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Executive Summary #1292es on Federal Budget

June 10, 1999

June 10, 1999 | Executive Summary on Federal Budget

Executive Summary: Crafting a Responsible Budget: The Energy and Water Appropriation

The Senate Appropriations Committee has recommended spending $21.7 billion on energy and water programs in fiscal year (FY) 2000. This is almost $279 million below budget estimates and nearly $440 million under the enacted appropriations level for these programs for the current fiscal year. It is significant that the committee succeeded in limiting discretionary budget authority for these programs to the funding allocation it established in order to maintain the spending caps in the Balanced Budget Act of 1997.

The Appropriations Committee is attempting to keep the U.S. Department of Energy (DOE) and other agencies on track to help to maintain budget targets and assure that surplus money remains for Social Security reform and tax cuts. By contrast, President Bill Clinton's budget proposal contains cap-shattering allocations that would make such reforms and tax cuts much more difficult to achieve. The committee's display of fiscal discipline masks the fact, however, that many energy and water programs have outlived their usefulness and are mere monuments to the federal government's inability to cut spending, and to the near-immortality of its programs.

This year, Congress consistently demonstrated its commitment to fiscal discipline in its budget resolutions, subcommittee funding allocations, and committee-reported appropriations legislation. Many of the most difficult decisions, however, lay ahead. It is anticipated already that the funding of critical programs may not be possible without raiding the Social Security surplus, unless Congress can make further savings in bills already reported out of the Appropriations Committee.

Fortunately, the Energy and Water Appropriations Bill, S. 1186, offers Congress the opportunity to trim outdated or ineffective programs. A prime example is the "Energy Supply Research" programs conducted at the DOE's national laboratories and other government-owned but contractor-operated laboratories, as well as programs for independent research under DOE grants, that are poorly managed and have a history of failures. The appropriations bill contains many programs that could be terminated, consolidated, privatized, or devolved. Privatization is an especially good option for DOE assets, illustrated by the sale of the smallest of its five power marketing administrations--the Alaskan Power Marketing Administration--for over $82 million in 1998. Such privatization of utilities is used more often overseas, with good results. Since 1988, almost 25 major utilities have been privatized around the world. In 1993, Argentina, Germany, and the United Kingdom raised a total of $4.4 billion by selling state-owned electric utilities to private investors, including U.S. investors. Congress should follow their lead.

The strong economy today offers Congress the best opportunity since the Great Depression to devolve programs to the states, such as the Appalachian Regional Commission (ARC). All 13 states in the ARC boast healthy revenues and significant increases in per capita spending since 1990. Nine of the 13 states cut their taxes by a total of $2.6 billion, which suggests they have the resources available to address their local development and energy needs.

More than $2.4 billion in federal domestic discretionary spending could be saved in FY 2000 if Congress maintained its commitment to fiscal responsibility established in the Balanced Budget Act and protected the surplus for Social Security by freezing energy and water appropriations to FY 1999 levels. By eliminating the unnecessary, consolidating the redundant, privatizing and making use of market forces, and devolving DOE services to the states and local communities, Congress would become better able to deliver on its pledges to strengthen Social Security and cut taxes. Congress cannot allocate 100 percent of the off-budget surplus to save Social Security and still support the continuing military operations in the Balkans without standing firm on domestic discretionary spending. The Energy and Water Appropriation Bill is a good place to start.

Peter Sperry is a former Budget Policy Analyst in The Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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