US & World Economies US Economy Fiscal Policy Guide to the Federal Budget Process How the federal budget is created By Kimberly Amadeo Updated on May 3, 2022 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Fact checked by Hans Jasperson Fact checked by Hans Jasperson Hans Jasperson has over a decade of experience in public policy research, with an emphasis on workforce development, education, and economic justice. His research has been shared with members of the U.S. Congress, federal agencies, and policymakers in several states. learn about our editorial policies In This Article View All In This Article The Budget Control Act Goal of the Federal Budget Process Federal Budget Process Steps The Role of the U.S. Treasury What Happens If It Isn't Followed How Debt Ceiling Comes Into Play Photo: Chip Somodevilla / Getty Images The federal budget process is a plan used to create the U.S. federal budget. The 1974 Budget Control Act established the process. The House originates spending bills, and the Senate amends them. The Budget Control Act centralized and consolidated this budget authority. The Budget Control Act The Act gave Congress three powers. First, it allows the House of Representatives and the Senate to have their own standing budget committees. This gives them the ability to create their own budgets to use in negotiating the final appropriations bills. The Act also created the Congressional Budget Office. This office provides non-partisan analysis to facilitate Congress’s review of the budget. This includes a detailed review of the president's budget for each fiscal year. It moved the beginning of the fiscal year from July 1 to Oct. 1 to give newly-elected officials more time to review each year's budget. The Main Goal of the Federal Budget Process Article 1, Section 7 of the U.S. Constitution gives Congress the power to raise revenue and spend. Elected officials represent the will of the voters, or they don't stay in office. Congress must agree on where the tax burden falls and on who receives the benefit of spending. Note The budget puts these priorities in hard numbers. The final budget allocates specific funding for each department and its programs. The budget process makes sure all voices within Congress are heard. It provides ample opportunity for debate. The government runs smoothly if the budget process is followed. 9 Steps to the Federal Budget Process The budget process starts a full year before the fiscal year begins. The fiscal year starts on Oct. 1 of the year before the calendar year starts. For example, FY 2022 is from Oct. 1, 2021, to Sept. 30, 2022. The budget process for the FY 2022 budget began in the fall of 2020. Early Fall All federal agencies submit their budget requests to the Office of Management and Budget. OMB prepares and manages the budget for the president. November OMB sends its budget review comments back to the agencies. December Agencies submit their final budget requests. OMB then assembles the final budget and sends it to the incoming president. January January is the deadline by which a president must outline their budget priorities in the State of the Union Address. The Council of Economic Advisors submits the Economic Report of the President. It analyzes economic trends. Note Though the State of the Union Address typically takes place in January, due to the pandemic and irregularities it has caused, President Biden will deliver his SOTU on March 1, 2022. First Monday in February This is the deadline by which the president must submit his budget to Congress. The president's budget puts their priorities into dollars and cents for three areas: Funding levels for federal agencies Changes to mandatory programs already enacted by Congress, including Medicare, Social Security, Medicaid, the Troubled Asset Relief Program, and the Affordable Care Act The budget must show the impact of changes to the tax code on federal revenue April 15 Congress prepares a budget resolution to guide spending. The House and Senate budget committees each hold hearings with agency officials who explain why they need the funds requested. The committees submit their resolutions to a floor vote. The Senate and House work out their differences in a conference committee. The final budget resolution must be passed by majority votes in the House and Senate. Congress often skips this step and defaults to the prior year's resolution. June 10 Congress uses the budget resolution to guide appropriations bills. They specify funds for each agency in the discretionary budget. The House and Senate each have 12 Appropriations Subcommittees. They hold more hearings, then prepare and pass their bills. These go to 12 conference committees to work out the differences. The final bills go to the floor for a vote before going to the president for signature. Meanwhile, each house of Congress has authorizing committees to address any potential changes to mandatory spending or tax laws. These go to the Senate and House budget committees for a vote. A conference committee works out the differences. The final bill goes to the floor for a final vote before going to the president. But the president typically doesn't get them until September at the earliest. The president treats this bill like any other submitted by Congress. The Constitution dictates that they must either approve or veto it within the next 10 days. A veto means the process must start all over again. Note The president can also allow the budget to go forward without their approval. October 1 This is the deadline by which all bills should be signed into law. Congress has two choices if this doesn't happen. It can pass a continuing resolution to keep federal agencies running at their current levels, or it can allow a government shutdown. A government shutdown means that all non-essential