How Congress Funds the Federal Government

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The United States Constitution grants Congress the “power of the purse”: “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” This ensures the executive branch can only spend what the people’s representatives approve.

The mechanism for exercising this power is the congressional appropriations process—an annual cycle designed to fund the federal government, debate national priorities, and conduct oversight.

This process is a tale of two realities. On paper, it’s a structured, sequential, and deliberate affair governed by a strict timetable. In practice, it has become a complex and often contentious scramble, where deadlines are routinely missed and legislative workarounds are the norm.

Understanding both the textbook ideal and the modern reality is essential to grasping how the U.S. government gets funded.

How It’s Supposed to Work

The formal appropriations process is governed by the Congressional Budget Act of 1974. This framework, often called “regular order,” outlines a step-by-step procedure for the President and Congress to collaborate on the federal budget for the upcoming fiscal year, which runs from October 1 to September 30.

The President’s Budget Request

Every year, the President kicks things off by submitting a budget proposal to Congress. By law, this is required on or before the first Monday in February, though this deadline is sometimes extended.

This document, prepared by the Office of Management and Budget, is a detailed statement of the administration’s policy goals, economic projections, and recommended spending levels for every federal agency and program.

The President’s budget is a request, not a command. It has no binding authority on Congress. However, it serves as the administration’s primary policy statement and the starting point for all legislative action. Its true function is often political, serving as a messaging document that publicly frames the administration’s priorities.

A central concept in the budget is budget authority. This is the legal authority granted by Congress to federal agencies to enter into financial obligations—like signing contracts or hiring staff—that will result in future government spending. The actual payments made from the Treasury to liquidate these obligations are called outlays.

An appropriations act primarily provides budget authority, which is then spent over time, leading to outlays. For example, budget authority for a major construction project might be provided in one year, but the outlays could occur over several years as the work is completed.

The Congressional Budget Resolution

After receiving the President’s request, Congress develops its own fiscal framework in the form of a concurrent budget resolution. Drafted by the House and Senate Budget Committees, this resolution is not a law and doesn’t require the President’s signature. Instead, it’s an internal blueprint for Congress that sets overall targets for spending, revenues, deficits, and debt for at least the next five fiscal years.

The budget resolution does one critical thing: it sets the spending limit for the upcoming fiscal year. This overall spending cap is known as the 302(a) allocation. While the statutory deadline for passing the budget resolution is April 15, this date is now rarely met.

To inform this process, Congress relies on the Congressional Budget Office. Created by the 1974 Budget Act, the CBO provides objective analysis of budgetary and economic issues, including projections on spending and revenue and formal cost estimates for legislation. The CBO’s independent analysis serves as a critical check on the data and projections provided by the President’s OMB.

The Appropriations Committees

Once the 302(a) allocation sets the size of the total discretionary spending “pie,” the process moves to the House and Senate Appropriations Committees. These powerful committees divide the total funding among their 12 parallel subcommittees. This subdivision is known as the 302(b) allocation, which effectively gives each subcommittee its own spending ceiling for the agencies and programs under its jurisdiction. Each 302(b) allocation represents one of the 12 “slices” of the pie.

These 12 subcommittees, whose jurisdictions are identical in both chambers, are the workhorses of the appropriations process. They draft the 12 annual regular appropriations bills that fund the government. The jurisdictions cover the entire scope of federal discretionary activity:

• Agriculture, Rural Development, Food and Drug Administration
• Commerce, Justice, Science
• Defense
• Energy and Water Development
• Financial Services and General Government
• Homeland Security
• Interior, Environment
• Labor, Health and Human Services, Education
• Legislative Branch
• Military Construction, Veterans Affairs
• State, Foreign Operations
• Transportation, Housing and Urban Development

Each subcommittee holds hearings where agency officials justify their budget requests. They then draft, or “mark up,” their respective appropriations bill before voting to send it to the full Appropriations Committee for another markup and vote.

This entire structure rests on a fundamental principle: the separation of authorization and appropriation. An authorization bill establishes a federal agency or program, sets its policies, and recommends funding levels. However, an authorization alone provides no actual money. A program is only funded after an appropriations bill provides it with budget authority.

