When a Budget Increase Really Isn’t What it Appears to Be

Copies of President Obama's budget sit on a table in the Senate Budget Committee room.

Copies of President Obama’s budget sit on a table in the Senate Budget Committee room.

In the lead up to the release of the Obama Administration’s Fiscal Year 2017 (FY 2017) budget request, rumors were flying that this final budget would once again be a “good one” for federal research programs. But as soon as the budget documents were released the research community found itself scratching its collective head. At first read, the topline budget request for the National Institutes of Health (NIH) was $33.1 billion, the National Science Foundation came in at just under $8 billion – increases over the previous year funding requests. But these totals came with an asterisk: a good chunk of the proposed budget increases are to be provided through mandatory funding. In an effort to stay within the discretionary budget caps set in the Bipartisan Budget Act of 2015, the Administration proposed budgetary increases through mandatory spending.

So what is the difference between these two forms of federal spending, and why does it matter as we look at the FY 2017 budget request?

There are three primary components to the federal budget: discretionary spending, direct or mandatory spending, and revenues. Discretionary spending is funding Congress allocates each year through appropriations legislation and accounts for roughly 30 percent of the federal budget.   The discretionary budget covers most of the federal programs of interest to Duke, including research and student aid, but also covers most military, workforce training, and other education program.

Nearly 70 percent of the federal budget is dedicated to mandatory or direct spending, which is spending controlled by laws outside of appropriations acts, often with a specific revenue stream. Examples here include Social Security, Medicare, and Medicaid. Instead of going through an annual Congressional process to determine spending levels, many mandatory programs have statutory eligibility guidelines that Congress can only revisit periodically. There are some instances where a program can be funded through both discretionary and mandatory spending. The Pell Grant program is one such example, where are portion of the budget is determined and approved through the annual appropriations process, but another part is funded through savings derived from legislative changes made to student loan programs (as well as the Pell Grant program).

Getting back to the FY 2017 budget request, the National Science Foundation (NSF) budget is an illustrative example. The Administration has proposed $7.96 billion budget for FY 17. Of this amount, $7.56 billion is discretionary funding and $400 million is mandatory funding. Without the proposed $400 million increase in mandatory funding, which would require new legislation, the NSF FY 17 budget request is only $100 million above the final FY 16 funding level.

We are still early in the congressional budget and appropriations process, but it will be interesting to see how Congress plans to approach this unique budget situation.

The Duke Office of Government Relations will continue to provide updates as the process moves forward through the DC Digest.