
over the last two years to produce a balanced budget in 2002. 
The budget omits any information would indicate which accounts 
would bear these reductions, or even how the reductions would 
be allocated between defense and non-defense activities.

Revenues

    The President proposes tax cuts of $97 billion (including a 
child tax credit, expanded IRAs, and an education tax credit), 
which are largely offset by extensions of expiring tax 
provisions and reforms of corporate taxes. Using CBO's economic 
and technical assumptions, however, the President's budget 
requires that the tax cuts be ``de-triggered'' after 2000 in 
order to reach balance in 2002 (yielding a net increase in 
revenues of $16 billion in 2002).

Other triggers

    Besides the revenue and discretionary spending triggers, 
which combined account for $71 billion of the $84 billion in 
contingent reductions needed to eliminate the deficit in the 
budget in 2002, the President requires two other contingencies. 
The President proposes to accelerate the current plan of the 
FCC to transition broadcasters from analog television to 
digital technology, and would auction in 2002 the spectrum that 
broadcasters would have to return by 2005. Because CBO 
estimates that this proposal would generate only about $11 
billion in receipts, while OMB expects the auction to raise $17 
billion, the President proposes that any shortfall less than 
$17 billion in actual auction receipts be made up by a fee or 
tax (amounting to $6 billion) that the FCC would charge to 
broadcasters for use of the spectrum for their digital signal.
    In addition, to get to balance, the President would have to 
rely on policies, further reducing Medicare spending by another 
$13 billion over the six years, that are not included in his 
basic Medicare proposal. Combined with additional debt service 
savings associated with all the President's contingent 
proposals, these last two triggers produce the remaining $13 
billion in savings the President needs to get to a zero deficit 
in 2002.
            The Impact of the President's discretionary trigger
    Under CBO scoring, the President's ``discretionary 
trigger'' will be activated in the years 2001 and 2002. This 
trigger necessitates additional discretionary spending 
reductions of $27.5 billion in budget authority in 2001 and 
$49.8 billion in budget authority in 2002.
    Although the President's budget specifies account-level 
detail for all the proposed spending increases in 1997, the 
reductions from the ``discretionary trigger'' in 2001 and 2002 
are left unspecified. The President's discretionary trigger 
would apply to non-defense discretionary spending, and would 
result in a 10.7 percent reduction in aggregate budget 
authority in 2001 and a 18.3 percent reduction in budget 
authority in 2002.
    The first graph compares the President's proposed budget 
for non-defense discretionary spending to the Committee's 
recommendation. For the President's budget, the graph 
illustrates that these additional discretionary reductions lead 
to a non-defense discretionary spending curve that increases in 
1997 and 1998, decreases in 1999 and 2000, and plummets in 2001 
and 2002.
    Lacking further specificity from the President about the 
application of these additional reductions, the Committee has 
assumed these reductions would be applied across the board to 
all non-defense discretionary programs. For various programs, 
the following graphs compare the spending levels assumed in the 
Committee recommendation with those in the President's budget, 
including the effects of an across-the-board application of the 
President's discretionary trigger.


                      C. COMMITTEE RECOMMENDATIONS

                          SPENDING BY FUNCTION

    This section of the report provides details on the 
Committee's spending recommendations for each of the 20 
functional areas of the budget.

                     Function 050: NATIONAL DEFENSE

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    Function 050 funds the Department of Defense (DoD), Atomic 
Energy Defense Activities (AEDA) in the Department of Energy 
(DoE), and some other, minor defense related activities in 
other agencies. More than 95 percent of the funds in function 
050 are for the Department of Defense. About 4 percent of the 
funds in this function are for AEDA in DOE.
    The Committee's recommendation adopts the 050 spending 
level endorsed by Congress last year in the FY 1996 Concurrent 
Budget Resolution, with a negative adjustment for revised 
inflation estimates. In doing so the Committee's recommendation 
reduces the amount specified by the 1996 resolution by $1.6 
billion in budget authority in 1997 and by $14.3 billion in 
budget authority over the 1997 to 2002 time period. For FY 
1997, the Committee's recommendation would set discretionary 
050 spending at $266.4 in budget authority and $264.6 in 
outlays. This is a $11.3 billion increase in budget authority 
and a $3.0 billion increase in outlays over the President's 
request for 1997. For the period 1997-2002, the Committee's 
recommendation amounts to $1,629.3 billion in discretionary 
budget authority and $1,598.9 billion in discretionary outlays. 
The President's request would total $1,618.4 billion in 
discretionary budget authority and $1,587.6 billion in 
discretionary outlays. The Committee's recommendation increases 
050 discretionary spending by $10.9 billion in budget authority 
and $11.3 in outlays above the President's six year plan. 
Compared to the baseline the Committee's recommendation 
increases budget authority in 1997 by $1.2 billion and it 
reduces outlays in 1997 by $1.3 billion.
    For 050, the President has requested $255.1 billion in 
discretionary budget authority and $261.6 billion in outlays 
for 1997. The President's request is $10.1 billion in budget 
authority and $4.3 billion in outlays below the baseline and it 
is a real 6.0 percent decline from spending in 1996. The 
request is also 40 percent below 1985's spending level, and it 
is the twelfth straight year of decline in real terms.
    The President has requested $243.5 billion in discretionary 
budget authority for the Department of Defense (subfunction 
051). This is a decrease from 1996 appropriations for 051 of 
$9.7 billion. Of the six major spending accounts in DoD, two 
show minor increases (Personnel and Research & Development) and 
the rest show declines (Operations & Maintenance, Procurement, 
Military Construction, and Family Housing). The President has 
requested $11.1 billion in budget authority and $10.8 billion 
in outlays for the AEDA activities of DoE (subfunction 053). 
This constitutes increases of $0.4 billion in budget authority 
and of $0.3 billion in outlays over 1996.
    Spending reductions in the President's request are 
especially evident in weapons procurement; since 1985 this 
account has been cut from $134.3 billion to $38.9 billion, a 71 
percent reduction. Projections of future spending in the 
procurement budget--and the entire 050 function--show increases 
starting in 1998. However, last year, Secretary of Defense 
Perry promised increases in the procurement budget starting in 
1997 and the President called for an end to defense cuts; the 
promised increases did not materialize. In 1996 DoD projected 
that procurement spending would increase from $39.4 billion to 
$43.5 billion in 1997--this did not occur. The 1997 request for 
procurement was $38.9 billion. In his State of the Union 
address on January 24, 1995, the President said, ``The budget I 
send to Congress draws the line against further defense cuts. * 
* * We must not cut defense further.'' However, the overall 
1997 request for DoD was almost $3 billion lower than the 1996 
request.
    Although the Administration states its highest priority is 
readiness, the 1997 request for Operations and Maintenance, 
$89.2 billion, is a $4.3 billion reduction. Future readiness 
budgets in the President's six year plan will barely keep pace 
with inflation. Given the increased aging of the weapons 
inventory accepted by the Administration's procurement plan and 
the resulting additional upkeep costs, it is probable that 
readiness levels will fall perceptibly.
    According to CBO and GAO studies, the President's defense 
budget does not adequately support the Bottom Up Review force 
structure plan of 13 active Army and Marine Corps divisions, 
346 battle force ships, and 20 active and reserve fighter 
wings. These CBO and GAO studies and the testimony of the Joint 
Chiefs of Staff to Congress make it clear that the 
modernization and force structure objectives of the 
Administration's Bottom-Up Review are seriously under funded by 
the President's Future Year Defense Plan (FYDP). Secretary of 
Defense Perry and DoD's Comptroller have stated that DoD will 
find funds to better support modernization plans through 
savings in three areas: procurement reform, base closing, and 
lower inflation estimates.\5\ Many procurement reforms have 
barely begun; total savings from these and additional future 
reforms are unclear, and, to date, the amounts needed have not 
been realized. Net savings from previous base closing decisions 
have not yet occurred, and according to GAO ``There are no 
significant infrastructure savings to DoD between fiscal years 
1996 and 2001. * * * '' \6\ Finally, according to CBO, only 
about one-third of the inflation savings projected by the 
Administration actually exist.
---------------------------------------------------------------------------
    \5\ Secretary of defense William J. Perry, March 4, 1996, testimony 
to Senate Committee on Armed Services. DoD Comptroller John Hamre, 
March 6, 1996, testimony to the Defense Subcommittee of the Senate 
Committee on Appropriations.
    \6\ Defense Infrastructure: Budget Estimates for 1996-2001 Offer 
Little Savings for Modernization, US General Accounting Office, GAO/
NSIAD-96-131, April 4, 1996, p. 2.
---------------------------------------------------------------------------
    Because of revised inflation estimates, the Committee 
recommendation contains a negative adjustment from the budget 
authority and outlay levels approved in last year's budget 
resolution Conference Agreement. Despite the apparent 
reduction, the Committee's recommendation retains the same real 
purchasing power of last year's resolution both for 1997 and 
for the 1997-2002 plan. This is because estimates for inflation 
for 1997 and the subsequent five years have been adjusted 
downward since last year. As a result, the lesser dollar 
figures in the Committee's recommendation will have the same 
purchasing power as the nominally higher levels adopted last 
year. CBO calculates the difference in last year's and this 
year's inflation estimates in discretionary budget authority to 
be $1.6 billion for FY 1997 and a total of $14.3 billion for 
the years 1997-2002. In discretionary outlays, CBO calculates 
the differences to be $1.1 billion in 1997 and $12.1 billion 
for the years 1997-2002. The Committee recommendation has made 
this negative adjustment to avoid an undenominated, but real, 
buying authority increase above the level endorsed by Congress 
last year in the 1996 Budget Resolution Conference Agreement.


    The Administration also calculated an inflation adjustment. 
Using significantly more optimistic OMB economic assumptions, 
DoD calculated an inflation adjustment of $4.3 billion in 1997 
and of $45.7 billion for 1997-2002. In an April 23, 1996 letter 
to the Chairman and Ranking Minority Member of the Budget 
Committee, CBO stated that ``The Administration's calculation 
is compromised * * * by its use of the price deflator for GDP, 
which is no longer the featured price measure * * * '' and that 
the deflator employed by the Administration incorporates a 
``large bias.''
    In the later years of the two 1997-2002 plans, the 
relationship between the Committee's recommendation and the 
President's budget changes. As the graphic below shows, after 
1997 and again after the year 2000, the President's plan shows 
significant increases in the rate of spending while the 
Committee's recommendation shows 050 spending increasing at a 
constant rate. Considering last year's promise from Secretary 
of Defense Perry that 1997 would witness increases in the 
procurement budget and the President's statement that there 
would be no further defense cuts--and that the promised 
increases did not materialize--it can be questioned whether the 
increases now espoused in the President's plan will actually 
occur. Moreover, the steady-state nature of the proposed 
Committee recommendation is a more sustainable spending 
strategy.
    The $11.3 billion increase in discretionary budget 
authority in 1997 and the similar increases over the total 
1997-2002 period will address a significant portion of the 
under funding in the Administration's plan. The Committee's 
recommendation assumes increases primarily, but not 
exclusively, in three major DoD spending accounts: Procurement, 
Operations & Maintenance (O&M;), and Military Construction. The 
increases in Procurement and O&M; are intended to address 
funding shortfalls in modernization and readiness that have 
been identified this and last year by CBO, GAO and other 
studies--in and out of the Department of Defense. The increases 
in Military Construction are intended to address potential 
underestimates of environmental clean up costs at defense 
facilities that are being closed pursuant to Base Realignment 
and Closure Commission proceedings and other potential 
increases to the President's request.
    This Committee's recommendation also assumes net increases 
in the AEDA portions of DoE spending. Specifically, it assumes 
increases in the 053 subfunction commensurate with the assumed 
increases in the 050 function. Because the 053 subfunction 
constitutes 4 percent of the total 050 function, the 
Committee's recommendation assumes an increase of $450 million 
in discretionary budget authority to the $11.1 requested by the 
Administration for DoE-AEDA spending.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    National Defense Stockpile Sales. Additional National 
Defense Stockpile sales are assumed to increase by amounts 
ranging from $79 million to $166 million per year from 1997 to 
2002. The various annual increases in these sales are the same 
levels as those endorsed last year by the Senate Armed Services 
Committee for the years 1996 to 2002 during the reconciliation 
process. Sales assumed last year for 1996 have been 
redistributed to the years 2001 and 2002. The specific stream 
of sales assumed in the Committee's recommendation are spread 
over time and over diverse stockpiles in order to minimize any 
adverse market impacts.

                  Function 150: INTERNATIONAL AFFAIRS

    Function 150 includes operation of foreign affairs 
establishments including embassies and other diplomatic 
missions abroad; sale of U.S. commodities under Food for Peace 
programs; foreign aid loan and technical assistance activities 
in the less developed countries; security assistance to foreign 
governments; foreign military sales made through the Foreign 
Military Sales Trust Fund; U.S. contributions to international 
financial institutions; Export-Import Bank activities; and 
refugee assistance.
    The Committee recommendation assumes that funding in 1997 
for Function 150 will be $14.2 billion in budget authority and 
$14.8 billion in outlays. Over the 1997-2002 period, federal 
spending on international affairs activities would total $75.7 
billion in budget authority and $78.4 billion in outlays, a 
reduction to the baseline of $14.1 billion in budget authority 
and $11.6 billion in outlays.

          MAJOR DISCRETIONARY IN THE COMMITTEE RECOMMENDATION

    Discretionary spending in 1997 for Function 150 would be 
frozen at the 1996 level excluding the Omnibus Consolidated 
Rescissions and Appropriations Act (OCRA). This level is $18.1 
billion in budget authority and $19.2 billion in outlays. Over 
the 1997-2002 period, discretionary spending on international 
affairs activities would be $95.0 billion in budget authority 
and $100.0 billion in outlays, a reduction to the baseline of 
$14.1 billion in budget authority and $11.6 billion in outlays.
    The Committee's recommendation assumes the President's 
requested cuts through 2002 in programs including the State 
Department Salaries and Expenses, Diplomatic and Consular 
Affairs, Acquisition of Buildings Abroad, Migration and Refugee 
Assistance, USIA Salaries and Expenses, Education and Cultural 
Exchange Programs, AID Operating Expenses, Sustainable 
Development, International Finance Corporation, and the 
European Bank for Reconstruction and Development. These cuts 
result in savings of $5.9 billion in budget authority and $5.5 
billion in outlays over the six year period.
    The Committee's recommendation maintains funding in 1997 
for export financing and trade promotion programs. The 
committee recognizes that exports are crucial to the economic 
health of the United States.
    The Committee's recommendation maintains the $200 million 
annual funding for Bosnia's reconstruction as pledged by the 
United States through 1998. Assumes other Eastern European 
countries will graduate from US aid programs by 2000 saving 
$2.1 billion in budget authority and $1.3 billion in outlays by 
fiscal year 2002.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes no mandatory changes 
to the baseline.

          Function 250: GENERAL SCIENCE, SPACE, AND TECHNOLOGY

    Function 250 includes the National Aeronautics and Space 
Administration (NASA) civilian space program, the National 
Science Foundation (NSF), and basic research programs of the 
Department of Energy (DOE).
    Spending for Function 250 would decrease from $16.8 billion 
in budget authority and $16.6 billion in outlays in 1996 to 
$15.5 billion in budget authority and outlays in 2002, a 
reduction of seven percent. Over the 1997-2002 period, federal 
spending on general science, space and technology activities 
would be $94.7 billion in budget authority and $95.4 billion in 
outlays. When Function 250 is compared to spending levels 
contained in the FY 1996 Concurrent Budget Resolution, total 
spending increases by nearly $1 billion.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee recommendation maintains the 1996 resolution 
assumptions, for NASA increasing total funding over the 
President's request through 2000. Funding would be set at $12.3 
billion in 1997 and $11.3 billion by 2000. The President's 
request for NASA would have set funding at $12.5 billion in 
1997, but reduced NASA to $10.5 billion in 2000, a reduction of 
16 percent. This proposal would save $5.7 billion in BA and 
$4.6 billion in outlays over 1997-2002.
    The Committee's recommendation assumes a three percent 
annual increase for research and related activities within NSF. 
Total research and related activities funding would increase 
from the 1996 level of $2.2 billion to $2.6 billion in 2002. 
Proposal also assumes the President's reductions to NSF, 
including the elimination of academic research infrastructure 
and reductions to salaries and expenses. Proposal would 
increase NSF by $1.1 billion in budget authority and $0.8 
billion in outlays over 1997-2002.
    The Committee's recommendation assumes the President's 
proposed reductions in the outyears for DOE general science 
programs saves $0.8 billion in BA and $0.6 billion in outlays 
over 1997-2002.
    The committee recognizes the importance of science and 
research by assuming that science will be a national priority 
and fully funded while balancing the budget by 2002. The 
Committee notes that action on appropriations this past year 
demonstrated Congress' commitment to science. For 1996 enacted 
appropriations, basic research was increased by 2.3 percent 
over 1995, while non-defense basic research increased by 2.9 
percent.
    The Committee believes science and basic research should be 
a national priority and that any reductions in research and 
development funding should be directed towards technology 
efforts that are more appropriately the responsibility of the 
private sector. The budget resolution makes funding a priority 
for science programs such as the National Science Foundation 
(NSF), the National Institutes of Health (NIH), and the science 
and basic research programs within the Department of Energy.

     major mandatory assumptions in the committee's recommendation

    There are no mandatory proposals in this function.

                          Function 270: ENERGY

                       major programs in function

    Function 270 funds the civilian activities of the 
Department of the Energy (DOE), the Rural Electrification 
Administration (REA), the Nuclear Regulatory Commission (NRC), 
and the net spending of the Tennessee Valley Authority (TVA) 
power program.
    The Committee's recommendation would reduce spending by 
$0.9 billion in BA and $0.2 billion in outlays in 1997 relative 
to the freeze baseline.

    major discretionary assumptions in the committee recommendation

    Over the next six years, the Committee's recommendation 
provides $26.5 billion in BA and $26.6 billion in outlays for 
discretionary programs in this Function.
    The Committee's recommendation fully funds Department of 
Energy programs that support science and basic research, such 
as DOE's efforts to map the human genome.
    The Committee's recommendation builds on the President's 
proposals to reduce funding for the development of energy 
technologies. The President proposes to eliminate any 
additional funding for the clean coal technology program and 
phases in a 37 percent reduction in Department of Energy fossil 
(coal, natural gas, and petroleum) technology development 
programs. The Committee's recommendation builds on these 
proposals and would extend these reductions to DOE's efforts to 
commercialize other energy technologies.
    The Committee's recommendation reduces DOE overhead by $1 
billion over the 7 year period. The Committee's recommendation 
adopts the President's proposal to shift some of DOE's 
functions from the Departmental Administration account to the 
DOE's energy supply research and development account. The 
Committee's recommendation does not, however, adopt the 
President's $33 million, or 38 percent, increase for the DOE 
headquarters' budget. The Committee's recommendation also 
includes reductions in other DOE headquarters functions.
    The Committee's recommendation adopts the President's 
proposals to reduce strategic petroleum reserve (SPRO) 
operations and maintenance funding. The Committee's 
recommendation also adopts the President's budget for the Rural 
Electrification Administration (REA), which provides sufficient 
resources to fully fund REA lending programs.
    The Nuclear Waste Policy Act provided for the disposal of 
commercial high level nuclear waste generated at civilian 
nuclear powerplants. Since 1982, the Federal government has 
collected a fee on nuclear-generated electricity to pay for the 
cost of the development of a nuclear waste disposal program. 
This law called on the Federal government to accept this 
commercial waste in 1998.
    Commercial nuclear waste is scattered in temporary storage 
facilities at over 113 nuclear reactors across the country. At 
least 26 of these reactors will run out of capacity in 1998, 
with 80 more running out of capacity in 2010. The 
Administration's fiscal year 1997 budget fails to provide 
sufficient resources over the next six years to develop a 
nuclear waste repository and the Administration has threatened 
to veto legislation that authorizes an interim storage 
facility. The result is that the Administration has no 
realistic plans to address the problem of nuclear waste.
    The Committee does not support taking the nuclear waste 
trust fund off-budget, but believes nuclear waste funding 
should be addressed as part of an effort to reform this program 
and meet the Federal government's commitment to provide for the 
safe and environmentally-sound storage and disposal of nuclear 
waste.

     major mandatory assumptions in the committee's recommendation

    The Committee recommendation adopts a proposal in the BBA 
and the President's budget that authorizes DOE to lease excess 
SPRO storage capacity. SPRO will hold 575 million barrels of 
oil after completion of some recent oil sales and has a total 
capacity of 750 million barrels.
    The Committee recommendation adopts a proposal from the BBA 
and the President's budget request that would extend the 
requirement through 2002 for the NRC to collect 100 percent of 
its budget from fees assessed on the nuclear powerplants that 
it regulates.

            Function 300: NATURAL RESOURCES AND ENVIRONMENT

                       major programs in function

    Function 300 includes funding for water resources, 
conservation and land management, recreational resources and 
pollution control and abatement. Agencies with major programs 
in this function include: the Army Corp of Engineers, Bureau of 
Reclamation, Forest Service, Bureau of Land Management, Fish 
and Wildlife Service, the National Park Service, Environmental 
Protection Agency, National Oceanic and Atmospheric 
Administration, and the U.S. Geological Survey.
    Budget authority in Function 300 would decrease from $21.4 
billion in 1996 to $20.3 billion in 1997 while outlays would 
decrease from $21.8 billion in 1996 to 21.4 billion in 1997. 
The resolution includes a reserve fund for superfund reform 
which provides an additional $5.4 billion over six years if the 
program is reformed and the superfund taxes are extended. Over 
the 1997-2002 period, including the increase in superfund, 
federal spending on natural resources and environment would be 
$123.8 billion in budget authority and $126.0 billion in 
outlays.

    major discretionary assumptions in the committee recommendation

    The Committee's recommendation assumes $6.5 billion, an 
increase of $0.8 billion from the freeze baseline for the 
superfund, safe drinking water, and operating and environmental 
enforcement programs of the Environmental Protection Agency 
(EPA). The total funding level for EPA is essentially at the 
level provided in Omnibus Consolidated Rescissions and 
Appropriations Act (OCRA). The superfund reserve fund would 
provide EPA with an additional $5.4 billion over the 6 year 
period. Over six years EPA would spend over $44 billion to 
protect and clean our nation's environment.
    The National Park Service (NPS) would continue to spend 
$6.6 billion over the next six years to operate our National 
Parks. The Committee's recommendation assumes full funding of 
the NPS operations.
    The Committee's recommendation assumes the elimination of 
duplicate programs, such as the Agriculture Conservation 
Program and the Colorado Salinity Control Program. The Federal 
Agriculture Improvement and Reform Act of 1996 funds these 
programs though a new mandatory Environmental Quality 
Incentives Program. The Committee's recommendation also assumes 
President's proposal to eliminate funding for the international 
forestry program.

      major mandatory assumptions in the committee recommendation

    The Committee's recommendation assumes the privatization of 
activities that can be more efficiently managed by non-federal 
entities and increase fees for the use of Federal resources. 
Many of the initiatives were included in the vetoed Balanced 
Budget Act and are also included in the President's budget. The 
major assumptions include:
    The Committee's recommendation ends the Federal 
government's processing and storage of helium, privatizes 
helium facilities, and sells remaining helium stockpiles over 
time. The Committee's recommendation also assumes a reduction 
in Federal royalties in new oil and gas leases in water depths 
of more than 200 meters in the Gulf Coast outer continental 
shelf. These proposals save $0.1 billion over six years.
    The Committee's recommendation authorizes the refinancing 
of outstanding debt owed by the Central Utah Water Conservancy 
District which saves $0.2 billion over six years.

                       Function 350: AGRICULTURE

                       major programs in function

    Function 350 includes programs that promote the economic 
stability in the agriculture sector. Programs in this function 
include direct assistance and loans to food and fiber 
producers, market information and agriculture research. 
Producers are assisted with transition payments, crop 
insurance, non-recourse crop loans, operating loans and export 
promotion.
    Spending for Function 350 would decrease from $12.7 billion 
in budget authority in 1996 to $12.5 in 1997 while outlays 
remain relatively constant at $10.8 billion. Over the 1997-2002 
period federal spending on agriculture would be $69.4 billion 
in budget authority and $58.4 billion in outlays.

    major discretionary assumptions in the committee recommendation

    Farm and other mandatory programs underwent dramatic 
reforms with the enactment of the Federal Agriculture 
Improvement and Reform Act of 1996 (P.L. 104-127). The 
resources necessary to administer farm programs should decline 
over time due to a variety of reforms contained in the new farm 
bill. These changes should allow downsizing and consolidation 
with the Department of Agriculture's Farm Service Agency (FSA) 
which administers the commodity programs. The Committee's 
recommendation assumes the administrative efficiency reductions 
included in the President's budget and similar reductions for 
the FSA. This assumption saves $0.6 billion over six years.

      major mandatory assumptions in the committee recommendation

    The 1996 farm bill made several reforms which add planting 
flexibility, fiscal spending constraints, and an opportunity 
for farmers to earn a living from the marketplace. The farm 
bill also saved $2.1 billion over 1996-2002. The farm bill 
includes seven year savings of $4.6 billion from farm and trade 
programs, spending increases of $2.0 billion for environment 
and conservation, and spending increases of $0.4 billion for 
rural development and other miscellaneous programs. The 
Committee's recommendation does not include further reductions 
for the commodity programs. However, the Committee's 
recommendation does assume the President's $0.2 billion in user 
fee proposals for the Animal Plant Health Inspection Service, 
Grain Inspection Standardization and Packers and Stockyards, 
and the Agriculture Marketing Service.

               Function 370: COMMERCE AND HOUSING CREDIT

                      major programs in functions

    Function 370 includes certain discretionary housing 
programs, such as subsidies for single and multifamily housing 
in rural areas and mortgage insurance provided by the Federal 
Housing Administration; net spending by the Postal Service; 
discretionary funding for commerce programs, such as 
international trade and exports, science and technology, the 
periodic census, and small business; and mandatory spending for 
deposit insurance activities related to banks, thrifts, and 
credit unions.
    Budget authority in Function 370 would decrease from $11.9 
billion in 1996 to $8.8 billion in 1997, while outlays would 
increase from -$7.1 billion in 1996 to -$2.0 billion in 1997. 
Over the 1997-2002 period, federal spending on commerce and 
housing credit activities would be $76.8 billion in budget 
authority and $32.6 billion in outlays, which is $2.6 billion 
less in budget authority and $3.3 billion less in outlays than 
the level of spending under the freeze baseline.

    major discretionary assumptions in the committee recommendation

    The Committee's recommendation assumes additional funding 
of $3.1 billion above the freeze baseline over the next six 
years to pay for the costs of conducting the decennial census, 
similar to the President's budget.
    The President's request would reduce funding for certain 
administrative accounts, and eliminate appropriations for 
certain expired activities, both of which are reflected in the 
Committee's recommendation.

      major mandatory assumptions in the committee recommendation

    The Committee's recommendation assumes enactment of 
provisions of the vetoed BBA that the President has also 
included in his budget request.

                      Function 400: TRANSPORTATION

                       MAJOR PROGRAMS IN FUNCTION

    Function 400 includes ground transportation programs, such 
as the federal-aid highway program, mass transit operating and 
capital assistance, rail transportation through AMTRAK and 
other rail programs; air transportation through the Federal 
Aviation Administration (FAA) Airport Improvement Program 
(AIP), aviation facilities and equipment programs, and 
operation of the air traffic control system; water 
transportation through the Coast Guard and the Maritime 
Administration; and related transportation support activities.
    Function 400 budget authority will continue to increase, 
growing from its 1996 level of $36.7 billion to $44.0 billion 
in 2002. Only eight percent of the function consists of 
mandatory outlays, therefore discretionary outlays determine 
almost all of Function 400 spending. Function 400 outlays will 
decrease from its current level of $39.3 billion in 1996 to 
$33.2 billion in 2002.
    Over the 1997-2002 period, federal spending on 
transportation activities would be $259.8 billion in budget 
authority and $212.3 billion in outlays. When total spending 
levels are compared to assumptions contained in the 1996 
Concurrent Budget Resolution, total spending increases by $3.7 
billion in budget authority and $6.4 billion in outlays.

     MAJOR DISCRETIONARY ASSUMPTION IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes discretionary 
spending levels of $12.7 billion in budget authority and $36.1 
billion in outlays, a reduction of $1.0 billion in budget 
authority and $0.4 billion in outlays from the 1996 level. 
Spending would decline to $10.4 billion in budget authority and 
$31.6 billion in outlays in 2002. The Committee's 
recommendation assumes the following major policy options to 
achieve the recommended funding levels:
    The Committee's recommendation continues the phase-out of 
federal funding for operating assistance to Amtrak and mass 
transit.
    As requested by the President, reduce FAA Facilities and 
Equipment program from its current level of $1.9 billion to the 
President's proposed level of $1.8 billion in 1997. This level 
of funding would be maintained through 2002.
    As requested by the President, reduce USDOT Office of the 
Secretary, general fund Rental Payments, and Inspector General 
funding in the outyears.
    Reduce Federal Transit Administration (FTA) Section 3 
Discretionary grants in the outyears, as requested in the 
President's budget.
    The Committee's recommendation also assumes continued 
efforts for alternative financing of transportation 
improvements and infrastructure over the next six years. With 
the 1997 reauthorization of the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA), and the 
reauthorization of the Airport Improvement Program (AIP) this 
year, efforts will be made to find innovative financing 
mechanisms to meet our future transportation needs while 
eliminating the federal deficit by 2002.
    The Committee commends the Coast Guard for its streamlining 
efforts. The Coast Guard's fiscal year 1997 budget submission 
includes over $54 million in reductions and keeps the agency on 
track to save $400 million and reduce its workforce by over 
4,000 (about 10 percent) personnel by fiscal year 1998--all 
without reducing services to the public. The Coast Guard is a 
model on how to provide better government at less cost.

      major mandatory assumptions in the COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes mandatory spending 
levels of $28.8 billion in budget authority and $2.6 billion in 
outlays in 1996. The Committee's recommendation assumes the 
following major policy options to achieve the recommended 
funding levels:
    As assumed in the BBA, the Committee's recommendation 
extends vessel tonnage fees, scheduled to expire on October 1, 
1998.
    As assumed in the BBA, the Committee's recommendation 
extends emergency preparedness fees, scheduled to expire on 
October 1, 1998.
    The Committee's recommendation also assumes the termination 
of 1997 ISTEA Highway Demonstration projects. This assumption 
would rescind contract authority and outlays for the final 
installment of highway demonstration projects under the 
Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA).

            Function 450: COMMUNITY AND REGIONAL DEVELOPMENT

                       MAJOR PROGRAMS IN FUNCTION

    Function 450 includes funding for community and regional 
development and disaster relief. The major programs are 
administered through a variety of agencies including the 
Department of Housing and Urban Development, Appalachian 
Regional Commission, Tennessee Valley Authority, Economic 
Development Administration, Bureau of Indian Affairs, Federal 
Emergency Management Agency, and the Department of Agriculture.
    Spending for Function 450 would decrease from $11.1 billion 
in budget authority and outlays in 1996 to $8.4 billion in 
budget authority and $10.7 billion in outlays in 1997. Over the 
1997-2002 period federal spending on community and regional 
development would be $41.8 billion in budget authority and 
$51.4 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The baseline includes $3.4 billion in emergency 
supplemental funding for disaster relief and loans for 1996 
which was provided in 1995 supplementals. Under CBO's standard 
baseline methodology for discretionary programs, the $3.4 
billion in emergency funds is continued in the baseline for 
each year 1997 through 2002. The Omnibus Consolidated 
Rescissions and Appropriations Act for 1996 included a 
rescission of $1.1 billion to offset increased spending. The 
Committee's recommendation includes $1.5 billion in 1997 for 
FEMA disaster relief. The Committee's recommendation directs 
that these funds be allocated only for FEMA disaster relief. 
For 1998 to 2002, the Committee's recommendation assumes the 
President's funding level of $320 million for disaster relief.
    The Committee's recommendation assumes a $0.1 billion 
increase for operation of Indian programs which funds basic 
reservation programs such as law enforcement, child protection, 
welfare assistance, and housing.
    The Committee acknowledges the unique trust relationship 
between the U.S. Government and the nation's Indian Tribes and 
Pueblos. The Committee recommendation assumes a $0.1 billion 
increase for the operation of Indian programs administered by 
the Bureau of Indian Affairs, which funds basic reservation 
programs such as law enforcement, child protection, welfare 
assistance, and housing.

        MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE ASSUMPTION

    The Committee's recommendation assumes the President's 
proposal to reauthorize FEMA's assessments on Nuclear 
Regulatory Commission licensees to cover 100 percent of the 
cost of providing site-specific services that directly 
contribute to the fulfillment of emergency preparedness 
requirements. This proposal saves $0.1 billion over six years.

   Function 500: EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

                       MAJOR PROGRAMS IN FUNCTION

    Function 500 includes those activities designed to promote 
the acquisition of knowledge and skills, to provide social 
services for needy individuals, and for research directly 
related to these program areas. In general, the activities 
funded by this function are administered through the 
Departments of Labor, Health and Human Services, and Education.
    Under the Committee's recommendation, total funding under 
this function is expected to grow from $47.8 billion in budget 
authority and $50.6 billion in outlays in 1996 to $52.6 billion 
in budget authority and $51.7 billion in outlays in 2002. Total 
spending over the six year period under the Committee's 
recommendation in this function would be $304 billion in budget 
authority and $301.7 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    For discretionary spending, the Committee's recommendation 
will accommodate increased spending under OCRA. Additionally, 
the Committee's recommendation proposes an increase in 
discretionary spending of $3.1 billion in budget authority and 
$1.5 billion in outlays over the next six years.
    An additional $4.4 billion in budget authority and $4.2 
billion in outlays is provided in the Committee's 
recommendation compared to the baseline level for six years.
    The Committee acknowledges the unique trust relationship 
between the U.S. Government and the nation's Indian Tribes and 
Pueblos. The Committee recommendation assumes that education 
programs serving Native Americans, including those administered 
through the Office of Indian Education, will be given priority 
for increased resources in 1997.
    The 1992 Adult Literacy Survey indicated that nearly 50 
percent of our nation's adults have only basic skill levels or 
below. Because this means that millions of Americans are only 
marginally literate and therefore at risk of being unemployed 
in our skilled and competitive workplace, the funding needs of 
programs addressing adult and continuing education should be 
carefully considered.
    The Committee urges that before any legislative action is 
taken that would result in an increase in the cost to students 
and their families of federal-assisted loans or loan guarantees 
for college, more innovative and aggressive procedures should 
be employed to collect unpaid student loans. Such actions 
should include, but are not limited to, the expanded seizure of 
tax rebates by the Internal Revenue Service, garnishment of 
income, and an increased use of, and coordination with, private 
collection agencies to ensure to the greatest extent possible 
that all efforts have been made to obtain repayment of 
delinquent loans for education.
    With respect to fiscal year 1997 funding, the Committee 
concurs with the intent of the appropriations conferees on H.R. 
3119 to provide all funding for Title I for the 1997-1998 
school year through the appropriation of fiscal year 1997 funds 
in the Fiscal Year 1997 Labor, Health, and Human Services, and 
Education and Related Agencies bill. The Committee concurs with 
the conferees' intent to work toward a fiscal year 1997 section 
602(b) suballocation such that Title I can be returned to a 
normal appropriations and obligation pattern.

       MAJOR MANDATORY ASSUMPTION IN THE COMMITTEE RECOMMENDATION

    For mandatory spending, the Committee's recommendation 
assumes total spending $92.3 billion in budget authority and 
$90.2 billion in outlays over the next six years, $3.4 billion 
in budget authority and $3.1 billion in outlays less than the 
baseline level, over the next six years.
    In general, as was the case last year's BBA, no assumption 
contained in this budget resolution will increase costs for 
students or limit access to student loans. Major assumptions 
include:
    Change the phase-in of the direct loan program from 50% to 
20% for academic year 1996 and beyond. By law direct loans were 
to increase as a percentage of all student loans from 50% in 
academic year 1996-1997 to 60% in the 1998-1999 academic year. 
Last year's budget resolution assumed a 10% cap. This proposal 
would save $280 million over six years.
    Eliminate the federal subsidy to schools (and alternate 
originators) for a direct loan origination fee. This fee is set 
at $10 for school originators for academic year 1994-1995 and 
is assumed to be adjusted by the Secretary in the outyears. It 
is set by contract for alternate originators. This proposal 
would save $475 million over six years. The President also 
proposed.
    Require that borrowers in the guaranteed loan program have 
same repayment options as those in the direct loan program. 
Currently, direct loan borrowers have more flexibility to 
choose graduated, extended-term, and income-contingent 
repayment options. Under the proposal, the income-contingent 
option would be at the discretion of the lender, however, 
borrowers could obtain an income contingent loan through loan 
consolidation if necessary. This proposal would cost $150 
million over six years.
    Increase the time before guarantee agencies may file for 
reinsurance to 360 days. This proposal would keep the time 
before lenders may file for an insurance claim at 180 days from 
delinquency. However, it would increase the time before 
guarantee agencies may file for reinsurance from the federal 
government from 180 days to 360 days from delinquency. Guaranty 
agencies would be required to use their reserve funds to 
purchase and hold these defaulted loans. This proposal would 
save $1.1 billion over six years.
    Reduce guarantee agency default collection retention 
allowance for 27% to 18.5%. This percentage is based on the 
amount of loans in default, collected by the guarantee agency. 
This provision would save less than $500,000 over six years. 
The President also proposed.
    Reduce the federal reinsurance on all loans including those 
insured by guarantee agencies with exceptional performance from 
98%/88%/78% to 96/86%/76% except exclude those made as lender-
of-last-resort. This proposal would save $165 million over six 
years. The President also proposed.
    Reduce the loan guarantee on all loans including loans made 
by lenders with exceptional performance, except exclude loans 
made as lender-of-last-resort from 98% to 95%. This proposal 
would save $240 million over seven years. The President also 
proposed.

                          Function 550: HEALTH

                       MAJOR PROGRAMS IN FUNCTION

    Function 550 includes all health spending except that for 
Medicare, military health, and veterans' health. The major 
programs include Medicaid, health benefits for federal 
retirees, the Food and Drug Administration, the Health 
Resources and Services Administration, Indian Health Services, 
the Centers for Disease Control and Prevention, the National 
Institutes of Health, and the Substance Abuse and Mental Health 
Services Administration.
    Under the Committee's recommendation, total funding under 
this function is expected to grow from $110.6 billion in budget 
authority and $123.0 billion in outlays in 1996 to $167.3 
billion in budget authority and $166.2 billion in outlays in 
2002. This is a $43.2 billion increase in outlays, a 35 percent 
increase.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The 1996 budget resolution conference report assumed NIH 
funding would be $11.20 billion in 1996. That resolution 
assumed the level would be $10.98 billion for each year from 
1997 through 2002. The 1996 appropriations process increased 
funding by $620 million, a 5.5 percent increase, to $11.95 
billion in budget authority for 1997. This year's Committee's 
recommendation assumes NIH budget authority will be held 
constant at the 1996 level ($11.95 billion BA) through 2002. 
This is almost $1 billion per year (8.8 percent) more than was 
assumed in last year's budget resolution for a total of $6.54 
billion more spending than was assumed last year.
    The Agency for Health Care Policy and Research (AHCPR) 
performs three functions: (1) research on health care systems 
cost and access, (2) research on health care outcomes, 
including clinical practice guidelines, and (3) health 
expenditures surveys. Direct budget authority for AHCPR in the 
baseline is $77 million; an additional $50 million is 
transferred to AHCPR from the Public Health Service and 
medicare. The Committee's recommendation assumes termination of 
AHCPR, except health expenditures surveys, which are assumed to 
be fully funded at $49 million. This option would save $69 
million in discretionary budget authority in 1997 and over $400 
million over the period 1997-2002.
    The Committee acknowledges the unique trust relationship 
between the U.S. Government and the nation's Indian Tribes and 
Pueblos. The Committee recommendation assumes that the critical 
health services and health facilities (especially sanitation) 
programs of the Indian Health Service will be given priority 
for increased resources in 1997.
    Nationwide 2,400 local health center service sites deliver 
primary and preventive care to more than 9 million people in 
all fifty states. There is an additional 20 percent of the 
current health care enrollment nationwide that is now waiting 
to be served. Because health centers fill a critical void in 
access to care, their funding needs should be carefully 
considered in order to ensure greater access to health care in 
this country.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes implementation of a 
bipartisan Medicaid reform plan provided by 48 governors in 
early February. Under this assumption, federal Medicaid 
spending would increase from $95.7 billion in 1996 to $139.5 
billion in 2002, a $43.8 billion (46 percent) increase. Federal 
Medicaid spending over the period 1996-2002 would total $827.1 
billion. This is $35.8 billion more spending over this period 
than contained in the Balanced Budget Act of 1995, and $54.0 
billion more spending than contained in last year's budget 
resolution. This option would save $72.0 billion over the 
period 1997-2002.

                         Function 570: MEDICARE

                       MAJOR PROGRAMS IN FUNCTION

    Function 570 includes only the medicare program. Medicare 
pays for medical services for 37.6 million senior and disabled 
citizens, and for those with End Stage Renal Disease. Medicare 
is administered by the Health Care Financing Administration, 
part of the Department of Health and Human Services.
    Under the Committee's recommendation, total Function 570 
outlays are expected to grow from $181.2 billion in budget 
authority and $179.1 billion in outlays in 1996 to $253.5 
billion in budget authority and $251.1 billion in outlays in 
2002. This is a $72.0 billion increase in outlays, a 40 percent 
increase. Total mandatory Medicare spending (not including 
premium receipts) is expected to grow from $196.1 billion in 
1996 to $279.1 billion in 2002, a $83 billion (42 percent) 
increase. Medicare spending per beneficiary was about $4,800 
last year; this year it is just over $5,300. Medicare spending 
per beneficiary under the Committee's recommendation would grow 
to about $7,000 in 2002.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes discretionary 
savings equal to those in the President's budget.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes Medicare reforms 
which extend the solvency of the Hospital Insurance Trust Fund 
for at least a decade. The Committee's recommendation assumes 
that these savings will be achieved through real reforms, not 
through budgetary gimmicks which transfer spending or savings 
from one part of Medicare to another. To extend the life of the 
Hospital Insurance Trust Fund for a decade, the following 
savings stream is assumed:

         Medicare part A outlay savings relative to CBO baseline

                        [In billions of dollars]

1997..............................................................    -5
1998..............................................................   -10
1999..............................................................   -16
2000..............................................................   -23
2001..............................................................   -30
2002..............................................................   -39
2003..............................................................   -48
2004..............................................................   -58
2005..............................................................   -69
2006..............................................................   -81

Savings over the six-year period 1997-2002 for this stream are 
$123 billion.
    The Committee's recommendation assumes Medicare reforms 
which produce the same level of savings as the part B reforms 
in the President's budget ($44.1 billion).

                     Function 600: INCOME SECURITY

                       MAJOR PROGRAMS IN FUNCTION

    Function 600 Income Security funds a broad range of 
programs including federal retirement programs, the major cash 
and in-kind welfare programs, housing programs and nutrition 
programs. These programs are administered by several agencies 
and departments including the Department of Health and Human 
Services, the Office of Personnel Management, the Social 
Security Administration and the Department of Housing and Urban 
Development.
    Spending for Function 600 would increase from $219.3 
billion in budget authority and $228.9 billion in outlays in 
1996 to $232.0 billion in budget authority and $240.1 billion 
in outlays in 1997, a 5.8 percent increase in budget authority. 
Spending will rise faster than inflation at an average annual 
rate of 3.7 percent, with total federal spending on income 
security programs over the 1997-2002 period of $1,531.8 billion 
in budget authority and $1,552.4 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The baseline for this function departs from a strict freeze 
baseline for the following reasons: Large numbers of assisted 
housing contracts (section 8) will be expiring over the next 
six years. Not renewing the contracts would mean people would 
no longer receive this housing assistance, but a strict freeze 
baseline would not include sufficient funds to accommodate 
renewal of all expiring contracts. According to CBO, adding $54 
billion in budget authority and $45 billion in outlays to the 
strict freeze baseline over the next six years would provide 
sufficient resources to renew contracts at market rents. This 
action would be consistent with the estimated losses assumed to 
occur in the mandatory baseline for the Federal Housing 
Administration because of marking down the rents of federally 
insured assisted housing projects.
    The WIC program provides at-risk pregnant and post partum 
women infants and children with nutritional assistance, 
nutrition education and counseling and health and immunization 
referrals. This proposal would increase WIC spending by $111 
million over the 1997 level, with $2.3 billion in additional 
funding over the period of 1997-2002. The Committee's 
recommendation assumes total funding over the next six years 
will be $24.5 billion
    Spending on the Child Care and Development Block Grant 
would total $1 billion in 1997, an increase of $65 million, 
with total funding of $6 billion over the period of 1997-2002.
    These two options, taken from the President's budget, would 
save $0.1 billion over 1997-2002.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee recommendation adopts the recommendation of 
the National Governor's Association and devolves authority and 
power over welfare spending to States by creating two block 
grants to states, one for cash benefits and job training and 
the other for child care. Restricts Supplemental Security 
Income (SSI) and Food Stamp benefits for certain legal 
immigrants. Creates a new definition of childhood disability 
and reforms the SSI program to focus resources on the more 
severely disabled children. Reforms the Child Support 
Enforcement program to increase collections to aid families 
leaving welfare and prevent others from starting welfare 
receipt. Reforms the Food Stamp and Child Nutrition programs to 
slow the rate of growth in spending.
    The Earned Income Tax Credit provides low-income workers a 
refundable tax credit to offset payroll taxes and lift minimum 
wage workers over poverty. This proposal would coordinate the 
new $500 tax credit with the EITC by phasing out the EITC as 
the child credit is phased in. EITC outlays will total $121.4 
billion over the next six years, only $11 billion less than 
under current law. Workers without children would no longer be 
eligible for the credit. Undocumented workers would no longer 
be eligible for the credit and other fraud abuse would be 
curbed.
    The Committee's recommendation assumes conforming 
Congressional pension rules with the rules that apply to all 
other federal workers, saving under $.5 million in 1997 and $9 
million over the period 1997 through 2002.
    The Committee's recommendation assumes adoption of the 
President's proposals to continue paying civilian retirees 
their annual cost-of-living adjustment (COLA) in April through 
the year 2002, saving $0.3 billion in 1997 and $2.0 billion 
over the period 1997 through 2002.
    The Committee's recommendation assumes increasing the 
federal agency and employee contributions to the retirement 
programs, as provided in the BBA, saving $0.6 billion in 1997 
and $6.0 billion over the period 1997 through 2002. The 
increased agency contributions are assumed in the Function 950 
totals, and the increased employee contributions are assumed in 
revenues.
    This option would reduce by 1 percentage point the amount 
of the annual adjustment factor paid to landlords of section 8 
certificate contracts when the tenant stays in the unit at the 
end of the year. When a unit is not vacated, then the landlord 
does not incur any transitional costs, and so does not need any 
adjustment to cover such costs. Saves $1 billion over 1997-
2002, and is assumed in President's budget.
    Under current law, owners of rental housing projects 
receive increased payments each year to cover the costs of 
inflation under contracts with HUD. This option would limit 
this annual adjustment factor to cover rent increases that are 
attributable to the effect of inflation on the operating costs, 
if the rent on those units is greater than the local fair 
Committee's recommendationed rent. Landlords would no longer 
receive inflation adjustments for the portion of their costs 
attributable to debt service (which remains unchanged from year 
to year), but tenants would not be affected. Saves $0.8 billion 
over the period, and is assumed in President's budget.

                     Function 650: SOCIAL SECURITY

                       MAJOR PROGRAMS IN FUNCTION

    Function 650 consists of the Social Security program, or 
old-age, survivors, and disability insurance (OASDI). Social 
Security is the largest entitlement program provided by the 
federal government. Benefits are paid from the Social Security 
trust funds and financed by payroll taxes. For purposes of the 
Budget Enforcement Act, the Social Security trust funds are 
off-budget and do not count toward deficit projections. 
However, the administrative expenses of the Social Security 
Administration (SSA) are on-budget and remain within the caps 
on discretionary spending.
    Spending for Function 650 would increase from $354.6 
billion in budget authority and $351.3 billion in outlays in 
1996 to $372.5 billion in budget authority and $368.1 billion 
in outlays in 1997, a 5.0 percent increase in budget authority 
and a 4.8 percent increase in outlays. Over the 1997-2002 
period, federal spending on Social Security would be $2,534.8 
billion in budget authority and $2,500.7 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes no change relative 
to the budget resolution baseline level in Function 650. 
Current law, however, provides for an adjustment to the 
discretionary caps to accommodate additional administrative 
funding to process Continuing Disability Reviews (CDRs). In 
1997, the adjustment can be as much as $160 million in outlays, 
and over the period 1997 to 2002, the adjustment can total $2.6 
billion in outlays. The additional CDRs processed by SSA are 
estimated to save $3.5 billion in mandatory outlays over the 
period 1997 to 2002. The additional discretionary funds and the 
mandatory savings are assumed in Function 600.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Committee's recommendation assumes no changes in Social 
Security benefits.

