United States budget process


United States budget process

The process of creating the budget for the United States government is known as the budget process. The framework used by Congress to formulate the budget was established by the Budget and Accounting Act of 1921,[1] the Congressional Budget and Impoundment Control Act of 1974,[2] and by other budget legislation.

Prior to 1974, Congress had no formal process for establishing a coherent budget. When newly-elected President Richard Nixon began to refuse to spend funds that the Congress had allocated, Congress needed a more formal means by which to challenge him. The Congressional Budget Act created the Congressional Budget Office and directed more control of the budget to CBO and away from the President's Office of Management and the Budget. The Act passed easily as the administration was embroiled in the Watergate scandal and unwilling to provoke Congress.[3]

Contents

Overview

The President, according to the Budget and Accounting Act of 1921, must submit a budget to Congress each year. In its current form, federal budget legislation law (31 U.S.C. 1105(a)) specifies that the President submit a budget between the first Monday in January and the first Monday in February. In recent times, the President's budget submission, entitled Budget of the U.S. Government, has been issued in the first week of February. Thus, President George W. Bush submitted the FY2007 budget in February 2006. The President's budget submission, along with supporting documents and historical budget data, can be found at the Office of Management and Budget's (OMB) website. The President's budget contains detailed information on spending and revenue proposals, along with policy proposals and initiatives with significant budgetary implications.

Each year in March, the Congressional Budget Office (CBO) publishes an analysis of the President's budget proposals. CBO budget report and other publications can be found at the CBO's website. CBO computes a current law baseline budget projection that is intended to estimate what federal spending and revenues would be in the absence of new legislation for the current fiscal year and for the coming 10 fiscal years. The current CBO 10 year budget baseline projection grows from $3.7 trillion in 2011 to $5.7 trillion in 2021.

The House and Senate Budget Committees begin consideration of the President's budget proposals in February and March. Other committees with budgetary responsibilities submit requests and estimates to the Budget committees during this time. The Budget committees each submit a budget resolution by April 1. The House and Senate each consider those budget resolutions and are expected to pass them, possibly with amendments, by April 15. Budget resolutions specify funding levels for appropriations committees and subcommittees.

Appropriations committees, starting with allocations in the budget resolution, put together appropriations bills, which may be considered in the House after May 15. Once appropriations committees pass their bills, they are considered by the House and Senate. A conference committee is typically required to resolve differences between House and Senate bills. Once a conference bill has passed both chambers of Congress, it is sent to the President, who may sign the bill or veto. If he signs, the bill becomes law. Otherwise, Congress must pass another bill to avoid a shutdown of at least part of the federal government.

In recent years, Congress has not passed all of the appropriations bills before the start of the fiscal year. Congress has then enacted continuing resolutions, that provide for the temporary funding of government operations.

Fiscal year

The federal government's fiscal year currently begins on October 1 and ends on September 30 of the next calendar year. The fiscal year corresponds to the calendar year in which it ends; thus, fiscal year 2009 would begin on October 1, 2008 and end September 30, 2009. The federal fiscal year's starting date was shifted from July 1 to October 1 in 1976. The period between the end of FY1976 and the start of FY1977 was called the Transition Quarter. An earlier shift in the U.S. government's fiscal year was made in the 1850s.

The process

The President's budget request

Congressional consideration of the federal budget begins once the President of the United States submits a budget request, which is formulated over a period of months with the assistance of the Office of Management and Budget, the largest office within the Executive Office of the President. The budget request includes funding requests for all federal executive departments and independent agencies.

The President submits the budget request each year to Congress for the following fiscal year, as required by the Budget and Accounting Act of 1921. Current law (31 U.S.C. 1105(a))[4] requires the President to submit a budget no earlier than the first Monday in January, and no later than the first Monday in February. Typically, Presidents submit budgets on the first Monday in February.

The President's budget request constitutes an extensive proposal of the administration's intended spending and revenue plans for the following fiscal year. The budget proposal includes volumes of supporting information intended to persuade Congress of the necessity and value of the budget provisions. In addition, each federal executive department and independent agency provides additional detail and supporting documentation to Congress on its own funding requests.

Budget resolution

The next step is the drafting of a budget resolution. The United States House Committee on the Budget and the United States Senate Committee on the Budget are responsible for drafting budget resolutions. Following the traditional calendar, by early April both committees finalize their drafts and submit it to their respective floors for consideration and adoption.

A budget resolution, which is one form of a concurrent resolution, binds Congress, but is not a law, and so does not require the President's signature. The budget resolution serves as a blueprint for the actual appropriation process, and provides Congress with some control over the appropriations process. No new spending authority, however, is provided until appropriation bills are enacted.

Once both houses pass the resolution, selected Representatives and Senators negotiate a conference report to reconcile differences between the House and the Senate versions. The conference report, in order to become binding, must be approved by both the House and Senate.

Authorization and appropriations

In general, funds for Federal Government programs must be authorized by an "authorizing committee" through enactment of legislation. Then, through subsequent acts by Congress, budget authority is then appropriated by the Appropriations Committee of the House. In principle, committees with jurisdiction to authorize programs make policy decisions, while the Appropriations Committees decide on funding levels, limited to a program's authorized funding level, though the amount may be any amount less than the limit.

