How Appropriations Work: Duration and Distribution

Last week, you learned what an appropriation is. This week: how they actually work in practice.

Last week, we covered the three elements of every appropriation (time, purpose, amount), and how Congress organizes the 12 annual appropriations bills.

But knowing what an appropriation IS doesn't tell you how it WORKS. And the mechanics matter enormously when you're tracking budget execution.

This week, we'll explore three critical aspects of how appropriations work in practice:

• Duration: How long do appropriations last?
• Flow of funds: How does money move from budget authority to actual payments?
• Distribution: Formula grants vs competitive grants
• Disruptions: What happens when the appropriations process breaks down?

Duration: One-Year, Multi-Year, and No-Year Money

Not all appropriations last the same amount of time. Congress specifies the period of availability—how long agencies have to obligate the funds.

One-Year Money (Annual Appropriations)

Duration: Must be obligated by September 30 of the fiscal year.

Common for: Salaries and expenses, routine operations, recurring programs.

Example: HUD Salaries and Expenses (086-0143) receives one-year funding. Money appropriated October 1, 2024 expires September 30, 2025.

What happens to unobligated balances:

• Expire on September 30
• Enter "expired" status for 5 years (available for adjustments only)
• Then permanently cancelled (cannot be spent)

Why agencies rush in September: Use it or lose it. Unobligated one-year money vanishes on September 30. This creates the famous "Q4 spending surge."^[1]

How to identify it: No language specified, or "for the fiscal year ending September 30, 20XX".

Example:
At the beginning of an appropriations bill, there's usually a statement of appropriations like this:

The following sums in this Act are appropriated, out of any money in the Treasury not otherwise appropriated, for the fiscal year ending September 30, 2024.

Individual accounts inherit that statement of appropriations, so when written they look like this:

For necessary expenses of the Executive Residence at the White House, $15,453,000, to be expended and accounted for as provided by 3 U.S.C. 105, 109, 110, and 112–114.

Multi-Year Money

Duration: Available for 2, 3, or more fiscal years.

Common for: Research programs, capital construction, grants that take time to award.

Example: DOT transit capital grants often have 2-year or 3-year availability. FY2024 funds remain available until September 30, 2026.

Why Congress does this: Some programs can't realistically obligate all funds in 12 months. Competitive grant processes take time. Construction projects require multiple years.

Impact on execution patterns: Multi-year money often shows SLOWER obligation rates in Year 1 than one-year money. This is expected and normal—not necessarily a problem.

How to identify it: Look for a date in the appropriation.

Example:

For expenses of family housing for the Army for construction, including acquisition, replacement, addition, expansion, extension, and alteration, as authorized by law, $304,895,000, to remain available until September 30, 2028.

No-Year Money (Available Until Expended)

Duration: Available indefinitely until fully obligated.

Common for: Trust funds, revolving funds, long-term construction, emergency funds.

Example: HUD Section 8 vouchers (086-X-0162) are no-year money. Funds remain available until spent.

Why Congress does this: Some programs serve multi-year obligations (Section 8 vouchers are annual but renewed), or involve unpredictable timing (disaster relief), or are funded from dedicated revenue sources (Highway Trust Fund).

Impact on execution: No September deadline = steadier execution patterns. Agencies don't face use-it-or-lose-it pressure.

How to identify it: Look for "to remain available until expended".

Example:

For construction, repair, improvement, extension, alteration, and purchase of fixed equipment or facilities of, or for use by, the Environmental Protection Agency, $40,676,000, to remain available until expended.

Budget Authority vs Outlays: The Critical Distinction

Appropriations provide budget authority—permission to obligate funds. This is NOT the same as outlays—actual cash leaving the Treasury.

Budget Authority

Definition: Legal authority to enter into obligations (contracts, grants, etc.) that will result in immediate or future outlays.

Example: Congress appropriates $1 billion for transit capital grants. This creates $1 billion in budget authority—DOT can award up to $1 billion in grants.

When it's created: The moment the President signs the appropriations bill.

Obligations

Definition: Commitments that will require outlays (payment). Signing a contract, awarding a grant, hiring an employee.

Example: DOT awards a $500 million grant to City X for a rail project. DOT has now obligated $500 million of its $1 billion budget authority.

When it happens: Days, weeks, or months after budget authority is created. Depends on agency speed and OMB apportionment.

Outlays

Definition: Actual cash payments from the Treasury.

Example: City X bills DOT for $50 million in construction costs. Treasury transfers $50 million to City X's bank account. This is an outlay.

When it happens: Months or years after obligation. Multi-year construction projects span many fiscal years. But the general rule is that outlays take place during the period of availability plus five years. So for single-year FY2025 funding, outlays could occur in FY2025 (period of availability) and FY2026, FY2027, FY2028, FY2029, and FY2030.

