November
25, 1998
The Honorable
Al Gore
President of the Senate
Washington D.C. 20515
Dear Mr.
President:
The
Balanced Budget and Emergency Deficit Control Act of 1985 (Section 251
(a) (7)), as amended by the Budget Enforcement Act of 1997, requires that
OMB submit a report to Congress on appropriations legislation within seven
days of enactment. Section 252(d) requires that OMB submit a report to
Congress on direct spending or receipts legislation within seven days
of enactment. Enclosed are separate appropriations and pay-as-you-go reports
for Public Law 105-277, which became law on October 21, 1998.
/s/
Jacob J.
Lew
Director
Enclosure
(82 kb)
Identical
Letter Sent to The Honorable Newt Gingrich
November
25, 1998
The Honorable
Newt Gingrich
Speaker of the House of
Representatives
Washington, D.C. 20515
Dear Mr.
Speaker:
The
Balanced Budget and Emergency Deficit Control Act of 1985 (Section 251
(a) (7)), as amended by the Budget Enforcement Act of 1997, requires that
OMB submit a report to Congress on appropriations legislation within seven
days of enactment. Section 252(d) requires that OMB submit a report to
Congress on direct spending or receipts legislation within seven days
of enactment. Enclosed are separate appropriations and pay-as-you-go reports
for Public Law 105-277, which became law on October 21, 1998.
/s/
Jacob J.
Lew
Director
Enclosure
(82 kb)
Identical
Letter Sent to The Honorable Al Gore
NOTE: This
PAYGO report should proceed after table 12, page 39 of this 7-Day-After-Report)
OMB
COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS
Report
No: 471
Date: 11/25/98
- LAW
NUMBER: P.L. 105-277 (H.R. 4328)
- BILL
TITLE: Omnibus Consolidated and Emergency
Supplemental Appropriations Act, FY 1999
- BILL
PURPOSE: The sections of P.L. 105-277 that
are subject to pay-as-you-go scoring extend certain expiring tax and
trade provisions, provide relief for farmers, close certain tax loopholes
and make other changes in the tax code. The pay-as-you-go sections of
the bill also affect various mandatory programs, including Medicare,
veterans compensation, and Tennessee Valley Authority (TVA) debt refinancing.
- OMB
ESTIMATE: Additional detail shown in Table
12
|
(Fiscal
years; in millions of dollars) |
|
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
Outlay
effect...... |
0 |
69 |
618 |
641 |
295 |
330 |
Receipt
effect...... |
0 |
-181 |
3,498 |
2,147 |
1,413 |
2,724 |
Net........ |
0 |
250 |
-2,880 |
-1,506 |
-1,118 |
-2,394 |
OMB estimates
that P.L. 105-277 will result in pay-as-you-go costs of $250 million
in 1999 but savings of $7.6 billion over five years. The revenue provisions
are estimated to reduce receipts $181 million in 1999 and increase
them $9.6 billion over five years. The major tax provisions include
the following:
- Extensions
of the research and experimentation credit, the work opportunity
tax credit, the welfare-to-work tax credit, and the Generalized
System of Preferences. The extensions reduce receipts $2.5 billion
in 1999 and $4.6 billion from 1999-2003.
- Offsets
from closure of a corporate loophole regarding certain deductible
liquidating distributions of regulated investment companies (RICs)
and real estate investment trusts (REITs). This offset increases
receipts $2.7 billion in 1999 and $15 billion from 1999-2003.
- A
change in the tax treatment of cash options for "qualified prizes",
which results in higher receipts of $220 million in 1999, and $1.4
billion from 1999-2003.
- Several
sections provide tax relief to farmers, including the permanent
extension of income averaging, and extending the net operating loss
carryback period from two to five years. These provisions reduce
receipts $170 million in 1999 and $1.0 billion over five years.
- P.L.
105-277 also accelerates the full deductibility of health insurance
costs for the self-employed, phases in an increase in the private
activity bond cap, and allows non-refundable personal tax credits
to offset an individual's regular tax in full for 1998. These and
other tax reduction provisions reduce receipts $601 million in 1999
and $1.9 billion over five years.
P.L.
105-277 also includes a variety of provisions affecting direct spending,
which are estimated to increase outlays $69 million in 1999 and $2.0
billion over five years. The major provisions include the following:
- Medicare
home health provisions that modify the interim payment system and
delay by one year implementation of the prospective payment system
and across-the-board payment reductions. The bill also reduces the
home health inflation adjustment over the period 2000-2003. The
net cost of these and other changes is $20 million in 1999, and
$710 million from 1999-2003.
