[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 375]]

 
      19.  OFF-BUDGET FEDERAL ENTITIES AND NON-BUDGETARY ACTIVITIES

   The budget does not include some activities of the Federal Government 
that result in the same kind of spending as budget outlays. These 
activities nevertheless channel economic resources toward particular 
uses in the same way as budget spending. They are discussed in the 
following section on off-budget Federal entities.
  The budget also does not include some activities that are related to 
the Federal Government but that are non-budgetary by their inherent 
nature. In some cases this is because they are not activities of the 
Government itself, and in other cases this is 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. They are discussed in 
the section of this chapter on non-budgetary activities.

                       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, at least one Federal entity has 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 Budget 
Enforcement Act of 1990 excludes these entities from general enforcement 
provisions (except for the administrative expenses of Social Security), 
although it has special enforcement provisions for Social Security.
   The off-budget Federal entities conduct programs of the same type as 
the 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, 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. A number of 
other entities were off-budget at different times before 1986 but were 
moved onto the budget by law as of 1986 or earlier.
   The following table divides the total Federal Government receipts, 
outlays, and surplus or deficit for years before 2001 between the on-
budget and off-budget amounts. Beginning in 2001, it also shows the 
effect of the Administration's proposal to reserve part of the on-budget 
surplus for Medicare solvency and for catastrophic prescription drug 
coverage. These amounts will not be available for spending under the 
budget resolution or on the PAYGO scorecard. They will be available only 
for debt reduction, pending their use for Medicare or the catastrophic 
prescription drug program. The difference between on-budget receipts and 
on-budget outlays in this table is therefore divided between the on-
budget surplus and the Medicare Solvency Debt Reduction Reserve.\1\
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  \1\ This proposal is part of a broader budget framework proposal 
discussed in chapter 13, ``Preview Report.''
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   Within this table 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.

                            TABLE 19-1.  COMPARISON OF TOTAL, ON-BUDGET, OFF-BUDGET, AND MEDICARE SOLVENCY TRANSACTIONS  \1\
                                                                (In billions of dollars)
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                                               Receipts                             Outlays                           Surplus or deficit (-)
                                 -----------------------------------------------------------------------------------------------------------------------
           Fiscal Year                                                                                                                         Medicare
                                     Total     On-budget  Off-budget     Total     On-budget  Off-budget     Total     On-budget  Off-budget   Solvency
--------------------------------------------------------------------------------------------------------------------------------------------------------
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      -185.6         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     1,409.5     1,142.9       266.6      -255.1      -300.5        45.3   ..........
1994............................    1,258.6       923.6       335.0     1,461.9     1,182.5       279.4      -203.3      -258.9        55.7   ..........

1995............................    1,351.8     1,000.8       351.1     1,515.8     1,227.2       288.7      -164.0      -226.4        62.4   ..........
1996............................    1,453.1     1,085.6       367.5     1,560.6     1,259.7       300.9      -107.5      -174.1        66.6   ..........
1997............................    1,579.3     1,187.3       392.0     1,601.3     1,290.7       310.6       -22.0      -103.4        81.4   ..........
1998............................    1,721.8     1,306.0       415.8     1,652.6     1,336.0       316.6        69.2       -30.0        99.2   ..........
1999............................    1,827.5     1,383.0       444.5     1,703.0     1,382.3       320.8       124.4         0.7       123.7   ..........

2000 estimate...................    1,956.3     1,479.5       476.8     1,789.6     1,460.6       328.9       166.7        18.9       147.8   ..........
2001 estimate...................    2,019.0     1,519.1       499.9     1,835.0     1,494.8       340.3       184.0         9.0       159.6        15.4
2002 estimate...................    2,081.2     1,559.0       522.2     1,895.3     1,545.2       350.2       185.9         1.2       172.1        12.6
2003 estimate...................    2,147.5     1,603.2       544.2     1,962.9     1,602.9       359.9       184.6         0.3       184.3   ..........
2004 estimate...................    2,236.1     1,669.4       566.7     2,041.1     1,669.1       372.0       195.0         0.3       194.6   ..........

