Skip to main content

The Federal Budget Process 101

Why Should I Care?

Understanding the federal budget is important for more than just the decision-makers in the executive and legislative branches of government preparing and approving it – the budget impacts the STEM community too. Understanding how your tax dollars turn into federal R&D funding can give you an insight into national plans, administration priorities, and help researchers predict how funding for their particular field will trend in the future.

Researchers should not be impassive observers to the federal budget process. Input from constituents is a crucial part of budget decisions – especially when it comes to R&D funding. Researchers are experts who can drive conversations about the future, about our next frontiers. To do so requires the ability to be able to provide useful input, and for that one must know how the process works.

This page is a brief explainer of the federal budget process. If preferred, there is also a PDF version of the budget explainer (with some extra notes), as well as a list of all the budget vocabulary you might encounter as you explore this topic.


The Budget Process

It's useful to think of the federal budget cycle in four phases. The first phase is agency planning; the second phase covers budget review by the Office of Management and Budget. These two phases together amount to the President's budget formulation. A third phase is the Congressional appropriations cycle, and the fourth and final phase is the execution of the budget by the agencies starting October 1, the beginning of the fiscal year. Even if every phase is completed on schedule, it takes the machinery of government well over two years to formulate, appropriate, and execute a single fiscal year's budget.

That means that there are three budgets in play at any given time, with the phases outlined above overlapping as shown in Figure 1 below. The following is a timeline of three sequential budget formulations in an ideal universe where all the deadlines are met.


A table showing three overlapping budget cycles with the months for each phase indicated


The budget process rarely operates on schedule though; 1996 was the last time federal lawmakers finalized the budget before the start of the fiscal year (see Figure 2 below). Instead, the budget is usually completed after the fiscal year, with agencies operating under a continuing resolution and then rushing to spend a year’s worth of funding on a reduced timeline once funding is finalized by Congress. We’ll go more into how that happens below, while discussing continuing resolutions.

A graph decpiting the number of days after the start of the fiscal year that the U.S. federal budget was signed into law in the last two decades.

Phase 1: Agency Planning

The agency budget process is an information-intensive proceeding that involves both bottom-up formulation and top-down guidance. Individual departments or program offices take the initial lead, developing their strategic plans, identifying their key priorities and goals, and producing estimates of the staff and resources necessary for achieving those goals. Offices receive guidance and directives on policy and funding priorities from agency leadership and external stakeholders such as advisory boards or National Academies panels, among others. Agencies may also have to respond to Congressional guidance, legislative authorizing language, and mandates in previous appropriations bills and reports. Ultimately, expert technical judgment from agency heads and staff, as well as departmental oversight, is central in budget formulation and assessment. 

The Executive Office of the President also performs an important oversight role. Agencies and offices receive their primary guidance from the Office of Management and Budget (OMB), which orchestrates the budget formulation process, serves as an information resource, and carries out the President's policy preferences. This guidance is delivered in the spring via meetings, memoranda, or more informal interpersonal contacts, and can include directives on general priorities, principles, strategies, or targets for increases and cuts. Science programs also receive budget guidance from the Office of Science and Technology Policy (OSTP) through a joint OMB/OSTP guidance memo typically released in the summer. For example, this memo identifies key areas for investment and administration priorities to keep in mind during formulation, such as climate research, biotechnology, or advanced manufacturing.

Phase 2: White House Review

Eventually, agency requests are completed and submitted to OMB for a stringent, thorough review in early fall. OMB reviews the requests, decides what the Administration will and will not support, and notifies agencies of these decisions through what are called “passbacks,” usually issued around Thanksgiving. The agencies can then either accept OMB’s decisions or, more often, appeal. OMB and the agencies must hash out their differences by January, in time for the President’s budget submission to Congress.

The Budget and Accounting Act of 1921 sets the requirement for the budget submission. Current law requires submission by the first Monday in February, though the budget can be delayed. The budget is typically delayed during presidential transition years as the new administration sets its own priorities, and can also be delayed when the prior budget is finalized too late by Congress to allow sufficient time to update and adjust the president’s budget request for the next fiscal year.

Phase 3: The Congressional Process

The President's job is to submit the budget request and spending priorities to Congress, but only Congress can actually grant funding, known as appropriations. Fiscally speaking, the President starts the conversation, but Congress finishes it by passing the 12 appropriations bills necessary to fund the federal government each year. This process gets underway when the President delivers the budget in February. In addition, Congress receives reports on the long-term fiscal and economic outlook of the proposed budget from the Congressional Budget Office. These documents identify long-term trends in economic growth, spending, and deficits.

