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ANALYTICAL PERSPECTIVES BUDGET OF THE UNITED STATES GOVERNMENT Fiscal Year 2005 THE BUDGET DOCUMENTS Budget of the United States Government, Fiscal Year 2005 contains the Budget Message of the President, information on the President’s budget and management priorities, and budget overviews organized by agency, including assessments of their performance. Analytical Perspectives, Budget of the United States Government, Fiscal Year 2005 contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective. This volume includes economic and accounting analyses; information on Federal receipts and collections; analyses of Federal spending; detailed information on Federal borrowing and debt; baseline or current services estimates; and other technical presentations. This year, the Analytical Perspectives volume contains a CD–ROM with certain information that was previously published in the budget documents, such as evaluations and analyses of programs and management at Federal departments and agencies, as well as lists of Federal programs by agency and account and by budget function. Historical Tables, Budget of the United States Government, Fiscal Year 2005 provides data on budget receipts, outlays, surpluses or deficits, Federal debt, and Federal employment over an extended time period, generally from 1940 or earlier to 2009. To the extent feasible, the data have been adjusted to provide consistency with the 2005 Budget and to provide comparability over time. Budget of the United States Government, Fiscal Year 2005— Appendix contains detailed information on the various appropriations and funds that constitute the budget and is designed primarily for the use of the Appropriations Committee. The Appendix contains more detailed financial information on individual programs and appropriation accounts than any of the other budget documents. It includes for each agency: the proposed text of appropriations language, budget schedules for each account, new legislative proposals, explanations of the work to be performed and the funds needed, and proposed general provisions applicable to the appropriations of entire agencies or group of agencies. Information is also provided on certain activities whose outlays are not part of the budget totals. AUTOMATED SOURCES OF BUDGET INFORMATION The information contained in these documents is available in electronic format from the following sources: Budget CD-ROM. The CD-ROM contains all of the budget documents and software to support reading, printing, and searching the documents. The CD-ROM also has many of the tables in the budget in spreadsheet format. The budget CD–ROM also contains the material on the Analytical Perspectives CD–ROM. Internet. All budget documents, including documents that are released at a future date, will be available for downloading in several formats from the Internet. To access documents through the World Wide Web, use the following address: http://www.whitehouse.gov/omb/budget For more information on access to electronic versions of the budget documents (except CD–ROMs), call (202) 512–1530 in the D.C. area or toll-free (888) 293–6498. To purchase the budget CD–ROM or printed documents call (202) 512-1800. GENERAL NOTES 1. 2. 3. All years referred to are fiscal years, unless otherwise noted. Detail in this document may not add to the totals due to rounding. At the time of this writing, 7 of the 13 appropriations bills for 2004 were not enacted, and the programs covered by them were operating under a continuing resolution. For these programs, references to 2004 spending, including current services or baseline estimates, in the text and tables reflect the conference report on H.R. 2673, the Consolidated Appropriations Bill, 2004. U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 2004 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 TABLE OF CONTENTS Page List of Charts and Tables ............................................................................................. iii Introduction 1. Introduction ....................................................................................................... 3 Performance and Management Assessments 2. Budget and Performance Integration and the Program Assessment Rating Tool (PART) ....................................................................................................... 9 Crosscutting Programs 3. Homeland Security Funding Analysis ............................................................. 25 4. Strengthening Federal Statistics ..................................................................... 41 5. Research and Development .............................................................................. 47 6. Federal Investment ........................................................................................... 63 7. Credit and Insurance ........................................................................................ 75 8. Aid to State and Local Governments ............................................................... 113 9. Integrating Services with Information Technology ........................................ 159 10. Federal Drug Control Funding ......................................................................... 165 Economic Assumptions and Analyses 11. Economic Assumptions ...................................................................................... 169 12. Stewardship ....................................................................................................... 181 13. National Income and Product Accounts .......................................................... 207 Budget Reform Proposals 14. Budget Reform Proposals .................................................................................. 215 Federal Borrowing and Debt 15. Federal Borrowing and Debt ............................................................................ 223 i ii TABLE OF CONTENTS—Continued Page Federal Receipts and Collections 16. Federal Receipts ................................................................................................ 239 17. User Charges and Other Collections ............................................................... 271 18. Tax Expenditures .............................................................................................. 285 Dimensions of the Budget 19. Comparison of Actual to Estimated Totals ..................................................... 329 20. Outlays to the Public, Net and Gross .............................................................. 337 21. Trust Funds and Federal Funds ...................................................................... 339 22. Off-Budget Federal Entities and Non-Budgetary Activities .......................... 345 23. Federal Employment and Compensation ........................................................ 349 Current Services Estimates 24. Current Services Estimates .............................................................................. 357 The Budget System and Concepts 25. The Budget System and Concepts ................................................................... 375 Detailed Functional Table 26. Detailed Functional Table ................................................................................ CD-ROM Federal Programs by Agency and Account 27. Federal Programs by Agency and Account ...................................................... CD-ROM Program Assessment Rating Tool (PART), Program Summaries 28. PART Summaries .............................................................................................. CD-ROM LIST OF CHARTS AND TABLES iii LIST OF CHARTS AND TABLES LIST OF CHARTS Page 5–1. 5–2. 5–3. 7–1. 12–1. 12–2. 12–3. 12–4. 12–5. 12–6. 12–7. 12–8. 16–1. 19–1. 25–1. Federal R&D Spending ....................................................................................................................... PART Assessments of 58 R&D Programs ......................................................................................... Funding for Academic Earmarks ....................................................................................................... Face Value of Federal Credit Outstanding ....................................................................................... A Presentation of the Federal Government’s Financial Condition ................................................. Net Federal Liabilities ........................................................................................................................ Health Care Cost Alternatives ........................................................................................................... Alternative Discretionary Spending Assumptions ............................................................................ Alternative Productivity Assumptions .............................................................................................. Alternative Fertility Assumptions ..................................................................................................... Alternative Mortality Assumptions ................................................................................................... Alternative Immigration Assumptions .............................................................................................. Major Provisions of the Tax Code Under the 2001 and 2003 Tax Cuts ......................................... Illustrative Range of Budget Outcomes ............................................................................................ Relationship of Budget Authority to Outlays for 2005 .................................................................... 47 50 52 98 183 189 192 193 194 195 195 196 240 335 386 LIST OF TABLES Page Performance and Management Assessments Budget and Performance Integration and the Program Assessment Rating Tool: 2–1. The PART in Sections ................................................................................................................ 2–2. The PART Questionnaire ........................................................................................................... 2–3. The PART, By Category ............................................................................................................. 2–4. Program Assessment Rating Tool (PART) ................................................................................ Crosscutting Programs Homeland Security Funding Analysis: 3–1. Homeland Security Funding By Agency ................................................................................... 3–2. Homeland Security Funding By National Strategy Mission Area ......................................... 3–3. Intelligence and Warning Funding ........................................................................................... 3–4. Border and Transportation Security Funding .......................................................................... 3–5. Domestic Counterterrorism Funding ........................................................................................ 3–6. Protecting Critical Infrastructure and Key Assets Funding ................................................... 3–7. Defending Catastrophic Threats Funding ................................................................................ 3–8. Emergency Preparedness and Response Funding ................................................................... 3–9. Estimates of Non-Federal Homeland Security Expenditures ................................................. 3–10. Discretionary Fee-funded Homeland Security Activities by Agency ...................................... 3–11. Mandatory Homeland Security Funding by Agency ................................................................ 3–12. Baseline Estimates—Total Homeland Security Funding by Agency ..................................... 3–13. Homeland Security Funding by Budget Function ................................................................... 3–14. Baseline Estimates—Homeland Security Funding by Budget Function ............................... Appendix Homeland Security Mission Funding by Agency and Budget Account .................................. 10 11 12 13 26 27 27 28 30 31 32 33 36 36 37 37 38 38 CD-ROM v vi ANALYTICAL PERSPECTIVES LIST OF TABLES—Continued Page Strengthening Federal Statistics: 4–1. 2003–2005 Budget Authority for Principal Statistical Agencies ............................................ Research and Development: 5–1. Permanent Extension of the Research and Experimentation Tax Credit ............................. 5–2. Federal Research and Development Spending ......................................................................... 5–3. Federal Science and Technology Budget .................................................................................. 5–4. Agency Detail of Selected Interagency R&D Efforts ............................................................... Federal Investment: 6–1. Composition of Federal Investment Outlays ............................................................................ 6–2. Federal Investment Budget Authority and Outlays: Grant and Direct Federal Programs 6–3. Summary of PART Ratings and Scores for Direct Federal Investment Programs ............... 6–4. Net Stock of Federally Financed Physical Capital .................................................................. 6–5. Net Stock of Federally Financed Research and Development ................................................ 6–6. Net Stock of Federally Financed Education Capital ............................................................... Credit and Insurance: Text Tables: Summary of PART Scores .......................................................................................................... Growth of GSEs in the Last Decade ......................................................................................... Capital Held by the GSEs and 10 of the Largest U.S. Financial Institutions ...................... 7–1. Estimated Future Cost of Outstanding Federal Credit Programs ......................................... 7–2. Reestimates of Credit Subsidies on Loans Disbursed Between 1992–2003 .......................... 7–3. Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2003–2005 ....................... 7–4. Loan Guarantee Subsidy Rates, Budget Authority, and Loan Levels 2003–2005 ................ 7–5. Summary of Federal Direct Loans and Loan Guarantees ...................................................... 7–6. Direct Loan Write-Offs and Guaranteed Loan Terminations for Defaults ............................ 7–7. Appropriations Acts Limitations on Credit Loan Levels ......................................................... 7–8. Face Value of Government-Sponsored Enterprise Lending .................................................... 7–9. Lending and Borrowing By Government-Sponsored Enterprises (GSEs) .............................. 7–10. Direct Loan Transactions of the Federal Government ............................................................ 7–11. Guaranteed Loan Transactions of the Federal Government .................................................. Aid to State and Local Governments: 8–1. Federal Grant Outlays by Agency ............................................................................................. 8–2. Summary of PART Ratings and Scores for Grants to State and Local Governments .......... 8–3. Trends in Federal Grants to State and Local Governments ................................................... 8–4. Federal Grants to State and Local Government’s Budget Authority and Outlays ............... 8–5. Summary of Programs by Agency, Bureau, and Program ...................................................... 8–6. Summary of Programs by State ................................................................................................ 8–7. National School Lunch Program ............................................................................................... 8–8. Special Supplemental Nutrition Program for Women, Infants, and Children ...................... 8–9. State Administrative Matching Grants for Food Stamp Program ......................................... 8–10. Title I Grants to Local Educational Agencies .......................................................................... 8–11. Special Education—Grants to States ........................................................................................ 8–12. Rehabilitation Services—Vocational Rehabilitation Grants to States ................................... 8–13. State Children’s Health Insurance Program ............................................................................ 8–14. Grants to States for Medicaid ................................................................................................... 8–15. Temporary Assistance for Needy Families (TANF)—Family Assistance Grants .................. 8–16. Child Support Enforcement—Federal Share of State and Local Administrative Costs and Incentives ................................................................................................................................. 8–17. Low Income Home Energy Assistance Program ...................................................................... 8–18. Child Care and Development Block Grant ............................................................................... 8–19. Child Care and Development Fund—Mandatory .................................................................... 46 58 59 61 62 65 66 69 72 73 74 78 81 84 99 100 102 103 104 105 107 109 110 CD-ROM CD-ROM 113 119 120 123 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 vii LIST OF CHARTS AND TABLES LIST OF TABLES—Continued Page 8–20. Child Care and Development Fund—Matching ....................................................................... 8–21. Head Start ................................................................................................................................... 8–22. Foster Care—Title IV–E ............................................................................................................ 8–23. Public Housing Operating Fund ................................................................................................ 8–24. Housing Choice Vouchers .......................................................................................................... 8–25. Public Housing Capital Fund .................................................................................................... 8–26. Community Development Block Grants—Entitlement Grants ............................................... 8–27. Community Development Block Grants—State and Small Cities Programs ........................ 8–28. Airport Improvement Program .................................................................................................. 8–29. Highway Planning and Construction ........................................................................................ 8–30. Federal Transit Capital Investment Grants (Fixed Guideway Modernization) .................... 8–31. Federal Transit Urbanized Area—Formula Grants (Section 5307) ....................................... 8–32. Federal Transit Formula and Research Grants ....................................................................... Integrating Services with Information Technology: 9–1. Effectiveness of Agency’s IT Management and E-Gov Processes ........................................... 9–2. Status of Presidential E-Government Initiatives ..................................................................... Federal Drug Control Funding: 10–1. Federal Drug Control Funding, FY 2003–2005 ........................................................................ Economic and Accounting Analyses Economic Assumptions and Analyses: 11–1. Economic Assumptions ............................................................................................................... 11–2. Comparison of Economic Assumptions ..................................................................................... 11–3. Comparison of Economic Assumptions in the 2004 and 2005 Budgets ................................. 11–4. Sources of Change in Budget Totals ......................................................................................... 11–5. Adjusted Structural Balance ..................................................................................................... 11–6. Sensitivity of the Budget to Economic Assumptions ............................................................... Stewardship: 12–1. Government Assets and Liabilities ........................................................................................... 12–2. Long-Run Budget Projections of 2005 Budget Policy .............................................................. 12–3. Actuarial Present Values Over a 75-Year Projection Period .................................................. 12–4. National Wealth .......................................................................................................................... 12–5. Economic and Social Indicators ................................................................................................. National Income and Product Accounts: 13–1. Federal Transactions in the National Income and Product Accounts, 2003–2005 ............... 13–2. Relationship of the Budget to the Federal Sector, NIPAs ...................................................... 13–3. Federal Receipts and Expenditures in the NIPAs, Quarterly, 2003–2005 ............................ Budget Reform Proposals Budget Reform Proposals: 14–1. General Purpose Discretionary Caps and Adjustments .......................................................... 14–2. Transportation Guarantee for Highways and Mass Transit Spending .................................. 14–3. PAYGO Proposals ....................................................................................................................... Federal Borrowing and Debt Federal Borrowing and Debt: 15–1. Trends in Federal Debt Held by the Public ............................................................................. 15–2. Federal Government Financing and Debt ................................................................................ 15–3. Agency Debt ................................................................................................................................ 15–4. Debt Held by Government Accounts ......................................................................................... 15–5. Federal Funds Financing and Change in Debt Subject to Statutory Limit .......................... 15–6. Foreign Holdings of Federal Debt ............................................................................................. 146 147 148 149 150 151 152 153 154 155 156 157 158 CD-ROM CD-ROM 165 173 175 176 177 178 180 188 191 199 201 203 209 211 212 215 216 216 223 225 229 230 233 235 viii ANALYTICAL PERSPECTIVES LIST OF TABLES—Continued Page Federal Receipts and Collections Federal Receipts: 16–1. Receipts by Source–Summary ................................................................................................... 16–2. Effect on Receipts of Changes in the Social Security Taxable Earnings Base ...................... 16–3. Effect of Proposals on Receipts .................................................................................................. 16–4. Receipts by Source ...................................................................................................................... User Charges and Other Collections: 17–1. Gross Outlays, User Charges, Other Offsetting Collections and Receipts from the Public, and Net Outlays ...................................................................................................................... 17–2. Total User Charge Collections ................................................................................................... 17–3. User Charge Proposals ............................................................................................................... 17–4. Offsetting Collections and Receipts from the Public ............................................................... 17–5. Offsetting Receipts by Type ....................................................................................................... Tax Expenditures: 18–1. Estimates of Total Income Tax Expenditures .......................................................................... 18–2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes ................. 18–3. Income Tax Expenditures Ranked by Total 2005–2009 Projected Revenue Effect ............... 18–4. Present Value of Selected Tax Expenditures for Activity in Calendar Year 2003 ................ 18–5. Outlay Equivalent Estimates for Tax Expenditures ............................................................... Appendix: 1. Comparison of Current Tax Expenditures with Those Implied by a Comprehensive Income Tax .................................................................................................................................. 2. Comparison of Current Tax Expenditures with Those Implied by a Comprehensive Consumption Tax ........................................................................................................................... 3. Revised Tax Expenditure Estimates ......................................................................................... Dimensions of the Budget Comparison of Actual to Estimated Totals: 19–1. Comparison of Actual 2003 Receipts with the Initial Current Services Estimates .............. 19–2. Comparison of Actual 2003 Outlays with the Initial Current Services Estimates ............... 19–3. Comparison of the Actual 2003 Deficit with the Initial Current Services Estimate ............ 19–4. Comparison of Actual and Estimated Outlays for Mandatory and Related Programs Under Current Law ................................................................................................................ 19–5. Reconciliation of Final Amounts for 2003 ................................................................................ 19–6. Comparison of Actual and Estimated Surpluses or Deficits Since 1982 ............................... 19–7. Differences Between Estimated and Actual Surpluses or Deficits for Five-year Budget Estimates Since 1982 .............................................................................................................. Outlays to Public, Net and Gross: 20–1. Total Outlays, Net and Gross of Offsetting Collections and Receipts from the Public, by Agency, 2003–2005 .................................................................................................................. Trust Funds and Federal Funds: 21–1. Receipts, Outlays, and Surplus or Deficit by Fund Group ...................................................... 21–2. Income, Outgo, and Balances of Trust Funds Group .............................................................. 21–3. Relationship of Total Federal Fund and Trust Fund Receipts to Unified Budget Receipts, Fiscal Year 2003 ...................................................................................................................... 21–4. Income, Outgo, and Balances of Major Trust Funds ............................................................... 21–5. Income, Outgo, and Balances of Selected Federal Funds ....................................................... Off-Budget Federal Entities and Non-Budgetary Activities: 22–1. Comparison of Total, On-Budget, and Off-Budget Transactions ............................................ Federal Employment and Compensation: 23–1. Federal Employment in the Executive Branch ........................................................................ 23–2. Total Federal Employment (Total Positions Filled) ................................................................. 239 230 265 269 271 274 275 281 282 287 290 294 296 296 324 325 325 329 330 331 332 333 334 335 337 339 341 342 CD-ROM CD-ROM 345 350 351 ix LIST OF CHARTS AND TABLES LIST OF TABLES—Continued Page 23–3. Total Federal Employment (Full-Time Equivalents) ............................................................... 23–4. Personnel Compensation and Benefits ..................................................................................... Current Service Estimates Current Service Estimates: 24–1. Baseline Category Totals ........................................................................................................... 24–2. Alternative Baseline Assumptions ............................................................................................ 24–3. Summary of Economic Assumptions ......................................................................................... 24–4. Beneficiary Projections for Major Benefit Programs ............................................................... 24–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline 24–6. Baseline Receipts by Source ...................................................................................................... 24–7. Change in Baseline Outlay Estimates by Category ................................................................. 24–8. Current Services Outlays by Function ..................................................................................... 24–9. Current Services Outlays by Agency ........................................................................................ 24–10. Current Services Budget Authority by Function ..................................................................... 24–11. Current Services Budget Authority by Agency ........................................................................ 24–12. Current Services Budget Authority by Function, Category and Program ............................. 24–13. Current Services Outlays by Function, Category and Program ............................................. 352 353 357 359 360 361 362 366 367 368 369 370 371 CD-ROM CD-ROM Budget System and Concepts and Glossary The Budget System and Concepts: 25–1. Totals for the Budget and the Federal Government ............................................................... 379 Detailed Functional Tables Detailed Functional Tables: 26–1. Budget Authority and Outlays by Function, Category and Program ..................................... CD-ROM Federal Programs by Agency and Account Federal Programs by Agency and Account: 27–1. The Budget for Fiscal Year 2005 by Agency and Account ...................................................... CD-ROM Program Rating Assessment Tool (PART), Program Summaries PART Summaries: PART Summary File .................................................................................................................. PART Data File—Funding, Scores, and Ratings ..................................................................... CD-ROM CD-ROM INTRODUCTION 1 1. INTRODUCTION Purpose of This Volume The Analytical Perspectives volume presents analyses that highlight specific subject areas or provide other significant budget data that place the budget in context. The volume presents crosscutting analyses of Government programs and activities from various perspectives. Presidential budgets have included separate analytical presentations of this kind for many years. The 1947 Budget and subsequent budgets included a separate section entitled ‘‘Special Analyses and Tables’’ that covered four or more topics. For the 1952 Budget, this section was expanded to have ten analyses, including many subjects that are still covered today, such as receipts, investment, credit programs, and aid to State and local governments. With the 1967 Budget this material became a separate volume entitled ‘‘Special Analyses,’’ and included 13 chapters. The material has generally remained a separate volume since then, with the exception of the budgets for 1991–1994, when the material was included in one large volume with other budget material. Beginning with the 1995 Budget, the volume has been named Analytical Perspectives. Changes from the 2004 Analytical Perspectives Volume The volume this year reflects an interest in publishing more information on program performance, so that Executive agencies, the Congress, and the public will become increasingly informed about how well programs are performing. Better performance information can help managers improve program effectiveness, and can help Executive and Congressional policymakers improve the allocation of public resources. The performance assessment information is summarized in Chapter 2, ‘‘Performance and Management Assessments,’’ and discussed in many other chapters, especially those in the section, ‘‘Crosscutting Programs.’’ In order to present a smaller document, this year many tables that have been included in prior years are no longer printed in this volume but are included as part of the budget on the enclosed Analytical Perspectives CD ROM. A list of the items on the CD ROM is in the Table of Contents of this volume. The next section discusses briefly the material covered in each chapter, and technical changes in the chapter from last year’s volume. Summary of the Chapters in This Volume Introduction 1. Introduction. This chapter highlights the changes in this volume compared to last year, particularly the new emphasis on performance in a crosscutting context. Performance and Management Assessments 2. Budget and Performance Integration and the Program Assessment Rating Tool. This chapter summarizes this year’s performance and management assessments, based primarily on the Program Assessment Rating Tool (PART). The enclosed Analytical Perspectives CD ROM includes one-page summaries of the program evaluations. This material is similar to the separate volume published last year, FY 2004 Performance and Management Assessments. Details of each of the assessments can be found on the OMB web page under ‘‘Budget Documents’’ at http://www.whitehouse.gov/ omb/ . Crosscutting Programs 3. Homeland Security Funding Analysis. This chapter discusses homeland security funding and provides information on homeland security program requirements, performance, and priorities. Additional detailed information is available on the enclosed Analytical Perspectives CD ROM. 4. Strengthening Federal Statistics. This chapter discusses the development of standards that principal statistical programs can use to assess their performance and presents highlights of their 2005 Budget proposals. 5. Research and Development. This chapter presents a crosscutting review of research and development funding in the budget, including discussions about priorities, performance, and coordination across agencies. 6. Federal Investment. This chapter discusses spending across Federal agencies that yields long-term benefits, and presents information on physical capital, research and development, and education and training. For the first time the chapter includes material on the PART assessments related to direct Federal investment spending. There is also a section on capital stocks. The sections from last year on capital budgeting and supple- 3 4 mental capital spending are not included this year because they vary little from year to year, and the reader may refer to last year’s chapter for this material. 7. Credit and Insurance. This chapter provides crosscutting analyses of the roles and risks of Federal credit and insurance programs and government sponsored enterprises (GSEs), as well as criteria for evaluation. It covers the categories of Federal credit (housing, education, business including farm operations, and international) and insurance programs (deposit insurance, pension guarantees, disaster insurance, and insurance against security-related risks). Two detailed tables that were part of this chapter last year, ‘‘Table 9–9. Direct Loan Transactions of the Federal Government’’ and ‘‘Table 9–10. Guaranteed Loan Transactions of the Federal Government’’ appear this year on the enclosed Analytical Perspectives CD ROM as Tables 7–10 and 7–11. 8. Aid to State and Local Governments. This discussion presents crosscutting information on Federal grants to State and local governments, including Administration proposals. For the first time the chapter includes material on the PART assessments related to grants. An Appendix to this chapter includes Stateby-State spending estimates of major grant programs. 9. Integrating Services with Information Technology. This chapter presents a crosscutting look at investments in information technology (IT). The chapter describes various aspects of the Administration’s information technology agenda, with special emphasis on the performance, efficiency, and effectiveness of the Government’s IT investments. Two detailed tables that were part of this chapter last year, ‘‘Table 22–1. Effectiveness of Agency’s IT Management and E-Gov Processes’’ and Table 22–2, which reported on the status of E-Gov initiatives, appear this year on the enclosed Analytical Perspectives CD ROM as Table 9–1, ‘‘Effectiveness of Agency’s IT Management & E-Gov Processes’’ and Table 9–2, ‘‘Status of Presidential E-Government Initiatives.’’ 10. Federal Drug Control Funding. This section presents estimated drug control funding for Federal departments and agencies. Economic Assumptions and Analyses 11. Economic Assumptions. This discussion reviews recent economic developments; presents the Administration’s assessment of the economic outlook, including the expected effects of macroeconomic policies; and compares the economic assumptions on which the budget is based with the assumptions for last year’s budget and those of other forecasters. 12. Stewardship. This chapter assesses the Government’s financial condition in an integrated framework that includes Federal assets and liabilities; 75-year projections of the Federal budget under alternative discre- ANALYTICAL PERSPECTIVES tionary spending, health cost, productivity, and demographic assumptions; actuarial estimates for the shortfalls in Social Security and Medicare; a national balance sheet that shows the Federal contribution to national wealth; and a table of economic and social indicators. Together these elements serve similar analytical functions to a business’s accounting statements. 13. National Income and Product Accounts. This chapter discusses how Federal receipts and outlays fit into the framework of the National Income and Product Accounts (NIPAs) prepared by the Department of Commerce. The NIPAs measures are the basis for reporting Federal transactions in the gross domestic product (GDP) and for analyzing the effect of the budget on aggregate economic activity. Budget Reform Proposals 14. Budget Reform Proposals. This chapter is a brief description of the Administration’s budget reform agenda for addressing the need for responsible budgeting and other reforms. Federal Borrowing and Debt 15. Federal Borrowing and Debt. This chapter analyzes Federal borrowing and debt and explains the budget estimates. It includes sections on special topics such as the trends in debt, agency debt, investment by Government accounts, and the debt limit. Federal Receipts and Collections 16. Federal Receipts. This discussion presents information on receipts estimates, enacted tax legislation, and the receipts proposals in the budget. 17. User Charges and Other Collections. This chapter presents information on receipts from regulatory fees and on collections from market-oriented activities, such as the sale of stamps by the Postal Service, which are recorded as offsets to outlays rather than as Federal receipts. 18. Tax Expenditures. This discussion describes and estimates tax expenditures, which are defined as revenue losses from special exemptions, credits, or other preferences in the tax code. This section is prepared by the Department of the Treasury. Dimensions of the Budget 19. Comparison of Actual to Estimated Totals. This chapter compares the actual receipts, outlays, and deficit for 2003 with the estimates for that year published two years ago in the 2003 Budget. It also includes a historical comparison of the differences between receipts, outlays, and the deficit as originally proposed with final outcomes. 5 1. INTRODUCTION 20. Outlays to the Public, Net and Gross. This section provides information on outlays net and gross of offsetting collections. Offsetting collections that are netted against outlays result primarily from the Government’s business-like activities, such as the sale of stamps by the Postal Service. 21. Trust Funds and Federal Funds. This chapter provides summary information on Federal funds and trust funds, which comprise the entire budget. For trust funds the information includes income, outgo, and balances. Two detailed tables that were part of this chapter last year, ‘‘Table 16–4. Income, Outgo, and Balances of Major Trust Funds’’ and ‘‘Table 16–5. Income, Outgo, and Balances of Selected Federal Funds’’ appear this year on the enclosed Analytical Perspectives CD ROM as Tables 21–4 and 21–5. 22. Off-Budget Federal Entities and Non-Budgetary Activities. This chapter provides summary information on the off-budget Federal entities (Social Security and Postal Service) and non-budgetary activities (such as cash flows for credit programs, deposit funds, and regulation). enacted. It discusses the conceptual framework for these estimates and provides an alternative formulation of a baseline, which is used in the main budget document. Two detailed tables that appeared in this chapter last year, ‘‘Table 15–11. Current Services Budget Authority by Function, Category, and Program’’ and ‘‘Table 15–12. Current Services Outlays by Function, Category, and Program’’ appear this year on the enclosed Analytical Perspectives CD ROM as Tables 24–12 and 24–13. Budget System and Concepts and Glossary 25. The Budget System and Concepts. This is a basic reference to the budget process, concepts, laws, and terminology. The chapter includes information on the relationship of budget authority to outlays, which was formerly a separate chapter in this volume. Other The following tables appeared as separate sections last year in this volume and appear this year on the enclosed Analytical Perspectives CD ROM: Current Services Estimates • Detailed Functional Tables. Two detailed tables, which last year appeard as, ‘‘Table 25–1. Budget Authority by Function, Category, and Program’’ and ‘‘Table 25–2. Outlays by Function, Category, and Program’’, this year are combined on the enclosed Analytical Perspectives CD ROM as Table 26–1. 24. Current Services Estimates. This chapter presents estimates, based on rules contained in the Budget Enforcement Act, of what receipts, outlays, and the deficit would be if no changes were made to laws already • Federal Programs by Agency and Account. This detailed table ‘‘Federal Programs by Agency and Account,’’ appears this year on the enclosed Analytical Perspectives CD ROM as Table 27–1. 23. Federal Employment and Compensation. This chapter provides summary data on the level and recent trends in civilian and military employment, and personnel compensation and benefits. PERFORMANCE AND MANAGEMENT ASSESSMENTS 7 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL The President’s Management Agenda (PMA) is helping the Federal Government become results-oriented. In addition to making it more efficient—reducing waste, fraud, and abuse—it is leading managers to ask whether programs are working as intended and if not, what can be done to achieve greater results. Government programs, however worthy their goals, should demonstrate they are actually effective at solving problems. That is why it is so important that we consistently ask, for instance, whether the Generation IV Nuclear Energy Systems Initiative at the Department of Energy is meeting its goals toward creating a next-generation nuclear energy system, or whether the National Institutes of Health’s HIV/AIDS Research program is on track to developing an HIV/AIDS vaccine by 2010. If we are not meeting our goals, then we should do something differently to address the shortfall. If we are not measuring our performance at all, that is a bigger problem. The Program Assessment Rating Tool (PART) is designed to help assess the management and performance of individual programs. The PART helps evaluate a program’s purpose, design, planning, management, results, and accountability to determine its overall effectiveness. Recommendations are then made to improve program management and performance. The Administration has assessed approximately 400 programs representing approximately 40 percent of the Federal Budget; 234 programs were assessed last year and another 173 programs were assessed this year.1 In three more years, the Administration plans to have assessed the performance and management of roughly 100 percent of the Federal Budget. With the help of the PART, we know much more about the performance of 40 percent of the budget than we did before. This year, there is a reduction in the percentage of programs that cannot demonstrate results and there was a modest increase in the programs rated ‘‘Effective.’’ Other results: • About 40 percent of programs were rated either ‘‘Effective’’ or ‘‘Moderately Effective’’; a quarter of programs rated just ‘‘Adequate’’ or ‘‘Ineffective’’; and about 40 percent of programs were unable to demonstrate results. • The PARTed programs for which we have current budget information show: almost $713 billion spent effectively or moderately effectively; almost $162 billion spent just adequately or ineffectively; and almost $209 billion spent on programs for which we cannot demonstrate results. 1 Some reassessed programs were combined for review for the 2005 Budget, which is why the number of programs assessed for the 2004 Budget and the number of programs assessed for the 2005 Budget do not add up to exactly 400 programs. The goal of the Budget and Performance Integration Initiative (part of the President’s Management Agenda) is to have the Congress and the Executive Branch routinely consider performance information, among other factors, when making management and funding decisions. This will enable the Government to better describe to taxpayers what they are getting for their money. The evolution and institutionalization of the PART goes a long way towards achieving this goal. There are a number of programs that have substantially improved their management practices or actual performance by implementing recommendations made through the PART process. For example: • The Broadcasting Board of Governors’ efforts to broadcast to Near East Asia and South Asia could not demonstrate that they were achieving results last year. But following the recommendations in last year’s PART, the program this year set goals for weekly audience, program quality, signal strength and cost-per-listener. With additional funding, the program dramatically increased its reach to Arab speaking countries to an estimated 10.5 million listeners each week, up from just 3.9 million in 2002. • Last year, the Administration on Aging, which provides services and benefits to the elderly so they can remain in their homes and communities, could not measure its impact. This year, the program was able to show it was moderately effective after demonstrating that its services enable the elderly to remain in their homes and communities and setting goals for increasing the number of people served per each million dollars spent. With level funding, the program plans to increase by 6 percent in 2004 and 8 percent in 2005 the number of people served per million dollars in funding. • The Department of Energy’s (DOE) Advanced Scientific Computing Research program—which provides world-class scientific supercomputing facilities and funds research in applied mathematics, computer science, and networking—did not have a sufficient strategic vision or adequate performance measures in last year’s PART. This year, the program has developed a strategic plan and has adopted performance measures that will focus on keeping its supercomputer hardware procurements on cost and schedule, and on making highimpact scientific advances by dedicating a substantial fraction of its supercomputing capacity to a small number of important, computationally intensive, large-scale research projects. These measures will routinely assess the usefulness and the 9 10 ANALYTICAL PERSPECTIVES efficiency of the facilities the program provides to scientists. • The PART completed for the TRIO Upward Bound Program (Department of Education), which provides intensive services to improve academic performance and college preparation for high school students, found the program was inadequately targeted to the high-risk students who have potential for college but are not performing successfully in high school. In response, the Department of Education has created a special competition and awarded $19.2 million to projects that serve highrisk students. The Department will monitor the college enrollment rate for these participants and will use the results of this demonstration Initiative to guide future changes in the program. What is the PART? The PART is a questionnaire which consists of approximately 30 questions. It examines four critical areas of assessment—purpose and design, strategic planning, management, and results and accountability. The first set of questions gauges whether the programs’ design and purpose are clear and defensible. The second section involves strategic planning, and weighs whether the agency sets valid annual and longterm goals for programs. The third section rates agency management of programs, including financial oversight and program improvement efforts. The fourth set of questions focuses on results that programs can report with accuracy and consistency. • The answers to questions in each of the four sections result in a numeric score for each section from 0 to 100 (100 being the best). These scores are then combined to achieve an overall qualitative rating of either Effective, Moderately Effective, Adequate, or Ineffective. Programs that do not have acceptable performance measures or have not yet collected performance data generally receive a rating of Results Not Demonstrated. • The PART helps determine a program’s strengths and weaknesses and focuses particularly on a program’s performance. The PART is best seen as a complement to traditional management techniques, and can be used to stimulate a constructive dialogue between program managers, budget analysts, and policy officials. The PART serves its purpose if its findings and recommendations play a substantial role in spending, management and other decisions on programs. • The PART was revised for the 2005 Budget to clarify the guidance and questions. The accompanying table provides a brief description of the four sections along with examples of programs that scored high or low in 2005. For more detailed information regarding PART guidance and PART worksheets, visit the OMB website at www.omb.gov/part. Table 2–1. THE PART IN SECTIONS Section Description Low Score Example High Score Example Program Purpose and Design Weight = 20 percent To assess whether the program’s purpose and design are clear and sound USDA Direct Crops Payment Program— program design needs improvement to effectively reduce need for government income support USDA Soil Survey Program—clear program; strong purpose commonly held by interested parties Strategic Planning Weight = 10 percent To assess whether the agency has established valid long-term and annual measures and targets for the program EPA Brownfields Program—lacks strategic planning, ambitious goal setting EPA Existing Chemicals Program—Longterm measures are outcome focused Program Management Weight = 20 percent To rate agency management of the program, including financial oversight and program improvement efforts DOE Fusion Energy Sciences Program— program merit review processes yet to be validated for impact on quality and performance of the research portfolio DOE Distributed Energy Resources Program—strong and responsive management and oversight Program Results/Accountability Weight = 50 percent To rate program performance on measures and targets reviewed in the strategic planning section through other evaluations DOD Defense Health Program—no fully developed performance measures DOD Energy Conservation Improvement Program—program achieves results, reduction in cost, net savings for investment 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL 11 The following table illustrates some key questions from each section of the PART. Table 2–2. THE PART QUESTIONNAIRE Key Questions for Every Program PROGRAM PURPOSE AND DESIGN • Is the program purpose clear? • Does the program address a specific and existing problem, interest, or need? • Is the program designed so it is not redundant or duplicative of any other federal, state, local or private need? • Is the program designed free of major flaws that would limit program effectiveness? • Is the program effectively targeted, so that resources will reach the intended beneficiaries and/or otherwise address the program’s purpose directly? STRATEGIC PLANNING • Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program? • Does the program have ambitious targets and timeframes for its long-term measures? • Does the program have a limited number of specific annual performance goals that can demonstrate progress toward achieving the program’s long-term goals? • Does the program have baselines and ambitious targets for its annual measures? • Do all partners (grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program? • Are independent evaluations of sufficient scope conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest or need? • Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program’s budget? • Has the program taken meaningful steps to address its strategic planning deficiencies? Description This section examines the clarity of program purpose and soundness of program design. It looks at factors including those the program, agency, or Administration may not directly control but which are within their influence, such as legislation and market factors. Programs should generally be designed to address a market failure—either an efficiency matter, such as a public good or externality, or a distributional objective, such as assisting low-income families—in the least costly or most efficient manner. A clear understanding of program purpose is essential to setting program goals, measures, and targets; maintaining focus; and managing the program. Potential source documents and evidence for answering questions in this section include authorizing legislation, agency strategic plans, annual performance plans, and other agency reports. Options for answers are Yes, No or Not Applicable. This section focuses on program planning, priority setting, and resource allocation. Key elements include an assessment of whether the program has a limited number of performance measures with ambitious—yet achievable—targets, to ensure planning, management, and budgeting are strategic and focused. Potential source documents and evidence for answering questions include strategic planning documents, agency performance plans and reports, reports and submissions from program partners, evaluation plans, budget submissions and other program documents. Options for answers are Yes, No or Not Applicable. PROGRAM MANAGEMENT • Does the agency regularly collect timely and credible performance information from key program partners, and use it to manage the program and improve performance? • Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results? • Are funds (Federal and partners’) obligated in a timely manner and spent for the intended purpose? • Does the program have procedures (i.e. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution? • Does the program collaborate and coordinate effectively with related programs? • Does the program use strong financial management practices? • Has the program taken meaningful steps to address its management deficiencies? This section focuses on a variety of elements related to whether the program is effectively managed to meet program performance goals. Key areas include financial oversight, evaluation of program improvements, performance data collection, and program manager accountability. Additionally, specific areas of importance for each program type are also explored. Potential source documents and evidence for answering questions in this section include financial statements, GAO reports, IG reports, performance plans, budget execution data, IT plans, and independent program evaluations. Options for answers are Yes, No or Not Applicable. PROGRAM RESULTS • Has the program demonstrated adequate progress in achieving its long-term performance goal(s)? • Does the program (including program partners) achieve its annual performance goals? • Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year? • Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals? • Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results? This section considers whether a program is meeting its long-term and annual performance goals. This section also assesses how well the program compares to similar programs and how effective the program is based on independent evaluations. Potential source documents and evidence for answering questions in this section include annual performance reports, evaluations, GAO reports, IG reports and other agency documents. Assessments of program results should be based on the most recent reporting cycle or other relevant data. Answers in this section are rated as Yes, Large Extent, Small Extent, and No. 12 ANALYTICAL PERSPECTIVES The PART segments mandatory and discretionary federal programs into seven categories. In addition to the questions which apply to all programs, each section includes questions that have been tailored for a specific type of program. A complete list of these questions is available at the OMB website. Table 2–3 describes the program categories. Problems and Revisions Since its inception, the PART has been improved annually based on feedback received from agencies and the public. Last year approximately 20 percent of programs were addressed using the PART, and for the 2005 Budget an additional 20 percent of programs were assessed. Those programs originally PARTed for the 2004 Budget were reassessed only where evidence showed an agency’s rating was likely to change. Changes to the PART centered on clarification of PART guidance and refinement of PART questions. Although all sections were revised to some degree, the strategic planning section received the bulk of the revision, having two key questions on long-term and annual performance measures enhanced to require more detailed information on appropriate measures and targets. Because of the strong focus on strategic planning and results and accountability, several questions in the two sections are linked. For instance, if a program was not able to demonstrate appropriate goals and targets in the strategic planning section, they were not given credit for measuring results against those targets in the performance results section. To alleviate this problem, agencies must improve the quality of the goals and targets arrived at through their strategic planning process. This year’s guidance was changed to include clarification on PART metrics. While the PART strives to focus on outcome performance measures, outputs can be appropriate practical measures in some cases. The 2005 guidance articulated the need for a high standard of justification for answers to receive a Yes. The completed PART is available to the public and as such, the review and its scores must be based on evidence. For the 2005 Budget, PART worksheets were revised in order to produce a database of PART responses more effectively. PART responses across agencies are available at www.whitehouse.gov/omb/budget/fy2005/ pma.html. Possible Areas for Improvement PART assessments will continue to be used for informing budget decisions, supporting management, identifying design problems, and promoting performance measurement and accountability. The performance of Government activities is sometimes difficult to measure and it will always be a challenge to assess the diversity of its programs in a uniform way. The Admin- Table 2–3. THE PART, BY CATEGORY Program Type Description Examples Competitive Grant Programs Programs that distribute funds to state, local and tribal governments, organizations, individuals and other entities through a competitive process • Head Start • Weed and Seed Block/Formula Grant Programs Programs that distribute funds to state, local and tribal governments and other entities by formula or block grant • Vocational Education State Grants • Native American Housing Block Grants Regulatory-Based Programs Programs that employ regulatory action to achieve program and agency goals through rulemaking that implements, interprets or prescribes law or policy, or describes procedure or practice requirements. These programs issue significant regulations, which are subject to OMB review • Occupational Safety and Health Administration • Food Safety and Inspection Service Capital Assets and Service Acquisition Programs Programs where the primary means to achieve goals is the development and acquisition of capital assets (such as land, structures, equipment, and intellectual property) or the purchase of services (such as maintenance and information technology) from a commercial source • Youth Anti-Drug Media Campaign • DOD—Shipbuilding Credit Programs Programs that provide support through loans, loan guarantees and direct credit • Rural Electric Utility Loans and Guarantees Direct Federal Programs Programs in which support and services are provided primarily by federal employees • Coin Production • National Weather Service Research and Development Programs Programs that focus on creating knowledge or applying it toward the creation of systems, devices, methods, materials or technologies • Solar Energy • Mars Exploration 13 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL istration, however, is committed to assessing the performance of the Government’s programs and to addressing and attempting to overcome the challenges associated with the effort. One area that will require additional attention is the consistency among assessments. OMB will continue to promote consistency in the standards applied to PART assessments. This year the internal OMB Performance Evaluation Team again conducted a consistency check on PART worksheets. This review was then examined by the Performance Consortium of the National Academy of Public Administration. Recommendations for strengthening the PART review process for next year include adequately justifying explanations with evidence; explicitly addressing statutory barriers to improved performance; focusing on completed, not planned, actions; and rating new programs. How the PARTs affect budget decisions PART ratings do not result in automatic decisions about funding. Clearly, over time, funding should be targeted to programs that can prove they achieve measurable results. But a PART rating of Ineffective or Results Not Demonstrated may suggest that greater funding is necessary to overcome identified shortcomings, while a program rated Effective may be in line for a proposed funding decrease. For example: • Although the Youth Activities program was rated ‘‘Ineffective,’’ the program’s proposed funding remains relatively stable. The program provides forTable 2–4. mula grants to States and local areas to provide training to low-income and other disadvantaged youth to help them secure employment, but does not have the authority to target funds to the areas of greatest need. To allow it to be more effective, the Administration proposes to give the Secretary of Labor and States increased authority to reallocate resources to areas of need. • Despite the Department of Energy’s Distributed Energy Resources Program’s ‘‘Moderately Effective’’ rating, the Administration proposes a small reduction in funding for the program. The program funds research for improved energy efficiency of and reduced emissions from on-site energy production. The decrease in funding is attributable not to the program’s rating, but to relative priorities among Department of Energy programs. The following table lists summary PART results and funding information for each assessed program. It affirms the fact that PART ratings are one factor, but not the only factor, in the Administration’s budget formulation process. The PART gives the Executive Branch, the Congress, and individual program managers valuable insight into ways we can improve program performance on behalf of the American people. Individual PART summaries are included on the CD that accompanies the Analytical Perspectives volume; full PART worksheets can be found on OMB’s web page www.whitehouse.gov/omb/budget/fy2005/pma.html. PROGRAM ASSESSMENT RATING TOOL (PART) (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Department of Agriculture: Agricultural Credit Insurance Fund—Guaranteed Loans ................................................ Animal Welfare ................................................ APHIS Plant and Animal Health Monitoring Programs ...................................................... Bioenergy ......................................................... CCC Marketing Loan Payments .................... Community Facilities Program ...................... Conservation Technical Assistance ................ Crop Insurance ................................................ Direct Crop Payments ..................................... Farmland Protection Program ....................... Food Aid Programs .......................................... Food Safety and Inspection Service ............... Food Safety Research ...................................... Food Stamp Program ...................................... Forest Legacy Program (FLP) ........................ Forestry Research Grants ............................... Land Acquisition ............................................. Multifamily Housing Direct Loans and Rental Assistance ................................................ National Forest Improvement and Maintenance ............................................................. National Resources Inventory ........................ National School Lunch .................................... Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate 3,080 16 2,416 16 2,866 17 165 116 4,999 489 663 2,982 4,151 78 154 755 95 23,653 68 22 133 173 150 2,701 508 694 3,372 5,375 101 152 775 97 27,293 64 22 67 261 100 2,954 527 560 3,295 5,284 121 148 715 106 28,917 100 22 67 Moderately Effective Adequate Credit Regulatory Based Effective Adequate Moderately Effective Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Adequate Results Not Demonstrated Results Not Demonstrated Adequate Results Not Demonstrated Moderately Effective Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Regulatory Based Direct Federal Direct Federal Credit Direct Federal Direct Federal Direct Federal Competitive Grant Mixed Regulatory Based Research and Development Block/Formula Grant Competitive Grant Block/Formula Grant Direct Federal Results Not Demonstrated Mixed 775 776 769 Adequate Capital Assets and Service Acquisition Direct Federal Block/Formula Grant 548 559 505 29 6,352 29 6,623 22 6,786 Results Not Demonstrated Results Not Demonstrated 14 ANALYTICAL PERSPECTIVES Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Pesticide Data/Microbiological Data Programs ............................................................ Plant Materials Program ................................ RBS Business and Industry Guaranteed Loan Program .............................................. Rural Electric Utility Loans and Guarantees Rural Utilities Service Telecommunications Loan Programs ............................................. Rural Water and Wastewater Grants and Loans ............................................................ Snow Survey and Water Supply Forecasting Soil Survey Program ....................................... USDA Wildland Fire Management ................ Wildlife Habitat Incentives Program ............. Department of Commerce: Advanced Technology Program ...................... Bureau of Economic Analysis ......................... Coastal Zone Management Act Programs ..... Commerce Small Business Innovation Research (SBIR) Program ............................... Current Demographic Statistics ..................... Decennial Census ............................................ Economic Development Administration ........ Intercensal Demographic Estimates .............. Manufacturing Extension Partnership .......... Minority Business Development Agency ....... National Marine Fisheries Service ................ National Weather Service ............................... NIST Laboratories ........................................... NOAA Navigation Services ............................. Pacific Coastal Salmon Recovery Fund ......... Survey Sample Redesign ................................ U.S. Patent and Trademark Office—Patents U.S. Patent and Trademark Office—Trademarks ............................................................ US and Foreign Commercial Service (USFCS) ........................................................ Department of Defense—Military: Air Combat Program ....................................... Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate 22 11 21 11 21 10 Adequate Results Not Demonstrated Direct Federal Research and Development Adequate Results Not Demonstrated Credit Credit 894 4,069 556 3,989 600 2,640 Results Not Demonstrated Credit 495 514 495 Results Not Demonstrated Results Not Demonstrated Moderately Effective Results Not Demonstrated Results Not Demonstrated Mixed Direct Direct Direct Direct 1,596 9 85 1,371 24 1,628 9 86 1,633 52 1,475 9 87 1,695 59 Adequate Effective Results Not Demonstrated Competitive Grant Direct Federal Block/Formula Grant 179 65 129 171 67 113 ................ 82 111 Results Not Demonstrated Moderately Effective Moderately Effective Moderately Effective Moderately Effective Moderately Effective Results Not Demonstrated Adequate Effective Effective Moderately Effective Results Not Demonstrated Effective Adequate Competitive Grant Direct Federal Direct Federal Competitive Grant Direct Federal Competitive Grant Competitive Grant Regulatory Based Direct Federal Research and Development Direct Federal Block/Formula Grant Direct Federal Direct Federal 8 54 145 319 9 106 29 754 755 423 70 129 13 1,053 4 58 253 315 9 39 29 676 825 401 74 89 13 1,090 ................ 61 433 320 11 39 34 662 839 482 73 100 12 1,371 Moderately Effective Direct Federal 129 132 162 Adequate Direct Federal 206 202 212 Moderately Effective Capital Assets and Service Acquisition Capital Assets and Service Acquisition Research and Development Capital Assets and Service Acquisition Capital Assets and Service Acquisition Capital Assets and Service Acquisition Direct Federal 15,149 16,023 16,457 5,300 4,798 5,937 1,369 1,449 1,404 1,650 1,341 1,457 877 1,079 1,252 5,600 6,273 6,276 15,398 16,392 17,640 Federal Federal Federal Federal Airlift Program ................................................ Moderately Effective Basic Research ................................................. Chemical Demilitarization .............................. Effective Ineffective Comanche Helicopter Program ...................... Results Not Demonstrated Communications Infrastructure ..................... Results Not Demonstrated Defense Health ................................................ DoD Small Business Innovation Research/ Technology Transfer .................................... Energy Conservation Improvement ............... Adequate Results Not Demonstrated Effective 963 35 1,100 50 1,133 60 Facilities Sustainment, Restoration, Modernization, and Demolition ......................... Housing ............................................................ Military Force Management ........................... Missile Defense ................................................ Research and Development Capital Assets and Service Acquisition Adequate Moderately Effective Effective Results Not Demonstrated 6,620 13,683 93,500 7,490 6,424 14,230 98,956 9,095 6,643 15,672 103,100 10,298 Recruiting ........................................................ Shipbuilding ..................................................... Moderately Effective Adequate Direct Federal Direct Federal Direct Federal Capital Assets and Service Acquisition Direct Federal Capital Assets and Service Acquisition 2,404 9,457 2,369 12,201 2,361 11,477 993 999 999 Department of Education: 21st Century Community Learning Centers Adequate Block/Formula Grant 15 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Adult Education State Grants ........................ Comprehensive School Reform ....................... Even Start ........................................................ Federal Family Education Loans ................... Federal Pell Grants ......................................... Federal Perkins Loans .................................... Federal Work-Study ........................................ GEAR UP ......................................................... IDEA Grants for Infants and Families .......... IDEA Grants to States .................................... IDEA Part D—Personnel Preparation ........... IDEA Part D—Research and Innovation ...... IDEA Preschool Grants ................................... Improving Teacher Quality State Grants ..... Independent Living (IL) Programs ................ National Assessment ....................................... National Center for Education Statistics ...... Nat’l Institute on Disability and Rehab. Research (NIDRR) ............................................ Occupational and Employment Information Safe and Drug Free Schools State Grants .... Student Aid Administration ........................... Supplemental Educational Opportunity Grants ........................................................... Teacher Quality Enhancement ....................... Tech-Prep Education State Grants ................ Tribally Controlled Postsecondary Vocational and Technical Institutions ............... TRIO Student Support Services ..................... TRIO Talent Search ........................................ TRIO Upward Bound ...................................... Troops-to-Teachers .......................................... Vocational Education State Grants ............... Vocational Rehabilitation State Grants ........ William D. Ford Direct Student Loans ......... Department of Energy: Advanced Fuel Cycle Initiative ...................... Advanced Scientific Computing Research ..... Advanced Simulation and Computing (ASCI) Basic Energy Sciences ..................................... Biological and Environmental Research ........ Bonneville Power Administration .................. Rating Results Not Adequate Ineffective Adequate Adequate Ineffective Results Not Adequate Results Not Results Not Results Not Results Not Results Not Results Not Results Not Effective Effective Demonstrated Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate Block/Formula Grant Block/Formula Grant Block/Formula Grant Credit Block/Formula Grant Credit Block/Formula Grant Competitive Grant Block/Formula Grant Block/Formula Grant Competitive Grant Research and Development Block/Formula Grant Block/Formula Grant Competitive Grant Research and Development Research and Development 587 233 248 3,432 11,365 99 999 293 434 8,874 92 77 387 2,931 85 95 89 590 234 247 2,880 12,007 99 999 298 444 10,068 91 78 388 2,930 96 95 92 590 ................ ................ 7,050 12,830 ................ 999 298 467 11,068 91 78 388 2,930 96 95 92 Results Not Demonstrated Results Not Demonstrated Ineffective Adequate Research and Development Competitive Grant Block/Formula Grant Capital Assets and Service Acquisition 109 9 469 900 107 9 441 912 107 ................ 441 935 Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Block/Formula Grant Competitive Grant Block/Formula Grant 760 89 107 770 89 107 770 89 ................ Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Ineffective Adequate Ineffective Adequate Adequate Competitive Grant Competitive Grant Competitive Grant Competitive Grant Competitive Grant Block/Formula Grant Block/Formula Grant Credit 7 264 145 279 29 1,192 2,533 4,225 7 264 146 282 15 1,195 2,584 2,381 7 267 146 281 15 1,012 2,636 –492 Moderately Effective Moderately Effective Effective Effective Effective Moderately Effective Research and Development Research and Development Research and Development Research and Development Research and Development Capital Assets and Service Acquisition Research and Development Research and Development Research and Development 57 167 674 1,020 507 –462 67 202 721 1,011 641 –30 46 204 741 1,064 502 –10 67 345 61 60 378 61 58 447 53 122 50 50 6,952 7,034 7,434 235 239 316 61 247 71 263 23 264 Development Development Development Development Development 17 29 718 39 39 24 26 734 34 82 31 26 737 45 95 Research and Development 499 514 492 Demonstrated Demonstrated Demonstrated Demonstrated Demonstrated Demonstrated Demonstrated Demonstrated Building Technologies ..................................... Clean Coal Research Initiative ...................... Distributed Energy Resources ........................ Elimination of Weapons-Grade Plutonium Production Program ..................................... Adequate Adequate Moderately Effective Environmental Management .......................... Adequate Facilities and Infrastructure .......................... Moderately Effective Fuel Cells (Stationary) .................................... Fusion Energy Sciences .................................. Generation IV Nuclear Energy Systems Initiative ............................................................ Geothermal Technology .................................. High Energy Physics ....................................... High Temperature Superducting R&D .......... Hydrogen Technology ...................................... Inertial Confinement Fusion Ignition and High Yield Campaign/NIF Construction Project ........................................................... Adequate Moderately Effective Capital Assets and Service Acquisition Capital Assets and Service Acquisition Capital Assets and Service Acquisition Research and Development Research and Development Moderately Moderately Moderately Moderately Moderately Research Research Research Research Research Results Not Demonstrated Effective Effective Effective Effective Effective Moderately Effective and and and and and 16 ANALYTICAL PERSPECTIVES Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title International Nuclear Materials Protection and Cooperation ........................................... Natural Gas Technologies ............................... Nuclear Energy Research Initiative .............. Nuclear Physics ............................................... Nuclear Power 2010 ........................................ Oil Technology ................................................. Readiness in Technical Base and Facilities (RTBF), Operations ..................................... Rating 2004 Estimate 2005 Estimate Direct Federal Research and Development Research and Development Research and Development Research and Development Research and Development 333 47 17 380 32 42 258 43 11 390 20 35 238 26 ................ 401 10 15 Moderately Effective Capital Assets and Service Acquisition Capital Assets and Service Acquisition Research and Development Direct Federal Direct Federal Direct Federal Block/Formula Grant Capital Assets and Service Acquisition Research and Development Capital Assets and Service Acquisition 996 1,022 1,018 529 553 667 84 5 27 172 224 168 83 5 28 171 227 177 80 5 29 172 291 173 42 457 41 577 42 880 Adequate Solar Energy .................................................... Southeastern Power Administration ............. Southwestern Power Administration ............. Strategic Petroleum Reserve (SPR) ............... Weatherization Assistance ............................. Western Area Power Administration ............. Moderately Moderately Moderately Effective Moderately Moderately Wind Energy .................................................... Yucca Mountain Project .................................. Moderately Effective Adequate Low Income Home Energy Assistance Program .............................................................. Maternal and Child Health Block Grant (MCHBG) ...................................................... Medicare ........................................................... Medicare Integrity Program (HCFAC) .......... National Health Service Corps ....................... Nursing Education Loan Repayment and Scholarship Program ................................... Office of Child Support Enforcement ............. Patient Safety .................................................. 2003 Actual Effective Ineffective Results Not Demonstrated Effective Adequate Ineffective Safeguards and Security ................................. Department of Health and Human Services: 317 Immunization Program ............................ Administration on Aging ................................ Agency for Toxic Substances and Disease Registry ........................................................ CDC State and Local Preparedness Grants .. Children’s Hospitals Graduate Medical Education Payment Program ............................. Childrens Mental Health Services ................. Chronic Disease—Breast and Cervical Cancer ................................................................. Chronic Disease—Diabetes ............................. Community Mental Health Services Block Grant ............................................................ Community Services Block Grant .................. Data Collection and Dissemination ............... Developmental Disabilities Grant Programs Domestic HIV/AIDS Prevention ..................... Food and Drug Administration ...................... Foster Care ...................................................... Head Start ....................................................... Health Alert Network ..................................... Health Care Fraud and Abuse Control (HCFAC) ....................................................... Health Centers ................................................ Health Professions .......................................... HIV/AIDS Research ........................................ Hospital Preparedness Grants ....................... IHS Federally-Administered Activities ......... IHS Sanitation Facilities Construction Program .............................................................. Primary Program Type Program Funding Level (dollars in millions) Effective Effective Effective Effective Effective Adequate Moderately Effective Competitive Grant Block/Formula Grant 651 1,367 643 1,374 534 1,377 Adequate Results Not Demonstrated Competitive Grant Block/Formula Grant 82 939 73 934 77 829 Adequate Moderately Effective Block/Formula Grant Competitive Grant 290 98 303 102 303 106 Adequate Adequate Competitive Grant Competitive Grant 199 63 210 67 220 67 Adequate Results Not Demonstrated Moderately Effective Adequate Results Not Demonstrated Moderately Effective Adequate Results Not Demonstrated Adequate Block/Formula Grant Block/Formula Grant Research and Development Block/Formula Grant Competitive Grant Regulatory Based Block/Formula Grant Competitive Grant Competitive Grant 437 646 62 132 700 1,652 4,451 6,687 183 435 642 67 138 695 1,695 4,706 6,775 183 436 495 64 138 696 1,845 4,871 6,944 183 Results Not Demonstrated Effective Ineffective Moderately Effective Results Not Demonstrated Moderately Effective Direct Federal Competitive Grant Competitive Grant Research and Development Block/Formula Grant Direct Federal 160 1,505 401 2,716 515 1,346 160 1,617 409 2,850 515 1,378 160 1,836 126 2,930 476 1,408 Moderately Effective Capital Assets and Service Acquisition 93 93 103 Results Not Demonstrated Block/Formula Grant 1,788 1,900 2,001 Moderately Effective Moderately Effective Effective Moderately Effective Block/Formula Grant Direct Federal Block/Formula Grant Competitive Grant 730 277,464 720 171 730 298,916 720 170 730 326,716 720 205 Adequate Effective Adequate Competitive Grant Block/Formula Grant Research and Development 20 3,845 55 27 4,413 80 32 4,074 84 17 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Projects for Assistance in Transition from Homelessness ............................................... Refugee and Entrant Assistance .................... Resource and Patient Management System Runaway and Homeless Youth ...................... Rural Health Activities ................................... Ryan White ...................................................... State Children’s Health Insurance Program Substance Abuse Prevention and Treatment Block Grant .................................................. Substance Abuse Treatment Programs of Regional and National Significance ........... Translating Research into Practice ................ Urban Indian Health Program ....................... Department of Homeland Security: Aids to Navigation ........................................... Assistance to Firefighters Grant Program .... Aviation Passenger Screening Program ........ Border Patrol ................................................... Coast Guard Fisheries Enforcement .............. Container Security Initiative ......................... Detention and Removal .................................. Disaster Relief Fund—Public Assistance ...... Drug Interdiction ............................................. Federal Air Marshal Service .......................... Federal Law Enforcement Training Center .. Federal Protective Service .............................. Hazard Mitigation Grant ................................ Immigration Services ...................................... Marine Environmental Protection ................. Metropolitan Medical Response System ........ National Flood Insurance ............................... Search and Rescue .......................................... Department of Housing and Urban Development: Community Development Block Grant (Formula) ............................................................. HOME Investment Partnerships Program ... HOPE VI .......................................................... Housing for Persons with Disabilities ........... Housing for the Elderly .................................. Housing Opportunities for Persons with AIDS ............................................................. Housing Vouchers ............................................ Lead Hazard Grants ....................................... National Community Development Initiative Native American Housing Block Grants ....... Partnership for Advancing Technology in Housing (PATH) ........................................... Project-Based Rental Assistance .................... Department of the Interior: Abandoned Mine Land Reclamation .............. DOI Wildland Fire Management ................... Energy and Minerals Management ............... Energy Resource Assessments ....................... Geologic Hazard Assessments ........................ Habitat Restoration Activities ........................ Indian Forestry Program ................................ Indian Law Enforcement ................................ Indian School Construction ............................ Indian School Operations ............................... Rating Moderately Effective Adequate Effective Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate 43 481 58 50 448 65 55 473 70 Results Not Demonstrated Adequate Adequate Adequate Block/Formula Grant Block/Formula Grant Capital Assets and Service Acquisition Competitive Grant Competitive Grant Block/Formula Grant Block/Formula Grant 105 184 1,993 4,355 105 147 2,020 5,232 105 56 2,055 5,299 Ineffective Block/Formula Grant 1,754 1,779 1,832 Adequate Adequate Adequate Competitive Grant Research and Development Block/Formula Grant 317 10 31 419 8 32 517 5 32 Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Moderately Effective Results Not Demonstrated Moderately Effective Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Moderately Effective Results Not Demonstrated Adequate Moderately Effective Results Not Demonstrated Moderately Effective Results Not Demonstrated Direct Federal Competitive Grant Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Direct Federal Block/Formula Grant Direct Federal Regulatory Based Block/Formula Grant Direct Federal Direct Federal 805 745 1,875 1,981 533 48 1,150 1,113 648 537 171 448 167 1,425 145 50 1,655 591 808 746 1,531 1,847 688 62 1,130 1,037 774 640 192 424 155 1,653 252 50 1,719 842 855 500 1,586 1,862 704 126 1,259 1,075 822 613 196 478 161 1,711 267 ................ 1,787 891 Ineffective Moderately Effective Ineffective Results Not Demonstrated Results Not Demonstrated Block/Formula Grant Block/Formula Grant Competitive Grant Competitive Grant Competitive Grant 4,340 1,987 570 249 778 4,331 2,006 149 250 774 4,331 2,084 ................ 249 773 Results Not Demonstrated Moderately Effective Moderately Effective Moderately Effective Results Not Demonstrated Block/Formula Grant Competitive Grant Competitive Grant Block/Formula Grant Block/Formula Grant 290 12,458 165 32 645 295 14,602 164 35 650 295 13,364 129 30 647 Results Not Demonstrated Ineffective Research and Development Capital Assets and Service Acquisition 8 4,766 8 4,769 2 5,102 Results Not Demonstrated Results Not Demonstrated Adequate Moderately Effective Moderately Effective Moderately Effective Adequate Results Not Demonstrated Results Not Demonstrated Block/Formula Grant Direct Federal Direct Federal Research and Development Research and Development Direct Federal Direct Federal Direct Federal Capital Assets and Service Acquisition Direct Federal 190 650 106 24 75 145 49 162 294 191 685 108 25 75 147 52 172 295 244 743 108 25 74 147 53 182 229 513 522 522 Adequate 18 ANALYTICAL PERSPECTIVES Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Land & Water Conservation Fund (LWCF) State Grants ................................................. Mineral Resource Assessments ...................... Minerals Revenue Management ..................... National Fish Hatchery System ..................... National Historic Preservation Programs ..... National Mapping ............................................ National Park Service Facility Management Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate Results Not Demonstrated Moderately Effective Results Not Demonstrated Results Not Demonstrated Moderately Effective Results Not Demonstrated Adequate Block/Formula Grant Research and Development Direct Federal Mixed Block/Formula Grant Research and Development Capital Assets and Service Acquisition 97 56 83 54 88 133 657 94 55 80 58 93 130 700 94 49 82 57 97 128 725 Moderately Effective Direct Federal 191 198 205 National Park Service Natural Resource Stewardship ................................................. National Wildlife Refuge Operations and Maintenance ................................................. Outer Continental Shelf Environmental Studies .......................................................... Partners for Fish and Wildlife ....................... Reclamation Hydropower ................................ Results Not Demonstrated Direct Federal 368 391 388 Moderately Effective Adequate Effective 16 38 145 16 42 148 16 50 159 Recreation Management ................................. Regulation of Surface Coal Mining Activities Rural Water Supply Projects .......................... Adequate Results Not Demonstrated Results Not Demonstrated 58 105 80 61 105 83 59 109 68 Science & Technology Program (S&T) ........... Title XVI Water Reuse and Recycling ........... Tribal Courts ................................................... Tribal Land Consolidation .............................. Effective Moderately Effective Results Not Demonstrated Moderately Effective Research and Development Direct Federal Capital Assets and Service Acquisition Direct Federal Regulatory Based Capital Assets and Service Acquisition Research and Development Competitive Grant Direct Federal Capital Assets and Service Acquisition 13 32 17 8 16 28 18 22 10 12 18 75 Department of Justice: ATF Firearms Programs—Integrated Violence Reduction Strategy ............................ Bureau of Prisons ............................................ Community Oriented Policing Services ......... Cybercrime ....................................................... Drug Courts ..................................................... Drug Enforcement Administration ................ Juvenile Accountability Block Grants ........... National Criminal History Improvement Program ........................................................ Organized Crime/Drug Enforcement ............. Residential Substance Abuse Treatment ...... State Criminal Alien Assistance Program .... USMS Apprehension of Fugitives .................. USMS Protection of the Judicial Process ...... Weed and Seed ................................................ White Collar Crime ......................................... Department of Labor: Black Lung Benefits Program ........................ Bureau of Labor Statistics .............................. Community Service Employment for Older Americans ..................................................... Davis-Bacon Wage Determination Program Dislocated Worker Assistance ........................ Employee Benefits Security Administration (EBSA) .......................................................... Federal Employees Compensation Act (FECA) .......................................................... Migrant and Seasonal Farmworkers ............. Mine Safety and Health Administration ....... Occupational Safety and Health Administration ................................................................ Office of Federal Contract Compliance Programs (OFCCP) ............................................ Trade Adjustment Assistance ......................... Unemployment Insurance Administration State Grants ................................................. Moderately Effective Moderately Effective Results Not Demonstrated Adequate Results Not Demonstrated Adequate Ineffective Direct Federal Direct Federal Competitive Grant Direct Federal Competitive Grant Direct Federal Block/Formula Grant 601 4,045 978 157 45 1,802 189 615 4,414 742 206 38 1,677 59 632 4,517 44 265 70 1,797 ................ Moderately Effective Adequate Results Not Demonstrated Results Not Demonstrated Adequate Adequate Results Not Demonstrated Adequate Block/Formula Grant Direct Federal Block/Formula Grant Block/Formula Grant Direct Federal Direct Federal Competitive Grant Direct Federal 40 478 65 248 180 514 59 474 30 495 ................ 297 180 540 58 512 58 512 76 ................ 184 554 58 509 Moderately Effective Effective Direct Federal Direct Federal 1,461 492 1,452 519 1,423 532 Ineffective Results Not Demonstrated Adequate Direct Federal Regulatory Based Block/Formula Grant 442 10 1,150 439 10 1,173 440 10 1,106 Results Not Demonstrated Regulatory Based 116 124 132 Moderately Effective Ineffective Adequate Direct Federal Competitive Grant Regulatory Based 2,475 77 273 2,558 77 269 2,631 ................ 276 Adequate Regulatory Based 450 458 462 Results Not Demonstrated Ineffective Regulatory Based Direct Federal 78 972 79 1,338 82 1,057 Moderately Effective Block/Formula Grant 2,634 2,619 2,711 19 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Youth Activities ............................................... Department of State: Anti-Terrorism Assistance .............................. Capital Security Construction Program ........ Contribution to the United Nations Development Programme (UNDP) ........................... Demining .......................................................... Educational and Cultural Exchange Programs in Near East Asia and South Asia Humanitarian Migrants to Israel .................. Military Assistance to new NATO and NATO Aspirant Nations .............................. Nonproliferation and Disarmament Fund ..... PKO—OSCE Programs ................................... Refugee Admissions to the U.S ...................... Security Assistance for the Western Hemisphere ........................................................... Security Assistance to Sub-Saharan Africa .. Support for Eastern European Democracy & Freedom Support Act .................................. Terrorist Interdiction Program (TIP) ............. UN High Commissioner for Refugees (UNHCR) ...................................................... Visa and Consular Services ............................ Worldwide Security Upgrades ........................ Department of Transportation: FAA Air Traffic Services ................................. FAA Grants-in-Aid for Airports (Airport Improvement Program) .................................... Federal Lands .................................................. Federal Motor Carrier Safety Administration Grant Program ..................................... FHWA Highway Infrastructure ..................... Hazardous Materials Transportation ............ National Highway Traffic Safety Administration Grant Program ................................ New Starts ....................................................... Railroad Safety Program (RSP) ..................... Research, Engineering & Development ......... Department of the Treasury: Administering the Public Debt ....................... African Development Fund ............................. ATF Consumer Product Safety Activities ..... Bank Enterprise Award .................................. Coin Production ............................................... Debt Collection ................................................ Earned Income Tax Credit (EITC) Compliance ............................................................... International Development Association ........ IRS Tax Collection .......................................... New Currency Manufacturing ........................ OCC Bank Supervision ................................... Office of Foreign Assets Control (OFAC) ...... OTS Thrift Supervision ................................... Submission Processing (SP) ............................ Treasury Technical Assistance ....................... Department of Veterans Affairs: Burial Benefits ................................................ Disability Compensation ................................. Medical Care .................................................... Montgomery GI Bill (MGIB) (Education Benefits) ........................................................ VA Research and Development ...................... Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate Ineffective Block/Formula Grant 994 995 1,001 Effective Effective Direct Federal Capital Assets and Service Acquisition 64 608 96 761 128 888 Results Not Demonstrated Effective Block/Formula Grant Direct Federal 100 45 100 50 90 59 Effective Moderately Effective Competitive Grant Block/Formula Grant 49 60 49 50 60 50 Moderately Effective Results Not Demonstrated Moderately Effective Moderately Effective Direct Federal Direct Federal Direct Federal Competitive Grant 99 15 18 113 95 30 32 136 22 30 3 136 Moderately Effective Moderately Effective Direct Federal Direct Federal 124 102 158 60 124 96 Results Not Demonstrated Results Not Demonstrated Competitive Grant Direct Federal 1,277 5 1,026 5 950 5 Moderately Effective Moderately Effective Moderately Effective Block/Formula Grant Direct Federal Direct Federal 303 664 553 310 807 647 229 865 659 Adequate Direct Federal 5,666 6,097 6,522 Moderately Effective Moderately Effective Competitive Grant Block/Formula Grant 3,378 773 3,400 767 3,500 947 Moderately Effective Moderately Effective Moderately Effective Block/Formula Grant Block/Formula Grant Block/Formula Grant 164 29,847 14 165 32,462 14 168 32,138 14 Moderately Effective Moderately Effective Moderately Effective Effective Block/Formula Grant Competitive Grant Regulatory Based Research and Development 446 1,275 115 163 449 1,356 129 113 456 1,599 138 117 Effective Results Not Demonstrated Adequate Results Not Demonstrated Effective Effective Direct Federal Block/Formula Grant Regulatory Based Competitive Grant Direct Federal Direct Federal 189 107 23 18 311 48 174 112 23 9 431 47 175 118 23 5 441 47 Ineffective Adequate Results Not Demonstrated Effective Effective Results Not Demonstrated Effective Results Not Demonstrated Adequate Direct Federal Block/Formula Grant Direct Federal Direct Federal Regulatory Based Direct Federal Regulatory Based Direct Federal Direct Federal 145 844 957 90 439 20 158 721 33 201 977 1,002 325 477 21 174 726 19 176 1,068 1,083 400 488 22 178 734 18 Moderately Effective Results Not Demonstrated Adequate Direct Federal Direct Federal Direct Federal 397 25,385 25,348 431 27,712 28,297 455 32,266 29,471 Results Not Demonstrated Results Not Demonstrated Direct Federal Research and Development 1,776 818 1,988 820 2,112 770 20 ANALYTICAL PERSPECTIVES Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Rating Corps of Engineers-Civil Works: Corps Hydropower ........................................... Results Not Demonstrated Emergency Management ................................ Flood Damage Reduction ................................ Moderately Effective Results Not Demonstrated Inland Waterways Navigation ....................... Results Not Demonstrated Non-regulatory Wetlands Activities ............... Results Not Demonstrated USACE Regulatory Program .......................... Environmental Protection Agency: Acid Rain .......................................................... Air Toxics ......................................................... Brownfields ...................................................... Civil Enforcement ............................................ Clean Water State Revolving Fund ............... Criminal Enforcement ..................................... Drinking Water State Revolving Fund .......... Ecological Research ......................................... Environmental Education ............................... Existing Chemicals .......................................... Leaking Underground Storage Tanks ........... New Chemicals ................................................ Nonpoint Source Grants ................................. Particulate Matter Research .......................... Pesticide Registration ..................................... Pesticide Reregistration .................................. Pollution Prevention and New Technologies RCRA Corrective Action ................................. Superfund Removal ......................................... Tribal General Assistance .............................. General Services Administration: Asset Management of Federally-Owned Real Property ........................................................ 2005 Estimate Moderately Effective Results Not Demonstrated Adequate Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Adequate Results Not Demonstrated Moderately Effective Results Not Demonstrated Results Not Demonstrated Adequate Results Not Demonstrated Results Not Demonstrated Adequate Results Not Demonstrated Adequate Regulatory Based Direct Federal Competitive Grant Direct Federal Block/Formula Grant Direct Federal Block/Formula Grant Research and Development Competitive Grant Direct Federal Block/Formula Grant Direct Federal Block/Formula Grant Research and Development Direct Federal Direct Federal Research and Development Regulatory Based Direct Federal Block/Formula Grant 17 100 167 431 1,341 40 850 132 9 16 72 15 237 61 45 72 49 35 196 57 17 113 170 448 1,342 42 845 132 9 17 76 15 195 65 66 77 42 39 200 62 17 113 210 456 850 43 850 110 ................ 17 73 15 209 65 66 83 36 39 183 62 Results Not Demonstrated Capital Assets and Service Acquisition Capital Assets and Service Acquisition Capital Assets and Service Acquisition Direct Federal 1,754 1,805 1,819 5,810 6,080 6,282 3,467 3,641 4,018 414 420 443 26 32 993 27 40 847 27 44 856 1,227 1,216 1,199 1,230 1,447 1,569 Leasing Space .................................................. Results Not Demonstrated Multiple Award Schedules .............................. Personal Property Management Program (FBP) ............................................................. Real Property Disposal (PR) ........................... Supply Depots and Special Order .................. Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Vehicle Acquisition .......................................... Results Not Demonstrated Vehicle Leasing ................................................ Results Not Demonstrated National Science Foundation: Facilities ........................................................... 2004 Estimate Moderately Effective Results Not Demonstrated Space Station ................................................... 2003 Actual Capital Assets and Acquisition Direct Federal Capital Assets and Acquisition Capital Assets and Acquisition Capital Assets and Acquisition Regulatory Based GSA’s Regional IT Solutions Program ........... National Aeronautics and Space Administration: Biological Sciences Research .......................... Earth Science Applications ............................. Mars Exploration ............................................. Mission and Science Measurement Technology ............................................................ Solar System Exploration ............................... Space Shuttle ................................................... Primary Program Type Program Funding Level (dollars in millions) Service 252 245 220 Service 75 1,011 ................ 972 50 930 Service 715 690 630 Service 279 260 300 138 139 150 Direct Federal Direct Federal Capital Assets and Service Acquisition Capital Assets and Service Acquisition Capital Assets and Service Acquisition Results Not Demonstrated Results Not Demonstrated Effective Research and Development Research and Development Research and Development 269 78 500 368 91 595 492 77 691 Moderately Effective Effective Results Not Demonstrated Research and Development Research and Development Capital Assets and Service Acquisition and Service Acquisition Capital Assets and Service Acquisition 304 1,039 3,301 467 1,316 3,945 1,094 1,187 4,319 1,462 1,498 1,863 527 612 683 Results Not Demonstrated Effective Research and Development 21 2. BUDGET AND PERFORMANCE INTEGRATION AND THE PROGRAM ASSESSMENT RATING TOOL Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title Individuals ....................................................... Information Technology Research .................. Nanoscale Science and Engineering .............. Small Business Administration: Business Information Centers ........................ Disaster Loan Program ................................... Section 504 Certified Development Company Guaranteed Loan Program ......................... Service Corps of Retired Executives .............. Small Business Development Centers ........... Small Business Investment Company ........... Social Security Administration: Disability Insurance ........................................ Supplemental Security Income for the Aged Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate Effective Effective Effective Research and Development Research and Development Research and Development 417 299 221 447 313 249 498 220 305 Results Not Demonstrated Moderately Effective Direct Federal Credit 14 190 14 169 ................ 197 Adequate Moderately Effective Moderately Effective Adequate Credit Block/Formula Grant Block/Formula Grant Credit 13 9 95 13 17 14 98 13 14 12 103 13 Moderately Effective Moderately Effective Direct Federal Direct Federal 71,523 4,208 78,645 4,298 84,119 4,652 Moderately Effective Direct Federal 15 13 14 Moderately Effective Direct Federal 88 128 95 Moderately Effective Credit 564 55 156 Adequate Credit 24 24 24 Adequate Credit 1,753 1,800 2,000 58 50 50 158 261 50 1,441 214 444 154 268 55 1,185 175 430 137 242 63 1,185 155 425 International Assistance Programs Broadcasting Board of Governors: Broadcasting to Africa .................................... Broadcasting to Near East Asia and South Asia ............................................................... Export-Import Bank of the United States: Export Import Bank—Long Term Guarantees ................................................................ Overseas Private Investment Corporation: Overseas Private Investment Corporation— Finance ......................................................... Overseas Private Investment Corporation— Insurance ...................................................... Trade and Development Agency: U.S. Trade and Development Agency ............ United States Agency for International Development: Child Survival and Health (LAC) .................. Development Assistance ................................. Office of Transition Initiatives ....................... Public Law 480 Title II Food Aid ................... USAID Climate Change .................................. USAID Development Assistance—Population Moderately Effective Competitive Grant Results Not Demonstrated Results Not Demonstrated Moderately Effective Adequate Adequate Moderately Effective Competitive Competitive Competitive Competitive Competitive Competitive Other Independent Agencies American Battle Monuments Commission: World War II Memorial .................................. Effective 76 55 22 Armed Forces Retirement Home: Asset Management of AFRH Real Property Capital Assets and Service Acquisition Moderately Effective Capital Assets and Service Acquisition 68 65 61 Results Not Demonstrated Regulatory Based 57 60 63 Results Not Demonstrated Competitive Grant 174 312 292 Results Not Demonstrated Regulatory Based 2,250 2,250 2,250 Results Not Demonstrated Regulatory Based 50 51 52 Adequate Direct Federal 332 374 391 Effective Regulatory Based 14 16 26 Effective Regulatory Based 97 96 157 Results Not Demonstrated Research and Development 22 18 18 Consumer Product Safety Commission: Consumer Product Safety Commission ......... Corporation for National and Community Service: AmeriCorps ...................................................... Federal Communications Commission: Schools and Libraries—Universal Service Fund .............................................................. Federal Election Commission: Compliance—Enforcement .............................. National Archives and Records Administration: Records Services Program .............................. Nuclear Regulatory Commission: Fuel Facilities Licensing & Inspection .......... Reactor Inspection and Performance Assessment .............................................................. Office of National Drug Control Policy: CTAC Counterdrug Research & Development .............................................................. Grant Grant Grant Grant Grant Grant 22 ANALYTICAL PERSPECTIVES Table 2–4. PROGRAM ASSESSMENT RATING TOOL (PART)—Continued (Current Data for All Programs Assessed by PART) 1 Agency/ Program Title CTAC Technology Transfer Program ............. Drug-Free Communities Support Program ... High Intensity Drug Trafficking Areas (HIDTA) ........................................................ Youth Anti-Drug Media Campaign ................ Office of Personnel Management: Federal Employees Group Life Insurance (FEGLI) ........................................................ Federal Employees Retirement Program ...... FEHBP Integrity ............................................. Public Defender Service for the District of Columbia: Public Defender Service for the District of Columbia ...................................................... Securities and Exchange Commission: Full Disclosure Program (Corporate Review) Tennessee Valley Authority: TVA Power ....................................................... TVA Resource Stewardship (Non-Power) ...... 1 If Rating Primary Program Type Program Funding Level (dollars in millions) 2003 Actual 2004 Estimate 2005 Estimate 26 60 22 70 22 80 226 150 226 145 208 145 Results Not Demonstrated Adequate Competitive Grant Competitive Grant Results Not Demonstrated Results Not Demonstrated Competitive Grant Capital Assets and Service Acquisition Results Not Demonstrated Results Not Demonstrated Effective Direct Federal Direct Federal Direct Federal 2,022 50,512 8 2,069 53,092 11 2,164 55,210 15 Results Not Demonstrated Direct Federal 23 25 30 Results Not Demonstrated Regulatory Based 44 61 79 Moderately Effective Capital Assets and Service Acquisition Capital Assets and Service Acquisition 7,585 7,474 7,579 83 84 83 Effective a program definition changed between the 2004 Budget and the 2005 Budget, only the program that was most recently PARTed is listed. CROSSCUTTING PROGRAMS 23 3. HOMELAND SECURITY FUNDING ANALYSIS Since the terrorist attacks of September 11, 2001, America has engaged in a broad, determined effort to thwart terrorism. The Administration has worked with the Congress to enact landmark legislation to reorganize the Federal Government, improve intelligence capabilities, acquire countermeasures to biological weapons, enhance security at our airports, seaports, land borders and local communities, and strengthen America’s preparedness and response capabilities. Every level of government, the private sector, and individual citizens contribute to homeland security—the concerted national effort to prevent terrorist attacks within the United States, reduce America’s vulnerability to terrorism, and minimize the damage from attacks that may occur. Since September 11th, homeland security has become a major policy focus for all levels of government, and one of the President’s highest priorities. To examine homeland security as a crosscutting Government-wide function, section 889 of the Homeland Security Act of 2002 requires a homeland security funding analysis to be incorporated in the President’s Budget. This analysis addresses that legal requirement. It covers the homeland security funding and activities of all Federal agencies, not only those carried out by the Department of Homeland Security (DHS), and discusses State, local, and private sector expenditures. In addition, not all activities carried out by DHS constitute homeland security funding (e.g., Coast Guard search and rescue activities), so DHS estimates in this section do not represent the entire DHS budget. Federal Expenditures The Federal spending estimates in this analysis utilize funding and programmatic information collected on the Executive Branch’s homeland security efforts 1. Throughout the budget formulation process, the Office of Management and Budget (OMB) collects three-year 1 All data in the Federal expenditures section are based on the President’s policy for the 2005 Budget. Additional policy and baseline data is presented in the ‘‘Additional Tables’’ section and on the Analytical Perspectives CD ROM. Data in this section may not add to totals in other Budget volumes due to rounding. funding estimates and associated programmatic information from all Federal agencies with homeland security responsibilities. These estimates do not include programs or funding within the Legislative or Judicial branches. Information in this chapter is augmented by a detailed appendix of account-level funding estimates, which is available on the Analytical Perspectives CD ROM. To compile these data, agencies report information using standardized definitions for homeland security. The data provided by the agencies are developed at the ‘‘activity level,’’ which is a set of like programs or projects that make up a coherent effort, at a level of detail sufficient to analyze governmental spending on homeland security. Agencies further categorize their funding data based on the critical mission areas defined in the National Strategy for Homeland Security: intelligence and warning, border and transportation security, domestic counterterrorism, protecting critical infrastructures and key assets, defending against catastrophic threats, and emergency preparedness and response. In all tables, classified funding for the Intelligence Community is combined with the Department of Defense and titled ‘‘Department of Defense.’’ To the extent possible, this analysis maintains programmatic and funding consistency with previous estimates. Some discrepancies from data reported in earlier years arise due to agencies’ improved ability to extract terrorism-related activities from host programs and refine their characterizations. In addition, the Administration may refine definitions or mission area estimates over time based on additional analysis or changes in the way specific activities are characterized, aggregated, or disaggregated. Activities in many of the mission areas are closely related. For example, information gleaned from activities in the intelligence and warning category may be utilized to inform law enforcement activities in the domestic counterterrorism category. Augmentation of pharmaceutical stockpiles, categorized as emergency preparedness and response, may address agents that represent catastrophic threats. 25 26 ANALYTICAL PERSPECTIVES Table 3–1. HOMELAND SECURITY FUNDING BY AGENCY (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted Department of Agriculture ...................................................................................................................................................... Department of Commerce ...................................................................................................................................................... Department of Defense .......................................................................................................................................................... Department of Education ....................................................................................................................................................... Department of Energy ............................................................................................................................................................ Department of Health and Human Services ......................................................................................................................... Department of Homeland Security ......................................................................................................................................... Department of Housing and Urban Development ................................................................................................................. Department of the Interior ...................................................................................................................................................... Department of Justice ............................................................................................................................................................ Department of Labor .............................................................................................................................................................. Department of State ............................................................................................................................................................... Department of Transportation ................................................................................................................................................ Department of the Treasury ................................................................................................................................................... Department of Veterans Affairs ............................................................................................................................................. Corps of Engineers ................................................................................................................................................................ Environmental Protection Agency .......................................................................................................................................... Executive Office of the President .......................................................................................................................................... General Services Administration ............................................................................................................................................ National Aeronautics and Space Administration ................................................................................................................... National Science Foundation ................................................................................................................................................. Office of Personnel Management .......................................................................................................................................... Social Security Administration ................................................................................................................................................ District of Columbia ................................................................................................................................................................ Federal Communications Commission .................................................................................................................................. Intelligence Community Management Account ..................................................................................................................... National Archives and Records Administration ..................................................................................................................... Nuclear Regulatory Commission ............................................................................................................................................ Securities and Exchange Commission .................................................................................................................................. Smithsonian Institution ........................................................................................................................................................... United States Holocaust Memorial Museum ......................................................................................................................... Corporation for National and Community Service ................................................................................................................ 299.9 111.6 8,442.0 5.7 1,246.9 4,002.4 18,652.4 1.6 47.4 1,892.5 69.4 632.7 382.8 80.0 154.3 36.0 132.9 41.0 67.1 205.0 284.6 3.0 132.0 25.0 1.0 .................... 10.1 47.0 5.0 82.8 8.0 16.3 110.0 ...................... ...................... ...................... 161.3 142.0 4,411.0 ...................... 7.3 456.9 ...................... 1.4 ...................... ...................... ...................... 39.0 ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 326.6 131.2 7,024.0 8.0 1,362.5 4,109.0 1 23,492.3 1.8 67.2 1 2,165.8 52.4 701.3 283.5 90.4 271.3 103.4 123.3 35.0 78.9 191.0 327.9 3.0 143.4 19.0 1.0 1.0 12.0 66.8 5.0 78.3 8.0 22.8 651.1 150.1 8,023.1 7.7 1,496.9 4,276.1 27,214.5 1.8 49.3 2,581.1 68.6 954.8 242.6 87.1 297.0 84.0 97.4 35.0 79.5 207.0 343.6 3.0 155.0 15.0 .................... 72.4 14.6 57.0 5.0 76.0 8.0 31.6 Total, Homeland Security Budget Authority ..................................................................................................................... Less Department of Defense ............................................................................................................................................. Less BioShield ................................................................................................................................................................... 37,118.2 –8,442.0 .................... 5,329.0 ...................... ...................... 41,307.1 –7,024.0 –885.0 47,385.7 –8,023.1 –2,528.0 Non-Def. Homeland Security BA excluding BioShield .................................................................................................... Less Fee-Funded Homeland Security Programs .............................................................................................................. Less Mandatory Homeland Security Programs ................................................................................................................ 28,676.2 –3,414.4 –1,759.4 5,329.0 705.0 ...................... 33,398.1 –3,655.1 –1,948.0 36,834.6 –4,080.5 –2,261.4 Net Non-Def. Disc. Homeland Security BA excluding BioShield .................................................................................. 23,502.4 6,034.0 27,795.0 30,492.7 Obligation Limitations Department of Transportation Obligation Limitation ......................................................................................................... 567.0 ...................... 139.6 92.9 1 2004 2005 Request Enacted does not include $91 million for Coast Guard and $16 million for FBI enacted as part of the FY 2004 Iraq supplemental. Total funding for homeland security has grown significantly since the attacks of September 11, 2001. For 2005, the President’s Budget includes $47.4 billion for homeland security activities, a $6.1 billion (15 percent) increase over the 2004 level. This is $26.8 billion, or 130 percent, over the government’s funding level for 2002. Excluding mandatory and fee funding, DOD, and DHS’ Project Bioshield, the 2005 Budget provides an increase of $2.7 billion (9.7 percent) over the 2004 level. A total of 32 Federal agencies include homeland security funding. Of those, five agencies—the Departments of Homeland Security (DHS), Defense (DOD), Health and Human Services (HHS), Justice (DOJ) and Energy (DOE)—account for approximately 92 percent of total Government-wide homeland security funding in 2005. The growth in Federal homeland security funding is indicative of the robust efforts that have been initiated to secure our Nation. However, it should be recognized that fully developing the strategic capacity to protect America into the future is a complex effort. There is a wide range of potential threats and risks to the Nation. To optimize the use of limited resources and minimize the potential social costs to our free and open society, homeland security activities should be prioritized based on the highest threats and risks. Homeland security represents a partnership among the Federal Government, State and local governments, the private sector, and individual citizens. The National Strategy for Homeland Security provides a framework for addressing these challenges. It 27 3. HOMELAND SECURITY FUNDING ANALYSIS guides the highest priority requirements for securing the Nation. As demonstrated below, the Federal Government has used the National Strategy to guide its homeland security efforts. However, the National Strategy is not static; it represents a dynamic effort to measure progress. In some cases, progress may be easily measured. In others, Federal agencies, along with State and local governments and the private sector, are working together to develop measurable goals. Finally, in Table 3–2. some areas, Federal agencies and partners must work to develop a better understanding of risks and threats— the biological agents most likely to be used by a terrorist group, the highest-risk and consequence critical infrastructure targets—in order to develop benchmarks. The following table summarizes funding levels by the National Strategy’s mission areas; more detailed analysis is provided in subsequent mission-specific sections. HOMELAND SECURITY FUNDING BY NATIONAL STRATEGY MISSION AREA (Budget authority, in millions of dollars) 2003 Enacted Agency 2003 Supplemental 2004 Enacted 2005 Request Intelligence and Warning ........................................ Border and Transportation Security ....................... Domestic Counterterrorism ..................................... Protecting Critical Infrastructure and Key Assets .. Defending Against Catastrophic Threats ............... Emergency Preparedness and Response ............. Other ........................................................................ 125.1 15,170.8 2,509.2 12,893.1 2,428.4 3,873.2 118.3 86.0 1,859.0 522.6 388.3 201.1 2,272.0 ...................... 268.7 15,322.5 2,994.1 12,571.0 2,827.2 7,132.5 191.1 474.1 17,074.6 3,419.8 14,060.0 3,358.2 8,802.4 196.5 Total, Homeland Security Budget Authority 37,118.2 5,329.0 41,307.1 47,385.7 National Strategy Mission Area: Intelligence and Warning The intelligence and warning mission area covers activities to detect terrorist threats and disseminate terrorist-threat information. The category includes intelligence collection, risk analysis, and threat-vulnerability integration activities for preventing terrorist attacks. It also includes information sharing activities among Federal, State, and local governments, relevant private sector entities (particularly custodians of critical infrastructure), and the public at large. It does not include most foreign intelligence collection, although this intelligence may inform homeland security activities. In 2005, the bulk of the funding for intelligence and warning is in DHS (61 percent in 2005), primarily in the Information Analysis and Infrastructure Protection (IAIP) Directorate and the Secret Service. Other large contributors are DOJ (19 percent in 2005), primarily in the Federal Bureau of Investigation (FBI), and the Table 3–3. Intelligence Community (15 percent in 2005), for the Terrorist Threat Integration Center (TTIC). The major requirements addressed in the intelligence and warning mission area include: • Unifying and enhancing the Government’s intelligence and analytical capabilities to ensure officials have the information they need to preempt attacks. • Implementing the Homeland Security Advisory System to allow Federal, State, local, and private authorities to take action to prevent attacks and protect potential targets. The Administration is addressing these homeland security requirements through a variety of efforts. Over the past year, significant steps have been taken to enhance coordination of information collection and analysis. The multi-agency TTIC, the Terrorist Screening Center (TSC), and DHS’ IAIP Directorate were established. These new units are improving information sharing among agencies and reducing potential gaps INTELLIGENCE AND WARNING FUNDING (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Agriculture ....................................... Department of Homeland Security ......................... Department of Justice ............................................. Department of the Treasury ................................... Intelligence Community Management Account ...... 0.8 86.3 35.7 2.3 .................... ...................... ...................... 86.0 ...................... ...................... 0.8 239.9 24.5 2.5 1.0 19.8 290.3 91.1 0.6 72.4 Total, Intelligence and Warning ...................... 125.1 86.0 268.7 474.1 28 ANALYTICAL PERSPECTIVES in intelligence. They were explicitly established as ‘‘hubs’’ to receive and share threat information with multiple Federal agencies and other entities. A further example of intelligence coordination is the Memorandum of Agreement signed by the Secretary of Homeland Security, the Attorney General, and the Director of Central Intelligence to improve the flow of homeland security information between their agencies. Announced by the President in the 2003 State of the Union, the multi-agency TTIC commenced operations on May 1st, 2003. TTIC’s interagency staff fully integrates terrorist threat-related information and analysis, and seeks to break down information ‘‘stovepipes’’ that have hindered intelligence efforts in the past. TTIC is co-located with counterterrorism elements from the Central Intelligence Agency and FBI to further improve communication and analysis. To complement the TTIC, the Administration initiated the TSC, which began operations in December 2003. The TSC was formed to consolidate Government watch lists and provide operational support for thousands of Federal screeners across the country and around the world by making this consolidated information accessible to Federal, State and local agencies. Information provided by TSC will allow Government investigators, screeners and agents to act quickly when a suspected terrorist is screened or stopped. The TSC works closely with the TTIC to ensure that the single, consolidated list of terrorist suspects is accurate and regularly updated. Enhancing the FBI’s analytical capability has been a major priority to improve the Government’s overall ability to deter, detect, and prevent terrorist attacks. The FBI has created an Office of Intelligence to establish intelligence requirements and coordinate information collection and sharing. The President’s Budget requests $29 million for this new office. IAIP was established as part of DHS to fill a new and unique role: mapping threat information against our nation’s vulnerabilities, and working with the Federal, State, and local government officials and private sector custodians of critical infrastructure to mitigate those vulnerabilities. Over the past year, the IAIP has made considerable strides by working with its partners within the intelligence community to become a focal point for integrating and disseminating operational and situational awareness information. For example, IAIP is partnering with homeland security directors of States Table 3–4. and territories to establish joint regional information exchange systems using DHS’ Homeland Security Operations Center. IAIP is working to not only eliminate barriers to information sharing but also create avenues to share information to its partners on specific threats, vulnerabilities, and responses to the threat. In addition, IAIP is responsible for operating the Homeland Security Advisory System (HSAS), which communicates threat alerts to the general public and government entities. IAIP is working to refine the warning system. For 2005, the President requests $10 million for the HSAS. The Federal Government is working to link other agency warning systems to the HSAS and to other public and private sector alert networks. DHS has been leading efforts to harmonize Federal systems, such as the National Oceanic and Atmospheric Administration’s all-hazards and weather radio system in the Department of Commerce, and has been working with State, local, and private sector entities to link systems, speed notification processes, and allow for more targeted warnings National Strategy Mission Area: Border and Transportation Security This mission area covers activities to protect border and transportation systems, such as screening airport passengers, detecting dangerous materials at ports overseas and at U.S. ports-of-entry, and patrolling our coasts and the land between ports-of-entry. The majority of funding in this mission area ($15.9 billion, or 93 percent, in 2005) is in DHS, largely for the U.S. Customs and Border Protection (CBP), the Transportation Security Administration (TSA), and the Coast Guard. Other DHS bureaus and other Departments, such as State and Agriculture, also play significant roles as well. The President’s 2005 request would increase funding for border and transportation security activities by 11 percent over the 2004 level. Securing our borders and transportation systems is a complex task. The Administration’s ‘‘Smart Border’’ initiative targets resources toward the highest risks and threats while facilitating the legitimate flow of commerce. This is cornerstone of an effective border and transportation security strategy. The creation of DHS, which unified the Federal Government’s major border and transportation security resources, facilitates the integration of risk targeting systems and ensures greater accountability in border and transportation security. BORDER AND TRANSPORTATION SECURITY FUNDING (Budget authority, in millions of dollars) Agency Department Department Department Department Department of of of of of 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Agriculture ....................................... Homeland Security ......................... Justice ............................................. State ............................................... Transportation ................................. 143.2 14,169.2 25.4 591.8 241.3 ...................... 1,859.0 ...................... ...................... ...................... 163.1 14,403.2 20.1 668.9 67.2 169.2 15,943.4 24.4 919.0 18.6 Total, Border and Transportation Security ... 15,170.8 1,859.0 15,322.5 17,074.6 3. HOMELAND SECURITY FUNDING ANALYSIS Rather than having separate systems for managing the flow of goods, people, and agricultural products, one agency is now accountable for ensuring there is one cohesive border management system. In the area of aviation security, the Federal Government has implemented the Aviation and Transportation Security Act of 2001. While intelligence suggests that aviation remains a preferred instrument of terrorism, Federal actions have bolstered the Nation’s defenses. The Federal Government funded the installation of reinforced, blast-resistant cockpit doors on all large commercial passenger aircraft. More than 7,000 screening devices have been installed in all 429 commercial airports. Screeners have been replaced or retrained at all airport checkpoints and all passengers on U.S. aircraft are pre-screened against terrorism watch lists. Aircraft and airport access controls have been tightened for all U.S. airports, and the Government is working with other nations to improve aviation security. DHS also recently implemented new air cargo security requirements so that high risk cargo may not be carried on passenger aircraft. The 2005 Budget supports substantial new investments in aviation security, including an increase of nearly $900 million increase over 2004 for TSA. This funding will help ensure strong screening system performance through more training, improved technology, and explosive detection system replacement at high volume airports. In addition, $60 million is provided to DHS to continue accelerated development of improved technologies to counter the threat of portable anti-aircraft missiles. The Budget also supports a regulatory enforcement program in CBP and TSA to ensure that the air cargo industry is complying with the higher security standards, and invests in research and development for better cargo screening technologies. The security of our seaports is no less critical, since terrorists may seek to use them to enter the country or introduce weapons or other dangerous materials. With 95 percent of all U.S. cargo passing through the Nation’s 361 ports, a terrorist attack on a seaport could be economically devastating. The Maritime Transportation Security Act (MTSA) and its implementing regulations, issued by DHS in October 2003, require certain ports, vessels, and facilities to conduct security assessments. DHS will establish security standards for certain vessels and facilities, and require them to adopt security plans based on their assessments. The 2005 Budget provides nearly $2 billion for port security, including $1.7 billion for Coast Guard activities such as Maritime Safety and Security Teams and Sea Marshals and nearly $50 million for port security grants. This includes over $100 million in new funding for the Coast Guard to develop and approve security plans, ensure foreign vessels arriving in the U.S. are in compliance with the new international port security standards, and enhance its intelligence and surveillance capabilities. CBP is responsible for inspecting travelers at ports of entry for immigration, customs, and agriculture com- 29 pliance, as well as interdicting illegal crossers between ports of entry. DHS streamlined border operations by merging inspection forces formerly maintained by the Departments of the Treasury, Justice, and Agriculture. CBP also includes the Border Patrol, formerly maintained by the Department of Justice. The merging of the agencies responsible for ensuring that all goods and persons entering and exiting the United States do so legally has improved accountability by leveraging all of our border security assets; creating a clear chain of command; and allowing for a comprehensive, cohesive border security strategy. To secure our borders while also maintaining openness to travel and trade, CBP utilizes a risk-based, layered security approach. Overall funding for CBP homeland security activities in 2005 would increase by almost $200 million over the 2004 enacted level, with enhancements supporting additional inspectors at ports-of-entry, additional Border Patrol agents, inspection equipment, enhancements to tracking and targeting databases, and information technology upgrades. Further, through its Container Security Initiative (CSI), CBP has addressed an area of identified risk—the security of international shipping containers. CSI aims to push our borders outward by screening cargo containers at foreign ports before the containers are placed on ships bound for the United States. The 2005 Budget provides $25 million in new funding for CSI. Another focus for CBP is new and improved inspection equipment. Nearly $300 million has been directed for this endeavor since September 11th. The new equipment affords inspectors the ability to examine a larger percentage of containers more easily than in the past. The 2005 Budget provides over $100 million to CBP for such equipment, including $50 million in funding to defend against radiological and nuclear threats by deploying next-generation radiation detection technologies. Additionally, CBP will continue deployments of current Non-Intrusive Inspection technologies to expand radiation detection capability across our borders. Another important element of a smart border strategy is managing the pre-entry, entry, stay, and departure of visitors. To do so, the 2005 Budget requests $340 million in DHS’ Border and Transportation Security Directorate to continue implementation of U.S. VISIT, an entry-exit control system to record the arrivals and departures of travelers. This program will provide specific information about who is entering the country and who is staying past their period of authorized admission. To ensure effective detention and removal of illegal aliens present in the U.S., the 2005 Budget also supports a nearly $100-million increase for the Detention and Removal Program. This includes funding to expand the program to apprehend alien fugitives and to increase efforts to ensure that aliens convicted of crimes in the U.S. are deported directly from correctional institutions after their time is served. 30 ANALYTICAL PERSPECTIVES National Strategy Mission Area: Domestic Counterterrorism Funding in the domestic counterterrorism mission area covers Federal and Federally-supported efforts to identify, thwart, and prosecute terrorists in the United States. The Department of Justice (largely for the FBI) and DHS (largely for U.S. Immigration and Customs Enforcement, or ICE) are the largest contributors to the domestic counterterrorism mission, accounting for $1.9 billion (57 percent) and $1.4 billion (41 percent) in funding for 2005, respectively. The President’s 2005 request would increase funding for domestic counterterrorism activities by 14 percent over the 2004 level. Since the attacks of September 11th, preventing and interdicting terrorist activity within the United States has become a priority for law enforcement at all levels of government. The major requirements addressed in the intelligence and warning mission area include: • Developing a proactive law enforcement capability to prevent terrorist attacks. • Apprehending potential terrorists. • Improving law enforcement cooperation and information sharing to enhance domestic counterterrorism efforts across all levels of government. The FBI has transformed its focus into to one dedicated to preventing terrorist attacks. In a series of measures to support this transformation, resources have been shifted from lower priority programs; analytical capability has been enhanced; additional field in- Table 3–5. vestigators have been hired; and headquarters oversight and management of terrorism cases has been strengthened. Overall, FBI resources in the domestic counterterrorism category have increased from $0.9 billion in 2003 to $1.3 billion in 2005, with the 2005 Budget providing an increase of approximately $300 million over the 2004 level. This increase will support a range of activities, such as counterterorism investigations and countering cyber crime. By merging existing immigration and customs enforcement functions into ICE, the Department of Homeland Security created one of America’s most robust law enforcement agencies. The Nation is better prepared to apprehend potential terrorists because the information and resources to identify and investigate illegal activities, such as smuggling, identity theft, money laundering, and trafficking in dangerous materials are combined. The 2005 Budget provides an increase of $160 million over the 2004 level for these enforcement activities. Cooperation among law enforcement agencies assumes its most tangible operational form in the Joint Terrorism Task Forces (JTTFs) that are currently established in 66 cities. These task forces are devised to prevent and investigate terrorism. They combine the national and international investigative resources of the FBI and other Federal agencies with the street-level expertise of local law enforcement agencies. This ‘‘copto-cop’’ cooperation has proved successful in disrupting terrorist activity. The 2005 Budget provides funding to support 18 additional JTTFs. DOMESTIC COUNTERRORISM FUNDING (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Homeland Security ......................... Department of Justice ............................................. Department of Transportation ................................. Department of the Treasury ................................... Social Security Administration ................................ 1,012.6 1,455.0 1.0 40.6 .................... 171.7 350.8 ...................... ...................... ...................... 1,246.2 1,677.7 21.0 45.2 4.0 1,410.1 1,938.3 21.0 46.0 4.4 Total, Domestic Counterterrorism .................. 2,509.2 522.6 2,994.1 3,419.8 31 3. HOMELAND SECURITY FUNDING ANALYSIS National Strategy Mission Area: Protecting Critical Infrastructure and Key Assets Funding in the protecting critical infrastructure and key assets mission area captures the efforts of the U.S. Government to secure the Nation’s infrastructure, including information infrastructure, from terrorist attacks. Protecting the Nation’s key assets is a complex challenge because more than 85 percent are not Federally-owned. DOD reports the largest share of funding in this category for 2005 ($7.6 billion, or 54 percent, in 2005), and includes programs focusing on physical security and improving the military’s ability to prevent or mitigate the consequences of attacks against soldiers and bases. DHS has overall responsibility for prioritizing and executing infrastructure protection activities at a national level and accounts for $2.6 billion (18 percent) of 2005 funding. A total of 26 other agencies report funding to protect their own assets and to work with States, localities, and the private sector to reduce vulnerabilities in their areas of expertise. The President’s 2005 request increases funding for activities to protect critical infrastructure and key assets by $1.5 billion (12 percent) over the 2004 level, of which $1 billion is for DOD. Securing America’s critical infrastructure and key assets is a complicated task. The major requirements include: • Unifying disparate efforts to protect critical infrastructure across the Federal Government, and with State, local, and private stakeholders. • Building and maintaining a complete and accurate assessment of America’s critical infrastructure and key assets and prioritizing protective action based on risk. • Enabling effective partnerships to protect critical infrastructure. • Reducing threats and vulnerabilities in cyberspace. The IAIP Directorate, as part of DHS, is responsible for prioritizing and addressing these requirements at Table 3–6. a national level. One of the first tasks undertaken by IAIP involved cataloguing critical infrastructure and key assets of national-level importance. IAIP leverages tactical intelligence with a risk-based strategy that identifies critical infrastructures in the targeted areas that might be affected by a terrorist incident, works to understand the vulnerabilities of that infrastructure, and recommends protective measures. In addition, IAIP trains State and local officials to improve security in the areas surrounding up to 1,000 key infrastructures sites per year. The FY 2005 Budget provides $287 million for the broad range of IAIP’s infrastructure protection activities. Cyberspace security is a key element of infrastructure protection because the internet and other computer systems link many infrastructure sectors. The consequences of a cyber attack could cascade across the economy, imperiling public safety and national security. In response, DHS has established the National Cyber Security Division (NCSD) to identify, analyze and reduce cyber threats and vulnerabilities, coordinate incident response, and provide technical assistance. Since its formal establishment in 2003, NCSD has worked with the private sector to improve security of the Nation’s information infrastructure. For example, it coordinated the response and mitigation of the Blaster worm and SoBig virus. $80 million is requested for the NCSD in 2005. Even with the creation of IAIP, the Government continues to utilize the infrastructure protection efforts of other Federal agencies to ensure the delivery of essential goods and services and maintain public safety and security. A number of agencies rely on specialized expertise and long-standing relationships with industry to assist them. Sector-specific agencies outside of DHS are pursuing infrastructure protection efforts. The Department of Energy is coordinating protection activities within the energy sector as any prolonged interruption of energy supply—be it electricity, natural gas, or oil products—could be devastating to the Nation. The Department of Trans- PROTECTING CRITICAL INFRASTRUCTURE AND KEY ASSETS FUNDING (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Agriculture ....................................... Department of Defense .......................................... Department of Energy ............................................ Department of Health and Human Services .......... Department of Homeland Security ......................... Department of Justice ............................................. Department of Transportation ................................. National Aeronautics and Space Administration .... National Science Foundation .................................. Social Security Administration ................................ Other Agencies ....................................................... 60.5 8,124.0 1,126.0 182.3 1,739.7 341.8 128.0 205.0 257.6 132.0 596.3 ...................... ...................... 77.3 ...................... 250.3 13.0 ...................... ...................... ...................... ...................... 47.7 86.5 6,543.8 1,254.9 164.6 2,413.1 413.4 180.1 191.0 300.9 139.4 883.4 166.0 7,550.7 1,397.7 173.8 2,558.2 484.0 189.0 207.0 316.6 150.6 866.4 Total, Protecting Critical Infrastructure and Key Assets .................................................... 12,893.1 388.3 12,571.0 14,060.0 32 ANALYTICAL PERSPECTIVES portation is working with local transit agencies to test and deploy integrated intrusion detection technologies in tunnels and open track areas in cities with major transit systems. The Department of Agriculture (USDA) is protecting agricultural resources, a source of essential commodities, through research and testing programs. To maintain public safety and security, the Environmental Protection Agency (EPA) and DHS are working with the chemical industry to enhance measures in place to ensure the safety of facilities and to prevent accidental releases. Companies representing more than 90 percent of chemical production have adopted a comprehensive security code that includes mandatory inspections. EPA has also provided grants and technical support to help drinking water systems complete vulnerability assessments. To protect Federal facilities that could be exploited by terrorists, the Army Corps of Engineers is addressing identified vulnerabilities at its highest-priority dams. To protect the Nation’s nuclear weapons complex, as well as nuclear weapons and their components while in transit between facilities, the Department of Energy has revised its assumptions of threats and requirements. The 2005 Budget includes a $166-million increase to address additional security. A major component of ensuring public safety and security is protecting Federal employees and Federallyowned, leased, or occupied buildings from terrorist attack. The largest share of funding in this area is for DOD ($7.6 billion for 2005). This includes programs focusing on physical security and improving the military’s ability to prevent or mitigate the consequences of attacks against soldiers and bases. National Strategy Mission Area: Defending Against Catastrophic Threats The defending against catastrophic threats mission area covers activities to research, develop, and deploy technologies, systems, and medical measures to detect and counter the threat of chemical, biological, radiological, and nuclear (CBRN) weapons. The agencies with the most significant resources in this category are HHS ($1.9 billion, or 57 percent, of the 2005 total), largely for research in the National Institutes of Table 3–7. Health, and in DHS’ Directorate of Science and Technology (S&T) ($0.9 billion, or 26 percent, of the 2005 total), to help develop and field technologies to counter CBRN threats. The President’s 2005 request would increase funding for activities defending against catastrophic threats by 19 percent over the 2004 level. The major requirements addressed in this mission area include: • Developing countermeasures, including broad spectrum vaccines, antimicrobials, and antidotes. • Preventing terrorist use of CBRN weapons through detection systems and procedures. A key element in addressing these requirements as a whole is developing and maintaining adequate countermeasures for a CBRN attack. This not only means stockpiling those countermeasures that are currently available, but developing new countermeasures for agents that currently have none, and next-generation countermeasures that are safer and more effective than those that presently exist. Also, unlike an attack with conventional weapons, an attack with many CBRN weapons may not be immediately apparent. Working to ensure earlier detection and characterization of an attack is another way to protect and save lives. The Federal Government is addressing these requirements. Primarily through the National Institutes of Health, HHS has conducted a research and development to develop next-generation diagnostics, vaccines and therapeutics to identify, prevent and treat the diseases caused by biological agents of terror. The 2005 Budget continues this effort by investing $1.7 billion, an increase of $128 million over 2004 and $1.4 billion over level prior to September 11th, including funding for a new program to focus on countermeasures against the threat of radiological and nuclear weapons. These investments have yielded results. For example, in November of 2003, NIH began the first human trial of vaccine designed to prevent Ebola infection. When proven effective, this vaccine will provide a life-saving advance in countries where the disease occurs naturally, and a medical tool to discourage and counteract the use of Ebola virus as an agent of bioterrorism. DHS’ Project BioShield, categorized as emergency prepared- DEFENDING CATASTROPHIC THREATS FUNDING (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Agriculture ....................................... Department of Commerce ...................................... Department of Defense .......................................... Department of Energy ............................................ Department of Health and Human Services .......... Department of Homeland Security ......................... Department of Justice ............................................. National Science Foundation .................................. Nuclear Regulatory Commission ............................ 44.6 63.9 105.0 .................... 1,664.4 491.0 23.6 27.0 8.9 110.0 ...................... ...................... 84.0 ...................... ...................... 7.1 ...................... ...................... 20.8 60.0 146.8 .................... 1,754.5 774.0 27.9 27.0 16.2 227.0 69.5 161.3 .................... 1,930.3 886.0 41.0 27.0 16.1 Total, Defending Against Catastrophic Threats ........................................................... 2,428.4 201.1 2,827.2 3,358.2 33 3. HOMELAND SECURITY FUNDING ANALYSIS ness and response because it will be utilized to augment pharmaceutical stockpiles, will also spur the development new biological countermeasures. In order to decrease the gap in time between a bioterrorist attack and the implementation of Federal, State, and local response protocols, the 2005 Budget includes a $274-million biosurveillance initiative. The initiative will help to build a comprehensive detection architecture by augmenting and integrating existing surveillance in the areas of human health, food supply, agriculture, and environmental monitoring, and then integrating those elements with each other and with other terrorist-threat information in real time. Improvements to these surveillance capabilities will be supported by investing an additional $130 million for HHS’ Centers for Disease Control and Prevention, an additional $15 million for HHS’ Food and Drug Administration and the Department of Agriculture, and a total of $118 million for DHS S&T in 2005. The Budget also provides $11 million for the IAIP Directorate to integrate this information. As part of the Biosurveillance Initiative, the BioWatch program in DHS’ S&T Directorate will be expanded. BioWatch continuously monitors the air for biological agents that might be released by terrorists. The 2005 Budget provides an additional $47 million to expand the program by adding scores of detectors in the top high-threat cities and at high-value targets such as stadiums and transit systems. To facilitate enhancements in the system, the budget provides $31 million in new funding for DHS to develop the next-generation of biological sensors, new detection systems at critical food nodes, and a model to enable better synthesis of biological incident data when assessing the extent of an actual attack. USDA, HHS, and DHS will also work together to improve the inputs into the biosurveillance system and protect the safety of the Nation’s food and agriculture systems from terrorist attacks. This effort spans across mission area categories, including efforts to detect catastrophic agents, improve warning systems, better protect the food and agriculture sectors from these threats on a regular basis, and, when necessary, implement response protocols. The 2005 Budget includes an inTable 3–8. crease of $357 million to expand laboratory capacity, conduct research, and improve surveillance of the food and agriculture supply. This funding will support the complete renovation and modernization of the national animal disease and diagnostic facility at Ames, Iowa. In addition, $15 million from the Biosurveillance initiative is specifically dedicated to improving food and agriculture surveillance. National Strategy Mission Area: Emergency Preparedness and Response The Emergency Preparedness and Response mission area covers agency efforts to prepare for and minimize the damage from major incidents and disasters, particularly terrorist attacks that would endanger lives and property or disrupt government operations. The mission area encompasses a broad range of agency incident management activities, as well as grants and other assistance to States and localities for similar purposes. DHS maintains the largest share of funding in this category ($5.9 billion, or 68 percent, for 2005), mostly for preparedness grant assistance to State and local first responders and Project BioShield. HHS, the second largest contributor ($2.2 billion, or 25 percent, in 2005), also assists to States and localities to upgrade their public health capacity. A total of 18 other agencies include emergency preparedness and response funding. A number maintain specialized response assets that may be called upon in select circumstances. In the President’s 2005 Budget, funding for emergency preparedness and response activities would increase by $1.7 billion (23 percent) over the 2004 level. Major requirements addressed in the emergency preparedness and response mission area include: • Integrating separate Federal response plans into a single all-discipline incident management plan. • Establishing measurable goals for national preparedness and ensuring that federal funding supports these goals • Ensuring that Federal programs to train and equip States and localities are coordinated and complementary. EMERGENCY PREPAREDNESS AND RESPONSE FUNDING (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Energy ............................................ Department of Health and Human Services .......... Department of Homeland Security ......................... Other Agencies ....................................................... 120.9 2,155.7 1,126.0 470.6 ...................... 142.0 2,130.0 ...................... 107.6 2,189.8 4,268.0 567.0 99.2 2,172.0 5,965.5 565.8 Total, Emergency Preparedness and Response ........................................................... Less BioShield .................................................... 3,873.2 .................... 2,272.0 ...................... 7,132.5 –885.0 8,802.4 –2,528.0 Total, Emergency Preparedness and Response excluding BioShield ....................... 3,873.2 2,272.0 6,247.5 6,274.4 34 • Encouraging standardization and interoperability of first responder equipment, especially for communications. • Building a national training, exercise, evaluation system. • Creating a national incident management system. • Preparing health care providers for catastrophic terrorism. • Augmenting America’s pharmaceutical and vaccine stockpiles. Many of the key elements of the national emergency response system are already in place. However, we must ensure that the investments made since September 11th to enhance Federal, State and local preparedness capabilities have actually resulted in a higher level of preparedness. Key elements in doing so are identifying capability gaps, establishing national preparedness goals, and improving response and recovery efforts at all levels of government. A related challenge is ensuring that investments in State and local preparedness are focused on new response capabilities for major events, and not supplanting normal operating expenses. DHS is leading an interagency effort to better match federal resources with achieving national preparedness goals. From 2001 through 2004, the Federal Government has allocated $13.4 billion in State and local terrorism preparedness grant funding from the Departments of Homeland Security, Health and Human Services, and Justice, increasing spending from an annual level of approximately $300 million in 2001 to $5.0 billion in the 2005 request. The funding growth has been directed to Federal assistance for State and local preparedness and response activities, including equipping and training first responders and preparing the public health infrastructure for a range of terrorist threats. The Federal Government has also taken steps to rationalize and simplify the distribution of State and local assistance. For example, DHS now maintains a website that contains information on homeland security and public safety grant opportunities offered by DHS and other agencies across the Federal Government. In addition, DHS’ Project SAFECOM has established consistent technical criteria for Federally-funded communications equipment, and is developing a strategic plan to encourage progress on standardizing equipment and protocols. In 2004, DHS will complete a National Response Plan and begin to implement a comprehensive National Incident Management System. By the end of 2004, over 500,000 first responders will have received terrorism preparedness and response training through the Departments of Justice and Homeland Security. Over 480 terrorism preparedness exercises will have been conducted, including the largest preparedness exercise in American history (TOPOFF II). The 2005 Budget continues to provide coordinated terrorism preparedness training and equipment for State and local responders across the various responder agencies. The 2005 request includes $3.6 billion for terrorism preparedness grants, training, and exercises administered by the Office for ANALYTICAL PERSPECTIVES Domestic Preparedness within DHS. DHS will also administer a new, $20 million program for planning and exercises associated with medical surge capabilities. Of this amount, $5 million is for planning and $15 million is for two pilot projects to evaluate fixed and mobile medical surge facilities capabilities. In addition, the Budget includes $2.5 billion, $1.6 billion over the 2004 level, for Project BioShield. BioShield is designed to stimulate the development of the next generation of countermeasures by allowing the Federal Government to buy critically needed vaccines and medications for biodefense as soon as experts agree they are safe and effective enough to be added to the Strategic National Stockpile. This program provides an incentive to manufacture these countermeasures. BioShield is a shared responsibility, joining the intelligence capabilities of DHS with the medical expertise of HHS. To take full advantage of that medical expertise, the Budget proposes to transfer funding for the Stockpile to HHS. The Budget includes $400 million to maintain and augment this supply of vaccines and other countermeasures that can be made available within 12 hours in the event of a terrorist attack or other public health emergency. The Budget also includes flexible authority to increase funding to augment the supply of antibiotics to protect the public against exposure to anthrax. HHS has the lead role in preparing public health providers for catastrophic terrorism. For 2005, HHS will provide $476 million to continue improvements for hospital infrastructure and mutual aid through the Health Resources and Services Administration (HRSA), and $829 million for States through the Centers for Disease Control and Prevention (CDC) for upgrades to State and local public health capacity. This investment will bring the total assistance provided by HHS to States, local governments and health care providers since 2001 to $5.8 billion. Non-Federal Expenditures Since September 11th, State and local governments and the private sector have also devoted extensive resources to the task of defending against terrorist threats. Some spending represents one-time costs; other spending is likely to be ongoing. In their roles as first responders, States and localities have hired more personnel, increased overtime for police, firefighters, and other emergency personnel, purchased new security equipment, activated and upgraded emergency operations centers, and invested in security-focused training. In the private sector, firms have devoted more resources to enhance security and ensure the continuity of operations in the event of an attack. Private sector spending has focused on strengthening information systems, reinforcing security and protection, improving surveillance, and establishing and improving backup systems and inventory management so that activities can be maintained in the event of a major disruption of normal operations. 3. HOMELAND SECURITY FUNDING ANALYSIS In order to estimate expenditures for homeland security activities by State and local governments and the private sector for the prior fiscal year and the current fiscal year, a number of methodological issues need to be addressed. Unlike the Federal Government, many State and local governments and private sector firms do not have budget systems that uniformly separate homeland security spending from other spending. Even when homeland security spending is tracked at the level of individual governmental units or firms, there is no organized data collection system for aggregating spending and for estimating spending for entities that do not collect homeland security data. This leads to a number of concerns with State, local, and private sector estimates that have been developed for, or are related to, homeland security: • Entities that have reported estimates may not have used a uniform definition of homeland security activities. For example, private firms have difficulty separating expenditures primarily motivated by the threat of terrorism from other security expenses, and State and local governments may not have separated general public safety costs from activities more clearly motivated by the threat of terrorism, such as purchases of bullet proof vests versus specialized training for incidents involving weapons of mass destruction. Furthermore, the large number of Federal, State, local, and private entities that perform homeland security activities makes it difficult to collect estimates and ensure uniformity. • Funding estimates may not have been categorized in a uniform way. For example, it is unclear whether certain estimates have reflected amounts budgeted versus amounts expended, or that certain estimates have been normalized to conform to a uniform fiscal year. • Expenditures for homeland security may be double-counted. For example, the ramp-up in State and local expenditures since September 11th may be attributed to the increase in Federal grant 35 funding for homeland security activities (see discussion below). The same applies to funding transfers among States and counties or cities. Although some estimates have attempted to control for this, uniform estimates that differentiate between where funding originated versus where it is ultimately expended are not available at this time. The possibility that fiscal substitution may have occurred—that one governmental entity lowered what it planned to spend based on anticipated funds from another source—is also a problem. • Many of the homeland security spending estimates generated since September 11th focus exclusively on increases, without accounting for pre-existing activities. A valid comparison must capture these historical costs in a logical way. For example, while public safety spending related to terrorism may have increased, it is problematic to assert that there were no homeland security activities at the State and local level before September 11th. Conversely, not all State and local and local public safety spending since that date may be attributed to homeland security. Furthermore, because some homeland security expenditures may be one-time costs or costs that occur infrequently (e.g., purchasing additional security cameras), some of the expenditures that occurred in the wake of September 11th may be one-time or infrequent costs. Given these issues, it is not surprising that there is a wide range of plausible estimates of non-Federal homeland security spending. Two private consulting firms have published estimates based on responses to surveys they conducted of a sample of States, localities, and private-sector firms. The estimates are shown in the table below. The wide range between the low and high estimates developed by Deloitte Consulting, and the wider range between those estimates and the estimates developed by International Horizons Unlimited attests to the difficulty of accurately estimating non-Federal homeland security spending. 36 ANALYTICAL PERSPECTIVES The estimates by International Horizons Unlimited are on a Federal fiscal year basis. The Deloitte Consulting estimates are on a fiscal year basis appropriate to the reporting entity. For States and localities, the fiscal year most often, but not always, begins July 1; for corporations, there are several common starting dates for fiscal years, including July 1, October 1, and January 1. For State and local spending, both sets of estimates attempted, as best as possible, to remove spending that was funded by Federal grants to avoid Table 3–9. any double counting of spending that was reported by the Federal Government. Federal grants to States and localities for homeland security activities totaled $5.2 billion in FY 2003 and are estimated to be $5.5 billion in 2004. The Administration will work closely with other public and private entities in the coming year to improve estimates of homeland security spending for inclusion in the 2006 Budget. ESTIMATES OF NON-FEDERAL HOMELAND SECURITY EXPENDITURES (funding estimates, in billions of dollars) 2003 2004 States and localities International Horizons Unlimited ........................................................ Deloitte Consulting ............................................................................. 6.5 14.6 to 29.2 7.5 around 15 Private Sector International Horizons Unlimited ........................................................ Deloitte Consulting ............................................................................. 4.5 45.9 to 76.5 4.8 around 46 Sources: ‘‘The Homeland Security Market,’’ Aviation Week/Deloitte Consulting, June 2002 Additional Tables The tables in the Federal expenditures section above present data based on the President’s policy for the 2005 Budget. The tables below present additional policy and baseline data, as directed by the Homeland Security Act of 2002. Estimates by Agency Table 3–10. DISCRETIONARY FEE-FUNDED HOMELAND SECURITY ACTIVITIES BY AGENCY (Budget authority, in millions of dollars) Agency 2003 Enacted 2003 Supplemental 2004 Enacted 2005 Request Department of Energy ............................................ Department of Homeland Security ......................... Department of Labor ............................................... Department of State ............................................... General Services Administration ............................ Social Security Administration ................................ Federal Communications Commission ................... Nuclear Regulatory Commission ............................ Securities and Exchange Commission ................... 1.2 2,571.0 4.0 591.8 61.5 132.0 1.0 47.0 5.0 ...................... –705.0 ...................... ...................... ...................... ...................... ...................... ...................... ...................... 1.2 2,701.0 14.9 649.0 72.8 143.4 1.0 66.8 5.0 1.2 2,875.0 16.1 898.0 73.2 155.0 .................... 57.0 5.0 Total, Discretionary Homeland Security FeeFunded Activities ......................................... 3,414.4 –705.0 3,655.1 4,080.5 37 3. HOMELAND SECURITY FUNDING ANALYSIS Table 3–11. MANDATORY HOMELAND SECURITY FUNDING BY AGENCY (Budget authority, in millions of dollars) 2003 Enacted Agency Department Department Department Department Department Department 2004 Enacted 2005 Request Agriculture ....................................... Commerce ...................................... Energy ............................................ Health and Human Services .......... Homeland Security ......................... Labor ............................................... 119.0 9.5 10.0 13.6 1,603.6 3.7 ...................... ...................... ...................... ...................... ...................... ...................... 133.0 9.5 11.0 13.7 1,777.6 3.2 140.0 10.8 11.0 14.6 2,082.4 2.6 Total, Homeland Security Mandatory Programs ............................................................. 1,759.4 ...................... 1,948.0 2,261.4 Table 3–12. of of of of of of 2003 Supplemental BASELINE ESTIMATES—TOTAL HOMELAND SECURITY FUNDING BY AGENCY (Budget authority, in millions of dollars) Agency 2004 Enacted 1 Baseline 2005 2006 2007 2008 2009 Department of Agriculture .............................................................................................................................. Department of Commerce .............................................................................................................................. Department of Defense .................................................................................................................................. Department of Education ............................................................................................................................... Department of Energy .................................................................................................................................... Department of Health and Human Services ................................................................................................. Department of Homeland Security 2 .............................................................................................................. Department of Housing and Urban Development ......................................................................................... Department of the Interior .............................................................................................................................. Department of Justice .................................................................................................................................... Department of Labor ...................................................................................................................................... Department of State ....................................................................................................................................... Department of Transportation ........................................................................................................................ Department of the Treasury ........................................................................................................................... Department of Veterans Affairs ..................................................................................................................... Corps of Engineers ........................................................................................................................................ Environmental Protection Agency .................................................................................................................. Executive Office of the President .................................................................................................................. General Services Administration .................................................................................................................... National Aeronautics and Space Administration ........................................................................................... National Science Foundation ......................................................................................................................... Office of Personnel Management .................................................................................................................. Social Security Administration ....................................................................................................................... District of Columbia ........................................................................................................................................ Federal Communications Commission .......................................................................................................... Intelligence Community Management Account ............................................................................................. National Archives and Records Administration ............................................................................................. Nuclear Regulatory Commission ................................................................................................................... Securities and Exchange Commission .......................................................................................................... Smithsonian Institution ................................................................................................................................... United States Holocaust Memorial Museum ................................................................................................. Corporation for National and Community Service ........................................................................................ 326 131 7,025 8 1,362 4,108 23,492 2 66 2,166 53 702 285 91 271 103 123 35 79 191 327 3 139 19 2 1 12 67 5 78 8 23 336 135 7,221 8 1,380 4,169 25,946 2 66 2,229 53 710 292 93 275 104 124 35 79 193 331 3 141 19 2 1 12 69 5 81 8 23 315 141 7,425 8 1,388 4,241 23,892 2 69 2,296 50 722 302 95 280 106 125 36 82 196 336 3 143 19 2 1 12 71 5 85 8 23 324 142 7,646 8 1,411 4,320 24,449 2 70 2,368 52 734 311 100 285 108 130 37 82 199 342 3 145 20 2 1 13 74 5 89 8 24 334 149 7,883 8 1,439 4,409 25,059 2 74 2,444 53 748 320 104 290 110 133 37 83 204 348 3 148 21 2 1 13 75 5 91 8 25 345 152 8,131 9 1,468 4,503 27,878 3 74 2,527 55 763 331 106 297 112 135 38 86 208 355 3 151 21 2 1 13 78 5 96 9 25 Total, Homeland Security Budget Authority ........................................................................................ Less Department of Defense .................................................................................................................... Less BioShield ........................................................................................................................................... 41,307 –7,025 –885 44,145 –7,221 –2,528 42,479 –7,425 ................ 43,504 –7,646 ................ 44,623 –7,883 ................ 47,980 –8,131 –2,175 Non-Def. Homeland Security BA excluding BioShield ............................................................................ Less Fee-Funded Homeland Security Programs ...................................................................................... Less Mandatory Homeland Security Programs ........................................................................................ 33,398 –3,651 –1,948 34,396 –3,688 –2,262 35,054 –3,744 –2,204 35,858 –3,810 –2,222 36,740 –3,885 –2,243 37,674 –3,963 –2,264 Net Non-Def. Disc. Homeland Security BA excluding BioShield .......................................................... Obligations Limitations Department of Transportation Obligations Limitation ............................................................................... 27,795 28,446 29,106 29,826 30,612 31,447 133 135 137 139 143 145 1 Details may not add to totals due to rounding differences. 2 DHS baseline estimates include BioShield funding in 2004 ($885M), 2005 ($2,528M), and 2009 ($2,175M). 38 ANALYTICAL PERSPECTIVES Estimates by Budget Function Table 3–13. HOMELAND SECURITY FUNDING BY BUDGET FUNCTION (budget authority, in millions of dollars) 2003 Enacted 1 2004 Enacted 2005 Request National Defense ........................................................................................................... International Affairs ........................................................................................................ General Science Space and Technology ..................................................................... Energy ............................................................................................................................ Natural Resources and the Environment ...................................................................... Agriculture ...................................................................................................................... Commerce and Housing Credit ..................................................................................... Transportation ................................................................................................................ Community and Regional Development ....................................................................... Education, Training, Employment and Social Services ................................................ Health ............................................................................................................................. Medicare ......................................................................................................................... Income Security ............................................................................................................. Social Security ............................................................................................................... Veterans Benefits and Services .................................................................................... Administration of Justice ............................................................................................... General Government ..................................................................................................... 10,461 634 533 91 274 402 106 9,481 3,601 166 4,231 10 7 132 154 11,543 623 9,098 702 555 109 319 313 110 7,997 2,974 151 5,082 13 6 143 271 12,829 634 10,368 955 608 99 258 614 126 9,206 3,147 174 6,864 14 7 155 297 13,800 690 Total, Homeland Security Budget Authority ............................................................ Less DoD (National Defense) ................................................................................... Less BioShield ........................................................................................................... 42,447 –8,442 ................ 41,307 –7,025 –885 47,386 –8,022 –2,528 Total non-Defense Homeland Security BA excluding BioShield .......................... Less Fee-Funded Homeland Security Programs ..................................................... Less Mandatory Homeland Security Programs ........................................................ 34,005 –2,709 –1,760 33,398 –3,655 –1,948 36,836 –4,080 –2,262 Net Non-Defense Disc. Homeland Security BA excluding BioShield .................. 29,536 27,795 30,493 1 FY 2003 Enacted includes supplemental funding; details may not add to totals due to rounding differences. Table 3–14. BASELINE ESTIMATES—HOMELAND SECURITY FUNDING BY BUDGET FUNCTION (Budget authority, in millions of dollars) Budget Authority 2004 Enacted 1 Baseline 2005 2006 2007 2008 2009 National Defense ............................................................................................................................................ International Affairs ........................................................................................................................................ General Science Space and Technology ...................................................................................................... Energy ............................................................................................................................................................. Natural Resources and the Environment ...................................................................................................... Agriculture ....................................................................................................................................................... Commerce and Housing Credit ..................................................................................................................... Transportation ................................................................................................................................................. Community and Regional Development ........................................................................................................ Education, Training, Employment and Social Services ................................................................................ Health 2 ........................................................................................................................................................... Medicare ......................................................................................................................................................... Income Security .............................................................................................................................................. Social Security ................................................................................................................................................ Veterans Benefits and Services .................................................................................................................... Administration of Justice ................................................................................................................................ General Government ...................................................................................................................................... 9,098 702 555 109 319 313 111 7,997 2,974 151 5,082 13 6 139 271 12,829 634 9,321 710 562 111 321 323 115 8,440 3,013 154 6,788 13 6 141 275 13,211 641 9,556 722 570 103 328 302 120 8,604 3,060 158 4,332 14 3 143 280 13,532 652 9,812 734 580 106 336 310 121 8,798 3,111 165 4,414 14 3 145 285 13,906 664 10,091 748 591 108 346 320 127 9,009 3,171 169 4,504 15 3 148 290 14,305 678 10,385 763 603 111 351 331 129 9,236 3,235 177 6,775 15 4 151 297 14,724 693 Total, Homeland Security Budget Authority ............................................................................................. Less DoD (National Defense) ................................................................................................................... Less BioShield ........................................................................................................................................... 41,307 –7,025 –885 44,145 –7,221 –2,528 42,479 –7,425 ................ 43,504 –7,646 ................ 44,623 –7,883 ................ 47,980 –8,131 –2,175 Total non-Defense Homeland Security BA, excluding BioShield .......................................................... Less Fee-Funded Homeland Security Programs ...................................................................................... Less Mandatory Homeland Security Programs ........................................................................................ 33,398 –3,651 –1,948 34,396 –3,688 –2,262 35,054 –3,744 –2,204 35,858 –3,810 –2,222 36,740 –3,885 –2,243 37,674 –3,963 –2,264 Net non-Def. Disc. Homeland Security BA excluding BioShield ........................................................... 27,795 28,446 29,106 29,826 30,612 31,447 1 Details 2 Health may not add to totals due to rounding differences. function baseline estimates include BioShield funding in 2004 ($885M), 2005 ($2,528M), and 2009 ($2,175M). 3. HOMELAND SECURITY FUNDING ANALYSIS Detailed Estimates by Budget Account An appendix of account-level funding estimates, organized by National Strategy mission area, is available on the Analytical Perspectives CD ROM. 39 4. STRENGTHENING FEDERAL STATISTICS Federal statistical programs produce key information about a range of topics of interest to public and private decision makers, including the economy, the population, agriculture, crime, education, energy, the environment, health, science, and transportation. The ability of governments, businesses, and citizens to make appropriate decisions about budgets, employment, investments, taxes, and a host of other important matters depends critically on the ready availability of relevant, accurate, and timely Federal statistics. Moreover, for Federal statistical programs to meet the needs of a wide range of users, the underlying data systems must be viewed as credible. In order to foster this credibility, Federal statistical programs seek to adhere to high quality standards and to maintain integrity and efficiency in the production of statistics. As the collectors and providers of these basic data, Federal agencies act as data stewards—balancing public and private decision makers’ needs for information with legal and ethical obligations to minimize reporting burden, respect respondents’ privacy, and protect the confidentiality of the data provided to the Government. This chapter discusses the development of standards that principal statistical programs can use to assess their performance and presents highlights of their 2005 budget proposals. Performance Standards Agencies maintain the quality of their data or information products as well as their credibility by setting high performance standards for their activities. The statistical agencies and statistical units represented on the Interagency Council on Statistical Policy (ICSP) have collaborated on developing an initial set of common performance standards for use under the Government Performance and Results Act and in completing the Administration’s new Program Assessment Rating Tool (PART). Federal statistical agencies have agreed that there are six conceptual dimensions within two general areas of focus that are key to measuring and monitoring statistical programs. The first area of focus is Product Quality, encompassing the traditional dimensions of relevance, accuracy, and timeliness. The second area of focus is Program Performance, encompassing the dimensions of cost, dissemination, and mission achievement. Statistical agencies historically have focused on measuring performance in the area of product quality, especially the dimensions most amenable to quantitative measurement, specifically accuracy and timeliness. Relevance, also an accepted measure of quality, can be either a qualitative description of the usefulness of products or a quantitative measure such as a customer satisfaction score. Relevance is more difficult to measure, and the indicators that do exist are more varied. Program performance standards form the basis for evaluating effectiveness. They address questions such as: Are taxpayer dollars spent most effectively? Are products made available to those who need them? Are agencies meeting their mission requirements or making it possible for other agencies to meet their missions? The indicators available to measure program performance for statistical activities currently are less well developed than those for product quality. Product quality and program performance standards are designed to serve as indicators when answering specific questions in the Administration’s PART process. (Please refer to Chapter 2 of this volume for a description of the PART.) Figure 4–1 presents each principal Federal statistical agency’s assessment of the status of its current and planned use of indicators on the six dimensions. Use of the indicators may be for internal management, strategic planning, or annual performance reporting. The dimensions shown in the figure reflect an overall set of indicators for statistical activities but the specific measures vary among the individual programs depending on their unique characteristics and requirements. Annual performance reports and PARTs contain these specific measures as well as additional information about performance goals and targets and whether a program is meeting, or making measurable progress toward meeting, its performance goals. The examples below illustrate different ways agencies track their performance on each dimension. Product Quality: Statistical agencies agree that product quality encompasses many attributes, including (but not limited to) relevance, accuracy, and timeliness. The basic measures in this group relate to the quality of specific products, thereby providing actionable information to managers. These are ‘‘outcome-oriented’’ measures and are key to the usability of information products. Statistical agencies or units establish targets and monitor how well targets are met. In some sense, relevance relates to ‘‘doing the right things,’’ while accuracy and timeliness relate to ‘‘doing things right.’’ Relevance: Qualitative or quantitative descriptions of the degree to which products are useful and responsive to users’ needs. Relevance of data products and analytic reports may be assessed through a professional review process and ongoing contacts with data users. Product relevance may be indicated by customer satisfaction with product content, information from customers about product use, demonstration of product improvements, comparability with other data series, agency responses to customer suggestions for improvement, new or 41 42 ANALYTICAL PERSPECTIVES customized products/services, frequency of use, or responses to data requests from users (including policy makers). Through a variety of professional review activities, agencies maintain the relevance, accuracy, and validity of programs, and encourage data users and other stakeholders to contribute to the agency’s data collection and dissemination program. Striving for relevance requires monitoring to ensure that information systems anticipate change and evolve to appropriately measure our dynamic society and economy. Accuracy: Qualitative or quantitative measures of important features of correctness, validity, and reliability of data and information products measured as degree of closeness to target values. For statistical data, accuracy measures include sampling error and various aspects of nonsampling error (e.g., response rates, size of revisions, coverage, edit performance). For analysis products, accuracy may be the quality of the reasoning, reasonableness of assumptions, and clarity of the exposition, typically measured and monitored through review processes. In addition, accuracy is assessed and improved by external and internal reviews, comparisons of data among different surveys, linkages of survey data to administrative records, redesigns of surveys, or expansions of sample sizes. Timeliness: Qualitative or quantitative measure of the timing of information releases. May be measured as time from the collection of data or the close of the reference period to the release of information, or customer satisfaction with timeliness. May also be measured as how well agencies meet scheduled and publicized release dates, expressed as a percent of release dates met. Program Performance: Statistical agencies agree that program performance encompasses balancing the dimensions of cost, dissemination, and mission accomplishment for the agency as a whole; operating efficiently and effectively; ensuring that customers receive the information they need; and serving the information needs of the Nation. Costs of products or programs may be used to develop efficiency measures. Dissemination involves making sure customers receive the information they need via the most appropriate mechanisms. Mission achievement means that the information program makes a difference. Hence, three key dimensions are being used to indicate program performance: cost (input), dissemination (output), and mission achievement (outcome). Cost: Quantitative measure of the dollar amount used to produce data products and services. The development and use of financial performance measures within the Federal Government is an established goal, and the intent of such measures is to determine the ‘‘true costs’’ of various programs or alternative modes of operation at the Federal level. Examples of cost data include full costs of products or programs, return on investment, dollar value of efficiencies, and ratios of cost to products distributed. Dissemination: Qualitative or quantitative information on the availability, accessibility, and distribution of products and services. Most agencies have goals to improve product accessibility, particularly through the Internet. Typical measures include: on-demand requests fulfilled, product downloads, degree of accessibility, customer satisfaction with ease of use, number of participants at user conferences, citations of agency data in the media, number of Internet user sessions, number of formats in which data are available, amount of technical support provided to data users, exhibits to inform the public about information products, issuance of newsletters describing products, usability testing of websites, and assessing compliance with Section 508 of the Rehabilitation Act which requires Federal agencies to make their electronic and information technology accessible to people with disabilities. Mission Achievement: Qualitative or quantitative information about the impact of or satisfaction with statistical programs. For Federal statistical programs, this dimension responds to the question—have we achieved our objectives and met the expectations of our stakeholders? Under this dimension, statistical programs document their contributions to the goals and missions of parent departments and other agencies, the Administration, the Congress, and information users in the private sector. For statistical programs, this broad dimension involves meeting recognized societal information needs and also addresses the linkage between statistical outputs and programmatic outcomes. However, identifying this linkage is far from straightforward. It is sometimes difficult to trace the impact of information products on the public good. Such products often are necessary intermediate inputs in the creation of a high visibility product whose societal benefit is clearly recognized. For example, the economic statistics produced by a variety of agencies are directly used by the Bureau of Economic Analysis in the calculation of the Gross Domestic Product (GDP), which analysts use to assess changes in the level of domestic economic activity. Similarly, statistics from specific surveys are directly used by the Bureau of Labor Statistics in the calculation of the Consumer Price Index (CPI), which is widely used in diverse applications, such as indexing pensions for retirees. As a result, a number of statistical agencies contribute to the GDP and/or the CPI and to the many uses of these information products. In addition, the data produced by statistical agencies are used to track the performance of programs managed by their parent agencies or other 4. 43 STRENGTHENING FEDERAL STATISTICS organizations in areas such as crime, education, energy, the environment, health, science, and transportation. In the absence of preferred quantitative indicators, qualitative narratives can indicate how statistical agency products contribute to and evaluate progress toward important goals established for government or private programs. In particular, narratives can highlight how statistical agencies measure the Nation’s social and economic structure, and how the availability of the information influences changes in policies and programs. These narratives contribute to demonstrating mission accomplishment, particularly in response to questions in Section I of the PART, ‘‘program purpose and design.’’ Narratives may describe the impact of measuring agency policy or change of policy, supporting research focused on policy issues, furnishing information to inform debate on policy issues, or providing in-house consulting support. Moreover, beyond the direct and focused uses of statistical products and programs, the statistical agencies and their products serve a diverse and dispersed set of data users working on a broad range of applications. Users include senior government policy makers at the Federal, State, and local levels, business leaders, households, academic researchers, analysts at public policy institutes and trade groups, marketers and planners in the private sector, and many others. Information produced by statistical agencies often is combined with other information for use in the decision-making process. Thus, as with many nonstatistical programs, the relationship between statistical program outputs and their beneficial uses and outcomes is often complex and difficult to track. In addition to narratives, quantitative measures may be used to reflect mission achievement. For example, customer satisfaction with the statistical agency or unit indicates if the agency or unit has met the expectations of its stakeholders. Figure 4-1. Availability of Indicators Reported by Principal Statistical Agencies, 2005 Dimension BEA BJS BLS BTS Census EIA ERS NASS NCES NCHS ORES SOI SRS Product Quality Relevance Accuracy Timeliness P P P Program Performance Cost Dissemination Mission Achievement Indicator Available P P P P P P P P Indicator in development P - No Indicator Description of Dimensions Product Quality Relevance: Qualitative or quantitative description of the degree to which products and services are useful to users and responsive to their needs. Accuracy: Qualitative or quantitative measure of important features of correctness, validity, and reliability of data and information products measured as degree of closeness to target values. Timeliness: Qualitative or quantitative measure of the timing of information releases. 44 ANALYTICAL PERSPECTIVES Description of Dimensions—Continued Program Performance Cost: Quantitative measure of the dollar amount used to produce data products and services. Dissemination: Qualitative or quantitative information on the availability, accessibility, and distribution of products and services. Mission Achievement: Qualitative or quantitative information about the impact of, or satisfaction with, statistical programs. Key to Statistical Agencies BEA = Bureau of Economic Analysis, Department of Commerce BJS = Bureau of Justice Statistics, Department of Justice BLS = Bureau of Labor Statistics, Department of Labor BTS = Bureau of Transportation Statistics, Department of Transportation Census = Census Bureau, Department of Commerce EIA = Energy Information Administration, Department of Energy ERS = Economic Research Service, Department of Agriculture NASS = National Agricultural Statistics Service, Department of Agriculture NCES = National Center for Education Statistics, Department of Education NCHS = National Center for Health Statistics, Department of Health and Human Services ORES = Office of Research, Evaluation, and Statistics, Social Security Administration SOI = Statistics of Income, Internal Revenue Service, Department of the Treasury SRS = Division of Science Resources Statistics, National Science Foundation Of the 14 principal Federal statistical agencies that are members of the ICSP, four agencies have programs that have been assessed using the PART process. These agencies’ programs have received PART summary ratings of Effective or Moderately Effective, as shown in Figure 4–2. As additional ICSP agencies have an opportunity to undergo the PART process, the agencies plan to use the results of the collaborative performance standards development effort to help maintain and extend their generally well-received assessments. Figure 4–2. 2005 PART SUMMARY RATINGS FOR STATISTICAL PROGRAMS Summary Rating Bureau of Economic Analysis Effective Bureau of Labor Statistics Effective Census Bureau Current Demographic Statistics Decennial Census Intercensal Demographic Estimates Survey Sample Redesign Moderately Effective Moderately Effective Moderately Effective Effective National Center for Education Statistics Statistics Assessment Effective Effective Highlights of 2005 Program Budget Proposals The programs that provide essential statistical information for use by governments, businesses, researchers, and the public are carried out by some 70 agencies spread across every department and several independent agencies. Approximately 40 percent of the funding for these programs provides resources for twelve agencies or agency units that have statistical activities as their principal mission. (Please see Table 4–1.) The remaining funding supports work in 60-plus agencies that carry out statistical activities in conjunction with other missions such as providing services or enforcing regulations. More comprehensive budget and program information about the Federal statistical system will be available in OMB’s annual report, Statistical Programs of the United States Government, Fiscal Year 2005, when it is published later this year. The following highlights elaborate on the Administration’s proposals to strengthen the programs of the principal Federal statistical agencies. Bureau of Economic Analysis: Funding is requested to complete work begun in 2003 to: (1) accelerate the release of some of the Nation’s most important economic statistics to dramatically increase their usefulness to policy makers, business leaders, and other users; (2) meet U.S. statistical obligations to international organizations on the Special Data Dissemination Standards and complete the incorporation of the North American Industry Classification System into BEA accounts; (3) improve the economic accounts by acquiring monthly real-time data from private sources to fill data gaps in current measures as well as conduct a quarterly survey of large and volatile international services such as telecommunications, finance, and insurance; and (4) produce more current business investment data that include associated employment and compensation estimates on an annual basis in order to provide data needed to conduct analyses of tax policy, business investment, and productivity in manufacturing and service industries. Bureau of Justice Statistics: Funding is requested to continue conversion of the National Crime Victimization Survey from primarily a paper and pencil operation to a fully automated data collection process. The BJS base program increase will provide for the maintenance of BJS’s core statistical programs, including: (1) the National Crime Victimization Survey, the Nation’s primary source of information on criminal victimization; (2) cybercrime statistics on the incidence, magnitude, 4. STRENGTHENING FEDERAL STATISTICS and consequences of electronic and computer crime to households and businesses; (3) law enforcement data from over 3,000 agencies on the organization and administration of police and sheriffs’ departments; (4) nationally representative prosecution data on resources, policies, and practices of local prosecutors; (5) court and sentencing statistics, including Federal and State case processing data; and (6) data on correctional populations and facilities from Federal, State, and local governments. Bureau of Labor Statistics: Funding is requested to support current program operations to measure the economy through producing, disseminating, and improving BLS economic measures, including: (1) modernizing the computing systems for monthly processing of the Producer Price Index (PPI) and U.S. Import and Export Price Indexes, and producing new data outputs, such as experimental PPI’s for goods and services that will provide the first economy-wide measures of changes in producer prices; (2) maintaining continuous updating of the Consumer Price Index (CPI) by updating the expenditure and population weights biennially, the superlative index annually, outlet samples on a four-year cycle, and item samples in key categories on a twoyear cycle, in lieu of performing major revisions about every ten years; and (3) continuing with a multi-year effort to enhance core BLS information technology infrastructure through a central Department of Labor appropriation. Bureau of Transportation Statistics: Funding is requested to: (1) develop the American Freight Data Program, a continuous source of freight data from shippers, carriers, and receivers, to replace the current fiveyear Commodity Flow Survey; (2) move the Airfare Price Index, an input to GDP and CPI indices, from experimental to production mode; and (3) develop more timely and comprehensive local and long-distance travel data. Census Bureau: Funding is requested for the Census Bureau’s economic and demographic programs and for a re-engineered 2010 Census. For the Census Bureau’s economic and demographic programs, funding is requested to: (1) support the release of all remaining data products from the 2002 Economic Census; (2) begin planning for the 2007 Economic Census and Census of Governments; (3) continue efforts begun in 2003 to eliminate data gaps by measuring migration across U.S. borders; (4) improve measurement of services by expanding key source data for critical quarterly and annual estimates of our Nation’s Gross Domestic Product; (5) continue efforts to offer electronic reporting for almost 100 current economic surveys; and (6) support the Automated Export System and accelerate release of trade statistics. For 2010 Census planning, funding is requested to continue to: (1) conduct extensive planning, testing, and development activities to support a re-engineered 2010 Census; (2) complete map feature accuracy within 7.6 meters of true GPS location for 45 48 percent of all counties in the U.S., Puerto Rico, and island areas; and (3) conduct the first full year of the American Community Survey program to provide data on an ongoing basis rather than waiting for oncea-decade censuses. Economic Research Service: Funding is requested to develop an integrated and comprehensive data and analysis framework of the food system beyond the farmgate to provide a basis for understanding, monitoring, tracking, and identifying changes in food supply and consumption patterns. Energy Information Administration: Funding is requested to: (1) continue the improvement of natural gas and electricity survey data; (2) undertake development work on a liquefied natural gas storage survey and a natural gas production survey; (3) enhance the National Energy Modeling System’s transportation modeling; and (4) revise the Voluntary Greenhouse Gases survey to support the President’s Initiative on Greenhouse Gases. National Agricultural Statistics Service: Funding is requested to: (1) continue restoration and modernization of the agricultural estimates program to ensure State, regional, and national level agricultural estimates of sufficient precision, quality, and detail to meet the needs of a broad customer base; and (2) support Government-wide and departmental E-Government initiatives. National Center for Education Statistics: Funding is requested to: (1) support the second wave of data collection of the Early Childhood Longitudinal Study—Birth Cohort and data release in Spring 2005; (2) continue efforts to improve electronic data collection and data dissemination; (3) support the ongoing data collection efforts for the Schools and Staffing Survey, the principal collection on national and State level indicators of teacher and school quality; (4) continue U.S. participation in data collections, analyses, and reporting on international assessments that compare educational performance and progress across countries; and (5) continue support for the National Assessment of Educational Progress (NAEP) program and its role in benchmarking national and State performance. National Center for Health Statistics: Funding is requested to: (1) maintain and transform HHS’ core health statistics capacity; (2) preserve and modernize the Nation’s vital statistics system; (3) fortify and transform basic operations for the National Health and Nutrition Examination Survey; (4) maintain and redesign systems for tracking the health care delivery system; and (5) redesign the sample for the National Health Interview Survey. Science Resources Statistics Division, NSF: Funding is requested to: (1) implement ongoing programs on the science and engineering (S&E) enterprise; (2) 46 ANALYTICAL PERSPECTIVES continue implementing quality improvements to surveys on the S&E workforce; (3) begin research on methods to implement necessary enhancements to the Industry Research and Development survey; (4) develop an ongoing data collection program on research instrumentation stocks, as mandated by Congress; and (5) continue activities to establish an ongoing data series on postdoctorates. Statistics of Income Division, IRS: Funding is requested to: (1) maintain and modernize core data collection systems, including several major statistical proTable 4–1. grams for the Treasury Department, the Congressional Joint Committee on Taxation, the Bureau of Economic Analysis, and SOI’s many other customers; (2) implement a databank repository for SOI and IRS population file data to more efficiently build longitudinal databases and enable sub-national estimates; (3) examine means to more effectively mask individual records to minimize the possibility of identification in the Individual Public Use sample files; and (4) modernize and expedite dissemination of data and publications, including a reengineered Internet website. 2003–2005 BUDGET AUTHORITY FOR PRINCIPAL STATISTICAL AGENCIES (in millions of dollars) 2003 Actual Bureau of Economic Analysis ....................................................................... 66 Estimate 2004 2005 67 82 Bureau of Justice Statistics .......................................................................... 32 32 39 Bureau of Labor Statistics ............................................................................ 492 518 534 Bureau of Transportation Statistics .............................................................. 30 31 34 Census ........................................................................................... Salaries and Expenses 1 ......................................................................... Periodic Censuses and Programs .......................................................... 571 202 369 632 213 419 848 240 608 Economic Research Service ......................................................................... 69 71 80 Energy Information Administration ................................................................ 80 81 85 Bureau 1 National Agricultural Statistics ....................................................... 138 128 138 National Center for Education Statistics ....................................................... Statistics ................................................................................................... Assessment ............................................................................................. 184 89 95 187 92 95 187 92 95 National Center for Health Statistics ............................................................ PHS Evaluation Funds ............................................................................ Budget Authority ...................................................................................... 126 126 0 128 128 0 150 150 0 Science Resources Statistics Division, NSF ................................................ 31 32 32 Statistics of Income Division, IRS ................................................................ 32 36 36 1 Includes Service 2 mandatory appropriations of $20 million for each year for the Survey of Program Dynamics and collection of data related to the allocation to States of State Children’s Health Insurance Program funds. 2 Includes funds for the periodic Census of Agriculture of $41, $25, and $23 million in 2003, 2004, and 2005, respectively. 5. RESEARCH AND DEVELOPMENT I. INTRODUCTION The eminent 19th Century American scientist Joseph Henry once asserted, ‘‘Modern civilization depends on science.’’ This still holds true. Indeed, investments in science and technology have resulted in much of the unparalleled economic growth in the United States over the last 50 years, as well as the standard of living and quality of life we now enjoy. Advances have been possible only with the support of both public and private investment in research and development (R&D). And we continue to invest. The R&D investments of the United States are unmatched. However, unlike 40 years ago, when Federal R&D expenditures doubled those of the private sector, industry R&D spending now exceeds that of the Federal Government. Still, by a wide margin, the U.S. Government continues to lead the world in R&D spending. Investments in technological advancement are vital to strengthening our capabilities to combat terrorism and defend our country. The President’s 2005 Budget continues to focus R&D on winning the war against terrorism, while moderating the growth in overall spending. But the benefits of innovation and discovery are not limited to national security. They are just as critical to economic security. The Administration, recognizing that fundamental research is the fuel for future innovation and technology development, has maintained the highest levels of support for priority R&D areas such as nanotechnology, information technology, hydrogen energy, and space exploration. The non-defense R&D share of the discretionary budget is at a nearrecord high over the last 30 years. Chart 5-1. Federal R&D Spending Billions of constant 2000 dollars, outlays 120 100 80 60 40 20 0 1990 1992 1994 1996 Author Aubrey Eben noted, ‘‘Science is not a sacred cow. Science is a horse. Don’t worship it. Feed it.’’ To this we would add: the horse also needs to be kept in good shape. The focus should not be solely on spending but, just as importantly, on performance. The Administration will continue to meet the President’s 1998 2000 2002 2004 charge to improve the management, performance, and results of the Federal Government. By strengthening effective programs and addressing lower performers through reforms or reallocations to higher performers, we will increase the productivity of the Federal R&D portfolio and transcend the attention given to year-to- 47 48 ANALYTICAL PERSPECTIVES year marginal increases or decreases. Additionally, while it can be difficult to assess the outcomes of some research programs—many of which may not have a measurable effect for decades—agencies can establish meaningful program goals and measure annual progress and performance in appropriate ways. Towards that end, the Administration is continuing to implement and improve investment criteria for R&D programs across the government. Further, the government will coordinate interrelated and complementary R&D efforts among agencies, combining programs where appropriate to improve effectiveness and eliminate redundancy, to leverage these resources to the greatest effect. The Federal Government funds R&D in many ways. The government is a strong supporter of basic research, which is directed toward greater understanding of fundamental phenomena. Basic research is the source of tomorrow’s discoveries and new capabilities, and this long-term research will fuel further gains in economic productivity, quality of life, and homeland and national security. The government also has a vital role in supporting applied research, which is driven by more specific needs, and development, which applies scientific knowledge and technology to specific needs. Together, II. the R&D portfolio is critical to the missions of Federal agencies, particularly in priority areas that private sources are not motivated to support. For example, if the private sector cannot profit from the development of a particular technology, Federal funding may be appropriate if the technology in question addresses a national priority or otherwise provides significant societal benefits. A good indicator of the relevance of Federal development funding is the level at which industry is willing to share the costs. Also, the Federal Government should help stimulate private investment and provide the proper incentives for private sources to continue to fuel the discovery and innovation of tomorrow. The Administration proposes to do this, for instance, by permanently extending the Research and Experimentation tax credit. This chapter discusses how the Administration will improve the performance of R&D programs through new investment principles and other means that encourage and reinforce quality research. The chapter also highlights the priority areas proposed for R&D agencies and the coordinated efforts among them. The chapter concludes with details of R&D funding across the Federal Government. IMPROVING PERFORMANCE OF R&D PROGRAMS R&D is critically important for keeping our Nation economically competitive, and it will help solve the challenges we face in health, defense, energy, and the environment. As a result, and consistent with the Government Performance and Results Act, every Federal R&D dollar must be invested as effectively as possible. R&D Investment Criteria The Administration is improving the effectiveness of the Federal Government’s investments in R&D by continuing to apply transparent investment criteria in making recommendations for program funding and management. R&D performance assessment requires special consideration. Research often leads scientists and engineers down unpredictable pathways with unpredictable results. This poses a difficult problem for measuring an R&D program’s performance against its initial goals. Adopting ideas first laid out by the National Academy of Sciences, the Administration is improving methods for setting priorities based on expected results, including applying specific criteria that programs or projects must meet to be started or continued, clear milestones for gauging progress, and improved metrics for assessing results. As directed by the President’s Management Agenda, the R&D Investment Criteria were first applied in 2001 to selected applied R&D programs at the Department of Energy (DOE). Through the lessons learned from that DOE pilot, the criteria subsequently were broadened in scope to cover other types of R&D programs at DOE and other agencies. To accommodate the wide range of R&D activities from basic research to development and demonstration programs, a new framework was devised for the criteria to address three fundamental aspects of R&D: • Relevance.—Programs must be able to articulate why they are important, relevant, and appropriate for Federal investment; • Quality.—Programs must justify how funds will be allocated to ensure quality; and • Performance.—Programs must be able to monitor and document how well the investments are performing. In addition, R&D projects and programs relevant to industry are expected to meet criteria to determine the appropriateness of the public investment, enable comparisons of proposed and demonstrated benefits, and provide meaningful decision points for completing or transitioning the activity to the private sector. 49 5. RESEARCH AND DEVELOPMENT Year Three in DOE Implementation of the Criteria. The Department of Energy continues to expand its use of the R&D criteria. For example, to ensure the relevance of the research it supports, DOE’s basic research programs have incorporated the programs’ long-term measures into requests for research proposals. The basic research programs have also expanded their use of Committees of Visitors, teams of independent experts that periodically assess the quality and performance of the research that the program has supported. Many of DOE’s applied R&D programs have made similar improvements, and some have even incorporated the specific ‘‘industry-related’’ R&D criteria into evaluation forms used by peer reviewers to assess individual projects. While DOE’s applied R&D programs still are faced with the challenge of generating comparable estimates of expected public benefits, they continue to work toward improving the consistency and quality of the data to better inform budget decisions. The Administration has been studying R&D management strategies that some agencies use to operate particularly effective programs. The Office of Management and Budget (OMB) and the Office of Science and Technology Policy (OSTP) are continuing to assess the strengths and weaknesses of R&D programs across agencies, in order to identify and apply good R&D management practices throughout the government. For example, some agencies have a more deliberate projectprioritization process, while other agencies have more experience estimating the returns of R&D and assessing the impact of prior investments. Assessing and implementing new approaches is an iterative process, involving the research agencies and the science and technology community. As the investment criteria are implemented more broadly and more deeply, one lesson that is increasingly apparent is the importance of coordination and partnerships. First, partnerships are key in determining the proper Federal role. These include partnerships with industry (such as the Administration’s FreedomCAR partnerships with U.S. automakers), partnerships with other countries (such as the Administration’s International Partnership for a Hydrogen Economy), and partnerships with university researchers. Partnerships and coordination across agencies, through the National Science and Technology Council, for example, can also make the use of research resources more efficient and effective. More effective coordination and partnerships will be pursued in further implementation of the investment criteria. Broader Application of the R&D Investment Criteria. This was the second year of implementation of the investment criteria for most R&D agencies. The National Aeronautics and Space Administration is recasting its strategic plans and budget to tie directly to the R&D criteria. To reflect the criteria, the National Science Foundation changed the way it characterizes its budget, as well as the guidelines it uses to evaluate its research. Nearly all R&D agencies assessed some R&D programs using a tailored Program Assessment Rating Tool that was based on the R&D criteria. The R&D agencies have more work to do to integrate the R&D criteria more meaningfully into their management processes and budget decisions, and OMB will continue to improve guidance and standards for implementing the R&D Investment Criteria. DOE has started to use the results of the R&D investment criteria to help analyze its portfolio of investments on the basis of the potential public benefits. This approach helps DOE to analyze, for example, whether the expected fruits of its investments are balanced across time, as well as the types of benefits they may yield. As data analysis of the Department’s applied R&D programs has shown, there is a greater need for consistent methods of analysis, including ways to present benefits estimates that make comparisons meaningful. DOE is continuing to improve the consistency and quality of its data. As discussed throughout the 2005 Budget, OMB and the agencies have been working on other initiatives as part of the President’s Management Agenda. To support the Budget and Performance Integration initiative, OMB developed a tool to assess the effectiveness of programs consistently: the Program Assessment Rating Tool (PART). Last year the effort included a version of the PART to specifically assess R&D programs, but PART assessments were done in isolation of the R&D Investment Criteria initiative. This year, the R&D PART was modified to align with the R&D criteria. In the process, the R&D PART became the instrument for assessing management and performance at the program level. In preparation of the 2005 Budget, OMB and the agencies completed or updated PART assessments of 58 R&D programs. Some programs rated ‘‘effective’’ were provided added funding to further the work they do. For example, the Budget requests $305 million for the National Science Foundation’s Nanoscale Science and Engineering, an increase of 20 percent from the 2004 likely enacted level. Other examples include: DOE’s Basic Energy Science 50 ANALYTICAL PERSPECTIVES Program, the National Aeronautics and Space Administration’s Mars Exploration Program, and the Department of Commerce’s laboratories at the National Institute of Standards and Technology. Other programs that were rated ‘‘ineffective’’ were cut, such as DOE’s Oil Technology program. However, funding changes and management reforms are not made by formula or based solely on PART results. For example, funding may be reduced for ‘‘effective’’ programs that have achieved what they set out to, and ‘‘ineffective’’ programs might receive more money if it is clear it would help them become more effective. The PART provides information that permits informed decisions. Chart 5-2. PART Assessments of 58 R&D Programs (Share of Total Funding Assessed) Ineffective 0.2% Adequate 3% Results Not Demonstrated 17% Effective 45% Moderately Effective 34% OMB will continue to work with the R&D agencies and others to integrate the R&D criteria more meaningfully into the budget formulation process in the coming year, and to clarify expectations for using the R&D Investment Criteria across the agencies. Based on lessons learned and other feedback from experts and stakeholders, the Administration will continue to improve the R&D investment criteria and their implementation to achieve more effective management of R&D programs and better-informed budget-allocation decisions across the R&D agencies. 51 5. RESEARCH AND DEVELOPMENT President’s Management Agenda Initiative Better Research and Development (R&D) Investment Criteria FY 2004, Quarter 1 Status: RED, Progress: YELLOW The initiative’s red status score reflects the limited success many agencies have had in the government-wide implementation of the initiative. The yellow progress score indicates that the initiative retains momentum, as some agencies have made improvements this year, including the National Science Foundation, NASA, and DOE. More R&D agencies are using the criteria to assess their programs, due to the improved alignment of the R&D investment criteria with the R&D PART for program-level assessments. Twelve of the top 13 R&D agencies are using the R&D PART to assess their programs this year, up from seven last year. Most of the major R&D agencies submitted 2005 Budget requests that, to varying degrees, observe the principles of the investment criteria. To achieve a yellow status score, half of the R&D programs assessed for each agency must receive at least a ‘‘moderately effective’’ rating, which is proving to be a challenging requirement. Agencies must also integrate the R&D criteria framework into their budget proposals, including using detailed criteria-based assessments to justify specific requests or allocation changes. Research Earmarks The Administration supports awarding research funds based on merit review through a competitive process. Such a system ensures that the best research is supported. Research earmarks—in general the assignment of money during the legislative process for use only by a specific organization or project—are counter to a merit-based competitive selection process. The use of earmarks improperly signals to potential investigators that there is an alternative to creating quality research proposals for merit-based consideration, including the use of political influence or appeals to parochial interests. Moreover, the practice of earmarking funds directly to colleges and universities for specific research projects has expanded dramatically in recent years. Despite broad-based support for merit review, earmarks for specific projects at colleges and universities have yet again broken prior records. According to The Chronicle of Higher Education, academic earmarks have steadily increased from a level of $296 million in 1996 to over $2 billion in 2003. These funds now form a greater share of the total Federal funding to colleges and universities, and increasingly displace competitive research that is awarded by merit. For example, in 2003, aca- demic earmarks accounted for eight percent of all Federal funding to colleges and universities, which is quite high relative to the 1996 level of 2.5 percent. Some argue that earmarks help spread the research money to states or institutions that would receive less research funding through other means. The Chronicle of Higher Education reports that this is not the main role they play; often only a minor portion of academic earmark funding goes to the states with the smallest shares of Federal research funds. Meanwhile, earmarks help some rich institutions become richer. In 2003, 17 of the 30 institutions receiving the most Federal earmarks were also among the 100 that received the most research funds from all sources. Some proponents of earmarking assert that earmarks provide a means of funding unique projects that would not be recognized by the conventional peer-review process. To address this concern, a number of agencies have procedures and programs to reward out-of-the-box thinking in the research they award. For example, within the Department of Defense (DOD), the Defense Advanced Research Projects Agency seeks out high risk, high payoff scientific proposals, and program managers at NSF set aside a share of funding for higher-risk projects in which they see high potential. 52 ANALYTICAL PERSPECTIVES Chart 5-3. Funding for Academic Earmarks Millions of dollars 2,500 2,012 2,000 1,837 1,668 1,500 1,044 1,000 500 797 440 528 296 0 1996 1997 1998 1999 2000 2001 2002 2003 Many earmarks have little to do with an agency’s mission. For example, the Congress earmarked DOD’s 2004 budget to fund research on a wide range of diseases, including breast cancer, ovarian cancer, prostate cancer, diabetes, leukemia, and polio. Funding at DOD for such research totals over two-thirds of a billion dollars in 2004 alone. While research on these diseases is very important, it is generally not unique to the U.S. military and can be better carried out and coordinated within civil medical research agencies, without III. disruption to the military mission. At the same time, intrusion of earmarks into the peer-review processes of civilian medical research agencies would have a significant detrimental impact on funding the most important and promising research. The Administration will continue to work with academic organizations, colleges and universities, and the Congress to discourage the practice of research earmarks and to achieve our common objectives. PRIORITIES FOR FEDERAL RESEARCH AND DEVELOPMENT The 2005 Budget requests $132 billion for Federal R&D funding, a $41 billion increase since the beginning of this Administration (Table 5–2 provides details by agency). This is a 44-percent increase over four years. Even if military R&D is excluded, the Administration has raised civilian R&D investment 26 percent over this same period. The 2005 Budget targets key basic research investments within agencies such as NSF, DOE’s Office of Science, DOC’s National Institute of Standards and Technology, and the National Institutes of Health (NIH), increasing basic research funding across all agencies by $6 billion (29 percent) since 2001. In a 1995 report from the National Academy of Sciences, the scientific community proposed a ‘‘Federal Science and Technology’’ (FS&T) budget to highlight the creation of new knowledge and technologies more consistently and accurately than the traditional R&D data collection. Also, because the FS&T budget empha- sizes research, it does not include funding for defense development, testing, and evaluation, and totals less than half of Federal R&D spending. FS&T is readily tracked through the budget and appropriations process, so the effects of budget decisions are clearer more immediately. As shown in Table 5–3, the 2005 Budget requests $60.4 billion for FS&T, a 27-percent increase since 2001. Over the past year, OSTP and OMB have worked with the Federal agencies and the science community to identify top priorities for Federal R&D. These are in areas critical to the Nation, such as information technologies, and in emerging fields, such as nanotechnology, that will provide new breakthroughs across many fields. Some priorities, such as combating terrorism R&D, address newly recognized needs. The discussion below identifies five multi-agency priority 5. RESEARCH AND DEVELOPMENT areas, followed by highlights of agency-specific R&D priorities. Multi-Agency R&D Priorities The 2005 Budget targets investments in important research and innovation that benefits from specialization and improved coordination across multiple agencies. Three of these multi-agency initiatives— nanotechnology, information technology R&D, and climate change science—have dedicated separate coordination offices to ensure unified strategic planning and implementation. The Administration is strengthening interagency coordination for other priority areas—such as combating bioterrorism. The Administration will continue to analyze other areas of critical need that could benefit in the future from improved focus and coordination among agencies. Combating Terrorism R&D: With the creation of the Department of Homeland Security (DHS), 2003 marked a fundamental change to the management of the Nation’s investment in combating terrorism R&D. Research programs from across the Federal Government were brought together and focused with the specific goal to develop systems to help prevent future terrorist activities, minimize our Nation’s vulnerability to terrorist acts, and respond and recover if an attack should occur. In addition to the DHS R&D funding (about $1 billion in 2005), substantial combating terrorism programs exist in the Departments of Health and Human Services (HHS—over $1.7 billion in 2005), Energy, Defense, Commerce, and Justice, as well as the National Science Foundation and Environmental Protection Agency (EPA). In 2003, there was significant progress in multi-agency efforts, including: • BioWatch, a collaborative effort of DHS, HHS, and EPA, which employs environmental sampling devices in 31 cities across the Nation to quickly detect hazardous biological releases in time to distribute life-saving pharmaceuticals to affected persons. • Project BioShield—A Presidential initiative that will speed development and procurement of new medical countermeasures against current and future terrorist threats. The Administration is coordinating research agendas and generating requirements and acquisition plans for the next generation of medical countermeasures to biological, chemical, and radiological/nuclear threat agents. • Atmospheric plume modeling and validation was enhanced by a joint effort of DHS, DOD, and DOE in a month-long atmospheric aerosol dispersion study in Oklahoma City. The resulting data and models will help emergency management, law enforcement, and other personnel to train for and respond to potential chemical, biological, or radiological events. • Demonstration of radiological and nuclear detection was deployed in the New York City metropolitan area (tunnels, bridges, ports, and airports). 53 This demonstration used state-of-the-art detectors from DOE with operations support by DHS and the City of New York, and serves as a model for deploying these technologies in other urban settings. • DHS initiated a development program for protection of commercial aircraft against surface-to-air missles (Man-Portable Air Defense Systems), following an interagency effort that included the Departments of Defense, Transportation, Justice, and State, and the intelligence community. DHS has solicited and selected projects to address this research effort. The National Science and Technology Council’s (NSTC) Committee on Homeland and National Security is working with the Homeland Security Council and the National Security Council to identify priorities for and facilitate planning among Federal departments and agencies involved in homeland security R&D. The coordinated Federal effort is developing: strategies to combat weapons of mass destruction; radiological and nuclear countermeasures; biological agent detection, diagnostics, therapeutics, and forensics; social, behavioral, and economic aspects of combating terrorism; and border entry/exit technologies. Networking and Information Technology R&D: The budget provides $2.0 billion for the multi-agency Networking and Information Technology Research and Development (NITRD) program. Networking and information technologies enable advances in other fields and provide capabilities that are utilized by virtually every sector of the economy, generating not only new products and tools but also significant improvements in productivity. Agencies with NITRD investments work together to coordinate their programs and leverage each others’ resources, which enables more rapid advancement than they could achieve working on their own. Recent accomplishments of the NITRD program are helping to support progress towards some of the Nation’s highest priorities, including defense and homeland security. For example, research on the incorporation of microsensors into wireless networks has implications not only for battlefield reconnaissance but also for environmental monitoring, and may also be used to improve the tools that first responders depend upon for communication in the field. The development of grid computing for accessing and managing distributed information technology resources is another example where NITRD research is influencing the information technology industry. High-end computing continues to be a major focus of interagency coordination efforts. In 2003, agencies with responsibilities for high-end computing formed the High-End Computing Revitalization Task Force and have worked to develop an interagency R&D roadmap for high-end computing core technologies, a Federal high-end computing capacity and accessibility improvement plan, and recommendations relating to Federal procurement of high-end computing systems. The NITRD interagency working group has taken the first 54 steps toward implementing task force recommendations, and it will continue to leverage the work of the Task Force in improving interagency coordination of high-end computing activities and investments. Nanotechnology R&D: The budget provides $886 million for the multi-agency National Nanotechnology Initiative (NNI), a three-percent increase over likely enacted funding in 2004. The NNI focuses on R&D that is directed toward understanding and creating materials, devices, and systems that exploit the fundamentally distinct properties of matter as it is manipulated at the atomic and molecular levels. The results of NNIsupported R&D could lead to breakthroughs in disease detection and treatment, manufacturing at the nanoscale, environmental monitoring and protection, energy production and storage, and electronic devices with even greater capabilities than those available today. Last year the President signed the 21st Century Nanotechnology Research and Development Act, which codified programs and activities supported by the NNI. Consistent with this legislation, in 2005, the Initiative will continue to focus on fundamental and applied research through investigator-led activities, multidisciplinary centers of excellence, education and training of nanotechnology workers, and infrastructure development, including user facilities and networks that are broadly available to researchers from across the scientific research community. In addition to supporting advancement of scientific and technical knowledge and understanding, as well as development of useful applications, the NNI will continue to promote activities aimed at assessing the societal implications of nanotechnology, including ethical, legal, environmental, and workforce-related issues. Last year the President’s Council of Advisors on Science and Technology (PCAST) was tasked with reviewing the multi-agency nanotechnology R&D program, articulating a strategic plan for the program, defining specific grand challenges to guide the program, and identifying metrics for measuring progress toward those grand challenges. In response, PCAST examined the status of nanotechnology R&D generally and the NNI in particular. PCAST will deliver an initial report in 2004 providing recommendations to further strengthen the Initiative. Climate Change R&D: In July 2003, the Administration released the Strategic Plan for the Climate Change Science Program (CCSP). The Plan provides a 10-year strategy and establishes near-term priorities consistent with the President’s Climate Change Research Initiative, which focuses on reducing significant uncertainties in climate science, improving global climate observing systems, and developing resources to support policymaking and resource management. To achieve the goals outlined in the Strategic Plan, the 2005 Budget includes $57 million of the $103 million in targeted funding committed over two years to accelerate efforts to advance understanding of the role ANALYTICAL PERSPECTIVES of aerosols in climate science, better quantify carbon sources and sinks, and improve the technology and infrastructure used to observe and model climate variations. These investments will help address critical knowledge gaps in climate change science. In November 2003, the Administration’s Climate Change Technology Program (CCTP) released two reports. The first, CCTP’s Research and Current Activities report, highlights several Administration initiatives and other areas of ongoing technology R&D that can help reduce greenhouse gas emissions. The CCTP’s more comprehensive Technology Options for the Near and Long Term is a compendium of technology profiles and ongoing R&D at participating Federal agencies. The CCTP continues to examine the portfolio of federally funded climate change technology R&D and to develop a strategic plan to coordinate and prioritize these activities, consistent with the President’s National Climate Change Technology Initiative (NCCTI). The 2005 Budget continues support for a NCCTI Competitive Solicitation program, a unique approach to selecting and funding innovative research ideas based on their potential to reduce, avoid, or sequester greenhouse gases. The program will enhance and complement the ongoing base of climate change technology R&D. Hydrogen R&D: The Hydrogen R&D Interagency Task Force, established by OSTP shortly after the President’s announcement of the Hydrogen Fuel Initiative, serves as the mechanism for collaboration among the nine Federal agencies that fund hydrogen-related R&D. In 2003, the task force gathered information and provided guidance for agency research directions. In 2004, the task force will complete an interagency 10year plan that will improve coordination of agency efforts, accelerate progress toward the goals of the initiative, and foster collaboration between the Federal Government and the private sector, state agencies, and other stakeholders. The DOE-led International Partnership for the Hydrogen Economy coordinates hydrogen research between the U.S. and other participating governments. Agency R&D Highlights Each Federal agency conducts R&D in the context of that agency’s unique mission, structure, and statutory requirements. Below are highlights of key programs in selected agencies in the 2005 Budget. Table 5–3 shows the FS&T budget. As shown in Table 5–2, these programs and those of other agencies are part of the larger Federal R&D portfolio. National Institutes of Health (NIH): The 2005 Budget provides $28.6 billion for NIH, a 2.6-percent increase over the 2004 likely enacted level. This level is an $8.2 billion (40.5-percent) increase since 2001. • The Administration has demonstrated its strong commitment to biomedical research by completing a five-year doubling of the NIH budget. • NIH continues to play a key role in addressing pressing health research issues, such as access 55 5. RESEARCH AND DEVELOPMENT to state-of-the-art instrumentation and biomedical technologies; development of specialized animal and non-animal research models; and emphasis on ‘‘smart’’ network-connected technologies, computer-aided drug design, gene and molecular therapy development, and bioengineering approaches to decreased health care costs. • In addition, the NIH budget continues support for biodefense research by providing $1.74 billion for NIH to accelerate clinical trials, target the development of new therapeutic and vaccine products for agents of bioterrorism, and establish Regional Centers of Excellence in Biodefense and Emerging Infectious Diseases. National Aeronautics and Space Administration (NASA): The 2005 Budget provides $9.4 billion for FS&T programs at NASA, a 1.3-percent increase over the 2004 likely enacted level. This is a 35-percent increase since 2001. • The 2005 Budget supports the President’s new vision of sustained solar system exploration involving both humans and robots. NASA’s FS&T programs will increasingly focus on this vision, which includes: —a new program of lunar exploration; —further robotic exploration of the solar system; —focused exploration of Mars to accelerate the search for water and life and to prepare for future human exploration; —development of technologies to support human and robotic space exploration; and —refocused Space Station research on activities that support space-exploration goals. • The budget also supports increased NASA investments in the President’s Climate Change Research Initiative, including investment in a critical satellite to help determine the impact of aerosols such as soot and dust on global climate change. • The budget supports several new major initiatives in aeronautics R&D, including a five-year $600 million program to improve the efficiency of aircraft propulsion systems. • PART assessments found NASA’s Mars and Solar System exploration programs to be effective and the agency’s crosscutting technology R&D to be moderately effective. The PART determined that the Space Station Program, Space Station R&D, and the Space Shuttle Program need to develop better performance goals and demonstrate results. National Science Foundation (NSF): To further promote research and education across the fields of science and engineering, the 2005 Budget provides $5.7 billion for NSF, a three-percent increase over the 2004 likely enacted level. This level is a 30-percent increase since 2001. • The budget provides: $761 million for NSF’s lead role in NITRD, focusing on long-term computer science research and applications; $305 million for NSF’s lead role in the National Nanotechnology • • • • Initiative; and $210 million for climate change science. The budget provides $1.1 billion for NSF programs that emphasize the mathematical and physical sciences, including physics, chemistry, and astronomy. This represents a 31-percent increase ($261 million) for these programs since 2001. To attract the most promising students into the sciences, the 2005 Budget provides funds for 5,500 graduate research fellowships and traineeships, an increase of 1,800 since 2001. Annual stipends in these programs have increased to a projected $30,000, compared with $18,000 in 2001. To enhance science infrastructure capabilities, the Budget initiates construction of the National Ecological Observatory Network, the Scientific Ocean Drilling Vessel, and the Rare Symmetry Violating Processes (RSVP) facility. PART assessments found all four of the NSF programs assessed to be effective: Facilities, Individuals, Nanoscale Science and Engineering, and Information Technology Research. Department of Energy (DOE): The 2005 Budget provides $5.4 billion for FS&T at DOE, a $492 million (or 10-percent) increase since 2001. • DOE will continue the President’s Hydrogen Fuel Initiative to accelerate the worldwide availability and affordability of hydrogen-powered fuel cell vehicles. The initiative, which will now include targeted basic research investments, focuses on research to advance hydrogen production, storage, and infrastructure. The Initiative complements the Department’s FreedomCAR Partnership with the auto industry, which is aimed at developing viable hydrogen fuel cell vehicle technology. • The 2005 Budget provides $3.4 billion for the Office of Science, including funding to ensure its continuing leadership in physical science research and its unique research in genomics, climate change, and supercomputing. The fifth and final nanoscience research center will begin construction as a part of the Office’s $211 million investment in the National Nanotechnology Initiative. • The budget dedicates $447 million to the President’s Coal Research Initiative on clean coal technologies, including $237 million for FutureGen which will be the world’s first zero-emissions electricity-producing power plant. This 10-year, $1 billion project will be cost-shared by the private sector and international participants. • DOE will continue its support for R&D to improve energy efficiency and reliability in buildings, industry, transportation, and the Federal Government ($544 million), and to reduce the cost of renewable energy technologies, such as wind, solar, geothermal, and biomass ($375 million). • The budget provides $34 million for the Generation IV Nuclear Energy Systems Initiative and $46 million for the Advanced Fuel Cycle Initiative to develop next-generation nuclear reactor and fuel 56 ANALYTICAL PERSPECTIVES cycle technologies that are sustainable, proliferation-resistant, and economical. • The budget includes $91 million for electricity transmission and distribution reliability R&D activities, a 12-percent increase over 2004. These funds include $45 million for high temperature superconductivity, $6 million for the new Gridworks program to support research that will enable power lines to carry more power and better control the flow of electricity to prevent blackouts, and $5 million for the Gridwise program to improve the communications and control system for the electricity grid. Department of Defense (DOD): DOD funds a wide range of R&D to ensure that our military forces have the tools to protect the Nation’s security. In 2005, DOD’s budget includes $5.2 billion that appears in the FS&T budget. This level is a $225 million (4.6-percent) increase since 2001. • The 2005 Budget funds ‘‘Science and Technology’’ programs to explore and develop technical options for new defense systems and to avoid being surprised by new technologies in the hands of adversaries. Areas of emphasis include computing and communications, sensors, nanotechnology, and hypersonic propulsion systems. DOD’s S&T includes the research counted in the FS&T budget, plus advanced technology development. • The Missile Defense Agency continues to develop technologies for intercepting ballistic missiles in multiple phases of flight. The budget provides funding for missile defense R&D, which includes new efforts for high-speed, boost-phase interceptors, sea-based radars, directed energy technology and advanced battle management systems. • The Army continues development efforts in support of the Future Combat System as a major part of its transformation to a lighter, more mobile, and more effective fighting force. • Development continues on the Joint Strike Fighter, the next generation affordable multi-role fighter aircraft, which will use innovative technologies to keep costs low. • The Navy continues development of the next generation DD(X) destroyer, the Littoral Combat Ship and associated shipboard technologies. These platforms will provide advanced capabilities that will ensure U.S. naval superiority continues into the future. • R&D to address terrorist and other unconventional threats continue to be a high priority. Systems and technologies under development to address defense against chemical or biological agents include: improved detectors of chemical and biological threats; troop protective gear for use under chemical and biological attack that is both more effective and more comfortable; and vaccines to protect against biological agents. Department of Agriculture (USDA): The 2005 Budget provides $1.9 billion for FS&T at USDA. • Funding for the Agricultural Research Service includes increases in high priority areas, such as homeland security (food safety and emerging and exotic diseases), genomics and genetics, human nutrition, and the establishment of a National Plant Disease Recovery System. • The Cooperative State Research, Education, and Extension Service funding for research and education grants includes $180 million for the National Research Initiative, an increase of $16 million (10 percent) over 2004, and $30 million for the network of university-based diagnostic laboratories. The budgets for both in-house research and research grants do not continue funding for unrequested earmarks. • The Economic Research Service budget includes increases totaling $7 million to study consumer behavior, particularly dietary attitudes, food consumption, and health awareness. • The budget includes an emphasis on putting forestry research to work, providing a significant increase to optimize the delivery of research findings by improving Forest Service management of investments in research, development, and technology applications. Funds are also provided for research on rapid management responses to address threats against forest and rangeland health and agriculture by invasive species. Department of the Interior (DOI): Within the Department of the Interior, the 2005 Budget provides $920 million for the United States Geological Survey (USGS). USGS provides science and information for DOI bureaus and local communities to make informed decisions regarding land and resource management. In 2005 some areas of focus for USGS include: • Work with at-risk jurisdictions to increase the number that have adopted hazard mitigation measures based on USGS geologic hazard information, and coordination with Federal partners to determine the effectiveness of Federal efforts to reduce the loss of life and property due to geologic hazards. • Expansion of USGS capabilities to monitor ground deformations with remote sensing technology, InSAR, to assist in predicting volcanic activity. • Additional water availability and aquifer characterization studies to support DOI’s Water 2025, and an additional $2 million to provide critical information about water quality and quantity and fish ecology that is necessary for management of the Klamath River Basin. • Consistent with 2004 PART findings, USGS is restructuring the Geography program in order to migrate from its traditional role as the primary data collector and producer of topographic maps to one that focuses on data sharing and partnerships. Workforce restructuring will provide savings in 2004 and 2005 to fund partnerships to 5. RESEARCH AND DEVELOPMENT develop needed science and applications to promote geographic integration and analyses. Department of Commerce (DOC): The 2005 Budget provides $832 million for FS&T at the Department of Commerce. • For the National Institute of Standards and Technology (NIST), the budget provides $482 million for research and physical improvements at NIST’s Measurement and Standards Laboratories. The budget also supports NIST facilities, including equipment for the Advanced Measurement Laboratory in Maryland and renovations of facilities in Boulder, Colorado. • The 2005 Budget proposes to terminate the Advanced Technology Program (ATP). The Administration believes that other NIST research and development programs are much more effective and necessary in supporting the fundamental scientific understanding and technological needs of U.S.based businesses, American workers, and the domestic economy. Further, large shares of ATP funding have gone to major corporations, and projects often have been similar to those being carried out by firms not receiving such subsidies. • For the National Oceanic and Atmospheric Administration (NOAA) the 2005 Budget provides $350 million for ongoing research on climate, weather, air quality, and ocean processes. This funding level includes $19 million for NOAA to expand climate observing capabilities in support of the Administration’s recently released Climate Change Science Program (CCSP) Strategic Plan. Department of Veterans Affairs (VA): The 2005 Budget provides $770 million for FS&T at the Department of Veterans Affairs. This level is a seven-percent increase since 2001. This will provide level funding to the VA R&D program after taking into consideration the significant funding the Department receives from other governmental agencies and private entities to support VA-conducted research. The total VA R&D program resources are $1.7 billion. • VA will soon begin to use increased funding from private companies for the indirect administration costs of conducting research in VA facilities. • The 2005 Budget provides for clinical, epidemiological, and behavioral studies across a broad spectrum of medical research disciplines. Among the agency’s top research priorities are improving the translation of research results into patient care, special populations (those afflicted with spinal cord injury, visual and hearing impairments, and serious mental illness), geriatrics, diseases of the brain (e.g., Alzheimer’s and Parkinson’s), treatment of chronic progressive multiple sclerosis, and chronic disease management. • The 2005 Budget reflects a restructuring of total resources in the Research Business Line as first shown in the 2004 Budget. 57 Environmental Protection Agency (EPA): The budget provides $725 million for FS&T for the Environmental Protection Agency to ensure that its efforts to safeguard human health and the environment are based on the best available scientific and technical information. • EPA’s homeland security research will result in more efficient and effective cleanup of contaminated buildings and faster threat detection and response for water systems. Additionally, EPA will develop practices and procedures that provide elected officials and other decision makers, the public, and first responders with rapid risk assessment protocols for chemical and biological threats. • As part of its Water Quality Monitoring initiative, EPA will address the integration of different scales and types of monitoring to target effective water quality management actions and document effectiveness of water quality management programs. Department of Transportation (DOT): The 2005 Budget provides $659 million for FS&T at DOT, a $138 million (26.5-percent) increase since 2001. • The Federal Highway Administration ($429 million in 2005) supports research, technology, and education to improve the quality and safety of the Nation’s transportation infrastructure, such as increasing the quality and longevity of roadways, identifying safety improvements, and promoting congestion mitigation through the use of Intelligent Transportation Systems. • The budget of the National Highway Traffic Safety Administration provides $103 million for R&D in crash-worthiness, crash avoidance, and data analysis to help reduce highway fatalities and injuries. The budget also includes funding for a crash causation survey. • In 2005, R&D at the Federal Motor Carrier Safety Administration focuses on issues including driver safety performance, commercial vehicle safety performance, carrier compliance and safety, and other studies toward the goal of achieving a substantial reduction in crashes and fatalities. • The 2005 Budget provides $117 million for the Federal Aviation Administration to continue critical safety and capacity research. The PART assessment found this program to be effective; it is well-managed and results-oriented, with a strategic plan that sets forth clear long-term goals that are tied to program performance measures. Department of Education: The 2005 Budget provides $370 million for research activities at the Department of Education, a $20 million increase over the 2004 likely enacted level. • The Institute of Education Sciences (IES) has the lead responsibility for the Department’s strategic goal of transforming education into an evidencebased field. Research, development, and dissemination ($185 million in 2005) supports research 58 ANALYTICAL PERSPECTIVES to advance our understanding of how students learn and identify effective approaches and interventions to improve education. • Research and innovation in special education activities ($78 million in 2005) yield new knowledge and help translate scientifically valid information into applied strategies. The 2005 PART showed that the program does not have specific long-term outcome goals against which its impact can be measured. The program is working to articulate long-term research objectives that have measurable outcomes. Pending legislation would transfer this program from the Office of Special Education Programs to IES to promote better coordination. • The National Institute for Disability Rehabilitation and Research (NIDRR—$107 million in 2005) conducts research, demonstration and training activities that advance independent living for people with disabilities. Consistent with the President’s New Freedom Initiative, NIDRR’s activities promote community integration and employment outcomes. The 2005 PART showed that NIDRR cannot demonstrate the results of its investments without long term performance measures. In response to this finding, NIDRR is developing longterm research goals that have measurable outcomes. Department of Homeland Security (DHS): The 2005 Budget requests just over one billion dollars for DHS R&D. Within DHS, the Directorate of Science and Table 5–1. Technology (S&T) serves as a centralized R&D arm that consolidates piecemeal R&D efforts into one agency. Its sole focus is to harness revolutionary technology, which can be used by law enforcement and emergency response personnel in carrying out their mission to protect the Nation. S&T works to solicit proposals and seeks to engage our Nation’s well-established R&D community in the fight against terrorism. S&T has separate offices dedicated to addressing the threat posed by each major category of weapons of mass destruction, such as chemical, biological, radiological, nuclear, and high-explosives. Stimulating Private Investment Along with direct spending on R&D, the Federal Government has sought to stimulate private R&D investment through tax preferences. Current law provides a 20-percent tax credit for private research and experimentation expenditures above a certain base amount. The credit, which expired in 1999, was retroactively reinstated for five years, through 2004, in the Tax Relief Extension Act of 1999. The budget proposes to make the Research and Experimentation (R&E) tax credit permanent. The proposed extension will cost nearly $30 billion over the period from 2005 to 2009. In addition, a permanent tax provision lets companies deduct, up front, the costs of certain kinds of research and experimentation, rather than capitalize these costs. Also, equipment used for research benefits from relatively rapid cost recovery. Table 5–1 shows a forecast of the costs of the tax credit. PERMANENT EXTENSION OF THE RESEARCH AND EXPERIMENTATION TAX CREDIT (Budget authority, dollar amounts in millions) 2004 2005 2006 2007 2008 2009 Current Law ................................. Proposed Extension .................... 4,400 672 2,550 3,610 1,090 5,187 460 6,291 150 7,129 60 7,775 4,310 29,992 Total ........................................ 5,072 6,160 6,277 6,751 7,279 7,835 34,302 IV. 2005–09 FEDERAL R&D DATA Federal R&D Funding R&D is the collection of efforts directed towards gaining greater knowledge or understanding and applying knowledge toward the production of useful materials, devices, and methods. R&D investments can be characterized as basic research, applied research, development, R&D equipment, or R&D facilities, and OMB has used those or similar categories in its collection of R&D data since 1949. Basic research is defined as systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. Applied research is systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met. 59 5. RESEARCH AND DEVELOPMENT Development is systematic application of knowledge toward the production of useful materials, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements. Research and development equipment includes acquisition or design and production of movable equipment, such as spectrometers, microscopes, detectors, and other instruments. Research and development facilities include the acquisition, design, and construction of, or major repairs or alterations to, all physical facilities for use Table 5–2. in R&D activities. Facilities include land, buildings, and fixed capital equipment, regardless of whether the facilities are to be used by the Government or by a private organization, and regardless of where title to the property may rest. This category includes such fixed facilities as reactors, wind tunnels, and particle accelerators. There are over twenty Federal agencies that fund R&D in the U.S. The nature of the R&D that these agencies fund depends on the mission of each agency and on the role of R&D in accomplishing it. Table 5–2 shows agency-by-agency spending on basic and applied research, development, and R&D equipment and facilities. FEDERAL RESEARCH AND DEVELOPMENT SPENDING (Budget authority, dollar amounts in millions) 2003 Actual 2004 Estimate 2005 Proposed Dollar Change: Percent Change: 2004 to 2005 2004 to 2005 By Agency Defense ...................................................................................................................... Health and Human Services ..................................................................................... NASA ......................................................................................................................... Energy ........................................................................................................................ National Science Foundation .................................................................................... Agriculture .................................................................................................................. Homeland Security .................................................................................................... Commerce ................................................................................................................. Veterans Affairs ......................................................................................................... Transportation ............................................................................................................ Interior ........................................................................................................................ Environmental Protection Agency ............................................................................. Other .......................................................................................................................... 58,838 27,411 10,681 8,312 3,972 2,334 737 1,200 819 701 643 568 1,223 65,484 28,275 10,893 8,835 4,115 2,308 1,053 1,126 824 701 675 575 1,092 69,856 29,381 11,308 8,893 4,252 2,105 1,216 1,075 772 749 648 577 1,034 4,372 1,106 415 58 137 –203 163 –51 –52 48 –27 2 –58 7% 4% 4% 1% 3% –9% 15% –5% –6% 7% –4% 0% –5% Total ...................................................................................................................... 117,439 125,956 131,866 5,910 5% Basic Research Defense ...................................................................................................................... Health and Human Services ..................................................................................... NASA ......................................................................................................................... Energy ........................................................................................................................ National Science Foundation .................................................................................... Agriculture .................................................................................................................. Homeland Security .................................................................................................... Commerce ................................................................................................................. Veterans Affairs ......................................................................................................... Transportation ............................................................................................................ Interior ........................................................................................................................ Environmental Protection Agency ............................................................................. Other .......................................................................................................................... 1,369 14,120 2,213 2,556 3,422 867 47 54 327 23 41 97 170 1,404 14,732 2,584 2,750 3,551 914 47 57 332 20 40 79 165 1,341 15,198 2,324 2,664 3,642 783 153 83 308 40 38 91 182 –63 466 –260 –86 91 –131 106 26 –24 20 –2 12 17 –4% 3% –10% –3% 3% –14% 226% 46% –7% 100% –5% 15% 10% Subtotal ................................................................................................................ 25,306 26,675 26,847 172 0.6% Applied Research Defense ...................................................................................................................... Health and Human Services ..................................................................................... NASA ......................................................................................................................... Energy ........................................................................................................................ National Science Foundation .................................................................................... Agriculture .................................................................................................................. Homeland Security .................................................................................................... Commerce ................................................................................................................. Veterans Affairs ......................................................................................................... Transportation ............................................................................................................ Interior ........................................................................................................................ Environmental Protection Agency ............................................................................. Other .......................................................................................................................... 4,252 11,982 3,192 2,656 218 974 92 910 451 405 547 366 579 4,425 13,174 3,052 3,020 211 1,049 124 891 450 398 584 361 609 3,828 13,522 3,122 3,395 220 888 278 838 425 455 560 346 617 –597 348 70 375 9 –161 154 –53 –25 57 –24 –15 8 –13% 3% 2% 12% 4% –15% 124% –6% –6% 14% –4% –4% 1% Subtotal ................................................................................................................ 26,624 28,348 28,494 146 0.5% 60 ANALYTICAL PERSPECTIVES Table 5–2. FEDERAL RESEARCH AND DEVELOPMENT SPENDING—Continued (Budget authority, dollar amounts in millions) 2003 Actual 2004 Estimate 2005 Proposed Dollar Change: Percent Change: 2004 to 2005 2004 to 2005 Development Defense ...................................................................................................................... 53,172 59,603 64,622 5,019 Health and Human Services ..................................................................................... 160 140 386 246 NASA ......................................................................................................................... 2,963 2,994 3,247 253 Energy ........................................................................................................................ 1,946 1,956 1,840 –116 National Science Foundation .................................................................................... ................ .................... .................... ...................... Agriculture .................................................................................................................. 145 152 142 –10 Homeland Security .................................................................................................... 549 794 750 –44 Commerce ................................................................................................................. 135 128 53 –75 Veterans Affairs ......................................................................................................... 41 42 39 –3 Transportation ............................................................................................................ 254 270 235 –35 Interior ........................................................................................................................ 53 48 47 –1 Environmental Protection Agency ............................................................................. 105 135 140 5 Other .......................................................................................................................... 460 311 228 –83 Subtotal ................................................................................................................ 59,983 66,573 71,729 5,156 8% 176% 8% –6% N/A –7% –6% –59% –7% –13% –2% 4% –27% 8% Facilities and Equipment Defense ...................................................................................................................... 45 52 65 13 25% Health and Human Services ..................................................................................... 1,149 229 275 46 20% NASA ......................................................................................................................... 2,313 2,263 2,615 352 16% Energy ........................................................................................................................ 1,154 1,109 994 –115 –10% National Science Foundation .................................................................................... 332 353 390 37 10% Agriculture .................................................................................................................. 348 193 292 99 51% Homeland Security .................................................................................................... 49 88 35 –53 –60% Commerce ................................................................................................................. 101 50 101 51 102% Veterans Affairs ......................................................................................................... ................ .................... .................... ...................... N/A Transportation ............................................................................................................ 19 13 19 6 46% Interior ........................................................................................................................ 2 3 3 ...................... ........................ Environmental Protection Agency ............................................................................. ................ .................... .................... ...................... N/A Other .......................................................................................................................... 14 7 7 ...................... ........................ Subtotal ................................................................................................................ 5,526 4,360 4,796 436 10% 61 5. RESEARCH AND DEVELOPMENT Table 5–3. FEDERAL SCIENCE AND TECHNOLOGY BUDGET (Budget authority, dollar amounts in millions) 2001 Actual By Agency National Institutes of Health ...................................................................................... NASA 1 ........................................................................................................................... Space Science ........................................................................................................... Earth Science ............................................................................................................ Biological & Physical Research ................................................................................ Aeronautics Technology ............................................................................................ Exploration Systems and Crosscutting Technology 2 ............................................. National Science Foundation ..................................................................................... Energy 3 ......................................................................................................................... Science Programs ..................................................................................................... Energy Supply: Renewables ..................................................................................... Energy Supply: Electricity Transmission & Distribution 4 ......................................... Energy Supply: Nuclear Energy ............................................................................... Energy Conservation 5 ............................................................................................... Fossil Energy 6 .......................................................................................................... Defense ......................................................................................................................... Basic Research ......................................................................................................... Applied Research ...................................................................................................... Agriculture .................................................................................................................... CSREES Research & Education 7 ............................................................................ Economic Research Service ..................................................................................... Agricultural Research Service 8 ................................................................................ Mandatory IFAFS 9 .................................................................................................... Forest Service 10 ....................................................................................................... Interior (USGS) ............................................................................................................. Commerce ..................................................................................................................... NOAA (Oceanic & Atmospheric Research) .............................................................. NIST Intramural Research and Facilities ................................................................. NIST Advanced Technology Program ...................................................................... Veterans Affairs 11 ....................................................................................................... Environmental Protection Agency 12 ......................................................................... Transportation .............................................................................................................. Highway research 13 .................................................................................................. Aviation research 14 ................................................................................................... Education ...................................................................................................................... Special Education Research and Innovation ........................................................... NIDRR 15 .................................................................................................................... Research, Development, and Dissemination 16 ........................................................ Total .......................................................................................................................... 1 All 2003 Actual 2004 Estimate 2005 Proposed Dollar Change: Percent Change: 2004 to 2005 2004 to 2005 20,361 27,066 27,878 28,607 729 3% 6,945 7,276 9,249 9,373 124 1% 2,609 3,531 3,971 4,068 97 2% 1,762 1,717 1,613 1,485 –128 –8% 362 883 985 1,049 64 6% 975 1,145 1,034 919 –115 –11% 1,237 1,741 1,646 1,852 206 13% 4,431 5,323 5,578 5,745 167 3% 4,886 5,208 5,494 5,378 –116 –2% 3,218 3,307 3,484 3,432 –52 –1% 312 322 357 375 18 5% 56 88 81 91 10 12% 238 258 292 300 8 3% 619 612 607 544 –63 –10% 443 621 673 636 –37 –5% 4,944 5,621 5,829 5,169 –660 –11% 1,271 1,369 1,404 1,341 –63 –4% 3,673 4,252 4,425 3,828 –597 –13% 1,885 1,988 2,048 1,865 –183 –9% 514 626 629 516 –113 –18% 69 69 71 80 9 13% 936 1,043 1,082 988 –94 –9% 120 ................ .................... .................... ...................... N/A 246 250 266 281 15 6% 884 919 938 920 –18 –2% 817 974 965 832 –133 –14% 325 372 393 350 –43 –11% 347 423 401 482 81 20% 145 179 171 .................... –171 –100% 719 818 820 770 –50 –6% 746 801 826 725 –101 –12% 521 655 683 659 –24 –4% 387 508 564 542 –22 –4% 134 147 119 117 –2 –2% 363 325 350 370 20 6% 77 77 78 78 ...................... ........................ 100 109 107 107 ...................... ........................ 186 139 165 185 20 12% 47,502 56,974 60,658 60,413 –245 –0.4% years normalized to reflect 2003 transfers of funding for Space Station research facilities, space communications activities, and associated institutional support from human space flight. 2 Includes Integrated Technology Transfer Partnerships, Mission and Science Measurement Technology, and the Space Launch Initiative. 3 2001 and 2003 data reflect transfers to Science Programs from other Department of Energy R&D programs to support the Small Business Innovation Research program and the Small Business Technology Transfer program. 4 This office was created in 2004. Data for 2001 and 2003 reflect funding for these activities from within the Renewable budget, which has been adjusted accordingly. 5 Excludes weatherization and state grant programs. 6 Enacted and requested levels exclude balances transferred from the Clean Coal Technology program for activities in 2003 ($40 million), and 2004 ($14 million). No transfers in 2005. 7 Includes Receipts for Native American Endowment: $7 million in 2003; $9 million in 2004; $12 million in 2005. 8 Excludes buildings and facilities. 9 Initiative for Future Agriculture and Food Systems. 10 Forest and Rangeland Research. 11 The VA research program budget has been restructured to include the research appropriation and VA medical care support transfer to research. This table shows resources under the revised budget structure. 12 Science and Technology, plus superfund transfer. The 2003 superfund transfer includes homeland resources for building decontamination research. 13 Includes research and development funding for the Federal Highway Administration, the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration. 14 Includes Federal Aviation Administration Research, Engineering, and Development. 15 National Institute on Disability and Rehabilitation Research. 16 Does not include funding for Regional Educational Labs. 62 ANALYTICAL PERSPECTIVES Table 5–4. AGENCY DETAIL OF SELECTED INTERAGENCY R&D EFFORTS (Budget authority, dollar amounts in millions) 2003 Actual 2004 Estimate 2005 Proposed Dollar Change: Percent Change: 2004 to 2005 2004 to 2005 Networking and Information Technology R&D National Science Foundation .................................................................................... Health and Human Services 1 ................................................................................... Energy ........................................................................................................................ National Aeronautics and Space Administration ...................................................... Defense ...................................................................................................................... Commerce ................................................................................................................. Environmental Protection Agency ............................................................................. 743 376 308 213 296 26 2 754 368 344 275 252 26 4 Total .......................................................................................................................... 1,964 2,023 National Nanotechnology Initiative National Science Foundation .................................................................................... 221 Energy ........................................................................................................................ 134 Defense ...................................................................................................................... 220 National Institutes of Health ...................................................................................... 78 Commerce (NIST) ..................................................................................................... 64 National Aeronautics and Space Administration ...................................................... 36 Agriculture .................................................................................................................. ................ Environmental Protection Agency ............................................................................. 5 Justice ........................................................................................................................ 1 Homeland Security (TSA) ......................................................................................... 1 254 203 218 80 63 37 1 5 2 1 305 51 20% 211 8 4% 180 –38 –17% 89 9 11% 53 –10 –16% 35 –2 –5% 5 4 400% 5 ...................... ........................ 2 ...................... ........................ 1 ...................... ........................ 864 886 22 3% Climate Change Science Program National Aeronautics and Space Administration ...................................................... 1,146 1,334 National Science Foundation .................................................................................... 202 213 Commerce (NOAA) ................................................................................................... 117 130 Energy ........................................................................................................................ 120 133 Agriculture .................................................................................................................. 68 67 National Institutes of Health ...................................................................................... 59 61 Interior (USGS) .......................................................................................................... 26 28 Environmental Protection Agency ............................................................................. 19 22 Smithsonian ............................................................................................................... 6 6 U.S. Agency for International Development ............................................................. 6 6 Transportation ............................................................................................................ ................ .................... State ........................................................................................................................... ................ 1 1,271 210 142 134 74 61 29 21 6 6 3 1 –63 –3 12 1 7 ...................... 1 –1 ...................... ...................... 3 ...................... –5% –1% 9% 1% 10% ........................ 4% –5% ........................ ........................ N/A ........................ Total .......................................................................................................................... 760 761 7 1% 371 3 1% 354 10 3% 259 –16 –6% 226 –26 –10% 33 7 27% 4 ...................... ........................ 2,008 –15 –1% Total .......................................................................................................................... 1,769 2,001 1,958 –43 –2% Subtotal, CCRI 2 (included in CCSP total) ........................................................... 41 168 238 70 42% 1 Includes 2 Climate funds from offsetting collections for the Agency for Healthcare Research and Quality. Change Research Initiative. 6. FEDERAL INVESTMENT Investment spending is spending that yields longterm benefits. Its purpose may be to improve the efficiency of internal Federal agency operations or to increase the Nation’s overall stock of capital for economic growth. The spending can be direct Federal spending or grants to State and local governments. It can be for physical capital, which yields a stream of services over a period of years, or for research and development or education and training, which are intangible but also increase income in the future or provide other longterm benefits. Most presentations in the Federal budget combine investment spending with spending for current use. This chapter focuses solely on Federal and federally financed investment. PART I. In this chapter, investment is discussed in the following sections: • a description of the size and composition of Federal investment spending; • a discussion of the performance of selected Federal investment programs; and • a presentation of trends in the stock of federally financed physical capital, research and development, and education. Two sections that appeared in this chapter last year, ‘‘Alternative Capital Budget and Capital Expenditure Presentations’’ and ‘‘Supplemental Physical Capital Information’’, are not included this year, primarily because the information in these sections changes little from year to year, and the reader may refer to earlier budgets for this information or analysis. DESCRIPTION OF FEDERAL INVESTMENT For more than fifty years, the Federal budget has included a chapter on Federal investment—defined as those outlays that yield long-term benefits—separately from outlays for current use. In recent years the discussion of the composition of investment has displayed estimates of budget authority as well as outlays. The classification of spending between investment and current outlays is a matter of judgment. The budget has historically employed a relatively broad classification, encompassing physical investment, research, development, education, and training. The budget further classifies investments into those that are grants to State and local governments, such as grants for highways or education, and all other investments, called ‘‘direct Federal programs,’’ in this analysis. This ‘‘direct Federal’’ category consists primarily of spending for assets owned by the Federal Government, such as defense weapons systems and general purpose office buildings, but also includes grants to private organizations and individuals for investment, such as capital grants to Amtrak or higher education loans directly to individuals. Presentations for particular purposes could adopt different definitions of investment: • To suit the purposes of a traditional balance sheet, investment might include only those physical assets owned by the Federal Government, excluding capital financed through grants and intangible assets such as research and education. • Focusing on the role of investment in improving national productivity and enhancing economic growth would exclude items such as national defense assets, the direct benefits of which enhance national security rather than economic growth. • Concern with the efficiency of Federal operations would confine the coverage to investments that reduce costs or improve the effectiveness of internal Federal agency operations, such as computer systems. • A ‘‘social investment’’ perspective might broaden the coverage of investment beyond what is included in this chapter to include programs such as childhood immunization, maternal health, certain nutrition programs, and substance abuse treatment, which are designed in part to prevent more costly health problems in future years. The relatively broad definition of investment used in this section provides consistency over time—historical figures on investment outlays back to 1940 can be found in the separate Historical Tables volume. Table 6–2 at the end of this section allows disaggregation of the data to focus on those investment outlays that best suit a particular purpose. In addition to this basic issue of definition, there are two technical problems in the classification of investment data involving the treatment of grants to State and local governments and the classification of spending that could be shown in more than one category. First, for some grants to State and local governments it is the recipient jurisdiction, not the Federal Government, that ultimately determines whether the money is used to finance investment or current purposes. This analysis classifies all of the outlays in the category where the recipient jurisdictions are expected to spend most of the money. Hence, the community development block grants are classified as physical investment, although some may be spent for current purposes. Gen- 63 64 ANALYTICAL PERSPECTIVES eral purpose fiscal assistance is classified as current spending, although some may be spent by recipient jurisdictions on physical investment. Second, some spending could be classified in more than one category of investment. For example, outlays for construction of research facilities finance the acquisition of physical assets, but they also contribute to research and development. To avoid double counting, the outlays are classified in the category that is most commonly recognized as investment. Consequently outlays for the conduct of research and development do not include outlays for research facilities, because these outlays are included in the category for physical investment. Similarly, physical investment and research and development related to education and training are included in the categories of physical assets and the conduct of research and development. When direct loans and loan guarantees are used to fund investment, the subsidy value is included as investment. The subsidies are classified according to their program purpose, such as construction or education and training. For more information about the treatment of Federal credit programs, refer to Chapter 25, ‘‘The Budget System and Concepts,’’ in this volume. This section presents spending for gross investment, without adjusting for depreciation. Composition of Federal Investment Outlays Major Federal Investment The composition of major Federal investment outlays is summarized in Table 6–1. They include major public physical investment, the conduct of research and development, and the conduct of education and training. Defense and nondefense investment outlays were $345.2 billion in 2003. They are estimated to increase to $376.7 billion in 2004 and are projected to increase further to $390.0 billion in 2005. Major Federal investment outlays will comprise an estimated 16 percent of total Federal outlays in 2005 and 3.2 percent of the Nation’s gross domestic product (GDP). Greater detail on Federal investment is available in Table 6–2 at the end of this section. That table includes both budget authority and outlays. Physical investment. Outlays for major public physical capital investment (hereafter referred to as physical investment outlays) are estimated to be $179.8 billion in 2005. Physical investment outlays are for construction and rehabilitation, the purchase of major equipment, and the purchase or sale of land and structures. More than three-fifths of these outlays are for direct physical investment by the Federal Government, with the remainder being grants to State and local governments for physical investment. Direct physical investment outlays by the Federal Government are primarily for national defense. Defense outlays for physical investment are estimated to be $85.6 billion 2005. Almost all of these outlays, or an estimated $78.4 billion, are for the procurement of weapons and other defense equipment, and the remain- der is primarily for construction on military bases, family housing for military personnel, and Department of Energy defense facilities. Outlays for direct physical investment for nondefense purposes are estimated to be $31.1 billion in 2005. These outlays include $16.4 billion for construction and rehabilitation. This amount includes funds for water, power, and natural resources projects of the Corps of Engineers, the Bureau of Reclamation within the Department of the Interior, and the Tennessee Valley Authority; construction and rehabilitation of veterans hospitals and Postal Service facilities; facilities for space and science programs, and Indian Health Service hospitals and clinics. Outlays for the acquisition of major equipment are estimated to be $14.1 billion in 2005. The largest amounts are for the air traffic control system. For the purchase or sale of land and structures, disbursements are estimated to exceed collections by $0.6 billion in 2005. These purchases are largely for buildings and land for parks and other recreation purposes. Grants to State and local governments for physical investment are estimated to be $63.1 billion in 2005. More than two-thirds of these outlays, or $43.8 billion, are to assist States and localities with transportation infrastructure, primarily highways. Other major grants for physical investment fund sewage treatment plants, community development, and public housing. Conduct of research and development. Outlays for the conduct of research and development are estimated to be $124.0 billion in 2005. These outlays are devoted to increasing basic scientific knowledge and promoting research and development. They increase the Nation’s security, improve the productivity of capital and labor for both public and private purposes, and enhance the quality of life. More than half of these outlays, an estimated $71.4 billion, are for national defense. Physical investment for research and development facilities and equipment is included in the physical investment category. Nondefense outlays for the conduct of research and development are estimated to be $52.6 billion in 2005. These are largely for the National Aeronautics and Space Administration, the National Science Foundation, the National Institutes of Health, and research for nuclear and non-nuclear energy programs. A more complete and detailed discussion of research and development funding appears in Chapter 5, ‘‘Research and Development’’ in this volume. Conduct of education and training. Outlays for the conduct of education and training are estimated to be $86.2 billion in 2005. These outlays add to the stock of human capital by developing a more skilled and productive labor force. Grants to State and local governments for this category are estimated to be $51.4 billion in 2005, three-fifths of the total. They include education programs for the disadvantaged and the disabled, vocational and adult education programs, training programs in the Department of Labor, and Head Start. Direct Federal education and training outlays are estimated 6. 