[Analytical Perspectives]
[Budget System and Concepts and Glossary]
[24. Budget System and Concepts and Glossary]
[From the U.S. Government Printing Office, www.gpo.gov]
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BUDGET SYSTEM AND CONCEPTS
AND GLOSSARY
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24. BUDGET SYSTEM AND CONCEPTS AND GLOSSARY
The budget system of the United States Government provides the means
by which the Government decides how much money to spend and what to
spend it on, and how to raise the money it has decided to spend. Once
these decisions are made, the budget system ensures they are carried
out. The Government uses the budget system to determine the allocation
of resources among its major functions--such as ensuring the national
defense, promoting commerce, and providing health care--as well as to
determine the objectives and scope of individual programs, projects, and
activities. While the focus of the budget system is on dollars, other
resources, such as Federal employment, are also controlled through the
budget system. The decisions made in the budget process affect the
nation as a whole, state and local governments, and individual
Americans. Many budget decisions have worldwide significance.
This chapter provides an overview of the budget system and explains
some of the more important budget concepts. A glossary of budget terms
is provided at the end of the chapter. Summary dollar amounts illustrate
major concepts. These figures and more detailed amounts are discussed in
more depth in other chapters of the budget documents.
The budget system is governed by various laws that have been enacted
to carry out requirements of the Constitution. The principal laws
pertaining to the budget system are referred to by title throughout the
text, and complete citations are given later in the chapter.
THE BUDGET PROCESS
The budget process has three main phases, each of which is
interrelated with the others:
(1) formulation of the President's budget;
(2) congressional action on the budget; and
(3) budget execution.
Formulation of the President's Budget
The Budget of the United States Government consists of several volumes
that set forth the President's financial proposal with recommended
priorities for the allocation of resources by the Federal Government.
The primary focus of the budget is on the budget year--the next fiscal
year for which Congress needs to make appropriations. However, the
budget may propose changes to funding levels already provided for the
current year, and it covers at least the four years following the budget
year in order to reflect the effect of budget decisions over the longer
term. The 1997 budget covers five years beyond the budget year because
budget negotiations concerning the 1996 budget addressed the years
through 2002. The budget includes data on the most recently completed
fiscal year so that the budget estimates can be compared to actual
accounting data.
The process of formulating the budget begins not later than the spring
of each year, at least nine months before the budget is transmitted and
at least 18 months before the fiscal year begins. (See the Budget
Calendar below.) The President establishes general budget and fiscal
policy guidelines. Based on these guidelines, the Office of Management
and Budget (OMB) works with the Federal agencies to establish specific
policy directions and planning levels for the agencies, both for the
budget year and for the following four years, at least, to guide the
preparation of their budget requests.
During the formulation of the budget, there is a continual exchange of
information, proposals, evaluations, and policy decisions among the
President, the Director of OMB, other officials in the Executive Office
of the President, the Secretaries of the departments, and the heads of
the Government agencies. Decisions concerning the upcoming budget are
influenced by the results of previously enacted budgets, including the
one for the fiscal year in progress, and reactions to the last proposed
budget, which is being considered by Congress. Decisions also are
influenced by projections of the economic outlook that are prepared
jointly by the Council of Economic Advisers, OMB, and the Treasury
Department.
In the fall, agencies submit budget requests to OMB, where analysts
review them and identify for OMB officials issues that need to be
discussed with agencies. Many issues are resolved between OMB and the
agency. Others require the involvement of the President and White House
policy officials. This decision-making process is usually completed by
late December. At that time, the final stage of developing detailed
budget data and the preparation of the budget documents begins.
The decision-makers must consider the effects of economic and
technical assumptions on the budget estimates. Interest rates, economic
growth, the rate of inflation, employment levels, and the size of the
beneficiary populations are some of the assumptions that must be made.
Small changes in these assumptions can affect budget estimates by
billions of dollars. (Chapter 1, ``Economic Assumptions,'' in the
Analytical Perspectives volume of the 1997 budget provides more
information on this subject.)
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Budget decisions must also take into account any statutory limitations
on receipts, outlays, and the deficit (see Budget Enforcement below).
