Inside the Budget Process

When a new appropriation is passed, we are often asked how soon awards will be made and other implications of the funding level. So we thought we’d offer a description of the 3-year budget process Exit icon, including an explanation of what we need to do to make awards once we have an appropriation.

The Federal budget process has three main phases: formulation, presentation (to Congress) and execution. From the beginning of the budget formulation phase to the end of the execution phase, the process takes almost 3 years.
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The Federal budget process has three main stages: formulation, presentation (to Congress) and execution. From the beginning of the budget formulation stage to the end of the execution stage, the process takes almost 3 years.

Stage 1a: Budget Formulation at the NIH Level (usually June through October of year 1)

NIH develops an agency-wide budget request and submits it to the Department of Health and Human Services (HHS). HHS reviews the request and provides an allowance of funds with policy guidelines.
Negotiations follow between NIH and HHS, resulting in a final budget allowance that HHS submits to the Office of Management and Budget (OMB). OMB reviews the HHS request along with all other department budgets and issues another budget allowance with policy guidelines.

After more negotiations, OMB issues a final allowance. NIH reworks its budget to fit this allowance and its guidelines, then makes allocations to each institute and center.

Stage 1b: Budget Formulation at the Institute/Center Level (usually November through January of year 2)

Each institute or center allocates its budget on a mechanism-by-mechanism basis (i.e., separate budget allocations for research grants, center grants, training grants, etc.) following the guidance provided by OMB and NIH. For an example, see this budget mechanism table.

Typical guidance examples include:

  • X% reduction on noncompeting research project grants.
  • The same overall average cost for competing grants as in the previous year.
  • The same number of trainees supported as in the previous year.

Stage 2: Budget Presentation to Congress (January through September of year 2)

The President issues his budget request for the upcoming fiscal year Exit icon, usually in early February.

Each institute or center then issues a Congressional justification (CJ) document defending its portion of the President’s budget request to Congress. The CJ displays budgets for the prior year, current year and upcoming year, along with other tables and program descriptions.

Next, usually in the spring, the NIH Director and selected institute or center directors attend Congressional hearings with the House and Senate subcommittees in charge of NIH appropriations. The NIH Director presents an opening statement and the committee members ask questions in person and later in writing. All directors submit written opening statements and may have to answer questions even if they don’t testify at a hearing.

The House and Senate subcommittees develop a budget allowance for each institute or center, including “report language” identifying any specific guidance and significant items they wish to address. This is followed by a conference to work out the differences and finally by an appropriation to each institute or center that the President signs into law.

If a budget is not approved by the start of the fiscal year (October 1), Congress will usually pass a continuing resolution to provide temporary funding. Under a standard continuing resolution, current operations may continue at a specified funding level, including the funding of some grants, but new programs cannot be started.

Stage 3: Budget Execution of the Current-Year Appropriation (October 1 through September 30 of year 3)

Once an appropriation is signed, several additional steps must take place before we can begin funding grants. For example, we need to submit documents to OMB so it can make funds available to us on a quarterly basis. Also, we need to implement the policy guidance and modify our grants management systems accordingly.

We then allocate the funds by mechanism, applying current policies and determining the cost of commitments within those mechanisms. We allocate the bulk of the remaining competing funds to investigator-initiated research project grants (RPGs), with a small portion going to special initiatives. RPG funds are disbursed to the NIGMS divisions three times per year, following each advisory council meeting. The divisions’ budgets are based on the specific applications assigned to them and their scores. Divisions make funding decisions that take into consideration the applications’ scientific merit, new investigator support, area of research and other parameters.

The Funding Decision Process

I recently described the role that an advisory council plays as the second level of peer review for applications submitted to NIH. One thing that neither advisory councils nor study sections do, however, is make funding decisions. How, then, are these decisions made?

In this post, I’ll describe the process we use at NIGMS.

The Institute is organized into five units: four divisions (Cell Biology and Biophysics; Genetics and Developmental Biology; Minority Opportunities in Research; and Pharmacology, Physiology, and Biological Chemistry) and a center (Bioinformatics and Computational Biology). Once the National Advisory General Medical Sciences Council has met, each unit organizes meetings (referred to as “paylist meetings”) attended by most or all of the program directors within that unit.

During a paylist meeting, applications are discussed and prioritized, beginning with the top-scoring applications. These applications (typically up to about half of the number that are expected to be funded) are given highest priority for funding unless there are specific issues, such as those related to the NIGMS well-funded laboratory policy or other concerns that came up at the Council meeting.

The discussion then turns to applications in the “gray area,” typically extending to about 10 percentile points beyond where we would expect to be able to fund applications if they were awarded in straight percentile order. Each application is discussed, typically in percentile order, although sometimes early-stage investigators (ESIs) are discussed first.

For each application, the responsible program director presents the scientific topic as well as factors such as whether the applicant is an ESI or new investigator, how much other support the applicant has (particularly if the application represents the only support available to the investigator), whether the Council has given us specific advice on the application, whether the scientific area is perceived to be particularly exciting, and how much other research we already support in the general area of the application. The other members of the unit listen to these presentations, and the group then produces a prioritized list of applications.

The other key factor for final funding decisions is, of course, the availability of funds. Funds are provided through the appropriations process, either through a regular appropriations bill or, sometimes toward the beginning of a fiscal year, a continuing resolution that typically funds government programs at the previous year’s level. When it is reasonably clear what level of funds is available at a particular point in the fiscal year, the funds are allocated to different mechanisms and programs (research project grants, training grants, various programs within the Division of Minority Opportunities in Research, and so on) based on our previously established budget. Funds for unsolicited R01s are allocated among the four units within NIGMS that fund these applications (the Divisions of Cell Biology and Biophysics; Genetics and Developmental Biology; and Pharmacology, Physiology, and Biological Chemistry; and the Center for Bioinformatics and Computational Biology), based on the fractions of applications that have scored well enough to be considered for possible funding.

Paylists are then developed using the prioritized lists, with budget adjustments for each application based on NIH and NIGMS-wide policies as well as considerations specific to the application provided by the responsible program director. Applications are paid until the available funds are exhausted. Applications that are relatively high on the priority list but could not be funded with a given allocation are flagged for consideration later in the fiscal year, when more funds may become available. This process leads, over the course of a full fiscal year, to the funding curves we recently posted.