discretionary programs close, and workers are furloughed without pay. This happened in 2013, 2018, and 2019. July 15 The president submits a Mid-Session Review of the budget to Congress. The Role of the U.S. Treasury The Treasury Department's Financial Management Services executes the budget once it's in effect. This is the agency that makes payments, collects revenues and delinquent debt, and issues reports, including Treasury Statements. When the Budget Process Isn't Followed Congress has only followed the budget process twice since FY 2010. Some experts argue that the process is inherently unworkable. It first shifts the burden of budgetary leadership to Congress, a body that's not structured to take a leadership role. Then it demands a level of coordination that Congress isn't set up to meet. Finally, it creates unrealistic deadlines. Events since the mid-term elections in 2010 seem to support this argument. Republicans won a majority in the House thanks to the tea party movement. But Democrats controlled the Senate and the presidency. Republicans refused to support President Obama's budgets and abandoned the budget process. They used the budget as a bargaining chip to achieve their goals. FY 2011 The FY 2011 budget wasn't approved until April 2011, six months behind schedule. Many government agencies almost shut down. Republicans were concerned about rising debt levels, so they cut discretionary spending by $38 billion. FY 2012 The FY 2012 budget wasn't approved until December 2011, two months behind schedule. Congress passed the Budget Control Act to reduce spending through sequestration. FY 2013 The FY 2013 budget was never approved. Congress instead passed two continuing resolutions to keep the government running until the end of the fiscal year. These resolutions also incorporated the spending reductions mandated by sequestration. FY 2014 The FY 2014 budget wasn't approved, either. Republicans instead forced a government shutdown for 16 days. The government reopened when they finally agreed to enter a budget conference committee, which resulted in a compromise on Dec. 18. FY 2015 The FY 2015 budget was approved on Dec. 13, 2014. The process was even more outside the norm. President Obama presented his proposed budget to Congress a month late on March 4, 2014. Then it took until Dec. 13 for the U.S. Senate to pass the House of Representatives' $1.1 trillion spending bill. The spending bill outlined Congress’s appropriations for the remaining nine and a half months of FY 2015, but it only funded Homeland Security through February 2015, in protest of President Obama's executive actions on immigration. The Bipartisan Budget Act set a cap on the discretionary portion of the FY 2015 budget, as well as the remainder of FY 2014. FY 2016 The FY 2016 budget was passed on Dec. 18, 2015, only two months behind schedule. FY 2017 The FY 2017 budget was never passed. A continuing resolution instead kept funding at FY 2016 levels. FY 2018 The FY 2018 budget was passed after the government shut down twice. A continuing resolution kept the government running until March 23, 2018. Congress passed the Omnibus Spending Bill on that day to appropriate funds for the discretionary budget. The first shutdown occurred on Jan. 19. Democrats opposed any bill that didn't protect immigrants eligible for Deferred Action for Childhood Arrivals. The second shutdown occurred for four and a half hours on Feb. 9. Senator Rand Paul objected to the bipartisan two-year spending bill. It added $320 billion to the debt by exceeding the spending caps imposed by sequestration. Defense spending increased by $160 over two years billion to $700 billion. Sequestration limited it to $549 billion. Democrats added $128 billion for non-defense discretionary spending. Sequestration limited it to $516 billion. Tax provisions added $17 billion. The Senate passed the bill shortly after 1 a.m. The House passed it at 5:30 a.m. President Trump signed it immediately, ending the shutdown before government offices opened. More Recent Events The longest shutdown in U.S. history began on Dec. 21, 2018. President Trump refused to sign the budget because it didn't include $5.7 billion for a wall on the border with Mexico. The government again lifted the debt ceiling in October 2021 in a bill that increased the debt ceiling by $480 billion. The national debt at the time was just over $28.4 trillion, permitted to rise to about $28.8 trillion. The ceiling was then increased yet again in December 2021 under President Joe Biden, this time by $2.5 trillion to nearly $31.4 trillion. This avoided a federal debt crisis. Why Congress Uses the Debt Ceiling Instead of the Budget Process Congress's only tool to control the budget before 1974 was the debt ceiling. The ceiling was created in 1917. This gave it a very limited yes/no power. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. U.S. Congress. "H.R.7130 - Congressional Budget and Impoundment Control Act of 1974." U.S. Constitution. "Article I, § 7." Speaker of the House. "Pelosi Invites President Biden to Deliver State of the Union Address on March 1." U.S. Department of the Treasury. "Financial Management Service." University of California, Berkeley. "1974 Congressional Budget and Impoundment Control Act." U.S. Congress. "H.R.1363 - Further Additional Continuing Appropriations Amendments, 2011." U.S. Congress. "H.R.2055 - Consolidated Appropriations Act, 2012." U.S. Congress. "S.365 - Budget Control Act of 2011." U.S. Congress. "H.R.933 - Consolidated and Further Continuing Appropriations Act, 2013." U.S. Congressional Research Service. "Shutdown of the Federal Government: Causes, Processes, and Effects," Page 7. Congressional Research Service. "Appropriations Status Table: FY2015." 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