                Function 750: ADMINISTRATION OF JUSTICE

                       MAJOR PROGRAMS IN FUNCTION

    Function 750 includes funding for federal law enforcement 
activities, including criminal investigations by the Federal 
Bureau of Investigation (FBI) and the Drug Enforcement 
Administration (DEA), border enforcement and the control of 
illegal immigration by the Customs Service and Immigration and 
Naturalization Service (INS), as well as funding for prison 
construction, drug treatment, crime prevention programs and the 
federal Judiciary.
    Spending for Function 750 would increase from $21.0 billion 
in budget authority and $17.7 billion in outlays in 1996 to 
$21.7 billion in budget authority and $20.6 billion in outlays 
in 1997, a three percent increase in budget authority and a 16 
percent increase in outlays. Over the 1997-2002 period, federal 
spending for the administration of justice would be $130.3 
billion in budget authority and $127.2 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Violent Crime Reduction Trust Fund provides resources 
for law enforcement programs enacted under the 1994 Crime Bill. 
To step up the federal fight against violent crime, the 1997 
Committee's recommendation again assumes full funding for these 
programs. The Committee's recommendation assumes $5 billion in 
1997 and over $29 billion through the year 2002 for the Crime 
Trust Fund. Last year's Senate Republican budget resolution and 
the President's 1997 budget also assume full funding for the 
Trust Fund.
    The 1997 Committee's recommendation proposes the 
elimination of the political appointment process for U.S. 
Marshals and the promotion of professionally trained deputy 
marshals to the positions of U.S. Marshall. The Committee's 
recommendation assumes $5 million in budget authority and 
outlay savings in 1997 and $30 million through the year 2002. 
Vice President Gore's National Performance Review and the 1996 
House Budget resolution both proposed this reform.
    The Community Relations Service mediates community disputes 
between ethnic and racial groups. Part of its responsibilities 
for Haitian and Cuban refugee assistance has been transferred 
to the INS, and its remaining focus is best handled by state 
and local agencies and nongovernment institutions. The 
Committee's recommendation assumes $5 million in savings in 
1997 and $30 million through 2002 from the elimination of the 
program. The 1996 Senate and House Budget resolutions proposed 
this elimination.
    The State Justice Institute funds research and 
demonstration projects and provides information to states about 
the administration of justice. The Institute provides no actual 
services and has not improved the administration of justice at 
any level. The Committee's recommendation assumes $5 million in 
savings in 1997 and $30 million through 2002. The 1996 House 
and Senate Budget resolutions both proposed elimination of the 
institute.
    The Associate Attorney General is an unnecessary, 
presidentially-appointed position which is not part of the 
formal Justice Department structure. It creates an additional 
level of bureaucracy unnecessary for the implementation of 
Justice Department policy. The Committee's recommendation 
assumes $2 million in 1997 and $12 million in savings through 
the year 2002. The 1996 House budget resolution assumed the 
elimination of this office.
    The Committee notes that teenage drug use is on the 
increase after years of decline. It is important that Congress 
take the steps necessary to support effective, well-designed 
programs aimed at protecting future generations from drug use 
and addiction. This must involve focused strategies supported 
by adequate policy and funding. The Committee supports programs 
that sustain individual responsibility, support families, and 
that lead to effective interdiction, prevention, law 
enforcement, and treatment efforts that meet measurable 
standards of accountability.
    The Committee notes the importance of providing adequate 
funding for federal law enforcement agencies responsible for 
the control of illegal immigration and drugs, particularly the 
Customs Service, the Immigration and Naturalization Service and 
the Drug Enforcement Administration.

                    Function 800: GENERAL GOVERNMENT

                       MAJOR PROGRAMS IN FUNCTION

    Function 800 consists of the activities of the Legislative 
Branch, the Executive Office of the President, U.S. Treasury 
fiscal operations (including the Internal Revenue Service), 
personnel and property management, and general purpose fiscal 
assistance to states, localities, and U.S. territories.
    Spending for Function 800 would increase from $12.5 billion 
in budget authority and $12.6 billion in outlays in 1996 to 
$13.8 billion in budget authority and $13.7 billion in outlays, 
a 10 percent increase. Over the 1997-2002 period, federal 
spending on general government activities would be $83.2 
billion in budget authority and $82.7 billion in outlays.

    MAJOR DISCRETIONARY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    Last year's budget resolution assumed a 25 percent 
reduction in funding for GAO from the 1995 level. During the 
appropriations process, this proposal was changed to a 25 
percent reduction over two years--15 percent in the first year 
and 10 percent in the second. The 1996 Legislative Branch 
appropriations bill actually saved 17 percent from the 1995 
level. The 1997 Committee's recommendation assumes the 
remaining 8 percent reduction will be accomplished this year. 
This proposal would save about $250 million over the next six 
years.
    Federal courthouse construction is assumed to be reduced by 
$1.5 billion over the 1997-2002 period.
    The President has identified roughly $0.8 billion in 
program administration and construction (non-GSA) cuts, 
primarily in Treasury.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    The Presidential election campaign fund is currently 
financed by the general fund of the Treasury. Spending is 
limited to the amount taxpayers ``checkoff'' on their tax 
returns. This proposal would change the checkoff to a direct 
contribution to be taken from tax refunds. Many states have 
used the refund offset as a way to finance a wide range of 
activities. This proposal would not terminate public financing, 
only the source of the funds. This proposal would save $0.3 
billion over the next six years.

                       Function 900: NET INTEREST

                       MAJOR PROGRAMS IN FUNCTION

    Function 900 displays net interest, which is a mandatory 
payment. There are no discretionary programs in function 900. 
Net interest includes interest on the public debt after 
deducting the amount of interest income received by the federal 
government.
    Interest on the public debt, or gross interest, is the 
Treasury's cost of financing the entire public debt of the U.S. 
government. Gross interest costs are not, however, a 
comprehensive measure of government borrowing costs because 
some of the debt is held by the government and generates 
interest income for the government. In 1995, more than $1.3 
trillion (about 27 percent) of the total public debt was held 
by the government itself, mostly by trust funds such as social 
security and federal civilian and military retirement. The 
government both pays and collects interest on these securities. 
In addition, the federal government lends money through other 
credit programs. These activities also result in interest 
income to the government. Since net interest reflects both the 
interest paid and interest earned by the government, it 
provides the best measure of the costs of federal borrowing.

                  SUMMARY OF COMMITTEE RECOMMENDATION

    Net interest payments in the Committee's recommendation 
fall from $242.1 billion in 1997 to $236.4 billion in 2002. 
Under the freeze baseline, net interest payments rise to $248.5 
billion in 2002. The net interest levels in the recommendation 
are $26.1 billion lower than the baseline over the next six 
years and $12.7 billion lower than the President's budget over 
the next six years.
    Interest on the public debt is a major beneficiary of 
deficit reduction and is lower in the Committee's 
recommendation because of the substantial deficit reduction 
embodied in the plan.

                                           FUNCTION 900: NET INTEREST                                           
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
Committee recommendation:                                                                                       
    Interest on the public debt...........     343.5     348.1     351.0     348.3     349.8     351.1     352.7
    Interest rec'd by trust funds.........     -97.6     -99.8    -100.8    -101.7    -103.4    -105.4    -107.6
    Other interest received...............      -6.2      -6.2      -6.0      -6.2      -6.8      -7.7      -8.7
                                           ---------------------------------------------------------------------
      Total net interest..................     239.7     242.1     244.3     240.4     239.6     238.0     236.4
                                           =====================================================================
Freeze baseline:                                                                                                
    Interest on the public debt...........     343.5     348.2     351.6     350.2     353.9     358.4     364.8
    Interest rec'd by trust funds.........     -97.6     -99.8    -100.8    -101.7    -103.4    -105.4    -107.6
    Other interest received...............      -6.2      -6.2      -6.0      -6.2      -6.8      -7.7      -8.7
                                           ---------------------------------------------------------------------
      Total net interest..................     239.7     242.2     244.9     245.3     243.7     245.3     248.5
                                           =====================================================================
President's budget:                                                                                             
    Interest on the public debt...........     343.6     348.5     352.0     352.8     352.1     354.0     356.1
    Interest rec'd by trust funds.........     -97.7    -100.1    -101.3    -102.6    -104.5    -106.7    -109.1
    Other interest received...............      -6.4      -6.7      -6.3      -6.0      -6.0      -6.2      -6.6
                                           ---------------------------------------------------------------------
      Total net interest..................     239.5     241.8     244.5     244.3     241.6     241.0     240.4
                                           =====================================================================
Committee recommendation compared to                                                                            
 freeze baseline:                                                                                               
    Interest on the public debt...........  ........      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1
    Interest rec'd by trust funds.........  ........  ........  ........  ........  ........  ........  ........
    Other interest received...............  ........  ........  ........  ........  ........  ........  ........
                                           ---------------------------------------------------------------------
      Total net interest..................  ........      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1
                                           =====================================================================
Committee recommendation compared to                                                                            
 President's budget:                                                                                            
    Interest on the public debt...........     -(  )      -0.4      -0.9      -4.5      -2.3      -2.9      -3.5
    Interest rec'd by trust funds.........     +(  )      +0.3      +0.5      +0.8      +1.1      +1.3      +1.5
    Other interest received...............      +0.2      +0.4      +0.3      -0.2      -0.8      -1.5      -2.1
                                           ---------------------------------------------------------------------
      Total net interest..................      +0.2      +0.3      -0.1      -3.9      -2.0      -3.0      -4.1
----------------------------------------------------------------------------------------------------------------

                        Function 920: ALLOWANCES

    Function 920 displays the budgetary effects of proposals or 
assumptions that cannot be easily distributed across other 
budget functions. The net impact on spending in this function 
would be an increase of $1.1 billion in outlays in 1997, and a 
decrease of $3.6 billion in outlays over the 1997-2002 period.
    The President's budget assumes savings of $54 billion in 
this function, almost all of which was unspecified. The 
Chairman's Committee's recommendation displays in this function 
$13.6 billion of savings (mostly from repealing the Davis-Bacon 
Act and Service Contract Act, in addition to other options), 
offset by $10 billion of spending for the education of graduate 
medical students.

            Function 950: UNDISTRIBUTED OFFSETTING RECEIPTS

                       MAJOR PROGRAMS IN FUNCTION

    Function 950 records offsetting receipts (receipts, not 
federal revenues or taxes, that the budget shows as offsets to 
spending programs) that are too large to record in other budget 
functions. Such receipts are either intra budgetary (a payment 
from one federal agency to another, such as agency payments to 
the retirement trust funds) or proprietary (a payment from the 
public for some type of business transaction with the 
government). The main types of receipts recorded as 
``undistributed'' in this function are--the payments federal 
agencies make to the retirement trust funds for their 
employees, payments made by companies for the right to explore 
and produce oil and gas on the Outer Continental Shelf, and 
payments by those who bid for the right to buy or use the 
public property or resources, such as the electromagnetic 
spectrum.
    Receipts in Function 950 would increase from $41.5 billion 
in 1996 to $50.3 billion in 1997. Over the 1997-2002 period, 
total receipts in this function would be $275.4 billion, an 
increase of $23.7 billion in receipts over baseline levels.

      MAJOR MANDATORY ASSUMPTIONS IN THE COMMITTEE RECOMMENDATION

    Most of the receipts assumed in the Committee's 
recommendation would stem from enactment of the expanded 
spectrum auction provisions included in the BBA.

                                REVENUES

    The Committee's recommendation provides tax relief of $122 
billion over six years.
    The Committee's recommendation provides maximum flexibility 
for a tax legislation this year. The recommendation assumes 
that Congress will act to extend expired trust fund excise 
taxes. The recommendation contains a reserve fund which may be 
used to provide tax relief to middle class families, small 
businesses, family farms, incentives for saving and investment, 
relief from fuel taxes or tax technical corrections on a 
deficit neutral basis.
    Absent the reserve fund, the Committee's recommendation 
accommodates permanent, middle income family tax relief in the 
form of the Balanced Budget Act's $500 per child tax credit. 
The credit is a permanent, nonrefundable, nonindexed tax credit 
of $500 per child under age 18, phased out for unmarried 
individuals with incomes over $75,000 and middle-class couples 
with incomes over $110,000. Taxpayers claim the child credit 
first in order to get its full benefit, then the Earned Income 
Credit (EIC).
    The President proposes a temporary, nonrefundable tax 
credit of $300 per child under age 13 for 1996, 1997 and 1998. 
The credit amount would rise to $500 per child for 1999 and 
2000. The credit would be phased out for taxpayers with 
adjusted gross incomes (AGI) between $60,000 and $75,000. The 
President's child credit would sunset effective December 31, 
2000.
    The Committee notes that the resolution provides the 
Finance Committee with the flexibility to address coal industry 
retiree health equity by providing relief to the ``reach back'' 
companies. This relief could take the form of reducing the 
insurance premiums required to be paid to the Combined Fund for 
the period October 1, 1996 through September 30, 1998, equal to 
the amount of any surplus in the Combined Fund. Such relief 
shall not adversely impact the coal industry retirees' health 
benefits.

                            TAX EXPENDITURES

    The Congressional Budget Act of 1974 requires a listing of 
tax expenditures in the President's budget submission and in 
reports accompanying congressional budget resolutions. Tax 
expenditures are defined by the Act as ``revenue losses 
attributable to provisions of the Federal tax law which allow a 
special exclusion, exemption, or deduction from gross income or 
which provide a special credit, a preferential rate of tax, or 
a deferral of tax liability.'' Under this definition, the 
concept of tax expenditures refers to revenue losses 
attributable exclusively to corporate and individual income 
taxes.
    The estimates presented here are those of the Joint 
Committee on Taxation and are based on the committee's most 
recent report of September 1, 1995 (Estimates of Federal Tax 
Expenditures for Fiscal Years 1996-2000) (JCS-21-95). The list 
shows the estimated revenue lost from tax expenditure items for 
fiscal years 1996 through 2000. Because of the interaction 
among provisions, the Joint Committee on Taxation warns that it 
is incorrect to assume that estimates of separate tax 
expenditures can be summed to calculate a total revenue effect 
of repeal of a group of tax expenditures. The tax expenditures 
in the following list are estimated separately, under the 
assumption that all other tax expenditures remain in the code. 
If two or more tax expenditures were estimated simultaneously, 
the total change in tax liability could be smaller or larger 
than the sum of the amounts shown for each item separately.

                                     TABLE 1.--TAX EXPENDITURE ESTIMATES BY BUDGET FUNCTION, FISCAL YEARS 1996-2000                                     
                                                                [In billions of dollars]                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Corporations                             Individuals                        
                           Function                           --------------------------------------------------------------------------------   Total  
                                                                1996    1997    1998    1999    2000    1996    1997    1998    1999    2000   1996-2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
National defense:                                                                                                                                       
    Exclusion of benefits and allowances to Armed Forces                                                                                                
     personnel...............................................  ......  ......  ......  ......  ......     2.0     2.0     2.1     2.1     2.2      10.4 
    Exclusion of military disability benefits................  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.5 
International affairs:                                                                                                                                  
    Exclusion of income earned abroad by U.S. citizens.......  ......  ......  ......  ......  ......     1.6     1.7     1.8     1.9     1.9       8.9 
    Exclusion of certain allowances for Federal employees                                                                                               
     abroad..................................................  ......  ......  ......  ......  ......     0.2     0.2     0.2     0.2     0.2       1.0 
    Exclusion of income of foreign sales corporations (FSCs).     1.5     1.5     1.5     1.6     1.6  ......  ......  ......  ......  ......       7.7 
    Deferral of income of controlled foreign corporations....     1.1     1.1     1.2     1.2     1.2  ......  ......  ......  ......  ......       5.8 
    Inventory property sales source rule exception...........     3.6     3.7     3.7     3.8     3.8  ......  ......  ......  ......  ......      18.6 
    Interest allocation rules exception for certain                                                                                                     
     nonfinancial institutions...............................     0.2     0.2     0.2     0.2     0.2  ......  ......  ......  ......  ......       1.0 
General science, space, and technology:                                                                                                                 
    Expensing of research and development expenditures.......     2.5     2.7     2.9     3.1     3.2   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)      14.5 
Energy:                                                                                                                                                 
    Expensing of exploration and development costs:..........                                                                                           
        Oil and gas..........................................     0.1     0.2     0.2     0.2     0.2   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       1.0 
        Other fuels..........................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       1.0 
    Excess of percentage over cost depletion:................                                                                                           
        Oil and gas..........................................     0.3     0.4     0.4     0.4     0.4     0.1     0.1     0.1     0.1     0.1       2.4 
        Other fuels..........................................   (\1\)     0.1     0.1     0.1     0.1   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.5 
    Credit for enhanced oil recovery costs...................   (\1\)     0.1     0.1     0.1     0.1   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.3 
    Credit for non-conventional fuels production.............     0.9     0.8     0.8     0.8     0.7     0.1     0.1     0.1     0.1     0.1       4.5 
    Credits for alcohol fuels \2\............................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)  ......  ......  ......  ......  ......       0.1 
    Exclusion of interest on State and local government                                                                                                 
     industrial development bonds for energy production                                                                                                 
     facilities..............................................     0.1     0.1     0.1     0.1     0.1     0.2     0.2     0.2     0.2     0.2       1.1 
    Expensing of tertiary injectants.........................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
    Exclusion of energy conservation subsidies provided by                                                                                              
     public utilities........................................     0.1     0.1     0.1     0.1     0.1   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.5 
    Credit for investments in solar and geothermal energy                                                                                               
     facilities..............................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.2 
    Credits for electricity production from wind and biomass.   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.4 
    Deductions and credits for clean-fuel vehicles and                                                                                                  
     refueling property......................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.3 
Natural resources and environment:                                                                                                                      
    Expensing of exploration and development costs, nonfuel                                                                                             
     minerals................................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.2 
    Excess of percentage over cost depletion, nonfuel                                                                                                   
     minerals................................................     0.2     0.2     0.2     0.2     0.2   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       1.0 
    Investment credit and 7-year amortization for                                                                                                       
     reforestation expenditures..............................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
    Expensing of multiperiod timber-growing costs............     0.4     0.5     0.5     0.5     0.5   (\1\)   (\1\)     0.1     0.1     0.1       2.8 
    Exclusion of interest on State and local government                                                                                                 
     sewage, water, and hazardous waste facilities bonds.....     0.2     0.2     0.2     0.2     0.2     0.5     0.5     0.5     0.5     0.5       3.8 
    Investment credit for rehabilitation of historic                                                                                                    
     structures..............................................     0.1     0.1     0.1     0.1     0.1   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.5 
    Special rules for mining reclamation reserves............   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.3 
Agriculture:                                                                                                                                            
    Expensing of soil and water conservation expenditures....   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.2 
    Expensing of fertilizer and soil conditioner costs.......   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.2 
    Expensing of the costs of raising dairy and breeding                                                                                                
     cattle..................................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)     0.1     0.1     0.1     0.1     0.1       0.8 
    Exclusion of cost-sharing payment........................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
    Exclusion of cancellation of indebtedness income of                                                                                                 
     farmers.................................................  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.3 
    Cash accounting for agriculture..........................     0.1     0.1     0.1     0.1     0.1     0.2     0.2     0.2     0.2     0.2       1.1 
Commerce and housing:                                                                                                                                   
    Financial institutions:                                                                                                                             
        Bad-debt reserves of financial institutions..........     0.1     0.1     0.1     0.1     0.1  ......  ......  ......  ......  ......       0.5 
        Exemption of credit union income.....................     0.8     0.8     0.9     0.9     0.9  ......  ......  ......  ......  ......       4.3 
    Insurance companies:                                                                                                                                
        Exclusion of investment income on life insurance and                                                                                            
         annuity contracts...................................     0.5     0.8     1.0     1.4     1.6     8.7    13.1    18.1    23.7    28.3      97.3 
        Exclusion of investment income from structured                                                                                                  
         settlement amounts..................................  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ......  ......  ......  ......  ......   ( \1\ ) 
        Small life insurance company taxable income                                                                                                     
         adjustment..........................................     0.1     0.1     0.1     0.1     0.1  ......  ......  ......  ......  ......       0.3 
        Special treatment of life insurance company reserves.     2.2     2.5     2.8     3.1     3.4  ......  ......  ......  ......  ......      14.0 
        Deduction of unpaid property loss reserves for                                                                                                  
         property and casualty insurance companies...........     1.8     1.9     2.1     2.3     2.5  ......  ......  ......  ......  ......      10.6 
        Special alternative tax on small property and                                                                                                   
         casualty insurance companies........................  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ......  ......  ......  ......  ......   ( \1\ ) 
        Tax exemption for certain insurance companies........  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ......  ......  ......  ......  ......   ( \1\ ) 
        Special deduction for Blue Cross and Blue Shield                                                                                                
         companies...........................................     0.3     0.4     0.4     0.3     0.2  ......  ......  ......  ......  ......       1.7 
    Housing:                                                                                                                                            
        Deductibility of mortgage interest on owner-occupied                                                                                            
         residences..........................................  ......  ......  ......  ......  ......    59.2    62.7    66.4    70.3    74.5     333.1 
        Deductibility of property tax on owner-occupied homes  ......  ......  ......  ......  ......    14.4    15.1    15.9    16.6    17.4      79.5 
        Deferral of capital gains on sales of principal                                                                                                 
         residences..........................................  ......  ......  ......  ......  ......    15.3    15.9    16.4    17.0    17.6      82.2 
        Exclusion of capital gains on sales of principal                                                                                                
         residences for persons age 55 and over ($125,000                                                                                               
         exclusion)..........................................  ......  ......  ......  ......  ......     5.1     5.3     5.5     5.7     5.9      27.5 
        Exclusion of interest on State and local government                                                                                             
         bonds for owner-occupied housing....................     0.6     0.6     0.6     0.6     0.7     1.5     1.5     1.5     1.5     1.5      10.8 
        Exclusion of interest on State and local government                                                                                             
         bonds for rental housing............................     0.4     0.3     0.3     0.3     0.3     0.8     0.8     0.7     0.7     0.7       5.3 
        Depreciation of rental housing in excess of                                                                                                     
         alternative depreciation system.....................     1.2     1.2     1.1     1.0     1.0     0.8     0.8     0.8     0.7     0.7       9.3 
        Low-income housing tax credit........................     0.9     1.0     1.1     1.2     1.4     1.7     1.9     2.2     2.4     2.5      16.3 
    Other business and commerce:                                                                                                                        
        Maximum 28% tax rate on long-term capital gains......  ......  ......  ......  ......  ......     9.1    10.2    11.4    12.7    14.3      57.6 
        Depreciation of buildings other than rental housing                                                                                             
         in excess of alternative depreciation system........     3.7     3.2     2.6     1.9     1.5     1.5     1.4     1.1     0.9     0.7      18.5 
        Depreciation of equipment in excess of alternative                                                                                              
         depreciation system.................................    22.5    22.2    21.6    21.4    21.1     5.6     5.8     5.8     5.8     5.8     137.6 
        Expenses of up to $17,500 of depreciable business                                                                                               
         property............................................     0.8     0.5     0.3     0.2     0.2     0.5     0.3     0.2     0.1     0.1       3.2 
        Exclusion of capital gains at death..................  ......  ......  ......  ......  ......    14.0    15.4    17.1    18.3    19.5      84.3 
        Deferral of capital gains on gifts...................  ......  ......  ......  ......  ......     1.5     1.5     1.6     1.7     1.7       8.0 
        Amortization of business startup costs...............  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )     0.2     0.2     0.2     0.2     0.2       1.1 
        Reduced rates on first $10,000,000 of corporate                                                                                                 
         taxable income......................................     4.1     4.3     4.4     4.6     4.7  ......  ......  ......  ......  ......      22.1 
        Permanent exemption from imputed interest rules......  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )     0.2     0.2     0.2     0.2     0.2       1.1 
        Expensing of magazine circulation expenditures.......  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ( \1\                                            
                                                                                                            )  ( \1\                                    
                                                                                                                    )  ( \1\                            
                                                                                                                            )  ( \1\                    
                                                                                                                                    )  ( \1\            
                                                                                                                                            )       0.2 
        Special rules for magazine, paperback book, and                                                                                                 
         record returns......................................  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ( \1\                                            
                                                                                                            )  ( \1\                                    
                                                                                                                    )  ( \1\                            
                                                                                                                            )  ( \1\                    
                                                                                                                                    )  ( \1\            
                                                                                                                                            )       0.1 
        Deferral of gain on non-dealer installment sales.....     0.4     0.4     0.5     0.5     0.5     0.3     0.3     0.4     0.4     0.4       4.1 
        Completed contract rules.............................     0.2     0.2     0.2     0.2     0.2  ( \1\                                            
                                                                                                            )  ( \1\                                    
                                                                                                                    )  ( \1\                            
                                                                                                                            )  ( \1\                    
                                                                                                                                    )  ( \1\            
                                                                                                                                            )       1.1 
        Cash accounting, other than agriculture..............  ( \1\                                                                                    
                                                                    )  ( \1\                                                                            
                                                                            )  ( \1\                                                                    
                                                                                    )  ( \1\                                                            
                                                                                            )  ( \1\                                                    
                                                                                                    )  ( \1\                                            
                                                                                                            )  ( \1\                                    
                                                                                                                    )     0.1     0.1     0.1       0.5 
        Exclusion of interest on State and local government                                                                                             
         small-issue industrial development bonds............     0.3     0.2     0.2     0.2     0.2     0.6     0.5     0.4     0.4     0.4       3.3 
        Deferral of gain on like-kind exchanges..............     0.5     0.5     0.5     0.6     0.6     0.3     0.3     0.3     0.4     0.4       4.5 
        Exception from net operating loss limitations for                                                                                               
         corporations in bankruptcy proceedings..............     0.4     0.5     0.5     0.5     0.5  ......  ......  ......  ......  ......       2.4 
Transportation:                                                                                                                                         
        Deferral of tax on capital construction funds of                                                                                                
         shipping companies..................................     0.1     0.1     0.1     0.1     0.1  ......  ......  ......  ......  ......       0.5 
    Exclusion of employer-paid transportation benefits.......  ......  ......  ......  ......  ......     2.1     2.2     2.3     2.4     2.5      11.5 
    Exclusion of interest on State and local government bond                                                                                            
     for high-speed rail.....................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
Community and regional development:                                                                                                                     
    Investment credit for rehabilitation of structures, other                                                                                           
     than historic structures................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.4 
    Exclusion of interest on State and local government bonds                                                                                           
     for private airports, docks, and mass-commuting                                                                                                    
     facilities..............................................     0.3     0.3     0.3     0.3     0.4     0.7     0.7     0.7     0.8     0.9       5.4 
    Regional economic development tax incentives: empowerment                                                                                           
     zones, enterprise communities, and Indian investment                                                                                               
     incentives..............................................     0.2     0.2     0.3     0.3     0.4     0.2     0.2     0.3     0.3     0.4       2.8 
Education, training, employment, and social services:                                                                                                   
    Education and training:                                                                                                                             
        Exclusion of scholarship and fellowship income.......  ......  ......  ......  ......  ......     0.8     0.9     0.9     1.0     1.1       4.6 
        Parental personal exemption for students age 19 to 23  ......  ......  ......  ......  ......     0.8     0.8     0.8     0.8     0.8       4.1 
        Exclusion of interest on State and local government                                                                                             
         student loans bonds.................................     0.1     0.1     0.1     0.1     0.3     0.2     0.2     0.2     0.1     1.4  .........
        Exclusion of interest on State and local government                                                                                             
         bonds for private nonprofit educational facilities..     0.3     0.3     0.3     0.3     0.3     0.6     0.6     0.7     0.7     0.7       4.8 
        Deductibility of charitable contributions for                                                                                                   
         educational institutions............................     0.5     0.5     0.5     0.5     0.5     2.0     2.1     2.1     2.2     2.3      13.5 
        Exclusion of interest on educational savings bonds...  ......  ......  ......  ......  ......   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
    Employment:                                                                                                                                         
        Exclusion of employee meals and lodging (other than                                                                                             
         military)...........................................  ......  ......  ......  ......  ......     0.6     0.6     0.6     0.7     0.7       3.2 
        Special tax provisions for employee stock ownership                                                                                             
         plans (ESOPs).......................................     0.9     1.0     1.1     1.2     1.2   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       5.4 
        Exclusion of benefits provided under cafeteria plans                                                                                            
         \3\.................................................  ......  ......  ......  ......  ......     4.4     5.0     5.7     6.5     7.2      28.8 
        Exclusion of rental allowances for ministers' homes..  ......  ......  ......  ......  ......     0.3     0.3     0.3     0.3     0.3       1.5 
        Exclusion of miscellaneous fringe benefits...........  ......  ......  ......  ......  ......     5.2     5.5     5.8     6.2     6.5      29.1 
        Exclusion of employee awards.........................  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.6 
        Exclusion of income earned by voluntary employees'                                                                                              
         beneficiary associations............................  ......  ......  ......  ......  ......     0.5     0.5     0.6     0.6     0.6       2.7 
        Targeted jobs tax credit.............................     0.1   (\1\)   (\1\)  ......  ......   (\1\)  ......  ......  ......  ......       0.1 
    Social services:                                                                                                                                    
        Deductibility of charitable contributions, other than                                                                                           
         for education and health............................     0.5     0.5     0.5     0.5     0.5    14.0    14.7    15.3    16.0    16.7      79.3 
        Credit for child and dependent care expenses.........  ......  ......  ......  ......  ......     2.7     2.8     2.8     2.9     3.0      14.2 
        Exclusion of employer-provided child care \4\........  ......  ......  ......  ......  ......     0.7     0.8     0.9     1.0     1.2       4.6 
        Exclusion of certain foster care payments............  ......  ......  ......  ......  ......   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
        Expensing of costs for removing architectural                                                                                                   
         barriers............................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
        Credit for disabled access expenditures..............   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
Health:                                                                                                                                                 
    Exclusion of employer contributions for medical insurance                                                                                           
     premiums and medical care \5\...........................  ......  ......  ......  ......  ......    48.4    52.0    55.7    59.8    64.0     279.8 
    Exclusion of medical care and CHAMPUS medical insurance                                                                                             
     for military dependents, retirees, and retiree                                                                                                     
     dependents..............................................  ......  ......  ......  ......  ......     0.5     0.6     0.6     0.6     0.6       2.9 
    Deductibility of medical insurance premiums by the self-                                                                                            
     employed................................................  ......  ......  ......  ......  ......     0.5     0.6     0.6     0.7     0.7       3.1 
    Deductibility of medical expenses........................  ......  ......  ......  ......  ......     3.5     3.8     4.1     4.4     4.8      20.7 
    Exclusion of interest on State and local government bonds                                                                                           
     for private nonprofit hospital facilities...............     0.6     0.6     0.6     0.6     0.7     1.3     1.3     1.4     1.5     1.6      10.2 
    Deductibility of charitable contributions to health                                                                                                 
     organizations...........................................     0.4     0.4     0.4     0.4     0.4     1.4     1.5     1.6     1.6     1.7       9.8 
Medicare:                                                                                                                                               
    Exclusion of untaxed medicare benefits:                                                                                                             
        Hospital insurance...................................  ......  ......  ......  ......  ......     9.0    10.0    11.0    12.1    13.3      55.3 
        Supplementary medical insurance......................  ......  ......  ......  ......  ......     4.2     4.9     5.7     6.5     7.5      28.7 
Income security:                                                                                                                                        
    Exclusion of workers' compensation benefits..............  ......  ......  ......  ......  ......     3.9     4.0     4.1     4.2     4.3      20.5 
    Exclusion of special benefits for disabled coal miners...  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.5 
    Exclusion of cash public assistance benefits.............  ......  ......  ......  ......  ......     0.5     0.5     0.6     0.6     .07       3.0 
    Net exclusion of pension contributions and earnings:                                                                                                
        Employer plans.......................................  ......  ......  ......  ......  ......    69.6    70.5    73.5    76.7    80.0     370.3 
        Individual retirement plans..........................  ......  ......  ......  ......  ......     8.8     9.3     9.8    10.3    10.9      49.1 
        Keogh plans..........................................  ......  ......  ......  ......  ......     3.5     3.7     3.9     4.2     4.4      19.7 
    Exclusion of other employee benefits:                                                                                                               
        Premiums on group term life insurance................  ......  ......  ......  ......  ......     2.0     2.0     2.1     2.1     2.2      10.5 
        Premiums on accident and disability insurance........  ......  ......  ......  ......  ......     0.2     0.2     0.2     0.2     0.2       1.0 
    Exclusion of employer-provided death benefits............  ......  ......  ......  ......  ......   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.2 
    Additional standard deduction for the blind and the                                                                                                 
     elderly.................................................  ......  ......  ......  ......  ......     1.7     1.9     2.0     2.1     2.3      10.0 
    Tax credit for the elderly and disabled..................  ......  ......  ......  ......  ......   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)       0.1 
    Deductibility of casualty and theft losses...............  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.4 
    Earned income tax credit (EITC)\6\.......................  ......  ......  ......  ......  ......     3.6     4.0     4.1     4.3     4.6      20.6 
Social Security and railroad retirement:                                                                                                                
    Exclusion of untaxed Social Security and railroad                                                                                                   
     retirement benefits.....................................  ......  ......  ......  ......  ......    23.1    24.2    25.2    26.4    27.5     126.4 
Veterans' benefits and services:                                                                                                                        
    Exclusion of veterans' disability compensation...........  ......  ......  ......  ......  ......     1.7     1.8     1.8     1.9     1.9       9.1 
    Exclusion of veterans' pensions..........................  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.5 
    Exclusion of GI bill benefits............................  ......  ......  ......  ......  ......     0.1     0.1     0.1     0.1     0.1       0.6 
    Exclusion of interest on State and local government bonds                                                                                           
     for veterans' housing...................................   (\1\)   (\1\)   (\1\)   (\1\)   (\1\)     0.1     0.1     0.1     0.1     0.1       0.5 
General purpose fiscal assistance:                                                                                                                      
    Exclusion of interest on public purpose State and local                                                                                             
     government debt.........................................     4.4     4.4     4.6     4.9     5.4    10.3    10.3    10.8    11.5    12.5      79.1 
    Deduction of nonbusiness State and local government                                                                                                 
     income and personal property taxes......................  ......  ......  ......  ......  ......    27.5    29.0    30.5    32.1    33.8     152.8 
    Tax credit for section 936 income........................     3.4     3.5     3.8     4.1     4.4  ......  ......  ......  ......  ......      19.3 
Interest:                                                                                                                                               
    Deferral of interest on savings bonds....................  ......  ......  ......  ......  ......     1.5     1.5     1.6     1.6     1.7       7.9 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Less than $50 million.                                                                                                                              
\2\ In addition, the 5.4-cents-per-gallon exemption from excise tax for alcohol fuels results in a reduction in excise tax receipts, net of income tax  
  effects of $0.6 billion per year in fiscal years 1996 and 1997, and $0.5 billion per year in fiscal years 1998 through 2000.                          
\3\ Estimate includes amounts of employer-provided health insurance purchased through cafeteria plans and employer-provided child care purchased through
  dependent care flexible spending accounts. These amounts are also included in other line items in this table.                                         
\4\ Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.                                         
\5\ Estimate includes employer-provided health insurance purchased through cafeteria plans.                                                             
\6\ The figures in the table show the effect of the EITC on receipts. The increase in outlays is: $19.9 billion in 1996, $21.9 billion in 1997, $22.9   
  billion in 1998, $23.9 billion in 1999, and $24.9 billion in 2000.                                                                                    
                                                                                                                                                        
Note.--Details may not add to totals due to rounding.                                                                                                   
                                                                                                                                                        
Source: Joint Committee on Taxation.                                                                                                                    

                           IV. Summary Tables

                                    COMMITTEE RECOMMENDATION--FUNCTION TOTALS                                   
                                             [In billion of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................     264.1     265.6     267.1     269.5     271.8     274.2     276.9
    OT....................................     263.6     263.7     262.1     265.1     268.6     267.5     267.2
150: International Affairs:                                                                                     
    BA....................................      15.0      14.2      12.7      11.6      12.0      12.4      12.7
    OT....................................      15.9      14.8      13.6      12.6      11.4      11.5      11.5
250: Science, Space and Technology:                                                                             
    BA....................................      16.8      16.5      16.1      15.7      15.4      15.5      15.5
    OT....................................      16.6      16.7      16.3      15.9      15.5      15.5      15.5
270: Energy:                                                                                                    
    BA....................................       3.8       2.8       2.9       2.6       2.5       2.7       2.4
    OT....................................       3.5       2.9       2.2       1.8       1.6       1.6       1.2
300: Natural Resources and Environment:                                                                         
    BA....................................      21.4      20.3      20.0      19.9      19.5      19.4      19.3
    OT....................................      21.8      21.4      20.9      20.6      20.1      19.6      19.4
350: Agriculture:                                                                                               
    BA....................................      12.7      12.5      12.5      12.2      11.5      10.5      10.3
    OT....................................      10.8      10.8      10.6      10.3       9.7       8.7       8.4
370: Commerce and Housing Credit:                                                                               
    On-budget:                                                                                                  
        BA................................       6.4       7.7       9.6      10.6      12.6      11.4      11.7
        OT................................      -6.4      -2.7       5.7       6.1       7.5       7.4       7.4
    Off-budget:                                                                                                 
        BA................................       5.4       1.1       4.7       3.6       0.4       3.4  ........
        OT................................      -0.7       0.7       1.5      -1.7      -0.5       1.1  ........
    Total:                                                                                                      
        BA................................      11.8       8.8      14.3      14.2      13.0      14.8      11.7
        OT................................      -7.1      -2.0       7.2       4.4       7.0       8.5       7.4
400: Transportation:                                                                                            
    BA....................................      36.7      41.5      43.3      43.8      43.5      43.7      44.0
    OT....................................      39.3      38.6      37.0      35.6      34.1      33.7      33.2
450: Community and Regional Development:                                                                        
    BA....................................      11.1       8.4       6.7       6.7       6.7       6.7       6.6
    OT....................................      11.1      10.7       9.5       8.6       7.7       7.2       6.7
500: Education, Training, Employment and                                                                        
 Social Services:                                                                                               
    BA....................................      47.8      49.7      49.0      50.2      51.0      51.8      52.6
    OT....................................      50.6      50.7      48.9      49.4      50.2      50.9      51.7
550: Health:                                                                                                    
    BA....................................     110.6     131.1     137.4     144.0     152.8     160.3     167.2
    OT....................................     123.0     131.8     137.8     144.1     152.7     159.9     166.7
570: Medicare:                                                                                                  
    BA....................................     181.3     193.0     205.9     216.7     227.3     239.3     253.5
    OT....................................     179.1     191.3     204.2     214.4     225.6     237.6     251.1
600: Income Security:                                                                                           
    BA....................................     219.3     232.0     241.9     246.5     264.6     264.1     282.8
    OT....................................     228.9     240.1     245.2     253.0     264.5     268.5     281.1
650: Social Security                                                                                            
    On-budget:                                                                                                  
        BA................................       6.9       7.8       8.5       9.2      10.0      10.8      11.6
        OT................................      10.0      10.5      11.2      11.9      12.7      13.5      14.3
    Off-budget:                                                                                                 
        BA................................     347.7     364.6     382.5     401.2     421.0     442.5     465.0
        OT................................     341.3     357.6     374.9     393.1     412.4     433.3     455.2
    Total:                                                                                                      
        BA................................     354.6     372.4     391.0     410.4     431.0     453.3     476.6
        OT................................     351.3     368.1     386.1     405.0     425.1     446.8     469.5
700: Veterans Benefits:                                                                                         
    BA....................................      38.5      39.0      38.6      38.7      38.7      38.8      39.0
    OT....................................      37.8      39.5      39.3      39.3      40.4      37.7      39.3
750: Administration of Justice:                                                                                 
    BA....................................      21.0      21.7      22.3      23.3      23.3      19.9      19.9
    OT....................................      17.7      20.6      21.6      22.4      23.0      19.8      19.8
800: General Government:                                                                                        
    BA....................................      12.5      13.8      13.6      13.3      13.2      13.3      13.5
    OT....................................      12.6      13.6      13.6      13.3      13.1      13.2      13.3
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
        BA................................     276.3     282.7     289.2     293.0     294.5     298.7     303.3
        OT................................     276.3     282.7     289.2     293.0     294.5     298.7     303.3
    Off-budget:                                                                                                 
        BA................................     -36.6     -40.6     -44.9     -49.7     -55.0     -60.7     -66.9
        OT................................     -36.6     -40.6     -44.9     -49.7     -55.0     -60.7     -66.9
    Total:                                                                                                      
        BA................................     239.7     242.1     244.3     243.3     239.5     238.0     236.4
        OT................................     239.7     242.1     244.3     243.3     239.5     238.0     236.4
920: Allowances:                                                                                                
    BA....................................      -0.2       1.9       0.1      -0.1      -0.6      -1.1      -3.6
    OT....................................  ........       0.9       0.4  ........      -0.5      -1.0      -3.6
950: Undistributed Offsetting Receipts:                                                                         
    On-budget:                                                                                                  
    BA....................................     -35.2     -43.7     -35.7     -34.9     -36.7     -38.5     -40.1
    OT....................................     -35.2     -43.7     -35.7     -34.9     -36.7     -38.5     -40.1
    Off-budget:                                                                                                 
    BA....................................      -6.3      -6.6      -7.0      -7.5      -8.2      -8.7      -9.4
    OT....................................      -6.3      -6.6      -7.0      -7.5      -8.2      -8.7      -9.4
    Total:                                                                                                      
    BA....................................     -41.5     -50.3     -42.7     -42.4     -44.9     -47.2     -49.5
    OT....................................     -41.5     -50.3     -42.7     -42.4     -44.9     -47.2     -49.5
                                           ---------------------------------------------------------------------
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA................................   1,266.8   1,318.5   1,361.7   1,392.5   1,433.6   1,453.9   1,499.1
        OT................................   1,277.0   1,314.9   1,353.6   1,382.5   1,415.7   1,433.0   1,467.4
    Off-budget:                                                                                                 
        BA................................     310.2     318.5     335.3     347.6     358.2     376.5     388.7
        OT................................     297.7     311.1     324.5     334.2     348.7     365.0     378.9
    Total:                                                                                                      
        BA................................   1,577.0   1,637.0   1,697.0   1,740.1   1,791.8   1,830.4   1,887.8
        OT................................   1,574.7   1,626.0   1,678.1   1,716.7   1,764.4   1,798.0   1,846.3
Revenues:                                                                                                       
    On-budget.............................   1,062.5   1,086.2   1,129.9   1,176.1   1,229.9   1,289.6   1,359.1
    Off-budget............................     365.2     385.0     402.3     423.4     445.1     465.2     487.3
    Total.................................   1,427.7   1,471.2   1,532.2   1,599.5   1,675.0   1,754.8   1,846.4
Deficit:                                                                                                        
    On-budget.............................    -214.5    -228.7    -223.7    -206.4    -185.8    -143.4    -108.3
    Off-budget............................      67.5      73.9      77.8      89.2      96.4     100.2     108.4
    Total.................................    -147.0    -154.8    -145.9    -117.2     -89.4     -43.2       0.1
----------------------------------------------------------------------------------------------------------------


                                     COMMITTEE RECOMMENDATION--DISCRETIONARY                                    
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................     264.9     266.4     267.8     270.2     272.5     274.9     277.5
    OT....................................     264.5     264.6     263.0     265.9     269.3     268.2     267.9
150: International Affairs:                                                                                     
    BA....................................      18.5      18.1      16.6      15.5      14.7      15.0      15.0
    OT....................................      19.8      19.2      17.9      16.6      15.7      15.3      15.1
250: Science, Space and Technology:                                                                             
    BA....................................      16.7      16.4      16.0      15.7      15.3      15.4      15.5
    OT....................................      16.5      16.6      16.3      15.8      15.5      15.4      15.5
270: Energy:                                                                                                    
    BA....................................       4.8       4.2       4.3       4.6       4.5       4.5       4.5
    OT....................................       5.8       5.2       4.8       4.9       4.7       4.6       4.5
300: Natural Resources and Environment:                                                                         
    BA....................................      20.5      19.6      19.4      19.2      19.0      19.0      19.0
    OT....................................      21.3      20.8      20.4      20.1      19.7      19.3      19.2
350: Agriculture:                                                                                               
    BA....................................       3.9       3.7       3.6       3.5       3.4       3.4       3.4
    OT....................................       4.0       3.8       3.7       3.6       3.5       3.4       3.4
370: Commerce and Housing Credit:                                                                               
    BA....................................       1.8       2.6       2.7       3.1       4.4       2.5       2.5
    OT....................................       1.9       2.6       2.6       2.8       3.9       2.7       2.3
400: Transportation:                                                                                            
    BA....................................      13.8      12.7      12.4      12.4      11.3      10.8      10.4
    OT....................................      36.5      36.1      34.8      33.8      32.5      32.1      31.6
450: Community and Regional Development:                                                                        
    BA....................................      10.5       8.1       6.4       6.4       6.4       6.4       6.4
    OT....................................      10.7      10.7       9.5       8.6       7.6       7.0       6.7
500: Education, Training, Employment and                                                                        
 Social Services:                                                                                               
    BA....................................      36.2      36.3      35.6      35.6      35.6      35.6      35.6
    OT....................................      38.8      37.8      35.5      35.3      35.3      35.3      35.3
550: Health:                                                                                                    
    BA....................................      23.3      21.6      21.6      21.6      21.6      21.6      21.6
    OT....................................      23.1      22.4      21.9      21.7      21.7      21.7      21.7
570: Medicare:                                                                                                  
    BA....................................       3.0       2.8       2.8       2.8       2.8       2.8       2.8
    OT....................................       3.0       2.7       2.8       2.8       2.8       2.8       2.8
600: Income Security:                                                                                           
    BA....................................      27.5      29.9      35.8      33.1      39.7      35.6      42.4
    OT....................................      38.7      40.6      41.5      42.0      42.1      42.3      43.1
650 Social Security:                                                                                            
    BA....................................       0.0       0.0       0.0       0.0       0.0       0.0       0.0
    OT....................................       3.1       2.7       2.7       2.7       2.7       2.7       2.7
700: Veterans Benefits:                                                                                         
    BA....................................      18.4      19.0      18.3      18.1      18.0      17.9      17.9
    OT....................................      19.0      19.3      18.8      18.5      18.0      17.9      17.9
750: Administration of Justice:                                                                                 
    BA....................................      20.6      21.4      21.9      22.9      22.9      19.5      19.5
    OT....................................      17.3      20.4      21.2      22.0      22.6      19.5      19.5
800: General Government:                                                                                        
    BA....................................      11.6      11.5      11.3      11.0      10.8      10.9      11.1
    OT....................................      11.7      11.3      11.3      11.0      10.8      10.8      10.9
920: Allowances:                                                                                                
    BA....................................      -0.2      -0.0      -1.9      -2.1      -2.6      -3.0      -3.6
    OT....................................      -0.0      -1.1      -1.6      -1.9      -2.5      -3.0      -3.5
                                           ---------------------------------------------------------------------
    Total Discretionary:                                                                                        
        BA................................     495.8     494.2     494.8     493.5     500.4     492.8     501.5
        OT................................     536.0     535.7     527.2     526.3     525.6     518.2     516.5
    Defense:                                                                                                    
        BA................................     264.9     266.4     267.8     270.2     272.5     274.9     277.5
        OT................................     264.5     264.6     263.0     265.9     269.3     268.2     267.9
    Nondefense:                                                                                                 
        BA................................     230.9     227.9     227.0     223.3     227.9     217.9     224.0
        OT................................     271.5     271.2     264.2     260.4     256.3     250.0     248.6
----------------------------------------------------------------------------------------------------------------


                                       COMMITTEE RECOMMENDATION--MANDATORY                                      
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................      -0.8      -0.8      -0.8      -0.7      -0.7      -0.7      -0.6
    OT....................................      -0.9      -0.8      -0.8      -0.8      -0.7      -0.7      -0.6
150: International Affairs:                                                                                     
    BA....................................      -3.5      -3.9      -3.9      -3.9      -2.7      -2.6      -2.3
    OT....................................      -4.0      -4.3      -4.4      -4.1      -4.2      -3.8      -3.6
250: Science, Space and Technology:                                                                             
    BA....................................       0.0       0.0       0.0       0.0       0.0       0.0       0.0
    OT....................................       0.0       0.0       0.0       0.0       0.0       0.0       0.0
270: Energy:                                                                                                    
    BA....................................      -1.1      -1.4      -1.5      -1.9      -2.0      -1.8      -1.2
    OT....................................      -2.3      -2.3      -2.5      -3.0      -3.1      -3.0      -3.3
300: Natural Resoruces and Environment:                                                                         
    BA....................................       0.9       0.7       0.5       0.6       0.5       0.4       0.4
    OT....................................       0.5       0.6       0.5       0.6       0.4       0.3       0.2
350: Agriculture:                                                                                               
    BA....................................       8,8       8.8       8.8       8.6       8.1       7.1       6.8
    OT....................................       6.8       7.0       6.9       6.7       6.2       5.2       5.0
370: Commerce and Housing Credit:                                                                               
    BA....................................      10.1       6.1      11.6      11.1       8.6      12.3       9.2
    OT....................................      -9.0      -4.7       4.7       1.6       3.1       5.9       5.1
400: Transportation:                                                                                            
    BA....................................      22.9      28.8      30.9      31.4      32.1      32.8      33.6
    OT....................................       2.8       2.6       2.1       1.8       1.7       1.6       1.6
450: Community and Regional Development:                                                                        
    BA....................................       0.6       0.3       0.3       0.3       0.3       0.3       0.2
    OT....................................       0.4       0.0       0.0       0.0       0.1       0.2       0.1
500: Education, Training, Employment and                                                                        
 Social Services:                                                                                               
    BA....................................      11.6      13.5      13.5      14.6      15.4      16.2      17.0
    OT....................................      11.7      13.0      13.4      14.1      14.8      15.6      16.3
550: Health:                                                                                                    
    BA....................................      87.3     109.5     115.8     122.4     131.2     138.7     145.6
    OT....................................      99.9     109.4     115.9     122.4     131.0     138.3     145.1
570: Medicare:                                                                                                  
    BA....................................     178.2     190.2     203.2     213.9     224.6     236.5     250.8
    OT....................................     176.1     188.5     201.4     211.6     222.8     234.8     248.4
600: Income Security:                                                                                           
    BA....................................     191.8     202.0     206.1     213.5     224.9     228.5     240.4
    OT....................................     190.2     199.5     203.6     211.0     222.5     226.1     238.0
650: Social Security:                                                                                           
    BA....................................     354.6     372.4     390.9     410.4     431.0     453.3     476.6
    OT....................................     348.2     365.4     383.4     402.4     422.4     444.1     466.8
700: Veterans Benefits:                                                                                         
    BA....................................      20.1      20.0      30.3      20.6      20.7      20.9      21.1
    OT....................................      18.8      20.2      20.4      20.7      22.4      19.8      21.4
750: Administration of Justice:                                                                                 
    BA....................................       0.4       0.3       0.4       0.4       0.4       0.4       0.3
    OT....................................       0.4       0.2       0.4       0.4       0.3       0.3       0.3
800: General Government:                                                                                        
    BA....................................       0.9       2.3       2.3       2.3       2.3       2.4       2.4
    OT....................................       1.0       2.3       2.3       2.3       2.3       2.4       2.4
900: Net Interest:                                                                                              
    BA....................................     239.7     242.1     244.3     243.3     239.5     238.0     236.4
    OT....................................     239.7     242.1     244.3     243.3     239.5     238.0     236.4
920: Allowances:                                                                                                
    BA....................................  ........       2.0       2.0       2.0       2.0       2.0      -0.0
    OT....................................  ........       2.0       2.0       2.0       2.0       2.0      -0.0
950: Undistributed Offsetting Receipts:                                                                         
    BA....................................     -41.5     -50.3     -42.7     -42.4     -44.9     -47.1     -49.5
    OT....................................     -41.5     -50.3     -42.7     -42.4     -44.9     -47.1     -49.5
                                           ---------------------------------------------------------------------
    Total Spending:                                                                                             
        BA................................   1,081.1   1,142.7   1,202.2   1,246.7   1,291.4   1,337.5   1,386.2
        OT................................   1,038.6   1,090.4   1,151.1   1,190.6   1,238.7   1,279.8   1,330.0
----------------------------------------------------------------------------------------------------------------