Thus, the budget formulation process involves the simultaneous
consideration of the resource needs of individual programs, the
allocation of resources among the functions of the Government, the total
outlays and receipts that are appropriate in relation to current and
prospective economic conditions, and statutory constraints.
The transmittal of the President's budget to Congress is scheduled in
law to occur on or after the first Monday in January but not later than
the first Monday in February of each year. This is eight to nine months
before the beginning of the next fiscal year on October first.
For various reasons, some parts or all of the budget documents have
been transmitted after the scheduled date. One reason is that the
current timing does not require an outgoing President to transmit a
budget, and it is impractical for an incoming President to complete a
budget within a few days of taking office on January 20th. President
Clinton, the first President subject to the current requirement,
submitted a report to Congress on February 17, 1993, describing the
comprehensive economic plan he proposed for the Nation and containing
summary budget information. He transmitted the Budget of the United
States for 1994 on April 8, 1993.\1\
\1\The transmittal date was changed in 1990 from the first Monday
after January 3rd. The report submitted on February 17, 1993, was
entitled, ``A Vision of Change for America.''
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In some years, the late or pending enactment of appropriations acts,
other spending legislation, and tax laws considered in the previous
budget cycle have delayed preparation and transmittal of complete
budgets. For this reason, President Reagan submitted his budget for 1988
forty-five days after the date specified in law. In other years,
Presidents have submitted abbreviated budget documents on the due date,
sending the more detailed documents weeks later. This is the case for
the 1997 budget. President Clinton transmitted a budget document to
Congress on February 5, 1996. It provided a thematic overview of his
priorities and the Administration's latest assumptions about the
economy. Because of uncertainty over 1996 appropriations as well as
possible changes in mandatory programs and tax policy, OMB was unable to
provide by that date all of the material normally contained in the
President's budget. That material is being transmitted in mid-March
1996.
Congressional Action\2\
\2\For a fuller discussion of the congressional budget process, see
Allen Schick, Robert Keith, and Edward Davis, Manual on the Federal
Budget Process (Congressional Research Service Report 91-902 GOV,
December 24, 1991) and Davis and Keith, Budget Process Changes Adopted
in August 1993 (CRS Report 93-778 GOV, December 6, 1993).
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Congress considers the President's budget proposals and approves,
modifies, or disapproves them. It can change funding levels, eliminate
programs, or add programs not requested by the President. It can add or
eliminate taxes and other sources of receipts, or make other changes
that affect the amount of receipts collected.
Congressional review of the budget begins shortly after the President
transmits the budget to Congress. Under the procedures established by
the Congressional Budget Act of 1974, Congress considers budget totals
before completing action on individual appropriations. The Act requires
each standing committee of the House and Senate to recommend budget
levels and report legislative plans concerning matters within the
committee's jurisdiction to the Budget Committee in each body. The
Budget Committees then initiate the concurrent resolution on the budget.
The budget resolution sets appropriate levels for total receipts and for
budget authority and outlays, in total and by functional category (see
Functional Classification below). It also sets appropriate levels for
the budget deficit (or surplus) and debt.
The explanatory statement that accompanies the budget resolution
allocates amounts of budget authority and outlays within the functional
category totals to the committees that have jurisdiction over the
programs in the functions. The House and Senate Appropriations
Committees are required, in turn, to allocate amounts of budget
authority and outlays among its respective subcommittees. Other
committees may make allocations among their subcommittees but are not
required to. There is no allocation at the program level. However, the
functional allocations are based on certain assumptions about the level
of funding for major programs. These assumptions may be included in the
explanatory statement, but they are not binding on the committees of
jurisdiction. The budget resolution may contain ``reconciliation
directives,'' which are discussed below.
The budget resolution is scheduled to be adopted by the whole Congress
by April 15 of each year, but passage is often delayed. After passage of
the budget resolution, a point of order can be raised to block
consideration of bills that would cause a committee's allocation to be
exceeded. Like the President's budget, the budget resolution is subject
to spending limitations imposed in law through 1998.
