How Does the Federal Government
Create A Budget?

There are five key steps in the federal budget process:

Step 1: The President submits a budget request to Congress

Step 2: The House and Senate pass budget resolutions

Step 3: House and Senate Appropriations subcommittees “markup” appropriations bills

Step 4: The House and Senate vote on appropriations bills and reconcile differences

Step 5: The President signs each appropriations bill and the budget becomes law

****

Step 1: The President Submits a Budget Request

The president sends budget request to Congress each February for the coming fiscal year, begins on Oct. 1.

For example, President Obama submitted his budget request for fiscal year 2013 in February of 2012.

Fiscal year 2013 commences on Oct. 1, 2012, and ends on Sept. 30, 2013.

The president’s budget request is just a proposal. Congress then reviews the request and passes its own appropriations bills; only after the president signs these bills does the country have a budget for the new fiscal year.
 
Step 2: The House and Senate Pass Budget Resolutions

Once the president’s budget request has been released, Congress begins the months-long process of reviewing the request. After the president submits the budget request and lawmakers have thoroughly reviewed it, the House Committee on the Budget and the Senate Committee on the Budget each writes a budget resolution.

A budget resolution is not a binding document, but is more like a blueprint.

It provides a framework for Congress for making budget decisions about spending and taxes.

It sets overall annual spending limits for federal agencies, but does not set specific spending amounts for particular programs.

After the two chambers pass their budget resolutions, a joint conference is formed to iron out differences between the two and a reconciled version is then voted on by each chamber.

Step 3: House and Senate Subcommittees “Markup” Appropriation Bills

The Appropriations Committees in both the House and the Senate are responsible for determining the precise levels of budget authority for all discretionary programs.

The Appropriations Committees in both the House and Senate are broken down into smaller Appropriations subcommittees, which review the president’s budget request pertaining to the federal agencies under their specific jurisdictions.

Subcommittees cover different areas of the federal government; for example, there is a subcommittee for defense spending, and another one for energy and water.

After each subcommittee reviews the president’s request, it conducts hearings and poses questions to leaders of its associated federal agencies about each agency’s requested budget.

Based on all of this information, the chair of each subcommittee writes a first draft of the subcommittee’s appropriations bill, abiding by the spending limits set out in the budget resolution.

All subcommittee members then consider, amend, and finally vote on the bill.

Once it has passed the subcommittee, the bill goes to the full Appropriations Committee.

The full committee reviews it, and then sends it to the full House or Senate for consideration.

Step 4: The House and Senate Vote on Appropriations Bills and Reconcile Differences

The full House and Senate then debate and vote on appropriations bills from each of the 12 subcommittees.

After both the House and Senate pass their versions of each appropriations bill, a conference committee meets to resolve differences between the House and Senate versions.

After the conference committee produces a reconciled version of the bill, the House and Senate vote again, but this time on a bill that is identical in both chambers.

After passing both the House and Senate, each appropriations bill goes to the president.

Step 5: The President Signs Each Appropriations Bill and the Budget Becomes Law

The president must sign each appropriations bill after it has passed Congress for the bill to become law.

When the president has signed all 12 appropriations bills, the budget process is complete.

Rarely, however, is work finished on all 12 bills by Oct. 1, the start of the new fiscal year.

This chart shows how all of these pieces fit together to make the annual federal budget process.