The Spending Pipeline: Stages of Federal Spending

The Spending Pipeline: Stages of Federal Spending

Order Code 98-405 GOV
Updated June 13, 2003
CRS Report for Congress
Received through the CRS Web
The Spending Pipeline:
Stages of Federal Spending
Bill Heniff Jr.
Analyst in American National Government
Government and Finance Division
Federal government spending involves a multi-step process in which budget
authority is enacted and obligated, and outlays are generated. Budget authority is enacted
in law; it provides federal agencies the legal basis to incur obligations. Obligations,
which reflect such activities as employing personnel, entering into contracts, and
submitting purchase orders, establish financial liabilities of the federal government.
Outlays are payments that liquidate these obligations. This multi-step process can be
illustrated as a spending pipeline (see Figure 1). For more information on budget
process, see [http://www.crs.gov/products/guides/guidehome.shtml].
Figure 1. The Spending Pipeline
Budget Authority
Obligations
Outlays
Budget authority, which is provided in appropriations acts and direct spending
legislation, establishes the specific amounts made available for obligation. In some
instances, however, budget authority is indefinite, providing "such sums as may be
necessary" to achieve certain purposes. Budget authority may be made available for
obligation for a one-year, multi-year, or no-year period. One-year, or annual, budget
authority is available for obligation only during a specific fiscal year, and any unobligated
authority expires at the end of that fiscal year; multi-year authority is available for a
period longer than one fiscal year; and no-year budget authority is available for an
indefinite period.
The Antideficiency Act (31 U.S.C. 1341-42; 1511-1519) prohibits agencies from
obligating more budget authority than was provided in law. Certain adjustments (e.g., a
rescission) may be made to cancel or reduce budget authority after it has been enacted in
law.
Congressional Research Service ˜ The Library of Congress

CRS-2
Outlay amounts included in budget documents are estimated amounts, and the actual
outlays for a fiscal year may differ from the estimates. The estimated outlays are
calculated using the historical spendout rates for each spending account and other factors.
The spendout rate reflects the proportion of total budget authority for an account that
becomes outlays during a fiscal year.
The amount of new budget authority enacted in a fiscal year does not necessarily
equal the amount of outlays in that year. Figure 2 illustrates this using the President's
proposed FY2004 budget. Most new budget authority made available is obligated and
becomes outlays in the fiscal year for which it is enacted; $1,808 billion of the $2,244
billion of new budget authority is expected to become outlays in FY2004.
However, a portion of the FY2004 new budget authority, $436 billion, either will be
obligated, but will not become outlays until future years, or will remain unobligated until
future years. This amount reflects multi-year and no-year budget authority for activities
like construction, where the obligation and outlay of funds may occur over a period of
several years. The remaining outlays for FY2004, $421 billion, are expected to derive
from unobligated budget authority from prior years, reflecting previously-enacted multi-
year or no-year budget authority that will be obligated and become outlays in FY2004.
Figure 2. Relationship of Budget Authority to Outlays for FY2004
Source: Office of Management and Budget. Budget of the U.S. Government, Fiscal Year 2004, Analytical Perspectives
(Washington: GPO, 2003), Chart 19-1, p. 398.