The Congressional Budget and Impoundment Control Act of 1974 became law on July 12, when the 93rd Congress voted to override President Richard Nixon’s veto. Titles I through IX, known as the Congressional Budget Act of 1974, govern the role of Congress in the federal budgeting process. Title X, known as the Impoundment Control Act of 1974, established rules for the rescission and deferral of appropriated funds.
The act established the House and Senate Committees on the Budget as standing committees of Congress. Prior to the act, the House and Senate Committees on the Budget operated as select committees between 1919 and 1921 and 1919 to 1920, respectively.
Title II established the Congressional Budget Office (CBO), which provides independent, non-partisan cost estimates, known as scores, for pending legislation. CBO also produces economic forecasts. Each year, the CBO produces a budget report and analysis of the President’s proposed budget, which informs the Congressional budgeting and appropriations process.
The act also shifted the federal government’s fiscal year from July 1 to October 1, allowing Congress time to respond to the President’s annual budget message and properly legislate federal spending.
Title III governs the procedures by which Congress adopts a budget resolution, a concurrent resolution passed by both the House and Senate but not presented to the President for signature. It does not have the force of law, but binds Congress and serves as a blueprint throughout the appropriations process. Congress is not required to pass a budget resolution every year. If Congress refrains from doing so, the previous year’s budget resolution stands.
The Congressional Budget Act of 1974 also defined tax expenditures and required the addition of a tax expenditure budget to the President’s annual budget. Tax expenditures are “revenue losses resulting from federal tax provisions that grant special tax relief designed to encourage certain kinds of taxpayer behavior or to aid taxpayers in special circumstances.” Thus, Congress was able for the first time to see the true cost of the numerous tax breaks it had enacted over the years. The mortgage interest deduction is a tax expenditure as is Low Income Housing Tax Credit.
Title X, known as the Impoundment Control Act of 1974, established rules for the rescission and deferral of appropriated funds. President Nixon, fearing a deepening budget deficit, opposed significant portions of spending bills passed by a Democratic-controlled Congress. Prior to the act, President Nixon liberally invoked the presidential power of impoundment, which allowed the President to prevent an executive branch agency from spending any or all funds appropriated to it. A President exercised impoundment by issuing an Executive order to the Department of the Treasury, barring it from transferring funds to a given agency. Every President since Thomas Jefferson used the power of impoundment, but none so zealously as President Nixon. Amid increasing concern about the expanded control exercised by the President, which was exacerbated by the Watergate scandal, Congress sought to limit this presidential power.
With the enactment of Title X, Congress effectively did away with impoundment. Now, to permanently prevent appropriated funds from being spent, known as rescission, the President must submit a request to Congress and obtain approval from both chambers within 45 days. Unless Congress explicitly approves the rescission, funds must be released from the Treasury. In the request, the President must identify the targeted agency, affected programs, amount of funds to be rescinded, and reasons for rescission.
The Impoundment Control Act also allowed the President to defer appropriated funds on a short-term basis. Initially, the President could defer funds for any reason and did not need explicit approval from Congress, although each chamber retained the right to disapprove a deferral. Subsequent court decisions led to legislation that allows the President to defer funds for only three reasons: to provide for special contingencies, to achieve savings through more efficient operations, and to exercise deferrals specifically provided for by law. Now, a proposed deferral is automatically considered approved unless the House or the Senate passes legislation specifically disapproving it.
The Congressional Budget and Impoundment Control Act has been amended several times, including through provisions in the Balanced Budget and Emergency Deficit Control Act of 1985, the Budget Enforcement Act of 1990, and the Balanced Budget Act of 1997. The 1974 legislation, however, established the basic framework for the federal budget process, a framework that remains in place today.
Bill Hennif, Jr. The Congressional Budget Process Timetable, Congressional Research Service, 7-5700, March 20, 2008,
Text of the Congressional Budget and Impoundment Control act of 1974, As Amended Through P.L. 113–67, Enacted December 26, 2013, http://legcounsel.house.gov/Comps/93-344.pdf
United States House of Representatives, History, Art, and Archives, http://history.house.gov/Historical-Highlights/1951-2000/Congressional-Budget-and-Impoundment-Control-Act-of-1974
Jeremy Byellin, Thompson Reuters Legal Solutions, http://blog.legalsolutions.thomsonreuters.com/legal-research/today-in-1974-congressional-budget-and-impoundment-control-act
Andrew Glass, Politico, July 12, 2011, http://www.politico.com/news/stories/0711/58693.html
Jane Gravelle. “Tax Expenditures.” http://www.taxpolicycenter.org/taxtopics/encyclopedia/Tax-expenditures.cfm
NLIHC is recognizing its 40th anniversary throughout 2014, culminating in a commemorative event on Monday, November 17 in Washington, DC. See article elsewhere in Memo for more information.