[Analytical Perspectives]
[Budget System and Concepts and Glossary]
[25. Budget System and Concepts and Glossary]
[From the U.S. Government Publishing Office, www.gpo.gov]
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BUDGET SYSTEM AND CONCEPTS AND GLOSSARY
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25. BUDGET SYSTEM AND CONCEPTS AND GLOSSARY
The budget system of the United States Government provides the means
for the President and Congress to decide how much money to spend, what
to spend it on, and how to raise the money they have decided to spend.
Through the budget system, they determine the allocation of resources
among the agencies of the Federal Government. The budget system focuses
primarily on dollars, but it also allocates other resources, such as
Federal employment. The decisions made in the budget process affect the
nation as a whole, State and local governments, and individual
Americans. Many budget decisions have worldwide significance. The
Congress and the President enact budget decisions into law. The budget
system ensures that these laws are carried out.
This chapter provides an overview of the budget system and explains
some of the more important budget concepts. It includes summary dollar
amounts to illustrate major concepts. Other chapters of the budget
documents discuss these amounts, and more detailed amounts, in greater
depth. A glossary of budget terms appears at the end of the chapter.
Various laws, enacted to carry out requirements of the Constitution,
govern the budget system. The chapter refers to the principal ones by
title throughout the text and gives complete citations in the section
just preceding the glossary.
THE BUDGET PROCESS
The budget process has three main phases, each of which is
interrelated with the others:
(1) Formulation of the President's budget;
(2) Congressional action on the budget; and
(3) Budget execution.
Formulation of the President's Budget
The Budget of the United States Government consists of several volumes
that set forth the President's financial proposal with recommended
priorities for the allocation of resources by the Government. The
primary focus of the budget is on the budget year the next fiscal year
for which Congress needs to make appropriations, in this case 2003.
(Fiscal year 2003 will begin on October 1, 2002 and end on September 30,
2003.) The budget also covers at least the four years following the
budget year in order to reflect the effect of budget decisions over the
longer term. It includes the funding levels provided for the current
year, in this case 2002, so that the reader can compare the budget
estimates to the most recently enacted levels, and it includes data on
the most recently completed fiscal year, in this case 2001, so that the
reader can compare budget estimates to actual accounting data.
The President begins the process of formulating the budget by
establishing general budget and fiscal policy guidelines, usually by the
spring of each year, at least nine months before the President transmits
the budget to Congress and at least 18 months before the fiscal year
begins. (See the Budget Calendar below.) Based on these guidelines, the
Office of Management and Budget (OMB) works with the Federal agencies to
establish specific policy directions and planning levels for the
agencies, both for the budget year and for at least the following four
years to guide the preparation of their budget requests.
During the formulation of the budget, the President, the Director of
OMB, and other officials in the Executive Office of the President
continually exchange information, proposals, and evaluations bearing on
policy decisions with the Secretaries of the departments and the heads
of the other Government agencies. Decisions reflected in previously
enacted budgets, including the one for the fiscal year in progress, and
reactions to the last proposed budget (which Congress is considering
when the process of preparing the upcoming budget begins) influence
decisions concerning the upcoming budget. So do projections of the
economic outlook, prepared jointly by the Council of Economic Advisers,
OMB, and the Treasury Department.
In early fall, agencies submit their budget requests to OMB, where
analysts review them and identify issues that OMB officials need to
discuss with the agencies. OMB and the agencies resolve many issues
themselves. Others require the involvement of the President and White
House policy officials. This decision-making process is usually
completed by late December. At that time, the final stage of developing
detailed budget data and the preparation of the budget documents begins.
The decision-makers must consider the effects of economic and
technical assumptions on the budget estimates. Interest rates, economic
growth, the rate of inflation, the unemployment rate, and the number of
people eligible for various benefit programs, among other things, affect
Government spending and receipts. Small changes in these assumptions can
affect budget estimates by billions of dollars. (Chapter 2, ``Economic
Assumptions,'' in the Analytical Perspectives volume of the budget
provides more information on this subject.)
Statutory limitations on changes in receipts and outlays also
influence budget decisions (see Budget Enforcement below).
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Thus, the budget formulation process involves the simultaneous
consideration of the resource needs of individual programs, the
allocation of resources among the agencies and functions of the Federal
Government, the total outlays and receipts that are appropriate in
relation to current and prospective economic conditions, and statutory
constraints.
The law governing the President's budget specifies that the President
is to transmit the budget to Congress on or after the first Monday in
January but not later than the first Monday in February of each year for
the following fiscal year, which begins on October 1. This gives
Congress eight to nine months before the fiscal year begins to act on
the budget.
In some years, for various reasons, the President cannot adhere to the
normal schedule. One reason is that the current law does not require an
outgoing President to transmit a budget, and it is impractical for an
incoming President to complete a budget within a few days of taking
office on January 20th. President Clinton, the first President subject
to the current requirement, submitted a report to Congress on February
17, 1993, describing the comprehensive economic plan he proposed for the
Nation and containing summary budget information. He transmitted the
Budget of the United States for 1994 on April 8, 1993. President George
W. Bush similarly submitted an initial document, A Blueprint for New
Beginnings A Responsible Budget for America's Priorities, to Congress on
February 28, 2001, and transmitted the Budget of the United States for
Fiscal Year 2002 on April 9, 2001.
In some years, the late or pending enactment of appropriations acts,
other spending legislation, and tax laws considered in the previous
budget cycle have delayed preparation and transmittal of complete
budgets. For this reason, for example, President Reagan submitted his
budget for 1988 forty-five days after the date specified in law. In
other years, Presidents have submitted abbreviated budget documents on
the due date, sending the more detailed documents weeks later. For
example, President Clinton transmitted an abbreviated budget document to
Congress on February 5, 1996, because of uncertainty over 1996
appropriations as well as possible changes in mandatory programs and tax
policy. He transmitted a Budget Supplement and other budget volumes in
March 1996.
Congressional Action \1\
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\1\ For a fuller discussion of the congressional budget process, see
Robert Keith and Allen Schick, Manual on the Federal Budget Process
(Congressional Research Service Report 98-720 GOV, August 28, 1998) and
Introduction to the Federal Budget Process (Congressional Research
Service Report 98-721 GOV, January 2, 2001).
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Congress considers the President's budget proposals and approves,
modifies, or disapproves them. It can change funding levels, eliminate
programs, or add programs not requested by the President. It can add or
eliminate taxes and other sources of receipts, or make other changes
that affect the amount of receipts collected.
Congress does not enact a budget as such. Through the process of
adopting a budget resolution (described below), it agrees on levels for
total spending and receipts, the size of the deficit or surplus, and the
debt limit. The budget resolution then provides the framework within
which congressional committees prepare appropriations bills and other
spending and receipts legislation. Congress provides spending authority
for specified purposes in several regular appropriations acts each year
(traditionally thirteen). It also enacts changes each year in other laws
that affect spending and receipts. Both appropriations acts and these
other laws are discussed in the following paragraphs.
In making appropriations, Congress does not vote on the level of
outlays (spending) directly, but rather on budget authority, which is
the authority provided by law to incur financial obligations that will
result in outlays. In a separate process, prior to making
appropriations, Congress usually enacts legislation that authorizes an
agency to carry out particular programs and, in some cases, limits the
amount that can be appropriated for the programs. Some authorizing
legislation expires after one year, some expires after a specified
number of years, and some does not expire. Congress may enact
appropriations for a program even though there is no specific
authorization for it.
Congress begins its work on the budget shortly after it receives the
President's budget. Under the procedures established by the
Congressional Budget Act of 1974, Congress decides on budget totals
before completing action on individual appropriations. The Act requires
each standing committee of the House and Senate to recommend budget
levels and report legislative plans concerning matters within the
committee's jurisdiction to the Budget Committee in each body. The
Budget Committees then initiate the concurrent resolution on the budget.
The budget resolution sets levels for total receipts and for budget
authority and outlays, both in total and by functional category (see
Functional Classification below). It also sets levels for the budget
deficit or surplus and debt.
In the report on the budget resolution, the Budget Committees allocate
the amounts of budget authority and outlays within the functional
category totals to the House and Senate Appropriations Committees and
the other committees that have jurisdiction over the programs in the
functions. The Appropriations Committees are required, in turn, to
allocate amounts of budget authority and outlays among their respective
subcommittees. The subcommittees may not exceed their allocations in
drafting spending bills. The other committees with jurisdiction over
spending and receipts may make allocations among their subcommittees but
are not required to. The Budget Committees' reports may discuss
assumptions about the level of funding for major programs. While these
assumptions do not bind the committees and subcommittees with
jurisdiction over the programs, they may influence their decisions. The
budget resolution may contain ``reconciliation directives'' (discussed
below) to the committees responsible for tax laws and for spending not
controlled by annual appropriation acts, in order to conform the level
of re
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ceipts and this type of spending to the levels specified in the budget
resolution.
The congressional timetable calls for the whole Congress to adopt the
budget resolution by April 15 of each year, but Congress regularly
misses this deadline. Once Congress passes a budget resolution, a member
of Congress can raise a point of order to block a bill that would exceed
a committee's allocation.
A concurrent resolution, such as the one on the budget, is not a law
and, therefore, does not require the President's approval. However,
Congress considers the President's views in preparing budget
resolutions, because legislation developed to meet congressional budget
allocations does require the President's approval. In some years, the
President and the joint leadership of Congress have formally agreed on
plans to reduce the deficit or balance the budget. These agreements were
reflected in the budget resolution and legislation passed for those
years.
Appropriations bills are initiated in the House. They provide the
budget authority for the majority of Federal programs. The
Appropriations Committee in each body has jurisdiction over annual
appropriations. These committees are divided into subcommittees that
hold hearings and review detailed budget justification materials
prepared by the agencies within the subcommittee's jurisdiction. After a
bill has been drafted by a subcommittee, the committee and the whole
House, in turn, must approve the bill, usually with amendments to the
original version. The House then forwards the bill to the Senate, where
a similar review follows. If the Senate disagrees with the House on
particular matters in the bill, which is often the case, the two bodies
form a conference committee (consisting of Members of both bodies) to
resolve the differences. The conference committee revises the bill and
returns it to both bodies for approval. When the revised bill is agreed
to, first in the House and then in the Senate, Congress sends it to the
President for approval or veto.
