How the Federal Budget Works

The Federal Budget Process

The federal budget determines how the government collects and spends trillions of dollars each year. Here's how it works:

1. The President's Budget Request (February)

Each year, the President submits a budget proposal to Congress. This is a "wish list" — Congress is not required to follow it.

2. Congressional Budget Resolution (Spring)

The House and Senate budget committees create a budget resolution that sets overall spending levels. This is a blueprint, not a law.

3. Appropriations Bills (Summer-Fall)

Congress writes 12 appropriations bills that fund government agencies. These cover "discretionary" spending — about 29% of the budget.

4. Mandatory Spending

The other 71% of spending is "mandatory" — programs like Social Security, Medicare, and Medicaid that are set by existing law. These don't go through annual appropriations.

5. Revenue

The government collects revenue primarily through:

• Individual income taxes (51%)
• Payroll taxes (33%)
• Corporate income taxes (9%)
• Other sources (7%)

When the Process Breaks Down

Congress often fails to pass all 12 appropriations bills on time. When this happens, they pass "continuing resolutions" to keep the government funded at previous levels, or the government "shuts down."

The Fiscal Year

The federal fiscal year runs from October 1 to September 30. So "FY2026" started on October 1, 2025.