The Federal Budget and Appropriations Process
The budget and appropriations process are the steps through which the U.S. decides annual spending. Learn about these inter-related processes.
Federal Budget Process
Step 1: President’s Budget Request
The budget process begins with the president’s submission to Congress of the administration’s proposed budget for the coming fiscal year, which begins on October 1. The budget must be submitted by the first Monday in February. The president’s proposal does not have the force of law, but includes detailed spending levels for all programs. Though only input to the budget process, it generally sets the tone for the process in three ways:
The president’s proposal is formally written up by the White House’s Office of Management and Budget (OMB), and it usually includes thousands of pages of supporting information, such as historical tables of past budget statistics.
Step 2: Congressional Action
The Congressional Budget Act of 1974 directs that, following the submission of the president’s budget proposal, the House and Senate Budget Committees (with assistance from the Congressional Budget Office, a nonpartisan body) create the budget resolution. A budget resolution serves as the general framework within which Congress will make its decisions about specific spending and taxing levels. Budget resolutions are concurrent congressional resolutions — they do not have the force of law and they do not require the president’s signature. They do not directly provide funding to any organization or program, but establish the structure of the budget.
To create a budget resolution, the Budget Committees gather reports and hold public hearings to question administration officials about the budget as a means of gaining input. They also receive “views and estimates” from congressional committees regarding details on budget issues that relate to each committee’s particular area of focus. This information usually takes the form of letters submitted to the chairman and ranking member of the Budget Committee within 6 weeks of the president’s budget proposal; these letters provide the Budget Committees with general direction and advice.
Each Budget Committee then compiles all of this information to formulate the budget resolution, which it does in a series of meetings called “markup” sessions; these sessions allow for discussion and consideration of the information, while committee members may offer their own input into the budget framework being created. Upon completion of the markups, the Budget Committee will present its budget resolution to its respective house, “on the floor.” A rule under the Congressional Budget Act of 1974 requires the full Senate to consider the budget resolution by April 1 each year.
The House and Senate independently proceed to debate, offer amendments, and vote upon their respective budget resolutions; amendments may be enacted by a majority vote. The House and Senate pass budget resolutions that differ from each other, so the two versions of the resolution go to a conference committee that meets to resolve differences and formulate a single budget resolution. The committee sends this version back to the House and Senate as a conference report. Both chambers consider the report, and once they have agreed to it through a majority vote (which they generally do, without making changes), the final version of the budget resolution takes effect. This is supposed to happen by April 15, but the process often takes longer to complete.
Step 3: The Budget Resolution — A Closer Look
The budget resolution is a crucial component of the budget process because it lays out the plan for spending and taxes for the following fiscal year. While the president’s budget proposal is very detailed, the budget resolution simply consists of a set of numbers dictating the specific amounts of money that Congress is permitted to spend in each of the 20 “budget functions” or “functional allocations,” categories of spending including transportation, agriculture, and health. Thus, the budget resolution does not set the annual spending levels for specific programs (this is done by the Committees on Appropriations — see the Appropriations Process), but rather sets targets. The budget resolution also distributes among the congressional committees the total spending figures that it has laid out for each budget function. The budget resolution lists these figures in a table called the 302(a) allocation.
Within the budget resolution, Congress also includes directions as to how it wishes to appropriate (spend) the money, either through discretionary or mandatory spending:
Discretionary spending refers to the funds allocated each year in the annual appropriations bills that are set by Congress for the purpose that it chooses. RESULTS Global focuses most of its efforts upon influencing discretionary spending through the appropriations process. See the next step in the Federal Budget Process, Discretionary Spending and the Appropriations Process, for more information.
The discretionary budget accounts for about one-third of the federal government’s total spending. Money in this category of spending is generally used for such programs as housing, education, and foreign aid. The president and Congress must act each year to ensure that spending on these programs continues.
The House and Senate Appropriations Committees determine the discretionary spending levels for the programs funded by the federal government on an annual basis.
