Budgeting by CR – Déjà Vu All Over Again

Just like last year, the new fiscal year began on October 1, 2011 with no federal budget in place. And just like last year, the U.S. government is being funded through a Continuing Resolution (CR) – temporary spending legislation that provides funding at current levels for any federal agency whose annual appropriations bill has not yet been enacted by Congress. And yes, just like last year, the new fiscal year began with none – as in zero – of the twelve annual appropriations bills enacted.

Hopefully, that is where the similarities end. Hopefully, but doubtful. If there is to be a FY2012 budget in the near-term, and at this point that's a pretty big "if," Congress will likely bundle all the appropriations bills into a single “omnibus” funding package. The Democratically controlled Senate is actually attempting to enact a series of smaller "mini-bus" bills – a couple of smaller bundles, but the GOP-controlled House doesn't seem interested.

Last year Congress passed CR after CR – eight in all, before the final FY2011 budget was enacted in April – six months into the fiscal year. And that final budget was itself the eighth CR – funding the entire government at FY2010 levels,  except the Defense Department, the only federal agency to get an appropriations bill passed.

Now, in FY2012, every agency except the Pentagon continues to be funded at FY2010 levels. But while the dollar values are the same as they were in FY2012 – the so-called “nominal” funding levels – actual purchasing power of those dollars is lower due to the effects of inflation. So even as federal agencies await the spending cuts mandated by the August agreement between the White House and Congress, inflation is eating at their budgets.

Fortunately, inflation is very low right now. But any increase in inflation rates, possibly triggered by a long-awaited upturn in the economy, could change all that.

Stay tuned next week for Part 2 of this story: the super committee deadline.