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

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

      The budget does not include some programs of the Federal Government
    that result in the same kind of spending as budget outlays. Despite
    their exclusion from the budget, these programs 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 in conjunction 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 documents include the on-
    budget and off-budget amounts both separately and in combination, or add
    them together, in order to arrive at the unified budget totals that 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 between the on-budget and off-budget
    amounts. The column for the on-budget surplus is labeled ``on-budget/
    contingencies,'' since for future years the on-budget estimates include
    a reserve for contingencies as well as estimated receipts and outlays.
    If future decisions are made to use the contingency reserve for higher
    spending or lower tax receipts, the future on-budget surplus would be
    correspondingly reduced.
      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.
      In 2002, the off-budget receipts are an estimated 24 percent of total
    receipts, and the off-budget outlays are an estimated 18 percent of
    total outlays. The off-budget surplus consists almost entirely of Social
    Security. Social Security had a deficit in the latter 1970s and early
    1980s, but since the middle 1980s it has had a large and growing
    surplus. This surplus is expected to continue to grow by very large
    amounts throughout the projection period. The on-budget accounts had
    deficits for many years until 1999, when they were essentially balanced,
    and 2000, when they had an $87 billion surplus. The on-budget accounts
    (including the contingency reserve) are estimated to have significant
    surpluses throughout the projection period, though much less than Social
    Security. The off-budget surplus of $172 billion in 2002 accounts for
    three-quarters of the unified budget surplus of $231 billion, and
    throughout the projection period the off-budget surplus remains around
    three-quarters to two-thirds of the unified budget surplus (including
    the contingency reserve).

                             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

    [[Page 332]]

                                          TABLE 19-1.  COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS \1\
                                                                    (In billions of dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Receipts                        Outlays                       Surplus or deficit (-)
                                                    --------------------------------------------------------------------------------------------------------
                      Fiscal Year                                           Off-                             Off-                   On-budget/        Off-
                                                      Total   On-budget    budget     Total    On-budget    budget     Total    Contingencies \2\    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    1,409.5    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...........................................  2,025.2    1,544.6      480.6    1,788.8    1,458.1      330.8      236.4             86.6        149.8
    2001 estimate..................................  2,136.9    1,633.1      503.9    1,856.2    1,508.5      347.7      280.7            124.6        156.1
    2002 estimate..................................  2,191.7    1,660.8      530.9    1,960.6    1,601.4      359.2      231.2             59.4        171.8
    2003 estimate..................................  2,258.2    1,697.4      560.8    2,016.2    1,648.7      367.6      242.0             48.8        193.2
    2004 estimate..................................  2,338.8    1,748.5      590.3    2,076.7    1,697.0      379.7      262.1             51.6        210.5

    2005 estimate..................................  2,437.8    1,808.8      629.0    2,168.7    1,776.4      392.4      269.0             32.4        236.6
    2006 estimate..................................  2,528.7    1,870.2      658.5    2,223.9    1,817.8      406.1      304.8             52.4        252.4
    2007 estimate..................................  2,643.3    1,950.0      693.3    2,303.4    1,880.5      422.9      339.9             69.5        270.4
    2008 estimate..................................  2,770.6    2,044.4      726.2    2,397.9    1,959.2      438.7      372.7             85.2        287.5
    2009 estimate..................................  2,909.9    2,148.9      761.0    2,490.3    2,032.2      458.1      419.6            116.7        302.9

    2010 estimate..................................  3,058.4    2,254.9      803.5    2,593.5    2,113.2      480.3      465.0            141.7        323.3
    2011 estimate..................................  3,232.6    2,386.3      846.3    2,706.3    2,202.7      503.7      526.2            183.6        342.6
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ Off-budget transactions consist of the social security trust funds for all years and the Postal Service fund as of 1989.

    \2\ The actual amount of annual debt retirement will vary depending on the availability of eligible redeemable debt, and the use, if any, of the
      contingency reserve.

    accounts when the Federal Government makes a direct 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. \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 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
    debt repayment or borrowing requirement 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 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.

    ---------------------------------------------------------------------------

    [[Page 333]]

      Credit programs are discussed in chapter 8 of this volume, ``Federal
    Credit and Insurance.''

       Premiums and discounts on debt buybacks.--The Treasury Department is
    buying back outstanding bonds as part of its efforts to manage the
    reduction of the publicly held debt. The premiums on debt buybacks are
    recorded outside the budget totals as a ``financing other than the
    change in debt held by the public.'' The concept is explained in a
    section of chapter 24, ``Budget System and Concepts and Glossary.''
    Buyback premiums are discussed further in chapter 12 of this volume,
    ``Federal Borrowing and Debt,'' and their actual or estimated amounts
    are shown for 2000 and 2001.
       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 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 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. 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 law. The change in classification is discussed in chapter
    15, ``Trust Funds and Federal Funds,'' in Analytical Perspectives for
    the fiscal year 2000 budget. Deposit funds as such are further discussed
    in a section of chapter 24 of this volume, ``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 III of the Budget, ``Creating a Better Government,''
    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. \3\
    ---------------------------------------------------------------------------
      \3\ The most recent publication was issued by the Regulatory
    Information Service Center in October 2000 and printed in the Federal
    Register of November 30, 2000.
    ---------------------------------------------------------------------------
      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. It has been
    updated twice, the last time in 2000, \4\ and it is required by statute
    to be issued annually starting in 2002.
    ---------------------------------------------------------------------------
      \4\ Office of Information and Regulatory Affairs, Office of Management
    and Budget, Report to Congress on the Costs and Benefits of Federal
    Regulation (2000).