OMB Pay-As-You-Go Report No. 493, 10/27/1999

OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS

Report No: 493
Date: 10/27/99

LAW NUMBER: P.L.106-65 (S. 1059)

BILL TITLE: National Defense Authorization Act for Fiscal Year 2000

BILL PURPOSE: (1) Authorizes FY 2000 appropriations for Department of Defense(DOD) programs, Department of Energy national security programs, and the MaritimeAdministration; (2) modifies military pay and retirement benefits (3) reorganizes nuclearweapons activities of the Department of Energy (DOE); and (4) makes variousamendments to national security programs.

OMB ESTIMATE:

	(Fiscal years; in millions of dollars)
	1999	2000	2001	2002	2003	2004
Net costs.....................	0	-18	112	87	36	16

P.L. 106-65 repeals the provision in current law that reduces retirement pay for militaryretirees employed in Federal civilian positions (re-employed annuitants), resulting inestimated additional outlays from the Military Retirement Trust Fund of approximately$74 million per year starting in FY 2000. The Act also reassigns certain spectrumfrequencies that previously had been identified for auction to the Federal Government foruse by the DOD, resulting in foregone receipts estimated at $150 million over theFY 2000-2002 period. Other major pay-as-you-go provisions offset some of these costsby authorizing the Secretary of the Navy to sell specific ships to certain foreign countriesand authorizing the DOD to sell several materials contained in the National DefenseStockpile. The ship sales are estimated to increase receipts by $91 million in FY 2000and the Stockpile sales are estimated to increase receipts by $202 million over five years. The Act also contains a number of retirement reform provisions with minor pay-as-you-go impact, yielding net costs estimated at $6 million over five years.

CBO ESTIMATE:

	(Fiscal years; in millions of dollars)
	1999	2000	2001	2002	2003	2004
Net costs....................	0	-97	-10	29	-25	-36

EXPLANATION OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:

The largest difference between OMB and CBO scoring is for the provision repealing themilitary retirement pay reduction in current law. OMB estimated the repeal wouldincrease benefit payments, and therefore direct spending by $74 million per year startingin FY 2000. CBO interpreted the increase in spending as discretionary, because theprovision ultimately requires contributions from discretionary military personnelaccounts to pay for the actuarial costs of the Military Retirement Fund. OMB believesthe repeal would have negligible impact on actuarial costs.

Another significant scoring difference results from the provision reassigning spectrumfrequencies to the Federal Government. OMB estimated the forgone spectrum auctionreceipts would cost $150 million over three years, but CBO estimated only a one timecost of $50 million in FY 2002. The difference is due to varying assumptions about thetiming of the auctions and estimated receipts for the spectrum frequencies that werereclaimed for Federal use.

CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATIONENACTED TO DATE:

	(Fiscal years; in millions of dollars)
	1999	2000	2001	2002	2003	2004
Outlay effect..............	53	730	1,061	681	906	18
Receipt effect............	-5	3,659	1,779	769	1,985	37
Net costs....................	58	-2,929	-718	-88	-1,079	-19

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