P.L. 99–177, Approved December 12, 1985 (99 Stat. 1037)

Public Debt Limit Increase

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Title II—Balanced Budget and Emergency Deficit Control Act of 1985

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SEC. 252. [2 U.S.C. 902]  ENFORCING PAY-AS-YOU-GO.

(a)  Purpose.—The purpose of this section is to assure that any legislation enacted before October 1, 2002, affecting direct spending or receipts that increases the deficit will trigger an offsetting sequestration.

(b)  Sequestration; Look-Back.—.

(1)  Timing.—Not later than 15 calendar days after the date Congress adjourns to end a session and on the same day as a sequestration (if any) under section 251 and 253, there shall be a sequestration to offset the amount of any net deficit increase caused by all direct spending and receipts legislation enacted before October 1, 2002, as calculated under paragraph (2).

(2)  Calculation of deficit increase.—OMB shall calculate the amount of deficit increase or decrease by adding—

(A)  all OMB estimates for the budget year of direct spending and receipts legislation transmitted under subsection (d);

(B)  the estimated amount of savings in direct spending programs applicable to budget year resulting from the prior year’s sequestration under this section or section 253, if any, as published in OMB’s final sequestration report for that prior year; and

(C)  any net deficit increase or decrease in the current year resulting from all OMB estimates for the current year of direct spending and receipts legislation transmitted under subsection (d) that were not reflected in the final OMB sequestration report for the current year.

(c)  Eliminating A Deficit Increase.—(1) The amount required to be sequestered in a fiscal year under subsection (b) shall be obtained from non-exempt direct spending accounts from actions taken in the following order:

(A)  First.—All reductions in automatic spending increases specified in section 256(a) shall be made.

(B)  Second.—If additional reductions in direct spending accounts are required to be made, the maximum reductions permissible under sections 256(b) (guaranteed and direct student loans) and 256(c) (foster care and adoption assistance) shall be made.

(C)  Third.—(i) If additional reductions in direct spending accounts are required to be made, each remaining non-exempt direct spending account shall be reduced by the uniform percentage necessary to make the reductions in direct spending required by paragraph (1); except that the medicare programs specified in section 256(d) shall not be reduced by more than 4 percent and the uniform percentage applicable to all other direct spending programs under this paragraph shall be increased (if necessary) to a level sufficient to achieve the required reduction in direct spending.

(ii)  For purposes of determining reductions under clause (i), outlay reductions (as a result of sequestration of Commodity Credit Corporation commodity price support contracts in the fiscal year of a sequestration) that would occur in the following fiscal year shall be credited as outlay reductions in the fiscal year of the sequestration.

(2)  For purposes of this subsection, accounts shall be assumed to be at the level in the baseline.

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SEC. 253. [2 U.S.C. 903] ENFORCING DEFICIT TARGETS.

(a)  Sequestration.—Within 15 calendar days after Congress adjourns to end a session (other than of the One Hundred First Congress) and on the same day as a sequestration (if any) under section 251 and section 252, but after any sequestration required by section 251 (enforcing discretionary spending limits) or section 252 (enforcing pay-as-you-go) there shall be a sequestration to eliminate the excess deficit (if any remains) if it exceeds the margin.

(b)  Excess Deficit; Margin.—The excess deficit is, if greater than zero, the estimated deficit for the budget year, minus—

(1)  the maximum deficit amount for that year;

(2)  the amounts for that year designated as emergency direct spending or receipts legislation under section 252(e); and

(3)  for any fiscal year in which there is not a full adjustment for technical and economic reestimates, the deposit insurance reestimate for that year, if any, calculated under subsection (h).

The “margin” for fiscal year 1992 or 1993 is zero and for fiscal year 1994 or 1995 is $15,000,000,000.

(c)  Dividing the Sequestration.—To eliminate the excess deficit in a budget year, half of the required outlay reductions shall be obtained from non-exempt defense accounts (accounts designated as function 050 in the President’s fiscal year 1991 budget submission) and half from non-exempt, non-defense accounts (all other non-exempt accounts).

(d)  Defense.—Each non-exempt defense account shall be reduced by a dollar amount calculated by multiplying the level of sequestrable budgetary resources in that account at that time by the uniform percentage necessary to carry out subsection (c), except that, if any military personnel are exempt, adjustments shall be made under the procedure set forth in section 251(a)(3).

(e)  Non-Defense.—Actions to reduce non-defense accounts shall be taken in the following order:

(1)  First.—All reductions in automatic spending increases under section 256(a) shall be made.

(2)  Second.—If additional reductions in non- defense accounts are required to be made, the maximum reduction permissible under sections 256(b) (guaranteed student loans) and 256(c) (foster care and adoption assistance) shall be made.