The Timeline

Oct 1: Congress appropriates $1B (budget authority created)
Jan 15: DOT awards $500M grant to City X (obligation)
Mar 1: City X bills DOT for $50M (request for outlay)
Mar 15: Treasury pays City X $50M (outlay)
Jun 1: City X bills DOT for $75M (request for outlay)
Jun 15: Treasury pays City X $75M (outlay)
...continues over multiple years

Total budget authority: $1 billion (created Oct 1)
Total obligations: $500 million (created Jan 15)
Total outlays Year 1: $125 million (paid Mar-Jun)
Remaining outlays: $375 million (will be paid in future years as City X bills for work performed)

Why this matters for tracking:

• Budget authority tells you the CEILING (max possible spending)
• Obligations tell you what's been COMMITTED (grants awarded, contracts signed)
• Outlays tell you what's actually been PAID (cash out the door)

Formula Grants vs Discretionary Grants

Appropriations also differ in HOW agencies must distribute funds.

Formula Grants

Definition: Funds distributed according to a statutory formula. Agency has no discretion over WHO gets money or HOW MUCH.

Example: After required set-asides, HUD's Community Development Block Grants (CDBG) funding is distributed by formula to existing grantees based on a statutory formula.^[2]

Why this matters: Formula grants are REQUIRED spending once appropriated. The agency MUST distribute funds according to the formula. Withholding formula grant funds violates the law (see: GAO impoundment decision, July 2025).^[3]

Execution pattern: Fast. Formula is known, recipients are known, payments are automatic. Obligations happen within weeks of appropriation. Some formula grant appropriations accounts have provisos that require funding awards to be made public shortly after enactment. For example, FY2024's CDBG account language included this provison:

Provided further, That for amounts made available under paragraphs (1) and (3), the Secretary shall notify grantees of their formula allocation within 60 days of enactment of this Act.

Discretionary Grants

Definition: Competitive grants where agency selects recipients based on applications and merit criteria.

Example: DOT RAISE grants (formerly TIGER/BUILD) are competitive. DOT reviews applications and selects winning projects based on published criteria.

Why this matters: Discretionary grants are SLOWER to execute. Application period (90 days), review period (60-90 days), selection, and award process can take 6-9 months.

Execution pattern: Slow in Q1-Q2 (accepting applications), faster in Q3-Q4 (making awards). Some discretionary grants are provided multi-year funding and may not be obligated until the second year, due to the complexity of the competition and the time required for application, review, and award.

Mixed Accounts

Some accounts have BOTH formula and discretionary components.

Example: HUD Public and Indian Housing (086-0162) includes:

• $29.2 billion for renewals (formula—automatic to existing voucher holders)
• $150 million for mobility demonstrations (competitive—selected projects)

The formula portion obligates fast (October-December). The competitive portion obligates slow (may take until June).

Why this matters for tracking: Don't compare formula and discretionary execution rates. They're fundamentally different processes.

What Happens at The End of the Year?

If Congress doesn't pass appropriations by October 1 (the start of the fiscal year), funding authority expires. This is called a lapse in appropriations or a government shutdown.

Last week we covered how lapses in appropriations, or "shutdowns" work in detail. See our post: "What is a Government Shutdown? Understanding Lapses in Appropriations" to learn all about it.

Continuing Resolutions (CRs)

To avoid shutdowns, Congress often passes a Continuing Resolution—temporary funding that extends prior year appropriations.

How CRs work:

• Fund agencies at prior year levels (with adjustments)
• Usually for days, weeks, or months
• Can be extended multiple times
• Called "stop-gap funding"

Example: FY2024 started with a CR funding government at FY2023 levels through November 17, 2023. Congress then passed another CR through January 19, 2024. Finally passed full-year bills in March 2024.
FY2025 was funded through two short term CRs and then a long-term or "full-year" CR through the end of the FY2025.

Impact on execution:

• Agencies can't start new programs (not in prior year funding)
• Can't award new grants above prior year levels
• Slows everything down (uncertainty about final funding levels)
• Creates "compressed execution timeline" once full-year bills pass

Why this matters for tracking: CRs cause SLOW obligation rates in Q1. This is normal when operating under CR, not necessarily an agency problem.

We will cover continuing resolutions in depth in a future post.

What's Next

Now that you understand how appropriations work in practice—the timing, the flow of funds, and what happens when the process breaks down—we can explore why tracking appropriations alone isn't enough.

Next post: The Three-Legged Stool—why you need to track THREE data sources (appropriations, apportionments, and SF-133 execution data) to understand federal budget execution. We'll explore how each source answers different questions and why missing any one of them leaves you blind to critical execution problems.

Because knowing what Congress appropriated is step one. Knowing how long it lasts and how it flows is step two. But understanding whether OMB is releasing it and whether agencies are spending it? That requires the complete picture.

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