House Democrats Claim Sequestration Woes From Shuster FAA Bill

House Democrats Claim Sequestration Woes From Shuster FAA Bill

October 31, 2017  | Jeff Davis

October 30, 2017

Democratic leaders of the House Transportation and Infrastructure Committee earlier today sent a letter to colleagues in the chamber, stating that the air traffic control corporatization bill passed by the committee earlier this year (H.R. 2997) would, if its latest public incarnation were enacted, trigger a new round of budgetary sequestration on the mandatory side of the budget that would threaten Medicare and other popular entitlement programs. They backed up their assertion with a memorandum dated October 13 from the nonpartisan and trusted Congressional Research Service.

The press office of the prime mover behind the bill, T&I chairman Bill Shuster (R-PA), refuted the Democratic allegation via Twitter later in the day: “CRS report on #21AIRRact is filled with so many caveats, qualifiers, and speculation that it’s pointless to draw any conclusions from it.”

The legislation would split up the Federal Aviation Administration, turning responsibility for air traffic control over to a non-governmental, non-profit corporation to be funded by user fees.

Where to begin?

Let’s start with the CRS memo itself. One of the big reasons that CRS reports are so well-respected is that they are always exceedingly carefully and cautiously crafted (sometimes to an almost absurd extent). In order to reach the assumptions about sequestration that the enactment of the latest version of H.R. 2997 might provoke, the CRS report is careful to add these cautionary words:

If H.R. 2997 were enacted in the version that appears on the House Rules Committee website (as referenced above), and the applicable budgetary effects recorded on the PAYGO scorecard were consistent with the cost estimate provided by the CBO (referenced above), then the amounts recorded on the PAYGO scorecard would likely be recorded as shown below.

That cost estimate, the unavoidable shortcomings of which were discussed at length here in August, said that enactment of the Rules Print version of the bill would debit the 5-year PAYGO scorecard by $22.2 billion and the 10-year PAYGO scorecard by $98.5 billion. After the PAYGO effects of other previously enacted legislation, and any future bills enacted by the end of 2017, are also put on the scorecard, any negative amounts on the scorecard would be reclaimed through another round of budget sequestration at the end of the year.

Problem number one is that the U.S. Supreme Court conclusively ruled in the Bowsher v. Synar (1986) decision that the agencies of the legislative branch (GAO and CBO) could have no role in the sequestration process, since sequestration is part of the execution of laws, not the making of laws, and thus an executive branch responsibility (the Office of Management and Budget). So CBO’s estimates of the costs of H.R. 2997 have no weight in the actual sequestration process.

OMB’s estimates would probably be tens of billions of dollars different than CBO’s estimate, because in the 2018 Budget earlier this year, OMB staff indicated that their official position was that the cash flow of the new non-governmental air traffic control corporation that would be created by H.R. 2997 should not be recorded as part of the federal budget. CBO disagrees on this conceptual issue, and the arguments of both sides have some merit. But in terms of what gets recorded for PAYGO enforcement, OMB wins and CBO loses – always. If OMB were to score the bill, the spending of the new ATC Corporation would not be part of the budget, nor would its user fees. But the reduction in current law federal excise taxes would be part of the budget, and those would probably be recorded as a PAYGO debit of around $78 billion (well below the $98.5 billion assumed in the CRS memo, but still a lot of money that would, on its own trigger more sequestration).

The bigger problem is the one that has plagued this bill from the beginning, to wit:

  • There are two separate scorekeeping and enforcement regimes in the federal budget – one for annual discretionary appropriations (spending caps), and the other one for everything else (mandatory spending and federal revenues) – PAYGO. Apples and oranges.
  • Each budget scorekeeping and enforcement system exists in its own separate universe. Budget law prohibits savings or overages in one system from being acknowledged by the other system.
  • The budget process is really, really, really not set up to handle legislation that would make spending or revenue changes that are recorded in both systems.
  • H.R. 2997 is particularly problematic because it takes money for air traffic control, currently measured in the discretionary appropriations system, and either moves it out of the budget entirely (if you side with OMB) or moves it to into the mandatory/revenue system (if you side with CBO). No matter whose side you take in that conceptual dispute, one thing is clear – the budget process does not allow Congress to move money from one universe to the other. It does not allow you to transmute apples into oranges (or vice versa).
  • Even though the Shuster FAA bill would reduce the need for $12 to $15 billion per year in discretionary appropriations because air traffic control would no longer be a problem that could be addressed in the discretionary budget, those savings cannot, by law, be used to offset the lost revenue on the mandatory/revenue side of the budget due to decreased aviation excise taxes. Sequestration is unavoidable.

