The federal budget process is a plan used to create the US federal budget. The 1974 Budget Control Act established the process. The House originates spending bills, and the Senate amends them. The Budget Control Act centralized and consolidated this budget authority.
The Budget Control Act
The Act gave Congress three powers. First, it allows the House of Representatives and the Senate to have their own standing budget committees. This gives them the ability to create their own budgets to use in negotiating the final appropriations bills.
The Act also created the Congressional Budget Office. This office provides non-partisan analysis to facilitate Congress’s review of the budget. This includes a detailed review of the president’s budget for each fiscal year.
It moved the beginning of the fiscal year from July 1 to Oct. 1 to give newly-elected officials more time to review each year’s budget.
The Main Goal of the Federal Budget Process
Article 1, Section 7 of the US Constitution gives Congress the power to raise revenue and spend. Elected officials represent the will of the voters, or they don’t stay in office. Congress must agree on where the tax burden falls and on who receives the benefit of spending.
Note
The budget puts these priorities in hard numbers. The final budget allocates specific funding for each department and its programs.
The budget process makes sure all voices within Congress are heard. It provides ample opportunity for debate. The government runs smoothly if the budget process is followed.
9 Steps to the Federal Budget Process
The budget process starts a full year before the fiscal year begins. The fiscal year starts on Oct. 1 of the year before the calendar year starts. For example, FY 2022 is from Oct. 1, 2021, to Sept. 30, 2022. The budget process for the FY 2022 budget began in the fall of 2020.
Early Fall
All federal agencies submit their budget requests to the Office of Management and Budget. OMB prepares and manages the budget for the president.
November
OMB sends its budget review comments back to the agencies.
December
Agencies submit their final budget requests. OMB then assembles the final budget and sends it to the incoming president.
January
January is the deadline by which a president must outline their budget priorities in the State of the Union Address. The Council of Economic Advisors submits the Economic Report of the President. It analyzes economic trends.
Note
Although the State of the Union Address typically takes place in January, due to the pandemic and irregularities it has caused, President Biden will deliver his SOTU on March 1, 2022.
First Monday in February
This is the deadline by which the president must submit his budget to Congress. The president’s budget puts their priorities into dollars and cents for three areas:
- Funding levels for federal agencies
- Changes to mandatory programs already enacted by Congress, including Medicare, Social Security, Medicaid, the Troubled Asset Relief Program, and the Affordable Care Act
- The budget must show the impact of changes to the tax code on federal revenue
April 15
Congress prepares a budget resolution to guide spending. The House and Senate budget committees each hold hearings with agency officials who explain why they need the funds requested. The committees submit their resolutions to a floor vote.
The Senate and House worked out their differences in a conference committee. The final budget resolution must be passed by majority votes in the House and Senate. Congress often skips this step and defaults to the prior year’s resolution.
June 10
Congress uses the budget resolution to guide appropriations bills. They specify funds for each agency in the discretionary budget. The House and Senate each have 12 Appropriations Subcommittees. They hold more hearings, then prepare and pass their bills. These go to 12 conference committees to work out the differences. The final bills go to the floor for a vote before going to the president for signature.
Meanwhile, each house of Congress has authorizing committees to address any potential changes to mandatory spending or tax laws. These go to the Senate and House budget committees for a vote. A conference committee works out the differences.
The final bill goes to the floor for a final vote before going to the president. But the president typically doesn’t get them until September at the earliest. The president treats this bill like any other submitted by Congress. The Constitution dictates that they must either approve or veto it within the next 10 days. A veto means the process must start all over again.
Note
The president can also allow the budget to go forward without their approval.
October 1
This is the deadline by which all bills should be signed into law. Congress has two choices if this doesn’t happen. It can pass a continuing resolution to keep federal agencies running at their current levels, or it can allow a government shutdown.
A government shutdown means that all non-essential discretionary programs close, and workers are furloughed without pay. This happened in 2013, 2018, and 2019.
July 15
The president submits a Mid-Session Review of the budget to Congress.