In practice, the separation between policy making and funding, and the division between appropriations and authorization activities are imperfect. Authorizations for many programs have long lapsed, yet still receive appropriated amounts. Other programs that are authorized receive no funds at all.[citation needed] In addition, policy language—that is legislative text changing permanent law—is included in appropriation measures.

Discretionary and mandatory spending

Each function within the budget may include "budget authority" and "outlays" that fall within the broad categories of discretionary spending or direct spending.

Discretionary spending

Discretionary spending requires an annual appropriation bill, which is a piece of legislation. Discretionary spending is typically set by the House and Senate Appropriations Committees and their various subcommittees. Since the spending is typically for a fixed period (usually a year), it is said to be under the discretion of the Congress. Some appropriations last for more than one year (see Appropriation bill for details). In particular, multi-year appropriations are often used for housing programs and military procurement programs.

There are currently 12 appropriation bills that must be passed each fiscal year in order for continued discretionary spending to occur. The subject of each appropriations bill corresponds to the jurisdiction of the respective House and Senate appropriation subcommittees:

As of 2012, there are twelve appropriations bills which need to be passed each year:[5]

  • Agriculture, Rural Development, and Food and Drug Administration
  • Commerce, Justice, and Science
  • Defense
  • Energy and Water Development
  • Financial Services and General Government
  • Homeland Security
  • Interior and Environment
  • Labor, Health and Human Services, and Education
  • Legislative Branch
  • Military Construction and Veterans Affairs
  • State and Foreign Operations
  • Transportation and Housing and Urban Development

Multiple bills are sometimes combined into one piece of legislations, such as the Omnibus Appropriations Act, 2009. A continuing resolution is often passed if an appropriations bill has not been signed into law by the end of the fiscal year.

Mandatory spending

Direct spending, also known as mandatory spending, refers to spending enacted by law, but not dependent on an annual or periodic appropriation bill. Most mandatory spending consists of entitlement programs such as Social Security benefits, Medicare, and Medicaid. These programs are called "entitlements" because individuals satisfying given eligibility requirements set by past legislation are entitled to Federal government benefits or services. Many other expenses, such as salaries of Federal judges, are mandatory, but account for a relatively small share of federal spending. The Congressional Budget Office (CBO) estimates costs of mandatory spending programs on a regular basis.[citation needed]

Congress can affect spending on entitlement programs by changing eligibility requirements or the structure of programs. Certain entitlement programs, because the language authorizing them are included in appropriation bills, are termed "appropriated entitlements." This is a convention rather than a substantive distinction, since the programs, such as Food Stamps, would continue to be funded even were the appropriation bill to be vetoed or otherwise not enacted.[citation needed]

Structure of the budget

Fundamentally, the budget resolution is structured along 20 budget functions, or categories of spending. Functional categories often cut across agency lines. For example, the National Defense function includes certain Department of Energy programs as well as Department of Defense programs. Functions are further subdivided into "subfunctions." In addition, though these functions and subfunctions are included in a budget resolution, which determines how Congress considers budget related legislation, they have little correspondence to any committee jurisdictions. Functions are, however, useful in understanding the placement of any given account in the federal government: Each account number has a series of numbers, the last three will indicate the function and subfunction; for example an account ending in "051" will indicate function 050 (Defense) and subfunction 051, which indicates a type of spending within the Defense category.

A listing of the budget functions can be found below.

Function Title FY 20051 ($ million)
050 National Defense 423,098
150 International Affairs 29,569
250 General Science, Space and Technology 24,459
270 Energy 1,883
300 Natural Resources and Environment 30,286
350 Agriculture 22,353
370 Commerce and Housing Credit 8,092
400 Transportation 69,494
450 Community and Regional Development 12,949
500 Education, Training, Employment and Social Services 91,817
550 Health 248,780
570 Medicare 293,574
600 Income Security 342,324
650 Social Security 516,457
700 Veterans Benefits and Services 65,444
750 Administration of Justice 40,781
800 General Government 19,392
900 Net Interest 177,909
920 Allowances (798)
950 Undistributed Offsetting Receipts (63,108)
Total: 2,354,755

^1 Estimated budget authority as presented in the President's budget (in million USD)

In addition to these functions, during the 110th Congress, in S. Con. Res. 21 and S. Con. Res 70, an additional function was included: Function 970, indicating spending on the global war on terrorism (Overseas Deployments and Other Activities (970)).

See also

References

  1. ^ Budget and Accounting Act of 1921 on GPO access
  2. ^ Budget and Impoundment Control Act of 1974 on GPO access
  3. ^ Budget Resolution Explainer, Rudolph Penner, Urban Institute
  4. ^ 31 U.S.C. 1105(a) on Cornell Legal Information Institute
  5. ^ "Status of Appropriations Legislation for Fiscal Year 2012". THOMAS. Library of Congress. http://thomas.loc.gov/home/approp/app12.html. Retrieved 15 November 2011. 

External links


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