Federal Budget and Appropriation Process
(How Things Work)
This brief guide is designed for non-experts as an overview of the federal budget and appropriations process. It will not be easy, but with a little study, you can better understand how the budget is put together and, therefore, have a better understanding of the gibberish coming out of Washington about various aspects of the process. Several exhibits are provided in order to show the various relationships in the process. They were chosen as a matter of convenience, and no political position/opinion should be inferred.
Some Basic Information
The Federal Government operates on a fiscal year basis, which runs from October 1 to September 30 of each year. The budget follows the same period, whereas individuals and most companies follow a calendar year (January 1 to December 31).
In terms of spending, the government funds a substantial and diverse range of programs and activities. The budget process can best be understood by breaking it down into its three major components – discretionary spending (39%), mandatory spending (65%), and interest on government debt (6%). See Exhibit I
Discretionary spending is where most of the time is spent. It covers military spending and all of the administrative overhead of the government, e.g., Congress and presidential salaries and associated over head. The budget for this category and each sub category (department) is subject to much debate every year and is subject to the formal procedures described below. See Exhibit II
However, the overwhelming majority of federal spending (in terms of the dollars disbursed) consists of “mandatory spending,” sometimes called entitlements. The so-called “entitlement” category includes some programs that are theoretically self-funded through payroll deductions (like Social Security, Medicare and unemployment benefits) as well as unfunded welfare programs (like Medicaid and 80-plus means-tested initiatives).
In mandatory funded programs, legislation defines the eligibility criteria for participation, and the government allocates funds to all who are eligible, regardless of the annual cost to the Treasury. There is no debate over the dollars to be budgeted; however, debates can be held over criteria for eligibility (benefit provisions and changes thereto), which would then affect the dollars budgeted. See Exhibit III
In terms of revenue, these numbers are compiled by the Office of Management and Budget (OMB) based on their best guess and wishes at the time. See Exhibit V
The President’s Budget Request
The federal funding process begins with the submission of the president’s annual budget request to Congress. Traditionally, this is done on the first Monday in February, though that date often slips, especially when new administrations take office.
The president’s budget request details the administration’s position on the full range of federal revenue and spending. The request encompasses economic projections and analysis, as well as detailed program-by-program funding levels proposed by the administration. It also projects deficits and surpluses for the government as a result of the recommendations in the budget for the immediate fiscal year, as well as the next nine fiscal years.
In addition, the administration uses the budget request to introduce new policies, programs, or changes they would like to see enacted. The budget document overall runs several thousand pages, including related information, appendices and charts. It is prepared by the Office of Management and Budget (OMB), which functions as the chief administrative agency of the Office of the President. The OMB scores the program funding and policy changes detailed in the budget request.
It is important to remember that the president’s budget proposal is simply a request. It has no binding authority on Congress and is best understood as a detailed statement by the administration of its fiscal goals and policy preferences. Additionally, as the OMB often produces different scores than the CBO, the budget request often has different numbers than those Congress uses to make its decisions. See Exhibit IV
Here is a link to a presidential budget request:
https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/budget.pdf
Congressional Budgeting (re Discretionary Spending)
The president’s budget request starts the process, and then Congress responds.
The first step in the funding process is the creation of a concurrent congressional budget resolution. The budget resolution has one key purpose, which is to set the total level of discretionary funding (known as the “302a allocation”) for the next fiscal year. While the resolution looks at total federal spending over a 10-year window, it is not binding beyond the approaching fiscal year.
The budget resolution is both similar to and different from traditional legislation. Like a legislative bill, budget resolutions originate in the relevant committee (in this case, the respective budget committees of each chamber) and must be approved by the whole chamber. Unlike a traditional bill, budget resolutions do not require presidential action and can pass with a simple majority, and the Senate is barred from filibustering votes on these bills.
Budget resolutions are supposed to be filed by April 15, although this has been rare in recent sessions. More commonly of late—particularly when the chambers are controlled by opposing parties— each chamber will pass its own resolution, or simply pass a “deeming resolution,” a simple resolution which sets the 302a allocation without advancing a budget.
Budget resolutions often include multiple policy proposals, usually along the lines of extending or rescinding various tax provisions. Due to their non-legislative status, these proposals are understood to be an effort by the majority to send a message about their fiscal priorities.
Congressional Appropriations (re Discretionary Spending)
With the 302a allocations determined, the funding process moves to the appropriations committees in each chamber. Long considered one of the most powerful and prestigious committees on which to serve, Appropriations is responsible for determining program-by-program funding levels. This is done through 12 separate appropriations bills, each generated by a specific subcommittee, covering either individual or groupings of federal agencies.
