Federal Budget Process Study Notes (session 14)

Types of levels: • Permanent levels
- Must be modified by law
  • Multi-periods
- Requires renewal
  • Annual appropriations

Mandatory Spending:
• Programs or activities established by law, with defined funding levels.
- Examples include:
  • Medicare
  • Medicaid
  • Federal military and civilian retirement
  • Veterans Disability benefits
  • Supplemental Nutrition Assistance Program
  • Farm Price Support Programs
Discretionary Spending:
• Programs or activities established by law without specified funding levels.
- Examples include:
  • Defense spending
  • Operating budgets of federal agencies
  • Medical care for veterans
  • Grant programs for education, medical research, and scientific research
  • Some low-income assistance programs

Key Features:
• A majority of revenues are permanent, needing legal modification for changes.
• Temporary revenues can exist, expiring without extension (e.g., 2017 individual income tax cuts expiring in 2025).
Jurisdiction:
• House Ways and Means Committee
• Senate Finance Committee

Distribution of expenditures for fiscal year 2023:
• Social Security: 23%
• Medicare: 14%
• Medicaid, Children’s Health Insurance Program (CHIP), Affordable Care Act (ACA) subsidies: 12%
• Other mandatory programs: 14%
• Non-defense discretionary spending: 16%
• Defense discretionary spending: 14%
• Interest on debt: 8%
Components of Federal Tax Revenue:
• Payroll taxes: 32%
• Individual Income taxes: 53%
• Corporate income taxes: 6%
• Other revenues: 9%

Note:

Timeline and Key Events: • February:
- On the first Monday, the President submits a detailed budget for federal departments and agencies.
  • February - Spring:
- Agency officials testify before relevant committees to justify budget requests.
  • April 15:
- Revenue and spending targets are established.
  • September 30:
- Marks the start of the new fiscal year on October 1, with appropriations bills needed before this date.
- If necessary, a Continuing Resolution is enacted to maintain funding and avoid government shutdowns.

Key Aspects: • Outlines the President’s recommendations for federal fiscal policy. • Indicates the proposed amounts for:
- Federal government spending.
- Tax revenue collection.
  • Establishes whether there will be a surplus or deficit.
  • Displays administration priorities on discretionary spending and proposals to modify mandatory programs.
  • Updates on anticipated spending for mandatory programs and revenue forecasts (status quo).

Process Involvement: • Begins with the receipt of the President’s budget request. • House and Senate Budget Committees consider the budget. • Conducts an economic analysis based on the President’s request. • Public hearings with administration officials on budget requests. • Development of individual budget plans (Budget Resolution) by both committees, sent to respective chambers. • Budget Resolution Adoption:
- Requires a simple majority and does not need the President’s signature (concurrent resolution).
- Should be adopted by April 15, setting targets for legislative proposals.

Challenges:
• Budget resolutions have been adopted late or not at all in 45 of the last 51 fiscal years, including fiscal year 2026.
• In absence of a budget resolution, deeming resolutions may serve as temporary annual budget resolutions for establishing budget levels.

Congressional Duties:
• Congress must pass separate bills for funding federal agencies and activities (appropriation bills), ideally by October 1.
• Continuing resolutions are often used to extend previous funding levels for existing programs.
• CRs require the President’s signature and can last from as short as a day to a full year.

Case Example: • Potential impacts of failing to extend Affordable Care Act subsidies, with analysis predicting:
- Premium increases of up to 114% for those losing subsidies.
- Estimated loss of health insurance coverage for 4 million people according to the Congressional Budget Office (CBO).

Posturing Between Parties:
• Dynamics involving Democrats and Republicans, including motivations behind acquiescence and legislative failures.
• Ex: A Democratic-led bill received 45 votes, while a Republican counterpart received 42, both falling short of a majority.
• Factors: Heavy-handed tactics by Republicans perceived as coercive; negotiation efforts for separate healthcare discussions following budget impasses.

Definition:
• A special legislative procedure enabling expedited passage of budget-related legislation.
• Allows for simple majority voting in the Senate, avoiding the 60-vote threshold for overcoming filibusters.
Operational Steps:
• Identical budget resolutions must be passed by both House and Senate with reconciliation instructions for committees.
• Committees draft legislation to meet fiscal targets and reconcile differing versions through a conference committee.
• Debate and passage are expedited; debates are limited to 20 hours in the Senate, with potential amendments but a final passage by a simple majority vote of 51 or 50 with the Vice President’s tie-breaking vote.

Overview: • Named after Senator Robert C. Byrd, aims to restrict budget reconciliation from facilitating unrelated policy changes. • Provisions can be considered "extraneous" and removed if they meet any of six criteria:
1. No significant change in federal spending or revenue.
2. Budgetary effect is "merely incidental" to broader policy goals.
3. Increases federal deficit beyond a 10-year budget window.
4. Outside the jurisdiction of the originating committee.
5. Changes to Social Security provisions.
6. Increases spending/decreases revenue contrary to committee reconciliation instructions.

Analysis on Legislative Changes:
• Reference to flagged provisions by Senate Parliamentarian Elizabeth MacDonough that violate the Byrd Rule, including impacts on Medicaid and student loans within proposed legislation.