The Congressional rules and statutory procedures that govern budget enforcement differ for those two types of spending.ĭiscretionary spending results from budget authority provided in appropriation acts. The distinction is generally made at the time a law creates a program or provides authority to undertake an activity. The labels discretionary and mandatory identify the process by which the Congress provides funds for federal programs or activities. In 2020, for example, lawmakers enacted four laws that provided supplemental appropriations in response to the coronavirus pandemic to give financial assistance to individuals, businesses, and other entities. The Congress can also supplement regular appropriations that have already been enacted. When regular appropriations are not in place by October 1, the start of the fiscal year, a continuing resolution can be enacted to provide temporary budget authority for a specified period, typically in amounts equal to appropriations for the previous year. The Congress may consider multiple regular appropriation bills in a given year or provide all discretionary appropriations in one omnibus bill. In the absence of an authorization act, an appropriation act-by providing funding-can also authorize agencies to operate a program or to undertake an activity. (For more information, see Expired and Expiring Authorizations of Appropriations: Fiscal Year 2021.)Īppropriation acts make funding available to federal programs and activities by providing budget authority to federal agencies, usually by specifying an amount of money for a given fiscal year. Those authorization laws may include language such as “there is authorized to be appropriated ,” indicating that any funding for the program must be provided in subsequent appropriation acts. Other authorization laws establish or continue discretionary programs, which receive their funding in appropriation acts. When an authorization act provides funding directly from the Treasury (so that the program does not require an annual appropriation), that amount is classified as mandatory spending. Such laws delineate a program’s terms and conditions-often, its duration and eligibility rules. Authorization Acts and Appropriation Acts?Īuthorization acts and appropriation acts provide the legal authority for the government to operate and fund programs or activities.Īuthorization acts establish or continue the authority for agencies to conduct programs or activities. (For more information about how the Congressional Budget Office estimates outlays, see CBO’s Waterfall Model for Projecting Discretionary Spending, March 2021.). That occurs, for example, when a federal agency deposits grant funds into recipients’ accounts or the Social Security Administration disburses payments to beneficiaries. In general, outlays occur when a federal agency issues checks, disburses cash, or makes electronic transfers to liquidate (or settle) an obligation. If funds are not obligated within the specified period, they expire (or lapse) and are no longer available for use. Often, the funds must be obligated within a specified period-typically one or several years-although some funds are available indefinitely.

For example, the Department of Defense incurs an obligation when it enters into a contract to purchase equipment. Once budget authority has been provided for a given purpose, an agency can incur an obligation-a legally binding commitment. For example, the federal crop insurance program uses indefinite budget authority to provide insurance products to farmers and ranchers at subsidized rates. The amount of budget authority provided can be specific-such as when the Congress provides a set amount for a program or activity-or indefinite. The authority to commit to spending federal funds is provided to agencies by law. Often called funding, budget authority is the amount of money available to a federal agency for a specific purpose. Budget Authority, Obligations, and Outlays?īudget authority, obligations, and outlays are related terms that describe the funds provided, committed, and used for a program or activity. (For detailed definitions, see CBO’s Glossary. This guide briefly explains-in plain language-the differences between some common budgetary terms.

Federal deficit meaning