As a policy guy, I’m often asked about the Federal budget process. I think most people understand the basic concepts of the Federal budget, in that the Executive Branch requests money from the Legislative Branch, which then passes laws providing money to the government as a whole.
The actual process involved, however, can be a bit opaque to the casual observer. Most people don’t have a good sense of “how the sausage is made.”I thought that this might be a good opportunity to describe NASA’s budget process in the hope that I can help members of The Planetary Society better understand our advocacy strategy.
Casey Dreier did a top-level rundown of this process in this episode of The Space Advocate:
NASA's Budget (part 1) The President's Budget Request kicks off the yearly budget season in United States. It takes a year to put together, and Congress plays no part. Why is that?
In this post, I'm going to go into more detail to help you really understand all the pieces that come together for the budget request. Remember, this whole process only takes us to the point where Congress comes in—it is a request, after all. But it's very important nonetheless.
The President’s Budget Request
The first thing to understand about the budget process is why the White House puts out an annual budget at all. After all, Congress has the power of the purse, so why don’t they just tell the White House how much it gets each year?
The answer to this is, basically, size. The executive branch of our government is not just the office of the President - it includes the military and every federal agency in government.The military and federal agencies consist ofseveral million employees and all the infrastructure required to execute the various functions of each agency. Together,they require a budget of roughly $3.5 trillion a year.
Congress, by contrast, is much smaller than the executive branch. It has 535 elected members, plus professional staff including the Congressional Budget Office, the Congressional Research Service, the Government Accountability Office, and the Library of Congress. Even with all of this technical expertise, the pool of Congressional personnel is smaller than the executive branch by at least a factor of 100.
In 1921, responding to the growing size and complexity of the Federal government, Congress passed the Budget and Accounting Act. It required the President to submit an annual budget to Congress and established the Bureau of the Budget to assist in doing so (the BOB became the Office of Management and Budget in 1970). It also established the General Accounting Office as the official auditor of the Federal government (which became the Government Accountability Office in 2004). Significantly, the idea was that members of Congress could rely on the expertise within the agencies for budget formulation, allowing Congress to focus on major issues.
The Fiscal Year (FY)
That covers the “why” of the President’s budget, but what about the “when?” What is a fiscal year? How is it different from a calendar year, and why can’t the government just use a normal calendar?
There is no fixed or universal definition for a fiscal year, and it can be broken up in any way that a business, government, or institution requires. The U.S. Federal government runs on a fiscal year beginning October 1 and ending September 31. It’s broken into four fiscal quarters, each three calendar months long (Q1 is Oct-Dec, Q2 is Jan-Mar, Q3 is Apr-Jun, Q4 is Jul-Sep). The fiscal year begins in the previous calendar year (so FY 2015 began in October, 2014). Why does the government use this system? Politics.
In fact, the U.S. government operated on the calendar year (January 1 to December 31) until 1843. In 1842, Congress changed the Federal calendar to begin on July 1, providing newly elected members of Congress the ability to participate in the budget process for the following fiscal year. Without the change, the government ran for a full 12 months on a budget voted on by the previous Congress.
Congress further amended the fiscal year with the Congressional Budget and Impoundment Control Act of 1974, which moved the fiscal calendar to run from October 1 through September 30, allowing Congress more time to act on the President’s budget request. Along with several changes to the Congressional budget process, the Act also established the Congressional Budget Office, which would independently assess the economic impacts of the President’s budget proposals.
For a brief history and a short primer on the Federal budget process as a whole, check out the Introduction to the Federal Budget Process, a report from the Congressional Research Service.
So, how exactly does NASA fit into this process?
According to the 1974 Congressional Budget Act, the White House is supposed to present its budget request to Congress by the first Monday in February each year (this doesn’t always happen on time). From the perspective of the agencies, including NASA, the release of the budget request is the end of a nearly year-long process. Soon after the release, the whole process starts again.
Step 1 – Spring: The Centers Weigh In
In March of each year, NASA’s Office of the Chief Financial Officer (OCFO) sends a request for information out to the head of each of NASA’s centers, asking them to compile their requests for the next budget, which is two fiscal years away. That may seem confusing, so let me explain.
FY 2015 began in October of last year, so we are currently in the second quarter of FY 2015 (FY15 Q2). The FY 2016 budget will be released on February 2, 2015, giving Congress and the President eight months to pass and sign a budget into law (by September 31, or FY15 Q4). The FY 2017 President’s Budget Request (also called a Congressional Justification) should be released in February, 2016 (FY16 Q2). That budget – the FY 2017 request – is the budget for which OCFO will ask the centers to provide input beginning in March, 2015 (FY15 Q2). Two fiscal years away. Keep following along, and hopefully it will start to make more sense.
Shortly after the request from OCFO, leadership at each center will distribute a request for budgets to the various program and project offices under their supervision. The program and project managers then compile financial information from everyone working on their projects. The request goes out to managers of each aspect of every project, who then report back the funding levels necessary to complete required work.
