Federal Budget Process

The federal government’s fiscal year begins October 1 and runs through September 30 of the following calendar year. The “normal” fiscal budget process begins quietly in the fall when the White House Office of Management & Budget starts to prepare the current President’s proposed budget for the following fiscal year. The President officially releases his proposed budget by the first Monday in February and sends it to Congress.  

Budget Resolution

The House and Senate Budget Committees are responsible for drafting Congress' annual budget plan for the Federal Government. These committees establish the level of total spending and revenues for the year and designate how spending is to be divided among the different functions of government, such as defense, agriculture, and health. The spending and revenue levels are set forth in a broad blueprint that is known as the “budget resolution.” It is in the form of a “concurrent resolution” which is approved by both houses of Congress, and binding on each. The budget resolution is not sent to the President for signature and does not become law.

The budget resolution is considered in the U.S. Senate under expedited procedures that limit time for debate and the scope of amendments, and prevent it from being filibustered. Because this process overrides the normal Senate rule permitting unlimited debate, all provisions of the budget resolution must be germane to the budget. Those provisions that are considered extraneous can be removed from the bill based on what is known as the Byrd Rule, named for Senator Robert Byrd (D-WV). The Byrd Rule may only be waived by the vote of 3/5ths of Senators.

Appropriations

Once the budget resolution is approved, the appropriations process begins. The House and Senate. Appropriations Committees divide up the budget among the 12 subcommittees on each side. The subcommittees add or deduct dollars and programs, and send them to the full Appropriations Committees, which also make revisions before sending the individual bills to the House and Senate for floor consideration. Congress must enact each of the 12 bills before the start of the new fiscal year on October 1 of each year, or pass stop-gap spending measures, known as “continuing resolutions,” to keep the government departments and programs running until they complete the unfinished appropriations bills.

Budget Reconciliation

Congress adopted the budget process in 1974 intending to secure fiscal restraint and to reduce the federal deficit. It also created a process known as “budget reconciliation” as a tool for securing statutory changes in mandatory spending (entitlements) or revenue programs (tax laws) to achieve goals set forth the budget resolution. The budget resolution includes instructions requiring specific authorizing committees with jurisdiction over mandatory spending and revenue policies to make changes to ensure budgetary savings. These legislative changes are packaged into one bill and considered under the same expedited procedures as resolution. The majority party in the Senate typically favors the reconciliation process because filibusters are not allowed and controversial changes to law can be approved with a simple majority.

The Budget Process in Practice

Although that is the text-book description of how the process is supposed to work, in the last two decades Congress has rarely enacted each of the 12 appropriations bills by the beginning of the fiscal year. Every year seems to have its special reasons. For example, the current FY 2010 budget fell outside the “normal” process for two reasons.  First, the massive stimulus bill (“America Recovery & Reinvest Act of 2009”) included many provisions that appropriated funds outside the regular budget process. Second, the normal budget process fell into disarray during the fall as the Senate focused on the health care reform bill. To ensure something got enacted, procedural devices were used to go around the normal process and instead complete action on appropriations for the year in late December 2009.

Pay As You Go (PAYGO) Budget Rules

Pay as you go, or PAYGO, is the term used for a special budget rule, reinstituted in 2010, designed to ensure that legislation does not add to the federal deficit. Simply stated, PAYGO requires that any new spending or tax cuts must be fully paid for with new revenue (tax increases) or spending cuts. The House and Senate can waive the PAYGO requirements upon a vote of 3/5^th of either chamber.

Additional Resources

• The Congressional Budget Process: An Explanation , prepared by the Senate Budget Committee, offers a thorough description of the federal budget process.
• The Budget Reconciliation Process, prepared by the House Rules Committee, offers a brief summary of the process.
• House Appropriations Committee
• House Budget Committee
• Senate Appropriations Committee
• Senate Budget Committee
• Budget Process Law Annotated