The Federal Budget Process: A Brief Outline

James V. Saturno
Specialist on the Congress
Government Division

April 26, 1996

96-368 GOV

SUMMARY

In a sense the term "budget process" is a misnomer when applied to the federal government. Budgeting for the federal government is not a single process; rather it consists of a number of processes that have evolved separately and which occur with varying degrees of coordination. This overview, and the accompanying flow chart, attempt to clarify the role played by each of the component parts of the budget process as well as how they operate together.

THE BUDGET CYCLE

The Constitution grants the "power of the purse" to Congress, but does not establish any specific procedure for consideration of budgetary legislation.

The Budget and Accounting Act of 1921, as codified in Title 31 of the United States Code, established the basis for an executive budget process and created the Bureau of the Budget (reorganized as the Office of Management and Budget (OMB) in 1970) to assist him in carrying out his responsibilities as well as the General Accounting Office (GAO) to assist Congress as the principle auditing agency of the federal government. The Act requires the President to submit a proposed budget by the first Monday in February. Although this budget does not itself have the force of law, it is a comprehensive look at government revenues and spending and the start of a dialogue with Congress.

The Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344) established the House and Senate Budget Committees and provided for the annual adoption of a concurrent resolution on the budget as a mechanism for facilitating congressional budgetary decision making. This Act also established the Congressional Budget Office (CBO) to provide budgetary information to Congress independent of the executive branch.

In response to the President's budget proposal, congressional committees hold hearings and submit their views and estimates of spending and revenues within their respective jurisdictions to the House or Senate Budget Committees. With this information, the Budget Committees draft and report a concurrent resolution on the budget to their respective houses.

While it also does not have the force of law, the concurrent resolution on the budget is the central part of the budget process in Congress. It is an agreement between the House and Senate which establishes an outline for all subsequent budgetary actions, and has a coordinating effect on the efforts of other committees. Spending and revenue laws are subsequently enacted separately. Enforcement of the budget resolution is accomplished by points of order against legislation that would violate its strictures, and through enactment of legislation in response to reconciliation instructions.

Although the budget resolution does not mention specific programs or accounts, aggregates, functional categories, and reconciliation instructions (if any) are predicated on non-binding assumptions which provide a guideline for subsequent actions. These guidelines are implemented through a process of "crosswalking" the amounts in functional categories to each committee with jurisdiction over spending under sections 302(a) and 602(a) of the Congressional Budget Act. The budget resolution also provides a guideline for the overall level of revenues, but not for their composition. Committees with jurisdiction over revenues, entitlements, or other mandatory spending not directly controlled though the annual appropriations process are then responsible for reporting any necessary legislation to their respective chamber to insure that revenue and spending conform to these allocations. In some years, the budget resolution includes reconciliation instructions. All committees receiving such instructions submit their recommendations to the Budget Committee in their chamber, which packages them as an omnibus measure and reports it without substantive revision. The reconciliation process has become the chief avenue for achieving the changes in revenues and entitlements necessary to implement the overall budget plan established in the budget resolution.

In addition, the budget resolution specifies an appropriate level of public debt to reflect the budgetary policies agreed upon in the resolution. In 1979, the House adopted a rule (House Rule XLIX) which deems the amount of public debt agreed to in the conference report on the budget resolution to be automatically agreed to as a separate joint resolution which is sent to the Senate. The Senate does not have an equivalent rule and must therefore consider the House joint resolution or some other legislation to raise the debt limit if an increase is needed.

The annual appropriations process provides funding for discretionary programs through the consideration of 13 appropriations bills. Congress must enact these measures prior to the start of each fiscal year (October 1) or provide for the affected programs in a continuing resolution. By custom, the House initiates all appropriations measures, although the Senate may amend them as it sees fit. The House and Senate Appropriations Committees are organized into 13 subcommittees which are each responsible for reporting one of these measures. These appropriations bills are constrained by the total amount allocated under the budget resolution as well as by the guidelines established separately in authorizing legislation. Authorizations may be permanent or temporary, and their provisions may be general or specific, but they do not themselves provide funding in the absence of appropriations actions.

Congressional budgetary actions are also restricted by two control mechanisms established under the Budget Enforcement Act of 1990. These restrictions entail a spending cap to limit the total amount of discretionary spending, and a pay-as-you-go process to require an offset to any congressional actions on entitlements or revenues which would increase the deficit. Under either process, congressional actions which violate these strictures would trigger a presidential order for an across the board cut of nonexempt programs (known as a sequester) in the affected area.

After submitting his budget, the President's role in the budget process is an informal one until budgetary legislation is presented for his signature. The President may either sign or veto any measure presented to him in its entirety. Beginning in 1997, once a measure becomes law, new presidential impoundment authority granted under the Line Item Veto Act of 1995 (P.L. 104-130) will allow the President to cancel spending for specified items. He will be able to submit a special rescission message within 20 days of the enactment of an appropriation measure or accompanying a January budget message canceling any dollar amount of discretionary budget authority, any item of new direct spending, or any limited tax benefit. The specified budget authority in such a message will be canceled unless a subsequent disapproval bill is enacted. In addition, any funds rescinded under this authority will be for deficit reduction, and unavailable to be reallocated for other spending.

FOR ADDITIONAL READING

U.S. Library of Congress. Congressional Research Service. Appropriations Procedures in Congress. CRS Report 94-1009 S, by Stanley Bach. Washington,

December 14, 1994. 80 p.

• ----. The Appropriations Process: An Introduction. CRS Report 96-106 GOV, by Sandy Streeter. Washington, January 31, 1996. 16 p.
• ----. The Authorization, Appropriation, and Budget Process in Congress: An Introduction. CRS Report 94-1005 S, by Stanley Bach. Washington, December 15, 1994. 30 p.
• ----. Budget Process Changes Made in the 102nd-103rd Congresses (1991-1994). CRS Report 95-457 GOV, by Robert Keith and Edward Davis. Washington,

March 31, 1995. 14 p.

• ----. Continuing Appropriations Acts: Brief Overview Of Recent Practices. CRS Report 95-992 GOV, by Edward Davis. Washington, September 22, 1995. 6 p.
• ----. Entitlements and Other Mandatory Spending. CRS Report 94-348 EPW, by Kenneth R. Cahill and Michelle Harlan. Washington, April 21, 1994. 28 p.
• ----. The House Appropriations Process, 1789-1993. CRS Report 93-729 S, by Louis Fisher. Washington, August 6, 1993. 26 p.
• ----. Item veto and expanded impoundment proposals. Issue brief IB89148, by Virginia A. McMurtry. Washington, updated regularly.
• ----. Manual on the Federal Budget Process. CRS Report 91-902 GOV, by Allen Schick, Robert Keith, and Edward Davis. Washington, December 24, 1991. 218 p.
• ----. Points of Order in the Congressional Budget Process. CRS Report 94-874 GOV, by Edward Davis. Washington, November 9, 1994. 15 p.