Budget Reductions for FY 1987

Pursuant to a congressional request, GAO reviewed the Office of Management and Budget (OMB) and Congressional Budget Office's (CBO) joint Initial Sequestration Report for fiscal year (FY) 1987.

GAO found that: (1) OMB and CBO disagree about outlays for defense programs in FY 1987; (2) the Department of Defense's (DOD) accounting and budgeting systems result in inadequate data for estimating the defense budget and for overseeing its execution; (3) the CBO defense outlays budget estimate is more accurate than the OMB estimate; (4) $56.8 billion of unobligated DOD balances will be available for obligation in FY 1987; (5) OMB and CBO disagree on how federal pay increases for FY 1987 will be funded; (6) the CBO estimate for funding the increases substantially through additional appropriations is more accurate and will result in an increase in defense program outlays, with a small increase in non-defense outlays; (7) its estimates differ from those of OMB and CBO regarding various non-defense programs; (8) the different revenue and outlay estimates stem from differing economic forecasts; (9) the pending tax reform bill, if enacted, may increase FY 1987 revenues; and (10) the OMB and CBO report may significantly underestimate the costs of responding to unanticipated program requirements. GAO concluded that it is likely that the deficit will increase in FY 1987, requiring further budget reductions or revenue increases.