Annually, congressional Appropriations committees determine how money will be spent on different programs and departments within the federal government. The Appropriations committees derive their power from a key provision in the Constitution that states, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Although the resulting legislation funds the federal government for the year, there are tools available to Congress and presidents to alter the appropriated funds. For example, between the years of 1974–2011, presidents proposed 1,178 rescissions while Congress proposed an additional 2,261. The below describes the powers afforded to Congress and the administration for appropriated money.
Congressional Budget and Impoundment Control Act
The modern congressional budget process was established with the passage of the Congressional Budget and Impoundment Control Act of 1974 (ICA). The ICA was passed in response to President Richard Nixon’s executive overreach in which his administration refused to release congressionally appropriated funds for programs he did not support. The legislation reasserted that Congress has the “power of the purse” by establishing the Congressional Budget Office, House and Senate Budget committees, reconciliation process, and impoundment control procedures. The impoundment control procedures laid out the procedures the president must follow to modify funding for discretionary spending accounts. The ICA divided impoundments into two categories, rescissions and deferrals.
Rescissions occur when previously appropriated discretionary spending is rescinded and approved by Congress. The request for the rescission can be made by Congress or the president (which was created by the ICA). Under current law, the president must send a message to Congress identifying the proposed rescission, amount, rationale and any effects (budgetary or economic). The president may withhold unspent funding for up to 45 days, in which Congress can vote or ignore the request. If Congress does not vote within 45 days of a continuous congressional session, then any withheld funding must be released.
Deferrals provide a mechanism in which the president is allowed to set money aside until later in the fiscal year (FY) in order to provide for a contingency, achieve budgetary savings through improved operational efficiency or provided by law. Deferrals cannot be used because a president doesn’t agree with the program and must allow agencies enough time to obligate the funds before the end of the fiscal year. Importantly, the deferral takes effect without congressional approval but could be overturned if Congress passes, and the president signs, a law disapproving of the deferral.
Only discretionary funding, not mandatory spending, can be subject to rescissions or deferrals. Discretionary spending (26% of the federal budget) is set annually through the appropriations process. Discretionary spending covers a broad array of areas such as certain health care and grant programs (e.g., veterans’ health, National Institutes of Health), education, transportation and defense. Mandatory spending (61% of the federal budget) does not require annual votes by Congress and is determined by existing law. This includes programs such as Social Security, Medicare, Medicaid and the Supplemental Nutrition Assistance Program (SNAP). Net interest (13%) makes up the remaining amount of the federal budget. The Government Accountability Office (GAO) is responsible for overseeing the president’s compliance with the ICA and monitoring the status of impounded funds.
Once an appropriations act becomes law, funds available to agencies must be apportioned by the Office of Management and Budget (OMB). The apportionment process is a way of ensuring that agencies do not obligate funds in excess of levels provided in law. Spending adjustments after enactment of an appropriations bill are possible but not guaranteed through transfers of funds (specifically authorized by law) or through reprogramming (subject to a certain threshold and congressional notification period).
Earmarks
Appropriations bills allow for Congress to allocate resources to specific projects through congressionally directed spending or community project funding historically referred to as earmarking. Congressional interest and concern with the practice has varied over the past decades, including a moratorium on the practice from 2011 to 2021. When the process was reinstated in 2022, several reforms were adopted, including a 1% cap on discretionary spending for all congressionally directed spending, a ban on spending to for-profit entities and enhanced transparency measures. In 2023, the House adopted additional reforms to the process and further reforms are possible in the 2026 appropriations process.
Unauthorized Spending
When an appropriations bill includes funding for expenditures not currently authorized by law, it is generally referred to as an unauthorized appropriation. Pursuant to clause 3(f)(1)(B) of rule XII of the Rules of the House of Representatives, a report of the Committee on Appropriations on a general appropriations bill shall include a list of all appropriations contained in the bill for expenditures that are not authorized. While House and Senate rules vary on the enforcement of unauthorized appropriations, a large share of appropriations are not authorized by law. According to a recent Congressional Budget Office (CBO) report, $516 billion in appropriations for 2024 was associated with 491 expired authorizations of appropriations.
FY2025 and Beyond
Congress is currently working through funding for FY 2025. A continuing resolution (CR), a temporary extension of federal funding, ends after Dec. 20. Another CR is expected to be enacted that would extend funding until early 2025. This allows Congress enough time to finish negotiations on the overall spending levels. Following passage of FY 2025 funding, congressional appropriators will turn to FY 2026 spending.
Several outstanding questions remain for FY 2026 spending and beyond. The Fiscal Responsibility Act of 2023 set discretionary spending limits for FY 2024 and FY 2025. Congress will start FY 2026 funding discussions without targeted top-line spending amounts. Additionally, the House and Senate will have to decide if they want to make major changes to the current earmark process and rules. For example, currently there are no earmarks allowed in the House Labor-Health and Human Services-Education bill and the House Financial Services and General Government bill.
During the first Trump administration, rescissions were proposed several times to claw back what the administration deemed “wasteful and unnecessary spending.” In 2019, President Trump withheld money allocated for Ukraine without notifying Congress. GAO concluded that the administration violated the law by withholding funds for a policy reason and the money was eventually released. Additionally, the Trump administration used a technique known as “pocket rescission” where they proposed a rescission within 45 days of the end of the fiscal year to prevent money from being spent by the end of the year. The GAO regarded this as a violation of the ICA since the 45-day period for Congress to act is outside the date on which the funds would expire.
In 2023, President Trump said that he would use impoundment authority to reduce federal spending, stating, “For 200 years under our system of government, it was undisputed that the President had the Constitutional power to stop unnecessary spending through what is known as Impoundment.” The transition team has said that it will challenge the limits placed on the ICA, while asking agencies and departments to identify areas of waste. The transition team further argues that Congress sets the ceiling for federal spending, but not the floor. President Trump and his administration will look for ways to use impoundment and rescissions to cut programs around the federal government as they wrap up FY 2025 funding and start to negotiate a future budget deal.
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