Basic Federal Budgeting Terminology
Bill Heniff Jr.
Analyst on Congress and the Legislative Process
November 29, 2010
Congressional Research Service
7-5700
www.crs.gov
98-410
CRS Report for Congress
P
repared for Members and Committees of Congress
Basic Federal Budgeting Terminology
n its most elemental form, the federal budget is a comprehensive accounting of the
government’s spending, revenues, and borrowing. This report provides a brief overview of the
I basic terminology and concepts used in the federal budget process.
Fiscal Year
The fiscal year is the accounting period of the federal government. It begins on October 1 and
ends on September 30 of the next calendar year. Each fiscal year is identified by the calendar year
in which it ends and commonly is referred to as “FY.” For example, FY2011 began October 1,
2010, and ends September 30, 2011.
Spending
The key terms of federal spending are budget authority, obligations, outlays, and spendout rate.
Congress and the President enact budget authority in law. Budget authority allows federal
agencies to incur obligations, such as entering into contracts, employing personnel, and
submitting purchase orders. Outlays represent the actual payment of these obligations, usually in
the form of electronic transfers or checks issued by the Treasury Department. The rate at which
budget authority becomes outlays in a fiscal year is called the spendout rate, or the outlay rate.
The spendout rate varies among agencies’ accounts depending on the timing of activity in each
account.
Budget authority may be made available for obligation for a one-year, multi-year, or no-year
period. One-year, or annual, budget authority is available for obligation only during a specific
fiscal year, and any unobligated authority expires at the end of that fiscal year; multi-year budget
authority is available for a period longer than one fiscal year; and no-year budget authority is
available for an indefinite period.
Typically, new budget authority is provided in the form of permanent appropriations or annual
appropriations. Permanent appropriations provide new budget authority each year without any
annual legislative action. Usually, this type of new budget authority is provided in legislation
authorizing the program, such as in the case of most entitlement programs (e.g., Social Security
benefits). Annual appropriations, on the other hand, generally provide new budget authority for
the particular fiscal year for which they were enacted. In some cases, new budget authority in
annual appropriations acts is made available for more than one year, or for a future fiscal year.
Annual appropriations are provided in the regular appropriations bills enacted by Congress and
the President each year. Annual appropriations also may be provided in supplemental
appropriations acts and continuing appropriations acts (often referred to as continuing
resolutions).
New budget authority also may be made available to agencies in the form of borrowing authority,
contract authority, and the authority to spend offsetting collections. Borrowing authority and
contract authority allow agencies to borrow funds and enter into contracts prior to enactment of
appropriations. Spending authority from offsetting collections, such as fees for certain market-
oriented activities, may be provided to allow agencies to obligate and spend these funds.
Offsetting collections are deducted from gross budget authority and outlays at the account or
higher level.
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Basic Federal Budgeting Terminology
Revenues
Revenues, also known as receipts, are the funds collected from the public primarily as a result of
the federal government’s exercise of its sovereign powers. Most of the federal government’s
revenues consist of receipts from individual income taxes, social insurance (payroll) taxes, and
corporate income taxes. Preferential provisions, such as tax exemptions, deductions, and credits,
which reduce government receipts, are called tax expenditures. Excise taxes, duties, gifts, and
miscellaneous receipts are other sources of federal revenues.
Offsetting collections are not classified as revenues, but instead are treated as negative spending
(i.e., as noted above, deducted from gross budget authority and outlays).
Budget Deficit or Surplus
The difference between government revenues and outlays in a fiscal year equals the budget deficit
or surplus. A budget deficit results when outlays exceed revenues; a budget surplus results when
revenues exceed outlays. What is counted as government revenues and outlays, however, depends
on the presentation of the federal budget. The federal budget typically is presented in the form of
the unified budget, reflecting a unified budget deficit or surplus. The unified budget, or
consolidated budget, includes the revenues and outlays of all budget accounts, including federal
funds and trust funds, regardless of whether they are designated in law as on-budget or off-
budget. The unified budget represents a comprehensive picture of the federal government’s
financial activities.
The federal budget also is presented to distinguish between on-budget and off-budget accounts.
That is, the federal budget also presents an on-budget deficit or surplus and an off-budget deficit
or surplus. The on-budget deficit or surplus includes all accounts not designated in law as off-
budget. The off-budget deficit or surplus includes those accounts designated in law as off-budget.
Currently, there are three accounts designated in law as off-budget: the Federal Old-Age and
Survivors Insurance Trust Fund (Social Security retirement), the Federal Disability Insurance
Trust Fund (Social Security disability), and the Postal Service Fund.
Debt
The gross federal debt, almost all of which is subject to statutory limitation, consists of the debt
held by the public plus the debt held by government accounts. The debt held by the public is the
total net amount borrowed from the public by the federal government to cover its budget deficits
over the years. Usually, analysts use the debt held by the public as the measure of the impact of
the federal government’s borrowing on the economy. It is this portion of federal debt that not only
reflects the amount of the nation’s wealth invested in federal government securities rather than in
private investment, but also determines the level of real resources the government must acquire to
make interest and principal payments. The debt held by government accounts is the total net
amount of federal debt issued to specialized federal accounts, primarily trust funds. It represents
internal transactions of the federal government.
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Basic Federal Budgeting Terminology
Author Contact Information
Bill Heniff Jr.
Analyst on Congress and the Legislative Process
wheniff@crs.loc.gov, 7-8646
Congressional Research Service
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