2005 estimate...................    2,340.9     1,742.3       598.6     2,125.5     1,740.5       384.9       215.4         1.8       213.7   ..........
2006 estimate...................    2,440.3     1,817.3       623.0     2,184.7     1,785.9       398.8       255.6         1.4       224.2        30.0
2007 estimate...................    2,558.8     1,906.3       652.5     2,267.0     1,853.2       413.8       291.8         1.1       238.7        52.0
2008 estimate...................    2,676.0     1,995.6       680.4     2,361.9     1,931.7       430.2       314.1         0.1       250.2        63.8
2009 estimate...................    2,785.2     2,076.7       708.6     2,456.1     2,007.1       449.0       329.1         0.1       259.6        69.4
2010 estimate...................    2,916.7     2,173.8       742.9     2,553.4     2,082.7       470.6       363.3         0.2       272.3        90.8
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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. The Medicare Solvency Debt
  Reduction Reserve consists of Medicare solvency transfers and reserve for catastrophic prescription drug coverage.

   In 2001, 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 off-budget surplus of $160 billion accounts for most 
of the unified budget surplus of $184 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 
has grown by very large amounts and is estimated to increase each year 
throughout the projection period. By 2010 the off-budget surplus of $272 
billion is still the major part of the unified budget surplus of $363 
billion.

                         Non-Budgetary Activities

  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

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loan or guarantees a private loan. The complete 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 except for 
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. \2\ Because the financing accounts are non-budgetary in 
concept, they are not classified as off-budget Federal entities.
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  \2\ See sec. 505(b).
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   The budget outlays of credit programs thus reflect only the cost of 
Government credit decisions, and they reflect this cost when the Federal 
credit assistance is provided. This enables the budget to fulfill better 
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. Because 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.'' \3\
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  \3\ 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. 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.
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   Credit programs are discussed in chapter 8 of this volume, ``Federal 
Credit and Insurance.''

   Premiums and discounts on debt buybacks.--The Treasury Department 
plans to buy back outstanding

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notes and bonds as part of its efforts to manage the reduction of the 
publicly held debt. The premiums and discounts on debt buybacks will be 
recorded outside the budget totals as a ``means of financing other than 
borrowing from the public.'' This is discussed in a section of chapter 
24, ``Budget System and Concepts and Glossary.''
   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 excludes funds that 
are owned by Indian tribes and held and managed by the Government in a 
fiduciary capacity on the tribes' behalf. The Indian tribal funds were 
included in the budget from the adoption of the unified budget in 1969 
through fiscal year 1999 under the generic title, ``tribal trust 
funds.'' Most of these funds, however, are owned by Indian tribes and 
held and managed by the Government in a fiduciary capacity on the 
tribes' behalf. Therefore, the transactions of these funds are not 
transactions of the Government itself and are non-budgetary in concept, 
like the transactions of the Thrift Savings Fund. The Indian tribal 
funds with these characteristics have been reclassified as deposit 
funds. Reclassification does not affect the ownership of the 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 24, ``Budget System and Concepts and Glossary.''

   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 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 composition of the Federal tax system, and by the rates and other 
structural characteristics of each Federal tax. These last 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 last effects, but not all, arise from revenue losses 
caused by special exclusions, exemptions, deductions, and similar 
provisions as identified by comparison of the tax law with a baseline. 
Revenue losses caused by these special provisions 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 V of the Budget, ``Improving Government 
Performance,'' in conjunction with the outlays that serve the same major 
purposes.

   Government-sponsored enterprises.--The Federal Government has 
established a number of Government-sponsored enterprises, such as the 
Federal National Mortgage Association and the Farm Credit Banks, to 
provide financial intermediation for specified public purposes. They are 
excluded from the budget because they are privately owned and 
controlled. However, primarily because they were established by the 
Federal Government for public-policy purposes, estimates of their 
activities are reported in a separate chapter of the budget Appendix, 
their activities are analyzed in chapter 8 of this volume, ``Credit and 
Insurance,'' and their lending and borrowing are summarized in tables 8-
11 and 8-12 of that chapter.
   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. \4\ 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. \5\
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  \4\ The most recent publication was issued by the Regulatory 
Information Service Center in October 1999 (and printed in the Federal 
Register of November 22, 1999).
  \5\ 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).
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   In the fall of 1997 the Office of Management and Budget published a 
report on the costs and benefits of Federal regulation. That report 
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. \6\ It was 
updated with new data and information last year \7\ and will be updated 
again in a report being published early this year.
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  \6\ 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).
  \7\ Office of Information and Regulatory Affairs, Office of Management 
and Budget, Report to Congress on the Costs and Benefits of Federal 
Regulation (1998).
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