Federal Budget And Its Process – An Overview

This article explains the US government’s federal budget process & what it entails. It covers important topics such as the definition of a budget, the approval process, what the President’s budget must show, who aids the President in preparing the budget, & how the federal budget process works. The article also explains in detail the seven steps involved in the budget process, including the President’s budget request, budget resolution, appropriations bills, authorization measures, revenue measures, budget reconciliation, & debt limit legislation. This article is a great resource for anybody, who is eager to learn more about the federal budgeting procedure in the United States.

Introduction

Every Year, on the First Monday in February, the President Submits a budget to congress. Before, going in Detail about the U.S. Government Budget -2023, it is pertinent for us to understand first what is budget and it’s Process. So let us first delve into that subject.

What is the Budget?

As a general definition a Budget is an Annual Financial Statement of an economy which shows Revenue and Expenditure of the Government. 

According to U.S. Senate “The budget contains estimates of federal government income and spending for the upcoming fiscal year and also recommends funding levels for the federal government.”

How does Budget get Approval?

As per the Budget and Accounting Act of 1921, the President should submit a budget to congress by the First Monday in February, every year. 

Based on the President’s recommendations as well as Congressional priorities the Congress then must pass appropriation bills. The Fiscal year starts on October 1, so if Congress does not pass all the appropriation measures by the start of fiscal year, then it has to enact a continuing resolution in to keep the government function.

What should the President’s Budget must show?

According to 31 United States Code (U.S.C.) Section 1105, the President should submit the Budget to the Congress – on or after the first January but not later than the first Monday in February each year. 

There are 38 (some consider 37(2) as 39) lists of contents that the President is required to submit as the part of the budget proposal under Section 1105.  The major list of contents are as follows:

1. Actual Receipts, Expenditures and Appropriations for the previous year
2. Estimated Expenditures, Receipts, Appropriations and proposed appropriations, of the Government for the current fiscal year.
3. Separate statements of amount for specified appropriation accounts and trust funds
4. Essential information about the debt of the Government.

However the following are the proposed spending plan of the President’s budget must show 

• The condition of the Treasury at the end of the last completed fiscal year.
• The estimated condition of the Treasury at the end of the current fiscal year.
• The estimated condition of the Treasury at the end of the next fiscal year if the budget proposals are carried out.

Who assists the President for preparation of Budget?

The Office of Management and Budget (OMB) is the coordinating office which assists the President in creation of President’s Budget. It gathers data from agencies and compile it into the final spending plan to be approved by the President.

The Budgeted amount depicts in totals for the current and upcoming fiscal years are only estimated/projected. The President Budget plans for the upcoming fiscal year in the Annual Documents provides a complete description about the estimated amount of expenditure (or Spending) for Congress, State & Local Governments, and the Public. 

How does the federal budget process work?

The Budget process has Seven Steps which are as follows:

1.  President’s budget request
2. Budget resolution
3. Appropriations bills
4. Authorization bills
5. Revenue measures
6. Budget reconciliation
7. Debt limit legislation and raising the U.S. debt ceiling

1. President’s Budget Proposal

According to 31 United States Code (U.S.C.) Section 1105, the President should submit the Budget to the Congress – on or after the first January but not later than the first Monday in February each year. This Budget outlines estimated Expenditure, Revenue, and details the administration’s policy & spending priorities. 

2. Budget Resolution

A holistic approach to Revenue and Expenditure which may result in Deficit or Surplus of the Federal Government is known as Budget resolution. It is a blueprint to govern internal decision-making of the Federal Government. This doesn’t go to the president – as the Lawmaker have often skipped this step during the recent years. Instead they work out a series of two-year deals, set by law, which increased the spending limits. 

During the fiscal years 2011 to 2013, and also for 2023, the Senate didn’t adopt Budget resolutions. In fact, in 2011 The House didn’t adopt a Budget resolution. In 2017, the Budget resolution was adopted after four months into fiscal year, that is, in January.

3. Appropriations Bills:

Based on the President’s proposal/recommendation as well as Congressional Priorities, the Federal Agencies receive funds for the Fiscal Year through appropriation bills passed by Congress. 

4. Authorization Measures:

There are three kind of Authorization measures. In an authorizing measure government can create/establish department, programs, and agencies. It can continue or modify these agencies as well as programme for a fixed or indefinite period.

There are authorization measure where set of rules are framed for how they’re operation and set funding levels. There are some Mandatory programme where authorization bills provide funding for one or more years without any action. But, most of the authorization measure requires congressional appropriation action – this is known as discretionary. 

5. Revenue measures

The Revenue measures are measures to increase tax rates, credit and rules. There are some tax las which have expiration dates, while some taxes are permanent. For the taxes which have expiration dates, Congress will revisit tax rates, credit and other rules of those taxes. But, mostly Congress doesn’t have to act each year on raising revenue measures. 

6. Budget reconciliation

Under the Congressional Budget act of 1974, the reconciliation process was created. The Congress uses this Special legal process to advance spending and tax policies through the Senate with a simple majority. This allows expedited consideration of certain spending, credit, taxes, and debt ceiling for a given fiscal year. The budget resolution shall contain instructions for reconciliation to achieve specified budgetary result. Most of the time Reconciliation affects revenue, expenditure (direct), and balances receipts but not discretionary spending. 

7. Debt limit legislation including raising the Debt Ceiling

There are limit for the Federal Government on the Debt that can be incurred by them (i.e Federal Government). Congress can increase the Debt ceiling or suspend the Debt limit for Certain period of time to allow the Government to take Steps to finance the deficit (or) surplus (i.e. differences between amount of revenue and amount of spending) required by the law. 

Conclusion

The U.S. federal budget is an annual financial statement that shows the government’s revenue & expenditure. The budget resolution is a holistic approach to income & expenditure that governs the internal decision-making of the federal government.

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