[Analytical Perspectives]
[Dimensions of the Budget]
[23. Off-Budget Federal Entities and Non-Budgetary Activities]
[From the U.S. Government Printing Office, www.gpo.gov]
[[Page 347]]
23. OFF-BUDGET FEDERAL ENTITIES AND NON-BUDGETARY ACTIVITIES
The unified budget of the Federal Government is divided by law between
on-budget and off-budget entities. Despite this legal distinction, the
off-budget Federal entities engage in the same basic activities of
government as the on-budget entities. They conduct similar programs and
the programs they conduct result in the same kind of spending and
receipts as do the on-budget entities. Off-budget spending channels
economic resources toward particular uses in the same way as does on-
budget spending. Off-budget spending and receipts are discussed further
in the following section on off-budget Federal entities.
The budget is a financial plan for proposing, deciding, and
controlling the allocation of resources by the Federal Government. It
does not include, however, the financial consequences of all Federal
activities. Some of these activities are non-budgetary by their inherent
nature either because the activities are not conducted by agencies of
the Government, such as the financial intermediation provided by
Government-sponsored enterprises; or because the funds involved are
privately owned, such as the deposit funds owned by Indian tribes and
managed on their behalf by the Government in a fiduciary capacity. In
other cases, such as regulation, the Federal activities give rise to
costs that are borne by the private sector rather than the Government.
Although non-budgetary, some of these activities are important
instruments of Federal policy and are discussed in other parts of the
budget along with relevant financial data. They are also discussed
further in the section of this chapter on non-budgetary activities.
TABLE 23-1. COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS \1\
(In billions of dollars)
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Receipts Outlays Surplus or deficit (-)
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Fiscal Year Off- Off- Off-
Total On-budget budget Total On-budget budget Total On-budget budget
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1980................................................... 517.1 403.9 113.2 590.9 477.0 113.9 -73.8 -73.1 -0.7
1981................................................... 599.3 469.1 130.2 678.2 543.0 135.3 -79.0 -73.9 -5.1
1982................................................... 617.8 474.3 143.5 745.7 594.9 150.9 -128.0 -120.6 -7.4
1983................................................... 600.6 453.2 147.3 808.4 660.9 147.4 -207.8 -207.7 -0.1
1984................................................... 666.5 500.4 166.1 851.9 685.7 166.2 -185.4 -185.3 -0.1
1985................................................... 734.1 547.9 186.2 946.4 769.4 176.9 -212.3 -221.5 9.2
1986................................................... 769.2 569.0 200.2 990.4 806.9 183.5 -221.2 -237.9 16.7
1987................................................... 854.4 641.0 213.4 1,004.1 809.3 194.8 -149.7 -168.4 18.6
1988................................................... 909.3 667.8 241.5 1,064.5 860.1 204.4 -155.2 -192.3 37.1
1989................................................... 991.2 727.5 263.7 1,143.8 932.9 210.9 -152.6 -205.4 52.8
1990................................................... 1,032.1 750.4 281.7 1,253.1 1,028.1 225.1 -221.0 -277.6 56.6
1991................................................... 1,055.1 761.2 293.9 1,324.3 1,082.6 241.7 -269.2 -321.4 52.2
1992................................................... 1,091.3 788.9 302.4 1,381.6 1,129.3 252.3 -290.3 -340.4 50.1
1993................................................... 1,154.5 842.5 311.9 1,409.5 1,142.9 266.6 -255.1 -300.4 45.3
1994................................................... 1,258.7 923.7 335.0 1,461.9 1,182.5 279.4 -203.2 -258.8 55.7
1995................................................... 1,351.9 1,000.9 351.1 1,515.9 1,227.2 288.7 -164.0 -226.4 62.4
1996................................................... 1,453.2 1,085.7 367.5 1,560.6 1,259.7 300.9 -107.4 -174.0 66.6
1997................................................... 1,579.4 1,187.4 392.0 1,601.3 1,290.7 310.6 -21.9 -103.2 81.4
1998................................................... 1,722.0 1,306.2 415.8 1,652.7 1,336.1 316.6 69.3 -29.9 99.2
