prepared jointly by the Council of Economic Advisers, the Office of Management and Budget, and the Treasury Department.

Following a review of both sets of projections, the President establishes general budget and fiscal policy guidelines for the fiscal year that will begin about 12 months later. (Because of the change in the fiscal year time-frame, these guidelines, beginning with the 1977 budget, will be established about 15 months prior to the beginning of the fiscal year.) Tentative policy determinations and planning ceilings are then given to the agencies as guidelines for the preparation of their budgets.

Agency budget requests are reviewed in detail by the Office of Management and Budget throughout the fall and early winter and are presented, along with OMB recommendations, to the President for decision. Overall fiscal policy issues-relating to total budget receipts and outlays are again examined. The actual budget data trom the most recently completed fiscal year provide an essential reference base in this review and decision process. Thus, the budget process involves the consideration simultaneously of the resource needs of individual program and the total outlays and receipts that are appropriate in relation to the outlook for the national economy. The budget reflects the results of both of these considerations.

The Congressional Budget and Impoundment Control Act has little effect on the executive budget formulation process. The act does, however, affect the content of the budget that is formulated. The budget for 1976 contains the following new information which the act requires be included this year:

• Estimates of tax expenditures for the budget year;

Detailed five-year projections of estimated outlays, budget authority, and receipts;

• Information with respect to estimates for the next succeeding fiscal year for any program for which advance appropriations have been authorized; and

• Estimates for the 3-month transition period beginning July 1, 1976, and ending September 30, 1976, in addition to the complete fiscal year 1976 estimates.

Comparisons of actual uncontrollable outlays and total receipts for the last completed fiscal year with the amounts initially estimated and explanations of any differences are also shown in this year's budget, although the act does not require that they be included for another two years.

Congressional authorization and appropriation.-Congressional review begins when the President transmits his budget to the Congress. The Congress can change programs, eliminate them, or add

programs not requested by the President. It can increase or decrease the amounts recommended by the President to finance existing and proposed new programs. It may also act upon legislation determining taxes and other means of raising revenues.

The Congress does not normally vote on outlays directly, but rather upon budget authority. The Congress first enacts legislation that authorizes an agency to carry out a particular program and, in some cases, sets a limit on the amount that subsequently can be considered for appropriation for the program. Many programs are authorized for a specified number of years, or even indefinitely; other programs, such as nuclear energy, space exploration, defense procurement, foreign affairs, and some construction programs, require annual authorizing legislation. Authorizing legislation for a new program or activity that is to continue for more than 1 fiscal year is submitted for at least the first 2 fiscal years of the program.

The granting of budget authority is usually a separate, subsequent action. In most cases, budget authority becomes available each year only as voted by the Congress. However, in some cases, the Congress has voted permanent budget authority, under which funds become. available annually without further congressional action. Most trust. fund appropriations are permanent, as is the appropriation to pay interest on the public debt.

Congressional consideration of requests for appropriations and for changes in revenue laws has traditionally followed an established pattern. They are considered first in the House of Representatives. The Ways and Means Committee reviews proposed revenue measures; the Appropriations Committee, through its subcommittees, studies the proposals for appropriations and examines in detail each agency's performance. Each committee then recommends the action to be taken by the House of Representatives.

As parts of the budget are approved by the House, the appropriation and tax bills are forwarded to the Senate, where a similar process is followed. In case of disagreement between the two Houses of Congress, a conference committee (consisting of Members of both bodies) meets to resolve the issues. The report of the conference committee is returned to both Houses for approval, and the measures are then transmitted to the President in the form of an enrolled bill, for his approval or veto. When action on appropriations is not completed by the beginning of the fiscal year, the Congress may enact a "continuing resolution" to provide authority for the affected agencies to continue operations until their regular appropriations are enacted.

When it goes into full effect, the new Congressional Budget Act will change the congressional budget process in several significant

ways:

• It establishes a new legislative agency, the Congressional Budget Office, to serve both Houses, and a Committee on the Budget in each House, all with substantial responsibilities.

• It requires that a "current services budget"-one that projects estimated budget authority and outlays for the fiscal year ahead based on current program levels-be submitted to the Congress by November 10 of each year.

• It establishes several additional budgetary controls, including: -by April 1, submission to the Senate and House Budget Committees of budget estimates by each committee of the Congress and a fiscal policy report by the Congressional Budget Office; -by May 15, adoption by the Congress of a concurrent budget resolution containing Government-wide budget targets for the Congress; and, by September 15, a second concurrent resolution containing budget ceilings for congressional budget action; -by September 25, completion by the Congress of action on any required reconciliation bill or resolution implementing the second concurrent resolution.

