Definition: Fiscal Year (FY) is a term that is used to differentiate an organization's budget or financial year from the calendar year. A fiscal year usually starts at the beginning of a quarter, such as April 1, July 1 or October 1.
However, most companies' fiscal year also coincides with the calendar year, which starts January 1. For the most part, it is simpler and easier that way. For some organizations, there are advantages for starting the fiscal year at a different time. For example, businesses that are seasonal might start their fiscal year July 1 or October 1. A business that has most of its income in the fall and most of its expenses in the spring might also choose to start its fiscal year on October 1. That way, they know what their income will be for the year, and can adjust their expenses to maintain their desired profit margins.
Some businesses might choose to start their fiscal year in April for tax purposes. They can shift income and expenses to a month outside of the fiscal year to improve their taxable income.
Federal Government Fiscal YearOne of the most important fiscal years for the economy is the Federal Fiscal Year, which defines the U.S. government's budget. It runs from October 1 of the prior year through September 30 of the year being described. For example:
- FY 2012 was from October 1 2011 through September 30 2012.
- FY 2013 was from October 1 2012 through September 30 2013.
- FY 2014 is from October 1 2013 through September 30 2014.
- FY 2015 is from October 1 2014 through September 30 2015.
- FY 2016 is from October 1 2015 through September 30 2016.
The Federal fiscal year gives elected Congressmen, who begin office in January, time to participate in the budget process for the next fiscal year. The President kicks off the process when he submits the budget for the next year by the first Monday in February. Congress, including the newly elected officials, have until September 30 submit their own budgets and negotiate final budget to submit back to the President. If Congress doesn't meet the deadline, then some non-essential government agencies may start to shut down. Usually Congress will enact a Continuing Resolution to keep the government running until they work out their disagreements about the budget.
However, this process started to slowly disintegrate in 2010. That's when a new Republican majority was voted in during the mid-term Congressional elections in November 2010. They were able to participate in the FY 2012 budget, which was submitted by President Obama in February 2011, a month after they took office.
However, before they could even consider the FY 2012 budget, they had to finalize the FY 2011 budget. Thanks to the election, the lame-duck Congress had missed its September 30 2010 deadline to agree on the FY 2011 budget. Instead, they waited until the mid-term elections were over. Fortunately, Congress had approved temporary spending orders to keep the government running.
The disagreement over the FY 2011 budget went on until April 2011, at which time the temporary spending orders were to expire. There was a real threat of a government shutdown. It was averted at the last minute when the President and Congress agreed to $80 billion in spending cuts.
By then, Congress only had six months to meet the approval deadline for the FY 2012 budget. A continuing resolution allowed the government to keep running until the FY 2012 budget was quietly approved by December 31, 2011.
The FY 2013 budget was never actually approved. Instead, a continuing resolution allowed the government to function until January 2013. At that time, the first round of sequestration was supposed to kick in. This reduced government spending by 10% across the board from the FY 2012 budget levels. However, Congress delayed the sequestration cuts until March 1, in the hopes that a budget could be negotiated. It couldn't, although Congress did enact a continuing resolution that was to expire September 30, 2013.
This time, tea party Republicans refused to enact another resolution unless Obamacare was defunded. The government shut down for 16 days, before the two parties agreed to keep things running until January 15, 2014. Meanwhile, another bicameral conference committee was established to negotiate the FY 2014 budget by December 15, 2013. This was supposed to have been approved by September 30, 2013. Article updated April 11, 2014
Federal Fiscal Year BudgetsWant to know more about the Federal budget for each Fiscal Year? Track the progress with these articles:
- Fiscal Year 2015 - With expected revenue of $3.337 trillion, and spending of $3.901 trillion, the deficit will be $564 billion.
- Fiscal Year 2014 - The deficit is projected to be $649 billion, after taking in $3.005 trillion in revenue and spending $3.651 trillion.
- Fiscal Year 2013 - Thanks to sequestration, only $3.454 trillion was spent, lower than the $3.8 trillion estimated by the Obama administration. Revenue was $2.774 trillion, also better-than-expected. The deficit was only $680 billion.
- Fiscal Year 2012 - The Federal government received $2.469 trillion in revenue, but spent $3.796 trillion, creating a $1.327 trillion deficit.
- Fiscal Year 2011 - The deficit for FY 2011 was $1.3 trillion, the third largest in history.
- Fiscal Year 2010 - President Obama's first budget created a record $1.6 trillion deficit.
- Fiscal Year 2009 - President Obama added the Economic Stimulus Act to President Bush's FY 2009 budget to fight the recession.
- Fiscal Year 2008 - This pre-recession budget focused on the War on Terror.
- Fiscal Year 2007 - The last year before the Great Recession had a deficit of only $162 billion.
- Fiscal Year 2006 - The War on Terror increased military spending to $566 billion, making it the highest budget item, even more than Social Security at $550 billion.
Examples: The word "fiscal" was originally a Latin word meaning "a small rush basket," used as a purse. This became the "public purse," which became the French word fiscal, meaning "to tax."