The First Step Act of 2018: An Overview

Summary: On December 21, 2018, President Trump signed into law the First Step Act of 2018 (P.L. 115-391). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety. This report provides an overview of the provisions of the act.

Summary: The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at the Bureau of Prisons (BOP), (2) sentencing reform via changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 (P.L. 110-199). The act also contains a series of other criminal justice-related provisions.

Summary: The First Step Act requires the Department of Justice (DOJ) to develop a risk and needs assessment system to be used by BOP to assess the recidivism risk of all federal prisoners and to place prisoners in programs and productive activities to reduce this risk. Prisoners who successfully complete recidivism reduction programming and productive activities can earn additional time credits that will allow them to be placed in prerelease custody (i.e., home confinement or a Residential Reentry Center) earlier than they were previously allowed. The act prohibits prisoners convicted of any one of dozens of offenses from earning additional time credits, though these prisoners can earn other benefits, such as additional visitation time, for successfully completing recidivism reduction programming. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses.

Summary: The act makes changes to the penalties for some federal offenses. The act modified mandatory minimum prison sentences for some drug traffickers with prior drug convictions by increasing the threshold for prior convictions that count toward triggering higher mandatory minimums for repeat offenders, reducing the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum, and reducing a life-in-prison mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act made the provisions of the Fair Sentencing Act of 2010 (P.L. 111-220) retroactive so that currently incarcerated offenders who received longer sentences for possession of crack cocaine than they would have received if sentenced for possession of the same amount of powder cocaine before the enactment of the Fair Sentencing Act can submit a petition in federal court to have their sentences reduced. The act also expands the safety valve provision, which allows courts to sentence low-level, nonviolent drug offenders with minor criminal histories to less than the required mandatory minimum for an offense. Finally, the act eliminated the stacking provision, which allowed prosecutors to charge offenders with a second and subsequent use of a firearm in furtherance of a drug trafficking or violent offense in the same criminal incident, which, if the offender is convicted, carries a 25-year mandatory minimum. Now, the mandatory minimum will only apply when the offender has a prior conviction for use of a firearm in furtherance of a drug trafficking or violent crime from a previous criminal prosecution.

Summary: The First Step Act contains the Second Chance Reauthorization Act of 2018. This act reauthorizes appropriations for and expands the scope of some grant programs that were initially authorized under the Second Chance Act of 2007 (P.L. 110-199). The reauthorized programs include the Adult and Juvenile State and Local Offender Demonstration Program, Grants for Family-Based Substance Abuse Treatment, Careers Training Demonstration Grants, the Offender Reentry Substance Abuse and Criminal Justice Collaboration Program, and the Community-Based Mentoring and Transitional Service Grants to Nonprofit Organizations Program. The act also reauthorized and modified a pilot program that allows BOP to place certain elderly and terminally ill prisoners on home confinement to serve the remainder of their sentences.

Summary: Finally, the First Step Act includes a series of other criminal justice-related provisions. These provisions include a prohibition on the use of restraints on pregnant inmates in the custody of BOP and the U.S. Marshals Service; a change to the way good time credit is calculated so prisoners can earn 54 days of good time credits for each year of imposed sentence rather than for each year of time served; a requirement for BOP to provide a way for employees to safely store firearms on BOP grounds; a requirement for BOP to try to place prisoners within 500 driving miles of their primary residences; authority for the Federal Prison Industries to sell products to public entities for use in correctional facilities, disaster relief, or emergency response, to the District of Columbia government, and to nonprofit organizations; a prohibition against the use of solitary confinement for juvenile delinquents in federal custody; and a requirement that BOP aid prisoners with obtaining identification before they are released.

O n December 21, 2018, President Trump signed into law the First Step Act of 2018 ( P.L. 115-391 ). The act was the culmination of several years of congressional debate about what Congress might do to reduce the size of the federal prison population while also creating mechanisms to maintain public safety.

Correctional and sentencing reform was an issue that drew interest from many Members of Congress. Some Members took it up for fiscal reasons; they were concerned that the increase in the Bureau of Prisons' (BOP) budget would take resources away from the Department of Justice's (DOJ) other priorities. Other Members were interested in correctional reform due to concerns about the social consequences (e.g., the effects incarceration has on employment opportunities and the families of the incarcerated, or the normalizing of incarceration) of what some deem mass incarceration , or they wanted to roll back some of the tough on crime policy changes that Congress put in place during the 1980s and early 1990s.

This report provides an overview of the provisions of the First Step Act. The act has three major components: (1) correctional reform via the establishment of a risk and needs assessment system at BOP, (2) sentencing reform that involved changes to penalties for some federal offenses, and (3) the reauthorization of the Second Chance Act of 2007 ( P.L. 110-199 ). The act also contains a series of other criminal justice-related provisions that include, for example, changes to the way good time credits are calculated for federal prisoners, prohibiting the use of restraints on pregnant inmates, expanding the market for products made by the Federal Prison Industries, and requiring BOP to aid prisoners with obtaining identification before they are released.

The correctional reform component of the First Step Act involves the development and implementation of a risk and needs assessment system (system) at BOP.

Development of the Risk and Needs Assessment System

The act requires DOJ to develop the system to be used by BOP to assess the risk of recidivism of federal prisoners and assign prisoners to evidence-based recidivism reduction programs and productive activities to reduce this risk. DOJ is required to develop and release the system within 210 days of enactment of the First Step Act. The system is to be used to

determine the risk of recidivism of each prisoner during the intake process and classify each prisoner as having a minimum, low, medium, or high risk; assess and determine, to the extent practicable, the risk of violent or serious prison misconduct of each prisoner; determine the type and amount of recidivism reduction programming that is appropriate for each prisoner and assign each prisoner to programming based on the prisoner's specific criminogenic needs ; periodically reassess the recidivism risk of each prisoner; reassign prisoners to appropriate recidivism reduction programs or productive activities based on their reassessed risk of recidivism to ensure that all prisoners have an opportunity to reduce their risk classification, that the programs address prisoners' criminogenic needs, and that all prisoners are able to successfully participate in such programs; determine when to provide incentives and rewards for successful participation in recidivism reduction programs or productive activities; determine when a prisoner is ready to transfer into prerelease custody or supervised release; and determine the appropriate use of audio technology for program course materials to accommodate prisoners with dyslexia.

DOJ is authorized to use existing risk and needs assessment instruments, validated annually, to meet the requirements of the act.

When developing the system, the Attorney General is required to consult with

the Director of BOP; the Director of the Administrative Office of the United States Courts; the Director of the Office of Probation and Pretrial Services; the Director of the National Institute of Justice; the Director of the National Institute of Corrections; and the Independent Review Committee, which is established by the First Step Act.

When developing the system, the Attorney General, with the assistance of the Independent Review Committee, is required to

conduct a review of the existing risk and needs assessment systems; develop recommendations regarding recidivism reduction programs and productive activities; conduct ongoing research and data analysis on (1) evidence-based recidivism reduction programs related to the use of risk and needs assessment, (2) the most effective and efficient uses of such programs, (3) which programs are the most effective at reducing recidivism, and the type, amount, and intensity of programming that most effectively reduces the risk of recidivism, and (4) products purchased by federal agencies that are manufactured overseas and could be manufactured by prisoners participating in a prison work program without reducing job opportunities for other workers in the United States; annually review and validate the risk and needs assessment system, including an evaluation to ensure that assessments are based on dynamic risk factors (i.e., risk factors that can change); validate any tools that the system uses; and evaluate the recidivism rates among similarly classified prisoners to identify any unwarranted disparities, including disparities in such rates among similarly classified prisoners of different demographic groups, and make any changes to the system necessary to address any that are identified; and submit an annual report to Congress each year for five years starting in 2020 (see below).

Also, prior to releasing the system, DOJ is required to consult with the Independent Review Committee to

review the effectiveness of recidivism reduction programs in prisons operated by BOP; review available information regarding the effectiveness of recidivism reduction programs and productive activities provided in state prisons; review the policies for entering into recidivism reduction partnerships authorized by the act; and direct BOP regarding (1) evidence-based recidivism reduction programs, (2) the ability for faith-based organizations to provide educational programs outside of religious courses, and (3) the addition of any new effective recidivism reduction programs that DOJ finds.

Under the act, the system is required to provide guidance on the type, amount, and intensity of recidivism reduction programming and productive activities to which each prisoner is assigned, including information on which programs prisoners should participate in based on their criminogenic needs and the ways that BOP can tailor programs to the specific criminogenic needs of each prisoner to reduce their risk of recidivism. The system is also required to provide guidance on how to group, to the extent practicable, prisoners with similar risk levels together in recidivism reduction programming and housing assignments.