The President can only approve or veto an entire bill. He cannot
approve or veto selected parts of a bill. In 1996, Congress enacted the
Line Item Veto Act, granting the President limited authority to cancel
new spending and limited tax benefits when he signs laws enacted by the
Congress. However, in 1998, the Supreme Court declared the authority
provided by the Act to be unconstitutional.
For 20 of the last 21 years, including 2002, appropriations bills have
not been enacted by the beginning of the fiscal year. When Congress does
not complete action on one or more appropriations bills by the beginning
of the fiscal year, it usually enacts a joint resolution called a
``continuing resolution,'' which is similar to an appropriations bill,
to provide authority for the affected agencies to continue operations at
some specified level up to a specific date or until their regular
appropriations are enacted. In some years, a continuing resolution has
funded a portion or all of the Government for the entire year. Congress
must present these resolutions to the President for approval or veto. In
some cases, Presidents have rejected continuing resolutions because they
contained unacceptable provisions. Left without funds, Government
agencies were required by law to shut down operations with exceptions
for some activities until Congress passed a continuing resolution the
President would approve. Shutdowns have lasted for periods of a day to
several weeks.
As explained earlier, Congress also provides budget authority in laws
other than appropriations acts. In fact, while annual appropriations
acts control the spending for the majority of Federal programs, they
control only one-third of the total spending in a typical year.
Permanent laws, called authorizing legislation, control the rest of the
spending. This category of spending includes interest the Government
pays on the public debt. It also includes the spending of several major
programs, such as Social Security, Medicare and Medicaid, unemployment
insurance, and Federal employee retirement. This chapter discusses the
control of budget authority and outlays in greater detail under BUDGET
AUTHORITY AND OTHER BUDGETARY RESOURCES, OBLIGATIONS, AND OUTLAYS.
Almost all taxes and most other receipts result from permanent laws.
The House initiates tax bills, specifically in the Ways and Means
Committee. In the Senate, the Finance Committee has jurisdiction over
tax laws.
The budget resolution often includes reconciliation directives, which
require authorizing committees to change permanent laws that affect
receipts and outlays. They direct each designated committee to report
amendments to the laws under the committee's jurisdiction that would
change the levels of receipts and spending controlled by the laws. The
directives specify the dollar amount of changes that each designated
committee is expected to achieve, but do not specify the laws to be
changed or the changes to be made. However, the Budget Committees'
reports on the budget resolution may discuss assumptions about how the
laws would be changed. Like other assumptions in the report, they do not
bind the committees of jurisdiction but may influence their decisions.
The committees subject to reconciliation directives draft the
implementing legislation. Such legislation may, for example, change the
tax code, revise benefit formulas or eligibility requirements for
benefit programs, or authorize Government agencies to charge fees to
cover some of their costs. In some years, Congress has enacted an
omnibus budget reconciliation act, which combines the amendments to
implement reconciliation directives in a single act. These acts,
together with appropriations acts for the year, often implement
agreements between the President and the Congress. They may include
other matters, such as laws providing the means for enforcing these
agreements, as described below.
Budget Enforcement
The Budget Enforcement Act (BEA), first enacted in 1990 and extended
in 1993 and 1997, significantly amended the laws pertaining to the
budget process,
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including the Congressional Budget Act, the Balanced Budget and
Emergency Deficit Control Act, and the law pertaining to the President's
budget (see PRINCIPAL BUDGET LAWS, later in the chapter). The BEA
constrains legislation enacted through 2002 that would increase spending
or decrease receipts. The BEA expires after 2002. The Administration
will work with Congress to develop appropriate controls to ensure that
enacted legislation is consistent with the proposed funding levels.
Enforcement could include discretionary caps and PAYGO, a joint budget
resolution that is signed by the President, or some other form of
controls on legislative action.
The BEA divides spending into two types--discretionary spending and
direct spending. Discretionary spending is controlled through annual
appropriations acts. Funding for salaries and other operating expenses
of Government agencies, for example, is usually discretionary because it
is usually provided by appropriations acts. Direct spending is more
commonly called mandatory spending. Mandatory spending is controlled by
permanent laws. Medicare and Medicaid payments, unemployment insurance
benefits, and farm price supports are examples of mandatory spending,
because permanent laws authorize payments for those purposes. The BEA
specifically defines funding for the Food Stamp program as mandatory
spending, even though appropriations acts provide the funding. The BEA
includes receipts under the same rules that apply to mandatory spending,
because permanent laws generally control receipts. The BEA constrains
discretionary spending differently from mandatory spending and receipts,
as explained in the following paragraphs.
The BEA defines categories of discretionary spending and specifies
dollar limits (``caps'') on the amount of spending in each category. The
categories and their amounts are determined by negotiations within
Congress, and between Congress and the President, each time the BEA is
amended. Amounts cannot be shifted from one category to another, and the
BEA provides no incentive for appropriating less than the cap levels.
Thus, the caps tend to be targets for the amount of spending in each
category. The caps apply to both budget authority and outlays--except in
the case of the highway and mass transit caps, which apply only to
outlays.
The categories have varied from year to year under the original and
amended versions of the BEA. The current categories, except for the one
called ``Other Discretionary,'' were added by amendments to the BEA by
other laws. The Transportation Equity Act for the 21st Century (TEA-21)
(Public Law 105-178) added categories for highway and mass transit
spending for 1999 through 2003. The Department of Interior and Related
Agencies Appropriations Act, 2001 (Public Law 106-291) added a category
for conservation spending for 2002 through 2006.\2\
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\2\ In addition to specifying caps for this category, the BEA
specifies minimum levels of spending for six subcategories. The
subcategories are not binding and are not enforced by sequestration.
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Because the BEA itself expires after 2002, the categories in later
years will apply to budgets for those years only if an extension of the
BEA is enacted and those categories are retained. In some years prior to
2000, the BEA divided discretionary spending into the major categories
of national defense, international, domestic spending, and violent crime
reduction. The Historical Tables volume of the budget provides
comparable data for the major BEA categories for 1962 through 2007.
The BEA includes general requirements for OMB to adjust the caps up or
down for changes in concepts and definitions, to accommodate
appropriations designated by the President and the Congress as emergency
spending, and to allow a limited amount of leeway when the level of
budget authority does not exceed the budget authority cap but the
estimate of outlays resulting from the budget authority exceeds the
outlay cap.
The BEA also specifies cap adjustments for certain programs for
various reasons. For example, the caps must be increased up to a
specified dollar limit to accommodate appropriations for continuing
disability reviews by the Social Security Administration. This
adjustment was included in the BEA because it was determined that the
reviews reduce overall spending by eliminating benefit payments to
ineligible individuals.
The caps adjustments required for the highways and mass transit
categories are designed to ensure that spending levels are consistent
with the level of receipts that are earmarked for those programs. The
highways and mass transit caps on outlays were based on estimates, at
the time TEA-21 was drafted, of gasoline excise taxes and other receipts
credited to the Highway Trust Fund each year. The TEA-21 amendments
require OMB to adjust these caps up or down for the difference in the
amount of receipts actually collected in the past year and for
Treasury's reestimates of the amount the Government expects to collect
in the budget year. For 2003, the law requires OMB to make a downward
adjustment, due to lower than expected collections of receipts. (See
Chapter 14, ``Preview Report,'' in the Analytical Perspectives volume of
the budget for additional information.)
The cap adjustments required for the conservation spending category
are designed to encourage Congress to appropriate up to the cap level.
If appropriations for a given year in the conservation spending category
are less than the caps, the BEA requires OMB to increase the caps for
the following year by the shortfall. And, if appropriations for a given
year in a subcategory of the conservation spending category are less
than the specified level for that category, the BEA requires OMB to
increase the minimum level for the following year by the shortfall.
In order to link the full cost of resources used with results achieved
in support of budgeting and managing for performance, the Administration
also proposes to fully accrue pensions and retiree health benefits for
Federal employees. This additional funding does not
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constitute additional program level; instead, it ensures that the budget
recognizes and accurately measures the full costs of existing programs.
The Administration's budget requests sufficient funding by account for
this conceptual budget change (see Chapter 1, ``Budget Performance
Integration'' and Chapter 14, ``Preview Report,'' in the Analytical
Perspectives volume of the budget).
The following table shows the adjusted caps for 2000 through 2002. The
Preview Report (described below) explains the cap adjustments.
Table 25-1. DISCRETIONARY SPENDING LIMITS
(In billions of dollars)
------------------------------------------------------------------------
2001 2002 2003
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Highways:
Budget Authority.............................. N/A N/A N/A
Outlays....................................... 27 29 28
Mass transit:
Budget Authority.............................. N/A N/A N/A
Outlays....................................... 5 5 6
Conservation spending:
Budget Authority.............................. N/A 2 2
Outlays....................................... N/A 1 2
Other discretionary:
Budget Authority.............................. 661 706 N/A
Outlays....................................... 652 731 N/A
Total discretionary:
Budget Authority.............................. 661 708 2
Outlays....................................... 684 767 35
------------------------------------------------------------------------
N/A means that this category was not applicable in the specified year.
If the amount of budget authority provided in appropriations acts for
a given year exceeds the cap on budget authority for a category, or the
amount of outlays in that year exceeds the cap on outlays for a
category, the BEA requires a procedure, called sequestration, for
reducing the spending in that category. A sequestration reduces spending
for most programs in the category by a uniform percentage. The BEA
specifies special rules for reducing some programs and exempts some
programs from sequestration entirely. In some years (including 2002),
the caps have been circumvented by designating funds as emergency
spending (such as spending for the decennial census) and by using
advance appropriations to spread budget authority over more than one
year, when there is no programmatic purpose for doing so.
The BEA does not cap mandatory spending or require a certain level of
receipts. Instead, it requires that all laws enacted through 2002 that
affect mandatory spending or receipts must be enacted on a ``pay-as-you-
go'' (PAYGO) basis. This means that if a law increases the deficit or
reduces a surplus in the budget year or any of the four following years,
another law must be enacted with an offsetting reduction in spending or
increase in receipts for each year that is affected. Legislated
increases in benefit payments, for example, would have to be offset by
legislated reductions in other mandatory spending or increases in
receipts. Otherwise, a sequestration would be triggered at the end of
the session of Congress in the fiscal year in which the deficit would be
increased. The BEA sequestration procedures require a uniform reduction
of mandatory spending programs that are neither exempt nor subject to
special rules. The BEA exempts Social Security, interest on the public
debt, Federal employee retirement, Medicaid, most means-tested
entitlements, deposit insurance, other prior legal obligations, and most
unemployment benefits. A special rule limits the sequestration of
Medicare spending to no more than four percent, and special rules for
some other programs limit the size of a sequestration for those
programs. As a result of exemptions and special rules, only about three
percent of all mandatory spending is subject to sequestration, including
the maximum amounts allowed under special rules.
