The Federal Budget Process Fact Sheet
The Federal Budget process begins the first Monday in February of each year and should be concluded by October 1, the start of the new Federal Fiscal Year. In some years, the October 1 date is not met. Here is how the process is supposed to work.
Following the procedure required by the Congressional Budget and Impoundment Control Act of 1974, the President presents a proposed budget for the coming Fiscal Year to Congress on or before the first Monday in February.
Based on the input of the Federal Agencies, the President’s budget projects estimated spending, revenue, and borrowing levels broken down by functional categories for the coming fiscal year to start October 1.
The President’s budget serves as a “starting point” for the Congress to consider. Congress is under no obligation to adopt all or any of the President’s budget and often makes significant changes. However, since the President must ultimately approve all future bills they propose, Congress is often reluctant to completely ignore the priorities of the President’s budget.
House and Senate Budget Committees Report the Budget Resolution
The Congressional Budget Act requires passage of an annual “Congressional Budget Resolution”, a concurrent resolution passed in identical form by both House and Senate, but not requiring the President’s signature.
The Budget Resolution is an important document providing Congress an opportunity to lay out its own spending, revenue, borrowing and economic goals for the coming fiscal year, as well as the next five future fiscal years. In recent years, the Budget Resolution has included suggestions for government program spending reforms leading to the goal of a balanced budget.
Both House and Senate Budget Committees hold hearings on the annual Budget Resolution. The committees seek testimony from Administration officials, Members of Congress and expert witnesses. Based on testimony and their own deliberations, each committee writes or “marks-up” its respective version of the Budget Resolution.
The Budget Committees are required to present or “report” their final Budget Resolution for consideration by the full House and Senate by April 1.
Full House and Senate Consider Budget Resolution
The full House and Senate now debate, amend, and take action on the Budget Resolution as reported to them by their respective Budget Committee.
While the Budget Act sets no deadline for this phase, it does require that a final, single version of the Budget Resolution, agreed to by both House and Senate be approved by April 15.
House and Senate Work Out Differences in Conference
Since the versions of the Budget Resolution passed by the House and Senate will always differ, each body appoints conferees — negotiators — to meet and resolve the differences. The “conference committee” works to come up with a single, agreed version of the Budget Resolution that must be agreed to by at least half of the conferees from both the House and Senate.
Full House and Senate Consider Conference Agreement
The Budget Act requires that by April 15, both the House and Senate approve by majority votes the final version of the Budget Resolution reported by the conference committee.
The terms of the final, approved Budget Resolution govern the remainder of the budget process for the year.
Discretionary Spending Allocations Set by Congress
As a vital part of the Budget Resolution, Congress must agree on “spending allocations” or limits on how much money can be spent on discretionary programs during the coming fiscal year and at least the next 5 fiscal years. “Discretionary” funding refers specifically to money provided each year through the allocations process. Congress exercises control over how and how much money is spent, hence the term “discretionary”. Discretionary spending usually represents about one-third of total annual Federal spending. Funds for programs to which the government is pre-committed to paying, like interest on the national debt and long-term entitlements, are called “uncontrollables”.
These spending allocations establish aggregate totals of money that cannot be exceeded by the House and Senate Appropriations Committees during the upcoming annual spending process.
Appropriations Committees Develop the 13 Spending Bills
The House and Senate Appropriations Committees now take the total aggregate spending allocations from the Budget Resolution and divide the amount into thirteen “suballocations”. Quite literally, they take the total discretionary “money pie” and cut it in to thirteen pieces. Each slice of the discretionary “pie” funds a different government function as follows:
- Agriculture, Rural Development, Food and Drug Administration, and related agencies
- Departments of Commerce, Justice, and State, the Judiciary, and related agencies
- Department of Defense
- Operations of the government of the District of Columbia
- Energy and water resources development
- Foreign operations, export financing, and related programs
- Department of the Interior and related agencies
- Departments of Labor, Health and Human Services, Education and related agencies
- Legislative Branch
- Military construction, family housing, and base realignment and closure for the Department of Defense
- Department of Transportation and related agencies.
- Treasury Department, the United States Postal Service, the Executive Office of the President, and certain Independent Agencies
- Veterans Affairs and Housing and Urban Development, and for sundry independent agencies, boards, commissions, corporations, and offices
House and Senate Consider 13 Annual Spending Bills
By June 10, the full House and Senate should begin consideration of the 13 annual spending bills. Other than some special rules of debate, the 13 spending bills follow the same legislative procedure as other bills.