Except…

Every so often, major legislation does come around that has significant effects in both budgetary universes. When that happens, the law requires that such legislation either mess up the PAYGO scorecard or else blow up the discretionary spending caps (the enforcement mechanism for limits on annual appropriations). In order to avoid that, Congress usually puts a provision in the text of the offending law that reads like this:

The budgetary effects of this Act shall not be entered on either PAYGO scorecard maintained pursuant to section 4(d) of the Statutory Pay-As-You-Go Act of 2010.

One might ask, “what is that terrible, budgetary offensive law that was excluded from the righteous PAYGO enforcement process in such a callous manner?”

In fact that language is taken from section 32401 of the FAST Act of 2015. Highway Trust Fund and Airport Improvement Program contract authority are the only programs left in the budget that, due to some odd historical loopholes, exist in both budgetary universes. (The budget authority is in the mandatory/revenue universe but the obligation limitations and outlays are in the discretionary universe).The section 32401 language prevented what would otherwise have been a $71.5 billion credit to the PAYGO scorecard (as estimated by CBO), because instead, those savings were being used to pay for a Highway Trust Fund bailout that does not score as part of the regular budget process.

Every time Congress tries to use savings in the mandatory/revenue universe to increase Trust Fund spending in the discretionary universe, they have to include a provision nullifying PAYGO for that bill. See also  section 8102 of TEA21 (eliminating a $9.6 billion PAYGO credit) and section 120001 of MAP-21 (eliminating a $16.3 billion PAYGO credit). (The 2005 SAFETEA-LU law was enacted during a period when PAYGO had been repealed, otherwise it would have required a nullifier as well.)

(House T&I ranking member Peter DeFazio (D-OR) and Aviation Subcommittee ranking member John Rick Larsen (D-WA), who sent out today’s letter, voted for the FAST Act and MAP-21. Both bills endorsed the principle of nullifying changes on the PAYGO scorecard if the budgetary effects were used in conjunction with matching changes in discretionary spending.)

The same principle was applied by the Budget Committees in 2013 when House chairman Paul Ryan (R-WI) and Senate chairman Patty Murray (D-WA) agreed on a deal to increase the spending caps limiting the discretionary universe and fully offset the cost of the increase with savings in the mandatory/revenue universe. Section 117 of the Bipartisan Budget Act of 2013 ensured that the savings would not be registered on the PAYGO scorecard, as would be otherwise required by law, so that they could instead be used as an extralegal offset for the increase in the spending in the other universe.

Everyone in the tiny world of budget geeks who understand this kind of thing had always assumed that if the Shuster bill ever got to the point where Congress was about to send it to the President’s desk, a similar provision preventing the bill’s budgetary effects from being registered on the PAYGO scorecard would be added, thus eliminating any possibility of a new round of sequestration. Such provisos are always added at the last minute (in the cases of TEA21, MAP-21 and FAST, the PAYGO nullifiers were added after the bill passed the House).

Bottom line: if the current version of H.R. 2997 were enacted into law without the inclusion of the same kind of PAYGO waiver that TEA21, MAP-21, and the FAST Act received, it would cause some kind of serious PAYGO hit and an additional round of budgetary sequestration (although almost certainly not in the amount that CBO predicts, because OMB will score the bill differently). But no one seriously thinks that, if the bill gets that far, Congress won’t add such a waiver, just like they did for TEA21, MAP-21, the Bipartisan Budget Act of 2013, and the FAST Act.

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