The federal budget process refers to the multiple processes involving the executive and legislative branches that outline federal expenditures and revenues for the upcoming fiscal year. The Budget and Accounting Act of 1921 and the Congressional Budget Act of 1974 establish many of the procedures for formulating the budget. Key components include: the President’s budget request, the Congressional budget resolution, and the appropriations process.
The President’s Budget Request
The President’s budget request reflects the administration’s recommendations for overall spending and revenue for the upcoming fiscal year as well as the subsequent four fiscal years. It also includes a projected deficit or surplus for each year. The budget request is developed by the Office of Management and Budget in coordination with federal agencies. By the first Monday each February, the President must submit the budget request for the upcoming fiscal years to Congress.
The budget request includes detailed information on how much funding should be spent on various individual government programs. It thus serves as an outline of the President’s policy priorities for the upcoming year. Click here to see the President’s fiscal year 2015 budget request or here to see New America’s analysis of the President’s fiscal year 2015 budget request for education programs. Following submission of the President’s budget request, administration officials testify on the proposals presented in the budget before various Congressional committees.
The Congressional Budget Resolution
After the submission of the President’s budget request, Congress prepares a budget resolution. The budget resolution, which is drafted by the House and Senate Budget Committees each year, is an agreement between the two legislative chambers establishing both spending and revenue levels for at least the five upcoming fiscal years, as well as various rules and procedures governing the budget process in the House and Senate. By law, the budget resolution is considered in an expedited manner in both chambers. Most importantly, it cannot be filibustered in the Senate, allowing it to pass by a simple majority vote.
After the House and Senate pass a budget resolution it does not go the President; it is not actually legislation. The budget resolution is a set of self-imposed guidelines used to govern subsequent Congressional activity and procedures related to taxing and spending legislation. Nevertheless, it is a crucial step in establishing funding levels for education and other government programs. Spending and revenue decisions established in a budget resolution can pave the way for increases in education spending or make increases more difficult with procedural hurdles. The target date for adopting the budget resolution conference report is April 15th, though it is often adopted later. In some years, Congress fails to adopt a new budget resolution altogether.
Mandatory vs. Discretionary Spending
There are two types of spending in the federal budget process: discretionary and mandatory. Discretionary spending is spending that is subject to the appropriations process, whereby Congress sets a new funding level each fiscal year (which begins October 1st) for programs covered in an appropriations bill. Roughly one third, or about $1 trillion, of the federal government’s activities are funded through appropriations legislation. Most of the direct activities of the federal government, such as those of the Federal Bureau of Investigations and Department of Defense, are funded through the annual appropriations process.
Mandatory spending is simply all spending that does not take place through appropriations legislation. Mandatory spending includes entitlement programs, such as Social Security, Medicare, and required interest spending on the federal debt. Mandatory spending accounts for about two-thirds of all federal spending. In most cases, but not all, mandatory spending is on-going; it occurs each year absent a change in an underlying law that provides the funding. Discretionary spending, on the other hand, will not occur unless Congress acts each year to provide the funding through an appropriations bill. Tax legislation is treated as mandatory spending in many areas of the Congressional budget process.
Almost all education programs are discretionary spending programs, except for a small number of programs such as student loans, some vocational grants, school lunch, and a few tax benefit programs.
Budget Resolution Recommends Spending and Revenue Levels
Both mandatory and discretionary spending recommendations in the budget resolution are established through the use of 20 categories, known as “budget functions,” that encompass a general purpose, such as national defense or transportation. Budget function 500 includes funding for the Department of Education as well as other education and training programs housed in other agencies. After Congress passes a budget resolution, all mandatory and discretionary spending levels set in each of the budget functions are allocated to the Congressional committees (such as the Senate Health, Education, Labor and Pensions Committee) with jurisdiction over the programs within the functions. Each committee receives one spending allocation (called a 302(a) allocation) for the years covered in the resolution. Proposed legislation that exceeds a committee’s 302(a) allocation could face procedural hurdles during consideration in the House or Senate. These procedural hurdles are included in various federal budget laws and the budget resolution itself.
Total federal revenue levels are also established in the budget resolution. While the resolution does not establish laws that will raise or reduce taxes, the revenue levels in the resolution serve to put forth a “revenue floor.” If legislation is considered by the Senate or House that would cause revenue to fall below the floor in the years specified in the budget resolution, the relevant bill could face additional procedural hurdles during consideration.