Learning about the federal government’s budget process can be daunting. Here are a few key terms to help better understand of the federal budget process as of late:
- The Congressional Budget and Impoundment Control Act of 1974: The Congressional Budget Act (CBA) formalized Congress’s process for writing America’s federal budget and established how the government reconciles spending and revenue legislation with overall budgetary goals, processes Congress lacked prior to the law’s passage. The CBA’s goal’s were to institute a more effective and timely way to set national priorities, and to rein in presidential power over the budget process; executive impoundment—the failure by a President to spend legislatively allocated funds—peaked under Richard Nixon. The legislation was designed to create a steady rhythm for the annual congressional budget process. Under the CBA, that process is meant to take place over nine months, starting on the first Monday in February, when the President submits a budget to Congress, and ending on October 1, which marks the start of the fiscal year.
- Side Deals or Handshake Agreements: Side deals or handshake agreements refer to deals made between members of congress and/or the executive branch that have been agreed upon, but are not written in law. These deals, which are technically non-enforceable, have an outsized impact on our funding process and subsequently on the public. When funding levels are tied to side deals, it leaves that funding vulnerable to change, adding to the insecurities faced by government agencies and the Americans that depend on them.
- Debt limit: The debt limit, which far predates the CBA, refers to a ceiling imposed by Congress on the amount of debt the Department of Treasury can issue to meet the government’s ongoing financial needs. Once the debt limit is reached, it is believed that Treasury cannot borrow more money, which means it won’t have enough revenue to meet all the funding obligations set by previous legislation. Though members of both parties regularly advance bills that push spending past the debt limit, then complain that Congress is spending beyond its means. If the debt limit is not addressed on time and the government defaults on its debt, it could send the United States into a recession, shock global financial markets, freeze credit markets, and send stock markets plummeting worldwide. My colleague Hannah Story Brown explained our take on default in May of 2023.
- The Fiscal Responsibility Act of 2023: The Fiscal Responsibility Act of 2023 (FRA) passed in the House on May 31st, passed in the Senate on June 1st, and was signed into law by President Biden on June 3rd. The FRA:
- Suspended the debt ceiling until January 2025
- Capped non-defense spending at $704 billion for fiscal year 2024 (Veterans Affairs healthcare spending was excluded from this cap)
- Capped defense spending at $886 billion in fiscal year 2024
- Rescinded approx. $30 billion of unspent coronavirus relief funding
- Rescinded $1.4 billion of Internal Revenue Service (IRS) funding
- Moved $20 billion of the $80 billion allocated to the agency in the Inflation Reduction Act of 2022 to non-defense funds
- Modified work requirements for the Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance to Needy Families program (TANF)
- Simplified environmental reviews for energy projects
- Ended the student loan debt repayment pause in August 2023
One of the conditions in the FRA was that if Congress did not pass all of its full-year spending bills by December 31 2023 (which it did not), a “trigger” would kick in that would automatically cut all defense and nondefense discretionary spending programs across the board by 1 percent from fiscal year 2023 levels. Given that we are currently operating under two continuing resolutions, this condition has not yet gone into effect. Due to several drafting errors, if the current continuing resolutions run past April 30 2024, there will be a $70 billion (9.4 percent) to nondefense funds and a $26.5- $36.5 billion cut in defense funds.
- Sequester: A sequester refers to the automatic cancellation of previously enacted spending, making largely across-the-board reductions to nonexempt programs, activities, and accounts. Sequesters are implemented through a sequestration order issued by the President as required by law. Sequesters enforce certain statutory budget requirements, such as enforcing statutory limits on discretionary spending or ensuring that new revenue and mandatory spending laws do not increase the deficit. According to the Congressional Research Service, sequesters have been used as an enforcement mechanism that can either discourage Congress from enacting legislation violating a specific budgetary goal or encourage Congress to enact legislation that would fulfill a specific budgetary goal.
- “Emergency” cash: “Emergency” cash refers to a routine maneuver designed to get around funding caps in debt law and increase agency and programmatic funding. Recently, a deal establishing topline figures for 2024 scrapped $10.5 billion in “emergency” cash put forward by Democrats.
- Poison pill: A poison pill (AKA killer amendment or wrecking amendment) refers to a legislative strategy of adding amendment to severely change a bill’s intent to kill a bill that would otherwise pass. Poison pills are typically used by legislators that oppose a bill but do not have enough votes to defeat it. If the poison pill is adopted, the bill’s original backers may withdraw their support, thus killing the bill. If the poison pill is not adopted, opponents can leverage the proposed changes to criticize the bill, suggesting that its failure to incorporate the amendment represents a flaw. For example, in the United States, poison pills often take the form of adding amendments related to social issues in order to take down an unrelated and principally economics focused bill.
- Continuing resolutions: Continuing resolutions (CRs) refer to pieces of legislation that extend funding for federal agencies (usually at the same level as the previous fiscal year) for a certain time frame. CRs are usually passed on or before the start of the next fiscal year (October 1) if Congress and the President fail to finalize all appropriations bills by then. They avoid a shutdown and keep the federal government operational until the appropriations bills for the next fiscal year become law.
- Omnibus bills: Omnibus spending bills are huge, typically rushed pieces of legislation that Congress uses to pass a budget after failing to pass 12 separate appropriations bills on time (by June 30). It is the sum of all appropriations bills that had yet to be passed before the next fiscal year.
- Minibus: Minibuses refer to annual spending bills in two or more smaller funding bundles, as opposed to one large bundle with all 12 appropriations bills known as an omnibus bill. Some may opt for a minibus instead of an omnibus to present funding levels in a more piecemeal, digestible format as many Congressmembers have lost patience with the hundreds of pages included in omnibus bills. While minibuses are smaller funding bundles, passing all of these smaller bills could leave Congress with very little time to fund the government before a government shutdown occurs. And they still do not constitute proper process under the Congressional Budget Act.
- Government shutdown: A government shutdown occurs when Congress fails to enact all or some of the 12 appropriation bills by the start of the new fiscal year on October 1. During a government shutdown, essential services and mandatory spending programs remain operational. However, agencies and programs that rely on discretionary funding (congressionally appropriated funds) shut down until Congress acts. Government shutdowns can be averted by passing all 12 appropriations bills on time, continuous resolutions or omnibus bills.
Image credit: “The End Of The Government Shutdown 2013” by Stephen D. Melkisethian is licensed under CC BY-NC-ND 2.0.