"Pay-as-you-go" (PAYGO) procedures play an important role in enforcing budget policies with respect to the consideration of revenue and direct spending legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent the enactment of legislation that would cause, or increase, a deficit or reduce a surplus. PAYGO procedures are not a comprehensive means of budget enforcement because they do not apply to discretionary spending, which is provided in annual appropriations acts; such spending is subject to other budget enforcement procedures. Further, PAYGO rules deal only with the budgetary impact of legislation considered by Congress; they do not address changes in direct spending and revenue levels under current law stemming from changes in the economy, demographic trends, and other factors. Over the years, several different PAYGO procedures have been used for budget enforcement purposes. The PAYGO procedures have been based in statute as well as congressional rules. Statutory and rules-based PAYGO procedures have been in effect simultaneously at times, while at other times only one form of PAYGO procedures was in effect. This report examines the statutory PAYGO process that was in effect from 1991 through 2002, beginning with a discussion of the complex and evolving budget enforcement framework of which it was an important part. The report continues with an explanation of the origin, extension, and termination of the PAYGO process, a review of its regular operation and statutory interventions in that operation involving directed scorekeeping, and an identification of major direct spending and revenue legislation subject to the PAYGO process. It concludes with a brief discussion of proposals to restore the PAYGO process. In the case of the PAYGO process, the BEA of 1997 extended it to legislation enacted through the end of FY2002 (i.e., September 30, 2002), but it covered the effects of such legislation through FY2006. Final PAYGO Determinations Made by the OMB Director

Under Section 252 of the 1985 Balanced Budget Act, as amended, the OMB director was required to issue a final sequestration report each year after the end of the congressional session indicating whether a PAYGO sequester was required. As the table shows, the final combined balances on the PAYGO scorecard for all years either were negative amounts or zero. Accordingly, no PAYGO sequester was required for any fiscal year during this period. While the OMB director's final determinations indicated compliance with the PAYGO requirement in all years, in some cases the balances reflected adjustments due to emergency requirements or directed scorekeeping provisions in law that prevented a sequester from occurring, as discussed in subsequent sections of this report. The most significant emergency designation under the PAYGO process applied to the Job Creation and Worker Assistance Act ( P.L. The seven measures containing directed scorekeeping provisions did not make adjustments in the FY1991-FY1993 balances on the PAYGO scorecard. 107-312 , the OMB director set the final balances for all fiscal years on the PAYGO scorecard to zero.
"Pay-as-you-go" (PAYGO) procedures play an important role in enforcing budget policies with respect to the consideration of revenue and direct spending legislation. Generally, the purpose of PAYGO procedures is to discourage or prevent the enactment of legislation that would cause, or increase, a deficit or reduce a surplus in the federal budget. PAYGO procedures are not a comprehensive means of budget enforcement because they do not apply to discretionary spending, which is provided in annual appropriations acts; such spending is subject to other enforcement procedures. Further, PAYGO rules deal only with the budgetary impact of legislation considered by Congress; they do not address changes in direct spending and revenue levels under current law stemming from changes in the economy, demographic trends, and other factors.
Over the years, several different PAYGO procedures have been used for budget enforcement purposes. The PAYGO procedures have been based in statute as well as congressional rules. Statutory and rules-based PAYGO procedures have been in effect simultaneously at times, while at other times only one form of PAYGO procedures was in effect.
This report examines the statutory PAYGO process that was in effect from 1991 through 2002, beginning with a discussion of the complex and evolving budget enforcement framework of which it was an important part. The report continues with an explanation of the origin, extension, and termination of the PAYGO process; a review of its regular operation and statutory interventions in that operation involving directed scorekeeping; and an identification of major direct spending and revenue legislation subject to the PAYGO process. It concludes with a brief discussion of proposals to restore the PAYGO process.
The statutory PAYGO process was established in 1990 as Section 252 of an underlying law, the 1985 Balanced Budget Act. As extended in 1993 and 1997, the PAYGO process applied to legislation enacted through the end of FY2002, but it covered the effects of such legislation through FY2006. The PAYGO process was effectively terminated in December 2002 by the enactment of P.L. 107-312, which set all remaining balances on the PAYGO scorecard to zero.
Under the PAYGO process, if the OMB director determined that there was a positive balance for a fiscal year on the PAYGO scorecard, then the President was required to issue a sequestration order implementing across-the-board cuts in nonexempt direct spending to eliminate the balance. The OMB director issued 12 final sequestration reports under the PAYGO process, for FY1992-FY2003. The final balances on the PAYGO scorecard for all years were either negative amounts (reflecting net savings) or zero. Accordingly, no PAYGO sequester was required for any fiscal year during this period. While the OMB director's final determinations indicated compliance with the PAYGO requirement in all years, in some cases the balances reflected adjustments due to emergency requirements, provided for under the process, or directed scorekeeping provisions in law that intervened in the normal operation of the process in order to prevent a sequester. Emergency designations and directed scorekeeping provisions sometimes involved amounts ranging from tens of billions to more than one hundred billion dollars for a year.
This report will be updated as developments warrant.