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Three Reasons Why Unused Funds Aren’t a Painless Source of Deficit Savings

March 4, 2013 at 3:23 PM

Senator Marco Rubio (R-FL) and several other congressional Republicans have proposed canceling $45 billion in unused funding that Congress provided for discretionary programs in prior years, using the savings to shrink deficits.  The idea that these “unobligated balances” are a painless source of budget savings isn’t new.  But it isn’t true, either, for three reasons in particular.

  • Nearly all of these funds will be needed in this or future years to finish the project for which Congress provided them. Congress often provides full funding up front for multi-year construction, research, or other projects; funding that isn’t used in the first year is carried over to later years, when it will be needed — and spent.  In some cases, canceling this funding would be tantamount to canceling the project altogether, which can be extremely wasteful.  It makes little sense, for example, to build two-thirds of a bridge, or to halt a research project after collecting the data but before analyzing the results.

    Even in cases where the loss of these funds wouldn’t undermine the project as a whole, it would weaken it, exactly as a similar cut in new funding would.  And it is generally better to cut new money than unobligated balances if doing the latter would waste money already invested.

  • Congressional Appropriations Committees regularly rescind unobligated balances that turn out to be unneeded. Some small proportion of multi-year funding will often turn out to be unusable, such as if the project was completed under budget or had to be scrapped.  But the Appropriations Committees regularly “rescind” (take back) those unobligated balances and use the savings to help fund other programs.  For this reason, it’s extremely unlikely that there are large pots of unusable money:  the Appropriations Committees have already found and rescinded them.
  • Eliminating unobligated funds that aren’t needed (but haven’t yet been rescinded) wouldn’t shrink deficits, since they weren’t going to be used in any case. In budget-speak, canceling these funds scores as a reduction in “budget authority” but doesn’t reduce outlays (the actual flow of dollars in any particular year), deficits, or debt.  If some funding proves to be unneeded and so won’t be spent, cancelling it may be good practice but won’t reduce the deficit.

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