United States budget process Totally Explained

Everything about United States Budget Process totally explained

The process of creating the budget for the United States Government is known as the budget process. The framework used by Congress to formulating the budget was established by the Budget and Accounting Act of 1921, the Congressional Budget and Impoundment Control Act of 1974, and by other budget legislation.

The President's budget request

Congressional consideration of the federal budget begins once the President submits a budget request. The President of the United States submits his/her budget request each year to Congress for the following fiscal year, as required by the Budget and Accounting Act of 1921. Current law (31 U.S.C. 1105(a)) requires the President to submit a budget no earlier than the first Monday in January, and no later than the first Monday in February. Typically, Presidents submit budgets on the first Monday in February.
The President's budget request constitutes an extensive proposal of the administration's intended spending and revenue plans for the following fiscal year. The budget proposal includes volumes of supporting information intended to persuade Congress of the necessity and value of the budget provisions. These documents are available at the Office of Management and Budget. Funding requests for all federal independent agencies and cabinet departments are included in the President's budget request, and each agency and department provides additional detail and supporting documentation to Congress on its own funding requests.

Budget resolution

The next step is the drafting of a budget resolution. The House and the Senate budget committees both are responsible for drafting budget resolutions. Following the traditional calendar, by early April both committees finalize their drafts and submit it to the respective floors for consideration and adoption.
A budget resolution, which is one form of a concurrent resolution, binds Congress, but isn't a law, and so doesn't require the President's signature. The budget resolution serves as a blueprint for the actual appropriation process, and provides Congress with some control over the appropriations process. No new spending authority, however, is provided until Appropriation bills are enacted.
Once both houses pass the resolution, selected Members of the Senate and the House typically negotiate a conference report to reconcile differences between the House and the Senate versions. The conference report, in order to become binding, must be approved by both the House and Senate.

Fiscal year

The federal government's fiscal year currently begins on October 1st. The federal fiscal year's starting date was shifted from July 1 to October 1 in 1976. The period between the end of FY1976 and the start of FY1977 was called the Transition Quarter. An earlier shift in the U.S. government's fiscal year was made in the 1850s.

Structure of the budget

Fundamentally, the budget resolution is structured along 20 budget functions, which are simply categories of spending. Functional categories often cut across agency lines. For example, the National Defense function includes certain Department of Energy programs as well as Department of Defense programs. Functions are further subdivided into "subfunctions."
A listing of the budget functions can be found below.

Function	Title	FY 2005 ($ million)
050	National Defense	423,098
150	International Affairs	29,569
250	General Science, Space and Technology	24,459
270	Energy	1,883
300	Natural Resources and Environment	30,286
350	Agriculture	22,353
370	Commerce and Housing Credit	8,092
400	Transportation	69,494
450	Community and Regional Development	12,949
500	Education, Training, Employment and Social Services	91,817
550	Health	248,780
570	Medicare	293,574
600	Income Security	342,324
650	Social Security	516,457
700	Veterans Benefits and Services	65,444
750	Administration of Justice	40,781
800	General Government	19,392
900	Net Interest	177,909
920	Allowances	(798)
950	Undistributed Offsetting Receipts	(63,108)
Total:		2,354,755

Estimated budget authority as presented in the President's budget (in million USD)

Discretionary vs. mandatory spending

Each function within the budget contains some line items as discretionary and some as mandatory spending. Discretionary spending requires an annual appropriation bill, which is a piece of legislation. Discretionary spending is typically set by the House and Senate Appropriations Committees and their various subcommittees. Since the spending is typically for a fixed period (usually a year), it's said to be under the discretion of the Congress. Some appropriations last for more than one year (see Appropriation bill for details). In particular, multi-year appropriations are often used for housing programs and military procurement programs. Mandatory spending refers to spending enacted by law, but not dependent on an annual or periodic appropriation bill. Most "mandatory" spending consists of entitlement programs such as Social Security benefits, Medicare, and Medicaid. These programs are called "entitlements" because individuals satisfying given eligibility requirements set by past legislation are entitled to Federal government benefits or services. Many other expenses, such as salaries of Federal judges, are mandatory, but account for a relatively small share of federal spending. The Congressional Budget Office (CBO) estimates costs of mandatory spending programs on a regular basis. Congress can affect spending on entitlement programs by changing eligibility requirements or the structure of programs. Food Stamps is considered an "appropriated entitlement."

Authorization and Appropriations

In general, spending for federal government programs must be authorized and then appropriated. In principle, committees with jurisdiction to authorize programs make policy decisions, while appropriations committee and their subcommittees decide on funding levels up to the maximum permitted by a program's authorized funding level. In practice, the separation between policy making and funding, and the division between appropriations and authorization activities are imperfect.

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