# Presentation: 063679

## The Federal Budget

- How it is Supposed to Work, and How it*** Actually ***Works

## Federal Budget 101

- Key Players
- The Executive Branch
- The White House
- Office of Management and Budget (OMB)
- Cabinet and Independent Agencies
- The Congress
- Budget Committee
- Appropriations Committee
- Other Authorizing Committees

## Federal Budget 101

- Key Elements
- President’s Budget
- Submission marks the start of every budget year
- Basis against which Congressional budget is crafted
- Congressional Budget Resolution
- Does not have force of law
- Provides overall spending limits
- Congressional Appropriations Acts
- 13 individual bills (theoretically)
- Often late and/or combined into “omnibus” bill(s)

## The Executive Branch

- White House Plays Crucial Role with Annual Submission of President’s Budget
- By law, the President must submit to Congress a “comprehensive budget” no later than the first Monday in February
- This deadline is one of the few on the federal budget calendar that is usually met

## Executive Branch Timeline: The Year Preceding the New Fiscal Year

- April-June: Agencies develop budgets
- July-August: OMB issues policy direction to agencies
- Early fall: Agencies submit initial budget requests to OMB
- November-December: OMB and the President review, make decisions, and “pass back” agency requests

## Executive Branch Timeline: The Year of the New Fiscal Year

- First Monday of February: President submits Administration budget to Congress
- February – September: Agencies defend requests to Congress and submit any budget amendments
- October 1: New Fiscal Year begins

## Congressional Timeline: Theory

- First Monday in February: Congress receives President’s budget
- April 15: Target for completion of budget resolution
- May 15: Appropriations bills may be considered, even without budget resolution
- June 30: Target for House to complete consideration of appropriations bills

## Congressional Timeline: Reality

- Congress rarely produces a timely budget resolution, and sometimes fails completely to approve a budget resolution
- Increasingly, Congress rarely provides  funds through 13 separate appropriations bills
- The “omnibus” appropriations act, combing several individual bills, has become a popular funding mechanism

## Congressional Budget Resolution

- Recent history aside, the budget resolution remains an important part of the budget and appropriations process
- Provides “reconciliation protection for tax legislation”
- Establishes spending limits that set parameters for appropriations

## Congressional Budget Resolution

- While these limits can be circumvented, they are a hammer for deficit control
- Even in FY 2005, the discretionary limit ($821.9 billion) was met, via an 0.83 percent across-the-board cut (minus DOD and DHS)
- Look for significant effort in Congress to approve an FY 2006 budget resolution

## Budget 101: Authorizations

- Theoretically, policy and spending limits are provided by authorizors, not  appropriators
- Most authorizing committees, though, rarely enact authorizing statutes
- Important Exceptions:
- DOD
- Intelligence
- Transportation
- Tax Reform

## Budget 101: Authorizations

- Key Committees:
- House and Senate Armed Services (HASC, SASC)
- House Permanent Select Committee on Intelligence (HPSCI); Senate Select Committee on Intelligence (SSCI)
- House Transportation and Infrastructure; Senate Commerce, Science and Transportation
- House Ways and Means, Senate Finance

## Budget 101: Authorizations

- National Defense Authorization Act
- Annual authorization act stands out relative to others because it is renewed every year
- Can be influential (e.g., Boeing tanker lease issue)
- Must be enacted quickly to affect DOD appropriations
- Intelligence Authorization Act
- Not as regularly enacted as DOD authorization
- More policy than spending influence

## Budget 101: Authorizations

- Transportation Authorization Acts
- More determinative of spending (and policy) than most authorizations because laws provide contract authority (unique among authorizations)
- ISTEA, TEA-21, NEXTEA are far-reaching laws
- Tax Legislation
- Obvious budget impacts
- Budget resolution can provide “reconciliation” protection – key in the Senate

## Placeholder for JB: Appropriations

## Back to Reality: Current Budget Status 

- In FY 2004, the U.S. ran a deficit of approximately $420 billion (a record)
- In FY 2005, the U.S. is estimated to run a deficit of around $350 billion
- That figure does not reflect what the U.S. will spend on the Iraq conflict, which will likely push the deficit above $400 billion again

## FY 2004 Budget Summary

**(in billions)**

## FY 2004 Budget Summary 

- Revenue

## FY 2004 Budget Summary

- Spending

## Current Status: FY 2005 Highlights

- DOE Budget of $23 billion is $1 billion above FY 2004, but slightly ($145 million) below the President’s request
- AAAS calculates that federal R&D spending in FY 05 will hit $132.2 billion, 4.8 percent above FY 2004
***Non-defense R&D***, however, is only up 2.2 percent (AAAS)

## What’s Ahead: Near Term

- Recently-passed FSC/ETI bill will add $5.7 billion to the deficit in FY 05, and $18 billion over the next three years, according to the Congressional Budget Office (CBO)
- Reports surfaced in late October that the Administration will seek $70 billion in new FY 2005 funds for Iraq in January

## What’s Ahead: Long Term

- Several Tax Cuts are not Permanent Yet:
- Upper Bracket Reductions
- Estate Tax Repeal
- Dividend Tax Reduction
- Alternative Minimum Tax (AMT) is sure to be addressed
- Social Security reform could have $1 trillion impact on the deficit, however it is “scored”

## What’s Ahead: Long Term

## Conclusion: Reality Bites

- AAAS estimates that deficit reduction efforts will hold non-DOD, non-DHS R&D increases below inflation through FY 2009
- Congress will surely work to protect its favorite programs, but will also continue to earmark (Taxpayers for Commons Sense says earmarks are up 400% over last ten years
- Pressure to control deficits ***will*** produce pain
- NSF FY 2005 funding is below FY 2004
- DOE is rumored to face a $1 billion reduction in FY 2006