Under this schedule the Congress will complete action on the budget before the new fiscal year begins on October 1.

The budget targets and ceilings adopted by the Congress will be classified by major function. The functional classification, which is explained below, arrays budgetary data according to the major purposes served, rather than on an agency basis. Appropriations will continue to be made, however, on the basis of agency accounts.

Budget execution and control. Once approved, the budget becomes the financial basis for the operations of each agency during the fiscal year.

Under the law, most budget authority and other budgetary resources are made available to the executive branch through an apportionment system. Under authority delegated by the President, the Director of the Office of Management and Budget apportions (distributes) appropriations and other budgetary resources to each agency by time periods (usually quarterly) or by activities. Obligations may not be incurred in excess of the amount apportioned.

The objective of the apportionment system is to assure the effective and orderly use of available authority and to reduce the need for

requesting additional or supplemental authority. It is, of course, necessary to insure flexibility if circumstances change.

Changes in laws or other factors may indicate the need for more authority, and supplemental requests may have to be transmitted to the Congress. On the other hand, reserves may be established under the Antideficiency Act (31 U.S.C. 665) to provide for contingencies or to effect savings made possible by or through changes in requirements or greater efficiency of operations. Amounts may also be withheld for policy or other reasons, pursuant to the Congressional Budget and Impoundment Control Act.

Whenever it is determined that all or part of any budget authority provided by the Congress will not be required to carry out the full objectives or scope of such programs (e.g., reserves for savings), or that such budget authority should be rescinded for fiscal policy or other reasons, a special message is transmitted by the President to the Congress requesting a rescission of the budget authority. If both the House and Senate do not pass a rescission bill within 45 days of continuous session, the budget authority proposed for rescission is made available for obligation.

Whenever the President proposes to defer (i.e., temporarily withhold), all or part of any budget authority provided by the Congress he transmits a special deferral message to the Congress. Either House may pass a resolution disapproving this deferral of budget authority, thus requiring that the funds be made available for obligation. When no congressional action is taken, deferrals may remain in effect until the end of the fiscal year.

Review and audit. This is the final step in the budget process. The individual agencies are responsible for assuring-through their own review and control systems-that the obligations they incur and the resulting outlays are in accordance with the provisions of the authorizing and appropriating legislation, as well as other laws and regulations relating to the obligation and expenditure of funds. The Office of Management and Budget reviews program and financial reports and keeps abreast of agency programs in attainment of program objectives.

In addition, the Comptroller General, as agent of the Congress, regularly audits, examines, and evaluates Government programs. His findings and recommendations for corrective action are made to the Congress, to the Office of Management and Budget, and to the agencies concerned. The Comptroller General also monitors the executive branch's reporting of special messages on proposed rescissions and deferrals. He reports any items not reported by the executive

branch, reports any differences that he may have with the classification (as rescission or deferral) of special messages submitted by the President, and is permitted to bring civil actions to obtain compliance should the President fail to make budget authority available in accordance with the Impoundment Control Act.

COVERAGE OF THE BUDGET TOTALS

Agencies and programs. The budget totals cover agencies and programs (including Government corporations) administered by the Federal Government, no matter how funded, except for the following: Exchange stabilization fund,

Rural electrification and telephone revolving funds,
Rural Telephone Bank,

Environmental Financing Authority,'

Export-Import Bank of the United States,2

Board of Governors of the Federal Reserve System,

Housing for the elderly or handicapped fund (after August 31,
1974),

Pension Benefit Guarantee Corporation (established in 1975),
Postal Service fund,

United States Railway Association,

Federal Financing Bank.

In addition to these exceptions, the totals exclude privately owned, Government-sponsored enterprises, such as the Federal land banks and Federal home loan banks. Information on the excluded Government agencies and on the Government-sponsored agencies is presented in the form of "annexed budgets" in Part IV of the Budget Appendix.

Functional classification. The functional classification arrays budgetary data according to the major purpose served by the unit being classified (usually, a budget account). Once the Congressional Budget Act is in full effect, the Congress will pass resolutions establishing budget targets and ceilings in terms of functional categories.

The following criteria are used in establishing and in assigning activities to functional categories:

• A function must have a common end or ultimate purpose addressed to an important national need. (The emphasis is on what the Federal Government seeks to accomplish rather than the means of accomplishment, what is purchased, or the clientele or geographic area served.)

A function must be of continuing national importance and be significant in size, i.e., normally account for at least 2% of total budget outlays over a number of years.

The authorization for the Environmental Financing Authority expires on June 30, 1975. 2 Beginning Oct. 1, 1976. the Export-Import Bank will be included in the budget totals.