How Does the Process to Fund the Government Work Anyway?

By: Eliza Joyner

The President released the FY2024 budget request last Thursday, so it seems appropriate for a quick refresher on how the government is funded each fiscal year.

Budget vs. Appropriations

As the media begins throwing around the terms budget and appropriations – often incorrectly and interchangeably – let's start with those terms. Think of your own personal budget. You set topline spending levels for categories such as rent, food, travel, etc., and these spending levels act as a guideline for how much money you want to spend in each category. The government budget works in the same way, except the spending categories apply to government programs and agencies, rather than your monthly allocation for the grocery store.

The appropriations process is meant to use these topline budget numbers asking, what new or existing programs at each federal agency should be funded? What should be eliminated? Compare it to reviewing your budget and taking note of the allocations you set for yourself, but also factoring in other necessary spending costs you will need in the future. Maybe while assessing your budget, you realized that you needed extra money for transportation this month. The appropriations process is supposed to consider these needs and adjust accordingly. This may mean than your weekly grocery allowance shrinks, but you now have additional money to spend on other necessities.

President’s Budget Request

Unlike other legislation, the appropriations process generally follows an annual timeline. It kicks off when the President’s annual budget request is drafted. The key word is should, as it rarely shakes out in regular order. This budget request is formulated by the President, who considers input from federal agencies on what are necessary levels of funding for agency programs. It is important to keep in mind that the President’s Budget is just a request — Congress has the power of the purse.

Wonky Terms Galore: Omnibus? Minibus? FSGG?

The meat of the process begins with Congressional Appropriations Committees, ideally after receiving the President’s budget (but not always). Since all revenue measures must start in the House, these appropriators get to work drafting the spending bills first.

There are 12 subcommittees within the House and Senate Appropriations Committees, each with specific jurisdiction over particular federal agencies and their programs. For example, the Financial Services and General Government Subcommittee (FSGG) handles funding levels for the Small Business Administration (SBA), Treasury Department and other agencies in financial services. This subcommittee drafts a bill solely relating to funding for those programs. So how does a subcommittee like FSGG determine funding levels for each program in a federal agency and decide which ones should stay or go? Each subcommittee holds multiple hearings where they invite witnesses from federal agencies to testify on the needs of their programs. Subcommittees also welcome fellow lawmakers to submit appropriations requests based on constituent submissions. They also draft a written report to accompany the bill. By the way, although a subcommittee may forgo hearings or a markup in some cases, it does not prevent subsequent consideration of an appropriations bill by the full Appropriations Committees or their respective chambers.

Once a funding level is set and a bill is drafted, the bill (usually) charts the following path:

Appropriations Subcommittee vote -> full Appropriations Committee vote -> heads to the House floor for a vote. The same process happens in the Senate. After the House and the Senate have each voted on its versions of an appropriations bill, a conference committee meets. That committee consists of equal number of House and Senate members who reconcile any differences between the spending bills before sending them to the President’s desk for signature.

The President must sign the appropriations bills into law by October 1, the first day of the new fiscal year. Otherwise, the government shuts down. A way to avoid a shutdown and give additional time to work on the bills after this deadline is for Congress to pass a “continuing resolution” (CR). A CR funds the government at the previous fiscal year levels. This has happened every year for the last 24 years. In an ideal world, the President would sign all 12 appropriations bills into law at once - called an “omnibus.” This rarely happens, and usually there is the passage of a “minibus,” a grouping of a few appropriations bills together. At the end of last year, however, Congress did pass an omnibus. Why is that? At the end of a Congress, which lasts two years, all bills expire. This means, that if these bills were not signed into law, all 12 bills would have had to be redrafted when the 118th Congress began in January.

Earmarks are still here.

Something new happened last Congress – the return of the famous earmark. Earmarking allows lawmakers to recommend set asides for programs that would benefit their state, district or locality using federal dollars. Congress banned earmarking in 2011 when the provision became associated with allegations of corruption. However, they are still back with a new set of rules and a new name: “Community Funding Projects” or "Congressionally Directed Spending." Each Member of Congress has a limit on how many funding requests they can submit, and some have said they do not want to do them at all. Last fiscal year's funded projects can be found here. Many Members have posted specific instructions on how constituents can submit a request on their official websites.

It is key for federal contractors to follow the appropriations process throughout the year, or as we say: follow the money.