With these materials in hand, the Congressional budget process commences. The first item of business for Congress is passage of the annual budget resolution. The budget resolution, which is developed by the House and Senate Budget Committees, sets an overall framework for funding decisions. It is not signed by the President, and thus is not law, but still serves to bind Congressional appropriations decisions later.

To this end the two Budget Committees  work separately to establish top-line numbers for federal revenues, mandatory or direct spending, and discretionary spending, with input from other legislators, committee chairs, and party leadership. The total discretionary spending target, also known as 302(a), is particularly important for federal R&D funding, as the federal R&D budget is a relatively steady percentage of the total federal discretionary budget.

The resolution must pass both the House and Senate floor by a simple majority, and any differences between the two versions are worked out by a conference committee - a joint committee composed of members of both chambers. This work is intended to be completed by April 15, but the budget resolution is often delayed. Indeed, in some years the House and Senate cannot agree on overall figures and fail to pass a concurrent budget resolution. When this occurs, each chamber can adopt its own framework in the form of a “deeming resolution,” meaning that each chamber can operate under its own independent overall discretionary spending target, which oftentimes creates problems when it's time to resolve the differences at the end of the appropriations cycle.

Once these targets are established, the Appropriations Committees begin their work. The Appropriations Committee in each chamber takes the 302(a) discretionary spending target and divides across broad themes, with each of the topic-specific subcommittees receiving its own 302(b) allocation after the relevant section of the Congressional Budget Act. The 302(b) allocations are intended to allow Congress to set priorities and to limit the size of the overall spending bill produced by each subcommittee, and they can be very different: the Defense appropriations subcommittees might have $500 billion to work with, while the Interior & Environment subcommittees have less than a tenth of that.

There are over two dozen federal research agencies, and their funding is scattered throughout these 12 bills. In many cases, these agencies compete with non-research agencies for funding in the same appropriations subcommittee. For instance, the NIH budget is part of the Labor, Health and Human Services, and Education (LHHS) appropriations bill, and thus competes directly with the Labor and Education departments for portions of the same funding allocation.

Appropriations subcommittees hold hearings on the President’s budget request mere weeks after the request has been submitted. Then the subcommittees, generally starting in the House, begin marking up and amending their respective bills. In each chamber, the 12 bills must first be passed by the subcommittees before going to the full Appropriations Committee. It is during the subcommittee and committee phase when legislators can amend draft bills, outline funding priorities for agencies, and attach earmarks. While earmarks are in reality a very small portion of overall spending, their number grew over decades until a moratorium in 2011, and then reinstated in 2021 with additional transparency and other limitations.  Despite their current use in the budget process, their relative merits continue to be debated in some quarters.

Once each spending bill has passed the chamber’s Appropriations Committee, it is subject to action by the full chamber. The bills can again be amended on the chamber floor, though the 302(b) spending limits mentioned above remain in force. Thus, most amendments looking to increase spending for a given program can introduce a zero-sum game with spending shifted in another area rather than add to the sum total.

Spending bills can pass the House by a simple majority, but are subject to the filibuster in the Senate. Spending bills are also subject to Presidential veto, and the administration may threaten a veto or otherwise issue a position on a bill through a Statement of Administration Policy.

Once a spending bill has passed both chambers of Congress, members form a conference committee to work out the differences between the two versions and the completed bill is sent to the White House for the President’s signature, which makes it law.

Phase 4: Spending

The last phase of the budget is once again performed by the agencies. With the budget now set, they are able to request their allocated funding from the Treasury and disburse it as indicated. In some cases, the agencies may have more freedom to direct internal funding than others – NASA will have funds directed to specific projects by Congress, while NSF will find its funds detailed at the directorate level or higher. In those cases, the program’s authorizations will often fill in the gaps left in appropriations language.

The federal fiscal year ends September 30, so all 12 spending bills should be completed and signed by then. If members of Congress cannot finish their appropriations work on time and want to avoid a government shutdown, they have the option of passing a continuing resolution. Continuing resolutions typically just extend the level of funding to agencies from the prior year, though they can also contain additional allocations targeted at specific programs. These changes are known as "anomalies." For instance, when Congress has previously passed continuing resolutions covering the Department of Energy, those bills have sometimes included extra funding for nonproliferation R&D, even as most other civilian energy programs remained flat. Large, multi-year projects, such as satellite launches, can also receive additional funding in a CR so that pre-established progress benchmarks can be achieved.

These days, multiple continuing resolutions are often required to avoid a shutdown, one after the other, until final appropriations are passed. The final appropriations will usually be bundled together to save time, either in a series of minibuses or one complete omnibus, before being approved by Congress and sent to the President for signing into law.


This is an update to a previous Budget 101 explainer.


Alessandra Zimmermann

Analyst / Writer