The act requires BOP, when developing the system, to take steps to screen prisoners for dyslexia and to provide programs to treat prisoners who have it.

Implementation of the Risk and Needs Assessment System

Within 180 days of DOJ releasing the system, BOP is required to

complete the initial risk and needs assessment for each prisoner (including for prisoners who were incarcerated before the enactment of the First Step Act); begin to assign prisoners to appropriate recidivism reduction programs based on the initial assessment; begin to expand the recidivism reduction programs and productive activities available at BOP facilities and add any new recidivism reduction programs and productive activities necessary to effectively implement the system; and begin to implement any other risk and needs assessment tools necessary to effectively implement the system over time.

BOP is required to expand recidivism reduction programming and productive activities capacity so that all prisoners have an opportunity to participate in risk reduction programs within two years of BOP completing initial risk and needs assessments for all prisoners. During the two-year period when BOP is expanding recidivism reduction programs and productive activities, prisoners who are nearing their release date are given priority for placement in such programs.

BOP is required to provide all prisoners with the opportunity to participate in recidivism reduction programs that address their criminogenic needs or productive activities throughout their term of incarceration. High- and medium-risk prisoners are to have priority for placement in recidivism reduction programs, while the program focus for low-risk prisoners is on participation in productive activities.

Prisoners who successfully participate in recidivism reduction programming or productive activities are required to be reassessed not less than annually, and high- and medium-risk prisoners who have less than five years remaining until their projected release date are required to have more frequent reassessments. If the reassessment shows that a prisoner's risk of recidivating or specific needs have changed, BOP is required to reassign the prisoner to recidivism reduction programs or productive activities consistent with those changes.

DOJ is required to develop and administer a training program for BOP employees on how to use the system. This training program must include

initial training to educate employees on how to use the system in an appropriate and consistent manner, continuing education, periodic training updates, and a requirement that employees biannually demonstrate competence in administering the system.

To ensure that BOP is using the system in an appropriated and consistent manner, DOJ is required to monitor and assess how the system is used at BOP, including an annual audit of the system's use.

Incentives and Rewards for Program Participation

The First Step Act requires the use of incentives and rewards for prisoners to participate in recidivism reduction programs, including the following:

additional phone privileges, and if available, video conferencing privileges, of up to 30 minutes a day, and up to 510 minutes a month; additional time for visitation at the prison, as determined by the warden of the prison; transfer to a facility closer to the prisoner's release residence, subject to the availability of bedspace, the prisoner's security designation, and the recommendation from the warden of the prison at which the prisoner is incarcerated at the time of making the request; and additional incentives and rewards as determined by BOP, to include not less than two of the following: (1) increased commissary spending limits and product offerings, (2) greater email access, (3) consideration for transfer to preferred housing units; and (4) other incentives solicited from prisoners and determined appropriate by BOP.

Rewards or incentives prisoners earn are in addition to any other rewards or incentives for which they may be eligible (e.g., good time credit under 18 U.S.C. Section 3624(b)).

Earned Time Credits for Program Participation

Under the act, prisoners who successfully complete recidivism reduction programming are eligible to earn up to 10 days of time credits for every 30 days of program participation. Minimum and low-risk prisoners who successfully completed recidivism reduction or productive activities and whose assessed risk of recidivism has not increased over two consecutive assessments are eligible to earn up to an additional five days of time credits for every 30 days of successful participation. However, prisoners serving a sentence for a conviction of any one of multiple enumerated offenses are ineligible to earn additional time credits regardless of risk level, though these prisoners are eligible to earn the other incentives and rewards for program participation outlined above. Offenses that make prisoners ineligible to earn additional time credits can generally be categorized as violent, terrorism, espionage, human trafficking, sex and sexual exploitation, repeat felon in possession of firearm, certain fraud, or high-level drug offenses. Prisoners who are subject to a final order of removal under immigration law are ineligible for additional earned time credits provided by the First Step Act.

Prisoners cannot retroactively earn time credits for programs they completed prior to the enactment of the First Step Act, and they cannot earn time credits for programs completed while detained pending adjudication of their cases.

The act requires BOP to develop guidelines for reducing time credits prisoners earned under the system for violating institutional rules or the rules of recidivism reduction programs and productive activities. The guidelines must also include a description of a process for prisoners to earn back any time credits they lost due to misconduct.

A prisoner is not eligible to be placed in prerelease custody until

the amount of time credits the prisoner has earned is equal to the remainder of his/her imposed term of imprisonment; the prisoner has shown a reduced risk of recidivism or has maintained a minimum or low recidivism risk during his/her term of imprisonment; the remainder of his/her imposed term of imprisonment has been computed under applicable law (e.g., any good time credits the prisoner has earned have been credited to his/her sentence); and the prisoner has been determined to be a minimum or low risk to recidivate based on his/her last two assessments, or has had a petition to be transferred to prerelease custody approved by the warden, after the warden's determination that the prisoner (1) would not be a danger to society if transferred to prerelease custody, (2) has made a good faith effort to lower his/her recidivism risk through participation in recidivism reduction programs or productive activities, and (3) is unlikely to recidivate.

A prisoner who is required to serve a period of supervised release after his/her term of incarceration and has earned time credits equivalent to the time remaining on his/her prison sentence can be transferred directly to supervised release if the prisoner's latest reassessment shows that he/she is a minimum or low risk to recidivate. However, BOP cannot allow a prisoner to start serving a period of supervised release more than 12 months before he/she would otherwise be eligible to do so. If a prisoner has earned more than 12 months of additional time credits, the amount in excess of 12 months would be served in prerelease custody.

Prisoners who are placed on prerelease custody on home confinement are subject to a series of conditions. Per the act, prisoners on home confinement are required to have 24-hour electronic monitoring that enables the identification of their location and the time, and must remain in their residences, except to

go to work or participate in job-seeking activities, participate in recidivism reduction programs or similar activities, perform community service, participate in crime victim restoration activities, receive medical treatment, attend religious activities, or participate in family-related activities that facilitate a prisoner's successful reentry.

When monitoring adherence to the conditions of prerelease custody, BOP is required, to the extent practicable, to reduce the restrictiveness of those conditions for prisoners who demonstrate continued compliance with their conditions.

If a prisoner violates the conditions of prerelease custody, BOP is authorized to place more conditions on the prisoner, or revoke prerelease custody and require the prisoner to serve the remainder of the sentence in prison. If the violation is nontechnical in nature (e.g., committing a new crime), BOP is required to revoke the prisoner's prerelease custody.

BOP is required to expand its capacity, if necessary, so that all eligible prisoners can be placed in prerelease custody.

The act requires the submission of several reports to help Congress oversee the implementation and assess the effects of the system.

Department of Justice Report to Congress

Two years after the enactment of the First Step Act, and each year thereafter for the next five years, DOJ is required to submit a report to the House and Senate Judiciary Committees and the House and Senate Subcommittees on Commerce, Justice, Science, and Related Agencies (CJS) Appropriations that includes information on

the types and effectiveness of recidivism reduction programs and productive activities provided by BOP, including the capacity of each program and activity at each prison and any gaps or shortages in capacity of such programs and activities; the recidivism rates of prisoners released from federal prison, based on the following criteria: (1) the primary offense of conviction; (2) the length of the sentence imposed and served; (3) the facility or facilities in which the prisoner's sentence was served; (4) the type of recidivism reduction programming; (5) prisoners' assessed and reassessed risk of recidivism; and (6) the type of productive activities; the status of prison work programs offered by BOP, including a strategy to expanding prison work opportunities for prisoners without reducing job opportunities for nonincarcerated U.S. workers; and any budgetary savings that have resulted from the implementation of the act, and a strategy for investing those savings in other federal, state, and local law enforcement activities and expanding recidivism reduction programs and productive activities at BOP facilities.

Report from the Independent Review Committee

Within two years of the enactment of the First Step Act, the Independent Review Committee is required to submit a report to the House and Senate Judiciary Committees and the House and Senate CJS Appropriations Subcommittees that includes

a list of all offenses that make prisoners ineligible for earned time credits under the system, and the number of prisoners excluded for each offense by age, race, and sex; the criminal history categories of prisoners ineligible to receive earned time credits under the system, and the number of prisoners excluded for each category by age, race, and sex; the number of prisoners ineligible for earned time credits under the system who did not participate in recidivism reduction programming or productive activities by age, race, and sex; and any recommendations for modifications to the list of offenses that make prisoners ineligible to earn time credits and any other recommendations regarding recidivism reduction.