1999................................................... 1,827.6 1,383.2 444.5 1,702.0 1,381.3 320.8 125.6 1.9 123.7
2000................................................... 2,025.5 1,544.9 480.6 1,789.2 1,458.5 330.8 236.2 86.4 149.8
2001................................................... 1,991.4 1,483.9 507.5 1,863.2 1,516.4 346.8 128.2 -32.4 160.7
2002................................................... 1,853.4 1,338.1 515.3 2,011.2 1,655.5 355.7 -157.8 -317.4 159.7
2003................................................... 1,782.5 1,258.7 523.8 2,160.1 1,797.1 363.0 -377.6 -538.4 160.8
2004................................................... 1,880.3 1,345.5 534.7 2,293.0 1,913.5 379.5 -412.7 -568.0 155.2
2005................................................... 2,153.9 1,576.4 577.5 2,472.2 2,070.0 402.2 -318.3 -493.6 175.3
2006 estimate.......................................... 2,285.5 1,675.5 610.0 2,708.7 2,277.7 431.0 -423.2 -602.1 179.0
2007 estimate.......................................... 2,415.9 1,773.5 642.3 2,770.1 2,317.0 453.1 -354.2 -543.4 189.2
2008 estimate.......................................... 2,590.3 1,911.1 679.1 2,813.6 2,347.1 466.5 -223.3 -436.0 212.7
2009 estimate.......................................... 2,714.2 1,998.0 716.2 2,921.8 2,435.2 486.6 -207.6 -437.2 229.7
2010 estimate.......................................... 2,878.2 2,119.7 758.5 3,060.9 2,527.2 533.7 -182.7 -407.5 224.8
2011 estimate.......................................... 3,034.9 2,233.3 801.6 3,239.8 2,648.7 591.1 -204.9 -415.4 210.5
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\1\ Off-budget transactions consist of the Social Security trust funds and the Postal Service fund.
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Off-Budget Federal Entities
The Federal Government has used the unified budget concept as the
foundation for its budgetary analysis and presentation since the 1969
Budget. This concept was developed by the President's Commission on
Budget Concepts in 1967. It calls for the budget to include all the
Federal Government's programs and all the fiscal transactions of these
programs with the public.
Every year since 1971, however, at least one Federal entity has been
declared to be off-budget. Off-budget Federal entities are federally
owned and controlled, but their transactions are excluded from the on-
budget totals by law. When a Federal entity is off-budget, its receipts,
outlays, and surplus or deficit are separated from the on-budget
receipts, outlays, and surplus or deficit; and its budget authority is
also separated from the total budget authority for the on-budget Federal
entities. The Budget Enforcement Act of 1990 excluded off-budget
entities from its general enforcement provisions (except for the
administrative expenses of Social Security); it had separate enforcement
provisions for Social Security.
Off-budget Federal entities conduct programs of the same type as on-
budget entities. Most of the tables in the budget include both on-budget
and off-budget amounts both separately and in combination, or show them
only as a total amount, in order to show the unified budget totals that
measure Federal outlays and receipts comprehensively.
The off-budget Federal entities currently consist of the two Social
Security trust funds, old-age and survivors insurance and disability
insurance, and the Postal Service fund. Social Security was classified
off-budget as of 1986 and the Postal Service fund in 1989. A number of
other entities were declared off-budget at different times before 1986,
but have been classified on-budget by law at least since 1985.
Table 23-1 divides total Federal Government receipts, outlays, and the
surplus or deficit between on-budget and off-budget amounts. Within this
table the Social Security and Postal Service transactions are classified
as off-budget for all years, in order to provide a consistent comparison
over time. Entities that were off-budget at one time but are now on-
budget are classified as on-budget for all years.
The off-budget entities are a significant part of total Federal
spending and receipts. In 2007, off-budget receipts are an estimated 27
percent of total receipts, and off-budget outlays are a smaller, but
still significant, percentage of total outlays at 16 percent. The
estimated unified budget deficit in 2007 is $354 billion--a $543 billion
on-budget deficit partly offset by a $189 billion off-budget surplus.
