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



[[Page 365]]

 
      19.  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 
involved 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 
surplus or deficit are not included in budget receipts, budget outlays, 
or the budget surplus or 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 (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.

                                                          TABLE 19-1.  COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS  \1\
                                                                                    (In billions of dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    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..............................................................    1,721.8       1,306.0         415.8       1,652.6       1,335.9         316.6          69.2         -29.9          99.2
1999 estimate.....................................................    1,806.3       1,362.3         444.0       1,727.1       1,404.0         323.1          79.3         -41.7         121.0
 
2000 estimate.....................................................    1,883.0       1,417.7         465.3       1,765.7       1,429.8         335.9         117.3         -12.2         129.5
2001 estimate.....................................................    1,933.3       1,450.7         482.6       1,799.2       1,450.5         348.7         134.1           0.2         133.9
2002 estimate.....................................................    2,007.1       1,505.3         501.8       1,820.3       1,460.9         359.5         186.7          44.4         142.3
2003 estimate.....................................................    2,075.0       1,552.8         522.2       1,893.0       1,521.4         371.6         182.0          31.4         150.7
2004 estimate.....................................................    2,165.5       1,622.6         542.9       1,957.9       1,572.8         385.2         207.6          49.8         157.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Off-budget transactions consist of the social security trust funds for all years and the Postal Service fund as of 1989.


[[Page 366]]

   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. A number of other entities were off-budget 
for different periods before 1986 but were moved onto the budget by 
subsequent law.
   The preceding table compares the total Federal Government receipts, 
outlays, and surplus or deficit with the amounts that are on-budget and 
off-budget. The estimates do not reflect the President's proposed reform 
of the social security system. 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 2000 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 2000 total surplus of $117 billion consists of an 
off-budget surplus of $129 billion and an on-budget deficit of $12 
billion. The off-budget surplus consists almost entirely of social 
security. Social security had a small surplus or even a deficit in the 
1970s and early 1980s, but the surplus then grew substantially to 1989. 
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.
---------------------------------------------------------------------------
  \1\ See sec. 505(b).
---------------------------------------------------------------------------
   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 change the amount of the Government's 
borrowing requirement or debt repayment as explained in chapter 12 of 
this volume, ``Federal Borrowing and Debt.'' \2\
---------------------------------------------------------------------------
  \2\ For more explanation of the budget concepts for direct loans and 
loan guarantees, see the section on Federal credit in chapter 23 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. Refinements and 
simplifications enacted by the Balanced Budget Act of 1997 or provided 
by later OMB guidance are explained briefly in chapter 8, ``Underwriting 
Federal Credit and Insurance,'' Analytical Perspectives, Budget of the 
United States Government, Fiscal Year 1999, p. 170.
---------------------------------------------------------------------------
   Credit programs are discussed in chapter 8 of this volume, 
``Underwriting Federal Credit and Insurance.''

   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 and not yet paid to the 
States). 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 non-budgetary in 
concept. The administrative costs and the transactions of budgetary 
accounts with the fund are included in the budget.
   Beginning in fiscal year 2000, the Federal budget will reclassify as 
deposit funds those trust funds that are owned by Indian tribes and held 
and managed in a fiduciary capacity by the Government on the tribes' 
behalf. These tribal trust funds, together with other trust funds, have 
been included in the budget totals since the unified budget concept was 
adopted for the

[[Page 367]]

1969 budget. However, most tribal trust funds are owned by the Indian 
tribes and therefore, like the Thrift Savings Fund, are non-budgetary in 
concept. Reclassification will not affect the ownership of the trust 
fund assets, the legal obligations of the Secretary of the Interior, or 
the Federal management of the funds as prescribed by current law. The 
change in classification is discussed in chapter 15, ``Trust Funds and 
Federal Funds.'' Deposit funds as such are further discussed in a 
section of chapter 23, ``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 is presented in chapter 8 of this 
volume, ``Underwriting Federal Credit and Insurance.''
   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: 
Program Performance in Federal Functions,'' in conjunction with the 
outlays and regulations that serve the same major purposes.
   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 by this Administration to develop better new regulations, to 
change the face of existing regulations, and to change the culture of 
the regulatory system. \4\
---------------------------------------------------------------------------
  \3\ The most recent publication was issued by the Regulatory 
Information Service Center in October 1998 (and printed in the Federal 
Register of November 9, 1998).
  \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).
---------------------------------------------------------------------------
   In the fall of 1997 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\ This report has 
recently been updated with new data and information. \6\ Section VI of 
the Budget, ``Investing in the Common Good: Program Performance in 
Federal Functions,'' has a separate chapter that summarizes the new 
estimates and conclusions in this revised report 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 major purposes.
---------------------------------------------------------------------------
  \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).
  \6\ Office of Information and Regulatory Affairs, Office of Management 
and Budget, ``Draft Report to Congress on Costs and Benefits of Federal 
Regulation,'' Federal Register, August 17, 1998.