January 31, 2006

• Federal Budget Process

---

Federal Budget Process

The second Session of the 109th Congress has now convened and has a full agenda for a shortened election year Session (60 scheduled legislative work days between February 1st and October 6th). 435 House seats and 33 Senate seats are on the November 7th ballot.

The only legislation this Congress is required to pass are the eleven FY 2007 appropriations bills and a FY 2007 budget resolution which is the "blueprint" for the appropriations bills. The budget resolution essentially sets the spending limits the appropriations bills adhere to. The House and Senate Republican leadership set the agenda for each chamber and, besides the appropriations and budget legislation, the agenda will include only legislation that holds a possibility of promoting that party's election prospects in November. The reauthorization of the Patriot Act, overhaul of federal laws governing campaign finance and lobbying, and immigration reform, at this time are at the top of the list.

But most all of this Congress' activity during the year will focus on FY 2007 appropriations, the budget resolution, reducing spending through across the board spending reductions through the appropriations bills, and further savings through entitlement reform through the budget process.

There is a reasonable possibility that the 2006 budget resolution will include budget reconciliation instructions similar to last year's. Senate Budget Committee Chair, Judd Greg (R-NM) stated last week that last year's budget reconciliation was a beginning in reigning in entitlement program spending and that he wants to see another round of budget reconciliation this year.

The House of Representatives and Senate Budget Committees set the schedule by which the House Budget, Appropriations, and substantive committees try to adhere to as they go about adopting a budget resolution and appropriations bills.

First Monday in February — President's budget submitted to congress.

February 15 — CBO issues its Budget and Economic Outlook report on projected spending for the forthcoming fiscal year.

Within six weeks after the President's budget submission-House and Senate committees submit their "views and estimates" for programs under their jurisdiction to the Budget Committees.

March 1-April 15 — House and Senate Budget Committees develop respective budget resolutions and report them to the full House and Senate. A House and Senate conference committee adjusts the differences between the two House and Senate passed resolutions and reports a final resolution back to each chamber for final passage. If a budget resolution is not agreed to, then each House and Senate Budget Committee issues 302(a) appropriations allocations for each budget function which sets pay-as-you-go ceilings.

April 15-May 15 — Authorizing committees develop reconciliation legislation (if necessary) and report legislation to Budget Committees. Budget Committees package reconciliation language and report to floors of their respective chambers. After passage in each chamber, House-Senate conferees develop conference report for final votes in House and Senate.

(The budget resolution may include reconciliation instructions as was the case in 2005.)

May 15 — The House begins to consider annual appropriations bills.

June 10 — House Appropriations Committee reports the last of its annual appropriations bills.

June 15 — Congress completes action on reconciliation legislation (if necessary).

June 30 — House completes action on House appropriations bills.

July 1-September 30 — Senate completes action on Senate appropriations bills. House-Senate conferees complete action on appropriations conference reports for final votes in House and Senate.

October 1 — Fiscal year begins.

Detailed information on the federal budget and appropriations process can be accessed at www.budget.senate.gov/republican/newbudgetbackground.htm and www.house.gov/budget/budgcalendar.pdf.

On a related topic, the Congressional Budget Office's (CBO) annual Outlook and Estimates report to Congress released on January 26th projects an increased $337 billion deficit for 2006 and $1.3 trillion through 2010. The CBO estimates annual deficits to decline to $270 billion in 2007 to $67 billion in 2016, and for the deficits to continue to equal less than 3 percent of the Gross Domestic Product through 2007, declining to .3 percent in 2016.

However, because of congressionally imposed rules that require the CBO's estimates to be static — assuming current laws do not change — these estimates include the Social Security Trust Fund surplus ($175 billion today, increasing to $293 billion in 2016), assume the 2001-2003 tax cuts will expire on schedule, and do not include any increased future costs for expenditures associated with the "war on terror" or hurricane Katrina and Rita relief.

According to the CBO, if only the 2001-2003 tax cuts are reauthorized by the Congress (which seems more probable than not), the $67 billion surplus in 2016 turns into a $584 billion deficit and a cumulative debt in 2010 of $4.2 trillion rather than $1.3 trillion.

Of special interest to those involved with the federal student loan programs, the CBO estimates that the three month Treasury Bill interest rate will increase from the 2005 3.2 percent to 4.5 percent in 2006 and 2007, and average 4.4 percent through 2016, which puts the current variable rate close to the scheduled fixed rate change on July 1st for new loans of 6.8 percent.

Two weeks ago, the Office of Management and Budget issued a preliminary estimate for the 2006 deficit totaling $400 billion.

The basic message here is that the Congress will continue to have one faction that will use the CBO report to persist in trying to reduce discretionary and mandatory spending, and another that will use the CBO data to make the case that the government cannot continue to finance new spending while cutting taxes and spending on domestic education, health and human service programs.

The student loan programs and the HEA reauthorization will, again, be caught up in this debate.

The full report and summary are available at www.cbo.gov.

Back to Top

For more information, contact:

TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100