The off-budget surplus consists almost entirely of the Social Security
surplus. Social Security had small deficits or surpluses from its
inception through the early 1980s, but since the middle 1980s it has had
a large and growing surplus. However, under present law, the surplus is
eventually estimated to decline, turn into a deficit, and never reach
balance again. The long-term challenge of Social Security is addressed
in a chapter of the main budget volume, ``The Nation's Fiscal Outlook,''
and in Chapter 13 of this volume, ``Stewardship.''
Non-Budgetary Activities
Federal credit: budgetary and non-budgetary transactions.--The Federal
Credit Reform Act of 1990 refined budget concepts by distinguishing
between the costs of credit programs, which are budgetary in nature, and
the other transactions of credit programs, which are not. For 1992 and
subsequent years, the costs of direct loans and loan guarantees are
calculated as the present value of estimated cash outflows from the
Government less the present value of estimated cash inflows to the
Government. These costs are similar to the net outlays of other Federal
programs and are included in the budget as outlays of credit program
accounts whenever the Federal Government makes a direct loan or
guarantees a private loan.
All of the other cash transactions with the public that result from
Government credit programs--the disbursement and repayment of loans, the
payment of default claims on guarantees, the collection of interest and
fees, and so forth--are recorded in separate financing accounts. The
financing accounts also receive payments from the credit program
accounts for the costs of direct loans and loan guarantees. The net
transactions of the financing accounts--i.e., the cash transactions with
the public less the amounts received from the program accounts--are not
costs to the Government. Therefore, the net transactions of the
financing accounts are non-budgetary in concept, and the Act excludes
them from the budget. \1\ Because they are non-budgetary in concept,
they are not classified as off-budget Federal entities. Transactions in
the financing accounts do, however, affect the Government's borrowing
requirement, as explained in Chapter 16 of this volume, ``Federal
Borrowing and Debt.''
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\1\ See 505(b) of the Federal Credit Reform Act of 1990.
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The budget outlays of credit programs thus measure the cost of
Government credit decisions, and they record this cost when the credit
assistance is provided. This enables the budget to more effectively
fulfill its purpose of being a financial plan for allocating resources
among alternative uses: comparing the cost of a program with its
benefits, comparing the cost of credit programs with the cost of other
spending programs, and comparing the cost of one type of credit
assistance with the cost of another type.\2\
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\2\ For more explanation of the budget concepts for direct loans and
loan guarantees, see the sections on Federal credit and credit financing
accounts in Chapter 26 of this volume, ``The Budget System and
Concepts.'' The structure of credit reform is further explained in
Chapter VIII.A of the Budget of the United States Government, Fiscal
Year 1992, Part Two, pp. 223-26. The implementation of credit reform
through 1995 is reviewed in Chapter 8, ``Underwriting Federal Credit and
Insurance,'' Analytical Perspectives, Budget of the United States
Government, Fiscal Year 1997, pp. 142-44. Refinements and
simplifications enacted by the Balanced Budget Act of 1997 or provided
by later OMB guidance are explained in Chapter 8, ``Underwriting Federal
Credit and Insurance,'' Analytical Perspectives, Budget of the United
States Government, Fiscal Year 1999, p. 170.
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Credit programs are discussed in Chapter 7 of this volume, ``Credit
and Insurance.''
Deposit funds.--Deposit funds are non-budgetary accounts that record
amounts held by the Government
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temporarily until ownership is determined (such as earnest money paid by
bidders for mineral leases) or held by the Government as an agent for
others (such as State income taxes withheld from Federal employees'
salaries and not yet paid to the States). The largest deposit fund is
the Thrift Savings Fund, which holds stocks and bonds as an agent for
Federal employees who participate in the Thrift Savings Plan, a defined
contribution retirement plan. Because these assets are the property of
the employees and are held by the Government in a fiduciary capacity,
the transactions of the fund are not transactions of the Government
itself and therefore are non-budgetary in concept. The administrative
costs and the transactions of budgetary accounts with the fund are
included in the budget. For similar reasons, the budget excludes funds
that are owned by Indian tribes and held and managed by the Government
in a fiduciary capacity on the tribes' behalf. The Social Security
personal retirement accounts proposed by the Administration would be
owned by individuals, not the Government. Contributions into the
accounts will be recorded as outlays, but the accounts themselves will
be non-budgetary in nature. If these accounts were held by the
Government, it would be only in a fiduciary capacity, and the accounts
would be classified as deposit funds. Deposit funds are further
discussed in a section of Chapter 26 of this volume, ``The Budget System
and Concepts.''
