U.S. Code > Title 2 The Congress > CHAPTER 20—EMERGENCY POWERS TO ELIMINATE BUDGET DEFICITS (§§ 900—922) > SUBCHAPTER I—ELIMINATION OF DEFICITS IN EXCESS OF MAXIMUM DEFICIT AMOUNT (§§ 900—909) > § 906. General and special sequestration rules

§ 906. General and special sequestration rules

(a) Repealed. Pub. L. 111–139, title I, § 10(a), Feb. 12, 2010, 124 Stat. 21
(b) Student loans
For all student loans under part B or D of title IV of the Higher Education Act of 1965 [20 U.S.C. 1071 et seq., 1087a et seq.] made during the period when a sequestration order under section 904 of this title is in effect as required by section 902 or 903 of this title, origination fees under sections 438 (c)(2) and (6) and 455 (c) [20 U.S.C. 1087–1 (c)(2), (6), 1087e (c)] and loan processing and issuance fees under section 428(f)(1)(A)(ii) of that Act [20 U.S.C. 1078 (f)(1)(A)(ii)] shall each be increased by the uniform percentage specified in that sequestration order, and, for student loans originated during the period of the sequestration, special allowance payments under section 438(b) of that Act [20 U.S.C. 1087–1 (b)] accruing during the period of the sequestration shall be reduced by the uniform percentage specified in that sequestration order.
(c) Repealed. Pub. L. 111–139, title I, § 10(c), Feb. 12, 2010, 124 Stat. 22
(d) Special rules for Medicare program
(1) Calculation of reduction in payment amounts
To achieve the total percentage reduction in those programs required by section 902 or 903 of this title, subject to paragraph (2), and notwithstanding section 710 of the Social Security Act [42 U.S.C. 911], OMB shall determine, and the applicable Presidential order under section 904 of this title shall implement, the percentage reduction that shall apply, with respect to the health insurance programs under title XVIII of the Social Security Act [42 U.S.C. 1395 et seq.]—
(A) in the case of parts A and B of such title [42 U.S.C. 1395c et seq., 1395j et seq.], to individual payments for services furnished during the one-year period beginning on the first day of the first month beginning after the date the order is issued (or, if later, the date specified in paragraph (4)); and
(B) in the case of parts C and D [42 U.S.C. 1395w–21 et seq., 1395w–101 et seq.], to monthly payments under contracts under such parts for the same one-year period;
such that the reduction made in payments under that order shall achieve the required total percentage reduction in those payments for that period.
(2) Uniform reduction rate; maximum permissible reduction
Reductions in payments for programs and activities under such title XVIII [42 U.S.C. 1395 et seq.] pursuant to a sequestration order under section 904 of this title shall be at a uniform rate, which shall not exceed 4 percent, across all such programs and activities subject to such order.
(3) Timing of application of reductions
(A) In general
Except as provided in subparagraph (B), if a reduction is made under paragraph (1) in payment amounts pursuant to a sequestration order, the reduction shall be applied to payment for services furnished during the effective period of the order. For purposes of the previous sentence, in the case of inpatient services furnished for an individual, the services shall be considered to be furnished on the date of the individual’s discharge from the inpatient facility.
(B) Payment on the basis of cost reporting periods
In the case in which payment for services of a provider of services is made under title XVIII of the Social Security Act [42 U.S.C. 1395 et seq.] on a basis relating to the reasonable cost incurred for the services during a cost reporting period of the provider, if a reduction is made under paragraph (1) in payment amounts pursuant to a sequestration order, the reduction shall be applied to payment for costs for such services incurred at any time during each cost reporting period of the provider any part of which occurs during the effective period of the order, but only (for each such cost reporting period) in the same proportion as the fraction of the cost reporting period that occurs during the effective period of the order.
(4) Timing of subsequent sequestration order
A sequestration order required by section 902 or 903 of this title with respect to programs under such title XVIII [42 U.S.C. 1395 et seq.] shall not take effect until the first month beginning after the end of the effective period of any prior sequestration order with respect to such programs, as determined in accordance with paragraph (1).
