What are appropriations?
Appropriations are annual decisions made by Congress about how the federal government spends some of its money. In general, the appropriations process addresses the discretionary portion of the budget – spending ranging from national defense to food safety to education to federal employee salaries, but excludes mandatory spending, such as Medicare and Social Security, which is spent automatically according to formulas.
How does Congress determine the total level of appropriations?
Under current law, after the President submits the Administration’s budget proposal to Congress, the House and Senate Budget Committees are each directed to report a budget resolution, which if passed by their respective houses, would then be reconciled in a budget conference (see Q&A: Everything You Need to Know About a Budget Conference). The resulting budget resolution, which is a concurrent resolution and therefore not signed by the President, includes what is known as a 302(a) allocation that sets a total amount of money for the Appropriations Committees to spend. For example, the conferenced budget between the House and Senate set the 302(a) limit for FY 2016 at $1.017 trillion.
In addition, discretionary spending is currently subject to statutory spending caps. The Budget Control Act of 2011 set discretionary caps through 2021, which were modified for 2013, 2014, and 2015 by the American Taxpayer Relief Act of 2012 and Bipartisan Budget Act of 2013. Beyond 2015, the statutory caps set by the Budget Control Act are reduced by about $90 billion annually through an enforcement mechanism known as “sequestration” (see Understanding the Sequester) implemented after the failure of the Joint Select Committee on Deficit Reduction to produce legislation to reduce the debt.
How does Congress allocate appropriations?
Once they receive 302(a) allocations, the House and Senate Appropriations Committees set 302(b) allocations to divide total appropriations among 12 subcommittees, each dealing with a different part of the budget. Those subcommittees must then decide how to distribute funds within their 302(b) allocations. These 302(b) allocations are voted on by the respective Appropriations Committees but are not subject to review or vote by the full House or Senate. The table below lists the FY 2015 regular (non-war, non-disaster) appropriations, along with the House FY 2016 302(b) allocations for each of the subcommittees.
Each subcommittee must propose a bill that ultimately must pass both chambers of Congress and be signed by the President to take effect. Although the budget process calls for 12 individual bills, many of them are often combined into what is known as an omnibus appropriations bill and sometimes a few are combined into what has been termed a minibus appropriations bill.
How are appropriations levels enforced?
If any appropriations bill or amendment in either house exceeds the 302(b) allocation for that bill, causes total spending to exceed the 302(a) allocation, or causes total spending to exceed statutory spending caps, then any Member of Congress can raise a budget “point of order” against consideration of the bill. The point of order can be waived by a simple majority in the House as part of the rule for floor consideration of the bill and overridden by a 60-vote majority in the Senate. If, despite these points of order, Congress enacts legislation increasing spending beyond the defense or non-defense caps, then the President must issue a sequestration order to reduce discretionary spending across-the-board in the category in which the caps were exceeded, effective 15 days after Congress adjourns for the year. Importantly, certain types of discretionary spending – including for overseas contingency operations and for designated emergencies – do not count against the statutory caps.
What happens if funds are needed outside of the appropriations process?
Congress can pass a supplemental appropriations bill in situations that require additional funding immediately, rather than waiting until the following year’s appropriations process. Supplementals are often used for emergencies such as natural disasters or military actions. Occasionally, Congress has used supplemental appropriations to stimulate the economy or to provide more money for routine government functions after determining that the amount originally appropriated was insufficient. Supplemental appropriations bills are subject to the same internal and statutory spending limits as regular appropriations. They require the same offsets to ensure they do not exceed spending limits, unless designated as emergency spending.
What role does the President play in the appropriations process?
Although the President has no power to set appropriations, he influences both the size and composition of appropriations by sending requests to Congress. Specifically, each year the President’s Office of Management and Budget (OMB) submits a detailed budget proposal to Congress based on requests from agencies. The appendix to the President’s budget submission contains much of the technical information and legislative language used by the Appropriations Committees. In addition, the President must sign or veto each of the 12 appropriations bills, giving him additional influence over what the bills look like.
