Federal spending (i.e., budget authority and outlays) is sometimes divided into 20 conceptual categories known as “budget functions.” This is a system of classifying spending according to the national needs being addressed. The President’s Budget and Congress’ annual Budget Resolution allocate budget authority and outlays among the various functions in the Federal Budget.
However, while the functions are a useful analytical display of Federal spending priorities, they have little practical impact on the annual process of allocating funds among programs.
The allocation of discretionary funds (25% of the budget) is determined by the House and Senate Appropriations Committees’ allocation of total discretionary funds among the 12 annual appropriations bills—and the line-item decisions made in each of those bills.
The allocation of mandatory federal funds (60% of the budget) is generally on auto-pilot, determined by legal requirements and eligibility formulas in entitlement laws, and does not change until Congress amends those laws–either through budget reconciliation legislation or the regular legislative process.