Federal Budget Process

Who Creates the Federal Budget?

President George W. Bush (L) talks with former President Bill Clinton
U.S. President George W. Bush (L) talks with former President Bill Clinton during a photo-op with other former presidents and incoming President-elect Barack Obama in the Oval Office January 7, 2009 in Washington, DC. Ron Sachs-Pool/Getty Images

The federal budget process is a five-step plan that the U.S. Congress uses to create the federal budget. The 1974 Budget Control Act established the process.  It also expanded Congressional power over the budget in three ways.

First, it allowed 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.

Second, it created the Congressional Budget Office. The CBO provides non-partisan analysis to Congress to facilitate its review of the budget. The CBO analyzes the president's budget for each fiscal year. 

Third, it moved the beginning of the fiscal year from July 1 to October 1. That gives newly elected officials more time to review each year's budget. 

The U.S. Constitution, Article 1, section 7 gave Congress the power to raise revenue and spend. The House originates the bills, and the Senate amends them. The Budget Control Act centralized and consolidated that budget authority. 

How the Federal Budget Process Should Work

The budget process starts 12 months before each fiscal year. The fiscal year starts on the October 1 before the calendar year starts. That means FY 2018 began on October 1, 2017, and runs through September 30, 2018. The budget process for the FY 2018 budget began in the fall of 2016.

Early fall 2016. All federal agencies submit their budget requests to the Office of Management and Budget. OMB prepares and manages the budget for the president.

November 2016. The Bureau sends its budget review comments back to the agencies.

December 2016. Agencies submit their final budget requests to OMB.

The bureau then assembles the final budget and sent it to the incoming president.

January 2017. The deadline for a president to outlined his budget priorities in the State of the Union Address. The Council of Economic Advisors also submits the "Economic Report of the President." It analyzed economic trends. President Trump's SOTU was February 27, 2017.

The first Monday in February 2017. The president submits his budget to Congress. This is typically delayed for new administrations. Trump submitted the FY 2018 budget outline on May 23, 2017. The president's budget put his priorities into dollars and cents for three areas:

  1. Funding levels for federal agencies.
  2. Changes to mandatory programs already enacted by Congress. These include Medicare, Social Security, Medicaid, the Troubled Asset Relief Program, and the Affordable Care Act.
  3. Changes to the tax code. The budget must show the impact on federal revenue.

April 15th, 2017. 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. A combined Senate and House conference committee works out their differences.

The final resolution must be passed by majority votes in the House and Senate. Often Congress skips this step, and defaults to the prior year's resolution.

June 10th, 2017. Congress uses the budget resolution to guide appropriation bills. They specify funds for each agency in the discretionary budget. The House and Senate each has 12 Appropriations Subcommittees. They hold more hearing, 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 to 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 he 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 he must either approve or veto it within the next 10 days. A veto means the process must start all over again. The president can also allow the budget to go forward without his approval.

October 1st, 2017. Deadline to sign all bills into law. If this doesn't happen, Congress has two choices. It can pass a continuing resolution to keep federal agencies running at their current levels. The other choice is to allow a government shutdown. That means all non-essential discretionary programs close, and workers are furloughed without pay. This happened in 2013. For the FY 2018 budget, Congress passed a series of continuing resolutions.

July 15, 2018. The president submits a Mid-Session Review of the budget to Congress. 

Role of the U.S.Treasury

The Treasury Department's Financial Management Services executes the budget. This is the agency that makes payments, collects revenues and delinquent debt, and issues reports including the Treasury statements.

What Happens When the Budget Process Isn't Followed

Since the FY 2010 budget, Congress has only followed the budget process twice. Some experts argue that the budget process is inherently unworkable. First, it shifted the burden of budgetary leadership to Congress. That body is not structured to take a leadership role. Second, it demands a level of coordination that Congress is not set up to meet. Third, it creates unrealistic deadlines. 

The events since the mid-term elections in 2010 seem to support that argument. Republicans won a majority in the House thanks to the tea party movement. But Democrats controlled the Senate and the presidency. Republicans, refusing to support President Obama's budgets, abandoned the budget process. They used the budget as a bargaining chip to achieve their goals. don't approve a new budget, don't pass continuing resolutions to fund the government at current levels, don't raise the debt ceiling, thereby risking America's first-ever debt default.

The FY 2011 budget didn't get 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.

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

The FY 2013 budget was never approved. Instead, Congress 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

The FY 2014 budget wasn't approved, either.  Instead, Republicans forced a government shutdown for 16 days. The government reopened when they finally agreed to enter a budget conference committee, which resulted in a December 18 compromise.

The FY 2015 budget was approved on December 13, 2014, when the U.S. Senate passed the $1.1 trillion spending bill. But it only funded Homeland Security through February 2015. Congress was protesting President Obama's executive actions on immigration.

The FY 2016 budget was passed on December 18, 2015, only two months behind schedule.

The FY 2017 budget was never passed. Instead, a continuing resolution kept funding at FY 2016 levels.

Why Congress Uses the Debt Ceiling Instead of the Budget Process

Before 1974, Congress's only tool to control the budget was the debt ceiling, created in 1917. This gave it a very limited yes-no power. Now that the budget process is much better, why would Congress ever feel the need to use the debt ceiling at all?

 

 

Current Federal Budget