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






[[Page 383]]


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

  The unified budget of the Federal Government is divided by law between 
on-budget and off-budget entities. The off-budget Federal entities 
conduct programs that result in the same kind of spending and receipts 
as on-budget entities. Despite their off-budget classification, these 
programs channel economic resources toward particular uses in the same 
way as on-budget spending. They are discussed in the following section 
on off-budget Federal entities.
  The budget does not include 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.

                                      TABLE 20-1.  COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS \1\
                                                                (In billions of dollars)
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                                                                 Receipts                        Outlays                    Surplus or deficit (-)
                                                     ---------------------------------------------------------------------------------------------------
                     Fiscal Year                                             Off-                             Off-                                Off-
                                                       Total   On-budget    budget     Total    On-budget    budget     Total      On-budget     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     1004.1      810.3      193.8     -149.8        -169.3       19.6
1988................................................    909.3      667.8      241.5     1064.5      861.8      202.7     -155.2        -194.0       38.8
1989................................................    991.2      727.5      263.7     1143.7      932.8      210.9     -152.5        -205.2       52.8
 
1990................................................   1032.0      750.3      281.7     1253.2     1028.1      225.1     -221.2        -277.8       56.6
1991................................................   1055.0      761.2      293.9     1324.4     1082.7      241.7     -269.4        -321.6       52.2
1992................................................   1091.3      788.9      302.4     1381.7     1129.3      252.3     -290.4        -340.5       50.1
1993................................................   1154.4      842.5      311.9     1409.5     1142.9      266.6     -255.1        -300.5       45.3
1994................................................   1258.6      923.6      335.0     1461.9     1182.5      279.4     -203.3        -258.9       55.7
 
1995................................................   1351.8     1000.8      351.1     1515.8     1227.2      288.7     -164.0        -226.4       62.4
1996................................................   1453.1     1085.6      367.5     1560.6     1259.7      300.9     -107.5        -174.1       66.6
1997................................................   1579.3     1187.3      392.0     1601.3     1290.7      310.6      -22.0        -103.4       81.4
1998................................................   1721.8     1306.0      415.8     1652.6     1336.0      316.6       69.2         -30.0       99.2
1999................................................   1827.5     1383.0      444.5     1701.9     1381.2      320.8      125.5           1.8      123.7
 
2000................................................   2025.2     1544.6      480.6     1788.8     1458.1      330.8      236.4          86.6      149.8
2001................................................   1991.0     1483.5      507.5     1863.9     1516.9      347.0      127.1         -33.4      160.5
2002 estimate.......................................   1946.1     1428.9      517.2     2052.3     1690.6      361.7     -106.2        -261.7      155.5
2003 estimate.......................................   2048.1     1502.7      545.3     2128.2     1761.5      366.8      -80.2        -258.8      178.6
2004 estimate.......................................   2175.4     1601.9      573.5     2189.1     1810.1      379.0      -13.7        -208.3      194.5
 
2005 estimate.......................................   2338.0     1729.8      608.2     2276.9     1885.5      391.4       61.1        -155.6      216.8
2006 estimate.......................................   2455.3     1821.6      633.7     2369.1     1963.4      405.7       86.2        -141.8      228.0
2007 estimate.......................................   2571.7     1906.4      665.3     2467.7     2045.8      421.9      104.0        -139.4      243.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Off-budget transactions consist of the social security trust funds for all years and the Postal Service fund as of 1989.


[[Page 384]]

                       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 on-budget 
totals by law. When a Federal entity is off-budget, its receipts, 
outlays, and surplus or deficit are not included in the on-budget 
receipts, outlays, and surplus or deficit; and its budget authority is 
not included in the totals of budget authority for the on-budget Federal 
entities. The Budget Enforcement Act of 1990 excludes off-budget 
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. 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 as of 1986 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 in 1985 or earlier.
  The preceding table divides the total Federal Government receipts, 
outlays, and surplus or deficit between the on-budget and off-budget 
amounts. 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.
  The off-budget entities are a significant part of total spending and 
receipts. In 2003, the off-budget receipts are an estimated 27 percent 
of total receipts, and the off-budget outlays are a moderately smaller 
percentage of the total. The unified budget deficit in that year is $80 
billion--a $259 billion on-budget deficit partly offset by a $179 
billion off-budget surplus. The off-budget surplus is virtually the same 
as the Social Security surplus. 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 large amounts throughout the projection period. While the on-budget 
deficit is estimated to be larger than the off-budget surplus in 2002 
and 2003 due to the recession and the response to the terrorist attacks, 
the unified budget for the Government as a whole is estimated to return 
to surplus in 2004 or 2005.

