[Analytical Perspectives]
[Other Technical Presentations]
[21. Off-Budget Federal Entities]
[From the U.S. Government Publishing Office, www.gpo.gov]


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                    21.  OFF-BUDGET FEDERAL ENTITIES

  The Federal Government has used the unified budget concept as the 
foundation for its budgetary analysis and presentation since the 1969 
budget. This concept was developed by the President's Commission on 
Budget Concepts in 1967. It calls for the budget to include all the 
Federal Government's programs and all the fiscal transactions of these 
programs with the public.
  Since 1971, however, one or more Federal entities each year have been 
off-budget. Off-budget Federal entities are federally owned and 
controlled, but their transactions are excluded from the budget totals 
by law. When a Federal entity is off-budget, its receipts, outlays, and 
deficit or surplus are not included in budget receipts, budget outlays, 
or the budget deficit; and its budget authority is not included in the 
totals of budget authority for the budget. The off-budget Federal 
entities conduct programs of the same type as on-budget entities 
(Federal entities included in the budget totals). Most of the tables in 
the budget document include the on-budget and off-budget amounts in 
combination, or add them together to arrive at the unified or 
consolidated Government totals, in order to show Federal outlays and 
receipts comprehensively.
  The off-budget Federal entities currently consist of the two social 
security trust funds, old-age and survivors insurance and disability 
insurance, and the Postal Service fund. Social security was removed from 
the budget in 1985 and the Postal Service fund in 1989. The Budget 
Enforcement Act of 1990 excludes these entities from the deficit targets 
and other enforcement calculations except for the administrative 
expenses of social security. Other entities were off-budget before 1986 
but were moved onto the budget under subsequent law.

                                                           TABLE 21-1.COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS  \1\                                                          
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                                                                                    Receipts                                   Outlays                           Surplus or deficit (-)         
                            Fiscal Year                            -----------------------------------------------------------------------------------------------------------------------------
                                                                        Total       On-budget    Off-budget       Total       On-budget    Off-budget       Total       On-budget    Off-budget 
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1970..............................................................      192.8         159.3          33.5         195.6         168.0          27.6          -2.8          -8.7           5.9   
1971..............................................................      187.1         151.3          35.8         210.2         177.3          32.8         -23.0         -26.1           3.0   
1972..............................................................      207.3         167.4          39.9         230.7         193.8          36.9         -23.4         -26.4           3.1   
1973..............................................................      230.8         184.7          46.1         245.7         200.1          45.6         -14.9         -15.4           0.5   
1974..............................................................      263.2         209.3          53.9         269.4         217.3          52.1          -6.1          -8.0           1.8   
                                                                                                                                                                                                
1975..............................................................      279.1         216.6          62.5         332.3         271.9          60.4         -53.2         -55.3           2.0   
1976..............................................................      298.1         231.7          66.4         371.8         302.2          69.6         -73.7         -70.5          -3.2   
TQ................................................................       81.2          63.2          18.0          96.0          76.6          19.4         -14.7         -13.3          -1.4   
1977..............................................................      355.6         278.7          76.8         409.2         328.5          80.7         -53.7         -49.8          -3.9   
1978..............................................................      399.6         314.2          85.4         458.7         369.1          89.7         -59.2         -54.9          -4.3   
1979..............................................................      463.3         365.3          98.0         504.0         404.1         100.0         -40.7         -38.7          -2.0   
                                                                                                                                                                                                
1980..............................................................      517.1         403.9         113.2         590.9         476.6         114.3         -73.8         -72.7          -1.1   
1981..............................................................      599.3         469.1         130.2         678.2         543.1         135.2         -79.0         -74.0          -5.0   
1982..............................................................      617.8         474.3         143.5         745.8         594.4         151.4        -128.0        -120.1          -7.9   
1983..............................................................      600.6         453.2         147.3         808.4         661.3         147.1        -207.8        -208.0           0.2   
1984..............................................................      666.5         500.4         166.1         851.9         686.1         165.8        -185.4        -185.7           0.3   
                                                                                                                                                                                                