                                                 FREEZE BASELINE                                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1996      1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................     264.1     264.5     264.5     264.6     264.6     264.7     264.8
    OT....................................     263.6     265.1     263.5     264.1     265.8     260.5     262.5
150: International Affairs:                                                                                     
    BA....................................      15.0      14.2      14.2      14.3      15.5      15.6      15.9
    OT....................................      15.9      14.9      14.4      14.6      14.2      14.4      14.5
250: Science, Space and Technology:                                                                             
    BA....................................      16.8      16.7      16.7      16.7      16.7      16.7      16.7
    OT....................................      16.6      16.8      16.7      16.6      16.7      16.7      16.7
270: Energy:                                                                                                    
    BA....................................       3.8       3.7       3.6       3.8       3.8       3.9       3.7
    OT....................................       3.5       3.1       2.7       2.8       2.6       2.8       2.4
300: Natural Resources and Environment:                                                                         
    BA....................................      21.4      20.1      19.9      19.9      19.8      19.7      19.6
    OT....................................      21.8      21.6      21.1      20.8      20.3      19.9      19.7
350: Agriculture:                                                                                               
    BA....................................      12.7      12.8      12.8      12.6      12.1      11.0      10.8
    OT....................................      10.8      11.0      10.8      10.7      10.2       9.2       9.0
370: Commerce and Housing Credit:                                                                               
    On-Budget:                                                                                                  
        BA................................       6.4       8.4      10.2      11.0      11.7      12.4      12.7
        OT................................      -6.4       1.2       5.7       6.0       6.2       7.3      89.2
    Off-budget:                                                                                                 
        BA................................       5.4       1.1       4.7       3.6       0.4       3.4  ........
        OT................................      -0.7       0.7       1.5      -1.7      -0.5       1.1  ........
    Total:                                                                                                      
        BA................................      11.9       9.4      14.9      14.6      12.1      15.8      12.7
        OT................................      -7.1       1.9       7.3       4.4       5.7       8.4       8.2
400: Transportation:                                                                                            
    BA....................................      36.7      43.7      44.7      45.3      46.0      46.7      47.5
    OT....................................      39.3      39.4      38.9      38.5      38.0      37.8      37.8
450: Community and Regional Development:                                                                        
    BA....................................      11.1      11.7      11.7      11.6      11.7      11.7      11.6
    OT....................................      11.1      11.1      11.2      11.5      11.6      11.6      11.5
500: Education, Training, Employment and                                                                        
 Social Services:                                                                                               
    BA....................................      47.8      50.1      49.0      50.1      50.9      51.7      52.5
    OT....................................      50.6      51.0      49.3      49.6      50.3      51.1      51.9
550: Health:                                                                                                    
    BA....................................     110.6     132.6     143.1     154.3     166.6     180.3     195.6
    OT....................................     123.0     132.6     143.2     154.4     166.4     179.9     195.1
570: Medicare:                                                                                                  
    BA....................................     181.3     199.6     218.5     238.7     259.1     281.7     306.5
    OT....................................     179.1     197.9     216.8     236.4     257.4     280.0     304.1
600: Income Security:                                                                                           
    BA....................................     219.3     236.3     252.4     259.5     279.6     280.1     301.5
    OT....................................     228.9     244.2     255.2     266.0     279.5     284.7     299.5
650: Social Security:                                                                                           
    On-Budget:                                                                                                  
        BA................................       6.9       7.8       8.5       9.2      10.0      10.8      11.6
        OT................................      10.0      10.5      11.2      11.9      12.7      13.5      14.3
    Off-budget:                                                                                                 
        BA................................     347.7     364.6     382.5     401.2     421.0     442.5     465.0
        OT................................     341.3     357.6     374.9     393.1     412.4     433.3     455.2
    Total:                                                                                                      
        BA................................     354.6     372.5     390.9     410.4     431.0     453.3     476.6
        OT................................     351.3     368.1     386.1     405.1     425.1     446.8     469.5
700: Veterans Benefits:                                                                                         
    BA....................................      38.5      38.6      38.9      40.1      40.3      40.6      40.9
    OT....................................      37.8      39.7      39.2      40.3      42.0      39.4      41.2
750: Administration of Justice:                                                                                 
    BA....................................      21.0      19.8      20.0      20.0      20.0      20.0      20.0
    OT....................................      17.7      19.2      19.6      20.6      20.0      19.9      19.9
800: General Government:                                                                                        
    BA....................................      12.5      13.9      13.9      13.9      13.9      14.0      14.0
    OT....................................      12.6      13.7      13.7      13.8      14.1      13.8      13.8
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
        BA................................     276.3     282.7     289.8     294.9     298.6     306.0     315.4
        OT................................     276.3     282.7     289.8     294.9     298.6     306.0     315.4
    Off-budget:                                                                                                 
        BA................................     -36.6     -40.6     -44.9     -49.7     -55.0     -60.7     -66.9
        OT................................     -36.6     -40.6     -44.9     -49.7     -55.0     -60.7     -66.9
    Total:                                                                                                      
        BA................................     239.7     242.2     244.9     245.3     243.7     245.3     248.5
        OT................................     239.7     242.2     244.9     245.3     243.7     245.3     248.5
920: Allowances:                                                                                                
    BA....................................      -0.2  ........  ........  ........  ........  ........  ........
    OT....................................      -0.0      -0.2  ........  ........  ........  ........  ........
950: Undistributed Offsetting Receipts:                                                                         
    Off-budget:                                                                                                 
        BA................................     -35.2     -43.3     -33.5     -31.1     -31.6     -32.6     -33.8
        OT................................     -35.2     -43.3     -33.5     -31.1     -31.6     -32.6     -33.8
    Off-budget:                                                                                                 
        BA................................      -6.3      -6.6      -7.0      -7.5      -8.2      -8.7      -9.4
        OT................................      -6.3      -6.6      -7.0      -7.5      -8.2      -8.7      -9.4
    Total:                                                                                                      
        BA................................     -41.5     -49.9     -40.5     -38.6     -39.8     -41.2     -43.3
        OT................................     -41.5     -49.9     -40.5     -38.6     -39.8     -41.2     -43.3
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA................................   1,266.7   1,333.8   1,399.0   1,449.6   1,509.4   1,555.1   1,627.4
        OT................................   1,276.9   1,332.4   1,389.8   1,442.4   1,495.0   1,536.0   1,603.7
    Off-budget:                                                                                                 
        BA................................     310.2     318.5     335.2     347.6     358.3     376.5     388.7
        OT................................     297.7     311.1     324.6     334.2     348.8     365.0     378.9
    Total:                                                                                                      
        BA................................   1,576.9   1,652.4   1,734.2   1,797.2   1,867.6   1,931.6   2,016.1
        OT................................   1,574.9   1,643.5   1,714.4   1,776.7   1,843.8   1,901.0   1,982.6
Revenues:                                                                                                       
    On-budget.............................   1,063.1   1,100.4   1,148.5   1,198.4   1,251.8   1,311.1   1,373.9
    Off-budget............................     365.2     385.0     402.3     423.4     445.1     465.2     487.3
    Total.................................   1,428.3   1,485.4   1,550.8   1,621.8   1,696.9   1,776.3   1,861.2
Deficit:                                                                                                        
    On-budget.............................    -213.8    -232.1    -241.3    -244.1    -243.2    -224.9    -229.8
    Off-budget............................      67.5      73.9      77.7      89.2      96.3     100.1     108.5
    Total.................................    -146.3    -158.2    -163.6    -154.9    -146.9    -124.8    -121.3
----------------------------------------------------------------------------------------------------------------


                                  COMMITTEE RECOMMENDATION COMPARED TO BASELINE                                 
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1997      1998      1999      2000      2001      2002      Total 
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................       1.0       2.5       4.9       7.1       9.5      12.1      37.2
                                                                                                                
    OT....................................      -1.4      -1.4       1.1       2.8       7.0       4.7      12.8
150: International Affairs:                                                                                     
    BA....................................  ........      -1.5      -2.7      -3.5      -3.2      -3.2     -14.1
                                                                                                                
    OT....................................      -0.1      -0.9      -2.0      -2.7      -2.9      -3.0     -11.6
250: Science, Space and Technology:                                                                             
    BA....................................      -0.2      -0.6      -1.0      -1.3      -1.2      -1.1      -5.4
                                                                                                                
    OT....................................      -0.1      -0.4      -0.7      -1.2      -1.2      -1.1      -4.7
270: Energy:                                                                                                    
    BA....................................      -0.9      -0.8      -1.2      -1.3      -1.3      -1.3      -6.6
                                                                                                                
    OT....................................      -0.2      -0.5      -0.9      -1.1      -1.2      -1.2      -5.0
300: Natural Resources and Environment:                                                                         
    BA....................................       0.3       0.1      -0.0      -0.2      -0.3      -0.3      -0.5
                                                                                                                
    OT....................................      -0.2      -0.2      -0.2      -0.2      -0.3      -0.3      -1.5
350: Agriculture:                                                                                               
    BA....................................      -0.3      -0.4      -0.4      -0.5      -0.5      -0.5      -2.7
                                                                                                                
    OT....................................      -0.2      -0.3      -0.4      -0.5      -0.5      -0.5      -2.4
370: Commerce and Housing Credit:                                                                               
    On-budget:                                                                                                  
        BA................................      -0.7      -0.6      -0.3       0.9      -1.0      -1.0      -2.6
                                                                                                                
        OT................................      -3.9      -0.0       0.1       1.3       0.1      -0.9      -3.3
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................      -0.7      -0.6      -0.3       0.9      -1.0      -1.0      -2.6
                                                                                                                
        OT................................      -3.9      -0.0       0.1       1.3       0.1      -0.9      -3.3
400: Transportation:                                                                                            
    BA....................................      -2.2      -1.4      -1.5      -2.5      -3.1      -3.5     -14.2
                                                                                                                
    OT....................................      -0.7      -1.9      -2.9      -3.9      -4.1      -4.6     -18.1
450: Community and Regional Development:                                                                        
    BA....................................      -3.3      -4.9      -5.0      -5.0      -5.0      -5.0     -28.1
                                                                                                                
    OT....................................      -0.4      -1.7      -2.9      -3.9      -4.4      -4.8     -18.2
500: Education, Training, Employment and                                                                        
 Social Services: :                                                                                             
    BA....................................      -0.3       0.1       0.1       0.1       0.1       0.1       0.0
                                                                                                                
    OT....................................      -0.3      -0.4      -0.2      -0.1      -0.2      -0.2      -1.4
550: Health:                                                                                                    
    BA....................................      -1.5      -5.7     -10.3     -13.8     -20.1     -28.4     -79.8
                                                                                                                
    OT....................................      -0.8      -5.4     -10.3     -13.7     -20.0     -28.4     -78.6
570: Medicare:                                                                                                  
    BA....................................      -6.6     -12.6     -22.0     -31.8     -42.4     -53.0    -168.5
                                                                                                                
    OT....................................      -6.6     -12.6     -22.0     -31.8     -42.4     -53.0    -168.5
600: Income Security:                                                                                           
    BA....................................      -4.3     -10.4     -12.9     -15.1     -16.1     -18.7     -77.5
                                                                                                                
    OT....................................      -4.1     -10.0     -13.0     -14.9     -16.2     -18.4     -76.6
650: Social Security:                                                                                           
    On-budget:                                                                                                  
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
700: Veterans Benefits:                                                                                         
    BA....................................       0.4      -0.3      -1.4      -1.6      -1.8      -1.9      -6.6
                                                                                                                
    OT....................................      -0.2       0.1      -1.0      -1.6      -1.7      -1.9      -6.4
750: Administration of Justice:                                                                                 
    BA....................................       1.8       2.3       3.3       3.3      -0.1      -0.1      10.5
                                                                                                                
    OT....................................       1.3       2.0       1.8       3.0      -0.1      -0.1       7.9
800: General Government:                                                                                        
    BA....................................      -0.1      -0.3      -0.6      -0.8      -0.7      -0.6      -3.0
                                                                                                                
    OT....................................      -0.1      -0.1      -0.5      -1.0      -0.6      -0.5      -2.8
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
    BA....................................      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1     -26.1
                                                                                                                
    OT....................................      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1     -26.1
    Off-budget:                                                                                                 
    BA....................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
    OT....................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
    BA....................................      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1     -26.1
                                                                                                                
    OT....................................      -0.1      -0.6      -1.9      -4.1      -7.3     -12.1     -26.1
920: Allowances:                                                                                                
    BA....................................       1.9       0.1      -0.1      -0.6      -1.1      -3.6      -3.4
                                                                                                                
    OT....................................       1.1       0.4       0.0      -0.5      -1.0      -3.6      -3.6
950: Undistributed Offsetting Receipts:                                                                         
    On-budget:                                                                                                  
        BA................................      -0.4      -2.2      -3.8      -5.1      -5.9      -6.3     -23.7
                                                                                                                
        OT................................      -0.4      -2.2      -3.8      -5.1      -5.9      -6.3     -23.7
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................      -0.4      -2.2      -3.8      -5.1      -5.9      -6.3     -23.7
                                                                                                                
        OT................................      -0.4      -2.2      -3.8      -5.1      -5.9      -6.3     -23.7
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA................................     -15.5     -37.2     -57.0     -75.8    -101.4    -128.3    -415.2
                                                                                                                
        OT................................     -17.4     -36.2     -59.8     -79.4    -103.0    -136.1    -431.9
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
                                                                                                                
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................     -15.5     -37.2     -57.0     -75.8    -101.4    -128.3    -415.2
                                                                                                                
        OT................................     -17.4     -36.2     -59.8     -79.4    -103.0    -136.1    -431.9
Revenues:                                                                                                       
    On-budget.............................     -14.1     -18.6     -22.3     -21.9     -21.5     -14.8    -113.2
    Off-budget............................  ........  ........  ........  ........  ........  ........  ........
    Total.................................     -14.1     -18.6     -22.3     -21.9     -21.5     -14.8    -113.2
Deficit:                                                                                                        
    On-budget.............................       3.3      17.5      37.5      57.6      81.5     121.3     318.8
    Off-budget............................  ........  ........  ........  ........  ........  ........  ........
    Total.................................       3.3      17.5      37.5      57.6      81.5     121.3     318.8
----------------------------------------------------------------------------------------------------------------


                                Committee Recommendation Compared to 1996 Levels                                
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1997      1998      1999      2000      2001      2002      Total 
----------------------------------------------------------------------------------------------------------------
050: National Defense                                                                                           
    BA....................................       1.5       2.9       5.4       7.7      10.1      12.8      40.4
    OT....................................       0.2      -1.5       1.6       5.0       3.9       3.6      12.8
150: International Affairs                                                                                      
    BA....................................      -0.8      -2.3      -3.4      -3.0      -2.6      -2.3     -14.4
    OT....................................      -1.1      -2.3      -3.3      -4.5      -4.4      -4.4     -20.0
250: Science, Space and Technology                                                                              
    BA....................................      -0.3      -0.7      -1.1      -1.4      -1.3      -1.2      -6.1
    OT....................................       0.1      -0.2      -0.7      -1.1      -1.1      -1.0      -4.0
270: Energy                                                                                                     
    BA....................................      -0.9      -0.9      -1.1      -1.3      -1.1      -1.4      -6.8
    OT....................................      -0.6      -1.3      -1.7      -2.0      -1.9      -2.3      -9.8
300: Natural Resources and Environment                                                                          
    BA....................................      -1.0      -1.4      -1.5      -1.9      -2.0      -2.0      -9.9
    OT....................................      -0.4      -0.9      -1.2      -1.7      -2.2      -2.4      -8.9
350: Agriculture                                                                                                
    BA....................................      -0.2      -0.3      -0.5      -1.2      -2.2      -2.5      -7.0
    OT....................................       0.0      -0.2      -0.5      -1.1      -2.1      -2.3      -6.1
370: Commerce and Housing Credit:                                                                               
    On-budget:                                                                                                  
        BA................................       1.2       3.2       4.2       6.1       5.0       5.3      25.0
        OT................................       3.7      12.1      12.5      13.8      13.8      13.7      69.7
    Off-budget:                                                                                                 
        BA................................      -4.4      -0.7      -1.8      -5.0      -2.0      -5.4     -19.4
        OT................................       1.4       2.2      -1.0       0.2       1.8       0.7       5.3
    Total:                                                                                                      
        BA................................      -3.1       2.4       2.4       1.1       2.9      -0.1       5.5
        OT................................       5.0      14.3      11.5      14.0      15.6      14.4      75.0
400: Transportation                                                                                             
    BA....................................       4.9       6.7       7.2       6.8       7.0       7.3      39.9
    OT....................................      -0.7      -2.3      -3.7      -5.2      -5.6      -6.1     -23.6
450: Community and Regional Development                                                                         
    BA....................................      -2.7      -4.4      -4.4      -4.4      -4.4      -4.5     -24.7
    OT....................................      -0.4      -1.6      -2.5      -3.4      -3.9      -4.4     -16.2
500: Education, Training, Employment and                                                                        
 Social Services                                                                                                
    BA....................................       2.0       1.3       2.4       3.2       4.0       4.8      17.6
    OT....................................       0.2      -1.6      -1.1      -0.4       0.4       1.1      -1.5
550: Health                                                                                                     
    BA....................................      20.5      26.8      33.4      42.2      49.7      56.6     229.3
    OT....................................       8.8      14.9      21.1      29.7      36.9      43.8     155.2
570: Medicare                                                                                                   
    BA....................................      11.7      24.7      35.4      46.1      58.0      72.3     248.2
    OT....................................      12.2      25.1      35.3      46.5      58.5      72.0     249.5
600: Income Security                                                                                            
    BA....................................      12.6      22.6      27.2      45.2      44.7      63.4     215.8
    OT....................................      11.2      16.3      24.1      35.7      39.6      52.2     179.1
650: Social Security:                                                                                           
    On-budget:                                                                                                  
        BA................................       0.9       1.6       2.4       3.1       3.9       4.7      16.7
        OT................................       0.6       1.2       1.9       2.7       3.5       4.3      14.2
    Off-budget:                                                                                                 
        BA................................     16.92      34.7      53.5      73.3      94.8     117.3     390.6
        OT................................      16.3      33.6      51.8      71.1      92.0     113.8     378.6
Total:                                                                                                          
        BA................................      17.9      36.4      55.9      76.4      98.7     122.0     407.3
        OT................................      16.8      34.8      53.7      73.8      95.5     118.1     392.8
700: Veterans Benefits                                                                                          
    BA....................................       0.5       0.1       0.2       0.2       0.3       0.5       1.7
    OT....................................       1.7       1.5       1.5       2.6      -0.1       1.6       8.8
750: Administration of Justice                                                                                  
    BA....................................       0.7       1.4       2.4       2.3      -1.1      -1.1       4.5
    OT....................................       2.9       3.9       4.7       5.3       2.1       2.1      21.0
800: General Government                                                                                         
    BA....................................       1.3       1.1       0.8       0.7       0.8       1.0       5.6
    OT....................................       1.0       1.0       0.6       0.4       0.5       0.7       4.2
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
        BA................................       6.4      12.9      16.7      18.2      22.4      27.0     103.6
        OT................................       6.4      12.9      16.7      18.2      22.4      27.0     103.6
    Off-budget                                                                                                  
        BA................................      -3.9      -8.3     -13.1     -18.3     -24.1     -30.2     -97.9
        OT................................      -3.9      -8.3     -13.1     -18.3     -24.1     -30.2     -97.9
Total:                                                                                                          
    BA....................................       2.4       4.6       3.7      -0.1      -1.7      -3.2       5.7
    OT....................................       2.4       4.6       3.7      -0.1      -1.7      -3.2       5.7
920: Allowances                                                                                                 
    BA....................................       2.1       0.3       0.1      -0.4      -0.9      -3.4      -2.1
    OT....................................       0.9       0.5       0.1      -0.5      -1.0      -3.5      -3.5
950: Undistributed Offsetting Receipts:                                                                         
    On-budget:                                                                                                  
        BA................................      -8.5      -0.5       0.3      -1.5      -3.3      -4.9     -18.4
        OT................................      -8.5      -0.5      -0.3      -1.5      -3.3      -4.9     -18.4
    Off-budget:                                                                                                 
        BA................................      -0.3      -0.7      -1.3      -1.9      -2.4      -3.1      -9.7
        OT................................      -0.3      -0.7      -1.3      -1.9      -2.4      -3.1      -9.7
    Total:................................                                                                      
        BA................................      -8.8      -1.2      -1.0      -3.4      -5.7      -8.1     -28.1
        OT................................      -8.8      -1.2      -1.0      -3.4      -5.7      -8.1     -28.1
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA................................      51.7      95.1     125.8     166.8     187.0     232.3     858.8
        OT................................      38.1      76.8     105.8     138.6     156.1     190.7     706.0
    Off-budget:                                                                                                 
        BA................................       8.3      25.0      37.4      48.0      66.3      78.5     263.5
        OT................................      13.4      26.8      36.5      51.1      67.3      81.2     276.3
Total:                                                                                                          
    BA....................................      60.0     120.1     163.2     219.9     253.3     310.8    1122.3
    OT....................................      51.1     103.6     142.3     189.7     223.4     271.8     982.4
Revenues:                                                                                                       
    On-budget.............................      23.7      67.4     113.6     167.4     227.1     296.6     895.8
    Off-budget............................      19.8      37.1      58.3      79.9     100.0     122.2     417.3
    Total.................................      43.6     104.5     171.8     247.4     327.1     418.8    1313.1
Deficit:                                                                                                        
    On-budget.............................     -14.4      -9.4       7.8      28.8      71.0     105.9     189.8
    Off-budget............................       6.4      10.3      21.7      28.9      32.7      41.0     141.0
    Total.................................      -8.0       0.9      29.5      57.7     103.7     146.9     330.8
----------------------------------------------------------------------------------------------------------------


                                    PRESIDENT'S BUDGET AS REESTIMATED BY CBO                                    
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
050: National Defense                                                                                           
    BA.................................       254.3      258.5     263.8     270.3     279.4     287.8          
    OT.................................       260.8      256.3     257.8     263.3     266.6     278.2          
150: International Affairs                                                                                      
    BA.................................        15.3       14.5      13.9      14.3      15.6      17.1          
    OT.................................        15.7       14.9      14.5      13.6      14.1      14.9          
250: Science, Space and Technology                                                                              
    BA.................................        17.9       16.1      15.3      14.6      15.8      17.2          
    OT.................................        16.9       16.6      16.0      15.1      15.5      16.6          
270: Energy                                                                                                     
    BA.................................         3.2        3.7       3.0       2.7       3.3       3.6          
    OT.................................         3.1        2.7       2.3       1.9       2.1       2.1          
300: Natural Resources and Environment                                                                          
    BA.................................        21.9       21.6      21.4      20.9      21.8      23.0          
    OT.................................        22.2       22.3      22.1      21.5      21.8      22.6          
350: Agriculture                                                                                                
    BA.................................        13.0       12.6      12.1      11.2      10.6      10.8          
    OT.................................        11.1       10.7      10.2       9.4       8.7       8.9          
370: Commerce and Housing Credit:                                                                               
    On-budget:                                                                                                  
        BA.............................         8.6       10.3      11.2      12.9      12.1      12.8          
        OT.............................        -1.9        6.5       6.8       8.1       8.2       8.5          
    Off-budget:                                                                                                 
        BA.............................         1.1        4.7       3.6       0.4       3.4  ........          
        OT.............................         0.7        1.6      -1.7      -0.5       1.1  ........          
    Total:                                                                                                      
        BA.............................         9.7       15.0      14.8      13.4      15.5      12.8          
        OT.............................        -1.2        8.0       5.2       7.6       9.4       8.5          
400: Transportation                                                                                             
    BA.................................        42.2       36.2      33.2      30.9      34.2      37.9          
    OT.................................        39.6       38.6      36.9      34.6      33.7      35.3          
450: Community and Regional Development                                                                         
    BA.................................         9.2        8.8       8.3       7.8       8.7       9.4          
    OT.................................        10.6       10.3       9.9       9.3       8.7       8.3          
500: Education, Training, Employment                                                                            
 and Social Services                                                                                            
    BA.................................        53.3       54.5      56.3      58.0      60.7      63.4          
    OT.................................        51.3       53.7      55.0      56.7      58.9      61.4          
550: Health                                                                                                     
    BA.................................       136.9      144.4     151.2     158.8     164.9     176.1          
    OT.................................       136.3      144.8     151.7     159.1     163.9     174.6          
570: Medicare                                                                                                   
    BA.................................       193.1      209.3     222.6     236.6     252.7     272.3          
    OT.................................       191.4      207.6     220.3     234.8     250.9     269.9          
600: Income Security                                                                                            
    BA.................................       231.6      244.1     255.5     270.1     277.9     293.8          
    OT.................................       239.0      247.1     256.5     269.6     275.7     290.1          
650: Social Security:                                                                                           
    On-budget:                                                                                                  
        BA.............................         7.8        8.5       9.2      10.0      10.8      11.6          
        OT.............................        10.9       11.6      12.3      13.0      13.9      14.8          
    Off-budget:                                                                                                 
        BA.............................       364.6      382.5     401.2     421.0     442.5     465.0          
        OT.............................       357.6      374.9     393.1     412.4     433.3     455.2          
    Total:                                                                                                      
        BA.............................       372.5      390.9     410.4     431.0     453.3     476.6          
        OT.............................       368.5      386.5     405.4     425.5     447.2     470.0          
700: Veterans Benefits                                                                                          
    BA.................................        39.0       37.9      36.6      35.2      37.3      39.7          
    OT.................................        39.6       38.7      37.0      37.1      36.0      39.8          
750: Administration of Justice                                                                                  
    BA.................................        23.5       24.5      25.5      25.5      24.8      24.1          
    OT.................................        21.2       24.4      24.8      25.5      25.7      25.0          
800: General Government                                                                                         
    BA.................................        15.5       15.2      15.2      15.3      15.8      16.3          
    OT.................................        14.8       14.9      14.9      15.2      15.3      16.0          
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
        BA.............................       282.3      289.4     293.9     296.6     301.8     307.3          
        OT.............................       282.3      289.4     293.9     296.6     301.8     307.3          
    Off-budget:                                                                                                 
        BA.............................       -40.6      -44.9     -49.7     -55.0     -60.7     -66.9          
        OT.............................       -40.6      -44.9     -49.7     -55.0     -60.7     -66.9          
    Total:                                                                                                      
        BA.............................       241.8      244.5     244.3     241.6     241.0     240.4          
        OT.............................       241.8      244.5     244.3     241.6     241.0     240.4          
920: Allowances                                                                                                 
    BA.................................        -0.5       -0.0      -0.0      -0.0     -12.9     -36.8          
    OT.................................        -0.5       -0.0      -0.0      -0.0     -16.5     -36.8          
950: Undistributed Offsetting Receipts:                                                                         
    On-budget:                                                                                                  
        BA.............................       -43.3      -35.4     -35.1     -38.2     -41.0     -62.2          
        OT.............................       -43.3      -35.4     -35.1     -38.2     -41.0     -62.2          
    Off-budget:                                                                                                 
        BA.............................        -6.6       -7.0      -7.5      -8.2      -8.7      -9.4          
        OT.............................        -6.6       -7.0      -7.5      -8.2      -8.7      -9.4          
    Total:                                                                                                      
        BA.............................       -50.0      -42.4     -42.6     -46.4     -49.7     -71.6          
        OT.............................       -50.0      -42.4     -42.6     -46.4     -49.7     -71.6          
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA.............................      1325.0     1374.6    1413.0    1453.6    1494.1    1525.3          
        OT.............................      1321.0     1375.7    1407.9    1446.0    1463.9    1495.4          
    Off-budget:                                                                                                 
        BA.............................       318.6      335.3     347.6     358.3     376.5     388.7          
        OT.............................       311.1      324.6     334.2     348.8     365.0     378.8          
    Total:                                                                                                      
        BA.............................      1643.6     1709.9    1760.6    1811.8    1870.7    1914.0          
        OT.............................      1632.1     1700.2    1742.2    1794.8    1828.9    1874.2          
Revenues:                                                                                                       
    On-budget..........................      1092.4     1146.4    1195.6    1244.6    1309.4    1389.9          
    Off-budget.........................       385.0      402.3     423.4     445.1     465.2     487.3          
    Total..............................      1477.4     1548.7    1619.0    1689.7    1774.5    1877.3          
Deficit:                                                                                                        
    On-budget..........................      -228.5     -229.3    -212.3    -201.4    -154.5    -105.5          
    Off-budget.........................        73.9       77.7      89.2      96.3     100.1     108.5          
    Total..............................      -154.7     -151.6    -123.2    -105.1     -54.4       3.1          
----------------------------------------------------------------------------------------------------------------


                                 President Compared to Committee Recommendation                                 
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                              1997      1998      1999      2000      2001      2002      Total 
----------------------------------------------------------------------------------------------------------------
050: National Defense:                                                                                          
    BA....................................     -11.2      -8.5      -5.7      -1.5       5.1      10.9      10.9
    OT....................................      -3.0      -5.8      -7.4      -5.4      -0.9      11.0      11.5
150: International Affairs:                                                                                     
    BA....................................       1.2       1.9       2.3       2.2       3.2       4.4     -15.1
    OT....................................       0.8       1.3       2.0       2.2       2.6       3.4     -12.3
250: Science, Space and Technology:                                                                             
    BA....................................       1.4       0.0      -0.4      -0.8       0.3       1.6      -2.2
    OT....................................       0.2       0.3       0.1      -0.4      -0.0       1.0      -1.2
270: Energy:                                                                                                    
    BA....................................       0.4       0.9       0.4       0.2       0.7       1.2      -3.7
    OT....................................       0.3       0.5       0.5       0.3       0.5       0.9      -2.9
300: Natural Resources and Environment:                                                                         
    BA....................................       1.6       1.6       1.6        14       2.4       3.6     N12.2
    OT....................................       0.8       1.4       1.4       1.4       2.2       3.3     -10.4
350: Agriculture:                                                                                               
    BA....................................       0.5       0.1      -0.1      -0.3      -0.1       0.6      -0.8
    OT....................................       0.3       0.2      -0.0      -0.3      -0.0       0.4      -0.7
370: Commerce and Housing Credit..........                                                                      
    On-budget:                                                                                                  
        BA................................       1.0       0.7       0.5       0.4       0.7       1.1      -4.3
        OT................................       0.8       0.8       0.7       0.6       0.8       1.2      -4.9
    Off-budget:                                                                                                 
        BA................................       0.0       0.0       0.0      -0.0      -0.0  ........      -0.1
        OT................................       0.0       0.0       0.0  ........       0.0  ........      -0.1
    Total:                                                                                                      
        BA................................       1.0       0.7       0.5       0.4       0.7       1.1      -4.4
        OT................................       0.8       0.8       0.7       0.6       0.8       1.2      -4.9
400: Transportation:                                                                                            
    BA....................................       0.7      -7.1     -10.6     -12.6      -9.5      -6.0      45.2
    OT....................................       0.9       1.7       1.2       0.5      -0.1       2.1      -6.4
450: Community and Regional Development:                                                                        
    BA....................................       0.8       2.1       1.6       1.1       2.0       2.8     -10.3
    OT....................................      -0.1       0.8       1.3       1.6       1.5       1.6      -6.7
500: Education, Training, Employment and                                                                        
 Social Services:                                                                                               
    BA....................................       3.5       5.4       6.1       7.1       8.9      10.8     -41.9
    OT....................................       0.5       4.8       5.6       6.5       8.0       9.8     -35.1
550: Health:                                                                                                    
    BA....................................       5.8       6.9       7.2       6.0       4.7       8.9     -39.5
    OT....................................       4.5       6.9       7.6       6.4       4.0       7.9     -37.4
570: Medicare:                                                                                                  
    BA....................................       0.2       3.4       5.9       9.2      13.4      18.8     -50.8
    OT....................................       0.2       3.4       5.9       9.2      13.4      18.8     -50.8
600: Income Security:                                                                                           
    BA....................................      -0.4       2.2       8.9       5.6      13.9      11.0     -41.1
    OT....................................      -1.1       1.9       3.5       5.0       7.3       9.0     -25.6
650: Social Security:                                                                                           
    On-budget:                                                                                                  
        BA................................       0.0       0.0       0.0       0.0       0.0       0.0      -0.0
        OT................................       0.3       0.4       0.3       0.4       0.4       0.5      -2.4
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................       0.0       0.0       0.0       0.0       0.0       0.0      -0.0
        OT................................       0.3       0.4       0.3       0.4       0.4       0.5      -2.4
700: Veterans Benefits:                                                                                         
    BA....................................       0.0      -0.7      -2.1      -3.5      -1.5       0.7       7.0
    OT....................................       0.0      -0.5      -2.3      -3.3      -1.7       0.4       7.3
750: Administration of Justice:                                                                                 
    BA....................................       1.9       2.2       2.1       2.2       4.9       4.3     -17.6
    OT....................................       0.7       2.7       2.4       2.5       5.9       5.2     -19.4
800: General Government:                                                                                        
    BA....................................       1.7       1.5       1.8       2.1       2.5       2.8     -12.6
    OT....................................       1.2       1.3       1.7       2.1       2.1       2.6     -10.9
900: Net Interest:                                                                                              
    On-budget:                                                                                                  
        BA................................      -0.3       0.1       0.9       2.0       3.1       4.0      -9.9
        OT................................      -0.3       0.1       0.9       2.0       3.1       4.0      -9.9
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........       0.0
        OT................................  ........  ........  ........  ........  ........  ........       0.0
    Total:                                                                                                      
        BA................................      -0.3       0.1       0.9       2.1       3.1       4.0      -9.8
        OT................................      -0.3       0.1       0.9       2.1       3.1       4.0      -9.8
920: Allowances:                                                                                                
    BA....................................      -2.4      -0.1       0.1       0.6     -11.9     -33.2      46.9
    OT....................................      -1.4      -0.4      -0.0       0.5     -15.5     -33.2      50.0
950: Undistributed Offsetting Receipts:                                                                         
    On-budget:                                                                                                  
        BA................................       0.4       0.3      -0.2      -1.5      -2.5     -22.1      25.6
        OT................................       0.4       0.3      -0.2      -1.5      -2.5     -22.1      25.6
    Off-budget:                                                                                                 
        BA................................  ........  ........  ........  ........  ........  ........  ........
        OT................................  ........  ........  ........  ........  ........  ........  ........
    Total:                                                                                                      
        BA................................       0.4       0.3      -0.2      -1.5      -2.5     -22.1      25.6
        OT................................       0.4       0.3      -0.2      -1.5      -2.5     -22.1      25.6
Total Spending:                                                                                                 
    On-budget:                                                                                                  
        BA................................       6.6      12.8      20.4      20.0      40.4      26.3    -126.6
        OT................................       6.0      22.0      25.3      30.5      30.9      27.8    -142.3
    Off-budget:                                                                                                 
        BA................................       0.0       0.0       0.0       0.0       0.0      -0.0      -0.0
        OT................................       0.0       0.0       0.0       0.0       0.0      -0.0      -0.0
    Total:                                                                                                      
        BA................................       6.6      12.9      20.5      20.0      40.4      26.2    -126.6
        OT................................       6.0      22.0      25.3      30.5      30.9      27.7    -142.4
Revenues:                                                                                                       
    On-budget.............................       6.2      16.5      19.5      14.6      19.8      30.8    -107.4
    Off-budget............................  ........  ........  ........  ........  ........  ........  ........
    Total.................................       6.2      16.5      19.5      14.6      19.8      30.8    -107.4
Deficit:                                                                                                        
    On-budget.............................       0.2      -5.5      -5.8     -15.9     -11.1       3.0      35.0
    Off-budget............................      -0.0      -0.0      -0.0      -0.0      -0.0       0.0       0.0
    Total.................................       0.2      -5.5      -5.8     -15.9     -11.1       3.1      35.0
----------------------------------------------------------------------------------------------------------------


                              CREDIT TOTALS IN COMMITTEE RECOMMENDATION BY FUNCTION                             
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                              1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Function 050:                                                                                                   
    Direct loans..........................................      0.0      0.0      0.0      0.0      0.0      0.0
    Guaranteed loans......................................      0.8      0.2      0.2      0.2      0.2      0.2
Function 150:                                                                                                   
    Direct loans..........................................      4.3      4.3      4.4      4.3      4.4      4.4
    Guaranteed loans......................................     18.1     18.3     18.3     18.3     18.4     18.4
Function 270:                                                                                                   
    Direct loans..........................................      1.0      1.0      1.0      1.0      1.0      1.0
    Guaranteed loans......................................      0.0      0.0      0.0      0.0      0.0      0.0
Function 300:                                                                                                   
    Direct loans..........................................      0.1      0.1      0.1      0.1      0.1      0.1
    Guaranteed loans......................................      0.0      0.0      0.0      0.0      0.0      0.0
Function 350:                                                                                                   
    Direct loans..........................................      7.8      9.3     10.7     10.7     10.6     10.6
    Guaranteed loans......................................      5.9      6.6      6.6      6.7      6.6      6.7
Function 370:                                                                                                   
    Direct loans..........................................      1.9      1.8      1.8      1.8      1.7      1.7
    Guaranteed loans......................................    197.3    196.8    196.3    195.9    195.4    194.9
Function 400:                                                                                                   
    Direct loans..........................................      0.1      0.1      0.1      0.1      0.1      0.1
    Guaranteed loans......................................      0.0      0.0      0.0      0.0      0.0      0.0
Function 450:                                                                                                   
    Direct loans..........................................      1.2      1.2      1.3      1.3      1.3      1.3
    Guaranteed loans......................................      2.1      2.1      2.2      2.2      2.2      2.2
Function 500:                                                                                                   
    Direct loans..........................................     16.2     16.2     16.2     16.2     16.2     16.2
    Guaranteed loans......................................     15.5     17.6     19.4     21.3     23.1     25.0
Function 550:                                                                                                   
    Direct loans..........................................      0.0      0.0      0.0      0.0      0.0      0.0
    Guaranteed loans......................................      0.2      0.1      0.0      0.0      0.0      0.0
Function 700:                                                                                                   
    Direct loans..........................................      0.9      1.0      1.0      1.0      1.2      1.2
    Guaranteed loans......................................     26.4     25.9     25.4     24.9     24.3     23.7
Function 950:                                                                                                   
    Direct loans..........................................      7.9      1.4      0.0      0.0      0.0      0.0
    Guaranteed loans......................................      0.0      0.0      0.0      0.0      0.0      0.0
                                                           -----------------------------------------------------
    Grand total:                                                                                                
         Direct loans.....................................     41.4     36.4     36.6     36.5     36.6     36.6
        Guaranteed loans..................................    267.1    267.8    268.6    269.7    270.4    271.3
----------------------------------------------------------------------------------------------------------------

  V. Budget Resolution: Enforcement, Reconciliation, and Other Issues

    Prior to 1974, the President was the dominant player in 
setting national budget priorities. Congress reasserted its 
role over the budget through the enactment of the Congressional 
Budget Act of 1974 (the Budget Act). The Budget Act established 
budget procedures and internal enforcement mechanisms to ensure 
effective Congressional control over fiscal policy and the 
budgetary process.

                  a. contents of the budget resolution

    The focus of the Congressional budget process is the 
concurrent resolution on the budget (the budget resolution), 
which plays the central role in setting and enforcing 
Congressional budget priorities. Under the Congressional Budget 
Act of 1974, as amended, the budget resolution is privileged 
and is considered under expedited procedures. Because such 
procedures are unusual in the Senate, section 301 places 
constraints on the budget resolution by setting forth the 
elements that must be contained in the budget resolution and 
those elements that may be included at the discretion of the 
Budget Committees.

Aggregates and functional levels

    Section 301(a) of the Budget Act requires the budget 
resolution to set forth the aggregate levels of new budget 
authority, outlays, revenues, the deficit (or surplus), and the 
public debt, among others. The aggregate amounts of new budget 
authority and outlays are then required to be divided and set 
forth for each major functional category. (Functional 
categories classify the budgetary resources of programs into 
categories according to the national need addressed, e.g. 
Defense, International Affairs, Health, General Government, 
etc). The budget resolution is also required to set forth the 
outlays and revenues of the Old-Age and Survivors Insurance and 
the Disability Insurance (OASDI) Trust Funds. These aggregates, 
functional levels, and other amounts required under section 301 
can be found in sections 101 through 105 of the fiscal year 
1997 budget resolution.

Social Security

    As discussed below, the fiscal year 1997 budget resolution 
complies with the Budget Enforcement Act of 1990 and with all 
of the restrictions on Social Security trust funds under 
section 301 of the Budget Act.
            The Social Security ``Firewall''
    The budget process in general, and thus all congressional 
budget resolutions, provide special treatment and several 
critical protections for the Social Security spending, 
revenues, and surpluses. These protections derive from both the 
process by which a budget resolution is created and the 
subsequent enforcement thereof by virtue of supermajority 
points of order.
    The Budget Enforcement Act (BEA) of 1990 took Social 
Security off-budget for purposes of both a congressional budget 
resolution and the President's submission (see section 13301) 
and provided several protections for the Social Security 
surplus (see sections 13302 and 13303). First, the 
Congressional Budget Act was amended such that a budget 
resolution is prohibited from including the receipts or 
disbursements in the budget deficit totals (see section 
301(a)). Second, the Budget Act was amended to prohibit the 
consideration of a budget resolution that would decrease the 
surplus in any of the years covered by the resolution (see 
section 301(i)). The fiscal year 1993 and 1994 budget 
resolutions made this prohibition applicable against floor 
amendments to the budget resolution, this restriction continues 
to apply as a rule of the Senate. Lastly, the BEA requires the 
budget resolution to set aggregate levels of Social Security 
outlays and revenues that are enforced through the existing 
provisions of the Budget Act that prohibit consideration of 
legislation that breaches the outlay ceiling or revenue floors 
(see section 311(a)(2)), or that breaches a committee's 
allocation of outlay levels (see section 302(f)(2)). Any 
legislation that would violate these prohibitions is subject to 
a point of order that may be waived only on an affirmative vote 
of sixty (60) senators.
            Social Security's treatment in the budget
    Since enactment of the BEA in 1990, every Congressional 
budget resolution has--as required by law--excluded Social 
Security from the levels of revenues, outlays, and deficits set 
forth in the resolutions. These budget resolutions have--as 
required by law--specified separately the amount of Social 
Security revenue and Social Security outlays provided for the 
budget period covered by the resolution because these levels 
are necessary for enforcing the Social Security ``firewall'' 
protections in the Senate.
    The President's budget is also required by the BEA to 
exclude Social Security from estimates of revenues, outlays, or 
the deficit. Since 1990, all of the President's budgets that 
have been sent to Congress have included estimates of the on-
budget deficit, which excludes Social Security.
    In practice, both the legislative and executive branches 
highlight the ``total deficit'' in budget discussions and 
informal and formal budget presentations. The total deficit, or 
unified budget deficit, includes the on-budget totals and 
Social Security. Every President's budget submitted since 1990 
and every budget resolution adopted by Congress since 1990 has 
highlighted the total deficit in summary tables accompanying 
the official budget presentations.
    In fact, during deliberations on balancing the budget in 
2002, every major proposal offered by Republicans and Democrats 
to reach balance in 2002 included Social Security in the 
deficit estimates that were highlighted in the supporting 
documents. For instance:
    The conference report on the 1996 budget resolution showed 
the on-budget deficit estimates, the off-budget surpluses, and 
the total deficit estimates in summary tables accompanying the 
text of the resolution (see House Report 104-159, pp. 42-44).
    The President's budget proposals in January 1995, June 
1995, January 1996, and March 1996 all highlight the total 
deficit in summary tables sent to the Congress (see Table S-1, 
Budget of the United States Government, Fiscal Year 1996, p. 
173; The President's Economic Plan: A Balanced Budget that Puts 
People First, June 1995; ``Deficit Reduction and Balanced 
Budget by Fiscal Year 2002,'' Message from the President of the 
United States, January 9, 1996, H. Doc. 104-160, Pt. 1, p. 4; 
Table S-2, Budget Supplement, Budget of the United States 
Government, Fiscal Year 1997, p. 142).
    Senators Daschle and others released a proposal in January 
1996 with a document called the ``Senate Democrats' Balanced 
Budget Highlights''. This document claimed the proposal 
``Balanced the budget in 7 years using CBO estimates'', and 
provided a chart showing the plan would eliminate the total 
budget deficit, which includes Social Security, by 2002.
    The total deficit remains an important measure in budget 
discussions because it clearly identifies the amount of 
additional borrowing from the public required annually by the 
federal government. Indeed, at some point, the Treasury must 
calculate the expected total deficit for a year to determine 
how much it needs to borrow from the public. In addition, this 
information is central to understanding the impact of fiscal 
policy on the nation's economy, and thus is crucial for sound 
analysis and assessment of alternative federal spending and tax 
policy. The additional amount the government borrows from the 
public has important implications for net national savings, 
overall investment, interest rates, inflation, and economic 
growth. No other approach to calculating the federal budget 
deficit can be translated directly into the government's 
additional borrowing needs, and therefore no other measure can 
fully substitute for the total, or unified, budget deficit.
            Additional protections for the Social Security surplus
    In addition to the protection afforded by the ``firewall'', 
Congress has enacted other provisions to provide special 
treatment for the Social Security program within the budget 
process. For example:
    In the context of a reconciliation measure (including 
amendments thereto and a conference report thereon), section 
310(g) prohibits the inclusion of recommendations with respect 
to Social Security. Moreover, section 313(b)(1)(f) provides 
that a provision which violates 310(g) will be extraneous for 
purposes of the ``Byrd Rule''. Both sections create points of 
order which may be waived only by an affirmative vote of sixty 
(60) Senators.
    Section 422(7), which was added by the Unfunded Mandates 
Act, specifically excludes provisions which relate to the 
Social Security program from that law's scrutiny.
    Section 255(a) of Gramm-Rudman-Hollings exempts benefits 
payable pursuant to the Social Security program (as well as 
those under the Railroad Retirement Act) from reductions 
arising from a sequestration order.

Additional matters that may be in budget resolutions

    Section 301(b) sets forth those elements that may be 
included in the budget resolution at the discretion of the 
Budget Committees. One of these elements is reconciliation 
instructions described in section 310 of the Budget Act. 
Periodically, Congress may adopt a budget resolution that will 
require changes in the projected levels of direct spending or 
revenues under current law. In order to implement that budget 
resolution, the differences between current law and the budget 
resolution must be reconciled and the budget resolution will, 
therefore, contain ``reconciliation instructions''. (See 
Reconciliation below).
    In addition to the aggregates, functional levels, and the 
reconciliation instructions, section 301(b) of the Budget Act 
permits the budget resolution to include ``other matters, and 
[to] require other procedures relating to the budget as are 
appropriate to carry out [the Budget] Act.'' This section has 
been the authority to include language amending the budget 
process, creating new enforcement mechanisms, and clarifying 
the application of existing provisions of the Budget. Such 
language may be temporary or permanent, and may affect only the 
Senate or may affect both Houses of Congress. The fiscal year 
1997 budget resolution establishes discretionary caps for 
defense and non-defense spending, establishes two ``reserve 
funds'' for deficit-neutral legislation, and clarifies the 
budget scoring treatment of certain transactions. (See Part VI, 
Miscellaneous Provisions, of this report).

Other constraints on the budget resolution

    Subsection (g) of section 301 and other sections of the 
Budget Act place restrictions on the budget resolution that are 
enforceable through points of order. Section 301(g) prohibits 
the consideration of a budget resolution (or an amendment 
thereto) that is based on more than one set of economic 
assumptions. The fiscal year 1997 budget resolution complies 
with this requirement (See Part II, Economics, of this report). 
Section 601(b) prohibits the consideration of a budget 
resolution (or an amendment thereto) that would exceed the 
discretionary spending limits set forth in section 601(a). The 
budget resolution meets this requirement and extends these 
discretionary caps in a separate provision in the fiscal year 
1997 budget resolution (See Part VI, Miscellaneous Provisions, 
of this report). Lastly, section 305(d) prohibits the Senate 
from voting on a budget resolution that is not mathematically 
consistent.
    In addition to points of order against the budget 
resolution that were established in the Budget Act, previously 
passed budget resolutions contain enforcement provisions 
against budget resolutions. For instance, section 24 of the 
fiscal year 1995 budget resolution (H. Con. Res. 218) contains 
the Exon-Grassley provision. This language reduced for purposes 
of considering future budget resolutions the then existing 
discretionary spending limits under section 601(a) of the 
Budget Act for an additional amount for each fiscal year, 1995 
through 1998. The statutory spending limits remain unchanged. 
In addition, Exon-Grassley created a point of order against a 
budget resolution for fiscal years 1996, 1997, 1998 that 
recommends discretionary spending levels in the first year of 
the resolution that exceed the Exon-Grassley levels. Both the 
fiscal year 1996 budget resolution and this resolution comply 
with this requirement and contain discretionary caps for fiscal 
years 1997 through 2002 that reduce the discretionary caps to 
levels below the Exon-Grassley reductions and, thereby, 
superseding the Exon-Grassley levels.

Crime trust fund

    The Violent Crime Control and Law Enforcement Act of 1994 
(the Crime Act) established the Violent Crime Reduction Trust 
Fund (the Fund). The Crime Act allocated funds to the Trust 
Fund each year through fiscal year 2000 and those funds are 
available to be appropriated for crime programs authorized in 
that Act. The Fund was established as a separate discretionary 
category whose activities are excluded from the discretionary 
spending caps under existing law. The fiscal year 1997 budget 
resolution includes the new budget authority and outlays 
associated with the Fund in the aggregates and function levels 
in the budget resolution, but exclude them from the 
discretionary caps set forth in section 201 of the resolution.

