Budget Formulation

Despite the advances in technologies across mobile devices, software, infrastructure, and networks, many governmental agencies still undergo thousands of disparate data collection and reconciliation steps in their operational and financial processes. One must ask why? It’s a result of disparate systems, cumbersome reporting, regulatory, security, audit requirements, slow, effort-intensive and costly solutions all adding to the unhurried rate of resolution.

Take for example the high-level budget formulation process outlined below – and realize this is just “the process” – with systems, data, security, audit requirements all layered in and having its impact on operational efficiency.

The federal budget process has four phases that are all connected to create a complete budget for the United States of America. Agency planning is the first phase of four. The Office of Management & Budget (OMB) is the second phase of budgeting for federal agencies and when combined with the first phase it represents the President’s budget formulation.

The Congressional appropriations cycle is phase three of the federal budget formulation process. The last phase known as the execution phase and is usually the longest phase because it carries out, monitors, adjusts and analyzes spend against the formulated budget.

Given the depth and breadth of these budgets, it easy to understand that it takes well over a couple years to formulate, appropriate and execute against the entire US budget for a given fiscal year. For this reason, there are always three budgets that are in motion at any given time. There is the current year execution, congressional appropriations for the following fiscal year, and federal agencies planning for planning for the year after the appropriations year.

For example:
– FY2018 would the Current Execution Year
– FY2019 would be Congressional Appropriation Year
– FY2020 would be Budget Formulation Year for Agencies

Presidential Budget Formulation Process

The most public aspect of the federal budgeting process is the congressional budget process. It typically starts 18 months prior to the start of the actual fiscal year being budgeted for, in line with where federal agencies start their internal budgeting process.From an agency perspective, the budget process is a high-information mixed budget (both bottoms-up and top-down drive) formulation process that can be quite complex and time-consuming.

Personnel at the individual offices begin developing strategic plans, key goals and priorities and the resources (human and physical capital) required for achieving these objectives.

Guidance, directives and informational recommendations are provided to the office from funding priorities, agency leadership, advisory boards, committees and external stakeholders that are incorporated into the agency budgets. There could also be guidance from Congress or legislative changes or mandates from previous appropriations that impact the agency budget.  Add into the mix the Executive Office oversight privileges and Office of Management and Budget (OMB) guidance, it’s easy for this process to take considerable time and effort to execute.

The Congressional Budget Formulation Process

The Congressional budget process starts when the President delivers his budget in February to Congress. Congress also receives reports on the long-term fiscal and economic outlook from the Congressional Budget Office. While it’s the President’s responsibility to actually issue the budget, it’s Congress that has the power to grant funding for the budget. Think of it in “old-fashioned” terms:

The President Proposes, the Congress Disposes

The Congressional budget resolution is the first order of business as it co-developed between the US Senate and House of Representatives. This resolution must pass both the House and Senate by a simple majority.

Once the resolution is passed, the Appropriations committees start taking the discretionary spending targets and divides it amongst the appropriations sub-committees through 302(b) allocations.

Appropriations subcommittees begin to hold hearings on the President’s budget request as early as February, mere weeks after the request has been issued. Usually in April, the subcommittees – traditionally starting with the House first – begin marking up and amending their respective bills. Each of the 12 bills must be passed by its subcommittee before being considered by the full Appropriations Committee.

The federal fiscal year ends September 30, so all 12 spending bills must be completed and signed by then. If Congress cannot finish their appropriations work on time and want to avoid a shutdown, they have the option of passing a continuing resolution. Continuing resolutions typically just extend the level of funding from the prior year, though they can also contain funding changes targeted at specific programs.

In some years, multiple continuing resolutions are required to avoid a shutdown, one after the other until final appropriations are passed. Congress can also bundle multiple appropriations bills together into an omnibus spending package. These steps have been common in recent years due to continuing conflict over spending and deficits. Lastly, the President can issue, and Congress can pass supplemental or emergency spending bills. These may be necessary to provide sufficient funds for wars, hurricane relief, or other needs.