- A
veterans compensation provision that lowers the standard for award
of monthly veterans disability benefits for those who served in
the Gulf War by requiring a presumption of service connection for
illnesses based on a simple "positive association" standard. This
provision increases outlays $502 million from 2001-2003.
- An
authorization for TVA to prepay debt it owes the Federal Financing
Bank at the "nominal value" of that debt, rather than at the debt's
higher "current market value," resulting in a total 17-year cost
to the Federal government of about $1.2 billion. This provision
increases outlays $94 million in 1999, and $690 million from 1999-2003.
- Other
outlay provisions in P.L. 105-277 affect visa fees for skilled nonimmigrant
workers, amend the Public Health Service Act concerning vaccine
injury compensation, accelerate privatization of the Student Loan
Marketing Association, extend the Trade Adjustment Assistance program,
and sell or convey land. These remaining outlay provisions result
in net savings of $45 million in 1999 and a net cost of $51 million
from 1999-2003.
- CBO
ESTIMATE: Additional detail shown in Table 12
|
(Fiscal
years; in millions of dollars) |
|
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
Outlay
effect... |
0 |
121 |
1,989 |
-1,037 |
102 |
-40 |
Receipt
effect.. |
0 |
201 |
1,869 |
14 |
-734 |
-240 |
Net
cost.......... |
0 |
-80 |
120 |
-1,051 |
836 |
200 |
- EXPLANATION
OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:
For the bill
as a whole, OMB estimates a net pay-as-you-go cost of $250 million in
1999, and a net savings of $7.6 billion over five years. CBO estimates
a net savings of $80 million in 1999, and a net cost of $25 million over
five years. OMB estimates a net increase in outlays of $32 million in
1999 and $1.9 billion over five years. CBO estimates a net increase in
outlays of $121 million in 1999, and $1.1 billion over five years. OMB
estimates a net reduction in receipts of $181 million in 1999, and a net
revenue gain of $9.6 billion over five years. CBO estimates a net revenue
gain of $201 million in 1999, and $1.1 billion over five years.
Of the five-year,
$8.5 billion receipts difference, the largest difference is due to the
provision restricting abusive liquidating REIT transactions. Over five
years, OMB estimates receipt increases of $15 billion from this provision,
while CBO estimates receipt increases of $5.6 billion. P.L. 105-277 required
that OMB score this provision using the economic and technical assumptions
used in preparing the FY 1999 Mid-Session Review (MSR) baseline receipts
forecast. The OMB MSR receipts baseline contained an explicit adjustment
for anticipated revenue losses associated with liquidating REIT transactions.
It is believed that CBO's estimate was made relative to a baseline that
did not fully capture the potential revenue erosion of these transactions.
Because of the baseline differences, OMB estimates that the provision
restricting liquidating REIT transactions raises significantly more revenue.
Partially
offsetting the estimating difference for the liquidating REIT provision
are differences in estimates for the extension of certain expiring tax
and trade provisions and provisions relating to farmers. OMB estimates
of the revenue loss for the tax and trade extensions and farming provisions
exceed CBO's estimates by $886 million and $675 million, respectively.
Technical modeling differences of the 1-year extension of a modified exception
from subpart F for active financing income and the provision of a special
5-year net operating loss carryback period for farming losses account
for most of the estimating differences.
There are
differences between OMB and CBO scoring of the provisions affecting Medicare,
veterans compensation, and TVA debt refinancing. For the Medicare provisions,
CBO estimates $150 million in outlays in 1999 and $800 million over five
years. OMB estimates 1999 outlays of $20 million, and five-year outlays
of $710 million. In 2000, OMB estimates outlays of $510 million, while
CBO estimates outlays of $2.0 billion. In 2001, OMB estimates outlays
$480 million, while CBO estimates outlay savings of $1.1 billion. CBO's
baseline assumes higher Medicare spending, and this accounts for the large
differences in the home health estimates in 2000 and 2001. For veterans
compensation, OMB and CBO differ in their assumptions of veterans behavior
and how quickly the Department of Veterans Affairs (VA) will implement
the provision affecting benefits for Gulf War veterans. Based on experience
with Agent Orange legislation, OMB assumes VA will process and grant more
claims than CBO does. OMB estimates outlays of $502 million from 2001-2003,
while CBO estimates outlays of $40 million over the same three years.
For the TVA debt repayment provision, OMB assumes lower long-term interest
rates and thus a higher market value for TVA's debt than does CBO. OMB
estimates outlays of $94 million in 1999, and $690 million over five years.
CBO estimates outlays of $16 million in 1999, and $306 million over five
years.
|