                             b. enforcement

    As explained above, the budget resolution sets forth the 
aggregate levels of new budget authority, outlays and revenues. 
Sections 302(a) and 602(a) of the Budget Act require the joint 
statement of managers accompanying the conference report on the 
budget resolution to allocate the aggregate levels of new 
budget authority, outlays, and Social Security outlays among 
the Senate committees, based on each committee's jurisdiction 
over legislation providing such budgetary resources. The budget 
authority and outlays associated with direct spending programs 
are allocated to the appropriate authorizing committees for the 
first year and the sum of the five fiscal years in the budget 
resolution. The budget authority and outlays associated with 
discretionary programs are allocated to the Appropriations 
Committee for the first fiscal year in that resolution. Section 
602(b) of the Budget Act requires the Appropriations Committee 
to suballocate that amount.
    The aggregate spending levels, the revenue floors, and the 
committee allocations contained in the budget resolution form 
the parameters within which Congress considers spending and 
revenue legislation that affect the fiscal years covered by 
that resolution. The Budget Act, generally, prohibits the 
consideration of legislation that would cause the appropriate 
levels or allocations to be breached.

Section 311

    In order to determine whether a particular piece of 
legislation would breach any of the appropriate levels or 
allocations, the Senate Budget Committee tracks and reports to 
the Senate on the cumulative effect of spending and revenue 
legislation that has been enacted. These ``Current Level 
Reports'' are printed in the Congressional Record at least 
monthly and form the basis against which the budgetary effects 
of legislation under consideration in the Senate are measured. 
If the new budget authority provided in, or the outlays 
resulting from, the legislation (together with the cumulative 
spending effects of previously enacted legislation) would 
exceed the aggregate level of new budget authority or outlays 
in the budget resolution for the first year, that legislation 
would be subject to a point of order under section 311 of the 
Budget Act. If the revenue loss resulting from legislation 
(together with the cumulative revenue effects of previously 
enacted legislation) would cause revenues to be less that the 
aggregate level of revenues in the budget resolution that 
legislation would be subject to a point of order under section 
311. The revenue aggregate is enforced in the first year and 
for total of the first year and the four succeeding fiscal 
years. Section 311 may be waived only on an affirmative vote of 
sixty (60) Senators.

Section 302

    Similarly, the budgetary effects of each bill, amendment, 
and conference report is assigned to the committee of 
jurisdiction. The cumulative effects of a committee's 
legislation that is enacted is tracked by the Senate Budget 
Committee and compared to that committee's allocation contained 
in the joint statement of managers on the budget resolution. 
Any legislation that would cause the committee to exceed its 
allocation for the first fiscal year or the total of five 
fiscal years would be subject to a point of order under section 
302(f) of the Budget Act. That provision may be waived only on 
an affirmative vote of sixty (60) Senators.
    The surplus in the Social Security trust funds is protected 
separately through the aggregate and allocation procedures 
under the Budget Act. The budget resolution sets aggregate 
levels of Social Security outlays and revenues that are 
enforced through the existing provisions of the Budget Act that 
prohibit consideration of legislation that breaches the outlay 
ceiling or revenue floors, or that breaches the committee 
allocation of outlay levels.

Other sections

            Pay-as-you-go
    In addition to points of order that were established in the 
Budget Act, subsection 12(c) of the 1994 budget resolution (H. 
Con. Res. 64) established a pay-as-you-go point of order in the 
Senate that prohibited consideration of legislation that would 
cause an increase in the deficit over a ten year period. The 
1995 budget resolution (H. Con. Res. 218) modified and extended 
this point of order to provide that legislation was out of 
order if it caused a deficit increase in the first year covered 
by the budget resolution, the sum of the first five years 
covered by the budget resolution, and the sum of the five years 
following the first five year period. This provision was 
modified slightly to eliminate the ability of Congress to use 
prior surpluses as an offset for legislation which would 
increase the deficit and was extended to 2002 in the fiscal 
year 1996 budget resolution. The ``pay-as-you-go'' provision 
may be waived only by the affirmative vote of sixty (60) 
Senators.

                       sale of government assets

    In 1987, the Congress adopted a change in the scoring of 
legislation to provide that the proceeds from assets sales 
should not be taken into account for budget enforcement 
purposes. Section 257(e) of the Balanced Budget and Emergency 
Deficit Control Act prohibits the scoring of the proceeds from 
asset sales. This rule blocked privatization efforts and other 
reforms that would shift activities to the private sector or 
other non-federal entities that can more appropriately or more 
efficiently manage these assets. The President's 1997 budget 
proposed $3.9 billion in proceeds from asset sales (his 1996 
budget proposed $8 billion in proceeds from assets sales and 
also proposed a change in the asset sale scoring rule to allow 
the proceeds from these asset sales to be scored).
    Section 206 of the fiscal year 1996 budget resolution 
provided that for the purposes of the Budget Act and budget 
resolutions the proceeds from asset sales will be scored. The 
Committee continues to be concerned about the long-term 
budgetary impact of asset sales and does not support asset 
sales that would cost the Federal government money in the long 
run. The Committee plans to consider a new scoring rule that 
would take into account the long-term budgetary impact of asset 
sales.
            Credit Reform and Student Loans
    The 1990 Federal Credit Reform Act modified the budgetary 
treatment of Federal credit programs to take into account the 
long-term cost of Federal credit activities. More specifically, 
this law required the cost of direct loans and guaranteed loans 
to be measured by taking the net present value of the cash 
flows over the life of the direct loan or loan guarantee.
    Under credit reform, several disparities have arisen in the 
scoring of student loans. Section 207 of the fiscal year 1996 
budget resolution corrected a portion of the problem associated 
with the budgetary treatment of administrative expenses. For 
direct student loans, the administrative costs are measured on 
a cash basis, with the budget reflecting only that year's cost 
of administering the loan. For guaranteed student loans, the 
administrative costs are measured on a net present value basis 
for the entire length of the loan. The result is that direct 
lending appears to be much less expensive than guaranteed 
student lending. Both the Congressional Research Service and 
the Congressional Budget Office have acknowledged the bias that 
this treatment of administrative expenses has created. This 
correction has put the measurement of administrative expenses 
on equal footing for legislation expanding direct student 
loans. More specifically, it provides that for the purposes of 
Congressional scoring, the administrative cost for new direct 
student loans will be measured on a net present value basis.
            Extension of Budget Act 60-vote Enforcement
    Under current law, the three-fifths requirement in the 
Senate to waive many of the Budget Act's points of order is 
permanent. The 1995 concurrent resolution on the budget 
provided a 1998 sunset date for the three-fifths waiver 
requirement for many of these points of order. The fiscal year 
1996 budget resolution extended the sunset date through 
September 30, 2002. This did not affect section 313 of the 
Budget Act (the Byrd rule) and this three-fifths waiver 
requirement for this point of order remains permanent.

Committee allocations

    Section 301(e)(9) of the Budget Act requires the written 
report accompanying the budget resolution to include 
allocations of the aggregate levels to the appropriate Senate 
committees in accordance with section 302(a). Accordingly, the 
committee allocations are shown below:

SENATE COMMITTEE BUDGET AUTHORITY AND OUTLAY ALLOCATIONS PURSUANT TO SECTION 302 OF THE CONGRESSIONAL BUDGET ACT
                                              FOR FISCAL YEAR 1997                                              
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                             Direct           Entitlements funded in annual     
                                                            spending                 appropriations             
                                                          jurisdiction -----------------------------------------
                        Committee                        --------------                                         
                                                             Budget        Budget        Outlays       Outlays  
                                                           authorit y     authority                             
----------------------------------------------------------------------------------------------------------------
Appropriations..........................................       785,988       826,355  ............  ............
Appropriations (Violent Crime Trust Fund)...............         5,000         4,213  ............  ............
Agriculture, Nutrition, and Forestry....................         7,942         4,888         8,074         6,498
Armed Services..........................................        41,588        41,429  ............  ............
Banking, Housing, and Urban Affairs.....................         5,881        -5,545  ............  ............
Commerce, Science, and Transportation...................         7,429         4,799           605           602
Energy and Natural Resources............................           150           228            52            54
Environment and Public Works............................        23,969         3,201  ............  ............
Finance.................................................     1,002,628       992,873       131,144       131,212
Foreign Relations.......................................        11,429        12,859  ............  ............
Governmental Affairs....................................        55,330        53,855  ............  ............
Judiciary...............................................         3,929         3,873           234           234
Labor and Human Resources...............................         5,550         5,055         1,412         1,412
Rules and Administration................................            95            25  ............  ............
Veterans Affairs........................................         1,432         1,577        19,514        19,559
Select Indian Affairs...................................           392           362  ............  ............
Small Business..........................................             3          -296  ............  ............
Not allocated to committees.............................      -321,730      -323,911  ............  ............
                                                         -------------------------------------------------------
      Total.............................................     1,636,975     1,625,840       161,035       159,571
----------------------------------------------------------------------------------------------------------------


SENATE COMMITTEE BUDGET AUTHORITY AND OUTLAY ALLOCATIONS PURSUANT TO SECTION 302 OF THE CONGRESSIONAL BUDGET ACT
                                           FIVE-YEAR TOTAL: 1997-2001                                           
                                            [In millions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                                Direct spending         Entitlements funded in  
                                                                 jurisdiction            annual appropriations  
                        Committee                        -------------------------------------------------------
                                                             Budget                      Budget                 
                                                            authority      Outlays      authority      Outlays  
----------------------------------------------------------------------------------------------------------------
Agriculture, Nutrition, and Forestry....................        37,277        22,474        58,707        25,289
Armed Services..........................................       223,457       222,807  ............  ............
Banking, Housing, and Urban Affairs.....................        35,375       -16,767  ............  ............
Commerce, Science, and Transportation...................        31,889        18,064         3,352         3,334
Energy and Natural Resources............................         5,479         5,386           252           276
Environment and Public Works............................       128,524        10,862  ............  ............
Finance.................................................     5,401,852     5,347,818       714,467       714,749
Foreign Relations.......................................        50,945        56,772  ............  ............
Governmental Affairs....................................       307,838       290,142  ............  ............
Judiciary...............................................        19,705        19,396         1,173         1,173
Labor and Human Resources...............................        31,010        28,624         7,499         7,499
Rules and Administration................................           486           402  ............  ............
Veterans Affairs........................................         5,088         6,421       101,620       101,502
Select Indian Affairs...................................         1,965         1,832  ............  ............
Small Business..........................................             9        -1,264  ............  ............
----------------------------------------------------------------------------------------------------------------

                           c. reconciliation

    As stated earlier, Congress may adopt a budget resolution 
that will require changes in the projected levels of direct 
spending or revenues under current law. Under these 
circumstances, the Budget Committee may include 
``reconciliation instructions'' in the budget resolution in 
order to implement the budget resolution. Section 310 of the 
Budget Act specifies the form of the instructions and sets 
forth the reconciliation process and procedures.

Instructions and procedure

    When the budget resolution contains reconciliation 
instructions, the Budget Committee specifies, to each committee 
to be reconciled, the total amount by which direct spending or 
revenues under existing laws is to be changed. The Committee 
may also specify the total amount by which the statutory limit 
on the public debt is to be changed. Each committee is then 
instructed to recommend the appropriate legislative changes to 
meet the instructions and to report those recommendations to 
the Senate Budget Committee by a specified date. Once the 
budget resolution is adopted in identical form in both Houses, 
the reconciliation instructions become binding.
    Upon receipt of each committee's recommendations (report 
language and CBO cost estimates) the Senate Budget Committee 
consolidates the legislative language into a single piece of 
legislation and reports it to the Senate, without substantive 
change. Section 310 of the Budget Act establishes expedited 
procedures for the consideration of this omnibus budget 
reconciliation legislation. In the Senate, debate on the 
reconciliation measures is limited to 20 hours. All amendments 
must be germane and may not cause a net increase in outlays or 
a net reduction in revenues if the adoption of the amendment 
would cause the committee to violate its reconciliation 
instructions. A motion to strike a provision, regardless of its 
effect on the deficit, is always in order. These provisions 
require the vote of sixty (60) Senators to waive. The same 
requirements concerning mathematical consistency that apply to 
budget resolutions apply to reconciliation measures; however, 
this requirement may be waived on a majority vote.

The ``Byrd'' Rule

    The ``Byrd Rule'' is codified in section 313 of the Budget 
Act and prohibits the inclusion of matter in a reconciliation 
measure, or an amendment thereto, that is extraneous to the 
conciliation instructions. If the Presiding Officer sustains a 
point of order under the Byrd Rule, that provision is stricken 
from the measure and may not be offered as an amendment from 
the floor. The Byrd Rule may be waived only on an affirmative 
vote of sixty (60) Senators.
    A provision is extraneous if it (1) produces no change in 
outlays or revenues, (2) increases the deficit, if the 
reporting committee fails to meet its instruction, (3) is not 
in the jurisdiction of the committee reporting it, (4) produces 
changes in outlays or revenues that are ``merely incidental'' 
to the non-budgetary components of the provision, (5) increases 
the deficit in any year beyond the years reconciled and such 
increase is not offset by other provisions in the same title, 
or (6) changes the OASDI program under title II of the Social 
Security Act.

Reconciliation instructions to the Senate committees

    Pursuant to section 310(b)(2), the fiscal year 1997 budget 
resolution includes instructions to the various Senate 
authorizing committees. The resolution recommends that 
committees be reconciled for 1 and 6 years through a three-step 
interdependent reconciliation process. First, two committees 
(Agriculture and Finance) are instructed to report their 
recommended changes in law to the Senate Budget Committee by 
June 14, 1996. If this first bill is enacted into law then all 
authorizing committees are instructed to report their 
recommended changes in law to the Budget Committee by July 12, 
1996. Finally, if both the first and second bills are enacted 
into law, the Committee on Finance is instructed to recommend 
changes in law to the Senate by September 18, 1996. The 
instructions set targets for fiscal year 1997, and fiscal years 
1997 through 2002.
    Congress has included reconciliation instructions in past 
budget resolutions calling for more than one piece of 
legislation and instructions to committees to increase the 
deficit. For instance, the budget resolution for fiscal year 
1994 (H. Con. Res. 64) which implemented President Clinton's 
first budget provided for two reconciliation bills: a debt 
limit bill and an omnibus bill. The budget resolution for 
fiscal year 1983 (S. Con. Res. 92) provided for: an omnibus 
reconciliation bill with committees instructed to report by 
July 20, 1982 and for the Committee on Finance to report 
additional changes by July 12, 1982. Again in H. Con. Res. 64 
for fiscal year 1994, the House Agriculture committee was 
reconciled for outlay increases for fiscal years 1994 through 
1998. In addition, the budget resolution for fiscal year 1996 
included an instruction to the Committee on Finance to reduce 
revenues.
    The Committee also notes that separate reconciliation bills 
allow for more time for consideration on the Senate floor. 
Rather than having just 20 hours of debate on a single bill and 
10 hours of debate on a conference report, this 3-step process 
would permit up to 60 hours of debate on the bills and 30 hours 
of debate on the conference reports. Moreover, in separating 
the committee's balanced budget proposal into manageable 
issues, Senators are permitted to address their specific 
concerns to the issues contained in each bill.

                                       RECONCILIATION BY SENATE COMMITTEE                                       
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
           Committee                               1997     1998     1999     2000     2001     2002      Total 
----------------------------------------------------------------------------------------------------------------
First Spending Reconciliation:                                                                                  
    Agriculture, Nutrition, and  OT                 -2.0     -4.2     -5.0     -5.5     -6.1      -6.6     -29.4
     Forestry.                                                                                                  
    Finance....................  OT                  0.3     -7.1    -13.3    -17.6    -24.1     -33.6     -95.4
                                --------------------------------------------------------------------------------
      Subtotal.................  OT                 -1.7    -11.3    -18.3    -23.1    -30.1     -40.2    -124.8
                                ================================================================================
Second Spending Reconciliation:                                                                                 
    Agriculture, Nutrition, and  OT                 -0.1     -0.1     -0.1     -0.1     -0.1      -0.1      -0.3
     Forestry.                                                                                                  
    Armed Services.............  OT                 -0.1     -0.1     -0.1     -0.1     -0.2      -0.2      -0.6
    Banking, Housing, and Urban  OT                 -3.6     -0.2     -0.0     -0.1     -0.1      -0.5      -3.6
     Affairs.                                                                                                   
    Commerce, Science, and       OT              .......     -1.4     -2.6     -4.4     -5.2      -5.6     -19.4
     Transportation.                                                                                            
    Energy and Natural           OT                 -0.1     -0.3     -0.2     -0.2     -0.3      -0.3      -1.4
     Resources.                                                                                                 
    Environment and Public       OT                 -0.1     -0.3     -0.5     -0.5     -0.4      -0.4      -2.2
     Works.                                                                                                     
    Finance....................  OT                 -6.7    -12.8    -22.2    -32.2    -42.6     -53.2    -169.7
    Governmental Affairs.......  DR                 -1.0     -1.5     -2.0     -1.5     -1.5      -1.5      -8.8
    Judiciary..................  OT              .......  .......     -0.1     -0.1     -0.1      -0.1      -0.5
    Labor and Human Resources..  OT                 -0.7     -0.3     -0.5     -0.5     -0.5      -0.6      -3.1
    Veterans Affairs...........  OT                 -0.2     -0.2     -1.1     -1.2     -1.2      -1.4      -5.2
                                --------------------------------------------------------------------------------
      Subtotal.................  DR                -12.5    -16.7    -29.3    -40.8    -52.0     -63.8    -214.8
                                ================================================================================
      Total Spending             DR                -14.2    -28.0    -47.6    -63.9    -82.1    -104.0    -339.6
       reconciliation.                                                                                          
                                ================================================================================
Revenue Reconciliation:                                                                                         
    Finance....................  Rev                14.3     19.2     22.8     22.4     22.0      15.4     116.1
    Finance....................  OT                 -1.7     -1.7     -1.8     -1.9     -2.1      -2.3     -11.5
                                --------------------------------------------------------------------------------
      Subtotal.................  DR                 12.6     17.4     21.0     20.5     20.0      13.1    104.6 
----------------------------------------------------------------------------------------------------------------
Note.--OT=outlays, Rev=revenues, DR=deficit reduction.                                                          

                            D. OTHER ISSUES

Federal aid to State and local governments

    The Committee recommendation includes as one of its 
objectives the return of programs to the States.
    A balanced budget will benefit States and local governments 
by lowering interest rates, increasing economic growth, and 
increasing the standard of living of the American people.
    The major assumptions in the Committee recommendations for 
Federal assistance to States and local governments are as 
follows:
    $731.4 billion would be spent on the Federal Medicaid 
program over the next six years, with an average growth rate of 
6.4 percent.
    $573 billion would be spent on programs to assist low 
income Americans. The resolution assumes that certain welfare 
programs and housing programs will be returned to states in the 
form of block grants. It is assumed that other programs will be 
reformed to give states and local governments more flexibility 
over program implementation.
    Funding would be maintained for major education and social 
services programs serving disadvantaged populations including: 
Chapter 1, Head Start, Special Education, Pell Grants, and the 
Community Services Block Grant program. The increased funding 
for labor, health, and human services programs contained in the 
Omnibus Consolidated Rescissions and Appropriations Act of 1996 
(OCR '96) would be accommodated in this resolution.

Other issues

    Because the goal of this resolution is to achieve a 
balanced budget in 2002 in a manner that generates economic 
dividends, the Budget committee discourages other committees 
from attempting to meet their reconciliation instructions with 
changes that only appear to reduce the deficit (through timing 
changes or other artifices) rather than changes with real 
economic effects. For example, the 1993 budget reconciliation 
bill included a provision directing the Federal Reserve to 
transfer $213 million from its surplus capital account to the 
Treasury over 1997 and 1998. Because the Federal Reserve is not 
included in the unified budget, the slated transfer was counted 
as savings for reconciliation purposes even though there is 
general agreement that the transfer is a timing gimmick, acts 
like an intragovernmental transfer, and leaves the private 
sector and the rest of the economy unaffected. The 
Congressional Budget Office concurs with the committee that 
such a transfer has no real economic impact on the deficit. 
Given this understanding, the committee (using the authority 
provided to the budget committees for estimating outlays and 
revenues by section 310(d)(4) of the Congressional Budget Act) 
directs the Congressional Budget Office to not score any 
savings for any new legislation that might affect the Federal 
Reserve's transfer of the surplus capital account to the 
Treasury.

              VI. Procedural and Miscellaneous Provisions

    The Senate-reported resolution includes a number of 
miscellaneous provisions to ensure a balanced budget is 
achieved by 2002 and the budget resolution's policies are 
executed. Title II of the resolution establishes procedures and 
rules to implement a balanced budget and title III includes 
provisions stating the sense of the Senate or Congress.

             Title II--Budgetary Restraints and Rulemaking

Sec. 201. Discretionary spending limits

    The 1990 Budget Enforcement Act (BEA) established caps on 
defense, international, and domestic discretionary spending. 
These caps were enforced by sequesters and points of order in 
the Senate. The separate caps covered 1990 through 1993. The 
BEA provided a cap on total discretionary spending for 1994 
through 1995. The Omnibus Budget Reconciliation Act of 1993 
extended caps on total discretionary spending through 1998. The 
1995 budget resolution (H. Con. Res. 218) reduced these 
discretionary caps. The 1996 budget resolution (H. Con. Res. 
67) reduced and extended these caps contingent upon the 
enactment of a reconciliation bill implementing a balanced 
budget. The President vetoed the Balanced Budget Act of 1995 
and the adjustments to the caps did not come into effect.
    The Committee recommendation establishes the following caps 
on defense and nondefense discretionary spending for 1996 
through 2002:

                                            DISCRETIONARY CAP TOTALS                                            
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                        1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
Defense:                                                                                                        
    Budget authority................................     266.4     267.8     270.2     272.5     274.9     277.5
    Outlays.........................................     264.6     263.0     265.9     269.3     268.2     267.9
Nondefense: \1\                                                                                                 
    Budget authority................................     222.9     221.5     216.8     221.4     217.9     224.0
    Outlays.........................................     267.0     259.1     254.4     250.0     250.0     248.6
Violent Crime Reduction Trust Fund:                                                                             
    Budget authority................................       5.0       5.5       6.5       6.5  ........  ........
    Outlays.........................................       4.2       5.2       6.0       6.2  ........  ........
                                                     -----------------------------------------------------------
      Total Discretionary:..........................                                                            
          Budget authority..........................     494.2     494.8     493.5     500.4     492.8     501.5
          Outlays...................................     535.7     527.2     526.3     525.6     518.2     516.5
----------------------------------------------------------------------------------------------------------------
\1\ Includes amounts reserved for continuing disability reviews (CDRs).                                         

    This section provides for the enforcement of these 
discretionary spending caps by creating a point of order in the 
Senate against consideration of a budget resolution that would 
exceed the aggregate cap on discretionary spending. This 
section also provides a point of order in the Senate against an 
appropriations bill that would exceed the defense or non-
defense levels for a fiscal year or that would exceed the 
section 602(b) suballocation of those levels. This point of 
order can be waived by an affirmative vote of three-fifths of 
the Senate. It is important to note that the enforcement of 
these caps in the outyears is contingent upon enactment of 
reconciliation legislation which balances the budget.

Sec. 202. Tax reserve fund in the Senate

    A budget resolution establishes binding ceilings on 
spending and binding floors on revenues. These ceilings and 
floors are enforced by points of order in the Senate that, if 
raised, can only be waived by an affirmative vote of three-
fifths of the Senate. A reserve fund provides the Chairman of 
the Budget Committee with the authority to modify the outlay 
ceiling and the revenue floor to accommodate deficit-neutral 
legislation. The Budget Act specifically authorizes the 
inclusion of reserve funds in a budget resolution and past 
budget resolutions have included reserve funds for a variety of 
purposes. For example, the 1994 budget resolution contained 11 
such reserve funds.
    The Committee recommendation provides a reserve fund for 
deficit-neutral legislation that reduces revenues. This reserve 
fund provides the Chairman authority to modify the aggregates 
for legislation that reduces revenues.
    Past budget resolutions have only required the legislation 
authorized in the resolution to be deficit neutral for the five 
year period covered by it. This reserve fund would give the 
Chairman of the Budget Committee the authority to trigger the 
reserve fund if the revenue legislation did not increase the 
deficit for 1997, the period covered by 1997-2001, and the 
period covered by 2002-2006.

Sec. 203. Superfund reserve fund in the Senate

    The Committee recommendation includes a reserve fund for 
the Environmental Protection Agency's Superfund program. This 
program receives appropriations from a trust fund that 
primarily is financed with surtaxes on corporate income and 
excise taxes on oil and chemical feedstocks. This extraordinary 
procedure is needed because these Superfund taxes expired at 
the end of 1995 and a reformed Superfund program will need 
additional financial resources.
    The Superfund Reserve Fund provides the Chairman of the 
Budget Committee with the authority to adjust the budget 
resolution spending and revenue levels to accommodate $5.4 
billion in additional spending for the Superfund program over 
the next six years. This additional funding is contingent on 
two actions. First, Congress must enact legislation that 
reforms the program and extends Superfund taxes to ensure that 
the additional spending does not add to the deficit. Second, 
the Appropriations Committee must report a fiscal year 1997 
appropriations bill that increases funding for the Superfund 
program. When these two conditions are met, the chairman will 
adjust the spending and revenue levels for each of the years 
covered by this budget resolution.
    This section provides a base amount for the Superfund 
program that is equal to the fiscal year 1996 appropriation of 
$1.302 billion. When the Appropriations Committee reports 
fiscal year 1997 appropriations legislation that provides an 
increase for the Superfund program relative to this base 
amount, the Chairman of the Budget Committee will adjust the 
spending limits and other budget levels by that excess amount 
to accommodate this additional spending for the Superfund 
program. To ensure this adjustment does not cause an increase 
in the deficit, it cannot exceed the net revenues generated by 
the extension of Superfund taxes.

Sec. 204. Scoring of emergency legislation

    The 1990 Budget Enforcement Act amended the Budget Act to 
provide a procedure that provided that the cost of emergency 
legislation would not be taken into account for the purposes of 
Budget Act points of order. More specifically, section 
606(d)(2) of the Budget Act provides that the budgetary impact 
of legislation is not taken into account for Budget Act points 
of order if legislation is designated as an emergency by the 
President and the Congress.
    The Committee is concerned about the abuse of these 
emergency procedures and is concerned that this provision of 
the law could be used to circumvent the balanced budget plan 
required by this budget resolution. However, the Committee also 
recognizes the need to fund emergency legislation.
    The Committee recommendation provides that all legislation 
will be scored for the purposes of the budget resolution and 
the Budget Act even if it is designated as an emergency. If 
legislation is a true emergency, there should be sufficient 
support to waive a Budget Act point of order against such 
legislation. In addition, the Committee recommendation does not 
affect current law provisions that provide adjustments to the 
caps so that emergency legislation does not cause a sequester 
under the Balanced Budget and Emergency Deficit Control Act. 
Moreover, the Committee recommendation provides that the 
discretionary caps established by section 201 of this 
resolution will be adjusted after the enactment of any 
emergency legislation to hold the caps harmless for the cost of 
the emergency legislation.

Sec. 205. Exercise of rulemaking powers

    The Committee recommendation includes a number of changes 
that have the effect of changing the rules of the Senate. The 
Committee recommendation includes a provision recognizing the 
Senate's constitutional right to change Senate rules at any 
time.

            Title III--Sense of the Congress and the Senate

    The Committee recommendation includes the following sense 
of the Congress and Senate provisions.
          Sale of government assets (sec. 301);
          Tax reductions should benefit working families (sec. 
        302);
          Bipartisan commission on the solvency of Medicare 
        (sec. 303);
          Consideration of a change in the minimum wage (sec. 
        304);
          Long term projections in budget estimates (sec. 305);
          Opposition to medicare transfers (sec. 306);
          Repeal of the gasoline tax (sec. 307); and
          Medicare trustees report (sec. 308).

                   VII. Committee VIews and Estimates

    Section 301(c) of the Congressional Budget Act requires the 
committees of the Senate to report to the Budget Committees 
their views and estimates of budget requirements for matters 
within their jurisdictions to assist the Budget committees in 
preparing the budget resolution.
    Following are the views and estimates received from the 
various Senate committees:

                                       U.S. Senate,
         Committee on Agriculture, Nutrition, and Forestry,
                                    Washington, DC, April 24, 1996.
Senator Pete V. Domenici, Chairman,
Senator J. James Exon, Ranking Member,
Committee on the Budget,
Washington, DC.
    Dear Senators Domenici and Exon: This letter provides the 
views of the Senate Committee on Agriculture, Nutrition, and 
Forestry regarding the FY 1997 Budget Resolution. These views 
are provided in response to your February 28 letter and are in 
accordance with the requirements of the Congressional Budget 
Act, as amended.
    Members of the Committee believe that Congress should 
continue efforts to balance the federal budget by 2002. To 
balance the budget, Congress will need to restrain 
discretionary spending and plan for major reforms in 
entitlement and other mandatory spending programs.
    CBO's March 1996 baseline projects that mandatory spending 
under the Agriculture Committee's jurisdiction will total $296 
billion over the next six years, FY 1997-2002. Food and 
nutrition programs account for $253 billion, or 85 percent of 
this total. The Food Stamp Program and nutrition assistance to 
Puerto Rico is expected to cost $190 billion--75 percent of 
total food and nutrition program spending. Farm and other 
mandatory programs, which have undergone dramatic reforms 
resulting from enactment of the Federal Agriculture Improvement 
and Reform Act (P.L. 104-127), account for the remaining $43 
billion. Annual spending for farm and other non-nutrition 
mandatory programs is projected to decline from $8.5 billion in 
FY 1997 to $5.7 billion in FY 2002.
    As part of a coordinated effort to balance the budget, the 
Committee is ready to do its share by reducing spending in food 
and nutrition programs. Most the Committee feels that 
modifications to mandatory food and nutrition provisions of the 
House/Senate conference agreement on welfare reform recently 
recommended by the National Governors' Association will 
responsibly reduce welfare spending while better targeting 
benefits to those most in need. Some in the Committee, 
including the Ranking Member, strongly feel that welfare reform 
cuts should not be made outside the context of comprehensive 
balanced budget legislation. However, if sizable spending 
reductions in food and nutrition programs are enacted this 
year, the Committee would oppose further reductions in the 
years ahead.
    Because of the policy reforms and spending reductions 
achieved in the new farm bill, the Committee feels strongly 
that further changes in farm programs should not be called for 
as part of this year's budget resolution. The new farm bill 
makes a significant contribution to deficit reduction even 
though it moved through Congress this year outside of the 
budget reconciliation process. CBO estimates that the 
conference report reduces mandatory farm spending by $2.1 
billion over the FY 1996-2002 fiscal year period measured 
against the December 1995 CBO baseline.
    In addition to providing farmers with greatly enhanced 
planting flexibility, the new farm bill replaces traditional 
open-ended deficiency payments with fixed market transition 
payments which will gradually decline over the next seven 
years. This will give taxpayers budget certainty, unlike 
previous farm bills whose actual outlays have routinely 
exceeded projections by large margins.
    The Committee is aware that overall discretionary spending 
will be restrained in the years ahead. As your Committee 
considers the aggregate discretionary spending levels in the 
1997 budget resolution, we ask that you keep in mind the need 
to accommodate a continued strong U.S. role in international 
food aid, as well as the critical importance of securing future 
productivity gains through agricultural research, especially 
competitive grants. The need for discretionary funding for 
conservation cost-sharing and incentive payments will decline 
as a result of the new farm bill's repeal of authority for the 
Agricultural Conservation Program, the Great Plains 
Conservation Program and the Water Quality Incentives Program. 
The functions of these initiatives are absorbed in the new 
Environmental Quality Incentives Program, which we expect will 
receive the full legislated level of mandatory funding. Also, 
the Committee believes that the resources necessary to 
administer farm programs will fall significantly over time due 
to a variety of reforms contained in the new farm bill. These 
changes should eventually allow accelerated downsizing and 
consolidation within the Department of Agriculture's Farm 
Service Agency and the transfer of some resources to other 
agencies that will face increasing workload requirements as a 
result of the new legislation.
    The Committee looks forward to working with you as we move 
ahead with our budget responsibilities this year.
            Sincerely,
                                        Richard G. Lugar, Chairman.
                                ------                                

                                       U.S. Senate,
                               Committee on Armed Services,
                                    Washington, DC, April 16, 1996.
Senator Pete V. Domenici, Chairman,
Senator J. James Exon, Ranking Minority Member,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete and Jim: In accordance with your request, we are 
forwarding our recommendations for the Fiscal Year 1997 Budget 
Resolution.
    The defense budget must provide sufficient resources to 
meet the national security requirements and ensure the United 
States' position as a world leader. When adjusted for 
inflation, the budget request of $254.4 billion reduces defense 
by $18.6 billion from the fiscal year 1996 levels of funding. 
We propose setting the budget authority for fiscal year 1997 at 
$267.3 billion (although we realize this number may have to be 
adjusted for inflation) and outlays at $265.0 billion as stated 
in the Concurrent Budget Resolution for Fiscal Year 1996.
    Providing these resource levels as stated in the Budget 
Resolution will still require a reduction of $5.7 billion from 
fiscal year 1996 levels with inflation. At this level of 
funding a more appropriate balance can be maintained between 
present and future readiness, quality of life for our military 
personnel and their families, modernization of the force to 
meet requirements, and the necessary emphasis on missile 
defense systems. The defense budget request forces trade offs 
in future readiness to meet current readiness requirements.
    The defense budget is in its twelfth straight year of 
decline. The procurement budget is at its lowest level since 
1950 with procurement accounts declining 72 percent since 1985. 
Armed Services Committee hearings have confirmed a shared 
concern by the Service Secretaries and Chiefs that 
recapitalization of our forces has continued to be projected 
further into the future with each succeeding budget. The 
military services have been forced to delay the fielding of 
critical systems. We cannot continue to defer the funding of 
these validated requirements. We must provide adequate funding 
now to meet critical future modernization requirements. Failure 
to modernize now will place our armed forces at greater risk in 
the future.
    Quality of life for our military personnel and their 
families remains an important bipartisan priority for this 
committee. We are committed to providing equitable pay and 
benefits with protection from inflation. In addition, funding 
for construction and maintenance of troop billets and family 
housing should be restored to more acceptable levels.
    Over the next month, the Committee will continue to review 
the adequacy of the defense budget request in an effort to 
address our national security requirements, current and future. 
We will achieve a more appropriate balance of near-term 
readiness, modernization and quality of life programs. The 
Committee will work to eliminate defense spending that does not 
contribute directly to the national security of the United 
States and to reevaluate the budget impacts of peacekeeping 
roles, policies, and operations. Where sufficient resources 
have not been requested to address the Nation's security 
requirements, we will recommend the necessary resources.
    We continue to support your efforts to maintain the fire 
walls between defense and non-defense discretionary spending. 
Requests for rescissions or supplemental appropriations offset 
with defense funds have totaled more than $1.5 billion to date 
for fiscal year 1996.
    We look forward to working with you on a Budget Resolution 
for Fiscal Year 1997, which will result in a budget that 
supports a strong national defense.
            Sincerely,
                                   Sam Nunn,
                                           Ranking Minority Member.
                                   Strom Thurmond,
                                           Chairman.
                                ------                                

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                    Washington, DC, April 15, 1996.
Hon. Pete V. Domenici, Chairman,
Hon. J. James Exon, Ranking Member,
Committee on the Budget,
Washington, DC.
    Dear Senators Domenici and Exon: This letter transmits the 
views and estimates of the Committee on Banking, Housing, and 
Urban Affairs regarding the funding of programs in our 
jurisdiction, as required by Section 301 of the Congressional 
Budget Act of 1974.

            savings association insurance fund stabilization

    The Committee is concerned about the significant deposit 
insurance premium disparity which now exists between the 
premiums paid by thrifts and those paid by commercial banks. 
Thrift premium rates are now more than six times the premium 
rates paid by commercial banks. Well-managed and well-
capitalized banks pay an effective assessment rate only 
slightly above zero. The continued high level of thrift 
premiums is needed to pay interest on Financing Corporation 
(FICO) bonds issued to raise funds to resolve the thrift crisis 
of the late 1980s and to recapitalize the Savings Association 
Insurance Fund (SAIF). SAIF is seriously undercapitalized with 
the ratio of fund reserves to SAIF-insured deposits at only 
0.47%, or slightly over one-third the 1.25% required for full 
capitalization.
    So long as such a substantial premium differential exists, 
SAIF-insured thrifts have a strong financial incentive to 
reduce their holdings of SAIF-insured deposits. Thus, the 
decline in SAIF-insured thrift deposits is likely to continue, 
and perhaps accelerate, in the event no legislative solution is 
adopted. This raises the possibility of a default on FICO bonds 
and threatens the long-term viability of the SAIF.
    The Committee continues to support passage of the SAIF 
stabilization package included in the Balanced Budget Act of 
1995. This package, which imposes a special assessment on 
institutions holding SAIF deposits and assesses all FDIC-
insured institutions to cover the FICO interest payments, would 
reduce existing incentives for SAIF deposits to flee SAIF, 
thereby strengthening the entire federal deposit insurance 
system.
    We urge the Budget Committee to work with the Banking 
Committee in securing the enactment of this critical package. 
In the vent that the SAIF stabilization package is not passed 
prior to adoption of the 1997 budget resolution, this Committee 
will work with the Budget Committee to make any necessary 
accommodation in the resolution.

               examination fees for state-chartered banks

    The Committee in the past has opposed a new Federal 
examination fee for state chartered banks. The proposal was 
submitted by the Administration in several previous budgets and 
was rejected by this Committee each time. The Administration 
has renewed its proposal to raise $1.1 billion by 2002 through 
the imposition of this fee on state-chartered banks.
    Committee members continue to express several concerns with 
this proposal. First, it would undermine the ``dual banking'' 
system. Second, it would create an inequity for state-chartered 
banks which already pay fees to their state regulators. Third, 
the banking industry as a whole, including state-chartered 
banks, pays all the expenses of the Federal Deposit Insurance 
Corporation (FDIC) through insurance premium assessments and 
through forgone interest on mandated sterile reserves held by 
the Federal Reserve System.

               securities and exchange commission funding

    The Committee believes that Securities and Exchange 
Commission (SEC) user fees should bear a rational relationship 
to the cost of regulation. As a result, the Committee continues 
to oppose increases in SEC user fees that are dedicated to 
deficit reduction. The Committee continues to be concerned that 
excessive user fees have become a tax on capital formation.
    Under current law, SEC ``user'' fees raise three times the 
level necessary to fund the SEC. The proposed 1997 budget would 
continue the practice of having the securities industry overpay 
for its regulation in order to fund unrelated government 
activities.
    The 1997 budget proposal would raise $776 million in fees 
to fund the SEC's $307 million budget by creating three tiers 
of fees. The first tier would raise registration fees paid by 
issuers for a total of $470 million. Tier 1 fees would be 
devoted exclusively to deficit reduction. The second tier would 
extend exchange trading transaction fees paid by broker-dealers 
to include the over-the-counter market and the corporate bond 
market for a total of $260 million. Tier 2 fees would be 
devoted to the SEC's budget. The third tier would add an 
increment to the Tier 1 registration fees to make up the 
additional $48 million needed to fund the balance of the SEC's 
budget.
    The Committee favors a funding structure for the SEC which 
more closely resembles legislation passed by the House of 
Representatives (H.R. 2972). The House approach would stabilize 
the SEC's fee structure over a five year period by moving 
registration fees closer to the statutory level of \1/50\th of 
1% and expanding the trading fees to the over-the-counter 
market. Over the five year period of fee reductions, direct 
appropriations will be used to fund the SEC. These funds would 
come from cuts in other discretionary programs. The fee 
structure in H.R. 2972 would allow the SEC to be virtually 
self-funded, yet would give the Congress greater control over 
the agency's budget.

               housing and community development programs

    The Committee recognizes that the cost of renewing expiring 
section 8 rental assistance contracts will begin to grow 
substantially in the years beyond 1997. However, in the 
interest of preserving existing affordable housing 
opportunities, the Committee urges that it be the policy of the 
Congress to renew all expiring contracts and to provide 
adequate funding for renewals, while the authorizing committee 
acts on policy changes that will reduce contract renewal costs.
    The Committee has as a priority developing a strategy for 
restructuring the Department of Housing and Urban Development's 
(HUD) multifamily mortgage portfolio. This process, also known 
as ``mark-to-market'', would reduce section 8 rents and 
restructure the debt on approximately half of the 9,000 
multifamily properties that are insured by the Federal Housing 
Administration (FHA) and assisted by HUD's section 8 project-
based rental subsidy programs.
    Project-based section 8 assistance for these properties is 
provided under housing assistance payment contracts that are 
generally 20 years in duration. In many cases, contract rents 
on these multifamily properties far exceed market-area rents. 
Budget authority for the entire term of the contract is 
provided in discretionary appropriations in the year the 
contract is initiated. In 1996, about $4.5 billion was required 
to renew expiring section 8 contracts. Without changes in 
policy which will reduce rents and, therefore, subsidies, this 
number will grow to more than $17 billion by 2000, almost 
equivalent to HUD's total 1996 discretionary budget authority.
    A debt restructuring strategy would lower the need for high 
section 8 contract subsidies, thus producing discretionary 
budget savings, and would prevent many defaults now projected 
under the current baseline. Debt restructuring will, however, 
result in some potentially high costs to the FHA multifamily 
insurance funds, since the current debt will either be 
completely or partially forgiven. The payment of these costs 
should not result in the need for discretionary appropriations, 
since FHA has permanent budget authority to pay these losses. 
This strategy would be designed to encourage owners with multi-
year section 8 contracts to restructure, thus reducing costs.
    Nevertheless, restructuring insured debt may produce tax 
consequences through the creation of ``cancellation of 
indebtedness income'', which may discourage project owners from 
voluntarily restructuring. The Committee believes it is 
essential that these transactions be tax-neutral in order to 
achieve maximum discretionary savings. However, the Committee 
wants to stress that it is possible that tax legislation may be 
necessary to ensure that debt restructuring will be successful 
to the maximum extent.
    The overall goal of the Committee is to consolidate HUD's 
housing and community development programs (where appropriate), 
to provide for greater responsibility and flexibility at the 
State and local level, and to facilitate private sector 
participation in developing solutions to the affordable housing 
and community development needs of the nation. These goals 
reflect the Committee's concern about HUD's capacity to carry 
out its mission, particularly in an era of government 
downsizing. As discussed in the 1994 report of the National 
Academy of Public Administration, the number of HUD programs 
has grown from 50 in 1980 to about 240 today. HUD continues to 
demonstrate that it has limited management capacity to 
administer this multitude of complex programs.
    The Senate has passed S. 1260, the Public Housing Reform 
and Empowerment Act, which will allow public housing 
authorities to operate their programs more effectively and 
cost-efficiently, and with less regulation by HUD. Given the 
current and expected levels of appropriations for the public 
housing program, enactment of this essential legislation, which 
is awaiting House action, will be an important first step 
toward overall reform of HUD.
    Nevertheless, the Committee asks the Budget Committee to be 
cognizant of the fact that many HUD programs have already 
sustained major spending reductions, and that even as programs 
are reformed, adequate resources will be necessary to ensure 
that the Department's programs can fulfill their basic 
missions.

                            transit program

    The Committee recognizes the crucial importance of the 
nation's mass transit system. As we enter the final year of the 
Intermodal Surface Transportation Efficiency Act (ISTEA) 
program, the Committee will examine ways to make the transit 
program more efficient while it serves ever-increasing numbers 
of people. In the face of dwindling federal resources, mass 
transit remains the most effective way to reduce urban traffic 
congestion, improve air quality, and serve the transportation 
needs of the disabled, poor and elderly.
    We urge the Budget Committee to maintain transit funding at 
levels sufficient to maintain vital transportation service to 
the nation.
            Sincerely,
                                      Alfonse M. D'Amato, Chairman.
                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                    Washington, DC, March 29, 1996.
Hon. Pete Domenici,
Chairman, Committee on the Budget.
Hon. J. James Exon,
Ranking Democratic Member, Committee on the Budget, U.S. Senate, 
        Washington, DC.
    Dear Senators Domenici and Exon: In accordance with section 
301(d) of the Congressional Budget Act, we are submitting the 
views and estimates of the Committee on Energy and Natural 
Resources on portions of the budget for fiscal year 1997 within 
the jurisdiction of this Committee.
    We appreciate your consideration of our views and look 
forward to working with you and your Committee on the FY 1997 
budget.
            Sincerely,
                                   J. Bennett Johnston,
                                           Ranking Democratic Member.
                                   Frank H. Murkowski,
                                           Chairman.

  Committee on Energy and Natural Rsources Views and Estimates on the 
                 Fiscal Year 1997 Budget, April 1, 1996

    The Committee continues to support the overall goal of a 
balanced budget by 2002.
    Due to the delay in the submission of the President's 
proposed budget for FY'97, the Committee has not been able to 
conduct normal oversight hearings or to prepare detailed 
comments.
    The Committee does not support the President's proposal to 
sell oil from the Strategic Petroleum Reserve. The Committee 
reluctantly agreed to include a limited sale of oil from Weeks 
Island to pay the cost of decommissioning that facility and to 
meet the Committee's reconciliation instructions last year. The 
Committee strongly opposes the sale of additional quantities 
from the Strategic Petroleum Reserve solely to raise revenues.
    The Committee does not contemplate reporting any measures 
that would create unfunded mandates.

                      [Memorandum, March 28, 1996]

To: Members, Committee on Energy and Natural Resources.
From: Frank H. Murkowski, Chairman, and J. Bennett Johnston Ranking 
        Democratic Member.
Re Views and Estimates for FY'97.
    Section 301(d) of the Congressional Budget and Impoundment 
Control Act of 1974 provides in pertinent part that ``[w]ithin 
6 weeks after the President submits a budget . . . each 
committee of the Senate having legislative jurisdiction shall 
submit to the Committee on the Budget of the Senate its views 
and estimates (as determined by the committee making such 
submission) with respect to all matters . . . within the 
jurisdiction or functions of such committee.'' The Chairman and 
Ranking Member of the Budget Committee have requested that all 
Committees submit their Views and Estimates by April 15, 1996.
    Due to the delay in the submission of the President's 
budget request for FY'97, the Committee has not been able to 
schedule oversight hearings or a business meeting to discuss 
our recommendations as we have done in the past.
    In order to comply with the request from the Budget 
Committee, we intend to send the attached letter and Views and 
Estimates.
                                ------                                

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                    Washington, DC, March 29, 1996.
Hon. Pete Domenici,
Chairman, Committee on the Budget.
Hon. J. James Exon,
Ranking Democratic Member, Committee on the Budget, U.S. Senate, 
        Washington, DC.
    Dear Senators Domenici and Exon: In accordance with section 
301(d) of the Congressional Budget Act, we are submitting the 
views and estimates of the Committee on Energy and Natural 
Resources on portions of the budget for fiscal year 1997 within 
the jurisdiction of this Committee.
    We appreciate your consideration of our views and look 
forward to working with you and your committee on the FY 1997 
budget.
            Sincerely,
                                   J. Bennett Johnston,
                                           Ranking Democratic Member.
                                   Frank H. Murkowski,
                                           Chairman.