Mandatory spending is enacted by law and does not depend on any annual appropriations bill. This type of spending makes up two-thirds of the total federal budget per year. It mostly includes entitlement programs that are consistently funded each year based upon the rules set forth by them. When Congress creates a program, such as Medicaid, it determines who will be eligible to receive financial benefits under the program, often determined by such criteria as age or income. Congress then estimates the number of people each year that will be eligible for the program, using this number to formulate its spending for the program. The president and Congress can change the level of mandatory spending for a program by altering the criteria for eligibility or the formula for payment. However, the government does not need to take action annually to ensure that the program continues to be funded.
The committees that set policy and the maximum funding levels allowed for these types of entitlement programs are called Authorizing Committees.
Measuring Federal Spending: The government measures the amount of money it spends each year in two ways: budget authority and outlays. Budget authority (BA) refers to the amount of money that Congress will authorize the government to spend on certain activities or programs. Outlays, also known as expenditures, are what the government actually spends in any given year. For instance, a bill could be passed that appropriates $75 million to build a hospital — this $75 million is provided in budget authority. However, the hospital may take several years to build and therefore, the money would not all be spent in the year during which it was originally appropriated. Thus, $75 million in outlays would not be used until the following year or more, when the hospital is built.
Note: In addition to setting spending levels, the budget resolution determines how much money the government will collect in revenue (the income of the government from taxation and other sources) for the following five years. The difference between the spending and revenue levels resolves whether there will be a surplus or a deficit, for which the budget resolution sets target levels as well; these targets are detailed in the “budget aggregates” section of the resolution.
Step 4: Discretionary Spending and the Appropriations Process
After the plan for the budget has been laid out in the president’s budget request and the budget resolution, the appropriations process — whereby money is finally distributed through appropriations bills — must take effect. Appropriations bills provide the funding that governmental programs such as national defense, education, homeland security, and foreign aid need to continue their activities. Thus, while the budget resolution has set goals for spending levels, appropriations bills actually provide this money to agencies. Spending through the appropriations process is considered discretionary spending.
Appropriations bills are created by the House and the Senate Appropriations Committee under the general direction of the budget resolution. There were 12 appropriations bills considered annually in the Committees on Appropriations for FY 2008 (this number can change from year to year). Both the House and the Senate Committees on Appropriations include 12 subcommittees, each of which has the responsibility of developing one appropriations bill.
The Appropriations Committee determines its spending levels for its appropriations bills based upon the 302(a) allocation it receives from the budget resolution (the budget resolution divides the money it is appropriating to each of the 20 budget functions among the congressional committees). In other words, the allocation sets the limit of the funding level allotted to the appropriations bills. The 302(a) allocation is mandated in Section 302(a) of the Congressional Budget Act of 1974.
The Congressional Budget Act of 1974 also includes a Section 302(b), termed the 302(b) sub-allocation. Under this section, the House and Senate Appropriations Committees must divide among its 12 subcommittees the total funding allotted to its programs; i.e., it must sub-allocate the money it has received in the 302(a) allocation. View the sub-allocations for the appropriations process of FY 2010.
Subcommittees on Appropriations Set Funding Levels for the 12 Appropriations Bills
When the subcommittees have received directions about the total amount of money that has been sub-allocated to them, they may proceed with work upon their respective appropriations bill. The subcommittees base their determinations of funding levels upon information gathered through public hearings, while also considering the previous year’s funding levels and the president’s budget request. The appropriations subcommittee members weigh in on their priorities and provide essential input to their subcommittee’s key decision makers —the chairman and ranking minority member — through “wish list” letters. The chairman and ranking minority member use these letters to determine funding levels for the agencies under their subcommittee’s jurisdiction. The subcommittee proceeds to vote upon these levels. When its members have come to an agreement, the subcommittee sends these bills to its Appropriations Committee (either for the House or the Senate). This committee begins a markup session to discuss, consider, and offer amendments (alterations) to the bill.
Appropriations Committees Send Bills to Full Chambers (the House or the Senate)
Once the Appropriations Committee has completed its work upon a bill, this legislation must be sent to its full chamber, either the Senate or the House. Traditionally, the consideration of the appropriations bills begins in the House of Representatives. Therefore, the Appropriations Committee will present the appropriations bill along with its report to the House of Representatives for floor consideration. The Budget Act of 1974 sets June 10 of each year as a target date to have completed the House Appropriations Committee’s work on its appropriations bills; however, the committee usually begins to report its bills in May or June, finishing all or most of the bills by July or by the annual recess in August (the Senate’s Committee on Appropriations works to follow the same timetable). When the appropriations bill is “on the floor,” representatives debate the bill and offer amendments after hearing opening statements from the chair and the ranking minority member of the subcommittee for which the bill applies.
