Background – Nixon Impoundment Controversy
One impetus for development of the congressional budget process was an executive-legislative power struggle that erupted during the Nixon Administration over presidential authority to impound funds appropriated by Congress. In response to President Nixon’s attempt to withhold congressionally appropriated funds, Title X of the 1974 Congressional Congressional Budget and Impoundment Control Act of 1974 as amended established legal procedures to prevent a recurrence of this dispute and is separately referred to as the “Impoundment Control Act” (ICA).
Under the procedures put in place by the Impoundment Control Act, the President may (1) “defer” (delay) using an amount of appropriated budget authority until later in a fiscal year or (2) propose to “rescind” (cancel) an amount of budget authority.
The authority of the President to defer budget authority and propose rescissions of budget authority does not apply to the nearly two-thirds of the budget that consists of mandatory spending and interest payments. The portion of the budget that is susceptible to rescissions or deferrals is the approximately one-third portion of the budget that is “discretionary” and subject to annual funding decisions.
Deferrals. The purpose of the deferral mechanism is to permit the Executive Branch to set money aside until later in the year to provide for a contingency, or to save money due to changes in operations. The President may not propose a deferral simply because he disagrees with Congress’ appropriations decision. A further restriction is that funds may not be deferred for a period that is too long to allow the agency to obligate the funds prudently by the end of the fiscal year. A deferral proposed by the President takes effect unless Congress passes, and the President signs, a law disapproving the deferral in which case the funds must be released.
Rescissions. Conversely, a rescission (cancellation) of appropriations, proposed by the President, does not occur unless Congress affirmatively passes a law approving the cancellation within 45 days (of continuous session). Consequently, if either the House or Senate fails to enact the President’s proposed rescission of budget authority in a timely manner, the President has no choice but to release the budget authority to the agency after expiration of the 45-day period. This gives Congress the upper hand in the rescission process.
As reflected in a 1999 GAO study, during the Impoundment Control Act’s first quarter century, Congress agreed to rescind only about one-third of the proposed $76 billion in presidential rescissions. Congress, however, has unfettered authority to initiate its own rescission legislation to revise earlier appropriations decisions and has increasingly made use of this authority.
Both the President and the Congress have used rescissions primarily as a mechanism to shift priorities, rather than to reduce overall spending. In drafting the 1974 Impoundment Control Act, Congress put teeth in its limitations on presidential impoundment by empowering the Comptroller General (who heads the Congress’ investigative arm, the GAO) to file suit in Federal Court to require the release of appropriated funds that have been illegally deferred or rescinded.