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
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Exhibit
II
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Exhibit
III
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Exhibit
IV
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Exhibit
V
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