Federal Budget Process

How It Works

The Congressional Budget Resolution of 1974 set specific procedures for how Congress develops federal tax and spending legislation. It requires Congress develop a “budget resolution” every year setting overarching limits on spending and tax cuts. These limits then apply to all legislation developed by the House and Senate.

The Fiscal Budget year runs from October 1 to September 30 each year. For example, FY2008 started October 1, 2007 and runs through September 30, 2008.

The President’s Budget

On or before the first Monday in February every year, the President submits a detailed budget to Congress. This budget request does three things:

  1. Tells Congress what the President believes overall federal fiscal policy should be.
  2. Lays out the President’s relative priorities for federal programs, and
  3. Indicates to Congress what spending and tax policy changes the President recommends.

The President’s budget MUST include funding for discretionary (or appropriated) programs. These programs (including defense spending, education, health research and housing) must have their funding renewed every year in order to continue operating. These programs make up about one-third of all federal spending. The President’s budget CAN include changes to mandatory programs (such as Social Security, Medicare, Medicaid and certain other programs) that are not controlled by annual appropriations and changes in the tax code.

Congress

Once Congress receives the President’s Budget, the House and Senate Budget Committees hold hearings to question Administration officials about their requests and develop their own budget resolutions. These resolutions then go to the House and Senate floors, where they can be amended by majority vote, and then to the House-Senate conference to resolve any differences. This budget resolution is supposed to be passed by April 15. Unlike the President’s Budget, this budget resolution is not very detailed. It states how much Congress is supposed to spend in each of 19 broad categories and how much total revenue the government will collect over the next five or more years. A report that accompanies the budget resolution includes a table called the “302(a) allocation.” This table takes the total spending figures and distributes them by congressional committee.

For example, the Appropriations Committees, under whose jurisdiction all discretionary programs fall, receives a single 302(a) allocation for all of its programs. It then decides how to divide up this funding among its subcommittees. There are 13 appropriations subcommittees, each with jurisdiction over one regular appropriations bill (click here for regular appropriations bills). Each House subcommittee is paired with a Senate subcommittee. When each subcommittee receives their allocation, they hold hearings and mark up their bills. These bills go to full committee, then to the House and Senate floors and finally to the House and Senate conference. Bills can be amended at any step. The final act is for Congress to send the bill to the President who has 10 days to sign or veto the measure. If the President vetoes the bill, he sends it back to Congress. Congress may override the veto but it requires a 2/3 vote in both houses.

Additional Issues

  • Continuing Resolutions: Regular appropriations bills expire at the end of the fiscal year. If a bill has not been completed by the deadline, the agencies funded by these bills must cease nonessential activities. However, continuing appropriations have traditionally been used to maintain temporary funding to agencies and programs under a joint continuing resolution.

  • Supplementals: During the fiscal year, Congress often considers one or more supplemental appropriations measures to provide additional funding for specific activities (ex. domestic funds to recover from a natural disaster or defense funds for a war).

  • Authorization vs. Appropriations: Appropriations bills are actually only half the battle, the latter half. First, an authorization act must establish, continue or modify an agency or program, often setting a spending ceiling for them. Authorization acts may provide permanent, annual year or multi-year authorizations. Authorization measures are under the jurisdiction of authorizing committees. In fact, most congressional committees are authorizing committees. Appropriations measures then provide the budget authority for the agency, program or activity authorized.

References

  • Coven M and Kogan R. Introduction to the Federal Budget Process. Center on Budget and Policy Priorities. January 17, 2006.
  • Streeter S. The Congressional Appropriations Process: An Introduction. CRS Report for Congress. December 6, 2004.