May 13, 2022
Introduction to Budget Authority
Under the U.S. Constitution, Congress exercises the “power
the issuance of promissory notes or other monetary
of the purse.” This power is expressed through the
credits;
application of several provisions, particularly Article I,
Section 9, which states that funds may be drawn from the
(iii) contract authority, which means the making of
Treasury only pursuant to appropriations made by law.
funds available for obligation but not for
However, when Congress enacts an appropriation, this does
expenditure; and
not mean that the Treasury sets aside cash for a specified
(iv) offsetting receipts and collections as negative
agency to allow it to carry out that purpose. In practice, it
budget authority, and the reduction thereof as
means that when Congress enacts an appropriation it is
positive budget authority.
providing an agency with “budget authority” that can be
used to finance federal programs and activities. This budget
Budget Authority
authority allows agencies to enter into various financial
In most cases, budget authority is provided in the form of
obligations and for the Treasury to subsequently outlay the
appropriations making funds available for both obligation
funds to meet those obligations. Agencies can enter into
and expenditure. The statutory language that provides
financial obligations through such things as employing
budget authority can be classified in various ways that
personnel, entering into contracts, submitting purchase
indicate how it is provided, how long it will be available,
orders, or other activities that establish a financial liability.
and how much will be available.
Because it takes time for budget authority to become
Discretionary vs. Direct Spending
outlays, the amount of budget authority enacted for a fiscal
Discretionary spending is provided and controlled by
year does not necessarily equal the amount of outlays that
appropriations acts. Direct spending (also referred to as
will occur in that year. The outlay amounts for proposed
mandatory spending) is provided and controlled by other
budget authority are estimates based on the historical rate at
laws. These classifications are defined in statute (2 U.S.C.
which funds for a given account or activity have been
§900(c)(7)-(8)) for purposes of procedural and statutory
expended (known as the outlay rate or spendout rate). As
budget enforcement rules.
illustrated in the figure below, the enactment of budget
authority, its obligation, and the outlay of funds by the
Classified by Duration
Treasury occur at separate stages of the spending process. A
Budget authority may be made available for obligation for a
portion of the budget authority enacted in a fiscal year may
one-year, multiyear, or no-year period. One-year, or annual,
be obligated but not become outlays until future years, or it
budget authority is available for obligation only during a
may remain unobligated until future years. Conversely,
specific fiscal year, and any unobligated authority expires at
some of the budget authority enacted in previous years may
the end of that fiscal year. Multiyear authority is available
become outlays in the current year.
for a period longer than one fiscal year (but still a defined
period). No-year budget authority is available for an
indefinite period. No-year budget authority is typically
identified by language indicating that it is “to remain
available until expended.”
Classified by Amount
Budget authority may establish a definite amount that is

available for obligation. In some instances, however, a
Section 3(2) of the Congressional Budget Act (2 U.S.C.
statute may instead provide an indefinite amount of budget
authority. For example, Congress may appropriate all or
§622(2)) defines budget authority to mean:
part of the receipts from certain sources, even though the
specific amount that will be collected cannot be determined.
(i) provisions of law that make funds available for
Congress may also appropriate “such sums as may be
obligation and expenditure (other than borrowing
necessary” for a given purpose.
authority), including the authority to obligate and
expend the proceeds of offsetting receipts and
Classified by Permanency
collections;
Some budget authority is provided on a temporary basis,
(ii) borrowing authority, which means authority
such as in annual appropriations or through periodic
granted to a Federal entity to borrow and obligate
reauthorizations (such as the farm bill), while other budget
and expend the borrowed funds, including through
authority is provided on a permanent basis (such as for
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Introduction to Budget Authority
Social Security and Medicare) without requiring repeated
Offsetting Collections and Receipts
action by Congress to provide additional amounts.
The terms offsetting collections and receipts describe funds
that federal agencies and departments collect from
Borrowing Authority
business-like transactions for goods and services (such as
Borrowing authority allows agencies to enter into
user fees, rents and royalties, and proceeds from the sale of
obligations and to finance certain activities and programs
government property).
using borrowed funds. It may be provided through (a)
authority to borrow from the Treasury; (b) authority to sell
These collections and receipts are defined as “negative
agency debt securities and, therefore, to borrow directly
budget authority” rather than as revenues. As a
from the public; (c) authority to borrow from the Federal
consequence, the collected funds offset an agency’s
Financing Bank; or (d) some combination of these.
spending authority. A reduction of offsetting collections or
Borrowing from the Treasury is the most common form and
receipts is correspondingly defined as positive budget
is also known as “public debt financing.”
authority. Authority to spend offsetting receipts and
collections may be provided in appropriations acts or other
The largest single use of borrowing authority is provided
laws.
for the Department of Agriculture’s Credit Commodity
Corporation, which has authority to borrow up to $30
Offsetting collections are collections authorized by law to
billion from the Treasury to conduct a range of commodity
be credited to appropriations or fund expenditure accounts.
price and income support, conservation, and disaster relief
These fees are available for obligation to meet the account’s
programs. (For more information, see CRS Report R44606,
purpose without further congressional action. Accordingly,
The Commodity Credit Corporation (CCC), by Megan
because the receiving agency has the authority to obligate
Stubbs.)
and expend offsetting collections, offsetting collections
constitute budget authority. For example, fees charged by
Contract Authority
the U.S. Citizenship and Immigration Services to expedite
Contract authority provides agencies with the authority to
its processing of certain petitions and applications are
obligate funds but does not include statutory language that
available to be used to carry out those purposes.
would allow for an outlay to occur. Thus, contract authority
permits agencies to enter into binding contracts, even
In contrast, offsetting receipts are offset against gross
though it does not provide funds to satisfy that obligation.
outlays but are not authorized to be credited to a specific
Congress must make a subsequent appropriation called a
expenditure account. Offsetting receipts may be deposited
“liquidating appropriation” or grant authority to use
in either specific accounts or in the general fund of the
offsetting receipts or collections to liquidate the obligated
Treasury. Offsetting receipts cannot be obligated and
contract authority. Contract authority may be provided in
expended, however, without further congressional action.
legislation other than appropriations acts, although
Because offsetting receipts are not available to the receiving
appropriations acts may include language that limits such
agency for obligation, they do not constitute budget
obligations to a specific amount (known as an obligation
authority until Congress takes action to appropriate them.
limit).
One example is rents and royalties paid to the federal
government for offshore oil and gas leases.
One example of contract authority is its use to finance
certain multiyear procurement activities by the Department
For more information on budget authority, see U.S.
of Defense. (For more information, see CRS Report
Government Accountability Office, Principles of Federal
R41909, Multiyear Procurement (MYP) and Block Buy
Appropriations Law (4th ed., 2016), GAO-16-464SP, Ch. 2,
Contracting in Defense Acquisition: Background and Issues
The Legal Framework, pp. 2-1 to 2-11.
for Congress, by Ronald O'Rourke.) The Department of
Transportation also uses contract authority to finance some
James V. Saturno, Specialist on Congress and the
transportation projects, such as highway and airport
Legislative Process
construction and maintenance.
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Introduction to Budget Authority


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