Within two years of BOP implementing the system, and every two years thereafter, the Government Accountability Office is required to audit how the system is being used at BOP facilities. The audit must include an analysis of the following:

whether prisoners are being assessed under the system with the required frequency; whether BOP is able to offer recidivism reduction programs and productive activities as defined in 18 U.S.C. Section 3632(f); whether BOP is offering the type, amount, and intensity of recidivism reduction programs and productive activities that allow prisoners to earn the maximum amount of additional time credits for which they are eligible; whether DOJ is carrying out the duties required by the First Step Act; whether employees of the BOP are receiving the training required by the act; whether BOP offers work assignments to all prisoners who might benefit from them; whether BOP transfers prisoners to prerelease custody or supervised release as soon as they are eligible; and the rates of recidivism among similarly classified prisoners to identify any unwarranted disparities, including disparities among similarly classified prisoners of different demographic groups.

The First Step Act authorizes $75 million per fiscal year from FY2019 to FY2023 for DOJ to establish and implement the system; 80% of this funding is to be directed to BOP for implementation.

The First Step Act makes several changes to federal sentencing law. The act reduced the mandatory minimum sentences for certain drug offenses, expanded the scope of the safety valve, eliminated the stacking provision, and made the provisions of the Fair Sentencing Act of 2010 ( P.L. 111-220 ) retroactive.

Changes to Mandatory Minimums for Certain Drug Offenders

The act adjusts the mandatory minimum sentences for certain drug traffickers with prior drug convictions. The act reduces the 20-year mandatory minimum (applicable where the offender has one prior qualifying conviction) to a 15-year mandatory minimum and reduces the life sentence mandatory minimum (applicable where the offender has two or more prior qualifying convictions) to a 25-year mandatory minimum. The act also changes the prior conviction criteria under which these mandatory minimum penalties apply. In order for these mandatory minimums to apply, the offender's prior convictions must meet the new criteria of a serious drug felony or a serious violent felony rather than any felony drug offense .

The act makes drug offenders with minor criminal records eligible for the safety valve provision, which previously applied only to offenders with virtually spotless criminal records. The safety valve allows judges to sentence low-level, nonviolent drug offenders to a term of imprisonment that is less than the applicable mandatory minimum.

The act eliminates stacking by providing that the 25-year mandatory minimum for a "second or subsequent" conviction for use of a firearm in furtherance of a drug trafficking crime or a violent crime applies only where the offender has a prior conviction for use of a firearm that is already final. Under prior law, two violations that were charged concurrently triggered the enhanced mandatory minimum.

Retroactivity of the Fair Sentencing Act

The First Step Act authorizes courts to apply retroactively the Fair Sentencing Act of 2010, which increased the threshold quantities of crack cocaine sufficient to trigger mandatory minimum sentences, by resentencing qualified prisoners as if the Fair Sentencing Act had been in effect at the time of their offenses. The retroactive application of the Fair Sentencing Act is not automatic. A prisoner must petition the court in order to have his/her sentence reduced.

Reauthorization of the Second Chance Act

The Second Chance Reauthorization Act of 2018 (Title V of the First Step Act) reauthorizes many of the grant programs that were initially authorized by the Second Chance Act of 2007 ( P.L. 110-199 ). The Second Chance Reauthorization Act also reauthorized a BOP pilot program to provide early release to elderly prisoners.

Reauthorization of the Adult and Juvenile State and Local Offender Demonstration Program

The Second Chance Reauthorization Act amends the authorization for the Adult and Juvenile State and Local Offender Demonstration Program so grants can be awarded to states, local governments, territories, or Indian tribes, or any combination thereof, in partnership with interested persons (including federal correctional officials), service providers, and nonprofit organizations, for the strategic planning and implementation of reentry programs. The Second Chance Reauthorization Act amended the authorization for this program to allow grants to be used for reentry courts and promoting employment opportunities consistent with a transitional jobs strategy in addition to the purposes for which grants could already be awarded.

The act also amended the Second Chance Act authorizing legislation for the program to allow DOJ to award both planning and implementation grants. DOJ is required to develop a procedure to allow applicants to submit a single grant application when applying for both planning and implementation grants.

Under the amended program, DOJ is authorized to award up to $75,000 for planning grants and is prohibited from awarding more than $1 million in planning and implementation grants to any single entity. The program period for planning grants is limited to one year and implementation grants are limited to two years. DOJ is also required to make every effort to ensure the equitable geographic distribution of grants, taking into account the needs of underserved populations, including tribal and rural communities.

Under the amended program, applicants for implementation grants are subject to several requirements, including

demonstrating that the application has the explicit support of the chief executive, or the designee, of the state, unit of government, territory, or Indian tribe applying for the grant; discussing the role of federal and state corrections, community corrections, juvenile justice systems, and tribal and local jail systems in ensuring the successful reentry of ex-offenders into the applicants' communities; providing evidence of collaboration with state, local, and tribal agencies overseeing health, housing, child welfare, education, substance abuse, victim services, employment agencies, and local law enforcement agencies; providing a plan for analyzing the barriers (e.g., statutory, regulatory, rules-based, or practice-based) to reentry for ex-offenders in the applicants' communities; demonstrating that a state, local, territorial, or tribal reentry task force will be used to carry out the activities funded under the grant; providing a plan for continued collaboration with a local evaluator; and demonstrating that the applicant participated in the planning grant process, or engaged in a comparable reentry planning process.

DOJ is also required to give priority consideration to applications for implementation grants that focus on areas with a disproportionate population of returning prisoners, received input from stakeholders and coordinated with prisoners families, demonstrate effective case assessment and management, review the process by which violation of community supervision are adjudicated, provide for an independent evaluation of reentry programs, target moderate and high-risk returning prisoners, and target returning prisoners with histories of homelessness, substance abuse, or mental illness.

Under the amended program, applicants for implementation grants would be required to develop a strategic reentry plan that contains measurable three-year performance outcomes. Applicants would be required to develop a feasible goal for reducing recidivism using baseline data collected through the partnership with the local evaluator. Applicants are required to use, to the extent practicable, random assignment and controlled studies, or rigorous quasi-experimental studies with matched comparison groups, to determine the effectiveness of the program.

As authorized by the Second Chance Act, grantees under the Adult and Juvenile State and Local Offender Demonstration program are required to submit annual reports to DOJ that identify the specific progress made toward achieving their strategic performance outcomes, which they are required to submit as a part of their reentry strategic plans. Data on performance measures only need to be submitted by grantees that receive an implementation grant. The act repeals some performance outcomes (i.e., increased housing opportunities, reduction in substance abuse, and increased participation in substance abuse and mental health services) and adds the following outcomes:

increased number of staff trained to administer reentry services; increased proportion of eligible individuals served by the program; increased number of individuals receiving risk screening needs assessment and case planning services; increased enrollment in and completion of treatment services, including substance abuse and mental health services for offenders who need them; increased enrollment in and degrees earned from educational programs; increased number of individuals obtaining and maintaining employment; increased number of individuals obtaining and maintaining housing; increased self-reports of successful community living, including stability of living situation and positive family relationships; reduction in drug and alcohol use; and reduction in recidivism rates for individuals receiving reentry services after release, as compared to either baseline recidivism rates in the jurisdiction of the grantee or recidivism rates of the comparison or control group.

The act allows applicants for implementation grants to include a cost-benefit analysis as a performance measure under their required reentry strategic plan.

The act reauthorizes appropriations for the program at $35 million for each fiscal year from FY2019 to FY2023.

Reauthorization of Grants for Family-Based Substance Abuse Treatment

The Second Chance Act authorized DOJ to make grants to states, local governments, and Indian tribes to develop, implement, and expand the use of family-based substance abuse treatment programs as an alternative to incarceration for parents who were convicted of nonviolent drug offenses and to provide prison-based family treatment programs for incarcerated parents of minor children.

The Second Chance Reauthorization Act amends the authorization for the program to allow grants to be awarded to nonprofit organizations and requires DOJ to give priority consideration to nonprofit organizations that demonstrate a relationship with state and local criminal justice agencies, including the judiciary and prosecutorial agencies or local correctional agencies.

The act reauthorizes appropriations for the program at $10 million for each fiscal year from FY2019 to FY2023.