(3)  Third.—(A) If additional reductions in non-defense accounts are required to be made, each remaining non-exempt, non-defense account shall be reduced by the uniform percentage necessary to make the reductions in non-defense outlays required by subsection (c), except that—

(i)  the medicare program specified in section 256(d) shall not be reduced by more than 2 percent in total including any reduction of less than 2 percent made under section 252 or, if it has been reduced by 2 percent or more under section 252, it may not be further reduced under this section; and

(ii)  the health programs set forth in section 256(e) shall not be reduced by more than 2 percent in total (including any reduction made under section 251),

and the uniform percent applicable to all other programs under this subsection shall be increased (if necessary) to a level sufficient to achieve the required reduction in non-defense outlays.

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SEC. 255. [2 U.S.C. 905]  EXEMPT PROGRAMS AND ACTIVITIES.

(a)  Social Security Benefits and Tier I Railroad Retirement Benefits.—Benefits payable under the old-age, survivors, and disability insurance program established under title II of the Social Security Act, and benefits payable under section 3(a), 3(f)(3), 4(a), or 4(f) of the Railroad Retirement Act of 1974, shall be exempt from reduction under any order issued under this part.

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(h)  Low-Income Programs.— The following programs shall be exempt from reduction under any order issued under this part:

Block grants to States for temporary assistance for needy families;

Child nutrition programs (with the exception of special milk programs) (12-3539-0-1-605);* * *;

Temporary assistance for needy families (75-1552-0-1-609);

Contingency fund (75-1522-0-1-609);

Child care entitlement to States (75-1550-0-1-609);

Commodity supplemental food program * * *;

Food stamp programs * * *;

Grants to States for Medicaid * * *;

Supplemental Security Income Program * * *; and

Special supplemental nutrition program for women, infants, and children (WIC) (12-3510-0-1-605); [174]

Family support payments to states (75-1501-0-1-609);[175]

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SEC. 256. [2 U.S.C. 906]  GENERAL AND SPECIAL SEQUESTRATION RULES.

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(d)  Special Rules for Medicare Program.—

(1)[176]  Calculation of reduction in individual payment amounts.—To achieve the total percentage reduction in those programs required by section 252 or 253, subject to paragraph (2), and notwithstanding section 710 of the Social Security Act, OMB shall determine, and the applicable Presidential order under section 254 shall implement, the percentage reduction that shall apply, with respect to the health insurance programs under title XVIII of the Social Security Act—

(A)  in the case of parts A and B of such title, to individual payments for services furnished during the oneyear period beginning on the first day of the first month beginning after the date the order is issued (or, if later, the date specified in paragraph (4)); and

(B)  in the case of parts C and D, to monthly payments under contracts under such parts for the same one-year period;

such that the reduction made in payments under that order shall achieve the required total percentage reduction in those payments for that period.

(2)[177]  Uniform reducton rate; maximum permissible reduction.—Reductions in payments for programs and activities under such title XVIII pursuant to a sequestration order under section 254 shall be at a uniform rate, which shall not exceed 4 percent, across all such programs and activities subject to such order.

(3)[178]  Timing of application of reductions.—

(A)  In general.—Except as provided in subparagraph (B), if a reduction is made under paragraph (1) in payment amounts pursuant to a sequestration order, the reduction shall be applied to payment for services furnished during the effective period of the order. For purposes of the previous sentence, in the case of inpatient services furnished for an individual, the services shall be considered to be furnished on the date of the individual’s discharge from the inpatient facility.

(B)  Payment on the basis of cost reporting periods.—In the case in which payment for services of a provider of services is made under title XVIII of the Social Security Act on a basis relating to the reasonable cost incurred for the services during a cost reporting period of the provider, if a reduction is made under paragraph (1) in payment amounts pursuant to a sequestration order, the reduction shall be applied to payment for costs for such services incurred at any time during each cost reporting period of the provider any part of which occurs during the effective period of the order, but only (for each such cost reporting period) in the same proportion as the fraction of the cost reporting period that occurs during the effective period of the order.

(4)[179]  Timing of subsequent sequestration order.—A sequestration order required by section 252 or 253 with respect to programs under such title XVIII shall not take effect until the first month beginning after the end of the effective period of any prior sequestration order with respect to such programs, as determined in accordance with paragraph (1).

(5)[180]  No increase in beneficiary charges in assignment-related cases.—If a reduction in payment amounts is made under paragraph (1) for services for which payment under part B of title XVIII of the Social Security Act is made on the basis of an assignment described in section 1842(b)(3)(B)(ii), in accordance with section 1842(b)(6)(B), or under the procedure described in section 1870(f)(1), of such Act, the person furnishing the services shall be considered to have accepted payment of the reasonable charge for the services, less any reduction in payment amount made pursuant to a sequestration order, as payment in full.