                        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 are 
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 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 financing accounts also include, as an 
offsetting collection, an amount equal to the outlays of the credit 
program accounts for the costs of direct loans and loan guarantees. The 
net transactions of the financing accounts--i.e., the cash transactions 
with the public net of these offsetting collections--are not costs to 
the Government. Therefore, the net transactions of the financing 
accounts 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.
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  \1\ 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 
debt repayment or borrowing requirement as explained in chapter 13 of 
this volume, ``Federal Borrowing and Debt.'' \2\
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  \2\ For more explanation of the budget concepts for direct loans and 
loan guarantees, see the sections on Federal credit and credit financing 
accounts in chapter 25 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 9 of this volume, ``Federal 
Credit and Insurance.''

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  Premiums and discounts on debt buybacks.--The Treasury Department has 
been buying back outstanding bonds as part of its efforts to manage the 
debt held by the public. 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 
25, ``Budget System and Concepts and Glossary.'' Buyback premiums are 
discussed further in chapter 13 of this volume, ``Federal Borrowing and 
Debt,'' and their actual or estimated amounts are shown for 2001 and 
2002.
  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. For similar reasons, 
the budget excludes funds that are owned by Indian tribes and held and 
managed by the Government in a fiduciary capacity on the tribes' behalf. 
Deposit funds as such are further discussed in a section of chapter 25 
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 economic effect, taxation has 
important effects on the allocation of resources among private uses and 
the distribution of income among individuals. These effects depend on 
the composition of the Federal tax system and the rates and other 
structural characteristics of each Federal tax. The latter 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 the latter effects of taxes on resource allocation and income 
distribution, but not all, arise from revenue losses caused by special 
exclusions, exemptions, deductions, and similar provisions that are 
identified by comparing the tax law with a baseline. Revenue losses 
caused by these special provisions are defined as ``tax expenditures'' 
and are discussed in chapter 6 of this volume, ``Tax Expenditures.'' The 
chapter includes tables with estimates for all tax expenditures arising 
from individual and corporation income taxes.
  The specification of a baseline is essential in defining and 
calculating tax expenditures. A ``normal tax'' baseline is currently 
used to identify most of the tax expenditures listed in chapter 6. 
However, this baseline, although partly patterned on a comprehensive 
income tax, is somewhat subjective, which makes it controversial and 
open to question in a number of respects. The Treasury Department has 
begun to consider a number of ways to improve the traditional tax 
expenditure presentation. They plan to focus on three aspects: using a 
comprehensive income tax as a baseline concept, identifying as 
``negative'' tax expenditures those tax receipts that would not be paid 
under the baseline income tax, and using a hypothetical consumption tax 
as an alternative baseline in addition to the comprehensive income tax.

  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 9 of this volume, ``Credit and 
Insurance,'' and their lending and borrowing are summarized in tables 9-
11 and 9-12 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\
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  \3\ The most recent publication was issued by the Regulatory 
Information Service Center in October 2001 and printed in the Federal 
Register of December 3, 2001.
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  The Office of Management and Budget began to publish a report on the 
costs and benefits of Federal regulation in 1997. The latest report, 
Making Sense of Regulation, was released in December 2001 and includes 
in the same document a report on unfunded mandates. \4\ The report 
estimates the total annual costs and benefits of Federal regulatory 
programs, the costs and benefits of recent major rules, and the impact 
of Federal regulation on groups such as state governments and on wages 
and economic growth. It also discusses the impact of the change in 
Administration on the rulemaking process, directions for regulatory 
improvement, and public comments on the draft report. The report on 
regulation is required by statute to be updated annually and delivered 
to Congress with the budget beginning next year.
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  \4\ Office of Information and Regulatory Affairs, Office of Management 
and Budget, Making Sense of Regulation: 2001 Report to Congress on the 
Costs and Benefits of Regulations and Unfunded Mandates on State, Local, 
and Tribal Entities (2001).