Reauthorization of the Grant Program to Evaluate and Improve Educational Methods at Prisons, Jails, and Juvenile Facilities

The Second Chance Act authorized a grant program to evaluate and improve academic and vocational education in prisons, jails, and juvenile facilities. This program authorizes DOJ to make grants to states, units of local government, territories, Indian tribes, and other public and private entities to identify and implement best practices related to the provision of academic and vocational education in prisons, jails, and juvenile facilities. Grantees are required to submit reports within 90 days of the end of the final fiscal year of a grant detailing the progress they have made, and to allow DOJ to evaluate improved academic and vocational education methods carried out with grants provided under this program.

The Second Chance Reauthorization Act amends the authorizing legislation for this program to require DOJ to identify and publish best practices relating to academic and vocational education for offenders in prisons, jails, and juvenile facilities. In identifying best practices, the evaluations conducted under this program must be considered.

The act reauthorizes appropriations for this program at $5 million for each fiscal year from FY2019 to FY2023.

Reauthorization of the Careers Training Demonstration Grants

The Second Chance Act authorized DOJ to make grants to states, units of local government, territories, and Indian tribes to provide technology career training for prisoners. Grants could be awarded for programs that establish technology careers training programs for inmates in a prison, jail, or juvenile detention facility.

The Second Chance Reauthorization Act expanded the scope of the program to allow grant funds to be used to provide any career training to those who are soon to be released and during transition and reentry into the community. The act makes nonprofit organizations an eligible applicant under the program. Under the legislation, grants funds could be used to provide subsidized employment if it is a part of a career training program. The act also requires DOJ to give priority consideration to any application for a grant that

provides an assessment of local demand for employees in the geographic area to which offenders are likely to return, conducts individualized reentry career planning upon admission to a correctional facility or post-release employment planning for each offender served under the grant, demonstrates connections to local employers, and evaluates employment outcomes.

The act reauthorizes appropriations for this program at $10 million for each fiscal year from FY2019 to FY2023.

Reauthorization of the Offender Reentry Substance Abuse and Criminal Justice Collaboration Program

The Second Chance Act authorized DOJ to make grants to states, units of local governments, territories, and Indian tribes in order to improve drug treatment programs in prisons and reduce the post-prison use of alcohol and other drugs by long-term users under correctional supervision. Grants may be used to continue or improve existing drug treatment programs, develop and implement programs for long-term users, provide addiction recovery support services, or establish medication assisted treatment (MAT) services as part of any drug treatment program offered to prisoners.

The Second Chance Reauthorization Act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023.

Reauthorization of the Community-Based Mentoring and Transitional Service Grants to Nonprofit Organizations Program

The Second Chance Act authorized DOJ to make grants to nonprofit organizations and Indian tribes to provide mentoring and other transitional services for offenders being released into the community. Funds could be used for mentoring programs in prisons or jails and during reentry, programs providing transition services during reentry, and programs providing training for mentors on the criminal justice system and victims issues.

The Second Chance Reauthorization Act amends the authorization for the program to pivot the focus toward providing community-based transitional services to former inmates returning to the community. Reflecting the change in focus, the reauthorization changed the name of the program to "Community-based Mentoring and Transitional Services Grants to Nonprofit Organizations." The act specifies the transitional services that can be provided to returning inmates under the program, including educational, literacy, vocational, and the transitional jobs strategy; substance abuse treatment and services; coordinated supervision and services for offenders, including physical health care and comprehensive housing and mental health care; family services; and validated assessment tools to assess the risk factors of returning prisoners.

The act reauthorizes appropriations for this program at $15 million for each fiscal year from FY2019 to FY2023.

Reauthorization and Expansion of the BOP Early Release Pilot Program

The Second Chance Reauthorization Act reauthorized and expanded the scope of a pilot program initially authorized under the Second Chance Act that allowed BOP to place certain elderly nonviolent offenders on home confinement to serve the remainder of their sentences. BOP was authorized to conduct this pilot program at one facility for FY2009 and FY2010. An offender eligible to be released through the program had to meet the following requirements:

at least 65 years old; never have been convicted of a violent, sex-related, espionage, or terrorism offense; sentenced to less than life; served the greater of 10 years or 75% of his/her sentence; not received a determination by BOP to have a history of violence, or of engaging in conduct constituting a sex, espionage, or terrorism offense; not escaped or attempted to escape; received a determination that release to home detention would result in a substantial reduction in cost to the federal government; and received a determination that he/she is not a substantial risk of engaging in criminal conduct or of endangering any person or the public if released to home detention.

The Second Chance Reauthorization Act reestablishes the pilot program and allows BOP to operate it at multiple facilities from FY2019 to FY2023. The act also modifies the eligibility criteria for elderly offenders so that any offenders who are at least 60 year old and have served two-thirds of their sentences can be placed on home confinement.

The act also expands the program so that terminally ill offenders can be placed on home confinement. Eligibility criteria for home confinement for terminally ill offenders under the pilot program is the same as that for elderly offenders, except that terminally ill offenders of any age and who have served any portion of their sentences, even life sentences, are eligible for home confinement. Terminally ill prisoners are those who are deemed by a BOP medical doctor to need care at a nursing home, intermediate care facility, or assisted living facility, or those who have been diagnosed with a terminal illness.

The Second Chance Act authorized appropriations for a series of reentry-related research projects, including the following:

a study by the National Institute of Justice (NIJ) identifying the number and characteristics of children with incarcerated parents and their likelihood of engaging in criminal activity; a study by NIJ identifying mechanisms to compare recidivism rates between states; a study by NIJ on the characteristics of individuals released from prison who do not recidivate; a study by the Bureau of Justice Statistics (BJS) analyzing the populations that present unique reentry challenges; studies by BJS to determine the characteristics of individuals who return to prison, jail, or a juvenile facility (including which individuals pose the highest risk to the community); annual reports by BJS on the profile of the population leaving prisons, jails, or juvenile facilities and entering the community; a national recidivism study by BJS every three years; a study by BJS of violations and revocation of community-based supervision (e.g., probation, parole, or other forms of post-incarceration supervision) violations; providing grants to states to fund studies aimed at improving data collection on former prisoners who have their post-incarceration supervision revoked in order to identify which such individuals pose the greatest risk to the community; and collecting data and developing best practices concerning the communication and coordination between state corrections and child welfare agencies, to ensure the safety and support of children of incarcerated parents.

The Second Chance Reauthorization Act reauthorizes appropriations for these research projects at $5 million for each fiscal year from FY2019 to FY2023.

Within five years of the enactment of the Second Chance Reauthorization Act, NIJ is required to evaluate grants used by DOJ to support reentry and recidivism reduction programs at the state, local, tribal, and federal levels. Specifically, NIJ is required to evaluate the following:

whether the programs are cost-effective, including the extent to which the programs improved reentry outcomes; whether the programs effectively delivered services; the effects programs had on the communities and participants involved; the effects programs had on related programs and activities; the extent to which programs met the needs of various demographic groups; the quality and effectiveness of technical assistance provided by DOJ to grantees for implementing such programs; and other factors as may be appropriate.

NIJ is required to identify outcome measures, including employment, housing, education, and public safety, that are the goals of programs authorized by the Second Chance Act and metrics for measuring whether those programs achieved the intended results. As a condition of receiving funding under programs authorized by the Second Chance Act, grantees are required to collect and report data to DOJ related to those metrics.

NIJ is required to make data collected during evaluations of Second Chance Act programs publicly available in a manner that protects the confidentiality of program participants and is consistent with applicable law. NIJ is also required to make the final evaluation reports publicly available.

The Second Chance Reauthorization Act requires BOP to develop policies for wardens of prisons and community-based facilities to enter into recidivism-reducing partnerships with nonprofit and other private organizations, including faith-based and community-based organizations to deliver recidivism reduction programming.

The Second Chance Reauthorization Act repealed the authorization for the State, Tribal, and Local Reentry Courts program (Section 111 of the Second Chance Act), the Responsible Reintegration of Offenders program (Section 212), and the Study on the Effectiveness of Depot Naltrexone for Heroin Addiction program (Section 244).

In addition to correctional and sentencing reform and reauthorizing the Second Chance Act, the First Step Act contained a series of other criminal justice-related provisions.

The act amended 18 U.S.C. Section 3624(b) so that federal prisoners can earn up to 54 days of good time credit for every year of their imposed sentence rather than for every year of their sentenced served . Prior to the amendment, BOP interpreted the good time credit provision in Section 3624(b) to mean that prisoners are eligible to earn 54 days of good time credit for every year they serve. For example, this means that an offender who was sentenced to 10 years in prison and earned the maximum good time credits each year could be released after serving eight years and 260 days, having earned 54 days of good time credit for each year of the sentence served, but in effect, only 47 days of good time credit for every year of the imposed sentence.