Floor Action and Conference

After approval by the full Appropriations Committee, each of the 12 bills goes to the floor of its respective chamber for debate, amendment, and passage. According to the statutory timetable, the House is supposed to complete action on all annual appropriations bills by June 30.

Because the House and Senate invariably pass different versions of each bill, the differences must be reconciled. This is traditionally accomplished through a conference committee, composed of members from both the House and Senate Appropriations Committees, who negotiate a single, compromise version. The resulting conference report must then pass in identical form in both chambers before going to the White House.

Presidential Action

Once a bill has passed both chambers in identical form, it’s presented to the President, who has 10 days (excluding Sundays) to either sign it into law or veto it. If the President signs the bill, the Treasury Department is authorized to provide the appropriated funds to the relevant agencies. If the President vetoes the bill, it’s returned to Congress, which can override the veto with a two-thirds vote in both chambers.

The entire process is designed to be completed before the new fiscal year begins on October 1.

The 1974 Budget Act

The modern appropriations process was born from a constitutional crisis that pitted Congress against the President. The Congressional Budget and Impoundment Control Act of 1974 was landmark legislation that fundamentally reshaped how Congress handles the federal budget and reasserted its authority over the nation’s finances.

The Historical Context

The Act was a direct response to President Richard Nixon’s expansive use of impoundment—the executive branch’s refusal to spend funds that Congress had legally appropriated. President Nixon used impoundment to unilaterally defund or dismantle programs he opposed, effectively giving himself a line-item veto that the Constitution didn’t grant.

Congress saw this as a threat. Nixon was undermining their constitutional power over spending. The 1974 Act was designed to end this practice and create a more disciplined, Congress-centric budget process.

What the Act Created

The law established the core architecture of the modern budget process:

House and Senate Budget Committees

These committees were created to analyze the budget as a whole and draft the annual budget resolution, giving Congress a mechanism to consider the big picture of fiscal policy rather than just individual spending bills.

Congressional Budget Office

The creation of the CBO was a pivotal reform. It provided Congress with its own source of high-quality, nonpartisan data and analysis, breaking the executive branch’s monopoly on budgetary information and allowing the legislature to challenge the President’s assumptions on equal footing.

A New Fiscal Calendar

The Act shifted the start of the federal fiscal year from July 1 to October 1, theoretically giving Congress an additional three months to complete its work on appropriations bills.

The Reconciliation Process

The Act created a special, fast-track legislative process known as reconciliation. It was originally intended as a tool to conform existing spending and revenue laws with the policies set forth in the budget resolution, primarily for deficit reduction.

Crucially, reconciliation bills are protected from filibuster in the Senate, allowing them to pass with a simple majority. This feature has transformed reconciliation from a budget-enforcement tool into the primary vehicle for enacting major, partisan policy changes—such as the Affordable Care Act and significant tax cuts—that couldn’t overcome the Senate’s 60-vote threshold for regular legislation.

Taming Presidential Impoundment

Title X of the Act directly addressed the impoundment crisis by establishing strict legal procedures that the President must follow to withhold congressionally appropriated funds. The core principle is that the President must faithfully execute the spending laws passed by Congress and can’t substitute his own policy preferences.

The Act created two formal mechanisms for withholding funds:

Rescissions

If the President wants to permanently cancel funding, he must send a special message to Congress proposing a rescission. Congress then has 45 days of continuous session to pass a bill approving the rescission. If Congress doesn’t act or disapproves the request, the President must make the funds available for obligation.

Deferrals

If the President wants to temporarily delay spending, he may propose a deferral. However, deferrals are only legally permissible for administrative reasons, such as providing for contingencies or achieving savings from efficiencies. They can’t be used to advance a policy objective.

The Act’s Legacy

The 1974 Act carries a dual legacy. In some respects, it was a remarkable success. The creation of the CBO is almost universally praised as a triumph of good governance, equipping Congress with the analytical power it needed. The Act also effectively ended the President’s ability to unilaterally impound funds for policy reasons.