 Committee on Energy and Natural Resources United States Senate Views 
      and Estimates on the Fiscal Year 1997 Budget, April 1, 1996

    The Committee continues to support the overall goal of a 
balanced budget by 2002.
    Due to the delay in the submission of the President's 
proposed budget for FY'97, the Committee has not been able to 
conduct normal oversight hearings or to prepare detailed 
comments.
    The Committee does not support the President's proposal to 
sell oil from the Strategic Petroleum Reserve. The Committee 
reluctantly agreed to include a limited sale of oil from Weeks 
Island to pay the cost of decommissioning that facility and to 
meet the Committee's reconciliation instructions last year. The 
Committee strongly opposes the sale of additional quantities 
from the Strategic Petroleum Reserve solely to raise revenues.
    The Committee does not contemplate reporting any measures 
that would create unfunded mandates.
                                ------                                

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                     Washington, DC, April 9, 1996.
Hon. Pete V. Domenici,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: In response to your letter of February 
28, 1996, I have prepared the following views and estimates 
report for programs under the jurisdiction of the Committee on 
Environment and Public Works. As you have requested, my 
comments are directed to the total level of federal spending 
for the five year period 1997-2001 and to the President's 
fiscal year 1997 budget request. As in previous years, a brief 
summary of legislative initiatives for this year is included as 
well.

                      new legislative initiatives

    As you know, in 1995 the Committee on Environment and 
Public Works reported and the Senate approved legislation to 
reauthorize the Safe Drinking Water Act; to provide States and 
localities greater control over shipments of solid waste; and 
to designate a National Highway System. Legislation authorizing 
projects for the civil works program of the Army Corps of 
Engineers is on the Senate calendar and will be taken up by the 
full Senate after the Easter recess. In addition, the Committee 
is currently developing legislation to reauthorize the 
Superfund program, the Endangered Species Act and the Clean 
Water Act's State Revolving Fund.
    As required by the recently enacted Unfunded Mandates 
Reform Act, the Committee will work with you as it considers 
any legislation that is likely to have a significant budgetary 
impact on any State, local or tribal government or any 
significant financial impact on the private sector.

                    specific discretionary programs

1. Environmental Protection Agency (EPA)

    The EPA budget is divided into three primary categories: 
water infrastructure (clean water and drinking water State 
revolving funds); operating programs; and Superfund and leaking 
underground storage tank funds. The total EPA budget request 
for fiscal year 1997 is $7.027 billion, an increase of $600 
million over the current Senate approved level for fiscal year 
1996.
    In broad terms, I support the President's request for EPA. 
The fiscal year 1997 request is $300 million less than the 
President requested last year.
            Water infrastructure
    The fiscal year 1997 request for the Water Infrastructure 
account which capitalizes State revolving loan funds for 
wastewater treatment and safe drinking water is $2.2 billion.
    This $2.2 billion total includes two key elements:
    (1) Clean Water State Revolving Fund (SRF)--for which $1.35 
billion is requested in fiscal year 1997. This request 
represents a substantial shortfall from the minimum annual 
levels necessary to meet the most basic municipal water 
infrastructure needs. The Clean Water SRF has been instrumental 
in helping municipalities meet the requirements of the Water 
Pollution Prevention and Control Act and a major contributor to 
the clean-up of our limited water resources. The Federal 
government has used this loan fund and its predecessor grant 
program to contribute more than $60 billion to State and local 
governments since the early 1970's. This is a program that has 
proven to be cost effective and of tremendous environmental 
benefit.
    (2) Drinking Water State Revolving Fund (SRF)--for which 
$550 million is requested in fiscal year 1997. As I stated 
earlier, the Senate has completed action on legislation 
reauthorizing the Safe Drinking Water Act. Once the program is 
fully authorized, these resources will allow states to fund 
both the construction of needed infrastructure improvements for 
drinking water systems and the restructuring of small systems 
to improve compliance. Despite the need for capital 
improvements at drinking water treatment facilities, it is 
regrettable that the Administration chose to tap the Clean 
Water SRF in fiscal year 1994 in an attempt to create a 
drinking water SRF.
    In reference to outyear funding through the year 2001, I 
support annual outlays of $2 billion for the Clean Water SRF 
and $500 million for the Drinking Water SRF.
            Operating programs
    Of the three accounts, operating programs, which includes 
EPA's efforts for the protection of air and water resources, 
science and technology work, and multimedia initiatives, would 
receive the largest increase over past years. The President's 
request for fiscal year 1997 is $3.4 billion, $400 million more 
than current funding levels. In general, I support the 
operating programs request and applaud EPA's efforts to target 
resources to the most serious health risks.
            Superfund and L.U.S.T. Trust Funds
    The President's fiscal 1997 request for Superfund is $1.34 
billion, an increase over the fiscal 1995 post-rescission 
appropriation of $1.33 billion and the fiscal 1996 
appropriation of $1.31 billion contained in H.R. 3019, the 
fiscal 1997 omnibus appropriations package currently in 
conference. I recommend lowering the fiscal 1997 funding level 
to the fiscal 1996 funding level provided in H.R. 3019, $1.31 
billion. This funding is sufficient for current Superfund 
program needs and, more importantly, provides flexibility for 
Superfund reform options currently under consideration by the 
Committee.
    The President's fiscal 1997 request for the Leaking 
Underground Storage Tank (L.U.S.T.) Trust fund is $66.5 
million, a decrease from the fiscal 1995 post-rescission 
appropriation of $69.2 million but an increase from the fiscal 
1996 appropriation of $45.8 million in H.R. 3019. I recommend 
the L.U.S.T. trust fund be maintained at $45.8 million.
    As you know, the Committee is currently developing 
comprehensive Superfund reform legislation, and the continuing 
assistance of the Budget Committee in this process is greatly 
appreciated. I expect to proceed to a markup of this 
legislation soon. An explicit goal of the legislation is to 
reduce the societal costs associated with Superfund. The cost 
saving features of Superfund reform include (1) reduction of 
cleanup costs by allowing more flexibility in how clean-up 
levels are determined and attained, and (2) reforming the 
current liability system to bring more fairness to parties 
involved in Superfund sites while reducing transaction costs 
associated with litigation.
    The Superfund reform bill currently under consideration 
could change the funding needs for the program considerably. 
Future funding needs will depend upon the level of clean-up 
cost savings achieved, and the amount of liability relief 
provided to private parties and assumed by Superfund. Please be 
assured that I will continue to work closely with the Budget 
Committee to craft a mechanism that permits significant 
liability reform without undermining deficit reduction 
objectives.
    For the five-year period beginning in fiscal 1996, the 
March CBO baseline projects Superfund BA flat in each fiscal 
year 1997 through 2001 at $1.152 billion. The baseline would be 
adjusted upward if the H.R. 3019 levels are enacted. The March 
OT projections for the next five fiscal years are: fiscal 1997 
($1.424 billion); fiscal 1998 ($1.386 billion); fiscal 1999 
($1.362 billion); fiscal 2000 ($1.344 billion); and fiscal 2001 
($1.094 billion).
    Similarly, the projections for the L.U.S.T. trust fund five 
year period from fiscal 1997 through 2001 is flat at $45 
million. The March CBO OT projections are: fiscal 1997 ($50 
million); fiscal 1998 ($49 million); fiscal 1999 ($44 million); 
fiscal 2000 ($46 million); and fiscal 2001 ($46 million).

2. Federal highways

    The Intermodal Surface Transportation Efficiency Act of 
1991 (ISTEA) was enacted on December 18, 1991. In fiscal 1997, 
the surface transportation law provides an obligation ceiling 
of $18.338 billion with an additional $1.85 billion for 
categories not subject to the spending limitation, or a total 
spending level of $20.188 billion. This level compares to an 
obligation limitation of $18.357 billion in fiscal 1996 with an 
additional $1.85 billion for categories not subject to the 
spending limitation, or a total spending level of $20.2 billion 
in fiscal 1996.
    Total budget authority (BA) estimates for the federal-aid 
highway program for fiscal 1997-2001 show a gradual current law 
rise after fiscal 1997 through fiscal year 2001, assuming 
reauthorization of the surface transportation law in 1997. BA 
projections are as follows; fiscal 1997 ($20.151 billion); 
fiscal 1998 ($22.024 billion); fiscal 1999 ($22.322 billion); 
fiscal 2000 ($22.750 billion); and fiscal 2001 ($23.192 
billion). The outlay projections are as follows: fiscal 1997 
($17.534 billion); fiscal 1998 ($17.565 billion); fiscal 1999 
($17.484 billion); fiscal 2000 ($17.550 billion); and fiscal 
2001 ($17.613 billion).
    Outlay projections do not rise during the upcoming years 
because of a new scoring rule for Highway Trust Fund programs. 
The new directs the Congressional Budget Office (CBO) to record 
any legislated changes in outlays for categories not subject to 
the spending limitation as mandatory rather than discretionary. 
Although the rule applies only to future legislation, CBO 
reclassified all exempt programs and projects as mandatory with 
the January 1996 baseline.
    As part of the fiscal 1997 budget, the President has 
requested $19.4 billion for the Federal Highway Administration 
(FHWA), a $500 million decrease from the fiscal 1996 request. 
The $19.4 billion request for FHWA includes an obligation 
limitation of $17.7 billion for Federal-aid highways. The 
President also has requested $1.3 billion for categories not 
subject to the spending limitation, including minimum 
allocation, demonstration projects, and emergency relief. This 
amount is $994 million ($694 million from ISTEA and other 
authorized highway demonstration projects; $300 million from 
the Minimum Allocation program) less than the fiscal 1996 
request. In addition, the President's budget request includes a 
special obligation limitation of $630 million for all highway 
demonstration projects.
    In general, I support the President's request for the 
fiscal 1997 federal highway program. The President's 1997 
budget takes a responsible approach to the funding of highway 
demonstration projects by including $694 million less than the 
fiscal year 1996 request. Additional highway savings, however, 
could be achieved by reducing the federal-aid highway 
obligation limitation. The Committee will address this issue as 
it considers reauthorization of the surface transportation law 
in 1997.

3. Tennessee Valley Authority (TVA)--Economic Development 
        Administration (EDA)--Appalachian Regional Commission (ARC)

    In an era of limited resources, it is my view that Congress 
should carefully consider whether there is a compelling need 
for continued federal participation in programs carried out by 
the TVA, EDA and ARC.

4. U.S. Army Corps of Engineers (civil works)

    The President's fiscal year 1997 request for the civil 
works program of the Army Corps of Engineers is $3.305 billion. 
Of that amount, $665 million, or 20 percent, would be derived 
from user fees and trust funds, including fuel and ad valorem 
taxes.
    In the fiscal 1997 request, I am encouraged that the 
Administration has increased funding for various Army Corps 
environmental initiatives, in particular, the $15 million for 
the Section 1135 program. While this modest funding level is 
$10 million lower than the amount requested in fiscal 1996, it 
is $5 million higher than the amount enacted in the fiscal 1996 
Energy and Water Development Appropriations Act.
    The Committee will consider legislation this year, in 
connection with the pending Water Resources Development Act (S. 
640), to modify the Federal/non-federal project cost sharing 
formulas for flood control, shore protection, and maintenance 
of small harbors, as established in the Water Resources 
Development Act of 1986. These cost sharing modifications, to 
be proposed by the Administration, are designed to encourage 
greater local project participation and to reduce Federal 
contributions. While the reduced Federal funding levels cannot 
be estimated until after legislation is developed and reviewed, 
enactment of such cost sharing changes will result in 
significant outyear budget savings for the Army Corps.
    Total Army Corps civil works program BA estimates for 
fiscal years 1997-2001 show flat outyear funding levels. Fiscal 
1997-2001 are projected in BA at: $3.365 billion; $3,366 
billion; $3.368 billion; $3.369 billion; and $3.371 billion, 
respectively. For OT, fiscal years 1997-2001 are projected at 
$3.476 billion; $3.403 billion; $3.355 billion; $3.358 billion, 
and $3.370 billion, respectively.

5. General Services Administration (Public Buildings Service)

    The President's fiscal year 1997 request for the Public 
Buildings Service (PBS) totals $5.587 billion. Of this amount, 
$518 million is requested indirect appropriations. The 
remaining $5.059 billion is to be derived from agency rental 
payments and the Federal Buildings Fund (FBF).
    For the repairs and alterations account, $775 million is 
requested. These funds are to be derived wholly from the FBF. 
For the construction and acquisition account, $715 million is 
budgeted. Of this amount, $518 million is requested in direct 
appropriations and $197 million is to be derived from the FBF. 
These two accounts, which comprise $1.49 billion of the overall 
$5.587 billion requested for the PBS, are the only areas for 
which the Committee possesses direct authorizing jurisdiction.
    Pursuant to the fiscal year 1996 Concurrent Resolution on 
the Budget, PBS funding for new construction is to be reduced 
by 30 percent over the seven fiscal years 1996 and 2002. For 
fiscal year 1996, the Committee achieved savings of 33 percent 
from the Administration's requested new construction funding 
level of $1.105 billion by authorizing only $737.345 million. I 
am pleased that the Administration's fiscal year 1997 request 
for new construction funding is slightly below the average 
annual level necessary to achieve the seven year aggregate 
reduction target of 30 percent.

Conclusion

    In crafting the fiscal year 1997 budget resolution, it is 
incumbent upon the Congress to not only downsize the federal 
bureaucracy through streamlining but to relinquish services 
that are better managed at the State and local level. More 
importantly, the time has come to make the tough decisions to 
close agencies or programs that have outlived their usefulness. 
Throughout the budget process, however, we must not lose sight 
of our ultimate goal, to serve the people fairly and 
economically. To achieve this and balance the budget, the 
Congress will be faced with hard choices. It is my hope that 
the fiscal year 1997 Budget Resolution will represent those 
choices.
    Thank you for your consideration of my views and do not 
hesitate to get in touch if you have any questions regarding 
this submital.
            Sincerely,
                                                    John H. Chafee.
                                ------                                

                                       U.S. Senate,
                                      Committee on Finance,
                                    Washington, DC, April 16, 1996.
Hon. Pete V. Domenici,
Chairman, Senate Committee on the Budget,
U.S. Senate, Washington, DC.
Hon. J. James Exon,
Ranking Member, Senate Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete and Jim: Pursuant to Section 301(d) of the 
Congressional Budget Act of 1974, we are submitting views and 
estimates with respect to federal spending and revenues within 
the jurisdiction of the Senate Committee on Finance.

                               debt limit

    On March 29, 1996, President Clinton signed into law a 
permanent increase in the public debt limit to $5.5 trillion 
(P.L. 104-121). According to the Congressional Budget Office, 
this increase is expected to be sufficient through September 
1997. Therefore, the Finance Committee does not expect further 
action on the debt limit to be needed for FY 1997.

                          consumer price index

    Pursuant to the FY 1996 Budget Resolution (H. Con. Res. 
67), the Finance Committee established a nonpartisan commission 
to study the accuracy of the consumer price index methodology 
and make recommendations for change. The Chairman of the CPI 
Commission is Dr. Michael J. Boskin of Stanford University, On 
September 15, 1995, the CPI Commission released an interim 
report which concluded that the CPI is overstated by 0.7 to 2.0 
percentage points. The CPI Commission is expected to release 
its final report during this summer.

                      welfare and medicaid reform

    Over the next seven years, federal, state, and local 
governments will spend more than $2.4 trillion on the current 
welfare and Medicaid programs. Medicaid spending alone doubled 
over the last seven years and is expected to nearly double 
again by 2003, diverting resources from other programs. It 
would be useful if the FY 1997 Budget Resolution contains a 
reserve fund which would allow for consideration of welfare and 
Medicaid reform proposals.

                                medicare

    In 1995, the Trustees of the Medicare Trust Funds reported 
that the Medicare Hospital Insurance (HI) Trust Fund would go 
bankrupt in 2002. Recent information on expenditures from the 
HI Trust Fund indicate that the situation is even worse than 
predicted, with bankruptcy now estimated to occur during 2001--
only five years away. The HI Trust Fund is already operating in 
the red, spending more money than it is receiving from payroll 
taxes, interest and other sources of income. The Medicare 
Supplementary Medical Insurance (SMI) Trust Fund also faces 
serious financial problems with an estimated average annual 
growth rate in excess of 10 percent.
    The Finance Committee will continue its efforts to 
preserve, protect, and improve the Medicare program by focusing 
on combating waste, fraud, and abuse; expanding choice in the 
types of private health plans available to Medicare 
beneficiaries; and implementing new payment policies to address 
escalating costs, particularly in the areas of home health 
care, skilled nursing facilities, and hospital outpatient 
departments.

                            social security

    On March 29, 1996, President Clinton signed into law an 
increase in the earnings limit for Social Security recipients 
as well as other provisions that impacted Social Security 
outlays (P.L. 104-121). The Finance Committee hopes that the 
budgetary impact of these recently-enacted provisions will be 
included in the calculation of the Social Security income and 
outgo amounts for the FY 1997 budget resolution.
    The Finance Committee is concerned that the Social Security 
Administration receive sufficient funding for operating 
expenses. Social Security programs touch the lives of most 
Americans directly or indirectly, and the FY 1997 budget 
resolution should provide adequate resources for the timely 
determination of eligibility and payment of claims.
    In addition, the Finance Committee continues to be 
concerned about the long-term solvency of the Social Security 
Old-Age, Survivors, and Disability Insurance (OASDI) Trust 
Funds, and public confidence in the ability of the Social 
Security Trust Funds to pay benefits in the future. Although 
the Committee expects no legislative action this session, the 
Committee will carefully review the report of the Trustees of 
the Social Security Trust Funds and the report of the Social 
Security Advisory Council which are expected to be released in 
upcoming months.

                          international trade

    The Finance Committee expects to consider legislation 
affecting international trade laws which may have modest 
budgetary consequences. Possible legislation may include: 
implementing legislation for the Organization for Economic 
Cooperation and Development (OECD) Agreement Respecting Normal 
Competitiveness Conditions in the Commercial Shipbuilding and 
Repair Industry; reauthorization of the Trade Adjustment 
Assistance program; legislation granting Most-Favored-Nation 
(MFN) trading status to Bulgaria and Cambodia; and legislation 
giving the President authority to restore tariff preferences 
under the U.S.-Israel Free Trade Agreement to imports from the 
West Bank and Gaza. It would be useful if the FY 1997 Budget 
Resolution contains a reserve fund which would allow for 
consideration of international trade legislation reported by 
the Finance Committee during the fiscal year.

                                revenues

    Family Tax Relief and Savings and Investment Incentives.--
The Finance Committee may consider legislation to provide tax 
relief for families, incentives to promote savings and 
investment, help with health care costs, simplify the tax code 
and other tax code changes. Such tax relief may be part of an 
effort to balance the budget or may be considered separately on 
a deficit-neutral basis later this year.
    Super Fund Trust Fund.--The excise and corporate 
environmental taxes that fund the Superfund program expired on 
December 31, 1995. The Senate Environment and Public Works 
Committee is in the process of developing legislation to make 
fundamental reforms to the Superfund program. As part of this 
effort, the Finance Committee expects to consider legislation 
reinstating the Superfund taxes and related proposals this 
year.
    Airport and Airway Trust Fund.--The excise taxes that fund 
the Airport and Airway Trust Fund also expired on December 31, 
1995. The authorization for the Airport and Airway Trust Fund 
program is scheduled to expire on September 30, 1996. The 
Finance Committee expects to consider legislation reinstating 
the excise taxes funding the Airport and Airway Trust Fund 
either in connection with the reauthorization of the program or 
on a separate basis.
    Tax Reform.--The Finance Committee expects to continue 
holding hearings on proposals to replace or fundamentally 
change the existing tax system.
    It would be useful if the FY 1997 Budget Resolution 
contains a reserve fund similar to the reserve fund contained 
in the FY 1996 Budget Resolution (H. Con. Res. 67) which would 
allow for consideration of tax relief legislation later this 
year.
    We appreciate the opportunity to comment on the areas of 
the budget within the jurisdiction of the Finance Committee and 
look forward to working with you on this year's budget effort.
            Sincerely,
                                   William V. Roth, Jr.,
                                           Chairman.
                                   Daniel Patrick Moynihan,
                                           Ranking Member.
                                ------                                

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                    Washington, DC, April 19, 1996.
Hon. Pete V. Domenici,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete: As Foreign Relations Committee chairman, I am 
gratified for this opportunity to share with you and the other 
members of the Budget Committee the views and estimates of the 
international affairs budget function pursuant to section 
301(d) of the Congressional Budget Act.
    I reiterate my strong support for your efforts to reduce 
all federal spending and to balance the federal budget by 2002. 
The FY 1996 budget resolution approved by Congress was historic 
in that, for the first time in decades, federal government 
spending has been placed on a glide slope to balance our 
budget. I know that you and the other members of the Budget 
Committee were forced to make immensely difficult decisions 
about which federal programs to cut in order to achieve a 
balanced federal budget in seven years. As spending for 
domestic programs is reduced, equal or greater cuts must be 
made in international programs.

              clinton administration FY 97 budget request

    During his State of the Union address in January, President 
Clinton claimed that, ``the era of big government is over.'' 
Regrettably, the President's budget fails to match his 
rhetoric. According to the excellent research conducted by your 
staff, the President's budget would increase overall budget 
authority in the international affairs account by more than $1 
billion (6.7 percent) in Fiscal Year 1997. Further, the 
Administration's budget seeks to increase discretionary budget 
authority in the 150 account by $1.4 billion, or 7.3 percent, 
in Fiscal Year 1997 and increase outlays by $700 million. Over 
seven years, the President's budget would increase 
international affairs spending by more than $2.6 billion.

       foreign affairs agencies revitalization and consolidation

    In March 1995, I unveiled a plan to restructure completely 
our nation's antiquated and anachronistic foreign affairs 
apparatus. Originally this plan sought to abolish the Agency 
for International Development (AID), the Arms Control and 
Disarmament Agency (ACDA), and the U.S. Information Agency 
(USIA). In an effort to accommodate the Administration, many 
important modifications were made during the legislative 
process. As presented to the President, this legislation would 
have mandated the abolition of at least one of these agencies 
and required $1.7 billion in savings over the next four years.
    Regrettably, the President vetoed this historic legislation 
on April 12, 1996. Apparently, despite his rhetoric, the 
President fell prey to the very bureaucratic self-interests 
which he claimed he intends to eliminate. The concept of 
consolidation enjoys the support of a majority in Congress, 
five former Secretaries of State, and the current Secretary, 
Warren Christopher, proposed an even more sweeping 
consolidation than the one which Congress sent to the 
President. I intend to pursue legislation this year which would 
eliminate these agencies.

Voluntary separation incentive--602(a) allocation

    It is still the Committee's intent to pursue an agenda to 
downsize the federal bureaucracy and federal agencies within 
the Committee's jurisdiction. If the Committee is successful in 
these efforts or if the Administration decides to pursue the $5 
billion in savings in the 150 budget function, as promised in 
January 1995, by abolishing one of the agencies (Arms Control 
and Disarmament Agency, Agency for International Development, 
United States Information Service), the abolished agency or 
agencies will require authority for voluntary separation 
incentives. Since direct spending costs are associated with 
this authority, the Committee will require a direct 602(a) 
allocation. The Committee would greatly appreciate the Budget 
Committee's assistance in providing this allocation for use in 
the handling employees of the abolished agencies.

                           foreign assistance

    I am disappointed, albeit not surprised, that the 
President's budget calls for a $400 million increase in 
spending on foreign aid programs in Fiscal Year 1997. Congress 
made great strides in cutting foreign aid spending in 1996--
slashing more than $1 billion from the FY 1995 level--but 
Congress's work is far from finished.
    It is indefensible to continue to provide foreign aid to 
more than 100 foreign countries while important domestic 
programs are cut. While supporters of larger foreign aid 
programs claim that international affairs spending accounts for 
just over one percent of the entire federal budget, they 
neglect the fact that more than 14 percent of our budget is 
dedicated solely to paying the interest on the federal debt--a 
debt that now soars above $5.2 trillion. Our government cannot 
afford to borrow money so that government bureaucrats can 
continue to spend huge sums on overseas aid.
    The Agency for International Development has yet to 
transmit to Congress its FY 1997 Congressional Presentation 
Document which includes information about which nations it 
wishes to provide aid and a justification of the need for that 
aid. It is difficult, therefore, to make specific 
recommendations to the Budget Committee since AID has not yet 
provided this basic information to Congress. I recommend the 
following for your committee's consideration:

Development assistance

    Development Assistance should be reduced further. According 
to President Clinton's 1993 task force on foreign aid reform, 
``Despite decades of foreign assistance, most of Africa and 
parts of Latin America, Asia and the Middle East are 
economically worse off today than they were 20 years ago.'' I 
see no evidence that the trend has been reversed over the past 
year as a result of additional AID funding, yet the President's 
budget calls for a $90 million increase in the Development 
Assistance account.
    Within the Development Assistance account, the 
Administration is requesting $435 million for population 
control programs. During this Administration, the population 
control account more than doubled. While slightly reduced from 
last year's levels, the fiscal year 1997 request is still $112 
million more than the highest level of the previous 
Administration. Spending on controversial population control 
programs has become bloated at the expense of popular programs 
such as child survival and education. The Administration also 
intends to use unspecified but significant amounts of Economic 
Support Funds (ESF) for population control, as well as $30 
million for the United Nations Population Fund (UNFPA). I urge 
the Budget Committee either to reduce further funds for 
population control and/or to shift scarce resources from 
population control to more popular development assistance 
programs.

International fund for Ireland

    Funding for the International Fund for Ireland should be 
terminated. During the past year, the IFI has devoted more than 
$5,000 to conduct a feasibility study for a bicycle trail and 
$3,000 to ``planning a seminar to develop a drama project.'' 
Ending this program would save millions annually.

Housing Guarantee Program

    AID's Housing Guarantee (HIG) program should be terminated. 
Last year, the General Accounting Office, when recommending 
termination of this program, reported, ``We estimate that the 
cost to the U.S. government of future loan defaults from the 
existing portfolio of loans is likely to be an additional $600 
million.'' That is on top of the $400 million GAO estimates has 
already been lost.

AID operating expenses

    AID's Operating Expenses are once again on the rise. Every 
year Congress hears the political rhetoric about streamlining 
of procedures, reductions in personnel, reduction in 
bureaucratic redundancies, and other cost saving measures, yet 
every year the budget request for AID/OE is above the level 
appropriated by Congress the previous year. Although, AID has 
yet to make available to the Foreign Relations Committee a 
detailed breakdown of its OE request, at least some portion is 
expected to be allocated for the agency's proposed move into 
the Federal Triangle Building which Congress has prohibited in 
1996. Operating Expenses should be reduced by at least an 
amount equal to that AID requested for its move into the 
Federal Triangle. Further, it is impossible to justify an 
increase in OE when, for example, those funds are used by AID's 
mission director in Moscow spend $300,000 on renovations to his 
home.
    AID currently maintains more than 80 overseas missions and 
recently announced that it will open a new mission in Angola 
this year. According to Vice President Al Gore's Reinventing 
Government task force, it costs taxpayers between $150,000 and 
$300,000--exclusive of salary--to keep a single AID employee 
overseas. Reducing the overstaffed AID missions overseas is an 
important step to reducing AID's operating costs.
    It is important to note that the Office of the Inspector 
General at AID has requested $8 million reduction for its 
operating expenses below its FY 1995 level. It is rare that any 
office in the federal government actually seeks to have its 
budget reduced, but this clearly shows that federal agencies 
can do more with less.

Debt forgiveness

    Congress should not approve the President's request of $22 
million for debt forgiveness, which represents a 500 percent 
increase above FY 1995 appropriated level. Administration 
budget documents cite only three countries--Nicaragua, Liberia 
and Ivory Coast--as prime candidates for debt forgiveness. 
Liberia has collapsed into anarchy and civil war; Nicaragua, 
despite receiving more than $1 billion in U.S. aid, refuses to 
compensate adequately Americans who property was stolen by the 
government. In addition, the President is requesting $25 
million in debt forgiveness for Jordan, on top of the $275 
million provided in FY 1995.

Inter-American Foundation and African Development Foundation

    Funding for the Inter-American Foundation--which has spent 
more than $1 billion since its creation--and the African 
Development Foundation should be cut significantly. Abolishing 
these two foundations outright, which I advocated last year, 
would save the taxpayers at least $35 million annually. Unless 
these organizations move swiftly to attract private funds for 
their sustainability, modest Congressional support will 
evaporate altogether.

Economic Support Fund

    The President has requested a $49 million increase in 
Economic Support funds (ESF). While the Administration seeks to 
increase ESF, it intends to divert greater amounts for purely 
development projects rather than economic purposes. The use of 
scarce ESF resources for development projects in Haiti, for 
example, clearly illustrates the Administration's misuse of 
ESF. Similarly, the use of ESF for population control programs 
over and above the $435 million already requested by AID is 
unwise.
    More than 80 percent of all ESF is dedicated to nations in 
the Middle East. It is, therefore, curious that the President 
would recommend initiating a new democracy program in the 
region at a cost of $1.4 million. New programs in the Middle 
East should be funded out of existing resources already 
dedicated to the region.
    As in FY 1996, the Administration is attempting to have the 
best of both worlds when requesting ESF and narcotics 
assistance. While consolidating all narcotics funding under the 
International Narcotics Control account, the Administration has 
chosen not to reduce ESF account proportionally. Both accounts, 
therefore, are increased. The Budget Committee should be aware 
of, and should make necessary adjustments to, these two 
accounts.

Multilateral development banks

    Middle East Development Bank.--The Administration is 
requesting $52.5 million for the creation of this new 
multilateral financial institution. Given the track record of 
the other MDBs in terms of accountability and transparency, the 
U.S. should not seek to establish yet another international 
bureaucracy. Considering the Middle East already consumes more 
than 40 percent of our nation's entire foreign aid budget, it 
would be unwise to dedicate new and scarce resources to this 
region. If the Administration is intent on creating this new 
institution, then it might consider diverting a portion of the 
ESF already dedicated to nations in the region for this 
purpose.
    African Development Bank and Fund.--Congress should not 
support the President's request for $66 million for the AfDB 
and the AfDF. Despite the Administration's claims that the AfDB 
has been ``radically reformed and restructured'', Congress has 
yet to receive concrete proof of these reforms. Unless true 
reforms are enacted, not simply promised, by AfDB officials, 
any U.S. assistance will only postpone the inevitable collapse 
of this institution.
    International Development Association (IDA).--President 
Clinton is requesting $934 million for IDA, an increase of more 
than $230 million above the current level. The Administration 
claims this increase will allow the U.S. to pay money ``now 
overdue'' to IDA. However, this ``overdue'' money is 
``overdue'' because the Executive Branch made commitments to 
IDA without seeking Congressional guidance. In the future, the 
Executive Branch should consult with Congress prior to entering 
into binding financial commitments with IDA and the other 
international financial institutions, rather than afterwards.

International organizations and programs

    Congress should reduce significantly the President's 
request of $325 million for U.N. voluntary programs. Congress 
appropriated only $285 million for the current fiscal year. 
Within this request, the Administration has asked Congress to 
provide an increase of $26.7 million for the United Nations 
Development Program (UNDP). Congress should cut funding a UNDP 
further, especially since this increase comes at the expense of 
UNICEF, which has long been a popular program in Congress. 
First, UNDP serves simply as a pass-through to other UN 
agencies or to international contractors, making UNDP an 
unnecessary middleman. Second, according to General Accounting 
Office research, UNDP has no way to monitor projects which fail 
or which fall victim to other waste, fraud, or abuse. Third, 
UNDP has established no criteria for ``graduating'' a country 
from aid, other than an arbitrary worldwide GNP threshold, so 
it is impossible to measure the true effect of UNDP funding on 
a country.
    There is serious overlap of activities in many of U.N. 
agencies funded under this account. For example, U.N. programs 
comprise many environmental organizations such as the U.N. 
Environmental Program (UNEP), the Environmental Fund of UNEP, 
Related Activities of UNEP, the Montreal Protocol Multilateral 
Fund, the International Union for Conservation of Nature, the 
Ramsar Convention on Wetlands, the Intergovernmental 
Negotiating Committee, the U.N. Framework Convention on Climate 
Change, the World Heritage Fund, and the World Meteorological 
Organization's Special Fund for Climate Change. Each of these 
organizations has emerged as a new international bureaucracy, 
with large operating and overhead budgets. The Administration 
must prioritize its request in regards to this account, rather 
than simply funding every new U.N. initiative blindly.
    To preempt Congressional efforts cut off funding for the 
United Nations Population Fund (UNFPA), the Administration has 
repeatedly assured Congress that UNFPA will end its program in 
communist China this Spring. Mr. Chairman, you have heard the 
horror stories about Chinese women being forced to abort their 
babies and undergo forced sterilization procedures. For this 
reason, most Americans to not support UNFPA's assistance of 
China's brutal population control program. I urge the Budget 
Committee to recommend an end to funding of UNFPA until it 
permanently ceases all activities in the People's Republic of 
China.

                  ARMS CONTROL AND DISARMAMENT AGENCY

    The Arms Control and Disarmament Agency (ACDA) should be 
abolished and only its essential functions should be 
incorporated into the Department of State. Abolishing ACDA is 
not a new concept. In 1993, the State Department proposed a 
detailed plan to abolish ACDA and transfer its functions and 
personnel in the Department, resulting in cost savings of $25.8 
million annually. The Clinton Administration in 1992 proposed 
the abolition of ACDA, only to be rebuffed by a Democratic 
Congress. Current Secretary of State Christopher, too, proposed 
the abolition of ACDA.

                    UNITED STATES INFORMATION AGENCY

International exchanges

    The Foreign Relations Committee continues to support 
international exchange of peoples and ideas. However, according 
to a report issued by the United States Information Agency in 
1995, the U.S. government funded over $1.67 billion in 
international exchanges conducted by more than 28 federal 
agencies. USIA maintains there is over $400 million of 
duplication or exchanges with ``similar objectives''. Since the 
federal agencies conducting exchanges fall under the 
jurisdiction of many different Committees, it will take some 
amount of cooperation to rectify the problems of overlap and 
rationalize the funding for international exchanges.
    Under the Fulbright-Hays legislation, USIA was given the 
authority to preform oversight over all government exchanges. 
This authority was reaffirmed and expanded by an Executive 
Order in 1978 which dictated that ``any ordering of the 
government's present uncoordinated approach to international 
exchange activities would help rationalize expenditures and 
increase effectiveness'' of the activities. It's been almost 20 
years since that Executive Order was promulgated and the U.S. 
government is still unable to coordinate and rationalize these 
exchanges effectively. USIA coordination role has been limited 
to the issuance of a report on exchanges the production of 
which has been hampered severely by other federal agencies that 
apparently do not wish to explain how they use their budgets on 
international exchanges. The Agency for International 
Development has been particularly recalcitrant in supplying 
USIA with information for this report.
    The Budget Committee could find at least $400 million in 
savings from international exchanges out of various budget 
functions and this Committee would support your efforts to do.

Broadcasting Board of Governors

    The International Broadcasting Act of 1994 (Public Law 103-
236, the Foreign Relations Authorization Act for Fiscal Years 
1994 and 1995) established the Broadcasting Board of Governors 
to direct and supervise all U.S. government funded, non-
military broadcasting. All nine members of the Board were 
confirmed by the Senate in 1995. Since that time, the Board has 
hired a full-time staff of highly-paid professionals and plans 
to increase that number. The Committee questions the need for 
both top-level management personnel at the Board and top-level 
managers for broadcasting at USIA. It is the Committee's belief 
that the management activities would be duplicative and feels 
that USIA management is better versed in the day-to-day 
operations of international broadcasting programs. Duplication 
in bureaucratic management functions should be avoided to the 
greatest extent possible. In considering the budget for USIA, 
specifically in the Salaries and Expenses account, the Budget 
Committee should take this situation into account. This 
Committee would support legislation that would contain the 
scope of the Board's activities.

                          DEPARTMENT OF STATE

Capital investment fund

    The Department of State should continue to devote an 
increasing percentage of resources to the development of more 
advanced technology throughout the Department and in embassies 
around the world. Replacing antiquated management information 
systems will allow the Department to meet its long-term goal of 
eliminating duplication and decreasing the overhead costs 
associated with excessive personnel. As the Budget Committee 
assess the international affairs budget account, in general, an 
emphasis should be given to increasing those resources 
allocated for improving information systems.
    Mr. Chairman, thank you again for the opportunity to share 
the Committee's views about necessary reductions in the 
international affairs budget account. I hope these 
recommendations are useful as your committee prepares its 
Fiscal Year 1997 budget resolution.
            Sincerely,
                                                       Jesse Helms.
                                ------                                

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                    Washington, DC, April 25, 1996.
Hon. Pete Domenici,
Chairman, Senate Committee on the Budget,
601 Dirksen Office Building, Washington, DC.
    Dear Pete: Pursuant to Section 301(d) of the Congressional 
Budget Act, I am submitting my views and estimates with respect 
to federal spending in the jurisdiction of the Senate 
Governmental Affairs Committee.
    Many of the provisions in the President's budget impacting 
federal employees are similar to those contained in my package 
which the Governmental Affairs Committee submitted as part of 
the Budget Reconciliation Act of 1996. Like the Governmental 
Affairs Committee's package, the Administration's budget would 
continue the April payout of cost-of-living adjustments to 
federal retirees through 2002. The President included our 
provision to increase the amount employees contribute to 
retirement by an additional .5 phased in over three years of 
the budget. The President's budget also adopted a provision of 
my package to reform the pensions of Members of Congress and 
their staffs to conform with those given to the majority of all 
other federal employees.
    However, the plans differ over the amount by which agencies 
are required to increase their contributions to retirement for 
their CSRS employees. The Governmental Affairs Committee 
package would have imposed an increase of 1.5%, raising 
agencies' annual contribution for most employees from 7% to 
8.5% each year over the seven years of the budget. The 
President's budget, however, assumes an increase of almost 11%, 
with agency contributions now at 7% rising to 17.6%, phased in 
beginning in 1999. While I appreciate the Administration's 
efforts to finance fully the costs of current and future CSRS 
benefits (now 25.14% of payroll), I am concerned about the 
impact such an increase would have on agency budgets and 
employees.
    As was the case in the Governmental Affairs Committee 
package last year, no additional appropriations would be made 
to the agencies to cover these payments. While most agencies 
would be able to absorb such an incremental increase as that 
included in our plan last year, under the Administration's 
budget agencies would have to reduce other discretionary 
spending significantly in order to transfer to the Civil 
Service Retirement and Disability Fund the required additional 
payments ($1.034 billion in FY 1999, rising to $3.936 billion 
in FY 2002).
    As chairman of the Governmental Affairs Committee, I am 
interested in exploring savings and deficit reduction that can 
be achieved through Executive Branch reorganization and the 
consolidation and elimination of programs. However, the 
pressure these additional payments will exert on agency budgets 
may result in reductions-in-force which could have uneven 
effects across agencies depending on their share of CSRS-
covered workers. The resulting downsized workforce might not 
reflect rational personnel realignment objectives.
    When you begin consideration of the Budget Resolution for 
fiscal year 1997, I would urge you to consider including the 
package adopted by the Governmental Affairs Committee last 
year, which represents $10.1 billion in savings in mandatory 
spending.
    With best wishes,
            Cordially,
                                             Ted Stevens, Chairman.
                                ------                                

                                       U.S. Senate,
                               Committee on Indian Affairs,
                                    Washington, DC, April 23, 1996.
Hon. Pete V. Domenici,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
Hon. J. James Exon,
Ranking minority member, Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Chairman Domenici and Senator Exon: This letter is in 
response to your request for the views and estimates of the 
Committee on Indian Affairs on the President's Budget Request 
for fiscal year 1997 for Indian programs.

               committee hearings and legislative record

    The Committee held three hearings on the President's Budget 
Request in mid-April, receiving oral and written testimony from 
the Department of the Interior, the Indian Health Service, the 
Department of Housing and Urban Development, the Department of 
Education, the Environmental Protection Agency, and numerous 
other Federal agencies, Indian tribes and tribal organizations.

      overall federal spending patterns on indians and non-indians

    As in previous years, the Committee asked the Library of 
Congress to prepare an analysis of the Federal spending trends 
on programs for American Indians and Alaska Natives over the 
past twenty years, as well as a comparison of this spending 
relative to Federal spending for other Americans. We have 
attached a copy of the April 15, 1996 Library of Congress 
report for your reference.
    The Library of Congress study reveals that, despite the 
efforts of the Committee on the Budget and the Committee on 
Appropriations to respond to the acute needs of Indian and 
Native communities, the gap between what the Federal government 
has annually spent overall on Indians, in contrast to the funds 
which the United States has spent on non-Indians for purposes 
other than the national defense, has steadily worsened for 
Indians since 1985. Graph 23B at page CRS-40 of the study 
displays this growing gap in constant 1994 dollars.
    The Administration's fiscal year 1997 budget request seeks 
only very minor increases in absolute dollars for most Indian 
programs. It also proposes to spend a slightly larger portion 
of these funds at the local level in Indian Reservation or 
Native communities. In 1994 constant dollars, the fiscal year 
1997 budget request for Indian programs overall would effect a 
modest reversal of the growing gap between the funds the United 
States annually spends on non-Indians and those it applies to 
the benefit of Native Americans. Given the harsh conditions and 
continuing needs that exist in much of Indian Country, the 
Committee supports the overall Indian program funding levels 
requested by the Administration for fiscal year 1997.
    In its action on the fiscal year 1996 budget, the Congress 
applied major reductions to new housing development, to 
educational assistance for Indian children, to the Tribal 
Priority Allocation (TPA) accounts which reflect the highest 
priorities identified by tribal governments for the provision 
of fundamental governmental services at the local level and 
which typically are spent under the direct control of Indian 
tribes, and to Federal administrative office accounts within 
the Bureau of Indian Affairs. The Administration's fiscal year 
1997 budget request acknowledges these cuts, and responds by 
continuing some of the reductions made to some of the accounts 
while seeking to restore funding levels for some other 
accounts. The majority of the funds the Administration seeks to 
restore are in areas of Indian program spending which are 
either directly controlled by tribal governments or expended at 
the Indian Reservation and Native community levels.
    Tribal governments are, of course, the governments closest 
to the American Indians and Alaska Natives who suffer the most 
dire and unmet needs. Yet most of the Federal funds that have 
been made available for Native Americans in the past two 
decades have tended to result in expanded Federal bureaucracy 
rather than an increase in tribally-controlled budgets. For 
Indian people, this fact has compounded their problems, as 
their tribal governments face greatly increased 
responsibilities without corresponding financial support.

             Relative Need for Federal Spending on Indians

    When compared with all other citizens of the United States, 
American Indians and Alaska Natives continue to suffer the 
worst conditions of unemployment, dilapidated and overcrowded 
housing, poor health, inadequate education, deteriorating or 
non-existent social and physical infrastructure systems, and 
other social and economic factors that seriously, and sometimes 
critically, erode the dignity and quality of life.
    1990 census data released by the Bureau of the Census last 
year confirms these conclusions in the area of housing: 18% of 
all American Indian households on Reservations are ``severely 
crowded.'' The comparable figure for non-Indians is 2%. 
Likewise, while 33% of all Reservation households are 
considered ``crowded'', the comparable figure for all 
households nationally is 5%. Approximately 90,000 Indian 
families are homeless or underhoused. One out of every five 
Indian homes lacks complete plumbing facilities.
    According to the Census Bureau, nearly one in three Native 
Americans lives in poverty. The number of Indian families below 
the poverty line is nearly three times the national average. 
One-half of all Indian households headed by a female live in 
poverty. One-half of the Indian children under the age of six 
living on reservations live in poverty. For every $100 earned 
by U.S. families, Indian families earn $62. The average per 
capita annual income for an Indian living on the reservation is 
$4,478. Poverty in Indian country is a persistent, everyday 
reality.
    Poor health is the twin sister of poverty. Tuberculosis 
strikes down Native Americans at four times the national 
mortality rate for this disease. The Indian mortality rate for 
diabetes exceeds the national average by 139 percent. Indians 
are four times more likely to die from alcoholism than are 
other Americans. Fetal Alcohol Syndrome rates among Native 
Americans are six times the national average. In some Indian 
communities, reported cases indicate that child abuse has 
victimized as many as one-fourth of the children. By all 
measures the health status of Native Americans lags 
significantly behind every other group of Americans.
    In recent decades, there have been two basic justifications 
given for the Federal funding of Indian programs. The first can 
be understood as a desire by the United States to address the 
compelling human needs revealed in statistical surveys like 
those summarized above. Tribal and Federal officials continue 
to inform the Committee on Indian Affairs of the existence of 
an overwhelming backlog of underdeveloped social, physical, and 
human infrastructure in Indian Country, which they attribute to 
years of Federal underfunding and relative Federal neglect. 
Many Indian tribes believe that there is an absolutely vital 
need for greatly increased Federal funding simply to ``catch 
up'' to the rest of America. The second basis for Federal 
funding of Indian programs can be understood as one expression 
of the unique, government-to-government relationship between 
the United States and each tribal government arising from well-
settled principles of Federal-Indian law. The courts have 
construed this law on the basis of treaties, agreements, 
statutes, Executive Orders, course of dealings, and 
jurisprudential precedence, which typically have relied on a 
rationale that the Indian tribes transferred to the United 
States land or other resources in return for peace and 
appropriations.

A. Committee recommendations on the Indian Health Service budget 
        request

    Within the Department of Health and Human Services, for 
fiscal year 1997, the Administration has requested $2.174 
billion in budget authority for the Indian Health Service 
(IHS). This amount represents an increase of $174.4 million 
over the total provided in the December, 1995 conference 
committee mark for fiscal year 1996 (hereinafter ``FY96 
conference mark''). The request represents an 8.7% increase for 
Indian health programs. Tribal and Federal officials have 
informed the Committee that this increase will actually result 
in a slight decrease in the level of health care provided to 
Native Americans, due to three factors: (a) the increasingly 
acute levels of unmet need for health care in Indian Country; 
(b) the expanding population growth of Indian beneficiaries 
requiring service; and (c) higher than average inflationary 
costs in the field of rural health care delivery. The requested 
increase is comprised of $138.107 million for services and 
$36.293 million for facilities. The Committee generally 
commends the Administration for its fiscal year 1997 budget 
request for the IHS and for abandoning the gross over-inflation 
of projected third party collections, a past practice that the 
Congress has repeatedly rejected.
    1. Population Growth.--The Administration's fiscal year 
1997 budget request for IHS does not adequately meet the 
population growth requirements necessary to maintain the level 
of services provided in fiscal year 1996. The IHS fiscal year 
1997 budget justification indicates there are about 1.4 million 
American Indians and Alaska Natives served by IHS funded 
operations. The Library of Congress reports that this service 
population is growing at an annual rate of 3.8%, creating an 
annual average increase of 38,679 additional Indians to be 
served. The average cost of care is approximately $1,260 per 
Indian out of the $1.760 billion health services budget 
authority likely to be provided for fiscal year 1996. This 
means that a nearly $50 million increase for the additional 
patients associated with population growth would be required 
simply to maintain existing service levels for all American 
Indians and Alaska Natives in fiscal year 1997.
    2. Contract Support Requirements.--The fiscal year 1997 IHS 
budget request seeks an increase of $46.115 million for 
contract support costs, including unfunded costs carried over 
from prior fiscal years and new and expanded program 
assumptions in fiscal year 1997. The Administration has 
informed the Committee that this request will meet existing 
requirements and allow expanded numbers of Indian tribes to 
assume the operation of programs and activities previously 
administered by the Federal bureaucracy. Two years ago, the 
Congress enacted Public Law 103-413 to expand tribal 
opportunities to operate Self-Determination contracts or Self-
Governance compacts in order to do for themselves what 
previously had been done for them by Federal bureaucrats. In 
the Committee's view, IHS should make contract support funds 
available to the Indian tribes at the levels tribes have 
negotiated with the Inspector General's office. Shortfalls in 
contract support funding are a major obstacle that keeps Indian 
tribes from expanding their contracts or compacts. These 
shortfalls result in the present Federal service bureaucracy 
being preserved and tribal initiative being discouraged. The 
Committee commends the Administration for making this cost item 
a priority in its budget request.
    3. Sanitation and Health Facility Construction.--In fiscal 
year 1990, Congress directed the IHS to prepare a 10-year plan 
to address the backlog of sanitation deficiencies for existing 
Indian homes and communities. Since then, annual appropriations 
have not met the level of need identified each year, and 
additionally, population growth, inflation, and more stringent 
environmental regulation have increased the backlog of need. 
IHS now estimates the backlog at $630 million. To meet the ten-
year plan by the year 2000 would require annual funding levels 
of $146.5 million simply to meet the needs of existing housing. 
The Administration request is $127.9 million, an increase of 
$43 million over the FY96 conference mark. Given the 
constraints on increases in Federal spending, the Committee 
commends the Administration for making this matter a priority.
    The Administration has requested no funds for new health 
facility construction projects in fiscal year 1997, including 
only $2.9 million to complete previously funded design projects 
for two health centers and one hospital. The Administration's 
5-Year Planned Construction Budget has estimated the cost of 
projects already on the IHS new health care facilities and 
staff quarters new construction priority lists at more than 
$600 million. In addition, there are 22 additional facilities 
which will be added to the priority list in the next year, for 
which cost estimates have not yet been finalized.
    The Committee wishes to emphasize that it desires to work 
with the Committee on the Budget, the Committee on 
Appropriations, the Congressional Budget Office, and the Office 
of Management and Budget in the immediate future to explore 
alternative financing mechanisms or other cost effective and 
aggressive means to address the overwhelming backlog of need 
for construction of new or replacement sanitation and health 
facilities, by leveraging private capital investment, including 
consideration of how capital leases are scored, a Federally-
guaranteed loan program, or a tribal investment bank that would 
result in the construction of much-needed facilities far more 
quickly than is now possible under the present discretionary 
appropriations structures.

B. Committee recommendations on the Bureau of Indian Affairs budget 
        request

    The Bureau of Indian Affairs (BIA) fiscal year 1997 
request, within the Department of the Interior, would provide 
for $1.783 billion in current budget authority, a $53.1 million 
or 3% increase over the enacted fiscal year 1995 level of 
$1.729 billion, and a $211.1 million or 13.4% increase over the 
FY96 conference mark. Tribal and Federal officials have 
informed the Committee that this increase will actually result 
in a slight decrease in the amount of service provided to 
Native Americans, due to three factors; (a) the increasingly 
acute levels of unmet needs in Indian Country; (b) the 
expanding population growth of the Indian beneficiaries 
requiring service; and (c) higher than average inflationary 
costs. The requested increases are primarily allocated to the 
Reservation and Native community level through the tribal 
priority allocation (TPA) account, which gains $157.5 million 
over the FY96 conference mark or $67.7 million over the fiscal 
year 1995-enacted level. These increases provide funds for 
local, essential governmental services and for tribal Self-
Governance compact and Self-determination contract support 
requirements. One other significant increase in the President's 
Budget Request is for BIA education programs, an increase of 
$43 million over the FY96 conference mark or $45 million over 
the fiscal year 1995 enacted level.
    The Committee generally commends the Administration for its 
fiscal year 1997 budget request for the BIA. In adopting the 
fiscal year 1996 conference report on Interior Appropriations, 
the Congress made significant reductions in three general areas 
of the BIA budget; (a) tribal priority allocations (TPA), which 
are funds directly controlled by tribal governments; (b) 
Central Office accounts; and (c) Area Office accounts. In 
August, 1995, the Senate-approved TPA funding reductions of 
more than $200 million from the fiscal year 1995 levels, nearly 
a 28% cut. In mid-December of 1995, the House-Senate Conference 
Committee lessened that reduction, providing $654 million for 
TPA in fiscal year 1996, a reduction of approximately $68 
million or 9.5% from fiscal year 1995 funding levels. The 
conference level would also fund Central Office operations at 
$50 million, which is $14 million or 22% below the fiscal year 
1995 funding levels. The conference action would fund BIA Area 
Office operations at $37 million, which is $16 million or 30% 
below fiscal year 1995 funding levels. These reductions at the 
Area Offices, the Central Office, and at the agency/tribal 
level will significantly reduce the delivery of vital services 
provided by the BIA and tribal governments and will require a 
major restructuring of BIA offices and staffing patterns during 
fiscal year 1996 and future years. The President's Budget 
Request for fiscal year 1997 maintains the reductions made by 
Congress to the Central Office and Area Office operational 
accounts in the FY96 conference mark.
    On December 12, 1995, the Committee ordered reported S. 
814, a bill to reorganize the BIA according to the priorities 
set by tribal governments rather than the Federal bureaucracy. 
Without the tribal negotiating authority provided under S. 814, 
tribes have concluded that the BIA staff reductions required by 
the fiscal 1996 funding cuts will not be made pursuant to any 
tribally-developed plans or reflect any tribal priorities for 
BIA reorganization. S. 814 would require, during the remainder 
of fiscal year 1996, a dramatic reorganization of the BIA so 
that all funds appropriated for Indians through the BIA are 
spent directly by, or under the direction and control of, 
American Indian and Alaska Native tribal governments. S. 814 
would allow Indian tribes to refashion the BIA into a technical 
support agency, and thereby provide Congress a greater degree 
of confidence that the funds requested through the BIA will be 
more efficiently spent by an on behalf of Native Americans.

