Skip Ribbon Commands
Skip to main content

 Email  Share  Print

A Brief Guide to the Federal Budget and Appropriations Process

December 30, 1899

hallway

 

The method for funding federal programs can seem extremely convoluted to the casual observer. It references jargon unique not just to Congress, but to budget and appropriations procedures as well. The process is expected to follow a rigid calendar and series of procedures, but those deadlines and procedures lately have rarely been followed. The complexity and apparent randomness of federal funding decisions can be terribly frustrating, as these funds are an increasingly large source of support to American higher education.

This brief guide is designed for non-experts as an overview of the federal budget and appropriations process and terminology. More detailed information on important topics (like Pell Grant funding, budget scoring rules and sequestration) will be published in future papers.

Some Basic Information

A small number of key concepts are important to understanding the federal funding process.

In the largest sense, the government funds a substantial and diverse range of programs and activities, from Pell Grants to scientific research to military operations. The overwhelming majority of federal spending (in terms of the dollars disbursed) consists of “mandatory spending,” sometimes called entitlements. In mandatory funded programs (like Social Security and Medicare), legislation defines the eligibility criteria for participation, and the government allocates funds to all who are eligible, regardless of the annual cost to the Treasury.

The other category of funding is known as “discretionary spending.” Nearly all federal funding that reaches colleges and universities comes through discretionary programs, though the largest student aid program, Pell Grants, combines both mandatory and discretionary funding streams. Discretionary-funded programs have annual allocations that set the total level of funding they can provide within that fiscal year. 

FY 2011 Discretionary Budget (Total: $1.21 trillion)


A final category of funding of interest to campuses is federal student loans. Student loans have terms set through legislation and are dispersed directly to institutions on behalf of student borrowers, who are then obligated to repay the Treasury under the terms of their individual loan. In this way, federal student loans work somewhat like an entitlement program in that the government does not set an annual loan amount to provide, and the terms of the loans and students’ ability to borrow are set in law.

The funding process is an annual event. Congress is tasked with producing a budget resolution and 12 appropriations bills for each federal fiscal year, which begins on Oct. 1. Other funding legislation, such as emergency funding in response to a natural disaster, frequently occurs outside of the standard process.

Both the House and Senate set their own rules for how funding bills are handled, but the impact on federal revenue (known as the “score”) is determined by the Congressional Budget Office (CBO). The CBO is also responsible for determining the baseline data used to assess the fiscal standing of the government under various criteria. This baseline data is used primarily to project future deficits or surpluses, but also to project the impact of legislation on federal revenues. The most frequently used baseline is a calculation of future federal spending, deficit and debt under the assumption that all current law remains unchanged.

The President’s Budget Request

The federal funding process begins with the submission of the president’s annual budget request to the Congress. Traditionally, this is done on the first Monday in February, though that date often slips, especially when new administrations take office.

The president’s budget request details the administration’s position on the full range of federal revenue and spending. The request encompasses economic projections and analysis, as well as detailed program-by-program funding levels proposed by the administration. It also projects deficits and surpluses for the government as a result of the recommendations in the budget for the immediate fiscal year, as well as the next nine fiscal years.

In addition, the administration uses the budget request to introduce new policies, programs or changes they would like to see enacted. The budget document overall runs several thousand pages, including related information, appendices and charts. It is prepared by the Office of Management and Budget (OMB), which functions as the chief administrative agency of the Office of the President. The OMB scores the program funding and policy changes detailed in the budget request.

It is important to remember that the president’s budget proposal is simply a request. It has no binding authority on Congress and is best understood as a detailed statement by the administration of its fiscal goals and policy preferences. Additionally, as the OMB often produces different scores than the CBO, the budget request often has different numbers than those Congress uses to make its decisions. 