Budget resolutions are not laws and, therefore, do not require the
President's approval. However, Congress considers the Administration's
views, because legislation developed to meet congressional budget
allocations does require the President's approval. In some years, the
President and the joint leadership of Congress have formally agreed on
the framework of a deficit reduction plan. These agreements were
reflected in the budget resolution and legislation passed for those
years.
Congress does not enact a budget as such. It provides spending
authority for specified purposes in several appropriations acts each
year (usually thirteen). It also enacts changes each year in permanent
laws that affect spending and receipts.
In making appropriations, Congress does not vote on the level of
outlays (spending) directly, but rather on budget authority, which is
the authority to incur legally binding obligations of the Government
that will result in immediate or future outlays. In a separate process,
prior to making appropriations, Congress usually enacts
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legislation that
authorizes an agency to carry out a particular program and, in some
cases, includes limits on the amount that can be appropriated for the
program. Some programs require annual authorizing legislation, some are
authorized for a specified number of years, and others are authorized
indefinitely. Congress may enact appropriations for a program even
though there is no specific authorization for it.
Appropriations bills are initiated in the House. The Appropriations
Committee in each body has jurisdiction over annual appropriations.
Those committees are divided into subcommittees that hold hearings and
review detailed budget justification materials prepared by the agencies
within the subcommittee's jurisdiction. After a bill has been approved
by the committee and by the whole House, usually with amendments to the
original version, it is forwarded to the Senate, where a similar review
follows. In case of disagreement between the two Houses of Congress, a
conference committee (consisting of Members of both bodies) meets to
resolve the differences. The report of the conference committee is
returned to both Houses for approval. When the measure is agreed to,
first in the House and then in the Senate, it is ready to be transmitted
to the President as an enrolled bill, for approval or veto.
If action on one or more appropriations bills is not completed by the
beginning of the fiscal year, Congress enacts a joint continuing
resolution to provide authority for the affected agencies to continue
operations at some specified level up to a specific date or until their
regular appropriations are enacted. In some years, a portion or all of
the Government has been funded for the entire year by a continuing
resolution. Continuing resolutions must be presented to the President
for approval or veto.
Congress provides spending authority in permanent laws as well as in
appropriations acts. These are laws that do not need to be reenacted
each year. In fact, while spending authority for the majority of Federal
programs is provided each year in appropriations acts, most of the total
spending authority available in a year is provided by permanent laws.
This is because the budget authority for interest on the public debt
($332 billion in 1995) and a few programs with large amounts of
obligations each year, such as social security ($333 billion in 1995),
are funded by permanent law. The outlays from permanent budget
authority, together with the outlays from obligations incurred with
budget authority provided in previous years, account for the majority of
the outlay total for any year. Therefore, the majority of outlays in a
year are not controlled through appropriations actions for that year.
The types of budget authority, their control by Congress, and the
relation of outlays to budget authority are discussed in more detail in
later in the chapter.
Almost all taxes and most other receipts result from permanent laws.
Tax bills are initiated in the House. The House Ways and Means Committee
and the Senate Finance Committee have jurisdiction over tax laws.
The budget resolution often includes reconciliation directives, which
require authorizing committees to change permanent laws. They instruct
each designated committee to make changes in the laws under the
committee's jurisdiction that will change the levels of receipts and
spending controlled by the laws. The instructions specify the dollar
amount of changes that each designated committee is expected to achieve
through changes in law, but do not specify the laws to be changed or the
changes to be made. However, the changes in receipt and outlay amounts
are based on certain assumptions about how laws would be changed, and
these assumptions may be included in the explanatory statement
accompanying the budget resolution. Like other assumptions included in
the explanatory statement, these are not binding on the committees of
jurisdiction.
The committees that are subject to reconciliation directives are
expected to prepare implementing legislation. Such legislation may, for
example, change the tax code, change benefit formulas or eligibility
requirements for entitlement programs, or authorize Government agencies
to charge fees to cover some of their costs. In some years, Congress has
enacted an omnibus budget reconciliation act, which combines the
amendments to implement reconciliation directives in a single act. These
acts, together with appropriations acts for the year, often implement
agreements between the President and the Congress. They may include
other matters, such as laws providing the means for enforcing these
agreements, as described below.