Taxation and tax expenditures.--Taxation provides the Government with
income, which is included in the budget as ``receipts.'' Taxes withdraw
purchasing power from the private sector to finance Government
expenditures. In addition to this primary economic effect, taxation has
important effects on the incentives that affect the allocation of
resources among private uses and the distribution of income among
individuals. These effects depend on the structure of the Federal tax
system, the tax rates and other structural characteristics of each
Federal tax. The effects of taxation on resource allocation and income
distribution can be similar to the effects of outlays, but these effects
are treated as non-budgetary.
One of the ways that the tax system affects resource allocation and
income distribution is through special exclusions, exemptions,
deductions, and similar provisions that have been added to the tax code
over time, and which can be identified by comparing the tax law with an
idealized tax baseline. The revenue discrepancies caused by these
special provisions are defined as ``tax expenditures'' and are discussed
in Chapter 19 of this volume, ``Tax Expenditures.'' That chapter
includes tables with estimates for tax expenditures associated with the
individual and corporation income taxes. The chapter also compares tax
expenditures with spending programs and regulation as alternative
methods for achieving policy objectives, and it provides an illustrative
overview of performance measures that might be used to evaluate tax
expenditures.
The baseline concepts used to identify and measure tax expenditures in
Chapter 19 reflect important ambiguities. Although partly patterned on a
comprehensive income tax, they are subjective, as explained in the tax
expenditure chapter in recent years, and are open to question in a
number of respects. The appendix to Chapter 19 provides the Treasury
Department's preliminary review of the current tax expenditure
presentation, focusing on three issues: (1) using a comprehensive income
tax as a baseline, (2) using a comprehensive consumption tax as a
baseline, and (3) defining negative tax expenditures (i.e., provisions
that cause people to pay more tax than they would under a baseline--such
as the failure to adjust interest, capital gains, and depreciation for
inflation in comparison to a comprehensive income tax).
Government-sponsored enterprises.--The Federal Government has
established several Government-sponsored enterprises, such as Fannie
Mae, Freddie Mac, and the Farm Credit Banks, to provide financial
intermediation for specified public purposes. They are excluded from the
budget because they are privately owned and controlled. However,
primarily because they were established by the Federal Government
originally for public-policy purposes, and because they still serve such
purposes to some extent, estimates of their activities are reported in a
separate chapter of the budget Appendix, and their activities are
analyzed in Chapter 7 of this volume, ``Credit and Insurance.''
Regulation.--Some types of regulation, by requiring the private sector
to make expenditures for specified purposes, such as safety and
pollution control, have economic effects that are similar to budget
outlays or tax expenditures. Regulatory priorities and plans are
described in the annual Regulatory Plan and the semi-annual Unified
Agenda of Federal Regulatory and Deregulatory Actions.\3\
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\3\ The most recent publication was issued by the General Services
Administration's Regulatory Information Service Center in October 2005
and printed in the Federal Register of October 31, 2005 (vol. 70, no.
209), and is available on-line at www.reginfo.gov.
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The Office of Management and Budget began to publish an annual report
on the costs and benefits of Federal regulation in 1997. The latest
report, Validating Regulatory Analysis, was released in December 2005
and also includes a report on unfunded mandates. \4\ The report
estimates the total costs and benefits of major Federal regulations
reviewed by OMB from October 1994 through September 2005 and the impact
of Federal regulation on State, local, and tribal governments. It also
reviews the international literature on the effects of regulation on
national economic growth and performance, reviews the accuracy of
projected benefit and cost estimates by comparing the projected impacts
of a subset of Federal regulation with benefit and cost information
obtained after the regulations have been implemented, and summarizes the
Administration's regulatory reform accomplishments. The draft of the
2006 report will be published in February 2006 for public comment.
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\4\ Office of Information and Regulatory Affairs, Office of Management
and Budget, Validating Regulatory Analysis: 2005 Report to Congress on
the Costs and Benefits of Federal Regulations and Unfunded Mandates on
State, Local, and Tribal Entities (2005).