The PAYGO rules do not apply to increases in mandatory spending or
decreases in receipts that are not the result of new laws. For example,
mandatory spending for benefit programs, such as unemployment insurance,
rises when the population of eligible beneficiaries rises, and many
benefit payments are automatically increased for inflation under
existing laws. Likewise, tax receipts decrease when the profits of
private businesses decline as the result of economic conditions.
The BEA requires OMB to make the estimates and calculations that
determine whether there is to be a sequestration and report them to the
President and Congress. It requires the Congressional Budget Office
(CBO) to make the same estimates and calculations, and the Director of
OMB to explain any differences between the OMB and CBO estimates. The
BEA requires the President to issue a sequestration order without
changing any of the particulars of the OMB report. It requires the
General Accounting Office to prepare compliance reports.
The BEA requires OMB and CBO to publish three sequestration reports--a
``preview''' report at the time the President submits the budget, an
``update'' report in August, and a ``final'' report at the end of a
session of Congress (usually in the fall of each year). The preview
report discusses the status of discretionary and PAYGO sequestration,
based on current law. This report also explains the adjustments that are
required by law to the discretionary caps and publishes the revised
caps. (See Chapter 14, ``Preview Report,'' in the Analytical
Perspectives volume of the budget.) The update and final reports revise
the preview report estimates to reflect the effects of newly enacted
discretionary and PAYGO laws. The BEA requires OMB and CBO to estimate
the effects of appropriations acts and PAYGO laws immediately after each
one is enacted and to include these estimates, without change, in the
update and final reports. OMB's final report estimates trigger a
sequestration if the appropriations enacted for the current year exceed
the caps or if the cumulative effect of PAYGO legislation is estimated
to increase a deficit or reduce a surplus. In addition, CBO estimates
the effects of bills as they move through Congress for the purpose of
the Budget Committees' en
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forcement of the budget resolution within Congress. OMB provides
advisory estimates on bills that might have significant consequences as
they move through Congress.
From the end of a session of Congress through the following June 30th,
discretionary sequestrations take place whenever an appropriations act
for the current fiscal year causes a cap to be exceeded. Because a
sequestration in the last quarter of a fiscal year might be too
disruptive, the BEA specifies that a sequestration that otherwise would
be required then is to be accomplished by reducing the cap for the next
fiscal year. These requirements ensure that supplemental appropriations
enacted during the fiscal year are subject to the budget enforcement
provisions.
Budget Calendar
The following timetable highlights the scheduled dates for significant budget events during the year.
Between the 1st Monday in January and the 1st President transmits the budget, including a sequestration
Monday in February............................ preview report.
Six weeks later................................ Congressional committees report budget estimates to Budget
Committees.
April 15....................................... Action to be completed on congressional budget resolution.
May 15......................................... House consideration of annual appropriations bills may begin.
June 15........................................ Action to be completed on reconciliation.
June 30........................................ Action on appropriations to be completed by House.
July 15........................................ President transmits Mid-Session Review of the budget.
August 20...................................... OMB updates the sequestration preview report.
October 1...................................... Fiscal year begins.
15 days after the end of a session of Congress. OMB issues final sequestration report, and the President issues
a sequestration order, if necessary.
Budget Execution
Government agencies may not spend more than Congress has appropriated,
and they may use funds only for purposes specified in law. The
Antideficiency Act prohibits them from spending or obligating the
Government to spend in advance of an appropriation, unless specific
authority to do so has been provided in law. Additionally, the Act
requires the President to apportion the budgetary resources available
for most executive branch agencies. The President has delegated this
authority to OMB, which usually apportions by time periods (usually by
quarter of the fiscal year) and sometimes by activities. Agencies may
request OMB to reapportion funds during the year to accommodate changing
circumstances. This system helps to ensure that funds are available to
cover operations for the entire year.
During the budget execution phase, the Government often finds that it
needs to spend more money than Congress has appropriated for the fiscal
year because of circumstances that were not anticipated when the budget
was formulated and appropriations enacted for that fiscal year. For
example, more money might be needed in order to provide adequate
assistance to an area stricken by an unusually severe natural disaster.
Under such circumstances, Congress may enact a supplemental
appropriation.
On the other hand, changing circumstances may reduce the need for
certain spending for which Congress has appropriated funds. Under the
requirements of the Impoundment Control Act of 1974, the President
cannot simply decline to spend appropriations. The President may propose
deferrals or rescissions. Deferrals, which are temporary withholdings,
take effect immediately unless overturned by an act of Congress. The
President may only defer funds to provide for contingencies, to achieve
savings made possible through changes in requirements or greater
efficiency of operations, or as otherwise specifically provided in law.
He may not defer funds for policy reasons. In 2001, over $1.9 billion in
deferrals were proposed, and Congress overturned none. Rescissions,
which permanently cancel budget authority, take effect only if Congress
passes a law approving them. The law may approve only part of a
rescission. If Congress does not pass such a law within 45 days of
continuous session, the President must make the funds available for
spending. The President may propose a rescission for any reason. In
total, Congress has rescinded about one-third of the amount of funds
that Presidents have proposed for rescission since enactment of the
Impoundment Control Act. In 2001, no rescissions were proposed.
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COVERAGE OF THE BUDGET
Federal Government and Budget Totals
Table 25-2. TOTALS FOR THE BUDGET AND THE FEDERAL GOVERNMENT
(In billions of dollars)
------------------------------------------------------------------------
Estimate
2001 -----------------
actual 2002 2003
------------------------------------------------------------------------
Budget authority
Unified.................................... 1,960 2,085 2,163
On-budget.................................. 1,604 1,721 1,789
Off-budget................................. 356 364 374
Receipts:
Unified.................................... 1,991 1,946 2,048
On-budget.................................. 1,484 1,429 1,503
Off-budget................................. 508 517 545
Outlays:
Unified.................................... 1,864 2,052 2,128
On-budget.................................. 1,517 1,691 1,762
Off-budget................................. 347 362 367
Surplus/Deficit (-):
Unified.................................... 127 -106 -80
On-budget.................................. -33 -262 -259
Off-budget................................. 161 156 179
------------------------------------------------------------------------
The budget documents provide information on all Federal agencies and
programs. However, because the laws governing Social Security (the
Federal Old-Age and Survivors Insurance and the Federal Disability
Insurance trust funds) and the Postal Service Fund exclude the receipts
and outlays for those activities from the budget totals and from the
calculation of the deficit or surplus for Budget Enforcement Act
purposes, the budget presents on-budget and off-budget totals. The off-
budget totals include the transactions excluded by law from the budget
totals. The on-budget and off-budget amounts are added together to
derive the totals for the Federal Government. These are sometimes
referred to as the unified or consolidated budget totals.
Neither the on-budget nor the off-budget totals include transactions
of Government-sponsored enterprises, such as the Federal National
Mortgage Association (Fannie Mae). Federal laws established these
enterprises for public policy purposes, but they are privately owned and
operated corporations. Because of their close relationship to the
Government, the budget discusses them and reports their financial data
in the Appendix to the budget and in some detailed tables.
The Appendix includes a presentation for the Board of Governors of the
Federal Reserve System for information only. The amounts are not
included in either the on-budget or off-budget totals because of the
independent status of the System within the Government. However, the
Federal Reserve System transfers its net earnings to the Treasury, and
the budget records them as receipts.
Functional Classification
The functional classification arrays budget authority, outlays, and
other budget data according to the major purpose served such as
agriculture, income security, and national defense. There are nineteen
major functions, most of which are divided into subfunctions. For
example, the Agriculture function comprises the subfunctions Farm Income
Stabilization and Agricultural Research and Services. The functional
classification is an integral part of the congressional budget process,
and the functional array meets the Congressional Budget Act requirement
for a presentation in the budget by national needs and agency missions
and programs.
The following criteria are used in establishing functional categories
and assigning activities to them:
A function encompasses activities with similar purposes,
emphasizing what the Federal Government seeks to accomplish
rather than the means of accomplishment, the objects
purchased, the clientele or geographic area served, or the
Federal agency conducting the activity.
A function must be of continuing national importance, and
the amounts attributable to it must be significant.
Each basic unit being classified (generally the
appropriation or fund account) usually is classified according
to its primary purpose and assigned to only one subfunction.
However, some large accounts that serve more than one major
purpose are subdivided into two or more subfunctions.
Chapter 26, ``Detailed Functional Tables,'' in the Analytical
Perspectives volume of the budget provides detailed information on
government activities by function and subfunction.
Agencies, Accounts, Programs, Projects, and Activities
Various summary tables in the Analytical Perspectives volume of the
budget provide information on budget authority, outlays, and offsetting
collections and receipts arrayed by Federal agency. Chapter 27 of that
volume, ``Federal Programs by Agency and Account,'' consists of a table
that lists budget authority and outlays by budget account within each
agency and the totals for each agency of budget authority, outlays, and
receipts that offset the agency spending totals. The Appendix provides
budgetary, financial, and descriptive information about programs,
projects, and activities by account within each agency. The Appendix
also presents the most recently enacted appropriation language for an
account and any changes that are proposed to be made for the budget
year.
Types of Funds
Agency activities are financed through Federal funds and trust funds.
Federal funds comprise several types of funds. Receipt accounts of the
general fund, which is the greater part of the budget, record receipts
not earmarked by law for a specific purpose, such as almost all income
tax receipts. The general fund also includes the proceeds of general
borrowing. General fund appropriation
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accounts record general fund expenditures. General fund appropriations
draw from general fund receipts and borrowing collectively and,
therefore, are not specifically linked to receipt accounts. Special
funds consist of receipt accounts for Federal fund receipts that laws
have earmarked for specific purposes and the associated appropriation
accounts for the expenditure of those receipts. Public enterprise funds
are revolving funds used for programs authorized by law to conduct a
cycle of business-type operations, primarily with the public, in which
outlays generate collections. Intragovernmental funds are revolving
funds that conduct business-type operations primarily within and between
Government agencies. The collections and the outlays of revolving funds
are recorded in the same budget account.
