1. Budget Structures & Institutions: Federal and State-Local

2. Page 81- Federal Outlays by Function
The Federal Budget
Spending by the Federal Government
Page 81- Federal Outlays by Function
20% for national defense
64% for human resources
5% for physical resources
8% interest payments
3% other

3. The Federal Budget Process
Process dictated by constitution, statute, tradition, politics
Important historical events
Budget & Accounting Act of 1921
Budget & Impoundment Control Act of 1974
Balanced Budget & Emergency Control Act of 1985
Budget Enforcement Act of 1990

4. Federal Budget Organizations
OFFICE OF MANAGEMENT AND BUDGET (OMB)
Created as the Bureau of the Budget in 1921
Executive Branch Ownership
Develops and controls the budget
The “M” is no longer silent
GOVERNMENT ACCOUNTABILITY OFFICE (GAO)
Congressional agency established in 1921
Primary “watchdog” agency for Congress & American people
External audit agency for the federal government
Headed by Comptroller General (15 year term)
CONGRESSIONAL BUDGET OFFICE (CBO)
Permanent, nonpartisan professional staff
Forecasts, analysis, scorekeeping, policy research

5. Phases in the Federal Budget Cycle
Executive Preparation and Submission phase
Legislative Review and Appropriation phase
Execution phase
Audit and Evaluation phase

6. Executive Preparation and Submission Phase
OMB orchestrates and collects requests
OMB ensures requests aligned with president
CEA and Federal Reserve provide forecasts
INFLATION RATE
INTEREST RATE
UNEMPLOYMENT RATE
GDP GROWTH RATE
Final review and submission
PRESIDENT’S BUDGET submitted first Monday in February

7. Legislative Review & Appropriation Phase
Committee pathways
Each house has an authorization committee, an appropriations committee, a budget committee, and a finance committee
12 appropriations committees in Senate, 10 in the House
Authorization committees set policy, create programs, & set ceilings
Appropriations committees provide the funds

8. Legislative Review & Appropriation Phase
Budget committees develop the congressional budget
Finance committees (Senate Finance Committee and House Ways and Means Committee) deal with tax/revenue, SSI, Medicare, Medicaid, unemployment, and debt

9. Legislative Review & Appropriation Phase
Annual Concurrent Budget Resolution looks at the macro-level budget as a whole in the spring
Annual reconcilliation bill
Matches spending to revenue
Important as a deficit-reduction tool
Prohibits filibusters
Requires amendments to be germane
Requires House & Senate agreement

10. Legislative Review & Appropriation Phase
Appropriations Bills signed by the president
Veto is available. Line item veto is not. (Line Item Veto Act of 1996). Why not?

11. Execution Phase Money spent, services provided
Apportionment applies a schedule to spending
President can IMPOUND funds (not spend the money)
RECISSION (permanent cancellation)
DEFERRAL (temporary delay)
Recissions must be approved by Congress, deferrals must be executed within the fiscal year

12. Audit Phase
GAO looks at both financial execution and performance

13. Budget Authority A budget is a commitment Types of authority include:
Appropriations authority (permits obligations and payment by the Treasury)
Contract authority (agencies may enter into binding contracts prior to the appropriation)
Borrowing authority (agency may incur debt)
Loan & loan-guarantee authority (permission to loan money and guarantee loans)
Entitlement authority (allowed to pay entitlements)

14. Appropriations 3 types of appropriations measures
Regular appropriations bills
Annual (one year only, no carry-over)
No-year (no restriction on year used)
Multiple-year (runs over several years)
Advance (funding for future years)
Permanent (no repeated action
Continuing resolutions
continue operating at the beginning of a new fiscal year when a budget has not yet been passed
Supplemental appropriations
New programs, bad forecasts, surprise events in execution year

15. Mandatory v Discretionary Spending
Discretionary – 40% of budget
Mandatory – 60% of budget
WHY?
Interest on the national debt
Social Security
Medicare/Medicaid
Food & Nutrition
Entitlements
Means-tested (determined by the economic status of the recipient)
Non-means-tested (transfer based on other characteristics)

16. Federal Deficits Found on page 110/111 Surplus in 2000!
To close the deficit, you need either more revenue or less spending
We sometimes borrow from off-budget funds
Pros and cons to deficit argument

17. Federal Deficits Attempts to control
DEBT LIMITS (currently 9 trillion)
AGGREGATE BUDGETING (Congress “approves” a deficit amount)
TARGETS & ENFORCEMENT (sequestration)
SPENDING CONTROLS (caps on discretionary spending), PAYGO (must offset an increase in spending from another program), and ADJUSTABLE DEFICIT TARGETS (due to economic and technical conditions)

18. Federal Fiscal Policy ECONOMIC STABILIZATION FISCAL POLICY
Promoting maximum employment, production, purchasing power
National policy of full employment, increased real income, balanced growth, balanced budget, productivity growth, price stability
FISCAL POLICY
The use of government decisions on spending and taxing to influence the overall economy. Does it work?
MONETARY POLICY
The use of the money supply to regulate the economy. Does it work?

19. State and Local Budgets
Local government dominated by elementary and secondary education
State government spends on public welfare, higher education, highways, medicine, corrections
Lots of diversity nationwide in structure/process

20. State-Local Compared to Federal
Christmas-list budgeting at local level
Some chief executives elected, some not
Varying budget cycles (biennial/triennial) and fiscal years
Less formality than federal procedures
All states have line-item veto
Public vote may be necessary to increase spending
Usually require balanced budgets
Limit on the ability to produce revenue / carry debt

21. Conclusion Federal budget cycle and process clearly defined
Process is in disarray, outcome is awful
All levels are fiscally constrained, some worse than others