The FRA’s Discretionary Spending Caps Under a CR: FAQs

What is the FRA and how does it limit discretionary spending?

The Fiscal Responsibility Act (FRA, P.L. 118-5), enacted in June 2023, temporarily suspended the debt limit and reinstituted enforceable discretionary spending limits for FY2024 and FY2025 for both defense and nondefense discretionary spending. The defense limits represent an increase in both fiscal years from the FY2023 enacted level, while the nondefense limits represent a decrease in both fiscal years from the FY2023 enacted level, as shown in Table 1.

If discretionary appropriations are enacted that exceed the limit in either category, a sequester is triggered making across-the-board reductions within the applicable category (defense and/or nondefense). In most cases, the President would issue such a sequester order within 15 calendar days after the end of a session of Congress. Certain types of spending, such as spending designated as being for emergency purposes, are effectively exempt from the limits.

What does the FRA require if a CR is in effect?

The FRA includes a provision that has been described as incentivizing Congress to enact regular full-year appropriations legislation instead of relying on continuing resolutions (CRs). This provision requires that if a CR is in effect on January 1 of 2024 or 2025 for any budget account, the discretionary spending limits for that fiscal year would be automatically revised to the levels shown below in Table 2. The revised levels would result in an increase in nondefense discretionary budget authority and a decrease for defense discretionary spending levels when compared with the original levels.

When would a sequester occur under a CR?

Under such a scenario, a sequester order would be issued on April 30 of either 2024 or 2025. The FRA states that the revised limits would revert to the original FRA limits if full-year appropriations were enacted before April 30.

Source: P.L. 118-5.

Does the FRA include an automatic CR or an automatic omnibus?

No. The FRA does not provide for the automatic enactment or implementation of spending legislation (either a CR or regular appropriations) at any point during the fiscal year. As in other years, if appropriations have not been enacted (either for the whole fiscal year or temporarily through a CR) at any point beginning on October 1, a funding gap and partial government shutdown would occur.

How do the FRA limits and revisions compare to FY2023 spending?

In FY2023, Congress enacted a total of $1.602 trillion in base discretionary spending. This includes $858.36 billion in the defense category and $743.89 billion in the nondefense category. Compared to these levels, the discretionary caps for FY2024 and FY2025 enacted in the FRA would provide a slight decrease in total discretionary spending for FY2024 and then a slight increase in total discretionary spending for FY2025. As shown in Table 3, Figure 1, and Figure 2, the caps would provide for nominal increases in defense discretionary spending for both FY2024 and FY2025 while decreasing in nominal terms nondefense discretionary spending for both fiscal years compared to FY2023 enacted discretionary spending in these categories.

If a CR is in effect for any discretionary account on January 1 of either 2024 (FY2024) or 2025 (FY2025), the FRA requires that the discretionary spending limits be revised for that fiscal year to reflect enacted levels for defense and nondefense categories for FY2023, decreased by 1 percent. Under this scenario, both defense and nondefense discretionary spending would decrease slightly in nominal terms in FY2024 and FY2025 compared to FY2023 enacted levels (as shown in Table 4, Figure 1, and Figure 2).

Figure 1. FY2024 FRA Limits and Revisions Compared to FY2023 Spending In Billions of Nominal Dollars

Source: P.L. 118-5 and CBO's "Status of Discretionary Appropriations" report for FY2023. Notes: This figure shows only base spending, which excludes funding that would be exempt from budgetary enforcement.

Figure 2. Projected Discretionary Spending Under the FRA as Enacted and with Revision Base Enacted (or Projected) Discretionary Spending (in Billions of Nominal Dollars): FY2020-FY2025

Sources: Information compiled from P.L. 118-5 and CBO's "Status of Discretionary Appropriations" reports for FY2020-FY2023. Note: This figure shows only base spending, which excludes funding that would be exempt from budgetary enforcement.