    [Analytical Perspectives]
    [Other Technical Presentations]
    [18. Relationship of Budget Authority to Outlays]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                 18. RELATIONSHIP OF BUDGET AUTHORITY TO OUTLAYS

       Budget authority is the authority provided by law to incur financial
    obligations that will result in outlays. \1\ Budget authority must be
    provided in laws, in accordance with Article I, Section 9, of the
    Constitution: ``No money shall be drawn from the Treasury, but in
    Consequence of Appropriations made by Law...'' Hence, Federal agencies
    cannot obligate the Government to make outlays until budget authority
    has been provided to them by appropriation.
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      \1\ The relationship of budget authority, obligations, and outlays is
    discussed generally in Chapter 23 of this volume, ``Budget System and
    Concepts and Glossary;'' for most individual budget accounts, this
    relationship is traced in a ``program and financing'' schedule [table]
    in the budget Appendix volume.
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       New budget authority for most Federal programs is provided in 13
    annually enacted appropriations acts. \2\ However, new budget authority
    for more than half of all outlays is made available through permanent
    appropriations under existing laws. This consists mainly of 1) budget
    authority for trust funds, which for most trust funds is automatically
    appropriated under existing law from the available balance of their
    receipts and equals the estimated annual obligations of the funds; 2)
    interest on the public debt, for which budget authority is automatically
    provided under a permanent appropriation enacted in 1847 and equals
    interest outlays; and 3) the authority to spend offsetting collections
    credited to appropriation or fund accounts.
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      \2\ Some or all of the 13 ``regular'' appropriation bills have
    sometimes been consolidated into a few acts or a single act.
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       Not all of the new budget authority for 2002 will be obligated or
    spent in 2002: \3\
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      \3\ This subject is also discussed in a separate OMB report,
    ``Balances of Budget Authority,'' which can be purchased from the
    National Technical Information Service shortly after the budget is
    transmitted and is made available on the internet, with the other budget
    documents.
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         Budget authority for most trust funds comes from the
              authority of these funds to spend their receipts (limited, in
              most cases, by the estimated obligations). Any unexpended
              balances remain available to these trust funds indefinitely in
              order to finance benefits and for other purposes specified by
              law.
         Budget authority for most major construction and
              procurement projects covers the entire cost estimated when the
              projects are initiated, even though work will take place and
              outlays will be made over a period extending beyond the year
              for which the budget authority is enacted.
         Until the 1998 budget, budget authority for large portions
              of the subsidized housing programs was equal to the
              Government's estimated obligation to pay subsidies under
              contracts, which extended for periods of up to 40 years. These
              contracts are now for one year only and the budget authority
              requirements are therefore now appropriated year-by-year.
         New budget authority for most other long-term contracts
              covers the estimated maximum obligation of the Government.
         Budget authority for most education and job training
              activity is appropriated for school or program years that
              begin in the fourth quarter of the fiscal year. Most of these
              funds result in outlays in the year after the year of
              appropriation.
         Government enterprises are occasionally given budget
              authority for standby reserves that will be used only in
              special circumstances.
       As a result of these factors, a substantial amount of budget
    authority carries over from one year to the next. Most of this is
    earmarked for specific uses and is not available for new programs. A
    small part may never be obligated or spent, primarily the amount for
    contingencies that do not occur or reserves that never have to be used.
    Also, some budget authority results in an exchange of assets for which
    no corresponding outlays are scored; budget authority backing
    International Monetary Fund arrangements to resolve international
    monetary crises is an example.
       As shown in the following chart, $363 billion of the outlays in 2002
    (19 percent of the total) will be made from budget authority enacted in
    previous years. At the same time, $407 billion of the new budget
    authority proposed for 2002 (20 percent of the total amount proposed)
    will not lead to outlays until future years. Although outlays in 2002
    are, coincidentally, very nearly equal to budget authority for that year
    (97.8 percent), this coincidence only occurs because the prior-year
    authority that will produce 2002 outlays ($363 billion) nearly equals
    the new 2002 authority that will not be spent until future years ($407
    billion). Thus, in general, the total budget authority for a particular
    year is not directly indicative of that year's outlays, since it
    combines various types of budget authority that have different short-
    term and long-term implications for budget obligations and outlays.

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