The federal government’s budget process rarely matches the ideal. But the ins and outs of authorizing and appropriating funds often shape the money that gets spent. And that affects people’s lives.
The Authorization Process
Before any program can receive government funding, Congress must authorize it. Authorizing committees approve bills, such as the “Farm Bill,” that describe the programs, indicate how the federal government will fund them, and set eligibility criteria for open-ended “entitlement” programs. Authorizations are normally renewed (reauthorized) every three to five years except for military programs—which come up for reauthorization every year. Authorizing committees work year-round.
The Budget Resolution
The president introduces a budget proposal in early February. The proposal is the first official presentation of the administration’s priorities for the coming fiscal year, which begins the following October 1. It includes a lot of detail about individual programs, past spending, trends, legislative proposals, etc. The president’s proposal is available on a CD and on the Internet. (Check www.whitehouse.gov/omb/)
Budget committees in each chamber of Congress receive the president’s proposal and consider it while they construct a budget resolution of their own. By April 15, the House and the Senate are supposed to have agreed on a budget resolution which maps out the spending and tax decisions Congress will make in later stages. This resolution, generally only a few pages long, sets out:
Functions: the amounts to be spent on major functions or purposes served by federal government programs, for example, transportation, defense, and income supports are three different budget functions;
Revenues: the amount of revenue to be raised; and
Reconciliation instructions: orders to various congressional committees to find ways to reduce the cost of entitlement programs, or to raise revenues by certain amounts.
The budget committees’ decisions about how to divide up the budget open a window for public comment and advocacy. Congress can act at this point early in the process to shift its spending plans among major budget categories. It can choose, for example, between more weapons and more access to housing or health care. Unfortunately, Congress rarely takes advantage of this opportunity for fundamental change in spending priorities.
Appropriations
Each chamber of Congress has an appropriations committee with 12 subcommittees overseeing spending for a set of departments or agencies. For example, the Appropriations Subcommittee on Labor, Health & Human Services and Education oversees the spending of the Department of Labor, the Department of Health and Human Services, and the Department of Education, plus other smaller, related agencies.
After the House and Senate agree on a budget resolution that sets ceilings for spending on the various large government functions, the appropriations committee divides up the available dollars among its subcommittees.
Appropriations committees have a direct role in setting levels of discretionary spending, as opposed to “entitlement” spending. Entitlement programs create a right to certain services for eligible individuals. Congress can’t save money by simply allocating less money to those programs. Instead, it has to change who is eligible for benefits, or change the nature of the benefits themselves, in order to reduce the cost of the entitlement program.
Each appropriations subcommittee is given an “allocation”—a total dollar amount to be divided up among all the programs under its jurisdiction. (This is called the “302b” allocation.) For example, the budget for military functions is allocated to the Department of Defense, Department of Energy, and several related agencies. Actual spending for each of these departments or agencies may be considered by different appropriations subcommittees.
Each subcommittee holds hearings and then recommends specific appropriations for specific programs, line by line. For example, one subcommittee gets to decide how many “gold-plated” F-16 fighter jets to buy, and another subcommittee decides whether to cut school lunches or a senior meal program. The committee can trade off spending among programs, as long as all the trade-offs are within the subcommittee’s jurisdiction and the total amount allocated to all programs stays under the subcommittee’s limit. The subcommittee chair then drafts a bill—“the chairman’s mark”—which the subcommittee considers, amends, and reports out to the full appropriations committee.
After the full appropriations committee approves each subcommittee’s bill, it goes to the floor in each chamber. After approval by each chamber, the House and Senate appoint a conference committee to work out the differences between their bills. After final approval, each appropriations bill goes to the president for his signature. Then, and only then, are departments of the federal government able to draw funds from the Treasury for the next fiscal year.
Reconciliation
In the process of developing the budget resolution, the budget committees match the spending limits they are setting with the amount of revenue the government can anticipate in the next fiscal year. When the two don’t match, the two amounts have to be “reconciled,” and the budget committees can “instruct” other committees to do this.
The committees that write tax laws (the Finance Committee in the Senate and the Ways and Means Committee in the House) may be given “reconciliation instructions” to find a way to raise more money (through income taxes, user fees, or trade tariffs) or to decrease spending on entitlement programs such as Medicare or Medicaid, which are also under the jurisdiction of these committees. Other committees that oversee entitlement programs (such as the Agriculture Committee, which oversees the food stamp program) might also be told to find ways to reduce the costs of the program, by changing who is eligible or changing the program’s benefits. These committees then report their decisions to the budget committees in the House and the Senate which compiles them into a “reconciliation bill.” The reconciliation bill can be one of the toughest pieces of legislation that Congress handles all year.
End of the Fiscal Year
The federal government’s fiscal year ends on September 30. By that time, all appropriations bills and a reconciliation bill (if there is one) must be approved by both houses and signed by the president. According to the script, Congress should wrap up its fiscal business and end in a glorious finale by midnight on September 30. But that rarely happens. Instead, the finale is often a confusing reprise of some of the major themes debated earlier in the budget performance.
Ultimately, Congress has to end the performance, and so it combines any remaining appropriations bills into a “continuing resolution” or “CR.”
Typically, the CR provides temporary spending authority—until a specific date given in the bill—at an agreed upon level (such as the previous year’s level plus or minus 1% or 2%.) Usually, the CR is negotiated by the leaders of both parties—including the president. Because time is of the essence in this closing act, the president wields a lot of power to affect the details of the spending bills, by threatening to veto an unacceptable bill and thus shutting down the government. So the final moments on the budget stage are dramatic and filled with power conflicts—loud, but neither illuminating nor inspiring.
