President Submits Budget to Congress

Although the Constitution does not require the President to present an annualbudget, in 1921 the Budget and Accounting Act became law and lay the foundationfor the modern budget process, which includes the President's budget. Morerecently, the Congressional Budget and Impoundment Control Act of 1974 establisheda timetable for the annual budget process, which is kicked off each yearby the Presidential budget submission. The Budget Act specifies that thePresident's budget should be presented to the Congress on or before thefirst Monday in February. This generally coincides with the timing of thePresident's annual State of the Union Address before the Congress.

The President's budget is generally viewed as a detailed outline of theAdministration's policy and funding priorities, as well as a presentationof the economic outlook for the coming fiscal year. The President's budget,which estimates spending, revenue and borrowing levels, is compiled frominput by the various federal agencies, with funding broken down by budgetfunction categories. This document is normally quite detailed, often comprisingseveral thick volumes of text, charts and graphs.

While the Congress is not bound to adhere to the President's budget -- andoften diverges significantly from it -- normally the President's requestis considered as a starting point for the Congressional budget process.Since the President's signature is ultimately required to implement spending,policy and revenue actions, the Congress ignores the President's prioritiesat the peril of losing out on its own.

House and Senate Budget Committees Reportthe BudgetResolution

The Congressional Budget Act specifies a series of provisions that mustbe included in the annual Congressional Budget Resolution, a concurrentresolution that must ultimately pass both the House and the Senate in identicalform -- but does not require signature by the President.

The budget resolution provides the Congress with an opportunity to lay outits spending, revenue, borrowing and economic goals -- as well as providingthe vehicle for imposing internal budget discipline through establishedenforcement mechanisms.

The Budget Committees of the House and the Senate hold hearings on the matterof the annual budget resolution, taking testimony from Administration officials,Members of Congress and expert witnesses. Then the committees "mark-up"their respective resolutions. This process allows members of the BudgetCommittees to offer amendments and make changes to the starting text, whichis usually presented by the Chairman. The Budget Act timetable specifiesthat the Budget Committee should receive views from other committees byFebruary 25 of each year. The Budget Act also specifies that the SenateBudget Committee should report its version of the budget resolution by April1 of each year. No specific reporting date is specified for the House althoughit is generally understood that House Budget Committee action will proceedconcurrently with that in the Senate.

The budget resolution, which covers the upcoming fiscal year and at leastfive ensuing fiscal years, must contain spending limits for discretionaryspending that serve as an internal control on spending through the Appropriationsprocess. In recent years, as the budget resolution has become a blueprintfor achieving a balanced budget, the budget resolution has included illustrativelists of program reforms to achieve that goal.

The budget resolution may contain instructions for various committees ofthe House and Senate to make changes in the laws governing entitlement programs.In addition the budget resolution must include a projection of annual budgetdeficits, as well as a statement of the aggregate federal debt.

Full House and Senate Consider Budget Resolution

Once the Budget Committees have marked-up and reported their budget resolutions,the full House and Senate take action. Although the Budget Act outlinesthe procedures for floor consideration of the budget resolution in bothbodies, in the House, the budget resolution traditionally is granted a specialrule by the Rules Committee to dictate the terms of floor consideration.

In recent years, the House has followed a policy of allowing only completesubstitute budget resolution proposals to be considered as amendments --and an additional requirement has been added in this Congress that all proposedsubstitutes must achieve a balanced budget within a set period of time.The Senate has generally operated under fewer constraints.

House and Senate work out differences in Conference

Once the House and Senate each pass their versions of the budget resolution,each body appoints conferees -- negotiators -- from their bi-partisan membershipto meet and work out differences. The goal of these negotiations is to cometo agreement on a single version of the budget resolution, which must besigned by at least half of the conferees of each body.

Full House and Senate Consider Conference Agreement

Both the House and the Senate must pass (by majority vote) the conferenceagreement version of the budget resolution. In the House, this conferenceagreement usually is considered first by the Rules Committee, which setsthe terms of the floor debate. In the Senate, debate on the conference agreementis proscribed by the Budget Act or by unanimous consent agreements on theSenate floor.

The Budget Act specifies that Congress should complete action on its budgetresolution by April 15 of each year.

Once the budget resolution conference agreement is adopted by both the Houseand the Senate, its terms govern the remainder of the budget process forthat year. The budget resolution does not require Presidential signature,although its terms are binding internally on the actions of the Congressthroughout the budget process.