Trust funds account for the receipt and expenditure of monies by the
Government for carrying out specific purposes and programs in accordance
with the terms of a statute that designates the fund as a trust fund
(such as the Highway Trust Fund) or for carrying out the stipulations of
a trust where the Nation is the beneficiary (such as any of several
trust funds for gifts and donations for specific purposes). Trust
revolving funds are trust funds credited with collections earmarked by
law to carry out a cycle of business-type operations.
The Federal budget meaning of the term ``trust,'' as applied to trust
fund accounts, differs significantly from its private sector usage. In
the private sector, the beneficiary of a trust usually owns the trust's
assets, which are managed by a trustee who must follow the stipulations
of the trust. In contrast, the Federal Government owns the assets of
most Federal trust funds, and it can raise or lower future trust fund
collections and payments, or change the purposes for which the
collections are used, by changing existing laws. There is no substantive
difference between a trust fund and a special fund or between a trust
revolving fund and a public enterprise revolving fund. The Government
does act as a true trustee for some funds. For example, it maintains
accounts on behalf of individual Federal employees in the Thrift Savings
Fund, investing them as directed by the individual employee. The
Government accounts for such funds in deposit funds, which are not
included in the budget. (Chapter 16, ``Trust Funds and Federal Funds,''
in the Analytical Perspectives volume of the budget provides more
information on this subject.)
Current Operating Expenditures and Capital Investment
The budget includes all types of spending, including both current
operating expenditures and capital investment. Capital investment
includes direct purchases of land, structures, equipment, and software.
It also includes subsidies for capital investment provided by direct
loans and loan guarantees; purchases of other financial assets; grants
to state and local governments for purchases of physical assets; and the
conduct of research, development, education, and training. (Chapter 7,
``Federal Investment Spending and Capital Budgeting,'' in the Analytical
Perspectives volume of the budget provides more information on capital
investment.)
RECEIPTS, OFFSETTING COLLECTIONS, AND OFFSETTING RECEIPTS
In General
The budget records money collected by Government agencies two
different ways. Depending on the nature of the activity generating the
collection, they are recorded as either:
Receipts, which are compared in total to outlays (net of
offsetting collections and receipts) in calculating the
surplus or deficit; or
Offsetting collections or offsetting receipts, which are
deducted from gross outlays to produce net outlay figures.
Receipts
Receipts are collections that result from the Government's exercise of
its sovereign power to tax or otherwise compel payment and gifts of
money to the Government. Sometimes they are called governmental
receipts. They consist mostly of individual and corporation income taxes
and social insurance taxes, but also include excise taxes, compulsory
user charges, customs duties, court fines, certain license fees, and
deposits of earnings by the Federal Reserve System. Total receipts for
the Federal Government include both on-budget and off-budget receipts
(see the table, ``Totals for the Budget and Federal Government,'' which
appears earlier in this chapter.) Chapter 4, ``Federal Receipts,'' in
the Analytical Perspectives volume of the budget provides more
information on receipts.
Offsetting Collections and Receipts
Offsetting collections and receipts result from either of two kinds of
transactions:
Business-like or market-oriented activities with the public.
The budget records the proceeds from the sale of postage
stamps, the fees charged for admittance to recreation areas,
and the proceeds from the sale of Government-owned land, for
example, as offsetting collections or receipts. They are
deducted from gross budget authority and outlays, rather than
added to receipts. This treatment produces budget totals for
receipts, budget authority, and outlays that represent
governmental rather than market activity.
Intragovernmental transactions. The budget also records
collections by one Government account from another as
offsetting collections or receipts. For example, the General
Services Admin
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istration records payments it receives from other Government
agencies for the rent of office space as offsetting
collections in the Federal Buildings Fund. Intragovernmental
offsetting collections and receipts are deducted from gross
budget authority and outlays so that the budget totals measure
the transactions of the Government with the public.
A table in Chapter 21, ``Outlays to the Public, Net and Gross,'' in
the Analytical Perspectives volume of the budget, shows the effect of
offsetting collections and receipts on gross outlays for each major
Federal agency.
Although offsetting collections and offsetting receipts both offset
gross budget authority and outlays, the budget accounts for them
differently, as explained in the following sections.
Offsetting Collections
Some laws authorize agencies to credit collections directly to the
account from which they will be spent and, usually, to spend the
collections for the purpose of the account without further action by
Congress. Most revolving funds operate with such authority. For example,
a permanent law authorizes the Postal Service to use collections from
the sale of stamps to finance its operations without a requirement for
annual appropriations. The budget records these collections in the
Postal Service Fund (a revolving fund) and records budget authority in
an amount equal to the collections. In addition to revolving funds, some
agencies are authorized to charge fees to defray a portion of costs for
a program that are otherwise financed by appropriations from the general
fund. In such cases, the budget records the offsetting collections and
resulting budget authority in the program's general fund expenditure
account. Similarly, intragovernmental collections authorized by some
laws may be recorded as offsetting collections and budget authority in
revolving funds or in general fund expenditure accounts.
Sometimes appropriations acts or provisions in other laws limit the
obligations that can be financed by offsetting collections. In those
cases, the budget records budget authority in the amount available to
incur obligations.
Where accounts have offsetting collections, the budget shows the
budget authority and outlays of the account both gross (before deducting
offsetting collections) and net (after deducting offsetting
collections). Totals for the agency, subfunction, and budget are net of
offsetting collections.
While most offsetting collections credited to expenditure accounts
result from business-like activity or are collected from other
Government accounts, some are governmental in nature but are required by
law to be treated as offsetting. The budget labels these ``offsetting
governmental collections.''
Offsetting Receipts
Collections that are offset against gross outlays but are not
authorized to be credited to expenditure accounts are credited to
general fund, special fund, or trust fund receipt accounts and are
called offsetting receipts. Offsetting receipts are deducted from budget
authority and outlays in arriving at total budget authority and outlays.
However, unlike offsetting collections credited to expenditure accounts,
offsetting receipts do not offset budget authority and outlays at the
account level. In most cases, they offset budget authority and outlays
at the agency and subfunction levels. Offsetting receipts are subdivided
into three categories, as follows:
Proprietary receipts from the public.--These are collections
from the public that arise out of the business-type or market-
oriented activities of the Government. Most proprietary
receipts are deducted from the budget authority and outlay
totals of the agency that conducts the activity generating the
receipt and of the subfunction to which the activity is
assigned. For example, fees for using National Parks are
deducted from the totals for the Department of Interior, which
has responsibility for the parks, and the Recreational
Resources subfunction. Proprietary receipts from a few
sources, however, are not offset against any specific agency
or function and are classified as undistributed offsetting
receipts. They are deducted from the Government-wide totals
for budget authority and outlays. For example, the collections
of rents and royalties from outer continental shelf lands are
undistributed because the amounts are large and for the most
part are not related to the spending of the agency that
administers the transactions and the subfunction that records
the administrative expenses.
Intragovernmental transactions.--These are collections of
payments from expenditure accounts that are deposited into
receipt accounts. Most intragovernmental transactions are
deducted from the budget authority and outlays of the agency
that conducts the activity generating the receipts and of the
subfunction to which the activity is assigned. In two cases,
however, intragovernmental transactions are classified as
undistributed offsetting receipts. They appear as special
deductions in computing total budget authority and outlays for
the Government rather than as offsets at the agency level
agencies' payments as employers into employee retirement trust
funds and interest received by trust funds. The special
treatment for these receipts is necessary because the amounts
are large and would distort the agency totals, as measures of
the agency's activities, if they were attributed to the
agency.
Offsetting governmental receipts.--These are collections
that are governmental in nature but are required by law to be
treated as offsetting and are not authorized to be credited to
expenditure accounts.
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User Charges and Fees
User charges are fees assessed for the provision of Government
services and for the sale or use of Government goods or resources. The
payers of the user charge must be limited in the authorizing legislation
to those receiving special benefits from, or subject to regulation by,
the program or activity beyond the benefits received by the general
public or broad segments of the public (such as those who pay income
taxes or customs duties). User charges are defined and the policy
regarding user charges is established in OMB Circular A-25, ``User
Charges'' (July 8, 1993). The term encompasses proceeds from the sale or
use of government goods and services, including the sale of natural
resources (such as timber, oil, and minerals) and proceeds from asset
sales (such as property, plant, and equipment).
User fees are a subset of user charges that are authorized to be
utilized solely to support the program or activity for which it was
levied. User fees are more limited in coverage than user charges. They
do not include the sale of natural resources and assets, and they must
be earmarked for the activity they finance by being credited to special
or trust receipts accounts (as receipts or offsetting receipts) or to
expenditure accounts (as offsetting collections). User charges that are
credited to the general fund of the Treasury are not user fees by
definition, because they are not utilized solely to support the program
or activity for which they were levied.
The terms user charges and user fees do not refer to separate budget
categories for collections. The budget records user charges and user
fees as receipts or as offsetting collections or offsetting receipts,
depending on whether the fee results primarily from the exercise of
governmental powers or from business-like activity (unless the law
requires governmental receipts to be classified as offsetting).
See Chapter 5, ``User Fees and Other Collections,'' in the Analytical
Perspectives volume of the budget, for a more detailed discussion of
user charges, user fees, offsetting collections and receipts.
BUDGET AUTHORITY AND OTHER BUDGETARY RESOURCES, OBLIGATIONS, AND OUTLAYS
Budget Authority and Other Budgetary Resources
Budget authority is the authority provided in law to enter into legal
obligations that will result in immediate or future outlays of
Government funds. In other words, it is the amount of money that the law
allows the Government to commit to be spent in current or future years.
Government officials may obligate the Government to make outlays only to
the extent they have been granted budget authority. The budget records
budget authority as a dollar amount in the year when it first becomes
available. Under the circumstances described below, unobligated balances
of budget authority may be carried over into the next year. The budget
does not record these balances as budget authority again. They do,
however, constitute a budgetary resource that is available for
obligation. In some cases, a provision of law (such as a limitation on
obligations or a benefit formula) precludes the obligation of funds that
would otherwise be available for obligation. In such cases, the budget
records budget authority equal to the amount of obligations that can be
incurred. (In a major exception to this rule, the budget authority
recorded for the highway and mass transit programs financed by the
Highway Trust Fund is the amount of budget authority (in the form of
contract authority, which is described below) provided in authorizing
statutes, even though the obligation limitations enacted in annual
appropriations acts restrict the amount of obligations that can be
incurred.)
