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The Federal Budget Process:  A Simple Explanation

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American Flag in an Article About the Federal Budget ProcessThere is so much talk about the different federal budgets in the news that it is easy to lose track of the bigger picture. We have heard about President Trump's new budget proposal for FY 2018. But we are also hearing about about government spending laws expiring on April 28. Since the federal budget process is a complex phenomena, perhaps a brief refresher on the basic process might be useful.

When Does a Fiscal Year Start?

A fiscal year for the federal government starts the first day of October before the next calendar year and runs through the end of September. So FY 2018 starts October 1, 2017, and runs through September 30, 2018. Our current fiscal year started in October of 2016. Due to unfinished business that budget process, lawmakers must agree on a new spending bill by April 28 to avoid a partial government shutdown.

What Are the Basic Steps in the Budget Process?

The Washington Post has a quick and easy chart that distills the process down to three major steps as it relates to discretionary spending:

  • The President's Budget - Typically, the President will submit a budget request to Congress the first week in February, although it can sometimes take longer. The Office of Management and Budget (OMB) helps prepare it, after gathering funding requests from all the federal departments.
  • Budget Resolutions from the House and Senate - Congress considers the President's proposal, but Budget Committees in both chambers come up with concurrent budget resolutions of their own. Differences between the two documents must be reconciled, which results in a final Congressional budget resolution. What this does is determine a target for the total amount allocated for discretionary spending, which is known as302(a) allocation. Although it sets the amount to be spent, it does not specify how much money each individual program gets.
  •  The Appropriations Process - The appropriations process determines how the money is spent, as opposed to the budget resolution, which determines how much is available. The responsibility for discretionary spending is divided into 12 subcommittees in both the House and Senate. Each subcommittee holds hearings with the relevant federal agencies on their requested budgets and operations, including their grant programs. Eventually, a bill is sent for a vote in each respective chamber. Once it is passed, there are usually differences between the House and Senate versions, which are resolved in conference. They vote again, and if approved, it is then sent to the President, who will then either sign or veto it. All 12 appropriations bills need to be signed individually.

What Happens If All Does Not Go As Planned?

If Congress fails to agree on a budget resolution, or if a bill is vetoed, the government turns to temporary spending measures. These are known as continuing resolutions, and must be also approved by Congress and signed by the President so that the federal agencies will have funding to operate. That is the situation we are in now, as continuing resolutions were passed in 2016, with the last one funding the government until April 28.

Further Reading

Of course the actual process is much more complicated than can be captured in a few paragraphs. If you would like more information, here are three additional links from nonpartisan sources that provide useful information in straightforward formats:

  • Briefing Book by the Tax Policy Center - A  comprehensive and detailed look at the process.

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