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Biennial Budgeting

July 25, 2001

Mr. Chairman, and Members of the Committee, I am pleased to be here this morning to discuss the issue of converting the annual budget and appropriations process to a biennial cycle.

President Bush strongly supports converting the Federal Government to biennial budgeting. The President is very familiar with this issue, having been the Governor of Texas, which is one of the States that has such a process. As the President explained last February in the Budget Blueprint, he supports this reform along with a number of other budget process reforms including the extension of the discretionary spending limits and the PAYGO requirement, the restoration of the President's line item veto authority, the conversion of the non-binding budget resolution into a binding law and the enactment of an automatic continuing resolution to avoid government shutdowns.

The potential benefits of biennial budgeting have been outlined in testimony presented by at least three of my predecessors as OMB Director - Leon E. Panetta, Franklin D. Raines, and Jacob J. Lew - in their testimony before the House Governmental Operations Committee (in 1993), the Senate Rules Committee (in 1994), the Senate Governmental Affairs Committee (in 1997), and this Committee (last year). Mr. Chairman, I would hope to see more progress on this issue than just the addition of another name to this list. This idea has had the support of at least two Administrations and Members of Congress from both parties. We should not spend a whole lot more time talking about the pros and cons. Biennial budgeting has become a perennial idea. It is time to enact the legislation to implement it or to admit that the forces against it are just not going to let it happen.

As has been said many times, the main benefit to be gained through a two-year process is that it will enable the Executive Branch and Congress to devote more time to the oversight and implementation of the appropriated programs. The annual process, as it has been operating, has prevented my predecessors from conducting an adequate review of program performance. We have resolved to spend more time on such reviews, but it has been very hard to do that while at the same time we have had to prepare a supplemental request for the 2001 budget, engage in a dialogue with Congress on the 2002 budget, and prepare guidance to the agencies for the 2003 budget.

In the limited time that we have for review and oversight, we tend to concentrate on annually appropriated programs to the exclusion of the growing portion of the budget that is funded under the entitlement laws on a permanent basis. We need to carve out more time to review and reform these mandatory programs. Our review should challenge the assumption of automatic spending for these programs and, where appropriate, we should subject them to the rigors of the budget and appropriations process.

Simply passing a two-year budgeting requirement will not be enough. It will require the will of the Congress to make it work. The experience to date is not promising. For the past 15 years, we have had a requirement for the President to submit biennial budget requests for the Defense Department, and Congress has routinely ignored these requests. I also urge the Congress to build additional flexibility into the process. Without it, there is a danger that this process will dissolve into a series of ad hoc supplemental appropriations bills. I think that we should consider providing appropriations for each year of a two-year period and allow the unobligated amounts from the first year's appropriation to carry over into the second year of the period. At the end of the two-year period, unobligated balances should be allowed to lapse. I also urge that there be less earmarking, less micro-management, and more reprogramming flexibility, in order to accommodate the changes in need that are bound to occur over the two-year time frame.

In sum, annual budgeting is a very inefficient process. Each year it consumes a great deal of time and energy that could be better spent on grappling with programmatic issues in greater detail and on a longer time frame. Under a two-year budget, the funding decisions would be made in the first year of each two-year period, thereby freeing-up the second year for greater attention to management, long-range planning, and oversight.

There can be no doubt but that biennial budgeting will require a fundamental change in how the Federal Government operates. The implementation of this reform will require conforming changes to those laws that are premised on the annual budget process and will require Congress and the Executive Branch to develop and implement new practices for proposing, considering, and enacting biennial budgets. For example, we will need to ensure that an incoming President has sufficient time, after taking office, to prepare and submit a budget proposal that will cover two years rather than only one. Moreover, because of the magnitude of the change, the beginning of the conversion process will likely pose significant challenges to confront and overcome. The implementing legislation needs to address these challenges.

Let's make this the year we finally act on this reform proposal.