Court Ruling Adds to Confusion On New Balanced-Budget Law

By James Hertling — February 19, 1991 4 min read


Federal agencies will enact 1986 budget cuts mandated by the Gramm-Rudman-Hollings deficit-reduction act--including a $170.9-million reduction in Education Department spending--despite a federal judicial panel’s ruling that the key provision of the law is unconstitutional.

This single budget-cutting step, however, is the only sure result of the ruling this month, which only muddied an already confused situation.

Left in its wake are numerous political, economic, and legal questions about the fate of the unprecedented budget-balancing law, the first wave of cuts that it mandated, and the course of Congressional action to trim the federal deficit, among other issues.

Decision Stayed

The three-judge panel announced its decision Feb. 7 but stayed its own ruling pending a final review by the U.S. Supreme Court. That decision is not expected to be handed down until June or July.

Thus, federal agencies will make their $11.7 billion in reductions as scheduled, March 1.

The Gramm-Rudman-Hollings law, which mandated a 4.3 percent reduction in virtually all domestic programs this year, would trim Education Department spending immediately by $170.9 million and cut program budgets, most of which are earmarked for the 1986-87 school year, by a total of $678 million.

Even if the Supreme Court upholds the lower-court decision, the fate of the initial round of cuts will depend upon the nature of the Court’s order. For example, the Justices could rescind the reductions, or they might allow this initial round to go through but prohibit such across-the-board cuts in the future.

Fate of E.D. Funds

And whatever the Court rules, ambiguities may remain for the Education Department. Along with the Defense Department, the E.D. is one of two federal agencies whose programs are “forward funded"--that is, most of the budget for one fiscal year is not actually spent until the following one.

The initial $170.9-million cut in 1986 Education Department spending will be made at the beginning of next month. But the fate of the rest of the cut--the $678 million in budget authority--is unclear.

Because this larger reduction, in aid earmarked for the 1986-87 school year, does not represent a cut in actual fiscal 1986 spending, but only in the authority to spend the funds the following year, the program accounts could conceivably be restored to their previous levels if the Supreme Court holds the Gramm-Rudman-Hollings cuts unconstitutional, said Bruce M. Carnes, the department’s deputy undersecretary for planning, budget, and evaluation.

But the $170.9-million reduction in outlays--what is spent--is linked to the budget authority--the amount that can be spent. “The $678-million cut in budget authority is what we need to generate the outlay savings,” according to Sally H. Christensen, the department’s budget director.

The judicial panel composed of three federal judges--Antonin Scalia of the Court of Appeals for the District of Columbia Circuit and Norma Holloway Johnson and Oliver Gasch of the U.S. District Court here--said the budget law unconstitutionally breached the separation-of-powers doctrine.

In reaching its decision, the judges accepted the main argument of the Reagan Administration, which, although nominally a defendant, also claimed the law was flawed. A Justice Department brief argued that the act infringed on executive-branch discretion.

But the panel rejected the contention of the group of Congressmen who had initially challenged the law on the grounds that the Congress had illegally delegated its own authority.

All parties in the combined suits--Representative Mike Synar v. U.S. and National Treasury Employees Union v. U.S.--challenged the integral role of the Comptroller General, who heads the General Accounting Office and is a Presidential appointee but may be removed by the Congress.

The Gramm-Rudman-Hollings law establishes legal limits on the annual federal deficit, mandating deep reductions in each of the next five years and a balanced budget by fiscal 1991. It prescribes an intricate series of steps to achieve across-the-board cuts in federal spending--while exempting over half of the U.S. budget--if the Congress and President fail to agree on spending cuts that meet the deficit ceiling.

In approving the law well into the 1986 fiscal year, the Congress simply let the automatic-cut process operate, rather than try to negotiate the required $11. 7-billion reduction.

Stalemate Seen

Under the law, the Comptroller General, Charles A. Bowsher, issues the final report on the cuts necessary to reach the target and the President must then sign the order.

“Since the powers conferred upon the Comptroller General as part of the automatic-reduction process are executive powers, which cannot be constitutionally exercised by an officer removable by Congress, those powers cannot be exercised and therefore the automatic deficit-reduction process to which they are central cannot be implemented,” the court said.

The court did not strike down the statute itself, or the mandated deficit targets, for example. But its invalidation of the automatic process not only removes the lever that would have ultimately enforced mandated savings, but also diminishes the incentive for compromise between the Congress and White House in reducing expenditures, some analysts said.

The main rationale for the automatic-cut process was to relieve legislators of having to vote for billions of dollars worth of spending cuts. It also gives the White House an incentive to avoid major reductions in defense spending, some critics say.

Meanwhile, Congressional budget leaders, rejecting the recently released Administration budget for fiscal 1987, have pledged to draft spending plans that meet the Gramm-Rudman-Hollings deficit ceiling of $144 billion.

A version of this article appeared in the February 19, 1986 edition of Education Week