Factbox: The budget process in three easy steps

(Reuters) - President Barack Obama unveils his budget request on Monday, but the actual decisions about how the government raises and spends money are made on Capitol Hill in a process that usually lasts most of the year.

Here's how it works, in three easy steps:

1. PRESIDENT'S BUDGET REQUEST. After asking federal agencies how much money they need to get their work done, the White House compiles a budget request and submits it to Congress on or before the first Monday in February.

The budget request shows broadly how the president wishes to implement fiscal policy -- how much he aims to raise in taxes, how much he wants to spend, and how much the gap between the two will add to the country's debt.

This year, Obama will propose a three-year spending freeze on many domestic government programs to help bring down a budget deficit that hovers at levels not seen relative to the economy since World War Two.

The document also offers a detailed look at the president's priorities. For example, Obama requested a 37 percent increase for the Environmental Protection Agency last year after what Democrats saw as years of neglect under the administration of Republican George W. Bush.

The budget request also shows how the president aims to implement specific policy goals. In his State of the Union speech on Wednesday, he said the United States should expand its use of nuclear power, and his budget proposal is expected to triple government loan guarantees to build new reactors.

2. CONGRESS DRAWS UP ITS PLAN

After the budget request is submitted, the House and Senate Budget committees develop their own "budget resolution" -- a guide that states how much revenue the government expects to collect and how much it will spend.

Congress is supposed to approve this resolution by April 15, but it often misses that goal. Congress has failed to adopt a resolution at all three times over the past 10 years.

Spending totals are defined in two ways: authority, or how much money a federal agency is authorized to spend, and outlays, or how much that agency will actually spend in the coming year.

For example, the Navy may be authorized to spend $750 million to build a new aircraft carrier, but only a small fraction of that total will be outlaid the first year, when plans for the ship are drawn up but construction has not started.

The budget resolution divides the money up across 19 categories that represents broad functions of government, such as international affairs or transportation.

The document also divides the money up by congressional committee, telling other lawmakers how much they have to work with as they set spending levels for individual government programs.

Both the House and the Senate have rules that can be used to enforce these spending ceilings.

3. CUTTING THE CHECKS

After the budget resolution passes, the 12 appropriations subcommittees in each chamber set funding levels for individual government programs and write up detailed instructions for the agencies that oversee them -- such as how to divide highway construction money among individual projects.

Lawmakers often insert "earmarks" into these spending bills, which ensure funding for specific projects in their home districts that are not requested by the president.

Earmarks have figured in several corruption scandals in recent years as some lawmakers have used them to steer money to supporters, and reformers often suggest banning them entirely.

Appropriators say earmarks are a necessary part of the process because they build support for the spending bills needed to keep government running and ensure that Congress exerts some control over the massive federal bureaucracy.

Ideally, Congress passes all 12 appropriations bills individually by October 1, the start of the fiscal year.

If this deadline is missed, as is common, lawmakers must pass "continuing resolutions" to fund government agencies at current levels while they finish their work.

Finally, the president must sign the spending bills into law or veto them if he finds them unacceptable.

At this point, the White House is already canvassing agencies to determine what their funding needs will be for the coming fiscal year, and the process begins again.

(Reporting by Andy Sullivan in Washington; Editing by Eric Walsh)