The process of creating the
budgetThe Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and legislation regarding the federal budget process...
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 1974The Congressional Budget and Impoundment Control Act of 1974 is a United States federal law that governs the role of the Congress in the United States budget process.-The Congressional budget process:...
, and by other budget legislation.
Congressional consideration of the federal budget begins once the
President of the United StatesThe President of the United States is the head of state and head of government of the United States and is the highest political official in the United States by influence and recognition...
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 PresidentThe Executive Office of the President consists of the immediate staff of the President of the United States, as well as multiple levels of support staff reporting to the President. The EOP is headed by the White House Chief of Staff, currently Rahm Emanuel.-History:In 1939, during Franklin D...
.
The process of creating the
budgetThe Budget of the United States Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year, beginning October 1. Congressional decisions are governed by rules and legislation regarding the federal budget process...
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 1974The Congressional Budget and Impoundment Control Act of 1974 is a United States federal law that governs the role of the Congress in the United States budget process.-The Congressional budget process:...
, and by other budget legislation.
The President's budget request
Congressional consideration of the federal budget begins once the
President of the United StatesThe President of the United States is the head of state and head of government of the United States and is the highest political official in the United States by influence and recognition...
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 PresidentThe Executive Office of the President consists of the immediate staff of the President of the United States, as well as multiple levels of support staff reporting to the President. The EOP is headed by the White House Chief of Staff, currently Rahm Emanuel.-History:In 1939, during Franklin D...
. The budget request includes funding requests for all
federal executive departmentsThe United States federal executive departments are among the oldest primary units of the executive branch of the federal government of the United States—the Departments of State, War, and the Treasury all being established within a few weeks of each other in 1789.The heads of the federal...
and
independent agenciesIndependent agencies of the United States federal government are those agencies that exist outside of the federal executive departments...
.
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)) 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
CongressThe United States Congress is the bicameral legislature of the federal government of the United States of America, consisting of two houses, the Senate and the House of Representatives. Both senators and representatives are chosen through direct election....
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 BudgetThe U.S. House Committee on the Budget, commonly known as the House Budget Committee, is a standing committee of the United States House of Representatives, the lower house of Congress...
and the
United States Senate Committee on the BudgetThe United States Senate Committee on Budget was established by the Congressional Budget and Impoundment Control Act of 1974. It is responsible for drafting Congress's annual budget plan and monitoring action on the budget for the Federal Government. The committee has jurisdiction over the...
are responsible for drafting budget resolutions. Following the traditional calendar, by early April both
committeesA congressional committee is a legislative sub-organization in the United States Congress that handles a specific duty . Committee membership enables members to develop specialized knowledge of the matters under their jurisdiction...
finalize their drafts and submit it to their respective floors for consideration and adoption.
A budget resolution, which is one form of a
concurrent resolutionIn the United States, a concurrent resolution is a legislative measure passed by both the Senate and the House of Representatives. Passed by both houses, concurrent resolutions are not presented to the President and do not have the force of law...
, 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 billAn appropriation bill or running bill is a legislative motion which authorizes the government to spend money. It is a bill that sets money aside for specific spending...
s are enacted.
Once both houses pass the resolution, selected Representatives and Senators negotiate a
conference reportA conference committee is an ad hoc joint committee of a bicameral legislature, which is appointed by, and consists of, members of both chambers to resolve disagreements on a particular bill. While such committees are common in the United States Congress and other U.S...
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, 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 "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.
| Function |
Title |
FY 2005 ($ 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 |
MedicareMedicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria. The medicare program also funds residency training programs for the vast majority of physicians in the...
|
293,574 |
| 600 |
Income Security |
342,324 |
| 650 |
Social Security Social Security in the United States currently refers to the federal Old-Age, Survivors, and Disability Insurance program....
|
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) |
|
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 terrorismThe War on Terrorism is the common term for the military, political, legal and ideological conflict against what the effort's leaders describe as Islamic terrorism and Islamic militants, and was specifically used in reference to operations by the...
(Overseas Deployments and Other Activities (970)).>
Total: |
2,354,755 |
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
Discretionary spending requires an annual appropriation bill, which is a piece of legislation. Discretionary spending is typically set by the
HouseThe Committee on Appropriations is a committee of the United States House of Representatives. It is in charge of setting the specific expenditures of money by the government of the United States...
and
Senate Appropriations CommitteeThe U.S. Senate Committee on Appropriations is a standing committee of the United States Senate. It has jurisdiction over all discretionary spending legislation in the Senate....
s 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 billAn appropriation bill or running bill is a legislative motion which authorizes the government to spend money. It is a bill that sets money aside for specific spending...
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:
- Agriculture
- Commerce, Justice and Science
- Defense
- Energy and Water
- Financial Services
- Homeland Security
- Interior and Environment
- Labor, Health and Education
- Legislative Branch
- Military Construction and Veterans Affairs
- State and Foreign Operations
- Transportation, Housing and Urban Development
A
continuing resolutionA continuing resolution is a type of appropriations legislation used by the United States Congress to fund government agencies if a formal appropriations bill has not been signed into law by the end of the Congressional fiscal year...
is often passed if an appropriations bill has not been signed into law by the end of the fiscal year.
Direct Spending
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 SecuritySocial Security in the United States currently refers to the federal Old-Age, Survivors, and Disability Insurance program....
benefits,
MedicareMedicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria. The medicare program also funds residency training programs for the vast majority of physicians in the...
, and
Medicaid Medicaid is the United States health program for eligible individuals and families with low incomes and resources. It is a means-tested program that is jointly funded by the states and federal government, and is managed by the states. Among the groups of people served by Medicaid are certain...
. 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 OfficeThe Congressional Budget Office is a federal agency within the legislative branch of the United States government. It is a government agency that provides economic data to Congress....
(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
- Office of Management and Budget
- United States public debt
The United States government debt, commonly called the "public debt" or the "national debt", is the amount of money owed by the Federal government of the United States to holders of U.S. debt instruments. Gross Debt is the national debt plus intragovernmental debt obligations or debt held by trust...
- Government financial statements
Government financial statements are annual financial statements or reports for the year. The financial statements, in contrast to budget, present the revenue collected and amounts spent. The government financial statements usually include a statement of activities , a balance sheet and often some...
- Anti-Deficiency Act
The Anti-Deficiency Act is legislation enacted by the United States Congress to prevent the incurring of obligations or the making of expenditures in excess of amounts available in appropriations or funds...
External links