Budget Resolution Must Contain Spending Allocations

Among the provisions in the budget resolution are spending allocations,the annual limits on discretionary spending, affectionately referredtoas the 302 (a) and 602(a) allocations -- this term is derived from the sectionsin the Budget Act that specify the process for allocating this money. Thesespending allocations are provided for the coming fiscal year and at leastthe ensuing five fiscal years. Levels are provided for budget authorityand for outlays for each of the relevant years.

The aggregate spending allocation provided by the budget resolution fordiscretionary spending serves as an internal control, enforceable throughpoints of order and other procedural mechanisms. The Appropriations Committeesin the House and the Senate may not exceed these aggregate totals in theirwork on the annual spending process.

House and Senate Appropriations Committees Develop 13 Spending Bills

When the Appropriations Committees receive the totals from the budget resolution,they divide the aggregate allocations into suballocations (affectionatelyknown as 302(b)'s and 602(b)'s after the operative sections of the BudgetAct) for each of their 13 Appropriations Subcommittees. In other words,the Committee takes the total discretionary spending pie (the aggregateallocations) and divides it into 13 pieces (the suballocations).

Once the 13 subcommittees receive their suballocation totals, each subcommitteebegins work on their annual spending bills for the areas of government operationsthey cover. The subcommittees work off the Administration's budget request,as well as previous year's spending bills, incorporating any new prioritiesthat they have.

Once the subcommittees complete their work, the 13 spending bills are considered,can be amended and ultimately must be approved by the full AppropriationsCommittee.

The ideal model for this process is that all funding that is approved forspending programs through the Appropriations cycleshould have already been authorized (established in law) by the Congress.The House and Senate have committees whose job it is to oversee and authorizefederal programs. These so-called authorizing committees cover all aspectsof the federal government and frequently consider one- or multi-year authorizationbills for the programs in their jurisdiction. There is a rule in the Houseagainst appropriating funds for programs that have not been authorized.

In practical terms, however, many programs do not have current authorizationbecause of the difficulty in completing authorization bills. As a result,the rule is often waived and many programs receive annual funding throughthe Appropriations process without having been previously authorized. Thiscan lead to additional struggles in the committees and on the floor of eachHouse regarding spending priorities.

Full House and Senate Consider 13 Annual Spending Bills

Although the Constitution designates the House as the House of Revenue,meaning revenue bills must originate in the House, there is no similar requirementenumerated for spending bills. However, by tradition Appropriations billsoriginate in the House. The Budget Act specifies that the House may beginconsideration of annual Appropriations bills by May 15 and the AppropriationsCommittee should be finished with its work on the 13 bills by June 10.

In the House, Appropriations Bills have privileged status, meaning thatthey can come straight from the Appropriations Committee to the floor ifthey don't violate any of the standing rules of the House. In recent times,however, given the extraordinary pressure to reduce federal spending, giventhe numbers of programs that have not been authorized, and given the tendencyto include in spending bills policy matters not directly related to theexpenditure of funds, most Appropriations bills have come to the Rules Committeefor special floor debate procedures.

If a special rule is granted by the Rules Committee governing floor considerationof an Appropriations bill, the House must first agree to that special rulebefore it may consider the spending bill itself. Then the House will proceedto consider the spending bill and any amendments to it that conform withthe rules for debate.

In the Senate, terms of debate on Appropriations bills are governed by thenormal procedures of the Senate.

Appropriations bills must be passed by majority vote in both the House andthe Senate.

House and Senate work out differences in Conference

Upon passage of their respective Appropriations bills, the House and Senateeach appoint conferees -- negotiators -- to meet and work out differencesin their respective versions of the bills. Ultimately they must agree onone version that can achieve the support of at least half of the confereesand that can pass both the House and Senate by majority vote.

These conferences must occur on all 13 Appropriations bills.

Full House and Senate Consider 13 Conference Agreements

Once the conference agreements are completed, both the House and the Senatemust approve them by majority vote.

The Budget Act specifies that final House action on conference agreementsfor the 13 spending bills should occur by June 30.

President May Sign or Veto the Appropriations Bills

The Congress will present the Appropriations Bills to the President forhis signature or veto, as proscribed by the Constitution. The Presidenthas ten days in which to decide: (1) to sign the bill, thereby making itlaw; (2) to veto the bill, thereby sending it back to Congress and requiringmuch of the process to begin again with respect the programs covered bythat bill; or (3) to allow the bill to become law without his signature,thereby making it law but doing so without his express approval.

