Similar to how people create a budget to keep track of their finances and manage spending, the United States federal government does too. Each year in early spring, the President will release their proposed federal budget for the upcoming year to Congress. The fiscal year begins on October 1 and ends on September 30. This proposed budget, known as the federal budget, will be edited once it is sent to Congress, but it is important because it lays out the President’s priorities for the upcoming year. The budget can be broken down into three main categories: 1) Mandatory Spending. This category is the majority of the budget and is dominated by earned-benefit or entitlement programs like Medicare and Social Security. The spending levels for these programs are generally determined by eligibility rules, which include factors such as age, earnings or qualifying disability. The recommendation by the White House for mandatory spending therefore does not typically include binding funding limits. Congress decides this part of the budget separately from the following categories by reviewing eligibility rules of specific programs, which in turn can increase or decrease this part of the budget based on who is eligible (1). 2) Discretionary Spending.This category is broken into two smaller categories, Defense and Non-Defense Discretionary. The Discretionary Spending category is determined by Congress each year through the annual appropriations process, which is described in detail below. Appropriations refers to the sum of money the President and Congress agree upon for a specific part of the budget. Discretionary spending incorporates everything from military programs (Defense) to the amount of money that is put toward funding science (Non-Defense), among many other things. 3) Interest on National Debt. This category makes up the final percentages of the budget. This amounts to the interest the government pays on the country’s accumulated debt, minus the interest income received by the government on assets it owns. The current national debt is about $28 trillion. The Congressional Budget Office projects that the 2021 national debt will total $2.3 trillion for the year. Together, mandatory spending and discretionary spending account for ~90% of the overall budget each year (1). For the Fiscal Year (FY) 2020, the federal budget totaled $4.8 trillion, and revenues brought in $3.4 trillion. FY2021 proposed budget totaled $4.8 trillion (2), and the percent originally allocated to each main category in the proposed budget is shown in the pie chart below. The FY2021 budget was ultimately passed as a $2.3 trillion consolidated spending bill on December 27, 2020 (3). This Bill contained $900 billion in COVID-19 relief in addition to an omnibus spending Bill, which we describe in more detail below. The FY2022 Discretionary Request was released by the White House on April 9, 2021 (4). The full budget request should be made public soon. Next week, we will highlight the main components of the Discretionary Request for some of the science-related Agencies. This is important for anyone interested in science because the budget directly impacts how much money will be available for directly funding scientific innovation. If you’re interested in reading more about funding for science and science-focused engagement, check out a great resource by Hetherington & Phillips 2018 (5) The federal budget and appropriations process happens in three stages: 1) Budget formation by the White House (typically, July-February) 2) Legislative process in Congress (March-June) 3) Finalization of spending levels in Congress (July-October) The purpose of the proposed budget is to recommend amounts of government spending for public purposes, amount that should be received from tax revenues, and the surplus between the two (1). Typically, federal spending exceeds the amount taken in from tax revenues. This results in a deficit for the year and contributes to the overall national debt (6). The budget formation process begins in the Executive Branch with a collaborative effort between federal agencies and the Office of the President. The President’s Office of Management budget (often referred to as OMB) provides guidance for levels of funding and priorities to federal agencies, which in turn have to propose budgets within those guidelines. Using the proposed budgets from federal agencies, the OMB then makes final decisions to form a proposed, all-encompassing federal budget for the upcoming fiscal year. The budget request should be submitted to Congress by the first Monday in February. However, this process can be delayed if Congress has delayed action on the prior year’s budget or oftentimes when a new administration is transitioning. For example, the Biden Administration released their proposed FY2022 discretionary request on April 9 this year. Once Congress receives the budget request, the House of Representatives and the Senate independently review it. Each chamber creates a resolution to cap overall spending on the Discretionary portion of the budget. From there, a mixed bi-partisan committee of House and Senate members resolves differences between the two resolutions. The House and Senate then divide the resolved Discretionary budget outlined by the resolution among their 12 subcommittees. These 12 subcommittees draft their own appropriations bill which allows them to set the funding for each agency (NASA, USGS, NOAA, etc.) within their individual scope. For example, the Commerce, Justice, and Science subcommittee would draft a bill to set the spending limit on NASA and other agencies within their scope, but would not set a limit on any agency in the Energy and Water Development subcommittee. The 12 subcommittees are:
Once each subcommittee creates their appropriations bill, it will undergo a vote by members of the House/Senate (wherever it was drafted). Once voted on and passed, all 12 bills from the House and 12 bills from the Senate will go back to the mixed bi-partisan committee of House and Senate members to consolidate and agree. The resolved appropriations bills then go to the President to be signed into law. Ideally, this all happens before October 1st. If it doesn’t, a government shutdown would begin. Benefits
The budget has to be agreed upon by Congress regardless of political party, which requires collaboration and working across the aisle. Additionally, a balanced federal budget is essential for avoiding excessive spending, and allows Congress to target areas that are in need. Typically, the budget reflects the values and priorities of society. Challenges It can be very difficult to get the House and Senate to agree - since 2010 the two chambers haven’t easily come to a conclusion. If October 1 comes around and the President hasn’t signed a new budget into law for the coming year, many government services stop. If Congress can’t agree on a single budget to pass to the President, an Omnibus bill can be passed by Congress, which includes multiple funding areas. This can be passed into law and serve as a budget for the coming year. The national debt is extremely high and continues to grow as revenue is typically less than spending. Footnotes:
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