65 FEDERAL INVESTMENT Table 6–1. COMPOSITION OF FEDERAL INVESTMENT OUTLAYS (In billions of dollars) 2003 Actual Estimate 2004 2005 Federal Investment Major public physical capital investment: Direct Federal: National defense ................................................................................................... Nondefense ........................................................................................................... 74.7 29.5 85.2 31.0 85.6 31.1 Subtotal, direct major public physical capital investment ............................... 104.2 116.3 116.7 Grants to State and local governments ................................................................... 59.8 61.3 63.1 Subtotal, major public physical capital investment .............................................. 164.1 177.6 179.8 Conduct of research and development: National defense ........................................................................................................ Nondefense ................................................................................................................ 57.3 44.1 65.8 49.2 71.4 52.6 Subtotal, conduct of research and development ................................................. 101.4 115.0 124.0 Conduct of education and training: Grants to State and local governments ................................................................... Direct Federal ............................................................................................................ 45.2 34.5 50.6 33.6 51.4 34.8 Subtotal, conduct of education and training ........................................................ 79.7 84.2 86.2 Total, major Federal investment outlays ..................................................... 345.2 376.7 390.0 Major Federal investment outlays: National defense ........................................................................................................ Nondefense ................................................................................................................ 132.0 213.1 151.0 225.7 157.0 233.0 MEMORANDUM Total, major Federal investment outlays .............................................................. 345.2 376.7 390.0 Miscellaneous physical investment: Commodity inventories .............................................................................................. Other physical investment (direct) ............................................................................ –0.6 5.7 –1.1 4.2 –0.4 3.7 Total, miscellaneous physical investment ................................................................ 5.1 3.1 3.3 Total, Federal investment outlays, including miscellaneous physical investment ........................................................................... 350.3 379.8 393.3 to be $34.8 billion in 2005. Programs in this category are primarily aid for higher education through student financial assistance, loan subsidies, the veterans GI bill, and health training programs. This category does not include outlays for education and training of Federal civilian and military employees. Outlays for education and training that are for physical investment and for research and development are in the categories for physical investment and the conduct of research and development. Outlays for commodity inventories are primarily for the purchase or sale of agricultural products pursuant to farm price support programs. Sales are estimated to exceed purchases by $0.4 billion in 2005. Outlays for other miscellaneous physical investment are estimated to be $3.7 billion in 2005. This category includes primarily conservation programs. These are entirely direct Federal outlays. Miscellaneous Physical Investment Outlays In addition to the categories of major Federal investment, several miscellaneous categories of investment outlays are shown at the bottom of Table 6–1. These items, all for physical investment, are generally unrelated to improving Government operations or enhancing economic activity. The following table provides data on budget authority as well as outlays for major Federal investment divided according to grants to State and local governments and direct Federal spending. Miscellaneous investment is not included because it is generally unrelated to improving Government operations or enhancing economic activity. Detailed Table on Investment Spending 66 ANALYTICAL PERSPECTIVES Table 6–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS (in millions of dollars) Budget Authority Description 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate GRANTS TO STATE AND LOCAL GOVERNMENTS Major public physical investments: Construction and rehabilitation: Transportation: Highways ............................................................................................................................. Mass transportation ............................................................................................................ Air transportation ................................................................................................................ 29,518 10,629 3,379 33,763 6,939 3,381 33,517 7,017 3,501 30,379 7,336 2,681 31,089 8,228 3,395 32,710 7,666 3,471 Subtotal, transportation .................................................................................................. 43,526 44,083 44,035 40,396 42,712 43,847 Other construction and rehabilitation: Pollution control and abatement ........................................................................................ Community development block grants ............................................................................... Other community and regional development ..................................................................... Housing assistance ............................................................................................................. Other construction .............................................................................................................. 2,499 4,905 1,481 7,250 255 2,511 4,934 1,203 6,845 402 2,348 4,618 901 6,711 139 2,883 5,569 1,379 7,827 715 1,037 5,990 1,532 8,133 704 2,359 5,586 1,456 8,384 204 Subtotal, other construction and rehabilitation .............................................................. 16,390 15,895 14,717 18,373 17,396 17,989 Subtotal, construction and rehabilitation ............................................................................ 59,916 59,978 58,752 58,769 60,108 61,836 Other physical assets .................................................................................................................. 1,247 1,265 1,189 1,074 1,195 1,290 Subtotal, major public physical capital ................................................................................... 61,163 61,243 59,941 59,843 61,303 63,126 Conduct of research and development: Agriculture .................................................................................................................................... Other ............................................................................................................................................ 254 553 264 574 283 830 251 319 260 495 261 870 Subtotal, conduct of research and development ................................................................... 807 838 1,113 570 755 1,131 Conduct of education and training: Elementary, secondary, and vocational education ..................................................................... Higher education ......................................................................................................................... Research and general education aids ........................................................................................ Training and employment ............................................................................................................ Social services ............................................................................................................................. Agriculture .................................................................................................................................... Other ............................................................................................................................................ 34,392 458 696 3,531 9,775 455 911 36,527 461 742 3,350 9,929 439 269 37,971 395 693 4,337 10,145 420 249 29,004 487 782 4,603 9,607 423 282 34,903 594 819 3,837 9,726 436 236 35,967 487 683 3,625 9,946 421 267 Subtotal, conduct of education and training .......................................................................... 50,218 51,717 54,210 45,188 50,551 51,396 Subtotal, grants for investment .............................................................................................. 112,188 113,798 115,264 105,601 112,609 115,653 Major public physical investment: Construction and rehabilitation: National defense: Military construction and family housing ............................................................................ Atomic energy defense activities and other ...................................................................... 7,283 835 6,357 883 6,416 489 5,917 795 6,560 834 6,451 714 Subtotal, national defense ............................................................................................. 8,118 7,240 6,905 6,712 7,394 7,165 Nondefense: International affairs ............................................................................................................. General science, space, and technology .......................................................................... Water resources projects ................................................................................................... Other natural resources and environment ......................................................................... Energy ................................................................................................................................. Postal Service ..................................................................................................................... Transportation ..................................................................................................................... Veterans hospitals and other health facilities .................................................................... Federal Prison System ....................................................................................................... GSA real property activities ............................................................................................... Other construction .............................................................................................................. 1,101 2,318 3,035 1,728 1,685 442 345 2,542 263 1,720 3,297 1,098 1,100 2,065 2,418 2,906 2,330 2,106 1,756 1,598 1,586 637 714 426 546 1,646 1,791 178 ...................... 1,748 1,636 2,349 1,765 656 2,436 3,104 1,905 1,685 307 342 2,187 533 1,298 2,919 1,000 2,137 2,583 1,662 1,600 409 389 1,675 275 1,926 2,582 987 2,287 2,654 2,030 1,580 530 564 1,581 390 1,872 1,905 DIRECT FEDERAL PROGRAMS Subtotal, nondefense ..................................................................................................... 18,476 16,757 15,642 17,372 16,238 16,380 Subtotal, construction and rehabilitation ............................................................................ 26,594 23,997 22,547 24,084 23,632 23,545 6. 67 FEDERAL INVESTMENT Table 6–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS—Continued (in millions of dollars) Budget Authority Description 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Acquisition of major equipment: National defense: Department of Defense ...................................................................................................... Atomic energy defense activities ....................................................................................... 78,484 128 80,918 202 74,986 142 67,890 128 77,705 157 78,246 182 Subtotal, national defense ............................................................................................. 78,612 81,120 75,128 68,018 77,862 78,428 Nondefense: General science and basic research ................................................................................. Space flight, research, and supporting activities ............................................................... Postal Service ..................................................................................................................... Air transportation ................................................................................................................ Water transportation (Coast Guard) ................................................................................... Other transportation (railroads) .......................................................................................... Hospital and medical care for veterans ............................................................................. Law enforcement activities ................................................................................................. Department of the Treasury (fiscal operations) ................................................................. Department of Commerce (NOAA) .................................................................................... GSA general supply fund ................................................................................................... Other ................................................................................................................................... 545 485 803 3,654 433 1,043 1,034 1,488 492 779 676 856 562 670 1,267 2,879 557 1,218 1,019 1,890 591 773 750 749 608 681 730 3,536 571 900 1,020 1,829 498 852 724 930 463 411 470 2,763 436 1,001 1,949 1,187 547 681 626 935 601 544 602 3,970 433 1,334 1,936 1,832 577 645 750 936 568 667 927 3,725 483 900 1,936 1,876 576 768 724 998 Subtotal, nondefense ..................................................................................................... 12,288 12,925 12,879 11,469 14,160 14,148 Subtotal, acquisition of major equipment .......................................................................... 90,900 94,045 88,007 79,487 92,022 92,576 Purchase or sale of land and structures: National defense ..................................................................................................................... Natural resources and environment ....................................................................................... General government ............................................................................................................... Other ........................................................................................................................................ –23 434 179 28 –33 296 170 42 –33 223 161 117 –23 458 200 16 –33 343 265 32 –33 296 214 89 Subtotal, purchase or sale of land and structures ............................................................ 618 475 468 651 607 566 Subtotal, major public physical investment ............................................................................ 118,112 118,517 111,022 104,222 116,261 116,687 Conduct of research and development: National defense: Defense military ...................................................................................................................... Atomic energy and other ........................................................................................................ 58,793 3,836 65,432 3,968 69,791 4,315 53,778 3,550 61,347 4,449 67,041 4,363 Subtotal, national defense .................................................................................................. 62,629 69,400 74,106 57,328 65,796 71,404 Nondefense: International affairs .................................................................................................................. General science, space and technology NASA .................................................................................................................................. National Science Foundation ............................................................................................. Department of Energy ........................................................................................................ 269 269 255 229 260 258 7,369 3,640 2,509 7,596 3,762 2,712 7,774 3,862 2,624 6,002 3,235 2,480 7,148 3,473 2,718 7,921 3,727 2,624 Subtotal, general science, space and technology ........................................................ 13,787 14,339 14,515 11,946 13,599 14,530 Energy ..................................................................................................................................... Transportation: Department of Transportation ............................................................................................ NASA .................................................................................................................................. Other ................................................................................................................................... 1,275 1,435 1,468 1,325 1,504 1,621 547 999 181 531 1,034 181 566 919 229 483 1,663 49 546 1,026 293 599 1,000 228 Subtotal, transportation .................................................................................................. 3,002 3,181 3,182 3,520 3,369 3,448 Health: National Institutes of Health ............................................................................................... All other health ................................................................................................................... 25,178 725 27,021 652 27,681 719 21,835 927 24,559 652 26,698 688 Subtotal, health .............................................................................................................. 25,903 27,673 28,400 22,762 25,211 27,386 68 ANALYTICAL PERSPECTIVES Table 6–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS—Continued (in millions of dollars) Budget Authority Description 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Agriculture ............................................................................................................................... Natural resources and environment ....................................................................................... National Institute of Standards and Technology .................................................................... Hospital and medical care for veterans ................................................................................. All other research and development ...................................................................................... 1,432 2,018 421 817 1,097 1,538 2,049 410 822 1,346 1,216 2,040 326 770 1,329 1,377 1,839 433 783 882 1,391 1,791 449 812 1,833 1,306 1,953 488 770 1,575 Subtotal, nondefense .......................................................................................................... 48,477 51,358 51,778 43,542 48,455 51,456 Subtotal, conduct of research and development ................................................................... 111,106 120,758 125,884 100,870 114,251 122,860 Conduct of education and training: Elementary, secondary, and vocational education ..................................................................... Higher education ......................................................................................................................... Research and general education aids ........................................................................................ Training and employment ............................................................................................................ Health ........................................................................................................................................... Veterans education, training, and rehabilitation ......................................................................... General science and basic research .......................................................................................... National defense .......................................................................................................................... International affairs ...................................................................................................................... Other ............................................................................................................................................ 1,902 23,872 1,789 1,563 1,634 2,227 935 8 405 619 1,648 22,105 1,856 1,576 1,575 2,479 930 8 349 763 1,341 23,260 1,882 1,661 1,297 2,502 864 8 376 643 1,858 23,875 1,699 1,514 1,500 2,295 775 9 393 567 2,063 21,642 1,838 1,528 1,704 2,633 953 8 352 886 1,754 23,118 1,887 1,611 1,568 2,795 901 8 373 774 Subtotal, conduct of education and training .......................................................................... 34,954 33,289 33,834 34,485 33,607 34,789 Subtotal, direct Federal investment ........................................................................................ 264,172 272,564 270,740 239,577 264,119 274,336 Total, Federal investment ............................................................................................................. 376,360 386,362 386,004 345,178 376,728 389,989 PART II: PERFORMANCE OF FEDERAL INVESTMENT Introduction. In recent years there has been increased emphasis on the performance of Government programs. The Congress mandated in the Government Performance and Results Act of 1993 that performance plans be developed and that the agencies report annual progress against these plans. In addition, this Administration began in the 2004 Budget to assess every Federal program over a five year period by a method known as the Program Assessment Rating Tool, or PART. With this budget, the second year of using the PART, the Administration has assessed about two-fifths of the programs of the Federal Government The PART system assesses each program on four components (purpose, planning, management, and results/accountability) and gives a score for each of the components. The scores for each component are then weighted—results/accountability carries the greatest weight—and the program is given an overall score. A program is rated effective if it receives an overall score of 85 percent or more, moderately effective if the score is 70 to 85 percent, adequate if the score is 50 to 70 percent, and inadequate if the score is 49 percent or lower. The program is given a rating ‘‘Results Not Demonstrated’’ if the program does not have a good performance measure or does not have data for that measure. Chapter 2 of this volume discusses the PART concepts in more detail. This section summarizes the results of the PART for direct investment programs, defined to include capital assets, research and development, and education. Because an entire program is assessed, not just the investment portion of the program, the assessments for some programs may cover more than just the investment spending. PART assessments of programs that are grants to State and local governments are not summarized in this chapter but are summarized in Chapter 8, ‘‘Aid to State and Local Governments’’, in this volume. This section covers the following 119 programs. • Programs for capital assets are those identified in the PART system as ‘‘capital assets and service acquisition’’ (44 programs); • Programs for research and development are essentially those identified in the PART system as ‘‘research and development’’ (59 programs); and • Programs for education (16 programs) are primarily programs in the Department of Education that are not grants to State and local governments (e.g., Federal Pell grants to individuals). This category also includes a few education programs in other agencies, such as the Montgomery GI Bill in the Department of Veterans Affairs and the Health Professions program in the Department of Health and Human Services. 6. 69 FEDERAL INVESTMENT Information on these and other programs assessed by PART is on the CD ROM that accompanies this volume. Summary of ratings. Table 6–3 shows that the average weighted score for the 119 investment programs that have been rated by PART was 66 percent, which Table 6–3. is a rating of ‘‘adequate’’. These programs had total spending of $132.0 billion in 2003. Of these programs: • 39 were rated ‘‘results not demonstrated’’ ($42.1 billion); • 23 were rated effective ($8.8 billion); • 31 were rated moderately effective ($34.6 billion); • 19 were rated adequate ($39.4 billion); and • 7 were rated ineffective ($7.1 billion). SUMMARY OF PART RATINGS AND SCORES FOR DIRECT FEDERAL INVESTMENT PROGRAMS (excludes grants to State and local governments for investment) Type of Investment Criteria Physical capital Research and development Education and training All investment programs Average Scores Purpose .............................................................................................. Planning .............................................................................................. Management ....................................................................................... Results/Accountability ........................................................................ Weighted Average 1 ........................................................................... Average Rating .................................................................................. 80% 74% 81% 49% 64% Adequate 91% 76% 84% 58% 71% Moderately effective 76% 74% 64% 35% 53% Adequate 85% 75% 80% 51% 66% Adequate Number of Programs Ratings 2 Results not demonstrated .................................................................. Effective .............................................................................................. Moderately effective ........................................................................... Adequate ............................................................................................ Ineffective ........................................................................................... 19 6 10 7 2 15 16 20 6 2 5 1 1 6 3 39 23 31 19 7 Total number of investment programs rated ................................ 44 59 16 119 In millions of dollars (2003) Results not demonstrated .................................................................. Effective .............................................................................................. Moderately effective ........................................................................... Adequate ............................................................................................ Ineffective ........................................................................................... $36,114 1,005 29,140 19,500 6,215 $2,842 7,736 5,337 570 89 $3,116 49 171 19,361 779 $42,072 8,790 34,648 39,431 7,083 All investment programs that were rated in PART ...................... $91,974 $16,574 $23,476 $132,024 1 Weighted as follows: Purpose (20%), Planning (10%), Management (20%), Results/Accountability (50%). rating of effective indicates a score of 85 percent or more; moderately effective, 70–85 percent; adequate, 50–70 percent; and ineffective, 49 percent or less. 2 The Assessments of individual programs. The ratings of the ten physical capital and education and training investment programs with the largest funding are summarized here. Information on research and development is in Chapter 5, ‘‘Research and Development’’ in this volume. Capital Assets Department of Defense. Air Combat Program ($15.1 billion in 2003). Rating: Moderately Effective. This program consists of a number of individual aircraft and helicopter research, development and procurement pro- grams that, taken together, comprise DOD’s investment in air combat capabilities. The PART analysis showed that the program purpose is clear owing to the unique military requirement for these systems. Department of Defense. Shipbuilding ($9.5 billion). Rating: Adequate. This program buys new ships and overhauls older ships for the Navy. The assessment shows that the program has a clear purpose, and the Navy has specific cost, schedule, and performance goals for each shipbuilding program. The program has experi- 70 enced cost increases and schedule slips on some ship construction programs. Tennessee Valley Authority (TVA) ($7.6 billion in 2003). Rating: Moderately Effective. TVA is the fifth largest electric utility in the country, generating power at 48 coal-fired, hydropower, nuclear, and other power plants that it operates to meet the electricity needs of 8.3 million people (3 percent of the U. S. market). The PART assessment gave TVA mixed reviews. TVA does an excellent job generating power at its existing power plants. A decade ago TVA’s nuclear power plants posed serious technical and safety problems but it has overcome these problems and today its nuclear power plants set industry standards. However, TVA has a high level of debt compared to many of its competitors in the electricity industry. It has recently issued a strategic plan that includes a debt reduction target of $3 billion to $5 billion over the next 10 to 12 years, which is incorporated into the budget estimates for TVA and will be a basis on which TVA’s annual performance plans are developed. Department of Defense. Missile Defense ($7.5 billion in 2003). Rating: Results Not Demonstrated. This program consists of multiple systems and capabilities developed by the Missile Defense Agency (MDA) or military services. This program fields active defenses against short, medium, and long-range missiles in a multi-layered global system. The assessment found that: a) the Department of Defense continues to design, engineer, and develop extensive missile defense capabilities, but has not programmed adequate funds to procure and operate newly developed capabilities; b) technical progress continues, but there have been challenges. Some missiles have operated effectively, but also experienced command and control problems; some tests have failed, but some were a success. Department of Energy. Environmental Management ($7.6 billion in 2003). Rating: Adequate. This program protects human health and the environment by cleaning up waste and contamination resulting from more than 50 years of nuclear weapons production and energy research at 114 Department of Energy sites in the United States and its territories. The assessment found that managers are implementing reforms that are improving program performance. The program needs to develop annual cost and schedule performance measures. General Services Administration. GSA’s Regional IT Solutions Program ($5.8 billion in 2003). Rating: Results Not Demonstrated. This program provides expert technical, acquisition, and information technology products and services to Federal clients. This assessment found that the program is useful to Federal agencies that do not have in-house expertise to acquire IT products or services. The assessment also found that the ANALYTICAL PERSPECTIVES program does not have long-term outcome goals that relate to other government agencies or the private sector. Department of Defense. Communications Infrastructure ($5.6 billion in 2003). Rating: Results Not Demonstrated. This program includes all networks and systems for transmission of voice, data, and video information for the Department. This assessment revealed that DOD does not manage its communications infrastructure on an enterprise or department-wide basis. The assessment also suggested that DOD should develop common performance measures to be used across the entire department for this program. Department of Defense. Airlift Program ($5.3 billion in 2003). Rating: Moderately Effective. This program consists of a number of individual Air Force tactical and strategic airlift aircraft research, development and procurement programs that, taken together, comprise DOD’s investment in airlift capabilities. The analysis showed that this is a coherent program with a clear and basic long-term goal, namely to be able to move military forces and their equipment from the U.S. to anywhere in the world whenever required. DOD must aggressively examine possible trade-offs within the program that could lower the cost of meeting the airlift requirement without sacrificing military readiness or combat capabilities. Department of Housing and Urban Development. Project-Based Rental Assistance ($4.8 billion in 2003). Rating: Ineffective. This program provides funding to landlords who rent a certain number of affordable apartments to low-income families or individuals. Assistance is tied directly to the properties—tenants cannot move without losing their assistance. The program receives low performance scores in part because there is confusion over program objectives, the program lacks strong financial accountability, and it produces poor results relative to alternative forms of housing assistance. Education Department of Education. Federal Pell Grants ($11.4 billion in 2003). Rating: Adequate. This program provides grant aid to nearly five million needy students to help them pay for an undergraduate education. The assessment found that the program helps ensure that low-income students can afford a college education. However, the Department of Education has only been minimally successful in achieving its long-term and annual performance goals for its main student aid programs. In addition, Pell grants, like other student aid, are prone to abuse, where students who under-report family income receive more aid than they should. The Department estimates that net overawards in Pell total more than $350 million annually. 6. 71 FEDERAL INVESTMENT PART III: FEDERALLY FINANCED CAPITAL STOCKS Federal investment spending creates a ‘‘stock’’ of capital that is available in the future for productive use. Each year, Federal investment outlays add to this stock of capital. At the same time, however, wear and tear and obsolescence reduce it. This section presents very rough measures over time of three different kinds of capital stocks financed by the Federal Government: public physical capital, research and development (R&D), and education. Federal spending for physical assets adds to the Nation’s capital stock of tangible assets, such as roads, buildings, and aircraft carriers. These assets deliver a flow of services over their lifetime. The capital depreciates as the asset ages, wears out, is accidentally damaged, or becomes obsolete. Federal spending for the conduct of research and development adds to an ‘‘intangible’’ asset, the Nation’s stock of knowledge. Spending for education adds to the stock of human capital by providing skills that help make people more productive. Although financed by the Federal Government, the research and development or education can be carried out by Federal or State government laboratories, universities and other nonprofit organizations, local governments, or private industry. Research and development covers a wide range of activities, from the investigation of subatomic particles to the exploration of outer space; it can be ‘‘basic’’ research without particular applications in mind, or it can have a highly specific practical use. Similarly, education includes a wide variety of programs, assisting people of all ages beginning with pre-school education and extending through graduate studies and adult education. Like physical assets, the capital stocks of R&D and education provide services over a number of years and depreciate as they become outdated. For this analysis, physical and R&D capital stocks are estimated using the perpetual inventory method. Each year’s Federal outlays are treated as gross investment, adding to the capital stock; depreciation reduces the capital stock. Gross investment less depreciation is net investment. The estimates of the capital stock are equal to the sum of net investment in the current and prior years. A limitation of the perpetual inventory method is that the original investment spending may not accurately measure the current value of the asset created, even after adjusting for inflation, because the value of existing capital changes over time due to changing market conditions. However, alternative methods for measuring asset value, such as direct surveys of current market worth or indirect estimation based on an expected rate of return, are especially difficult to apply to assets that do not have a private market, such as highways or weapons systems. In contrast to physical and R&D stocks, the estimate of the education stock is based on the replacement cost method. Data on the total years of education of the U.S. population are combined with data on the current cost of education and the Federal share of education spending to yield the cost of replacing the Federal share of the Nation’s stock of education. It should be stressed that these estimates are rough approximations, and provide a basis only for making broad generalizations. Errors may arise from uncertainty about the useful lives and depreciation rates of different types of assets, incomplete data for historical outlays, and imprecision in the deflators used to express costs in constant dollars. The methods used to estimate capital stocks are discussed further in the technical note at the end of Chapter 12, ‘‘Stewardship,’’ in this volume. Additional detail about these methods appeared in a methodological note in the Chapter 7, ‘‘Federal Investment Spending and Capital Budgeting,’’ in the Analytical Perspectives volume of the 2004 Budget. The Stock of Physical Capital This section presents data on stocks of physical capital assets and estimates of the depreciation of these assets. Trends.—Table 6–4 shows the value of the net federally financed physical capital stock since 1960, in constant fiscal year 2000 dollars. 1 The total stock grew at a 2.2 percent average annual rate from 1960 to 2003, with periods of faster growth during the late 1960s and the 1980s. The stock amounted to $2,137 billion in 2003 and is estimated to increase to $2,266 billion by 2005. In 2003, the national defense capital stock accounted for $646 billion, or 30 percent of the total, and nondefense stocks for $1,491 billion, or 70 percent of the total. 1 Constant dollar stock estimates are expressed in chained 2000 dollars, consistent with the December 2003 revisions to the National Income and Product Accounts. The shift to a more recent base year changes the reported level of real stocks, but leaves the yearto-year trends largely the same. 72 ANALYTICAL PERSPECTIVES Table 6–4. NET STOCK OF FEDERALLY FINANCED PHYSICAL CAPITAL (In billions of 2000 dollars) Nondefense Fiscal Year Five year intervals: 1960 .................................................... 1965 .................................................... 1970 .................................................... 1975 .................................................... 1980 .................................................... 1985 .................................................... 1990 .................................................... 1995 .................................................... Annual data: 2000 .................................................... 2001 .................................................... 2002 .................................................... 2003 .................................................... 2004 est. ............................................. 2005 est. ............................................. Total National Defense Total Nondefense Direct Federal Capital Total Water and Power Capital Financed by Federal Grants Other Total Transportation Community and Regional Natural Resources Other 849 937 1,101 1,137 1,258 1,462 1,740 1,882 608 589 630 545 494 572 722 714 242 348 470 592 763 890 1,018 1,168 95 123 146 166 195 222 256 297 59 74 88 102 123 136 147 157 36 49 58 64 72 86 109 141 146 225 324 426 568 668 762 871 89 158 230 282 342 397 462 534 27 32 47 76 121 146 158 168 21 22 26 42 79 100 113 123 10 13 21 25 27 26 28 46 1,979 2,022 2,078 2,137 2,204 2,266 635 631 636 646 663 677 1,345 1,391 1,442 1,491 1,541 1,588 337 351 366 379 393 405 160 163 165 166 167 168 178 188 201 213 226 237 1,007 1,040 1,076 1,112 1,148 1,183 618 640 666 690 716 741 183 186 189 193 196 199 131 132 134 135 135 136 75 81 87 94 100 106 Real stocks of defense and nondefense capital show very different trends. Nondefense stocks have grown consistently since 1970, increasing from $470 billion in 1970 to $1,491 billion in 2003. With the investments proposed in the budget, nondefense stocks are estimated to grow to $1,588 billion in 2005. During the 1970s, the nondefense capital stock grew at an average annual rate of 5.0 percent. In the 1980s, however, the growth rate slowed to 2.9 percent annually, with growth continuing at about that rate since then. Real national defense stocks began in 1970 at a relatively high level, and declined steadily throughout the decade as depreciation from investment in the Vietnam era exceeded new investment in military construction and weapons procurement. Starting in the early 1980s, a large defense buildup began to increase the stock of defense capital. By 1987, the defense stock exceeded its earlier Vietnam-era peak. In the early 1990s, however, depreciation on the increased stocks and a slower pace of defense physical capital investment began to reduce the stock from its previous levels. The increased defense investment in the last few years has reversed this decline, increasing the stock from an estimated $646 billion in 2003 to $677 billion in 2005. Another trend in the Federal physical capital stocks is the shift from direct Federal assets to grant-financed assets. In 1960, 39 percent of federally financed nondefense capital was owned by the Federal Government, and 61 percent was owned by State and local governments but financed by Federal grants. Expansion in Federal grants for highways and other State and local capital, coupled with slower growth in direct Federal investment for water resources, for example, shifted the composition of the stock substantially. In 2003, 25 percent of the nondefense stock was owned by the Federal Government and 75 percent by State and local governments. The growth in the stock of physical capital financed by grants has come in several areas. The growth in the stock for transportation is largely grants for highways, including the Interstate Highway System. The growth in community and regional development stocks occurred largely following the enactment of the community development block grant in the early 1970s. The value of this capital stock has grown only slowly in the past few years. The growth in the natural resources area occurred primarily because of construction grants for sewage treatment facilities. The value of this federally financed stock has increased about 35 percent since the mid-1980s. The Stock of Research and Development Capital This section presents data on the stock of research and development capital, taking into account adjustments for its depreciation. Trends.—As shown in Table 6–5, the R&D capital stock financed by Federal outlays is estimated to be $1,054 billion in 2003 in constant 2000 dollars. Roughly half is the stock of basic research knowledge; the remainder is the stock of applied research and development. The nondefense stock accounted for about three-fifths of the total federally financed R&D stock in 2003. Although investment in defense R&D has exceeded that of nondefense R&D in nearly every year since 1981, the nondefense R&D stock is actually the larger of the two, because of the different emphasis on basic research and applied research and development. Defense R&D spending is heavily concentrated in applied research and development, which depreciates much more quickly than basic research. The stock of applied research and 6. 73 FEDERAL INVESTMENT development is assumed to depreciate at a ten percent geometric rate, while basic research is assumed not to depreciate at all. The defense R&D stock rose slowly during the 1970s, as gross outlays for R&D trended down in constant dollars and the stock created in the 1960s depreciated. Increased defense R&D spending from 1980 through 1990 led to a more rapid growth of the R&D stock. Subsequently, real defense R&D outlays tapered off, depreciation grew, and, as a result, the real net defense R&D stock stabilized at around $420 billion. Renewed Table 6–5. spending for defense R&D in this budget is projected to increase the stock to $513 billion in 2005. The growth of the nondefense R&D stock slowed from the 1970s to the 1980s, from an annual rate of 3.8 percent in the 1970s to a rate of 2.1 percent in the 1980s. Gross investment in real terms fell during much of the 1980s, and about three-fourths of new outlays went to replacing depreciated R&D. Since 1988, however, nondefense R&D outlays have been on an upward trend while depreciation has edged down. As a result, the net nondefense R&D capital stock has grown more rapidly. NET STOCK OF FEDERALLY FINANCED RESEARCH AND DEVELOPMENT 1 (In billions of 2000 dollars) National Defense Fiscal Year Five year intervals: 1970 .................................................................. 1975 .................................................................. 1980 .................................................................. 1985 .................................................................. 1990 .................................................................. 1995 .................................................................. Annual data: 2000 .................................................................. 2001 .................................................................. 2002 .................................................................. 2003 .................................................................. 2004 est. .......................................................... 2005 est. .......................................................... 1 Excludes Total Basic Research Nondefense Applied Research and Development Total Basic Research Total Federal Applied Research and Development Total Basic Research Applied Research and Development 261 276 279 321 403 418 16 21 25 30 36 40 245 256 255 291 367 378 215 262 311 339 382 428 67 97 131 174 229 268 148 165 179 165 154 161 475 538 590 659 785 846 82 118 156 204 265 308 393 421 434 455 520 539 423 421 435 456 483 513 48 50 52 54 55 57 375 371 383 402 428 456 543 563 579 598 621 646 368 386 405 424 445 467 175 177 175 174 176 178 966 984 1,014 1,054 1,104 1,159 416 436 457 478 501 524 549 548 557 577 604 634 stock of physical capital for research and development, which is included in Table 6–4. The Stock of Education Capital This section presents estimates of the stock of education capital financed by the Federal Government. As shown in Table 6–6, the federally financed education stock is estimated at $1,292 billion in 2003 in constant 2000 dollars. The vast majority of the Nation’s education stock is financed by State and local governments, and by students and their families themselves. This federally financed portion of the stock represents about 3 percent of the Nation’s total education stock. 2 Nearly three-quarters is for elementary and secondary education, while the remaining one quarter is for higher education. The federally financed education stock has grown steadily in the last few decades, with an average annual growth rate of 5.4 percent from 1970 to 2003. The expansion of the education stock is projected to continue under this budget, with the stock rising to $1,465 billion in 2005. 2 For estimates of the total education stock, see table 12–4 in Chapter 12, ‘‘Stewardship.’’ 74 ANALYTICAL PERSPECTIVES Table 6–6. NET STOCK OF FEDERALLY FINANCED EDUCATION CAPITAL (In billions of 2000 dollars) Fiscal Year Five year intervals: 1960 ............................................................................... 1965 ............................................................................... 1970 ............................................................................... 1975 ............................................................................... 1980 ............................................................................... 1985 ............................................................................... 1990 ............................................................................... 1995 ............................................................................... Annual data: 2000 ............................................................................... 2001 ............................................................................... 2002 ............................................................................... 2003 ............................................................................... 2004 est. ........................................................................ 2005 est. ........................................................................ Total Education Stock Elementary and Secondary Education Higher Education 70 98 225 324 458 565 745 853 51 71 176 260 356 421 550 619 20 27 49 64 102 144 195 234 1,121 1,174 1,221 1,292 1,378 1,465 819 847 879 932 1,004 1,073 302 327 342 360 374 391 7. CREDIT AND INSURANCE Federal credit programs offer direct loans and loan guarantees for a wide range of activities, primarily housing, education, business and community development, and exports. At the end of 2003, there were $249 billion in Federal direct loans outstanding and $1,184 billion in loan guarantees. Through its insurance programs, the Federal Government insures bank, thrift, and credit union deposits, guarantees private definedbenefit pensions, and insures against other risks such as natural disasters, all up to certain limits. The Federal Government also enhances credit availability for targeted sectors indirectly through Government-Sponsored Enterprises (GSEs)—privately owned companies and cooperatives that operate under Federal charters. GSEs increase liquidity by guaranteeing and securitizing loans, as well as by providing direct loans. In return for serving social purposes, GSEs enjoy many privileges, which differ across GSEs. In general, GSEs can borrow from Treasury in amounts ranging up to $4 billion at Treasury’s discretion, GSEs’ corporate earnings are exempt from state and local income taxation, GSE securities are exempt from SEC registration, and banks and thrifts are allowed to hold GSE securities in unlimited amounts and use them to collateralize public deposits. These privileges leave many people with the impression that their securities are risk-free. GSEs, however, are not part of the Federal Government, and their securities are not federally guaranteed. By law, GSE securities carry a disclaimer of any U.S. obligation. This chapter discusses the roles and risks of these diverse programs and entities in the context of evolving financial markets and assesses their effectiveness and efficiency. • The first section analyzes the roles of Federal credit and insurance programs. Federal programs play useful roles when market imperfections prevent the private market from efficiently providing credit and insurance. Financial evolution has partly corrected many imperfections and generally weakened the justification for Federal intervention. The roles of Federal programs, however, may still be critical in some areas. • The second section examines how credit and insurance programs fared with the Program Assessment Rating Tool (PART) and discusses special features of credit programs that may need to be considered in interpreting and refining this tool. • The third section reviews Federal credit programs and GSEs in four sectors: housing, education, business and community development, and exports. This section discusses program objectives, recent developments, performance, and future plans for each program. • The final section describes Federal deposit insurance, pension guarantees, disaster insurance, and insurance against terrorism and other security-related risks in a context similar to that for credit programs. I. FEDERAL PROGRAMS IN CHANGING FINANCIAL MARKETS The Federal Role The roles of Federal credit and insurance programs can be broadly classified into two categories: helping disadvantaged groups and correcting market imperfections. Subsidized Federal credit programs redistribute resources from the general taxpayer to disadvantaged regions or segments of the population. Since disadvantaged groups can be assisted through other means, such as direct subsidies, the value of a credit or insurance program critically depends on the extent to which it corrects market imperfections. In most cases, private lending and insurance businesses efficiently meet societal demands by allocating resources to the most productive uses, and Federal intervention is unnecessary or can even be distortionary. However, Federal intervention may improve the market outcome in some situations. Insufficient Information. Financial intermediaries promote economic growth by allocating credit to the most productive uses. This critical function, however, may not be performed effectively when there is little objective information about borrowers. Some groups of borrowers, such as start-up businesses, start-up farmers, and students, have limited incomes and credit histories. Many creditworthy borrowers belonging to these groups may fail to obtain credit or be forced to pay excessively high interest. Government intervention, such as loan guarantees, can reduce this inefficiency by enabling these borrowers to obtain credit more easily and cheaply and also by providing opportunities for lenders to learn more about those borrowers. Externalities. Decisions at the individual level are not socially optimal when individuals do not capture the full benefit (positive externalities) or bear the full cost (negative externalities) of their activities. Examples of positive and negative externalities are education and pollution. The general public benefits from the high productivity and good citizenship of a well-educated person and suffers from pollution. Without Government intervention, people will engage less than socially opti- 75 76 mal in activities that generate positive externalities and more in activities that generate negative externalities. Federal programs can address externalities by influencing individuals’ incentives. Limited Ability to Secure Resources. The ability of private entities to absorb losses is more limited than that of the Federal Government, which has general taxing authority. For some events potentially involving a very large loss concentrated in a short time period, therefore, Government insurance commanding more resources can be more credible and effective. Such events include massive bank failures and some natural and man-made disasters that can threaten the solvency of private insurers. Resource constraints can also limit the lending ability of private entities. Small lenders operating in a local market, in particular, may have limited access to capital and occasionally be forced to pass up good lending opportunities. Imperfect competition. Competition is imperfect in some markets because of barriers to entry, economies of scale, and foreign government intervention. For example, legal barriers to entry or geographic isolation can cause imperfect competition in some rural areas. If the lack of competition forces some rural residents to pay excessively high interest on loans, Government credit programs aiming to increase the availability of credit and lower the borrowing cost for those rural residents may improve economic efficiency. Effects of Changing Financial Markets Financial markets have undergone fundamental changes that greatly enhanced competition and economic efficiency. The main forces behind these changes are financial services deregulation and technological advances. Deregulation, represented by the Riegle-Neal Interstate Banking and Branching Act of 1997 and the Financial Services Modernization Act of 1999, has increased competition and prompted consolidation by removing geographic and industry barriers. By increasing the availability of information and lowering transaction costs, technological advances have significantly contributed to enhancing liquidity, refining risk management tools, and spurring globalization. These developments have significant implications for Federal credit and insurance programs. Financial evolution has generally increased the private market’s capacity to serve the populations traditionally targeted by Federal programs, and hence has weakened the role of Federal credit and insurance programs. The private market now has more information and better technology to process it, has better means to secure resources, and is more competitive. To improve the effectiveness of credit and insurance programs, therefore, the Federal Government may focus on more specific objectives that have been less affected by financial evolution and on narrower target populations that still have difficulty in obtaining credit from private lenders. Problems related to externalities, for example, are likely to persist because the price mechanisms that drive the private market will continue to ANALYTICAL PERSPECTIVES ignore the value of the externality. In addition, the benefits of deregulation and technological advances may have been uneven across populations. The Federal Government also needs to pay more attention to new challenges introduced by financial evolution and other economic developments. Information about borrowers is more widely available and easier to process, thanks to technological advances. Lenders now have easy access to large databases, powerful computers, and sophisticated analytical models. Thus, many lenders use credit scoring models that evaluate creditworthiness based on various borrower characteristics derived from extensive credit bureau data. As a result, creditworthy borrowers are less likely to be turned down, while borrowers that are not creditworthy are less likely to be approved for credit. The Federal role of improving credit allocation, therefore, is generally not as strong as it once was. The benefit from financial evolution, however, can be uneven across groups and over time. Credit scoring, for example, is still difficult to apply to some borrowers with unique characteristics that are difficult to standardize. In times of economic downturn or financial instability, lenders can be overly cautious, turning away some creditworthy borrowers. Financial evolution has also alleviated resource constraints faced by private entities. Financial derivatives, such as options, swaps, and futures, have improved the market’s ability to manage and share various types of risk such as price risk, interest rate risk, credit risk, and even catastrophe-related risk. An insurer can distribute the risk of a natural or man-made catastrophe among a large number of investors through catastrophe-related derivatives, although the extent of risk sharing in this way is still limited because of the small size of the market for those products. Securitization (pooling a certain type of asset and selling shares of the asset pool to investors) facilitates fund raising and risk management. By securitizing loans, even a lender with limited access to capital can make a large amount of loans, while limiting its exposure to credit and interest risk. Imperfect competition is much less likely in general. Financial deregulation removed legal barriers to competition. More commercial firms borrow directly in capital markets, bypassing financial intermediaries; the use of commercial paper (short-term financing instruments issued by corporations) has been particularly notable. Nonbank financial institutions, such as finance companies and venture capital firms, have increased their presence, providing more financing alternatives to small, start-up firms that formerly relied heavily on banks. Internet-based financial services have lowered the cost of financial transactions and reduced the importance of physical location. Due to globalization, foreign financial institutions actively compete in the U.S. market. All of these developments have increased competition. Nevertheless, concerns remain. The removal of geographic barriers spurred consolidation among banks. 77 7. CREDIT AND INSURANCE Consolidation can negatively affect the markets that were traditionally served by small banks. Large financial institutions with global operations may want to focus more on large customers and business lines that utilize economies of scale and scope more fully, leaving out small borrowers in remote rural areas and inner city areas. Another concern is that nontraditional financing sources, such as commercial paper and venture capital, can become unavailable when they are needed most. For example, commercial-paper issuance by nonfinancial companies and venture capital investments plunged during the last recession. The decreased volume of these instruments may have mostly reflected changed market conditions, such as decreased investment demand. A part of the reason, however, may have been the investors’ overreaction to unfavorable market conditions, which could cause financing difficulties for creditworthy firms. Federal credit programs can play useful roles on these occasions. Overall, the financial market is evolving to be more efficient and safer. Financial evolution and other economic developments, however, are often accompanied by new risks. Federal agencies need to be vigilant to identify and, when appropriate, to manage new risks. Consolidation, for example, has increased bank size. Thus, the failure of even a single large bank can seriously drain the federal deposit insurance fund. As a result of deregulation, banks engage in more activities. While diversification across business lines may generally improve the safety of banks, new businesses introduce new risks. For example, one concern raised recently is that the motive to obtain underwriting business from borrowing firms may have affected lending decisions, undermining loan quality at some large banking organizations. Globalization also has both an upside and a downside. A financial institution with a worldwide operation may overcome difficulties in the U.S. market more easily, but it is more heavily exposed to economic turmoil in other countries, especially those that are less-developed or politically unstable. The large size of some GSEs is also a potential problem. Financial trouble of a large GSE could cause repercussions in financial markets, affecting federally insured entities and economic activity. Three years of stock market declines following the 2000 peak and the slow economic recovery have increased the risk and uncertainty for the pension benefit guaranty program by impairing the financial health of many pension funds and firms offering pension benefits. New and amended insurance programs for security-related risks also make the Federal Government’s liability more uncertain. Security-related events such as terrorism and war are highly uncertain in terms of both the frequency of occurrence and the magnitude of potential loss. II. PERFORMANCE OF CREDIT AND INSURANCE PROGRAMS The Program Assessment Rating Tool (PART) produces an assessment of the performance of federal programs, which is designed to be consistent across programs. This section analyzes the PART score for credit and insurance programs as a group to identify the strengths and weaknesses of credit and insurance programs. Also discussed are special features of credit programs that may need to be considered in interpreting and refining the common assessment of performance. PART Scores The PART classifies performance into four categories (program purpose and design, strategic planning, program management, and program results) and assigns a numerical score (0 to 100 percent) to each category. For the final evaluation, the PART weights the four categories, placing a particularly heavy weight on program results. There are 14 credit programs and 2 insurance programs among 399 programs that have been rated by the PART (excluding programs that were assessed for the 2004 Budget but are being reassessed as components of a different program in 2005 to avoid doublecounting). Overall, the PART scores for credit and insurance programs are fairly similar to those for other programs (see Table ‘‘Summary of PART Scores’’). When appropriately weighted, higher scores for credit and insurance programs in some categories are roughly offset by lower scores in other categories. A detailed analysis suggests that the dispersion of scores across programs is also similar for the two groups of programs. Across categories, there are some similarities, as well as differences, between credit and insurance programs and other types of programs. For most programs, the scores are relatively high for program purpose and design and for program management, while the scores are low for program results. This general pattern holds for credit and insurance programs. Relative to other programs, however, credit and insurance programs scored low in program purpose and design and high in program management. The PART indicates that most credit and insurance programs have clear purposes. Some credit and insurance programs, however, fail to score high in program design. Some are duplicative of other federal programs or private sources, and some have outdated designs due to failure to adapt to changed economic and financial environments. For example, Federal involvement in venture capital financing is difficult to justify, given that the venture capital market has matured. Regarding strategic planning, many credit and insurance programs reveal the need to improve on setting targets and time frames for their long-term measures, evaluating program effectiveness and improvements on a regular basis, and tying budgets to accomplishment of performance goals. Program management is a relatively strong area for credit and insurance programs. They are particularly 78 ANALYTICAL PERSPECTIVES SUMMARY OF PART SCORES Programs Purpose and Design Strategic Planning Program Mgmt Program Results ED Student Loan Guarantees .......................... ED Direct Studen Loans ................................... ED Perkins Loans ............................................. SBA Section 504 ............................................... SBA Disaster Assistance .................................. SBA SBIC Venture Capital ............................... FSA Loan Guarantees ...................................... RHS Community Facilities ................................ RUS Rural Electric Utility .................................. RUS Telecommunications ................................. RBS Business and Industry .............................. Ex-Im Bank L-T Guarantees ............................. OPIC Insurance ................................................. OPIC Finance .................................................... Crop Insurance .................................................. National Flood Insurance .................................. 60 60 20 60 100 60 100 80 80 60 80 100 100 100 80 90 75 75 50 50 100 88 63 50 17 50 75 86 75 75 67 86 33 33 33 100 78 67 100 100 90 100 100 100 100 100 86 100 53 53 0 60 73 60 67 33 25 33 33 67 42 42 58 67 Credit and Insurance Programs Average .............................................................. Standard Deviation ............................................ 77 22 68 20 83 26 48 19 Other Programs (all programs excluding credit and insurance programs) Average .............................................................. Standard Deviation ............................................ 85 19 70 24 79 19 47 26 strong in basic financial and accounting practices, such as spending funds for intended purposes. The financial complexity of credit and insurance programs may have forced program managers to develop better financial management tools. Nevertheless, some credit and insurance programs show weaknesses in more sophisticated financial management, such as cost control. Another weakness for some credit and insurance programs is in collecting and effectively utilizing performance information. Program results, the most important category of performance, are a weak area for credit and insurance programs, as well as for other programs assessed by the PART. While most credit and insurance programs had some success in achieving short-term performance and efficiency goals, most of them have had trouble making progress toward long-term goals. A more troubling indication from detailed analyses is that many credit and insurance programs have a low PART score for program effectiveness and achieving results. Based on this finding, the managers of credit and insurance programs need to place much more emphasis on resultsdriven management. Common Features Credit programs share many features that distinguish them from other programs. For example, the cost is uncertain because of various risks, such as default risk, prepayment risk, and interest rate risk. Given these risks, risk management is an important aspect of credit programs. Most credit programs are also intended to address imperfections in financial markets. These common features are discussed in the context Rating Adequate Adequate Ineffective Adequate Moderately Effective Adequate Moderately Effective Results Not Demonstrated Results Not Demonstrated Results Not Demonstrated Adequate Moderately Effective Adequate Adequate Results Not Demonstrated Moderately Effective of the four areas of the PART. Although this section focuses on credit programs, much of the discussion also applies to insurance programs. For example, the cost is uncertain for insurance programs, too, because insured events occur unexpectedly. Financial market imperfections are also the main justification for insurance programs. In analyzing the PART scores of credit programs, it is important to understand the common features of credit programs. Understanding common features facilitates the comparison of efficiency across credit programs and helps lead to improvements in performance. For example, if the PART score related to a common feature, such as risk management, is particularly low for a credit program, managers of the program may significantly improve performance by emulating the practice of other credit programs. A uniformly low PART score for all credit programs, on the other hand, may indicate that credit programs are facing a unique difficulty. In that case, program managers may need to make collective efforts to identify the difficulty and to address the problem. Individual efforts would be less efficient. Program purpose and design. Program purposes widely vary across credit programs. They include increasing homeownership, increasing college graduates, promoting entrepreneurship, and promoting exports. The private market serves some of these distinctive purposes better now than it did in the past. Thus, it can be useful to compare the effects of changes in financial markets on the need for various credit programs. Credit programs share many critical elements of design. Using the common tool, credit, they try to correct 7. CREDIT AND INSURANCE imperfections in financial markets. Thus, credit programs mostly target those borrowers who would not be able to obtain credit in the private market without government assistance. In addition, the lending business involves many complexities, such as setting appropriate lending terms, screening borrowers, and monitoring borrowers. Given these complexities, it is important to utilize the private sector’s expertise. Targeting the right borrowers and utilizing the private sector’s expertise require careful program design, which needs to consider various factors, such as borrowers’ incentives, private lenders’ incentives, the state of financial markets, and general economic conditions. Excessively low lending rates, for example, might attract many borrowers who could obtain credit from private lenders. To be effective, partnership with the private sector should be designed such that the private partner’s profit is closely tied to its performance in achieving the public purpose. Private lenders are generally better at screening borrowers, but their incentive to screen borrowers effectively evaporates if the Government provides a 100-percent loan guarantee. Credit programs with low PART scores related to these aspects of program design may draw useful lessons from the practices of other credit programs. Strategic planning. Credit programs operate in rapidly changing financial markets. Thus, an important aspect of strategic planning for credit programs is to adapt to changes in financial markets. To achieve the maximum efficiency, program managers need to watch closely and adapt their programs quickly to new developments. For example, private lenders are more willing to serve many customers to whom they did not want to lend in the past. Thus, some Federal credit programs may need to focus more narrowly on customers who are still underserved by private lenders. Quickly adopting new technologies is also important, because financial institutions are increasingly applying advanced technologies to risk management. Program management. Some elements of program management are more important for credit programs than for other programs. To address these areas of special interest, the PART adds two extra items for credit programs: risk management and estimation models. Credit programs face similar risks in the lending business. To minimize the risks, program managers must carefully manage the loan portfolio that is held either directly or by private lenders. Once a loan defaults, effective collection efforts can reduce the loss. Estimating the program cost is a critical feature of credit programs. The cashflow is uncertain for credit programs. Some loans default, while some others are prepaid. The program cost must be estimated based on the expected default, prepayment, and recovery rates. This estimation is critical for program evaluation. Without knowing the cost, one cannot tell if a program is effective. 79 Some other management issues that apply to all government programs are particularly important for credit programs. Data collection is essential for effective risk management and cost estimation. Effective risk management requires accurate and timely information. Default and prepayment histories are key ingredients in cashflow estimation. In addition, accurate estimation requires detailed data on borrower and lender characteristics. Thus, managers of credit programs need to make extensive efforts to collect and process relevant information. To achieve efficiency and effectiveness, it is also important to have well organized procedures and to coordinate with other credit programs to carry out many complex functions, such as loan origination, loan servicing, lender monitoring, and collection of defaulted loans. Financial management is more challenging for credit programs because of the complex structure of cashflows. Program Results. The main difficulty in evaluating program performance is to measure the net outcome of the program (improvement in the intended outcome net of what would have occurred in the absence of the program). For example, although many Federal programs help college students, it is difficult to tell how many of those would not have obtained a college education without Federal assistance. For credit programs, this difficulty is compounded by the uncertainty of the program cost. In evaluating programs, the outcome must be weighed against the cost. For a program intended to increase the number of college graduates, the relevant statistic is the number of college graduates due to the program per dollar spent by the program, not just the total number of college graduates produced by the program. For credit programs, the validity of this evaluation critically depends on the accuracy of the cost estimation. An underestimation (overestimation) of the cost would make the program appear unduly effective (ineffective). Thus, results for credit programs need to be interpreted in conjunction with the accuracy of the cost estimate. In some cases, whether a program’s performance has improved over the past may be more meaningful than whether it performs better than others. It is also important to evaluate credit programs in the context of changing financial markets. The financial sector is very dynamic, and the net outcome of a credit program may change quickly with the state of financial markets. The net outcome can decrease, as private entities become more willing to serve those customers whom they were reluctant to serve in the past, or it can increase if financial markets fail to function smoothly due to some temporary disturbances. A subpar performance by a credit program could be related to financial market developments; the program might fail to adapt to rapid changes in financial markets, or its function might become obsolete due to financial evolution. The program should be restructured in the former case, and discontinued in the latter case. 80 ANALYTICAL PERSPECTIVES III. CREDIT IN FOUR SECTORS Housing Credit Programs and GSEs The Federal Government makes direct loans, provides loan guarantees, and enhances liquidity in the housing market to promote homeownership among low- and moderate-income people and to help finance rental housing for low-income people. While direct loans are largely limited to low-income borrowers, loan guarantees are offered to a much larger segment of the population, including moderate-income borrowers. Increased liquidity achieved through GSEs benefits virtually all borrowers in the housing market. Federal Housing Administration In June 2002, the President issued America’s Homeownership Challenge to increase first-time minority homeowners by 5.5 million through 2010. During the first 15 months since the goal was announced, over one million minority families have become homeowners, setting a pace to exceed this goal. HUD’s Federal Housing Administration (FHA) accounted for over 250,000 of these first-time minority homebuyers through its insurance funds, mainly the Mutual Mortgage Insurance Fund. FHA mortgage insurance provides access to homeownership for people who lack the financial resources or credit history to qualify for a conventional home mortgage. In 2003, FHA insured $159 billion in mortgages for over 1.3 million households. Most of these were people buying their first homes, many of whom were minorities. The dollar volume of FHA mortgages exceeded the 2002 volume by seven percent, driven by high housing demand and increased refinancings in response to lower interest rates. For fiscal year 2005, FHA is proposing two new mortgage programs that reduce the biggest barriers to homeownership—the down payment and impaired credit. The Zero Down mortgage allows first-time buyers with a strong credit record to finance 100 percent of the purchase price and closing costs. For borrowers with limited or weak credit histories, Payment Rewards initially charges a higher insurance premium, but reduces the borrower’s premiums once they have established a history of regular payments, thereby demonstrating their creditworthiness. The Budget expands HUD’s support for new homeowners by increasing funds for pre- and post-purchase housing counseling services through a network of counseling agencies. At the proposed funding level, almost 800,000 potential and existing homeowners will receive counseling in 2005. The President’s Management Agenda sets out several critical tasks for FHA to complete to combat fraud and improve risk management. In 2005, as in 2004, HUD will conduct quarterly rounds of Credit Watch—a lender monitoring program that rates lenders and underwriters by the performance of their loans and allows FHA to sever relationships with those showing poor performance. HUD also will have in place an automated system to enforce its regulations prohibiting the preda- tory practice of property flipping and will refine the Appraiser Watch system established in 2003 in order to closely monitor appraiser performance and hold appraisers accountable for the quality of their work. These efforts will reduce the possibility of improperly originated FHA loans that victimize the borrower and expose FHA to excessive losses. VA Housing Program The Department of Veterans Affairs (VA) assists veterans, members of the Selected Reserve, and active duty personnel to purchase homes as recognition of their service to the Nation. The program substitutes the Federal guarantee for the borrower’s down payment. In 2003, VA provided $66 billion in guarantees to assist 508,436 borrowers. Both the volume of guarantees and the number of borrowers increased substantially from 2002 as lower interest rates increased loan originations and refinancings in the housing market. Since the main purpose of this program is to help veterans, lending terms are more favorable than loans without a VA guarantee. In particular, VA guarantees zero down payment loans. The subsidy rate decreased due to an improved default rate methodology that more appropriately recognizes the relationship between defaults and interest rates. In order to help veterans retain their homes and avoid the expense and damage to their credit resulting from foreclosure, VA plans aggressive intervention to reduce the likelihood of foreclosures when loans are referred to VA after missing three payments. VA was successful in 45 percent of its 2003 interventions, and its goal is to achieve at least a 47 percent success rate in 2005. VA is continuing its efforts to reduce administrative costs through restructuring and consolidations. In order to refocus VA’s housing loan program towards its original intent of serving as a readjustment benefit from military to civilian life, the Administration will be transmitting legislation that would limit eligibility for veterans’ housing loans to one-time use in lieu of the lifetime multi-use entitlement it has become. For those who are already veterans upon enactment of this bill, the proposal allows unlimited usage for the next five years, and then only once thereafter. The proposal would not limit use by active duty members. Rural Housing Service The U.S. Department of Agriculture’s (USDA’s) Rural Housing Service (RHS) offers direct and guaranteed loans and grants to help very low- to moderate-income rural residents buy and maintain adequate, affordable housing. The single family guaranteed loan program guarantees up to 90 percent of a private loan for low to moderate-income rural residents. The program’s emphasis is on reducing the number of rural residents living in substandard housing. In 2003, $3.1 billion of guarantees went to 31,100 households, of which 30 per- 81 7. CREDIT AND INSURANCE cent went to very-low and low-income families (with income 80 percent or less than median area income). In 2002, RHS approved separate risk categories for guarantee refinancing (refis) and guarantees of new loans. As part of that change, RHS also reduced the guarantee fee to 0.5 percent for the refis. This change reflected the lower risk on refis as compared to an unseasoned borrower receiving a new loan. It is also consistent with the rate HUD and VA charge on their refis of similar loans. For 2005, RHS will increase the guarantee fee on new loans to 1.75 percent from 1.5 percent. This will be coupled with language that would allow the guarantee fee to be financed as part of the loan. The ability to finance the guarantee fee is more in line with the housing industry, including HUD and VA, and will allow more lower income rural Americans to realize the dream of home ownership. In 2003, RHS continued to enhance a web-based system that will, with future planned improvements, provide the capacity to accept electronic loan originations from their participating lenders. RHS is also continuing development of an automated underwriting system (AUS) that will add significant benefits to loan processing efficiency, consistency and timeliness for RHS, the lenders, and customers. RHS continues to operate under the ‘‘best practice’’ for asset disposition for its guaranteed loan program. For single family guarantees, the lender is paid the loss claim, including costs incurred for up to three months after the default. After the loss claim is paid, RHS has no involvement in the property, and it becomes the sole responsibility of the lender for disposition. RHS is also developing the capacity to partner with lenders to seek recovery of loss claims from the former homeowner. They are also in the process of centralizing and automating the loss claim process to improve consistency and efficiency. RHS programs differ from other Federal housing loan guarantee programs. RHS programs are means-tested and more accessible to low-income, rural residents. In addition, the RHS direct loan program offers deeper assistance to very-low-income homeowners by reducing the interest rate down to as low as 1 percent for such borrowers. The program helps the ‘‘on the cusp’’ borrower obtain a mortgage, and requires graduation to private credit as the borrower’s income and equity in their home increases over time. The interest rate depends on the borrower’s income. Each loan is reviewed annually to determine the interest rate that should be charged on the loan in that year based on the borrower’s projected annual income. The program cost is balanced between interest subsidy and defaults. For 2005, RHS expects to provide $1.1 billion in loans with a subsidy cost of 11.58 percent. RHS also offers multifamily housing loans, which includes farm labor housing loans. Direct loans are offered to private developers to construct and rehabilitate multi-family rental housing for very-low to low-income residents, elderly households, or handicapped individuals. As an incentive to the developers to provide low income rental housing in rural areas, these loans are heavily subsidized; the interest rate is between 1 and 2 percent. RHS rental assistance grants supplement the loan to the developer in the form of project based rent subsidies for very low-income rural households (for continuation of this assistance plus new commitments, the cost will be $592 million in 2005). RHS will address management issues in its multifamily housing portfolio in 2005 by restricting the $60 million loan level to repair and rehabilitation of its existing portfolio (17,400 projects, 446,000 units). Farm labor housing will have a program level of $59 million and will provide for new construction as well as repair/rehabilitation. RHS also offers guaranteed multifamily housing loans with a loan level of $100 million a year. Housing GSEs Three organizations were chartered by Congress to increase the flow of credit for housing. These government-sponsored enterprises (GSEs) are privately owned companies; the shares of two of them are listed on the New York Stock Exchange. They receive special benefits as a result of their Government sponsorship, including exemption from State and local taxes. Their missions are to increase the liquidity and improve the distribution of mortgage financing, particularly for lowand moderate-income borrowers. Two of the GSEs, Fannie Mae and Freddie Mac, primarily accomplish this mission by guaranteeing mortgages for sale as securities to investors. The third GSE, the Federal Home Loan Bank System, provides loans at preferred rates to member financial institutions. The three GSEs have grown significantly since they were chartered decades ago and are now three of the largest financial companies in the world. The GSEs are increasingly in the asset management business, growing significant portfolios of mortgages GROWTH OF THE GSEs IN THE LAST DECADE Dollars in millions Balance Sheet Assets 1992 2002 Fannie Mae ............................................. Federal Home Loan Bank System ........ Freddie Mac ............................................ $ 172,055 $ 161,834 $ 62,739 $ 887,515 $ 763,631 $ 752,249 Total ........................................................ $396,628 $2,403,395 Change Balance Sheet Liabilities Change 1992 2002 416% 372% 1099% $ 163,602 $ 151,210 $ 59,281 $ 871,227 $ 727,307 $ 718,610 433% 381% 1112% 506% $374,093 $2,317,144 519% Note: Freddie Mac data not audited. Freddie Mac liabilities exclude minority interest in consolidated subsidiaries. 82 and mortgage-backed securities. The GSEs are highly leveraged, holding much less capital in relation to their assets than similarly sized financial institutions. A consequence of that highly leveraged condition is that a misjudgment or unexpected economic event could quickly deplete this capital, potentially making it difficult for a GSE to meet its debt obligations. Given the very large size of each enterprise, even a small mistake by a GSE could have consequences throughout the economy. More than six out of ten institutions in the banking industry hold as assets GSE debt in excess of 50 percent of their equity capital. As shown in the accompanying table (Growth of the GSEs in the Last Decade), the outstanding liabilities of the GSEs have grown by more than five hundred percent since 1992, to $2.3 trillion at the end of December 2002. For comparison, the privately held debt of the Federal Government at that time was $3.0 trillion.1 In 2003, the Office of Federal Housing Enterprise Oversight (OFHEO), which oversees the safety and soundness of Fannie Mae and Freddie Mac, studied the risks posed by these GSEs to the financial system. Its study indicated that should a GSE experience large unexpected losses, the market for its and other GSEs’ debt might become illiquid. Institutions holding this debt would see a rapid depletion in the value of their assets and a loss of liquidity, spreading the problems of the GSEs into financial sectors beyond the housing market. Freddie Mac. In 2003, serious accounting problems surfaced at Freddie Mac, leading its Board of Directors in June to remove the company’s top management, including its Chairman and CEO, its President and COO, and its Chief Financial Officer. This triggered multiple lawsuits on behalf of investors, and investigations by OFHEO, the Securities and Exchange Commission, and the Department of Justice, some still underway. The company restated its earnings, both up and down, over the period 2000–2002. OFHEO reported that Freddie Mac misstated its financial results and assessed Freddie Mac a monetary penalty of $125 million. The magnitude of the accounting restatement was large. The net impact is a cumulative increase of $5 billion in reported earnings over 2000–2002, which will result in a decrease in reported earnings in future years. Most of these amounts are linked to changes in the valuation of derivative financial instruments under relatively new accounting standards. The $5 billion increase in earnings represented over twenty percent of Freddie Mac’s total capital available to cover losses and illustrates why an error by a GSE, intentional or not, may pose risks to investors. To date, Freddie Mac has made progress towards, but has not achieved, accurate and timely financial reporting and controls. Freddie Mac expects to provide an annual report for 2002 in the first quarter of 2004. Freddie Mac expects to publish 2003 results by June 2004. Fannie Mae. Fannie Mae reported an accounting error in November 2003, requiring it to file a correction 1 Privately held debt differs from debt held by the public (the measure generally used in the budget) by not including the Federal debt held by the Federal Reserve Banks. ANALYTICAL PERSPECTIVES with the Securities and Exchange Commission. The correction of Fannie Mae’s reported balance sheet showed a change of over $1 billion in shareholders’ equity. The company reported that the error was unintentional, the result of a computational mistake made when implementing a new accounting standard. OFHEO has begun an investigation of the accounting practices at Fannie Mae. Federal Home Loan Bank System. The Federal Home Loan Bank System, a cooperative of twelve regional banks that issue debt for which all are jointly and severally liable, suffered a significant decline in profits in 2003, primarily stemming from investment losses and a failure to hedge interest rate risk adequately at several Federal Home Loan Banks. As a result, one ratings organization downgraded its outlook for some individual banks of the 12-bank System. The Administration stated in September and October 2003 that the Government’s supervisory system for the three housing GSEs has neither the tools nor the stature to deal effectively with the current size, complexity, and importance of these companies. Department of the Treasury Secretary John Snow and then Department of Housing and Urban Development (HUD) Secretary Mel Martinez proposed a set of reforms on behalf of the Administration to give housing finance a regulatory framework as strong as those in place for other financial sectors. The reforms follow the principles accepted throughout the world as requirements for first-class regulation, based on a three-pronged regulatory approach: strong market discipline, effective supervision, and adequate capital requirements. Market discipline. Chief among the factors that guide a company in its decision-making is the discipline imposed by the market. Market participants can signal to a company that it is making risky choices, for example, by charging the company more to borrow, or paying less for its stock. This discipline places constraints on companies. As Federal Reserve Chairman Alan Greenspan has noted, however, market discipline is not as strong for the GSEs as it is for other private companies. Some mistakenly perceive that GSE securities are backed by the Government—despite the fact that the Government explicity does not guarantee their securities. In both domestic and international markets, therefore, investors pay a premium for GSE debt by accepting a relatively low rate of return. As a result, the enterprises are able to finance their activities at a lower cost than others. The Congressional Budget Office estimated that in 2002 the value of the resulting subsidy exceeded $15 billion per year. Market discipline also is hindered because GSE investors do not enjoy the same level of disclosure, or oversight of disclosures, as investors in fully private companies. The GSEs have a statutory exemption from the registration and disclosure requirements of the Securities and Exchange Commission (SEC). Recognizing this disadvantage to GSE investors, the Administration in 2002 called upon the three housing GSEs to register voluntarily their equity securities under the 1934 Secu- 7. CREDIT AND INSURANCE rities Exchange Act, triggering mandatory SEC disclosures. To date, only Fannie Mae has complied, registering with the SEC in March 2003. Freddie Mac does not anticipate being in compliance until 2005, and the Federal Home Loan Bank System has not committed to comply voluntarily. The Federal Housing Finance Board has proposed a rule that would require each Federal Home Loan Bank to register voluntarily with the SEC under the 1934 Securities Exchange Act. Mandatory SEC disclosures would improve market discipline, and additional disclosures might further enhance investor awareness of and discipline over the GSEs’ risk-taking. Market discipline also requires that a company be controlled by those who represent the best interests of its owners. An independent Board of Directors, therefore, is essential. A board unduly influenced by the company’s management may have reason not to provide investors timely and adequate information. In 2002, the President established a 10-point plan for corporate governance practices that emphasized the importance of corporate board independence. In addition, the Administration proposed in 2003 to eliminate the Presidential appointees to the Fannie Mae and Freddie Mac Boards. Supervision. An effective financial regulator must possess authorities and capabilities commensurate with its responsibilities. The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient powers and stature to meet their responsibilities, and therefore that both OFHEO, regulator of Fannie Mae and Freddie Mac, and the Federal Housing Finance Board, regulator of the Federal Home Loan Bank System, should be replaced with a new, strengthened regulator. The Administration has proposed a new regulator, empowered with expanded enforcement authorities, independent litigation authority, receivership authority, and control over its funding levels independent of Congressional appropriations. It regards such authorities as essential to a world-class regulator. A new regulator must have full authority together with accountability for the prudential supervision of the enterprises, which includes the authority to approve new activities of the enterprises. Under current law, the responsibility for new program approval of Fannie Mae and Freddie Mac has been split between OFHEO, an independent agency within HUD, and HUD itself. Neither, therefore, is fully accountable for this key element of effective supervision of these two large and complex entities. The Administration’s proposal would remedy this by establishing a single new regulator with consolidated responsibility for the prudential operation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, as well as authority to review their ongoing business activities and reject new ones proposed by the GSEs, if they would be inconsistent with the charter or prudential operations of the GSEs, or incompatible with the public interest. HUD would continue to be consulted on new activities. 83 A new regulator must have the stature to avoid regulatory capture, i.e., undue influence by the entities it regulates. This is difficult for a regulator of a small number of very large entities. The Administration proposes placing the new regulator within the Department of the Treasury to provide the necessary stature and other supervisory benefits, provided the Department is given adequate oversight authority. The Administration, however, does not support an outcome that would create the illusion of greater oversight by the Treasury without the authority to make it a reality. Capital requirements. Because neither investors nor regulators can predict all of the impacts of possible errors by a company or unexpected economic changes, requirements that ensure that the GSEs hold capital adequate to cushion such shocks are essential. Capital requirements must be set with an eye to both known risks and unknown or unquantifiable risks. Losses from these latter risks can well exceed losses from measured risks, as shown by the rapid depletion of capital in 1998 for the highly leveraged hedge fund, Long-Term Capital Management. For this reason, it is essential that the new regulator of the housing GSEs have ongoing authority to adjust both risk-based and minimum capital requirements. The accompanying table (Capital Held by the GSEs and 10 of the Largest U.S. Financial Institutions) contrasts the capital held by the GSEs with that held by similarly sized financial institutions. On average, the GSEs hold less than one-half the capital of these other companies. Risks, and how they are measured, evolve over time. The Administration proposes to give the new GSE regulator full flexibility to establish risk-based capital standards. The current risk-based capital standards for Fannie Mae and Freddie Mac are rigidly defined by a 10-year old statute. The risk-based capital standards for the Federal Home Loan Bank System, while more flexible, have not been fully implemented. Affordable housing mission. As noted above, many investors perceive an implicit guarantee of GSE securities by the Government, and convey a large subsidy to the GSEs by paying a premium for their securities. Fannie Mae and Freddie Mac purchase two-thirds of all single-family mortgages originated (non-governmental, non-jumbo). With this large subsidy, and with their substantial market share, the GSEs conceivably could have a considerable impact on lowering mortgage costs. Yet the Congressional Budget Office estimated in 2001 that Fannie Mae and Freddie Mac lower mortgage rates by no more than 25 basis points, or onequarter of one percentage point. A 2003 working paper by a member of the Federal Reserve Board staff estimates that the two GSEs lower mortgage rates by an even smaller amount. At the higher estimate of 25 basis points, a homeowner saves about $25 on the monthly payment for a median-priced $160,000 thirty-year mortgage. One reason the effect is not larger is that Fannie Mae and Freddie Mac do not pass through the entire subsidy to mortgage borrowers. According to CBO, 37 percent is retained by the companies, their executives, 84 ANALYTICAL PERSPECTIVES CAPITAL HELD BY THE GSEs AND 10 OF THE LARGEST U.S. FINANCIAL INSTITUTIONS (Dollars in millions; December 31, 2002) Stockholders’ Equity Capital Ratio: Equity to Assets Companies ranked by assets Balance Sheet Assets Citigroup Inc ................................................. Fannie Mae .................................................. Federal Home Loan Bank System ........... JP Morgan Chase & Co .............................. Freddie Mac ................................................ Bank of America Corp ................................. Wells Fargo & Co ........................................ Wachovia Corp ............................................. Bank One Corp ............................................ Washington Mutual Inc ................................ FleetBoston Financial Corp ......................... US Bancorp .................................................. American Express Company ....................... $1,097,190 $887,515 $763,631 $758,800 $752,249 $660,458 $349,259 $341,839 $277,383 $268,298 $190,453 $180,027 $157,253 $86,718 $16,288 $36,324 $42,306 $31,330 $50,319 $30,358 $32,078 $22,440 $20,134 $16,833 $18,101 $13,861 7.9% 1.8% 4.8% 5.6% 4.2% 7.6% 8.7% 9.4% 8.1% 7.5% 8.8% 10.1% 8.8% Average all companies ................................ Average GSEs ............................................. Average excluding GSEs ............................. .................... .................... .................... .................... .................... .................... 7.2% 3.6% 8.2% Notes: In addition to GSEs, this table includes the ten largest publicly traded U.S. companies in the finance industry, in terms of balance sheet assets, excluding insurance companies and security brokers and dealers. Capital defined as stockholders’ equity. Financial regulators may use an alternative definition of capital. Data sources: Securities and Exchange Commission public filings, Federal Home Loan Bank System Office of Finance, and Freddie Mac. Freddie Mac data not audited. shareholders, or other stakeholders. Current market and regulatory mechanisms are not sufficient to force the GSEs to pass on greater savings to borrowers. To encourage the GSEs to use their Government sponsorship to benefit those less likely to have access to mortgage credit and households with moderate or low incomes, the governing statutes require them to address affordable housing needs. For Fannie Mae and Freddie Mac, HUD is required to set and enforce annual housing goals. These require that a certain percentage of the two companies’ mortgage purchases be mortgages for low- and moderate-income borrowers or from geographic areas that have been underserved by the market. For the Federal Home Loan Bank System, the Federal Housing Finance Board enforces a requirement to dedicate 10 percent of the System’s profits to affordable housing and to provide subsidized loans to members’ community investment programs. Given the different methods used to convey affordable housing subsidies, comparing the relative efforts of the Federal Home Loan Bank System with Fannie Mae and Freddie Mac is not simple. Comprehensive research in this area has not been undertaken. Such a comparative analysis would be useful to policy makers and GSE regulators. The Administration has identified weaknesses in the system for setting and enforcing the affordable housing goals for Fannie Mae and Freddie Mac. These weaknesses could result in their failure to perform the targeted housing mission for which they were created. For example, HUD needs new administrative authority to enforce the goals. Current law does not permit the Secretary to impose timely and appropriate penalties for a GSE’s failure to meet a goal. This authority is nec- essary to ensure that the goals are strict requirements that the GSEs must meet. The Administration also has proposed that these two GSEs be required to meet a national home purchase goal, a tool specifically to promote affordable homeownership, particularly for first-time homebuyers. This goal would ensure that the GSEs’ activities support home purchases, even in years when refinance activity is high. Although Fannie Mae and Freddie Mac provide liquidity in the refinance market, the share of funding they provide for home purchases declines during years when many mortgages are refinanced. HUD has conducted analyses showing that private lenders operating without the benefits and subsidies enjoyed by the GSEs contribute more to affordable housing than do Fannie Mae and Freddie Mac. For example, during 1999–2002, home loans for low- and moderate-income families accounted for 44.3 percent of all home purchase mortgages originated by lenders in the conventional conforming market. Yet these loans accounted for only 42.5 percent of Fannie Mae’s purchases and 42.3 percent of Freddie Mac’s purchases. The GSEs particularly lag the market in funding firsttime homebuyers. First-time homebuyers accounted for 26.5 percent of each GSE’s purchases of mortgages used to buy homes, compared with 37.6 percent of home purchase mortgages originated in the conventional conforming market. The GSEs’ risk management affects not only their owners and investors, but the entire financial system. Despite their Government sponsorship and mission, the GSEs do not lead the market in creating homeownership opportunities for less advantaged Americans. The 85 7. CREDIT AND INSURANCE Administration’s proposed reforms to the supervisory system for the GSEs address these problems by promoting a strong and resilient financial system, while increasing opportunities for affordable housing and homeownership. Education Credit Programs and GSEs The Federal Government guarantees loans through intermediary agencies and makes direct loans to students to encourage post-secondary education. The Student Loan Marketing Association (Sallie Mae), a GSE, makes secondary market purchases of guaranteed student loans from banks and other eligible lenders. Student Loans The Department of Education helps finance student loans through two major programs: the Federal Family Education Loan (FFEL) program and the William D. Ford Federal Direct Student Loan (Direct Loan) program. Eligible institutions of higher education may participate in one or both programs. Loans are available to students regardless of income. However, borrowers with low family incomes are eligible for loans with additional interest subsidies. For low-income borrowers, the Federal Government subsidizes loan interest costs while borrowers are in school, during a six-month grace period after graduation, and during certain deferment periods. In 2005, nearly 9 million borrowers will receive over 14.5 million loans totaling over $85 billion. Of this amount, nearly $57 billion is for new loans, and the remainder reflects the consolidation of existing loans. Loan levels have risen dramatically over the past 10 years as a result of rising educational costs and an increase in eligible borrowers. The FFEL program provides loans through an administrative structure involving over 3,500 lenders, 36 State and private guaranty agencies, roughly 50 participants in the secondary market, and approximately 6,000 participating schools. Under FFEL, banks and other eligible lenders loan private capital to students and parents, guaranty agencies insure the loans, and the Federal Government reinsures the loans against borrower default. In 2005, FFEL lenders will disburse over 11 million loans totaling almost $65 billion in principal, roughly a third of which involve consolidations of existing loans. Lenders bear two percent of the default risk, and the Federal Government is responsible for the remainder. The Department also makes administrative payments to guaranty agencies and, at certain times, pays interest subsidies on behalf of borrowers to lenders. The William D. Ford Direct Student Loan program was authorized by the Student Loan Reform Act of 1993. Under the Direct Loan program, the Federal Government provides loan capital directly to more than 1,100 schools, which then disburse loan funds to students. In 2005, the Direct Loan program will generate more than 3.5 million loans with a total value of nearly $21 billion, including over $6 billion in consolidations of existing loans. The program offers a variety of flexi- ble repayment plans including income-contingent repayment, under which annual repayment amounts vary based on the income of the borrower and payments can be made over 25 years with any residual balances forgiven. The Congress is currently considering legislative reforms to both FFEL and DL as part of this year’s Higher Education Act reauthorization. These reforms come at a critical time with college costs continuing to rise at increasing rates and the widening gap between the number of high income and low income students that attend college. The President’s Budget proposes several legislative changes to the student loan programs to help make college more affordable for millions of students while making both student loan programs more cost efficient. To help students meet rising tuition costs, the Budget proposes to increase loan limits for first year students, retain variable interest rates beyond 2006 so students can continue to take advantage of historically low interest rates, expand borrower repayment options, and increase loan forgiveness for highly qualified teachers who teach math, science, or special education for five years in high-need schools. To fund these changes, the Administration proposes to reduce program costs through modest changes to lender subsidies and Guaranty Agency fees. For example, the Budget proposes to eliminate an expensive loophole that provides lenders with a federally financed 9.5% guaranteed return on loans that are tied to out-dated tax exempt bonds. The Administration’s proposed changes are consistent with the PART findings for the student loan programs, which found that program benefits were not well targeted to student borrowers while they are attending school. The PART also found that both programs could meet their goals in a more cost effective manner if financial benefits for program participants were more closely tied to market realities. The PART generated specific proposals for addressing these areas, many of which are included in the HEA reforms package in the President’s Budget. Sallie Mae The Student Loan Marketing Association (Sallie Mae) was chartered by Congress in 1972 as a for-profit, shareholder-owned, Government-sponsored enterprise (GSE). Sallie Mae was reorganized in 1997 pursuant to the authority granted by the Student Loan Marketing Association Reorganization Act of 1996. Under the Reorginization Act, the GSE became a wholly owned subsidiary of SLM Corporation and must wind down and be liquidated by September 30, 2008. In January 2002, the GSE’s board of directors announced that it expects to complete dissolution of the GSE by Sep- 86 ANALYTICAL PERSPECTIVES tember 30, 2006. The Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 allows the SLM Corporation to affiliate with a financial institution upon the approval of the Secretary of the Treasury. Any affiliation will require SLM Corporation to dissolve the GSE within two years of the affiliation date (unless such period is extended by the Department of the Treasury). Sallie Mae makes funds available for student loans by providing liquidity to lenders participating in the FFEL program. Sallie Mae purchases guaranteed stu- dent loans from eligible lenders and makes warehousing advances (secured loans to lenders). Generally, under the privatization legislation, the GSE cannot engage in any new business activities or acquire any additional program assets other than purchasing student loans. The GSE can continue to make warehousing advances under contractual commitments existing on August 7, 1997. SLM Corporation and its affiliates, including the GSE, currently hold approximately 38 percent of all outstanding guaranteed student loans. Business and Rural Development Credit Programs and GSEs The Federal Government guarantees small business loans to promote entrepreneurship. The Government also offers direct loans and loan guarantees to farmers who may have difficulty obtaining credit elsewhere and to rural communities that need to develop and maintain infrastructure. Two GSEs, the Farm Credit System and the Federal Agricultural Mortgage Corporation, increase liquidity in the agricultural lending market. Small Business Administration The Small Business Administration (SBA), created in 1953, helps entrepreneurs start, sustain, and grow small businesses. As a ‘‘gap lender’’ SBA works to supplement market lending and provide access to credit where private lenders are reluctant to do so without a Government guarantee. Additionally, SBA assists home- and business-owners cover the uninsured costs of recovery from disasters. The 2005 Budget requests $326 million, including administrative funds, for SBA to leverage nearly $25 billion in financing for small businesses and disaster victims. The 7(a) General Business Loan program will support $12.5 billion in guaranteed loans—a more than 25 percent increase over 2004—while the 504 Certified Development Company program will support $4.5 billion in guaranteed loans. SBA will supplement the capital of Small Business Investment Companies (SBICs), which provide equity capital and long-term loans to small businesses, with up to $7 billion in participating securities and guaranteed debentures. To continue to serve the needs of small businesses, SBA will focus program management in three areas: 1) Targeting economic assistance to the neediest small businesses SBA seeks to target assistance more effectively to credit-worthy borrowers who would not be well-served by the commercial markets in the absence of a Government guarantee to cover defaults. SBA is actively encouraging financial institutions to increase lending to start-up firms, low-income entrepreneurs, and borrowers in search of financing below $150,000. Preliminary evidence shows that SBA’s outreach for the 7(a) program has been successful. Average loan size has decreased from $258,000 in 2000 to $167,000 in 2003, while the number of small businesses served has grown from 43,748 to 67,306 during the same time period. In addition, SBA issued new regulations for the Section 504 program that foster additional competition among intermediaries, thereby allowing borrowers greater access to loans. 2) Improving program and risk management Improving management by measuring and mitigating risks in SBA’s $45 billion business loan portfolio is one of the agency’s greatest challenges. As the agency delegates more responsibility to the private sector to administer SBA guaranteed loans, oversight functions become increasingly important. SBA established the Office of Lender Oversight, which is responsible for evaluating individual SBA lenders. This office has made progress in employing a variety of analytical techniques to ensure sound financial management by SBA and to hold lending partners accountable for performance. These analytical techniques include financial performance analysis, industry concentration analysis, portfolio performance analysis, selected credit reviews, and credit scoring to compare lenders’ performance. The oversight program is also developing on-site safety and soundness examinations and off-site monitoring of Small Business Lending Companies (SBLCs) and compliance reviews of SBA lenders. In addition, the office will develop incentives for lenders to minimize defaults and to adopt sound performance measures. Improving risk management also means improving SBA’s ability to more accurately estimate the cost of subsidizing small businesses. During 2003, the SBA followed through on its commitment to improve its accuracy in estimating the cost of the Section 7(a) General Business Loan program by developing a loan-level econometric credit and reestimate model for the program. The improved model should help SBA avoid repeating its experience during the 1990’s, when subsidy costs for the 7(a) program were overestimated by $1 billion. (These subsidy overestimates, however, were significantly offset by program administrative costs during the same period.) More recent analysis, using the new model, shows that during the last few years the 7(a) program has cost almost $230 million more than previously estimated. Building upon the 7(a) modeling improvements, a comparable model was developed for the 2005 subsidy estimates for the Section 504 loan program. 7. CREDIT AND INSURANCE Improving risk management is especially important for the Small Business Investment Company (SBIC) venture capital program. Like the private venture capital market, performance in the SBIC program began to decline in 2000. The SBIC program is now expected to cost taxpayers approximately $2 billion due to defaults and other cash loses. In addition to the overall market decline, the poor performance in the SBIC program is due to the following structural flaws. • The Federal Government’s financial returns are not proportional to its investment. SBA invests up to two-thirds of total funds but, on average, receives only about ten percent of SBICs’ profits. Ninety percent of those profits were generated by only 14 of 170 SBICs licensed in the Participating Securities program since 1994. • SBICs do not have adequate incentives to pay back funds expeditiously to the Government. Under the current statute, SBICs make ‘‘profit’’ payments to SBA but these are generally insufficient to repay the original principal investment in a timely manner which extends SBA’s risk exposure. • The prior subsidy model underestimated the cost of the program. The technical assumptions (e.g., defaults, recoveries, and profits) have turned out to be more optimistic than actual program performance. The 2005 Budget takes steps to address the first of these issues by proposing to increase borrowers’ fees and SBA’s share of profits in the SBIC Participating Securties program. The Budget also proposes to accelerate repayments to the Government. In addition, the subsidy model for the Participating Securities program has been improved by incorporating more realistic technical assumptions, which are generally based upon historical experience. During 2004, SBA expects to reexamine the methodology used to calculate the cost to subsidize the SBIC Participating Securities program. With realized and projected losses of about $2 billion (reflected in an upward mandatory subsidy reestimate) on an outstanding portfolio of about $5 billion, these steps are critical if the program is to be fiscally sound and not rely on large taxpayer subsidies. SBA is improving oversight and accounting practices of its Secondary Market Guarantee (SMG) program for 7(a) guaranteed loans. To properly manage any risk associated with this fund which is authorized under section 5(g) of the Small Business Act, SBA is budgeting for the Government’s liability in accordance with the Federal Credit Reform Act. In accordance with the commitment that SBA made last year, it refined its estimate of the Government’s liability for the program, which is reflected in the $105 million upward mandatory reestimate cost in the 2005 budget. Due to reforms that are being implemented in 2004, this program will not require discretionary subsidy appropriations to operate in 2005. 87 In 1999, SBA initiated an asset sales program as a means of improving portfolio management and curtailing the growing level of assets—primarily disaster loans—serviced by SBA. More than $5 billion in direct and repurchased (defaulted) guaranteed loans were sold to investors in seven separate sales through 2002. These assets were sold to private sector buyers without any recourse for future default claims or interest supplements from the Government. While the sales reduced loan management burdens on SBA, discrepancies eventually appeared between accounting and budgetary records; the agency’s financial statements indicated losses on the program of $1.8 billion while the model used to value loans for purposes of sales showed gains of approximately $800 million. SBA and the General Accounting Office attempted to identify the source of the discrepancies in early 2002, but neither was able to explain the inconsistencies. As a result, SBA assembled a team of financial experts and undertook a detailed review of the financial records relating to the program between October 2002 and February 2003. The assessment revealed three sources of discrepancies. First, accounting entries overstated loan values and did not fully reconcile to subsidy estimates. Second, the agency’s credit subsidy model, which assessed costs at an aggregate program level, did not always provide reliable loan cost estimates. Third, the model used to provide individual loan values for asset sales significantly underestimated the worth of those assets and did not reconcile to the subsidy model. Because of the findings, SBA halted its eighth sale scheduled for April 2003 and all subsequent sales. In addition, SBA has adjusted its accounting records and developed a single new loanlevel credit model that can also determine the value of individual loans proposed for sale. Adjustments in the financial records have revealed that selling repurchased SBA guaranteed loans was profitable, while the sale of performing disaster loans resulted in budgetary costs to the Federal Government. On net, SBA’s asset sales program has resulted in an $828 million loss. 3) Operating more efficiently To operate more efficiently, SBA has automated loan origination activities in the Disaster Loan program with a paperless loan application. As a result, loan-processing costs, times, and errors will decrease, while Government responsiveness to the needs of disaster victims will increase. SBA is also transforming the way that staff perform loan management functions in both the 7(a) and 504 programs. In 2003, SBA implemented a pilot program at three of its 68 district offices to consolidate and expedite Section 504 loan processing. Results have been very positive with the average loan processing time reduced from four weeks to only a few days. SBA is expanding the pilot nationally. Similarly, SBA is also shifting additional responsibilities to intermediaries by centralizing loan liquidation functions for the Section 504 program and requiring intermediaries to assume increased liquidation responsibilities. 88 USDA Rural Infrastructure and Business Development Programs USDA provides grants, loans, and loan guarantees to communities for constructing facilities such as health-care clinics, day-care centers, and water and wastewater systems. Direct loans are available at lower interest rates for the poorest communities. These programs have very low default rates. The cost associated with them is due primarily to subsidized interest rates that are below the prevailing Treasury rates. The program level for the Water and Wastewater (W&W) treatment facility loan and grant program in the 2005 President’s Budget is $1.4 billion. These funds are available to communities of 10,000 or less residents. The program finances W&W facilities through direct or guaranteed loans and grants. Applicant communities must be unable to finance their needs through their own resources or with commercial credit. Priority is given based on their median household income, poverty levels, and size of service population as determined by USDA. The community typically receives a grant/loan combination. The grant is usually for 35–45% of the project cost (it can be up to 75%). Loans are for 40 years with interest rates based on a three-tiered structure (poverty, intermediate, and market) depending on community income. The community facility programs are targeted to rural communities with fewer than 20,000 residents and have a program level of $527 million in 2005. USDA also provides grants, direct loans, and loan guarantees to assist rural businesses, including cooperatives, to increase employment and diversify the rural economy. In 2005, USDA proposes to provide $600 million in loan guarantees to rural businesses (these loans serve communities of 50,000 or less). These community programs are all part of the Rural Community Advancement Program (RCAP). Under RCAP, States have increased flexibility within the three funding streams for Water and Wastewater, Community Facilities, and Business and Industry (B&I). USDA also provides loans through the Intermediary Relending Program (IRP), which provides loan funds at a 1 percent interest rate to an intermediary such as a State or local government agency that, in turn, provides funds for economic and community development projects in rural areas. In 2005, USDA expects to retain or create over 66,000 jobs through its business programs, which will be achieved primarily through the B&I guarantee and the IRP loan programs. Electric and Telecommunications Loans USDA’s Rural Utilities Service (RUS) has programs that provide loans for rural electrification, telecommunications, distance learning, telemedicine, and broadband and grants for distance learning and telemedicine. The electric and telecommunications program makes new loans to maintain existing infrastructure and to modernize electric and telephone service in rural America. Historically, the Federal risk associated with the $40 billion loan portfolio in electric and telephone loans has ANALYTICAL PERSPECTIVES been small, although several large defaults have occurred in the electric program. The Distance Learning and Telemedicine (DLT) provides loans and grants to improve distance learning and telemedicine services in rural areas and encourage students, teachers, medical professionals, and rural residents to use telecommunications, computer networks, and related advanced technologies. The USDA Broadband programs provide loans to provide broadband service to rural communities. The subsidy rates for several of the electric and telecommunication programs remain negative, though changes to the interest rate assumptions resulted in positive subsidy rates for the Electric Hardship and Municipal rate programs. Recent problems in the telecommunications industry have not had a significant impact on rural telecommunications cooperatives. The number of electric loans has been increasing due to large increases in loan level appropriated over the last several years. The average size for electric loans has also been increasing. The number and the size of telecommunications loans have remained steady. The subsidy rate for the DLT loan program increases in FY2005 from negative to positive due to a few defaults that were not included in the original assumptions. The Broadband subsidy rates increase slightly due to interest rate assumption changes. Providing funding and services to needy areas is of concern to USDA. Many rural cooperatives provide service to areas where there are high poverty rates. Based on PART findings, USDA will review its current method of issuing telecommunications loans, ‘‘‘first in; first out,’’ to determine if it allows for adequate support for areas with the highest priority needs. In addition, to ensure the electric and telecommunications programs’ focus on rural areas, legislation will be proposed to require recertification of rural status for each electric and telecommunications borrower on the first loan request received in or after FY 2005 and on the first loan request received after each subsequent Census. Legislation will be sought to allow for the rescission of loans that are more than ten years old. RUS proposes to make $2.5 billion in direct and guaranteed electric loans in 2005, including provision for guaranteeing $100 million in electric loans made by private banks. The demand for loans to rural electric cooperatives has been increasing and is expected to increase further as borrowers replace many of the 40year-old electric plants. With the $2.5 billion in loans, RUS borrowers are expected to upgrade 225 rural electric systems, which will benefit over 3.4 million customers. USDA’s RUS proposes to make $495 million in direct telecommunications loans in 2005. With the $495 million in loans, RUS borrowers are expected to fund over 50 telecommunication systems for advanced telecommunications services which will provide broadband and high-speed Internet access and benefit over 300 thousand rural customers. 89 7. CREDIT AND INSURANCE With the $25 million in DLT grants RUS borrowers are expected to provide distance learning facilities to 300 schools, libraries, and rural education centers and also provide telemedicine equipment to 150 rural health care providers, benefiting millions of residents in rural America. Loan funds are not provided due to the positive subsidy rate and the lack of interest in DLT loans. The budget proposes converting the mandatory broadband funding into discretionary funding and provides discretionary funding that supports $331 million in broadband loans. Loans to Farm Operators Farm Service Agency (FSA) assists low-income family farmers in starting and maintaining viable farming operations. Emphasis is placed upon aiding beginning and socially disadvantaged farmers. FSA offers operating loans and ownership loans, both of which may be either direct or guaranteed loans. Operating loans provide credit to farmers and ranchers for annual production expenses and purchases of livestock, machinery, and equipment. Farm ownership loans assist producers in acquiring and developing their farming or ranching operations. As a condition of eligibility for direct loans, borrowers must be unable to obtain private credit at reasonable rates and terms. As FSA is the ‘‘lender of last resort,’’ default rates on FSA direct loans are generally higher than those on private-sector loans. However, in recent years the loss rate has decreased with a rate of 5.1 percent in 2003, compared to 5.6 percent in 2002. FSA guaranteed farm loans are made to more creditworthy borrowers who have access to private credit markets. Because the private loan originators must retain 10 percent of the risk, they exercise care in examining the repayment ability of borrowers. As a result, losses on guaranteed farm loans remain low with default rates of .71 percent in 2003 as compared to .70 percent in 2002. The 2002 Farm Bill changed some of the requirements for managing inventory property. Property acquired through foreclosure on direct loans must now be sold at auction within 165, rather than 105 days of acquisition. The new rule allows more time to advertise and encourage participation from beginning farmers. The subsidy rates for these programs have been fluctuating over the past several years. These fluctuations are mainly due to the interest component of the subsidy rate. The default rates for these programs tend to be below ten percent. As shown above, both the direct and guaranteed loans have experienced a decreasing default rate. In fiscal year 2003, FSA provided loans and loan guarantees to approximately 32,000 family farmers totaling $3.94 billion. The number of loans provided by these programs has fluctuated over the past several years. The average size for farm ownership loans has been increasing. The majority of assistance provided in the operating loan program is to existing FSA farm borrowers. In the farm ownership program, new customers receive the bulk of the benefits furnished. In the last few years, the demand for FSA direct and guaranteed loans has been high due to crop/livestock price decreases and some regional production problems. In 2005, USDA’s FSA proposes to make $3.8 billion in direct and guaranteed loans through discretionary programs. A PART evaluation of the guaranteed loan portfolio was conducted in 2003. The review found that the program is well-managed and serves a clear purpose in helping farmers who have difficulty in demonstrating creditworthiness obtain credit at reasonable rates from private lenders. However, while the program has a low loss rate, it is unable to adequately demonstrate whether it is achieving the objective of improving the economic viability of U.S. farmers and ranchers. Over the next year, FSA will be conducting an in-depth review of its direct and guaranteed loan portfolios to assess program performance, including the effectiveness of targeted assistance and the ability of borrowers to graduate to private credit. The Farm Credit System and Farmer Mac The Farm Credit System (FCS or System) and the Federal Agricultural Mortgage Corporation (Farmer Mac) are Government-Sponsored Enterprises (GSEs) that enhance credit availability for the agricultural sector. The FCS provides production, equipment, and mortgage lending to farmers and ranchers, aquatic producers, their cooperatives, and related businesses, while Farmer Mac provides a secondary market for agricultural real estate and rural housing mortgages. The Nation’s agricultural sector and, in turn, its lenders continue to exhibit stability in their income and balance sheets. This is due, in part, to government assistance payments being provided from 1998 through 2003. Also, the low interest rate environment seen over the past two years has reduced interest expense for the capital-intensive agricultural sector and bolstered farmland values. Favorable growing conditions were widespread, and commodity prices generally rose in 2003, although weakness continued for some products. Farmland values increased moderately, up 5.0 percent in 2002, due to a combination of government payments, urban influences, and declining interest rates. Projections for 2003 see a smaller rise of 3.0 percent for farmland values Commercial banks maintained their predominant farm debt market share of 40 percent in 2002. The FCS trailed at a 29.8 percent share. The United States Department of Agriculture (USDA) direct farm loan programs market share was 3.7 percent, though it would more than double if adjusted for guaranteed loans issued through private institutional lenders. In 2003, USDA expects the market-share gap between commercial banks and the FCS to have narrowed marginally. 90 The Farm Credit System During 2003, the financial condition of the System’s banks and associations continued a 15-year trend of improving financial health and performance. Sound asset quality and strong income generation enabled FCS banks and associations to post record capital levels. As of September 30, 2003, capital increased 6.4 percent for the year and stood at $16.2 billion. These capital numbers exclude $2.0 billion of restricted capital held by the Farm Credit System Insurance Corporation (FCSIC). Loan volume has increased since 1989 to $91.3 billion in September 2003, which surpasses the high of $90.0 billion, set in December 2002. The rate of asset growth for the preceding three-year period (2000–2002) has been averaging 7.6 percent. However, the rate of capital accumulation has been greater resulting in total capital equaling 15.4 percent of total assets at yearend 2002 compared to 14.9 percent at yearend 1999. Nonperforming assets increased slightly to 1.4 percent of the portfolio in September 2003 compared to 1.3 percent in December 2002. Competitive pressures and a falling interest rate environment have narrowed the FCS’s net interest margin to 2.62 percent in September 2003 from 2.76 percent in 2002. The net interest margin is expected to remain stable in the near-term, given the expectations for a continued low interest rate environment into 2004. Consolidation continues to affect the structure of the FCS. In January 1995, there were nine banks and 232 associations; by September 2003, there were six banks and 99 associations. The FCSIC ensures the timely payment of interest and principal on FCS obligations. FCSIC’s net assets, largely comprised of premiums paid by FCS institutions, supplement the System’s capital and support the joint and several liability of all System banks for FCS obligations. On September 30, 2003, FCSIC’s net assets totaling $1.7 billion were slightly below (1.98 percent) the statutory minimum of 2.0 percent of outstanding debt. In 2003, the premium rate was increased to bolster FCSIC’s net assets to meet the expansion in the System’s outstanding debt caused by strong growth in its asset base. The premium rate is slated to be reduced slightly in 2004. Improvement in the FCS’s financial condition is also reflected in the examinations by the Farm Credit Administration (FCA), its Federal regulator. Each of the System institutions is rated under the FCA Financial Institution Rating System (FIRS) for capital, asset quality, management, earnings, liquidity, and sensitivity. At the beginning of 1995, 197 institutions carried the best FIRS ratings of 1 or 2, 36 were rated 3, one institution was rated 4, and no institutions received the lowest rating of 5. In September 2003, all 105 banks ANALYTICAL PERSPECTIVES and associations had ratings of 1 or 2 and no institution was under an enforcement action. Over the past 12 months, the System’s loans outstanding have grown by $3.4 billion, or 3.9 percent, while over the past five years they have grown $25.2 billion, or 38.1 percent. The volume of lending secured by farmland increased 52.6 percent, while farm-operating loans have increased 32.1 percent since 1998. Total members served increased about 2 percent during the past year. Agricultural producers represented the largest borrower group, with $72.8 billion including loans to rural homeowners and leases, or just under 80 percent of the dollar amount of loans outstanding. As required by law, all borrowers are also stockholder owners of System banks and associations. The System has more than 453,000 stockholders; about 83 percent of these are farmers with voting stock. Over half of the System’s total loan volume outstanding (53.6 percent) is in long-term real estate loans, over one-quarter (26.2 percent) is in short- and intermediate-term loans to agricultural producers, and 17 percent is to cooperatives. International loans (export financing) represent 3.2 percent of the System’s loan portfolio. Young, beginning, and small farmers and ranchers loans represented 12.7, 18.0, and 30.1-percent, respectively, of the total dollar volume outstanding in 2002, which is slightly higher than in 2001. These percentages cannot be summed given significant overlap in these categories. Providing credit and related services to young, beginning, and small farmers and ranchers is a legislated mandate and a high priority for the System. The System, while continuing to record strong earnings and capital growth, remains exposed to numerous risks, including concentration risk, changes in government assistance payments, the volatility of exports and crop prices, and lower non-farm earnings of farm households associated with weakness in the economy’s employment sector. Farmer Mac Farmer Mac was established in 1987 to facilitate a secondary market for farm real estate and rural housing loans. Since the Agricultural Credit Act of 1987, there have been several amendments to Farmer Mac’s chartering statute. Perhaps the most significant amending legislation for Farmer Mac was the Farm Credit System Reform Act of 1996 that transformed Farmer Mac from a guarantor of securities backed by loan pools into a direct purchaser of mortgages, enabling it to form pools to securitize. The 1996 Act increased Farmer Mac’s ability to provide liquidity to agricultural mortgage lenders. Since the passage of the 1996 Act, Farmer Mac’s program activities and business have increased significantly. 91 7. CREDIT AND INSURANCE Farmer Mac continues to meet statutory minimum core capital and regulatory risk-based capital requirements. Farmer Mac’s total program activity (loans purchased and guaranteed, and AgVantage bonds purchased, and real estate owned) as of September 30, 2003, totaled $5.6 billion. That volume represents growth of 8 percent over program activity at September 30, 2002. Of total program activity, $2.4 billion were on-balance sheet loans and agricultural mortgagebacked securities and $3.2 billion were off-balance sheet obligations. Total assets were $4.2 billion at the close of the third quarter, with non-program investments accounting for $1.6 billion of those assets. Farmer Mac’s net income for the first three quarters of 2003 was $20 million, an increase of $1.56 million, or 8.8 percent over the same period in 2002. International Credit Programs Seven Federal agencies, the Department of Agriculture (USDA), the Department of Defense, the Department of State, the Department of the Treasury, the Agency for International Development (USAID), the Export-Import Bank, and the Overseas Private Investment Corporation (OPIC), provide direct loans, loan guarantees, and insurance to a variety of foreign private and sovereign borrowers. These programs are intended to level the playing field for U.S. exporters, deliver robust support for U.S. manufactured goods, stabilize international financial markets, and promote sustainable development. Leveling the Playing Field Federal export credit programs counter subsidies that foreign governments, largely in Europe and Japan, provide their exporters, usually through export credit agencies (ECAs). The U.S. Government has worked since the 1970’s to constrain official credit support through a multilateral agreement in the Organization for Economic Cooperation and Development (OECD). This agreement has significantly constrained direct interest rate subsidies and tied-aid grants. Further negotiations resulted in a multilateral agreement that standardized the fees for sovereign lending across all ECAs beginning in April 1999. Fees for non-sovereign lending, however, continue to vary widely across ECAs and markets, thereby providing implicit subsidies. The Export-Import Bank attempts to strategically ‘‘level the playing field’’ and to fill gaps in the availability of private export credit. The Export-Import Bank provides export credits, in the form of direct loans or loan guarantees, to U.S. exporters who meet basic eligibility criteria and who request the Bank’s assistance. USDA’s ‘‘GSM’’ programs similarly help to level the playing field. Like programs of other agricultural exporting nations, GSM programs guarantee payment from countries and entities that want to import U.S. agricultural products but cannot easily obtain credit. The U.S. has been negotiating in the OECD the terms of agricultural export financing, the outcome of which could affect the GSM programs. Stabilizing International Financial Markets In today’s global economy, the health and prosperity of the American economy depend importantly on the stability of the global financial system and the economic health of our major trading partners. The United States can contribute to orderly exchange arrangements and a stable system of exchange rates by providing resources on a multilateral basis through the IMF (discussed in other sections of the Budget), and through financial support provided by the Exchange Stabilization Fund (ESF). The ESF may provide ‘‘bridge loans’’ to other countries in times of short-term liquidity problems and financial crises. In the past, ‘‘bridge loans’’ from ESF provided dollars to a country over a short period before the disbursement of an IMF loan to the country. Also, a package of up to $20 billion of medium-term ESF financial support was made available to Mexico during its crisis in 1995. Such support was essential in helping to stabilize Mexican and global financial markets. Mexico paid back its borrowings under this package ahead of schedule in 1997, and the United States earned almost $600 million more in interest than it would have if it dollars had not been lent. There was zero subsidy cost for the United States as defined under credit reform, as the medium-term credit carried interest rates reflecting an appropriate country risk premium. The United States also expressed a willingness to provide ESF support in response to the financial crises affecting some countries such as South Korea in 1997 and Brazil in 1998. It did not prove necessary to provide an ESF credit facility for Korea, but the United States agreed to guarantee through the ESF up to $5 billion of a $13.2 billion Bank for International Settlements credit facility for Brazil. In the event, the ESF guaranteed $3.3 billion in BIS credits to Brazil and earned $140.3 million in commissions. Such support helped to provide the international confidence needed by these countries to begin the stabilization process. Using Credit to Promote Sustainable Development Credit is an important tool in U.S. bilateral assistance to promote sustainable development. USAID’s Development Credit Authority (DCA) allows USAID to use a variety of credit tools to support its development activities abroad. This unit encompasses newer DCA activities, such as municipal bond guarantees for local governments in developing countries, as well as USAID’s traditional microenterprise and urban environmental credit programs. DCA provides non-sovereign loans and loan guarantees in targeted cases where credit serves more effectively than traditional grant mechanisms to achieve sustainable development. DCA is intended to mobilize host country private capital to fi- 92 ANALYTICAL PERSPECTIVES nance sustainable development in line with USAID’s strategic objectives. Through the use of partial loan guarantees and risk sharing with the private sector, DCA stimulates private-sector lending for financially viable development projects, thereby leveraging hostcountry capital and strengthening sub-national capital markets in the developing world. While there is clear demand for DCA’s facilities in some emerging economies, the utilization rate for these facilities is still very low. OPIC also supports a mix of development, employment, and export goals by promoting U.S. direct investment in developing countries. OPIC pursues these goals through political risk insurance, direct loans, and guarantee products, which provide finance, as well as associated skills and technology transfers. These programs are intended to create more efficient financial markets, eventually encouraging the private sector to supplant OPIC finance in developing countries. OPIC has also created a number of investment funds that provide equity to local companies with strong development potential. Ongoing Coordination International credit programs are coordinated through two groups to ensure consistency in policy design and credit implementation. The Trade Promotion Coordinating Committee (TPCC) works within the Administration to develop a National Export Strategy to make the delivery of trade promotion support more effective and convenient for U.S. exporters. The Interagency Country Risk Assessment System (ICRAS) standardizes the way in which agencies budget for the cost associated with the risk of international lending. The cost of lending by the agencies is governed by proprietary U.S. government ratings, which correspond to a set of default estimates over a given maturity. The methodology establishes assumptions about default risks in international lending using averages of international sovereign bond market data. The strength of this method is its link to the market and an annual update that adjusts the default estimates to reflect the most recent risks observed in the market. For 2005, OMB updated the default estimates using the default estimate methodology introduced in FY 2003 and the most recent market data. The 2003 default estimate methodology implemented a significant revision that uses more sophisticated financial analyses and comprehensive market data, and better isolates the expected cost of default implicit in interest rates charged by private investors to sovereign borrowers. All else being equal, this change expands the level of international lending an agency can support with a given appropriation. For example, the Export-Import Bank will be able to generally provide higher lending levels using lower appropriations in 2005. Adapting to Changing Market Conditions Overall, officially supported finance and transfers account for a tiny fraction of international capital flows. Furthermore, the private sector is continuously adapting its size and role in emerging markets finance to changing market conditions. In response, the Administration is working to adapt international lending at Export-Import Bank and OPIC to dynamic private sector finance. The Export-Import Bank, for example, is developing a sharper focus on lending that would otherwise not occur without Federal assistance. Measures under development include reducing risks, collecting fees from program users, and improving the focus on exporters who truly cannot access private export finance. OPIC in the past has focused relatively narrowly on providing financing and insurance services to large U.S. companies investing abroad. As a result, OPIC did not devote significant resources to its mission of promoting development through mobilizing private capital. In 2003, OPIC implemented new development performance measures and goals that reflect the mandate to revitalize its core development mission. These changes at the Export-Import Bank and at OPIC will place more emphasis on correcting market imperfections as the private sector’s ability to bear emerging market risks becomes larger, more sophisticated, and more efficient. Performance Assessment For FY 2005, the Administration used the Performance Assessment Rating Tool (PART) to rate OPIC’s insurance and finance programs. The PART revealed the insurance program is generally well-managed and that it has instituted a meaningful policy to ensure it does not compete with private insurance companies. The PART found that the finance program could improve its credit function by ensuring the independence of the Credit Committee and the credit review process from the deal originating departments. IV. INSURANCE PROGRAMS Deposit Insurance Federal deposit insurance promotes stability in the U.S. financial system. Prior to the establishment of Federal deposit insurance, failures of some depository institutions often caused depositors to lose confidence in the banking system and rush to withdraw deposits. Such sudden withdrawals caused serious disruption to the economy. In 1933, in the midst of the Depression, the system of Federal deposit insurance was established to protect small depositors and prevent bank failures from causing widespread disruption in financial markets. The federal deposit insurance system came under serious strain in the late 1980s and early 1990s when over 2,500 banks and thrifts failed. The Federal Government responded with a series of reforms designed 93 7. CREDIT AND INSURANCE to improve the safety and soundness of the banking system. These reforms, combined with more favorable economic conditions, helped to restore the health of depository institutions and the deposit insurance system. The Federal Deposit Insurance Corporation (FDIC) insures deposits in commercial banks and savings associations (thrifts) through separate insurance funds, the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The National Credit Union Administration (NCUA) administers the insurance fund for most credit unions (certain credit unions are privately insured and not covered by the fund). FDIC and NCUA insure deposits up to $100,000 per account. FDIC insures over $3.4 trillion of deposits at almost 8,000 commercial banks and 1,500 savings institutions. NCUA insures about 9,500 credit unions with $474 billion in insured shares. Current Industry and Insurance Fund Conditions Four BIF members with combined assets of $1.2 billion dollars failed during fiscal year 2003, while no SAIF members failed. In the last five years, assets associated with BIF failures have averaged $1.1 billion per year, while failures associated with SAIF averaged $465 million. During 2003, 8 federally insured credit unions with $25 million in assets failed (including assisted mergers). The FDIC currently classifies 116 institutions with $30 billion in assets as ‘‘problem institutions,’’ compared to 148 institutions with $42 billion in assets a year ago. By comparison, at the height of the banking crisis in 1989, failed assets rose to over $150 billion. In the third quarter ending September 30, 2003, banks and thrifts reported record-high earnings. In fiscal year 2003, the industry net income totaled $115 billion, an increase of 13 percent over fiscal year 2002. The largest factor in the earnings increase is higher non-interest income, particularly growth in securitization income and gains on loan sales. Credit quality continues to improve and banks are reporting higher returns on assets. Despite the improving trends, prospects for higher interest rates cause concerns for the industry as increased interest rates usually reduce lending margins. In fiscal year 2003, the reserve ratio (ratio of insurance reserves to insured deposits) of BIF stayed above the 1.25-percent statutory target. As of September 30, 2003, BIF had estimated reserves of $33 billion, or 1.31 percent of insured deposits. Factors that helped BIF stay above the statutory target in fiscal year 2003 include slower deposit growth, increases in unrealized gains on securities available for sale, and reductions to reserves previously set aside for future estimated losses. In 2003, FDIC developed a new model to estimate the amount of reserves needed for losses after it completed a study that found faults in its current methodology. FDIC continues to refine its new model as it looks to incorporate it in their reserve estimating process. The SAIF reserve ratio remained comfortably above the designated reserve ratio throughout the year. As of September 30, 2003, SAIF had reserves of $12 billion, or 1.40 percent of insured deposits. Through June 30, 2004, the FDIC will continue to maintain deposit insurance premiums in a range from zero for the healthiest institutions to 27 cents per $100 of assessable deposits for the riskiest institutions. In May, the FDIC will set assessment rates for July through December of this year. Due to the strong financial condition of the industry and the insurance funds, less than 10 percent of banks and thrifts paid insurance premiums in 2003. The National Credit Union Share Insurance Fund (NCUSIF) ended fiscal year 2003 with assets of over $6 billion and an equity ratio of 1.28 percent, below the NCUA-set target ratio of 1.30 percent. Each insured credit union is required to deposit and maintain an amount equal to 1 percent of its member share accounts in the fund. Premiums were waived during 2003 because sufficient investment income was generated. As the Fund’s equity ratio did not exceed 1.30 percent, NCUA did not provide a dividend to credit unions in fiscal year 2003. As a result of consolidation, fewer large banks control an increasingly substantial share of banking assets. Thus, the failure of even one of these large institutions could strain the insurance fund. Banks are increasingly using sophisticated financial instruments such as assetbacked securities and financial derivatives, which could have unforeseen effects on risk levels. Whether or not these new instruments add to risk, they do complicate the work of regulators who must gauge each institution’s financial health and the potential for deposit insurance losses that a troubled institution may represent. Federal Deposit Insurance Reform While the deposit insurance system is in good condition, the Administration supports reforms to make improvements in the operation and fairness of the deposit insurance system for banks and thrifts. In 2003, the Treasury Department and federal banking regulatory agencies submitted to the U.S. Senate a draft bill that would accomplish this objective. Specifically, the proposal would merge the BIF and the SAIF, which offer an identical product. A single merged fund would be stronger and better diversified than either fund alone. A merged fund would prevent the possibility that institutions posing similar risks would pay significantly different premiums for the same product. Under the current system, the FDIC is required to maintain a ratio of insurance fund reserves to total insured deposits of 1.25 percent. If insurance fund reserves fall below the required ratio, the FDIC must charge either sufficient premiums to restore the reserve ratio to 1.25 percent within one year, or no less than 23 basis points if the reserve ratio remains below 1.25 percent for more than one year. The Administration’s proposal would give the FDIC authority to adjust the ratio periodically within prescribed upper and lower bounds and greater discretion in determining how quickly it restores the ratio to target levels. This flexibility would help the 94 ANALYTICAL PERSPECTIVES banking industry to stabilize the premium costs over time and to avoid sharp premium increases when the economy might be under stress. Finally, the FDIC has been prohibited since 1996 from charging premiums to ‘‘well-capitalized’’ and well-run institutions as long as insurance fund reserves equal or exceed 1.25 percent of insured deposits. Therefore, less than 10 percent of banks and thrifts pay insurance premiums, allowing a large number of financial institutions to rapidly increase their insured deposits without any contribution to the insurance fund. The Administration proposal would repeal this prohibition to ensure that institutions with rapidly increasing insured deposits or greater risks appropriately compensate the insurance fund. Pension Guarantees The Pension Benefit Guaranty Corporation (PBGC) insures most defined-benefit pension plans sponsored by private employers. PBGC pays the benefits guaranteed by law when a company with an underfunded pension plan becomes insolvent. PBGC’s exposure to claims relates to the underfunding of pension plans, that is, to any amount by which vested future benefits exceed plan assets. In the near term, its loss exposure results from financially distressed firms with underfunded plans. In the longer term, additional loss exposure results from the possibility that currently healthy firms become distressed and currently well-funded plans become underfunded due to inadequate contributions or poor investment results. PBGC monitors troubled companies with underfunded plans and acts, in bankruptcies, to protect its beneficiaries and the future of the program. Such protections include, where necessary, initiating plan termination. Under its Early Warning Program, PBGC negotiates settlements with companies that improve pension security and reduce PBGC’s future exposure to risk. PBGC’s single-employer program ended 2002 at a deficit of $3.6 billion, which deepened in 2003 to about $11.3 billion. The deficit has resulted from record losses on plan terminations in 2001 through 2003. In 2002 LTV, a steel company, terminated its plan with underfunding of nearly $2 billion, which then was PBGC’s largest claim ever. But in December 2002, an even larger pension plan terminated. Bethlehem Steel’s plan covered 95,000 workers and retirees and was underfunded by about $4.3 billion, of which PBGC is liable for about $3.6 billion. Other large underfunded terminations in 2003 included Columbia Hospital for Women, Consolidated Freightways, Geneva Steel, Hawaii Baking Company, National Steel, and US Airways’ Pilots Plan. Since year’s end, PBGC has terminated Kaiser Aluminum Salaried Plan, Pillowtex, and Weirton Steel. Moreover this ‘‘snapshot’’ measure of PBGC’s deficit could hide significant risk of further losses. It includes the financial effects only of pension plans that have already terminated and of seriously underfunded large plans for which termination is considered ‘‘probable.’’ Additional risk and exposure may remain for the future because of economic uncertainties and significant underfunding in single-employer pension plans, which exceeded an estimated $350 billion at year end, compared to $50 billion in December 2000. Some of the companies with the most underfunded plans are in financially troubled industries (like airlines or the oldline steel companies), or are already in Chapter 11 bankruptcy proceedings. The smaller multiemployer program guarantees pension benefits of certain unionized plans offered by several employers in an industry. It ended 2003 with its first deficit in over 20 years, of about $261 million. Underfunding in multiemployer plans approximated $100 billion at year end. PBGC is not in crisis—the agency has sufficient assets to meet its obligations for a number of years into the future—but it is clear that the financial integrity of the federal pension insurance system is at risk. Looking to the long term, in order to avoid benefit reductions, strengthen PBGC, and help stabilize the defined-benefit pension system, the 2005 Budget proposes legislative reforms to: • Give employers two years of relief from current pension plan contribution requirements—now tied to 30-year Treasury bond interest rates—and base requirements on more appropriate corporate bond rates. • After the two-year transition period, base pension funding requirements on a ‘‘yield curve’’ (commonly used in corporate finance), which would better tie funding requirements to the timing of the payout of retiree benefits. • Make additional changes to restrict promises of added benefits by severely underfunded plans and to provide better information on pension finances to workers, retirees, and stockholders. Additionally, the Administration is developing a plan for comprehensive reform of the pension funding rules to: strengthen funding for workers’ defined-benefit pensions; simplify funding rules; offer sponsors new, flexible approaches to finance their plans without the present yearly volatility; and make additional reforms to ensure PBGC’s continued ability to safeguard pension benefits. 95 7. CREDIT AND INSURANCE Disaster Insurance Flood Insurance The Federal Government provides flood insurance through the National Flood Insurance Program (NFIP), which is administered by the Emergency Preparedness and Response Directorate of the Department of Homeland Security (DHS). Flood insurance is available to homeowners and businesses in communities that have adopted and enforced appropriate flood plain management measures. Coverage is limited to buildings and their contents. By 2005, the program is projected to have approximately 4.7 million policies from more than 19,000 communities with $699 billion of insurance in force. Prior to the creation of the program in 1968, many factors made it cost prohibitive for private insurance companies alone to make affordable flood insurance available. In response, the NFIP was established to make insurance coverage widely available. The NFIP requires building standards and other mitigation efforts to reduce losses, and operates a flood hazard mapping program to quantify the geographic risk of flooding. These efforts have made substantial progress. The number of policies in the program has grown significantly over time. The number of enrolled policies grew from 2.4 to 4.3 million between 1990 and 2002, and by about 34,000 policies in 2003. DHS is using three strategies to increase the number of flood insurance policies in force: lender compliance, program simplification, and expanded marketing. DHS is educating financial regulators about the mandatory flood insurance requirement for properties with mortgages from federally regulated lenders. The NFIP also has a multipronged strategy for reducing future flood damage. The NFIP offers mitigation insurance to allow flood victims to rebuild to code, thereby reducing future flood damage costs. Further, through the Community Rating System, DHS adjusts premium rates to encourage community and State mitigation activities beyond those required by the NFIP. Despite these efforts, the program faces financial challenges. The program’s financing account, which is a cash fund, has sometimes had expenses greater than its revenue, preventing it from building sufficient longterm reserves. This is mostly because a large portion of the policyholders pay subsidized premiums. DHS charges subsidized premiums for properties built before a community adopted the NFIP building standards. Properties built subsequently are charged actuarially fair rates. The creators of the NFIP assumed that eventually the NFIP would become self-sustaining as older properties left the program. The share of subsidized properties in the program has fallen, but remains substantial; it was 70 percent in 1978 and is 28 percent today. Until the mid-1980s, Congress appropriated funds periodically to support subsidized premiums. However, the program has not received appropriations since 1986. During the 1990s, FEMA, which is now part of DHS, relied on Treasury borrowing to help finance its loss expenses (the NFIP may borrow up to $1.5 billion). As of October 31, 2002, the NFIP had repaid all of its outstanding debt. Although the program is generally well run, it receives some criticism about the low participation rate and the inclusion of subsidized properties, especially those that are repetitively flooded. The program has identified approximately 11,000 properties for mitigation action. To the extent they are available; funds will come from the Hazard Mitigation Grant Program, the Predisaster Mitigation Grant Program, and the Flood Mitigation Grant Program. There is also current legislation pending to address the problem of repetitive loss properties. An additional problem is the fairly low participation rate. Currently, less than half of the eligible properties in identified flood plains participate in this program. In comparison, the participation rate for private wind and hurricane insurance is nearly 90 percent in at-risk areas. Given that flood damage causes roughly $6 billion in property damage annually, DHS will have to evaluate its incentive structure to attract more participation in the program, while not encouraging misuse of the program. Crop Insurance Subsidized Federal crop insurance administered by USDA’s Risk Management Agency (RMA) plays an important role in assisting farmers to manage yield and revenue shortfalls due to bad weather or other natural disasters. RMA continues to evaluate and, as appropriate, provide new products so that the Government can further reduce the need for ad-hoc disaster assistance payments to the agriculture community in bad years. The USDA crop insurance program is a cooperative effort between the Federal Government and the private insurance industry. Private insurance companies sell and service crop insurance policies. These companies rely to varying degrees on reinsurance provided by the Federal Government and the commercial reinsurance market to manage their individual risk portfolio. The Federal Government also reimburses private companies for the administrative expenses associated with providing crop insurance and reinsures the private companies for excess insurance losses on all policies. The Federal Government also subsidizes premiums for farmers. In crop year 2003, 215 million acres were insured, with an estimated $3.4 billion in total premiums collected, including $2 billion in premium subsidy. During FY 2004 RMA will be renegotiating the Standard Reinsurance Agreement (SRA). The SRA contains the operational and financial risk sharing terms between the Federal government and the private companies. The Agriculture Risk Protection Act of 2000 (ARPA) allowed these terms to be renegotiated once during the 2001 and 2005 reinsurance years. RMA is taking this opportunity to strengthen the document now 96 ANALYTICAL PERSPECTIVES to address such issues as company oversight and quality control. In addition, significant attention will be given to evaluating all the financial incentives, risk sharing scenarios and administrative cost reimbursement percentages to ensure that the companies and the Federal government are bearing an appropriate amount of the costs associated with the crop insurance program. RMA is seeking to finalize the new SRA by June of 2004. There are various types of insurance programs. The most basic type of coverage is Catastrophic Crop Insurance (CAT), which compensates the farmer for losses up to 50 percent of the individual’s average yield at 55 percent of the expected market price. The CAT premium is entirely subsidized, and farmers pay only a small administrative fee. Commercial insurance companies deliver the product to the producer in all states. Additional coverage is available to producers who wish to insure crops above the basic coverage. Premium rates for additional coverage depend on the level of coverage selected and vary from crop to crop and county to county. The additional levels of insurance coverage are more attractive to farmers due to availability of optional units, other policy provisions not available with CAT coverage, and the ability to obtain a level of protection that permits them to use crop insurance as loan collateral and to achieve greater financial security. Private companies sell and service the catastrophic portion of the crop insurance program, and also provide higher levels of coverage, which are also federally subsidized. Approximately 80 percent of eligible acres participated in one or more crop insurance programs in 2003. There are also a wide range of yield and revenuebased insurance products are available through the crop insurance program. Revenue insurance programs protect against loss of revenue stemming from low prices, poor yields, or a combination of both. These programs extend traditional multi-peril crop insurance protection by adding price variability to production history. Indemnities are due when any combination of yield and price results in revenue that is less than the revenue guarantee. The price component common to these plans uses the commodity futures market for price discovery. USDA also continues to expand coverage. In September 2001, RMA published an interim rule that allows RMA to reimburse developers of private crop insurance products for their research and development costs and maintenance costs. Two pilot insurance programs for Iowa swine producers to protect them from lower hog prices began in 2002. The Livestock Gross Margin (LGM) and the Livestock Risk Protection (LRP). The LRP program was expanded in August 2003 to 10 additional states. In April 2003, RMA announced two pilot programs that will extend insurance protection to fed and feeder cattle. They are designed to insure against declining market prices. Both offer coverage prices based on expected cash prices. The Federal Crop Insurance Corporation (FCIC) will subsidize 13 percent of the producer’s gross premium under both programs. LRP-Feeder Cattle is available in 10 states. LRP-Fed Cattle is available to producers in three states. For more information and additional crop insurance program details, please reference RMA’s web site: (www.rma.usda.gov). Insurance against Security-Related Risks The Federal Government offers terrorism risk insurance and Airline War Risk Insurance on a temporary basis, and has created the smallpox injury compensation program. After the September 11 attacks, private insurers became reluctant to insure against securityrelated risks such as terrorism and war. Those events are so uncertain in terms of both the frequency of occurrence and the magnitude of potential loss that private insurers have difficulty estimating the expected loss. Furthermore, terrorism can produce a large loss that could wipe out private insurers’ capital. These uncertainties make the private sector reluctant to provide security-related insurance. Thus, it is necessary for the Federal Government to insure against security-related risks, until the private sector learns enough to be comfortable about estimating those risks, to ensure the smooth functioning of the economy. Terrorism Risk Insurance On November 26, 2002, President Bush signed into law the Terrorism Risk Insurance Act of 2002. The Act was designed to address disruptions in economic activity caused by the withdrawal of many insurance companies from the marketplace for terrorism risk in- surance in the aftermath of the terrorist attacks of September 11, 2001. Their withdrawal in the face of great uncertainty as to their risk exposure to future terrorist attacks led to a moratorium in construction projects, increased business costs for the insurance that was available, and substantial shifting of risk—from reinsurers to primary insurers, and from insurers to policyholders (e.g., investors, businesses, and property owners). Ultimately, these costs were borne by American workers and communities through decreased development and economic activity. The Act establishes a temporary Federal program that provides for a system of shared public and private compensation for insured commercial property and casualty losses arising from acts of terrorism. The program is administered by the Treasury Department and will sunset on December 31, 2005. Under the Act, insurance companies included under the program must make available to their policyholders during the first two years of the program coverage for losses from acts of terrorism (as defined by the Act), and Treasury is required to determine whether to extend this requirement into the third and final year of the program. The Act also requires as a condition 7. CREDIT AND INSURANCE for Federal payment that insurance companies disclose to policyholders the premium charged for terrorism risk insurance and the Federal share of compensation under the program. In the event of a future terrorist attack on private businesses and others covered by this program, insurance companies will cover insured losses up to each company’s deductible as specified in the Act. Insured losses above that amount in a given year would be shared between the insurance company and the Treasury, with Treasury covering 90 percent of the losses above the company’s deductible. However, neither the Treasury nor any insurer would be liable for any amount exceeding the statutory annual cap of $100 billion in aggregate insured losses. The Act also provides authority for the Treasury to recoup Federal payments via surcharges on policyholders. In some circumstances this recoupment is mandatory, in other circumstances, as specified in the Act, its exercise is optional. Promptly after the Act was signed into law, Treasury issued a number of interim guidance notices to assist the insurance industry in complying with the requirements of the Act. The interim guidance notices were directly followed by the issuance of formal regulations to implement the Act. Treasury has also created a separate Terrorism Risk Insurance Program office to implement the Act, which includes setting up an infrastructure to handle potential claims under the Act. Airline War Risk Insurance After the September 11, 2001 attacks, private insurers cancelled third party liability war risk coverage for airlines and dramatically increased the cost of other war risk insurance. In response, the Department of Transportation (DOT) provided a short-term reimbursement to airlines for the increased cost of aviation hull and passenger liability war risk insurance under the authority provided in P.L. 107–42. Under Presidential Determination No. 01–29, the President delegated the authority to extend the duration of aviation insurance to the Secretary of Transportation. Due to the extended disruption in the marketplace, DOT also offered airlines third-party liability war risk insurance coverage at subsidized rates to replace coverage initially withdrawn by private insurers. DOT has continued to provide insurance coverage in 60-day increments since 2001. The Homeland Security Act of 2002 included airline war risk insurance legislation. This law extended the term of third party war risk coverage and expanded the scope of coverage to include war risk hull, passenger, crew, and property liability insurance. Under the law, the Secretary of Transportation was directed 97 to extend insurance policies until August 31, 2003. In addition, the law also limited the total premium for the three types of insurance to twice the premium rate charged for the third party liability insurance as of June 19, 2002. In 2003 the Department of Defense supplemental appropriation further extended the mandatory provision of insurance through August 31, 2004. Consequently, in December 2003 the President issued Presidential Determination 2004–13 which authorizes the continued provision of insurance now in force through August 31, 2004 and the DOT expects to amend current policies to conform to that date. Recently, the basic authority of the insurance program was extended through December 31, 2008 by P.L. 108–176, Vision 100—Century of Aviation Reauthorization Act. Currently 76 air carriers are insured by DOT. Coverage for individual carriers ranges from $80 million to $4 billion per carrier with the median insurance coverage at approximately $1.8 billion per occurrence. Premiums collected by the Government are deposited into the Aviation Insurance Revolving Fund. In FY 2003, the fund collected approximately $136 million in premiums for insurance provided by DOT. In FY 2004, it is anticipated that up to $125 million in premiums may be collected by DOT for the provision of insurance. At the end of FY 2003, the balance of the Aviation Insurance Revolving Fund used to pay claims was $218 million. Any claims by the airlines that exceed the balance in the aviation insurance revolving fund would be paid by the Federal Government. Smallpox Injury Compensation The Administration has taken steps to insure the immediate mobilization of emergency response personnel in the event of a smallpox attack. The Smallpox Injury Compensation Program, set up under the Smallpox Emergency Personnel Protection Act of 2003, encourages vaccination of designated emergency personnel by providing benefits and/or compensation to certain persons harmed as a direct result of receiving smallpox countermeasures, including the smallpox vaccine. Only persons receiving the smallpox vaccine under the Department of Health and Human Services Declaration Regarding the Administration of Smallpox Countermeasures are eligible for benefits. Also, the Homeland Security Act of 2002 provided medical liability protection to doctors, drug manufacturers, and hospitals that administer smallpox vaccine and other countermeasures during an emergency declaration. 98 ANALYTICAL PERSPECTIVES Chart 7-1. Face Value of Federal Credit Outstanding Dollars in trillions 1.4 1.2 Loan Guarantees 1 0.8 0.6 0.4 0.2 Direct Loans 0 1970 1975 1980 1985 1990 1995 2000 2005 99 7. CREDIT AND INSURANCE Table 7–1. ESTIMATED FUTURE COST OF OUTSTANDING FEDERAL CREDIT PROGRAMS (in billions of dollars) Program Outstanding 2002 Estimated Future Costs of 2002 Outstanding 1 Outstanding 2003 Estimated Future Costs of 2003 Outstanding 1 Direct Loans 2 Federal Student Loan Programs ................................................... Farm Service Agency (excl.CCC), Rural Development, Rural Housing ...................................................................................... Rural Utilities Service and Rural Telephone Bank ....................... Housing and Urban Development ................................................. Agency for International Development .......................................... Public Law 480 .............................................................................. Export-Import Bank ........................................................................ Commodity Credit Corporation ...................................................... Federal Communications Commission .......................................... Disaster Assistance ........................................................................ Other Direct Loan Programs ......................................................... 99 14 102 10 45 32 12 9 11 12 5 5 4 14 11 2 2 7 2 4 3 * * * 44 32 13 9 11 11 7 5 3 12 11 3 3 4 7 4 3 1 1 * Total Direct Loans ..................................................................... 248 45 249 47 Guaranteed Loans: 2 FHA Mutual Mortgage Insurance Fund ......................................... VA Mortgage .................................................................................. Federal Family Education Loan Program ..................................... FHA General/Special Risk Insurance Fund .................................. Small Business ............................................................................... Export-Import Bank ........................................................................ International Assistance ................................................................. Farm Service Agency and Rural Housing .................................... Commodity Credit Corporation ...................................................... Other Guaranteed Loan Programs ................................................ 467 265 182 96 41 31 19 23 5 17 3 6 12 5 1 5 2 * 1 2 407 323 213 89 53 34 19 24 4 18 2 5 15 4 2 3 2 1 * 2 Total Guaranteed Loans ........................................................... 1,146 37 1,184 36 Total Federal Credit ............................................................ 1,394 82 1,433 83 * Less than $500 million. 1 Direct loan future costs are the financing account allowance for subsidy cost and the liquidating account allowance for estimated uncollectible principal and interest. Loan guarantee future costs are estimated liabilities for loan guarantees. 2 Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform, such as CCC commodity price supports. Defaulted guaranteed loans which become loans receivable are accounted for as direct loans. 100 ANALYTICAL PERSPECTIVES Table 7–2. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992–2003 1 (Budget authority and outlays, in millions of dollars) Program 1994 1995 1996 1997 1998 1999 2000 2001 2002 –72 ............ ............ ............ –1 ............ * 1 2 ............ ............ ............ ............ ............ 28 ............ ............ ............ ............ ............ 61 ............ 152 ............ 1 ............ ............ 84 2 ............ ............ ............ ............ ............ –37 ............ 46 ............ ............ ............ –37 –38 –31 ............ ............ ............ ............ ............ 84 10 –73 1 ............ 8 –1 ............ 23 ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ –39 –9 71 –1 –6 5 ............ ............ 331 ............ ............ ............ ............ ............ ............ ............ ............ * ............ ............ ............ ............ –656 ............ ............ ............ ............ ............ –17 –1 19 ............ ............ 37 –23 ............ Commerce: Fisheries finance .............................................................................................................. ............ ............ ............ ............ ............ ............ ............ –19 2003 2004 DIRECT LOANS: Agriculture: Agriculture credit insurance fund ..................................................................................... Farm storage facility loans .............................................................................................. Apple loans ...................................................................................................................... Emergency boll weevil loan ............................................................................................. Agricultural conservation .................................................................................................. Distance learning and telemedicine ................................................................................ Rural electrification and telecommunications loans ........................................................ Rural telephone bank ....................................................................................................... Rural housing insurance fund .......................................................................................... Rural economic development loans ................................................................................ Rural development loan program .................................................................................... Rural community advancement program 2 ...................................................................... P.L. 480 ............................................................................................................................ P.L. 480 Title I food for progress credits ........................................................................ 921 10 –701 –1 –7 –8 –2 1 ............ ............ 1 * ............ ............ ............ 1 –1 ............ –42 101 ............ ............ –3 –7 –29 –435 ............ –1 –1 ............ –1 –3 ............ 3 –1 ............ 65 –348 33 ............ –112 –44 –3 1 Defense: Military housing improvement fund .................................................................................. ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ –1 Education: Federal direct student loan program: 3 Volume reestimate ....................................................................................................... ............ ............ ............ ............ ............ 22 ............ Other technical reestimate .......................................................................................... ............ ............ 3 –83 172 –383 –2,158 College housing and academic facilities loans ............................................................... ............ ............ ............ ............ ............ ............ ............ Homeland Security: Disaster assistance .......................................................................................................... ............ ............ ............ ............ ............ ............ 47 –1 –6 ............ 43 ............ 560 ............ 3,678 2,005 –1 ............ ............ ............ 36 –7 –6 * Interior: Bureau of Reclamation loans .......................................................................................... ............ ............ ............ ............ ............ ............ 3 3 –9 –14 ............ Bureau of Indian Affairs direct loans .............................................................................. ............ ............ ............ ............ ............ 1 5 –1 –1 2 * Assistance to American Samoa ...................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ * Transportation: High priority corridor loans .............................................................................................. Alameda corridor loan ...................................................................................................... Transportation infrastructure finance and innovation ...................................................... Railroad rehabilitation and improvement program .......................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ –3 ............ ............ ............ ............ ............ ............ ............ ............ ............ –58 ............ ............ ............ –50 ............ ............ ............ ............ 18 ............ ............ –4 ............ ............ ............ ............ ............ ............ ............ –5 Treasury: Community development financial institutions fund ........................................................ ............ ............ ............ ............ ............ ............ 1 ............ ............ * –2 Veterans Affairs: Veterans housing benefit program fund .......................................................................... –39 30 76 –72 465 –111 –52 –107 –697 Native American veteran housing ................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ Vocational rehabilitation loans ......................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ 17 –3 * –178 * * * –3 Environmental Protection Agency: Abatement, control and compliance ................................................................................ ............ ............ ............ ............ ............ ............ ............ 3 General Services Administration: Columbia hospital for women .......................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ International Assistance Programs: Foreign military financing ................................................................................................. U.S. Agency for International Development: Micro and small enterprise development .................................................................... Overseas Private Investment Corporation: OPIC direct loans ........................................................................................................ Debt reduction .................................................................................................................. ............ ............ ............ 13 4 1 152 –166 ............ ............ ............ ............ ............ ............ ............ ............ –1 –6 ............ ............ 119 –397 –64 * ............ * ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ 36 –4 ............ Small Business Administration: Business loans ................................................................................................................. ............ ............ ............ ............ ............ ............ ............ Disaster loans .................................................................................................................. ............ ............ ............ ............ –193 246 –398 1 –282 –2 –14 Other Independent Agencies: Export-Import Bank direct loans ...................................................................................... –28 –16 37 ............ ............ ............ –177 Federal Communications Commission spectrum auction ............................................... ............ ............ ............ ............ 4,592 980 –1,501 157 –804 117 92 –4 * –21 –48 1 ............ 266 624 –640 346 –353 380 101 7. CREDIT AND INSURANCE Table 7–2. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992–2003 1—Continued (Budget authority and outlays, in millions of dollars) Program 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 LOAN GUARANTEES: Agriculture: Agriculture credit insurance fund ..................................................................................... 5 14 12 –51 96 ............ –31 205 40 –36 –32 Agriculture resource conservation demonstration project ............................................... ............ ............ ............ ............ ............ ............ ............ 2 ............ 1 * Commodity Credit Corporation export guarantees ......................................................... 3 103 –426 343 ............ ............ ............ –1,410 ............ –13 –431 Rural development insurance fund .................................................................................. 49 ............ ............ –3 ............ ............ ............ ............ ............ ............ ............ Rural housing insurance fund .......................................................................................... 2 10 7 –10 ............ 109 ............ 152 –56 32 ............ Rural community advancement program 2 ...................................................................... ............ ............ ............ –10 ............ 41 ............ 63 17 91 ............ Commerce: Fisheries finance .............................................................................................................. ............ ............ ............ ............ –2 ............ ............ –3 –1 Emergency steel guaranteed loans ................................................................................. ............ ............ ............ ............ ............ ............ ............ ............ ............ Emergency oil and gas guaranteed loans ...................................................................... ............ ............ ............ ............ ............ ............ ............ * * 3 50 * * * * Defense: Military housing improvement fund .................................................................................. ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ Defense export loan guarantee ....................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ –2 –4 Education: Federal family education loan program: 3 Volume reestimate ....................................................................................................... ............ ............ Other technical reestimate .......................................................................................... 97 421 535 99 ............ 60 ............ ............ –13 –140 –60 –42 ............ 277 ............ 667 –3,484 ............ –2,483 –3,278 Health and Human Services: Heath center loan guarantees ......................................................................................... ............ ............ ............ ............ ............ ............ 3 ............ * Health education assistance loans .................................................................................. ............ ............ ............ ............ ............ ............ ............ ............ ............ Housing and Urban Development: Indian housing loan guarantee ........................................................................................ Title VI Indian guarantees ............................................................................................... Community development loan guarantees ...................................................................... FHA-mutual mortgage insurance ..................................................................................... FHA-general and special risk .......................................................................................... ............ ............ ............ ............ –175 ............ ............ ............ ............ ............ * –5 * –37 ............ ............ ............ ............ ............ –6 * –1 ............ ............ ............ ............ ............ ............ ............ –1 ............ ............ ............ ............ ............ ............ ............ ............ ............ –340 ............ 3,789 ............ 2,413 –1,308 1,100 –110 –25 743 79 ............ –217 –403 77 * 1 19 5,947 351 Interior: Bureau of Indian Affairs guaranteed loans ..................................................................... ............ ............ ............ 31 ............ ............ ............ –14 Transportation: Maritime guaranteed loans (title XI) ................................................................................ ............ ............ ............ ............ ............ –71 30 –15 Minority business resource center ................................................................................... ............ ............ ............ ............ ............ ............ ............ ............ –1 –2 –1 187 27 1 ............ –16 * Treasury: Air transportation stabilization program ........................................................................... ............ ............ ............ ............ ............ ............ ............ ............ ............ Veterans Affairs: Veterans housing benefit fund program .......................................................................... International Assistance Programs: U.S. Agency for International Development: Development credit authority ....................................................................................... Micro and small enterprise development .................................................................... Urban and environmental credit .................................................................................. Assistance to the new independent states of the former Soviet Union 4 ................. Loan guarantees to Israel ........................................................................................... Overseas Private Investment Corporation: OPIC guaranteed loans ............................................................................................... –447 167 334 –706 38 492 229 ............ ............ –2 ............ ............ ............ ............ –1 ............ ............ ............ ............ –7 ............ ............ ............ ............ ............ ............ ............ ............ ............ –14 ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ ............ –770 Other Independent Agencies: Export-Import Bank guarantees ....................................................................................... –11 –59 Total ............................................................................................................................. –616 995 257 –16 –279 –545 13 ............ ............ ............ 727 –832 5,642 –235 –199 –184 –1,547 ............ –1 ............ * ............ ............ ............ 4 ............ –4 –15 48 ............ –34 ............ ............ ............ ............ ............ –76 ............ ............ ............ ............ ............ ............ ............ ............ Small Business Administration: Business loans ................................................................................................................. ............ ............ –163 113 –528 –191 –1,520 5 77 60 –226 304 1,750 –417 –2,042 –1,031 4,518 –3,641 –6,427 –1,860 –142 3,083 * Less than $500,000. 1 Excludes interest on reestimates. Additional information on credit reform subsidy rates is contained in the Federal Credit Supplement. 2 Includes rural water and waste disposal, rural community facilities, and rural business and industry programs. 3 Volume reestimates in mandatory loan guarantee programs represent a change in volume of loans disbursed in the prior years. These estimates are the result of guarantee programs where data from loan issuers on actual disbursements of loans are not received until after the close of the fiscal year. 4 Closing reestimate executed in fiscal year 2002. 102 ANALYTICAL PERSPECTIVES Table 7–3. DIRECT LOAN SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS, 2003–2005 (in millions of dollars) 2003 Actual Agency and Program Subsidy Subsidy budget rate 1 authority 2004 Enacted Subsidy Subsidy budget rate 1 authority Loan levels 2005 Proposed Subsidy Subsidy budget rate 1 authority Loan levels Loan levels Agriculture: Agricultural credit insurance fund .................................................................................... Farm storage facility loans .............................................................................................. Rural community advancement program ........................................................................ Rural electrification and telecommunications loans ........................................................ Rural telephone bank ....................................................................................................... Distance learning, telemedicine, and broadband program ............................................. Farm labor ........................................................................................................................ Rural housing insurance fund .......................................................................................... Rural development loan fund .......................................................................................... Rural economic development loans ................................................................................ Public law 480 title I ........................................................................................................ 14.71 1.28 10.00 –0.85 1.38 1.30 49.02 22.47 48.26 21.36 62.84 155 2 104 –38 2 1 30 269 19 3 51 1,054 147 1,040 4,454 168 77 61 1,197 40 15 81 Commerce: Fisheries finance .............................................................................................................. –5.52 –8 145 –2.44 –4 164 –13.33 –4 30 Defense—Military: Family housing improvement fund .................................................................................. 21.71 28 129 69.23 153 221 34.22 181 529 269 .............. .............. 21,013 –2.93 –648 170 22,287 Education: College housing and academic facilities loans ............................................................... .............. .............. Federal direct student loan program ............................................................................... –1.50 –318 Homeland Security: Disaster assistance direct loan ........................................................................................ –4.10 –1 Housing and Urban Development: FHA-mutual mortgage insurance ..................................................................................... .............. .............. FHA-general and special risk .......................................................................................... .............. .............. 13.10 109 0.46 .............. 1.96 30 –1.73 –76 –4.32 –7 2.30 49 42.73 18 12.11 184 43.27 17 18.61 3 78.90 30 269 .............. .............. 21,205 –1.19 –250 25 –2.02 –1 50 .............. .............. 50 .............. .............. 832 8.11 74 912 82 –2.44 –2 82 1,532 7.85 102 1,300 4,404 –1.15 –35 3,035 174 .............. .............. .............. 2,131 2.75 8 291 42 47.06 20 42 1,520 13.48 164 1,217 40 46.38 16 34 15 18.79 5 25 38 86.42 26 30 25 –2.60 –1 25 50 .............. .............. 50 .............. .............. 50 50 State: Repatriation loans ............................................................................................................ 80.00 1 1 70.75 1 1 69.73 1 1 Transportation: Federal-aid highways ....................................................................................................... 7.10 10 140 5.96 127 2,400 5.94 131 2,400 Treasury: Community development financial institutions fund ........................................................ 32.85 1 4 34.37 4 11 36.52 4 11 Veterans Affairs: Vocational rehabilitation and employment administration ............................................... Housing ............................................................................................................................. 1.50 .............. –1.54 –7 3 566 1.33 .............. –0.44 –5 4 1,135 1.14 .............. –4.49 –77 4 1,715 International Assistance Programs: Foreign military financing loan ......................................................................................... .............. .............. 3,800 –0.05 .............. 550 .............. .............. .............. Debt restructuring ............................................................................................................. .............. 211 .............. .............. 59 .............. .............. 105 .............. Overseas Private Investment Corporation ...................................................................... 