Budget “Sequestration” and Selected Program Exemptions and Special Rules Page: 2 of 28
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Budget "Sequestration" and Selected Program Exemptions and Special Rules
"Sequestration" is a process of automatic, largely across-the-board spending reductions under
which budgetary resources are permanently canceled to enforce certain budget policy goals. It
was first authorized by the Balanced Budget and Emergency Deficit Control Act of 1985
(BBEDCA, Title II of PL. 99-177, commonly known as the Gramm-Rudman-Hollings Act).
Sequestration is of current interest because it was included as an enforcement tool in the Budget
Control Act of 2011 (BCA, P.L. 112-25). Sequestration can also occur under the Statutory Pay-
As-You-Go Act of 2010 (Statutory PAYGO, Title I of PL. 111-139). In either case, certain
programs are exempt from sequestration, and special rules govern the effects of sequestration on
others. Most of these provisions are found in Sections 255 and 256 of BBEDCA, as amended.
Two provisions were included in the BCA that could result in automatic sequestration:
" Establishment of discretionary spending limits, or caps, for each of FY20 12-
FY202 1. If Congress appropriates more than allowed under these limits in any
given year, sequestration would cancel the excess amount.
" Failure of Congress to enact legislation developed by a Joint Select Committee
on Deficit Reduction, by January 15, 2012, to reduce the deficit by at least $1.2
trillion. The BCA provided that such failure would trigger a series of automatic
spending reductions, including sequestration of mandatory spending in each of
FY20 13-FY2021, a one-year sequestration of discretionary spending for FY20 13,
and lower discretionary spending limits for each of FY2Ol4-FY2021.
In fact, the Joint Committee did not develop the necessary legislation and Congress did not meet
the January 15, 2012, deadline. Thus, automatic spending cuts under the BCA were triggered,
with the first originally scheduled to occur on January 2, 2013. Legislation was enacted on
January 2, however, that delayed the effective date until March 1, 2013 (PL. 112-240).
Under the Statutory PAYGO Act, sequestration is part of a budget enforcement mechanism that is
intended to prevent enactment of mandatory spending and revenue legislation that would increase
the federal deficit. This act requires the Office of Management and Budget (0MB) to track costs
and savings associated with enacted legislation and to determine at the end of each congressional
session if net total costs exceed net total savings. If so, a sequestration will be triggered.
If sequestration occurs-either under the BCA or Statutory PAYGO Act the exemptions and
special rules of Sections 255 and 256 of BBEDCA apply. Most exempt programs are mandatory,
and include Social Security and Medicaid; refundable tax credits to individuals; and low-income
programs such as the Children's Health Insurance Program, Supplemental Nutrition Assistance
Program, Temporary Assistance for Needy Families, and Supplemental Security Income. Some
discretionary programs also are exempt, notably all programs administered by the Department of
Veterans Affairs. Also, subject to notification of Congress by the President, military personnel
accounts may either be exempt or reduced by a lower percentage.
Special rules also apply to several, primarily mandatory, programs. For example, under Section
256 of BBEDCA, Medicare may not be sequestered by more than 400. However, under a
sequester triggered by the BCA, reduction of Medicare is further limited to no more than 200.
Congressional Research Service
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Budget “Sequestration” and Selected Program Exemptions and Special Rules, report, January 10, 2013; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc806081/m1/2/: accessed April 21, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.