However, the Act has largely failed in its central goal of imposing discipline and timeliness on the congressional budget process itself. The deadlines it established are now routinely ignored, and the orderly procedure it envisioned has become a historical artifact.

How It Works Today

The textbook process of “regular order”—passing 12 individual appropriations bills on time—has become exceptionally rare. The modern appropriations process is defined by chronic delays, legislative workarounds, and the ever-present threat of a government shutdown.

This breakdown is driven by intense political polarization, where spending bills become battlegrounds for unrelated policy fights, and by disagreements not just between the two parties but within them.

Continuing Resolutions

When Congress fails to pass the regular appropriations bills by the October 1 deadline, it must pass a continuing resolution to prevent a lapse in funding. A CR is a temporary spending bill that provides stopgap funding to keep government agencies open, typically at the previous fiscal year’s levels.

CRs generally prohibit the start of new programs or activities, locking agencies into the priorities and funding levels of the past.

Enacted as joint resolutions that require the President’s signature, CRs can last for a single day, a few weeks, or even an entire fiscal year. Since fiscal year 1977, Congress has had to enact at least one CR in all but three years.

This constant reliance on short-term funding measures creates massive uncertainty for federal agencies, disrupting long-term planning, delaying hiring and contracting, and reducing operational efficiency.

Omnibus and Minibus Bills

As deadlines loom after a series of CRs, and with no path forward for individual bills, congressional leaders often resort to packaging multiple appropriations bills together into a single, massive piece of legislation.

An omnibus bill combines all 12 regular appropriations bills into one take-it-or-leave-it package.

A minibus is a smaller version, combining two or more—but not all—of the bills.

A cromnibus is a hybrid that combines an omnibus for some agencies with a CR for others.

These legislative vehicles are used for several practical and political reasons. They offer a path to completing the appropriations process under extreme time pressure, thereby avoiding a government shutdown. They also provide immense leverage for leadership, who can bury controversial provisions or earmarks for pet projects deep within a thousand-page bill that must be passed quickly. This tactic shields individual members from accountability and forces the President to accept provisions he might otherwise veto.

The trade-off is reduced opportunities for public review and debate. These massive bills are typically negotiated in secret by a small handful of party leaders and are often released to the public and rank-and-file members just hours before a vote, undermining meaningful oversight.

Government Shutdowns

If Congress and the President can’t agree on either the regular appropriations bills or a CR before funding expires, a funding gap occurs, triggering a partial or full government shutdown.

The legal basis for a shutdown is the Antideficiency Act of 1870, a law that makes it a crime for federal officials to spend money or incur financial obligations without a congressional appropriation. For a century after its passage, agencies often continued to operate during brief funding gaps, assuming Congress didn’t intend for them to close.

This changed dramatically in 1980 and 1981, when Attorney General Benjamin Civiletti issued legal opinions arguing that the Antideficiency Act’s language was unambiguous: without an appropriation, an agency must cease all non-essential operations.

These opinions established the legal framework for modern government shutdowns. During a shutdown:

• Federal employees deemed “non-essential” are furloughed, meaning they’re sent home and can’t work. By law, they now receive back pay after the shutdown ends.
• Employees whose work is considered essential for the “safety of human life or the protection of property”—such as active-duty military, air traffic controllers, and federal law enforcement—are deemed “excepted” and must continue to work without pay until funding is restored.
• Government services are disrupted, national parks and museums close, regulatory approvals are delayed, and federal contracts are put on hold.

The shutdown, once a rare procedural accident, has been increasingly used as leverage in negotiations. It’s now used as leverage in high-stakes negotiations over policy issues that may have little to do with the spending levels in the appropriations bills themselves—such as the 2013 shutdown over funding for the Affordable Care Act or the 2018–2019 shutdown over funding for a border wall.

This dysfunction creates a vicious cycle: partisan gridlock prevents passage of individual bills, forcing reliance on CRs. The pressure of repeated CR deadlines leads to a last-minute omnibus bill negotiated in secret, which breeds resentment and distrust among members, making future bipartisan cooperation even more difficult.

When Did Congress Last Follow the Process?