After the bill is passed in the House, it is sent to the Senate, which also considers the bill and amendments it wishes to make. Once the Senate has made its changes, a conference committee must be formed to reconcile the differences between the House and the Senate versions of the bill. These negotiations usually take place between the chair and ranking minority members of the full Appropriations Committees, as well as the members of the subcommittee with jurisdiction over the bill. Upon reaching an agreement, the bill is once again sent to the chambers, both of which generally accept the conference report.
Congress Sends Reconciled Appropriations Bills to the President
Just as for any bill, the president may:
Should the president veto the bill, Congress can attempt to override the veto (which would enable the bill to become a law) with at least a two-thirds majority vote by a quorum, i.e., a minimum number of members that need to be present in order for Congress to do business.
Congress must pass and the president must sign every appropriations bill before October 1, which is the start of the federal fiscal year. Often, Congress and the president are unable to complete action on every bill before this date. Thus, a continuing resolution (CR) must take effect. A continuing resolution will continue to fund the appropriations bills from the previous year as a temporary solution, so that funding is not completely cut off to a program or agency.
[Emergency] Supplemental Appropriations Bills
At times, the government must respond to an unanticipated circumstance that arises during the middle of a fiscal year and requires funding. In this case, a supplemental appropriations bill (or an emergency supplemental appropriations bill) is employed. For example, a supplemental spending bill might be needed in order to respond to natural disasters such as Hurricane Katrina. These emergency supplemental spending bills were once a rarity but have now become much more common, especially since the U.S. military invasion of Iraq. Many criticize these spending bills, as they have grown dramatically in size and often include money for unrelated programs that do not appear urgent; because they have been used for predictable, as opposed to emergency, spending; and because they reduce transparency of the overall budget process.
Omnibus Appropriations Bills
At the end of the legislative cycle, the Appropriations Committee may decide to consolidate several appropriations bills into one, which is known as an omnibus appropriations bill. The committee will generally create this type of bill when they are struggling to pass all the appropriations bills by October 1, perhaps due to disagreements among Congressmen or to a large amount of work being done on another spending bill.
The appropriations process is critical to the creation of a budget in Congress each year — it provides the money! Specifically, there are 12 annual appropriations (spending) bills that must be passed annually to keep programs and agencies of the government running; each is considered by a different appropriations subcommittee. By working to influence these bills, RESULTS can influence the funding of the programs related to our issues of focus.
The steps that RESULTS takes to influence the appropriations process are illustrated by this example of the Basic Education funding requests in the Foreign Operations Appropriations Bill for Fiscal Year (FY) 2005.
January through May: Appropriations Bills are Considered by the Appropriations Subcommittees
RESULTS’ work began immediately in January 2004, when the House and Senate Appropriations Committees began consideration of the following year’s budget (FY 2005). The president submitted his budget request in the beginning of February, which the House and Senate Budget Committees used to create a budget resolution (a blueprint for government spending levels). From January through May, the appropriations committees compiled their own requests for the funding levels of the twelve appropriations bills, using input from civil society. The appropriations committees then finalized these funding levels after receiving directions from the budget resolution. Specifically, the budget resolution determines the amount of money to be allocated to each committee (called “302(a) allocations”). Once the Committees on Appropriations receive their overall spending level, the “302(b) sub-allocations” then direct the chairmen of the Appropriations Committees to decide how much each of their twelve subcommittees should receive. These twelve subcommittees in turn must determine how to distribute their money among the programs funded within their appropriations bills.
Funding for basic education is included in the appropriations bill of the Subcommittee on State, Foreign Operations, and Related Affairs (“Foreign Ops”). First, the House Foreign Ops Subcommittee would consider funding requests for basic education. Therefore, RESULTS urged members of this subcommittee to include our funding requests in their “wish lists” letters to their chairman and ranking minority member (the key decision-makers). Wish list letters allow members to weigh-in on their key funding priorities. We asked our grassroots volunteers to meet with or write letters to their members of Congress on the subcommittee, passing along a draft wish list letter provided by RESULTS staff that included our requests.