(6)[181]  Sequestration disregarded in computing payment amounts.—The Secretary of Health and Human Services shall not take into account any reductions in payment amounts which have been or may be effected under this part, for purposes of computing any adjustments to payment rates under such title XVIII, specifically including—

(A)  the part C growth percentage under section 1853(c)(6);

(B)  the part D annual growth rate under section 1860D–2(b)(6); and

(C)  application of risk corridors to part D payment rates under section 1860D–15(e).

(7)[182]  Exemptions from sequestration.—In addition to the programs and activities specified in section 255, the following shall be exempt from sequestration under this part:

(A)  Part d low-income subsidies.—Premium and cost-sharing subsidies under section 1860D–14 of the Social Security Act.

(B)  Part d catastrophic subsidy.—Payments under section 1860D–15(b) and (e)(2)(B) of the Social Security Act.

(C)  Qualified individual (qi) subsidy.—Payments to States for coverage of Medicare cost-sharing for certain low-income Medicare beneficiaries under section 1933 of the Social Security Act.

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(f)  Treatment of Child Support Enforcement Program.—Notwithstanding any change in the display of budget accounts, any order issued by the President under section 254 shall accomplish the full amount of any required reduction in expenditures under sections 455 and 458 of the Social Security Act by reducing the Federal matching rate for State administrative costs under such program, as specified (for the fiscal year involved) in section 455(a) of such Act, to the extent necessary to reduce such expenditures by that amount.

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(i)  Treatment of Payments and Advances Made With Respect to Unemployment Compensation Programs.—

(1)  For purposes of section 254.—

(A)  any amount paid as regular unemployment compensation by a State from its account in the Unemployment Trust Fund (established by section 904(a) of the Social Security Act),

(B)  any advance made to a State from the Federal unemployment account (established by section 904(g) of such Act) under title XII of such Act and any advance appropriated to the Federal unemployment account pursuant to section 1203 of such Act, and

(C)  any payment made from the Federal Employees Compensation Account (as established under section 909 of such Act) for the purpose of carrying out chapter 85 of title 5, United States Code, and funds appropriated or transferred to or otherwise deposited in such Account,

shall not be subject to reduction.

(2)(A)  A State may reduce each weekly benefit payment made under the Federal-State Extended Unemployment Compensation Act of 1970 for any week of unemployment occurring during any period with respect to which payments are reduced under an order issued under section 254 by a percentage not to exceed the percentage by which the Federal payment to the State under section 204 of such Act is to be reduced for such week as a result of such order.

(B)  A reduction by a State in accordance with subparagraph (A) shall not be considered as a failure to fulfill the requirements of section 3304(a)(11) of the Internal Revenue Code of 1954.

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(k)  Effects of Sequestration.—The effects of sequestration shall be as follows:

(1)  Budgetary resources sequestered from any account other than a trust or special fund account shall be permanently cancelled.

(2)  Except as otherwise provided, the same percentage sequestration shall apply to all programs, projects, and activities within a budget account (with programs, projects, and activities as delineated in the appropriation Act or accompanying report for the relevant fiscal year covering that account, or for accounts not included in appropriation Acts, as delineated in the most recently submitted President’s budget).

(3)  Administrative regulations or similar actions implementing a sequestration shall be made within 120 days of the sequestration order. To the extent that formula allocations differ at different levels of budgetary resources within an account, program, project, or activity, the sequestration shall be interpreted as producing a lower total appropriation, with the remaining amount of the appropriation being obligated in a manner consistent with program allocation formulas in substantive law.

(4)  Except as otherwise provided, obligations in sequestered accounts shall be reduced only in the fiscal year in which a sequester occurs.

(5)  If an automatic spending increase is sequestered, the increase (in the applicable index) that was disregarded as a result of that sequestration shall not be taken into account in any subsequent fiscal year.

(6)  Except as otherwise provided, sequestration in trust and special fund accounts for which obligations are indefinite shall be taken in a manner to ensure that obligations in the fiscal year of a sequestration are reduced, from the level that would actually have occurred, by the applicable sequestration percentage.

SEC. 257. [2 U.S.C. 907]  THE BASELINE.

(a)  In General.—For any budget year, the baseline refers to a projection of current-year levels of new budget authority, outlays, revenues, and the surplus or deficit into the budget year and the outyears based on laws enacted through the applicable date.

(b)  Direct Spending and Receipts.—For the budget year and each outyear, the baseline shall be calculated using the following assumptions:

(1)  In general.—Laws providing or creating direct spending and receipts are assumed to operate in the manner specified in those laws for each such year and funding for entitlement authority is assumed to be adequate to make all payments required by those laws.

(2)  Exceptions.—

(A)(i)  No program established by a law enacted on or before the date on enactment of the Balanced Budget Act of 1997 with estimated current year outlays greater than $50,000,000 shall be assumed to expire in the budget year or the outyears. The scoring of new programs with estimated outlays greater than $50,000,000 a year shall be based on scoring by the Committees on Budget or OMB, as applicable. OMB, CBO and the Budget Committees shall consult on the scoring of such program where there are differences between CBO and OMB.