What is the timeline for appropriations?
The 1974 Budget Act calls for the President to submit his budget request by the first Monday in February and for Congress to agree to a concurrent budget resolution by April 15th. The House may begin consideration of appropriations bills on May 15th even if a budget resolution has not been adopted, and is supposed to complete action on appropriations bills by June 30th. However, none of these deadlines are enforceable and they are regularly missed. The practical deadline for passage of appropriations is October 1st, when the next fiscal year begins and the previous appropriation bills expire. For a full timeline of the budget process, click here.
What happens if appropriations bills do not pass by October 1st?
If the appropriations bills are not enacted before the fiscal year begins on October 1st, federal funding will lapse, resulting in a government shutdown. To avoid a shutdown, Congress may pass a continuing resolution (CR), which allows for continued funding, providing additional time for completion of the appropriations process. If Congress has passed some, but not all, of the 12 appropriations bills, a partial government shutdown can occur.
What is a continuing resolution?
A continuing resolution, often referred to as a CR, is a temporary bill that continues funding for all programs based on a fixed formula, usually at or at least based on the prior year funding levels. Congress can pass a CR for all or just some of the appropriations bills. CRs can increase or decrease funding and can include “anomalies,” which adjust spending in certain accounts to avoid technical or administrative problems caused by continuing funding at current levels, or for other reasons.
What happens during a government shutdown?
A shutdown represents a lapse in available funding, and during a shutdown the government stops most non-essential activities related to the discretionary budget. To learn more, see Q&A: Everything You Should Know About Government Shutdowns.
Do agencies have any discretion in how they use funds from appropriators?
Executive branch agencies must spend funds provided by Congress in the manner directed by Congress in the text of the appropriations bills. Appropriations bills often contain accompanying report language with additional directions, which are not legally binding but are generally followed by agencies. And in some instances, Congress will provide for very narrow authority or can use funding limitation clauses to tell agencies what they cannot spend the money on. That said, Congress often provides broad authority, which gives agencies more control in allocating spending. Agencies also have some authority to reprogram funds between accounts after notifying (and in some cases getting approval from) the Appropriations Committees.
What is the difference between appropriations and authorizations?
Authorization bills create, extend, or make changes to the law and specific programs and specify the amount of money that appropriators may spend on a specific program (some authorizations are open ended). Appropriations bills then provide the discretionary funding available to agencies and programs that have already been authorized. For example, an authorization measure may create a food inspection program and set a funding limit for the next five years. However, that program is not funded by Congress until an appropriations measure is signed into law. The authorization bill designs the rules and sets out the details for the program, while the appropriations bill provides the actual resources to execute the program. In the case of mandatory spending, an authorization bill both authorizes and appropriates the funding for a specific program, without requiring a subsequent appropriations law.
Where are the House and Senate in the current appropriations process?
The Senate and House have set a 302(a) allocation level of $1.017 trillion for regular appropriations pursuant to the budget conference agreement. The House has passed the agreement and the Senate is expected to do so in the near future. The House Appropriations Committee has issued the 302(b) subcommittee allocations (see table above), while the Senate has yet to do so. Currently, the House is passing individual appropriations bills through committee and has already begun floor consideration, while the Senate is holding subcommittee hearings. To follow the progress of individual appropriations bills throughout the process, see our Appropriations Watch: FY 2016.
This year, Congress made it a priority to pass a concurrent budget resolution. Both the House of Representatives and Senate passed their own budget plans at the end of March, and now they must work through the differences in the two budgets through a budget conference committee. This week, both chambers began the process and appointed conferees to serve on the committee. Below, we explain how this budget conference will work, and what it intends to accomplish.
What is a budget conference?
A budget conference is a process by which the House and Senate iron out the differences in the budget resolutions they each passed separately to arrive at a unified “concurrent budget resolution” that each chamber will then adopt. The leaders of each party and budget committee in both houses choose members to participate in the conference committee.