When determining funding levels, the chairman and ranking minority member will consider input not only from their subcommittee members but also from those congressmen not on their subcommittee. Therefore, RESULTS also asked all of its grassroots volunteers to meet with or write to their members of Congress, urging their member to send a letter to the chairman or ranking minority member to bring attention to our issues (these letters are not called “wish lists,” since the congressmen are not part of the subcommittee itself). Depending on the representative that writes, these letters can be of great importance to the chairman and ranking member, and they can reinforce the requests made by subcommittee members.
Another way for members of Congress to express their support for an issue is by adding their name to a congressional sign-on letter. RESULTS generates sign-on letters to be sent to key decision-makers, for instance, of the Committee on Appropriations or one of its subcommittees.
In general, our best chance to influence legislation is at this stage, when it is being considered by a subcommittee of appropriations.
Mid-May through June: Appropriations Committees Complete Work and Send Bills to Full House and Senate
The State, Foreign Operations, and Related Affairs Subcommittee completed its work and set the funding level request for Basic Education at $400 million. The subcommittee then sent the bill to the full Committee on Appropriations. During this stage, RESULTS re-emphasized our requests to the chairman and ranking minority member of the Committee on Appropriations, who determine final appropriations levels among the different foreign affairs accounts and programs (though the Committee on Appropriations and the full House usually do not change the subcommittee’s recommended funding level). The Committee on Appropriations passed the Basic Education funding request, and the bill was sent to the full House of Representatives for consideration on the floor. Following the recommendations of the Committee on Appropriations, the House approved the subcommittee’s $400 million funding level request for Basic Education.
The bill was then considered in the Senate by its Committee on Appropriations, specifically its Subcommittee on State, Foreign Operations, and Related Affairs (“Foreign Ops”). RESULTS next worked with Senate members of this committee to request an even higher level of funding for Basic Education funding than the amount requested by the House.
After June 30, But Before October 1: Conference Committee Reconciles Both Versions of the Bill, and It Is Sent To the President for Final Approval
After consideration by the Senate Appropriations Committees and subsequently the full Senate, the Senate set its level of funding for Basic Education at $335 million. A conference committee was then formed to reconcile the differences between the House and Senate versions of the bill. At this point, RESULTS again went to members of both chambers, asking the House to continue to support the $400 million it had originally requested while also asking the Senate to support $400 million (since the House had proposed a larger level of funding than the Senate). Ultimately, the conference committee settled on the House’s request of $400 million for Basic Education funding; this was a great success, since the funding level was set at the higher House level. The conference committee sent the final version back to both the House and the Senate for one last approval before it was presented to and signed by the president.
What is the Foreign Operations Appropriations Bill?
The Foreign Operations Appropriations Bill is perhaps the most relevant appropriations bill for our global work to end hunger and poverty. This bill is considered in the Subcommittee on State, Foreign Operations, and Related Affairs and provides funding to Basic Education, HIV/AIDS, child survival programs, tuberculosis, UNICEF, microfinance programs, and other foreign assistance activities. Within the Foreign Ops Appropriations Bill, Basic Education and microenterprise are funded under the Development Assistance Account (DA), while most of our health programs are funded within the Child Survival and Health Programs Fund.* RESULTS also works to influence the appropriations bill considered by the Subcommittee on Labor, Health, and Human Services, Education, and Related Agencies (“Labor HHS”) because domestic TB programs are funded through this subcommittee’s appropriations bill; for FY 2008, President Bush requested money for the Global Fund to Fight AIDS, TB, and Malaria in this bill as well (the Global Fund is usually funded through the Foreign Ops subcommittee).
*The Development Assistance Account (DA) and Child Survival and Health Programs Fund (CSH) are two of the many accounts within a bill to which money is allotted to support specific programs. Another such example is the Economic Support Fund (ESF).
The Center on Budget and Policy Priorities, Introduction to the Federal Budget Process.
CRS Report for Congress, The Congressional Appropriations Process: An Introduction (pdf).