Federal Budget Process (How it’s supposed to work)
The Federal Budget Process (How it's supposed to work)
The Constitution gives Congress the authority to raise revenue and appropriate money for federal programs. With today’s emphasis on cost containment and deficit reduction, the federal budget often serves as a vehicle for domestic and foreign policy-making. The budget process is complex and constantly evolving.
The government’s fiscal year begins on October 1 and ends September 30. Approximately one year before the fiscal year starts, each federal agency develops a proposed budget, which is submitted to the Office of Management, and Budget (OMB). This executive branch agency has the responsibility for finalizing the administration’s proposed funding levels for government programs that are indicative of the President’s domestic and foreign policy priorities.
The President annually submits the administration’s budget to Congress in late January or early February. It is first considered by the House and Senate Budget Committees. The Congressional Budget Office (CBO), an independent branch of Congress, provides economic forecasts and assists legislators with budget analysis.
The House and Senate Budget Committees each develop budgets, which may or may not reflect the spending priorities contained in the President’s budget requests. By law, the Budget Committees are required to issue two budget resolutions during each fiscal year. The first resolution sets revenue and spending targets; the second resolution is issued later in the year and updates the first resolution to reflect current economic data. In reality, the two chambers rarely consider a second resolution, instead adhering to the targets established in the first one. Since the budget resolution is a concurrent resolution, it does not require the President’s signature.
If government spending exceeds the parameters outlined in the budget resolution, a process known as budget reconciliation is used to achieve savings needed to meet budget targets. For the last several years, Congress has enacted several budget reconciliation measures that have had a profound impact on health programs. Budget reconciliation is primarily used to reduce spending in entitlement programs such as civil service retirement, Medicare, and Medicaid. These programs are permanently authorized by the government to provide payments or services to eligible beneficiaries; therefore, federal law establishing the scope of benefits and criteria for recipient eligibility must be changed in order to reduce government expenditures.
Budget reconciliation is initiated when each authorizing committee is instructed to make savings in programs to fall within the targets specified in the budget resolution. After all committees have completed reductions and program changes, their recommendations are combined into one reconciliation bill, which is brought before the full House and Senate for a vote. Because of the sheer size and scope of these bills, which range from health care to transportation, they are generally considered under modified closed rules. Since few amendments are permitted on the floor under this procedure, legislators have begun to use the reconciliation process at the committee level to accomplish much of their legislative agenda. Reauthorization of expiring programs, as well as program expansion has been included in addition to program cuts. Thus, reconciliation has proved to be far more important than mere agreement on budget savings.
After the first budget resolution is adopted, both the house and Senate Appropriations Committees divide the budget for consideration among their 13 appropriations subcommittees. Authorizing committees establish or make changes in government programs and set ceilings on the monies that can be used to finance these programs. Appropriating committees decide actual funding levels. Each appropriations subcommittee holds hearings and votes on funding totals for agencies under its jurisdiction. In the House and the Senate, the Transportation, Housing and Urban Development sub committees has jurisdiction over funding for transportation programs, TIGER and the Sustainable Communities partnership. After the subcommittees complete work on their bills, they are sent to the full committee and, if approved, to the floor of the appropriate chamber. House rules prohibit the inclusion of authorization language in appropriations bills; however, amendments eliminating funding or restricting the use of funds for a particular purpose can be considered. When appropriations bills are considered on the Senate floor, a Senator may offer amendments, which must be germane or relevant to the issue at hand. The House and Senate often disagree on funding levels for government programs; therefore, appropriations bills usually go to conference before they are sent to the President.
As noted earlier, the budget process is constantly evolving as Congress and the President struggle to achieve often conflicting objectives. Time spent on the process is indicative of the great importance all participants in the cycle place on current budget issues.