Backdoor spending authority in the United States federal budget is authority to incur obligations that are outside the normal Congressional appropriations process because it is provided in legislation other than appropriation acts. Former Democratic House Rules Committee Chairwoman Louise Slaughter determined that "spending authority is the technical term for backdoor authority and defined in section 401(c)(2) of the Congressional Budget Act of 1974, as amended, as various types of authority to obligate the United States to make payments, the budget authority for which is not provided in advance in appropriations acts." It can also be known as a permanent appropriation.
Origins and issues
Originally created by a parliamentary ruling of the House of Representatives in 1949, "backdoor spending" devices have been held not to constitute appropriations. The ruling permitted legislative committees, which are specifically prohibited from handling appropriations matters, to authorize agencies to obtain funds via the "backdoor" method. In some cases these spending authorities do not come before the appropriations committees for review.
- One type of backdoor is contract authority which permits an agency to obligate funds in advance of appropriations. The matter comes before the appropriations committees only when money is needed to liquidate the obligation, too late for them to exercise any meaningful control.
- Another way to work with non-appropriated funds is to authorize agencies to borrow funds from the Treasury or from the public. Borrowing authority outside the appropriations process has been authorized since this backdoor was opened in 1932 with creation of the Reconstruction Finance Corporation.
- The third and largest form of backdoor is mandatory entitlement of specified payments to eligible beneficiaries. Most entitlements are open-ended: their cost depends on the varying number of claimants and amounts allowable to each, rather than on current legislative decisions. Most entitlements are also in the form of permanent appropriations that bypass the appropriations committees altogether. Even when the entitlements go through the regular appropriations process (as is the case with public assistance and veterans' benefits) the appropriations committees have no real say over the amounts that are to be spent.
The Congressional Budget and Impoundment Control Act of 1974 originally was intended to limit and reform backdoor authority by requiring new spending authority or entitlements to go through the appropriations process. By 2010 however, 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 expenditures."
Exceptions to statutory attempts to limit backdoor spending
There are many exceptions to this procedure. First, although this requirement is a law, the Speaker of the US House of Representatives ruled in 1975 that limits on backdoor spending can be waived if the House adopts a recommendation to do so from the House Rules Committee. Second, it applies only to consideration of new spending after 1975. Third, broad categories involving gifts and trust funds were exempt.
In 1990, the Congress further attempted to limit backdoor authority by establishing controls over changes in direct spending—spending that is generally the same as backdoor authority. The Budget Enforcement Act of 1990 (BEA) amended both the Congressional Budget Act of 1974 and the Balanced Budget and Emergency Deficit Control Act of 1985. In addition to establishing dollar limits for total annual appropriations, BEA contains a “pay-as-you-go” (PAYGO) provision requiring that legislation enacted be either deficit neutral or deficit reducing. In other words, any legislation reducing taxes or expanding direct spending programs must be offset by direct spending cuts or revenue increases.
Since 1976, any bill that creates spending authority for funds that are not appropriated is subject to a point of order. In effect, this procedural rule is intended to protect the House and Senate appropriations committee from being bypassed by the committees with substantive responsibility for various subjects.
Various types of backdoor spending authority include authority to enter into contracts; to incur indebtedness; to make payments (including loans, grants and entitlements) to persons, states and local governments and other entities that meet requirements established by law; to allow United States government executive departments and agencies to forgo collection of proprietary offsetting receipts; and to make any other payments (including loans, grants, and payments from revolving funds.
From the perspective of the appropriations committees, funding by these forms of spending authority slips away from their control through legislative back doors. The Congressional Budget Act of 1974 allowed older forms of backdoor spending to be grandfathered in but attempted to give the appropriations committees some control over new spending, or new borrowing and contract authority. (2 U.S.C. § 651)
Backdoor tax expenditures
Tax expenditures are defined by the Joint Committee on Taxation (JCT) as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferentialrate of tax, or a deferral of tax liability.”
A tax expenditure is considered federal spending when an eligible filer takes advantage of tax breaks in the law that lower their tax liability and consequently lower the projected baseline of federal revenues. This is one way the federal government funnels money to projects outside the regular appropriations process.
- Glossary of Terms in the Federal Budget Process, Louise M. Slaughter, House Rules Committee Chairwoman (2007-2011).
- pp. 13-14 pdf.
- "Borrowing authority", also known as "authority to spend debt receipts", pg.46; Report to the House Committee on the Budget by the Comptroller General of the United States. Revolving Funds: Full Disclosure Needed For Better Congressional Control. August 30, 1978. http://www.gao.gov
- See Discretionary spending The political philosopher and journalist George Will contends all government spending is discretionary, with the exception of debt service. Econtalk, George Will, Feb-28-2011.
- The Battle of the Budget, Allen Schick, Proceedings of the Academy of Political Science, Vol. 32, No. 1, Congress against the President, (1975), pp. 51-70. Published by: The Academy of Political. JSTOR.
- The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform. December 2010. The White House. P. 29, pdf.
- 121 Cong. Rec. 7677, 94th Cong. 1st Sess., Mar. 20, 1975 (ruling by Speaker Carl Albert [Okla.]).
- 2 U.S.C. § 651(c)
- U.S. General Accounting Office, Budget Issues: Inventory of Accounts With Spending Authority and Permanent Appropriations, GAO/AIMD-96-79, May 31, 1996.
- collection of some taxes, fees and debts justly due.