Budget Laws

The Budget and Accounting Act of 1921 created the core of the current Federal budget process. Before enactment of this law, there was no annual centralized budgeting in the Executive Branch. Federal Government agencies usually sent budget requests independently to congressional committees with no coordination of the various requests in formulating the Federal Government’s budget. The Budget and Accounting Act required the President to coordinate the budget requests for all Government agencies and to send a comprehensive budget to the Congress. The Congress has amended the requirements many times and portions of the Act are codified in Title 31, United States Code. The major laws that govern the budget process are as follows:

  • Article 1, section 8, clause 1 of the Constitution, which empowers the Congress to collect taxes.
  • Article 1, section 9, clause 7 of the Constitution, which requires appropriations in law before money may be spent from the Treasury and the publication of a regular statement of the receipts and expenditures of all public money.
  • Antideficiency Act(codified in Chapters 13 and 15 of Title 31, United States Code), which prescribes rules and procedures for budget execution.
  • Balanced Budget and Emergency Deficit Control Act of 1985, as amended, which establishes limits on discretionary spending and provides mechanisms for enforcing mandatory spending and discretionary spending limits.
  • Chapter 11 of Title 31, United States Code, which prescribes procedures for submission of the President’s budget and information to be contained in it.
  • Congressional Budget and Impoundment Control Act of 1974 (Public Law 93–344), as amended. This Act comprises the:
  • a: Congressional Budget Act of 1974, as amended, which prescribes the congressional budget process; and
  • b: Impoundment Control Act of 1974, as amended, which controls certain aspects of budget execution.
  • c: Federal Credit Reform Act of 1990, as amended (2 USC 661–661f), which the Budget Enforcement Act of 1990 included as an amendment to the Congressional Budget Act to prescribe the budget treatment for Federal credit programs.
  • Chapter 31 of Title 31, United States Code, which provides the authority for the Secretary of the Treasury to issue debt to finance the deficit and establishes a statutory limit on the level of the debt.
  • Chapter 33 of Title 31, United States Code, which establishes the Department of the Treasury as the authority for making disbursements of public funds, with the authority to delegate that authority to executive agencies in the interests of economy and efficiency.
  • Government Performance and Results Act of 1993 (Public Law 103–62, as amended) which emphasizes managing for results. It requires agencies to prepare strategic plans, annual performance plans, and annual performance reports.
  • Statutory Pay-As-You-Go Act of 2010, which establishes a budget enforcement mechanism generally requiring that direct spending and revenue legislation enacted into law not increase the deficit.

The Federal Government uses three primary enforcement mechanisms to control revenues, spending, and deficits.

  • 1. The Statutory Pay-As-You-Go Act of 2010, enacted on February 12, 2010, reestablished a statutory procedure to enforce a rule of deficit neutrality on new revenue and mandatory spending legislation.
  • 2. The Budget Control Act of 2011 (BCA), enacted on August 2, 2011, amended the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) by reinstating limits (“caps”) on the amount of discretionary budget authority that can be provided through the annual appropriations process.
  • 3. The BCA also created a Joint Select Committee on Deficit Reduction that was instructed to develop a bill to reduce the Federal deficit by at least $1.5 trillion over a 10year period, and imposed automatic spending cuts to achieve $1.2 trillion of deficit reduction over nine years after the Joint Committee process failed to achieve its deficit reduction goal.

Government agencies may not spend or obligate more than the Congress has appropriated, and they may use funds only for purposes specified in law. The Antideficiency Act prohibits them from spending or obligating the Government to spend in advance or in excess of an appropriation, unless specific authority to do so has been provided in law. Additionally, the Antideficiency Act requires the President to apportion the budgetary resources available for most executive branch agencies. The President has delegated this authority to OMB. Some apportionments are by time periods (usually by quarter of the fiscal year), some are by projects or activities, and others are by a combination of both. Agencies may request OMB to reapportion funds during the year to accommodate changing circumstances. This system helps to ensure that funds do not run out before the end of the fiscal year. During the budget execution phase, the Government sometimes finds that it needs more funding than the Congress has appropriated for the fiscal year because of unanticipated circumstances. For example, more might be needed to respond to a severe natural disaster. Under such circumstances, the Congress may enact a supplemental appropriation.

On the other hand, the President may propose to reduce a previously enacted appropriation, through a “rescission” or “cancellation” of those funds. How the President proposes this reduction determines whether it is considered a rescission or a cancellation. A rescission is a reduction in previously enacted appropriations proposed following the requirements of the Impoundment Control Act (ICA). The ICA allows the President, using the specific authorities in that Act, to transmit a “special message” to the Congress to inform them of these proposed rescissions, at which time the funding can be withheld from obligation for up to 45 days on the OMB approved apportionment. Agencies are instructed not to withhold funds without the prior approval of OMB. If the Congress does not act to rescind these funds within the 45-day period, the funds are made available for obligation. In May of 2018, the President proposed the largest single ICA rescissions package by sending a request to permanently reduce approximately $15 billion of budget authority.

The President can also propose reductions to previously enacted appropriations outside of the ICA; in these cases, these reductions are referred to as cancellations. Cancellation proposals are not subject to the requirements and procedures of the ICA and amounts cannot be withheld from obligation. The 2021 President’s Budget includes $18 billion in proposed cancellations.