Baseline (Budgeting)
Encyclopedia
Baseline budgeting is a method of developing a budget which uses existing spending levels as the basis for establishing future funding requirements. The concept assumes that the organization is generally headed in the right direction and only minor changes in spending levels will be required. The baseline is normally enhanced by adding adjustment factors based on issues such as inflation, new programs, and anticipated changes to existing programs.
The genesis of baseline budget projections can be found in the Congressional Budget Act of 1974. That act required the Office of Management and Budget (OMB) to prepare projections of federal spending for the upcoming fiscal year based on a continuation of the existing level of governmental services. It also required the newly established Congressional Budget Office to prepare five-year projections of budget authority, outlays, revenues, and the surplus or deficit. OMB published its initial current-services budget projections in November 1974, and CBO's five-year projections first appeared in January 1976. Today's baseline budget projections are very much like those prepared more than two decades ago, although they now span 10 years instead of five.
The Budget Act was silent on whether to adjust estimates of discretionary appropriations for anticipated changes in inflation. Until 1980, OMB's projections excluded inflation adjustments for discretionary programs. CBO's projections, however, assumed that appropriations would keep pace with inflation, although CBO has also published projections without these so-called discretionary inflation adjustments.
CBO's budget projections took on added importance in 1980 and 1981, when they served as the baseline for computing spending reductions to be achieved in the budget reconciliation process. The reconciliation instructions contained in the fiscal year 1982 budget resolution (the so-called Gramm-Latta budget) required House and Senate committees to reduce outlays by a total of $36 billion below baseline levels, but each committee could determine how those savings were to be achieved. The CBO baseline has been used in every year since 1981 for developing budget resolutions and measuring compliance with reconciliation instructions.
The Deficit Control Act of 1985 provided the first legal definition of baseline. For the most part, the act defined the baseline in conformity with previous usage. If appropriations had not been enacted for the upcoming fiscal year, the baseline was to assume the previous year's level without any adjustment for inflation. In 1987, however, the Congress amended the definition of the baseline so that discretionary appropriations would be adjusted to keep pace with inflation. Other technical changes to the definition of the baseline were enacted in 1990, 1993, and 1997.
Baseline budget projections increasingly became the subject of political debate and controversy during the late 1980s and early 1990s, and more recently during the 2011 debt limit debate. Some critics contend that baseline projections create a bias in favor of spending by assuming that federal spending keeps pace with inflation and other factors driving the growth of entitlement programs. Changes that merely slow the growth of federal spending programs have often been described as cuts in spending, when in reality they are actually reductions in the rate of spending growth.
There have been attempts to eliminate the baseline budget concept and replace it with zero based budgeting, which is the opposite of baseline budgeting. Zero based budgeting requires that all spending must be re-justified each year or it will be eliminated from the budget regardless of previous spending levels.
According to the Government Accountability Office
, a Baseline is as follows:
Baseline
"An estimate of spending, revenue, the deficit or surplus, and the public debt expected during a fiscal year under current laws and current policy. The baseline is a benchmark for measuring the budgetary effects of proposed changes in revenues and spending. It assumes that receipts and mandatory spending will continue or expire in the future as required by law and that the future funding for discretionary programs will equal the most recently enacted appropriation, adjusted for inflation. Under the Budget Enforcement Act (BEA), which will expire at the end of fiscal year 2006, the baseline is defined as the projection of current-year levels of new budget authority, outlays, revenues, and the surplus or deficit into the budget year and outyears based on laws enacted through the applicable date.
CBO Baseline
Projected levels of governmental receipts (revenues), budget authority, and outlays for the budget year and subsequent fiscal years, assuming generally that current policies remain the same, except as directed by law. The baseline is described in the Congressional Budget Office’s (CBO) annual report for the House and Senate Budget Committees, The Budget and Economic Outlook, which is published in January. The baseline, by law, includes projections for 5 years, but at the request of the Budget Committees, CBO has provided such projections for 10 years. In most years the CBO baseline is revised in conjunction with CBO’s analysis of the President’s budget, which is usually issued in March, and again during the summer. The “March” baseline is the benchmark for measuring the budgetary effects of proposed legislation under consideration by Congress."