From the President's FY 2013 Budget Request

FY 2012 appropriation
(in millions)
​FY 2013 request
(in millions)
One-year
change
Department of Education​ ​ ​ ​
​Student assistance
   Pell Grants (program costs)
$41,572
$36,118 -13%
   Supplemental Educational Opportunity Grants ​$735 ​$735 ​0%
   Federal Work-Study ​$977 ​$1,127 ​15%
   Student aid administration ​$1,043 ​$1,126 ​8%
   TEACH Grants ​$41 ​$11 ​-73%
   Graduate Assistance in Areas of National Need
​$31 ​$31 ​0%
   Teacher education assistance ​$41 ​$201 ​390%
New loans
   Stafford Loans ​$35,554 ​$32,044 ​-10%
   Unsubsidized Stafford Loans ​$58,468 ​$66,160 ​13%
   PLUS Loans ​$20,652 ​$22,618 ​10%
Aid to disadvantaged students
   TRIO programs ​$840 ​$840 ​0%
   GEAR UP $302​ ​$302 ​0%
Discretionary institutional assistance
   HBCUs
​$228 ​$228 ​0%
   Hispanic-Serving Institutions ​$100 ​$100 ​0%
   Tribal colleges ​$26 ​$26 ​0%
   Hawkins Centers of Excellence ​$0 ​$30 ​n/a
Career and technical education
   State grants ​$1,123 ​$1,123 ​0%
Education research and statistics
   Research, development & dissemination ​$190 ​$202 ​6%
   Statewide data systems ​$38 ​$53 ​39%
Fund for the Improvement of Postsecondary Education ​$4 ​$70 ​1,650%
​National Institutes of Health & National Science Foundation Research
NIH (program level) ​$30,072 ​$30,072 ​0%
NSF
   Total
$7,023
​$7,372 ​5%
   Research ​$5,689 ​$5,983 ​5%
   Education ​$829 ​$876 ​6%
   Major research equipment ​$197 ​$196 ​-1%
​   Agency operations & award management ​$299 ​$299 ​0%
 

Congressional Budgeting

The president’s budget request starts the process, and then Congress responds.

The first step in the funding process is the creation of a concurrent congressional budget resolution. The budget resolution has one key purpose, which is to set the total level of discretionary funding (known as the “302a allocation”) for the next fiscal year. While the resolution looks at total federal spending over a 10-year window, it is not binding beyond the approaching fiscal year.

The budget resolution is both similar to and different from traditional legislation. Like a legislative bill, budget resolutions originate in the relevant committee (in this case, the respective budget committees of each chamber) and must be approved by the whole chamber. Unlike a traditional bill, budget resolutions do not require presidential action and can pass with a simple majority, and the Senate is barred from filibustering votes on these bills.

Budget resolutions are supposed to be filed by April 15, although this has been rare in recent sessions. More commonly of late—particularly when the chambers are controlled by opposing parties— each chamber will pass its own resolution, or simply pass a “deeming resolution,” a simple resolution which sets the 302a allocation without advancing a budget.
Budget resolutions often include multiple policy proposals, usually along the lines of extending or rescinding various tax provisions, though occasionally as detailed as making changes to the Pell Grant eligibility formula. Due to their non-legislative status, these proposals are understood to be an effort by the majority to send a message about their fiscal priorities.

Congressional Appropriations

With the 302a allocations determined, the funding process moves to the appropriations committees in each chamber. Long considered one of the most powerful and prestigious committees on which to serve, Appropriations is responsible for determining program-by-program funding levels. This is done through 12 separate appropriations bills, each generated by a specific subcommittee, covering either individual or groupings of federal agencies. For example, the bill that covers traditional student financial aid and National Institute of Health funding is the Labor-Health and Human Services-Education and Related Agencies appropriations bill, and it covers the Departments of Labor, HHS, Education and a handful of small agencies like the Corporation for Public Broadcasting.

The chairs of the appropriations subcommittees, under direction of the appropriations committee chairperson, divide the 302a allocation among the 12 subcommittees. This allocation provides the total funding pool for each of the appropriations bills, known as the ‘302b allocation.’ In simple terms, the 302a allocation represents the size of the whole funding pie, while the 302b allocation is equivalent to the size of one of 12 slices of that pie.

Armed with their 302b allocation, the various subcommittees then divide that funding level among the programs under their authority. This process is accompanied by multiple activities. The most visible are public hearings by the subcommittees, where they invite the secretaries of the various agencies to testify on their budget requests. Simultaneously, legislators and their staff from outside the subcommittees submit requests for funding levels they would like to see, expressing their support for programs. Finally, committee staffers often meet with advocates of the programs to discuss the funding outlook.