Bureau of Prisons Secure Firearm Storage

The act requires BOP to provide a secure storage area outside of the secure perimeter of a correctional institution for qualified law enforcement officers employed by BOP to store firearms or allow this class of employees to store firearms in their personal vehicles in lockboxes approved by BOP. The act also requires BOP, notwithstanding any other provision of law, to allow these same employees to carry concealed firearms on prison grounds but outside of the secure perimeter of the correctional institution.

Prohibition on the Use of Restraints on Pregnant Prisoners

The act prohibits BOP or the U.S. Marshals Service (USMS) from using restraints on pregnant inmates in their custody. The prohibition on the use of restraints begins on the date that pregnancy is confirmed by a healthcare professional. The restriction ends when the inmate completes postpartum recovery.

The prohibition on the use of restraints does not apply if the inmate is determined to be an immediate and credible flight risk or poses an immediate and serious threat of harm to herself or others that cannot be reasonably prevented by other means, or a healthcare professional determines that the use of restraints is appropriate for the medical safety of the inmate. Only the least restrictive restraints necessary to prevent escape or harm can be used. The exception to the use of restraints does not permit BOP or USMS to use them around the ankles, legs, or waist of an inmate; restrain an inmate's hands behind her back; use four-point restraints; or attach an inmate to another inmate. Upon the request of a healthcare professional, correctional officials or deputy marshals shall refrain from using restraints on an inmate or shall remove restraints used on an inmate.

If restraints are used on a pregnant inmate, the correctional official or deputy marshal who used the restraints is required to submit a report within 30 days to BOP or USMS, and the healthcare provider responsible for the inmate's health and safety, that describes the facts and circumstances surrounding the use of the restraints, including the reason(s) for using them; the details of their use, including the type of restraint and length of time they were used; and any observable physical effects on the prisoner.

BOP and USMS are required to develop training guidelines regarding the use of restraints on inmates during pregnancy, labor, and postpartum recovery. The guidelines are required to include the following:

how to identify certain symptoms of pregnancy that require immediate referral to a healthcare professional; circumstances under which exceptions to the prohibition on the use of restraints would apply; in cases where an exception applies, how to use restraints in a way that does not harm the inmate, the fetus, or the newborn; the information required to be reported when restraints are used; and the right of a healthcare professional to request that restraints not be used and the requirement to comply with such a request.

Placement of Prisoners Closer to Families

The act amends 18 U.S.C. Section 3621(b) to require BOP to house prisoners in facilities as close to their primary residence as possible, and to the extent practicable, within 500 driving miles, subject to a series of considerations. When making decisions about where to house a prisoner, BOP must consider bedspace availability, the prisoner's security designation, the prisoner's programmatic needs, the prisoner's mental and medical health needs, any request made by the prisoner related to faith-based needs, recommendations of the sentencing court, and other security concerns. BOP is also required, subject to these considerations and a prisoner's preference for staying at his/her current facility or being transferred, to transfer a prisoner to a facility closer to his/her primary residence even if the prisoner is currently housed at a facility within 500 driving miles.

The act amends 18 U.S.C. Section 3624(c)(2) to require BOP, to the extent practicable, to place prisoners with lower risk levels and lower needs on home confinement for the maximum amount of time permitted under this paragraph. Under Section 3624(c)(2), BOP is authorized to place prisoners in prerelease custody on home confinement for 10% of the term of imprisonment or six months, whichever is shorter.

Increasing the Use and Transparency of Compassionate Release

The act amends 18 U.S.C. Section 3582(c) regarding when a court can modify a term of imprisonment once it is imposed. Under Section 3582(c)(1)(A), a court, upon a petition from BOP, can reduce a prisoner's sentence and impose a term of probation or supervised release, with or without conditions, equal to the amount of time remaining on the prisoner's sentence if the court finds that "extraordinary and compelling reasons warrant such a reduction," or the prisoner is at least 70 years of age, the prisoner has served at least 30 years of his/her sentence, and a determination has been made by BOP that the prisoner is not a danger to the safety of any other person or the community. This is sometimes referred to as compassionate release . The amendments made by the act allow the court to reduce a prisoner's sentence under Section 3582(c)(1)(A) upon a petition from BOP or the prisoner if the prisoner has fully exhausted all administrative rights to appeal a failure by BOP to bring a motion on the prisoner's behalf or upon a lapse of 30 days from the receipt of such a request by the warden of the prisoner's facility, whichever is earlier.

The act also requires BOP within 72 hours of a prisoner being diagnosed with a terminal illness to notify the prisoner's attorney, partner, and family about the diagnosis and inform them of their option to submit a petition for compassionate release on the prisoner's behalf. Within seven days, BOP is required to provide the prisoner's partner and family with an opportunity to visit. BOP is also required to provide assistance to the prisoner with drafting and submitting a petition for compassionate release if such assistance is requested by the prisoner or the prisoner's attorney, partner, or family. BOP is required to process requests for compassionate release within 14 days.

If a prisoner is mentally or physically unable to submit a petition for compassionate release, BOP is required to notify the prisoner's attorney, partner, or family that they can submit a petition on the prisoner's behalf. BOP is required to accept and process requests for compassionate release that are drafted by the prisoner's attorney, partner, or family. BOP is also required to assist prisoners who are mentally or physically unable to prepare their own request if such assistance is requested by the prisoner's attorney, partner, or family.

BOP is required to make available to prisoners information regarding their ability to request compassionate release, the timeline for submitting a request, and their right to appeal to a court the denial of a request after exhausting all administrative appeals BOP makes available to prisoners. This information is to appear in written materials for prisoners and staff, and be visibly posted

The act also requires BOP to submit annual reports to the House and Senate Judiciary Committees that provides data on how BOP is processing applications for compassionate release.

The act amends the authorization for the federal prisoner reentry initiative (34 U.S.C. Section 60541(b)) to require BOP to assist prisoners and offenders who were sentenced to a period of community confinement with obtaining a social security card, driver's license or other official photo identification, and birth certificate prior to being released from custody.

The act also amends 18 U.S.C. Section 4042(a) to require BOP to establish prerelease planning procedures to help prisoners apply for federal and state benefits and obtain identification, including a social security card, driver's license or other official photo identification, and birth certificate. BOP is required to help prisoners secure these benefits, subject to any limitations in law, prior to being released. The act also amends Section 4042(a) to require prerelease planning to include any individuals who only served a sentence of community confinement.

Expanding Prisoner Employment Through the Federal Prison Industries

The act authorizes the Federal Prison Industries (FPI, also known by its trade name, UNICOR) to sell products to public entities for use in correctional facilities, disaster relief, or emergency response; to the District of Columbia government; and to nonprofit organizations. However, FPI is not allowed to sell office furniture to nonprofit organizations.

The act also requires BOP to set aside 15% of the wages paid to prisoners with FPI work assignments in a fund that will be payable to the prisoner upon release to aid with the cost of transitioning back into the community.

The act requires BOP to provide training to correctional officers and other BOP employees (including correctional officers and employees of facilities that contract with BOP to house prisoners) on how to de-escalate encounters between a law enforcement officer or an officer or employee of BOP and a civilian or a prisoner, and how to identify and appropriately respond to incidents that involve people with mental illness or other cognitive deficits.

Evidence-Based Treatment for Opioid and Heroin Abuse

Within 90 days of enactment of the act, BOP is required to submit a report to the House and Senate Judiciary and Appropriations Committees that assesses the availability of, and the capacity of BOP to provide, evidence-based treatment to prisoners with opioid and heroin abuse problems, including MAT, where appropriate. As a part of the report, BOP is required to provide a plan to expand access to evidence-based treatment for prisoners with heroin and opioid abuse problems, including MAT, where appropriate. After submitting the report, BOP is required to execute the plan it outlines in the report.

The act places a similar requirement on the Administrative Office of the United States Courts (AOUSC) regarding evidence-based treatment for opioid and heroin abuse for prisoners serving a term of supervised release. AOUSC has 120 days after enactment to submit its report to the House and Senate Judiciary and Appropriations Committees.

BOP Pilot Programs for Mentoring and Rescue Animals

The act requires BOP to establish two pilot programs that are to run for five years in at least 20 facilities. The first is a mentoring program that is to pair youth with volunteer mentors from faith-based or community organizations. The other program is to use prisoners to provide training and therapy to animals seized by federal law enforcement officers and to abandoned or rescued animals in the care of organizations that provide shelter and similar services.