The genesis of baseline budget projections can be found in the Congressional Budget Act of 1974. That act required the Office of Management and Budget (OMB) to prepare projections of federal spending for the upcoming fiscal year based on a continuation of the existing level of governmental services. It also required the newly established Congressional Budget Office to prepare five-year projections of budget authority, outlays, revenues, and the surplus or deficit. OMB published its initial current-services budget projections in November 1974, and CBO's five-year projections first appeared in January 1976. Today's baseline budget projections are very much like those prepared more than two decades ago, although they now span 10 years instead of five.
The Budget Act was silent on whether to adjust estimates of discretionary appropriations for anticipated changes in inflation. Until 1980, OMB's projections excluded inflation adjustments for discretionary programs. CBO's projections, however, assumed that appropriations would keep pace with inflation, although CBO has also published projections without these so-called discretionary inflation adjustments.
CBO's budget projections took on added importance in 1980 and 1981, when they served as the baseline for computing spending reductions to be achieved in the budget reconciliation process. The reconciliation instructions contained in the fiscal year 1982 budget resolution (the so-called Gramm-Latta budget) required House and Senate committees to reduce outlays by a total of $36 billion below baseline levels, but each committee could determine how those savings were to be achieved. The CBO baseline has been used in every year since 1981 for developing budget resolutions and measuring compliance with reconciliation instructions.
The Deficit Control Act of 1985 provided the first legal definition of baseline. For the most part, the act defined the baseline in conformity with previous usage. If appropriations had not been enacted for the upcoming fiscal year, the baseline was to assume the previous year's level without any adjustment for inflation. In 1987, however, the Congress amended the definition of the baseline so that discretionary appropriations would be adjusted to keep pace with inflation. Other technical changes to the definition of the baseline were enacted in 1990, 1993, and 1997.
Baseline budget projections increasingly became the subject of political debate and controversy during the late 1980s and early 1990s, and more recently during the 2011 debt limit debate. Some critics contend that baseline projections create a bias in favor of spending by assuming that federal spending keeps pace with inflation and other factors driving the growth of entitlement programs. Changes that merely slow the growth of federal spending programs have often been described as cuts in spending, when in reality they are actually reductions in the rate of spending growth.
There have been attempts to eliminate the baseline budget concept and replace it with zero based budgeting, which is the opposite of baseline budgeting. Zero based budgeting requires that all spending must be re-justified each year or it will be eliminated from the budget regardless of previous spending levels.
According to the Government Accountability Office
Government Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...
, a Baseline is as follows:
Baseline
"An estimate of spending, revenue, the deficit or surplus, and the public debt expected during a fiscal year under current laws and current policy. The baseline is a benchmark for measuring the budgetary effects of proposed changes in revenues and spending. It assumes that receipts and mandatory spending will continue or expire in the future as required by law and that the future funding for discretionary programs will equal the most recently enacted appropriation, adjusted for inflation. Under the Budget Enforcement Act (BEA), which will expire at the end of fiscal year 2006, the baseline is defined as the projection of current-year levels of new budget authority, outlays, revenues, and the surplus or deficit into the budget year and outyears based on laws enacted through the applicable date.
CBO Baseline
Projected levels of governmental receipts (revenues), budget authority, and outlays for the budget year and subsequent fiscal years, assuming generally that current policies remain the same, except as directed by law. The baseline is described in the Congressional Budget Office’s (CBO) annual report for the House and Senate Budget Committees, The Budget and Economic Outlook, which is published in January. The baseline, by law, includes projections for 5 years, but at the request of the Budget Committees, CBO has provided such projections for 10 years. In most years the CBO baseline is revised in conjunction with CBO’s analysis of the President’s budget, which is usually issued in March, and again during the summer. The “March” baseline is the benchmark for measuring the budgetary effects of proposed legislation under consideration by Congress."