Key terms you need to understand when processing a budget

     1.  Appropriations Bill: This is a piece of legislation that authorizes the government to spend money. It is a bill that sets money aside for specific spending. In the United States, the Constitution states that “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” This means that Congress must pass legislation approving the spending of money before it can be spent. There are typically twelve appropriations bills that must be passed each fiscal year, each funding different aspects of the government.

    2.  Continuing Resolution: This is a type of appropriations bill used by Congress to fund government agencies if a formal appropriations bill has not been signed into law by the end of the Congressional fiscal year. Instead of approving new funding, a continuing resolution continues the pre-existing appropriations at the same or slightly modified levels. It is essentially a stop-gap measure to prevent a government shutdown when the new fiscal year starts and no new appropriations bills have been passed.

    3.  Budget: In the context of United States Congress, a budget is an estimation of the revenue and expenses over a specified future period of time, which is typically a fiscal year. The budget process formally begins when the President submits a budget request to Congress. The House and Senate Budget Committees then draft budget resolutions, which, if passed by their respective houses, are then reconciled into a joint budget resolution. This resolution guides Congressional action on spending and revenue for the coming fiscal year.

    In essence, these three terms are part of the process that Congress uses to plan, approve, and spend government funds. They are critical elements in how the U.S. government operates and funds its various agencies and programs.


    How things appear on the ground

    As we approach the end of the fiscal year on October 1st, it appears increasingly unlikely that Congress will pass the budget in time. This situation is further complicated by Congress being in recess until September, leaving a limited window for important budgetary actions.

    The House of Representatives has yet to pass an appropriations bill, a crucial step for government spending. On the other hand, the Senate has passed their version of the appropriations bill, but both chambers need to pass their respective bills before they can confer on what will make it into the final bill.

    The challenge lies in the divergent views between the House and Senate. The House is advocating to maintain the budget at Fiscal Year 2022 levels, while the Senate is pushing for an increase. This difference in opinion makes it unlikely for the two chambers to reach a consensus on what should be included in the bill.

    Moreover, even if Congress manages to pass an appropriations bill, it is unlikely that the president will sign the legislation. The president is unlikely to approve anything that reverts spending levels to FY22 levels. This makes a Continuing Resolution (CR) more likely, as it would maintain spending at FY23 levels.

    However, a Continuing Resolution comes with its own set of challenges. For instance, no new contracts can be awarded during this period. This poses difficulties for new contractors trying to enter the market and existing contractors looking to grow. In addition, existing contracts are extended at current levels, which can be challenging for contractors as they struggle to maintain operations at current levels amidst ongoing inflation.

    From a financial and accounting perspective, a Continuing Resolution can also create uncertainties. Predictable and stable funding is crucial for financial planning and management. A Continuing Resolution, while preventing a shutdown, only provides temporary funding and often at levels that may not meet current needs or allow for growth.

    Moreover, government agencies may delay payments to contractors due to uncertainties about future funding levels. This can cause cash flow problems for businesses that rely heavily on government contracts.

    While a Continuing Resolution seems like the most likely outcome given the current circumstances, it is not without its challenges. It is crucial for Congress and the President to work towards a more sustainable solution that provides stability and predictability for government spending and allows for economic growth.

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