Supplemental Appropriations: Trends and Budgetary Impacts Since 1981

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

Hurricane Katrina, which struck Louisiana, Mississippi, and Alabama, caused widespread flooding, significant property damage, and lost lives. In response, Congress passed two supplemental appropriations measures providing a combined $62.3 billion for relief and recovery needs. Many knowledgeable observers think that the costs will likely rise much higher. Some have called for offsets in the federal budget to pay for Katrina (and, to a lesser extent, Hurricane Rita) relief and recovery efforts. Recently, many in Congress have expressed renewed concern about the impact of supplemental appropriations on the federal budget deficit and federal debt.

Supplemental appropriations provide additional funding to an agency during the course of a fiscal year for programs and activities that are considered too urgent to wait until next year's budget. The major purposes of supplemental appropriations have changed over the past 25 years. In the 1980s, almost half of supplemental appropriations were for mandatory programs such as unemployment compensation, and the rest were for discretionary spending. After 1990, over 90% of supplemental appropriations have been for discretionary spending, as the major purpose has shifted toward funding natural disaster relief.

The amount of new budget authority contained in supplemental appropriations bills fell after 1981 from over 3% of total budget authority to only about 0.1% by 1988. Except for a sharp spike in 1991 to fund the first Gulf war, supplemental appropriations remained at less than 1% of total budget authority throughout most of the 1990s. Supplemental appropriations began to rise after 1998, and by 2005 reached about 6% of budget authority. In addition to hurricane relief, FY2005 supplemental appropriations provided funding for the wars in Iraq and Afghanistan, tsunami relief, and the global war on terror.

Since FY1981, an average of 36% of the supplemental appropriations were offset by rescissions. After FY2002, however, less than 0.5% of the supplemental appropriations were offset through rescissions. It has been argued, however, that the offsetting rescissions were merely write-offs of budget authority that would never be used. For example, CBO estimated that in the 1980s, nearly half of the rescinded funds were unlikely to ever have been spent.

Supplemental appropriations net of rescissions have usually increased the budget deficit, and federal debt held by the public is larger than it would have been had the supplemental appropriations been fully offset. Had supplemental appropriations been fully offset since 1981, federal debt held by the public could have been reduced by about 18% or $830 billion. This could have reduced interest payments to the public by $35 billion per year. On the other hand, if 25% of the supplemental appropriations in FY2003 through FY2005 had been offset (the average offset for previous years), federal debt held by the public would have been reduced by over 1% or almost $65 billion. Presently, reducing federal debt by $65 billion could save about $2 billion annually in interest payments to the public. This report may be updated if events warrant.