OFF–BUDGET FEDERAL ENTITIES AND NON–BUDGETARY ACTIVITIES
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.
The off-budget Federal entities conduct programs that
result in the same kind of spending and receipts as
on-budget entities. Despite its off-budget classification,
this spending channels economic resources toward particular
uses in the same way as on-budget spending.
Off-budget spending and receipts are discussed 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 activities that are
related to the Federal Government but that are nonbudgetary
by their inherent nature. In some cases this
is because the activities are not conducted by the Government,
such as the financial intermediation provided
by the Government-sponsored enterprises; or because
they involve funds that 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 this is because the activities are
not costs to the Government itself, such as regulation.
Nevertheless, some of these activities are important instruments
of Federal policy. Some are discussed in the
budget documents, and in certain cases the amounts
involved are presented in conjunction with budget data.
They are discussed in the section of this chapter on
non-budgetary activities.
TABLE 23–1. COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS 1
(In billions of dollars)
Fiscal Year
Receipts Outlays Surplus or deficit (–)
Total On-budget Off-budget Total On-budget Off-budget Total On-budget Off-budget
1975 ............................... 279.1 216.6 62.5 332.3 270.8 61.6 –53.2 –54.1 0.9
1976 ............................... 298.1 231.7 66.4 371.8 301.1 70.7 –73.7 –69.4 –4.3
TQ .................................. 81.2 63.2 18.0 96.0 77.3 18.7 –14.7 –14.1 –0.7
1977 ............................... 355.6 278.7 76.8 409.2 328.7 80.5 –53.7 –49.9 –3.7
1978 ............................... 399.6 314.2 85.4 458.7 369.6 89.2 –59.2 –55.4 –3.8
1979 ............................... 463.3 365.3 98.0 504.0 404.9 99.1 –40.7 –39.6 –1.1
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 ............................... 1,032.0 750.3 281.7 1,253.1 1,028.1 225.1 –221.1 –277.7 56.6
1991 ............................... 1,055.0 761.2 293.9 1,324.3 1,082.6 241.7 –269.3 –321.5 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 ............................... 1,154.4 842.5 311.9 1,409.5 1,142.9 266.6 –255.1 –300.4 45.3
1994 ............................... 1,258.6 923.6 335.0 1,461.9 1,182.5 279.4 –203.2 –258.9 55.7
1995 ............................... 1,351.8 1,000.8 351.1 1,515.8 1,227.2 288.7 –164.0 –226.4 62.4
1996 ............................... 1,453.1 1,085.6 367.5 1,560.5 1,259.6 300.9 –107.5 –174.1 66.6
1997 ............................... 1,579.3 1,187.3 392.0 1,601.2 1,290.6 310.6 –21.9 –103.3 81.4
1998 ............................... 1,721.8 1,306.0 415.8 1,652.6 1,336.0 316.6 69.2 –30.0 99.2
1999 ............................... 1,827.5 1,383.0 444.5 1,701.9 1,381.1 320.8 125.5 1.9 123.7
2000 ............................... 2,025.2 1,544.6 480.6 1,789.1 1,458.3 330.8 236.2 86.3 149.8
2001 ............................... 1,991.2 1,483.7 507.5 1,863.0 1,516.2 346.8 128.2 –32.5 160.7
2002 ............................... 1,853.2 1,337.9 515.3 2,011.0 1,655.3 355.7 –157.8 –317.5 159.7
2003 ............................... 1,782.3 1,258.5 523.8 2,159.9 1,796.9 363.0 –377.6 –538.4 160.8
2004 ............................... 1,880.1 1,345.3 534.7 2,292.2 1,912.7 379.5 –412.1 –567.4 155.2
2005 estimate ................ 2,052.8 1,491.5 561.4 2,479.4 2,080.0 399.4 –426.6 –588.5 162.0
2006 estimate ................ 2,177.6 1,584.4 593.2 2,567.6 2,144.3 423.3 –390.1 –559.9 169.9
2007 estimate ................ 2,344.2 1,715.0 629.2 2,656.3 2,221.4 434.9 –312.1 –506.4 194.3
2008 estimate ................ 2,507.0 1,842.5 664.6 2,757.8 2,308.1 449.8 –250.8 –465.6 214.8
2009 estimate ................ 2,650.0 1,949.3 700.7 2,882.9 2,412.3 470.6 –232.9 –463.0 230.1
2010 estimate ................ 2,820.9 2,077.7 743.2 3,028.2 2,537.3 490.9 –207.3 –459.6 252.3
1 Off-budget transactions consist of the social security trust funds and the Postal Service fund for all years.
378 ANALYTICAL PERSPECTIVES
1 See sec. 505(b) of the Act.
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 9, ‘‘Underwriting Federal Credit and Insurance,’’ Analytical Perspectives,
Budget of the United States Government, Fiscal Year 1999, p. 170.