C. Committee recommendations on other agencies' budget requests.

    Various Federal agencies maintain programs of direct or 
otherwise measurable benefit to American Indians and Alaska 
Natives. The Committee On Indian Affairs wishes to provide 
additional recommendations on several of these programs as 
outlined below.
    1. Department of Housing and Urban Development (HUD).--In 
his testimony before the Committee on Indian Affairs on April 
17, 1996, HUD Secretary Henry Cisneros set forth a commendable 
plan for dramatically increasing the allocations of HUD funds 
to American Indian and Alaska Native housing and community 
development even as the Department undergoes down-sizing and 
funding reductions. Given the critical housing needs in many 
Indian communities, HUD's fiscal year 1997 request includes a 
significant overall reallocation of HUD funds to support 
increased funding for the needs of Native Americans. While the 
need for new and replacement housing continues to grow in the 
face of severe overcrowding in Native American communities, the 
Administration's fiscal year 1997 request for budget authority 
for the construction of new homes is reduced to $200 million 
from the $248 million originally provided in fiscal year 1995 
but reflects an increase of $40 million over the amount last 
approved by Congress to be provided in fiscal year 1996 for 
this purpose. Of particular note is a $19 million increase 
(from $50 million to $69 million) for the Community Development 
Block Grant Fund program. The Committee commends the Secretary 
for his responsiveness to the acute housing and community 
development needs in Indian Country, and recommended to the 
Committee on the Budget that the HUD allocations identified to 
American Indian and Alaska Natives by maintained at the level 
requested.
    2. Department of Education.--Many American Indian and 
Alaska Native children attend public schools, which are 
supported in large part by various programs administered 
through the U.S. Department of Education, as are schools funded 
through the BIA. The Administration's budget request for fiscal 
year 1997 for Indian education programs under the Department of 
Education seeks $81.5 million, a $29 million increase over the 
amount provided in the fiscal year 1996 Interior and Related 
Agencies appropriations bill, and a $459,000 increase over the 
amount provided in fiscal year 1995. The $29 million increase 
is designed to restore a sharp reduction made by the Congress 
to this account for fiscal year 1996.
    3. Environmental Protection Agency (EPA).--The 
Administration's budget request for the EPA for fiscal year 
1997 include a total of $98.7 million for EPA's tribal 
programs, an increase of $13.7 million over its request for 
fiscal year 1996. EPA asserts the additional funds and 
resources are available to Indian tribes from general 
operational assistance and support accounts not expressly 
identified as tribal programs. The Committee acknowledges and 
commends the commitment by EPA to increase its focus on 
specific Indian Reservation and Native community environmental 
needs which have been neglected for decades. Of particular note 
is the EPA request for $28 million for its ``general assistance 
program for Indian tribes'', an increase of $13 million over 
its fiscal year 1996 request. The Committee supports this and 
other increases in the Administration's request for fiscal year 
1997, which should result in significant progress in tribal 
planning and development efforts.

D. Conclusion

    The Committee on Indian Affairs, in its April 23, 1996 
business meeting, favorably adopted the foregoing letter or 
recommendations on the budget views and estimates. We very much 
appreciate the opportunity to provide this information on the 
President's Budget Request for Indian programs for fiscal year 
1997 to the Committee on the Budget and look forward to working 
with you in the coming year.
            Sincerely,
                                   John, McCain,
                                           Chairman.
                                   Daniel K. Inoquye,
                                           Vice-Chairman.
                                ------                                

                                               U.S. Senate,
                                    Washington, DC, April 29, 1996.
Hon. Pete V. Domenici,
Chairman,
Committee on the Budget,
U.S. Senate, Washington, DC.

Hon. J. James Exon,
Ranking Minority Member, Committee on the Budget
U.S. Senate, Washington, DC.
    Dear Chairman Domenici and Senator Exon: We are writing 
this letter to request several actions by the Committee on the 
Budget in support of the Committee on Indian Affairs' April 
23rd letter on its views and estimates concerning the 
President's Budget Request for fiscal year 1997 for American 
Indian and Alaska Native programs.
    We make these requests because of three main concerns. Very 
harsh living conditions continue to characterize most Indian 
Reservations and Alaska Native communities. Census statistics 
reveal that, as a group, Native Americans suffer the worst 
housing, the highest unemployment rates, and the lowest incomes 
of all Americans. Nevertheless, an April 15, 1996 CRS study 
shows that the Federal government has been spending 
increasingly more on non-Indians than on Indians since 1985. 
And American Indian and Alaska Native programs bore a painfully 
huge and inequitable share of the cuts finally imposed by the 
Congress for fiscal year 1996. For example, the Department of 
Commerce, which many in Congress initially sought to zero out 
for fiscal year 1996, ended up with only a 3% reduction from 
fiscal year 1995 funding levels, while the basic essential 
governmental programs at the Reservation or Native community 
level suffered a reduction of nearly 10%. Within the Interior 
Department, Native American programs were cut 8% in fiscal year 
1996, while the Bureau of Land Management was cut 4%, the Fish 
and Wildlife Service was cut 2%, and the National Park Service 
enjoyed an increase of 1%.
    We write to ask the Budget Committee to build funding into 
the fiscal year 1997 Budget Resolution that expressly supports 
the President's full request for the Indian Health Service, the 
Bureau of Indian Affairs, and the Department of Education 
(Office of Indian Education), which request would represent a 
$385.5 million increase over the fiscal year 1996 enacted 
levels for those agencies. In addition, we ask that you include 
language in the Committee Report accompanying the Budget 
Resolution for fiscal year 1997 that incorporates the themes we 
have set out below in support of the $385.5 million increase. 
And we ask that the Budget Committee's crosswalk and 
illustrative 602(b) allocations provided to the Committee on 
Appropriations reflect the President's full request for these 
programs, in furtherance of an allocation by the Committee on 
Appropriations to the Interior and Related Agencies 
Subcommittee of an increase of $385.5 million over the amount 
enacted for fiscal year 1996 that is identified to these Indian 
programs.

               Proposed Budget Committee Report Language

    The Administration's fiscal year 1997 budget request seeks 
only very minor increases in absolute dollars for most Indian 
programs, but it would effect a modest reversal of the growing 
gap between the amount of money spent on non-Indians and 
Indians. Very harsh living conditions continue to characterize 
most Indian Reservations and Alaska Native communities. Census 
statistics reveal that, as a group, Native Americans suffer the 
worst housing, the highest unemployment rates, and the lowest 
incomes of all Americans. For these reasons, we support the 
Administration's request for Indian programs and recommend that 
the Appropriations Committee give the highest priority to 
funding Indian programs at the requested levels for fiscal year 
1997.
    Within the Department of Health and Human Services, the 
Administration has requested $2.174 billion in budget authority 
for the Indian Health Service (IHS), an increase of $174.4 
million over the amount enacted for fiscal year 1996. We urge 
the Appropriations Committee to fund this requested IHS 
increase of 8.7%. Such a funding increase actually would result 
in a slight decrease in the level of health care provided to 
Native Americans, due to three factors: (a) the increasingly 
acute levels of unmet need for health care in Indian Country; 
(b) the expanding population growth (3.8% annually) of the 
Indian beneficiaries requiring service; and (c) higher than 
average inflationary costs in the field or rural Indian and 
Native health care delivery. The requested increase is 
comprised of $138.107 million for services and $36.293 million 
for facilities. We wish to highlight the fact that the IHS 
annually spends an average of $1,149 per individual Indian, 
while for Americans as a whole, an average of $2,764 per person 
is spent on health services each year. Included in the 
recommended increase is $46.115 million for the contract 
support costs of Indian tribes and Native organizations. In 
recent years, shortages of these funds have become a major 
obstacle to Native Americans expanding their Self-Determination 
contracts and Self-Governance compacts, resulting in the 
present Federal service bureaucracy being preserved and tribal 
initiative being discouraged. Also included is a $43 million 
increase in the efforts to address the $630 million backlog of 
sanitation deficiencies for existing Indian homes and 
communities. The President has not requested any funds for new 
health facility construction projects in fiscal year 1997. We 
intend to work with the Committee on Appropriations, the 
Congressional Budget Office, and the Office of Management and 
Budget to explore alternative financing mechanisms or other 
cost effective and aggressive means to address the overwhelming 
backlog of need for construction of new or replacement 
sanitation and health facilities, by leveraging private capital 
investment, including consideration of how capital leases are 
scored, a Federally-guaranteed loan program, or a tribal 
investment bank that would result in the construction of much-
needed facilities far more quickly than is now possible under 
the present discretionary appropriations structures.
    Within the Department of the Interior, the Administration 
has requested $1.783 billion in budget authority for the Bureau 
of Indian Affairs (BIA). We urge the Appropriations Committee 
to fund the full amount requested for the BIA. While the amount 
requested includes an increase of $211.1 million or 13.4% over 
the amount enacted for fiscal year 1996, it is just 3% over the 
amount enacted for fiscal year 1995. The requested funding 
increase will actually result in a slight decrease in the 
amount of services provided to Native Americans, due to three 
factors: (a) the increasingly acute levels of unmet needs in 
Indian Country: (b) the expanding population growth of the 
Indian beneficiaries requiring service; and (c) higher than 
average inflationary costs. $157.5 million of the requested 
increase is for Indian reservation and Alaska Native community 
tribal priority allocation (TPA) accounts, which provide funds 
for local, essential governmental services and for Self-
Governance compact and Self-Determination contract support 
requirements. $43 million of the increase is for BIA education 
programs. While the President's request restores the funds cut 
by the Congress in the tribal priority accounts, it maintains 
the reductions made by the Congress in fiscal year 1996 to the 
Central Office and Area Office operational accounts. We note 
that the Committee on Indian Affairs has reported a bill that 
would allow Indian tribes to refashion the BIA into a technical 
support agency, providing the Congress with a greater degree of 
confidence that the funds requested through the BIA will be 
more efficiently spent by and on behalf of Native Americans.
    Within the Department of Education request, the President 
seeks $81.5 million, an increase of $29 million over the amount 
enacted in fiscal year 1996 for its Office of Indian Education 
(OIE) programs. We urge the Appropriations Committee to fully 
fund this request. In a reflection of the severity of the cuts 
imposed in fiscal year 1996, it is noteworthy that the $81.5 
million requested is just $459,000 more than the amount enacted 
for this purpose in fiscal year 1996. Most American Indian and 
Alaska Native children attend public schools. OIE funding 
primarily supports these public school children and, to a 
lesser extent, Indian children in BIA schools.
    We thank you for your kind attention to these requests. We 
know you both share our concern for equitable and fair 
treatment of this Nation's Native Americans and will do 
everything within your power as a Budget Committee to ensure 
that our national budget priorities are rearranged so that the 
President's requests in these areas can be provided.
            Sincerely,
                                   John McCain,
                                   Ted Stevens,
                                   Daniel K. Inouye
                                   Ben Nighthorse Campbell,
                                           U.S. Senators.
                                ------                                

                    Congressional Research Service,
                                   The Library of Congress,
                                    Washington, DC, April 15, 1996.
To: Senate Committee on Indian Affairs, Attention: Patricia M. Zell.
From: Roger Walke, Analyst in American Indian Policy, Government 
        Division.
Subject: Indian-Related Federal Spending Trends, FY 1975-1997.\1\
---------------------------------------------------------------------------
    \1\ Andorra Bruno, Analyst in American National Government, 
assisted in gathering data for FY 1975-1995. Garrine Laney, Analyst in 
American National Government, and Megan Perry, Intern, assisted in 
gathering the data for FY 1975-1991.
---------------------------------------------------------------------------
    This memorandum responds to your request that CRS's 
analysis of Indian-related budget authority be updated to cover 
fiscal years 1975-1997. The Committee has previously published 
these CRS analyses in the appendix of its recurring committee 
print entitled Budget Views and Estimates for fiscal years 
1989, 1991, 1992, and 1993.\2\ The Committee has also included 
the CRS analyses in its materials printed in the Senate Budget 
Committee reports on the concurrent budget resolutions for FY 
1995 and FY 1996.\3\
---------------------------------------------------------------------------
    \2\ S. Prt. 100-116, S. Prt. 101-89, S. Prt. 102-32, and S. Prt. 
102-91, respectively.
    \3\ S. Rept. 103-238 and S. Rept. 104-82, respectively.
---------------------------------------------------------------------------
    The memorandum summarizes trends in most Indian-related 
areas of the federal budget over the period FY 1975-1997. The 
budget items selected usually account for two-thirds to three-
quarters or more of total federal spending each year on 
American Indians and Alaska Natives.
    The trends are summarized in tables 1-4, and selected 
trends are illustrated in graphs 1-26. Both tables and graphs 
are based on the data in appendix tables 1 and 2. For each 
budget area, tables 1-4 show the following measures: the 
average level of spending in each year over the time period; 
the annual charge (i.e., the annual trend) in such spending; 
the ratio of the annual change in spending to the average level 
of spending (called the ``change ratio''); and an indicator of 
the consistency of the annual change.
    Table 1 covers the period FY 1975-1997, using current 
dollars. Table 2 covers the same period using constant, or 
inflation-adjusted, 1994 dollars. Tables 3 and 4 present the 
same current- and constant-dollar data for the period FY 1982-
1997.
    The analysis presented here emphasizes constant-dollar 
figures. Since such figures are adjusted for the effects of 
inflation, they are better indicators of real changes in 
spending.
    This memorandum is not intended to be a complete analysis 
of all the Indian-related budget items selected. Rather it is 
meant to compare trends in major budget items affecting the 
nation's Indian population (particularly those programs 
targeting Indians in federally recognized tribes), on the one 
hand, with trends in parallel budget items affecting the entire 
U.S. population. The discussion that follows is organized in 
three parts: methodology and sources; budget trends in 
education, health, housing, and economic development and 
employment training; and overall trends.

                        methodology and sources

    The Indian-related budget items chosen for this analysis 
are the Bureau of Indian Affairs (BIA), and some of its 
components, in the Department of the Interor (DOD); the Indian 
Health Service (IHS) and the Administration for Native 
Americans (ANA) in the Department of Health and Human Services 
(HHS); the Office of Indian Education in the Department of 
Education; the Indian Housing Development program in the 
Department of Housing and Urban Development (HUD); and the 
Indian and Native American Employment and Training Program 
(INAP) \4\ in the Department of Labor. According to figures 
from the Office of Management and Budget, these agencies 
annually accounted for about 72 percent of estimated Indian-
related spending government-wide in the period FY 1988-1996.
---------------------------------------------------------------------------
    \4\ The Indian and Native American Employment and Training Program 
was authorized by Section 401 of the Job Training Partnership Act 
(JTPA) of 1982 (P.L. 97-300) and began its expenditures in FY 1984. 
JTPA's predecessor, the Comprehensive Employment and Training Act 
(CETA), included a similar Indian employment and training program. This 
memo uses CETA Indian program spending for the period FY 1975-1983 and 
INAP spending for FY 1984 to the present.
---------------------------------------------------------------------------
    For the BIA program categories chosen for the analysis--
education, economic development, natural resources, and tribal 
(formerly ``Indian'') services--the memo contains a break in 
the continuity of the time-series data. The BIA restructured 
its budget presentation for FY1994, based on recommendations 
from the Joint Tribal/BIA/DOI Advisory Task Force on Bureau of 
Indian Affairs Reorganization. The general categories of 
education, economic development, natural resources, and Indian 
services, under which specific programs were grouped in 
previous budget presentations, are not used as general 
categories in the restructured budget presentation (instead 
they are used as subcategories within the BIA's new general 
categories). While the BIA has applied this restructured 
presentation to its FY1993 budget, it has not done so for 
earlier years. Hence the time-series data for BIA component 
programs are internally consistent for FY1975-1992 and for 
FY1993-1997 but may not be consistent between the two time 
periods.
    In this memo we re-grouped FY1993-1997 data for the 
relevant BIA programs into the general categories of education, 
economic development, natural resources, and Indian 
services.\5\ We stress that re-grouping data for the BIA 
components for FY1993-1997 means that the figures for the 
components for these years are estimates and that they are not 
necessarily consistent with earlier years. Hence computations 
and statistics for these BIA components for the periods FY1975-
1997 and FY1982-1997 are also estimates. Furthermore, the 
special circumstances of the FY1996 and FY1997 BIA budgets 
required us to estimate spending for some of the BIA programs 
that we group into the categories, or components, of education, 
economic development, natural resources, and Indian services. 
Hence the current-and constant-dollar figures for BIA 
components for FY1996-1997 in this memo may be subject to later 
revision.
---------------------------------------------------------------------------
    \5\ The re-grouped figures for FY1993-1994 for these BIA components 
generally produced budget figures that were markedly higher than 
figures for FY1992. This suggests that analytical statistics for these 
BIA components based on the FY1975-1997 time series may be skewed, 
either up or down.
---------------------------------------------------------------------------
    Spending by agencies is measured in this memo in terms 
either of appropriations (or budget authority) or of outlays, 
depending on data availability and on past usage in the 
Committee's study of FY1989. Indian housing spending data have 
been available as ``use of budget authority,'' and we include 
data for both outlays and budget authority in measuring federal 
spending on housing in general. (Annual outlay and budget 
authority figures may diverge from each other more in housing, 
with its multi-year spending patterns, than in other budget 
areas.)
    To adjust for inflation, current-dollar figures were 
changed into constant dollars. THe base year for the constant 
dollars was 1994, and the inflation index used to compute 
constant dollars from current-dollar figures was the Chain-Type 
Price Index for Gross Domestic Product (GDP). The Chain-Type 
Price Index is a new index introduced in 1995 by the Bureau of 
Economic Analysis of the Department of Commerce to measure real 
GDP, essentially replacing the Implicit Price Deflator. (For 
further discussion of the Chain-Type Price Index, see CRS 
Report No. 95-892 E, A New Measure of Real GDP.) We use the 
Chain-Type Price Index instead of the Consumer Price Index 
(CPI) because the former accounts for inflation in the entire 
economy rather than just in consumer purchases, and hence is 
more appropriate for the full range of Indian budget areas.

Statistical measures

    The average, or mean, level of spending during the period 
FY1975-1997 was computed by dividing total spending over the 
time period by the number of years.
    Annual change (annual trend) and trend consistency over the 
FY1975-1997 period were both determined by a time-series linear 
regression analysis. Such an analysis attempts to find the best 
straight line illustrating the relationship between a variable 
(here, a budget item) and time. The Annual change is the 
``slope'' of such a straight line. The slope, or annual change, 
shows how much the spending on a budget item changes for every 
year that passes. (The slope is also known technically as the 
``coefficient of X'' or the ``regress coefficient.'') Trend 
consistency is the ``coefficient of determination,'' or r\2\, 
generated by a regression analysis. Here, r\2\ can be 
interpreted as follows: if the r\2\ is high (i.e., closer to 
1), then the trend, whether up or down, is very consistent; if 
the r\2\ is low (closer to 0), then the trend is very 
irregular.
    Change ratio denotes the annual change divided by the 
average level of spending. This is to control for the fact that 
the size of a budget item's annual change varies with the total 
amount of dollars spent by an agency. For instance, an annual 
change of $10 million for an agency whose average spending is 
$100 billion a year constitutes a much lower increase, 
proportionally, than the same $10 million increase for an 
agency whose average spending is $50 million a year. The change 
ratio allows one agency's annual change to be compared to that 
of another agency while taking relative budget size into 
account.

Sources

    Sources for budget data are the respective agencies and the 
annual Budget of the United States Government submitted by the 
President. Budget data collected included historical 
appropriations and outlays and FY1997 budget estimates, by 
agency and by budget function \6\ category. Agencies previously 
contacted include the BIA, IHS, ANA, HUD, Education Department, 
Interior Department, and Labor Department. HUD was not able to 
provide Indian Housing Development Program data for FY1975 and 
FY1977 because the data had been archived.
---------------------------------------------------------------------------
    \6\ Budget functions represent classifications of budget 
expenditures by major objectives and operations, regardless of the 
agency responsible. Budget functions are further divided into budget 
subfunctions.
---------------------------------------------------------------------------
    U.S. population data came from the Statistical Abstract of 
the United States and the Census Bureau's Current Population 
Reports (Series P-25, No. 1130). We used the figure for total 
U.S. population, including Armed Forces abroad. Indian 
population data came from the Indian Health Service's Trends in 
Indian Health 1995, and are based on that agency's service 
population. IHS population estimates are updated annually.
    Historical figures for the Chain-Type Price Index for GDP 
were obtained from the Economic Report of the President 
(February 1996) and the Bureau of Economic Analysis; 
projections for 1996 and 1997 came from Data Resources, Inc. 
(DRI).

                               education

    Education data from table 1 show that Indian education 
spending appears to have been growing from FY1975 to FY1997. 
The annual change for BIA education, for instance, shows an 
increase of $14 million per year, for a positive change ratio 
of 4.19.\7\ These figures, however, are in current dollars. 
Inflation has not been taken into account. The constant-dollar 
figures in table 2 do take inflation into account. These data 
show that BIA education has actually fallen by $2.3 million a 
year, for a negative change ratio of -0.53, during the period 
FY1975-1997. This pattern--an increase in current dollars and 
an actual decline in constant dollars--is repeated in most 
Indian-related budget areas.
---------------------------------------------------------------------------
    \7\ Excludes BIA construction for education. As noted above, the 
time series for BIA education is not internally consistent because of 
BIA budget restructuring for FY1993-1997. In addition, FY1991 
appropriations for BIA education programs included forward funding of 
$208,900,000 for the 1991-1992 school year (July-June). For this 
analysis, these funds have been included under FY1991.
---------------------------------------------------------------------------
    Table 2 shows that the U.S. Department of Education budget 
has averaged $24.2 billion in constant 1994 dollars during 
FY1975-1997 and has grown at a rate of $415.3 million a year 
(1.72 change ratio), but with some annual variation (r \2\ of 
.608). In contrast, Office of Indian Education (OIE) programs 
in the Department of Education which averaged $97.3 million a 
year in constant dollars, fell $2.9 million a year over the 
same time period (-3.02 change ratio). The r \2\ figure for the 
OIE in the Education Department (.751) shows that it has fallen 
fairly consistently over the time period.
    Table 4 compares budget trends in constant dollars during 
the period FY1982/1997. The Department of Education has 
averaged $25.1 billion during that period, with an increase of 
$606.7 million a year (2.41 change ratio). BIA education 
increased $11.1 million a year (2.66 change ratio) in FY1982-
1997, faster than the Education Department fell $2 million a 
year (-2.40 change ratio).
    Graphs 1-3 illustrate the trends in education in constant 
dollars for FY1976-1997. Graph 1 shows the generally upward, 
but fluctuating, trend for the Department of Education budget. 
Graph 2 shows a long downward trend with a recent recovery for 
BIA education, while graph 3 illustrates that the OIE in the 
Department of Education had a long-term downward trend, 
followed by a leveling-off, and then a recent fall.

                                 health

    Federal health outlays, as measured by the health budget 
function (shown in table 2), averaged $62.7 billion in constant 
1994 dollars during FY1975-1997, increasing at a rate of $4.1 
billion a year, for a change ratio of 6.52. Expenditures of the 
Department of Health and Human Services (HHS)--excluding Social 
Security payments and Social Security Administration 
administrative costs (but including other HHS non-health 
spending)--averaged $178.9 billion in the same time period, 
increasing at $10.6 billion a year (5.90 change ratio). Indian 
Health Service appropriations, in constant dollars, also 
increased during FY1975-1997, but at a lower rate than those of 
HHS or the health budget function. IHS's annual increase was 
$51.8 million, a change ratio of 3.85, on an average level of 
$1.3 billion.
    Spending on the health budget function during FY1982-1997, 
shown in table 4, was at an average level of $73.5 billion in 
constant dollars during the period, with an annual increase of 
$6.2 billion (8.51 change ratio). HHS outlays averaged $210.6 
billion in FY1982-1997, increasing $12.9 billion annually (6.13 
change ratio). IHS spending during the same period had a lower 
gain than these two measures, showing a change ratio of 4.97, 
based on annual increases of $73.6 million and an average 
spending level of nearly $1.5 billion per year.
    Graphs 4-6 depict the trends in the HHS, health function, 
and IHS budgets for the years FY1975-1997, in constant dollars. 
They show that the increase over time was more consistent for 
HHS (r \2\ of .929) than for the federal health budget function 
(r \2\ of .831) or the IHS r \2\ of .828).

                                housing

    Federal housing expenditure trends differ for outlays and 
budget authority during FY1978-1997. Outlays have generally 
risen, on either side of a sudden jump in FY1985, while budget 
authority fell from FY1978 before leveling off after the FY1985 
surge. The trend in Indian Housing Development expenditures (as 
measured in ``use of budget authority'') differs sharply from 
that for federal outlays for housing and more closely resembles 
that for federal housing budget authority, except that Indian 
housing development has fallen more steeply. Table 2 shows that 
Department of Housing and Urban Development (HUD) outlays 
averaged $23.9 billion in constant dollars from FY1978 to 
FY1997 \8\ and increased at an annual rate of $400.5 million, 
for a positive change ratio of 1.68. Outlays for the federal 
housing assistance subfunction increased even faster, rising 
$861.6 million a year on an average level of $18.1 billion, for 
a positive change ratio of 4.76. Budget authority for HUD, 
however, fell $2.2 billion a year in constant dollars, for a 
negative -6.95 change ratio on average spending of $31.8 
billion. Budget authority in constant dollars for the housing 
assistance subfunction showed the same pattern, falling $1.8 
billion a year on average spending of $24.5 billion for a 
negative change ratio of -7.15. The Indian Housing Development 
program, as measured by annual budget authority for new 
construction, decreased in constant dollars at an annual rate 
of $64.3 million on average spending of $515.7 million, for a 
negative change ratio of -12.46, a more steeply declining rate 
than for federal housing budget authority as a whole. Graphs 7 
and 8 illustrate the trends in both outlays and budget 
authority for HUD and the housing assistance subfunction. Graph 
9 depicts the trend for the Indian Housing Development Program. 
Graph 10 combines HUD and housing assistance subfunction 
outlays with Indian housing development budget authority.\9\
---------------------------------------------------------------------------
    \8\ The time period for housing data is shortened from FY1975-1996 
to FY1978-1996 because of missing data for Indian housing development 
in FY1975 and FY1977.
    \9\ Budget authority data for HUD and the housing assistance 
subfunction were not included in graph 10 because they caused scaling 
problems in the graph.
---------------------------------------------------------------------------
    Housing trends during FY1982-1997 are mixed compared with 
those for the longer period (see table 4). Indian Housing 
Development program expenditures in constant dollars decreased 
less rapidly than in FY1978-1997, falling at an annual rate of 
$26.6 million (-8.52 change ratio) on an average level of $312 
million. Overall HUD outlays in constant dollars, on the other 
hand, were slower than in FY1978-1997, increasing only $254.6 
million a year (1.02 change ratio) on an average level of $24.9 
billion. Housing assistance subfunction outlays in constant 
dollars grew faster than HUD spending--a change ratio of 3.22 
based on increases of $651.5 million a year with an average 
level of $20.2 billion--but still lagged behind the rate for 
FY1978-1997. Budget authority trends for HUD and the housing 
assistance subfunction, in constant dollars, were somewhat more 
positive in the FY1982-1997 period than in the longer FY1978-
1997 period. As graphs 7 and 8 show, the greatest fall in 
budget authority for HUD and the housing assistance subfunction 
occurred before FY1984. (The decline in Indian Housing 
Development budget authority, as graph 9 shows, extended until 
FY1990.) During FY1982-1997, HUD's budget authority in constant 
dollars declined $490.5 million a year on average spending of 
$23.9 billion, a negative change ratio of -2.05, while housing 
assistance subfunction budget authority, in constant dollars, 
fell less rapidly than in FY1978-1997, going down $178.8 
million a year on average spending of $17.8 billion, for a 
change ratio of -1.00.

            economic development and employment and training

    Economic development spending, in constant dollars, has 
declined during the period FY1975-1997 in both the overall U.S. 
budget and the Indian-related budget. Here we compare the U.S. 
community and regional development budget function with the BIA 
economic development program \10\ and with the Administration 
for Native Americans, which provides funding for social and 
economic development projects to Indian tribal governments and 
nongovernmental Indian organizations. Measured in constant 
dollars, all three economic development programs have lost 
ground, but the Indian-related ones have fallen slightly 
faster. Table 2 shows that the U.S. community and regional 
development function has declined at an annual rate of $389 
million, for a change ratio of -3.31, while averaging $11.7 
billion a year in spending during this period. ANA 
expenditures, with an average level of $46.9 million, have 
decreased by $2.2 million a year, for a negative change ratio 
of -4.64. The BIA economic development program has fallen most 
rapidly, declining by $4.7 million a year--a negative change 
ratio of -5.51--on an average spending level of $86 million. 
Graphs 11-13, and the respective r \2\s for the community and 
regional development function (.317), BIA economic development 
(.669), and ANA (.691), all show that the decline during 
FY1975-1997 has been more consistent for the Indian-related 
programs.
---------------------------------------------------------------------------
    \10\ As noted above, the time series for BIA economic development 
is not internally consistent because of BIA budget restructuring for 
FY1993-1997.
---------------------------------------------------------------------------
    Economic development spending during the FY1982-1997 
period, measured in constant dollars, continued to decline for 
Indian but not national economic development, as shown in table 
4, although not as fast as in the longer period. The federal 
community and regional development function rose during this 
period by $7.6 million a year (change ratio of 0.08) on average 
spending of $9.4 billion. ANA spending fell by a negative 
change ratio of -1.16 ($0.4 million a year) on an average level 
of $36.6 million. BIA economic development went down the 
fastest, being reduced by a change ratio of -3.11 ($2 million a 
year) on average spending of $63.4 million. The downward trends 
were not at all consistent for any of these economic 
development measures during this period.
    Employment and training expenditures, in constant dollars, 
also declined during FY1975-1997 for both general U.S. programs 
and Indian-related programs. The federal training and 
employment subfunction fell at an annual rate of $513.8 
million, producing a negative change ratio of -5.25 on average 
spending of $9.8 billion. The U.S. Department of Labor fell at 
a slower rate, its larger annual decrease (-$834.7 million) 
generating a smaller change ratio (-2.10) on higher average 
spending ($39.7 billion). The Indian and Native American 
Employment and Training Program (INAP) in the Labor Department 
had the largest negative change ratio, -9.11, based on an 
annual decrease of $12.5 million and average spending of $136.7 
million.\11\ Graphs 14-16 depict these declines in employment 
and training expenditures.
---------------------------------------------------------------------------
    \11\ As noted above, the time series used here includes CETA Indian 
programs for FY1975-1983 and the INAP proper for FY1984-1997.
---------------------------------------------------------------------------
    The FY1982-1997 period saw a lessening of the rates of 
decline in employment and training expenditures in constant 
dollars for the Labor Department, the training and employment 
subfunction, and INAP, as table 4 shows. The Labor Department's 
negative change ratio shrank to -0.85 because its annual 
decrease in constant dollars was only $304.1 million on average 
spending of $35.8 billion. The training and employment 
subfunction showed a negative change ratio of only -0.17, based 
on an annual decrease of $11.8 million and average spending of 
$6.8 billion, both in constant dollars. INAP fell at a far 
higher rate than the Labor Department or the training and 
employment subfunction during FY1982-1997, losing $3.7 million 
in constant dollars annually in spending for a negative change 
ratio of -5.08, based on average spending of $73.1 million.

                          overall budget areas

    This section compares trends over the time period for the 
total BIA budget, overall Indian-program spending,\12\ and the 
federal non-defense budget \13\ as a whole, using both current 
and constant dollars. For the BIA, table 1 and graph 17 
indicate an increase in spending in current dollars during 
FY1975-1997, with spending going up by $45 million a year 
(change ratio of 3.76) with an average level of $1.2 billion. 
Table 2 and graph 18, however, show that in constant dollars 
there was actually a decline in the BIA budget of $11.3 million 
a year (-0.71 change ratio), on an average spending level of 
$1.6 billion. A steady increase (r \2\ of .844) in current 
dollars becomes, when corrected for inflation, an uneven 
decline (r \2\ of .134) in constant dollars. As graph 18 shows, 
the unevenness results from a lengthy decline (in constant 
dollars) followed by an uneven rise.
---------------------------------------------------------------------------
    \12\ ``Overall Indian-program spending'' means here the six major 
Indian programs covered in this memo.
    \13\ The Federal non-defense budget used here excludes both 
national defense expenditures and net interest payments on the national 
debt.
---------------------------------------------------------------------------
    Overall federal non-defense spending, however, departs from 
the pattern for Indian-related spending. Federal spending as a 
whole in current dollars went up during the period FY1975-1997, 
at a rate of $40.4 billion a year (6.44 change ratio) with an 
average level of $626.9 billion (see table 1). In constant 
dollars, federal spending still went up, at a rate of $20.6 
billion (2.61 change ratio) on an average level of $789.2 
billion (see table 2). Graphs 19 and 20 illustrate these upward 
trends in current and constant dollars.
    The overall Indian-related budget follows the same pattern 
as the BIA. Current-dollar spending during the FY1975-1997 
period, as shown in table 1, went up at a rate of $109.9 
million a year, change ratio of 3.92, on an average level of 
$2.8 billion. Constant-dollar spending, however, is shown in 
table 2 to have gone down at a rate of $15.9 million a year 
(-0.43 negative change ratio) on an average spending level of 
$3.7 billion. The small size of the negative change ratio in 
constant dollars, and the inconsistency of the related trend (r 
\2\ of .027), result from the same pattern as that for BIA--a 
long fall followed by a recent uneven upward trend. Graphs 21 
and 22 demonstrate the two trends.
    Population data can be used to get a simple comparison of 
per-capita federal spending between the overall U.S. population 
and the Indian population. Table 1 includes population data 
similar to the budget data. The data (which include projections 
for 1996 and 1997) show that overall United States population 
increased at a rate of 2,342,822 people a year (0.97 change 
ratio) during the period 1975-1997, with an average level of 
241,267,652 people. The Indian population (as measured by the 
IHS service population) is much smaller, with an average level 
of 1,016,945, but it has grown much faster, increasing at an 
annual rate of 38,679 persons, for a change ratio of 3.80.
    To get a measure of per-capita federal spending for each of 
the two groups, we took each year in the FY1975-1997 period and 
divided the overall federal non-defense budget by the total 
U.S. population, and the overall Indian budget by the Indian 
population. Graphs 23A and 23B illustrate the resulting trends 
for current and constant dollars, respectively. They show that 
during the first ten years of the period the federal government 
spent more per capita on Indians than on the population as a 
whole. After 1985, however, Indians received less expenditure 
per capita, under major Indian-related programs, than the 
population as a whole. Throughout the 1975-1997 period, per-
capita spending in constant dollars on the U.S. population as a 
whole consistently increased, whereas per-capita spending in 
constant dollars on Indians through major Indian-related 
programs began to fall after 1979, with a slight upward change 
from 1990 to 1994. Graphs 23C and 23D display the two 
populations' growth trends over the 1975-1997 period.

                                summary

    The data show that Indian-related spending, corrected for 
inflation, has been going down in almost all areas. Among the 
Indian-related items examined for the FY1975-1997 period, as 
measured in constant dollars, only the IHS and two program 
areas within the BIA, natural resources and tribal services 
(which here includes the BIA's Housing Improvement Program), 
have avoided this trend.\14\ In the FY1982-1997 period, 
however, the BIA natural resources program area changes to a 
negative trend.
---------------------------------------------------------------------------
    \14\ As noted above, the time series for BIA natural resources and 
tribal services is not internally consistent because of BIA budget 
restructuring for FY1993-1997.
---------------------------------------------------------------------------
    The overall downward trend in federal Indian spending is 
not obvious if one looks only at current-dollar data. One has 
to look instead at constant-dollar figures. The tables and 
graphs show that, in constant dollars, overall Indian spending 
has tended to go down over the full course of the FY1975-1997 
period, while overall federal non-defense spending has gone up. 
The latter years of this period, after 1990, have seen an 
uneven upward trend in overall Indian spending in constant 
dollars, though not yet enough to bring the annual change and 
change ratio to positive numbers.
    When one looks not only at overall Indian spending but also 
at its major components--BIA, IHS, Office of Indian Education 
in the Education Department, Indian Housing Development program 
in HUD, ANA, and INAP--one sees from table 2 and graph 24 that, 
in constant dollars, all major spending items except IHS have 
declined during the period FY1975-1997. Moreover, a comparison 
in constant dollars of overall Indian spending and its major 
components, on the one hand, with comparable budget items in 
the full federal budget, on the other, indicates that most 
Indian-program spending areas have lagged behind their 
equivalent federal spending areas. (See graph 25.) This is true 
even of IHS.
    If BIA spending and overall Indian spending were both to 
decline in constant dollars at the same rates of annual change 
during the period FY1998-2005 as they did during FY1975-1997 
(-$11.3 million and -$15.9 million, respectively, in constant 
dollars), as shown in graph 26, then by FY2005 overall Indian-
program spending in 1994 dollars would have fallen from a 
proposed $3.94 billion in FY1997 to $3.81 billion in FY2005. 
BIA spending in 1994 dollars would have fallen from a proposed 
$1.66 billion in FY1997 to $1.57 billion in FY2005.
    If you have any questions, or if I can be of further 
assistance, please call me at 707-8641.

         TABLE 1--Trends in Selected Elements of the Federal Budget in Current Dollars, FY 1975-1997\1\         
                                          [Dollar figures in millions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                                                       Trend    
                                                   Average level   Annual change   Change ratio     consistency 
                                                        (A)             (B)            (B/A)          (r\2\)    
----------------------------------------------------------------------------------------------------------------
Eductions:                                                                                                      
    U.S. Dept. of Education.....................       $18,935.3        $1,067.0            5.63           0.937
    Education function..........................        34,938.2         1,554.5            4.45           0.868
    Indian Education Office (U.S. Dept. of                                                                      
     Education).................................            69.8             0.9            1.26           0.343
    BIA education...............................           333.3            14.0            4.19           0.682
Health:                                                                                                         
    U.S. Dept. of Health & Human Services                                                                       
     (excluding Social Security Admin.).........       149,957.9        13,909.4            9.28           0.928
    Health function.............................        53,042.5         5,307.9           10.01           0.871
    Indian Health Service.......................         1,091.4            82.4            7.55           0.930
Housing:                                                                                                        
    U.S. Dept. of Housing & Urban Devt.                                                                         
     (outlays)\3\...............................        19,761.0         1,017.3            5.15           0.773
    U.S. Dept. of Housing & Urban Devt.                                                                         
     (B.A.)\3\..................................        23,419.8          -561.1           -2.40           0.930
    Housing assistance subfunction (outlays)\3\.        15,502.5         1,207.0            7.79           0.820
    Housing assistance subfunction (B.A.)\3\....        17,973.0          -429.0           -2.39           0.131
    Indian Housing Devt. Pgm. in HUD (B.A.)\3\..           350.0           -29.5           -8.43           0.623
Economic Development and Training and                                                                           
 Employment:                                                                                                    
    Community & regional development function...         8,353.7           108.6            1.30           0.088
    Administration for Native Americans (HHS)...            32.4             0.1            0.22           0.019
    BIA economic development\2\.................            58.6            -0.6           -1.02           0.084
    U.S. Dept. of Labor.........................        28,998.6           686.6            2.37           0.367
    Training & employment subfunction...........         6,692.3           -40.9           -0.61           0.020
    Indian & Native Am. Training & Emplt                                                                        
     (DOL)\4\...................................            86.1            -4.4           -5.12           0.317
Natural Resources:                                                                                              
    U.S. Dept. of the Interior..................         5,071.7           205.2            4.05           0.934
    Natural resources function..................        15,117.3           621.4            4.11           0.922
    BIA natural resources\2\....................           112.4             5.3            4.71           0.764
Overall:                                                                                                        
    BIA Toal....................................         1,197.4            45.0            3.76           0.844
    BIA tribal services\2\......................           310.8            19.5            6.27           0.916
    Overall Indian budget.......................         2,803.8           109.9            3.92           0.772
    Federal Non-defense budget\5\...............       626,946.1        40,353.5            6.44           0.978
Propulation:                                                                                                    
    U.S. population.............................     241,267,652       2,342,822            0.97           0.999
    Indian population (IHS) ests)...............       1,016,945          38,679            3,80           0.987
----------------------------------------------------------------------------------------------------------------
\1\ See Appendix table 1 for data used to calculate these figures.                                              
\2\ Inconsistent time series from FY 1993 on, because of BIA budget restructuring. ``BIA education'' excludes   
  BIA education construction. Data for FY 1996E and FY1997P are CRS estimates.                                  
\3\ Covers only FY 1978-1997. B.A. = budget authority.                                                          
\4\ FY 1975-1983: CETA Indian program. FY 1984-1997: Indian & Native American Training & Employment Program.    
\5\ Excludes national devense outlays and net interest payments on national debt.                               


      TABLE 2.--Trends in Selected Elements of the Federal Budget in Constant 1994 Dollars, FY1975-1997 \1\     
                           [Constant dollars based on Chain-Type Price Index for GDP]                           
                                          [Dollar figures in millions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                                                       Trend    
                                                   Average level   Annual change   Change ratio     consistency 
                                                        (A)             (B)            (B/A)          (r\2\)    
----------------------------------------------------------------------------------------------------------------
Education:                                                                                                      
    U.S. Dept. of Education.....................       $24,198.7          $415.3            1.72           0.608
    Education function..........................        45,975.5            69.7            0.15           0.005
    Indian Education Office (U.S. Dept of                                                                       
     Education).................................            97.3            -2.9           -3.02           0.751
    BIA education \2\...........................           444.5            -2.3           -0.53           0.032
Health:                                                                                                         
    U.S. Dept. of Health & Human Services                                                                       
     (excluding Social Security Admin.).........       178,909.2        10,558.0            5.90           0.929
    Health function.............................        62,740.1         4,089.4            6.52           0.831
    Indian Health Service.......................         1,346.0            51.8            3.85           0.828
Housing:                                                                                                        
    U.S. Dept. of Housing & Urban Devt.                                                                         
     (outlays) \3\..............................        23,906.7           400.5            1.68           0.240
    U.S. Dept. of Housing & Urban Devt. (B.A.)                                                                  
     \3\........................................        31,812.9        -2,211.4           -6.95           0.540
    Housing assistance subfunction (outlays) \3\        18,085.3           861.6            4.76           0.574
    Housing assistance subfunction (B.A.) \3\...        24,511.4        -1,752.6           -7.15           0.457
    Indian Housing Devt. Pgm. in HUD (B.A.) \3\.           515.7           -64.3          -12.46           0.657
Economic Development and Training and                                                                           
 Employment:                                                                                                    
    Community & regional development function...        11,739.0          -389.0           -3.31           0.317
    Administration for Native Americans (HHS)...            46.9            -2.2           -4.64           0.691
    BIA economic development \2\................            86.0            -4.7           -5.51           0.669
    U.S. Dept. of Labor.........................        39,716.8          -834.7           -2.10           0.338
    Training & employment subfunction...........         9,788.4          -513.8           -5.25           0.477
    Indian & Native Am. Training & Emplt. (DOL)                                                                 
     \4\........................................           136.7           -12.5           -9.11           0.471
Natural Resources:                                                                                              
    U.S. Dept. of the Interior..................         6,690.3            -3.2           -0.05           0.001
    Natural resources function..................        19,982.3           -26.0           -0.13           0.008
    BIA natural resources \2\...................           144.5             1.9            1.29           0.171
Overall:                                                                                                        
    BIA Total...................................         1,600.4           -11.3           -0.71           0.134
    BIA tribal services \2\.....................           394.0             8.9            2.27           0.637
    Overall Indian budget.......................         3,727.9           -15.9           -0.43           0.027
    Federal non-defense budget \5\..............       789,233.6        20.578.6            2.61          0.941 
----------------------------------------------------------------------------------------------------------------
\1\ See Appendix table 2 for data used to calculate these figures.                                              
\2\ Inconsistent time series from FY 1993 on, because of BIA budget restructuring. ``BIA education'' excludes   
  BIA education consturction. Data for FY1996E and FY1997P are CRS estimates.                                   
\3\ Covers only FY1978-1997. B.A.=budget authority.                                                             
\4\ FY1975-1983: CETA Indian program. FY1984-1997: Indian & Native American Training & Employment Program.      
\5\ Excludes national defense outlays and net interest payments on national debt.                               


        TABLE 3.--Trends in Selected Elements of the Federal Budget in Current Dollars, FY 1982-1997 \1\        
                                          [Dollar figures in millions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                                                       Trend    
                                                   Average level   Annual change   Change ratio     Consistency 
                                                        (A)             (B)            (B/A)           (r2)     
----------------------------------------------------------------------------------------------------------------
Education:                                                                                                      
    U.S. Dept. of Education.....................       $22,295.9        $1,223.3            5.49           0.914
    Education function..........................        39,066.1         2,134.1            5.46           0.945
    Indian Education Office (U.S. Dept. of                                                                      
     Education).................................            72.5             0.6            0.89           0.181
    BIA education \2\...........................           368.6            21.8            5.91           0.729
Health:                                                                                                         
    U.S. Dept. of Health & Human Services                                                                       
     (excluding Social Security Admin.).........       191,867.4        18,107.2            9.44           0.951
    Health function.............................        67,809.9         7,630.8           11.25           0.936
    Indian Health Service.......................         1,336.7           105.7            7.91           0.946
Housing:                                                                                                        
    U.S. Dept. of Housing & Urban Devt.                                                                         
     (outlays) \3\..............................        21,920.9           936.2            4.27           0.615
    U.S. Dept. of Housing & Urban Devt. (B.A.)                                                                  
     \3\........................................        20,574.3           251.3            1.22           0.051
    Housing assistance subfunction (outlays) \3\        18,038.9         1,147.2            6.36           0.681
    Housing assistance subfunction (B.A.) \3\...        15,470.0           357.9            2.31           0.108
    Indian Housing Devt. Pgm. in HUD (B.A.) \3\.           256.8           -12.8           -4.99           0.423
Economic Development and Training and                                                                           
 Employment:                                                                                                    
    Community & regional development function...         8,200.6           306.5            3.74           0.404
    Administration for Native Americans (HHS)...            31.7             0.7            2.10           0.800
    BIA economic development \2\................            54.2             0.2            0.37           0.007
    U.S. Dept. of Labor.........................        31,066.3           793.0            2.55           0.222
    Training & employment subfunction...........         5,968.2           188.9            3.16           0.817
    Indian & Native Am. Training & Emplt. (DOL)                                                                 
     \4\........................................            61.6            -1.1           -1.81           0.520
Natural Resources:                                                                                              
    U.S. Dept. of the Interior..................         5,738.2           215.6            3.76           0.930
    Natural resources function..................        16,974.5           750.2            4.42           0.936
    BIA natural resources \2\...................           135.0             2.7            2.02           0.350
Overall:                                                                                                        
    BIA Total...................................         1,324.1            60.4            4.56           0.842
    BIA tribal services \2\.....................           370.7            23.9            6.46           0.891
    Overall Indian budget.......................         3,083.4           153.5            4.98           0.862
    Federal non-defense budget \5\..............       758,749.0        45,698.5            6.02           0.970
Population:                                                                                                     
    U.S. population.............................     249,348,563       2,405,504            0.96           0.998
    Indian population (IHS ests.)...............       1,147,544          40,405            3.52           0.979
----------------------------------------------------------------------------------------------------------------
\1\ See Appendix table 1 for data used to calculate these figures.                                              
\2\ Inconsistent time series from FY1993 on, because of BIA budget restructuring. ``BIA education'' excludes BIA
  education construction. Data for FY1996E and FY1997P are CRS estimates.                                       
\3\ Covers only FY1978-1997. B.A.=budget authority.                                                             
\4\ FY1975-1983: CETA Indian program. FY1984-1997: Indian & Native American Training and Employment Program.    
\5\ Excludes national defense outlays and net interest payments on national debt.                               


      TABLE 4. TRENDS IN SELECTED ELEMENTS OF THE FEDERAL BUDGET IN CONSTANT 1994 DOLLARS, FY 1982-1997 \1\     
                           [Constant dollars based on Chain-Type Price Index for GDP]                           
                                          [Dollar figures in millions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                                                       Trend    
                                                   Average Level   Annual Change   Change Ratio     Consistency 
                                                        (A)             (B)            (B/A)          (r\2\)    
----------------------------------------------------------------------------------------------------------------
Education:                                                                                                      
    U.S. Dept. of Education.....................       $25,132.2          $606.7            2.41           0.725
    Education function..........................        44,063.3         1,026.2            2.33           0.813
    Indian Education Office (U.S. Dept. of                                                                      
     Education).................................            84.4            -2.0           -2.40           0.617
    BIA education \2\...........................           414.6            11.1            2.66           0.368
Health:                                                                                                         
    U.S. Dept. of Health & Human Services                                                                       
     (excluding Social Security Admin.).........       210,612.0        12,915.0            6.13           0.951
    Health function.............................        73,467.7         6,252.7            8.51           0.932
    Indian Health Service.......................         1,481.5            73.6            4.97           0.906
Housing:                                                                                                        
    U.S. Dept. of Housing & Urban Devt.                                                                         
     (outlays) \3\..............................        24,941.9           254.6            1.02           0.070
    U.S. Dept. of Housing & Urban Devt. (B.A.)                                                                  
     \3\........................................        23,879.1          -490.5           -2.05           0.124
    Housing assistance subfunction (outlays) \3\        20,232.8           651.5            3.22           0.302
    Housing assistance subfunction (B.A.) \3\...        17,826.0          -178.8           -1.00           0.020
    Indian Housing Devt. Pgm. in HUD (B.A.) \3\.           312.0           -26.6           -8.52           0.620
Economic Development and Training and                                                                           
 Employment:                                                                                                    
    Community & regional development function...         9,389.9             7.6            0.08           0.000
    Administration for Native Americans (HHS)...            36.6            -0.4           -1.16           0.572
    BIA economic development \2\................            63.4            -2.0           -3.11           0.315
    U.S. Dept. of Labor.........................        35,761.3          -304.1           -0.85           0.030
    Training & employment subfunction...........         6,846.3           -11.8           -0.17           0.011
    Indian & Native Am. Training & Emplt. (DOL)                                                                 
     \4\........................................            73.1            -3.7           -5.08           0.850
Natural Resources:                                                                                              
    U.S. Dept. of the Interior..................         6,547.7            39.6            0.60           0.299
    Natural resources function..................        19,283.2           241.1            1.25           0.590
    BIA natural resources \2\...................           155.8            -1.5           -0.95           0.094
Overall:                                                                                                        
    BIA Total...................................         1,502.8            20.4            1.35           0.338
    BIA tribal services \2\.....................           415.6            13.6            3.27           0.719
    Overall Indian budget.......................         3,490.4            61.2            1.75           0.470
    Federal non-defense budget \5\..............       852,556.6        24,846.5            2.91           0.934
----------------------------------------------------------------------------------------------------------------
Notes:                                                                                                          
\1\ See Appendix table 2 for data used to calculate these figures.                                              
\2\ Inconsistent time series from FY 1993 on, because of BIA budget restructuring. ``BIA education'' excludes   
  BIA education construction. Data for FY 1996E and FY 1997P are CRS estimates.                                 
\3\ Covers only FY 1978-1997. B.A.=budget authority.                                                            
\4\ FY 1975-1983: CETA Indian program. FY 1984-1997: Indian & Native American Training & Employment Program.    
\5\ Excludes national defense outlays and net interest payments on national debt.                               