4.97 20 394 16.78 24 143 17.12 19 111 Small Business Administration: Disaster loans .................................................................................................................. Business loans ................................................................................................................. 15.21 13.05 117 4 769 29 11.72 9.55 56 2 758 20 Export-Import Bank of the United States: Export-Import Bank loans ................................................................................................ 1.72 1 58 34.00 17 50 34.00 17 50 Total ............................................................................................................................. N/A 657 35,971 N/A 540 37,674 N/A 185 35,015 N/A = Not applicable. 1 Additional information on credit subsidy rates is contained in the Federal Credit Supplement. 12.86 79 614 10.25 .............. .............. 103 7. CREDIT AND INSURANCE Table 7–4. LOAN GUARANTEE SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS, 2003–2005 (in millions of dollars) 2003 Actual Agency and Program Subsidy Subsidy budget rate 1 authority 2004 Enacted Loan levels Agriculture: Agricultural credit insurance fund .................................................................................... 3.38 90 2,662 Commodity Credit Corporation export loans ................................................................... 4.10 170 4,146 Rural community advancement program ........................................................................ 3.28 35 1,067 Rural electrification and telecommunications loans ........................................................ 0.08 .............. .............. Distance learning, telemedicine, and broadband program ............................................. .............. .............. .............. Local television loan guarantee ....................................................................................... .............. .............. .............. Rural housing insurance fund .......................................................................................... 1.22 39 3,186 Rural business investment ............................................................................................... 20.00 .............. .............. Subsidy Subsidy budget rate 1 authority 27.69 69 Defense—Military: Procurement of ammunition, Army .................................................................................. Family housing improvement fund .................................................................................. 3.34 3.70 1 7 17 189 3.38 1.54 1 4 Education: Federal family education loan ......................................................................................... 9.57 6,411 66,976 9.19 6,501 Health and Human Services: Health education assistance loans .................................................................................. Health resources and services ........................................................................................ 15.76 3.65 16 1 100 4 16.48 4.68 25 1 Housing and Urban Development: Indian housing loan guarantee fund ................................................................................ Native Hawaiian housing loan guarantee fund ............................................................... Native American housing block grant ............................................................................. Community development loan guarantees ...................................................................... FHA-mutual mortgage insurance ..................................................................................... FHA-general and special risk .......................................................................................... 2.43 2.43 11.07 2.30 –2.53 –1.02 5 197 1 40 2 17 6 275 –3,584 165,000 –254 25,000 2.73 2.73 10.56 2.30 –2.47 –1.17 Interior: Indian guaranteed loan .................................................................................................... 6.91 Loan levels 72 6.13 16 .............. .............. .............. 259 9.65 14 145 70,760 7,050 71,349 150 .............. .............. .............. 17 5.64 1 17 5 84 6.76 5 86 2.53 .............. 4.77 10 6.10 25 18 200 410 2.08 4.68 6.76 1 9 25 18 200 370 13.70 180 1,276 –8.93 –3 Veterans Affairs: Veterans housing benefit program .................................................................................. 0.83 547 66,074 0.58 275 1,600 .............. .............. 280 3.11 21 712 1.81 5 30 .............. .............. .............. 47,312 –86 41,829 3,460 .............. .............. 675 4.31 21 276 0.49 3 3,650 487 615 20,986 .............. .............. 29,000 11,976 Small Business Administration: Business loans ................................................................................................................. 0.77 118 15,318 0.38 79 Export-Import Bank of the United States: Export-Import Bank loans ................................................................................................ 3.06 320 10,449 3.03 349 11,507 0.14 .............. 200 Presidio Trust: Presidio Trust ................................................................................................................... .............. .............. .............. 9.47 5 197 2.58 1 29 1 40 2.58 1 37 2 18 10.32 2 18 6 275 .............. .............. .............. –3,545 185,000 –1.73 –2,627 185,000 –293 25,000 –0.69 –242 35,000 Treasury: Air transportation stabilization 2 ....................................................................................... Total ............................................................................................................................. Subsidy Subsidy budget rate 1 authority 250 .............. .............. .............. .............. .............. .............. Transportation: Minority business resource center program .................................................................... 2.69 .............. 9 Federal-aid highways ....................................................................................................... .............. .............. .............. Maritime guaranteed loan (title XI) .................................................................................. 6.09 21 345 International Assistance Programs: Loan guarantees to Israel ................................................................................................ .............. .............. Development credit authority ........................................................................................... 6.44 18 Overseas Private Investment Corporation ...................................................................... –8.01 –57 Loan levels 3.27 79 2,416 2.83 81 2,866 6.96 289 4,155 6.82 309 4,528 2.99 25 837 3.28 29 885 0.06 .............. 99 0.06 .............. 100 3.75 3 80 5.00 2 40 8.46 44 520 .............. .............. .............. 1.64 46 2,808 1.31 37 2,825 20.00 .............. .............. 20.00 .............. .............. Commerce: Emergency steel guaranteed loan ................................................................................... 5 2005 Proposed –0.21 3.94 474 0.05 .............. .............. N/A 4,167 365,261 N/A 3,960 377,805 N/A 5,110 391,070 –0.33 –398 252,870 –0.27 –405 200,000 –0.23 –368 200,000 ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS GNMA: Guarantees of mortgage-backed securities loan guarantee .......................................... N/A = Not applicable. 1 Additional information on credit subsidy rates is contained in the Federal Credit Supplement. 2 Numbers shown for 2004 include estimates for loan guarantees that have received either conditional or final approval. This presentation should not be construed as prejudging the outcome of the Air Transportation Stabilization Board’s deliberations. The Board does not anticipate making any loan guarantees in 2005. 104 ANALYTICAL PERSPECTIVES Table 7–5. SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES (In billions of dollars) Actual 1998 1999 Estimate 1996 1997 2000 2001 2002 Direct Loans: Obligations .............................................................. Disbursements ........................................................ New subsidy budget authority 2 ............................. Reestimated subsidy budget authority 1 ................ Total subsidy budget authority 3 ............................ 23.4 23.6 * ................ 1.8 33.6 32.2 * ................ 2.4 28.8 28.7 –0.8 7.3 6.5 38.4 37.7 1.6 1.0 2.6 37.1 35.5 –0.4 –4.4 –4.8 39.1 37.1 0.3 –1.8 –1.5 43.7 39.6 * 0.5 0.5 45.4 39.7 0.7 2.9 3.5 46.4 39.0 0.5 2.3 2.8 44.5 41.5 0.2 ................ 0.2 Loan Guarantees: Commitments .......................................................... Lender disbursements ............................................ New subsidy budget authority 2 ............................. Reestimated subsidy budget authority 1 ................ Total subsidy budget authority ............................... 175.4 143.9 * ................ 4.0 172.3 144.7 * ................ 3.6 218.4 199.5 3.3 –0.7 2.6 252.4 224.7 * 4.3 4.3 192.6 180.8 3.6 0.3 3.9 256.4 212.9 2.3 –7.1 –4.8 303.7 271.4 2.9 –2.4 0.5 345.9 331.3 3.8 –3.5 0.3 338.4 318.1 3.6 1.5 5.0 349.5 333.5 4.7 ................ 4.7 * Less than $50 million. 1 Includes interest on reestimate. 2 Prior to 1998 new and reestimated subsidy budget authority were not reported separately. 3 GNMA secondary guarantees of loans that are guaranteed by FHA, VA and RHS are excluded from the totals to avoid double-counting. 2003 2004 2005 105 7. CREDIT AND INSURANCE Table 7–6. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS In millions of dollars Agency and Program As a percentage of outstanding loans 1 2003 actual 2004 estimate 2005 estimate 2003 actual 2004 estimate Agriculture: Agricultural credit insurance fund ............................................................................................................... Farm storage facility loans program .......................................................................................................... Rural community advancement program ................................................................................................... Rural electrification and telecommunications loans ................................................................................... Rural telephone bank .................................................................................................................................. Rural development insurance fund ............................................................................................................. Rural housing insurance fund .................................................................................................................... Rural development loan fund ..................................................................................................................... P.L.480 ........................................................................................................................................................ Debt reduction (P.L.480) ............................................................................................................................. 158 1 5 ................. ................. 1 153 1 34 ................. 151 1 .............. 109 .............. 1 142 1 .............. 29 140 .............. .............. 98 3 1 135 1 .............. 37 1.95 0.54 0.07 ................. ................. 0.03 0.57 0.25 0.32 ................. 1.99 0.44 ................ 0.34 ................ 0.04 0.54 0.24 ................ 6.44 ................ 0.29 0.44 0.04 0.53 0.23 ................ 6.85 Commerce: Economic development revolving fund ....................................................................................................... 1 1 1 3.84 4.54 5.55 Education: Student financial assistance ....................................................................................................................... 3 4 4 0.92 1.24 1.26 Housing and Urban Development: Revolving fund (liquidating programs) ........................................................................................................ Guarantees of mortgage-backed securities ............................................................................................... 1 3 1 4 1 21 8.33 2.91 16.66 3.47 25.00 16.53 Interior: Indian direct loan ........................................................................................................................................ 2 2 2 3.92 4.44 5.12 Labor: Pension Benefit Guaranty Corporation ....................................................................................................... 5 11 39 ................. ................ ................ State: Repatriation loans ....................................................................................................................................... ................. 1 .............. ................. 33.33 ................ Transportation: Railroad rehabilitation and improvement .................................................................................................... ................. 2 4 ................. 0.85 0.98 Treasury: Community development financial institutions fund ................................................................................... ................. .............. 1 ................. ................ 1.58 Veterans Affairs: Veterans housing benefit program ............................................................................................................. 15 13 11 0.87 0.75 0.59 International Assistance Programs: Military debt reduction ................................................................................................................................. Debt reduction (AID) ................................................................................................................................... Overseas Private Investment Corporation ................................................................................................. ................. ................. ................. .............. 19 1 14 13 1 ................. ................. ................. ................ 10.61 0.47 5.83 7.64 0.38 Small Business Administration: Disaster loans ............................................................................................................................................. Business loans ............................................................................................................................................ 47 11 43 10 43 9 1.39 3.23 1.35 3.54 1.18 4.05 Other Independent Agencies: Export-Import Bank ..................................................................................................................................... Debt reduction (ExIm Bank) ....................................................................................................................... Spectrum auction program ......................................................................................................................... Tennessee Valley Authority ........................................................................................................................ 570 13 95 1 48 17 .............. 1 45 41 .............. 1 5.17 4.65 1.82 2.08 0.47 3.61 ................ 1.81 0.48 8.24 ................ 1.63 Total, direct loan writeoffs .................................................................................................................. 1,119 612 667 0.50 0.27 0.28 Agriculture: Agricultural credit insurance fund ............................................................................................................... Commodity Credit Corporation export loans .............................................................................................. Rural community advancement program ................................................................................................... Rural electrification and telecommunications loans ................................................................................... Rural development insurance fund ............................................................................................................. Rural housing insurance fund .................................................................................................................... 92 102 72 ................. 27 170 77 172 60 6 .............. 117 80 184 55 6 .............. 121 0.92 2.38 1.66 ................. 41.53 1.25 0.73 3.81 1.36 0.57 ................ 0.85 0.72 3.27 1.27 0.37 ................ 0.87 Commerce: Emergency oil and gas guaranteed loan program .................................................................................... Emergency steel guaranteed loan program ............................................................................................... ................. ................. 1 32 .............. 12 ................. ................. 100.00 15.53 ................ 5.74 Defense—Military: Family housing improvement fund ............................................................................................................. ................. 3 4 ................. 0.78 1.06 2005 estimate DIRECT LOAN WRITEOFFS 1.98 GUARANTEED LOAN TERMINATIONS FOR DEFAULT 106 ANALYTICAL PERSPECTIVES Table 7–6. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS—Continued In millions of dollars Agency and Program 2003 actual As a percentage of outstanding loans 1 2004 estimate 2005 estimate 2003 actual 2004 estimate 2005 estimate Education: Federal family education loan .................................................................................................................... 3,509 4,708 5,334 1.77 2.08 2.12 Health and Human Services: Health education assistance loans ............................................................................................................. 56 58 58 2.42 2.43 2.44 Housing and Urban Development: Indian housing loan guarantee ................................................................................................................... Title VI Indian Federal guarantees program .............................................................................................. FHA—Mutual mortgage insurance ............................................................................................................. FHA—General and special risk .................................................................................................................. ................. ................. 7,410 1,740 1 1 4,681 1,903 1 1 4,533 1,773 ................. ................. 1.69 1.87 1.56 1.36 1.08 2.13 1.38 1.25 0.90 1.90 Interior: Indian guaranteed loan ............................................................................................................................... 1 1 1 0.38 0.32 0.28 Transportation: Maritime guaranteed loan (Title XI) ........................................................................................................... ................. 30 35 ................. 0.81 0.87 Treasury: Air transportation stabilization ..................................................................................................................... ................. 448 60 ................. 29.35 5.18 Veterans Affairs: Veterans housing benefit program ............................................................................................................. 1,345 2,917 3,016 0.45 0.85 0.79 International Assistance Programs: Foreign military financing ............................................................................................................................ Micro and small enterprise development ................................................................................................... Urban and environmental credit program .................................................................................................. Development credit authority ...................................................................................................................... Overseas Private Investment Corporation ................................................................................................. ................. 3 54 ................. 33 3 1 41 1 45 11 1 42 1 45 ................. 7.69 2.71 ................. 0.99 0.09 1.81 2.23 1.11 1.37 0.37 1.33 2.49 0.56 1.27 Small Business Administration: Business loans ............................................................................................................................................ Pollution control equipment ........................................................................................................................ 1,255 ................. 2,325 1 1,272 1 2.65 ................. 4.19 16.66 2.03 33.33 Other Independent Agencies: Export-Import Bank ..................................................................................................................................... 215 368 391 0.66 1.07 1.11 Total, guaranteed loan terminations for default .............................................................................. 16,084 18,001 17,038 0.95 1.02 0.87 Total, direct loan writeoffs and guaranteed loan terminations ...................................................... 17,203 18,613 17,705 0.90 0.94 0.81 1 1 1 11.11 11.11 11.11 13 .............. .............. 28.26 ................ ................ 213 196 198 1.16 1.08 1.05 26 24 24 2.93 2.68 2.65 2 309 .............. 362 .............. 354 1.63 10.61 ................ 11.06 ................ 9.43 18 3 .............. 51.42 13.63 ................ ................. .............. 383 ................. ................ 150.78 87 83 95 7.63 6.87 6.97 40 .............. .............. 8.43 ................ ................ 543 302 574 28.10 9.98 14.33 1,252 971 1,629 3.93 2.83 4.46 ADDENDUM: WRITEOFFS OF DEFAULTED GUARANTEED LOANS THAT RESULT IN LOANS RECEIVABLE Agriculture: Agricultural credit insurance fund ............................................................................................................... Commerce: Fisheries finance ......................................................................................................................................... Education: Federal family education loan .................................................................................................................... Health and Human Services: Health education assistance loans ............................................................................................................. Housing and Urban Development: FHA—Mutual mortgage insurance ............................................................................................................. FHA—General and special risk .................................................................................................................. Interior: Indian guaranteed loan ............................................................................................................................... Treasury: Air transportation stabilization ..................................................................................................................... Veterans Affairs: Veterans housing benefit program ............................................................................................................. International Assistance Programs: Urban and environmental credit program .................................................................................................. Small Business Administration: Business loans ............................................................................................................................................ Total, writeoffs of loans receivable ................................................................................................... 1 Average of loans outstanding for the year. 107 7. CREDIT AND INSURANCE Table 7–7. APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS 1 (In millions of dollars) Agency and Program Estimate 2003 Actual 2004 2005 DIRECT LOAN OBLIGATIONS Agriculture: Agricultural credit insurance fund ........................................................................................................................................................... Distance learning, telemedicine, and broadband ................................................................................................................................... Rural electrification and telecommunications ......................................................................................................................................... Rural telephone bank .............................................................................................................................................................................. Rural water and waste disposal direct loans ........................................................................................................................................ Rural housing insurance fund ................................................................................................................................................................ Rural community facility direct loans ..................................................................................................................................................... Rural economic development ................................................................................................................................................................. Rural development loan fund ................................................................................................................................................................. P.L. 480 direct credit .............................................................................................................................................................................. 1,006 300 4,454 172 789 1,260 255 15 40 44 844 898 4,404 174 1,032 1,563 500 15 40 38 937 291 3,035 ...................... 1,000 1,259 300 25 34 30 Commerce: Fisheries finance ..................................................................................................................................................................................... 24 24 30 Education: Historically black college and university capital financing ..................................................................................................................... 269 269 170 Homeland Security: Disaster Assistance Direct Loan Financing Account ............................................................................................................................. 25 25 25 Housing and Urban Development: FHA-general and special risk ................................................................................................................................................................. FHA-mutual mortgage insurance ............................................................................................................................................................ 50 50 50 50 50 50 Interior: Assistance to American Samoa ............................................................................................................................................................. 1 1 1 State: Repatriation loans ................................................................................................................................................................................... 1 1 1 Transportation: Transportation infrastructure finance and innovation program .............................................................................................................. Transportation infrastructure finance and innovation program line of credit ........................................................................................ 2,200 200 2,200 200 2,200 200 Treasury: Community development financial institutions fund ............................................................................................................................... 11 11 11 Veterans Affairs: Native American and transitional housing ............................................................................................................................................. Vocational rehabilitation and education ................................................................................................................................................. ...................... 3 50 4 30 4 International Assistance Programs: Foreign military financing ........................................................................................................................................................................ Military debt reduction ............................................................................................................................................................................. 3,800 ...................... 550 32 ...................... ...................... Small Business Administration: Business loans ........................................................................................................................................................................................ 25 20 ...................... Total, limitations on direct loan obligations ................................................................................................................................. 14,994 12,995 9,683 Agriculture: Agricultural credit insurance fund ........................................................................................................................................................... Rural electrification and telecommunications guaranteed loans ........................................................................................................... Rural water and waste water disposal guaranteed loans ..................................................................................................................... Distance learning and telemedicine ....................................................................................................................................................... Rural housing insurance fund ................................................................................................................................................................ Rural community facility guaranteed loans ............................................................................................................................................ Rural business and industry guaranteed loans ..................................................................................................................................... 2,766 ...................... 75 ...................... 3,186 210 845 2,401 100 75 ...................... 2,809 210 552 2,866 100 75 40 2,825 210 600 Defense—Military: Arms initiative .......................................................................................................................................................................................... 17 16 ...................... Health and Human Services: Health education assistance loans ......................................................................................................................................................... 160 150 ...................... Housing and Urban Development: Indian housing loan guarantee fund ...................................................................................................................................................... Title VI Indian Federal guarantees ......................................................................................................................................................... Native Hawaiian housing loan guarantee fund ...................................................................................................................................... Community development loan guarantees ............................................................................................................................................. 197 17 40 273 197 18 40 273 29 18 37 ...................... LOAN GUARANTEE COMMITMENTS 108 ANALYTICAL PERSPECTIVES Table 7–7. APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS 1—Continued (In millions of dollars) Agency and Program Estimate 2003 Actual 2004 2005 FHA-general and special risk ................................................................................................................................................................. FHA-mutual mortgage insurance ............................................................................................................................................................ 25,000 165,000 25,000 185,000 35,000 185,000 Interior: Indian loan guarantee ............................................................................................................................................................................. 72 84 86 Transportation: Minority business resource center ......................................................................................................................................................... Transportation infrastructure finance and innovation program loan guarantee .................................................................................... 18 200 18 200 18 200 International Assistance Programs: Loan guarantees to Israel ...................................................................................................................................................................... Development credit authority .................................................................................................................................................................. 3,000 ...................... 3,000 700 3,000 700 Small Business Administration: Business guarantee ................................................................................................................................................................................ 15,318 20,986 29,000 Total, limitations on loan guarantee commitments ..................................................................................................................... 216,394 241,829 259,804 Housing and Urban Development: Guarantees of mortgage-backed securities ........................................................................................................................................... 200,000 200,000 200,000 Total, limitations on secondary guaranteed loan commitments ............................................................................................... 200,000 200,000 200,000 ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS 1 Data represents loan level limitations enacted or proposed to be enacted in appropriation acts. For information on actual and estimated loan levels supportable by new subsidy budget authority requested, see Tables 7–3 and 7–4. 109 7. CREDIT AND INSURANCE Table 7–8. FACE VALUE OF GOVERNMENT-SPONSORED ENTERPRISE LENDING 2 (In billions of dollars) Outstanding Government Sponsored Enterprises: 1 Fannie Mae1 ....................................................................................... Freddie Mac 2 ..................................................................................... Federal Home Loan Banks 3 ............................................................. Sallie Mae 4 ........................................................................................ Farm Credit System ........................................................................... Total 2 ............................................................................................. 2002 2003 1,689 1,255 524 ...................... 83 3,551 2,086 N/A 758 ...................... 86 N/A N/A = Not applicable. 1 Net of purchases of federally guaranteed loans. 2 2003 financial data for Freddie Mac is not presented here because the company has not yet reported financial results for 2003. In addition, on November 21, 2003, Freddie Mac announced the results of its restatement of previously issued consolidated financial statements for the years 2000 and 2001 and the first three quarters of 2002 and the revision of fourth quarter and full-year consolidated financial statements for 2002 (collectively referred to as the ‘‘restatement’’). This restatement has changed the data provided last year in the 2004 Budget. Restated data for 2002 has not yet been audited. 3 The lending by the Federal Home Loan Banks measures their advances to member thrift and other financial institutions. In addition, their investment in private financial instruments at the end of 2003 was $186 billion, including federally guaranteed securities, GSE securities, and money market instruments. The change between 2002 and 2003 is not comparable because of discontinuity in the data series. 4 The face value and Federal costs of Federal Family Education Loans in the Student Loan Marketing Association’s portfolio are included in the totals for that program under guaranteed loans in table 7–1. 110 ANALYTICAL PERSPECTIVES Table 7–9 LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs) 1,2 (In millions of dollars) Enterprise Student Loan Marketing Association: Net change ...................................................................................................... Outstandings .................................................................................................... Federal National Mortgage Association: Portfolio programs: Net change ...................................................................................................... Outstandings .................................................................................................... Mortgage-backed securities: Net change ...................................................................................................... Outstandings .................................................................................................... Federal Home Loan Mortgage Corporation: 1 Portfolio programs: Net change ...................................................................................................... Outstandings .................................................................................................... Mortgage-backed securities: Net change ...................................................................................................... Outstandings .................................................................................................... 2003 –14,009 27,923 162,939 922,672 220,989 1,210,263 N/A N/A N/A N/A Farm Credit System: Agricultural credit bank: Net change ...................................................................................................... Outstandings .................................................................................................... Farm credit banks: Net change ...................................................................................................... Outstandings .................................................................................................... Federal Agricultural Mortgage Corporation: Net change ...................................................................................................... Outstandings .................................................................................................... .......................... 6,000 Federal Home Loan Banks: Net change ...................................................................................................... Outstandings .................................................................................................... 232,687 770,499 Less guaranteed loans purchased by: Student Loan Marketing Association: Net change ...................................................................................................... Outstandings .................................................................................................... Federal National Mortgage Association: Net change ...................................................................................................... Outstandings .................................................................................................... Other: Net change 3 .................................................................................................... Outstandings 1 .................................................................................................. 2,997 23,463 188 58,353 –14,009 27,923 –12,843 47,300 N/A 13,897 BORROWING Student Loan Marketing Association: Net change ...................................................................................................... Outstandings .................................................................................................... Federal National Mortgage Association: Portfolio programs: Net change ...................................................................................................... Outstandings .................................................................................................... Mortgage-backed securities: Net change ...................................................................................................... Outstandings .................................................................................................... Federal Home Loan Mortgage Corporation: 1 Portfolio programs: Net change ...................................................................................................... Outstandings .................................................................................................... Mortgage-backed securities: Net change ...................................................................................................... Outstandings .................................................................................................... Farm Credit System: Agricultural credit bank: Net change ...................................................................................................... Outstandings .................................................................................................... –18,899 26,821 175,479 975,734 220,989 1,210,263 N/A N/A N/A N/A 3,938 26,451 111 7. CREDIT AND INSURANCE Table 7–9 LENDING AND BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES (GSEs) 1,2—Continued (In millions of dollars) Enterprise Farm credit banks: Net change ...................................................................................................... Outstandings .................................................................................................... Federal Agricultural Mortgage Corporation: Net change ...................................................................................................... Outstandings .................................................................................................... Federal Home Loan Banks: Net change ...................................................................................................... Outstandings .................................................................................................... 2003 4,255 68,049 764 3,838 49,325 716,886 DEDUCTIONS Less borrowing from other GSEs: Net change 3 .................................................................................................... Outstandings 1 .................................................................................................. Less purchase of Federal debt securities: Net change 3 .................................................................................................... Outstandings 1 .................................................................................................. Less borrowing to purchase loans guaranteed by: Student Loan Marketing Association: Net change ...................................................................................................... Outstandings .................................................................................................... Federal National Mortgage Association: Net change ...................................................................................................... Outstandings .................................................................................................... Other: Net change 3 .................................................................................................... Outstandings 1 .................................................................................................. N/A 78,370 N/A 3,094 –14,009 27,923 –12,843 47,300 N/A 13,897 N/A = Not applicable. The estimates of borrowing and lending were developed by the GSEs based on certain assumptions that are subject to periodic review and revision and do not represent official GSE forecasts of future activity, nor are they reviewed by the President. The data for all years include programs of mortgage-backed securities. In cases where a GSE owns securities issued by the same GSE, including mortgage-backed securities, the borrowing and lending data for that GSE are adjusted to remove double-counting. 1 Financial data for Freddie Mac is not presented here because the company has not yet reported financial results for 2003. In addition, on November 21, 2003, Freddie Mac announced the results of its restatement of previously issued consolidated financial statements for the years 2000 and 2001 and the first three quarters of 2002 and the revision of fourth quarter and full-year consolidated financial statements for 2002 (collectively referred to as the ‘‘restatement’’). This restatement has changed the data provided last year in the 2004 Budget. Restated data for 2002 has not yet been audited. 2 Totals and subtotals have not been calculated because a substantial portion of the total, Freddie Mac, is subject to the above-described restatement. 3 Not calculated due to discontinuity in the data series. 8. AID TO STATE AND LOCAL GOVERNMENTS 1 State and local governments have a vital constitutional responsibility to provide government services. They have the major role in providing domestic public services, such as public education, law enforcement, roads, water supply, and sewage treatment. The Federal Government contributes to that role by promoting a healthy economy. It also provides grants, loans, and tax subsidies to State and local governments. Federal grants help State and local governments finance programs covering most areas of domestic public spending, including income support, infrastructure, education, and social services. Federal grant outlays were $387.3 billion in 2003 and are estimated to be $418.1 billion in 2004 and $416.5 billion in 2005. The reduction from 2004 to 2005 is due primarily to temporary grant increases in 2003 and 2004 for Medicaid and fiscal assistance that were enacted as part of the economic recovery proposals. Grant outlays to State and local governments for individuals, such as Medicaid payments, are estimated to be 65 percent of total grants in 2005; grant outlays for physical capital investment, 15 percent; and grant outlays for all other purposes, largely education, training, and social services, 20 percent. Some tax expenditures also constitute Federal aid to State and local governments. Tax expenditures stem from special exclusions, exemptions, deductions, credits, deferrals, or tax rates in the Federal tax laws. The deductibility of State and local personal income and property taxes from gross income for Federal income tax purposes and the exclusion of interest on State and local public purpose bonds from Federal taxation comprise the two largest tax expenditures benefiting State and local governments. These provisions, on an outlay equivalent basis, are estimated to be $103 billion in 2005. Chapter 18, ‘‘Tax Expenditures,’’ of this volume provides a detailed discussion of the measurement and definition of tax expenditures and a complete list of the estimated costs of specific tax expenditures. As discussed in that chapter, there are generally inter- actions among tax expenditure provisions, so that the total cost estimates only approximate the aggregate effect of these provisions. Tax expenditures that especially aid State and local governments are displayed separately at the end of Table 18–5 in that chapter, and also at the ends of Tables 18–1 and 18–2. For the first time, this chapter includes information on the performance of selected grant programs based on the Program Assessment Rating Tool. An Appendix to this chapter includes State-by-State estimates of major grant programs. Table 8–1. FEDERAL GRANT OUTLAYS BY AGENCY (In billions of dollars) Estimate 2003 Actual 2003 2004 Department of Agriculture .................................................. Department of Commerce ................................................. Department of Education ................................................... Department of Energy ........................................................ Department of Health and Human Services ..................... Department of Homeland Security .................................... Department of Housing and Urban Development ............ Department of the Interior ................................................. Department of Justice ........................................................ Department of Labor .......................................................... Department of Transportation ............................................ Department of the Treasury .............................................. Department of Veterans Affairs ......................................... Environmental Protection Agency ...................................... Other agencies ................................................................... 23.2 0.6 32.5 0.3 222.0 8.0 31.8 3.0 4.1 8.9 41.0 5.4 0.4 3.9 2.0 23.9 0.9 38.6 0.3 240.3 7.2 34.1 3.2 3.8 7.8 43.5 5.5 0.4 4.3 4.4 24.0 0.6 39.1 0.3 245.6 7.0 34.1 3.5 3.6 6.8 44.9 0.4 0.5 3.8 2.5 Total ............................................................................... 387.3 418.1 416.5 Table 8–1 shows the distribution of grants by agency. Grant outlays by the Department of Health and Human Services are estimated to be $245.6 billion in 2005, almost 60 percent of total grant outlays. Grant outlays for the Department of the Treasury decline in 2005 due to temporary fiscal assistance grants enacted for 2003 and 2004 as part of the economic recovery proposals. HIGHLIGHTS OF THE FEDERAL AID PROGRAM Several proposals in this budget affect Federal aid to State and local governments and the important relationships between the levels of government. Through the use of grants, the Federal Government shares with State and local governments the cost and, ultimately, the benefits of a better educated, healthier, and safer citizenry. The Administration intends to work with State and local governments to make the Federal sys- tem more efficient and effective and to improve the design, administration, and financial management of Federal grant programs. The Administration will achieve these goals through various efforts. In programs where the Federal Government and State and local governments partner in the provision of services, State and local government involvement is critical to improving the performance of Federal pro- 1 Federal aid to State and local governments is defined as the provision of resources by the Federal Government to support a State or local program of governmental service to the public. The three primary forms of aid are grants, loan subsidies, and tax expenditures. 113 114 grams. To date, the Administration has rated the effectiveness of about two fifths of all Federal programs using the Program Assessment Rating Tool (PART). On average, grant programs received lower ratings than other types of programs, which suggests the need for strengthening partnerships and accountability for achieving program outcomes. In support of the Administration’s initiative to identify and eliminate erroneous payments, managers of several programs jointly administered by the Federal Government and the States, including Medicaid and the School Lunch program, are developing methodologies to estimate improper payment rates, identify the causes and remedy them. The passage of the Improper Payments Information Act of 2002 codified the requirement of the President’s initiative to estimate the extent of erroneous payments for all Federal programs and activities. Following the passage of the Act, OMB issued guidance to agencies to assist with the expanded reporting requirements in the statute. Now, all major agencies are beginning to develop and implement plans to identify and eliminate erroneous payments within all programs and activities. In addition, under the auspices of the Federal Financial Assistance Management Improvement Act of 1999 (PL 106–107) and the Administration’s Grant.Gov initiative, the Federal grant making agencies have worked individually and collectively to improve and streamline the efficiency of grant programs. Particularly, in 2003, the Federal Government has realized its objectives to: • establish a single website to house synopses of Federal grant funding opportunities; • develop and implement a standard format for communicating the details of those funding opportunities; and • enable electronic receipt of applications. Highlights of grants to State and local governments are presented below. For additional information on grants, see Table 8–4 in this Chapter, and discussions in the main budget volume. Homeland Security Because homeland security is a national challenge, not just a Federal challenge, State, local, regional, and tribal governments are vital to fighting terrorism and safeguarding our homeland. From 2001 through 2004, the Department of Homeland Security (DHS) and its predecessor agencies provided over $11 billion for terrorism and other emergency preparedness needs of State and local responders. When combined with funds in the Departments of Health and Human Services (HHS) and Justice (DOJ), State and local assistance has totaled $15.8 billion. This funding has allowed unprecedented investments in critical equipment, hundreds of coordinated exercises, training for over 500,000 first responders, and development of a homeland security strategy for every State and most major cities. These funds have also enabled a dramatic expansion of Citizen Corps initiatives, enabling community-based volunteers to support ANALYTICAL PERSPECTIVES front-line responders. A major challenge for the Department is to ensure that such grant funds are used effectively. The Federal Government has provided an enormous investment in these programs and these funds must be targeted to leverage State and local resources to meet terrorist threats, and not simply supplant State and local public safety funding. To that end, DHS is developing national domestic preparedness goals that will establish measurable targets that encompass readiness for various hazards, including terrorist attacks, major disasters, and other emergencies. The 2005 Budget request provides funding of $3.6 billion in the Office for Domestic Preparedness to continue these enhancements and achieve national preparedness goals—including a doubling of the Urban Area Security Initiative (UASI), which has provided more than $1.5 billion over the last two years for ‘‘highthreat’’ urban areas. This shifting away from arbitrary formulas to ‘‘high-threat’’ allocations will enable the Department to reinvigorate its commitment to providing homeland security funds based on terrorism risks, threats, and vulnerabilities. DHS will also continue grants for law enforcement terrorism prevention efforts, and direct grants to improve the response of fire departments to terrorism and other major incidents. Education Leaving no child behind. When President Bush entered office, two-thirds of all low-income fourth graders could not read on grade level, and the achievement gap between rich and poor was growing. On January 8, 2002, President Bush signed into law the No Child Left Behind Act and forever changed public education in America. Local schools are now held accountable for rigorous achievement goals for all students, parents are provided with detailed information on school performance, and students in under-performing schools have the option to attend a school that demonstrates results. The 2005 Budget continues the President’s unprecedented commitment to K-12 education and to helping schools meet the new challenges of No Child Left Behind, providing $13.3 billion for Title I grants, a $1.0 billion increase from last year, and a $4.6 billion, or 52 percent, increase since the President took office. With the 2005 Budget, funding for reading programs will have increased more than four-fold since 2001— for a total of $1.3 billion—with a goal that every child be able to read at grade level or above by the end of third grade. Renewing America’s commitment to students with special needs. America’s schools need better tools to improve services for students with disabilities—11 percent of all students. The President is committed to reforms for Federal special education programs that increase accountability for results, reduce administrative burdens on States and schools, enhance the role of parents, and ensure that research-based practices are widely used. The 2005 Budget demonstrates the President’s commitment to serving students with disabilities by providing $11.1 billion for Special Education Grants 8. AID TO STATE AND LOCAL GOVERNMENTS to States, a $1.0 billion increase from last year, and a $4.7 billion (or 75 percent) increase since the President took office. Training and Employment The Administration will continue pressing in 2005 for significant improvements in existing Federal employment and training programs. The Administration is requesting $4.3 billion in budget authority for 2005 for grants in the training and employment services programs in the Department of Labor (DOL) to support these activities. The Workforce Investment Act’s (WIA) expiration presents an opportunity to improve Federal employment and training programs by eliminating redundancies, strengthening resource allocation, improving accountability, enhancing the role of employers in the national workforce system, and increasing State flexibility. The Administration proposes to: • Clarify roles and eliminate overlap. The Administration proposes to target resources more effectively by increasing State flexibility. • Combine three programs into a single adult training grant. The new grant proposes to consolidate the WIA adult and dislocated worker programs and Employment Service State grants into a single funding stream. This reform will give States and DOL greater ability to target resources where needed, promote coordination, and eliminate duplication among current services for adults. • Tap unused resources to target areas of need. For the past few years, large amounts of WIA State formula grants funding have remained unspent in the Federal Treasury at the end of the year. In 2004, these balances will exceed $1.4 billion. While total unexpended balances remain high, some States and localities have exhausted the resources available to them. The 2005 Budget uses unspent formula grant balances to maintain or increase service levels and provide more flexibility to DOL and States to reallocate and target funding where it is most needed. • Focus the Department of Labor’s role in serving youth. The reformed program will minimize overlap identified in the Program Assessment Rating Tool (PART) between DOL and the Department of Education. Through targeted formula grants and competitive grants, the reformed program will focus DOL’s resources on out-of-school youth programs and non-school programs that support academic achievement. The competitive grants will support programs designed to help youth acquire the skills, credentials, and experience they need to succeed in the labor market. • Continue program eliminations proposed in the 2004 Budget. This budget continues to recommend serving all workers through the core WIA system and ending narrow-purpose programs identified as ineffective or duplicative. The budget pro- 115 poses the elimination of the Migrant and Seasonal Farmworkers program deemed ‘‘ineffective’’ by the PART and the H-1B Training Grants, which have not been proven successful in raising the skills of U.S. workers in specialty occupations. Social Services In April 2002, building on his Administration’s emphasis on preschool programs, President Bush announced the Good Start, Grow Smart preschool education initiative with three goals: • Strengthening Head Start; • Partnering with States to improve early childhood education; and • Providing information on child development and early learning to teachers, caregivers, parents, and grandparents and closing the gap between research and practice in early childhood education. The initiative recognizes that for Head Start, achieving program goals means not only improving children’s health and nutrition, but preparing them to succeed in kindergarten and beyond. Research shows that Head Start can achieve better school-readiness for its children by specifying particular skills and abilities to be taught in pre-reading, language, mathematics, cognitive skills and social/emotional competencies. To support this goal, the Administration has proposed a new demonstration authority permitting States to assume financial and operational control of Head Start. The budget increases Head Start by $169 million, including $45 million in additional Head Start funding in 2005 to support State implementation of the demonstration authority to promote better coordination of existing programs, to improve services for families and children, and to achieve better results with the resources already being used. This budget requests $6.9 billion in budget authority for Head Start for 2005. Income Support Food and nutrition assistance. The Administration strongly supports child nutrition programs and seeks to ensure that all eligible children are served. The Administration wants to work with the Congress to make improvements in program integrity and well targeted investments to improve the nutritional quality of meals. The budget fully funds child nutrition and provides for the extension of a number of expiring provisions to ensure that all aspects of the program continue to operate without interruption. The Special Supplemental Nutrition Program for Women, Infants and Children, more commonly known as the WIC Program, serves the nutritional needs of low-income pregnant and post-partum women, infants, and children up to their fifth birthday. The President’s Budget reproposes a WIC reauthorization plan to provide $4.7 billion for WIC services, full funding for all those estimated to be eligible and seeking services. If these funds are insufficient, the Administration will work with the Congress to ensure eligible individuals seeking services can access this important program. In addition, the funds will support: a breastfeeding peer 116 counselor program to target nutrition education and information to increase breastfeeding initiation and duration; test programs to see if WIC can help prevent childhood obesity; an independent, comprehensive evaluation of the effectiveness of the WIC program; and efforts to improve State WIC agencies’ management information systems. In 2003, Congress enacted the Administration-proposed contingency fund, which remains available, to ensure that the WIC program can expand to serve an increasing number of eligible persons should that be necessary. Housing assistance. The Administration is requesting $24.2 billion in budget authority for housing assistance to State and local governments for 2005. Major housing initiatives for this budget include homeless assistance and housing vouchers. Homeless assistance. The Administration continues the commitment made in 2002 to end chronic homelessness within a decade. Innovative local strategies are being funded through a variety of interagency initiatives to move chronically homeless individuals from the street to permanent supportive housing and to prevent such people from falling into homelessness in the first place. The chronically homeless are a sub-population of perhaps 150,000 individuals who often have an addiction or suffer from a disabling physical or mental condition. They are homeless for extended periods of time or experience multiple episodes of homelessness. Research indicates that although these individuals may comprise less than 10 percent of the homeless population, they consume a disproportionately large amount of emergency homeless services because their needs are not comprehensively addressed. Thus, they remain in the homeless system or on the street. To help realize the Administration’s goal, the U.S. Interagency Council on Homelessness has been working closely with communities across the country to create local plans. Already, 41 States have created State interagency councils to combat homelessness, and 80 cities and counties have agreed to develop 10-year plans. This budget requests $1.3 billion in budget authority for Department of Housing and Urban Development (HUD) homeless assistance grants for 2005. Housing vouchers. The Housing Choice Voucher program provides two million low-income families with subsidies to help them afford a decent place to live. They pay 30 percent of their income; the Government pays the rest. In the past, funds have been appropriated for a specific number of units each year. These funds were then given to public housing agencies (PHAs) based on the number of vouchers they were awarded. HUD and the Congress are concerned that voucher costs have increased at a rate of more than double the average increase in the private rental market for the past two years. This rate of increase, combined with an extremely complex set of laws and rules that govern the program has limited the effectiveness of the program. ANALYTICAL PERSPECTIVES The Administration proposes to simplify the program and give more flexibility to PHAs to administer the program to better address local needs. Building on changes in the 2004 Consolidated Appropriations bill, the Administration proposes switching from a ‘‘unitbased’’ approach to a ‘‘dollar-based’’ approach. PHAs would receive a fixed dollar amount but would have the freedom to adjust the program to the unique and changing needs of their community, including the ability to set their own rents based on local market conditions rather than having HUD predict and set rents for every market in the nation. These changes would provide a more efficient and effective program by eliminating large balances of unused resources (a concern noted in the 2004 PART review) and helping low-income families more easily obtain decent, safe, affordable housing. This budget requests $12.6 billion in budget authority for grants for housing vouchers for 2005. Other income security. In 1996, the Congress passed legislation to create the Temporary Assistance for Needy Families (TANF) program, replacing Aid to Families with Dependent Children and related welfare programs. TANF is a block grant with bonuses for performance, with estimated grant outlays of $18.4 billion in 2005. States have significant flexibility in designing the eligibility criteria and benefit rules for their TANF programs, which require and reward work in exchange for time-limited benefits. TANF is considered one of the most successful federally-funded domestic programs in decades. Nationally, the TANF caseload (number of cash recipients) has declined 60 percent since the program’s inception, while average monthly earnings of those employed increased by 49 percent from 1996 to 2001. As a result, States are using an increasing portion of welfare dollars on services to help individuals retain and advance in their jobs. Building on these successes, the Administration continues to pursue its plan to extend the TANF program. The Administration’s plan maintains funding, strengthens work participation requirements, supports healthy marriages and family formation, and provides a more accessible contingency fund. Health Medicaid and State Children’s Health Insurance Program (SCHIP). Close to 42 million individuals were enrolled in Medicaid in 2003. Medicaid covers approximately one-fourth of the Nation’s children and is the largest single purchaser of maternity care and nursing home/long-term care services in the United States. In 2003, the elderly and those with disabilities represented approximately 30 percent of Medicaid beneficiaries but account for two-thirds of its spending. Total Medicaid spending will be an estimated $322 billion ($182 billion Federal share) in 2005. SCHIP was established in 1997 to make available approximately $40 billion over ten years for States to provide health care coverage to low-income, uninsured children. SCHIP gives States broad flexibility in pro- 8. AID TO STATE AND LOCAL GOVERNMENTS gram design while protecting beneficiaries through Federal standards. Since the beginning of the Administration, enrollment in SCHIP has grown by over 1 million children, to approximately 5.3 million in 2002. Over the past year, the Administration has held productive discussions with stakeholders on ways to modernize the Medicaid and SCHIP programs based on an Administration proposal included in the 2004 Budget. A common complaint among States is that the complex array of Medicaid laws, regulations, and administrative guidance is confusing, overly burdensome, and serves to stifle State innovation and flexibility. The creation of the SCHIP program created new opportunities for States, but because rules governing Medicaid and SCHIP differ in significant respects, coordination of the two programs has proven difficult. As a result, States frequently request waivers to tailor their Medicaid and SCHIP programs to their specific insurance markets or to expand eligibility to the uninsured beyond mandatory groups. Years of States’ experience with implementing home and community based waiver programs, waiver programs to extend Medicaid coverage to higher income and non-traditional populations, and implementation of the SCHIP program provide States with a wealth of knowledge and a multitude of strategies to design more efficient and effective programs. Further, in August 2001, the Administration introduced the Health Insurance Flexibility and Accountability (HIFA) demonstration initiative. These experiences give States knowledge of the flexibility they need to design tailored, innovative approaches to increase access to health insurance coverage for the uninsured. The Administration remains committed to enacting legislation that will reform Medicaid and SCHIP to give States as much flexibility as possible with predictable financing. Health Centers. The Administration is requesting $1.8 billion for 2005 for grants to locally managed health centers. These centers deliver high-quality, affordable health care to over 13 million patients at 3,600 sites across the United States. These centers serve individuals that live in underserved and rural areas and their clients include low income individuals, migrant farm workers, homeless individuals, school children, individuals in need of drug and alcohol treatment, and HIV/AIDS infected individuals. In many areas, Health Centers are the only primary care facilities readily available. The President’s Health Centers Initiative is creating 1,200 new and expanded health center sites to serve an additional 6.1 million people by 2006. The budget would help more than 1.6 million additional low-income individuals receive health care in 2005 through 332 new and expanded sites in rural areas and underserved urban neighborhoods. Natural Resources and Environment This budget continues the President’s commitment to the Clean Water and Drinking Water State Revolving Funds (SRFs). SRFs provide States and commu- 117 nities with a long-term source of funding for water infrastructure to protect public health and the environment. Since the Clean Water SRF’s inception in 1988, EPA has provided nearly $20 billion of Federal investment, with over $5 billion provided since 2001. These funds have allowed States to make available over $47 billion in loans to municipalities. These loans have helped finance over 14,000 wastewater projects, such as treatment plant and sewer construction. This budget requests $850 million in budget authority for 2005 for the Clean Water SRF, resulting in a long-term average revolving level of $3.4 billion. The budget also fully supports the President’s commitment to the Drinking Water SRF. With cumulative Federal capitalization totaling $5 billion, the Drinking Water SRF has made available $6.4 billion in loans and financed over 3,000 drinking water infrastructure improvement projects nationwide. The President also proposes to fund the Drinking Water SRF at $850 million in budget authority for 2005, resulting in a longterm average revolving level of $1.2 billion. In the coming year, EPA will improve both SRFs’ ability to link their activities to environmental and public health outcomes, consistent with PART recommendations. Administration of Justice The Administration is requesting more than $2.7 billion in grant resources to assist State and local law enforcement, mostly comprised of grants administered by the Department of Justice ($2.2 billion). Within the Justice request: • The Administration proposes consolidation of Byrne grants, Local Law Enforcement Block Grants, and COPS Hiring grants—which have multiple and overlapping purposes—into a simplified, flexible Justice Assistance Grant program, to be funded at more than $0.5 billion. • The Office on Violence Against Women will administer almost $350 million in grants authorized under the Violence Against Women Act that help to counter domestic violence and its effects on women and families. • The Office of Justice Programs will provide $142 million in grants for critical drug intervention strategies designed to steer drug offenders into specialized ‘‘Drug Courts’’ that can offer treatment alternatives, and to help offenders kick their habits-even while incarcerated-through the ‘‘Residential Substance Abuse Treatment’’ program. Transportation Grants support State and local programs for highways, mass transit, and airports. For grants to State and local governments for 2005, this budget includes: • $33.6 billion in budgetary resources for Federalaid highway programs to maintain and improve surface transportation infrastructure, along with improvements in the physical condition and safety of the facilities; • $7.3 billion in budgetary resources to assist with mass transit projects, including $1.5 billion for 118 ANALYTICAL PERSPECTIVES major capital transit projects (‘‘New Starts’’) and $148 million to expand transportation options available to individuals with disabilities; and • $3.5 billion in budgetary resources for airports. These funds will continue to support major capacity, safety, and noise mitigation projects that provide the greatest benefits to the national system, while targeting airports with significant needs. Community and Regional Development The Community Development Block Grant (CDBG) program provides annual grants totaling $4.3 billion each year to over 1,000 eligible cities, counties, and States to help develop viable urban communities in our Nation’s distressed areas. The primary strength of the program is the flexibility each community has to spend funds on the areas of greatest local need such as housing, economic development, and public facilities. Alternatively, a weakness is that local governments often spread CDBG funds across many different areas, which reduces the ability to achieve the program’s primary objective—revitalizing distressed neighborhoods. This year, the Administration rated the CDBG program as needing improvement based on several areas of weakness: • lack of clarity in the program’s purpose and design; • weak targeting of funds by the CDBG formula and by grantees to areas of greatest need; • lack of transparent program and performance information; and • lack of annual output and long-term outcome performance measures. Many of these issues result from an ambiguous mission, loose targeting requirements, and local pressure to spread funds across many groups. To address this, the Administration wants to clarify that the purpose— and only meaningful measure of a successful local CDBG program—is a city’s ability to transform distressed neighborhoods. The Administration plans to work with stakeholders to identify ways to increase local accountability, improve targeting of funds, and demonstrate results, including legislative reforms. Other Functions Discussions of these and other Federal aid programs can be found in the main budget volume and elsewhere. As noted earlier, a detailed listing of budget authority and outlays for all grants to State and local governments is in Table 8–4 in this chapter. PERFORMANCE OF GRANTS TO STATE AND LOCAL GOVERNMENTS The Administration is committed to measuring and improving the performance of Government programs. The Congress mandated in the Government Performance and Results Act of 1993 that performance plans be developed and that the agencies report annual progress against these plans. In addition, this Administration began in the 2004 Budget to assess every Federal program over a five year period in an assessment strategy known as the Program Assessment Rating Tool, or PART. With this budget, the second year of using the PART, the Administration has evaluated about two-fifths of the programs of the Federal Government. The PART system assesses each program on four components (purpose, planning, management, and results/accountability) and gives a score for each of the components. The scores for each component are then weighted—results/accountability carries the greatest weight—and the program is given an overall score. A program is rated effective if it receives an overall score of 85 percent or more, moderately effective if the score is 70 to 85 percent, adequate if the score is 50 to 70 percent, and inadequate if the score is 49 percent or lower. The program is given a rating ‘‘Results Not Demonstrated’’ if the program does not have a good performance measure or does not have data for that measure. Chapter 2 of this volume discusses the PART in more detail. As shown in Table 8–2, 100 of the programs that have been assessed are primarily grants to State and local governments. Of these 100, 46 programs, or 46 percent of all grant programs assessed, received a rating of ‘‘Results Not Demonstrated’’. This is higher than for all programs, in which 37 percent were given this rating. The higher percent of grants that have this rating might be explained in part because of the breadth of purpose of some grants, lack of agreement among grantees and Federal parties on the purpose and performance measure(s), and therefore lack of focused planning to achieve common goals. Table 8–2 also shows that the average weighted score for the 100 grant programs that have been rated by PART was 53 percent, which is a rating of ‘‘adequate’’. These programs had total spending of $133.2 billion in 2003. Of these 100 programs: • 46 were rated ‘‘results not demonstrated’’ ($43.2 billion); • 2 were rated effective ($5.4 billion); • 20 were rated moderately effective ($55.3 billion); • 22 were rated adequate ($19.0 billion); and • 10 were rated ineffective ($10.3 billion). If the 46 programs rated ‘‘Results Not Demonstrated’’ are excluded, the average score for the remaining 54 programs was 62 percent, higher than the rating for all 100 grants but still a rating of ‘‘adequate’’. 8. 119 AID TO STATE AND LOCAL GOVERNMENTS Table 8–2. SUMMARY OF PART RATINGS AND SCORES FOR GRANTS TO STATE AND LOCAL GOVERNMENTS Average Scores Components Programs excluding grants rated ‘‘results not demonstrated’’ All grant programs Purpose .............................................................................................. Planning .............................................................................................. Management ....................................................................................... Results/Accountability ........................................................................ Weighted average 1 ............................................................................ Average rating .................................................................................... 80% 60% 70% 34% 53% Adequate 80% 76% 76% 46% 62% Adequate Number of grants programs 2003 Program Level (in millions) Results not demonstrated .................................................................. Effective .............................................................................................. Moderately effective ........................................................................... Adequate ............................................................................................ Ineffective ........................................................................................... 46 2 20 22 10 43,187 5,350 55,341 19,045 10,275 Total number of grant programs rated .............................................. 100 133,198 Rating 2 1 Weighted as follows: Purpose (20%), Planning (10%), Management (20%), Results/Accountability (50%). rating of effective indicates a score of 85 percent or more; moderately effective, 70–85 percent; adequate, 50–70 percent; and ineffective, 49 percent or less. 2 The The ratings of the largest five of these 100 grant programs are summarized here. More complete summaries of these and other programs are in the enclosed Analytical Perspectives CD ROM. • Department of Transportation: Highway Infrastructure ($29.8 billion in 2003). Rating: Moderately Effective. This program provides financial and technical assistance to States to construct and maintain a national system of roads and bridges. The assessment found that the program has been generally successful in improving highway safety and maintaining mobility, but that it should also take steps to improve oversight of State management of Federal highway dollars. • Department of Housing and Urban Development (HUD): Housing Vouchers ($12.5 billion in 2003). Rating: Moderately Effective. This program provides assistance to extremely low-income households so they can afford to go out on their own and rent apartments in the private market. This program received a relatively high score in comparison with other HUD programs because it is a potentially cost-effective alternative to other forms of housing assistance. However, some of the Public Housing Authorities (PHAs) that administer the vouchers are poor managers. The Administration is proposing reforms to allow PHAs greater flexibility in the use of funds and to lessen administrative burdens. • Department of Education: IDEA Grants to States ($8.9 billion in 2003). Rating: Results Not Demonstrated. The Individuals with Disabilities Education Act (IDEA) grants to States program provides funds for special education and related services to students aged 3–21 with disabilities. While IDEA funding grew from $5.0 billion in 2000 to $8.9 billion in 2003, there is no evidence that this funding has further improved educational outcomes for children with disabilities. • Department of Health and Human Services: Head Start ($6.7 billion in 2003). Rating: Results Not Demonstrated. This program provides grants to local public, non-profit, and for-profit programs to help low-income children prepare for school and improve their overall development. The current program design is flawed because it does not hold individual grantees responsible for effectively preparing children for school. • Department of Agriculture: National School Lunch ($6.4 billion in 2003). Rating: Results Not Demonstrated. This program provides funds to States for lunches served to children in schools. This program is generally well designed and has a clear purpose, however, a large proportion of children certified for free and reduced price meal benefits are from households with incomes above the program’s eligibility thresholds. While the assessment was based largely on existing measures, these measures do not adequately demonstrate results. 120 ANALYTICAL PERSPECTIVES HISTORICAL PERSPECTIVES In recent decades, Federal aid to State and local governments has become a major factor in the financing of certain government functions. The rudiments of the present system date back to the Civil War. The Morrill Act, passed in 1862, established the land grant colleges and instituted certain federally-required standards for States that received the grants, as is characteristic of the present grant programs. Federal aid was later initiated for agriculture, highways, vocational education and rehabilitation, forestry, and public health. In the depression years, Federal aid was extended to meet inTable 8–3. come security and other social welfare needs. However, Federal grants did not become a significant factor in Federal Government expenditures until after World War II. Table 8–3 displays trends in Federal grants to State and local governments since 1960. Section A shows Federal grants by function. Functions with a substantial amount of grants are shown separately. Grants for the national defense, energy, social security, and the veterans benefits and services functions are combined in the ‘‘other functions’’ line in the table. TRENDS IN FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS (Outlays; in billions of dollars) Actual 1960 1965 1970 A. Distribution of grants by function: Natural resources and environment .............................................................................. 0.1 0.2 Agriculture ...................................................................................................................... 0.2 0.5 Transportation ................................................................................................................ 3.0 4.1 Community and regional development ......................................................................... 0.1 0.6 Education, training, employment, and social services ................................................. 0.5 1.1 Health ............................................................................................................................. 0.2 0.6 Income security .............................................................................................................. 2.6 3.5 Administration of Justice ............................................................................................... ............ ............ General government ...................................................................................................... 0.2 0.2 Other .............................................................................................................................. 0.0 0.1 Total ........................................................................................................................... B. Distribution of grants by BEA category: Discretionary .................................................................................................................. Mandatory ...................................................................................................................... 1975 1980 1985 Estimate 1990 1995 2000 2003 2004 2005 0.4 0.6 4.6 1.8 6.4 3.8 5.8 * 0.5 0.1 2.4 0.4 5.9 2.8 12.1 8.8 9.4 0.7 7.1 0.2 5.4 0.6 13.0 6.5 21.9 15.8 18.5 0.5 8.6 0.7 4.1 2.4 17.0 5.2 17.1 24.5 27.9 0.1 6.8 0.8 3.7 1.3 19.2 5.0 21.8 43.9 36.8 0.6 2.3 0.8 4.0 0.8 25.8 7.2 30.9 93.6 58.4 1.2 2.3 0.8 4.6 0.7 32.2 8.7 36.7 124.8 68.7 5.3 2.1 0.9 5.6 0.8 41.0 15.1 51.5 173.8 86.5 4.5 7.4 1.0 6.5 0.9 43.5 14.8 56.9 191.9 88.3 4.3 9.9 1.1 5.9 0.8 44.9 13.9 57.0 197.1 88.5 4.3 2.8 1.2 7.0 10.9 24.1 49.8 91.4 105.9 135.3 225.0 284.7 387.3 418.1 416.5 N/A N/A 2.9 8.0 10.2 13.9 21.0 28.8 53.3 38.1 55.5 50.4 63.3 72.0 94.0 131.0 116.7 168.0 165.1 222.2 177.6 240.5 170.9 245.6 Total ........................................................................................................................... C. Composition: Current dollars: Payments for individuals 1 ......................................................................................... Physical capital 1 ....................................................................................................... Other grants .............................................................................................................. 7.0 10.9 24.1 49.8 91.4 105.9 135.3 225.0 284.7 387.3 418.1 416.5 2.5 3.3 1.2 3.7 5.0 2.2 8.7 7.1 8.3 16.8 10.9 22.2 32.6 22.6 36.2 50.1 24.9 30.9 77.3 27.2 30.9 144.4 39.6 41.0 182.6 48.7 53.4 246.6 59.8 80.9 266.1 61.3 90.7 271.2 63.1 82.2 Total ...................................................................................................................... Percentage of total grants: Payments for individuals 1 ......................................................................................... Physical capital 1 ....................................................................................................... Other grants .............................................................................................................. 7.0 10.9 24.1 49.8 91.4 105.9 135.3 225.0 284.7 387.3 418.1 416.5 35.3% 47.3% 17.4% 34.1% 45.7% 20.2% 36.2% 29.3% 34.5% 33.6% 21.9% 44.5% 35.7% 24.7% 39.6% 47.3% 23.5% 29.2% 57.1% 20.1% 22.8% 64.2% 17.6% 18.2% 64.1% 17.1% 18.8% 63.7% 15.5% 20.9% 63.6% 14.7% 21.7% 65.1% 15.2% 19.7% Total ...................................................................................................................... 100.0% 100.0% 100.0% 100.0% 100.0% Constant (FY 2000) dollars: Payments for individuals 1 ......................................................................................... 12.0 16.9 33.5 48.0 63.9 Physical capital 1 ....................................................................................................... 17.0 24.2 27.2 26.0 38.9 Other grants .............................................................................................................. 10.0 15.6 44.6 83.8 89.9 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 75.0 34.2 53.9 96.6 32.6 42.9 157.6 43.3 47.0 182.6 48.7 53.4 233.6 56.5 72.8 247.2 56.8 80.2 246.8 57.4 71.3 Total ...................................................................................................................... D. Total grants as a percent of: Federal outlays: Total ........................................................................................................................... Domestic programs 2 ................................................................................................. State and local expenditures ........................................................................................ Gross domestic product ................................................................................................ E. As a share of total State and local gross investments: Federal capital grants .................................................................................................... State and local own-source financing ........................................................................... 39.0 56.7 105.3 157.7 192.6 163.1 172.1 247.9 284.7 363.0 384.2 375.5 7.6% 18.0% 18.2% 1.4% 9.2% 18.3% 19.1% 1.6% 12.3% 23.2% 23.0% 2.4% 15.0% 21.7% 25.7% 3.2% 15.5% 22.2% 28.5% 3.4% 11.2% 18.2% 21.7% 2.6% 10.8% 17.1% 19.0% 2.4% 14.8% 21.6% 23.2% 3.1% 15.9% 22.0% 22.8% 2.9% 17.9% 23.7% 26.1% 3.6% 18.0% 24.1% N/A 3.6% 17.4% 23.2% N/A 3.5% 24.6% 75.4% 25.5% 74.5% 25.4% 74.6% 26.0% 74.0% 35.4% 64.6% 30.2% 69.8% 21.9% 78.1% 26.0% 74.0% 21.9% 78.1% 23.9% 76.1% N/A N/A N/A N/A Total ...................................................................................................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% N/A N/A N/A: Not available. * indicates $50 million or less. 1 Grants that are both payments for individuals and capital investment are shown under capital investment. 2 Excludes national defense, international affairs, net interest, and undistributed offsetting receipts 8. AID TO STATE AND LOCAL GOVERNMENTS Federal grants for transportation increased to $3.0 billion, or 43 percent of all Federal grants, in 1960 after initiation of aid to States to build the Interstate Highway System in the late 1950s. By 1970 there had been significant increases in the relative amounts for education, training, employment, social services, and health (largely Medicaid). In the early and mid-1970s, major new grants were created for natural resources and environment (construction of sewage treatment plants), community and regional development (community development block grants), and general government (general revenue sharing). Since the late 1970s changes in the relative amounts among functions reflect steady growth of grants for health (Medicaid) and income security. The functions with the largest amount of grants are health; income security; education, training, employment, and social services; and transportation, with combined estimated grant outlays of $352.9 billion, or more than 90 percent of total grant outlays in 2003. The increase in total outlays for grants overall since 1990 has been driven by increases in grants for health, which have increased almost four-fold from $43.9 billion in 1990 to $173.8 billion in 2003. The income security; education, training, employment, and social services; and transportation functions also increased substantially, but at a slower rate than the increase for health. Section B of the Table shows the distribution of grants divided into mandatory and discretionary spending. Funding required for grant programs classified as mandatory is determined in authorizing legislation. Funding levels for mandatory programs can only be changed by changing eligibility criteria or benefit formulas established in law and are usually not limited by the annual appropriations process. Outlays for mandatory grant programs were $222.2 billion in 2003. The three largest mandatory grant programs are Medicaid, with outlays of $160.8 billion in 2003, Temporary Assistance for Needy Families, $19.4 billion, and child nutrition programs, $10.7 billion. The funding level for discretionary grant programs is determined annually through appropriations acts. Outlays for discretionary grant programs were $165.1 billion in 2003. Table 8–4 at the end of this chapter identifies discretionary and mandatory grant programs separately. For more information on the Budget Enforcement Act and these categories, see Chapter 25, ‘‘The Budget System and Concepts’’ in this volume. Section C of Table 8–3 shows the composition of grants divided into three major categories: payments for individuals, grants for physical capital, and other 121 grants. 2 Grant outlays for payments for individuals, which are mainly entitlement programs in which the Federal Government and the States share the costs, have grown significantly as a percent of total grants. They increased from 57 percent of the total in 1990 to 64 percent of the total in 2003. These grants are distributed through State or local governments to provide cash or in-kind benefits that constitute income transfers to individuals or families. The major grant in this category is Medicaid. Temporary Assistance for Needy Families, Food Stamps administration, child nutrition programs, and housing assistance are also large grants in this category. Grants for physical capital assist States and localities with construction and other physical capital activities. The major capital grants are for highways, but there are also grants for airports, mass transit, sewage treatment plant construction, community development, and other facilities. Grants for physical capital were almost half of total grants in 1960, shortly after grants began for construction of the Interstate Highway System. The relative share of these outlays has declined, as payments for individuals have grown. In 2003, grants for physical capital were $59.8 billion, 16 percent of total grants. The other grants are primarily for education, training, employment, and social services. These grants were 21 percent of total grants in 2003. Section C of Table 8–3 also shows these three categories in constant dollars. In constant 2000 dollars, total grants increased from $172.1 billion in 1990 to an estimated $363.0 billion in 2003, an average increase of 5.9 percent per year. During this same period, grants for payments to individuals increased an average of 7.0 percent per year; grants for physical capital an average of 4.3 percent per year, and other grants an average of 4.2 percent per year. In contrast to these increases, outlays for total grants in constant 2000 dollars decreased during the 1980s, from $192.6 billion in 1980 to $172.1 billion in 1990. Section D of this table shows grants as a percentage of Federal outlays, State and local expenditures, and gross domestic product. Grants have increased as a percentage of total Federal outlays from 11 percent in 1990 to 18 percent in 2003. Grants as a percentage of domestic programs were 24 percent in 2003. As a percentage of total State and local expenditures, grants have increased from 19 percent in 1990 to 26 percent in 2003. Section E shows the relative contribution of physical capital grants in assisting States and localities with gross investment. Federal capital grants are estimated to be 24 percent of State and local gross investment in 2003. 2 Certain housing grants are classified in the budget as both payments for individuals and physical capital spending. In the text and tables in this section, these grants are included in the category for physical capital spending. 122 ANALYTICAL PERSPECTIVES OTHER INFORMATION ON FEDERAL AID TO STATE AND LOCAL GOVERNMENTS Additional information regarding aid to State and local governments can be found elsewhere in this budget and in other documents. Major public physical capital investment programs providing Federal grants to State and local governments are identified in Chapter 6, ‘‘Federal Investment.’’ Data for summary and detailed grants to State and local governments can be found in many sections of a separate budget volume entitled Historical Tables. Section 12 of that document is devoted exclusively to grants to State and local governments. Additional information on grants can be found in Section 6 (Composition of Federal Government Outlays); Section 9 (Federal Government Outlays for Investment: Major Physical Capital, Research and Development, and Education and Training); Section 11 (Federal Government Payments for Individuals); and Section 15 (Total (Federal and State and Local) Government Finances). In addition to these sources, a number of other sources of information are available that use slightly different concepts of grants, provide State-by-State information, provide information on how to apply for Federal aid, or display information about audits. The Bureau of the Census in the Department of Commerce provides data on public finances, including Federal aid to State and local governments. The Survey of Current Business, published monthly by the Bureau of Economic Analysis in the Department of Commerce, provides data on the national income and product accounts (NIPA), a broad statistical concept encompassing the entire economy. These accounts include data on Federal grants to State and local governments. Data using the NIPA concepts appear in this volume in Chapter 13, ‘‘National Income and Product Accounts.’’ Federal Aid to States, a report prepared by the Bureau of the Census, shows Federal spending by State for grants for the most recently completed fiscal year. The Consolidated Federal Funds Report is an annual document that shows the distribution of Federal spending by State and county areas and by local governmental jurisdictions. It is prepared by the Bureau of the Census. The Federal Assistance Awards Data System (FAADS) provides computerized information about current grant funding. Data on all direct assistance awards are provided quarterly by the Bureau of the Census to the States and to the Congress. The Catalog of Federal Domestic Assistance is a primary reference source for communities wishing to apply for grants and other domestic assistance. The Catalog is prepared by the General Services Administration with data collected by the Office of Management and Budget. It contains a detailed listing of grant and other assistance programs; discussions of eligibility criteria, application procedures, and estimated obligations; and related information. The Catalog is available on the Internet at http://www.cfda.gov. The Federal Audit Clearinghouse maintains an online database (http://harvester.census.gov/sac) that provides access to summary information about audits conducted under OMB Circular A–133, ‘‘Audits to States, Local Governments, and Non-Profit Organizations.’’ Information is available for each audited entity, including the amount of Federal money expended by program and whether there were audit findings. DETAILED FEDERAL AID TABLE Table 8–4, ‘‘Federal Grants to State and Local Governments-Budget Authority and Outlays,’’ provides detailed budget authority and outlay data for grants, in- cluding proposed legislation. This table displays discretionary and mandatory grant programs separately. 8. 123 AID TO STATE AND LOCAL GOVERNMENTS Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate ENERGY Discretionary: Department of Energy: Energy Programs: Energy conservation ........................................................................................................... 268 271 332 260 270 289 Mandatory: Tennessee Valley Authority fund ................................................................................................ 329 343 364 329 343 364 Total, energy ................................................................................................................. 