Glossary of Important Budget Terms
by Guest Blogger, 11/20/2003
A list of frequently used budget terms and their definitions, along with some links to other budget and economic glossaries.
302(b) Allocations: The Budget Resolution gives the Appropriations Committees their overall allocation of spending authority. The Appropriations Committees then divide that amount among the 13 subcommittees in each House that share responsibility for the various departments of the Government. These are called the 302(b) allocations.
Appropriations Bill: A bill that comes from the House or Senate Appropriations Committees, giving budget authority to those federal programs and/or agencies for which Congress must provide funding each year (see also "discretionary spending"). There are 13 appropriations bills.
Advance Appropriation: Budget authority that does not become available until a year or more beyond the fiscal year for which the appropriations act is passed.
Advance Funding: Budget authority that is to be charged to the appropriation in the succeeding year but which authorizes obligations to be incurred in the last quarter of the current year if necessary to meet benefit payments over the specific amount appropriated for the year.
Forward Funding: Budget authority that is made available for obligation beginning in the last quarter of the fiscal year for the financing of grant programs during the next fiscal year?used mostly for education programs.
Authorization Bill or Act: Legislation (under the jurisdiction of a committee other than the House or Senate Committees on Appropriations) that creates, continues the operation of, or alters the operation of a federal program or agency, setting forth its goals and objectives. An authorization act may suggest a level of budget authority needed to fund the program or agency, which is then provided in a future appropriation act. However, for many programs, the authorization may itself provide the budget authority (see also "budget authority"). Programs that are not authorized indefinitely must be reauthorized if they are to continue. For instance, Temporary Assistance to Needy Families or TANF, the federal welfare block grant program, is up for authorization for FY 2004.
Balanced Budget: When total revenues equal total outlays for a fiscal year a budget is balanced.
Baseline: A benchmark for measuring the effects on the budget of proposed changes in federal revenues or spending. The baseline is the projection of current-year levels of new budget authority, outlays, revenues, and the surplus or deficit into the budget year and out-years based on current laws and policies.
Budget Authority (BA): The amount of money that the law allows an agency to commit to be spent in current or future years. An agency may choose not to spend its total budget authority in a fiscal year, but it may not exceed it. Budget authority is what permits a department to cut a check or sign a contract.
Budget Outlays: Cash actually paid out to employees, suppliers, beneficiaries, etc., to satisfy obligations incurred by a department or agency under its budget authority.
Budget Resolution: The annual broad framework within which Congress makes its decisions about spending and taxes. This framework includes targets for total spending, total revenues, and predicted deficit or surplus, as well as allocations for discretionary and mandatory spending. It is a guide for Congress to follow and does not require the President's signature. Budget resolutions are enforceable in the House and Senate through procedural barriers on legislation that violates the terms of the budget resolution.
"Caps" or Discretionary Spending Limits: A limit on the amount of budget authority provided for in annual appropriations acts. Separate caps have often been imposed on specific categories of discretionary spending, such as defense, highways, and violent crime reduction. The FY 2004 budget resolution extended the budget caps through 2005, enforceable through Senate procedural rules.
Continuing Resolution: A bill enacted by Congress to continue the funding for programs and agencies into a new fiscal year when the regular appropriations process has not been completed in time. A continuing resolution can be of any length, even for the entire fiscal year, and specifies the amount of funding. It may, for instance, set funding for a program at the previous year?s level.
Deficit: The difference produced when outlays exceed revenues in a fiscal year.
Debt: The accumulation of past deficits. The gross Federal debt is divided into two categories: debt held by the public and debt the Government owes itself. Another category is debt subject to legal limit.
Debt Held by the Public: The total of all Federal deficits, minus surpluses, over the years. This is the cumulative amount of money the Federal Government has borrowed from the public, through the sale of notes and bonds of varying sizes and time periods.
Debt the Government Owes Itself: The total of all trust fund surpluses over the years, like the Social Security surplus, that the law says must be invested in Federal securities. (Currently, the Social Security trust fund is running a surplus, i.e., more taxes are being collected than are needed to pay current claims.)
Debt Ceiling or Debt Legal Limit: The maximum amount of Federal securities that may be legally outstanding at any time. When the limit is reached, the President and Congress must enact a law to increase it.
Discretionary Spending: The budget resources for programs that the President and Congress must decide to fund each fiscal year. Discretionary spending is funded through 13 annual appropriations bills. Examples include money for such activities as the FBI and the Coast Guard, housing and education, space exploration and highway construction, and defense and foreign aid.