Budget Enforcement
The Budget Enforcement Act of 1990 (BEA) significantly amended the
laws pertaining to the budget process, including the Congressional
Budget Act, the Balanced Budget and Emergency Deficit Control Act, and
the law pertaining to the President's budget (see PRINCIPAL BUDGET LAWS,
later in the chapter). The BEA constrains legislation that would
increase spending or decrease receipts through 1998. As this budget was
being prepared, the Administration and Congress were considering the
extension of the BEA through 2002.
The BEA divides spending into two types--discretionary spending and
direct spending. Direct spending is more commonly called mandatory
spending. Discretionary spending is controlled through annual
appropriations acts. Funding for salaries and other operating expenses
of Government agencies, for example, is usually discretionary because it
is usually provided by appropriations acts. Mandatory spending is
controlled by permanent laws. Medicare and medicaid payments,
unemployment insurance benefits, and farm price supports are examples of
mandatory spending, because payments for those purposes are authorized
in permanent laws. The BEA specifically defines funding for the Food
Stamp program as mandatory spending, even though funding for the program
is provided in appropriations acts. The BEA includes receipts under the
same rules that apply to mandatory spending, because receipts are
generally controlled by permanent laws.
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The BEA constrains discretionary spending differently from mandatory
spending and receipts. Discretionary spending is constrained by dollar
limits (``caps'') on total budget authority and outlays for this
category for each fiscal year through 1998. The caps are adjusted when
the budget is transmitted each year for the difference between the
inflation rates assumed when the caps were enacted and the actual
inflation rates. The BEA also requires the caps to be adjusted for
certain other reasons, such as to reflect the enactment of emergency
appropriations. The caps for this budget, adjusted to reflect proposed
changes, are shown in the following table:
DISCRETIONARY SPENDING LIMITS
(In billions of dollars)
------------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------------
Budget authority................................ 495.8 496.8 501.5
Outlays......................................... 539.1 538.6 534.2
------------------------------------------------------------------------
If the amount of budget authority provided in appropriations acts for
the year exceeds the discretionary cap on budget authority, or the
amount of outlays estimated to result from this budget authority is
estimated to exceed the discretionary cap on outlays, the BEA specifies
a procedure, called sequestration, for reducing discretionary spending.
Under a sequester, spending for most discretionary programs is reduced
by a uniform percentage. Special rules apply in reducing some programs,
and some programs are exempt from sequester by law.
The Violent Crime Control and Law Enforcement Act of 1994 created the
Violent Crime Reduction Trust Fund to earmark funding for specified
programs. It appropriated a specified amount to the Fund for each year
from 1995 through 2000. Spending from the Fund is controlled by annual
appropriations acts, but it is not subject to the general purpose
discretionary caps. Instead, the Act specified outlay caps, which are
not adjustable, and effectively capped budget authority, as shown in the
following table:
VIOLENT CRIME REDUCTION LIMITS
(In billions of dollars)
------------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------------
Budget authority............................. 4.3 5.0 5.5
Outlays...................................... 2.3 3.9 4.9
------------------------------------------------------------------------
A separate sequester procedure, similar to the one required for
general purpose discretionary spending, applies to amounts appropriated
from the Trust Fund if the Violent Crime Reduction caps are exceeded.
The BEA constrains mandatory spending and receipts differently. Laws
that would increase mandatory spending or decrease receipts are
constrained through ``pay-as-you-go'' (PAYGO) rules. Under these rules,
the cumulative effects of legislation affecting mandatory spending or
receipts must not increase the deficit. Legislated increases in benefit
payments, for example, have to be offset by legislated reductions in
other mandatory spending or increases in receipts. Following the end of
a session of Congress, OMB estimates the net effect on the deficit of
laws enacted since the BEA was passed that affect mandatory spending and
receipts. If there is an estimated net increase in the deficit for the
current fiscal year and the budget year combined, the BEA specifies
sequester procedures for the uniform reduction of most non-exempt
mandatory spending programs. Special rules apply in reducing some non-
exempt programs. Less than 3 percent of all mandatory spending is
sequesterable by either uniform reduction or special rule; the rest is
exempt from sequester by law.