The chairs of the appropriations subcommittees, under direction of the appropriations committee chairperson, divide the 302a allocation among the 12 subcommittees. This allocation provides the total funding pool for each of the appropriations bills, known as the ‘302b allocation.’ In simple terms, the 302a allocation represents the size of the whole funding pie, while the 302b allocation is equivalent to the size of one of 12 slices of that pie.
Armed with their 302b allocation, the various subcommittees then divide that funding level among the programs under their authority. This process is accompanied by multiple activities. The most visible are public hearings by the subcommittees, where they invite the secretaries of the various agencies to testify on their budget requests. Simultaneously, legislators and their staff from outside the subcommittees submit requests for funding levels they would like to see, expressing their support for programs. Finally, committee staffers often meet with advocates of the programs to discuss the funding outlook.
The subcommittee staff then produces an appropriations bill that is brought to the full subcommittee for a vote. While it is possible to amend a bill in subcommittee, it is not common. If it passes, the bill is then taken up by the full committee, often with several amendments to the underlying bill.
This process works in identical fashion in both the House and Senate. It is not uncommon for the two chambers to have different 302a’s and 302b’s, with the resulting versions of the bill millions or billions of dollars apart. Even when the chambers work from similar allocation levels, differences often occur between the total funding levels for the many programs in each bill.
In addition, it has become increasingly common for appropriations bills to include policy changes, or “riders.” A common rider is language prohibiting an agency from using any of the funds included in the bill to perform a certain action that legislators oppose. Other riders may make policy changes in order to lower the overall cost of a program. These riders may vary significantly between the chambers, adding further complication to the process of passing a unified bill.
All appropriations bills are supposed to be passed in “regular order,” meaning the full passage through both chambers by the start of the federal fiscal year on Oct. 1. Failure to provide appropriations would result in a nearly complete shutdown of federal operations, although in practice, this rarely happens.
Over the last many years, few if any of the appropriations bills have been passed in regular order, even those enjoying wide bipartisan support, such as the Defense and the Military Construction-Veterans Affairs bills. Instead, Congress often enacts a series of continuing resolutions (CRs), which are short-term spending bills that typically maintain funding levels at the previous year’s levels.
When CRs are used in place of the “regular order,” you hear accusations like “they have not produced a budget in XX years”. CRs are also harder for Congress to reject since rejection might shut down the entire (or substantial portion of the) government instead of only certain sections or departments included in one of the 12 funding pools associated with “regular order”.
CRs can last for as little as a day but usually are for a number of weeks, and are renewed when negotiations extend beyond the new deadline. CRs also can contain policy provisions and revisions to funding levels.
With so many bills and areas of possible disagreement between the House and Senate, it is not surprising that Congress has difficulty passing each appropriations bill in regular order. As the fiscal year ends, leadership in both chambers will often negotiate on passing all the bills together in one combined package, known as an omnibus bill. On certain occasions, when less controversial bills have been passed into law, a bundle of the remaining appropriations bills will be bundled to finish funding work, and this package is known colloquially as a “minibus.” The omnibus approach allows for a greater range of negotiation than any individual bill would and also makes a presidential veto over a particular issue less likely.
Regardless of the final form the appropriations bills take, the final step in enacting program funding consists of the president signing the bills. As with more traditional legislation, the president has the authority to veto appropriations bills, and Congress can then attempt to override the veto. A two-thirds vote is required in both chambers to overturn a veto. See Exhibit V.
Emergency Spending and Deficit Legislation
While the standard budget and appropriations process is meant to encompass all federal operations, in practice, there are a number of occasions where the Congress and the president pass legislation outside the normal order that impacts federal budgeting and spending.
This course of action is most commonly seen in what is known as emergency funding. Emergency funding is essentially what it sounds like: supplemental funding provided in response to an unanticipated emergency, particularly natural disasters. Over the last decade, it has also become common to fund ongoing overseas military operations—most notably those in Iraq and Afghanistan—outside of the traditional defense appropriations bill through emergency appropriations. One of the appeals of this approach to lawmakers is that funding designated as emergency funding is not subject to the limits imposed by budget resolutions or committee allocations. As a result, emergency funding can mask total spending by a Congress.
Other approaches to addressing federal spending have also been taken up outside of the regular process. Recent concern over federal spending has prompted several legislative efforts to address federal deficits and debts by setting limits on current and future spending levels, and creating mechanisms for enforcing these levels. Such efforts also were undertaken in the early 1990’s and 1970’s. The most recent example was the passage in August 2011 of the Budget Control Act (BCA), which created several extra-ordinary procedures to limit federal spending and reduce the debt. Such procedures usually focus on the big-picture, capping overall spending levels while leaving the decisions as to how to meet them up to Congress.
Links to other resources:
https://www.nationalpriorities.org/analysis/2014/presidents-2015-budget-in-pictures/
http://sparkaction.org/content/understanding-federal-budget-primer
Exhibit I
Exhibit IV
https://online.fliphtml5.com/pxvte/vuew/