The act requires BJS to expand data collected under its National Prisoner Statistics program to include 26 new data elements related to federal prisoners. Some of the data the act requires BJS to collect include the following:

the number of prisoners who are veterans; the number of prisoners who have been placed in solitary confinement in the past year; the number of female prisoners who are known to be pregnant and the result of those pregnancies; the number of prisoners who received MAT to treat a substance abuse problem; the number of prisoners who are the parent or guardian of a minor child; the number of assaults on BOP staff by prisoners and the number of criminal prosecutions that resulted from those assaults; the capacity of recidivism reduction programs and productive activities to accommodate eligible prisoners at each BOP facility; and the number of prisoners enrolled in recidivism reduction programs and productive activities at each BOP facility, broken down by risk level and by program, and the number of those enrolled prisoners who successfully completed each program.

Starting one year after the enactment of the act, BJS is required to submit an annual report to the House and Senate Judiciary Committees for a period of seven years that contains the data specified in the act.

The act requires BOP to provide tampons and sanitary napkins that meet industry standards to prisoners for free and in a quantity that meets the healthcare needs of each prisoner.

Federal Interagency Reentry Coordination

The act requires the Attorney General to coordinate with the Secretary of Housing and Urban Development, the Secretaries of Labor, Education, Health and Human Services, Veterans Affairs, and Agriculture, and the heads of other relevant federal agencies, as well as interested persons, service providers, nonprofit organizations, and state, tribal, and local governments, on federal reentry policies, programs, and activities, with an emphasis on evidence-based practices and the elimination of duplication of services.

The Attorney General, in consultation with the secretaries specified in the act, is required to submit a report to Congress within two years of the enactment of the act that summarizes the achievements of the coordination, and includes recommendations for Congress on how to further reduce barriers to successful reentry.

The act prohibits juvenile facilities from using room confinement for discipline, punishment, retaliation, or any reason other than as a temporary response to a covered juvenile's behavior that poses a serious and immediate risk of physical harm to any individual. The provisions of the act only apply to juveniles who have been charged with an alleged act of juvenile delinquency; have been adjudicated as delinquent under Chapter 403, Title 18 of the U.S. Code; or are facing charges as an adult in a federal district court for an alleged criminal offense.

Juvenile facilities are required to try to use less restrictive techniques, such as talking with the juvenile in an attempt to de-escalate the situation or allowing a mental health professional to talk to the juvenile, before placing the juvenile in room confinement. If the less restrictive techniques do not work and the juvenile is placed in room confinement, the staff of the juvenile facility is required to tell the juvenile why he/she is being placed in room confinement. Staff are also required to inform the juvenile that he/she will be released from room confinement as soon as he/she regains self-control and no longer poses a threat of physical harm to himself/herself or others. If a juvenile who poses a threat of harm to others does not sufficiently regain self-control, staff must inform the juvenile that he/she will be released within three hours of being placed in room confinement, or in the case of a juvenile who poses a threat of harm to himself/herself, that he/she will be released within 30 minutes of being placed in room confinement. If after the maximum period of confinement allowed the juvenile continues to pose a threat of physical harm to himself/herself or others, the juvenile is to be transferred to another juvenile facility or another location in the current facility where services can be provided to him/her. If a qualified mental health professional believes that the level of crisis services available to the juvenile are not adequate, the staff at the juvenile facility is to transfer the juvenile to a facility that can provide adequate services. The act prohibits juvenile facilities from using consecutive periods of room confinement on juveniles.


Social Security: The Trust Funds

Summary: The Social Security program pays monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. Projections show that the OASI fund will remain solvent until 2034, whereas the DI fund will remain solvent until 2052, meaning that each trust fund is projected to be able to pay benefits scheduled under current law in full and on time up to that point. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income to each fund is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. The two trust funds are legally distinct and do not have authority to borrow from each other. However, Congress has authorized the shifting of funds between OASI and DI in the past to address shortfalls in a particular fund. Therefore, this CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds. On a combined basis, the trust funds are projected to remain solvent until 2035. Following depletion of combined trust fund reserves at that point, continuing income is projected to cover 80% of scheduled benefits.

Summary: Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds.

Summary: The Social Security trust funds represent funds dedicated to pay current and future Social Security benefits. However, it is useful to view the trust funds in two ways: (1) as an internal federal accounting concept and (2) as the accumulated holdings of the Social Security program.

Summary: By law, Social Security tax revenues must be invested in U.S. government obligations (debt instruments of the U.S. government). The accumulated holdings of U.S. government obligations are often viewed as being similar to assets held by any other trust on behalf of the beneficiaries. However, the holdings of the Social Security trust funds differ from those of private trusts because (1) the types of investments the trust funds may hold are limited and (2) the U.S. government is both the buyer and seller of the investments.

Summary: This report covers how the Social Security program is financed and how the Social Security trust funds work.

The Social Security program pays benefits to retired or disabled workers and their family members and to the family members of deceased workers. As of March 2019, there were 63.3 million Social Security beneficiaries. Approximately 70% of those beneficiaries were retired workers and 13% were disabled workers. The remaining beneficiaries were the survivors of deceased insured workers or the spouses and children of retired or disabled workers.

Social Security is financed primarily by payroll taxes paid by covered workers and their employers. The program is also credited with federal income taxes paid by some beneficiaries on a portion of their benefits, reimbursements from the General Fund of the Treasury for various purposes, and interest income from investments held by the Social Security trust funds. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds.

The Secretary of the Treasury (the Managing Trustee of the Social Security trust funds) is required by law to invest Social Security revenues in securities backed by the U.S. government. The purchase of U.S. government securities allows any surplus Social Security revenues to be used by the federal government for other (non-Social Security) spending needs at the time. This trust fund financing mechanism allows the General Fund of the Treasury to borrow from the Social Security trust funds. In turn, the General Fund pays back the trust funds (with interest) when the trust funds redeem the securities. The process of investing Social Security revenues in securities and redeeming the securities as needed to pay benefits is ongoing.

The Social Security trust funds are both designated accounts within the U.S. Tr easury and the accumulated holdings of special U.S. government obligations. Both represent the funds designated to pay current and future Social Security benefits.

How the Social Security Program Is Financed

The Social Security program is financed primarily by revenues from Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. FICA taxes are paid by both employers and employees, but it is employers who remit the taxes to the U.S. Treasury. Employers remit FICA taxes on a regular basis throughout the year (e.g., weekly, monthly, quarterly or annually), depending on the employer's level of total employment taxes (including FICA and federal personal income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.2% for Social Security and 1.45% for Medicare Hospital Insurance. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. The respective Social Security contribution rates are levied on covered wages and net self-employment income up to $132,900 in 2019. Self-employed individuals may deduct one-half of the SECA taxes for federal income tax purposes. SECA taxes are normally paid once a year as part of filing an annual individual income tax return. In 2018, Social Security payroll taxes totaled $885.1 billion and accounted for 88.2% of the program's total income.

In addition to payroll taxes, the Social Security program receives income from other sources. First, certain Social Security beneficiaries must include a portion of their Social Security benefits in taxable income for the federal income tax, and the Social Security program receives a portion of those taxes. In 2018, revenue from the taxation of benefits totaled $35.0 billion, accounting for 3.5% of the program's total income. Second, the program receives reimbursements from the General Fund of the Treasury for a variety of purposes. General Fund reimbursements totaled $0.2 billion, accounting for less than 0.1% of the program's total income. Finally, the Social Security program receives interest income from the U.S. Treasury on its investments in special U.S. government obligations. Interest income totaled $83.3 billion, accounting for 8.3% of the program's total income.

The Internal Revenue Service (IRS) processes the tax returns and tax payments for federal employment taxes and federal individual income taxes. All of the tax payments are deposited in the U.S. Treasury along with all other receipts from the public for the federal government.

The Social Security Trust Funds as Designated Accounts

Within the U.S. Treasury, there are numerous accounts established for internal accounting purposes. Although all of the monies within the U.S. Treasury are federal monies, the designation of an account as a trust fund allows the government to track revenues dedicated for specific purposes (as well as expenditures). In addition, the government can affect the level of revenues and expenditures associated with a trust fund through changes in the law.

Social Security program income and outgo are accounted for in two separate trust funds authorized under Title II of the Social Security Act: (1) the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and (2) the Federal Disability Insurance (DI) Trust Fund. Under current law, the two trust funds are legally distinct and do not have authority to borrow from each other. This is important given projections showing that the asset reserves held by the OASI fund will be depleted in 2034, whereas the asset reserves held by the DI fund will be depleted in 2052. Following the depletion of trust fund reserves (2052 for DI and 2034 for OASI), continuing income is projected to cover 91% of DI scheduled benefits and 77% of OASI scheduled benefits. In the past, Congress has authorized temporary interfund borrowing and payroll tax reallocations between OASI and DI to address funding imbalances. This CRS report discusses the operations of the OASI and DI trust funds on a combined basis, referring to them collectively as the Social Security trust funds . On a combined basis, the trust funds are projected to remain solvent until 2035, at which point continuing income is projected to cover 80% of program costs. (For a discussion of the status of the DI trust fund, see CRS Report R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Current Status .)