(5) No increase in beneficiary charges in assignment-related cases
If a reduction in payment amounts is made under paragraph (1) for services for which payment under part B of title XVIII of the Social Security Act [42 U.S.C. 1395j et seq.] is made on the basis of an assignment described in section 1842 (b)(3)(B)(ii) [42 U.S.C. 1395u (b)(3)(B)(ii)], in accordance with section 1842 (b)(6)(B) [42 U.S.C. 1395u (b)(6)(B)], or under the procedure described in section 1870 (f)(1) [42 U.S.C. 1395gg (f)(1)], of such Act, the person furnishing the services shall be considered to have accepted payment of the reasonable charge for the services, less any reduction in payment amount made pursuant to a sequestration order, as payment in full.
(6) Sequestration disregarded in computing payment amounts
The Secretary of Health and Human Services shall not take into account any reductions in payment amounts which have been or may be effected under this subchapter, for purposes of computing any adjustments to payment rates under such title XVIII [42 U.S.C. 1395 et seq.], specifically including—
(A) the part C growth percentage under section 1853 (c)(6) [42 U.S.C. 1395w–23 (c)(6)];
(B) the part D annual growth rate under section 1860D–2 (b)(6) [42 U.S.C. 1395w–102 (b)(6)]; and
(C) application of risk corridors to part D payment rates under section 1860D–15 (e) [42 U.S.C. 1395w–115 (e)].
(7) Exemptions from sequestration
In addition to the programs and activities specified in section 905 of this title, the following shall be exempt from sequestration under this subchapter:
(A) Part D low-income subsidies
Premium and cost-sharing subsidies under section 1860D–14 of the Social Security Act [42 U.S.C. 1395w–114].
(B) Part D catastrophic subsidy
Payments under section 1860D–15(b) and (e)(2)(B) of the Social Security Act [42 U.S.C. 1395w–115 (b), (e)(2)(B)].
(C) Qualified individual (QI) premiums
Payments to States for coverage of Medicare cost-sharing for certain low-income Medicare beneficiaries under section 1933 of the Social Security Act [42 U.S.C. 1396u–3].
(e) Community and migrant health centers, Indian health services and facilities, and veterans’ medical care
(1) The maximum permissible reduction in budget authority for any account listed in paragraph (2) for any fiscal year, pursuant to an order issued under section 904 of this title, shall be 2 percent.
(2) The accounts referred to in paragraph (1) are as follows:
(A) Community health centers (75-0350-0-1-550).
(B) Migrant health centers (75-0350-0-1-550).
(C) Indian health facilities (75-0391-0-1-551).
(D) Indian health services (75-0390-0-1-551).
(E) Veterans’ medical care (36-0160-0-1-703).
For purposes of the preceding provisions of this paragraph, programs are identified by the designated budget account identification code numbers set forth in the Budget of the United States Government—Appendix.
(f) Treatment of child support enforcement program
Notwithstanding any change in the display of budget accounts, any order issued by the President under section 904 of this title shall accomplish the full amount of any required reduction in expenditures under sections 455 and 458 of the Social Security Act [42 U.S.C. 655, 658a] by reducing the Federal matching rate for State administrative costs under such program, as specified (for the fiscal year involved) in section 455(a) of such Act, to the extent necessary to reduce such expenditures by that amount.
(g) Federal pay
(1) In general
For purposes of any order issued under section 904 of this title—
(A) Federal pay under a statutory pay system, and
(B) elements of military pay,
shall be subject to reduction under an order in the same manner as other administrative expense components of the Federal budget; except that no such order may reduce or have the effect of reducing the rate of pay to which any individual is entitled under any such statutory pay system (as increased by any amount payable under section 5304 of title 5 or section 302 of the Federal Employees Pay Comparability Act of 1990) or the rate of any element of military pay to which any individual is entitled under title 37, or any increase in rates of pay which is scheduled to take effect under section 5303 of title 5, section 1009 of title 37, or any other provision of law.