The PAYGO rules do not apply to increases in mandatory spending or
decreases in receipts that are not the result of new laws. For example,
mandatory spending for benefit programs, such as unemployment insurance,
rises when the population of eligible beneficiaries rises, and many
benefit payments are automatically increased for inflation under
existing laws. Tax receipts decrease when the profits of private
businesses decline as the result of economic conditions. To address the
problem of rising mandatory spending, President Clinton issued Executive
Order No. 12857, which established targets for mandatory spending
(excluding deposit insurance and interest on the public debt) for 1994
through 1997. The targets were based on estimates made in 1994 and may
be adjusted for unanticipated increases in the number of beneficiaries.
If there is an actual or projected overage in any year, the President
must submit a message to Congress, explaining the cause. Depending on
the economic circumstances at the time, the President may recommend
recouping or eliminating all, some, or none of the overage. If the
President recommends reducing the overage, he must specify how. The
House has instituted rules to expedite its response to such a message.
(Chapter 13, ``Review of Direct Spending and Receipts,'' in the
Analytical Perspectives volume of the 1997 budget provides more
information on this subject.)
The BEA requires OMB to make the estimates and calculations that
determine whether there is to be a sequester and report them to the
President and Congress. The Congressional Budget Office (CBO) is
required to make the same estimates and calculations, and the Director
of OMB is required to explain any differences between the OMB and CBO
estimates. The estimates and calculations by OMB are the basis for
sequester orders issued by the President. The President's orders may not
change any of the particulars of the OMB report. The General Accounting
Office is required to prepare compliance reports.
OMB and CBO are required to publish three sequestration reports--a
``preview'' report at the time the President submits the budget, an
``update'' report in August, and a ``final'' report at the end of a
session of Congress (usually in the fall of each year). The preview
report discusses the status of discretionary and PAYGO sequestration,
based on current law. This report also explains the adjustments that are
required
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by law to the discretionary caps and publishes the revised
caps. The preview report estimates are revised in the update and final
reports to reflect the effects of laws enacted since the preview report.
In addition to these reports, OMB and CBO are required to estimate the
effects of appropriations acts and PAYGO laws immediately after each one
is enacted. The estimates in the OMB final report trigger a sequester if
the appropriations enacted for the current year exceed the caps or if
the cumulative effect of PAYGO legislation is estimated to increase the
deficit.
From the end of a session of Congress through the following June 30th,
discretionary sequesters take place whenever an appropriations act for
the current fiscal year causes a cap to be exceeded. Because a sequester
in the last quarter of a fiscal year might be too disruptive, the BEA
specifies that a sequester that otherwise would be required then is to
be accomplished by reducing the limit for the next fiscal year. These
requirements ensure that supplemental appropriations enacted during the
fiscal year are covered by the budget enforcement provisions.
Budget Execution
Government officials are generally required to spend no more and no
less than has been appropriated, and they may use funds only for
purposes specified in law. The Antideficiency Act prohibits government
officials from spending or obligating the government to spend in advance
of an appropriation, unless specific authority to do so has been
provided in law. Additionally, the Act requires the President to
apportion the funds available to most executive branch agencies. The
President has delegated this authority to OMB, which usually apportions
by time periods (usually by quarter of the fiscal year) and sometimes by
activities. Agencies may request that an account be reapportioned during
the year to accommodate changing circumstances. This system helps to
ensure that funds are available to cover operations for the entire year.
If changes in laws or other factors make it necessary, Congress may
enact supplemental appropriations. For example, a supplemental
appropriation might be required to respond to an unusually severe
natural disaster.
