Order Code 98-410 GOV
Updated March 5, 2001
CRS Report for Congress
Received through the CRS Web
Basic Federal Budgeting Terminology
Bill Heniff Jr.
Consultant in American National Government
Government and Finance Division
In its most elemental form, the federal budget is a comprehensive accounting of the
government’s spending, revenues, and borrowing. This fact sheet provides a brief
overview of the basic terminology and concepts used in the federal budget process.
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 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 13 regular appropriations bills enacted by Congress and the President each
year. Annual appropriations also may be provided in continuing resolutions and
supplemental appropriations acts.
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
Congressional Research Service ˜ The Library of Congress
CRS-2
contracts without advance appropriations. However, the 1974 Congressional Budget Act
(P.L. 93-344) has curbed this practice for the past 20-odd years. 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.
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 taxes (or payroll taxes, such as Social Security and Medicare 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 usually are deducted from the budget authority and outlays
made available to agencies, and are not classified as revenue.
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. However, what is counted as
government revenues and outlays depends on the presentation of the federal budget. For
the past several decades, the focus of debates about the federal budget deficit or surplus
has been on the
consolidated budget. The consolidated budget, also referred to as the
unified budget, consists of the two main types of funds: federal funds and trust funds.
Federal funds comprise general government receipts not earmarked for any specific
government activity. Trust funds are designated by law to a particular purpose. For
example, the Hospital Insurance trust funds are earmarked to Medicare Part A benefits.
The consolidated budget represents a comprehensive picture of the federal government’s
financial activities.
Federal 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.