The Fiscal Responsibility Act (FRA) in FY2024: Current Status

Spending Limits

The Fiscal Responsibility Act (FRA, P.L. 118-5), enacted in June 2023, temporarily suspended the debt limit and established statutory discretionary spending limits for FY2024 and FY2025 for both defense and nondefense discretionary spending, as shown in Table 1.

Additionally, the FRA included a provision described as incentivizing Congress to enact regular, full-year appropriations legislation instead of relying on short-term continuing resolutions (CRs). This provision requires that if a CR is in effect on January 1, 2024, for any budget account, the discretionary spending limits for FY2024 be revised to the levels also shown in Table 1. The revisions reduce the overall amount of spending permitted by $4 billion but entail a $33 billion increase to the original nondefense discretionary spending limit and a $37 billion decrease to the original defense discretionary spending limit. These revised levels, however, would not be enforced until April 30, 2024, should a CR still be in effect, and will revert back to the original limits upon the enactment of full-year appropriations.

Enforcement

If discretionary appropriations are enacted that exceed a statutory limit for a fiscal year, a sequester is triggered, making across-the-board reductions to nonexempt spending to eliminate spending above the limit within the applicable category (defense and/or nondefense). The Office of Management and Budget (OMB) has the sole statutory responsibility of determining whether sequestration is required and, if so, the amount of sequestration needed. Any sequestration of affected discretionary budget authority would not occur until OMB issues a final sequestration report specifying the amount of any breach, as well as the sequestration percentages necessary to achieve the required reduction. A complex set of deadlines currently governs the date on which OMB must issue any required final sequestration report (as shown in Table 2).

Current Status

The government is currently operating under a short-term CR (P.L. 118-15, as amended by P.L. 118-22), which provides continuing appropriations for four of the regular appropriations acts through January 19, 2024, and the remaining eight through February 2, 2024. Because a short-term CR was in effect on January 1, the revised limits, as shown in Table 1, are currently operational. These revised levels, however, are not enforced immediately and will revert back to the original limits if full-year appropriations are later enacted. Table 2 provides information on which spending levels will be in effect, and when those levels will be enforced, under three different potential scenarios.

While enforcement of the spending limits is not yet required, some Members and media reports have suggested that adherence to these levels, through legislation or sequestration, could result in substantial reductions to current funding levels. These reports stem from information provided by the Congressional Budget Office (CBO), including a recent letter that states that if the levels of funding provided through the current short-term CR were annualized over FY2024, "sequestration would be required and would result in across-the-board reductions ranging from 5 percent to 9 percent for nondefense funding and from zero to 1 percent for defense funding, depending on when appropriations were enacted and what form they took." Further information on such amounts is provided below in Figure 1.

OMB recently issued guidance to agencies stating, among other things, that agencies should "not attempt to self-sequester and must continue as normal" in order to comply with current law, as enforcement of the spending limits will not occur until after the enactment of further FY2024 appropriations legislation.

Figure 1. Comparison of Original and Revised FRA Discretionary Limits for FY2024 to the Annualized CBO Estimate of the Current Short-Term CR

Source: For FRA original levels, Section 101 of the Fiscal Responsibility Act of 2023 (P.L. 118-5); for FRA revised levels, Section 102 of the Fiscal Responsibility Act of 2023 (P.L. 118-5); for the annualized rate provided under Division A of P.L. 118-22, Table 1 of the CBO cost estimate for H.R. 6363 (signed into law as P.L. 118-22), and CBO, Implementing the Statutory Limits on Discretionary Funding for Fiscal Year 2024, January 2024. Notes: The original limits represent those established for the defense ("Security") and nondefense ("Nonsecurity") categories for FY2024 in Section 101 of the FRA. The revised limits represent those established for the defense ("Security") and nondefense ("Nonsecurity") categories for FY2024 in Section 102 of the FRA, which went into effect on January 1, 2024, as a short-term CR was in effect. The annualized levels in the current CR represent the estimated total budget authority in the defense and nondefense categories for FY2024 if the current CR (P.L. 118-15, as amended by P.L. 118-22) were in effect for the full fiscal year, as estimated by CBO.