How the Federal Budget Really Works

From shutdowns to tax laws, every federal budget decision affects our Tribal health care, housing, education, and infrastructure. But how does the budget process actually work—and why does it seem so complicated? Here’s a breakdown of the three main tools Congress uses to manage federal spending.

This year has seen several federal budget mechanisms play out in Congress. These include the actual appropriation process, budget rescissions, and budget reconciliation. This article is meant to give tribal leaders, government staff, and tribal members insights into what these processes are and how they work.

Understanding Filibusters

Before we dive into the budget process it is important to discuss the Senate filibuster. A filibuster in the U.S. Senate is a tactic that allows a minority of senators to delay or block a vote by keeping debate open—sometimes indefinitely—on a bill, amendment, or nomination. To end a filibuster, the Senate uses a process called cloture, a rule first adopted in 1917 that limits further debate. Under today’s rules, invoking cloture requires a three-fifths majority, or 60 out of 100 senators, except for certain nominations where that threshold has been lowered. Once cloture is invoked, debate is capped at 30 more hours, after which the Senate holds a final vote on the matter. In effect, the filibuster gives the minority a powerful tool to compel negotiation, while cloture ensures the majority can ultimately move forward—if they can muster enough votes.

The appropriations process is subject to the filibuster, but budget rescissions and budget reconciliation are not. This means that a simple majority vote in the Senate can move rescissions and reconciliation forward. This generally means that the appropriations process is more bipartisan because it has to be, whereas rescissions and reconciliation are usually very partisan.

Appropriations Process and Timeline (Subject to the Filibuster)

Each year, the appropriations process starts when the President submits a budget request to Congress, typically in February for the next federal fiscal year. This is akin to a national “spending wish list,” outlining the President’s priorities for defense, education, infrastructure, and more. While the President proposes how much each federal agency should receive, Congress holds the real power of the purse. In March and April, Congress begins crafting a budget resolution—a broad blueprint that sets overall limits for how much money can be spent in different categories, like health care or national security. This resolution does not allocate actual funds yet, but it guides the next phase.

From May through the summer, the House and Senate Appropriations Committees divide the agreed-upon spending totals into 12 separate bills, each covering a specific area of government (e.g., defense, agriculture, homeland security, Interior). Subcommittees in both chambers write these bills, hold hearings, and revise them based on stakeholder input and political negotiations. By June–July, the House usually votes first, followed by the Senate. If both chambers pass different versions, they work out the differences in a conference committee. Once both sides agree on final versions, the full Congress must approve them again.

The federal fiscal year begins October 1st, so all 12 appropriations bills should ideally be signed by the President by September 30th – this hasn’t been accomplished in more than a decade. If Congress misses the deadline, they can pass a continuing resolution (“CR”) to temporarily extend last year’s funding levels and avoid a government shutdown. If neither full appropriations bills nor a CR are passed in time, non-essential parts of the government shut down until funding is resolved. This final stage determines whether agencies can keep operating smoothly—or face disruptions due to political gridlock.

Budget Rescissions (Not Subject to the Filibuster)

The budget rescission process is a way for the President or Congress to cancel previously approved funding that has not yet been spent. Under the Impoundment Control Act of 1974, the President can propose a rescission by sending a formal request to Congress, specifying which funds should be canceled and why. Once submitted, Congress has 45 legislative days to act. If both the House and Senate approve the rescission by a simple majority vote, the funding is permanently canceled. However, if Congress does not act within the 45-day window, the proposed funds must be released and spent as originally intended. While the rescission process is a tool for fiscal discipline, it is rarely successful unless the President’s party controls both chambers of Congress.

Budget Reconciliation (Not Subject to the Filibuster)

The budget reconciliation process is a special legislative procedure in Congress used to quickly pass certain budget-related laws with limited debate and a simple majority vote—bypassing the Senate filibuster. It begins when Congress passes a budget resolution that includes “reconciliation instructions” directing specific committees to make changes in spending, revenue, or the debt limit. These instructions are then compiled into a single reconciliation bill, which can be passed with just 51 votes in the Senate instead of the usual 60. Because of this lower threshold, reconciliation is often used to pass major fiscal legislation—such as tax cuts or health care reforms—when one party holds narrow control of the Senate as well as controlling the White House and House of Representatives.

However, to prevent the process from being misused for unrelated policies, the Byrd Rule—named after Senator Robert Byrd—sets limits on what can be included in a reconciliation bill. Under the Byrd Rule, any provision that does not directly affect federal spending or revenue, or that causes a deficit beyond the budget window (usually 10 years), can be removed through a procedural objection, called a point of order. The Senate Parliamentarian interprets the rule, and unless 60 senators vote to waive it, non-compliant provisions are stripped from the bill. This makes the Byrd Rule a powerful guardrail, ensuring that reconciliation remains focused strictly on budgetary matters.

Conclusion

This year has been a case study in the various federal budget mechanisms that exist, including those that are rarely deployed like recissions. To date the House and Senate have approved a budget reconciliation bill (H.R. 1 One Big Beautiful bill) and are poised to approve a recissions package. The two chambers are also working through their 12 appropriations bills for Federal Fiscal Year 2026.