Testimony: Senator Enzi proposed that a capital budget at the agency level would be useful for consistent accounting and budgeting. He defined capital assets as land, structures, equipment, and intellectual property (including software) that are used by the Federal government and have an estimated useful life of two years or more. This definition appears in the Capital Programming Guide produced by the U.S. Office of Management and Budget. It excludes education, welfare, health care, most military spending, and Federal grants to State and local governments.

Senator Enzi criticized the current budget process as encouraging agencies to manage by crisis and to plan only for short-term annual budgetary needs. Initiatives such as the Government Performance and Results Act (GPRA), the Federal Acquisition Streamlining Act, the Chief Financial Officers Act, and the Government Management Reform Act have helped to focus attention on long-term spending and investments during the budget process.

Senator Enzi did not recommend a separate capital budget, but rather a system whereby agencies would develop a long-term capital acquisition plan to be funded by agency-specific capital reserve funds. Use of these funds would be restricted to capital asset acquisitions and guided by the agency's strategic plan. GAO's Budgeting for Federal Capital indicates that Congress must be able to ensure the appropriate use of these funds. Senator Enzi's proposal would improve Congressional oversight for the capital acquisition process in the agency.

Questions from the Commissioners:

Q.    Are you specifically not recommending that capital budgeting is appropriate for Congress?
A.    Yes. I'm recommending that it's not appropriate for Congress. I can see them getting carried away with it tremendously. What we need to do is move it back to the agency level so that we've got the agency planning for capital.

Q.    How would your proposal work at the agency level, this capital budget?
A.    It would relate down to a low enough level that you can see what's being purchased. The purpose of it would be to eliminate the peaks and valleys, not to just add a whole bunch of things to the budget.

Q.    How would this work in the Federal highways example?
A.    The Federal highway program gives monies out to States on a relatively even flow on an annual basis, so it doesn't qualify under my definition of a capital budget.