Off-Budget Federal Entities
The Federal Government has used the unified budget
concept as the foundation for its budgetary analysis
and presentation since the 1969 budget. This concept
was developed by the President’s Commission on Budget
Concepts in 1967. It calls for the budget to include
all the Federal Government’s programs and all the fiscal
transactions of these programs with the public.
Every year since 1971, however, at least one Federal
entity has been off-budget. Off-budget Federal entities
are federally owned and controlled, but their transactions
are excluded from the on-budget totals by law.
When a Federal entity is off-budget, its receipts, outlays,
and surplus or deficit are not included in the
on-budget receipts, outlays, and surplus or deficit; and
its budget authority is not included in the total budget
authority for the on-budget Federal entities. The Budget
Enforcement Act of 1990 excluded off-budget entities
from general enforcement provisions (except for the administrative
expenses of Social Security), although it
had special enforcement provisions for Social Security.
The off-budget Federal entities conduct programs of
the same type as the on-budget entities. Most of the
tables in the budget documents include the on-budget
and off-budget amounts both separately and in combination,
or show them only as a total amount, in order
to arrive at the unified budget totals that show Federal
outlays and receipts comprehensively.
The off-budget Federal entities currently consist of
the two Social Security trust funds, old-age and survivors
insurance and disability insurance, and the Postal
Service fund. Social Security was classified off-budget
as of 1986 and the much smaller Postal Service fund
in 1989. A number of other entities were off-budget
at different times before 1986 but were classified onbudget
by law in 1985 or earlier.
The preceding table divides the total Federal Government
receipts, outlays, and surplus or deficit between
the on-budget and off-budget amounts. Within this
table the Social Security and Postal Service transactions
are classified as off-budget for all years, in order
to provide 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 2006, the off-budget
receipts are an estimated 27 percent of total receipts,
and the off-budget outlays are a somewhat smaller percentage
of the total. The estimated unified budget deficit
in that year is $390 billion—a $560 billion on-budget
deficit partly offset by a $170 billion off-budget surplus.
The off-budget surplus is virtually the same as
the Social Security surplus. Social Security had a deficit
in the latter 1970s and early 1980s, but since the middle
1980s it has had a large and growing surplus. This
surplus is expected to continue to grow throughout the
period of this table and for some years thereafter. However,
it is estimated to subsequently decline, turn into
a deficit, and never reach balance again under present
law. 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 equivalent
to the outlays of other Federal programs and are included
in the budget as outlays of credit program accounts
when the Federal Government makes a direct
loan or guarantees a private loan.
The complete cash transactions with the public—the
disbursement and repayment of loans, the payment of
default claims on guarantees, the collection of interest
and fees, and so forth—are recorded in separate financing
accounts. The financing accounts also 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 nonbudgetary
in concept, they are not classified as offbudget
Federal entities. Transactions in the financing
accounts do affect the Government’s borrowing requirement,
as explained in chapter 16 of this volume, ‘‘Federal
Borrowing and Debt.’’
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
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
379 23. OFF–BUDGET FEDERAL ENTITIES AND NON–BUDGETARY ACTIVITIES
3 The most recent publication was issued by the Regulatory Information Service Center
in December 2004 and printed in the Federal Register of December 13, 2004 (vol. 69,
no. 238).
4 Office of Information and Regulatory Affairs, Office of Management and Budget, Progress
in Regulatory Reform: 2003 Report to Congress on the Costs and Benefits of Federal Regulations
and Unfunded Mandates on State, Local, and Tribal Entities (2004).
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. 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,’’ and which withdraws 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 composition of the
Federal tax system and the rates and other structural
characteristics of each Federal tax. The latter effects
of taxation on resource allocation and income distribution
are in many ways analogous to the effects of outlays,
but these effects are not recorded as budget outlays
nor are they measured by budget receipts.
Some of the effects of taxes on resource allocation
and income distribution, but not all, arise from special
exclusions, exemptions, deductions, and similar provisions
that are identified by comparing the tax law with
a baseline. Revenue losses caused by these special provisions
are defined as ‘‘tax expenditures’’ and are discussed
in chapter 19 of this volume, ‘‘Tax Expenditures.’’
The 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 have 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 Treasury Department
has therefore begun to review the tax expenditure
presentation. The appendix to chapter 19 provides
a review, 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 for publicpolicy
purposes, 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 have economic
effects that are similar to budget outlays or tax
expenditures by requiring the private sector to make
expenditures for specified purposes, such as safety and
pollution control. The regulatory planning process is
described annually in The Regulatory Plan and the Unified
Agenda of Federal Regulatory and Deregulatory Actions.
3
The Office of Management and Budget began to publish
a report on the costs and benefits of Federal regulation
in 1997. The latest report, Progress in Regulatory
Reform, was released in December 2004 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 1993
through September 2003 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 economic literature on the impacts
of regulation on manufacturing, and summarizes the
Administration’s regulatory reform accomplishments.
The draft of the 2005 report will be published in February
2005 for public comment.
