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Writer's pictureMaddy Bynes

The Federal Budget and Why it Matters

With the end of the federal fiscal year quickly approaching, and Congress getting ready to pass a continuing resolution to extend the FY 2023 budget to after the election – you may be hearing a thing or two about the federal budget in the news.


The federal budget, in a very simplified definition, is a series of spending priorities that fund federal agencies. These agencies create programs, administer funding to States, and create grant opportunities for community organizations and local governments to take advantage of. Most non-profits, especially locally, don’t receive direct appropriations from the federal government, so why does the federal budget matter?


It's simple, because without continued advocacy for the programs and services that are helping your constituency, Congress may cut funding and you may lose opportunities for service. And it seems crazy to us! How can Congress have an over $7 trillion budget but not find $1 million to help single mothers get car seats? Understanding some basics about the federal budget will help you to better understand why these arguments happen and why advocacy is needed move the needle on your issues.


Broadly, the federal budget is broken into three categories: mandatory funding, discretionary funding, and interest on the national debt. Mandatory funding is just as it sounds – funding that continues without the action of Congress year after year. Mandatory funding includes some of the most basic safety net programs like Medicare, Medicaid, and Social Security, and it accounts for approximately 2/3 of the overall federal budget. After that, about 10% of the national budget is spent on paying interest on the national debt.




That leaves a relatively small amount of funding left – discretionary funding. Discretionary funding accounts for a little under 30% of the national budget and can be broken down further into defense discretionary funding and non-defense discretionary funding. Defense discretionary funding is about half of the discretionary funding pie, and then non-defense discretionary funding is ALL of the other government programs needing funding. These programs include education, health care, social services, housing, veteran’s benefits, and environmental programs – just to name a few. If you get money from state or local governments, there’s a good chance that there is some federal funding tie as well.


Realistically, when we are talking about funding debates, we are talking about the non-defense discretionary funds (and that’s a mouthful so we usually call it NDD). That’s about 10-13% of the entire federal budget, a little under $1 trillion! That still sounds like a lot, but when you divide the non-defense discretionary funding up among all 50 states, it comes out to about $17 billion per state. For perspective, Arizona’s last state budget was about $18 billion in FY 2023.


This is all to illustrate that federal funding is in high demand and is somewhat scarce. That’s why you need good advocacy in both data driven and story-based arguments. It’s also why you need an advocacy plan to discuss with your elected officials what funding streams help or hurt your clients and constituencies. Though most of us don’t rely solely on federal funding, understanding the ins and outs of government funding can be important to strategically growing your non-profit to help more in need in our community.


Source: National Priorities Project: https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

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