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 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 his 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 determine spending levels for each line-item of the budget, 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 by 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 resolutions. 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. For example, the FY2017 budget was not adopted until March 23, 2018 when Congress approved the “Consolidated Appropriations Act, 2018,” five and a half months after the beginning of the fiscal year. 

Pay As You Go (PAYGO) Budget Rules

Pay as you go, or PAYGO, is the term used for a special budget rule designed to ensure that legislation does not add to the federal deficit. When the rule is in effect, 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 3/5ths of either chamber.

Additional Resources

• The Congressional Budget Process: A Brief Overview, Congressional Research Service, January 2004
• House Appropriations Committee
• House Budget Committee
• Senate Appropriations Committee
• Senate Budget Committee
• Budget Process Law Annotated