On the other hand, changing circumstances may reduce the need for
certain spending for which funds have been appropriated. The President
may withhold appropriated amounts from obligation only under certain
limited circumstances--to provide for contingencies, to achieve savings
made possible through changes in requirements or greater efficiency of
operations, or as otherwise specifically provided in law. The
Impoundment Control Act of 1974 specifies the procedures that must be
followed if funds are withheld. Deferrals, which are temporary
withholdings, take effect immediately unless overturned by an act of
Congress. In 1995, a total of $17.8 billion in deferrals was reported to
Congress and none was overturned. Rescissions, which permanently cancel
budget authority, do not take effect unless Congress passes a law
rescinding them. If such a law is not passed within 45 days of
continuous session, the withheld funds must be made available for
spending. In total, Congress has rescinded less than one-third of the
amount of funds that Presidents have proposed for rescission since
enactment of the Impoundment Control Act. In 1995, the President
proposed rescissions totalling $1.2 billion, and Congress rescinded a
total of $0.8 billion.
Budget Calendar
The following timetable highlights the scheduled dates for significant budget events during the year.
Between the 1st Monday in January and the 1st
Monday in February............................ President transmits the budget, including a sequester preview
report.
Six weeks later................................ Congressional committees report budget estimates to Budget
Committees.
April 15....................................... Action to be completed on congressional budget resolution.
May 15......................................... House consideration of annual appropriations bills may begin.
June 15........................................ Action to be completed on reconciliation.
June 30........................................ Action on appropriations to be completed by House.
July 15........................................ President transmits Mid-Session Review of the budget.
August 20...................................... OMB updates the sequester preview.
October 1...................................... Fiscal year begins.
15 days after the end of a session of Congress. OMB issues final sequester report, and the President issues a
sequester order, if necessary.
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COVERAGE OF THE BUDGET
Federal Government and Budget Totals
The budget documents provide information on all Federal agencies and
programs. The total receipts and outlays of the Federal Government are
composed of both on-budget receipts and outlays and receipts and outlays
that, by law, are designated as off-budget. By law, the receipts and
outlays of social security (the Federal Old-Age and Survivors Insurance
and the Federal Disability Insurance trust funds) and the Postal Service
Fund are excluded from the budget totals and from the calculation of the
deficit for Budget Enforcement Act purposes. The off-budget transactions
are separately identified in the budget. The on-budget and off-budget
amounts are added together to derive the unified totals for the Federal
Government. These are sometimes referred to as the unified or
consolidated budget totals.
TOTALS FOR THE BUDGET AND THE FEDERAL GOVERNMENT
(In billions of dollars)
------------------------------------------------------------------------
1995 1996 1997
actual estimate estimate
------------------------------------------------------------------------
On-budget:
Budget authority......................... 1,253 1,263 1,319
Outlays.................................. 1,230 1,270 1,318
Receipts................................. 1,004 1,059 1,107
----------------------------
Deficit................................ -226 -211 -210
Off-budget:
Budget authority......................... 291 308 320
Outlays.................................. 289 302 318
Receipts................................. 351 367 388
----------------------------
Surplus................................ 62 65 70
Federal Government:
Budget authority......................... 1,543 1,572 1,638
Outlays.................................. 1,519 1,572 1,635
Receipts................................. 1,355 1,427 1,495
----------------------------
Deficit................................ -164 -146 -140
------------------------------------------------------------------------
Neither the on-budget nor the off-budget totals include transactions
of Government-sponsored enterprises, such as the Federal National
Mortgage Association (Fannie Mae) and the Student Loan Marketing
Association (Sallie Mae). These enterprises were established by Federal
law for public policy purposes but are privately owned and operated
corporations. Because of their close relationship to the Government,
these enterprises are discussed in several parts of the budget, and
their financial data are reported in the Appendix to the Budget of the
United States Government and some detailed tables.
A presentation for the Board of Governors of the Federal Reserve
System is included in the Appendix for information only. The amounts are
not included in either the on-budget or off-budget totals because of the
independent status of the System. However, the Federal Reserve System's
net earnings are transferred annually to the Treasury and are recorded
in the budget as receipts.