In deciding the amount of budget authority to request for a program,
project, or activity, agency officials estimate the total amount of
obligations they will need to incur to achieve desired goals and
subtract the amounts of unobligated balances available for these
purposes. The amount of budget authority requested is influenced by the
nature of the programs, projects, or activities being financed. For
current operating expenditures, the amount requested usually covers
needs for the year. For major procurement programs and construction
projects, the Government generally applies a full funding policy. Under
this policy, agencies must request an amount to be appropriated in the
first year that they estimate will be adequate to complete an
economically useful segment of a procurement or project, even though it
may be obligated over several years. This policy is intended to ensure
that the decision-makers take into account all costs and benefits fully
at the time decisions are made to provide resources. It also avoids
sinking money into a procurement or project without being certain if or
when future funding will be available to complete the procurement or
project.
Budget authority takes several forms:
Appropriations, provided in annual appropriations acts or
permanent laws, permit agencies to incur obligations and make
payment;
Authority to borrow, usually provided in permanent laws,
permits agencies to incur obligations but requires them to
borrow funds, usually from the general fund of the Treasury,
to make payment;
Contract authority, usually provided in permanent law,
permits agencies to incur obligations in advance of a separate
appropriation of the cash for payment or in anticipation of
the collection of receipts that can be used for payment; and
Spending authority from offsetting collections, usually
provided in permanent law, permits agencies to credit
offsetting collections to an ex
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penditure account, incur obligations, and make payment using
the offsetting collections.
Because offsetting collections and receipts are deducted from gross
budget authority, they are referred to as negative budget authority for
some purposes, such as Congressional Budget Act provisions that pertain
to budget authority.
Authorizing statutes usually determine the form of budget authority
for a program. The authorizing statute may authorize a particular type
of budget authority to be provided in annual appropriations acts, or it
may provide one of the forms of budget authority directly, without the
need for further appropriations. Most programs are funded by
appropriations. An appropriation may make funds available from the
general fund, special funds, or trust funds, or authorize the spending
of offsetting collections credited to expenditure accounts, including
revolving funds. Borrowing authority is usually authorized for business-
like activities where the activity being financed is expected to produce
income over time with which to repay the borrowing with interest.
Contract authority is a traditional form of budget authority for certain
programs, particularly transportation programs.
Annual appropriations acts generally make budget authority available
for obligation only during the fiscal year to which the act applies.
However, they specify many exceptions that allow budget authority for a
particular purpose to remain available for obligation for a longer
period or indefinitely (that is, until expended or until the program
objectives have been attained). Typically, appropriations acts make
budget authority for current operations available for only one year, and
budget authority for construction and some research projects available
for a specified number of years or indefinitely. Many appropriations of
trust fund receipts make the budget authority available indefinitely.
Only another law can extend a limited period of availability (see
Reappropriation below). Budget authority provided in authorizing
statutes usually remains available until expended.
Budget authority that is available for more than one year and that is
not obligated in the year it becomes available is carried forward for
obligation in a following year. In some cases, an account may have
carried forward unobligated budget authority from more than one year.
The sum of such amounts constitutes the account's unobligated balance.
Budget authority that has been obligated but not paid constitutes the
account's obligated balance. For example, in the case of salaries and
wages, one to three weeks elapse between the time of obligation and the
time of payment. In the case of major procurement and construction,
payments may occur over a period of several years after the obligation
is made. Obligated balances of budget authority at the end of the year
are carried forward until the obligations are paid or the balances are
canceled. (A general law cancels the obligated balances of budget
authority that was made available for a definite period five years after
the end of the period, and then other resources must be used to pay the
obligations.) Due to such flows, a change in the amount of obligations
incurred from one year to the next does not necessarily result from an
equal change in the amount of budget authority available for that year
and will not necessarily result in an equal change in the level of
outlays in that year. Conversely, a change in the amount of budget
authority available in any one year may change the level of obligations
and outlays for several years to come. \3\
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\3\ A separate report, ``Balances of Budget Authority,'' provides
additional information on balances. The National Technical Information
Service, Department of Commerce, makes the report available shortly
after the budget is transmitted.
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Congress usually makes budget authority available on the first day of
the fiscal year for which the appropriations act is passed.
Occasionally, the appropriations language specifies a different timing.
The language may provide an advance appropriation budget authority that
does not become available until one year or more beyond the fiscal year
for which the appropriations act is passed. Forward funding refers to
budget authority that is made available for obligation beginning in the
last quarter of the fiscal year (beginning on July 1st) for the
financing of ongoing grant programs during the next fiscal year. This
kind of funding is used mostly for education programs, so that
obligations for grants can be made prior to the beginning of the next
school year. For certain benefit programs funded by annual
appropriations, the appropriation provides for advance funding--budget
authority that is to be charged to the appropriation in the succeeding
year but which authorizes obligations to be incurred in the last quarter
of the current fiscal year if necessary to meet benefit payments in
excess of the specific amount appropriated for the year.
Provisions of law that extend the availability of unobligated amounts
that have expired or would otherwise expire are called reappropriations.
Reappropriations count as new budget authority in the fiscal year in
which the balances become newly available. For example, if a 2003
appropriations act extends the availability of unobligated budget
authority that otherwise would expire at the end of 2002, new budget
authority would be recorded for 2003.
For purposes of the Budget Enforcement Act (discussed earlier under
``Budget Enforcement''), the budget classifies budget authority as
discretionary or mandatory. Generally, budget authority is discretionary
if provided in an annual appropriations act and mandatory if provided in
authorizing legislation. However, the BEA requires the budget authority
provided in annual appropriations acts for certain specifically
identified programs to be treated as mandatory. This is because the
authorizing legislation in these cases entitles beneficiaries to receive
payment or otherwise obligates the Government to make payment, even
though the payments are funded by a subsequent appropriation. Since the
authorizing legislation effectively determines the amount of budget
authority required, the BEA classifies it as mandatory. As discussed
later, the discretionary
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and mandatory classification applies to the outlays that flow from
budget authority, according to the classification of the budget
authority.
The amount of budget authority recorded in the budget depends on
whether the law provides budget authority in a specific amount or
specifies a variable factor that determines the amount. It is considered
definite if the legislation that provides it specifies a dollar amount
(which may be an amount not to be exceeded). It is considered indefinite
if, instead of specifying an amount, the legislation providing it
permits the amount to be determined by subsequent circumstances. For
example, indefinite budget authority is provided for interest on the
public debt, payment of claims and judgments awarded by the courts
against the U.S., and many entitlement programs. Many of the laws that
authorize collections to be credited to revolving, special, and trust
funds make all of the collections available for expenditure for the
authorized purposes of the fund, and such authority is considered to be
indefinite budget authority. In some such cases, only some of the amount
of collections otherwise available is counted as budget authority,
because the rest is precluded from obligation in a fiscal year by a
provision of law, such as a limitation on obligations or a benefit
formula that determines the amounts to be paid (for example, the formula
for unemployment insurance benefits).
Obligations Incurred
Following the enactment of budget authority and the completion of
required apportionment action, Government agencies incur obligations to
make payments. Agencies must record obligations when they enter into
binding agreements that will result in outlays, immediately or in the
future. Such obligations include the current liabilities for salaries,
wages, and interest; and contracts for the purchase of supplies and
equipment, construction, and the acquisition of office space, buildings,
and land. For Federal credit programs, obligations are recorded in an
amount equal to the estimated subsidy cost of direct loans and loan
guarantees (see FEDERAL CREDIT below).
Outlays
Outlays are the measure of Government spending. They are payments that
liquidate obligations (other than the repayment of debt). The budget
records them when obligations are paid, in the amount that is paid.
Agency, function, and subfunction, and outlay totals are stated net of
related refunds to the Government, offsetting collections, and
offsetting receipts for most budget presentations. (Offsetting receipts
from a few sources do not offset any specific function, subfunction, or
agency but only offset Government-wide totals.) Outlay totals for
accounts with offsetting collections are stated both gross and net of
the offsetting collections credited to the account. However, the outlay
totals for special and trust funds with offsetting receipts are not
stated net of the offsetting receipts.
The Government usually makes outlays in the form of cash (currency,
checks, or electronic fund transfers). However, in some cases agencies
pay obligations without disbursing cash and the budget records outlays
nevertheless. For example, the budget records outlays for the full
amount of Federal employees' salaries, even though the cash disbursed to
employees is net of Federal and state income taxes, retirement
contributions, life and health insurance premiums, and other deductions.
(The budget also records receipts for the deductions of Federal income
taxes and other payments to the Government.) When debt instruments
(bonds, debentures, notes, or monetary credits) are used to pay
obligations, the budget records outlays, as well as an increase in debt.
For example, the budget records the acquisition of physical assets
through certain types of lease-purchase arrangements as though an outlay
were made for an outright purchase. Because no cash is paid up front to
the nominal owner of the asset, the transaction creates a Government
debt. In such cases, the cash lease payments are treated as repayments
of principal and interest.
The measurement of interest varies. The budget records outlays for the
interest on the public issues of Treasury debt securities as the
interest accrues, not when the cash is paid. A small portion of this
debt consists of inflation-indexed securities, which feature monthly
adjustments to principal for inflation and semiannual payments of
interest on the inflation-adjusted principal. As with fixed-rate
securities, the budget records the interest payments on these securities
as outlays as the interest accrues. The monthly adjustment to principal
is recorded, simultaneously, as an increase in debt outstanding and an
outlay of interest.
Most Treasury debt securities held by trust funds and other Government
accounts are in Government account series (special issues). The budget
normally states the interest on these securities on a cash basis. When a
Government account is invested in Federal debt securities, the purchase
price is usually close or identical to the par (face) value of the
security. The budget records the investment at par value and adjusts the
interest paid by Treasury and collected by the account by the difference
between purchase price and par, if any. However, two trust funds in the
Department of Defense, the Military Retirement Trust Fund and the
Education Benefits Trust Fund, routinely have relatively large
differences between purchase price and par. For these funds, the budget
records the holdings of debt at par but records the differences between
purchase price and par as adjustments to the assets of the funds that
are amortized over the life of the security. The budget records interest
as the amortization occurs.
For Federal credit programs, outlays are equal to the subsidy cost of
direct loans and loan guarantees and are recorded as the underlying
loans are disbursed (see FEDERAL CREDIT below).
The budget records refunds of receipts that result from overpayments
(such as income taxes withheld in
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excess of tax liabilities) as reductions of receipts, rather than as
outlays. The budget records payments to taxpayers for tax credits (such
as earned income tax credits) that exceed the taxpayer's tax liability
as outlays.