(2) Definitions
For purposes of this subsection:
(A) The term “statutory pay system” shall have the meaning given that term in section 5302 (1) of title 5.
(B) The term “elements of military pay” means—
(i) the elements of compensation of members of the uniformed services specified in section 1009 of title 37,
(ii) allowances provided members of the uniformed services under sections 403a and 405 of such title, and
(iii) cadet pay and midshipman pay under section 203(c) of such title.
(C) The term “uniformed services” shall have the meaning given that term in section 101 (3) of title 37.
(h) Treatment of Federal administrative expenses
(1) Notwithstanding any other provision of this title,[1] administrative expenses incurred by the departments and agencies, including independent agencies, of the Federal Government in connection with any program, project, activity, or account shall be subject to reduction pursuant to an order issued under section 904 of this title, without regard to any exemption, exception, limitation, or special rule which is otherwise applicable with respect to such program, project, activity, or account under this subchapter.
(2) Notwithstanding any other provision of law, administrative expenses of any program, project, activity, or account which is self-supporting and does not receive appropriations shall be subject to reduction under a sequester order, unless specifically exempted in this subchapter.
(3) Payments made by the Federal Government to reimburse or match administrative costs incurred by a State or political subdivision under or in connection with any program, project, activity, or account shall not be considered administrative expenses of the Federal Government for purposes of this section, and shall be subject to reduction or sequestration under this subchapter to the extent (and only to the extent) that other payments made by the Federal Government under or in connection with that program, project, activity, or account are subject to such reduction or sequestration; except that Federal payments made to a State as reimbursement of administrative costs incurred by such State under or in connection with the unemployment compensation programs specified in subsection (h)(1) [1] of this section shall be subject to reduction or sequestration under this subchapter notwithstanding the exemption otherwise granted to such programs under that subsection.
(4) Notwithstanding any other provision of law, this subsection shall not apply with respect to the following:
(A) Comptroller of the Currency.
(B) Federal Deposit Insurance Corporation.
(C) Office of Thrift Supervision.
(D) National Credit Union Administration.
(E) National Credit Union Administration, central liquidity facility.
(F) Federal Retirement Thrift Investment Board.
(G) Resolution Trust Corporation.
(H) Farm Credit Administration.
(i) Treatment of payments and advances made with respect to unemployment compensation programs
(1) For purposes of section 904 of this title—
(A) any amount paid as regular unemployment compensation by a State from its account in the Unemployment Trust Fund (established by section 904(a) of the Social Security Act [42 U.S.C. 1104 (a)]),
(B) any advance made to a State from the Federal unemployment account (established by section 904(g) of such Act [42 U.S.C. 1104 (g)]) under title XII of such Act [42 U.S.C. 1321 et seq.] and any advance appropriated to the Federal unemployment account pursuant to section 1203 of such Act [42 U.S.C. 1323], and
(C) any payment made from the Federal Employees Compensation Account (as established under section 909 of such Act [42 U.S.C. 1109]) for the purpose of carrying out chapter 85 of title 5 and funds appropriated or transferred to or otherwise deposited in such Account,
shall not be subject to reduction.
(2)
(A) A State may reduce each weekly bene­fit payment made under the Federal-State Extended Unemployment Compensation Act of 1970 for any week of unemployment occurring during any period with respect to which payments are reduced under an order issued under section 904 of this title by a percentage not to exceed the percentage by which the Federal payment to the State under section 204 of such Act is to be reduced for such week as a result of such order.
(B) A reduction by a State in accordance with subparagraph (A) shall not be considered as a failure to fulfill the requirements of section 3304 (a)(11) of title 26.
(j) Commodity Credit Corporation
(1) Powers and authorities of the Commodity Credit Corporation
This title [2] shall not restrict the Commodity Credit Corporation in the discharge of its authority and responsibility as a corporation to buy and sell commodities in world trade, to use the proceeds as a revolving fund to meet other obligations and otherwise operate as a corporation, the purpose for which it was created.