The subcommittee staff then produces an appropriations bill that is brought to the full subcommittee for a vote. While it is possible to amend a bill in subcommittee, it is not common. If it passes, the bill is then taken up by the full committee, often with several amendments to the underlying bill.

This process works in identical fashion in both the House and Senate. It is not uncommon for the two chambers to have different 302a’s and 302b’s, with the resulting versions of the bill millions or billions of dollars apart. Even when the chambers work from similar allocation levels, differences often occur between the total funding levels for the many programs in each bill.

In addition, it has become increasingly common for appropriations bills to include policy changes, or “riders.” A common rider is language prohibiting an agency from using any of the funds included in the bill to perform a certain action that legislators oppose. Other riders may make policy changes in order to lower the overall cost of a program, such as changes to Pell Grant eligibility made to close a projected funding shortfall. These riders may vary significantly between the chambers, adding further complication to the process of passing a unified bill.

All appropriations bills are supposed to be passed in “regular order,” meaning the full passage through both chambers by the start of the federal fiscal year on Oct. 1. Failure to provide appropriations would result in a nearly complete shutdown of federal operations, although in practice, this rarely happens.

Over the last few years, few if any of the appropriations bills passed in regular order, even those enjoying wide bipartisan support such as the Defense and the Military Construction-Veterans Affairs bills. Instead, Congress often enacts a series of continuing resolutions (CRs), which are short-term spending bills that typically maintain funding levels at the previous year’s levels.

CRs can last for as little as a day but usually are for a number of weeks, and are renewed when negotiations extend beyond the new deadline. CRs also can contain policy provisions and revisions to funding levels. For example, the Leveraging Educational Assistance Partnership (LEAP) Program had its funding eliminated in the first of several CRs addressing FY 2012 appropriations. 

With so many bills and areas of possible disagreement between the House and Senate, it is not surprising that Congress has difficulty passing each appropriations bill in regular order. As the fiscal year ends, leadership in both chambers will often negotiate on passing all the bills together in one combined package, known as an omnibus bill. On certain occasions, where less controversial bills have been passed into law, a bundle of the remaining appropriations bills will be bundled to finish funding work, and this package is known colloquially as a “minibus.” The omnibus approach allows for greater range of negotiation than any individual bill would and also makes a possible presidential veto over a particular issue less likely.

Regardless of the final form the appropriations bills take, the final step in enacting program funding consists of the president signing the bills. As with more traditional legislation, the president has the authority to veto appropriations bills, and Congress can then attempt to override the veto. A two-thirds vote is required in both chambers to overturn a veto.

Emergency Spending and Deficit Legislation

While the standard budget and appropriations process is meant to encompass all federal operations, in practice, there are a number of occasions where the Congress and the president pass legislation outside the normal order that impacts federal budgeting and spending.

This course of action is most commonly seen in what is known as emergency funding. Emergency funding is essentially what it sounds like: supplemental funding provided in response to an unanticipated emergency, particularly natural disasters. Over the last decade, it has also become common to fund ongoing overseas military operations—most notably those in Iraq and Afghanistan—outside of the traditional defense appropriations bill through emergency appropriations. One of the appeals of this approach to lawmakers is that funding designated as emergency funding is not subject to the limits imposed by budget resolutions or committee allocations. As a result, emergency funding can mask total spending by a Congress.  

Other approaches to addressing federal spending have also been taken up outside of the regular process. Recent concern over federal spending has prompted several legislative efforts to address federal deficits and debts by setting limits on current and future spending levels, and creating mechanisms for enforcing these levels. Such efforts also were undertaken in the early 1990’s and 1970’s. The most recent example was the passage in August 2011 of the Budget Control Act (BCA), which created several extra-ordinary procedures to limit federal spending and reduce the debt. Such procedures usually focus on the big-picture, capping overall spending levels while leaving the decisions as to how to meet them up to Congress.

Other ACE News

 

 Related Content