Functional Classification
The functional classification arrays budget authority, outlays, and
other budget data according to the major purpose served--such as
agriculture, income security, and national defense. There are nineteen
major functions, most of which are divided into subfunctions. For
example, the Agriculture function is divided into Farm Income
Stabilization and Agricultural Research and Services. The functional
classification is an integral part of the congressional budget process,
and the functional array meets the Congressional Budget Act requirement
for a presentation in the budget by national needs and agency missions
and programs.
The following criteria are used in the establishment of functional
categories and the assignment of activities to them:
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GLOSSARY OF BUDGET TERMS
Balances of budget authority--These are amounts of budget authority
provided in previous years that have not been outlayed.
Obligated balances--These are amounts of budget authority that have
been obligated but not yet outlayed. Unobligated balances are amounts
that have not been obligated and that remain available for obligation
under law.
Baseline--An estimate of the receipts, outlays, and deficit that would
result from continuing current law through the period covered by the
budget.
Breach--A breach is the amount by which new budget authority or
outlays within a category of discretionary appropriations for a fiscal
year is above the cap on new budget authority or outlays for that
category for that year.
Budget--The Budget of the United States Government sets forth the
President's comprehensive financial plan for allocating resources and
indicates the President's priorities for the Federal Government.
Budget authority (BA)--Budget authority is the authority becoming
available during the year to enter into obligations that will result in
immediate or future outlays of Government funds. (For a description of
the several forms of budget authority, see Budget Authority and Other
Budgetary Resources earlier in this chapter.).
Budgetary resources--Budgetary resources comprise new budget authority
and unobligated balances of budget authority provided previous years.
Budget totals--The budget includes totals for budget authority,
outlays, and receipts. Some presentations in the budget distinguish on-
budget totals from off-budget totals. On-budget totals reflect the
transactions of all Federal Government entities except those excluded
from the budget totals by law. Off-budget totals reflect the
transactions of Government entities that are excluded from the on-budget
totals by law. Currently excluded are the social security trust funds
(Federal Old-Age and Survivors Insurance and Federal Disability
Insurance Trust Funds) and the Postal Service Fund. The on- and off-
budget totals are combined to derive a total for Federal activity.
Cap--This is the term commonly used to refer to legal limits on the
budget authority and outlays for each fiscal year provided by
discretionary appropriations. A sequester is required if an
appropriation for a category causes a breach in the cap.
Credit program account--A credit program account receives an
appropriation for the subsidy cost of a direct loan or loan guarantee
program and disburses such cost to a financing account for the program
when the direct loan or guaranteed loan is disbursed.
Deficit--A deficit is the amount by which outlays exceed receipts.
Direct loan--A direct loan is a disbursement of funds by the
Government to a non-Federal borrower under a contract that requires the
repayment of such funds with or without interest. The term includes the
purchase of, or participation in, a loan made by another lender. The
term also includes the sale of a Government asset on credit terms of
more than 90 days duration. The term does not include the acquisition of
a federally guaranteed loan in satisfaction of default claims or the
price support loans of the Commodity Credit Corporation. (Cf. loan
guarantee.)
Direct spending--Direct spending, more commonly called mandatory
spending, is a category of outlays from budget authority provided in law
other than appropriations acts, entitlement authority, and the budget
authority for the food stamp program. (Cf. discretionary
appropriations.)
Discretionary appropriations--Discretionary appropriations is a
category of budget authority that comprises budgetary resources (except
those provided to fund direct-spending programs) provided in
appropriations acts. (Cf. direct spending.)
Emergency spending--Emergency spending is spending that the President
and the Congress have designated as an emergency requirement. Such
spending is not subject to the limits on discretionary spending, if it
is discretionary spending, or the pay-as-you-go rules, if it is direct
spending.
Federal funds--Federal funds are the moneys collected and spent by the
Government other than those designated as trust funds. Federal funds
include general, special, public enterprise, and intragovernmental
funds. (Cf. trust funds.)
Financing account--A financing account receives the cost payments from
a credit program account and includes other cash flows to and from the
Government resulting from direct loan obligations or loan guarantee
commitments made on or after October 1, 1991. At least one financing
account is associated with each credit program account. For programs
that make both direct loans and loan guarantees, there are separate
financing accounts for the direct loans and the loan guarantees. The
transactions of the financing accounts are not included in the budget
totals. (Cf. liquidating account.)