Outlays during a fiscal year may liquidate obligations incurred in the
same year or in prior years. Obligations, in turn, may be incurred
against budget authority provided in the same year or against
unobligated balances of budget authority provided in prior years.
Outlays, therefore, flow in part from budget authority provided for the
year in which the money is spent and in part from budget authority
provided in prior years. The ratio of the outlays resulting from budget
authority enacted in a given year to the amount of that budget authority
is referred to as the spendout rate for that year.
As described earlier, the budget classifies budget authority as
discretionary or mandatory for the purposes of the BEA. This
classification indicates whether appropriations acts or authorizing
legislation control the amount of budget authority that is available.
Outlays are classified as discretionary or mandatory according to the
classification of the budget authority from which they flow. This
classification of outlays measures the extent to which actual spending
is controlled through the annual appropriations process. Typically, only
one-third ($657 billion in 2001) of total outlays for a fiscal year are
discretionary and the rest ($1,207 billion in 2001) consists of
mandatory spending and net interest. Such a large portion of total
spending is nondiscretionary because authorizing legislation determines
net interest ($206 billion in 2001) and the spending for a few programs
with large amounts of spending each year, such as Social Security ($429
billion in 2001) and Medicare ($214 billion in 2001).
Outlays for an account are stated both gross and net of any offsetting
collections credited to the account, but function, agency, and
Government-wide outlay totals are only stated net. (See Chapter 21,
``Outlays to the Public, Net and Gross,'' in the Analytical Perspectives
volume of the budget.) Total outlays for the Federal Government include
both on-budget and off-budget outlays. (See the table, ``Totals for the
Budget and Federal Government'' above.)
FEDERAL CREDIT
Some Government programs make direct loans or loan guarantees. A
direct loan is a disbursement of funds by the Government to a non-
Federal borrower under a contract that requires the repayment of such
funds with or without interest. The term includes equivalent
transactions such as selling a property on credit terms in lieu of
receiving cash up front. A loan guarantee is any guarantee, insurance,
or other pledge with respect to the payment of all or a part of the
principal or interest on any debt obligation of a non-Federal borrower
to a non-Federal lender. The Federal Credit Reform Act (FCRA) prescribes
the budget treatment for Federal credit programs. This treatment is
designed to measure the subsidy cost of direct loans and loan guarantees
in the budget, when the loans are disbursed, rather than the cash flows
over the term of the loan, so direct loans and loan guarantees can be
compared to each other and to other methods of delivering benefits, such
as grants, on an equivalent basis.
The budget records the estimated long-term cost to the Government
arising from direct loans and loan guarantees in credit program
accounts. The cost is estimated as the present value of expected
disbursements over the term of the loan less the present value of
expected collections. \4\ For most credit programs, as with most other
kinds of programs, agencies can incur costs only if Congress has
appropriated funds sufficient to cover the costs in annual
appropriations acts.
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\4\ Present value is a standard financial concept that allows for the
time value of money, that is, for the fact that a given sum of money is
worth more at present than in the future because interest can be earned
on it.
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When a Federal agency disburses a direct loan or when a non-Federal
lender disburses a loan guaranteed by a Federal agency, the program
account outlays an amount equal to the cost to a non-budgetary credit
financing account. For a few programs, the computed cost is negative,
because the present value of expected collections over the term of the
loan exceeds that of expected disbursements. In such cases, the
financing account makes a payment to the program's receipt account in
the Treasury general fund, where it is recorded as an offsetting
receipt. In a few cases, the receipts are earmarked in a special fund
established for the program and are available for appropriation for the
program.
The agencies responsible for credit programs must reestimate the cost
of the outstanding direct loans and loan guarantees, normally each year.
If an agency estimates the cost to have increased, the agency must make
an additional outlay from the program account to the financing account.
If the agency estimates the cost to have decreased, the agency must make
a payment from the financing account to the program's receipt account,
where it is recorded as an offsetting receipt. The FCRA provides a
permanent indefinite appropriation to pay the increased costs resulting
from reestimates.
If the Government modifies the terms of an outstanding direct loan or
loan guarantee in a way that increases the cost, as the result of a law
or the exercise of administrative discretion under existing law, the
agency must record an obligation in the program account for an
additional amount equal to the increased cost and outlay the amount to
the financing account. As with the original costs, agencies may incur
modification costs only if Congress has appropriated funds to cover
them. The Government may reduce costs by modifications, in which case
the agency makes a payment
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from the financing account to the program's receipt account.
Credit financing accounts record all cash flows to and from the
Government arising from direct loan obligations and loan guarantee
commitments. These cash flows consist mainly of direct loan
disbursements and repayments, loan guarantee default payments, fees and
interest from the public, the receipt of subsidy cost payments from
program accounts, and interest paid to or received from Treasury.
Separate financing accounts record the cash flows of direct loans and of
loan guarantees for programs that do both. The budget totals exclude the
transactions of financing accounts because they are not a cost to the
Government. Financing account transactions affect the means of financing
a budget surplus or deficit (see Credit Financing Accounts in the next
section). The budget documents display the transactions of the financing
accounts, together with the related program accounts, for information
and analytical purposes.
The FCRA, which was enacted in 1990, grandfathered direct loan
obligations and loan guarantee commitments made prior to fiscal year
1992. The budget records the transactions associated with these direct
loans and loan guarantees on a cash flow basis in credit liquidating
accounts, which is the same way they were recorded before FCRA was
enacted. However, this exception ceases to apply if the direct loans or
loan guarantees are modified as described above. In that case, the
budget records a modification subsidy cost or savings, as appropriate,
and begins to account for the associated transactions as the FCRA
prescribes for direct loan obligations and loan guarantee commitments
made in fiscal year 1992 or later.
BUDGET DEFICIT OR SURPLUS AND MEANS OF FINANCING
When outlays exceed receipts, the difference is a deficit. The
Government finances deficits primarily by borrowing. When receipts
exceed outlays, the difference is a surplus, and the Government uses the
surplus to reduce debt. The Government's debt (debt held by the public)
is approximately the cumulative amount of borrowing to finance deficits,
less repayments from surpluses. Borrowing is not exactly equal to the
deficit, and debt repayment is not exactly equal to the surplus, because
of the other means of financing such as those discussed under this
heading. Some, such as the premium on debt buybacks, normally increase
the Government's borrowing needs or decrease its ability to repay debt;
others normally have the opposite effect or may be either positive or
negative. In some years the net effect of the other means of financing
may be significant relative to the borrowing or debt repayment.
Borrowing and Debt Repayment
The budget treats borrowing and debt repayment as a means of
financing, not as receipts and outlays. If borrowing were defined as
receipts and debt repayment as outlays, the budget would be virtually
balanced by definition. This rule applies both to borrowing in the form
of Treasury securities and to specialized borrowing in the form of
agency securities (including the issuance of debt securities to
liquidate an obligation and the sale of certificates representing
participation in a pool of loans). In 2001, the Government repaid $90.1
billion of debt held by the public. This was the result of a $127.1
billion surplus in that year. The rest of the surplus was needed to
finance direct loans disbursed in credit financing accounts, which are
discussed below, and for smaller changes in the other means of
financing. At the end of 2001, the debt held by the public was $3,320.0
billion. In addition to selling debt to the public, the Treasury
Department issues debt to Government accounts, primarily trust funds
that are required by law to invest in Treasury securities. Issuing and
redeeming this debt does not affect the means of financing, because
these transactions occur between one Government account and another and
thus do not raise or use any cash for the Government as a whole. (See
Chapter 13, ``Federal Borrowing and Debt,'' in the Analytical
Perspectives volume of the budget for a fuller discussion of this
topic.)
Debt Buyback Premiums and Discounts
Since 2000, the Treasury Department has bought back outstanding U.S.
Treasury bonds as part of its efforts to manage efficiently the publicly
held debt. Because interest rates are lower than the coupon rates on the
bonds that Treasury bought back, the government has had to pay a premium
over the book value of these securities.
The buyback premium is part of the cost of borrowing money for the
period in which the debt was outstanding, like a coupon interest
payment. However, while interest payments are normally recorded as
budget outlays over the period in which the debt is outstanding, buyback
premiums would have to be recorded in full when the debt was repaid.
This would show the cost in a later year than when it was incurred and
would make it appear that the buyback itself resulted in an additional
cost to the government. It would also reduce the budget surplus, which
could discourage buybacks, even though they impose no additional cost to
the government. Moreover, under this accounting, the budget would record
receipts if securities were bought at a discount (which would be the
case when current interest rates were higher than the rates on
outstanding securities). This would create a perverse incentive to buy
back securities that were available at a discount to increase the
recorded surplus, even though such transactions would yield no long-term
gain to the government.
After consulting with the Congressional Budget Office and the House
and Senate Budget Committees, OMB concluded that, on balance, the best
option was to record payments for premiums or collections for dis
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counts not as outlays or receipts, but as a means of financing the
surplus or deficit, in the year of the buyback. This treatment clearly
would not be appropriate for any non-financial Federal transaction or
for most Federal financial transactions, which impose a cost on the
government and allocate resources. Chapter 24, ``Budget System and
Concepts and Glossary,'' pages 457-58 in the Analytical Perspectives
volume of the 2001 budget, discusses the basis for this conclusion in
more detail, including an examination of the alternatives that were
considered.
Exercise of Monetary Power
Seigniorage is the profit from coining money. It is the difference
between the value of coins as money and their cost of production.
Seigniorage adds to the Government's cash balance, but unlike the
payment of taxes or other receipts, it does not involve a transfer of
financial assets from the public. Instead, it arises from the exercise
of the Government's power to create money. Therefore, the budget
excludes seigniorage from receipts and treats it as a means of financing
other than borrowing from the public. The budget treats profits
resulting from the sale of gold as a means of financing, since the value
of gold is determined by its value as a monetary asset rather than as a
commodity.
Credit Financing Accounts
The budget records the net cash flows of credit programs in credit
financing accounts, which are excluded from the budget totals and are
called net financing disbursements. (See FEDERAL CREDIT above.) Net
financing disbursements are defined in the same way as the outlays of a
budgetary account and are therefore a means of financing other than
borrowing from the public. Like outlays, they may be either positive or
negative.
