Deep Dive: Year-End Spending

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Deep Dive: Year-End Spending

Members of Congress are negotiating this week on a package of bills that will, among other things, keep the federal government from partially shutting down. These government shutdowns have become a quasi-routine experience in recent years, the result of Congress and the president failing to agree on a spending package that will fund the federal government for an entire fiscal year. The current spending legislation to keep all parts of the federal government open expires on Friday.

 

A previous Deep Dive examined the budget process that talks about the overall spending blueprint for the federal government. This Deep Dive will discuss the specific part affecting spending – the appropriations process. This is key to understanding when and why the federal government shuts down.

 

The Status of Federal Spending

 

The 2020 fiscal year ended on September 30. A new fiscal year started on October 1, which means that Congress needed to approve a new round of spending to keep the federal governments (or parts of the federal government) operating. If it failed to do so, this would lead to a government shutdown. These shutdowns occur when either Congress fails to pass spending bills to keep parts of the government open or the president vetoes these spending bills.

 

While Congress did not pass legislation to fund the federal government for the entire 2021 fiscal year, it did pass HR 8337, which continued federal funding at the Fiscal Year 2020 level. This continuing resolution keeps the federal government operating through December 11. Members of Congress and the Trump Administration have been negotiating during this time to come to an agreement on spending for the current fiscal year. 

 

With no agreement likely this week, Congress will vote on another short-term continuing resolution to prevent a government. Congressional leadership and the Trump Administration are close to finalizing a spending package for the rest of the fiscal year that includes a new coronavirus relief package as well and possibly defense authorization legislation.

 

The new continuing resolution will fund the federal government through December 18.

 

The Appropriations Process

 

Article I, Section 9, of the U.S. Constitution states: “No money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

 

Federal government spending is divided into two categories:

  • Mandatory: Programs authorized by Congress that operate outside the regular spending process are entitlement programs, and their spending is deemed “mandatory.” For Social Security, Medicare, and Medicaid, anyone who meets certain qualification is entitled to benefits. Funding for these programs does not have to be authorized yearly by Congress, although the eligibility and payment rules can be changed.
  • Discretionary: To pay for other government activities, ranging from military operations undertaken by the Defense Department to operating national parks to paying congressional staff, Congress must pass 12 appropriations, or spending, bills. These bills operate on a fiscal year basis. If they do not become law, funds cannot be drawn from the U.S. Treasury to pay for the government operations they cover.

 

Appropriations Bills

 

The 12 appropriations bills that should be passed by Congress every fiscal year (October 1 through September 30) are:

  • Agriculture
  • Commerce/Justice/Science
  • Defense
  • Energy and Water
  • Financial Services
  • Homeland Security
  • Interior and Environment
  • Labor/Health and Human Services/Education
  • Legislative Branch
  • Military/Veterans
  • State/Foreign Operations
  • Transportation/Urban Development

 

You can see the progress of the Fiscal Year 2021 appropriations bills through Congress here.

 

The number and title of these bills can be changed by Congress. After the 2001 terrorist attacks, Congress re-organized the appropriations process, which at that time had operated with 13 appropriations bills.

 

Consolidated Appropriations/Continuing Appropriations/Omnibus Appropriations

 

While the spending process is supposed to proceed with the 12 bills being passed separately and signed into law by October 1 of each year, this almost never happens. In fact, since 1977 (when the current spending system was put in place), Congress has passed all of the appropriations bills on time in only four years. The last time it did this was 1997. The usual pattern is that Congress passes some, but not all, of the bills to be signed into law by October 1.

 

When this happens, Congress can take a variety of steps to avoid a government shutdown. It can pass a resolution for continuing appropriations, which fund the government for a specified period of time at the level of the previous fiscal year. During this time, it can then pass a consolidated appropriations act, which combines two or more appropriations bills. An omnibus appropriations bill generally wraps all the outstanding appropriations bills into a single act for the rest of the fiscal year.

 

If special spending needs arise during the fiscal year, Congress can also pass a supplemental appropriations bill, which provides funding more money than what was contained in the original spending bill.

 

The Previous Government Shutdown

 

There have been a handful of government shutdowns since the mid-1990s, with the latest ending in January 2019. While called “shutdowns,” in reality much of the government keeps operating during these times. Government employees working in capacities deemed “essential” had to work. Those in “non-essential” positions could not do any work.

Prior to the beginning of Fiscal Year 2019 (which began on October 1, 2018), Congress had only passed these appropriations bills:

  • Defense
  • Energy and Water
  • Labor/Health and Human Services/Education
  • Legislative Branch
  • Military/Veterans

 

Continuing resolutions funded the government agencies covered by the other appropriations bills through December 21. President Trump signaled his opposition to signing any spending bills that did not contain funding for a wall on the U.S.-Mexican border. As a consequence, the agencies not covered by the already-passed appropriations bills were shut down on that date.

 

The parts of the government that were covered by these spending bills could continue to operate as normal, however. Since the Legislative Branch appropriations bill was signed into law, congressional staffers could continue to be paid their salary. So could employees of the Energy Department, Defense Department, the Labor Department, the Department of Health and Human Services, and the Education Department.

 

When President Trump signed House Joint Resolution 31 in January, it funded the federal government through the end of Fiscal Year 2019. There was no government shutdown for Fiscal Year 2020.

 

What This Means for You

 

A government shutdown can disrupt a variety of federal activities, from passport processing to the use of national parks. It also leads to disruptions in the pay of federal employees. It is possible that if Congressional leadership and the Trump Administration fail to come to an agreement by December 18, there could be another partial government shutdown. That is unlikely, since many details of the funding package appear to be agreeable to both sides. However, the Fiscal Year 2021 spending bill will also likely contain coronavirus relief legislation. Many have been urging Congress to pass a new coronavirus aid bill, so they are watching this closely to see what it will contain. The new or extended programs in this bill could have a significant effect on millions of Americans, but it will also come with a significant price tag.

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