The Social Security trust funds receive a credit equal to the Social Security payroll taxes deposited in the U.S. Treasury by the IRS. The payroll taxes are allocated between the OASI and DI trust funds based on a proportion specified by law. A provision included in the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) temporarily directs a larger share of total payroll tax revenues to the DI fund. For 2016 to 2018, the 12.4% payroll tax rate is allocated as follows: 10.03% for the OASI fund and 2.37% for the DI fund. Beginning in 2019, the allocation reverts back to 10.6% for the OASI fund and 1.8% for the DI fund.

The U.S. Treasury makes Social Security benefit payments to individuals on a monthly basis, as directed by the Social Security Administration (SSA) as to whom to pay and the amount of the payment. When benefit payments are made by the U.S. Treasury, the Social Security trust funds are debited for the payments. Periodically, the Social Security trust funds are also debited for the administrative costs of the Social Security program. These administrative costs are incurred by several government agencies, including SSA, the U.S. Treasury, and the IRS.

The annual revenues to the Social Security trust funds are used to pay current Social Security benefits and administrative expenses. If, in any year, revenues are greater than costs, the surplus Social Security revenues in the U.S. Treasury are available for spending by the federal government on other (non-Social Security) spending needs at the time. If, in any year, costs are greater than revenues, the cash flow deficit is offset by selling some of the accumulated holdings of the trust funds (U.S. government securities) to help pay benefits and administrative expenses.

There are two measures of Social Security trust fund operations: the annual cash flow operations and the accumulated holdings (or trust fund balance). The annual cash flow operations of the Social Security trust funds are a measure of current revenues and current costs. The cash flow operations are positive when current revenues exceed costs (a cash flow surplus) and negative when current costs exceed revenues (a cash flow deficit). In years with cash flow deficits, the Social Security program (unlike other federal programs that operate without a trust fund) may use the accumulated holdings of the Social Security trust funds from prior years to help pay benefits and administrative expenses.

Although Social Security is a pay-as-you-go system, meaning that current revenues are used to pay current costs, changes made to the Social Security program in 1983 began a sustained period of annual cash flow surpluses through 2009. Since 2010, however, Social Security has had annual cash flow deficits (program costs have exceeded tax revenues). The 2019 Annual Report of the Social Security Board of Trustees projects that, under their intermediate assumptions, annual cash flow deficits will continue throughout the 75-year projection period (2019-2093).

At the end of 2018, the Social Security trust funds had accumulated holdings (asset reserves) of more than $2.9 trillion. The 2019 Annual Report projects that the trust funds will have asset reserves (a positive balance) until 2035, meaning that Social Security benefits scheduled under current law can be paid in full and on time until then. This is the same year projected in last year's report.

In addition, the 2019 Annual Report shows the 75-year actuarial deficit for the Social Security trust funds. The actuarial deficit is the difference between the present discounted value of scheduled benefits and the present discounted value of future taxes plus asset reserves held by the trust funds. It can be viewed as the amount by which the payroll tax rate would have to be increased to support the level of benefits scheduled under current law throughout the 75-year projection period (or, roughly the amount by which the payroll tax rate would have to be increased for the trust funds to remain fully solvent throughout the 75-year period). The 2019 Annual Report projects that the 75-year actuarial deficit for the trust funds is equal to 2.78% of taxable payroll. With respect to the change in the projected 75-year actuarial deficit, the trustees state,

A 0.05 percentage point increase in the OASDI actuarial deficit would have been expected if nothing had changed other than the one-year shift in the valuation period from 2018 through 2092 to 2019 through 2093. The effects of updated demographic, economic, and programmatic data, and improved methodologies, collectively reduced the actuarial deficit by 0.11 percent of taxable payroll, offsetting most of the effect of changing the valuation period.

As noted above, on a combined basis, the Social Security trust funds are projected to have asset reserves sufficient to pay full scheduled benefits until 2035 . Considered separately, the OASI Trust Fund is projected to have sufficient asset reserves until 2034 (last year's report also projected 2034 as the depletion year) and the DI Trust Fund is projected to have sufficient asset reserves until 2052 (20 years later than projected in last year's report). The trustees note,

In last year's report, the projected reserve depletion year was the same for OASI and 20 years earlier (2032) for DI. The change in the reserve depletion for DI is largely due to continuing favorable experience for DI applications and benefit awards. Disability applications have been declining steadily since 2010, and the total number of disabled-worker beneficiaries in current payment status has been falling since 2014. Relative to last year's Trustees Report, disability incidence rates are lower in 2018. They are also assumed to rise more gradually from current levels to reach ultimate levels at the end of 10 years that are slightly lower. Accordingly, the projected Trust Fund depletion date is 20 years later and the 75-year actuarial deficit (0.12 percent of taxable payroll) is 0.09 percentage points lower than was projected last year.

Table 1 shows the annual cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow surplus/deficit) for the historical period 1957 to 2018. From 1957 to 1983, the last time Congress enacted major amendments to the program, the Social Security trust funds operated with cash flow deficits (cost exceeded noninterest income) in 20 of the 28 years. Since 1984, the trust funds have operated with cash flow deficits in nine of the past 35 years (2010 to 2018).

Table 2 shows projected cash flow operations of the Social Security trust funds (noninterest income, cost, and cash flow deficits) for the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions).

One way to measure the cash flow operations of the trust funds is to take the ratio of noninterest income to cost for each year. A ratio greater than 100% indicates positive cash flow (a cash flow surplus); a ratio less than 100% indicates negative cash flow (a cash flow deficit). Figure 1 shows the ratio of current noninterest income to current cost for the Social Security trust funds each year over the historical period 1957 to 2018 and over the 2019 to 2034 period, as projected by the trustees in the 2019 Annual Report (under the intermediate assumptions).

As shown in the figure, in 2009, noninterest income of $689.2 billion divided by a cost of $685.8 billion results in a ratio just over 100% (100.5%), indicating a cash flow surplus for the Social Security trust funds that year. By comparison, in 2018, noninterest income of $920.1 billion divided by a cost of $1,000.2 billion results in a ratio of 92.0%, indicating a cash flow deficit.

In the 2019 Annual Report, the Social Security trustees project that the ratio of current noninterest income to current cost will remain below 100% for the 75-year projection period (2019-2093), with the gap between noninterest income and cost increasing over time (under the intermediate assumptions).

When the Social Security trust funds operate with annual cash flow deficits, the U.S. Treasury can continue to pay benefits scheduled under current law as long as the accumulated balance in the trust funds is sufficient to cover the costs. This is because the Social Security program has budget authority to pay benefits in full and on time as long as there is an adequate balance in the Social Security trust funds (the designated accounts). When current Social Security revenues are not sufficient to pay benefits, however, the U.S. government must raise the funds necessary to honor the redemption of U.S. government obligations held by the Social Security trust funds as they are needed to pay benefits. If there are no surplus governmental receipts, the U.S. government may raise the necessary funds by increasing taxes or other income, reducing non-Social Security spending, borrowing from the public (i.e., replacing bonds held by the trust funds with bonds held by the public), or a combination of these measures.

Investment of the Social Security Trust Funds

The Secretary of the Treasury is required by law to invest Social Security revenues in securities backed by the U.S. government. In addition, the Social Security trust funds receive interest on its holdings of special U.S. government obligations. Each U.S. government security issued by the U.S. Treasury for purchase by the Social Security trust funds must be a paper instrument in the form of a bond, note, or certificate of indebtedness. Specifically, Section 201(d) of the Social Security Act states,

Each obligation issued for purchase by the Trust Funds under this subsection shall be evidenced by a paper instrument in the form of a bond, note, or certificate of indebtedness issued by the Secretary of the Treasury setting forth the principal amount, date of maturity, and interest rate of the obligation, and stating on its face that the obligation shall be incontestable in the hands of the Trust Fund to which it is issued, that the obligation is supported by the full faith and credit of the United States, and that the United States is pledged to the payment of the obligation with respect to both principal and interest. The Managing Trustee may purchase other interest-bearing obligations of the United States or obligations guaranteed as to both principal and interest by the United States, on original issue or at the market price, only where he determines that the purchase of such other obligations is in the public interest.