597 614 696 589 613 653 NATURAL RESOURCES AND ENVIRONMENT Discretionary: Department of Agriculture: Natural Resources Conservation Service: Watershed rehabilitation program ...................................................................................... Resource conservation and development .......................................................................... Watershed and flood prevention operations ...................................................................... Forest Service: State and private forestry ................................................................................................... Management of national forest lands for subsistence uses ............................................. Department of Commerce: National Oceanic and Atmospheric Administration: Operations, research, and facilities .................................................................................... Pacific coastal salmon recovery ......................................................................................... Department of the Interior: Office of Surface Mining Reclamation and Enforcement: Regulation and technology ................................................................................................. Abandoned mine reclamation fund .................................................................................... Bureau of Reclamation: Bureau of Reclamation loan subsidy ................................................................................. United States Fish and Wildlife Service: State and tribal wildlife grants ........................................................................................... Cooperative endangered species conservation fund ........................................................ Wildlife conservation and appreciation fund ...................................................................... Landowner incentive program ............................................................................................ National Park Service: Urban park and recreation fund ......................................................................................... National recreation and preservation ................................................................................. Land acquisition and State assistance .............................................................................. Historic preservation fund ................................................................................................... Environmental Protection Agency: State and tribal assistance grants ..................................................................................... Hazardous substance superfund ........................................................................................ Leaking underground storage tank trust fund ................................................................... Total, discretionary ........................................................................................................... .................... 95 –95 .................... ...................... ...................... .................... ...................... ...................... 1 1 1 34 83 11 47 99 64 162 5 182 6 140 5 154 5 217 6 179 5 135 129 135 89 120 100 83 107 118 330 109 100 57 208 58 173 59 226 56 202 56 172 57 246 .................... ...................... ...................... 2 ...................... ...................... 65 69 80 17 64 69 80 82 90 61 87 82 .................... ...................... ...................... 1 ...................... ...................... .................... 30 50 .................... 32 42 .................... ...................... ...................... 1 1 4 97 94 94 39 40 38 7 1 15 39 26 1 70 40 21 4 87 38 3,835 94 61 3,877 95 66 3,232 182 64 3,684 177 56 4,039 161 77 3,575 164 72 5,002 5,175 4,400 4,715 5,596 4,915 288 375 3 2 3 2 227 336 226 351 47 48 Mandatory: Department of the Interior: Bureau of Land Management: Miscellaneous permanent payment accounts .................................................................... 252 286 380 251 Minerals Management Service: National forests fund, Payment to States .......................................................................... 3 3 3 3 Leases of lands acquired for flood control, navigation, and allied purposes .................. 1 2 2 1 United States Fish and Wildlife Service: Federal aid in wildlife restoration ....................................................................................... 234 228 238 256 Sport fish restoration .......................................................................................................... 330 345 369 320 National Park Service: Other permanent appropriations ........................................................................................ 40 46 49 40 Departmental Management: Everglades watershed protection ....................................................................................... .................... ...................... ...................... .................... Everglades restoration account .......................................................................................... .................... ...................... ...................... 2 6 ...................... 1 1 124 ANALYTICAL PERSPECTIVES Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Department of the Treasury: Financial Management Service: Payment to terrestrial wildlife habitat restoration trust fund ............................................. 5 5 5 5 5 5 Total, mandatory ............................................................................................................... 865 915 1,046 878 915 1,011 Total, natural resources and environment ............................................................... 5,867 6,090 5,446 5,593 6,511 5,926 AGRICULTURE Discretionary: Department of Agriculture: Cooperative State Research, Education, and Extension Service: Extension activities ............................................................................................................. Outreach for socially disadvantaged farmers .................................................................... Research and education activities ..................................................................................... Integrated activities ............................................................................................................. Agricultural Marketing Service: Payments to States and possessions ............................................................................... Farm Service Agency: State mediation grants ....................................................................................................... 455 3 238 15 439 6 241 22 420 6 243 39 418 3 237 10 426 10 242 13 421 9 241 19 1 1 1 1 1 1 3 3 3 3 3 4 Total, discretionary ........................................................................................................... 715 712 712 672 695 695 Mandatory: Department of Agriculture: Office of the Secretary: Fund for rural America ....................................................................................................... .................... ...................... ...................... Farm Service Agency: Commodity Credit Corporation fund .................................................................................. 120 156 67 8 14 ...................... 120 156 67 Total, mandatory ............................................................................................................... 120 156 67 128 170 67 Total, agriculture .......................................................................................................... 835 868 779 800 865 762 COMMERCE AND HOUSING CREDIT Mandatory: Department of Commerce: National Oceanic and Atmospheric Administration: Promote and develop fishery products and research pertaining to American fisheries .. 10 18 1 3 28 10 .................... ...................... ...................... 2,681 3,395 3,471 .................... ...................... ...................... 187 124 ...................... .................... ...................... ...................... .................... ...................... ...................... 87 4 ...................... 283 50 ...................... 7 39 93 29,960 136 254 5 169 27 30,380 316 345 3 178 15 32,309 225 268 TRANSPORTATION Discretionary: Department of Transportation: Federal Aviation Administration: Grants-in-aid for airports (Airport and airway trust fund) .................................................. Federal Highway Administration: State infrastructure banks .................................................................................................. Appalachian development highway system ....................................................................... Appalachian development highway system (Highway trust fund) .................................... Federal-aid highways .......................................................................................................... Miscellaneous appropriations ............................................................................................. Miscellaneous highway trust funds .................................................................................... Federal Motor Carrier Safety Administration: National motor carrier safety program ............................................................................... Motor carrier safety ............................................................................................................ Motor Carrier Safety Grants ............................................................................................... Border enforcement program ............................................................................................. National Highway Traffic Safety Administration: Highway traffic safety grants .............................................................................................. Federal Railroad Administration: Alaska railroad rehabilitation .............................................................................................. Railroad research and development .................................................................................. Federal Transit Administration: Research, training, and human resources ........................................................................ Job access and reverse commute grants ......................................................................... Interstate transfer grants-transit ......................................................................................... 167 171 ...................... 155 233 125 10 ...................... ...................... 1 9 ...................... .................... ...................... 225 .................... ...................... 62 .................... ...................... ...................... 3 13 ...................... 213 22 2 208 439 199 219 313 25 ...................... 2 2 20 2 19 2 29 2 .................... ...................... ...................... .................... 105 104 ...................... 84 .................... ...................... ...................... 9 1 ...................... 108 104 4 3 8. 125 AID TO STATE AND LOCAL GOVERNMENTS Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program Outlays 2003 Actual 2004 Estimate Washington Metropolitan Area Transit Authority ............................................................... Formula grants .................................................................................................................... Capital investment grants ................................................................................................... Transit planning and research ........................................................................................... Major capital investments grants ....................................................................................... Discretionary grants (Highway trust fund, mass transit account) ..................................... Formula Grants and Research ........................................................................................... Research and Special Programs Administration: Pipeline safety .................................................................................................................... .................... 4,773 5,861 17 .................... .................... .................... ...................... 3,766 3,189 17 ...................... ...................... ...................... 19 19 19 19 19 19 Total, discretionary ........................................................................................................... 11,746 7,679 7,817 41,017 43,447 44,892 3,379 3,381 3,501 .................... ...................... ...................... 29,111 33,758 33,703 .................... ...................... ...................... 13 13 13 12 13 13 Total, mandatory ............................................................................................................... 32,503 37,152 37,217 12 13 13 Total, transportation .................................................................................................... 44,249 44,831 45,034 41,029 43,460 44,905 Mandatory: Department of Transportation: Federal Aviation Administration: Grants-in-aid for airports (Airport and airway trust fund) .................................................. Federal Highway Administration: Federal-aid highways .......................................................................................................... Research and Special Programs Administration: Emergency preparedness grants ....................................................................................... 2005 Estimate 2003 Actual 2004 Estimate ...................... 11 9 ...................... 4,393 3,963 ...................... 2,636 3,993 ...................... 22 –43 1,563 .................... ...................... ...................... 293 261 5,569 .................... ...................... 2005 Estimate 6 3,379 3,400 106 187 121 567 COMMUNITY AND REGIONAL DEVELOPMENT Discretionary: Department of Agriculture: Rural Development: Rural community advancement program ........................................................................... 900 638 477 800 798 768 Rural Utilities Service: Distance learning, telemedicine, and broadband program ............................................... 77 81 15 22 3 63 Rural Housing Service: Rural community grants ..................................................................................................... .................... ...................... –30 .................... ...................... –21 Rural Business—Cooperative Service: Rural cooperative development grants .............................................................................. 49 64 21 29 59 23 Department of Commerce: Economic Development Administration: Economic development assistance programs ................................................................... 289 280 290 375 383 363 Department of Homeland Security: Departmental Management: State and local programs ................................................................................................... 3,410 3,062 2,512 550 3,583 2,967 Firefighter assistance grants .............................................................................................. 745 746 500 31 399 560 Emergency Preparedness and Response: Operating Expenses ........................................................................................................... 621 –3 ...................... .................... 319 ...................... Mitigation grants ................................................................................................................. 169 169 170 21 74 173 Disaster Relief .................................................................................................................... 1,870 1,736 1,828 7,259 2,588 2,859 Department of Housing and Urban Development: Public and Indian Housing Programs: Moving to work ................................................................................................................... .................... ...................... ...................... 1 1 ...................... Community Planning and Development: Community development block grants ............................................................................... 4,905 4,934 4,618 5,569 5,990 5,586 Urban development action grants ...................................................................................... .................... –30 ...................... 16 10 ...................... Community development loan guarantees subsidy ........................................................... 7 7 ...................... 7 10 9 Brownfields redevelopment ................................................................................................ 25 25 ...................... 13 20 23 Empowerment zones/enterprise communities ................................................................... 30 15 ...................... 60 70 65 Office of Lead Hazard Control and Healthy Homes: Lead hazard reduction ........................................................................................................ 175 174 139 91 127 134 Department of the Interior: Bureau of Indian Affairs: Operation of Indian programs ............................................................................................ 146 146 148 146 146 147 Indian guaranteed loan subsidy ......................................................................................... 5 6 6 5 6 7 Appalachian Regional Commission ............................................................................................ 64 59 59 74 88 96 Delta regional authority ............................................................................................................... 8 5 2 6 12 8 Denali Commission ...................................................................................................................... 48 56 2 2 47 57 126 ANALYTICAL PERSPECTIVES Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program Total, discretionary ........................................................................................................... 2003 Actual 2004 Estimate 13,543 12,170 Outlays 2005 Estimate 10,757 2003 Actual 2004 Estimate 15,077 14,733 2005 Estimate 13,887 Mandatory: Department of Agriculture: Rural Housing Service: Rural community grants ..................................................................................................... .................... 20 10 .................... ...................... 21 Department of Housing and Urban Development: Community Planning and Development: Community development loan guarantees subsidy ........................................................... .................... 26 ...................... .................... 26 ...................... Department of the Interior: Bureau of Indian Affairs: Indian direct loan subsidy .................................................................................................. 5 ...................... ...................... 5 ...................... ...................... Total, mandatory ............................................................................................................... 5 46 10 5 26 21 Total, community and regional development ........................................................... 13,548 12,216 10,767 15,082 14,759 13,908 11 ...................... 5 ...................... 40 20 22 17 21 12 .................... ...................... ...................... 116 116 116 1,181 1,222 1,222 .................... ...................... ...................... .................... ...................... ...................... 14,326 13,800 15,158 7,087 6,041 5,825 214 112 1,103 1 206 11,204 5,964 EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES Discretionary: Department of Commerce: National Telecommunications and Information Administration: Public telecommunications facilities, planning and construction ....................................... Information infrastructure grants ........................................................................................ Department of Education: Office of Elementary and Secondary Education: Reading excellence ............................................................................................................ Indian education ................................................................................................................. Impact aid ........................................................................................................................... Chicago litigation settlement .............................................................................................. Education reform ................................................................................................................ Education for the disadvantaged ....................................................................................... School improvement programs .......................................................................................... Office of Innovation and Improvement: Innovation and improvement .............................................................................................. Office of Safe and Drug-Free Schools: Safe schools and citizenship education ............................................................................ Office of English Language Acquisition: English language acquisition .............................................................................................. Office of Special Education and Rehabilitative Services: Special education ............................................................................................................... Rehabilitation services and disability research .................................................................. American Printing House for the Blind .............................................................................. Office of Vocational and Adult Education: Vocational and adult education .......................................................................................... Office of Postsecondary Education: Higher education ................................................................................................................. Federal Student Aid: Student financial assistance ............................................................................................... Institute of Education Sciences: Institute of education sciences ........................................................................................... Department of Health and Human Services: Administration for Children and Families: Promoting safe and stable families ................................................................................... Children and families services programs .......................................................................... Administration on Aging: Aging services programs .................................................................................................... Department of the Interior: Bureau of Indian Affairs: Operation of Indian programs ............................................................................................ Department of Labor: Employment and Training Administration: Training and employment services .................................................................................... Community service employment for older Americans ....................................................... Welfare to work jobs .......................................................................................................... State unemployment insurance and employment service operations .............................. Unemployment trust fund ................................................................................................... 26 5 156 64 121 116 1,331 1,224 1 ...................... 179 ...................... 14,049 14,288 8,041 6,259 .................... 547 610 .................... 27 387 .................... 798 775 .................... 40 557 578 610 622 450 677 553 9,131 126 16 11,194 129 16 11,957 143 16 8,216 128 15 8,779 230 22 10,446 141 16 1,905 2,070 1,564 1,908 1,870 1,975 374 378 378 405 509 417 66 ...................... 65 68 53 .................... ...................... ...................... 89 77 ...................... 67 402 8,281 402 8,407 503 8,684 337 8,161 412 8,253 430 8,460 1,309 1,374 1,376 1,309 1,313 1,376 97 119 112 184 87 91 3,531 100 .................... 154 1,046 3,472 4,337 4,291 3,656 3,623 97 97 98 107 97 –122 ...................... .................... ...................... ...................... 142 119 167 157 190 1,072 325 1,071 1,071 394 8. 127 AID TO STATE AND LOCAL GOVERNMENTS Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Corporation for National and Community Service: Domestic volunteer service programs, operating expenses ............................................. 90 90 93 81 94 86 National and community service programs, operating expenses ..................................... 200 305 337 264 168 350 Corporation for Public Broadcasting: Corporation for Public Broadcasting .................................................................................. 411 437 390 411 437 390 District of Columbia: District of Columbia Courts: Federal payment to the Mayor of the District of Columbia .............................................. 1 ...................... ...................... 1 ...................... ...................... District of Columbia General and Special Payments: Federal payment for resident tuition support .................................................................... 17 17 17 17 17 17 Federal payment for school improvement ......................................................................... .................... 40 40 .................... 40 40 Institute of American Indian and Alaska Native Culture and Arts: Payment to the institute ..................................................................................................... 1 1 ...................... 1 1 ...................... National Endowment for the Arts: National Endowment for the Arts: grants and administration ........................................... 51 54 53 42 53 56 Institute of Museum and Library Services: Office of Museum and Library Services: grants and administration ................................ 233 250 250 239 251 236 Total, discretionary ........................................................................................................... 50,862 53,160 55,119 46,814 52,333 Mandatory: Department of Education: Office of Special Education and Rehabilitative Services: Rehabilitation services and disability research .................................................................. 2,534 2,584 2,636 2,465 2,427 Department of Health and Human Services: Administration for Children and Families: Social services block grant ................................................................................................ 1,700 1,700 1,700 1,740 1,767 Children and families services programs .......................................................................... .................... ...................... 50 .................... ...................... Department of Labor: Employment and Training Administration: Welfare to work jobs .......................................................................................................... .................... ...................... ...................... 312 181 Federal unemployment benefits and allowances .............................................................. 259 259 259 212 233 Foreign labor certification processing ................................................................................ .................... ...................... 6 .................... ...................... 52,365 2,602 1,769 30 2 253 6 Total, mandatory ............................................................................................................... 4,493 4,543 4,651 4,729 4,608 4,662 Total, education, training, employment, and social services ................................ 55,355 57,703 59,770 51,543 56,941 57,027 43 44 45 43 44 45 1 1 1 1 1 1 2,499 2,651 2,809 2,499 2,651 2,809 2,056 2,735 2,676 2,603 2,377 2,423 2,259 2,318 2,512 2,171 2,268 2,428 1,791 1,692 1,603 1,198 1,775 1,558 102 102 96 102 102 96 8 8 8 8 8 8 Total, discretionary ........................................................................................................... 8,759 9,551 9,750 8,625 9,226 9,368 Mandatory: Department of Health and Human Services: Health Resources and Services Administration: Health resources and services ........................................................................................... 50 50 ...................... 14 HEALTH Discretionary: Department of Agriculture: Food Safety and Inspection Service: Salaries and expenses ....................................................................................................... Department of Health and Human Services: Food and Drug Administration: Salaries and expenses ....................................................................................................... Health Resources and Services Administration: Health resources and services ........................................................................................... Centers for Disease Control and Prevention: Disease control, research, and training ............................................................................. Substance Abuse and Mental Health Services Administration: Substance abuse and mental health services .................................................................. Departmental Management: General departmental management ................................................................................... Department of Labor: Occupational Safety and Health Administration: Salaries and expenses ....................................................................................................... Mine Safety and Health Administration: Salaries and expenses ....................................................................................................... 17 ...................... 128 ANALYTICAL PERSPECTIVES Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Centers for Medicare and Medicaid Services: Grants to States for medicaid ............................................................................................ State children’s health insurance fund .............................................................................. State grants and demonstrations ....................................................................................... 164,663 5,382 132 183,054 3,175 117 176,514 4,082 331 160,805 4,355 15 177,407 5,232 47 182,170 5,299 304 Total, mandatory ............................................................................................................... 170,227 186,396 180,927 165,189 182,703 187,773 Total, health .................................................................................................................. 178,986 195,947 190,677 173,814 191,929 197,141 INCOME SECURITY Discretionary: Department of Agriculture: Food and Nutrition Service: Food donations programs .................................................................................................. Commodity assistance program ......................................................................................... Special supplemental nutrition program for women, infants, and children (WIC) ........... Department of Health and Human Services: Administration for Children and Families: Low income home energy assistance ............................................................................... Refugee and entrant assistance ........................................................................................ Payments to States for the child care and development block grant .............................. Department of Homeland Security: Emergency Preparedness and Response: Emergency food and shelter .............................................................................................. Department of Housing and Urban Development: Public and Indian Housing Programs: Public housing operating fund ........................................................................................... Drug elimination grants for low-income housing ............................................................... Revitalization of severely distressed public housing (HOPE VI) ...................................... Native Hawaiian Housing Block Grant .............................................................................. Public housing capital fund ................................................................................................ Native American housing block grant ................................................................................ Housing certificate fund ...................................................................................................... Community Planning and Development: Homeless assistance grants .............................................................................................. Home investment partnership program .............................................................................. Emergency food and shelter program ............................................................................... Housing opportunities for persons with AIDS ................................................................... Rural housing and economic development ....................................................................... Samaritan housing .............................................................................................................. Housing Programs: Homeownership and opportunity for people everywhere grants (HOPE grants) ............. Housing for persons with disabilities ................................................................................. Housing for the elderly ....................................................................................................... Department of Labor: Employment and Training Administration: State unemployment insurance and employment service operations .............................. Unemployment trust fund ................................................................................................... Total, discretionary ........................................................................................................... Mandatory: Department of Agriculture: Agricultural Marketing Service: Funds for strengthening markets, income, and supply (section 32) ................................ Food and Nutrition Service: Food stamp program .......................................................................................................... Child nutrition programs ..................................................................................................... Department of Health and Human Services: Administration for Children and Families: Payments to States for child support enforcement and family support programs .......... Contingency fund ................................................................................................................ Payments to States for foster care and adoption assistance .......................................... Child care entitlement to States ........................................................................................ Temporary assistance for needy families .......................................................................... 59 ...................... ...................... 180 164 184 4,696 4,612 4,787 96 ...................... ...................... 167 160 176 4,548 4,715 4,900 1,688 333 2,079 2,001 301 2,093 2,030 352 2,313 152 ...................... 152 152 1,889 281 2,080 1,892 378 2,230 1,965 389 2,161 152 ...................... 3,577 3,579 3,573 3,395 3,551 3,572 –23 ...................... –5 222 75 ...................... 570 149 ...................... 555 626 699 .................... ...................... 10 .................... ...................... 1 2,712 2,696 2,674 3,665 3,716 3,742 645 650 626 723 733 723 12,295 12,554 12,621 13,451 14,641 14,615 1,217 1,260 1,282 1,080 1,400 1,987 2,006 2,084 1,616 1,747 .................... ...................... 153 .................... ...................... 290 295 295 254 282 25 25 ...................... 20 20 .................... ...................... 50 .................... ...................... –6 ...................... ...................... 2 .................... 250 249 .................... 1,027 774 773 992 .................... ...................... ...................... 3,140 2,156 2,106 2 252 755 1,467 1,884 153 292 20 5 2 255 766 –3 ...................... ...................... 2,627 2,158 2,107 36,643 35,572 35,857 38,257 39,485 39,894 1,201 1,122 772 1,253 907 821 4,266 10,508 4,276 11,261 4,355 11,231 4,162 10,664 4,381 11,295 4,344 11,441 3,845 1,958 6,609 2,733 17,009 4,413 4,026 3,788 4,098 2,000 ...................... .................... ...................... 6,814 6,765 6,124 6,442 2,710 2,710 2,876 2,859 17,609 17,148 19,352 18,866 4,219 9 6,693 2,710 18,354 8. 129 AID TO STATE AND LOCAL GOVERNMENTS Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate 2005 Estimate Total, mandatory ............................................................................................................... 48,129 50,205 47,007 48,219 48,848 48,591 Total, income security ................................................................................................. 84,772 85,777 82,864 86,476 88,333 88,485 SOCIAL SECURITY Mandatory: Social Security Administration: Federal disability insurance trust fund ............................................................................... 1 28 74 2 14 51 VETERANS BENEFITS AND SERVICES Discretionary: Department of Veterans Affairs: Medical Programs: Medical care ....................................................................................................................... 487 529 564 403 443 475 ADMINISTRATION OF JUSTICE Discretionary: Department of Health and Human Services: Administration for Children and Families: Violent crime reduction programs ...................................................................................... .................... ...................... ...................... 6 Department of Homeland Security: Departmental Management: State and local programs ................................................................................................... .................... 497 500 .................... Department of Housing and Urban Development: Fair Housing and Equal Opportunity: Fair housing activities ......................................................................................................... 46 48 48 50 Department of Justice: Office of Justice Programs: Justice assistance ............................................................................................................... 110 124 1,536 151 State and local law enforcement assistance ..................................................................... 1,944 1,232 ...................... 1,856 Juvenile justice programs ................................................................................................... 240 299 ...................... 233 Community oriented policing services ............................................................................... 978 744 44 1,148 Violence Against Women Office ........................................................................................ .................... 365 348 .................... Equal Employment Opportunity Commission: Salaries and expenses ....................................................................................................... 33 33 33 33 Federal Drug Control Programs: High-intensity drug trafficking areas program .................................................................... 196 223 208 194 State Justice Institute: salaries and expenses ........................................................................... 3 2 ...................... 3 Total, discretionary ........................................................................................................... Mandatory: Department of Justice: Legal Activities and U.S. Marshals: Assets forfeiture fund ......................................................................................................... Office of Justice Programs: Crime victims fund .............................................................................................................. Department of the Treasury: Departmental Offices: Treasury forfeiture fund ...................................................................................................... 3 ...................... 124 423 47 44 129 1,920 1,305 ...................... 212 ...................... 1,271 524 76 207 33 33 231 222 2 ...................... 3,550 3,567 2,717 3,674 3,433 3,373 260 204 274 239 245 329 557 572 639 510 513 643 75 ...................... 75 75 75 ...................... Total, mandatory ............................................................................................................... 892 851 913 824 833 972 Total, administration of justice .................................................................................. 4,442 4,418 3,630 4,498 4,266 4,345 15 ...................... ...................... .................... 5 8 GENERAL GOVERNMENT Discretionary: Department of Health and Human Services: Administration for Children and Families: Disabled voter services ...................................................................................................... Department of the Interior: United States Fish and Wildlife Service: National wildlife refuge fund ............................................................................................... Departmental Management: Payments in lieu of taxes .................................................................................................. 21 21 21 21 20 21 219 225 226 219 225 226 130 ANALYTICAL PERSPECTIVES Table 8–4. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (in millions of dollars) Budget Authority Function, Category, Agency, and Program 2003 Actual 2004 Estimate Outlays 2005 Estimate 2003 Actual 2004 Estimate Insular Affairs: Trust Territory of the Pacific Islands ................................................................................. .................... ...................... ...................... 2 Department of Labor: Employment and Training Administration: Workers compensation programs ...................................................................................... .................... ...................... ...................... 44 Department of the Treasury: Financial Management Service: Temporary State fiscal assistance fund ............................................................................ 5,000 5,000 ...................... 5,000 District of Columbia: District of Columbia Courts: Federal payment to the District of Columbia courts ......................................................... 161 167 228 116 Defender services in District of Columbia courts .............................................................. 17 32 42 30 Federal payment for family court act ................................................................................. .................... ...................... ...................... 10 District of Columbia General and Special Payments: Federal support for economic development and management reforms in the District ... 144 108 31 145 Federal payment for emergency planning and security cost in the District of Columbia 15 11 15 .................... Election Assistance Commission: Election reform programs ................................................................................................... 830 1,491 40 .................... Total, discretionary ........................................................................................................... 6,422 Mandatory: Department of Agriculture: Forest Service: Forest Service permanent appropriations .......................................................................... 596 Department of Energy: Energy Programs: Payments to States under Federal Power Act .................................................................. 3 Department of the Interior: Bureau of Land Management: Miscellaneous permanent payment accounts .................................................................... .................... Minerals Management Service: Mineral leasing and associated payments ........................................................................ 948 Insular Affairs: Assistance to territories ...................................................................................................... 76 Payments to the United States territories, fiscal assistance ............................................ 95 Department of the Treasury: Alcohol and Tobacco Tax and Trade Bureau: Internal revenue collections for Puerto Rico ..................................................................... 357 Corps of Engineers-Civil Works: Permanent appropriations .................................................................................................. 7 2005 Estimate 2 2 131 ...................... 5,000 ...................... 167 221 32 41 11 ...................... 108 26 31 15 2,172 185 7,055 603 5,587 7,899 750 366 370 374 366 370 3 3 6 3 3 5 5 .................... 5 5 1,099 1,124 948 1,099 1,124 76 108 73 108 76 95 69 108 73 108 372 382 357 372 382 8 9 6 8 9 Total, mandatory ............................................................................................................... 2,082 2,037 2,074 1,862 2,030 2,074 Total, general government .......................................................................................... 8,504 9,092 2,677 7,449 9,929 2,824 Total, Grants ............................................................................................................. Discretionary .......................................................................................................... Mandatory .............................................................................................................. 397,653 137,997 259,656 418,131 135,441 282,690 402,979 128,628 274,351 387,281 165,101 222,180 418,091 177,560 240,531 416,512 170,903 245,609 8. 131 AID TO STATE AND LOCAL GOVERNMENTS APPENDIX: SELECTED GRANT DATA BY STATE This Appendix displays State-by-State spending for the selected grant programs to State and local governments shown in the following table, ‘‘Summary of Programs by Agency, Bureau, and Program.’’ The programs selected here cover more than 80 percent of total grant spending. The first summary table shows the obligations for each program. The second summary table, ‘‘Summary of Programs by State,’’ shows the amounts for each State for these programs. The individual program tables display obligations for each program on a Stateby-State basis, consistent with the estimates in this budget. Each table reports the following information: • The Federal agency that administers the program. • The program title and number as contained in the Catalog of Federal Domestic Assistance. Table 8–5. • The budget account number from which the program is funded. • Actual 2003 obligations by State, Federal territory, and Indian tribes in thousands of dollars. Undistributed obligations shown at the bottom of each page are generally project funds that are not distributed by formula, or programs for which State-by-State data are not available. • Estimates of 2004 obligations by State from previous budget authority, from new budget authority, and total obligations. • Estimates of 2005 obligations by State, which are also based on the 2005 budget request, unless otherwise noted. • The percentage share of 2005 estimated program funds distributed to each State. SUMMARY OF PROGRAMS BY AGENCY, BUREAU, AND PROGRAM (obligations in millions of dollars) Agency, Bureau, and Program Department of Agriculture, Food and Nutrition Service National School Lunch Program (10.555) .................................................................................................................... Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557) .................................... State Administrative Matching Grants for Food Stamp Program (10.561) ................................................................. Department of Education, Office of Elementary and Secondary Education Title I Grants to Local Educational Agencies (84.010) ................................................................................................ Department of Education, Office of Special Education and Rehabilitative Services Special Education—Grants to States (84.027) ............................................................................................................. Rehabilitation Services—Vocational Rehabilitation Grants to States (84.126) ........................................................... Department of Health and Human Services, Centers for Medicare and Medicaid Services State Children’s Health Insurance Program (93.767) .................................................................................................. Grants to States for Medicaid (93.778) ........................................................................................................................ Department of Health and Human Services, Administration for Children and Families Temporary Assistance for Needy Families (TANF)—Family Assistance Grants (93.558) ......................................... Child Support Enforcement—Federal Share of State and Local Administrative Costs and Incentives (93.563) ...... Low Income Home Energy Assistance Program (93.568) .......................................................................................... Child Care and Development Block Grant (93.575) .................................................................................................... Child Care and Development Fund—Mandatory (93.596a) ......................................................................................... Child Care and Development Fund—Matching (93.596b) ........................................................................................... Head Start (93.600) ....................................................................................................................................................... Foster Care—Title IV–E (93.658) ................................................................................................................................. Department of Housing and Urban Development, Public and Indian Housing Programs Public Housing Operating Fund (14.850) ..................................................................................................................... Housing Choice Vouchers (14.871) .............................................................................................................................. Public Housing Capital Fund (14.872) .......................................................................................................................... Department of Housing and Urban Development, Community Planning and Development Community Development Block Grants—Entitlement Grants (14.218) ....................................................................... Community Development Block Grants—State and Small Cities Programs (14.228; 14.219; 14.225) ..................... Department of Transportation, Federal Aviation Administration Airport Improvement Program (20.106) ........................................................................................................................ Department of Transportation, Federal Highway Administration Highway Planning and Construction (20.205) .............................................................................................................. Department of Transportation, Federal Transit Administration Federal Transit Capital Investment Grants (Fixed Guideway Modernization) (20.500) .............................................. Federal Transit Urbanized Area—Formula Grants (Section 5307) (20.507) .............................................................. Federal Transit Formula and Research Grants (Section 5307) (20.507) ................................................................... Total ................................................................................................................................................................................... FY 2003 (actual) Estimated FY 2004 obligations from: Previous authority 6,351 10 4,686 61 2,321 .................. New authority Total FY 2005 (estimated) 6,613 4,749 2,331 6,623 4,810 2,331 6,786 4,869 2,378 37 13,986 14,022 13,341 8,246 45 2,533 .................. 10,327 2,584 10,372 2,584 11,068 2,698 3,175 .................. 169,105 .................. 3,175 177,232 3,175 177,232 4,082 183,303 10,046 17,393 4,053 1,788 2,086 1,235 1,482 6,667 4,573 .................. .................. .................. .................. .................. .................. .................. .................. 17,200 4,352 1,789 2,087 1,235 1,482 6,775 4,685 17,200 4,352 1,789 2,087 1,235 1,482 6,775 4,685 17,240 4,387 1,800 2,100 1,235 1,482 6,877 4,855 3,617 11,273 2,783 4 101 530 3,579 14,464 2,541 3,583 14,565 3,071 3,573 13,339 2,485 3,038 .................. 1,309 .................. 3,032 1,306 3,032 1,306 3,027 1,304 3,286 .................. 3,187 3,187 3,205 7,100 35,818 35,092 1,212 108 900 1,008 4,184 742 2,569 3,311 .................. .................. .................. .................. 1,647 1,598 2,585 31,775 308,217 28,719 30,357 299,279 329,635 336,355 132 ANALYTICAL PERSPECTIVES Table 8–6. SUMMARY OF PROGRAMS BY STATE (obligations in millions of dollars) Programs distributed in all years State or Territory Alabama .................................................................................................................... Alaska ....................................................................................................................... Arizona ...................................................................................................................... Arkansas ................................................................................................................... California ................................................................................................................... Colorado ................................................................................................................... Connecticut ............................................................................................................... Delaware ................................................................................................................... District of Columbia .................................................................................................. Florida ....................................................................................................................... Georgia ..................................................................................................................... Hawaii ....................................................................................................................... Idaho ......................................................................................................................... Illinois ........................................................................................................................ Indiana ...................................................................................................................... Iowa .......................................................................................................................... Kansas ...................................................................................................................... Kentucky ................................................................................................................... Louisiana ................................................................................................................... Maine ........................................................................................................................ Maryland ................................................................................................................... Massachusetts .......................................................................................................... Michigan .................................................................................................................... Minnesota ................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana .................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ........................................................................................................ New Jersey ............................................................................................................... New Mexico .............................................................................................................. New York .................................................................................................................. North Carolina .......................................................................................................... North Dakota ............................................................................................................ Ohio .......................................................................................................................... Oklahoma .................................................................................................................. Oregon ...................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................ South Carolina .......................................................................................................... South Dakota ............................................................................................................ Tennessee ................................................................................................................ Texas ........................................................................................................................ Utah .......................................................................................................................... Vermont .................................................................................................................... Virginia ...................................................................................................................... Washington ............................................................................................................... West Virginia ............................................................................................................ Wisconsin .................................................................................................................. Wyoming ................................................................................................................... American Samoa ...................................................................................................... Guam ........................................................................................................................ Northern Mariana Islands ......................................................................................... Puerto Rico ............................................................................................................... Virgin Islands ............................................................................................................ Indian Tribes ............................................................................................................. All programs FY 2003 (actual) FY 2003 (actual) Estimated FY 2004 obligations from: Previous authority New authority Total FY 2005 (estimated) FY 2005 Percentage of distributed total 4,616 1,383 5,113 3,198 36,990 3,005 3,744 776 1,730 12,946 7,963 1,179 1,206 11,179 5,473 2,688 2,227 4,964 5,826 1,852 4,580 7,676 9,425 4,710 3,908 6,136 1,098 1,664 1,390 1,107 7,819 2,595 34,358 8,018 762 11,758 3,467 3,387 13,592 1,465 4,315 828 6,858 19,387 1,743 851 5,204 5,666 2,526 5,221 619 40 134 35 2,044 114 656 4,616 1,383 5,113 3,198 36,990 3,005 3,744 776 1,730 12,946 7,963 1,179 1,206 11,179 5,473 2,688 2,227 4,964 5,826 1,852 4,580 7,676 9,425 4,710 3,908 6,136 1,098 1,664 1,390 1,107 7,819 2,595 34,358 8,018 762 11,758 3,467 3,387 13,592 1,465 4,315 828 6,858 19,387 1,743 851 5,204 5,666 2,526 5,221 619 40 134 35 2,044 114 656 509 178 477 357 2,925 279 329 112 163 1,065 1,127 259 198 1,014 527 308 357 377 616 122 500 1,162 770 460 328 513 222 188 205 149 854 225 1,632 616 167 1,143 424 268 1,555 145 407 212 706 1,825 228 148 715 529 360 505 149 11 8 4 133 35 1 4,213 1,431 5,592 3,259 36,332 2,838 3,583 724 1,480 13,198 7,378 991 1,103 10,972 5,190 2,443 2,027 4,682 5,264 1,852 4,463 7,661 9,138 4,648 3,907 5,914 837 1,524 1,430 995 7,421 2,647 38,604 8,041 651 11,995 3,271 3,150 13,035 1,453 4,073 677 6,379 19,197 1,664 785 4,493 5,313 2,205 4,689 505 27 98 25 2,192 75 686 4,722 1,609 6,068 3,615 39,256 3,116 3,912 836 1,643 14,263 8,505 1,249 1,301 11,985 5,717 2,751 2,384 5,059 5,879 1,975 4,963 8,823 9,907 5,108 4,235 6,427 1,059 1,713 1,635 1,144 8,275 2,872 40,236 8,657 818 13,138 3,695 3,418 14,590 1,598 4,480 888 7,085 21,022 1,892 933 5,208 5,842 2,565 5,194 654 38 106 29 2,325 110 687 4,895 1,659 6,612 3,684 39,242 3,091 3,959 820 1,793 14,730 8,671 1,244 1,342 12,210 6,050 2,797 2,400 5,047 5,951 1,997 5,037 8,527 10,035 5,192 4,289 6,604 1,070 1,740 1,671 1,153 8,438 3,013 41,774 9,192 823 13,296 3,628 3,429 14,586 1,599 4,487 896 7,470 21,361 2,006 935 5,258 5,910 2,624 5,316 647 162 103 30 2,250 108 719 1.47 0.50 1.98 1.10 11.76 0.93 1.19 0.25 0.54 4.42 2.60 0.37 0.40 3.66 1.81 0.84 0.72 1.51 1.78 0.60 1.51 2.56 3.01 1.56 1.29 1.98 0.32 0.52 0.50 0.35 2.53 0.90 12.52 2.76 0.25 3.99 1.09 1.03 4.37 0.48 1.35 0.27 2.24 6.40 0.60 0.28 1.58 1.77 0.79 1.59 0.19 0.05 0.03 0.01 0.67 0.03 0.22 Total, programs distributed by State in all years ........................................... 303,208 303,208 28,797 298,418 327,215 333,571 100.00 MEMORANDUM:. Not distributed by State in all years 1 ................................................................... 5,009 5,009 1,560 861 2,420 2,784 N/A 308,217 308,217 30,357 299,279 329,635 336,355 N/A Total, including undistributed ............................................................................... 1 The sum of programs not distributed by State in all years. Department of Agriculture, Food and Nutrition Service Table 8–7. 12–3539–0–1–605 NATIONAL SCHOOL LUNCH PROGRAM (10.555) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... DOD/AF/USMC ................................................................................ Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 124,671 17,809 130,074 73,292 855,095 60,804 52,563 13,064 14,651 361,667 244,398 28,181 28,727 253,486 108,379 52,983 51,648 103,495 148,083 19,232 80,480 89,403 162,618 79,374 107,561 114,164 15,237 34,300 35,198 12,762 128,195 56,091 430,872 191,341 11,087 180,392 86,918 59,384 187,919 18,793 110,933 17,052 127,301 692,848 47,752 8,294 114,204 103,915 41,463 83,802 8,204 ...................... 3,700 ...................... 114,013 ...................... 4,256 ...................... 42,581 5,885 201 29 210 118 1,380 98 85 21 24 583 394 45 46 409 175 85 83 167 239 31 130 144 262 128 173 184 25 55 57 21 207 90 695 309 18 291 140 96 303 30 179 27 205 1,117 77 13 184 168 67 135 13 ........................ 6 ........................ 184 ........................ 7 ........................ ........................ 9 130,695 18,670 136,360 76,834 896,415 63,742 55,103 13,695 15,359 379,144 256,208 29,543 30,115 265,735 113,616 55,543 54,144 108,496 155,239 20,161 84,369 93,723 170,476 83,210 112,759 119,681 15,973 35,957 36,899 13,379 134,390 58,801 451,693 200,587 11,623 189,109 91,118 62,254 197,000 19,701 116,294 17,876 133,453 726,328 50,060 8,695 119,723 108,936 43,467 87,852 8,600 ...................... 3,879 ...................... 119,522 ...................... 4,462 ...................... ...................... 6,169 130,896 18,699 136,570 76,952 897,795 63,840 55,188 13,716 15,383 379,727 256,602 29,588 30,161 266,144 113,791 55,628 54,227 108,663 155,478 20,192 84,499 93,867 170,738 83,338 112,932 119,865 15,998 36,012 36,956 13,400 134,597 58,891 452,388 200,896 11,641 189,400 91,258 62,350 197,303 19,731 116,473 17,903 133,658 727,445 50,137 8,708 119,907 109,104 43,534 87,987 8,613 ...................... 3,885 ...................... 119,706 ...................... 4,469 ...................... ...................... 6,178 134,127 19,160 139,940 78,851 919,955 65,416 56,550 14,055 15,762 389,099 262,935 30,318 30,906 272,713 116,599 57,002 55,565 111,345 159,315 20,691 86,584 96,184 174,952 85,394 115,719 122,823 16,393 36,902 37,868 13,730 137,918 60,345 463,553 205,854 11,928 194,074 93,511 63,888 202,172 20,218 119,347 18,345 136,957 745,400 51,374 8,923 122,866 111,797 44,608 90,158 8,826 ...................... 3,981 ...................... 122,661 ...................... 4,579 ...................... ...................... 6,331 1.98 0.28 2.06 1.16 13.56 0.96 0.83 0.21 0.23 5.73 3.87 0.45 0.46 4.02 1.72 0.84 0.82 1.64 2.35 0.30 1.28 1.42 2.58 1.26 1.71 1.81 0.24 0.54 0.56 0.20 2.03 0.89 6.83 3.03 0.18 2.86 1.38 0.94 2.98 0.30 1.76 0.27 2.02 10.98 0.76 0.13 1.81 1.65 0.66 1.33 0.13 .................... 0.06 .................... 1.81 .................... 0.07 .................... .................... 0.09 6,350,594 10,172 6,612,835 6,623,007 6,786,467 100.00 133 Department of Agriculture, Food and Nutrition Service Table 8–8. 12–3510–0–1–605 SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC) (10.557) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Farmers’ Market Nutrition Program ................................................ Total ................................................................................................. 1 Excludes FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 76,640 21,516 84,376 50,831 822,231 47,241 34,117 9,841 11,421 210,449 137,624 29,029 18,678 175,951 71,675 36,606 33,845 69,745 86,045 12,197 55,620 63,968 121,628 63,690 62,324 70,686 13,608 22,294 26,181 10,037 80,698 33,864 301,729 118,765 8,770 143,130 50,494 64,420 125,488 14,229 60,715 12,085 93,608 444,166 33,742 10,725 71,465 99,796 30,661 59,198 6,513 6,055 6,034 ...................... 170,024 ...................... 5,490 43,902 15,232 24,995 1,008 283 1,110 668 10,815 621 449 129 150 2,767 1,810 382 246 2,314 942 481 445 917 1,131 160 731 841 1,599 837 820 929 179 293 344 132 1,061 445 3,968 1,562 115 1,882 664 847 1,650 187 798 159 1,231 5,841 444 141 940 1,312 403 778 86 80 79 ........................ 2,236 ........................ 72 577 ........................ ........................ 76,903 21,590 84,666 51,006 825,055 47,403 34,234 9,875 11,460 211,172 138,096 29,129 18,742 176,555 71,921 36,732 33,961 69,984 86,340 12,239 55,811 64,188 122,046 63,909 62,538 70,929 13,655 22,371 26,271 10,071 80,975 33,980 302,765 119,173 8,800 143,621 50,667 64,641 125,919 14,278 60,923 12,126 93,929 445,691 33,858 10,762 71,710 100,139 30,766 59,401 6,535 6,076 6,055 ...................... 170,608 ...................... 5,509 44,053 60,055 26,636 77,911 21,873 85,776 51,674 835,870 48,024 34,683 10,004 11,610 213,939 139,906 29,511 18,988 178,869 72,863 37,213 34,406 70,901 87,471 12,399 56,542 65,029 123,645 64,746 63,358 71,858 13,834 22,664 26,615 10,203 82,036 34,425 306,733 120,735 8,915 145,503 51,331 65,488 127,569 14,465 61,721 12,285 95,160 451,532 34,302 10,903 72,650 101,451 31,169 60,179 6,621 6,156 6,134 ...................... 172,844 ...................... 5,581 44,630 60,055 26,636 79,214 22,239 87,210 52,538 849,840 48,827 35,263 10,171 11,805 217,516 142,246 30,004 19,305 181,860 74,082 37,835 34,982 72,087 88,935 12,607 57,488 66,116 125,713 65,829 64,417 73,060 14,065 23,043 27,060 10,374 83,408 35,001 311,862 122,753 9,065 147,937 52,190 66,583 129,702 14,707 62,754 12,491 96,752 459,082 34,875 11,085 73,865 103,147 31,691 61,186 6,732 6,258 6,237 ...................... 175,734 ...................... 5,674 45,376 66,650 ...................... 1.65 0.46 1.82 1.09 17.70 1.02 0.73 0.21 0.25 4.53 2.96 0.62 0.40 3.79 1.54 0.79 0.73 1.50 1.85 0.26 1.20 1.38 2.62 1.37 1.34 1.52 0.29 0.48 0.56 0.22 1.74 0.73 6.49 2.56 0.19 3.08 1.09 1.39 2.70 0.31 1.31 0.26 2.01 9.56 0.73 0.23 1.54 2.15 0.66 1.27 0.14 0.13 0.13 .................... 3.66 .................... 0.12 0.94 .................... .................... 4,686,087 61,091 4,748,503 4,809,594 4,868,528 1 100.00 undistributed obligations. 134 Department of Agriculture, Food and Nutrition Service Table 8–9. 12–3505–0–1–605 STATE ADMINISTRATIVE MATCHING GRANTS FOR FOOD STAMP PROGRAM (10.561) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 31,185 5,517 27,833 20,964 330,026 24,080 22,114 6,971 11,000 81,445 60,976 10,195 7,414 85,779 37,777 15,506 12,968 26,452 40,125 7,029 33,615 32,326 87,785 35,866 27,769 40,507 6,308 13,903 10,465 5,199 75,094 15,479 251,123 58,810 5,454 99,512 30,990 30,506 127,337 5,046 21,459 5,684 34,418 176,158 15,936 5,283 71,542 34,885 13,278 31,002 1,907 ...................... 1,806 ...................... ...................... ...................... 3,950 ...................... 44,933 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 31,942 5,651 28,509 21,473 338,036 24,665 22,651 7,140 11,267 83,422 62,456 10,442 7,594 87,861 38,694 15,882 13,283 27,094 41,099 7,200 34,431 33,111 89,916 36,737 28,443 41,490 6,461 14,240 10,719 5,325 76,917 15,855 257,219 60,238 5,586 101,928 31,742 31,247 130,428 5,168 21,980 5,822 35,253 180,434 16,323 5,411 73,279 35,732 13,600 31,755 1,953 ...................... 1,850 ...................... ...................... ...................... 4,046 ...................... ...................... 31,942 5,651 28,509 21,473 338,036 24,665 22,651 7,140 11,267 83,422 62,456 10,442 7,594 87,861 38,694 15,882 13,283 27,094 41,099 7,200 34,431 33,111 89,916 36,737 28,443 41,490 6,461 14,240 10,719 5,325 76,917 15,855 257,219 60,238 5,586 101,928 31,742 31,247 130,428 5,168 21,980 5,822 35,253 180,434 16,323 5,411 73,279 35,732 13,600 31,755 1,953 ...................... 1,850 ...................... ...................... ...................... 4,046 ...................... ...................... 32,586 5,765 29,083 21,906 344,853 25,162 23,108 7,284 11,494 85,104 63,715 10,653 7,747 89,633 39,474 16,203 13,551 27,640 41,928 7,345 35,125 33,778 91,729 37,477 29,017 42,327 6,591 14,528 10,935 5,433 78,468 16,174 262,405 61,452 5,699 103,983 32,382 31,877 133,058 5,273 22,423 5,939 35,964 184,072 16,652 5,520 74,756 36,452 13,875 32,395 1,993 ...................... 1,887 ...................... ...................... ...................... 4,127 ...................... ...................... 1.37 0.24 1.22 0.92 14.50 1.06 0.97 0.31 0.48 3.58 2.68 0.45 0.33 3.77 1.66 0.68 0.57 1.16 1.76 0.31 1.48 1.42 3.86 1.58 1.22 1.78 0.28 0.61 0.46 0.23 3.30 0.68 11.03 2.58 0.24 4.37 1.36 1.34 5.60 0.22 0.94 0.25 1.51 7.74 0.70 0.23 3.14 1.53 0.58 1.36 0.08 .................... 0.08 .................... .................... .................... 0.17 .................... .................... 2,320,691 ........................ 2,331,000 2,331,000 2,378,000 100.00 135 Department of Education, Office of Elementary and Secondary Education Table 8–10. 91–0900–0–1–501 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (84.010) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Excludes FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 150,452 28,146 167,511 93,703 1,405,904 92,540 99,835 26,929 34,671 455,647 301,427 31,944 32,561 415,666 144,991 60,913 71,895 145,615 206,931 38,100 146,193 217,287 400,123 107,443 126,576 161,295 33,654 37,507 40,703 26,130 247,508 81,575 997,915 211,469 25,786 333,556 117,105 93,261 384,201 34,170 137,390 26,661 149,742 845,060 41,807 21,987 165,791 137,905 78,775 141,283 23,559 7,453 6,646 3,541 326,549 ...................... 10,014 81,886 11,049 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 8,122 7,243 3,645 ........................ ........................ 10,914 ........................ 6,796 213,346 36,452 237,177 130,298 1,978,436 128,577 127,858 36,658 53,716 633,005 418,136 43,839 47,697 585,187 192,953 74,465 101,029 194,667 302,924 55,334 183,155 301,014 495,194 137,208 187,673 228,225 47,146 55,763 66,512 34,894 321,672 124,085 1,407,518 316,433 35,462 471,188 156,775 144,514 516,607 52,079 188,562 38,021 224,673 1,235,689 56,817 31,922 223,943 193,334 111,716 182,591 34,178 ...................... ...................... ...................... 502,587 ...................... ...................... 86,703 ...................... 213,346 36,452 237,177 130,298 1,978,436 128,577 127,858 36,658 53,716 633,005 418,136 43,839 47,697 585,187 192,953 74,465 101,029 194,667 302,924 55,334 183,155 301,014 495,194 137,208 187,673 228,225 47,146 55,763 66,512 34,894 321,672 124,085 1,407,518 316,433 35,462 471,188 156,775 144,514 516,607 52,079 188,562 38,021 224,673 1,235,689 56,817 31,922 223,943 193,334 111,716 182,591 34,178 8,122 7,243 3,645 502,587 ...................... 10,914 86,703 6,796 201,479 34,974 247,541 127,256 1,892,513 126,089 115,294 34,725 53,082 629,014 408,277 43,714 44,923 575,005 186,773 69,476 86,418 181,101 282,102 47,734 177,862 242,950 444,074 113,909 172,535 198,318 43,348 51,446 69,765 31,691 283,975 120,330 1,334,482 302,223 32,416 422,846 152,110 145,692 466,342 49,683 177,594 37,147 215,745 1,202,518 55,363 29,975 215,581 187,176 102,869 173,348 31,937 8,600 7,669 3,860 533,825 ...................... 11,556 94,027 8,500 1.51 0.26 1.86 0.95 14.19 0.95 0.86 0.26 0.40 4.72 3.06 0.33 0.34 4.31 1.40 0.52 0.65 1.36 2.12 0.36 1.33 1.82 3.33 0.85 1.29 1.49 0.33 0.39 0.52 0.24 2.13 0.90 10.01 2.27 0.24 3.17 1.14 1.09 3.50 0.37 1.33 0.28 1.62 9.02 0.42 0.22 1.62 1.40 0.77 1.30 0.24 0.06 0.06 0.03 4.00 .................... 0.09 0.71 .................... 10,045,931 36,720 13,985,610 14,022,330 13,340,776 1 100.00 undistributed obligations. 136 Department of Education, Office of Special Education and Rehabilitative Services Table 8–11. 91–0300–0–1–501 SPECIAL EDUCATION—GRANTS TO STATES (84.027) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Excludes FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 132,465 24,523 122,666 79,493 863,460 103,891 97,637 22,475 11,300 446,581 215,645 28,345 38,148 368,642 187,610 90,286 78,114 114,757 131,869 40,467 144,033 209,933 286,500 140,387 85,278 167,991 26,025 55,222 46,131 35,097 267,314 67,392 558,783 221,785 18,249 318,655 108,378 94,676 310,967 32,340 127,509 21,740 170,012 671,738 75,774 17,596 199,415 157,548 56,165 153,874 18,460 5,950 13,180 4,547 46,289 ...................... 10,902 80,459 21,401 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 28,694 ........................ ........................ ........................ 16,000 165,763 31,050 155,318 99,942 1,093,300 131,545 120,579 28,457 14,309 561,838 273,047 35,890 48,302 456,474 233,307 111,279 97,410 142,313 166,971 49,876 179,379 258,744 358,663 173,028 107,977 207,050 32,888 68,061 58,410 43,257 329,467 83,272 691,950 275,898 23,107 402,336 135,051 117,926 389,947 39,860 159,657 27,527 211,443 850,545 95,924 22,280 250,175 199,473 69,223 189,763 23,374 6,471 14,349 4,918 94,942 ...................... 9,120 82,101 22,579 165,763 31,050 155,318 99,942 1,093,300 131,545 120,579 28,457 14,309 561,838 273,047 35,890 48,302 456,474 233,307 111,279 97,410 142,313 166,971 49,876 179,379 258,744 358,663 173,028 107,977 207,050 32,888 68,061 58,410 43,257 329,467 83,272 691,950 275,898 23,107 402,336 135,051 117,926 389,947 39,860 159,657 27,527 211,443 850,545 95,924 22,280 250,175 199,473 69,223 189,763 23,374 6,471 14,349 4,918 123,636 ...................... 9,120 82,101 38,579 175,795 33,735 168,746 106,814 1,184,687 142,917 128,204 30,918 15,546 608,918 296,653 38,993 52,445 485,975 248,443 117,871 103,387 150,744 181,406 52,831 192,290 274,072 383,842 183,322 117,048 219,316 35,470 72,093 63,460 45,819 348,984 88,633 732,941 296,710 25,105 432,818 143,859 126,626 415,615 42,221 169,190 29,906 225,395 924,080 103,545 24,206 268,549 215,341 73,324 201,192 25,394 6,269 13,901 4,764 103,151 ...................... 8,835 83,210 22,579 1.59 0.31 1.53 0.97 10.73 1.29 1.16 0.28 0.14 5.51 2.69 0.35 0.47 4.40 2.25 1.07 0.94 1.36 1.64 0.48 1.74 2.48 3.48 1.66 1.06 1.99 0.32 0.65 0.57 0.41 3.16 0.80 6.64 2.69 0.23 3.92 1.30 1.15 3.76 0.38 1.53 0.27 2.04 8.37 0.94 0.22 2.43 1.95 0.66 1.82 0.23 0.06 0.13 0.04 0.93 .................... 0.08 0.75 .................... 8,246,070 44,694 10,327,106 10,371,800 11,068,106 1 100.00 undistributed obligations. 137 Department of Education, Office of Special Education and Rehabilitative Services Table 8–12. 91–0301–0–1–506 REHABILITATION SERVICES—VOCATIONAL REHABILITATION GRANTS TO STATES (84.126) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 52,930 8,430 45,401 32,324 251,750 24,708 18,387 8,439 11,844 122,430 73,729 9,662 13,759 91,967 59,428 28,603 24,449 47,353 41,526 14,344 37,535 44,347 87,351 39,813 38,113 55,526 10,092 16,106 12,774 9,923 51,046 20,610 132,280 77,974 8,356 108,669 37,934 29,974 113,063 9,218 44,993 8,473 59,032 184,321 23,143 8,445 58,075 43,424 23,879 50,917 7,106 841 2,085 897 65,404 ...................... 1,850 28,436 ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 52,957 8,511 48,460 33,076 243,059 31,269 18,465 8,511 11,757 135,277 76,060 10,212 13,720 93,294 60,435 29,312 24,992 47,352 53,453 14,224 37,170 42,740 87,505 39,527 38,442 55,753 10,227 16,182 14,920 9,613 51,532 21,178 133,309 80,859 8,511 109,423 38,443 31,182 112,925 9,730 45,329 8,511 59,601 188,050 23,887 8,511 57,310 43,951 23,703 51,004 8,511 854 2,548 960 65,225 ...................... 1,838 30,800 ...................... 52,957 8,511 48,460 33,076 243,059 31,269 18,465 8,511 11,757 135,277 76,060 10,212 13,720 93,294 60,435 29,312 24,992 47,352 53,453 14,224 37,170 42,740 87,505 39,527 38,442 55,753 10,227 16,182 14,920 9,613 51,532 21,178 133,309 80,859 8,511 109,423 38,443 31,182 112,925 9,730 45,329 8,511 59,601 188,050 23,887 8,511 57,310 43,951 23,703 51,004 8,511 854 2,548 960 65,225 ...................... 1,838 30,800 ...................... 54,942 8,885 51,558 34,424 255,080 32,737 19,159 8,885 12,009 143,010 79,845 10,720 14,482 97,110 62,911 30,452 25,998 49,238 55,463 14,805 38,800 44,079 90,940 41,151 39,871 57,988 10,690 16,848 16,036 10,019 53,506 22,182 138,051 84,503 8,885 113,423 40,029 32,681 117,026 10,118 47,335 8,885 62,090 197,934 25,163 8,885 59,978 46,069 24,591 53,044 8,885 890 2,673 1,029 67,753 ...................... 1,902 32,000 ...................... 2.04 0.33 1.91 1.28 9.46 1.21 0.71 0.33 0.45 5.30 2.96 0.40 0.54 3.60 2.33 1.13 0.96 1.83 2.06 0.55 1.44 1.63 3.37 1.53 1.48 2.15 0.40 0.62 0.59 0.37 1.98 0.82 5.12 3.13 0.33 4.20 1.48 1.21 4.34 0.38 1.75 0.33 2.30 7.34 0.93 0.33 2.22 1.71 0.91 1.97 0.33 0.03 0.10 0.04 2.51 .................... 0.07 1.19 .................... 2,533,492 ........................ 2,584,162 2,584,162 2,697,645 100.00 138 Department of Health and Human Services, Centers for Medicare and Medicaid Services Table 8–13. 75–0515–0–1–551 STATE CHILDREN’S HEALTH INSURANCE PROGRAM (93.767) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 FY2003 amounts. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 51,973 7,430 87,709 34,154 548,808 37,915 24,361 8,686 7,202 171,991 96,977 9,648 16,795 132,153 53,710 21,368 24,444 37,984 61,291 9,689 33,648 46,201 95,696 30,626 37,673 43,425 11,326 15,414 30,436 8,904 69,346 32,789 227,517 81,748 5,437 114,614 44,622 40,709 100,846 7,319 43,402 6,152 58,354 311,504 24,694 3,813 53,438 50,326 18,551 43,825 5,481 397 1,158 364 30,297 ...................... 860 ...................... ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 54,679 7,157 87,024 35,073 533,991 44,865 27,975 7,817 7,199 193,615 103,893 9,648 16,958 120,970 54,027 19,703 23,542 39,287 64,523 9,474 36,121 46,201 89,138 30,626 36,897 41,923 10,194 13,873 31,164 8,013 64,390 32,789 216,456 85,754 5,437 103,803 44,622 38,057 98,748 7,380 43,355 5,790 57,958 330,852 24,091 3,813 55,715 50,327 18,760 43,505 4,952 397 1,158 364 30,297 ...................... 860 ...................... ...................... 54,679 7,157 87,024 35,073 533,991 44,865 27,975 7,817 7,199 193,615 103,893 9,648 16,958 120,970 54,027 19,703 23,542 39,287 64,523 9,474 36,121 46,201 89,138 30,626 36,897 41,923 10,194 13,873 31,164 8,013 64,390 32,789 216,456 85,754 5,437 103,803 44,622 38,057 98,748 7,380 43,355 5,790 57,958 330,852 24,091 3,813 55,715 50,327 18,760 43,505 4,952 397 1,158 364 30,297 ...................... 860 ...................... ...................... 70,302 9,202 111,888 45,094 686,560 57,684 35,968 10,050 9,256 248,934 133,577 12,405 21,803 155,533 69,463 25,332 30,268 50,512 82,958 12,181 46,441 59,401 114,606 39,376 47,439 53,901 13,107 17,837 40,068 10,302 82,787 42,157 278,301 110,255 6,990 133,461 57,371 48,930 126,962 9,489 55,742 7,444 74,517 425,381 30,974 4,902 71,634 64,706 24,120 55,935 6,367 510 1,489 468 38,953 ...................... 1,106 ...................... ...................... 1.72 0.23 2.74 1.10 16.82 1.41 0.88 0.25 0.23 6.10 3.27 0.30 0.53 3.81 1.70 0.62 0.74 1.24 2.03 0.30 1.14 1.46 2.81 0.96 1.16 1.32 0.32 0.44 0.98 0.25 2.03 1.03 6.82 2.70 0.17 3.27 1.41 1.20 3.11 0.23 1.37 0.18 1.83 10.42 0.76 0.12 1.75 1.58 0.59 1.37 0.16 0.01 0.04 0.01 0.95 .................... 0.03 .................... .................... 1 3,175,200 ........................ 3,175,200 1 3,175,200 1 4,082,400 100.00 and FY 2004 amounts published in FEDERAL REGISTER; FY2005 are estimates; FY2003, FY2004 and FY2005 do not include redistribution/retention 139 Department of Health and Human Services, Centers for Medicare and Medicaid Services Table 8–14. 75–0512–0–1–551 GRANTS TO STATES FOR MEDICAID (93.778) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Survey and Certification .................................................................. Fraud Control Units ......................................................................... Vaccines For Children ..................................................................... Medicare Part B Transfer ............................................................... Medicare Part D .............................................................................. Adjustments ..................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 2,558,176 553,188 3,173,602 1,939,726 18,020,772 1,416,384 1,987,481 398,399 932,848 7,143,923 4,234,217 513,944 644,996 5,547,749 3,180,739 1,490,276 1,196,630 2,842,596 3,623,279 1,233,265 2,337,403 4,461,971 5,088,625 2,682,277 2,487,126 3,730,980 504,609 903,271 621,240 634,470 4,128,343 1,604,749 22,048,106 4,844,869 353,127 6,607,667 1,888,936 1,875,631 7,671,305 852,904 2,726,669 389,951 4,555,674 10,163,965 848,130 496,035 2,345,250 3,035,439 1,484,996 3,016,290 229,004 3,727 6,591 2,235 215,666 ...................... 6,641 ...................... ...................... 182,172 120,153 1,164,194 112,094 ...................... 40,730 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 2,524,653 806,044 3,776,578 2,282,049 18,424,892 1,403,569 2,023,038 424,358 901,172 7,736,075 4,367,010 530,065 703,000 5,699,779 3,251,085 1,509,138 1,247,296 3,018,086 3,506,799 1,323,762 2,552,600 5,189,325 5,219,495 2,917,474 2,704,138 3,885,646 415,473 888,012 744,129 621,318 4,205,878 1,802,300 26,959,349 5,135,793 363,517 7,594,403 2,014,116 1,822,753 8,311,044 948,437 2,712,135 418,924 4,545,611 10,857,198 959,475 532,772 2,361,169 3,069,794 1,534,748 2,855,074 243,921 3,947 6,683 2,381 219,397 ...................... 6,913 ...................... ...................... 242,820 129,000 1,208,420 125,000 ...................... ¥4,556,620 2,524,653 806,044 3,776,578 2,282,049 18,424,892 1,403,569 2,023,038 424,358 901,172 7,736,075 4,367,010 530,065 703,000 5,699,779 3,251,085 1,509,138 1,247,296 3,018,086 3,506,799 1,323,762 2,552,600 5,189,325 5,219,495 2,917,474 2,704,138 3,885,646 415,473 888,012 744,129 621,318 4,205,878 1,802,300 26,959,349 5,135,793 363,517 7,594,403 2,014,116 1,822,753 8,311,044 948,437 2,712,135 418,924 4,545,611 10,857,198 959,475 532,772 2,361,169 3,069,794 1,534,748 2,855,074 243,921 3,947 6,683 2,381 219,397 ...................... 6,913 ...................... ...................... 242,820 129,000 1,208,420 125,000 ...................... ¥4,556,620 2,684,767 831,692 4,324,884 2,327,134 18,215,331 1,357,010 2,047,094 412,412 1,000,602 8,081,629 4,513,123 508,085 724,503 5,775,645 3,532,269 1,553,375 1,272,629 2,997,006 3,591,806 1,356,687 2,618,169 4,948,076 5,328,080 2,986,600 2,742,827 4,045,420 422,539 926,841 776,467 629,925 4,271,380 1,928,522 28,207,414 5,700,006 371,778 7,734,778 1,948,962 1,792,902 8,179,799 958,818 2,717,472 420,981 4,885,193 11,093,478 1,052,184 537,317 2,383,815 3,104,757 1,556,280 2,961,296 234,996 3,947 6,683 2,381 210,100 ...................... 6,913 ...................... ...................... 247,420 138,500 1,208,296 ...................... 105,900 ¥3,202,030 1.46 0.45 2.36 1.27 9.94 0.74 1.12 0.22 0.55 4.41 2.46 0.28 0.40 3.15 1.93 0.85 0.69 1.64 1.96 0.74 1.43 2.70 2.91 1.63 1.50 2.21 0.23 0.51 0.42 0.34 2.33 1.05 15.39 3.11 0.20 4.22 1.06 0.98 4.46 0.52 1.48 0.23 2.67 6.05 0.57 0.29 1.30 1.69 0.85 1.62 0.13 * * * 0.11 .................... * .................... .................... 0.13 0.08 0.66 .................... 0.06 ¥1.75 169,105,405 ........................ 177,232,410 177,232,410 183,302,865 100.00 * $500 or less or 0.005 percent or less. 140 Department of Health and Human Services, Administration for Children and Families Table 8–15. 75–1552–0–1–609 TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF)—FAMILY ASSISTANCE GRANTS (93.558) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Tribal NEW Program ....................................................................... Employment Achieve Bonus ........................................................... TANF Research and Technical Assistance ................................... Family Formation Match ................................................................. Territories Matching Fund ............................................................... Total ................................................................................................. Previous authority New authority Total 104,914 66,626 227,334 68,625 3,708,706 169,449 278,533 33,545 117,230 660,838 372,423 99,772 35,996 585,057 226,243 138,692 112,124 195,758 184,759 82,400 250,502 461,564 797,303 280,561 96,623 238,757 48,020 63,572 49,747 41,249 408,288 122,513 2,466,019 341,867 27,682 749,354 154,110 172,869 751,157 97,880 101,523 22,865 224,265 566,538 90,289 48,623 174,114 401,283 113,000 326,543 38,703 ...................... 3,993 ...................... 70,000 ...................... 3,735 110,823 ...................... 7,633 ...................... ...................... ...................... ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 104,408 60,265 226,131 62,951 3,683,469 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,525 101,931 181,288 180,999 78,121 229,098 459,371 775,353 267,161 95,803 217,052 44,109 57,769 47,710 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 147,594 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 389,069 110,176 315,767 18,501 ...................... 3,993 ...................... 71,035 ...................... 2,847 125,828 ...................... 7,633 1 100,000 1 100,000 1 100,000 1 6,000 104,408 60,265 226,131 62,951 3,683,469 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,525 101,931 181,288 180,999 78,121 229,098 459,371 775,353 267,161 95,803 217,052 44,109 57,769 47,710 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 147,594 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 389,069 110,176 315,767 18,501 ...................... 3,993 ...................... 71,035 ...................... 2,847 125,828 ...................... 7,633 1 100,000 1 100,000 1 100,000 1 6,000 104,408 60,265 226,131 62,951 3,683,469 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,525 101,931 181,288 180,999 78,121 229,098 459,371 775,353 267,161 95,803 217,052 44,109 57,769 47,710 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 147,594 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 389,069 110,176 315,767 18,501 ...................... 3,993 ...................... 71,035 ...................... 2,847 125,828 ...................... 7,633 1 100,000 1 120,000 1 120,000 1 6,000 0.61 0.35 1.31 0.37 21.37 0.87 1.55 0.19 0.54 3.61 2.13 0.57 0.20 3.39 1.20 0.76 0.59 1.05 1.05 0.45 1.33 2.66 4.50 1.55 0.56 1.26 0.26 0.34 0.28 0.22 2.34 0.68 14.17 1.96 0.15 4.22 0.86 0.97 4.17 0.55 0.58 0.12 1.24 3.13 0.49 0.27 0.92 2.26 0.64 1.83 0.11 .................... 0.02 .................... 0.41 .................... 0.02 0.73 .................... 0.04 0.58 0.70 0.70 0.03 2 17,392,591 ........................ 17,199,625 17,199,625 17,239,625 100.00 1 Distribution 2 State FY 2005 Percentage of distributed total FY 2005 (estimated) of obligation levels to be determined. and Territory levels in FY 2003 reflect actual obligations, including bonus funds and Territory Matching Funds. 141 Department of Health and Human Services, Administration for Children and Families Table 8–16. 75–1501–0–1–609 CHILD SUPPORT ENFORCEMENT—FEDERAL SHARE OF STATE AND LOCAL ADMINISTRATIVE COSTS AND INCENTIVES (93.563) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 42,935 16,239 42,329 39,417 800,415 47,140 52,370 14,121 13,151 181,363 83,397 7,975 13,970 125,504 37,698 37,987 34,788 46,835 39,059 17,944 71,791 65,862 209,155 114,828 21,255 70,897 9,437 32,696 24,114 12,844 121,884 25,472 223,985 88,587 8,888 270,533 41,173 42,779 166,158 7,635 25,162 7,094 52,181 228,843 26,012 10,211 71,157 109,597 29,017 111,500 7,343 ...................... 2,863 ...................... 31,198 ...................... 3,241 13,157 ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 46,056 17,419 45,405 42,282 858,595 50,566 56,177 15,147 14,106 194,545 89,458 8,555 14,986 134,626 40,438 40,748 37,317 50,239 41,898 19,248 77,009 70,649 224,357 123,175 22,800 76,050 10,123 35,072 25,867 13,777 130,743 27,323 240,265 95,026 9,534 290,197 44,166 45,888 178,235 8,190 26,991 7,610 55,973 245,476 27,902 10,953 76,329 117,563 31,126 119,604 7,876 ...................... 3,071 ...................... 33,466 ...................... 3,477 18,000 ...................... 46,056 17,419 45,405 42,282 858,595 50,566 56,177 15,147 14,106 194,545 89,458 8,555 14,986 134,626 40,438 40,748 37,317 50,239 41,898 19,248 77,009 70,649 224,357 123,175 22,800 76,050 10,123 35,072 25,867 13,777 130,743 27,323 240,265 95,026 9,534 290,197 44,166 45,888 178,235 8,190 26,991 7,610 55,973 245,476 27,902 10,953 76,329 117,563 31,126 119,604 7,876 ...................... 3,071 ...................... 33,466 ...................... 3,477 18,000 ...................... 46,216 17,479 45,563 42,429 861,571 50,741 56,371 15,200 14,155 195,219 89,769 8,585 15,038 135,092 40,578 40,890 37,446 50,413 42,043 19,315 77,276 70,894 225,135 123,602 22,879 76,313 10,158 35,194 25,956 13,825 131,196 27,418 241,098 95,356 9,567 291,203 44,319 46,047 178,853 8,218 27,085 7,636 56,167 246,327 27,999 10,991 76,594 117,970 31,233 120,019 7,904 ...................... 3,082 ...................... 33,582 ...................... 3,489 38,000 ...................... 1.05 0.40 1.04 0.97 19.64 1.16 1.29 0.35 0.32 4.45 2.05 0.20 0.34 3.08 0.93 0.93 0.85 1.15 0.96 0.44 1.76 1.62 5.13 2.82 0.52 1.74 0.23 0.80 0.59 0.32 2.99 0.63 5.50 2.17 0.22 6.64 1.01 1.05 4.08 0.19 0.62 0.17 1.28 5.62 0.64 0.25 1.75 2.69 0.71 2.74 0.18 .................... 0.07 .................... 0.77 .................... 0.08 0.87 .................... 4,053,186 ........................ 4,351,674 4,351,674 4,386,698 100.00 142 Department of Health and Human Services, Administration for Children and Families Table 8–17. 75–1502–0–1–609 LOW INCOME HOME ENERGY ASSISTANCE PROGRAM (93.568) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Discretionary Funds ........................................................................ Technical Assistance ....................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 15,037 6,462 6,719 11,539 80,557 28,286 36,900 4,898 5,731 23,922 18,919 1,905 10,853 102,133 46,236 32,773 15,041 24,065 15,460 23,032 28,254 73,783 96,520 69,859 12,943 40,796 10,982 16,204 3,435 13,971 68,352 8,470 223,410 32,808 11,341 90,352 12,729 21,757 120,181 12,116 12,010 9,388 24,377 39,808 12,906 10,472 34,417 34,597 15,925 62,883 5,186 39 86 30 2,147 ...................... 82 17,597 ...................... 27,321 298 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 15,039 8,286 6,723 11,546 80,599 28,278 36,922 4,901 5,734 23,936 18,930 1,906 10,844 102,195 46,264 32,793 15,050 24,079 15,469 23,046 28,271 73,828 96,426 69,901 12,951 40,821 10,989 16,214 3,437 13,980 68,393 8,475 223,499 32,828 11,401 90,407 12,687 21,753 120,254 12,123 12,017 9,393 24,392 39,832 12,894 10,478 34,437 34,610 15,935 62,921 5,056 39 87 30 2,148 ...................... 82 16,215 ...................... 27,338 298 15,039 8,286 6,723 11,546 80,599 28,278 36,922 4,901 5,734 23,936 18,930 1,906 10,844 102,195 46,264 32,793 15,050 24,079 15,469 23,046 28,271 73,828 96,426 69,901 12,951 40,821 10,989 16,214 3,437 13,980 68,393 8,475 223,499 32,828 11,401 90,407 12,687 21,753 120,254 12,123 12,017 9,393 24,392 39,832 12,894 10,478 34,437 34,610 15,935 62,921 5,056 39 87 30 2,148 ...................... 82 16,215 ...................... 27,338 298 15,128 8,335 6,763 11,614 81,076 28,446 37,142 4,930 5,768 24,078 19,042 1,918 10,909 102,802 46,539 32,988 15,139 24,222 15,561 23,182 28,439 74,266 96,998 70,316 13,028 41,063 11,054 16,310 3,457 14,063 68,799 8,525 224,825 33,023 11,469 90,943 12,762 21,882 120,967 12,195 12,089 9,449 24,537 40,068 12,971 10,540 34,642 34,815 16,030 63,295 5,086 40 87 30 2,161 ...................... 82 16,312 ...................... 27,500 800 0.84 0.46 0.38 0.65 4.50 1.58 2.06 0.27 0.32 1.34 1.06 0.11 0.61 5.71 2.58 1.83 0.84 1.35 0.86 1.29 1.58 4.12 5.39 3.91 0.72 2.28 0.61 0.91 0.19 0.78 3.82 0.47 12.49 1.83 0.64 5.05 0.71 1.22 6.72 0.68 0.67 0.52 1.36 2.23 0.72 0.59 1.92 1.93 0.89 3.52 0.28 * * * 0.12 .................... * 0.91 .................... 1.53 0.04 1,788,300 ........................ 1,789,380 1,789,380 1,800,500 100.00 * $500 or less or 0.005 percent or less. 143 Department of Health and Human Services, Administration for Children and Families Table 8–18. 75–1515–0–1–609 CHILD CARE AND DEVELOPMENT BLOCK GRANT (93.575) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Technical Assistance ....................................................................... Research Set-Aside ........................................................................ Child Care Aware ............................................................................ Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 41,670 4,235 45,571 24,908 237,917 23,006 15,024 4,458 3,629 109,500 71,136 8,397 11,227 79,109 40,065 19,106 19,991 35,916 49,230 7,746 27,853 27,872 60,260 26,588 33,832 39,381 6,162 11,821 11,694 5,121 39,225 18,864 116,407 61,675 4,442 69,277 31,232 22,218 65,775 5,731 36,970 6,126 45,041 200,954 20,756 3,353 40,206 34,071 14,332 30,894 3,196 2,646 3,975 1,626 44,872 ...................... 2,185 41,727 ...................... 5,216 9,935 994 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 41,347 4,238 47,827 24,828 236,074 23,901 14,833 4,406 3,420 113,433 74,027 8,540 11,282 78,797 40,675 18,452 18,817 34,866 48,317 7,274 28,257 26,969 59,304 25,791 33,350 39,718 5,850 11,787 12,667 4,953 38,636 18,662 112,928 64,051 4,128 69,473 30,891 22,512 63,999 5,558 36,762 5,935 45,807 206,707 21,301 3,160 40,722 34,113 13,656 30,504 3,074 2,647 3,977 1,627 42,538 ...................... 2,186 41,746 ...................... 5,218 9,798 994 41,347 4,238 47,827 24,828 236,074 23,901 14,833 4,406 3,420 113,433 74,027 8,540 11,282 78,797 40,675 18,452 18,817 34,866 48,317 7,274 28,257 26,969 59,304 25,791 33,350 39,718 5,850 11,787 12,667 4,953 38,636 18,662 112,928 64,051 4,128 69,473 30,891 22,512 63,999 5,558 36,762 5,935 45,807 206,707 21,301 3,160 40,722 34,113 13,656 30,504 3,074 2,647 3,977 1,627 42,538 ...................... 2,186 41,746 ...................... 5,218 9,798 994 41,591 4,263 48,109 24,974 237,463 24,042 14,921 4,432 3,440 114,099 74,462 8,590 11,348 79,260 40,914 18,560 18,927 35,071 48,601 7,317 28,423 27,127 59,653 25,943 33,546 39,951 5,885 11,856 12,741 4,982 38,863 18,771 113,592 64,428 4,153 69,882 31,073 22,644 64,375 5,590 36,978 5,970 46,076 207,922 21,426 3,178 40,961 34,314 13,736 30,683 3,092 2,768 3,961 1,733 42,788 ...................... 2,037 41,995 ...................... 5,249 10,000 1,000 1.98 0.20 2.29 1.19 11.31 1.14 0.71 0.21 0.16 5.43 3.55 0.41 0.54 3.77 1.95 0.88 0.90 1.67 2.31 0.35 1.35 1.29 2.84 1.24 1.60 1.90 0.28 0.56 0.61 0.24 1.85 0.89 5.41 3.07 0.20 3.33 1.48 1.08 3.07 0.27 1.76 0.28 2.19 9.90 1.02 0.15 1.95 1.63 0.65 1.46 0.15 0.13 0.19 0.08 2.04 .................... 0.10 2.00 .................... 0.25 0.48 0.05 2,086,346 ........................ 2,087,310 2,087,310 2,099,729 100.00 144 Department of Health and Human Services, Administration for Children and Families Table 8–19. 75–1550–0–1–609 CHILD CARE AND DEVELOPMENT FUND—MANDATORY (93.596a) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Technical Assistance ....................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,981 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ...................... ...................... ...................... ...................... ...................... ...................... 54,340 ...................... 3,532 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,981 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ...................... ...................... ...................... ...................... ...................... ...................... 54,340 ...................... 3,532 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,981 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ...................... ...................... ...................... ...................... ...................... ...................... 54,340 ...................... 3,532 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,981 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ...................... ...................... ...................... ...................... ...................... ...................... 54,340 ...................... 3,532 1.33 0.29 1.60 0.43 6.93 0.82 1.52 0.42 0.37 3.48 2.96 0.40 0.23 4.60 2.12 0.69 0.79 1.35 1.12 0.24 1.89 3.64 2.60 1.89 0.51 2.00 0.26 0.86 0.21 0.37 2.13 0.67 8.25 5.64 0.20 5.68 2.02 1.57 4.48 0.54 0.80 0.14 3.05 4.84 1.02 0.32 1.73 3.39 0.71 1.98 0.23 .................... .................... .................... .................... .................... .................... 4.40 .................... 0.29 1,235,397 ........................ 1,235,397 1,235,397 1,235,397 100.00 145 Department of Health and Human Services, Administration for Children and Families Table 8–20. 75–1550–0–1–609 CHILD CARE AND DEVELOPMENT FUND—MATCHING (93.596b) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Technical Assistance ....................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 22,787 3,839 28,412 13,733 192,462 22,479 17,446 3,995 2,458 74,237 44,824 6,054 7,394 66,796 32,146 14,641 14,336 20,211 24,393 5,918 27,911 30,933 53,020 25,788 15,669 28,791 4,470 8,986 10,784 6,254 43,403 10,194 96,498 40,800 3,126 58,673 17,882 17,092 58,864 5,087 20,604 3,984 28,626 120,757 14,661 2,899 35,645 30,661 7,988 27,256 2,476 ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 3,260 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 22,358 3,807 30,537 13,665 194,510 23,435 17,711 3,845 2,409 78,288 46,689 6,058 7,438 66,611 32,397 13,866 13,962 18,815 23,785 5,340 27,931 29,583 51,750 24,784 15,411 27,930 4,163 8,784 11,949 6,055 43,455 9,979 93,739 42,592 2,843 58,044 17,581 17,186 56,664 4,802 19,747 3,839 28,550 125,093 14,787 2,669 36,138 30,360 7,695 26,364 2,350 ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 3,260 22,358 3,807 30,537 13,665 194,510 23,435 17,711 3,845 2,409 78,288 46,689 6,058 7,438 66,611 32,397 13,866 13,962 18,815 23,785 5,340 27,931 29,583 51,750 24,784 15,411 27,930 4,163 8,784 11,949 6,055 43,455 9,979 93,739 42,592 2,843 58,044 17,581 17,186 56,664 4,802 19,747 3,839 28,550 125,093 14,787 2,669 36,138 30,360 7,695 26,364 2,350 ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 3,260 22,358 3,807 30,537 13,665 194,510 23,435 17,711 3,845 2,409 78,288 46,689 6,058 7,438 66,611 32,397 13,866 13,962 18,815 23,785 5,340 27,931 29,583 51,750 24,784 15,411 27,930 4,163 8,784 11,949 6,055 43,455 9,979 93,739 42,592 2,843 58,044 17,581 17,186 56,664 4,802 19,747 3,839 28,550 125,093 14,787 2,669 36,138 30,360 7,695 26,364 2,350 ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 3,260 1.51 0.26 2.06 0.92 13.13 1.58 1.20 0.26 0.16 5.28 3.15 0.41 0.50 4.50 2.19 0.94 0.94 1.27 1.61 0.36 1.89 2.00 3.49 1.67 1.04 1.89 0.28 0.59 0.81 0.41 2.93 0.67 6.33 2.87 0.19 3.92 1.19 1.16 3.82 0.32 1.33 0.26 1.93 8.44 1.00 0.18 2.44 2.05 0.52 1.78 0.16 .................... .................... .................... .................... .................... .................... .................... .................... 0.22 1,481,603 ........................ 1,481,603 1,481,603 1,481,603 100.00 146 Department of Health and Human Services, Administration for Children and Families Table 8–21. 