In addition, beginning on January 1, 1997, the President will also havethe line item veto as a tool to use on spendingand tax bills. The 104th Congress passed the Line Item Veto Act, grantingthe President the authority to cancel specific items of spending from Appropriationsbills, by identifying those items within 5 days of signing the entire measureinto law. The President's use of this authority triggers a process by whichthe Congress has an opportunity to disapprove the President's action, althoughthe bias is toward saving the money rather than spending it.

Budget Resolution May Contain Reconciliation Instructions

Because discretionary spending only accounts forabout 1/3 of the total federal budget, in order to achieve deficit reductionCongress must grapple with the spending that occurs through entitlementprograms and make decisions about appropriate levels of federal revenues(taxes).

Since there is no requirement that these spending and revenue policies beaddressed on an annual basis -- because they are provided for in permanentlaw -- Congress has instituted a process known as reconciliation.

The reconciliation process is an important budgetenforcement tool designed to force the Congress and the President to cometo agreements about the policies that drive the entitlement and revenueportions of the federal budget equation.

If the Congress determines that it wishes to trigger the reconciliationprocess, the budget resolution that is adopted will contain so-called "reconciliationinstructions." These provisions are instructions to the authorizingcommittees with jurisdiction over entitlement and tax policies, instructionswhich require those committees to make changes in those programs to effecta specified level of budgetary savings. When the Congress adopts an annualbudget resolution that includes reconciliation instructions, it agrees toenforce those level of savings, although the authorizing committees havesome leeway in terms of how they wish to achieve those savings.

House and Senate Authorizing Committees Develop Legislation

The budget resolution normally includes a timetable by which the authorizingcommittees must report legislation that meets the savings specified in thereconciliation instructions. The relevant committees will hold hearingsand mark-up legislation as necessary to achieve the savings they are requiredto find, and that legislation will be reported to the Budget Committee.

House and Senate Budget Committees Compile Reconciliation Package(s)

Once the relevant authorizing committees have reported their legislationto the Budget Committees, it is the Budget Committees' responsibility tocombine those bills into a reconciliation package (or packages) as specifiedby the budget resolution.

The Budget Committees' function is largely administrative at this point,since the Budget Act provides that, if the savings targets are met, theBudget Committee may not make substantive changes in the legislation. However,if one or more authorizing committees do not report legislation meetingthe savings targets specified in the reconciliation instructions, then theBudget Committees are authorized to develop legislation to find those savings.

Full House and Senate Consider Reconciliation Package(s)

The Budget Act specifies that Congressional action on reconciliation legislationshould be complete by June 15. The Budget Act also provides specific proceduresand restrictions for floor consideration of reconciliation measures, particularlyin the Senate, to ensure timely completion.

In the House, reconciliation legislation is brought from the Budget Committeeto the Rules Committee, which grants special rulesgoverning floor considerationof the measure.

House and Senate Members work out differences in Conference

Once a reconciliation bill is passed in the House and the Senate, membersof each body meet to work out their differences. At least half of thoseconferees must agree on a single version of the bill before it can be broughtback to the full House and Senate for a vote on final passage.

Full House and Senate Consider Reconciliation Conference Agreement

The House and Senate must each by majority vote pass the conference agreementon the reconciliation legislation. In the House the conference agreementgoes first to the Rules Committee for a special rule governing floor consideration.In the Senate, the floor debate is government by Senate rules and specificprovisions of the Budget Act.

President May Sign or Veto Reconciliation

The Congress will present the reconciliation legislation to the Presidentfor his signature or veto, as proscribed by the Constitution. The Presidenthas ten days in which to decide: (1) to sign the bill, thereby making itlaw; (2) to veto the bill, thereby sending it back to Congress and requiringmuch of the process to begin again with respect the programs covered bythat bill; or (3) to allow the bill to become law without his signature,thereby making it law but doing so without his express approval.

In addition, beginning on January 1, 1997, the President will also havethe line item veto as a tool to use on spending and tax bills. The 104thCongress passed the Line Item Veto Act, granting the President the authorityto cancel specific items of new direct spending or limited tax benefitsfrom bills, by identifying those items within 5 days of signing the entiremeasure into law. The President's use of this authority triggers a processby which the Congress has an opportunity to disapprove the President's action,although the bias is toward saving the money rather than spending it.