Any interest or proceeds from the sale of U.S. government securities held by the Social Security trust funds must be paid in the form of paper checks from the General Fund of the Treasury to the Social Security trust funds. The interest rates paid on the securities issued to the Social Security trust funds are tied to market rates.

For internal federal accounting purposes, when special U.S. government obligations are purchased by the Social Security trust funds, the U.S. Treasury is shifting surplus Social Security revenues from one government account (the Social Security trust funds) to another government account (the General Fund). The special U.S. government obligations are physical documents held by SSA, not the U.S. Treasury. The securities held by the Social Security trust funds are redeemed on a regular basis. These special U.S. government obligations, however, are not resources for the federal government because they represent both an asset and a liability for the government.

Off-Budget Status of the Social Security Trust Funds

For federal budget purposes, on-budget status generally refers to programs that are included in the annual congressional budget process, whereas off-budget status generally refers to programs that are not included in the annual congressional budget process.

Social Security is a federal government program that, like the Postal Service, has had its receipts and (most) outlays designated by law as off budget. The off-budget designation, however, has no practical effect on program funding, spending, or operations. The annual congressional budget resolution, in its legislative language, separates the off-budget totals (receipts and outlays) from the on-budget totals (receipts and outlays). The report language accompanying the congressional budget resolution usually shows the unified budget totals (which combine the on- and off-budget amounts) as well as the separate on- and off-budget totals. The President's budget tends to use the unified budget measures in discussing the budget totals. The President's budget documents also include the totals for the on- and off-budget components, as required by law. The Congressional Budget Office uses the unified budget numbers in its analyses of the budget; it generally does not include on- and off-budget data in its regular annual reports.

The unified budget framework is important because it includes all federal receipts and outlays, providing a more comprehensive picture of the size of the federal government and the federal budget's impact on the economy. In the unified budget, the Social Security program is a large source of both federal receipts (35.2% in FY2018) and federal outlays (25.1% in FY2018). For purposes of the unified budget, the annual Social Security cash flow surplus or deficit is counted in determining the overall federal budget surplus or deficit.

The Social Security Trust Funds as Accumulated Holdings

The Social Security trust funds can be viewed as trust funds, similar to any private trust funds, that are to be used for paying current and future benefits (and administrative expenses). By law, the Social Security revenues credited to the trust funds (within the U.S. Treasury) are invested in non-marketable U.S. government obligations. These obligations are physical (paper) documents issued to the trust funds and held by SSA. When the obligations are redeemed, the U.S. Treasury must issue a check (a physical document) to the Social Security trust funds for the interest earned on the obligations.

Unlike a private trust that may hold a variety of assets and obligations of different borrowers, the Social Security trust funds can hold only U.S. government obligations. The sale of these obligations by the U.S. government to the Social Security trust funds is federal government borrowing (from itself) and counts against the federal debt limit. The requirement that the Social Security trust funds purchase U.S. government obligations serves several purposes, such as

offering a mechanism for the Social Security program to recoup the surplus revenues loaned to the rest of the government; paying interest so that the loan of the surplus revenues does not lose value over time; ensuring that the Social Security trust funds (and not other government accounts) receives credit for the interest earnings; ensuring a level of return (interest) to the Social Security trust funds; and providing a means outside of the securities market for the U.S. government to borrow funds.

The accumulated holdings of the Social Security trust funds represent the sum of annual surplus Social Security revenues (for all past years) that were invested in U.S. government obligations, plus the interest earned on those obligations. As a result of surplus Social Security revenues from 1984 to 2009 and the interest income credited to the Social Security trust funds, the accumulated holdings of the Social Security trust funds totaled about $2.9 trillion at the end of calendar year 2018. It is the accumulated holdings of the Social Security trust funds (or the trust fund balance) that many people refer to when discussing the Social Security trust funds. Table 3 shows the accumulated holdings of the Social Security trust funds for the historical period 1957 to 2018. Table 4 shows the projected accumulated holdings of the Social Security trust funds for the 2019 to 2034 period, as projected by the Social Security trustees in the 2019 Annual Report (under the intermediate assumptions). The Social Security trustees project that in 2020 the program's total cost will exceed its total income. Under intermediate assumptions, this relationship is projected to continue until the trust funds are depleted in 2034.

The Social Security trustees project that, on average over the next 75 years (2019 to 2093), program costs will exceed income by an amount equal to 2.78% of taxable payroll (on average, costs are projected to exceed income by at least 20%). The gap between income and costs, however, is projected to increase over the 75-year period. For example, in 2035, the cost of the program is projected to exceed income by an amount equal to 3.15% of taxable payroll (costs are projected to exceed income by about 19%). By 2093, the cost of the program is projected to exceed income by an amount equal to 4.11% of taxable payroll (costs are projected to exceed income by about 24%).

For illustration purposes, the trustees project that the Social Security trust funds would remain solvent throughout the 75-year projection period if, for example,

revenues were increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.70 percentage points (from 12.40% to 15.10%; a relative increase of 21.8%); or benefits scheduled under current law were reduced by an amount equivalent to an immediate and permanent reduction of (1) about 17% if applied to all current and future beneficiaries, or (2) about 20% if applied only to those who become eligible for benefits in 2019 or later; or some combination of these approaches were adopted.

The Social Security Trust Funds and the Level of Federal Debt

As part of the annual congressional budget process, the level of federal debt (the federal debt limit) is established for the budget by Congress. The federal debt limit includes debt held by the public, as well as the internal debt of the U.S. government (i.e., debt held by government accounts). Borrowing from the public and the investment of the Social Security trust funds in special U.S. government obligations both fall under the restrictions of the federal debt limit. This means that the balance of the Social Security trust funds has implications for the federal debt limit.

The Social Security Trust Funds and Benefit Payments

The accumulated holdings of the Social Security trust funds represent funds designated to pay current and future benefits. When current Social Security tax revenues fall below the level needed to pay benefits, however, these funds become available only as the federal government raises the resources needed to redeem the securities held by the trust funds. The securities are a promise by the federal government to raise the necessary funds. In past years, when Social Security was operating with annual cash flow surpluses, Social Security's surplus revenues were invested in U.S. government securities and used at the time to pay for other federal government activities. Social Security's past surplus revenues, therefore, are not available to finance benefits directly when Social Security is operating with annual cash flow deficits, as it does today. The securities held by the trust funds must be redeemed for Social Security benefits to be paid.

Stated another way, when Social Security is operating with a cash flow deficit, the program relies in part on the accumulated holdings of the trust funds to pay benefits and administrative expenses. Because the trust funds hold U.S. government securities that are redeemed with general revenues, there is increased reliance on the General Fund of the Treasury. With respect to reliance on the General Fund when Social Security is operating with a cash flow deficit, it is important to note that Social Security does not have authority to borrow from the General Fund. Social Security cannot draw upon general revenues to make up for any current funding shortfall. Rather, Social Security relies on revenues that were collected for the program in previous years and used by the federal government at the time for other (non-Social Security) spending needs, plus the interest earned on its trust fund investments. Social Security draws on its own previously collected tax revenues and interest income (accumulated trust fund holdings) when current Social Security tax revenues fall below current program expenditures.

As the trustees point out, over the program's history, Social Security has collected approximately $21.9 trillion and paid out $19.0 trillion, leaving asset reserves of $2.9 trillion at the end of 2018. The accumulated trust fund holdings of $2.9 trillion represent the amount of money that the General Fund of the Treasury owes to the Social Security trust funds. The General Fund could be said to have fully paid back the Social Security trust funds if the trust fund balance were to reach zero (i.e., if all of the trust funds' asset reserves were depleted).

The trustees project that the asset reserves held by the Social Security trust funds will be depleted in 2035. At that point, the program will continue to operate with incoming receipts to the trust funds. Incoming receipts are projected to be sufficient to pay about 80% of scheduled benefits through the end of the projection period in 2093 (under the intermediate assumptions of the 2019 Annual Report). Title II of the Social Security Act, which governs the program, does not specify what would happen to the payment of benefits in the event that the trust funds' asset reserves are depleted and incoming receipts to the trust funds are not sufficient to pay scheduled benefits in full and on time. Two possible scenarios are (1) the payment of full monthly benefits on a delayed basis or (2) the payment of partial monthly benefits on time.

Appendix. Projected Trust Fund Dates, 1983-2019

The following table shows the key dates projected for the Social Security trust funds by the Social Security Board of Trustees (based on their intermediate set of assumptions) in each of their annual reports from 1983 to 2019.