Fiscal year--The fiscal year is the Government's accounting period. It
begins on October 1st and ends on September 30th, and is designated by
the calendar year
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in which it ends. Before 1976, the fiscal year began
on July 1 and ended on June 30.
General fund--The general fund consists of accounts for receipts not
earmarked by law for a specific purpose, the proceeds of general
borrowing, and the expenditure of these moneys.
Governmental receipts--These are collections from the public that
result primarily from the exercise of the Government's sovereign or
governmental powers. Governmental receipts consist mostly of individual
and corporation income taxes and social insurance taxes, but also
include excise taxes, compulsory user charges, customs duties, court
fines, certain license fees, and deposits of earnings by the Federal
Reserve System. Gifts and donations are also counted as governmental
receipts. They are compared to outlays in calculating a surplus or
deficit. (Cf. offsetting collections.)
Liquidating account--A liquidating account includes all cash flows to
and from the Government resulting from direct loan obligations and loan
guarantee commitments made prior to October 1, 1991. (Cf. financing
account.)
Loan guarantee--A loan guarantee is any guarantee, insurance, or other
pledge with respect to the payment of all or a part of the principal or
interest on any debt obligation of a non-Federal borrower to a non-
Federal lender. The term does not include the insurance of deposits,
shares, or other withdrawable accounts in financial institutions. (Cf.
direct loan.)
Mandatory spending--See direct spending.
Intragovernmental funds--Intragovernmental funds are accounts for
business-type or market-oriented activities conducted primarily within
and between Government agencies and financed by offsetting collections
that are credited directly to the fund.
Obligations--Obligations are binding agreements that will result in
outlays, immediately or in the future. Budgetary resources must be
available before obligations can be incurred legally.
Off-budget--See budget totals.
Offsetting collections--Offsetting collections are collections from
the public that result from business-type or market-oriented activities
and collections from other Government accounts. These collections are
deducted from gross disbursements in calculating outlays, rather than
counted in Governmental receipt totals. Some offsetting collections are
credited directly to expenditure accounts; others, called offsetting
receipts, are credited to receipt accounts. The authority to spend
offsetting collections is a form of budget authority. (Cf. governmental
receipts.)
Offsetting receipts--See offsetting collections.
On-budget--See budget totals.
Outlays--Outlays are the measure of Government spending. They are
payments to liquidate obligations (other than the repayment of debt),
net of refunds and offsetting collections. Outlays generally are
recorded on a cash basis, but also include cash-equivalent transactions,
the subsidy cost of direct loans and loan guarantees, and interest
accrued on public issues of Treasury debt.
Pay-as-you-go (PAYGO)--This term refers to requirements in law that
result in a sequester if the estimated combined result of legislation
affecting direct spending or receipts is an increase in the deficit for
a fiscal year.
Public enterprise funds--Public enterprise funds are revolving
accounts for business or market-oriented activities conducted primarily
with the public and financed by offsetting collections that are credited
directly to the fund.
Receipts--See governmental receipts and offsetting collections.
Sequester--A sequester is the cancellation of budgetary resources
provided by discretionary appropriations or direct spending legislation,
following various procedures prescribed in law. A sequester may occur in
response to a discretionary appropriation that causes a breach or in
response to increases in the deficit resulting from the combined result
of legislation affecting direct spending or receipts (referred to as a
``pay-as-you-go'' sequester).
Special funds--Special funds are Federal fund accounts for receipts
earmarked for specific purposes and the associated expenditure of those
receipts. (Cf. trust funds.)
Subsidy--This term means the same as cost when it is used in
connection with Federal credit programs.
Surplus--A surplus is the amount by which receipts exceed outlays.
Supplemental appropriation--A supplemental appropriation is one
enacted subsequent to a regular annual appropriations act when the need
for funds is too urgent to be postponed until the next regular annual
appropriations act.
Trust funds--Trust funds are accounts, designated by law as trust
funds, for receipts earmarked for specific purposes and the associated
expenditure of those receipts. (Cf. special funds.)