The funding requests move up from team leads to project and program managers to center leadership, and, at each stage, a negotiation takes place. Each team wants as much money as possible allocated at the correct time to complete their work, and center leadership in turn has to balance the needs of each project against the resources available from NASA Headquarters. As you might expect, this process can be a bit contentious from time to time.
Step 2 – Summer: Directorates and Centers Make Their Cases
By June or July, the centers have compiled their budget requests. The associate administrators for NASA’s directorates, with copious help from their division directors, work with center managers to align the center requests with division and directorate priorities (this is an ongoing process beginning in March, but continues after the centers deliver their requests).
Adding to the stress is the fact that the President’s budget request must include cost projections for four fiscal years beyond the request. So, the FY 2016 budget request will include projections through FY 2020, even though those projections are highly subject to change in later years.
Showing plans for future years allows NASA to adjust the “phasing” of project and program budgets, meaning that managers can allocate more money to a project undergoing the costliest phases of its development this fiscal year, while showing that the allocation will decrease in future years as the project enters a less expensive phase (usually operations). Conversely, NASA can allocate a lesser amount to projects in a phase requiring fewer resources, such as planning or early implementation. Phasing also allows NASA management to adjust the amount of “unallocated future expenses,” commonly understood to mean “reserves,” held for each project in a given fiscal year.
The center budgets, now with input from NASA’s directorate and division leadership, are submitted to OCFO. Analysts in OCFO make sure that the budgets align with NASA commitments, fall within internal allocation agreements, and align at the agency level (that is, each directorate is spending what it’s supposed to spend). The full budget then goes to the Administrator’s Suite on the 9th floor at NASA HQ for a final review.
This entire process may seem highly comparmentalized, but there is, in fact, a constant dialogue at all levels, with problems or issues raised to the appropriate levels long before the draft budgets are elevated to the next bureaucratic level at NASA. But generally speaking, the budget follows the process described above.
Step 3 – Fall: OMB Enters the Fray
Once the Administrator signs off on the budget, it is sent to OMB, an organization within the Executive Office of the President charged with ensuring the entire Federal budget request (including all agency programs and policies) complies with the President’s policy goals.
When NASA’s budget request reaches OMB, usually in early September, it undergoes several levels of review.
First, it goes to the Science and Space Branch of the Energy, Science, and Water Division. This small branch (fewer than 10 people) reviews NASA’s request down to the project level, and drafts budget recommendations based on the priorities of the Administration. Science and Space Branch discusses these budget recommendations with its chain of command, the Deputy Associate Director (DAD) for the Energy, Science, and Water Division (a high-level career official) and the Associate Director for Natural Resource Programs (Associate Directors are commonly known as “PAD”s). The PADs represent the first politically appointed representatives at OMB to review agency budgets.
Once the Branch, DAD, and PAD have finalized their recommendations, they personally present those recommendations to the OMB Director in what is known as “Director’s Review.” The Branch team tends to lead these presentations. Typically, discussions with the Director, a key cabinet member with direct access to the President, focus on the most important or politically sensitive issues.
The Branch incorporates any guidance from the Director into their recommendations. The Branch then produces a letter containing all of OMB’s changes to NASA’s budget request, which it sends to the NASA Administrator. This process is called “passback.” Because the Federal budget represents both fiscal and policy considerations, OMB’s changes may include shifting or altering funding allocations, approving or cancelling programs and projects, or providing direction regarding NASA policy.
Step 4 – Late Fall: Passback
OMB usually provides NASA with passback soon after Thanksgiving, though it isn’t unusual for this date to slip. The Administrator discusses the changes with affected parties within NASA and then decides whether to accept the changes made by OMB or to attempt to reconcile NASA’s request with OMB changes.
If the NASA Administrator pushes back on any change, he or she will provide an “appeal letter” to the Director of OMB. Negotiations then take place between OMB and the agency. Although the Administrator’s appeal letter goes formally to the Director, almost all the negotiation takes place between the Branch and the agency, with the bigger issues raised to the DAD and PAD.If the Administrator doesn’t agree with the final decision, the only option left is to appeal directly to the President. This has rarely occurred, and the issue would have to be extremely politically sensitive or important to go to the President. Most issues related to passback are resolved fairly quickly between the Administrator and OMB.
Step 5 – Winter: The Final Touches
Once things are settled with OMB, generally just before the Christmas holidays, NASA’s OCFO conducts a final edit of the budget, while also attempting to make all of the various sections (which were written by hundreds of different authors and changed through many rounds of review) appear as uniform as possible. This is the last chance to catch any inaccuracies before printing. The process can take anywhere from a week to a month (or longer) to complete.
Usually in mid-January, two weeks before the budget release, OCFO sends the budget request to NASA’s printing office, located in the basement of NASA HQ. It takes the entire two weeks to print all of the copies requested by the White House, Congress, and other stakeholders. NASA also distributes the annual budget request online. Once the budget is officially released, NASA conducts numerous meetings and press conferences around the country to explain the new budget request and talk about any changes the agency wants to highlight.
The President presents the budget request to Congress, which then begins deliberation on funding the Federal government. But that is a subject for another post.