The net financing disbursements result partly from intragovernmental
transactions with budgetary accounts (the receipt of subsidy payments
and the receipt or payment of interest) and partly from transactions
with the public (disbursement and repayment of loans, receipt of
interest and fees, payment of default claims, etc.). An
intragovernmental transaction affects the deficit or surplus and the
means of financing in equal amounts but with opposite signs, so they
have no combined effect on Treasury borrowing from the public. On the
other hand, financing account disbursements to the public increase the
requirement for Treasury borrowing in the same way as an increase in
budget outlays. Financing account receipts from the public can be used
to finance the payment of the Government's obligations and therefore
reduce the requirement for Treasury borrowing from the public in the
same way as an increase in budget receipts.
Deposit Fund Account Balances
The Treasury uses deposit funds, which are non-budgetary accounts, to
record amounts held temporarily until ownership is determined (for
example, earnest money paid by bidders for mineral leases) or held by
the Government as agent for others (for example, State and local income
taxes withheld from Federal employees' salaries and not yet paid to the
State or local government). Deposit fund balances may be held in the
form of either invested or uninvested balances. To the extent that
deposit fund balances are not invested, changes in the balances are a
means of financing other than borrowing from the public. To the extent
that the balances are invested in Federal debt, changes in the balances
are reflected as borrowing from the public in lieu of borrowing from
other parts of the public.
Exchanges with the International Monetary Fund
Under the terms of its participation in the IMF, the U.S. transfers
dollars to the IMF and receives Special Drawing Rights (SDR's) in
return. The SDR's are interest-bearing monetary assets and may be
exchanged for foreign currency at any time. These transfers are like
bank deposits and withdrawals. Following a recommendation of the 1967
President's Commission on Budget Concepts, the budget excludes these
transfers from budget outlays or receipts. The budget does record
interest paid by the IMF on U.S. deposits (as an offsetting collection).
It also records outlays for foreign currency exchanges to the extent
there is a realized loss in dollars terms and offsetting collections to
the extent there is a realized gain in dollar terms.
Railroad Retirement Board Investments
The budget includes a special treatment for investments in equities
and other private securities by the National Railroad Retirement
Investment Trust. The Railroad Retirement and Survivors' Improvement Act
of 2001 (Public Law 107-90) requires purchases or sales of non-Federal
assets by the National Railroad Retirement Investment Trust to be
treated as a means of financing in the budget.
Under longstanding rules, the budget treats investments in non-Federal
securities as a purchase of an asset, recording an obligation and an
outlay in an amount equal to the purchase price in the year of the
purchase. Since investments in non-Federal securities consume cash, fund
balances normally exclude the value of non-Federal securities. However,
the investments in non-Federal securities by the National Railroad
Retirement Investment Trust are required by law to be included in the
fund balances reported in the budget. Earnings on investments are
estimated as described below.
Investments by National Railroad Retirement Investment Trust in
private assets pose some challenges for budget projections. Equities and
private bonds earn a higher return on average than the Treasury rate,
but that return is subject to greater uncertainty. Sound budgeting
principles require that estimates of future trust fund balances reflect
both the average return and the cost of risk associated with the
uncertainty of that return. (The latter is particularly true in cases
where
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individual beneficiaries have not made a voluntary choice to assume
additional risk.) Estimating both of these separately is quite
difficult. While the additional returns that these assets have received
in the past are known, it is quite possible that these premiums will
differ in the future. Furthermore, there is no existing procedure for
the budget to record separately the cost of risk from such an
investment, even if it could be estimated accurately. Economic theory
suggests, however, that the difference between the expected return of a
risky liquid asset and the Treasury rate is equal to the cost of the
asset's additional risk as priced by the market. Following through on
this insight, the best way to project the rate of return on the Fund's
balances is to use a Treasury rate. This will mean that assets with
equal economic value as measured by market prices will be treated
equivalently, avoiding the appearance that the budget could benefit if
the Government bought private sector assets.
The actual and estimated returns to private securities will be
recorded in subfunction 909, other investment income. The actual year
returns will include interest, dividends, and capital gains and losses
on private equities and other securities. The Fund's portfolio of these
assets will be revalued at market prices at the end of the actual year
to determine capital gains or losses. As a result, the Fund's end-of-
year balance will reflect the amount of resources available to the
Government to finance benefits. Earnings for the current and future
years will be estimated using the 10-year Treasury rate and the value of
the Fund's portfolio at the end of the actual year. No estimates will be
made of gains and losses for the current year or subsequent years.
FEDERAL EMPLOYMENT
The budget includes information on civilian and military employment
and personnel compensation and benefits. It also compares the Federal
workforce, State and local government workforces, and the United States
population. The budget provides two different measures of Federal
employment levels--actual positions filled and full-time equivalents
(FTE). One FTE equals one work year or 2,080 hours. For most purposes,
the FTE measure is more meaningful, because it takes into account part-
time employment, temporary employment, and vacancies during the year.
For example, one full-time employee and two half-time employees would
count as two FTE's but three positions. (Chapter 11, ``Federal
Employment and Compensation,'' in the Analytical Perspectives volume of
the budget provides more information on this subject.)
BASIS FOR BUDGET FIGURES
Data for the Past Year
The past year column (2001) generally presents the actual transactions
and balances as recorded in agency accounts and as summarized in the
central financial reports prepared by the Treasury Department for the
most recently completed fiscal year. Occasionally the budget reports
corrections to data reported erroneously to Treasury but not discovered
in time to be reflected in Treasury's published data. The budget usually
notes the sources of such differences (see Chapter 18, ``Comparison of
Actual to Estimated totals for 2001,'' in the Analytical Perspectives
volume of the budget for a summary of these differences).
Data for the Current Year
The current year column (2002) includes estimates of transactions and
balances based on the amounts of budgetary resources that were available
when the budget was transmitted, including amounts appropriated for the
year. This column also reflects any supplemental appropriations or
rescissions proposed in the budget.
Data for the Budget Year
The budget year column (2003) includes estimates of transactions and
balances based on the amounts of budgetary resources that are estimated
to be available, including new budget authority requested under current
authorizing legislation, and amounts estimated to result from changes in
authorizing legislation and tax laws.
The budget Appendix generally includes the appropriations language for
the amounts proposed to be appropriated under current authorizing
legislation. In a few cases, this language is transmitted later because
the exact requirements are unknown when the budget is transmitted. The
Appendix generally does not include appropriations language for the
amounts that will be requested under proposed legislation; that language
is usually transmitted later, after the legislation is enacted. However,
this year the appropriations language presented in the Appendix includes
the additional amounts required to implement the Administration's
proposal to fully accrue pensions and retirees' health benefits for
Federal employees. Some tables in the budget identify the items for
later transmittal and the related outlays separately. Estimates of the
total requirements for the budget year include both the amounts
requested with the transmittal of the budget and the amounts planned for
later transmittal.
Data for the Outyears
The budget presents estimates for each of the four years beyond the
budget year (2004 through 2007) in order to reflect the effect of budget
decisions on longer term objectives and plans.
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Federal Employee Pensions and Annuitant Health Benefits
The budget presents the Administration's proposal to pay the full
share of accruing employee pensions and annuitant health benefits for
Federal employees in the regular budget schedules on a three-year
comparable basis, as if the proposal had been enacted and effective in
2001 and 2002. However, in the budget Appendix and selected summary and
other tables, budget totals are displayed that remove the effects of the
proposed legislation in all years (see Chapter 14, ``Preview Report,''
in the Analytical Perspectives volume of the budget).
Allowances
The budget may include lump-sum allowances to cover certain
transactions that are expected to increase or decrease budget authority,
outlays, or receipts but are not, for various reasons, reflected in the
program details. For example, the budget might include an allowance to
show the effect on the budget totals of a proposal that would actually
affect many accounts by relatively small amounts, in order to avoid
unnecessary detail in the presentations for the individual accounts.
Congress does not enact the allowances as such.
Baseline
The budget baseline is an estimate of the receipts, outlays, and
deficits or surpluses that would occur if no changes were made to
current laws during the period covered by the budget. The baseline
assumes that receipts and mandatory spending, which generally are
authorized on a permanent basis, will continue in the future as required
by current law. The baseline assumes that the future funding for
discretionary programs, which generally are funded annually, will equal
the most recently enacted appropriation, adjusted for inflation. The
baseline represents the amount of real resources that would be used by
the Government over the period covered by the budget on the basis of
laws currently enacted. (Chapter 15, ``Current Services Estimates,'' in
the Analytical Perspectives volume of the budget provides more
information on the baseline.)
The baseline serves several useful for purposes:
It may warn of future problems, either for Government fiscal
policy as a whole or for individual tax and spending programs;
or it may show the resources available for future use to
reduce the publicly held debt, increase spending programs, or
cut taxes.
It provides a starting point for formulating the President's
budget.
It provides a ``policy-neutral'' benchmark against which the
President's budget and alternative proposals can be compared
to assess the magnitude of proposed changes.
OMB uses it, under the BEA, to determine how much will be
sequestered from each account and the level of funding
remaining after sequestration.
PRINCIPAL BUDGET LAWS
The following basic laws govern the Federal budget process:
Article 1, section 8, clause 1 of the Constitution, which
empowers the Congress to collect taxes.
Article 1, section 9, clause 7 of the Constitution, which
requires appropriations in law before money may be spent from
the Treasury.
Antideficiency Act (codified in Chapters 13 and 15 of Title
31, United States Code), which prescribes rules and procedures
for budget execution.
Chapter 11 of Title 31, United States Code, which prescribes
procedures for submission of the President's budget and
information to be contained in it.
Congressional Budget and Impoundment Control Act of 1974
(Public Law 93-344), as amended. This Act comprises the:
--Congressional Budget Act of 1974, as amended, which prescribes
the congressional budget process; and
--Impoundment Control Act of 1974, which controls certain aspects
of budget execution.
Balanced Budget and Emergency Deficit Control Act of 1985
(Public Law 99-177), as amended, which prescribes rules and
procedures (including ``sequestration'') designed to eliminate
excess spending.
Budget Enforcement Act of 1990 (Title XIII, Public Law 101-
508), which significantly amended key laws pertaining to the
budget process, including the Congressional Budget Act and the
Balanced Budget and Emergency Deficit Control Act. The Budget
Enforcement Act of 1997 (Title X, Public Law 105-33) extended
the BEA requirements through 2002 (2006 in part) and altered
some of the requirements. The requirements generally referred
to as BEA requirements (discretionary spending limits, pay-as-
you-go, sequestration, etc.) are part of the Balanced Budget
and Emergency Deficit Control Act.