House and Senate work out differences in Conference
Since the spending bills are once again being debated and amended separately, House and Senate versions will have to go through the same conference committee process as the Budget Resolution. The conferees have to agree on one version of each bill capable of passing in both the House and Senate by a majority vote.
Full House and Senate Consider 13 Conference Agreements
Once the conference committees have forwarded their agreements to them, the House and Senate must both approve them by a majority vote.
The Budget Act stipulates that the House should have given final approval to all 13 spending bills by June 30.
President May Sign or Veto Any or All of the Appropriations Bills
As spelled out in the Constitution, the President has ten days in which to decide: (1) to sign the bill, thereby making it law; (2) to veto the bill, thereby sending it back to Congress and requiring much of the process to begin again with respect the programs covered by that bill; or (3) to allow the bill to become law without his signature, thereby making it law but doing so without his express approval.
The Government Begins a New Fiscal Year
If and when the process goes as planned, all 13 spending bills have been signed by the President and have become Public Laws by October 1, the start of the new Fiscal Year. Most years, this happens, but not always. If the budget process is not completed by the October 1 deadline, a “Continuing Resolution” to extend current funding for government operations must be passed and signed by the President to avoid a government shutdown.
The Budget Calendar Summary
Before the 1st Monday in February
President transmits proposed budget to Congress
Six Weeks Later
Congressional committees report budget estimates to Budget Committees
Action to be completed on congressional budget resolution
House consideration of annual appropriations bills may begin
Action to be completed on conference committee reports
Action on appropriations bills to be completed by House
President transmits Mid-Session Review of the budget
New Fiscal Year begins
The Federal Budget – Basic Terms and Concepts
Authorization is the substantive legislation that establishes the purpose and guidelines for a given activity and usually sets a limit on the amount that can be appropriated or spent. The authorization does not provide actual dollars for a program. Important elements contained in an authorization are the purpose for the program’s existence, funding formula and general program structure, including applicable percentage for administration. Authorization bills are usually for a multi-year time frame.
However, it is not the only source of a program’s description because appropriations committees may offer language that will also direct the program. The distinction between authorizing legislation and appropriations has been blurred by the following: insertion of legislative provisions in appropriation acts, extensive earmarking or specific dedication of funds, the growth of direct spending (entitlement) legislation, and the insertion of appropriation-forcing language in authorization legislation.
An appropriation is the amount of money that can be spent on a particular program in a given year. Throughout the budget process, an appropriation is also known as discretionary spending because it is subject to the annual appropriation process. Generally speaking, appropriations are for one year time frames.
An entitlement is a particular type of authorization that mandates that the federal government pay benefits to any person or unit of government that meets the eligibility requirements that are established for the program. An entitlement represents a binding obligation on the part of the federal government; eligible recipients have legal recourse to compel payment from the government if the obligation is not fulfilled. Usually the authorization contains formulas or criteria that specify who is eligible for federal assistance. Therefore, once direct spending is authorized it will continue almost automatically until revised through the authorization process. The question of how much will be spent is answered by the number of eligible people and what services they will receive. Attempts to control this spending usually involve capping expenditures at a certain level, reducing eligibility, or limiting payments.
Discretionary spending is a category of federal spending subject to the annual appropriations process. It includes such things as funding for transportation, environmental programs, job training, and education programs.
Budget authority is the permission granted by law to an agency or department to make commitments to spend money. It is not the actual expenditure of cash. When Congress appropriates funds for a particular program it is enacting budget authority, not cash or outlays. However, for the purposes of deficit calculations it is the outlays that are measured and it is through levels of budget authority that Congress controls spending.
Outlays are the actual expenditure of cash. The difference between budget authority and outlays is most evident in construction projects that may have budget authority over a number of years without spending cash.
Deficit is the amount by which the federal government’s total budget outlays exceeds their total receipt for a fiscal year.
Federal debt is the total accumulation of debt by the federal government. Federal law contains a statutory limit called the debt ceiling, which must be periodically extended or else federal borrowing must cease. In the last federal government shutdown in 1995, the Secretary of the Treasury resorted to borrowing extensively from federal trust funds to prevent defaults on federal loans.
Mark-up refers to meetings by congressional committees or subcommittees for the purpose of agreeing on the specific language of bills.