The Role of the US Treasury
The Treasury Department’s Financial Management Services executes the budget once it’s in effect. This is the agency that makes payments, collects revenues and delinquent debt, and issues reports, including Treasury Statements.
When the Budget Process Isn’t Followed
Congress has only followed the budget process twice since FY 2010. Some experts argue that the process is inherently unworkable. It first shifts the burden of budgetary leadership to Congress, a body that’s not structured to take a leadership role. Then it demands a level of coordination that Congress isn’t set up to meet. Finally, it creates unrealistic deadlines.
Events since the mid-term elections in 2010 seem to support this argument. Republicans won a majority in the House thanks to the tea party movement. But Democrats controlled the Senate and the presidency. Republicans refused to support President Obama’s budgets and abandoned the budget process. They use the budget as a bargaining chip to achieve their goals.
FY 2011
The FY 2011 budget wasn’t approved until April 2011, six months behind schedule. Many government agencies almost shut down. Republicans were concerned about rising debt levels, so they cut discretionary spending by $38 billion.
FY 2012
The FY 2012 budget wasn’t approved until December 2011, two months behind schedule. Congress passed the Budget Control Act to reduce spending through sequestration.
FY 2013
The FY 2013 budget was never approved. Congress instead passed two continuing resolutions to keep the government running until the end of the fiscal year. These resolutions also incorporated the spending reductions mandated by sequestration.
FY 2014
The FY 2014 budget wasn’t approved, either. Republicans instead forced a government shutdown for 16 days. The government reopened when they finally agreed to enter a budget conference committee, which resulted in a compromise on Dec. 18.
FY 2015
The FY 2015 budget was approved on Dec. 13, 2014. The process was even more outside the norm. President Obama presented his proposed budget to Congress a month late on March 4, 2014. Then it took until Dec. 13 for the US Senate to pass the House of Representatives’ $1.1 trillion spending bill.
The spending bill outlined Congress’s appropriations for the remaining nine and a half months of FY 2015, but it only funded Homeland Security through February 2015, in protest of President Obama’s executive actions on immigration. The Bipartisan Budget Act set a cap on the discretionary portion of the FY 2015 budget, as well as the remainder of FY 2014.
FY 2016
The FY 2016 budget was passed on Dec. 18, 2015, only two months behind schedule.
FY 2017
The FY 2017 budget was never passed. A continuing resolution instead kept funding at FY 2016 levels.
FY 2018
The FY 2018 budget was passed after the government shut down twice. A continuing resolution kept the government running until March 23, 2018. Congress passed the Omnibus Spending Bill on that day to appropriate funds for the discretionary budget.
The first shutdown occurred on Jan. 19. Democrats opposed any bill that didn’t protect immigrants eligible for Deferred Action for Childhood Arrivals.
The second shutdown occurred for four and a half hours on Feb. 9. Senator Rand Paul objected to the bipartisan two-year spending bill. It added $320 billion to the debt by exceeding the spending caps imposed by sequestration.
Defense spending increased by $160 over two years billion to $700 billion. Sequestration limited it to $549 billion. Democrats added $128 billion for non-defense discretionary spending. Sequestration limited it to $516 billion. Tax provisions added $17 billion. The Senate passed the bill shortly after 1 am The House passed it at 5:30 am President Trump signed it immediately, ending the shutdown before government offices opened.
More Recent Events
The longest shutdown in US history began on Dec. 21, 2018. President Trump refused to sign the budget because it didn’t include $5.7 billion for a wall on the border with Mexico.
The government again lifted the debt ceiling in October 2021 in a bill that increased the debt ceiling by $480 billion. The national debt at the time was just over $28.4 trillion, permitted to rise to about $28.8 trillion. The ceiling was then increased yet again in December 2021 under President Joe Biden, this time by $2.5 trillion to nearly $31.4 trillion. This avoided a federal debt crisis.
Why Congress Uses the Debt Ceiling Instead of the Budget Process
Congress’s only tool to control the budget before 1974 was the debt ceiling. The ceiling was created in 1917. This gave it a very limited yes/no power.