The Federal Budget

1
The Federal Budget

• How it is Supposed to Work, and How it Actually
  Works

2
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

3
Federal Budget 101

• Key Elements
• Presidents 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)

4
The Executive Branch

• White House Plays Crucial Role with Annual
  Submission of Presidents 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

5
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

6
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

7
Congressional Timeline Theory

• First Monday in February Congress receives
  Presidents 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

8
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

9
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

10
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

11
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

12
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

13
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

14
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

15
Placeholder for JB Appropriations
16
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

17
FY 2004 Budget Summary
(in billions)
18
FY 2004 Budget Summary

• Revenue

19
FY 2004 Budget Summary

• Spending

20
Current Status FY 2005 Highlights

• DOE Budget of 23 billion is 1 billion above FY
  2004, but slightly (145 million) below the
  Presidents request
• AAAS calculates that federal RD spending in FY
  05 will hit 132.2 billion, 4.8 percent above FY
  2004
• Non-defense RD, however, is only up 2.2 percent
  (AAAS)

21
Whats 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

22
Whats 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

23
Whats Ahead Long Term
24
Conclusion Reality Bites

• AAAS estimates that deficit reduction efforts
  will hold non-DOD, non-DHS RD 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