Over what time period will the conference negotiate?
According to the Budget Act of 1974, which created the current budget process, a budget conference is supposed to be completed and the resolution passed by both chambers by April 15th. Obviously, Congress has not met this deadline – and indeed it is routinely missed. However, Senate Budget Committee Chairman Mike Enzi (R-WY) and House Budget Committee Chairman Tom Price (R-GA) have already been negotiating ahead of a formal conference, and formal negotiations will begin shortly now that conferees have been named. A formal meeting of the conference committee will occur on April 20th, after which a timeline for completion may become clearer.
Who is in the budget conference?
The budget conference committee will consist of 30 lawmakers – 22 from the Senate and 8 from the House of Representatives. Of the Senate members, 12 are Republicans and 10 are Democrats (including two independents caucusing with Democrats). Of the House members, 5 are Republicans and 3 are Democrats. The conference committee is chaired by Representative Tom Price (R-GA) and Senator Mike Enzi (R-WY), and includes Representatives Diane Black (R-TN), Mario Diaz-Balart (R-FL), John Moolenaar (R-MI), Gwen Moore (D-WI), Todd Rokita (R-IN), Chris Van Hollen (D-MD), and John Yarmuth (D-KY) and Senators Kelly Ayotte (R-NH), Tammy Baldwin (D-WI), Bob Corker (R-TN), Mike Crapo (R-ID), Tim Kaine (D-VA), Angus King (I-ME), Lindsey Graham (R-SC), Chuck Grassley (R-IA), Ron Johnson (R-WI), Jeff Merkley (D-OR), David Perdue (R-GA), Rob Portman (R-OH), Bernie Sanders (I-VT), Jeff Sessions (R-AL), Debbie Stabenow (D-MI), Pat Toomey (R-PA), Mark Warner (D-VA), Sheldon Whitehouse (D-RI), Roger Wicker (R-MS), and Ron Wyden (D-OR).
Today, the Congressional Budget Office (CBO) released its re-estimate of the President’s FY 2016 budget, using its own economic and technical assumptions. While CBO generally shows lower debt in the near term than the Office of Management and Budget (OMB) did, it also shows debt on a slight upward path as a share of GDP after 2020. Thus, it is less likely that the budget would stabilize debt over the long term, as OMB’s projections showed.
According to CBO, debt held by the public in the President’s budget would reach 73.1 percent of GDP by 2025, 1 percentage point lower than in 2014 (and about what OMB estimated), but 1 percentage point higher than in 2020. In dollars, debt would rise from about $13.1 trillion today to $20.1 trillion by 2025.
CBO projects debt under the President’s budget would be $1.1 trillion lower than in CBO’s current law baseline in 2025. Those savings can be mostly attributed to two factors: increased revenue and reductions in war spending that are largely already expected to occur.
CBO projects annual deficits would fall from $486 billion (2.7 percent of GDP) in 2015 to $380 billion (2.0 percent of GDP) in 2016 before rising in every subsequent year to over $800 billion (2.9 percent of GDP) by 2025. Both spending and revenue will be growing as a share of GDP over this period, but spending will increase slightly faster, from 20.5 percent in 2015 to 22.1 percent in 2025, while revenue will rise from 17.8 percent to 19.2 percent. These increases are the result of both current law trends and policy changes proposed in the President’s budget.
CBO estimates deficits through 2025 will be $206 billion higher under the President’s budget than OMB estimates, with more than the entire difference ($345 billion) coming from differences in economic projections. In the other direction, $139 billion of technical differences reduced deficits relative to what OMB estimated. In addition, using CBO’s GDP instead of OMB’s results in the 2025 debt-to-GDP ratio being one percentage point higher.
Ultimately, CBO shows that while the President’s budget responsibly offsets its new spending, it does not go far enough in reducing the debt to ensure fiscal sustainability over the long term.
Read the full paper below, or download a printer-friendly version here.
Update 3/16/2015: This document was updated to correct several typographical and formatting errors.