The President's Budget is transmitted to Congress each year on the first Monday of February. Preparation of the President's Budget begins nine months prior to transmittal. For example, formulation of the President's FY 2008 Budget began in the spring of 2006 when the President's Office of Management and Budget (OMB) issued planning guidance to the various departments and agencies to develop budget proposals for FY 2008 based on the President's priorities and policy objectives.
After several months of examining budget needs and priorities, each department and agency submits to OMB its initial budget request in early fall. OMB then conducts a review, analyzing agency budget requests and melding them into a complete set of budget proposals.
Following an opportunity for agencies to review the OMB draft budget and to appeal issues of concern to the OMB Director and the President, OMB makes final adjustments to the budget and transmits the massive documents to Congress on the first Monday of February, as required by law. Elements of the upcoming President's Budget are often incorporated into the State of the Union address just prior to budget transmittal.
Following the State of the Union and transmittal of the President's Budget request, the Congress begins its own budget process for making fiscal policy decisions on total spending and revenue levels, spending levels for individual programs, and changes - if any - to entitlement programs and the tax code.
After receiving the President's Budget, the Senate and House Budget Committees hold public hearings in February at which they receive testimony on the President's Budget proposals from Administration officials, experts from various disciplines, representatives from national trade associations and interest groups, Members of Congress, and the general public.
At the same time, the other committees of Congress carefully review the President's Budget proposals and transmit to the Budget Committees their own "views and estimates" on appropriate spending or revenue levels for programs within their respective jurisdictions.
The Senate and House Budget Committees - using the President's Budget request, information from their own hearings, views and estimates from other committees of Congress, and Congressional Budget Office reports - each draft a congressional budget plan during March in a series of working meetings known as committee "mark-ups." The draft House and Senate budget plans are known as the Congressional Budget Resolution.
The Budget Resolution does not become a law and is not presented to the President for signature. Rather, it is a congressional blueprint to guide subsequent action on specific spending and revenue measures. The Budget Resolution sets total spending and revenue levels, allocates total spending among the various committees of jurisdiction, and establishes procedures to enforce the budget blueprint.
The Budget Resolution may also include special provisions called "Reconciliation Instructions" directing the committees of the Senate and House to report legislation making changes in entitlement programs and tax laws to achieve certain budgetary objectives, such as reducing projected deficits by particular amounts. Legislation reported in response to these special instructions is considered by Congress under special procedural protections and cannot be filibustered in the Senate.
When the House and Senate Budget Committees complete committee action on drafting their respective budget plans, they report their respective resolutions to the full House and full Senate. Members of the House and Senate then have an opportunity to alter the work of their respective Budget Committees by offering amendments to the Budget Resolutions as they are debated on the House and Senate Floors.
When the Senate and House have both passed their respective versions of the Budget Resolution, they appoint several of their Members to a Senate-House conference committee to resolve the differences between the Senate- and House-passed resolutions. When differences have been resolved in conference, each chamber must then vote on the compromise version of the Budget Resolution called a "Conference Report."
Following adoption of a Budget Resolution Conference Report, the Budget Committees allocate total spending among the various committees of the House and Senate based on jurisdiction, with all discretionary appropriations allocated in one lump sum to the House and Senate Appropriations Committees, respectively.
The Appropriations Committees then subdivide their allocations among their 12 subcommittees, respectively. This allocation of discretionary spending by the full Appropriations Committees among their 12 subcommittees is key point in the budget process because it determines how much spending is allocated to agriculture vs. defense vs. energy vs. health, etc. When an appropriations subcommittee has completed "marking up" its appropriations bill for the upcoming fiscal year, the bill then goes to the full Appropriations Committee for consideration.
Following full committee action, the appropriations bill travels to the House or Senate Floor, respectively, for consideration by the full chamber. After the House and Senate have both acted on a particular appropriations bill, the bill then goes to a House-Senate Conference Committee, generally composed of senior members of the relevant House and Senate appropriations subcommittees. The task of the conferees is to resolve all differences between the two versions of the bill, producing a compromise version known as a conference report. The major constraint under which the conferees operate is to produce a conference report that is consistent with the spending limits established by the Budget Resolution.
Simultaneous with the appropriations process, the authorizing committees of Congress mark-up and report legislation to make changes in entitlement laws and the tax code if the Budget Resolution for that year included "Reconciliation Instructions." After Reconciliation legislation is reported by the respective authorizing committees, it is packaged into a Reconciliation bill for House and Senate consideration, followed by a House-Senate conference and a final vote on a Conference Report. Reconciliation legislation is considered under special expedited procedures that preclude Senate filibuster and strictly limit amendments, making "Budget Reconciliation" a very powerful mechanism for bringing the tax code and entitlement laws into compliance with the dictates of the Budget Resolution.
Congress' objective is to complete action on all twelve appropriations bills as well as Budget Reconciliation legislation by October 1, when the new fiscal year begins. However, if action on particular appropriations bills is not completed by the start of the new fiscal year, Congress passes a "continuing resolution" to keep agencies operating at a particular level of funding (usually the lower of House-passed, Senate-passed, or previous year's funding level) while they endeavor to complete appropriations action.
During the course of the new fiscal year, Senators and Representatives can object to consideration of legislation that would cause a breach of the spending or revenue levels established by that year's Budget Resolution.
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