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United States budget process

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

The President's budget request

Congressional consideration of the federal budget begins once the President submits a budget request. The President of the United States 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)) 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. These documents are available at the Office of Management and Budget. Funding requests for all federal independent agencies and cabinet departments are included in the President's budget request, and each agency and department 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 House and the Senate budget committees both are responsible for drafting budget resolutions. Following the traditional calendar, by early April both committees finalize their drafts and submit it to the 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 Members of the Senate and the House typically 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.

Fiscal year

The federal government's fiscal year currently begins on October 1st and ends on September 30th of the next calendar year. 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.

Structure of the budget

Fundamentally, the budget resolution is structured along 20 budget functions, which are simply 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 "151" will indicate function 150 (Defense) and subfunction 151, which indicates a type of spending within the Defense category.

A listing of the budget functions can be found below.

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)).
Function Title FY 2005Template:Fn ($ 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

Template:Fnb Estimated budget authority as presented in the President's budget (in million USD)

Discretionary vs. 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 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.

Direct 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. 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.

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 Committees of the House and Senate. 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. In addition, policy language -- that is legislative text changing permanent law -- is included in appropriation measures.

See also

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