[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 AND NON-BUDGETARY ACTIVITIES

  The budget does not include some activities of the Federal Government 
that result in spending similar to budget outlays. These activities 
nevertheless channel economic resources toward particular uses in ways 
that are similar or analogous to budget spending. The budget also does 
not include some activities that are related to the Government but are 
non-budgetary by their inherent nature, either because they are not 
activities of the Government itself or because the transactions are not 
costs to the Government. Nevertheless, many of these activities are 
discussed in the budget documents, and in some cases the amounts of 
spending are presented together with budget data.

  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.
  Every year since 1971, however, one or more Federal entities 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 or surplus; 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 (i.e., Federal entities included in the budget totals). Most of 
the tables in the budget 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

TABLE 21-1.  COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS  \1\                                                         
------------------------------------------------------------------------------                                                                                    Receipts                                   Outlays                           Surplus or deficit (-)         
                            Fiscal Year                            ------------------------------------------------------------------------------                                                                        Total       On-budget    Off-budget       Total       On-budget    Off-budget       Total       On-budget    Off-budget 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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         547.9         186.2         946.4         769.6         176.8        -212.3        -221.7           9.4   
1986..............................................................      769.2         569.0         200.2         990.5         807.0         183.5        -221.2        -238.0          16.7   
1987..............................................................      854.4         641.0         213.4       1,004.1         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..............................................................    1,351.8       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       1,560.5       1,259.6         300.9        -107.4        -174.0          66.6   
1997..............................................................    1,579.3       1,187.3         392.0       1,601.2       1,290.6         310.6         -21.9        -103.3          81.4   
1998 estimate.....................................................    1,657.9       1,241.9         416.0       1,667.8       1,348.1         319.7         -10.0        -106.3          96.3   
1999 estimate.....................................................    1,742.7       1,308.6         434.1       1,733.2       1,404.4         328.9           9.5         -95.7         105.3   
                                                                                                                                                                                                
2000 estimate.....................................................    1,793.6       1,339.7         453.9       1,785.0       1,444.6         340.4           8.5        -104.9         113.5   
2001 estimate.....................................................    1,862.6       1,389.9         472.7       1,834.4       1,484.0         350.4          28.2         -94.1         122.3   
2002 estimate.....................................................    1,949.3       1,455.0         494.3       1,859.6       1,499.6         360.0          89.7         -44.6         134.4   
2003 estimate.....................................................    2,028.2       1,511.5         516.6       1,945.4       1,574.3         371.1          82.8         -62.8         145.5   
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\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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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 at different times before 1986 but were 
moved onto the budget by subsequent laws.
  The preceding table compares the total Federal Government receipts, 
outlays, and deficit or surplus 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 1999 the off-budget receipts are an estimated 25 percent of total 
receipts, and the off-budget outlays are an estimated 19 percent of 
total outlays. The 1999 total surplus of $9.5 billion consists of an 
off-budget surplus of $105.3 billion and an on-budget deficit of $95.7 
billion. The off-budget surplus consists almost entirely of social 
security. It was small or even a deficit in the 1970s and 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.

  Federal credit: budgetary and non-budgetary transactions.--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 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 are not 
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 of the deficit as explained in chapter 13 of 
this volume, ``Federal Borrowing and Debt.'' \2\
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  \2\ For more explanation of the budget concepts for direct loans and 
loan guarantees, see the section on Federal credit in chapter 24 of this 
volume, ``Budget System and Concepts and Glossary.'' 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 through 1995 is reviewed in chapter 8, ``Underwriting Federal 
Credit and Insurance,'' Analytical Perspectives, Budget of the United 
States Government, Fiscal Year 1997, pp. 142-44. Recent simplifications 
enacted by the Balanced Budget Act of 1997 or provided by OMB guidance 
are explained briefly in Part I of chapter 8 of this volume, 
``Underwriting Federal Credit and Insurance.''
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  Federal insurance.--Insurance programs have economic effects and pose 
financial risks to the Government, but under present budgetary 
accounting they do not result in budget outlays until an 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.''
  Deposit funds.--Deposit funds are non-budgetary accounts that record 
amounts held by the Government temporarily until ownership is determined 
(such as earnest money paid by bidders for mineral leases) or held by 
the Government as an agent for others (such as State income taxes 
withheld from Federal employees' salaries). The largest deposit fund is 
the Thrift Savings Fund, which holds stocks and bonds for Federal 
employees who participate in the Thrift Savings Plan, a defined 
contribution retirement plan. Because these assets are the property of 
the employees and are held by the Government in a fiduciary capacity, 
the transactions of the fund are not transactions of the Government 
itself and therefore are inherently non-budgetary. The administrative 
costs and the transactions of budgetary accounts with the fund are 
included in the budget. Deposit funds are further discussed in a section 
of chapter 24, ``Budget Systems and Concepts and Glossary.''
  Government-sponsored enterprises.--The Federal Government has 
established a number of Government-sponsored enterprises, such as the 
Federal National Mortgage Association, to provide financial 
intermediation for specified purposes. They 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, ``Underwriting Federal Credit and 
Insurance.''

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  Taxation and tax expenditures.--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 used to collect receipts 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 are defined as ``tax 
expenditures'' and are discussed in chapter 5 of this volume, ``Tax 
Expenditures.'' Tax expenditures are also discussed in the individual 
chapters of Section VI of the Budget, ``Investing in the Common Good: 
What the Federal Government Does,'' in conjunction with the outlays that 
serve the same function.
  Regulation.--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 regulatory planning process is described annually in The 
Regulatory Plan and the Unified Agenda of Federal Regulatory and 
Deregulatory Actions.\3\ In 1996 the Office of Management and Budget 
published a report, More Benefits, Fewer Burdens, that documented 
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.\4\
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  \3\ The most recent publication was issued by the Regulatory 
Information Service Center in October 1997 (and printed in the Federal 
Register of October 29, 1997).
  \4\ 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).
---------------------------------------------------------------------------
  Last fall the Office of Management and Budget published a report on 
the costs and benefits of Federal regulation that discussed the 
development of the regulatory system and regulatory analysis, estimated 
the total annual costs and benefits of Federal regulatory programs, 
estimated the costs and benefits of recent major rules, and recommended 
ways to improve regulatory programs.\5\ Section VI of the Budget, 
``Investing in the Common Good: What the Federal Government Does,'' has 
a separate chapter that summarizes this report's estimates and 
conclusions on the costs and benefits of Federal regulation. Information 
on regulation is also included in the other chapters of Section VI in 
conjunction with the outlays and tax expenditures that serve the same 
function.
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  \5\ Office of Information and Regulatory Affairs, Office of Management 
and Budget, Report to Congress on the Costs and Benefits of Federal 
Regulation (September 30, 1997).