The decline of regular order is not a recent phenomenon but a decades-long trend. Answering the question “When was the last time Congress went through the full appropriations process?” requires defining what “fully” means.

Fiscal Year 1997: All Bills Enacted On Time

By the most common measure—enacting all required appropriations into law before the October 1 start of the fiscal year—the last time Congress succeeded was Fiscal Year 1997. This achievement, however, came with a significant caveat: it wasn’t done through regular order. To meet the deadline, Congress had to package several of the final appropriations bills into a single consolidated measure.

Since FY1997, Congress has failed to enact all spending bills on time every single year.

Fiscal Year 1994: All Bills Passed Individually and On Time

For a stricter definition of the “full and complete” process—passing each appropriations bill as a separate, standalone piece of legislation before the fiscal year began—one must go back even further, to Fiscal Year 1994. During that year, under President Bill Clinton, Congress passed all 13 regular appropriations bills (the number at the time) individually and had them signed into law before the October 1 deadline.

The Long-Term Trend

The data reveals a clear and steady erosion of the regular appropriations process:

• In the nearly five decades since the 1974 Budget Act established the modern system, Congress has managed to pass all spending bills on time in only four fiscal years: 1977, 1989, 1995, and 1997.
• Reliance on CRs has become ubiquitous. At least one CR has been required in every fiscal year since FY1998.
• Omnibus bills have become the default method for completing the process. In 12 of the 15 fiscal years leading up to FY2025, all regular appropriations were ultimately bundled into after-deadline omnibus packages.

This history demonstrates that the standards for success have been significantly degraded. In the 1990s, success meant getting all bills passed on time, even if it required some packaging. Today, simply avoiding a prolonged government shutdown or a full-year CR is often portrayed as a legislative achievement.

The goalposts have shifted from achieving the orderly process envisioned by law to merely maintaining the basic functions of government.

Key Budget Terms

Appropriation: A law passed by Congress that provides federal agencies with the legal authority to incur obligations and make payments out of the U.S. Treasury for specified purposes.

Authorization: A law that establishes or continues a federal agency, program, or activity. It sets policy guidelines and may recommend funding levels but doesn’t provide actual funds.

Budget Authority: The authority provided by law to enter into financial obligations that will result in immediate or future outlays of federal funds. Appropriation is the most common form of budget authority.

Budget Resolution: A non-binding, concurrent resolution passed by both the House and Senate that serves as a framework for congressional budget decisions. It sets overall spending and revenue targets for at least five years.

Continuing Resolution (CR): A temporary appropriations law that provides stopgap funding for federal agencies to continue operating when their regular appropriations bills haven’t been enacted by the start of the fiscal year.

Discretionary Spending: Spending controlled through the annual appropriations process. It funds most federal agency operations, including defense, homeland security, and education.

Fiscal Year: The federal government’s accounting period, which begins on October 1 and ends on September 30 of the following year. The fiscal year is designated by the calendar year in which it ends (e.g., FY2025 begins on October 1, 2024, and ends on September 30, 2025).

Impoundment: Any action or inaction by the executive branch that prevents the obligation or expenditure of budget authority. The 1974 Impoundment Control Act created two types: rescissions (proposals to permanently cancel funds) and deferrals (proposals to temporarily delay spending).

Mandatory Spending: Spending controlled by laws other than annual appropriations acts, also known as direct spending. It includes entitlement programs like Social Security and Medicare, for which funding is determined by eligibility rules rather than a fixed annual amount.

Omnibus / Minibus / Cromnibus: An omnibus is a single bill that packages all 12 regular appropriations bills together. A minibus packages two or more, but not all, of the bills. A cromnibus combines a CR for some agencies with an omnibus for others.

Outlays: The actual payments made from the U.S. Treasury to liquidate a federal obligation. Outlays are the measure of government spending.

Reconciliation: An expedited legislative process, protected from filibuster in the Senate, used to bring existing revenue and direct spending laws into compliance with the policies of the budget resolution.

302(a) and 302(b) Allocations: The 302(a) allocation is the total amount of discretionary spending set by the congressional budget resolution. The 302(b) allocations are the subsequent subdivisions of that total amount among the 12 appropriations subcommittees.

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