The federal government's financial condition and fiscal outlook have deteriorated dramatically since 2000. The federal budget has gone from surplus to deficit and the nation's major reported long-term fiscal exposures--a wide range of programs, responsibilities, and activities that either explicitly or implicitly commit the government to future spending--have more than doubled. Current budget processes and measurements do not fully recognize these fiscal exposures until payments are made. Increased information and better incentives to address the long-term consequences of today's policy decisions can help put our nation on a more sound fiscal footing. Given its interest in accurate and timely information on the U.S. fiscal condition, the Senate Committee on the Budget asked us to update our study of other nations' experiences with accrual budgeting and look at other ways countries have increased attention to their long-term fiscal challenges.
Matter for Congressional Consideration
|To increase awareness and understanding of the long-term budgetary implications of current and proposed policies for the budget, Congress may wish to require increased information on major tax and spending proposals.||The Budget Control Act of 2011 set up the Joint Select Committee on Deficit Reduction to provide recommendations and legislative language that would significantly improve the short-term and long-term fiscal imbalance of the Federal Government. The Committee may not vote on any of the joint committee's recommendations unless CBO provides information for consideration on the long-term budget effect of the legislation beyond the year 2021.|
|Regardless of what is decided about the information and incentives for individual programs, Congress may wish to require periodic reports on fiscal sustainability for the government as a whole. Such reports would help increase awareness of the longer-term fiscal challenges facing the nation in light of our aging population and rising health care costs as well as the range of federal responsibilities, programs, and activities that may explicitly or implicitly commit the government to future spending.||The Federal Accounting Standards Advisory Board (FASAB) adopted a new accounting standard in September 2009 requiring the federal government to issue a statement of fiscal sustainability every year as part of the government's Consolidated Financial Statements. The statement will be based on comprehensive long-term projections and help the Congress determine whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.|
|Congress may wish to consider requiring increased reporting of accrual-based cost information alongside cash-based budget numbers for both existing and proposed programs where accrual-based cost information includes significant future cash resource requirements that are not yet reflected in the cash-based budget. Such programs include veterans compensation, federal employee pensions and retiree health, insurance, and environmental liabilities. To ensure that the information affects incentives and budgetary decisions, the Congress could explore further use of accrual-based budgeting for these programs.||Several bills were introduced to budget for certain programs on an accrual basis, but none were debated or voted on by the Congress.|