                                           APPENDIX TABLE 1. BUDGET DATA FOR SELECTED ELEMENTS OF THE FEDERAL BUDGET, IN CURRENT DOLLARS, FY 1975-1997                                          
                                                                    [Dollar amounts in thousands, except per capita figures]                                                                    
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                             Indian & Native                    
                                                              Bureau of Indian    Indian Health     Indian Education    Indian Housing   Admin. for Native       American                       
                        Fiscal year                               Affairs            Service        Office in Educ.   Devt. Pgm. in HUD      Americans         Employment &      Overall Indian 
                                                                 (Approps.)         (Approps.)      Dept. (Approps.)  (B.A. Use for New      (Approps.)     Training in Labor        Budget     
                                                                                                                        Construction)                        Dept. (Approps.)                   
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975.......................................................           $738,236           $293,103            $42,034                 NA            $32,000            $62,304          1,167,677
1976.......................................................            808,095            338,926             57,055           $511,200             41,000             80,198          1,836,474
1977.......................................................            787,359            509,055             57,212                 NA             33,000            236,525          1,623,151
1978.......................................................            897,840            513,267             59,732            696,900             33,000             77,160          2,277,799
1979.......................................................          1,031,195            569,153             71,735            874,300             33,100            208,684          2,788,167
1980.......................................................            994,227            620,871             75,900            847,900             33,800            183,835          2,756,533
1981.......................................................          1,098,447            869,762             81,680            471,500             33,800            146,817          2,702,006
1982.......................................................            970,360            676,157             77,852            494,300             28,000             77,436          2,324,105
1983.......................................................          1,149,902            752,916             69,185            340,600             28,000             77,355          2,417,958
1984.......................................................            957,593            832,407             68,780            368,100             29,000             62,243          2,318,123
1985.......................................................          1,019,411            862,203             67,404            290,200             29,000             62,243          2,330,461
1986.......................................................            995,693            867,177             64,187            299,500             27,742             59,567          2,313,866
1987.......................................................          1,036,253            940,750             64,036            245,000             28,989             61,484          2,376,512
1988.......................................................          1,071,406          1,008,818             64,234            247,800             29,679             59,713          2,481,650
1989.......................................................          1,122,966          1,081,993             71,553            102,699             29,975             58,996          2,468,182
1990.......................................................          1,355,720          1,250,133             73,620            136,099             31,709             58,193          2,905,474
1991.......................................................          1,588,541          1,577,549             75,364            216,083             33,375             59,624          3,520,536
1992.......................................................          1,536,954          1,705,954             76,570            239,797             33,920             63,000          3,656,195
1993.......................................................          1,548,709          1,858,630             80,583            257,610             34,502             61,871          3,841,905
1994.......................................................          1,778,653          1,947,175             83,500            263,000             30,984             63,895          4,167,207
1995.......................................................          1,729,398          1,960,074             81,041            248,006             38,382             59,787          4,116,688
1996E......................................................          1,571,412          1,999,800             61,000            160,000             35,000             50,000          3,877,212
1997P......................................................          1,782,490          2,066,155             81,500            200,000             38,382             50,000          4,218,527
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                   U.S. Dept. of                                
                                                              BIA Education     BIA Tribal      BIA Economic      BIA Natural      U.S. Dept. of    HHS (except                                 
                        Fiscal year                            Program \1\       Services      Devt. Program   Resources Program     Education       Soc. Sec.     U.S. Dept. of   U.S. Dept. of
                                                               (Approps.)    Program \1\,\2\      \1\,\3\        \1\ (Approps.)      (Outlays)        Admin.)      HUD (Outlays)     HUD (BA)   
                                                                                (Approps.)       (Approps.)                                          (Outlays)                                  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975.......................................................        $226,495          $98,703          $44,223            $31,337      $7,557,000     $33,751,000      $7,512,000              NA
1976.......................................................         243,590          137,616           42,441             36,012       8,049,000      40,261,000       7,026,000      29,200,000
1977.......................................................         236,700          159,118           73,966             45,536       8,887,000      46,493,000       5,808,000      33,818,000
1978.......................................................         258,203          189,086           76,422             76,967      10,037,000      51,752,000       7,650,000      37,994,000
1979.......................................................         262,242          205,198           83,162             75,338      12,423,000      57,820,000       9,220,000      31,142,000
1980.......................................................         270,033          210,128           77,971             74,237      14,770,000      68,255,000      12,735,000      35,852,000
1981.......................................................         270,183          227,249           73,365             85,711      17,053,000      80,821,000      14,880,000      34,220,000
1982.......................................................         265,606          235,315           52,884             84,743      14,808,000      88,408,000      15,232,000      20,911,000
1983.......................................................         298,143          277,865           59,821            119,241      14,558,000      95,008,000      15,814,000      16,561,000
1984.......................................................         255,754          254,355           59,009             99,657      15,511,000     102,375,000      16,663,000      18,148,000
1985.......................................................         269,644          241,807           71,002            124,101      16,682,000     114,271,000      28,720,000      31,398,000
1986.......................................................         257,299          254,152           60,810            135,179      17,673,000     122,943,000      14,139,000      15,928,000
1987.......................................................         277,783          275,367           38,025            144,428      16,800,000     131,414,000      15,484,000      14,657,000
1988.......................................................         238,434          340,025           39,543            146,010      18,246,000     140,039,000      18,938,000      14,949,000
1989.......................................................         268,503          315,973           45,299            181,696      21,608,000     152,699,000      19,680,000      14,347,000
1990.......................................................         287,384          322,629           36,496            125,719      23,109,000     175,531,000      20,167,000      17,315,000
1991.......................................................         544,545          364,060           42,408            139,694      25,339,000     198,110,000       22,751,00      27,634,000
1992.......................................................         416,859          432,045           48,072            139,932      26,047,000     231,560,000      24,470,000      24,966,000
1993.......................................................         454,694          454,705           68,440            137,662      30,290,000     253,835,000      25,181,000      26,468,000
1994.......................................................         498,675          527,999           67,614            148,338      24,699,000     278,901,000      25,845,000      26,322,000
1995.......................................................         510,968          538,285           66,622            150,321      31,322,000     303,081,000      29,044,000      19,800,000
1996.......................................................         510,241          493,324           53,850            136,640      30,404,000     327,429,000      26,432,000      17,874,000
1997P......................................................         552,468          602,766           56,586            146,944      26,639,000     354,274,000      32,175,000      21,910,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Housing         Housing        Economic       Training &  
                                                                   U.S. Dept of    U.S. Dept of      Education        Health        Assistance      Assistance      Development     Employment  
                           Fiscal year                               Interior          Labor         Function        Function       Subfunction     Subfunction      Function       Subfunction 
                                                                     (Outlays)       (Outlays)       (Outlays)       (Outlays)       (Outlays)        (B.A.)         (Outlays)       (Outlays)  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975............................................................      $2,221,000     $17,610,000     $16,022,000     $12,930,000      $2,058,000             N/A      $4,322,000      $4,063,000
1976............................................................       2,433,000      25,526,000      18,910,000      15,734,000       2,499,000     $19,421,000       5,442,000       6,288,000
1977............................................................       3,213,000      22,269,000      21,104,000      17,302,000       2,968,000      28,629,000       7,021,000       6,877,000
1978............................................................       3,874,000      22,712,000      26,710,000      18,524,000       3,677,000      32,300,000      11,841,000      10,784,000
1979............................................................       4,168,000      22,459,000      30,223,000      20,494,000       4,367,000      24,780,000      10,480,000      10,833,000
1980............................................................       4,472,000      29,510,000      31,843,000      23,169,000       5,632,000      27,932,000      11,252,000      10,345,000
1981............................................................       4,456,000      29,821,000      33,709,000      26,866,000       7,752,000      26,927,000      10,568,000       9,241,000
1982............................................................       3,944,000      30,387,000      27,029,000      27,445,000       8,738,000      14,608,000       8,347,000       5,464,000
1983............................................................       4,547,000      37,604,000      26,606,000      28,641,000       9,998,000      10,498,000       7,560,000       5,295,000
1984............................................................       4,943,000      24,292,000      27,579,000      30,417,000      11,270,000      12,671,000       7,673,000       4,644,000
1985............................................................       4,820,000      23,699,000      29,342,000      33,542,000      25,263,000      26,879,000       7,680,000       4,972,000
1986............................................................       4,785,000      23,941,000      30,585,000      35,936,000      12,383,000      11,643,000       7,233,000       5,257,000
1987............................................................       5,046,000      23,253,000      29,724,000      39,967,000      12,656,000       9,864,000       5,051,000       5,084,000
1988............................................................       5,143,000      21,743,000      31,938,000      44,487,000      13,906,000       9,698,000       5,294,000       5,215,000
1989............................................................       5,207,000      22,549,000      36,674,000      48,390,000      14,715,000       9,568,000       5,362,000       5,292,000
1990............................................................       5,790,000      25,215,000      38,755,000      57,716,000      15,891,000      11,135,000       8,498,000       5,619,000
1991............................................................       6,088,000      33,954,000      43,354,000      71,183,000      17,175,000      19,721,000       6,811,000       5,934,000
1992............................................................       6,539,000      47,078,000      45,248,000      89,497,000      18,904,000      19,736,000       6,838,000       6,479,000
1993............................................................       6,784,000      44,651,000      50,012,000      99,415,000      21,542,000      21,170,000       9,052,000       6,700,000
1994............................................................       6,900,000      37,047,000      46,307,000     107,122,000      23,884,000      21,110,000      10,454,000       7,097,000
1995............................................................       7,405,000      32,090,000      54,263,000     115,418,000      27,524,000      15,325,000      10,641,000       7,430,000
1996E...........................................................       6,939,000      34,404,000      54,131,000     121,211,000      26,573,000      17,214,000      12,878,000       7,617,000
1997P...........................................................       6,931,000      35,154,000      53,510,000     134,572,000      28,200,000      16,680,000      11,837,000       7,392,000
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                    Chain-Type      Chain-Type  
                                                                      Natural      Total Federal                                                                    Price Index     Price Index 
                                                                     Resources      Non-Defense     U.S. Total        Indian       Overall U.S.     Indian Per       for Gross       for Gross  
                           Fiscal year                               Function       Budget \4\      Population      Population      Per Capita        Capita         Domestic        Domestic   
                                                                     (Outlays)       (Outlays)                      (IHS data)      Expenditure     Expenditure       Product         Product   
                                                                                                                                                                    (1992=100)      (1994=100)  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975............................................................      $7,346,000    $222,579,000     215,973,000         587,468          $1,031          $1,988            42.2            40.2
1976............................................................       8,184,000     255,446,000     218,035,000         611,296           1,172           3,004            44.6            42.5
1977............................................................      10,032,000     282,076,000     220,239,000         635,313           1,281           2,555            47.5            45.2
1978............................................................      10,983,000     318,793,000     222,585,000         726,551           1,432           3,135            50.9            48.5
1979............................................................      12,135,000     344,507,000     225,055,000         790,486           1,531           3,527            55.3            52.7
1980............................................................      13,858,000     404,414,000     227,726,000         828,609           1,776           3,327            60.4            57.5
1981............................................................      13,568,000     451,962,000     229,966,000         849,315           1,965           3,181            66.1            63.0
1982............................................................      12,998,000     475,402,000     232,188,000         871,167           2,047           2,668            70.2            66.9
1983............................................................      12,672,000     508,649,000     234,307,000         902,701           2,171           2,679            73.2            69.7
1984............................................................      12,593,000     513,310,000     236,348,000         936,942           2,172           2,474            75.9            72.3
1985............................................................      13,357,000     564,139,000     238,466,000         961,881           2,366           2,423            78.6            74.9
1986............................................................      13,639,000     580,914,000     240,651,000         986,551           2,414           2,345            80.6            76.8
1987............................................................      13,363,000     583,260,000     242,804,000       1,011,837           2,402           2,349            83.1            79.1
1988............................................................      14,606,000     621,941,000     245,021,000       1,038,121           2,538           2,391            86.1            82.0
1989............................................................      16,182,000     670,347,000     247,342,000       1,072,886           2,710           2,298            89.7            85.4
1990............................................................      17,080,000     769,153,000     249,911,000       1,207,236           3,078           2,407            93.6            89.1
1991............................................................      18,559,000     855,960,000     252,643,000       1,243,073           3,388           2,832            97.3            92.7
1992............................................................      20,025,000     883,085,000     255,407,000       1,270,666           3,458           2,877           100.0            95.2
1993............................................................      20,239,000     918,778,000     258,120,000       1,298,632           3,559           2,958           102.6            97.7
1994............................................................      21,064,000     976,242,000     260,651,000       1,339,678           3,745           3,111           105.0           100.0
1995............................................................      22,105,000   1,014,894,000     262,820,000       1,376,415           3,862           2,991           107.6           102.5
1996E...........................................................      21,550,000   1,065,796,000     265,253,000       1,405,971           4,018           2,758           110.1           104.8
1997P...........................................................      21,560,000   1,138,114,000     267,645,000       1,435,947           4,252           2,938           112.5           107.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                       APPENDIX TABLE 2.--BUDGET DATA FOR SELECTED ELEMENTS IF THE FEDERAL BUDGET, IN CONSTANT 1994 DOLLARS, FY 1975-1997                                       
                                                                    [Dollar amounts in thousands, except per capita figures]                                                                    
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                             Indian & Native                    
                                                              Bureau of Indian    Indian Health     Indian Education    Indian Housing   Admin. for Native       American                       
                        Fiscal year                               Affairs            Service        Office in Educ.   Devt. Pgm. in HUD      Americans         Employment &      Overall Indian 
                                                                 (Approps.)         (Approps.)      Dept. (Approps.)  (B.A. Use for New      (Approps.)     Training in Labor        Budget     
                                                                                                                        Construction)                        Dept. (Approps.)                   
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975.......................................................         $1,836,843           $729,285           $104,587                 NA            $79,621           $155,022         $2,905,357
1976.......................................................          1,902,466            797,920            134,322          1,203,498             96,525            188,807          4,323,537
1977.......................................................          1,740,478          1,125,279            126,469                 NA             72,947            522,845          3,588,018
1978.......................................................          1,851,919          1,058,802            123,219          1,437,613             68,075            159,171          4,698,800
1979.......................................................          1,957,965          1,080,670            136,206          1,660,063             62,848            396,235          5,293,988
1980.......................................................          1,728,375          1,079,329            131,945          1,473,998             58,758            319,581          4,791,986
1981.......................................................          1,744,886          1,381,619            129,749            748,979             53,691            233,219          4,292,143
1982.......................................................          1,451,393          1,011,346            116,445            739,338             41,880            115,823          3,476,225
1983.......................................................          1,649,450          1,080,002             99,241            488,566             40,164            110,960          3,468,382
1984.......................................................          1,324,733          1,151,551             95,150            509,229             40,119             86,107          3,206,890
1985.......................................................          1,361,809          1,151,798             90,044            387,672             38,740             83,149          3,113,211
1986.......................................................          1,297,119          1,129,697             83,618            390,167             36,140             77,600          3,014,342
1987.......................................................          1,309,345          1,188,673             80,912            309,567             36,629             77,687          3,002,813
1988.......................................................          1,306,593          1,230,266             78,334            302,195             36,194             72,821          3,026,402
1989.......................................................          1,314,509          1,266,547             83,758            120,216             35,088             69,059          2,889,176
1990.......................................................          1,520,840          1,402,393             82,587            152,675             35,571             65,281          3,259,346
1991.......................................................          1,681,879          1,702,391             81,328            233,183             36,016             64,342          3,799,140
1992.......................................................          1,613,802          1,791,252             80,399            251,787             35,616             66,150          3,839,005
1993.......................................................          1,584,936          1,902,107             82,468            263,636             35,309             63,318          3,931,774
1994.......................................................          1,778,653          1,947,175             83,500            263,000             30,984             63,895          4,167,207
1995.......................................................          1,687,610          1,912,712             79,083            242,013             37,455             58,342          4,017,214
1996E......................................................          1,498,965          1,907,603             58,188            152,623             33,386             47,695          3,698,460
1997P......................................................          1,663,710          1,928,472             76,069            186,673             35,824             46,668          3,937,416
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                   U.S. Dept. of                                
                                                                BIA Education    BIA Tribal     BIA Economic      BIA Natural      U.S. Dept. of    HHS (except                                 
                         Fiscal year                             Program \1\      Services      Devt. Program  Resources Program     Education       Soc. Sec.     U.S. Dept. of   U.S. Dept. of
                                                                 (Approps.)     Program 1, 2        1, 3         \1\ (Approps.)      (Outlays)        Admin.)      HUD (Outlays)    HUD (B.A.)  
                                                                                 (Approps.)      (Approps.)                                          (Outlays)                                  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975.........................................................        $563,554        $245,588        $110,034            $77,971     $18,802,962     $83,977,607     $18,690,995              NA
1976.........................................................         573,474         323,984         123,460             84,782      18,949,439      94,784,865      16,541,031      68,744,395
1977.........................................................         523,232         351,735         163,504            100,659      19,644,947     102,774,000      12,838,737      74,755,579
1978.........................................................         532,639         390,060         157,649            158,773      20,705,010     106,757,564      15,780,943      78,376,621
1979.........................................................         497,928         389,616         157,903            143,047      23,587,975     109,784,810      17,506,329      59,130,380
1980.........................................................         469,428         349,643         135,546            129,054      25,676,325     118,655,215      22,138,659      62,325,497
1981.........................................................         429,186         360,986         116,540            136,153      27,088,729     128,384,342      23,636,914      54,358,548
1982.........................................................         397,274         351,967          79,100            126,752      22,148,718     132,234,188      22,782,906      31,277,137
1983.........................................................         427,664         398,577          85,809            171,042      20,882,377     136,281,967      22,684,016      23,755,533
1984.........................................................         353,810         351,875          81,633            137,865      21,457,905     141,625,494      23,051,581      25,105,929
1985.........................................................         360,211         323,025          94,850            165,784      22,285,115     152,652,099      38,366,412      41,943,893
1986.........................................................         335,191         331,091          79,219            176,102      23,023,139     160,161,476      18,419,293      20,749,876
1987.........................................................         350,989         347,937          48,046            182,490      21,227,437     166,046,570      19,564,621      18,519,675
1988.........................................................         290,773         414,665          48,223            178,061      22,251,220     170,779,268      23,095,122      18,230,488
1989.........................................................         314,301         369,868          53,026            212,688      25,293,645     178,744,649      23,036,789      16,794,147
1990.........................................................         322,386         361,924          40,941            141,031      25,923,558     196,909,776      22,623,237      19,423,878
1991.........................................................         587,638         392,871          45,764            150,749      27,344,245     213,787,770      24,551,439      29,820,863
1992.........................................................         437,702         453,647          50,476            146,929      27,349,350     243,138,000      25,693,500      26,214,300
1993.........................................................         465,330         465,341          70,041            140,882      30,998,538     259,772,661      25,770,029      27,087,135
1994.........................................................         498,675         527,999          67,614            148,338      24,699,000     278,901,000      25,845,000      26,322,000
1995.........................................................         498,621         525,278          65,012            146,689      30,565,149     295,757,481      28,342,193      19,321,561
1996E........................................................         478,132         470,580          51,367            130,340      29,002,278     312,333,477      25,213,400      17,049,951
1997P........................................................         515,653         562,599          52,815            137,152      27,663,941     330,666,181      30,030,949      20,449,979
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Housing         Housing        Economic       Training &  
                                                                   U.S. Dept. of   U.S. Dept. of     Education        Health        Assistance      Assistance      Development     Employment  
                           Fiscal year                               Interior          Labor         Function        Function       Subfunction     Subfunction      Function       Subfunction 
                                                                     (Outlays)       (Outlays)       (Outlays)       (Outlays)       (Outlays)        (B.A.)         (Outlays)       (Outlays)  
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975............................................................      $5,526,185     $43,816,351     $39,865,166     $32,171,801      $5,120,616              NA     $10,753,791     $10,109,360
1976............................................................       5,727,915      60,094,843      44,519,058      37,041,928       5,883,296      45,722,085      12,811,883      14,803,587
1977............................................................       7,102,421      49,226,211      46,650,947      38,246,526       6,560,842      63,285,158      15,520,105      15,201,789
1978............................................................       7,991,552      46,851,866      55,099,214      38,212,574       7,585,167      66,630,648      24,426,424      22,245,972
1979............................................................       7,913,924      42,643,671      57,385,443      38,912,658       8,291,772      47,050,633      19,898,734      20,568,987
1980............................................................       7,774,172      51,300,497      55,356,209      40,277,235       9,790,728      48,557,285      19,560,596      17,983,858
1981............................................................       7,078,366      47,370,726      53,546,823      42,676,702      12,314,070      42,773,601      16,787,292      14,679,349
1982............................................................       5,899,145      45,450,641      40,427,991      41,050,214      13,069,658      21,849,573      12,484,829       8,172,650
1983............................................................       6,522,336      53,940,164      38,164,344      41,083,402      14,341,393      15,058,607      10,844,262       7,595,287
1984............................................................       6,838,142      33,605,534      38,152,767      42,078,854      15,590,909      17,529,051      10,614,822       6,424,506
1985............................................................       6,438,931      31,658,969      39,197,328      44,808,015      33,748,282      35,907,061      10,259,542       6,641,985
1986............................................................       6,233,561      31,188,648      39,843,983      46,814,888      16,131,700      15,167,680       9,422,643       6,848,449
1987............................................................       6,375,812      29,381,047      37,557,401      50,499,819      15,991,336      12,463,538       6,382,130       6,423,827
1988............................................................       6,271,951      26,515,854      38,948,780      54,252,439      16,958,537      11,826,829       6,456,098       6,359,756
1989............................................................       6,095,151      26,395,151      42,929,431      56,643,813      17,224,916      11,200,000       6,276,589       6,194,649
1990............................................................       6,495,192      28,286,058      43,475,160      64,745,513      17,826,442      12,491,186       9,533,013       6,303,365
1991............................................................       6,569,784      36,641,007      46,784,892      76,816,187      18,534,173      21,281,655       7,350,000       6,403,597
1992............................................................       6,865,950      49,431,900      47,510,400      93,971,850      19,849,200      20,722,800       7,179,900       6,802,950
1993............................................................       6,942,690      45,695,468      51,181,871     101,740,497      22,045,906      21,665,205       9,263,743       6,856,725
1994............................................................       6,900,000      37,047,000      46,307,000     107,122,000      23,884,000      21,110,000      10,454,000       7,097,000
1995............................................................       7,226,069      31,314,591      52,951,812     112,629,089      26,858,922      14,954,693      10,383,875       7,250,465
1996E...........................................................       6,619,090      32,817,866      51,635,388     115,622,786      25,347,900      16,420,380      12,284,283       7,265,832
1997P...........................................................       6,469,138      32,811,437      49,944,245     125,604,502      26,320,832      15,568,492      11,048,216       6,899,418
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                         Total Federal Non-                                     
                                      Natural Resources    Defense Budget    Overall U.S. Per  Indian Per Capita
             Fiscal year                   Function        \4\ (Outlays)          Capita          Expenditure   
                                          (Outlays)                            Expenditure                      
----------------------------------------------------------------------------------------------------------------
1975................................        $18,277,962       $553,810,308             $2,564             $4,946
1976................................         19,267,265        601,386,323              2,758              7,073
1977................................         22,176,000        623,536,421              2,831              5,648
1978................................         22,656,483        657,627,996              2,955              6,467
1979................................         23,041,139        654,127,215              2,907              6,697
1980................................         24,090,894        703,037,583              3,087              5,783
1981................................         21,552,799        717,942,663              3,122              5,054
1982................................         19,441,453        711,071,368              3,062              3,990
1983................................         18,177,049        729,619,467              3,114              3,842
1984................................         17,421,146        710,112,648              3,005              3,423
1985................................         17,843,321        753,620,802              3,160              3,237
1986................................         17,767,928        756,773,821              3,145              3,055
1987................................         16,884,657        736,971,119              3,035              2,968
1988................................         17,812,195        758,464,634              3,096              2,915
1989................................         18,942,140        784,687,124              3,172              2,690
1990................................         19,160,256        862,831,891              3,453              2,700
1991................................         20,027,698        923,697,842              3,656              3,056
1992................................         21,026,250        927,239,250              3,630              3,021
1993................................         20,712,427        940,269,883              3,643              3,028
1994................................         21,064,000        976,242,000              3,745              3,111
1995................................         21,570,864        990,370,539              3,768              2,919
1996E...............................         20,556,476      1,016,659,399              3,833              2,631
1997P...............................         20,123,302      1,062,273,296              3,969              2,742
----------------------------------------------------------------------------------------------------------------
Notes to Appendix Tables:                                                                                       
1. Inconsistent time series from FY1993 on, because of BIA budget restructuring. ``BIA Education Program''      
  excludes BIA education construction. FY1996E and FY1997P are CRS estimates.                                   
2. Includes Tribal Services (with Housing Improvement Program) and Navajo-Hopi Settlement programs.             
3. Includes Road Maintenance program.                                                                           
4. Excludes national defense outlays and net interest payments on national debt.                                
N/A Not Available.                                                                                              
E Estimate                                                                                                      
P Proposed amounts and projections.                                                                             
B.A. Budget authority.                                                                                          

                                       U.S. Senate,
                                Committee on the Judiciary,
                                       Washington, DC, May 2, 1996.
Hon. Pete V. Domenici, Chairman,
Hon. Jim Exon, Ranking Minority Member,
Committee on the Budget, U.S. Senate, Washington, DC.
    Dear Pete and Jim: Thank you for your letter of February 
28, 1996 requesting our views pursuant to section 301(d) of the 
Congressional Budget Act. As you know, the Committee on the 
Judiciary has jurisdiction over Administration of Justice 
programs.
    Balancing the federal budget will, of course, require us to 
make tough choices about spending priorities. We share your 
view that we can make changes to produce savings throughout the 
government. No department should be exempt from scrutiny.
    The Administration's Fiscal Year 1997 request is quite 
different from the Fiscal Year 1995 submission. The 1995 
submission proposed fewer criminal case filings, fewer FBI 
personnel, fewer DEA personnel, fewer Organized Crime Drug 
Enforcement Task Force personnel and fewer federal prosecutors. 
This year, the Administration requests additional personnel. 
Nevertheless, there are opportunities for additional 
enhancements.

Flexibility in providing Assistance to Local Law Enforcement and Edward 
   Byrne Memorial State and Local Law Enforcement Assistance Programs

    The Administration requests $2.0 billion in seed money to 
fund the Community Oriented Policing Services program. We 
support additional policy officers on the street and we believe 
that local law enforcement knows best how to expend scarce 
financial resources. Therefore, they should be given more 
flexibility in how to utilize additional police personnel.
    The Administration's budget fails to recognize the need to 
provide State and Local governments with the appropriate 
flexibility to use federal funds in the manner which best suits 
their individual needs. During this 104th Congress, Republicans 
are attempting to fix this deficiency and will continue to 
fight to support local law enforcement. Accordingly, the Budget 
Committee should consider enhancements to the Edward Byrne 
Memorial State and Local Law Enforcement Assistance Programs.

                 immigration and naturalization service

    In Fiscal Year 1996, Congress provided an increase to the 
Immigration and naturalization Service of 25% over Fiscal year 
1995 levels. The Administration requests another 16% increase 
for the Immigration and Naturalization Service. We agree there 
is a need for enforcement of the nations' immigration laws, 
however, we need to be prudent as we spend scarce taxpayer 
resources. The Immigration and Naturalization Service needs to 
ensure that adequate safeguards are in place to properly screen 
and select candidates for employment that meet the highest 
standard required for each identified position.

                                 drugs

    After years of lack of leadership on the fight against 
drugs, the administration attempts to gloss over its dismal 
record by requesting an increase of 18.3% for the DEA and 
increases for other antidrug-operations. During this 
administration, the number of 12-17 year olds using marijuana 
increased from 1.6 million in 1992 to 2.9 million in 1994. The 
category of ``recent marijuana use'' increased a staggering 200 
percent among 14-15 year olds over the same period. Since 1992, 
there has been a 52 percent jump in the number of high-school 
seniors using drugs monthly. Even as worrisome, declines are 
noted in peer disapproval of drug use.
    We are pleased that the administration has taken heed of 
our warnings and is requesting sufficient funding for federal 
law enforcement initiatives to combat drug trafficking, 
distribution and abuse.

                          prison construction

    The proposed Fiscal year 1997 cuts the new construction 
budget by 11.6%, from $335 million to $296 million. As we 
attempt to bring more criminals to justice by funding 
additional agents, attorneys and judicial personnel, we need 
additional prison capacity. Now is not the time to yield on the 
initiative of increasing prison capacity.
    Additionally, we support full funding of the Violent 
Offender Incarceration and Truth-in-Sentencing Incentive Grants 
as passed by this Congress.

                         antiterrorism funding

    In the recently passed Antiterrorism and Effective Death 
Penalty Act of 1996, Congress authorized for Fiscal Year 1997 
$253.5 million to support the antiterrorism efforts of Federal 
law enforcement, State and local law enforcement and emergency 
service personnel. We support full funding of the amounts 
authorized in the Antiterrorism and Effective Death Penalty Act 
of 1996.

                  department of justice funding trends

    Since Fiscal Year 1982, the first full budget submission of 
the Reagan Administration, to the Fiscal Year 1997 request, the 
Justice Department's budget authority increases over 600%. 
Since Fiscal Year 1990 to Fiscal Year 1997 request, the Justice 
Department budget doubled. In fact, in recent history, the only 
year in which Justice Department funding did not increase was 
Fiscal Year 1994 budget, the first full year budget request of 
the Clinton Administration.
    Given the Fiscal Year 1994 and 1995 budget requests, the 
first two requests of this Administration, it is safe to say 
that funding increases for the Department of Justice and 
Federal Law Enforcement are due, in large part, to the efforts 
of this Republican party.
    In these times of fiscal restraint, enforcement of the law, 
the administration of Justice, and the punishment of crimes are 
vital functions on which the security and well being of our 
nation depend. All agencies of the government must face renewed 
scrutiny, however, special attention must be given to core 
government functions. In an annual budget of $1.638 trillion, 
expenditures of about $23.9 billion, less than 1.5% for the 
Administration of Justice function, is not exorbitant.
    Thank you again for contacting me on this matter, and we 
look forward to working closely with you on this matter and 
other issues.
            Sincerely,
                                   Orrin G. Hatch,
                                   Charles E. Grassley,
                                           U.S. Senators.
                                ------                                

                                       U.S. Senate,
                    Committee on Labor and Human Resources,
                                    Washington, DC, April 15, 1996.
Hon. Pete Domenici,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete: Thank you for seeking the views and estimates of 
the Senate Committee on Labor and Human Resources to aid your 
efforts in assembling the 1997 budget resolution.
    The Committee on Labor and Human Resources will continue to 
do its part to contribute to fiscal restraint. Doing so will 
allow us to preserve programs that work and serve the national 
interest best. We again look forward to working with your 
committee and the Committee on Appropriations to ensure that 
authorized funding levels for programs under the Labor 
Committee's jurisdiction are consistent with overall spending 
limits.
    The committee has an ambitious agenda for the remainder of 
the 104th Congress. As before, we will focus on the dual 
responsibilities of oversight and authorization, with an 
emphasis on program consolidation.

                               oversight

    The committee will continue to fulfill its oversight 
responsibilities, a task begun in the first session of the 
104th Congress. Special attention will be given to evaluating 
the continued need for programs under its jurisdiction.
    The committee is in the process of reauthorizing the 
National Institutes of Health. Grants made by the NIH to 
biomedical researchers constitute the bulk of support for 
biomedical research throughout this country. Two oversight 
hearings conducted earlier this year made a compelling case for 
continuing and increasing levels of government support for the 
NIH.
    Recently, the committee reported a bill reauthorizing the 
Individuals with Disabilities Education Act. Under the bill, 
discretionary programs under IDEA would be authorized at $254 
million annually. The committee also hopes to report 
legislation reauthorizing the Older Americans Act and allowing 
states more flexibility to meet the core objectives of the act 
based on the needs of senior citizen in each state.
    The committee also has approved legislation reforming the 
Food and Drug Administration and the Occupational Safety and 
Health Act. Other programs scheduled for oversight or 
reauthorization this year include AmeriCorps, the Fair Labor 
Standards Act, the National Science Foundation, and the Legal 
Services Corporation. The committee also plans oversight 
hearings on pension issues.
    As you will recall, the committee last year reported 
legislation to repeal the Davis-Bacon Act, 65-year-old 
legislation enacted when labor conditions were much different 
than they are today. Enactment of this repeal legislation would 
produce estimated savings of $2.7 billion over five years.

                             consolidation

    The committee will seek to continue efforts to achieve 
budget savings by reducing administrative expenses and 
eliminating duplicative activities in programs under its 
jurisdiction. Program consolidation is an important tool in 
accomplishing that task.
    Last year, the committee reported important legislation 
consolidating federal job training and work force development 
programs. More than 80 federal programs will be replaced by a 
grant to states. This legislation passed the Senate, and the 
bill is currently in conference with the House of 
Representatives.
    The Youth Development Community Block Grant, which also has 
been favorably reported by the committee, would consolidate 
current problem-focused federal programs funded through the 
Departments of Education, Justice, and Health and Human 
Services, as well as the crime bill, into a single grant 
allowing communities the flexibility and funding to develop 
programs to meet local needs. The bill authorizes $900 million 
for the grant, a level equal to the sum of the fiscal year 1995 
appropriation levels for existing programs and estimated fiscal 
year 1996 appropriations for the crime bill programs, less 10 
percent.
    The committee also hopes for enactment of legislation 
consolidating 44 separate health professions training programs 
into six programs, at a five-year savings of 7.5 percent. Such 
legislation was reported out of committee last year. The 
federal government spends approximately $400 million on these 
programs annually.

                              other issues

    During the budget reconciliation process last year, the 
committee drafted reforms to the student loan program to meet 
reconciliation instructions. In the reconciliation bill's final 
form, the student loan reforms would save $4.7 billion over 
seven years.
    Although the Balanced Budget Act of 1995 has been vetoed, 
the committee continues to hope for an agreement that could 
incorporate those savings. Additional substantial mandatory 
savings that might be expected of the committee during this 
budget cycle would be difficult to attain, given the limited 
number of mandatory programs under the committee's jurisdiction 
and the Senate's position on further changes to the student 
loan program.
    However, the committee will continue to seek to limit the 
expansion of the direct student loan program. The savings 
associated with this program depend on faulty scoring practices 
that last year's budget resolution attempted to correct. Until 
we have more data and experience with this program, it should 
be capped. We hope that you will again include language in the 
budget resolution requiring that the administrative cost of new 
direct student loans be measured on a net present value basis.
    The committee looks forward to continuing to work with you 
throughout the fiscal year 1997 budget process.
            Warmest regards,
                                    Nancy Landon Kassebaum,
                                                      U.S. Senator.
                                ------                                

                                       U.S. Senate,
                    Committee on Labor and Human Resources,
                                    Washington, DC, April 18, 1996.
Hon. Pete V. Domenici, Chairman

Hon. J. James Exon, Ranking Member
U.S. Senate, Committee on the Budget,
Washington, DC.
    Dear Pete and Jim: I write to provide minority views and 
estimates from the labor and Human Resources Committee for your 
consideration as you prepare the fiscal year 1997 budget 
resolution.
    As you know, the Labor Committee has very few programs or 
accounts within its jurisdiction that can generate mandatory 
savings. In fact, only the student loan accounts can provide 
significant mandatory savings.
    With respect to student loans, I urge you to reject the 
directed scorekeeping provision inserted into last year's 
budget resolution that incorrectly accounts for administrative 
expenses in the direct student loan program and will require an 
addition of $5.8 billion in outlays to the baseline used for 
the consideration of this year's budget resolution. It is 
completely unacceptable to manipulate scoring rules to create 
an artificial advantage for the guaranteed student loan 
program--particularly when such manipulation adds almost $6 
billion to the deficit.
    The President's budget proposal outlines a sound approach 
on student loans. It specifies that colleges, not the 
government, should be free to choose the student loan program 
that best serves their students, and it identifies $4.4 billion 
in outlay savings over six years by lowering costs in both the 
direct and guaranteed loan programs.
    On the discretionary side of the budget, the 602(b) 
allocation for the Labor, Health and Human Services, and 
Education Appropriations Subcommittee should be increased from 
the current level. We need to invest in the nation's future by 
supporting increased funding for education, job training, labor 
protection enforcement, health care, and poverty programs. The 
President's fiscal year 1997 budget request demonstrates that 
it is possible to balance the budget without cuts in these 
crucial areas.
    It is more important than ever to invest in education. Next 
year, enrollments will reach an all-time high of 52 million 
students. Schools and communities are working to help all 
children come to school ready to learn, to make their schools 
safe, to help all children achieve higher standards, and to 
provide access to higher education. We should support these 
efforts.
    I support increased funding in early childhood development 
programs, including Head Start and immunizations. I also 
support an increased investment in education programs, 
including Goals 2000, Title I: Helping Disadvantaged Children 
meet High Standards, TRIO, Safe and Drug-Free Schools and 
Communities, and Educational Technology. The President has made 
strong investments in these areas, and I encourage you to adopt 
them. We also should increase the maximum Pell grant and 
maintain or increase funding in higher education programs such 
as campus-based aid programs, including college work study, and 
Perkins loans and State Student Incentive Grants.
    In addition, the Budget Committee has an opportunity to 
establish a pro-worker support system. Priority investments in 
training and labor protection will provide individuals with the 
opportunity to improve their job skills and will ensure them a 
safe and secure workplace. I ask the Committee to invest in 
training programs including the Dislocated Worker, Summer Youth 
Employment, and School-to-Work programs. Priority workforce 
protection programs include the Occupational Safety and Health 
Administration, the Mine Safety and Health Administration, and 
the Wages and Hour Division. The President's 1997 budget 
request funds these programs at appropriate levels.
    Increased investments in health care and research will also 
benefit the nation. Increased funding for the Ryan White CARE 
Act will enhance the quality of life for individuals and 
families living with HIV disease. We should increase child care 
funding for low-income working families, so that they will not 
have to choose between the job they need and taking care of 
their children. In addition, the Substance Abuse and Mental 
Health Services Administration should receive an increase above 
the enacted fiscal year 1995 level. I support the President's 
fiscal year 1997 budget request for the Low-Income Home Energy 
Assistance Program, which would provide $1 billion in regular 
appropriations, plus $300 million in emergency funds.
    With my thanks for your consideration of these requests, 
and I look forward to working with you on these important 
issues.
            Sincerely,
                                 Edward M. Kennedy, Ranking Member.
                                ------                                

                                       U.S. Senate,
                     Committee on Rules and Administration,
                                    Washington, DC, April 15, 1996.
Hon. Pete V. Domenici, Chairman,
Hon. Jim Exon, Ranking Member
Committee on the Budget, U.S. Senate,
Washington, DC.
    Dear Pete and Jim: This is in response to your letter dated 
February 28, 1996, regarding the views and estimates of the 
Rules Committee on the budget for fiscal year 1997.
    We have reviewed the President's Budget with respect to the 
Legislative Branch accounts within the Committee's jurisdiction 
and believe that for the purposes of the budget resolution we 
do not anticipate any changes. These are the estimates of the 
Legislative Branch and are printed in the President's Budget 
without change. At this time the Committee has no plans for new 
initiatives that would have significant budgetary impact.
    With kind regards,
            Sincerely,
                                   John Warner,
                                           Chairman.
                                   Wendell H. Ford,
                                           Ranking Member.
                                ------                                

                                       U.S. Senate,
                               Committee on Small Business,
                                    Washington, DC, April 15, 1996.
Hon. Pete Domenici,
Chairman, Committee on the Budget,
U.S. Senate, Washington, DC.
Hon. J. James Exon,
Ranking Minority Member, Committee on the Budget
U.S. Senate, Washington, DC.
    Dear Pete and Jim: As Chairman of the Committee on Small 
Business, I am submitting the following views and estimates on 
the President's FY 1997 budget request for the Small Business 
Administration and other matters under the Committee's 
jurisdiction in compliance with Section 301(d) of the 
Congressional Budget Act.
    Last year, Senator Bumpers joined me in signing a letter to 
you in which we commented that it was time for the Small 
Business Administration to reevaluate the programs it 
administers to determine if they are truly needed federal 
responsibilities and, if so, whether they are being 
administered as effectively and efficiently as possible. We 
viewed 1995 as an opportunity to undertake a through top-to-
bottom review to ``rethink'' SBA, which would include its 
mission and purpose, its customers, and results Congress 
expects from funded programs and initiatives.
    Reaching this goal has not been easy. Last year, after 
Administration had submitted its Fiscal Year 1996 budget 
request, it subsequently announced its intention to undertake a 
significant reorganization of SBA, including elimination of 
certain field offices and adjustments to selected program 
activities. For the most part, SBA officials backed up its 
``reinvention'' announcement with press release-type 
documentation. The Committee on Small Business did not receive 
any detailed planning documents or cost analysis from SBA to 
implement its reorganization. In fact, within days after its 
announcement, SBA began to backtrack from its ``reinvention'' 
proposal, and no serious effort was made to implement its 
plans.
    I continue to support the fundamental mission of SBA, and I 
continue to believe that SBA can be streamlined and made more 
efficient in achieving this mission. The current structure of 
its headquarters and its 65+ field offices is antiquated and 
fails to make the best use of its resources in delivering its 
programs. For example, SBA continues to rely heavily on each of 
its field offices to process individual guaranteed loan 
applications, duplicating work already completed by banks that 
submit loan applications under the 7(a) guaranteed business 
loan program. By centralizing this function and enhancing its 
bank examination and supervision efforts, SBA would be able to 
close a substantial number of its field offices. Historical 
evidence indicates that the federal government sustains a lower 
loss rate on its SBA loan guarantees when originating lending 
institutions, rather than SBA, perform the loan review and 
approval process. Therefore, the taxpayer and the federal 
government would win twice if these reforms were adopted: first 
with a lower loan loss rate, and second with a reduced payroll 
accompanied by significant administrative and organizational 
savings.
    Last year Senator Bumpers and I recommended reducing the 
annual Function 370 Budgetary Authority in FY 1996-FY 2000 from 
$706 million to $586 million, a reduction of $120 million per 
year. This reduction was a 17% cut from SBA's FY 1995 BA. We 
believed these savings could be accomplished consistent with a 
Congressional demand for capable performance of SBA's necessary 
and appropriate core functions. The five year savings we 
projected last year would total $600 million.
    The final funding level approved by Congress for SBA under 
Function 370 was $489 million for FY 1996. At that time, I 
believed these reductions would trigger real efforts to 
streamline SBA. During the Senate floor debate on the FY 1996 
Commerce, Justice, State Appropriations bill, Senator Hatfield 
entered into a colloquy with me regarding the need for the 
Small Business Administration to continue to reduce its 
staffing level as part of the overall effort to balance the 
budget. To date, SBA staff levels remain about the same as last 
fall, and the Administration's FY 1997 budget request 
recommends an increase of 28 FTEs above the FY 1996 level.
    The Administration recently requested $664 for function 370 
SBA funding, substantially more money for Fiscal Year 1997 than 
it requested in Fiscal Year 1996. This increase is primarily to 
fund a 150% increase in the credit subsidy rate for the 7(a) 
guaranteed business loan program. This subsidy rate increase 
was presented to the Congress without any advance warning. The 
preliminary numbers presented in support of the subsidy rate 
increase appear to contradict the data submitted last year to 
the Committee. Explanations supporting the increase are 
sketchy. The Committee staff has requested additional data to 
help us analyze this increase, and there will be some direct 
and pointed inquiries made of SBA about what management and 
operational changes will be made in response to this material 
adverse change in the condition of this program.
    This year I am comfortable reiterating the vision for SBA 
that Senator Bumpers and I set forth last year, which reduced 
Function 370 budget Authority from FY 1996-FY 2000 to $586 
million annually. To develop a coherent, multi-year strategy to 
reduce the size of SBA while maintaining the delivery of 
programs deemed critical to small business, SBA needs to 
combine an orderly downsizing with the adoption of improved 
agency operating procedures and management information systems 
to allow it to deliver its key programs more effectively. This 
strategy must be executed with special effort and a sense of 
urgency at SBA because of the recently acknowledged 
deficiencies in some of the credit programs. Senate and House 
Appropriations Committees will need to impose explicit, 
targeted reductions in SBA's organization and personnel if we 
are to meet the funding goals outlined for SBA. Concurrently, 
Congress will need to fund improvements in SBA's information 
systems to complete the progression to a more streamlined SBA. 
These objectives can be accomplished within the funding levels 
contained in this budget recommendation.
    Senator Bumpers is not joining in this letter this year in 
deference to the Administration's substantially higher budget 
request, and I understand Senator Bumpers' position under these 
circumstances. Our bipartisan activities in the Committee 
during the 104th Congress serve as ample evidence of our share 
commitment to the important priorities of America's small 
businesses and entrepreneurs. In good conscience, I do not 
believe the interests of small businesses are best served by 
further increases in federal spending and the budget deficit. I 
believe SBA will prove itself to be up to the challenge of 
prioritizing and becoming increasingly effective and efficient, 
which I believe is a fair request and one that Congress is 
justified in insisting upon.
    I look forward to the opportunity to work with you to 
develop this portion of the Budget Resolution for FY 1997.
            Sincrely,
                                     Christopher S. Bond, Chairman.
                                ------                                

                                       U.S. Senate,
                               Committee on Small Business,
                                    Washington, DC, April 18, 1996.
Hon. Pete Domenici, Chairman,
Hon. Jim Exon, Ranking Democrat,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete and Jim: As Democratic members of the Small 
Business Committee, we are writing to state our views and 
estimates of the President's budget request for the Small 
Business Administration. For the first time in many years, we 
seem to have an honest but serious disagreement between the 
majority and minority members of our Committee with respect to 
the President's budget.
    For many years our Committee has been united in rejecting 
phony savings which SBA budgets have contained, including 
imposing fees or other gimmicks which would not be enacted. 
This year, however, is different. The Clinton Administration's 
FY 1997 budget for SBA is, notwithstanding some serious 
questions and concerns on specific issues, the best and most 
honest budget for small business programs in the memory of 
anyone now serving. Moreover, substantial savings for SBA were 
achieved in 1993 and again in 1995 by both the authorizing and 
appropriations committees, as well as during previous 
administrations. Further reductions in resources for loans 
would be imprudent given the current economic uncertainty, and 
reduction in personnel for loan making and collection would be 
dangerous and perhaps very costly in the long run.
    President Clinton has requested a significant increase in 
budget authority for SBA compared to the FY 96 request or the 
appropriated level. Overwhelmingly, however, this increase goes 
to fund a current services level of loan programs and is 
necessitated by an OMB re-estimate of the subsidy cost of the 
largest small business loan program, Sec. 7(a) guaranteed bank 
loans. The budget contains an even more drastic increase in 
cost of the Sec. 504 long-term debenture program, but this cost 
is offset by a proposed restructuring of the 504 program. We 
have serious questions about the magnitude of these increases 
in subsidy costs and OMB's reasoning. However, we are impressed 
by the thoroughness with which OMB and SBA have approached this 
reassessment of loan program costs--the first such major study 
since the Credit Reform Act of 1990 became law.
    It bears mentioning that the 7(a) program underwent major 
surgery in 1993 which reduced the subsidy cost from 5.4% to 
2.2%, and again in 1993 when it was further reduced to about 
1%. As frustrating as it is to see this rise again to 2.7%, we 
cannot recommend further surgery of this vital economic 
program. Such a course would strain both borrowers and banks 
which participate beyond the dropout point.
    If program costs are higher than previously thought, in 
part because recoveries on failed loans have been less than 
anticipated, we can hardly agree that the solution is to have 
still fewer people doing even more work. Some historical 
perspective is needed. Ten years ago, SBA had over 4,000 
employees, and the 7(a) program was a little over $2 billion. 
Today, the appropriated level for 7(a) is $10 billion, and SBA 
has 3,400 employees. The expression ``doing more with less'' 
has been worn threadbare in Congress. In many ways, we are now 
doing less with less, and a policy of fewer resources for 
oversight and loanmaking is surely dangerous given the agency's 
exposure in outstanding, taxpayer-backed loans. The agency 
currently is responsible for collection 450,000 loans totaling 
over $33.5 billion.
    Regrettably, we must differ with Chairman Bond's assertion 
in his letter to you that SBA could significantly reduce its 
costs by closing offices in some areas. In fact, SBA proposed a 
dramatic reorganization in both 1993 and 1995, and both efforts 
were halted by opposition--including that of many Republicans--
in Congress. We hope our Committee will conduct one or more 
hearings on the President's budget proposal in the near future. 
This will enable us to better understand the reasoning behind 
these large increases in subsidy costs. For the time being, we 
must say that we are generally in support of the 
Administration's budget request, reserving the rights of both 
authorizing and appropriations committees to make final 
decisions on individual items.
            Sincerely,
                                   Dale Bumpers,
                                   John F. Kerry,
                                   Carl Levin,
                                   Paul D. Wellstone,
                                   Howell Heflin,
                                   Tom Harkin,
                                   Sam Nunn,
                                   Frank R. Lautenberg,
                                   Joe Lieberman.
                                ------                                

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                       Washington, DC, May 7, 1996.
Hon. Pete V. Domenici, Chairman,
Hon. J. James Exon, Ranking Minority Member,
Committee on the Budget,
U.S. Senate, Washington, DC.
    Dear Pete and Jim: Pursuant to section 301(d) of the 
Congressional Budget Act of 1974, and with the approval of the 
members of the Committee on Veterans' Affairs, the Committee on 
Veterans' Affairs (hereafter, ``Committee'') hereby reports to 
the Committee on the Budget its views and estimates on the FY 
1997 budget for veterans' programs within the Committee's 
jurisdiction. This report is submitted in fulfillment of the 
Committee's obligation to provide recommendations for programs 
in Function 700 (Veterans' Benefits and Services) and for 
certain veterans' programs included in Function 500 (Education, 
Training, Employment, and Social Services).

