[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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