[Analytical Perspectives]
[Other Technical Presentations]
[20. Relationship of Budget Authority to Outlays]
[From the U.S. Government Publishing Office, www.gpo.gov]


[[Page 321]]

 
            20.  RELATIONSHIP OF BUDGET AUTHORITY TO OUTLAYS

  Budget authority is the authority for Federal agencies to enter into 
obligations that will result in immediate or future outlays. \1\ Budget 
authority is provided in laws, and Federal agencies cannot obligate the 
Government to make outlays until budget authority is provided. New 
budget authority for most Federal programs is provided in 13 annually 
enacted appropriations acts. However, new budget authority for more than 
half of all outlays is made available through permanent appropriations 
under existing laws. This consists mainly of budget authority for trust 
funds, which for most trust funds is automatically appropriated under 
existing law from the available balance of their receipts and equals the 
estimated annual obligations of the funds; interest on the public debt, 
for which budget authority is automatically provided under a permanent 
appropriation enacted in 1847 and equals interest outlays; and the 
authority to spend offsetting collections credited to appropriation or 
fund accounts.
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  \1\ For most budget accounts, the relationship of budget authority, 
obligations, and outlays is shown in a ``program and financing'' 
schedule in the budget Appendix volume.
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  Not all of the new budget authority for 1998 will be obligated or 
spent in 1998: \2\
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  \2\ This subject is also discussed in a separate OMB report, 
``Balances of Budget Authority,'' which can be purchased from the 
National Technical Information Service shortly after the budget is 
transmitted.
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    Budget authority for most trust funds comes from the 
          authority of these funds to spend their receipts (limited, in 
          most cases, by the estimated obligations). Any unexpended 
          balances remain available to these trust funds indefinitely in 
          order to finance benefits and other purposes specified by law.
    Budget authority for most major construction and procurement 
          projects covers the entire cost estimated when the projects 
          are initiated, even though work will take place and outlays 
          will be made over a period extending beyond the year for which 
          the budget authority is enacted.
    Until recent years, budget authority for large portions of 
          the subsidized housing programs was equal to the Government's 
          estimated obligation to pay subsidies under contracts, which 
          extended for periods of up to 40 years; these contracts are 
          now for one year only and the budget authority requirements 
          are therefore now appropriated year-by-year.
    New budget authority for most other long-term contracts 
          covers the estimated maximum obligation of the Government.
    Budget authority for most education and job training 
          activity is appropriated for school or program years that 
          begin in the fourth quarter of the fiscal year. Most of these 
          funds result in outlays in the year after the year of 
          appropriation.
    Government enterprises are occasionally given budget 
          authority for standby reserves that will be used only in 
          special circumstances.
  As a result of these factors, a substantial amount of budget authority 
carries over from one year to the next. Most of this is earmarked for 
specific uses and is not available for new programs. A small part may 
never be obligated or spent, primarily the amount for contingencies that 
do not occur or reserves that never have to be used.
  As shown in the following chart, $353 billion of the outlays in 1998 
(21 percent of the total) will be made from budget authority enacted in 
previous years. At the same time, $375 billion of the new budget 
authority proposed for for 1998 (22 percent of the total amount 
proposed) will not lead to outlays until future years. Although outlays 
in 1998 are, coincidentally, very nearly equal to budget authority for 
that year (98.7 percent), this coincidence only occurs because the 
prior-year authority that will produce 1998 outlays ($353 billion) 
nearly equals the new 1998 authority that will not be spent until future 
years ($375 billion). Thus, in general, the total budget authority for a 
particular year is not directly indicative of that year's outlays, since 
it combines various types of budget authority that have different short-
term and long-term implications for budget obligations and outlays.