OMB Director Mick Mulvaney testifies on Capitol Hill last week on the Trump administration's budget request.

OMB Director Mick Mulvaney testifies on Capitol Hill last week on the Trump administration's budget request. Susan Walsh/AP

Budget Director Picks Fight on Spending 'Gimmicks' Called CHIMPs

Mulvaney asks House Speaker Ryan for process reforms to bring more spending under budget caps.

Tacked on to the Trump administration’s fiscal 2019 budget unveiled on Feb. 12 is an unusual “addendum” targeting a decades-old budgeting technique that critics say masks the true amounts in annual spending bills.

“The higher discretionary caps reached in [this month’s breakthrough two-year] cap deal provide an opportunity to eliminate longstanding budget gimmicks and to bring more federal spending under these caps,” wrote Budget Director Mick Mulvaney to House Speaker Paul Ryan, R-Wis.

Mulvaney’s proposal would target the use of “changes in mandatory programs, or CHIMPs, that generate no net outlay savings, but are used to offset real increases in discretionary spending,” he wrote. “While there are programmatic reasons for some CHIMPs, most of them are accounting gimmicks—they push the availability of funding from one year to the next, or rescind money from a program that no one actually expected would be spent.”

In taking on a technical budgeting habit that both parties have banked on for three decades, Mulvaney appeared to be reopening the delicate bipartisan fiscal 2018 budget deal arrived at on Feb. 7.

He proposed switching $17 billion within the new caps to “eliminate the use of CHIMPs from appropriations bills, except for a handful of small CHIMPs that are not gimmicks.” In total, his proposals would affect the Justice Department’s spending bill line item for its crime victims’ fund, as well as take money from the Defense Department’s Overseas Contingency Operations funds to use in the base budget for Trump priorities at the departments of State, Veterans Affairs, Health and Human Services, and Transportation.

On top of that short-term request for the coming two fiscal years, Mulvaney challenged Congress to change budget rules to outlaw CHIMPs, which activists on the political right during the past few years have placed on their shrink-the-government hit list. It is not a prospect that Democrats, fresh from negotiating higher levels of domestic spending, are likely to relish.

CHIMPs are “provisions in appropriation bills making changes in mandatory spending programs, usually to reduce or limit mandatory spending,” says an explainer from the Committee for a Responsible Federal Budget. “Budget rules allow savings from CHIMPs to offset increases in discretionary appropriations above discretionary spending limits. The use of CHIMPs has increased dramatically since 2010, likely to help appropriators wiggle around the spending caps established in the Budget Control Act. CHIMPs averaged $6.7 billion from 2007 to 2010, but after 2010 CHIMPs have averaged $18.4 billion” a year.

The conservative Taxpayers for Common Sense characterized the tool more harshly, stating in a paper that, “There are two main types of CHIMPs: Those that rely on fake ‘paper savings’ to mask increased spending elsewhere in the federal budget and those resulting in meaningful funding cuts with real-world consequences, such as undermining underlying program goals and creating uncertainty and unpredictability.”

Marc Goldwein, head of policy for the Committee for a Responsible Federal Budget, said not all CHIMPs are gimmicks. “Occasionally, they lead to actual cuts in mandatory spending,” he said. But in practice, most of them in recent bills “are phantom spending cuts to pay for real spending increases.”

Often CHIMPs either cut budget authority that is never expected to be spent, or else shift spending from Year 1 to Year 2 and award budgeters credit for the first-year savings when the exact same costs take place the next year, added Goldwein, who worked on the 2010 Simpson-Bowles deficit reduction commission and Congress’s 2011 Budget Control Act. “Most don’t actually save money," he said. "Most are clear egregious gimmicks that hide spending outside the one-year budget window.”

Many conservatives in Congress have had their eyes on CHIMPs for years. Past budget resolutions have included points of order to address Mulvaney’s recent concerns, a spokesman for Sen. Budget Committee Chairman Mike Enzi, R-Wyo., told Government Executive.  The committee last Congress approved a bill from Sen. Pat Toomey, R-Pa., that would more directly target Justice funds to crime victims, rather than permit broader spending. The spokesman said the push to reduce CHIMPs is likely to be considered this year.

(A spokeswoman for the House Budget Committee said it is too soon to determine whether Mulvaney’s proposal would end up in the fiscal 2019 budget resolution now in the works.) 

When CHIMPs started in the early 1990s at the Justice Department, “the Crime Victims Fund was being created to transfer funds from criminal penalties to aid victims of crimes,” said David Haun, a Grant Thornton LLP public sector director who spent three decades at OMB, including working on the Justice account. “When the fund began to receive large amounts of cash from big settlements, the appropriators figured out how to cap that spending (on the mandatory side) and get credit for it on the discretionary side, which was controlled by the appropriators. “It was purely an accounting gimmick intended to allow the appropriators to spend more money under spending caps.”

The problem at Justice, Haun added, was that the transfers were being done in small amounts, perhaps several hundred million per year, but soon grew ever-larger from funds from new penalties—with the account resting today at around $12 billion. “This is ridiculous,” he said. “It’s complex enough that most people don’t understand it, but once you take, say, $300 million one year as a CHIMP, you can’t ever take it back—or else you have to find another $300 million offset,” he said.

“Mulvaney is absolutely right in that anyone, Democrats and Republicans, who cares about truth in budgeting should abhor the use of CHIMPs,” Haun said. The problem comes with Mulvaney’s solution of taking away CHIMP credits and transferring $20 billion in Overseas Contingency Operations to the base budget, which forces bookkeepers to count spending against budgets of the State Department and the Veterans Affairs Department out of the newly authorized spending caps.

When the Democrats negotiated the raised spending caps this month, “I’m not sure they assumed the caps would include these budget reforms,” Haun said. “I don’t think [Senate Minority Leader Chuck Schumer, D-N.Y.] ever agreed to this. The Democrats would be giving up $37 billion they could be spending on other non-defense priorities. There’s no question that the way to do away with such gimmicks is to do a budget deal.  It is just that I doubt the Congress intended to include in these reforms in the new caps.”

Richard Kogan, a senior fellow at the progressive-leaning Center for Budget and Policy Priorities, said, “CHIMPs are effectively baked into the Budget Control Act cap levels. If they wanted to get rid of CHIMPs, then the negotiators [this month] would have needed to raise the caps another $18 billion beyond what they did. Because they did not, the administration is attempting to move the goal posts when it calls for banning CHIMPs and treating the agreed levels as ‘ceilings, not floors.’ ”

CORRECTION: This story has been revised to indicate that a spokesman for Sen. Budget Committee Chairman Mike Enzi, R-Wyo., said lawmakers are likely this year to consider a push to reduce use of CHIMPs, rather than to end it completely