Federal Credit Reform Act of 1990 (as amended by the Budget
Enforcement Act of 1997), a part of the Budget Enforcement Act
of 1990, which amended the Congressional Budget Act to
prescribe the budget treatment for Federal credit programs.
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Government Performance and Results Act of 1993, which
emphasizes managing for results. It requires agencies to
prepare strategic plans, annual performance plans, and annual
performance reports.
GLOSSARY OF BUDGET TERMS
Advance appropriation means appropriations of new budget authority
that become available one or more fiscal years beyond the fiscal year
for which the appropriation act was passed.
Advance funding means appropriations of budget authority provided in
an appropriations act to be used, if necessary, to cover obligations
incurred late in the fiscal year for benefit payments in excess of the
amount specifically appropriated in the act for that year, where the
budget authority is charged to the appropriation for the program for the
fiscal year following the fiscal year for which the appropriations act
is passed.
Agency means a department or establishment of the Government.
Allowance means a lump-sum included in the budget to represent certain
transactions that are expected to increase or decrease budget authority,
outlays, or receipts but that are not, for various reasons, reflected in
the program details.
Balances of budget authority means the amounts of budget authority
provided in previous years that have not been outlayed.
Baseline means an estimate of the receipts, outlays, and deficit or
surplus that would result from continuing current law through the period
covered by the budget.
Budget means the Budget of the United States Government, which sets
forth the President's comprehensive financial plan for allocating
resources and indicates the President's priorities for the Federal
Government.
Budget authority (BA) means the authority provided by law to incur
financial obligations that will result in outlays. (For a description of
the several forms of budget authority, see Budget Authority and Other
Budgetary Resources earlier in this chapter.)
Budget totals mean the totals included in the budget for budget
authority, outlays, and receipts. Some presentations in the budget
distinguish on-budget totals from off-budget totals. On-budget totals
reflect the transactions of all Federal Government entities except those
excluded from the budget totals by law. The off-budget totals reflect
the transactions of Government entities that are excluded from the on-
budget totals by law. Under current law, the off-budget totals include
the Social Security trust funds (Federal Old-Age and Survivors Insurance
and Federal Disability Insurance Trust Funds) and the Postal Service
Fund. The budget combines the on- and off-budget totals to derive
unified or consolidated totals for Federal activity.
Budgetary resources mean amounts available to incur obligations in a
given year. The term comprises new budget authority and unobligated
balances of budget authority provided in previous years.
Cap means the legal limits for each fiscal year on the budget
authority and outlays provided by discretionary appropriations.
Cash equivalent transaction means a transaction in which the
Government makes outlays or receives collections in a form other than
cash or the cash does not accurately measure the cost of the
transaction. (For examples, see the section on Outlays earlier in this
chapter.)
Collections mean money collected by the Government that the budget
records as either a receipt, an offsetting collection, or an offsetting
receipt.
Credit program account means a budget account that receives and
obligates appropriations to cover the subsidy cost of a direct loan or
loan guarantee and disburses the subsidy cost to a financing account.
Current services estimate--see baseline.
Deficit means the amount by which outlays exceed receipts in a fiscal
year. It may refer to the on-budget, off-budget, or unified budget
deficit.
Direct loan means a disbursement of funds by the Government to a non-
Federal borrower under a contract that requires the repayment of such
funds with or without interest. The term includes the purchase of, or
participation in, a loan made by another lender. The term also includes
the sale of a Government asset on credit terms of more than 90 days
duration as well as financing arrangements for other transactions that
defer payment for more than 90 days. It also includes loans financed by
the Federal Financing Bank (FFB) pursuant to agency loan guarantee
authority. The term does not include the acquisition of a federally
guaranteed loan in satisfaction of default or other guarantee claims or
the price support loans of the Commodity Credit Corporation. (Cf. loan
guarantee.)
Direct spending--see mandatory spending.
Discretionary spending means budgetary resources (except those
provided to fund mandatory spending programs) provided in appropriations
acts. (Cf. mandatory spending.)
Emergency appropriation means an appropriation that the President and
the Congress have designated as an emergency requirement. Such spending
is not subject to the limits on discretionary spending, if it is
discretionary spending, or the pay-as-you-go rules, if it is mandatory.
Federal funds group refers to the moneys collected and spent by the
Government other than those designated as trust funds. Federal funds
include general, special, public enterprise, and intragovernmental
funds. (Cf. trust funds.)
Financing account means a non-budgetary account (its transactions are
excluded from the budget totals) that records all of the cash flows
resulting from post-
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1991 direct loan obligations or loan guarantee commitments. At least one
financing account is associated with each credit program account. For
programs that make both direct loans and loan guarantees, there are
separate financing accounts for the direct loans and the loan
guarantees. (Cf. liquidating account.)
Fiscal year means the Government's accounting period. It begins on
October 1st and ends on September 30th, and is designated by the
calendar year in which it ends.
Forward funding means appropriations of budget authority that are made
for obligation in the last quarter of the fiscal year for the financing
of ongoing grant programs during the next fiscal year.
General fund means the accounts for receipts not earmarked by law for
a specific purpose, the proceeds of general borrowing, and the
expenditure of these moneys.
Intragovernmental fund--see revolving fund.
Liquidating account means a budget account that records all cash flows
to and from the Government resulting from pre-1992 direct loan
obligations or loan guarantee commitments. (Cf. financing account.)
Loan guarantee means any guarantee, insurance, or other pledge with
respect to the payment of all or a part of the principal or interest on
any debt obligation of a non-Federal borrower to a non-Federal lender.
The term does not include the insurance of deposits, shares, or other
withdrawable accounts in financial institutions. (Cf. direct loan.)
Mandatory spending means spending controlled by laws other than
appropriations acts (including spending for entitlement programs) and
spending for the food stamp program. Although the Budget Enforcement Act
use the term direct spending to mean this, mandatory spending is
commonly used instead. (Cf. discretionary spending.)
Means of financing refers to borrowing, the change in cash balances,
and certain other transactions involved in financing a deficit. The term
is also used to refer to the debt repayment, the change in cash
balances, and certain other transactions involved in using a surplus. By
definition, the means of financing are not treated as receipts or
outlays.
Obligated balance means the cumulative amount of budget authority that
has been obligated but not yet outlayed. (Cf. unobligated balance.)
Obligation means a binding agreement that will result in outlays,
immediately or in the future. Budgetary resources must be available
before obligations can be incurred legally.
Off-budget--see budget totals.
Offsetting collections mean collections that are deducted from gross
budget authority and outlays, rather than added to receipts, and, by
law, are credited directly to expenditure accounts. Usually, they
authorized to be spent for the purposes of the account without further
action by Congress. They result from business-type or market-oriented
activities with the public and other Government accounts. The authority
to spend offsetting collections is a form of budget authority. (Cf.
receipts and offsetting receipts.)
Offsetting receipts mean collections that are deducted from gross
budget authority and outlays, rather than added to receipts, and that
are not authorized to be credited to expenditure accounts. Instead of
being credited to expenditure accounts, they are credited to offsetting
receipt accounts. The legislation that authorizes the offsetting
receipts may require them to be appropriated in annual appropriation
acts before they can be spent. Like offsetting collections, they result
from business-type or market-oriented activities with the public and
other Government accounts. (Cf. receipts, undistributed offsetting
receipts, and offsetting collections.)
On-budget--see budget totals.
Outlay means a payment to liquidate an obligation (other than the
repayment of debt). Outlays are the measure of Government spending.
Outyear estimates means estimates presented in the budget for the
years beyond the budget year (usually four) of budget authority,
outlays, receipts, and other items (such as debt).
Pay-as-you-go (PAYGO) means the requirements of the Budget Enforcement
Act that result in a sequestration if the estimated combined result of
legislation affecting mandatory spending or receipts is a net cost for a
fiscal year.
Public enterprise fund--see revolving fund.
Receipts mean collections that result from the Government's exercise
of its sovereign power to tax or otherwise compel payment and gifts of
money to the Government. They are compared to outlays in calculating a
surplus or deficit. (Cf. offsetting collections and offsetting
receipts.)
Revolving fund means a fund that conducts continuing cycles of
business-like activity, in which the fund charges for the sale of
products or services and uses the proceeds to finance its spending,
usually without requirement for annual appropriations. There are two
types of revolving funds: Public enterprise funds, which conduct
business-like operations mainly with the public, and intragovernmental
revolving funds, which conduct business-like operations mainly within
and between Government agencies.
Scorekeeping means measuring the budget effects of legislation,
generally in terms of budget authority, receipts, and outlays for
purposes of the Budget Enforcement Act.
Sequestration means the cancellation of budgetary resources provided
by discretionary appropriations or mandatory spending legislation,
following various procedures prescribed by the Budget Enforcement Act. A
sequestration may occur in response to a discretionary appropriation
that causes discretionary spending to exceed the discretionary spending
caps or in response to net costs resulting from the combined result of
legislation affecting mandatory spending or receipts (referred to as a
``pay-as-you-go'' sequestration).
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Special fund means a Federal fund accounts for receipts earmarked for
specific purposes and for the expenditure of these receipts. (Cf. trust
fund.)
Subsidy means the same as cost when it is used in connection with
Federal credit programs.
Surplus means the amount by which receipts exceed outlays.
Supplemental appropriation means an appropriation enacted subsequent
to a regular annual appropriations act, when the need for funds is too
urgent to be postponed until the next regular annual appropriations act.
Trust fund refers to a type of account, designated by law as a trust
fund, for receipts or offsetting receipts earmarked for specific
purposes and the expenditure of these receipts. Some revolving funds are
designated as trust funds, and these are called trust revolving funds.
(Cf. special fund and revolving fund.)
Trust funds group refers to the moneys collected and spent by the
Government through trust fund accounts. (Cf., Federal funds group.)
Undistributed offsetting receipts mean offsetting receipts that are
deducted from the Government-wide totals for budget authority and
outlays instead of offset against a specific agency and function. (Cf.
offsetting receipts.)
Unobligated balance means the cumulative amount of budget authority
that is not obligated and that remains available for obligation under
law.
User charges are fees assessed for the provision of Government
services and for the sale or use of Government goods or resources. The
payers of the user charge must be limited in the authorizing legislation
to those receiving special benefits from, or subject to regulation by,
the program or activity beyond the benefits received by the general
public or broad segments of the public. (Cf. user fees.)
User fees are a subset of user charges (as defined above) that are
authorized to be utilized solely to support the program or activity for
which they were levied. (Cf. user charges.)