Emergency Appropriations: An exception to the budget "caps," allowing the limit to be raised by the amount of the emergency appropriation. There are no precise definitions of what constitutes an "emergency," and it has included things like natural disasters, September 11, "Y2K," etc. In mandatory (see "mandatory spending") programs, the emergency designation would exempt the spending from pay-as-you-go (see "pay-as-you-go") requirements.
Entitlement: A program that legally obligates the Federal Government to make payments to a person, business, or unit of government that meets the criteria set in law. The Congress generally controls entitlement programs by setting eligibility criteria and benefit or payment rules ? not by providing budget authority through an annual appropriation act. The best-known entitlements are the major benefit programs, such as Social Security and Medicare. Entitlements are funded through "mandatory" (not "discretionary") spending.
Fiscal Year: The Government's accounting period begins October 1 and ends on September 30. It is named after the year when it ends, so FY 2004 begins on October 1, 2003 and ends September 31, 2004.
Gross Domestic Product (GDP): The standard measurement of the size of the economy. It is the total value of the production of goods and services within the United States in a given period of time. GDP serves as the principal measure of the size of a country's economy.
Lockbox: Any of several legislative mechanisms that attempt to isolate or "lock away" funds of the federal government for purposes such as reducing federal spending, protecting the surplus, or protecting the solvency of trust funds. Legislation to put Social Security Trust Funds into a lockbox became popular in the late 1990's. Since the government can't "save" money, though, the "lockbox" concept has not been very useful.
Mandatory Spending (also known as direct spending): Spending that is authorized by permanent law - not through appropriations acts. Examples are entitlements, like Social Security, or interest payments on the national debt. If Congress wishes to change the level of spending in a mandatory program, it must change the underlying authorization act - for example, by changing the eligibility criteria for benefits.
"Marking up" a Bill: Going through the original draft of a bill section by section in committee so that members of the committee can offer amendments that can then be accepted or rejected by the entire committee?s membership.
"Off-Budget": Spending or revenues excluded from the budget totals by law. Social Security and the Postal Service are "off-budget." "Off-budget" spending is excluded from budget caps, sequestration, and "pay-as-you-go" requirements.
"On-Budget": Federal budget totals excluding "off-budget" programs. The "Unified" budget is the presentation of the Federal budget in which revenues from all sources and outlays to all activities are consolidated.
Omnibus Bill: The package that results when a number of bills on related topics are combined into a single bill for floor action. Often the jurisdictions of several committees are involved.
"Pay-As-You-Go" or "Paygo": A requirement that legislation that would increase mandatory spending or reduce revenues must be offset by cuts in other mandatory spending or by tax increases, to insure that the deficit does not rise. These rules are enforced by sequestration (see "sequestration"). The statutory pay-as-you-go rules expired after 2002. There are still modified pay-as-you-go rules in the Senate created through the FY 2004 budget resolution.
Referral: The process through which a bill is assigned to a committee or subcommittee for action.
Reconciliation Instructions: Usually included in the budget resolution, these instructions direct various House and Senate committees to report legislation modifying programs under their jurisdiction to produce specified spending reductions or revenue increases. "Reconciliation" has recently been used to insure the passage of tax cuts, i.e., reconciliation instructions were included in the FY 2004 Resolution requiring passage of a specified amount as tax cut legislation.
Revenue: Funds collected from the public that come about from government's exercise of its sovereign or governmental powers, including taxes, customs duties, fees, and fines.
Sequestration: A procedure created by law to automatically cut spending (across-the-board) if, for a given fiscal year, discretionary appropriations exceed the discretionary spending limits or enacted legislation affecting mandatory spending and receipts increases the deficit or reduces the surplus.
Supplemental Appropriations: An act to provide funds for an agency or program in addition to a regular appropriations bill, usually reserved for circumstances that cannot wait for the next normal appropriations cycle.
Surplus: The amount by which revenues exceed outlays.
Trust Funds: Government accounts for revenues and spending designated for specific purposes. The Social Security Trust Fund is one example. Even though the surplus trust fund revenue is spent, an accounting of how much the Trust Fund is ?owed? is made (see also Debt the Government Owes Itself).
Other budget glossaries:
Coalition on Human Needs
House Budget Committee (Democratic)
Congressional Budget Office
Senate Budget Committee (Democratic)