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A New Fiscal Year for the Federal Government on the Horizon—Fantasy or Reality?

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Stephen R. Rolandi
July 1, 2022

The Federal budget process has been the focus of study for many public administration scholars, political scientists and practitioners for many years. According to the well-respected Brookings Institution (www.brookings.edu), Congress has had a poor reputation for many years for not passing spending bills on time, as well as the tendency for budget proposals to become a vehicle for partisan gamesmanship which has served to increase the dysfunction. Despite the reform legislation of the mid-1970s, the last time Congress was able to complete all of its spending bills before the start of the new fiscal year (October 1) was in 1996, under the administration of President William J (Bill) Clinton.  

One proposal worth examining is a proposed change to the beginning and ending dates of the Federal fiscal year from the current October 1-September 30 to January 1-December 31. This proposal is contained in H.R. 3955, entitled the “It’s About Time Act,” which was introduced in the House of Representatives last year by Representative Michael R. Turner (R-Ohio). Representative Turner previously served as Mayor of Dayton, Ohio and President of the NATO Advisory Parliamentary Assembly. This proposed legislation has been referred to the House Budget, Oversight and Reform Committee.   

Some History

The Federal government’s fiscal year was not always October 1-September 30.

At the beginning of the Federal government under the administration of President George Washington and Treasury Secretary Alexander Hamilton in 1789, the fiscal year for accounting and budgetary purposes was January 1-Deceber 31—the standard calendar year. At that time, the total budget passed by Congress was $639,000—equivalent to almost $21.3 million today.

In 1842, under the administration of President John Tyler‑who had succeeded William Henry Harrison, who died in office after only one month as President—Congress changed the start/end dates of the Federal fiscal year to July 1/June 30. Historians are not sure why the change was made; some speculate that it was done to take advantage of seasonal fluctuations in revenue; others believe this was a way to check Tyler’s use of executive power—many in Congress saw him as an “Acting President” not entitled to assume the full powers of the Presidential office.

In the wake of the Watergate scandal, Congress passed the Congressional Budget and Impoundment Control Act of 1974 (ICA) which reasserted Congressional power over the Federal Budget. It also changed the Federal fiscal year beginning/end dates to October 1/September 30 (a three-month transition period was also established for the period: July 1, 1976 to September 30, 1976).

The Proposed “It’s About Time Act” H.R. 3955

This legislation would amend the Federal government’s fiscal year to coincide with the calendar year from January 1 through December 31; as the Federal government currently operates on an October 1/September 30 budget cycle, there would be a transition period/budget to cover the intervening three months (October – December). It is anticipated that this bill, if enacted, would occur at the earliest in 2023 or 2024.

If enacted into law, the Office of Management and Budget (OMB) would manage the transition period. This proposed legislation would align the Federal government’s budget year with the current (calendar) tax year, the period covered by tax filers’ returns to Internal Revenue Service (IRS).

Proponents of this bill argue that the fiscal calendar date change would align better with the Department of Defense’s annual planning and operational calendars. Many nations, such as Israel, Mexico, Italy, Spain, France, Turkey, Russia, Germany, etc., follow a calendar year.  

Opponents of Representative Turner’s proposal point to the reason the fiscal year was changed in 1974. The ICA’s intention was to allow current members of Congress to craft and vote on the Federal Budget, particularly before an election year. As members of Congress are sworn into office during the first week of January, going back to the nation’s original January-December cycle would mean that the annual Federal budget would be created and voted upon by the previous Congress. Such a change would contribute to a lack of accountability in the Federal appropriations process.

Personally speaking, another problem I see with this proposed change is that a large portion of the Federal budget’s revenue stream is from the individual income taxes that are filed after April 15th, which occurs in the second quarter of the calendar year.

I believe that some more effective solutions to repair the dysfunctional budget process would be institution of a two-year budget cycle and to adopt a requirement that if the proposed budget is not adopted by the start of the new fiscal year, the preceding year’s budget would take effect—there are similar arrangements in many other jurisdictions such as school districts.

Representative Turner’s proposal could serve as a starting point to begin reforming the Federal Budget process. In a little less than 5 months from now, Congressional mid-term elections will be held to select the 118th Congress which will convene in Washington, DC on January 3, 2023.

Time will tell if the next Congress will seriously consider proposals that have been advanced to improve the Congressional budget process, which is in dire need of reform.

Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has  served  on many  association boards. He is a frequent guest commentator on  public affairs and political issues affecting the nation and New York State. You can reach him at: [email protected] or [email protected] or  914.536.5942 or 212.237.8000.

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