(2) Reduction in payments made under contracts
(A) Loan eligibility under any contract entered into with a person by the Commodity Credit Corporation prior to the time an order has been issued under section 904 of this title shall not be reduced by an order subsequently issued. Subject to subparagraph (B), after an order is issued under such section for a fiscal year, any cash payments for loans or loan deficiencies made by the Commodity Credit Corporation shall be subject to reduction under the order.
(B) Each loan contract entered into with producers or producer cooperatives with respect to a particular crop of a commodity and subject to reduction under subparagraph (A) shall be reduced in accordance with the same terms and conditions. If some, but not all, contracts applicable to a crop of a commodity have been entered into prior to the issuance of an order under section 904 of this title, the order shall provide that the necessary reduction in payments under contracts applicable to the commodity be uniformly applied to all contracts for the next succeeding crop of the commodity, under the authority provided in paragraph (3).
(3) Delayed reduction in outlays permissible
Notwithstanding any other provision of this title,[2] if an order under section 904 of this title is issued with respect to a fiscal year, any reduction under the order applicable to contracts described in paragraph (1) may provide for reductions in outlays for the account involved to occur in the fiscal year following the fiscal year to which the order applies.
(4) Uniform percentage rate of reduction and other limitations
All reductions described in paragraph (2) which are required to be made in connection with an order issued under section 904 of this title with respect to a fiscal year shall be made so as to ensure that outlays for each program, project, activity, or account involved are reduced by a percentage rate that is uniform for all such programs, projects, activities, and accounts, and may not be made so as to achieve a percentage rate of reduction in any such item exceeding the rate specified in the order.
(5) Dairy program
Notwithstanding any other provision of this subsection, as the sole means of achieving any reduction in outlays under the milk price support program, the Secretary of Agriculture shall provide for a reduction to be made in the price received by producers for all milk produced in the United States and marketed by producers for commercial use. That price reduction (measured in cents per hundred weight of milk marketed) shall occur under section 1446 (d)(2)(A) of title 7, shall begin on the day any sequestration order is issued under section 904 of this title, and shall not exceed the aggregate amount of the reduction in outlays under the milk price support program that otherwise would have been achieved by reducing payments for the purchase of milk or the products of milk under this subsection during the applicable fiscal year.
(6) Certain authority not to be limited
Nothing in this joint resolution shall limit or reduce, in any way, any appropriation that provides the Commodity Credit Corporation with budget authority to cover the Corporation’s net realized losses.
(k) Effects of sequestration
The effects of sequestration shall be as follows:
(1) Budgetary resources sequestered from any account shall be permanently cancelled, except as provided in paragraph (6).
(2) Except as otherwise provided, the same percentage sequestration shall apply to all programs, projects, and activities within a budget account (with programs, projects, and activities as delineated in the appropriation Act or accompanying report for the relevant fiscal year covering that account, or for accounts not included in appropriation Acts, as delineated in the most recently submitted President’s budget).
(3) Administrative regulations or similar actions implementing a sequestration shall be made within 120 days of the sequestration order. To the extent that formula allocations differ at different levels of budgetary resources within an account, program, project, or activity, the sequestration shall be interpreted as producing a lower total appropriation, with the remaining amount of the appropriation being obligated in a manner consistent with program allocation formulas in substantive law.
(4) Except as otherwise provided, obligations in sequestered accounts shall be reduced only in the fiscal year in which a sequester occurs.
(5) If an automatic spending increase is sequestered, the increase (in the applicable index) that was disregarded as a result of that sequestration shall not be taken into account in any subsequent fiscal year.
(6) Budgetary resources sequestered in revolving, trust, and special fund accounts and offsetting collections sequestered in appropriation accounts shall not be available for obligation during the fiscal year in which the sequestration occurs, but shall be available in subsequent years to the extent otherwise provided in law.

[1] See References in Text note below.

[2] See References in Text note below.