The voices of Urban Institute's researchers and staff
April 17, 2017

“Fixing” the budget process will only make matters worse

April 17, 2017

Because of Congress’s competing budget priorities and party differences, the federal budgeting process is fraught with uncertainty and drama. For funding, the government currently relies on a stopgap measure called a continuing resolution, which, roughly speaking, continues one year’s (e.g., 2016) level and pattern of appropriated spending into the next fiscal year (2017).

The resolution expires on April 28, and if at least 60 senators don’t vote to extend it, the federal government will close. The 52 Republican senators need Democratic support to keep the government open.

The nation should be outraged that a shutdown is even possible. But the budget process is so dysfunctional that we deem it a great success if the government continues to operate.

The last time Congress completed the appropriations process before the beginning of the fiscal year was in 1997. A portion of the 12 necessary appropriations bills were finished on time in the years that followed, but recently, none have been. As a result, government is funded by passing huge, poorly understood omnibus bills that cover hundreds of activities.

Why shouldn’t Congress rely on continuing resolutions?

Philip Joyce of the University of Maryland has described how continuing resolutions harm government efficiency. Continuing resolutions have some flexibility, but they are not as responsive to changing needs as in a carefully considered appropriations process.

Moreover, government agencies that do not know how much money they have to spend until after the fiscal year begins cannot plan efficiently. Assuming that appropriations for fiscal year 2017 will be completed April 28—which is not yet certain—the final appropriations will come almost seven months after fiscal year 2017 began on October 1, 2016.

When appropriations do not cover a full year, time is wasted planning for government shutdowns, even if there’s little chance they will occur. The bureaucracy cannot be caught flat-footed if they have to shut things down quickly.

Much of the government is run by outside contractors, and contracts are generally contingent on appropriations being available. Uncertainties regarding appropriations force contractors build in a risk premium when they bid, adding to the cost of running the government.

Could these problems be reduced by a different budget process?

A good budget process provides discipline to prompt legislators to accomplish difficult tasks. It can also ensure that difficult decisions cannot be easily reversed once made. A process cannot, however, make Congress do what it does not want to do. If the rules are inconvenient, Congress will ignore or change them.

Major process reforms have recently been suggested by both the House and Senate Budget Committees and by various outside groups. Many suggest that appropriations be enacted for two-year periods. Presumably, this would reduce the workload and make on-time task completion more likely. Appropriations and authorization committees would also have more time to oversee programs.

But neither hope may be realized. In 1976, the fiscal year was moved forward three months to give appropriation committees more time. Timeliness has since deteriorated. Forecasting needs two years in advance is difficult. Many more supplemental appropriation bills would be necessary in the interim, and disciplining supplementals is notoriously difficult.

The most rigorous program oversight is the annual appropriations process. Agencies must justify their budget requests first before the Office of Management and Budget and before appropriations subcommittees. The hearings are tough, and critiques of programs can be valuable, even when the appropriations process is not completed on time. This oversight will likely diminish if it occurs only every two years.

Biennial budgeting has another awkward implication. Presumably, Congress would like to respond quickly to a new president’s priorities, but a president’s first budget is typically not thorough because it is developed so quickly after the inauguration. With two-year appropriations, Congress could not react to a complete presidential budget until two years later, or after the next midterm election.

The budget process is not the problem

Although Congress’s worsening on-time performance should not be excused, appropriating is more difficult than it once was. Programs requiring appropriations are being squeezed by growing entitlements for the elderly and by a reluctance to raise taxes.

Many programs have not kept up with inflation and the demands created by a growing population. In contrast, spending on Social Security, Medicare, and Medicaid rose from 5.9 percent of GDP in 1980 to 10.1 percent in 2016. It is difficult to appropriate when you have few resources.

When Congress finally addresses these competing problems of insufficient revenue and surging entitlement spending, the budget process will function as it should.

The Capitol is seen from the Supreme Court Building in Washington, DC on April 4, 2017. Photo by J. Scott Applewhite/AP

SHARE THIS PAGE

As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.