[Analytical Perspectives]
[Other Technical Presentations]
[19. Off-Budget Federal Entities and Non-Budgetary Activities]
[From the U.S. Government Publishing Office, www.gpo.gov]
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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 (-)
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Fiscal Year Medicare
Total On-budget Off-budget Total On-budget Off-budget Total On-budget Off-budget Solvency
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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).