                            I. Introduction

    We have carefully reviewed the Administration's proposed FY 
1997 budget for veterans' programs. We have also carefully 
reviewed the testimony of witnesses at the Committee's hearing 
of April 24, 1996, on the proposed budget. At that hearing, 
testimony was received from the Secretary of Veterans Affairs, 
and VA witnesses were questioned at length by the Committee's 
members. Statements were also accepted from the Chief Judge of 
the U.S. Court of Veterans Appeals, the Assistant Secretary of 
Labor for Veterans' Employment and Training, and the following 
veterans service organizations: The American Legion, AMVETS, 
the Disabled American Veterans, the Paralyzed Veterans of 
America, the Veterans of Foreign Wars, and the Vietnam Veterans 
of America. In addition, Committee staff has engaged in 
informal briefing sessions with representatives of affected 
government agencies and service organizations, and has 
requested information, in writing, from hearing witnesses. 
While responses have not been received on the date of this 
submission, we endeavor to offer our views based on the 
information that is currently available, and the analysis that 
is currently possible.

                          II. General Comments

    In preparing these comments, the Committee's members have 
kept in mind the fiscal limitations within which we must 
operate if we are to get Federal spending under control and 
thereby reduce the Federal deficit and debt. We believe that 
the Government can be fiscally responsible while still 
fulfilling its commitments to the most deserving among us--our 
Nation's veterans. We also are mindful of the fact that 
uncontrolled Federal spending threatens the long-term health of 
the Nation's economy and, in turn, could affect the provision 
of veterans' benefits. Thus, we recognize that those who have 
worn the uniform in defense of the Nation seek, as we do, to 
protect the health of the Nation's economy.

                       a. cost-savings provisions

    The Committee is pleased to note that the Administration 
recommends the enactment of a number of cost-savings 
provisions, the majority of which the Committee agreed to last 
year as part of the budget reconciliation process. On September 
20, 1995, the Committee unanimously approved a series of 
recommendations for meeting the budget reconciliation 
instructions presented to it in the Concurrent Resolution on 
the Budget for Fiscal Year 1996, H. Con. Res. 67. Subsequently, 
our Committee's recommendations were reconciled with those of 
the House Committee on Veterans' Affairs, and those 
recommendations were included in Title X of H.R. 2491, the 
``Balanced Budget Act of 1995.'' This bill was vetoed by the 
President in December 1995. The provisions in Title X, if 
enacted, would have resulted in savings of almost $6 billion 
over fiscal years 1996-2002.
    Among the provisions approved by the Congress in the 
``Balanced Budget Act,'' most of which were included in the 
legislation reported by our Committee, were a series of 
extensions to time-limited measures that had previously been 
enacted in prior Omnibus Budget Reconciliation Acts (OBRAs). 
Those provisions are summarized below:
    Extension of the authority of the Department of Veterans 
Affairs (VA) to require that certain veterans make copayments 
for outpatient medications;
    Extension of VA's medical care cost recovery authority;
    Extension of VA's income verification authority;
    Extension of VA's authority to limit pensions paid to VA 
beneficiaries who are receiving Medicaid-covered nursing home 
care;
          Extension of certain additional home loan guaranty 
        program fees;
          Extension of procedures applicable to liquidation 
        sales on defaulted home loans guaranteed by VA; and
          Extension of VA's enhanced loan asset sale authority.

Collectively, these provisions, if enacted, would have saved 
$2.709 billion over seven fiscal years.
    In addition to these extensions in previously enacted OBRA 
provisions, the ``Balanced Budget Act'' included provisions, 
some of which were in the Senate-passed legislation, which 
would have:
          Increased the amount of the copayment charged by VA 
        for prescription drugs received by certain veterans as 
        part of outpatient care from $2.00/prescription/month 
        to $4.00/prescription/month, and removed VA's authority 
        to waive the recovery of copayments;
          Modified the methodology for computing annual cost-
        of-living adjustments made to VA compensation, and 
        dependency and indemnity compensation, benefits;
          Revised the standard for the receipt of compensation 
        for disability or death resulting from VA health care 
        treatment; and
          Allowed VA to refer a veteran's home loan guaranty 
        debt for offset, under certain circumstances, to the 
        Internal Revenue Service or the debtor's employing 
        Federal agency (if applicable).

These provisions, had they been enacted, would have saved 
$3.964 billion over seven years.
    With two execptions--the extension of VA's enhanced loan 
asset sale authority and the copayment increase--each and every 
one of these measures is now included in the Administration's 
FY 97 budget submission. Thus, it appears that the 
Administration and the Congress have reached consensus on 
approving measures which were scored in 1995 as achieving 
savings of over $5.896 billion over a seven year period, an 
amount which represents over 88% of this Committee's 1995 
reconciliation instructions.
    While this Committee's members may have disagreements on a 
number of policy issues, we are pleased to be able to report 
that all interested parties--Republicans and Democrats, the 
Administration and the Congress--agree on the lion's share of 
what we expect we will be charged to accomplish in terms of 
savings for FY 97 and beyond. As is noted above, the 
Committee's members--and this Nation's veterans--recognize the 
need for all to pull their weight.

                     B. Other General Observations

    As noted last year, there is bipartisan consensus that 
veterans' programs--particularly aspects of veterans' programs 
which are non-discretionary, ``entitlement'' spending--do not 
display the sharply spiraling growth patterns that other 
aspects of the Federal budget do. That being the case, 
veterans' programs are not necessarily among the chief factors 
in looming Federal deficits; budgetary categories which display 
unrestrained growth patterns are. That said, we believe further 
efficiencies in the administration of veterans' programs can be 
identified which will control the rate of budgetary growth. We 
are determined to preserve scarce funds for the benefit to 
direct beneficiaries.
    We acknowledge the leadership of the veterans' community 
which has expressed a willingness to support limits on the rate 
of growth of veterans' entitlements--if the growth of other 
Federal entitlements is similarly restrained. Ultimately, the 
deficit will be brought under control by such a course. 
Veterans will pull their weight in such a concerted effort--
just as they have pulled their weight in defense of the Nation 
in the past.

                    C. Overall Spending Projections

    The fact that veterans' spending is not spiraling out of 
control is reflected by the overall numbers set forth in the 
President's proposed budget for FY 97. Overall spending is 
slated to increase at a rate of 2.6% relative to FY 96 funding. 
Entitlement spending will increase at a lower rate (2.1%), 
while VA discretionary spending--principally, spending for the 
provision of medical care--will increase by less than 3% 
relative to FY 96 levels. When viewed against the backdrop of 
the likely requirement that VA provide, from discretionary 
funding, cost-of-living salary and wage adjustments to a 
workforce of over 200,000 employees, the proposed budget for FY 
97 can be fairly characterized as one that stands in place.
    The Committee notes, however, that the Administration's 
budget proposes declining funding levels for medical care in 
the years after FY 97. There is however, nothing in the budget 
to explain the policy which would permit the Veterans Health 
Administration (VHA) to furnish care at such levels. Further, 
there is nothing in the budget which explains why such cuts 
would be necessary to achieve a balanced budget. The Secretary 
of Veterans Affairs has testified that he believes that out 
year funding levels will be revisited in subsequent years.
    It is the Committee's view that the out year funding levels 
in the budget cannot be sustained; further, it is the 
Committee's view, based on a collective assessment of relative 
priorities, that such funding cuts need not be sustained in 
order to achieve a balanced budget.
    Thus, absent any information which refutes the Committee's 
current understanding, the Committee rejects the out year 
projections for medical care funding levels as an unrealistic 
route to the laudable goal of achieving a balanced budget. It 
urges the Budget Committee to do likewise.

                      III. Veterans' Medical Care

                A. Projected FY 97 Medical Care Spending

    The President requests a modest increase of $448.4 million 
to provide medical care to 2,858,582 patients (unchanged from 
1996). Inpatient average daily census would be reduced, while 
outpatient visits would be increased by 1,575,451. VA projects 
a reduction of 5,154 employees in VHA staffing.
    The Committee notes with approval VA's continuing movement 
from inpatient to outpatient care. We also endorse VA's effort 
to provide more cost effective, therapeutically appropriate 
care. FY 97 will be the first year in which VHA field 
operations will operate under the new Veterans Integrated 
Service Network (VISN) structure. The Committee hopes that the 
VISN structure will help VA achieve greater efficiencies in 
delivering medical services to veterans. VA's allocation of 
scarce resources will depend upon accurate and reliable data 
showing actual and projected medical services costs and 
workloads. The Committee is concerned that any shortcomings in 
the collection, processing, and analysis of that data may 
result in the inequitable distribution of resources among, and 
within, the VISNs.

                        b. construction programs

    VA's FY 97 budget request proposes ``major'' (by current 
definition, over $3 million) construction projects with a total 
cost of $529.6 million. Of that amount, $425.9 million would be 
expended for the construction of one new hospital, the 
replacement of another hospital, and the renovation or 
replacement of inpatient facilities at three existing 
hospitals. VA also proposes two outpatient construction 
projects with a total cost of $90 million. Finally, VA proposes 
five medical facility renovation projects for which no cost is 
reported (except that the cost would be more than $3 million 
and less than $10 million). Four of these projects would be for 
inpatient facilities and only one for an outpatient project.
    To summarize, then, 83% of the total cost of projects 
exceeding $10 million each would be for inpatient medical care 
facilities; and four out of five projects with a cost between 
three and 10 million dollars would be expended on inpatient 
medical care projects. The Committee continues to be concerned 
that, even as VA takes commendable steps to emphasize primary 
medical care, its construction programs continue to emphasize 
inpatient hospital facilities.

                    IV. Veterans' Benefits Programs

                  a. compensation and pension benefits

    The Committee notes that expenditures for compensation and 
pension benefits--the principal entitlements payments made to 
disabled veterans and their survivors--are slated to rise only 
slightly more than three-quarters of one percent during FY 97. 
As is noted above, therefore, veterans' entitlements are not 
properly characterized as being among those which are 
experiencing unrestrained growth. We expect this slow growth 
pattern to continue for so long a period as there are no major 
military mobilizations.

                 b. the Gardner and Davenport Decisions

    Notwithstanding the foregoing, two recent judicial 
decisions, Brown v. Gardner, 115 S. Ct. 552 (1994), and 
Davenport v. Brown, 7 Vet. App. 476 (1995), will, as matters 
now stand, result in significant compensation costs not 
previously anticipated. To summarize, Gardner allows for the 
payment of compensation for injuries or deaths sustained by VA-
treated patients irrespective of VA fault. Davenport dictates 
that certain veterans be deemed eligible for vocational 
rehabilitation benefits even if there is no ``nexus'' between 
the veteran's service-connected disability and his or her job 
impairment. The Committee notes with approval that VA 
recommends that the statutes which were subjected to judicial 
interpretation in these two cases be amended to reflect VA's 
previous--and invalidated--constructions.

                     V. General Operating Expenses

                  a. veterans benefits administration

    The Veterans Benefits Administration, (VBA), the VA 
operating entity charged with the administration of veterans' 
benefits programs, continues to make significant progress in 
reversing the previously growing backlog of pending benefits 
claims. It projects continued progress despite declining 
funding and staffing ceilings.
    VBA has identified a number of planned restructuring 
initiatives, one of which (the removal of ``on site'' 
adjudication of compensation and pension claims from four VBA 
regional offices) has been the subject of numerous expressions 
of concern by Members of Congress (including members of the 
Committee). The Committee will closely monitor VBA actions with 
respect to this planned initiative.

                     b. board of veterans' appeals

    For the second straight year, VA propose Board of Veterans' 
Appeals (BVA) staffing increases of over 10%. The Committee 
notes that BVA reports that in FY 97, for the first time in 
many years, the number of BVA decisions rendered will exceed 
the number of appeals received. Even so, we remain highly 
concerned that the wholly unacceptable backlog of appeals 
currently pending will still not be reduced to acceptable 
levels for many years. The Committee awaits the recommendations 
of the Veterans' Claims Adjudication Commission established 
pursuant to Pub. L. No. 103-446.

                             VI. Conclusion

    On balance, the Committee is pleased with the budget 
proposals presented. They restrain budgetary growth and, thus, 
reflect a consensus that progress must be made in progressing 
toward a balanced budget. The major reservation that can be 
expressed with respect to the out years is the uncertain status 
of funding for VA health care.
    These views reflect the best judgment of the Committee on 
Veterans' Affairs as of this date. If we or the Committee staff 
can provide further assistance in your consideration of this 
report, please feel free to call on us.
            Sincerely,
                                   Alan K. Simpson,
                                           Chairman,
                                   John D. Rockefeller IV,
                                           Ranking Minority Member,
                                   Bob Graham,
                                   Daniel K. Akaka,
                                   Paul Wellstone,
                                   Patty Murray,
                                   Strom Thurmond,
                                   Frank H. Murkowski,
                                   Arlen Specter,
                                   James M. Jeffords,
                                   Ben Nighthorse Campbell,
                                   Larry E. Craig,
                                           Members.

                         VIII. Committee Votes

    Paragraph 7(b) of Rule XXVI of the Standing Rules of the 
Senate requires the committee report accompanying a measure 
reported from the committee to include the results of each 
rollcall vote taken on the measure and any amendments thereto. 
In addition, paragraph 7(c) requires the report to include 
tabulation of the vote cast by each member of the committee on 
the question of reporting the measure.
    In accordance with the Standing Rules of the Senate, the 
following are rollcall votes taken during the Senate Budget 
Committee mark-up of the Budget Resolution.
    (1) Exon substitute amendment, ``The President's Budget''.
    Amendment rejected by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams
    (2) Grams sense of the Senate that both the President's 
Budget and the report accompanying the budget resolution should 
include long term projections of the budget's impact on 
entitlement spending.
    Amendment adopted by voice vote.
    (3) Snowe sense of the Congress that Congress should reject 
the President's proposal to transfer spending for home health 
care from Hospital Insurance Trust Fund to the general revenues 
that pay for Medicare part B.
    Amendment adopted by:
        YEAS: 13                      NAYS: 11
Domenici                            Exon
Grassley                            Hollings
Nickles                             Johnston
Gramm                               Lautenberg
Bond                                Simon
Lott                                Conrad
Brown                               Dodd
Gorton                              Sarbanes
Gregg                               Boxer
Snowe                               Murray
Abraham                             Wyden
Frist
Grams
    (4) Murray amendment to raise discretionary spending levels 
in function 500 to those proposed in the President's FY `97 
Budget and offset this increase by reducing tax cuts.
    Amendment failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams
    (5) Wyden sense of the Senate to limit tax cuts solely to 
college and vocational education deductions.
    Amendment failed by:
        YEAS: 6                       NAYS: 18
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Simon                               Gramm
Murray                              Bond
Wyden                               Lott
                                    Brown
                                    Gorton
                                    Gregg
                                    Snowe
                                    Abraham
                                    Frist
                                    Grams
                                    Lautenberg
                                    Conrad
                                    Dodd
                                    Sarbanes
                                    Boxer
    (6) Snowe sense of the Senate, as modified, to repeal the 
4.3 cents per gallon gas tax contained in the Omnibus Budget 
Reconciliation Act of 1993.
    Amendment adopted by:
        YEAS: 13                      NAYS: 11
Domenici                            Exon
Grassley                            Hollings
Nickles                             Johnston
Gramm                               Lautenberg
Bond                                Simon
Lott                                Conrad
Brown                               Dodd
Gorton                              Sarbanes
Gregg                               Boxer
Snowe                               Murray
Abraham                             Wyden
Frist
Grams
    (7) Lautenberg amendment to establish a 60 vote--point of 
order against the consideration of any legislation that would 
include tax cuts along with reductions in Medicare or Medicaid 
funding.
    Motion to appeal the decision of the Chair, ruling the 
amendment out of order, failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams
    (8) Lautenberg-Boxer amendment to increase environmental 
funding and offset this increase by reducing tax loopholes.
    Amendment failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams
    (9) Lautenberg amendment to establish a 60-vote point of 
order against the consideration of a reconciliation bill or a 
conference report thereto that does not include a 90 cent 
increase in the minimum wage.
    Motion to appeal the decision of the Chair, ruling the 
amendment out of order, failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams

    (10) Grassley amendment to withhold the difference between 
the Chairman's 1997 mark for defense and the President's 
suggested levels, until notification from the President that 
additional funds are needed for national security purposes.
    Amendment failed by:
        YEAS: 12                      NAYS: 12
Grassley                            Domenici
Exon                                Nickles
Hollings                            Gramm
Johnston                            Bond
Lautenberg                          Lott
Simon                               Brown
Conrad                              Gorton
Dodd                                Gregg
Sarbanes                            Snowe
Boxer                               Abraham
Murray                              Frist
Wyden                               Grams

    (11) Boxer amendment to establish a majority point of order 
against the consideration of any legislation containing a cut 
in income taxes which did not have at least 90% of the tax 
benefits going to families with incomes of less than $100,000.
    Motion to appeal the decision of the Chair, ruling the 
amendment out of order, failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams

    (12) Boxer amendment to establish a majority point of order 
against the consideration of any legislation that jeopardizes 
the quality of nursing home standards or places a financial 
burden on families who are financing long-term nursing care.
    Motion to appeal the decision of the Chair, ruling the 
amendment out of order, failed by:
        YEAS: 11                      NAYS: 13
Exon                                Domenici
Hollings                            Grassley
Johnston                            Nickles
Lautenberg                          Gramm
Simon                               Bond
Conrad                              Lott
Dodd                                Brown
Sarbanes                            Gorton
Boxer                               Gregg
Murray                              Snowe
Wyden                               Abraham
                                    Frist
                                    Grams

    (13) Simon amendment to transfer defense funds to education 
and international affairs.
    Amendment failed by:
        YEAS: 9                       NAYS: 15
Hollings                            Domenici
Johnston                            Grassley
Lautenberg                          Nickles
Simon                               Gramm
Conrad                              Bond
Sarbanes                            Lott
Boxer                               Brown
Murray                              Gorton
Wyden                               Gregg
                                    Snowe
                                    Abraham
                                    Frist
                                    Grams
                                    Exon
                                    Dodd

    (14) Simon amendment regarding budget scoring of the 
administrative costs of direct and guaranteed student loans.
    Amendment withdrawn.
    (15) Brown sense of the Senate that there should be a cap 
on the application of COLA's to civilian and military 
retirement.
        YEAS: 11                      NAYS: 13
Domenici                            Gramm
Grassley                            Bond
Nickles                             Lott
Brown                               Gorton
Gregg                               Snowe
Frist                               Abraham
Grams                               Hollings
Exon                                Johnston
Simon                               Lautenberg
Conrad                              Dodd
Boxer                               Sarbanes
                                    Murray
                                    Wyden

    (16) Gregg sense of the Senate that the Medicare Trustees 
should issue their 1996 report on the financial status of the 
Medicare Hospital Insurance Trust Fund immediately.
    Amendment adopted by voice vote.
    ( 17) Grams amendment to provide for the minting and 
circulation of one dollar coins with the savings to go towards 
deficit reduction.
    Amendment failed by:
        YEAS: 7                       NAYS: 17
Domenici                            Gramm
Grassley                            Bond
Nickles                             Lott
Brown                               Gregg
Gorton                              Abraham
Snowe                               Frist
Grams                               Exon
                                    Hollings
                                    Johnston
                                    Lautenberg
                                    Simon
                                    Conrad
                                    Dodd
                                    Sarbanes
                                    Boxer
                                    Murray
                                    Wyden
    (18) Motion to report the budget resolution as amended.
    Motion adopted by:
        YEAS: 13                      NAYS: 11
Domenici                            Exon
Grassley                            Hollings
Nickles                             Johnston
Gramm                               Lautenberg
Bond                                Simon
Lott                                Conrad
Brown                               Dodd
Gorton                              Sarbanes
Gregg                               Boxer
Snowe                               Murray
Abraham                             Wyden
Frist
Grams
                          IX. Additional Views

                ADDITIONAL VIEWS OF SENATOR DON NICKLES

    Following on President Clinton's veto of the first balanced 
budget since 1969, Senate Budget Committee Republicans have 
acted again without constructive assistance from Senate 
Democrats or the President to report another balanced budget 
plan.
    Under our policies the federal unified budget deficit will 
become the federal unified budget surplus in fiscal year 2002. 
This is a dramatic achievement, especially considering the lack 
of effort by President Clinton and the Democrats.
    Comparing the Senate Republican Balanced Budget Resolution 
and President Clinton's 1993 tax bill highlights the 
differences between the two political parties:
          Spending.--The Senate Republican Balanced Budget 
        Resolution eliminates the deficit by slowing the growth 
        of federal spending. Under our plan spending would 
        continue to grow, but at a slower rate. In contrast, 
        the Congressional Budget Office says that virtually no 
        spending cuts have resulted from President Clinton's 
        1993 tax bill.
          Taxes.--The Senate Republican Balanced Budget 
        Resolution does not raise taxes, instead it provides a 
        $500 per child tax credit to millions of American 
        families. The Congressional Budget Office says 
        President Clinton's 1993 tax bill raised taxes and user 
        fees by $259 billion, including a $30 billion tax 
        increase on transportation fuels.
          Social Security.--The Senate Republican Balanced 
        Budget Resolution does not touch social security. 
        President Clinton's 1993 tax bill increased taxes on 
        social security recipients making over $34,000 per 
        year.
    Considering these facts, there can be no doubt about who is 
serious about balancing the budget.
    In addition to the $500 per child tax credit, the Senate 
Republican Balanced Budget Resolution also contains a reserve 
fund to accommodate other deficit-neutral tax reduction 
initiatives. It is my hope that the Senate Finance and House 
Ways & Means Committees will use this reserve fund to provide 
significant tax incentives for economic growth including reform 
of the alternative minimum tax, a reduction in the capital 
gains tax, a reduction in estate tax for family businesses, and 
the expansion of individual retirement accounts.
    Unlike President Clinton, Republicans should not settle for 
2% annual economic growth. These tax policies are essential to 
jump-start our stagnant economy, stimulate investment, and 
create new high-wage jobs.
                                                       Don Nickles.
                 ADDITIONAL VIEWS OF SENATOR BILL FRIST

    The Chairman's mark is a good plan. I support the overall 
package and look forward to working with the Chairman to 
achieve a balanced budget by 2002.
    One specific example that I would like the committee to 
reconsider is the assumption that the Agency for Health Care 
Policy and Research (AHCPR) be terminated. Last year, there was 
much focus on the Agency's performance in the area of clinical 
practice guidelines. Some felt it was unnecessary and 
duplicative. As a result, the appropriators directed the Agency 
to foster the growth of a strong public-private partnership. 
The Agency is responding and has announced its intent to get 
out of the practice guideline business. Its focus will be on 
working with universities to support their research and 
educational efforts in outcomes evaluation.
    This is so important to the future of our changing health 
care system that I regret the implication that it be 
terminated. I hope to work with my colleagues to encourage that 
this important function be maintained.
                                                        Bill Frist.
                     MINORITY VIEWS OF SENATOR EXON

    The Republicans try to hide as much as they can in this 
budget, but they still deliver much of the same. As with last 
year's failed budgets, the 1997 Republican budget still places 
its heaviest burden on health care for the elderly, all to fund 
more generous tax breaks. The Republicans wring $50 billion 
more out of Medicare and $18 billion more in Medicaid than the 
President's budget. And experience teaches us that when they 
finally write the tax law, Republicans will cut taxes for the 
wealthiest.
    The Republicans give short shrift to investments in 
domestic discretionary spending. Their budget cuts $65 billion 
more than the President's. While they have learned to give lip 
service to education and the environment, their funding levels 
show dramatic cuts. Last year's budget experience taught the 
Republicans that they cannot say what they are doing, but they 
do it nonetheless.
    The Senate Republican budget is an exercise in camouflage. 
While promising to improve, the Budget Committees leave 
spending and tax decisions to other committees. In many areas, 
last year's vetoed budget remains our best indication of what 
they intend to do. It is ironic that this budget comes from the 
same group of Senators who just 3 weeks ago criticized the 
President's detailed budget for lacking specifics.
    The Republican budget is also rife with gimmicks. The tax 
cuts mysteriously drop off from $23 billion to $16 billion in 
2002. The Republicans count as savings toward balancing the 
budget spending cuts that they have already used in the 
Kennedy-Kassebaum health care bill. They similarly count twice 
savings in housing. Without these gimmicks, the Republican 
budget would not balance.
    At their press conference, the Republicans made much of 
their claim that their budget savings were not backloaded in 
the final years. If you compare the last 3 years of the two 
plans, however, the amount of total savings is identical--82 
percent.

                                medicare

    The reduction in projected spending for Medicare is still 
too large. The Republican budget reduces Medicare by $167 
billion, $50 billion more than the President's budget. This 
would reduce Medicare spending growth per-beneficiary far below 
projected private sector growth rates, reducing quality and 
access to health care for millions of middle-class Americans. 
The $123 billion reduction in Part A will devastate rural and 
urban hospitals.
    Damaging structural changes proposed by the Republicans 
will risk turning Medicare into a second-class system for 
seniors who cannot afford to opt out of traditional Medicare 
through Medical Savings Accounts. These changes would segregate 
the sickest and least affluent beneficiaries into in a severely 
weakened fee-for-service program.
    Senate Republicans have not disavowed their intention to 
increase premiums to pay for tax cuts. Seniors, with an average 
income of $17,000, already spend more than 20 percent of their 
income on health care and can hardly afford additional health 
care expenses. Previous Republican proposals also permitted 
physicians to charge beneficiaries extra--through ``balance 
billing'' in private Medicare pans--increasing out-of-pocket 
costs for beneficiaries and slowly draining the fee-for-service 
system of both doctors and dollars.
    The President's budget shows that premium hikes, deep 
reductions, and damaging structural changes are not necessary 
to balance the budget and guarantee the life of the Medicare 
trust fund. By preserving cuts in corporate subsidies for tax 
cuts for the rich, the Republicans are forced to reduce the 
growth of programs for middle-class Americans far deeper than 
the President's plan.
    The President proved you can balance the budget with far 
fewer Medicare savings while keeping Medicare solvent and 
protecting seniors from new costs. The Republicans offer no 
detail from CBO to substantiate their claim that their plan 
achieves solvency for 10 years.

                  reductions from low-income programs

    Although the Republican budget does not identify all of the 
assumptions behind cuts in mandatory programs, at least 40 
percent of these savings come from programs that help low-
income Americans.
Medicaid
    The Republican budget includes $72 billion in Medicaid 
cuts. This could translate into total cuts of more than $250 
billion if states spend only the minimum required to receive 
their full allocations. Medicaid spending would reduce spending 
growth per person to a level below the general rate of 
inflation.
    Although the Republican budget does not describe how these 
savings would be achieved, there is no indication that the 
Republicans intend to back down from their proposal to block 
grant Medicaid. If this is the case, the Medicaid provisions 
would not reflect the National Governors' Association proposal 
(as the Republican budget claims), because the governors said 
that states must be protected from unanticipated program costs 
resulting from economic fluctuations in the business cycle, 
changing demographics, and natural disasters.
    If the block grant proposal and the spending constraints 
are enacted, 36 million people will lose their guaranteed 
access to health care. Those who do receive coverage will no 
longer be guaranteed a basic level of benefits. States could be 
forced to deny coverage to millions of children and people with 
disabilities, and to older Americans who rely on Medicaid to 
pay for nursing home and long-term care. In addition, the 
Republican budget gives no indication whether nursing home 
quality standards would be enforced.
    Under their new baseline, CBO forecasts that Medicaid will 
cost $25 billion less than projected in December. The 
Republicans do not reduce their Medicaid savings by $25 
billion, however, trimming them by only $12 billion. Thus, they 
actually propose to spend less on Medicaid than they proposed 
to spend during the budget negotiations.

Welfare

    The Republicans claim to adopt the National Governors' 
Association welfare reform recommendations. The Republican 
budget cuts $53 billion from welfare programs, however, which 
matches CBO reestimates of cuts in the vetoed welfare reform 
conference report, rather than with the $43 billion in savings 
attributed to the bipartisan NGA proposal. In fact, the 
governors actually agreed only to $22 billion in savings and 
were silent about cuts to legal immigrants. The governors also 
proposed to expand child care and other funding above the 
levels provided in the welfare reform conference report. It 
would appear that the Republicans would rather play election-
year politics with welfare reform than work toward real reforms 
that could be signed into law.

Earned Income Tax Credit

    The Republican plan includes $17 billion in cuts to the 
Earned Income Tax Credit (EITC). The FITC helps low-income 
working families stay off welfare and out of poverty. While the 
details are not specified, the savings would appear to reflect 
a more rapid phase-out of the credit and ending the credit for 
four million childless workers. The Republican budget implies 
that no one would be worse off under this proposal because of 
the $500-per-child tax credit. Most families who receive the 
EITC, however, would be ineligible for much, if not all, of the 
child tax credit. Childless workers would clearly not benefit 
from the child tax credit. The same claims were made last year, 
but analysis of the final proposal indicated that more than 
seven million working households would have had their taxes 
increased under the EITC provisions in the reconciliation 
conference report.

                            the environment

    The Republican's budget plan freezes all the essential 
environmental and natural resources programs at 1996 levels for 
the next 6 years. Compared to the President, the Republican 
budget reduces overall funding for environment and natural 
resources programs by 16 percent by the year 2002, including a 
20 percent reduction for National Park Service operations, a 23 
percent reduction for the EPA's enforcement and operations, and 
a 36 percent reduction for energy conservation programs. The 
Republican plan uses these reductions to let polluters off the 
hook, to the tune of $5.4 billion, by financing taxpayer 
spending for Superfund cleanups rather than requiring 
responsible parties to pay the cost.
    The Republican budget would weaken EPA's ability to protect 
public health and the environment and lead to further 
deterioration of the National Parks. The Republican plan 
jeopardizes administration priorities such as the environmental 
cops on the beat program, the Partnership for a new Generation 
of Vehicles, and the Climate Change Action plan.

                               education

Capping the direct student loan program

    The Republican budget proposes capping the Federal direct 
student loan program at 20 percent of loan volume, crippling 
this successful program. Since schools participating in the 
direct loan program handle nearly 40 percent of loan volume, 
700 will be forced out of the program. Another 400 schools 
planning to enter the direct loan program on July 1, 1996, 
would be barred under the GOP plan. This will lead to 
disruptions and disarray for colleges and universities and 
considerable headache and uncertainty for students. The 
Majority apparently does not believe that competition and 
choice belong in the student loan market; they want to assure 
banks and guarantee agencies continued access to Federal 
subsidies.
    Even though the Republicans claim outlays savings of $2.9 
billion over 6 years from their cap on direct lending, their 
proposal would cost, not save, billions, if it were score under 
the existing rules of the Credit Reform Act. The Republican add 
$6 billion in outlays to the deficit through a ``baseline 
adjustment'' directing the Congressional Budget Office to 
override the Credit Reform Act in their scoring of student loan 
programs.

No real investment in education and training

    The trivial increase claimed in the Republican mark of $3 
billion over their baseline for Function 500 (Education, 
Training, Employment, and Social Services) discretionary 
spending is preposterous. They boast about increasing education 
funding from 1996 to 1997, but a $34 million increase is 
shameful given how important education and training are to this 
Nation. They admit that their Function 500 level is $3.2 
billion below a 1996 freeze. Since their baseline does not 
carry forward into 1997 the hard-fought compromise from last 
year's appropriations battle, it is clear that the Republicans 
have not learned that the American people, a majority of 
Congress, and the President believe adequate funding for 
education programs is essential. In real terms, the Republican 
mark reduced education and training spending by $25 billion 
below over 6 years.

                           crime and justice

    The Violent Crime Reduction Fund is not contained in the 
Republican Budget in the years 2001 and 2002. This would mean 
that the actual level of funding in the Administration of 
Justice account would actually decrease $3.4 billion in each of 
these fiscal years. It is unlikely that our need to commit 
adequate resources to fighting crime will end after the year 
2000.
    The Republican budget calls for the elimination of the 
C0mmunity Relations Service. This would mean the termination of 
all assistance now provided to local communities in preventing 
and resolving disputes and difficulties arising from 
discriminatory practices based on race, color, or national 
origin, or which disrupt peaceful relations among citizens.
    The Republican budget would eliminate the State Justice 
Institute, which is a nonprofit corporation making grants and 
undertaking other activities to improve the administration of 
justice in the United States. The President's budget proposal 
for this activity calls for $5 million, down from $14 million 
in fiscal year 1995.
    Although not specifically cited in material highlighting 
the Republican budget, documents concerning the House budget 
resolution indicate that they seek to completely eliminate the 
Legal Services Corporation in 1998.

                         repeal of davis bacon

    The Republican budget assumes $13.6 billion in savings 
primarily by repealing the Davis Bacon Act and the Service 
Control Act.

                               tax breaks

    No one should be fooled into believing that the Republicans 
intend to limit their tax breaks to $122 billion, as claimed by 
their budget. The gross cuts will be much higher. The 
Republicans try to hide the size of their tax breaks by not 
including in their baseline about $33 billion that will be 
raised by extending three expired taxes dedicated to trust 
funds and by counting the cuts over 6 years as opposed to last 
year's 7 years. The Republicans are not backing off of their 
huge tax breaks; they are merely disguising them with clever 
gimmicks. House Budget Committee Chairman Kasich, describing 
the same budget, claimed that the tax breaks will be in the 
range of $180 billion.
    On its face, this budget does not even pay for the one tax 
cut it endorses, as the child tax credit costs about $137 
billion. That proposal has a proven record of being a stalking 
horse for tax benefits for the wealthy, and there is little 
reason to believe otherwise with this budget. The Republican 
majority rejected Democrats' efforts during markup to assure 
that 90 percent of the tax cuts will benefit those earning less 
than $100,000.
    The Republican budget does not call upon special interests 
to assume any of the burden of balancing our budget. While 
President Clinton has proposed that $40 billion be raised from 
corporate reforms and loophole closing legislation, the 
Republican budget lists no savings from those categories. 
Chairman Domenici made it clear, however, that tax increases 
can be used by the Finance Committee to offset additional tax 
decreases. If the past is any guide, the Republicans will soon 
be proposing to raid pension funds for working families as a 
way to pay for tax cuts that benefit primarily our wealthiest 
citizens.
    The Republican budget allows for a ``deficit neutral'' tax 
relief bill that will most likely include capital gains tax 
breaks and other tax cuts. As many of the corporate reform 
provisions in the Balanced Budget Act have already been 
promised to pay for other legislation before the Senate, it 
remains unclear what will be used to offset the costs of any 
additional tax breaks.
    Experience tells us to be very wary of Republican promises 
of who will benefit from their tax breaks. Last year's vetoed 
Republican reconciliation bill devoted 47 percent of its tax 
cuts to people making more than $100,000. Chairman Kasich has 
already promised that this year's tax breaks will likely be 
more of the same.

               national defense and international affairs

    The Republican budget increases the Pentagon's 1997 request 
by $11.3 billion. This tops last year's GOP budget, which 
increased the Pentagon's request by $6.9 billion. As 
demonstrated by recent action in the House and Senate 
authorizing committees, much of this increase will go toward 
wasteful programs that the Defense Department did not want and 
never would have ordered. The House Budget Committee mark 
includes an increase of $12.9 billion.
    The Republican budget for 1997 cuts International Affairs 
spending from last year's level by $400 million to $18.1 
billion. This is $1.2 billion less than the President 
requested. For the period of 1997 through 2002, the Republican 
budget provides $15.7 billion less than the President 
requested. These cuts will undermine or global leadership 
responsibilities and compromise our ability to advance core 
national interests. Republicans once again talk the talk of 
being a global superpower, but then refuse to walk the walk by 
allocating the funds necessary to act like one.

                    process in the budget resolution

    The Republican budget contains instructions for three 
different reconciliation bills to try to maximize Republican 
exposure during this election year. The reporting date for the 
fist reconciliation bill is June 14, 1996. The instructions in 
this first bill are limited to the Agriculture and Finance 
Committees.
    The reporting date for the second reconciliation bill is 
July 12, 1996. The committees are only required to report if 
the first reconciliation bill has been enacted. These 
instructions are given widely to the Committees on Agriculture, 
Armed Services, Banking, Commerce, Energy, Environment, 
Finance, Governmental Affairs, Judiciary, Labor, and Veteran's 
Affairs.
    The reporting date for the third reconciliation bill is 
September 18, 1996, barely a month and a half before the 
election. Reporting is contingent on passage of the prior two 
reconciliation bills. This last reconciliation bill is limited 
to tax cuts.
    The Republican budget contains a tax reserve fund that 
allows tax cut legislation to be offset by spending cuts. The 
types of tax breaks allowable show the Republican priorities: 
family tax relief, fuel tax relief, and incentives to stimulate 
savings, investment, job creation, and economic growth--real 
capital gains--so long as the legislation does not increase the 
deficit.
    The Republican budget contains a reserve fund to 
reauthorize superfund. This will allow discretionary spending 
to be moved off budget to pay for cleanup without holding 
original polluters responsible.
    The Republican budget repeals current scoring of emergency 
spending. The new provision prohibits adjustments to 
discretionary and mandatory caps even in the case of an 
emergency designated by both the President and the Congress.
    The Republican budget contains a sense of the Senate 
provision on minimum wage that contradicts the wishes of a 
majority of the Senate. It sets out inflated statistics on the 
costs of raising the minimum wage, claims the legislation is a 
bad idea, and then tries to limit any legislation on the 
minimum wage to a freestanding bill and not an amendment.
    The Republican majority has given us another extreme 
budget, and the Senate should reject it.

                                   Jim Exon.
                                   
                                   

                COMPARISON OF BUDGET PLANS: 6-YEAR TOTALS               
                        [In billions of dollars]                        
------------------------------------------------------------------------
                                   President's   Republican             
                                      budget       budget     Difference
------------------------------------------------------------------------
Spending Cuts:                                                          
    Discretionary................         -230         -296          -65
    Mandatory:                                                          
        Medicare.................         -117         -167          -50
        Mediciad.................          -54          -72          -18
        Other health \1\.........            9           10            1
        Welfare..................          -38          -53          -15
        EITC.....................           -5          -17          -12
        Spectrum auctions........          -37          -19           18
        Other mandatory..........          -24          -19            5
                                  --------------------------------------
          Subtotal...............         -265         -337          -72
                                  ======================================
Revenues:                                                               
    Tax relief and other.........           99          180          -81
    Coprporate reforms \2\.......          -40          -21           19
    Other proposals..............           -5          (?)            5
    Expiring provisions \2\......          -43          -36            7
                                  --------------------------------------
      Subtotal...................           11          122          111
                                  ======================================
Policy Savings...................         -485         -511          -26
Debt Service.....................          -41          -56          -16
                                  --------------------------------------
      Total Savings..............         -525         -567          -42
2002 Deficit/Surplus.............            0            0            0
------------------------------------------------------------------------
\1\ Health care reforms in President's budget, GME add-back in          
  Republican plan.                                                      
\2\ The Republican plan reconciles a net tax change of $122 billion over
  6 years, but includes reserve fund language that allows for additional
  tax cuts on a revenue neutral basis. The revenue figures for the      
  Republican plan show gross tax cuts assuming that the Republicans     
  adopt the corporate reforms contained in the Balanced Budget Act and  
  certain tax provisions that have expired since last year.             


               COMPARISON OF BUDGET PLANS: SAVINGS IN 2002              
                        [In billions of dollars]                        
------------------------------------------------------------------------
                                   President's   Republican             
                                      budget       budget     Difference
------------------------------------------------------------------------
Spending cuts:                                                          
    Discretionary................          -84          -97          -13
    Mandatory:                                                          
        Medicare.................          -34          -53          -19
        Medicaid.................          -22          -27           -5
        Welfare..................           -8          -13           -5
        EITC.....................           -1           -3           -2
        Spectrum auctions........          -23           -7           16
        Other mandatory..........           -5           -5            0
                                  --------------------------------------
          Subtotal...............          -92         -107          -15
                                  --------------------------------------
Revenues:                                                               
    Tax relief and other.........            3           28           25
    Corporate reforms \1\........           -7           -5            2
    Other proposals..............           -3          (?)            2
    Expiring provisions \1\......           -8           -7            1
                                  --------------------------------------
      Subtotal...................          -15           16           31
                                  --------------------------------------
Policy savings...................         -190         -188            2
Debt service.....................          -20          -22           -2
                                  --------------------------------------
      Total savings..............         -210         -210            0
2002 deficit/surplus.............            0            0            0
------------------------------------------------------------------------
\1\ The Republican plan reconciles a net tax change of $122 billion over
  6 years, but includes reserve fund language that allows for additional
  tax cuts on a revenue neutral basis. The revenue figures for the      
  Republican plan show gross tax cuts assuming that the Republicans     
  adopt the corporate reforms contained in the Balanced Budget Act and  
  certain tax provisions that have expired since last year.             

                  MINORITY VIEWS OF SENATOR PAUL SIMON

    I oppose this budget resolution for a number of reasons. 
Instead of spreading the burden of balancing the budget among 
all segments of our society, this resolution enacts deep 
spending cuts on those programs that serve the least advantaged 
among us--our children, our elderly, our poor. It provides 
inadequate funds for education and training initiatives that 
make the American dream possible for many citizens. It 
insulates defense spending from any reduction at all. It uses 
the money from the deep spending cuts in social services to 
provide billions in tax cuts while we have a nearly five 
trillion dollar national debt to repay. The Budget Committee 
voted on a number of amendments related to these issues, and I 
am disappointed that none prevailed.
    On another, more technical issue, I want to tank the 
Chairman for agreeing to take a closer look at a provision that 
was added to last year's budget resolution required CBO to add 
certain expenses in its calculation of the costs of the direct 
student program. However, the provision did not require that 
the same types of expenses be included in calculating the cost 
of the guaranteed student loan program. I offered an amendment 
in Committee this year that would apply last year'' scorekeeing 
change to both programs, rather than just the direct student 
loan program. But because this issue is so technical and 
complicated, I withdrew the amendment after having gotten the 
Chairman's pledge to review the issue before the resolution 
comes to the floor.
    In the past, I have asked the scorekeeping provision be 
repealed, for the reasons outlined below. But if it is not 
repealed, it should at least be applied equally to the direct 
and government-guaranteed student loan programs, as the 
amendment I proposed would do.
    My position continues to be that it is not appropriate to 
bend scorkeeping rules just to accomplish a narrow policy 
objective. If scoring practices are changed, all appropriate 
issues should be addressed, and the corrections should be both 
balanced and comprehensive. This is particularly important with 
loan programs, where interest rate projections, the choice of 
discount rates, varying tax benefits, and default expectation 
all play an important role. As Lawrence Lindsey, a Republican 
member of the Federal Reserve Board, point out last year in a 
letter to Sen. Abraham:

          Making the [scoring] change the industry proposes 
        without looking at other changes which might be 
        necessary is problematic. For example, the use of the 
        ten year treasury rate for estimating purposes when 
        program costs are based on short term rates creates 
        obvious inconsistencies. Further, the $2.3 billion in 
        revenue loss that occurs through the use of tax exempt 
        student loan bonds is not taken into account in 
        estimating program costs.

As Governor Lindsey pointed out, there are numerous problems 
with the way that student loan costs are scored by CBO (and in 
many cases by OMB). These include:
    1. Current scorekeeping practices do not consider default 
problems that plague the government-guaranteed student loan 
program but are absent from direct loan program.
    Three design flaws in the guarantee program contribute to 
default costs paid by taxpayers. The direct loan program does 
not have these flaws. However CBO and OMB still assume that 
defaults in the two programs will be identical. This makes no 
sense.
    First, GAO has pointed out that perverse financial 
incentives contribute to defaults in the Federal Family 
Education Loan Program (FFEL, the guarantee program). The 
auditors have pointed out that ``guaranty agencies have more 
financial incentive to expend resources collecting on defaulted 
loans than working with borrowers to prevent defaults because 
they can earn additional revenue from default collections.'' On 
the other hand, because direct lending uses private sector 
contractors to collect on loans, competitive pressures keep 
them focuses on the task of collecting payments. Since 
defaulted loans are moved to other servicers or collection 
procedures, direct loan contractors have no incentive to allow 
defaults.
    Second, the enormous complexity of the guarantee system 
causes borrower confusion and, according to the most recent IG/
GAO financial audit (February 1996), ``hampers the Department's 
ability to obtain reliable student loan data.'' This audit 
declares that ``[o]ne of the most significant problems is that 
the Department's student loan information system contains data 
that is not timely or accurate, thereby limiting its use for 
compliance and evaluation purposes.'' The number of lawsuits 
challenging default rate determinations is testament to this 
problem.
    Third, and perhaps most dangerous, are the conflicts of 
interest that plague FFEL. Both the U.S. General Accounting 
Office and the Inspector General have pointed out how guaranty 
agencies risk taxpayer funds when they, or their officials, 
also have financial ties to lenders, secondary markets, or loan 
servicers. Indeed, the collapse of the Higher Education 
Assistance Foundation (HEAF), which cost taxpayers an estimated 
$280 million according to GAO, was related to a conflict-of-
interest problem. In its March 1993, report, the IG described 
an ``egregious'' example in which one agency, accused of not 
following due diligence requirements, asked the Department of 
Education to waive a $1 million fine ``because it would ruin 
its affiliated secondary market.'' The report points out that:

          The guaranty agency's appeal was clearly designed to 
        protect the financial condition of its affiliated 
        secondary market. It also demonstrates how the 
        financial health or an affiliate may influence the 
        decision-making of the guaranty agency.
          The conflict was even more apparent in June 1990, 
        when the same guaranty agency completed a lender review 
        of its affiliated secondary market and reported 
        numerous areas of noncompliance, including due 
        diligence violations. However, the guaranty agency 
        neither required the appropriate repayments resulting 
        from the violations nor took action to ensure future 
        corrective action. The guaranty agency's actions were 
        even more egregious because it had contracted with the 
        secondary market to review the secondary market's own 
        claims and determine whether the guaranty agency should 
        pay them.
          About eight months later, in February 1991, OSFA 
        [ED's Office of Student Financial Assistance] conducted 
        a review of the same secondary market. OSFA found that 
        the guaranty agency's prior review had not been 
        appropriately resolved, and compelled the secondary 
        market to formally address the findings. Only after 
        OSFA's intervention did the guaranty agency assess 
        liability of over $1.1 million against its affiliate. 
        In our opinion, the guaranty agency's reluctance to 
        enforce the Federal regulations clearly demonstrates 
        that the interests of the taxpayers and those of its 
        affiliate were in direct conflict.
These types of costly conflicts of interest do not exist in the 
direct loan program, according to testimony by the acting IG 
before the Senate Labor and Human Resources Committee on March 
30, 1995.
    Despite all of the design flaws of FFEL that contribute to 
defaults, and the simplicity and appropriate competitive 
pressures in the direct loan program, CBO and OMB still assume 
that defaults will be the same in both programs. Given the 
evidence, this practice clearly should be reviewed.
    2. Budget scoring does not consider significant tax losses 
attributable to FFEL.
    The majority's analysis of President Clinton's 1997 budget 
criticizes OMB's scoring of direct versus guaranteed loans, and 
declares that FFEL and direct loan ``program costs are 
virtually identical * * * [but] capital for guaranteed loans 
comes from private sector lenders.'' This latter statement 
ignores the fact that (1) the capital is essentially co-signed 
by federal taxpayers, (2) the largest student loan secondary 
market, Sallie Mae, is a government-sponsored enterprise, and 
(3) most of the other secondary markets are state government 
and non-profit entities that are financed using state-
sanctioned bonds that are exempt from federal income taxes.
    The tax losses from these bonds--estimated by the Joint Tax 
Committee at $2.3 billion over five years--are not included in 
the budget analysis of direct versus guaranteed loans.
    These government and ``non-profit'' secondary markets and 
loan servicing entities also reduce federal income by not 
paying income taxes on activities that would otherwise be 
subject to corporate income taxes. Thousands of state 
government and ``non-profit'' employees work for banks and 
secondary markets collecting payments on loans. The ``profits'' 
from these activities are not taxed, giving these agencies an 
unfair advantage over risk-taking entrepreneurs and robbing the 
federal government of revenue. In the direct loan program, 
these activities are undertaken by private sector, tax-paying 
contractors. Again, the budget analysis ignores these millions 
of dollars of tax losses.
    3. Budget scorekeeping conventions protect banks from 
interest variations and artifically reduce costs in FFEL, while 
inflating direct loan costs.
    Through their entitlement to a ``special allowance 
payment,'' lenders are protected by the federal government from 
short-term interest fluctuations. Banks and secondary markets, 
therefore, can and do fund their student loans through low-
interest, short-term securities. In this situation, the 
standard accounting practice would be to assume that the 
government's cost of funds is also based on short-term 
securities. Indeed, that is the deal that Sallie Mae got when 
the United States lent hundreds of millions of dollars to the 
company; even though they were 15-year loans, the interest rate 
was pegged to three-month Treasury bills (and was reset 
weekly). However, CBO and OMB assume that the government's cost 
of funds is a higher, long-term rate. This practice unfairly 
disadvantages the direct loan program compared to FFEL.
    4. Excess payments to banks should be counted. With its 
forty-odd guaranty agencies and thousands of banks, the 
crisscrossing invoices and subsidies make the guarantee program 
nearly impossible to audit. GAO has found that some banks 
benefit from this complexity by failing to pass along student 
origination fees that are due the government. These types of 
costs should be included in the cost calculation for FFEL. 
Unfortunately, the guaranty agencies have prevented a real 
analysis of the costs of the guarantee program by refusing to 
provide the Department with data for a random sample of 
borrower records. This type of insubordination should not be 
tolerated.
    These and other important budget scoring issues cannot be 
addressed by adding a few words to the budget resolution. That 
is why I am asking that last year's change be repealed. If it 
is not, then I am hopeful that, through the Chairman's review 
of the issue, it will be fixed on the floor, in the manager's 
amendment, so that it is not one-sided.
                                                        Paul Simon.