Termination of the "Pay-As-You-Go" (PAYGO) Requirement for FY2003 and Later Years

Publication Date: December 2002

Publisher: Library of Congress. Congressional Research Service

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Research Area: Banking and finance

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Abstract:

Under the "pay-as-you-go" (PAYGO) requirement established by the Budget Enforcement Act of 1990, legislation proposing new direct spending or decreasing revenues for a fiscal year must not result in a net cost for that year. Balances on the PAYGO "scorecard" were set for FY2002-2006 based on legislation enacted through the close of September 30, 2002. The PAYGO requirement is enforced after the close of a congressional session by sequestration, which involves automatic, largely acrossthe-board cuts in nonexempt programs. (There has never been a PAYGO sequester.)

In order to prevent a sequester for FY2003 due to net costs on the PAYGO scorecard of more than $127 billion (including $2 billion for FY2002), the House and Senate passed H.R. 5708 in November 2002. President Bush signed the bill into law on December 2 as P.L. 107-312. The act instructed the director of the Office of Management and Budget to set the balances for all years on the PAYGO scorecard to zero, thereby preventing a PAYGO sequester for FY2003 and each year thereafter through FY2006. A total of $560 billion was removed from the PAYGO scorecard for FY2002-2006. This report will not be updated.