(ii)  On the expiration of the suspension of a provision of law that is suspended under section 171 of Public Law 104-127 and that authorizes a program with estimated fiscal year outlays that are greater than $50,000,000, for purposes of clause (i), the program shall be assumed to continue to operate in the same manner as the program operated immediately before the expiration of the suspension.

(B)  The increase for veterans’ compensation for a fiscal year is assumed to be the same as that required by law for veterans’ pensions unless otherwise provided by law enacted in that session.

(C)  Excise taxes dedicated to a trust fund, if expiring, are assumed to be extended at current rates.

(3)  Hospital insurance trust fund.—Notwithstanding any other provision of law, the receipts and disbursements of the Hospital Insurance Trust Fund shall be included in all calculations required by this Act.

(c)  Discretionary Appropriations.—For the budget year and each outyear, the baseline shall be calculated using the following assumptions regarding all amounts other than those covered by subsection (b):

(1)  Inflation of current-year appropriations.—Budgetary resources other than unobligated balances shall be at the level provided for the budget year in full-year appropriation Acts. If for any account a full-year appropriation has not yet been enacted, budgetary resources other than unobligated balances shall be at the level available in the current year, adjusted sequentially and cumulatively for expiring housing contracts as specified in paragraph (2), for social insurance administrative expenses as specified in paragraph (3), to offset pay absorption and for pay annualization as specified in paragraph (4), for inflation as specified in paragraph (5), and to account for changes required by law in the level of agency payments for personnel benefits other than pay.

(2)  Expiring housing contracts.—New budget authority to renew expiring multiyear subsidized housing contracts shall be adjusted to reflect the difference in the number of such contracts that are scheduled to expire in that fiscal year and the number expiring in the current year, with the per-contract renewal cost equal to the average current-year cost of renewal contracts.

(3)  Social insurance administrative expenses.—Budgetary resources for the administrative expenses of the following trust funds shall be adjusted by the percentage change in the beneficiary population from the current year to that fiscal year: the Federal Hospital Insurance Trust Fund, the Supplementary Medical Insurance Trust Fund, the Unemployment Trust Fund, and the railroad retirement account.

(4)  Pay annualization; offset to pay absorption.—Current-year new budget authority for Federal employees shall be adjusted to reflect the full 12-month costs (without absorption) of any pay adjustment that occurred in that fiscal year.

(5)  Inflators.—The inflator used in paragraph (1) to adjust budgetary resources relating to personnel shall be the percent by which the average of the Bureau of Labor Statistics Employment Cost Index (wages and salaries, private industry workers) for that fiscal year differs from such index for the current year. The inflator used in paragraph (1) to adjust all other budgetary resources shall be the percent by which the average of the estimated gross national product fixed-weight price index for that fiscal year differs from the average of such estimated index for the current year.

(6)  Current-year appropriations.—If, for any account, a continuing appropriation is in effect for less than the entire current year, then the current-year amount shall be assumed to equal the amount that would be available if that continuing appropriation covered the entire fiscal year. If law permits the transfer of budget authority among budget accounts in the current year, the current-year level for an account shall reflect transfers accomplished by the submission of, or assumed for the current year in, the President’s original budget for the budget year.

(d)  Up-to-Date Concepts.—In deriving the baseline for any budget year or outyear, current-year amounts shall be calculated using the concepts and definitions that are required for that budget year.

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[Internal References.—SSAct §710(a) cites the Balanced Budget and Emergency Deficit Control Act of 1985. SSAct Titles II, IV Part D. and XVIII and §§455 heading, 1842(a), 1870(f), and 1876(a) have footnotes referring to P.L. 99-177.]



[174]  As in original. The word “and” probably should follow “(12-3510-0-1-605);”

[175]  As in original. The semicolon probably should be a period.

[176]  P.L. 111-139, §10(d)(2), amended paragraph (1) in its entirety, effective February 12, 2010.

[177]  P.L. 111-139, §10(d)(3), added this new paragraph (2), effective February 12, 2010.

[178]  P.L. 111-139, §10(d)(1), redesignated this former paragraph (2) as paragraph (3).

[179]  P.L. 111-139, §10(d)(4), added this new paragraph (4), effective February 12, 2010.

[180]  P.L. 111-139, §10(d)(1), redesignated this former paragraph (3) as paragraph (5).

[181]  P.L. 111-139, §10(d)(1), redesignated this former paragraph (4) as paragraph (6). P.L. 111-139, §10(d)(5), amended paragraph (6) in its entirety, effective February 12, 2010.

[182]  P.L. 111-139, §10(d)(6), added this new paragraph (7), effective February 12, 2010.