Federal Budget

THE ISSUE
Each year, after the State of the Union address is delivered, the President presents to Congress a budget proposal which represents the Administration's desired funding plan for the upcoming fiscal year, but which is nonbinding and does not receive a vote. Subsequently, taking into consideration the President's budget request and their own priorities, the House and Senate Budget Committees each develop a budget resolution outlining how much the government may spend, particularly the total level of discretionary funding that will be available for the upcoming fiscal year. Procedurally, next the full Senate and House should each approve their respective resolutions, before meeting in conference to agree on a single, joint resolution, which does not require the President's approval and does not have the force of law. (However, this process has often proved difficult and Congress has seldom completed action on the budget resolution by the April 15 target date specified in the Budget Act.) After agreeing to overall budget numbers, Congress proceeds to consider and pass Appropriations bills officially setting funding levels for the next fiscal year.

2016 Budget Deal
In 2011, the Budget Control Act implemented spending cuts for defense and domestic discretionary funding.  These strict budget cuts were temporarily softened in Fiscal Years 2014 and 2015, but were scheduled to take effect again for Fiscal Year 2016.  This would have meant cuts to vital domestic programs important to the communities served by the nonprofit sector.

In October 2015, a bipartisan deal was reached between outgoing House Speaker John Boehner (R-OH), Senate Leader Mitch McConnell (R-KY), and President Obama. The budget deal raised the spending caps for 2016 and 2017.  The additional spending was split evenly between defense programs and discretionary spending programs.

President's FY 2017 Budget
President Obama’s Fiscal Year 2017 budget, unveiled on February 9, 2016, would abide by the discretionary caps set in last year’s bipartisan budget deal.  The nonbinding budget plan would total $4.15 trillion, with $1.1 trillion spent on discretionary spending.  It is seen as a blueprint of the President’s party’s priorities, with increased funding allocated for clean energy, education, and Medicaid.  The overall budget increases would partly be paid for through tax increases, particularly raising the top tax rate on capital gains and imposing the “Buffet Rule,” which would require millionaires to pay at least 30 percent of their income in taxes.  The budget also includes these priorities: an ambitious "moonshot" program to cure cancer; a tripling of the maximum Child and Dependent Care Tax Credit (CDCTC); several policies aimed at addressing climate change, including a new $10-a-barrel tax on oil; and tax credits for middle-class Americans.

The President's budget proposal:

  • Includes again a provision to cap at 28 percent the value of itemized deductions, including the charitable deduction, for high-income taxpayers. This marks the eighth consecutive budget that the president has proposed capping the charitable deduction, which has never been adopted by Congress.
  • Achieves about $2.9 trillion in deficit reduction, primarily from reforms in health programs, the tax code, and immigration, and lifts sequestration in future years.
    • $955 billion in deficit reduction through changes to the tax code
      • Capping at 28% all itemized deductions, including the charitable deduction, for high-income earners
      • Would implement the "Buffett Rule" by creating a new "Fair Share Tax:" 30% minimum effective tax rate (after charitable contributions) for joint-filing taxpayers on income in excess of $1 million Adjusted Gross Income (AGI).
    • $14 billion in savings in 2017 from 117 cuts, consolidations, and savings proposals
      • Savings from discretionary proposals total $5.9 billion in 2017
      • Savings from mandatory and program integrity proposals total $8.2 billion in 2017 and $670 billion over 10 years; about 75 percent of these savings are from health reform proposals.
  • Proposes to permanently set the estate tax at 2009 levels

Analysis of the President’s Budget


Background

What's in the Federal Budget?
The budget consists of three primary components:
  • Revenue – money coming in
  • Spending – money going out
  • Impact on the debt

Spending initiatives are then divided into three categories:

  • Mandatory or entitlement spending – for social safety net programs like Social Security, Medicaid, assistance and food programs for needy families, and the State Children's Health Insurance Program.
  • Defense discretionary spending – includes the salaries of soldiers and sailors, research and development, and the acquisition of weapons, vehicles, and other technology.
  • Non-defense discretionary spending – guides the operations of nearly every federal government agency and program and largely determines how much federal assistance state and local governments will receive. Spending categories include: agriculture, education, housing, health and human services, the environment, arts, and transportation.
The Federal Budget Process in Practice
In practice, each year varies -- Congress frequently modifies this schedule when it is unable to agree on a joint budget resolution or appropriations legislation. On the occasions when Congress and the President have not agreed on all 12 appropriations bills, Congress must pass a stop-gap measure, known as a continuing resolution, which provides temporary funding for all of the departments, agencies, and programs covered in the unfinished bills. Continuing resolutions can last for only a few weeks -- in order to provide the House, Senate, and President time to work out differences -- for the remainder of the session of Congress, or longer.

The Federal Budget - Legislative Process
Legislative activity on the federal budget generally takes place between the months of February and September, although spending and tax priorities contained within a budget document are often determined well before the president makes known his budget for the upcoming fiscal year.

February

On or by the first Monday in February, the President presents a budget proposal to Congress after the state of the union. The President's budget request includes proposed funding levels for discretionary and mandatory programs and changes to the tax code, as well as the level of deficit or surplus on which the government should run.

February through April

Taking into consideration the President's budget request and their own priorities, the House and Senate Budget Committees each develop a budget resolution outlining how much the government must spend according to 19 broad categories or budget "functions," how much revenue the government must collect, and the level of deficit or surplus on which the government will run. In particular, the resolution determines the total level of discretionary funding that will be available for the upcoming fiscal year. The full Senate and House each approve their respective resolutions, before meeting in conference to agree on a single, joint resolution, which does not require the President's approval.

April/May through Early Fall

The Appropriations Committees of each chamber consist of 12 subcommittees and set allocations for each one based on the budget resolution. Following hearings, each Subcommittee drafts a bill proposing spending levels for the programs and agencies under its jurisdiction, adhering to the overall discretionary spending level set by the budget resolution. After passage by the Subcommittee, the bill is sent to the full Appropriations Committee for passage.

Summer through Early Fall

Following passage by the Appropriations Committee, the individual appropriations bills are voted on separately in the House and Senate. After passage by their respective chambers, the bills are sent to a conference committee where the differences between the two chambers' bills are resolved.

September 30

The budget is enacted after the President has signed each individual appropriations bill.

Access Presidential budget proposals from previous years:

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