During the coming summer months, Congress will focus its attention on the appropriations process—an annual exercise that, ideally, ends with a determination of funding for the federal government for the following fiscal year (October 1 through September 30). Congress does this through the passage of a series of twelve bills, each of which funds a specific area of the government, e.g., Defense programs, Agriculture programs, Energy and Water programs, etc.

In its purest "civics class" form, the House and Senate separately pass each one of the twelve bills, inevitable differences between the bills are addressed and resolved in a conference committee, the reconciled bills are then passed once again by the two chambers, and then they are sent to the President for his signature. A process which seems very quaint to Congress watchers today. It simply does not happen that way anymore.

What does happen is that only a few appropriations bills are passed in this manner, usually Pentagon-related funding contained in the Defense, Military Construction/Veterans Affairs (Milcon/VA), and Homeland Security bills (but not always). The others face a variety of fates—some are passed out of committee and go to the floor; some are passed on the floor and sent to the other body; others are passed only out of the subcommittee and never go farther than that; and some are never even passed out of their respective subcommittees. What happens to these?

Usually, bills that fall short of becoming law are "pre-conferenced" behind the scenes by the House and Senate appropriations committees and then combined in an "omnibus" appropriations bill. (Sometimes this is called a "mini-bus" if only a few bills are packaged together.) Because appropriations bills are considered "must pass" legislation – or else the government will shut down – the omnibus is often held hostage and used as political leverage for other issues. Once an overall agreement can be reached on the other issues, Congress passes the omnibus to keep the government funded. However, before this can happen, usually it is necessary to have several short-term stop-gap funding bills (called "continuing resolutions") to keep the government open for a few weeks at current spending levels until the political stars are aligned and the omnibus can pass. Ideally, the omnibus keeps the government operating until the next fiscal year when the process starts anew.

This year, the tortured process is made even more difficult by the sequestration. When the funding process starts, the appropriations committees must have a baseline - generally the prior year's spending levels - to know where to cut, where to increase and where to maintain the status quo. However, this year's appropriations were reduced three months into the year by $85 billion due to sequestration, so an important issue to consider is, what baseline to use?

The House, which generally supports the budget caps achieved by sequestration due to its Republican majority, is using the reduced levels contained in the Budget Control Act (BCA) as its baseline. This means the House is writing bills to fund the government in FY 2014 at levels that are 1.8% below the post-sequester levels in FY 2013. (Remember that the BCA, which is enforced by sequestration, provides specific budget caps for each of the next nine fiscal years.)

The Senate has said it will ignore the budget caps and sequestration in its baseline and instead write bills to the level contained in the President's budget request, which is almost 1.5% higher than the pre-sequester FY 2013 levels. This effectively would negate the sequestration that occurred in 2013, but would do nothing to address the impending one in 2014. With the House and Senate so far apart on topline funding ($90 billion apart), some believe this stand-off will set the stage for a broad agreement to replace the BCA and its resulting sequestration. At least that is what the Democratic-controlled Senate is hoping.

To date there have been few negative consequences from the sequestration, as Congress has addressed some of the more dire consequences through targeted fixes, such as ensuring FAA control towers remain operational so passenger flights can continue as usual. And there have been some positive consequences, such as a reduction in the deficit. Some believe that with the coming summer months, greater impacts will soon be felt from the significant furlough of over 600,000 Pentagon-related employees, to the less-severe cancelling of the July 4th fireworks displays in some locations across the country.

It is still too early to predict what will be the ultimate result of the sequestration and upcoming budget process. We will continue to report on the issue throughout the summer and fall.