1985..............................................................      734.1         548.0         186.2         946.5         769.7         176.8        -212.3        -221.7           9.4   
1986..............................................................      769.3         569.0         200.2         990.5         807.0         183.5        -221.2        -238.0          16.7   
1987..............................................................      854.4         641.0         213.4       1,004.2         810.3         193.8        -149.8        -169.3          19.6   
1988..............................................................      909.3         667.8         241.5       1,064.5         861.8         202.7        -155.2        -194.0          38.8   
1989..............................................................      991.2         727.5         263.7       1,143.7         932.8         210.9        -152.5        -205.2          52.8   
                                                                                                                                                                                                
1990..............................................................    1,032.0         750.3         281.7       1,253.2       1,028.1         225.1        -221.2        -277.8          56.6   
1991..............................................................    1,055.0         761.2         293.9       1,324.4       1,082.7         241.7        -269.4        -321.6          52.2   
1992..............................................................    1,091.3         788.9         302.4       1,381.7       1,129.3         252.3        -290.4        -340.5          50.1   
1993..............................................................    1,154.4         842.5         311.9       1,409.4       1,142.8         266.6        -255.0        -300.4          45.3   
1994..............................................................    1,258.6         923.6         335.0       1,461.7       1,182.4         279.4        -203.1        -258.8          55.7   
                                                                                                                                                                                                
1995..............................................................    1,531.8       1,000.8         351.1       1,515.7       1,227.1         288.7        -163.9        -226.3          62.4   
1996..............................................................    1,453.1       1,085.6         367.5       1,560.3       1,259.9         300.5        -107.3        -174.3          67.0   
1997 estimate.....................................................    1,505.4       1,116.5         388.9       1,631.0       1,316.0         315.0        -125.6        -199.5          73.9   
1998 estimate.....................................................    1,566.8       1,161.9         404.9       1,687.5       1,358.9         328.6        -120.6        -197.0          76.4   
1999 estimate.....................................................    1,643.3       1,218.1         425.2       1,760.7       1,422.8         337.9        -117.4        -204.7          87.3   
                                                                                                                                                                                                
2000 estimate.....................................................    1,727.3       1,280.4         446.9       1,814.4       1,463.8         350.7         -87.1        -183.3          96.2   
2001 estimate.....................................................    1,808.3       1,340.7         467.6       1,844.5       1,480.0         364.5         -36.1        -139.2         103.1   
2002 estimate.....................................................    1,896.7       1,406.8         489.9       1,879.7       1,499.4         380.3          17.0         -92.5         109.5   
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\1\ Off-budget transactions consist of the social security trust funds for all years and the Postal Service fund as of 1989.                                                                    

