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Backdoor spending authority (view source)
Revision as of 18:20, January 11, 2013
, 18:20, January 11, 2013new vs old
The Congressional Budget and Impoundment Control Act of 1974 originally was intended to limit and reform backdoor authority<ref>http://www.gao.gov/assets/210/202440.html</ref><ref>http://appropriations.house.gov/about/</ref>, however by 2010, [[President Obama]]'s Simpson-Bowles Commission reported the that tax code had become riddled with $1.1 trillion (roughly equal to annual projected deficits) in backdoor spending as hidden "[[tax expenditure]]s."<ref>[http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform]. December 2010. The White House. P. 29, pdf.</ref>
The Congressional Budget and Impoundment Control Act of 1974 originally was intended to limit and reform backdoor authority<ref>http://www.gao.gov/assets/210/202440.html</ref><ref>http://appropriations.house.gov/about/</ref>, however by 2010, [[President Obama]]'s Simpson-Bowles Commission reported the that tax code had become riddled with $1.1 trillion (roughly equal to annual projected deficits) in backdoor spending as hidden "[[tax expenditure]]s."<ref>[http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform]. December 2010. The White House. P. 29, pdf.</ref>
==New vs old spending authority==
Section 401 of the Congressional Budget Act of 1974 both defines and limits the use of spending authority. The term "spending authority" is used to describe legislation which authorizes the obligation of funds outside of or prior to the appropriations process—such as by contract or borrowing authority. This type of financing mechanism was also referred to as backdoor authority. The intent of section 401 was to control the use of this type of authority by
treating both contract and borrowing authority the same as regular authorizations for which funds are to be available only to the extent provided in appropriations acts. A grandfather clause existing in this legislation distinguishes between '''new spending authority''' which became law after the effective date of the Congressional Budget Act of 1974 (July 12, 1974) and is subject to this provision and '''old spending authority''' which is not subject to this provision.
When this section was enacted, it was assumed that old spending authority would be used up at some time in the future. Thus, the use of contract and borrowing authority as backdoor financing mechanisms would be eliminated.
But insured and guaranteed loans were not included. Section 401(c) provides that the term "spending authority, "... does not include authority to ''insure or guarantee'' the repayment of indebtedness incurred by another person or government."
Therefore, revolving fund programs which conduct their operations through insured or guaranteed loans, or are converted from making direct loans to this mechanism, were not subject to the required appropriations action on new spending authority. The reasoning is that insuring or guaranteeing loans does not require the immediate use of budget authority to carry out program objectives and that budget authority is only needed to cover losses from program operations, such as defaults on loans which are accounted for when the loss occurs.
Another form of spending authority covered by section 401 is entitlement authority. Procedures for control of entitlement authority differ, however, from those applied to contract and borrowing authority.
Section 401(d) lists other exceptions to the requirement subjecting new spending authority to amounts provided in appropriations acts. Included in this section is the following which relates to numerous public enterprise revolving funds:
{{Quote box|"(3) Subsections (a) and (b) shall not apply to new spending authority to the extent that—(A) the outlays resulting therefrom are made by an organization which is (i) a mixed-ownership Government corporation (as defined in section 201 of the Government Corporation Control Act), or (ii) a wholly owned Government corporation (as defined in section 101 of such Act) which is specifically exempted by law from compliance with any or all of the provisions of that Act."}}
The effect of section 401's provisions on the remaining public enterprise revolving funds which are not exempted in any way from its provisions is questionable. Although treating contract or borrowing authority as an authorization subject to amounts approved in appropriations acts appears on the surface to be exerting budgetary control, the approach was not always effective.
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