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  The preceding table compares the total Federal Government receipts, 
outlays, and deficit with the amounts that are on-budget and off-budget. 
Social security is classified as off-budget for all years, in order to 
provide consistent comparison over time. The much smaller Postal Service 
transactions are classified as off-budget starting in 1989. Entities 
that were off-budget at one time but are now on-budget are classified as 
on-budget for all years.
  In 1998 the off-budget receipts are an estimated 26 percent of total 
receipts, and the off-budget outlays are an estimated 19 percent of 
total outlays. The 1998 total deficit of $120.6 billion consists of an 
off-budget surplus of $76.4 billion and an on-budget deficit of $197.0 
billion. The off-budget surplus consists almost entirely of social 
security. It was small or even a deficit in the early 1980s but then 
grew substantially to 1990. It has grown again since 1994 and is 
estimated to increase each year throughout the projection period.
  The Federal Credit Reform Act of 1990 refined budget concepts by 
distinguishing between the costs of credit programs, which are budgetary 
in nature, and the other transactions of the credit programs, which are 
not. For 1992 and subsequent years, the costs of direct loans and loan 
guarantees have been calculated as the present value of estimated cash 
outflows from the Government less the present value of estimated cash 
inflows to the Government. These costs are equivalent to the outlays of 
other Federal programs and are included in the budget as outlays of 
credit program accounts when the Federal Government makes a direct loan 
or guarantees a private loan. The cash transactions with the public--the 
disbursement and repayment of loans, the payment of default claims on 
guarantees, the collection of interest and fees, and so forth--are 
recorded in separate financing accounts. The transactions of the 
financing accounts do not represent costs to the Government above and 
beyond those costs that are already included in the credit program 
accounts. Therefore, they are non-budgetary in concept, and the Act 
excludes them from the budget.\1\ Because the financing accounts are 
non-budgetary in concept, they are not classified as off-budget Federal 
entities.
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  \1\ See sec. 505(b).
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  The budget outlays of credit programs thus reflect only the cost of 
Government decisions, and they reflect this cost when the Federal credit 
assistance is provided. This enables the budget to better fulfill its 
purpose of being a financial plan for allocating resources among 
alternative uses: comparing the cost of a program with its benefits, 
comparing the cost of credit programs with the cost of other spending 
programs, and comparing the cost of one type of credit assistance with 
the cost of another type. Since the financing accounts do affect the 
Government's cash position, they add to the Government's borrowing 
requirement or finance part the deficit as explained in Chapter 12 of 
this volume, ``Federal Borrowing and Debt.'' \2\
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  \2\For additional explanation of the budget concepts for direct loans 
and loan guarantees, see Chapter 24 of this volume, ``Budget System and 
Concepts and Glossary,'' the section on Federal credit. The structure of 
credit reform is further explained in Chapter VIII.A of the Budget, 
Fiscal Year 1992, Part Two, pp. 223-26. The implementation of credit 
reform is discussed in Chapter 8, ``Underwriting Federal Credit and 
Insurance,'' Analytical Perspectives, Budget of the United States 
Government, Fiscal Year 1997, pp. 142-44.
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  Insurance programs have economic effects and pose a financial risk to 
the Government, but under present budgetary accounting they do not 
result in budget outlays unless the insured event occurs and the 
Government pays a claim. In this respect their budgetary treatment is 
similar to the treatment of loan guarantees before the Credit Reform 
Act. Insurance programs are discussed in Chapter 8, ``Underwriting 
Federal Credit and Insurance.''
  Other activities related to the Federal Government are outside the 
scope of budget outlays because of their inherent nature. The 
Government-sponsored enterprises, which are mostly financial 
intermediaries, are excluded from the budget on the grounds that they 
are privately owned and controlled. However, because of their close 
relationship to the Federal Government, detailed estimates of their 
activities are reported in a separate chapter of the budget appendix and 
an assessment of the risk they pose to the Government is presented in 
Chapter 8.
  Taxation provides the Government with income, which is included in the 
budget as ``receipts'' and which withdraws purchasing power from the 
private sector in order to finance Government expenditure. In addition 
to this primary effect, taxation has important effects on the allocation 
of resources among private uses and the distribution of income among 
individuals. These effects are caused by the choice of taxes and by the 
rates and other structural characteristics of each tax. These latter 
effects of taxation on resource allocation and income distribution are 
analogous to the effects of outlays, but they are not recorded as 
outlays nor are they measured by receipts. Some of these effects arise 
from revenue losses caused by special exclusions, exemptions, 
deductions, and other special provisions. Such revenue losses have been 
defined as ``tax expenditures'' and are discussed in Chapter 5, ``Tax 
Expenditures.'' Tax expenditures are also discussed in the individual 
chapters of Section VI of the Budget, ``What the Government Does,'' in 
conjunction with the outlays that serve the same function.
  Some types of regulation have economic effects that are similar to 
budget outlays by requiring the private sector to make expenditures for 
specified purposes such as safety and pollution control. The Office of 
Management and Budget has recently published a report to the President, 
More Benefits, Fewer Burdens, that documents efforts in this 
Administration since the President issued Executive Order No. 12866 to 
develop better new regulations, to change the face of existing 
regulations, and to change the culture of the regulatory system.\3\ The 
regulatory planning process is described annually in The Regulatory Plan 
and the Unified Agenda of Federal Regulatory and Deregulatory 
Actions.\4\
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  \3\ Office of Information and Regulatory Affairs, Office of Management 
and Budget, More Benefits, Fewer Burdens: Creating a Regulatory Systems 
that Works for the American People (December 1996).
  \4\ The most recent publication was issued by the Regulatory 
Information Service Center in October 1996 (and printed in the Federal 
Register of November 29, 1996).