75–1536–0–1–506 HEAD START (93.600) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Other Pacific .................................................................................... Migrant Program .............................................................................. Secretary’s Reserve ........................................................................ Unallocated Expansion .................................................................... State Demonstration ........................................................................ Technical Assistance ....................................................................... Research, Development, and Education ........................................ Program Support ............................................................................. Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 103,588 12,126 100,174 62,645 811,487 66,428 50,604 12,537 24,408 255,501 163,757 22,248 21,820 263,047 93,523 50,109 49,503 104,829 141,892 26,991 75,851 105,476 228,045 70,369 157,165 115,663 20,365 35,008 23,315 13,018 126,711 50,852 422,350 137,403 16,697 239,770 78,784 57,704 222,603 21,446 80,223 18,301 116,072 465,422 36,709 13,183 96,214 98,022 49,227 88,082 12,028 ...................... ...................... ...................... 243,016 ...................... 9,992 183,412 ...................... 15,128 260,201 10,000 ...................... ...................... 169,688 20,000 26,051 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 105,318 12,329 101,846 63,691 825,026 67,537 51,449 12,746 24,815 259,767 166,491 22,620 22,184 267,439 95,084 50,945 50,330 106,579 144,261 27,441 77,118 107,237 231,852 71,544 159,789 117,594 20,705 35,593 23,704 13,236 128,827 51,701 429,401 139,697 16,976 243,773 80,099 58,667 226,319 21,804 81,562 18,607 118,010 473,192 37,322 13,403 97,820 99,659 50,049 89,553 12,229 ...................... ...................... ...................... 247,073 ...................... 10,159 186,474 ...................... 15,381 264,545 10,000 64,852 ...................... 104,623 20,000 26,801 105,318 12,329 101,846 63,691 825,026 67,537 51,449 12,746 24,815 259,767 166,491 22,620 22,184 267,439 95,084 50,945 50,330 106,579 144,261 27,441 77,118 107,237 231,852 71,544 159,789 117,594 20,705 35,593 23,704 13,236 128,827 51,701 429,401 139,697 16,976 243,773 80,099 58,667 226,319 21,804 81,562 18,607 118,010 473,192 37,322 13,403 97,820 99,659 50,049 89,553 12,229 ...................... ...................... ...................... 247,073 ...................... 10,159 186,474 ...................... 15,381 264,545 10,000 64,852 ...................... 104,623 20,000 26,801 106,206 12,433 102,705 64,228 831,978 68,106 51,883 12,853 25,024 261,957 167,895 22,811 22,371 269,694 95,886 51,374 50,754 107,477 145,477 27,672 77,768 108,141 233,807 72,147 161,136 118,585 20,880 35,893 23,904 13,348 129,913 52,137 433,021 140,875 17,119 245,828 80,774 59,162 228,227 21,988 82,250 18,764 119,005 477,181 37,637 13,516 98,645 100,499 50,471 90,308 12,332 ...................... ...................... ...................... 249,156 ...................... 10,245 188,046 ...................... 15,511 266,775 10,000 64,852 45,000 106,149 20,000 26,801 1.54 0.18 1.49 0.93 12.10 0.99 0.75 0.19 0.36 3.81 2.44 0.33 0.33 3.92 1.39 0.75 0.74 1.56 2.12 0.40 1.13 1.57 3.40 1.05 2.34 1.72 0.30 0.52 0.35 0.19 1.89 0.76 6.30 2.05 0.25 3.57 1.17 0.86 3.32 0.32 1.20 0.27 1.73 6.94 0.55 0.20 1.43 1.46 0.73 1.31 0.18 .................... .................... .................... 3.62 .................... 0.15 2.73 .................... 0.23 3.88 0.15 0.94 0.65 1.54 0.29 0.39 6,666,783 ........................ 6,774,848 6,774,848 6,876,580 100.00 147 Department of Health and Human Services, Administration for Children and Families Table 8–22. 75–1545–0–1–506 FOSTER CARE—TITLE IV–E (93.658) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Technical Assistance ....................................................................... New Program Option ...................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 29,031 10,180 43,218 31,795 1,340,945 56,438 31,592 8,731 24,733 97,343 31,261 16,962 6,343 378,963 46,230 18,203 26,593 50,285 51,345 31,912 127,019 76,789 130,618 70,374 8,767 55,859 17,415 21,000 13,510 15,877 71,418 19,542 462,302 48,573 10,814 232,680 27,633 36,417 272,078 13,487 28,951 5,635 22,185 161,688 16,947 11,181 85,426 62,023 23,878 62,832 2,604 ...................... ...................... ...................... 13,821 ...................... ...................... ...................... ...................... 11,872 ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 29,741 10,428 44,275 32,572 1,373,720 57,817 32,364 8,945 25,337 99,722 32,025 17,377 6,499 388,225 47,360 18,648 27,243 51,514 52,600 32,692 130,123 78,666 133,810 72,094 8,981 57,224 17,841 21,513 13,840 16,265 73,163 20,019 473,600 49,760 11,078 238,366 28,308 37,307 278,728 13,817 29,658 5,773 22,727 165,639 17,361 11,454 87,513 63,538 24,461 64,368 2,667 ...................... ...................... ...................... 14,159 ...................... ...................... ...................... ...................... 12,075 ...................... 29,741 10,428 44,275 32,572 1,373,720 57,817 32,364 8,945 25,337 99,722 32,025 17,377 6,499 388,225 47,360 18,648 27,243 51,514 52,600 32,692 130,123 78,666 133,810 72,094 8,981 57,224 17,841 21,513 13,840 16,265 73,163 20,019 473,600 49,760 11,078 238,366 28,308 37,307 278,728 13,817 29,658 5,773 22,727 165,639 17,361 11,454 87,513 63,538 24,461 64,368 2,667 ...................... ...................... ...................... 14,159 ...................... ...................... ...................... ...................... 12,075 ...................... 30,571 10,719 45,510 33,481 1,412,041 59,430 33,267 9,194 26,044 102,504 32,918 17,862 6,680 399,056 48,682 19,168 28,003 52,951 54,068 33,604 133,754 80,860 137,543 74,105 9,232 58,820 18,339 22,113 14,227 16,719 75,205 20,578 486,813 51,148 11,387 245,017 29,098 38,348 286,504 14,203 30,486 5,934 23,361 170,260 17,846 11,774 89,955 65,311 25,144 66,164 2,742 ...................... ...................... ...................... 14,553 ...................... ...................... ...................... ...................... 15,204 36,600 0.63 0.22 0.94 0.69 29.08 1.22 0.69 0.19 0.54 2.11 0.68 0.37 0.14 8.22 1.00 0.39 0.58 1.09 1.11 0.69 2.75 1.67 2.83 1.53 0.19 1.21 0.38 0.46 0.29 0.34 1.55 0.42 10.03 1.05 0.23 5.05 0.60 0.79 5.90 0.29 0.63 0.12 0.48 3.51 0.37 0.24 1.85 1.35 0.52 1.36 0.06 .................... .................... .................... 0.30 .................... .................... .................... .................... 0.31 0.75 4,573,318 ........................ 4,685,000 4,685,000 4,855,100 100.00 148 Department of Housing and Urban Development, Public and Indian Housing Programs Table 8–23. 86–0163–0–1–604 PUBLIC HOUSING OPERATING FUND (14.850) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Other (DOJ Anti-Drug) .................................................................... Other (Volunteer Graduate Bonus) ................................................ Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 114,223 7,432 17,046 28,441 131,209 14,666 64,914 9,171 67,178 112,823 113,611 10,234 1,232 255,717 42,716 5,470 14,700 51,879 82,701 8,579 69,342 98,612 49,800 44,264 27,457 43,572 3,990 10,638 20,251 7,067 156,190 8,876 812,830 103,811 1,864 148,663 24,542 17,233 250,449 20,288 35,742 2,072 105,974 120,057 4,031 2,613 69,665 41,139 15,973 16,848 1,197 ...................... 4,817 ...................... 95,438 ...................... 17,676 ...................... ...................... 9,935 ...................... 127 8 19 32 146 16 72 10 75 126 126 11 1 284 48 6 17 58 92 10 77 109 55 49 30 48 4 12 22 8 173 10 903 115 2 165 27 19 278 23 40 2 118 133 4 3 77 46 18 19 1 ........................ 5 ........................ 106 ........................ 20 ........................ ........................ ........................ ........................ 113,016 7,353 16,866 28,140 129,823 14,511 64,228 9,074 66,469 111,631 112,410 10,126 1,219 253,016 42,264 5,411 14,545 51,331 81,827 8,489 68,610 97,570 49,274 43,797 27,167 43,112 3,948 10,525 20,037 6,993 154,540 8,782 804,243 102,714 1,844 147,092 24,283 17,051 247,803 20,074 35,365 2,050 104,854 118,789 3,989 2,585 68,929 40,705 15,804 16,670 1,185 ...................... 4,766 ...................... 94,430 ...................... 17,490 ...................... ...................... 9,941 ...................... 113,143 7,361 16,885 28,172 129,969 14,527 64,300 9,084 66,544 111,757 112,536 10,137 1,220 253,300 42,312 5,417 14,562 51,389 81,919 8,499 68,687 97,679 49,329 43,846 27,197 43,160 3,952 10,537 20,059 7,001 154,713 8,792 805,146 102,829 1,846 147,257 24,310 17,070 248,081 20,097 35,405 2,052 104,972 118,922 3,993 2,588 69,006 40,751 15,822 16,689 1,186 ...................... 4,771 ...................... 94,536 ...................... 17,510 ...................... ...................... 9,941 ...................... 112,673 7,331 16,815 28,055 129,430 14,467 64,039 9,046 66,267 111,292 112,069 10,096 1,215 252,249 42,136 5,395 14,501 51,175 81,579 8,463 68,402 97,274 49,124 43,664 27,085 42,981 3,936 10,493 19,976 6,971 154,071 8,756 801,805 102,402 1,838 146,646 24,209 16,999 247,052 20,013 35,257 2,044 104,536 118,428 3,977 2,578 68,720 40,581 15,756 16,620 1,181 ...................... 4,752 ...................... 94,143 ...................... 17,437 ...................... ...................... ...................... 15,000 3.15 0.21 0.47 0.79 3.62 0.40 1.79 0.25 1.85 3.11 3.14 0.28 0.03 7.06 1.18 0.15 0.41 1.43 2.28 0.24 1.91 2.72 1.37 1.22 0.76 1.20 0.11 0.29 0.56 0.20 4.31 0.25 22.44 2.87 0.05 4.10 0.68 0.48 6.91 0.56 0.99 0.06 2.93 3.31 0.11 0.07 1.92 1.14 0.44 0.47 0.03 .................... 0.13 .................... 2.63 .................... 0.49 .................... .................... .................... 0.42 3,616,858 4,005 3,578,760 3,582,765 3,573,000 100.00 149 Department of Housing and Urban Development, Public and Indian Housing Programs Table 8–24. 86–0319–0–1–604 HOUSING CHOICE VOUCHERS (14.871) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 103,670 24,458 131,977 71,003 2,322,524 163,532 222,598 20,804 89,336 483,501 319,537 74,927 29,481 321,510 150,459 77,842 34,726 122,537 153,146 54,642 258,633 608,044 233,117 148,186 69,439 156,820 25,327 37,224 75,222 51,150 447,772 64,402 944,701 229,356 21,974 390,049 108,159 146,551 361,259 47,614 100,681 21,499 139,168 691,157 56,401 30,532 242,970 265,949 48,202 96,198 6,933 ...................... 28,922 2,023 140,369 ...................... 4,689 ...................... ...................... 930 219 1,184 637 20,834 1,467 1,997 187 801 4,337 2,866 672 264 2,884 1,350 698 312 1,099 1,374 490 2,320 5,454 2,091 1,329 623 1,407 227 334 675 459 4,017 578 8,477 2,057 197 3,499 970 1,315 3,241 427 903 193 1,248 6,200 506 274 2,180 2,386 432 863 62 ........................ 259 18 1,259 ........................ 42 ........................ ........................ 133,558 27,273 143,457 90,637 2,729,567 217,067 288,022 30,299 98,442 631,717 345,818 91,200 31,926 694,001 195,372 86,776 53,780 150,011 177,331 66,894 338,807 745,195 276,442 202,706 85,148 197,875 27,908 55,850 94,613 64,457 559,773 67,949 1,491,435 300,183 29,396 473,657 123,166 189,846 492,587 62,435 121,211 26,076 160,038 881,677 64,173 33,823 289,581 317,621 59,734 132,776 11,155 ...................... 32,006 2,132 161,817 ...................... 7,470 ...................... ...................... 134,488 27,492 144,641 91,274 2,750,401 218,534 290,019 30,486 99,243 636,054 348,684 91,872 32,190 696,885 196,722 87,474 54,092 151,110 178,705 67,384 341,127 750,649 278,533 204,035 85,771 199,282 28,135 56,184 95,288 64,916 563,790 68,527 1,499,912 302,240 29,593 477,156 124,136 191,161 495,828 62,862 122,114 26,269 161,286 887,877 64,679 34,097 291,761 320,007 60,166 133,639 11,217 ...................... 32,265 2,150 163,076 ...................... 7,512 ...................... ...................... 122,997 25,111 132,084 83,452 2,513,289 200,184 266,358 27,898 92,514 584,704 318,402 83,970 29,395 640,868 179,883 79,959 49,517 138,118 163,461 62,418 310,603 684,000 254,531 188,335 78,397 182,188 25,696 51,830 87,112 59,006 519,996 62,562 1,376,395 276,144 27,065 436,156 113,402 175,147 454,678 57,485 111,601 24,009 147,371 812,073 59,694 31,422 268,288 292,952 54,999 122,272 10,270 ...................... 29,469 1,963 150,430 ...................... 6,877 ...................... ...................... 0.92 0.19 0.99 0.63 18.84 1.50 2.00 0.21 0.69 4.38 2.39 0.63 0.22 4.80 1.35 0.60 0.37 1.04 1.23 0.47 2.33 5.13 1.91 1.41 0.59 1.37 0.19 0.39 0.65 0.44 3.90 0.47 10.32 2.07 0.20 3.27 0.85 1.31 3.41 0.43 0.84 0.18 1.10 6.09 0.45 0.24 2.01 2.20 0.41 0.92 0.08 .................... 0.22 0.01 1.13 .................... 0.05 .................... .................... 11,272,902 101,124 14,463,866 14,564,990 13,339,000 100.00 150 Department of Housing and Urban Development, Public and Indian Housing Programs Table 8–25. 86–0304–0–1–604 PUBLIC HOUSING CAPITAL FUND (14.872) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 FY FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 67,454 3,324 12,229 26,918 121,953 17,941 32,542 6,470 25,323 78,198 96,559 16,025 1,564 205,979 35,069 7,648 15,894 54,183 74,236 7,377 46,232 76,284 49,572 42,058 28,426 45,478 4,077 11,757 9,314 7,191 101,377 9,854 483,291 66,776 3,078 121,511 23,192 14,208 188,015 18,333 28,590 3,645 76,584 113,289 3,998 2,714 40,839 39,056 13,087 23,942 1,414 ...................... 1,578 ...................... 169,202 ...................... 8,413 ...................... ...................... 11,237 513 1,767 5,227 49,108 2,553 8,912 1,017 5,329 21,450 17,204 2,561 242 52,824 4,857 1,175 2,468 9,494 9,819 1,132 6,159 13,246 10,759 6,528 4,399 7,149 633 1,852 1,473 1,086 15,784 1,395 86,955 10,590 471 22,760 3,574 2,164 39,003 2,838 4,105 402 9,698 17,819 612 422 7,004 5,175 255 3,625 219 ........................ 254 ........................ 31,432 ........................ 1,608 ........................ ........................ 61,586 3,035 11,165 24,576 111,344 16,380 29,711 5,907 23,120 71,396 88,159 14,631 1,428 188,061 32,018 6,983 14,511 49,470 67,778 6,735 42,210 69,648 45,260 38,399 25,953 41,522 3,722 10,734 8,504 6,565 92,558 8,997 441,249 60,967 2,810 110,941 21,175 12,972 171,660 16,738 26,103 3,328 69,922 103,434 3,650 2,478 37,286 35,659 11,949 21,859 1,291 ...................... 1,441 ...................... 154,483 ...................... 7,681 ...................... ...................... 72,823 3,548 12,932 29,803 160,452 18,933 38,623 6,924 28,449 92,846 105,363 17,192 1,670 240,885 36,875 8,158 16,979 58,964 77,597 7,867 48,369 82,894 56,019 44,927 30,352 48,671 4,355 12,586 9,977 7,651 108,342 10,392 528,204 71,557 3,281 133,701 24,749 15,136 210,663 19,576 30,208 3,730 79,620 121,253 4,262 2,900 44,290 40,834 12,204 25,484 1,510 ...................... 1,695 ...................... 185,915 ...................... 9,289 ...................... ...................... 64,603 2,691 9,899 26,790 128,719 14,523 26,342 5,237 25,499 78,300 96,163 20,972 1,266 184,736 37,388 6,191 12,866 53,860 29,000 5,972 34,000 73,751 48,628 48,045 32,910 47,814 3,300 12,517 9,040 7,221 96,063 9,977 391,215 25,271 3,392 110,361 18,774 16,501 169,195 14,840 27,143 2,951 72,993 105,705 3,236 5,197 33,058 40,615 10,594 25,381 1,145 ...................... 1,277 ...................... 144,966 ...................... 6,810 ...................... ...................... 2.60 0.11 0.40 1.08 5.18 0.58 1.06 0.21 1.03 3.15 3.87 0.84 0.05 7.43 1.50 0.25 0.52 2.17 1.17 0.24 1.37 2.97 1.96 1.93 1.32 1.92 0.13 0.50 0.36 0.29 3.87 0.40 15.74 1.02 0.14 4.44 0.76 0.66 6.81 0.60 1.09 0.12 2.94 4.25 0.13 0.21 1.33 1.63 0.43 1.02 0.05 .................... 0.05 .................... 5.83 .................... 0.27 .................... .................... 2,783,261 530,337 2,541,145 1 3,071,482 1 2,484,900 100.00 2004 and FY 2005 estimates are projected formula grant estimates only. 151 Department of Housing and Urban Development, Community Planning and Development Table 8–26. 86–0162–0–1–451 COMMUNITY DEVELOPMENT BLOCK GRANTS—ENTITLEMENT GRANTS (14.218) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Represents FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 28,388 2,330 49,758 9,219 510,439 31,986 33,862 6,343 22,864 157,879 48,476 12,102 2,831 170,232 43,475 16,751 12,697 21,225 39,709 5,913 57,354 90,541 113,413 44,703 6,087 50,885 2,786 8,459 19,897 4,786 110,977 7,635 362,127 31,423 1,812 133,586 16,030 26,291 205,139 14,427 17,959 1,616 27,539 215,906 15,507 1,064 47,100 54,040 8,566 44,809 1,221 ...................... ...................... ...................... 67,513 ...................... ...................... ...................... ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 28,006 2,590 49,134 9,732 503,834 31,910 33,348 6,213 22,462 155,775 50,434 11,856 3,593 169,177 45,628 17,230 12,588 21,854 39,027 6,375 56,849 89,132 112,847 44,133 5,906 51,904 2,752 8,246 20,341 4,700 109,717 7,993 358,080 30,932 1,754 133,989 15,642 26,272 202,676 14,110 17,760 1,576 27,611 213,920 16,464 1,044 49,391 53,927 9,654 45,254 1,214 ...................... ...................... ...................... 75,036 ...................... ...................... ...................... ...................... 28,006 2,590 49,134 9,732 503,834 31,910 33,348 6,213 22,462 155,775 50,434 11,856 3,593 169,177 45,628 17,230 12,588 21,854 39,027 6,375 56,849 89,132 112,847 44,133 5,906 51,904 2,752 8,246 20,341 4,700 109,717 7,993 358,080 30,932 1,754 133,989 15,642 26,272 202,676 14,110 17,760 1,576 27,611 213,920 16,464 1,044 49,391 53,927 9,654 45,254 1,214 ...................... ...................... ...................... 75,036 ...................... ...................... ...................... ...................... 27,961 2,586 49,055 9,716 503,024 31,859 33,294 6,203 22,426 155,525 50,353 11,837 3,587 168,905 45,555 17,202 12,568 21,819 38,964 6,365 56,758 88,989 112,666 44,062 5,897 51,821 2,748 8,233 20,308 4,692 109,541 7,980 357,505 30,882 1,751 133,774 15,617 26,230 202,350 14,087 17,731 1,573 27,567 213,576 16,438 1,042 49,312 53,840 9,638 45,181 1,212 ...................... ...................... ...................... 74,915 ...................... ...................... ...................... ...................... 0.92 0.09 1.62 0.32 16.62 1.05 1.10 0.20 0.74 5.14 1.66 0.39 0.12 5.58 1.51 0.57 0.42 0.72 1.29 0.21 1.88 2.94 3.72 1.46 0.19 1.71 0.09 0.27 0.67 0.16 3.62 0.26 11.81 1.02 0.06 4.42 0.52 0.87 6.69 0.47 0.59 0.05 0.91 7.06 0.54 0.03 1.63 1.78 0.32 1.49 0.04 .................... .................... .................... 2.48 .................... .................... .................... .................... 1 3,037,677 ........................ 3,031,592 1 3,031,592 1 3,026,721 100.00 budget authority, not obligations. 152 Department of Housing and Urban Development, Community Planning and Development Table 8–27. 86–0162–0–1–451 COMMUNITY DEVELOPMENT BLOCK GRANTS—STATE AND SMALL CITIES PROGRAMS (14.228; 14.219; 14.225) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Represents FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 29,135 3,465 13,633 22,489 50,812 12,778 15,532 2,204 ...................... 32,872 47,908 5,887 10,945 37,834 38,007 30,909 19,876 31,789 33,057 16,845 9,391 39,743 42,587 23,763 34,156 29,327 7,844 14,448 3,661 10,516 9,743 16,723 57,312 50,688 5,630 57,188 19,751 16,625 58,836 6,023 27,036 7,641 30,930 85,241 8,521 8,525 24,352 18,938 20,358 33,160 3,673 1,022 2,761 1,234 63,554 ...................... 1,937 ...................... ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 30,041 2,955 14,405 22,524 49,910 13,006 15,863 2,296 ...................... 33,334 47,120 6,137 10,549 37,843 36,841 30,975 20,158 31,819 34,124 16,856 9,358 40,542 42,906 24,291 35,330 28,398 8,012 14,711 3,176 10,765 9,403 16,626 57,279 52,454 5,717 57,073 20,040 16,683 59,972 6,156 27,821 7,774 31,243 86,718 7,526 8,692 22,736 18,647 19,912 33,073 3,754 1,023 2,763 1,235 55,710 ...................... 1,938 ...................... ...................... 30,041 2,955 14,405 22,524 49,910 13,006 15,863 2,296 ...................... 33,334 47,120 6,137 10,549 37,843 36,841 30,975 20,158 31,819 34,124 16,856 9,358 40,542 42,906 24,291 35,330 28,398 8,012 14,711 3,176 10,765 9,403 16,626 57,279 52,454 5,717 57,073 20,040 16,683 59,972 6,156 27,821 7,774 31,243 86,718 7,526 8,692 22,736 18,647 19,912 33,073 3,754 1,023 2,763 1,235 55,710 ...................... 1,938 ...................... ...................... 29,993 2,950 14,382 22,488 49,830 12,985 15,838 2,292 ...................... 33,281 47,045 6,127 10,532 37,783 36,782 30,925 20,126 31,768 34,069 16,829 9,343 40,477 42,837 24,252 35,274 28,353 7,999 14,687 3,171 10,748 9,388 16,599 57,187 52,370 5,708 56,982 20,008 16,656 59,876 6,146 27,777 7,762 31,193 86,579 7,514 8,678 22,700 18,617 19,880 33,020 3,748 1,021 2,759 1,233 55,621 ...................... 1,935 ...................... ...................... 2.30 0.23 1.10 1.72 3.82 1.00 1.21 0.18 .................... 2.55 3.61 0.47 0.81 2.90 2.82 2.37 1.54 2.44 2.61 1.29 0.72 3.10 3.28 1.86 2.70 2.17 0.61 1.13 0.24 0.82 0.72 1.27 4.39 4.02 0.44 4.37 1.53 1.28 4.59 0.47 2.13 0.60 2.39 6.64 0.58 0.67 1.74 1.43 1.52 2.53 0.29 0.08 0.21 0.09 4.26 .................... 0.15 .................... .................... 1 1,308,815 ........................ 1,306,213 1 1,306,213 1 1,304,125 100.00 budget authority, not obligations. 153 Department of Transportation, Federal Aviation Administration Table 8–28. 69–8106–0–7–402 AIRPORT IMPROVEMENT PROGRAM (20.106) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Excludes 2 Excludes FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 56,304 190,981 43,901 34,065 274,283 81,512 8,227 4,873 377 185,422 133,931 50,159 18,013 108,799 44,849 34,181 25,747 100,299 59,366 23,052 24,037 39,483 61,914 61,629 41,048 72,558 36,823 32,396 45,416 19,217 31,563 30,363 178,417 61,405 21,633 83,257 43,965 40,528 98,311 7,570 30,989 20,441 54,141 213,463 41,093 4,026 62,128 108,880 29,090 39,866 27,714 5,356 23,303 15,222 11,716 ...................... 5,314 ...................... 83,072 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 74,472 148,861 100,814 41,060 269,772 75,519 17,485 6,806 1,194 165,140 76,618 58,832 21,874 95,638 52,449 43,693 16,020 48,825 49,377 6,126 35,546 45,896 94,635 81,375 31,398 49,026 34,133 31,847 90,092 27,982 39,804 12,153 139,453 49,470 16,838 110,897 27,747 47,620 102,447 10,521 36,662 16,268 65,765 178,968 37,675 7,233 97,417 71,495 22,136 38,918 30,443 8,547 9,299 11,150 8,592 ...................... 11,089 ...................... 85,745 74,472 148,861 100,814 41,060 269,772 75,519 17,485 6,806 1,194 165,140 76,618 58,832 21,874 95,638 52,449 43,693 16,020 48,825 49,377 6,126 35,546 45,896 94,635 81,375 31,398 49,026 34,133 31,847 90,092 27,982 39,804 12,153 139,453 49,470 16,838 110,897 27,747 47,620 102,447 10,521 36,662 16,268 65,765 178,968 37,675 7,233 97,417 71,495 22,136 38,918 30,443 8,547 9,299 11,150 8,592 ...................... 11,089 ...................... 85,745 75,297 150,511 101,931 41,515 272,762 76,356 17,679 6,881 1,208 166,970 77,467 59,484 22,117 96,698 53,031 44,177 16,197 49,366 49,924 6,194 35,939 46,405 95,684 82,276 31,745 49,569 34,511 32,200 91,090 28,292 40,245 12,288 140,998 50,018 17,024 112,126 28,054 48,148 103,582 10,637 37,069 16,449 66,493 180,951 38,092 7,313 98,497 72,287 22,381 39,350 30,780 8,642 9,402 11,274 8,687 ...................... 11,212 ...................... 69,302 2.40 4.80 3.25 1.32 8.70 2.44 0.56 0.22 0.04 5.33 2.47 1.90 0.71 3.08 1.69 1.41 0.52 1.57 1.59 0.20 1.15 1.48 3.05 2.62 1.01 1.58 1.10 1.03 2.91 0.90 1.28 0.39 4.50 1.60 0.54 3.58 0.89 1.54 3.30 0.34 1.18 0.52 2.12 5.77 1.21 0.23 3.14 2.31 0.71 1.25 0.98 0.28 0.30 0.36 0.28 .................... 0.36 .................... .................... 1 3,285,688 ........................ 3,186,858 1 3,186,858 1 3,204,778 2 100.00 state block grants. undistributed obligations. 154 Department of Transportation, Federal Highway Administration Table 8–29. 69–8083–0–7–401 HIGHWAY PLANNING AND CONSTRUCTION (20.205) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 Excludes FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) 641,871 340,597 490,487 412,238 2,241,105 391,015 414,824 129,317 124,268 1,253,242 864,109 151,712 224,057 941,354 674,219 384,612 322,069 686,105 489,036 156,372 528,973 528,665 843,702 418,333 368,746 670,727 273,726 246,255 220,862 146,864 697,438 277,840 1,443,380 806,493 181,711 1,025,641 463,933 398,445 1,398,201 186,391 470,886 205,689 593,275 2,325,140 241,566 120,979 1,006,705 548,157 375,874 604,459 200,695 6,398 20,028 3,616 45,568 ...................... 12,581 ...................... 2,534,583 489,287 174,209 418,247 348,694 2,642,020 271,760 310,807 108,380 148,174 1,020,565 1,064,163 253,589 196,153 950,184 513,310 304,256 350,943 363,308 593,974 117,916 472,151 1,084,896 750,560 434,907 320,575 499,567 220,848 181,268 187,342 145,099 805,973 217,448 1,479,163 581,186 166,091 1,083,621 417,087 259,465 1,494,436 139,618 393,183 210,595 690,403 1,751,471 225,415 146,156 681,848 482,634 358,004 483,637 148,004 2,562 ........................ ........................ 5,048 ........................ 22,414 ........................ 1,536,003 129,075 175,517 143,928 49,416 317,709 144,722 145,418 34,748 ¥19,571 522,523 59,662 ¥90,654 32,477 103,789 201,278 74,764 17,843 183,482 ¥108,562 50,039 54,490 ¥496,259 228,138 17,666 57,858 219,211 85,547 74,412 44,012 13,113 38,134 84,137 91,698 309,845 43,001 ¥20,681 79,244 107,393 ¥11,680 51,107 132,586 9,001 ¥10,426 789,289 20,568 506 109,903 74,847 ¥45,406 135,959 68,460 ¥2,562 ...................... ...................... ¥5,048 ...................... ¥22,414 ...................... 2,606,463 618,362 349,726 562,175 398,110 2,959,729 416,482 456,225 143,128 128,604 1,543,088 1,123,825 162,935 228,629 1,053,972 714,588 379,019 368,787 546,790 485,412 167,955 526,641 588,637 978,698 452,572 378,433 718,778 306,395 255,680 231,354 158,212 844,107 301,585 1,570,861 891,031 209,092 1,062,940 496,331 366,859 1,482,756 190,725 525,769 219,596 679,978 2,540,760 245,983 146,662 791,751 557,480 312,598 619,596 216,464 ...................... ...................... ...................... ...................... ...................... ...................... ...................... 4,142,466 627,256 368,022 542,788 409,257 2,990,695 411,079 471,589 138,203 123,616 1,528,053 1,122,877 161,134 239,884 1,056,801 732,185 373,096 363,730 550,652 504,786 164,204 519,795 582,561 981,577 467,011 384,908 732,677 308,204 242,047 226,414 160,966 845,007 306,963 1,611,749 889,435 204,899 1,084,841 482,108 379,112 1,546,792 185,258 522,758 222,860 703,157 2,494,641 244,466 142,786 799,791 557,676 349,817 618,589 217,324 122,587 ...................... ...................... ...................... ...................... ...................... ...................... 3,073,678 1.96 1.15 1.70 1.28 9.34 1.28 1.47 0.43 0.39 4.77 3.51 0.50 0.75 3.30 2.29 1.17 1.14 1.72 1.58 0.51 1.62 1.82 3.07 1.46 1.20 2.29 0.96 0.76 0.71 0.50 2.64 0.96 5.03 2.78 0.64 3.39 1.51 1.18 4.83 0.58 1.63 0.70 2.20 7.79 0.76 0.45 2.50 1.74 1.09 1.93 0.68 0.38 .................... .................... .................... .................... .................... .................... .................... 31,775,136 28,718,614 7,099,715 35,818,329 35,092,362 1 100.00 undistributed obligations. 155 Department of Transportation, Federal Transit Administration Table 8–30. 69–1134–0–1–401; 69–8303–0–7–401 FEDERAL TRANSIT CAPITAL INVESTMENT GRANTS (FIXED GUIDEWAY MODERNIZATION) (20.500) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) ...................... 5,158 ...................... ...................... 125,302 2,182 41,850 3,500 64,650 18,787 42,954 3,052 ...................... 138,542 10,071 ...................... ...................... ...................... 3,011 ...................... 18,665 46,584 916 7,307 ...................... 4,741 ...................... ...................... ...................... ...................... 95,132 ...................... 388,567 ...................... ...................... 19,800 ...................... 4,633 122,898 ...................... ...................... ...................... 313 6,822 ...................... ...................... 7,518 19,161 ...................... 840 ...................... ...................... ...................... ...................... 1,443 ...................... ...................... ...................... 7,363 ........................ 1,125 2,069 ........................ 32,629 ........................ 3,039 ........................ 2,777 * ........................ 597 ........................ * ........................ ........................ ........................ ........................ 1,463 ........................ 17,837 14,197 323 21 ........................ ........................ ........................ ........................ ........................ ........................ 6,759 ........................ * ........................ ........................ 7,372 ........................ * 2,016 1,675 ........................ ........................ 26 6,174 ........................ ........................ 1,284 2,425 ........................ ........................ ........................ ........................ ........................ ........................ 3,288 ........................ ........................ ........................ 1,082 ...................... 1,524 1,719 ...................... 108,338 2,274 30,398 ...................... 36,598 13,265 19,971 836 ...................... 99,746 6,445 ...................... ...................... ...................... 2,125 ...................... 20,801 55,340 442 4,480 ...................... 3,155 ...................... ...................... ...................... ...................... 77,039 ...................... 272,954 ...................... ...................... 13,199 ...................... 3,125 75,200 60 ...................... ...................... 213 7,461 ...................... ...................... 12,061 16,535 ...................... 557 ...................... ...................... ...................... ...................... 1,684 ...................... ...................... ...................... 11,994 ...................... 2,649 3,788 ...................... 140,967 2,274 33,438 ...................... 39,375 13,265 19,971 1,433 ...................... 99,746 6,445 ...................... ...................... ...................... 3,588 ...................... 38,638 69,537 765 4,501 ...................... 3,155 ...................... ...................... ...................... ...................... 83,799 ...................... 272,954 ...................... ...................... 20,571 ...................... 3,125 77,216 1,735 ...................... ...................... 239 13,635 ...................... ...................... 13,345 18,960 ...................... 557 ...................... ...................... ...................... ...................... 4,972 ...................... ...................... ...................... 13,076 ...................... 3,272 3,632 ...................... 202,839 4,135 54,460 ...................... 73,830 26,854 35,091 1,622 ...................... 177,587 12,176 ...................... ...................... ...................... 3,989 ...................... 39,334 101,379 925 8,745 ...................... 6,334 ...................... ...................... ...................... ...................... 140,925 ...................... 499,120 ...................... ...................... 23,142 ...................... 6,285 134,565 126 ...................... ...................... 454 11,811 ...................... ...................... 24,000 33,137 ...................... 1,141 ...................... ...................... ...................... ...................... 3,401 ...................... ...................... ...................... 12,387 .................... 0.20 0.22 .................... 12.41 0.25 3.33 .................... 4.52 1.64 2.15 0.10 .................... 10.87 0.75 .................... .................... .................... 0.24 .................... 2.41 6.20 0.06 0.54 .................... 0.39 .................... .................... .................... .................... 8.62 .................... 30.54 .................... .................... 1.42 .................... 0.38 8.23 0.01 .................... .................... 0.03 0.72 .................... .................... 1.47 2.03 .................... 0.07 .................... .................... .................... .................... 0.21 .................... .................... .................... .................... 1,211,764 108,178 899,541 1,007,719 1,646,701 1 100.00 * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. 156 Department of Transportation, Federal Transit Administration Table 8–31. 69–1129–0–1–401 FEDERAL TRANSIT URBANIZED AREA—FORMULA GRANTS (SECTION 5307) (20.507) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. Previous authority New authority 19,868 15,888 987 10,928 855,823 58,576 72,221 10,872 105,068 183,112 108,398 25,404 5,917 269,824 41,407 14,246 5,091 12,896 32,817 6,434 66,263 95,482 92,722 58,164 7,296 62,826 2,448 5,004 33,326 4,613 215,453 2,062 626,112 39,524 3,003 90,968 13,110 43,610 175,308 20,097 14,364 2,096 31,033 281,815 29,728 4,358 64,743 95,659 5,219 46,628 1,231 ...................... ...................... ...................... 76,261 ...................... ...................... ...................... 17,602 5,924 1,810 51,975 1,379 167,606 2,199 3,204 2,383 5,847 15,340 40,587 756 773 4,805 6,613 1,597 2,492 2,302 7,553 2,549 969 42,835 4,146 16,153 1,502 3,286 478 4,477 15,212 2,041 19,556 4,728 51,459 20,092 120 23,391 1,668 4,141 14,405 317 8,174 423 3,258 36,144 777 797 21,088 34,747 628 16,033 353 ........................ ........................ ........................ 60,681 ........................ ........................ ........................ ........................ 11,389 6,365 33,396 5,913 440,486 35,353 33,764 4,622 51,878 124,388 50,531 19,844 4,266 164,655 26,306 9,567 7,420 13,940 22,069 2,291 51,943 94,058 50,293 32,035 3,794 28,287 1,932 6,222 17,988 3,474 161,449 6,791 409,483 27,852 2,286 65,088 10,805 27,256 112,615 6,853 10,520 1,757 21,219 146,865 21,506 781 40,078 70,792 3,704 29,288 1,034 ...................... ...................... 506 32,208 ...................... ...................... ...................... ...................... 3 4,183,904 741,772 2,569,207 1 Includes Alaska Railroad. not Include Oversight Section 5327. Federal Highway Transfers. 4 Excludes undistributed obligations. 2 Does 3 Includes 157 FY 2005 (estimated) FY 2005 Percentage of distributed total 85,371 7,291 608,092 37,553 36,968 7,005 57,726 139,728 91,118 20,599 5,039 169,459 32,920 11,164 9,912 16,242 29,622 4,840 52,912 136,893 54,439 48,189 5,296 31,573 2,410 10,699 33,200 5,515 181,006 11,519 460,942 47,945 2,407 88,478 12,472 31,397 127,020 7,170 18,694 2,179 24,477 183,010 22,284 1,578 61,167 105,539 4,332 45,321 1,387 ...................... ...................... 506 92,889 ...................... ...................... ...................... 7,046 3,997 21,151 3,805 272,991 21,209 19,976 2,990 31,952 76,404 29,145 13,002 2,667 101,628 16,552 5,907 4,630 8,913 14,251 1,425 32,132 58,178 31,466 19,466 2,465 16,926 1,202 3,835 11,391 2,161 101,074 4,446 256,437 17,642 1,422 41,957 6,642 16,512 71,224 4,137 6,634 1,093 13,470 91,483 12,690 486 25,414 44,574 2,304 18,689 643 ...................... ...................... 315 20,024 ...................... ...................... ...................... 0.44 0.25 1.32 0.24 17.08 1.33 1.25 0.19 2.00 4.78 1.82 0.81 0.17 6.36 1.04 0.37 0.29 0.56 0.89 0.09 2.01 3.64 1.97 1.22 0.15 1.06 0.08 0.24 0.71 0.14 6.32 0.28 16.05 1.10 0.09 2.63 0.42 1.03 4.46 0.26 0.42 0.07 0.84 5.72 0.79 0.03 1.59 2.79 0.14 1.17 0.04 .................... .................... 0.02 1.25 .................... .................... .................... .................... 3,310,979 1,598,174 4 100.00 Total 17,313 1 8,175 2 2 Department of Transportation, Federal Transit Administration Table 8–32. 69–8303–0–7–401 FEDERAL TRANSIT FORMULA AND RESEARCH GRANTS (SECTION 5307) (20.507) (obligations in thousands of dollars) Estimated FY 2004 obligations from: State or Territory FY 2003 Actual Alabama ........................................................................................... Alaska .............................................................................................. Arizona ............................................................................................. Arkansas .......................................................................................... California .......................................................................................... Colorado .......................................................................................... Connecticut ...................................................................................... Delaware .......................................................................................... District of Columbia ......................................................................... Florida .............................................................................................. Georgia ............................................................................................ Hawaii .............................................................................................. Idaho ................................................................................................ Illinois ............................................................................................... Indiana ............................................................................................. Iowa ................................................................................................. Kansas ............................................................................................. Kentucky .......................................................................................... Louisiana ......................................................................................... Maine ............................................................................................... Maryland .......................................................................................... Massachusetts ................................................................................. Michigan .......................................................................................... Minnesota ........................................................................................ Mississippi ....................................................................................... Missouri ........................................................................................... Montana ........................................................................................... Nebraska ......................................................................................... Nevada ............................................................................................ New Hampshire ............................................................................... New Jersey ...................................................................................... New Mexico ..................................................................................... New York ......................................................................................... North Carolina ................................................................................. North Dakota ................................................................................... Ohio ................................................................................................. Oklahoma ........................................................................................ Oregon ............................................................................................. Pennsylvania ................................................................................... Rhode Island ................................................................................... South Carolina ................................................................................. South Dakota ................................................................................... Tennessee ....................................................................................... Texas ............................................................................................... Utah ................................................................................................. Vermont ........................................................................................... Virginia ............................................................................................. Washington ...................................................................................... West Virginia ................................................................................... Wisconsin ........................................................................................ Wyoming .......................................................................................... American Samoa ............................................................................. Guam ............................................................................................... Northern Mariana Islands ................................................................ Puerto Rico ...................................................................................... Freely Associated States ................................................................ Virgin Islands ................................................................................... Indian Tribes .................................................................................... Undistributed .................................................................................... Total ................................................................................................. 1 In FY 2005 Percentage of distributed total Previous authority New authority Total FY 2005 (estimated) ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... ...................... 11,399 6,466 34,216 6,155 441,615 34,310 32,315 4,837 51,688 123,598 47,148 21,034 4,314 164,403 26,776 9,556 7,490 14,418 23,053 2,306 51,980 94,114 50,903 31,489 3,988 27,382 1,944 6,204 18,428 3,495 163,506 7,192 414,835 28,539 2,301 67,874 10,745 26,712 115,218 6,692 10,732 1,768 21,791 147,992 20,528 786 41,111 72,107 3,727 30,232 1,040 ...................... ...................... 509 32,392 ...................... ...................... ...................... ...................... 0.44 0.25 1.32 0.24 17.08 1.33 1.25 0.19 2.00 4.78 1.82 0.81 0.17 6.36 1.04 0.37 0.29 0.56 0.89 0.09 2.01 3.64 1.97 1.22 0.15 1.06 0.08 0.24 0.71 0.14 6.32 0.28 16.05 1.10 0.09 2.63 0.42 1.03 4.46 0.26 0.42 0.07 0.84 5.72 0.79 0.03 1.59 2.79 0.14 1.17 0.04 .................... .................... 0.02 1.25 .................... .................... .................... .................... ...................... ........................ ...................... ...................... 1 2,585,351 100.00 the President’s FY 2005 Budget, the Administration is proposing the creation of this new account. 158 9. INTEGRATING SERVICES WITH INFORMATION TECHNOLOGY This year the President is proposing to spend nearly $60 billion for computers, software, and services used to deliver benefits and services to American citizens. It is a priority for agencies to focus this investment on the achievement of goals that will result in benefits to the American people. There are three major efforts underway to assure the Federal Government’s investment in Information Technology brings the greatest value to the public: • Management for Results • Successful Uses of Electronic Government • Modernization Blueprints MANAGEMENT FOR RESULTS The Clinger-Cohen Act of 1996 calls for Federal departments and agencies to find ways to use technology to accomplish their mission; to operate more proficiently; and to make better purchasing decisions. The Act requires the Director of the Office of Management and Budget (OMB) to submit a report to the Congress on the results we’re achieving from Federal IT spending. This Budget chapter fulfills the statutory reporting requirements of the Clinger-Cohen Act through Chapter 9, Table 9–1, Effectiveness of Agency’s IT Management and E-Gov Processes, included on the CD–ROM, which summarizes the results of IT management processes at major agencies. As a result of the Administration’s oversight, agencies’ capital planning activities have improved. Agencies are now better able to identify ‘‘net program performance benefits achieved’’ by their IT investments and ‘‘how the benefits relate to the accomplishments of the goals’’ of their agency. However, much work remains to move beyond good explanations to good—and measurable—results. Performance of Government.—Agencies need proper management practices and support systems to deliver projects on time, within budget, and performing as expected. Once the IT projects represented by these investments move from planning to operations, agencies must be able to determine whether or not the projects continue to accomplish the intended outcome while staying within the approved budget. These projects must have: • Sound risk management strategies; and • Strong links to agency mission and strategic goals. While ensuring the projects are: • On schedule and within the approved budget; • Achieving performance goals; and • Included in the modernization blueprint for the agency, called an enterprise architecture The Government continues to improve productivity and demonstrate results from its IT investments. The Administration requires all cabinet agencies to prepare ‘‘business cases’’ for any planned or operational system that is critical to the mission of the agency. These investment rationales are graded on specific criteria including: • the value they will provide to the agency • the likelihood they will succeed • the cyber-security plans planned or in place • the acquisition strategy • the project management plans • the analysis of viable alternatives Government agencies continue to make significant improvement in their efforts to guarantee the prudent expenditure of taxpayer dollars. All of the 59 business cases submitted by the Department of Veterans Affairs passed the scoring criteria without revision of the original business cases. To achieve this, VA developed a project management agenda and trained more than 500 project managers while instituting a rigorous internal review process to pre-score their business cases before submission to OMB. The Administration continues to monitor the performance of its IT projects long after the original budget request is made. For example, of the $60 billion in the 2005 Budget for IT investments, 621 major projects representing $22 billion are currently on the ‘‘Management Watch List.’’ This list includes mission-critical projects needing improvement in the areas of performance measures, earned value management and/or IT security. Agencies must remediate the shortfalls identified in their business cases or the Administration will not support the expenditures until agencies have demonstrated their ability to address these weaknesses. The Agency IT Investment Portfolios (available in Exhibit 53 on the Internet at www.whitehouse.gov/OMB) provide details of the Administration’s proposed 2005 IT investments. Related documents on IT security and Electronic Government (E-Government) will also be available at www.whitehouse.gov/OMB and will be published by March 1, 2004. As part of the process by which the Administration evaluates IT business cases, investments are studied to determine whether there is duplication across Government entities. If an investment is found to be duplicative, the Administration brings together the appropriate agencies and helps them consider broad based solutions that will allow inter-agency data sharing and cooperation to build a single system, rather than maintaining separate investments. 159 160 This Administration leverages Government buying power while reducing redundant purchases. As an example, the Government is developing common solutions that meet multiple agencies’ needs in the areas of Financial Management and Human Resources. As part of its management responsibilities, OMB continued using one of the key authorities established in section 5113 ‘‘Enforcement of Accountability’’ of the Clinger-Cohen Act (CCA). Under this authority, the Director is required to evaluate information resources management practices of the executive agencies with respect to IT investments. As part of this evaluation, OMB issued one Clinger-Cohen letter, M–03–14 ‘‘Reducing Cost & Improving Quality in Federal Purchases of Commercial Software’’ (06/02/2003). The purpose of this letter was to coordinate and leverage the buying power of Government by creating the Software Managed and Acquired on the Right Terms (SmartBUY) initiative. This letter is available at www.whitehouse.gov/omb/memoranda/m03–14.html. In addition, management guidance titled ‘‘Streamlining Authentication and Identity Management’’ was issued on July 3, 2003. This memorandum provides agency Chief Information Officers (CIOs) with the appropriate guidance to coordinate and consolidate investments related to authentication and identity management and is available at www.whitehouse.gov/omb/inforeg/ eauth.pdf. The Government IT Workforce.—As part of the President’s Management Agenda (PMA), analysis is underway to develop a strategy for the recruitment, development, retention, and management of the Federal IT workforce and to insure that expenditures in technology are professionally delivered and managed. The immediate focus is to assess the current ‘‘bench strength’’ among existing employees, identify gaps in needed skills, and develop plans of action to fill critical workforce needs for project managers, solution architects, security specialists, and other need areas as identified in the Federal workforce survey completed in the fall of 2003 by the Office of Personnel Management (OPM) and the Federal CIO Council. Electronic Government..—Expanding Electronic Government makes it easier for citizens and businesses to interact with their Government and saves taxpayer dollars by reducing the cost of delivering those services. The Administration developed specific E-Government projects and an overall agenda of bringing the principles of E-Government to all Government programs, allowing taxpayers to conduct business with Government in their own time and on their own terms. For the past five years the Government has been aggressively implementing the Government Paperwork Elimination Act. The Act required the Government to provide the option for electronic filing and electronic signature for the full range of Government activities unless it is not practicable to do so. During the first two years of the Act’s implementation, 1,800 transactions could be conducted electronically. As of December 2003, 4,000 government transactions could be con- ANALYTICAL PERSPECTIVES ducted electronically. This represents 57% of the 7,000 potential transactions between citizens and their government. For instance: • The Department of Agriculture is implementing an agency-wide system to conduct business electronically; and • The Department of Transportation established an efficient online method for motor carriers to apply for operating authority and register for a USDOT number. As the Government continues to use new technology our business processes continue to improve. One specific example is the way we keep records. The National Archives and Records Administration (NARA) will preserve our electronic records for future generations just as it has for paper records in the past. NARA’s Electronic Records Archives project will preserve and provide access to digital records from Federal agencies. NARA’s work on the Electronic Records Management initiative will provide agencies with the policies and procedures necessary for managing these electronic records. Because of this foresight, historians will be assured of continuing access to essential evidence documenting the rights of American citizens, the actions of Federal officials, and the national experience. Securing Government Systems..—Over the last three years the Federal Government has improved considerably in identifying and resolving long-standing, serious, and pervasive IT security problems. Agencies report both annually and quarterly on their efforts to address IT security weaknesses against key IT security performance measures. As one example, the Environmental Protection Agency has excelled at protecting their information technology assets. EPA has evaluated the risks to, and certified the security of, its IT systems. Beyond documentation, however, EPA has implemented quantifiable measures of repelled attacks and blocked viruses. Internal scorecards are used to measure success and managers are encouraged to compete for top scores. By focusing on cyber-security, EPA has taken great steps to protect the integrity of the agency. In addition to assessing each agency’s IT security performance, the Administration also established the following three Government-wide goals in the 2004 President’s Budget. • Goal 1.—By the end of calendar year 2003, all Federal agencies were to have created a central remediation process to ensure that program and system level IT security weaknesses, once identified, are tracked and corrected. Each agency Inspector General (IG) was to verify whether or not the agency had a satisfactory IT security remediation process in place. Status.—While each Federal agency does have an IT security remediation process, the maturity of those processes vary greatly. Out of 26 Federal agencies, 10 agencies have a remediation process verified by their IG as meeting the necessary criteria. The Administration will continue to work 161 9. INTEGRATING SERVICES WITH INFORMATION TECHNOLOGY with the remaining Federal agencies to achieve this goal by the end of calendar year 2004. • Goal 2.—By the end of calendar year 2003, 80 percent of Federal IT systems were to be certified and accredited. Status.—Based on agencies’ reports 61 percent of Federal IT systems were certified and accredited at the end of calendar year 2003. At the end of calendar year 2002, only 47 percent had met this goal. Many agencies are not adequately prioritizing their IT expenditures to be assured that significant IT security weaknesses are appropriately addressed. • Goal 3.—By the end of calendar year 2003, 80 percent of the Federal Government’s 2004 major IT systems were to have appropriately integrated security into the lifecycle of the expenditures. Status.—Based on agencies’ reports for 2003, 75 percent of Federal IT systems planned and budgeted for IT security requirements as part of the overall development or maintenance. At the end of calendar year 2002, this number was slightly more than 60 percent. While agencies have made improvements in integrating security into new IT systems, significant problems remain, particularly in ensuring security of legacy systems. Additionally, the Federal Government has placed increased emphasis on prevention of negative impacts from worms and viruses through the installation of patches for known vulnerabilities. Further, improved information sharing allows agencies to rapidly identify and respond to cyber threats and critical vulnerabilities. These steps have led to stronger Government-wide processes for intrusion detection and response. While notable progress in resolving IT security weaknesses has been made, challenges remain and new threats and vulnerabilities continue to materialize. Agencies continue to improve the security of the information and systems supporting the Federal Government’s missions. To address the above challenges the Administration works with agencies, Inspectors General, the Congress and the General Accounting Office (GAO) to assure appropriate cost-effective IT security programs, policies, and procedures are in place to protect Government systems. Additional information and detail concerning the Federal Government’s IT security program and agency IT security performance can be found in OMB’s Annual Report to Congress on IT Security. The next such report will be issued by March 1, 2004 and will be made available on OMB’s website. Protecting Privacy.—The promise of E-Government can only be realized if people use the services provided by the Government. Citizens will only use these services if they trust their information will be protected and their privacy maintained. The obligation to maintain the public’s trust is demonstrated by the passage of the E-Government Act, which reflects the Government’s commitment to the privacy and security of the citizen’s confidential information. Specifically, the EGovernment Act requires agencies, as they develop new information technology systems or information collections, to: • Conduct Privacy Impact Assessments (PIAs) taking privacy into consideration in the design of the system or in any information collection activities. • Publicly post standardized web privacy policies regarding the handling of personal information provided electronically to the Government. The greater challenge for Government is clearly the PIAs. These assessments demand the combined analysis of individuals with technical, programmatic and legal expertise. With varying degrees of success, agencies attempted to comply with the new statutory mandate. Going forward, the Government must continue to meet the challenges presented by privacy concerns and ensure PIAs include consideration of alternative business processes or systems designs. The Administration anticipates greater transparency on the part of Government agencies as the PIA effort continues. This will inspire greater trust in and greater use of E-Government products. Making Government Accessible to All.—The Government is making its websites and information technology accessible to persons with disabilities by providing new standards for accessibility, developed in accordance with Section 508 of the Rehabilitation Act of 1973. These new standards assume access to Government information and data is a civil right. The Government is engaged in a variety of activities to fulfill the requirements that agencies, industry, and the public understand these standards. This year, the Administration conducted extensive outreach with industry, the public, and Federal agencies to assist in implementation. Additionally, the General Services Administration (GSA) developed a web-based tool to help agencies procure information technology accessible to persons with disabilities. In the next year, GSA will issue a survey to assess how Federal agencies are implementing the Section 508 accessibility standards and to allow agencies to share best practices. SUCCESSFUL USES OF ELECTRONIC GOVERNMENT E-Government seeks to leverage information technologies to make Government services available to the citizen while guaranteeing the security of those systems, the privacy of citizen information and the prudent use of taxpayer money. E-Government is about helping the citizens, businesses and Government conduct business with one another more efficiently and effectively. Previously, the agency was the focus of the process because the citizens had to adjust their schedule and circumstances in order to accommodate the transaction 162 ANALYTICAL PERSPECTIVES with the Government. Now, the citizen and the assistance they require are the focus of the process. The service is more important than the bureaucracy. For Governments and agencies, the benefit comes in the form of improved business processes, the way and the speed with which business is conducted. By collecting the data electronically, agencies benefit by reducing the processing time for transactions. This allows agencies to share data more easily, and speeds transactions conducted between and within agencies. Examples of successful adoption of the tenets of EGovernment to deliver services to the citizen and make the government more effective include the National Science Foundation (NSF) and the Office of Personnel Management. NSF’s FastLane system is used by more than 200,000 scientists, educators, technology experts and administrators to conduct business over the Internet. OPM manages five Presidential E-Government initiatives including USAJOBS, which receives on average 200,000 visits per day by Federal employment job seekers who can create resumes using the tools available on-line. Federal employees have taken more than 160,000 courses through the Gov Online Learning Center (GoLearn.gov), while E-Payroll is consolidating agencies payroll services into four service providers Government agencies have traditionally considered themselves as separate businesses with each serving its own mission. Citizens, however, may not draw distinctions between different agencies and agency missions; they simply want access to information in a timely fashion. Through the PMA, the Presidential E-Government initiatives and the efforts to provide a Federal Enterprise Architecture (FEA), Government is managing itself as one business with many subsidiaries. Through multi-agency E-Government initiatives such as Regulations.gov and Grants.gov, multiple agencies work together to provide service to the citizen from a single location. Regulations.gov makes it easier for citizens and businesses to easily find, review, and submit comments on proposed rules in the Federal Register that may affect them. Grants.gov makes it easier for grant seekers to find and apply for more than $350 billion in Federal grant opportunities across more than 900 programs in 26 agencies. Equally important, grant-seekers won’t have to visit each federal agency’s website every day to find or apply for grant opportunities. Chapter 9, Table 9–2, Status of the Presidential EGovernment Initiatives, included on the CD–ROM, provides an update for each project. MODERNIZATION BLUEPRINTS Over the past three years, as a result of the implementation of this Administration’s Electronic Government initiative, dramatic changes have begun to occur in the way the Government uses information technology to provide services to citizens. Federal agencies are rapidly developing and implementing sophisticated IT management policies and practices for their Capital Planning and Investment Control, professional project management practices and processes, and comprehensive security management practices Computers and related IT equipment and services are a means to an end, not an end in and of themselves. They are a tool to do a job and must support the business of the agency in order to be effective. IT, properly managed and focused, can help deliver government services and results to the public faster, cheaper, and with better quality than current methods. To gain the maximum benefit from IT systems, Agencies must understand how technology fits into and can support their missions. The FEA and the companion efforts of the agencies’ Enterprise Architectures together provide the ‘‘blueprint’’ for completing analysis in the areas of common business practices, opportunities for consolidation, and acceleration of service delivery. OMB, in collaboration with the Federal CIO Council, is developing the Government-wide FEA to provide a common view across the Government of the work agencies do and the technology used to deliver services. The FEA creates the blueprint to identify where agencies share common functions and consequently can use shared technology solutions. With these efforts, the Government is completing the design of a common, shared information technology support structure within and across agencies. Historically, data communications, databases, office automation and security have been planned and deployed to support individual agencies, or even individual organizations and applications within an agency. This process has led not only to duplication but also to difficulty in operating effectively across lines of business. To address these deficiencies, the Administration asked agencies to plan for the integration of their common infrastructure and office automation environments. Included in these plans were strategies to move towards an integrated support environment while using the Government blueprint. The final result of these plans, migration strategies and support systems will be a comprehensive Government-wide view of the technologies being used to support the implementation of agency and cross-agency systems. To support the implementation of the agencies’ modernization efforts, the Administration initiated programs like SmartBUY. This initiative leverages the immense buying power of the Federal Government in order to achieve the maximum cost savings, most favorable terms and conditions, and the best quality commercial brand-name software while continuing to motivate vendors to do business with the Government. Sharing Technology across Agencies Will Drive Results.—While the effort to integrate and consolidate IT environments within an agency can provide substantial 9. INTEGRATING SERVICES WITH INFORMATION TECHNOLOGY cost savings and performance improvement, the real potential benefit comes from the integration of agency processes and systems and the extension and integration of those environments across agencies. Based on the initial implementation of the FEA in the 2004 budget, six common areas where the work activities of diverse agencies were similar or nearly identical in providing services to citizens were identified. These strong similarities in activities present excellent opportunities for sharing resources and gaining efficiencies. The results of on-going analysis will provide the opportunity for breakthrough improvements in service performance for citizens. For example, the Health and Case Management functions have become the subject of Government-wide collaboration initiatives. The Department of Health and Human Services has taken the lead in a broad crossagency effort to develop a complete architecture for the Health function, which is expected to yield a number of major cross-agency initiatives. The Department of Justice has taken a leading role in developing a broader cross-agency approach to Case Management that will enable agencies to implement common business practices and technology solutions to this widely used process. Initiatives such as these will result in ‘‘best practice’’ solutions that span across agencies, and across all levels of government to bring significant benefits to citizens, businesses, and government entities. 163 Other areas of commonality that have already been identified for similar initiatives include Financial Management, Human Resources Management, and Grants. These common functional areas will be targeted by cross-agency teams for integration and consolidation. These efforts are expected to yield new common practices and technology initiatives to save money, improve efficiency and provide for significant improvements in service delivery beginning in 2005. Moving Forward.—In 2005 and beyond, the Government will continue identifying additional areas where the work of agencies is similar enough to believe that a shared approach to the use of information technology will yield major benefits. This effort will pave the way for major breakthroughs in the pace at which agencies can adapt to changing mission needs and deliver the results citizens are demanding. The Federal Government has made significant progress in implementing E-Government to better serve the citizen, but much remains to be done. Through the PMA, the Clinger-Cohen Act, the E-Government Act, and budget guidance, the Federal Government has the tools necessary to make it easier for citizens and businesses to interact with their Government. Through sound management practices, responsible investment, improved security and privacy, and innovative approaches to meeting the needs of the taxpayer, agencies can accomplish this important goal. 10. FEDERAL DRUG CONTROL FUNDING Table 10–1. FEDERAL DRUG CONTROL FUNDING, FY 2003–2005 1 (Budget authority, in millions of dollars) Department/Agency FY 2003 Enacted FY 2004 Estimate FY 2005 Request Department of Defense ...................................................................... Department of Education ................................................................... Dept. of Health and Human Services ............................................... National Institutes of Health .......................................................... Substance Abuse and Mental Health Services Admin ................ Department of Homeland Security .................................................... Immigration and Customs Enforcement ........................................ Customs and Border Protection .................................................... U.S. Coast Guard .......................................................................... Department of Justice ........................................................................ Bureau of Prisons .......................................................................... Drug Enforcement Administration .................................................. Interagency Crime and Drug Enforcement 2 ................................. Office of Justice Programs ............................................................ ONDCP ............................................................................................... Operations ...................................................................................... High Intensity Drug Trafficking Area Program .............................. Counterdrug Technology Assessment Center .............................. Other Federal Drug Control Programs .......................................... Department of State ........................................................................... International Narcotics Control and Law Enforcement Affairs ..... Andean Counterdrug Initiative ....................................................... Department of Veterans Affairs ......................................................... Other Presidential Initiatives 3 ............................................................ 906 644 3,315 961 2,354 2,040 518 874 648 2,430 43 1,640 477 270 521 26 226 47 222 874 145 729 664 3 909 624 3,480 991 2,489 2,383 539 1,070 774 2,483 48 1,703 551 181 522 28 225 42 228 914 188 727 765 2 853 611 3,657 1,019 2,638 2,519 576 1,121 822 2,750 49 1,816 581 304 511 28 208 40 235 922 191 731 823 4 Total Federal Drug Spending ......................................................... 11,397 12,082 12,649 1 Detail may not add due to rounding. 2 Prior to FY 2004 funds for the Interagency Crime and Drug Enforcement programs were appropriated into two accounts, one in the Justice Department and one in the Treasury Department. Beginning in FY 2004, those accounts were consolidated. In this table, funding is shown as combined for all three years. 3 Includes Small Business Administration Drug Free Workplace grants and National Highway Traffic Safety Administration Drug Impaired Driving Program. 165 ECONOMIC ASSUMPTIONS AND ANALYSES 167 11. ECONOMIC ASSUMPTIONS Introduction The economic outlook appears brighter now than at any time in recent years. Expansionary fiscal and monetary policies, combined with the inherent resilience of the American economy, have finally succeeded in overcoming the forces of restraint that have held growth back. Barring adverse shocks, over the nearterm there is good reason to believe that a self-sustaining and on-going expansion is at hand, one that will create more jobs, more income, and more consumer spending and business investment. From a longer-term perspective, the expansion should proceed briskly in the years ahead due to strengthened productivity growth and improvements in the tax system that will make it easier for markets to reward work and investment. A healthy economy will raise living standards and shrink the budget deficit when combined with restraint in Federal spending. Economic growth began to slow in 2000 following the stock market downturn that began in March. The decline showed up first in manufacturing, where employment peaked in July 2000. The overall economy contracted in the third quarter of 2000, and the slowdown turned into a brief, mild recession in early 2001 that was over by the end of the year. Although the economy began to expand in the fourth quarter of 2001, the pace of growth was initially well shy of that of a normal recovery and the labor market weakened further. In a typical business recovery, employment begins to rise soon after the recession ends, but in this instance payroll employment sagged for many months following the recession trough. Beginning in mid-2003, however, there were gathering signs of self-reinforcing economic growth. In such a virtuous circle, rising employment adds to workers’ incomes and supports consumer spending, which leads to additional increases in output and further gains in employment. Growing consumer confidence contributes to new spending and is further strengthened by continued growth and prosperity. Meanwhile, as businesses experience increased sales, orders, and profits, they are encouraged to boost capital spending, which creates still more jobs and income. Improved business conditions strengthen investor confidence in the economy’s future, which drives up the stock market, boosting household wealth and reducing the cost of capital to business, which helps spur further growth. The process can continue as long as inflation and interest rates remain low and the economy does not bump up against supply constraints. With inflation and interest rates at their lowest levels in decades, there is good reason to expect that the strengthening eco- nomic forces now emerging will return the economy to high levels of labor and capital resource use. Productivity growth accelerated in the last half of the 1990s and has stepped up still further in the last three years. Some of the recent acceleration is very likely a temporary gain: cyclical pressures pushed firms to cut labor and other costs in the face of weak sales. Even taking such cyclical factors into account, however, the underlying pace of productivity growth appears to have improved significantly. If more rapid productivity growth is sustained, then future economic growth would be considerably stronger than most forecasters currently expect. Consistent with conservative forecasting, the Administration assumes productivity growth that is slower than recent experience and close to the average pace of the last four decades. The Administration’s economic near- and mediumterm projections reflect a reasonably sanguine view of the outlook, which is shared by most forecasters. The Administration’s economic projections are similar to those of private sector forecasters and the Congressional Budget Office. However, after several years of generally disappointing economic news, it would not be surprising if the gathering positive cyclical forces propelled the economy forward even faster than is now generally anticipated. Policy Actions Fiscal Policy: During the first three years of this Administration, the President proposed and Congress passed three important tax relief measures that have helped pull the economy out of recession and provide a foundation for future growth. • In June 2001, the President signed the Economic Growth and Tax Relief and Reconciliation Act (EGTRRA). It provided significant income tax rate reductions including lower marginal income tax rates; a reduction in the marriage tax penalty; and a new, lower, 10 percent tax bracket. Beginning in July 2001, 85 million taxpayers received rebate checks totaling $36 billion reflecting the new 10 percent bracket. The rebate and lower withholding rates bolstered consumer spending at a critical juncture, helping to return the economy to growth by the end of 2001. • In March 2002, the President signed the Job Creation and Worker Assistance Act (JCWAA). The main provision of JCWAA reduced the tax disincentive for business to invest by permitting expensing on 30 percent of the value of qualified new capital assets, primarily equipment and software. This expensing provision created a temporary period of lower capital costs until the provision originally expired in September 2004. JCWAA 169 170 was aimed directly at weak capital spending, a key reason why the business cycle recovery was much slower than usual. The Act also provided additional unemployment benefits for long-term unemployed workers who exhausted their regular unemployment insurance benefits. • In May 2003, the President signed another extension of unemployment insurance benefits for individuals who had exhausted their regular benefits. He also signed the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) to provide additional stimulus to the subpar recovery. This legislation: 1) Advanced the date at which the 2001 tax bill’s lower marginal individual income tax rates were to take effect and made them retroactive to January 2003; raised the child tax credit for 2003 and 2004, with the 2003 increase given to families in the form of rebate checks during the summer; advanced the reduction in the marriage penalty; and raised the exemption amount for the individual Alternative Minimum tax (AMT) in 2003 and 2004. (Taxpayers pay the higher of their tax liability as determined by the regular income tax and the AMT calculation.) 2) Reduced the individual income tax rates on dividend income and capital gains. The tax bill reduced to 15 percent the maximum tax rate on dividends which previously were taxed at the taxpayer’s marginal tax rate, and it reduced the maximum tax rate on net capital gains (the excess of net long-term gains over net short-term losses) from 20 percent to 15 percent. Tax rates on capital income were also reduced for those lower income families paying less than the maximum rate. The reductions in the tax rates on capital gains and dividends reduced a longstanding distortion in the tax code: the double taxation of corporate earnings that had lowered business investment and biased corporate financing against equity and in favor of debt. 3) Raised the expensing provision of the 2002 tax bill from 30 percent to 50 percent and extended the window for eligible investments from September 11, 2004 to the end of the year. Also, the maximum amount of new investment that a small business can expense was raised from $25,000 to $100,000. All told, the three tax relief bills provided $68 billion in tax stimulus in fiscal year 2001, $89 billion in 2002, $159 billion in 2003, $272 billion in 2004, and $171 billion in 2005. The total stimulus, including assistance to States and long-term unemployed workers, was even larger. Tax relief played a crucial role in ending the 2001 recession and then invigorating the recovery. It took two years, but the stimulus in the tax bills is finally producing the rapid economic growth that the economy needs and that will eventually generate new jobs and higher incomes. In addition to the near-term stimulus, the 2001 and 2003 Acts also made fundamental im- ANALYTICAL PERSPECTIVES provements in the Nation’s tax system that will raise the long-term level of economic activity by reducing the disincentives and distortions in the system. • The reductions in marginal tax rates mean that individuals, sole proprietorships, and partnerships will have more incentive to produce more, earn more, save more, and invest more. • Lower tax rates on dividends and capital gains will lower the after-tax cost of purchasing capital equipment and software, thus raising the rate of investment. Lower tax rates will also shift investment to more productive uses by reducing distortions in the pattern of investment caused by the tax system. By reducing the bias in favor of debt over equity finance, lower tax rates on dividends and capital gains will encourage corporations to maintain stronger balance sheets. • The reduction in the individual capital gains tax rates will encourage more high-risk, high-payoff investments essential to maintaining a dynamic economy and ensuring U.S. competitiveness in the world economy. • Lower tax rates on capital income will help raise asset values and thereby improve household and business balance sheets. The short-term benefits of fiscal stimulus are already evident in the quick end to the recession in 2001 and the further surge in economic growth that occurred in the second half of 2003. The tax cuts have helped to transform an ailing economy into a healthier one. The longer-term benefits from an improved tax system will be evident in the years ahead as new incentives alter the behavior of individuals and businesses in ways that augment economic growth. Monetary Policy: Since early 2001 the Federal Reserve has aggressively pursued a policy aimed at restoring strong, self-sustaining growth. As it became clear that the abrupt slowing of growth in late 2000 would likely turn into a recession in early 2001, the Federal Reserve cut the federal funds rate sharply. Eventually, it lowered this key interest rate eight times, bringing it down from 61 2 percent at the start of 2001 to 31 2 percent by August. In the months following the terrorist attacks of September 11th, the Federal Reserve cut the rate four more times bringing it to just 13 4 percent by the end of the year, the lowest level since the early 1960s. As the economy began to expand beginning in the fourth quarter of 2001, the Federal Reserve held the federal funds rate constant, but as the pace of growth proved disappointing and payrolls continued to contract, the Federal Reserve reduced the funds rate to 11 4 percent in November 2002 and to 1 percent in June 2003. Even as growth accelerated in the second half of 2003, the Federal Reserve indicated that it intended to maintain an accommodative monetary policy for a considerable period of time. At the longer end of the maturity spectrum, interest rates declined sharply in late 2000 as markets perceived the slowdown in the economy. They remained 11. ECONOMIC ASSUMPTIONS about unchanged during 2001, and then resumed their decline in 2002 and the first half of 2003. At its low point in June 2003, the yield on the 10-year Treasury note fell to 3.1 percent, three percentage points below its level three years earlier and the lowest level since the late 1950s. The yield rose during the second half of 2003 and finished the year at 4.3 percent. With the exception of the past year and a half, this is the lowest level for the 10-year note since 1965. The decline in long-term interest rates that continued until mid-2003 reflected slack credit demand, a reduction in inflation and in inflation expectations, and the easing of monetary policy. The final phase of the decline in rates in May through June 2003 also reflected some apparent confusion in financial markets regarding the Federal Reserve’s intentions. The rise in long-term rates during the second half of 2003 reflected a better understanding by market participants of Federal Reserve policy, along with the pickup in economic activity, and the expectation of further strengthening of the expansion in 2004. The trend in yields on long-term private sector instruments was similar to that of Treasury notes, declining to very low levels by mid-2003 and then rising to still relatively low levels by year’s end. The yield on corporate AAA bonds closed the year at 5.6 percent, the lowest level since 1967. The rate on 30-year fixed rate mortgages finished the year at 5.8 percent, the lowest level since the early 1960s. Recent Developments The economic expansion that began in late 2001 was restrained by a number of special factors. The stock market decline, which lasted from early 2000 until early 2003, was much longer—and much steeper—than in a typical business cycle. The market decline was prolonged by the corporate accounting scandals in 2002 that shook investor confidence. The erosion of consumer confidence was another negative factor that persisted until early 2003, well beyond the normal cyclical correction. Confidence was sapped not only by economic conditions in 2001–2002, but also by the terrorist attacks on September 11, 2001, and subsequent developments in the War on Terror which periodically heightened anxiety. Another factor holding back growth was the business capital stock overhang that had emerged in late 2000 and needed to be worked off. The overhang held down investment spending until mid-2003. Finally, slow growth, or even recession, in other leading industrial nations curtailed U.S. exports. These obstacles to growth had been overcome or greatly reduced by mid-2003. The stock market was on the rise again as the uncertainties surrounding the 2002 accounting scandals subsided and new legislation passed in 2002 led to wide-ranging reforms of corporate governance. Consumers and investors became more optimistic as the Administration and the American people together successfully met the domestic and international threats to the Nation’s security at home and overseas. Businesses had largely eliminated the excess 171 capital stock by mid-2003, and investment began increasing again. Growth abroad also picked up modestly. The attenuation of these special factors permitted the highly stimulative fiscal and monetary policies put in place in 2001–2003 to operate to full effect, restoring the economy to a healthy growth rate. The economy surged in the third quarter of 2003 as real GDP growth soared to an 8.2 percent annual rate, the fastest quarterly advance since 1983. Growth in the fourth quarter undoubtedly moderated from this stellar pace, but it appears to have remained robust. (The official estimate of fourth quarter growth was not available until after the Budget had gone to press.) A telling indication that the expansion has become healthier and more self-sustaining is the more balanced mix of the growth of GDP components. Unlike the initial phase of the expansion, which was dominated by consumer and Government spending, growth is now being propelled by business and consumer spending as Government spending growth slows. Components of Aggregate Demand: Business investment in equipment and software, adjusted for inflation, increased at an 18 percent annual rate in the third quarter, the fastest growth in 51 2 years. Rising shipments of nondefense capital goods in October and November suggest that equipment investment made a substantial contribution to GDP growth in the fourth quarter as well. Business investment in structures has leveled off instead of declining as it had earlier. Given the usual lags, an upturn in spending on structures is increasingly likely this year. The stalwart of the expansion has been consumer spending, and it continued to expand rapidly at nearly a 7 percent annual rate in the third quarter. Consumption probably remained strong in the fourth quarter, as well. Individuals’ discretionary spending, such as for new cars, has been especially robust. Residential investment has been the other mainstay of the expansion so far, spurred by relatively low mortgage rates. Residential investment spending rose at over a 20 percent rate in the third quarter, the fastest pace in a decade. Housing starts in November reached the highest level in almost twenty years, which suggests another doubledigit rise in residential investment in the fourth quarter. Other Indications of Stronger Growth: • The Nation’s payrolls have begun increasing again, and unemployment is on the decline. The unemployment rate fell from 6.3 percent in June to 5.7 percent in December. From July to December, employers added 278,000 workers to their payrolls, reversing the trend of shrinking payrolls of the prior months. However, the gain in December of only 1,000 jobs suggests that job creation at the end of the year was still well shy of the usual expansion pace. Further significant payroll gains are likely in 2004, although recent experience suggests that job growth may remain uneven through the early part of the year. 172 • Output in the hard-hit manufacturing sector turned around in 2003. Manufacturing production during September through December rose at the fastest pace in nearly four years. The Purchasing Managers’ Index, a forward looking indicator of manufacturing activity, reached 66 in December, the highest level in 20 years. A reading above 50 indicates an expanding manufacturing sector. • Consumer and investor confidence has risen sharply. From their low points in March 2003, the University of Michigan Index of Consumer Sentiment increased nearly 20 percent through December and the Conference Board measure advanced almost 50 percent. A survey of investor confidence conducted by UBS/Gallup rose from a low reading of 5 in March to 104 in December. • Corporate profit margins and overall profits expanded briskly in 2003, which should help foster further increases in business hiring and capital spending in 2004. In the third quarter, the share of profits in GDP reached 10 percent, the highest level since late 1997. Strong productivity growth, well in excess of the growth of labor compensation, has contributed to the growth of profits by lowering unit labor costs and raising profit margins. • Stock markets have soared since March 2003. The S&P 500 and the Dow Jones Industrial average each gained about 30 percent during the last nine months of 2003; the NASDAQ, with its predominance of high-tech companies, rose 50 percent. The increase in equity values added almost $3 billion to household wealth from the end of March to the end of December and reduced the cost of equity capital to businesses. • At the same time that economic activity has been picking up, inflation has been drifting lower. The core Consumer Price Index, which excludes the volatile food and energy components, increased a mere 1.1 percent in the 12 months ending in December 2003. That is the lowest rate in 40 years and well below the 2.7 percent increase at the recession’s trough in November 2001. The rise in the overall CPI was 1.9 percent during the most recent 12 months. This was higher than the core rate mainly because of a jump in energy prices. The GDP price index increased 1.7 percent in the year ending in the third quarter of 2003. The absence of any significant inflationary pressures suggests that the Federal Reserve should be able to maintain an accommodative monetary policy for some time yet. Productivity and the Longer Run Outlook: Since the fourth quarter of 2000, productivity in the nonfarm business sector has risen at a 4.4 percent annual rate. That is much faster than the 1.4 percent average from 1974 to 1995 and faster even than the accelerated 2.5 percent pace during the latter half of the 1990s. While some of the recent step up is likely attributable to intense cost cutting during the recession and the subsequent slow recovery, and therefore transitory, a consid- ANALYTICAL PERSPECTIVES erable part of the productivity improvement is likely to prove to be permanent. Strong productivity growth is the best foundation for continued economic growth. In summary, the accommodative stances of fiscal and monetary policy have combined to ignite a more vigorous expansion. Growth is likely to be above average this year, accompanied by further declines in unemployment and stronger employment gains. Beyond this year, solid productivity growth, low inflation, and an improved tax framework offer the prospect of a new, extended period of robust economic growth. Economic Projections The Administration’s economic projections are summarized in Table 11–1. These assumptions are close to those of the Congressional Budget Office and the average of private sector forecasters, as described in more detail below. The assumptions were based on information available as of late November. In December, the Bureau of Economic Analysis released a comprehensive revision of the National Income and Product Accounts. The Addendum to Table 11–1 presents the assumptions on a basis comparable to the revised national accounts. As the foregoing discussion suggests, the Administration is projecting the economy to improve steadily. The major contributors to economic growth this year are likely to be business investment and consumer spending, spurred by stronger income growth, the tax relief legislation of the past three years, the rise in stock market, and increased housing wealth. Spending on equipment and software could surge later this year as firms take advantage of the expensing provision scheduled to expire at year’s end. To the extent that the timing of investment is shifted forward from 2005 to 2004, capital spending in early 2005 may be temporarily weakened. Businesses are also likely to add to their inventories in 2004, which were lean at the end of 2003. The foreign sector may once again make at least a modest positive contribution to growth because of an expected pick up of economic activity abroad and the recent decline in the value of the dollar, both of which should help U.S. exports. From February 2002 to the end of 2003, the dollar declined 23 percent against the currencies of the major U.S. trading partners. Residential investment may not maintain the exceptionally high levels reached in late 2003 and so may make little, if any, contribution to growth. The contribution to real GDP growth from Government spending is also likely to be at most modest. At the Federal level, growth in spending on security requirements will be partly offset by more moderate spending growth in areas of lower priority. At the State and local level, growth of outlays will continue to be restrained as these governments strive to achieve balanced budgets. Real GDP and Unemployment: The economy is projected to grow 4.4 percent in 2004 measured on a calendar year-over-year basis, compared with 3.1 percent in 2003. During the next few years, real growth is 173 11. ECONOMIC ASSUMPTIONS Table 11–1. ECONOMIC ASSUMPTIONS 1 (Calendar years; dollar amounts in billions) Actual 2002 Projections 2003 2004 2005 2006 2007 2008 2009 10,446 9,440 110.7 10,939 9,730 112.4 11,566 10,163 113.8 12,139 10,528 115.3 12,746 10,886 117.1 13,396 11,248 119.1 14,096 11,607 121.4 14,831 11,969 123.9 4.3 2.9 1.3 5.8 4.2 1.5 5.2 4.0 1.2 4.9 3.4 1.4 5.0 3.3 1.6 5.2 3.3 1.8 5.2 3.1 2.0 5.2 3.1 2.0 3.6 2.4 1.1 4.7 3.1 1.6 5.7 4.4 1.2 4.9 3.6 1.3 5.0 3.4 1.5 5.1 3.3 1.7 5.2 3.2 2.0 5.2 3.1 2.0 Incomes, billions of current dollars: Corporate profits before tax ........................................... Wages and salaries ........................................................ Other taxable income 2 ................................................... 665 4,996 2,411 756 5,101 2,487 891 5,356 2,609 1,181 5,686 2,681 1,134 6,008 2,727 1,134 6,347 2,791 1,175 6,687 2,888 1,222 7,030 3,016 Consumer Price Index: 3 Level (1982–84=100), annual average .......................... Percent change, fourth quarter over fourth quarter ...... Percent change, year over year .................................... 179.9 2.2 1.6 184.0 2.0 2.3 186.6 1.4 1.4 189.4 1.6 1.5 192.8 1.9 1.8 196.8 2.2 2.1 201.5 2.5 2.4 206.6 2.5 2.5 Unemployment rate, civilian, percent: Fourth quarter level ........................................................ Annual average ............................................................... 5.9 5.8 5.9 6.0 5.5 5.6 5.3 5.4 5.2 5.2 5.1 5.1 5.1 5.1 5.1 5.1 Federal pay raises, January, percent: Military 4 ........................................................................... Civilian 5 .......................................................................... 6.9 4.6 4.7 4.1 4.15 4.1 3.5 1.5 NA NA NA NA NA NA NA NA Interest rates, percent: 91-day Treasury bills 6 .................................................... 10-year Treasury notes .................................................. 1.6 4.6 1.0 4.0 1.3 4.6 2.4 5.0 3.3 5.4 4.0 5.6 4.3 5.8 4.4 5.8 10,481 10,083 103.9 10,984 10,397 105.7 11,612 10,858 107.0 12,187 11,248 108.4 12,796 11,630 110.0 13,449 12,017 111.9 14,151 12,401 114.1 14,890 12,788 116.4 4.2 2.8 1.4 5.9 4.3 1.5 5.2 4.0 1.2 4.9 3.4 1.4 5.0 3.3 1.6 5.2 3.3 1.8 5.2 3.1 2.0 5.2 3.1 2.0 3.8 2.2 1.5 4.8 3.1 1.6 5.7 4.4 1.2 4.9 3.6 1.3 5.0 3.4 1.5 5.1 3.3 1.7 5.2 3.2 2.0 5.2 3.1 2.0 745 4,975 2,349 845 5,092 2,401 992 5,352 2,515 1,313 5,682 2,587 1,261 6,004 2,634 1,262 6,342 2,701 1,307 6,682 2,796 1,359 7,025 2,923 Gross Domestic Product (GDP): Levels, dollar amounts in billions: Current dollars ................................................................ Real, chained (1996) dollars .......................................... Chained price index (1996=100), annual average ........ Percent change, fourth quarter over fourth quarter: Current dollars ................................................................ Real, chained (1996) dollars .......................................... Chained price index (1996=100) .................................... Percent change, year over year: Current dollars ................................................................ Real, chained (1996) dollars .......................................... Chained price index (1996=100) .................................... ADDENDUM: 7 Gross Domestic Product (GDP), revised: Levels, dollar amounts in billions: Current dollars ................................................................ Real, chained (2000) dollars .......................................... Chained price index (2000=100), annual average ........ Percent change, fourth quarter over fourth quarter: Current dollars ................................................................ Real, chained (2000) dollars .......................................... Chained price index (2000=100) .................................... Percent change, year over year: Current dollars ................................................................ Real, chained (2000) dollars .......................................... Chained price index (2000=100) .................................... Incomes, billions of current dollars, revised: Corporate profits before tax ........................................... Wages and salaries ........................................................ Other taxable income 2 ................................................... NA = Not Available. 1 Based on information available as of late November 2003. 2 Dividends, rent, interest and proprietors’ income components of personal income. 3 Seasonally adjusted CPI for all urban consumers. 4 Percentages apply to basic pay only; 2002, 2003, and 2004 figures are averages of various rank- and longevity- specific adjustments; percentages to be proposed for years after 2005 have not yet been determined. 5 Overall average increase, including locality pay adjustments. Percentages to be proposed for years after 2005 have not yet been determined. 6 Average rate, secondary market (bank discount basis). 7 Assumptions adjusted to reflect comprehensive revisions to GDP and incomes released by the Bureau of Economic Analysis in December 2003. 174 expected to exceed the long-run potential growth rate. As a result, the unemployment rate is projected to decline gradually from its 5.7 percent level in December 2003 to 5.1 percent in 2007. This rate is in the center of the range that is thought to be consistent with stable inflation. Potential GDP: The growth of potential GDP is assumed to be 3.1 percent per year. Potential growth is approximately equal to the sum of the trend growth rates of the labor force and of productivity. The labor force is projected to grow about 1.0 percent per year on average, a combination of a 1.1 percent increase in the working-age population and a slight decline in the labor force participation rate. Trend productivity growth in the nonfarm business sector is assumed to average 2.3 percent per year, about the average during the past four decades, an extended period that encompasses rapid and slow productivity growth trends. The productivity assumption is a cautious one, especially in light of the 4.4 percent average growth rate in nonfarm productivity since the fourth quarter of 2000. Inflation: Inflation is expected to edge up slightly from its low levels in 2003. The GDP chain-weighted price index is projected to increase 1.2 percent this year, rising to 2.0 percent in 2008 and 2009. The CPI is expected to increase 1.4 percent this calendar year, and then move up to 2.5 percent in 2009. The difference between inflation measured by the CPI and the GDP price index in the outyears is consistent with historical experience. The forecast for low inflation in the coming years reflects the current very low inflation, the absence of inflationary expectations, the additional downward pressure on wages and prices that will persist until stronger growth eventually eliminates excess slack in the economy, and the demonstrated ability of the Federal Reserve in recent years to assure a reasonable degree of price stability. Not since the mid-1960s has there been a 10-year period with average inflation as low as is projected for 2000–2009. Interest Rates: As is usual during an expansion, interest rates are projected to rise. The 3-month Treasury bill rate ended 2003 at 0.9 percent. It is expected to increase to 4.4 percent by 2009. The yield on the 10year Treasury note ended last year at 4.3 percent. It is projected to increase to 5.8 percent by 2009. The larger increase at the short end of the maturity spectrum than at the longer end is the usual cyclical experience and reflects an assumed less accommodative monetary policy as the expansion matures. Rates start from such a low level currently that, despite their projected increase, interest rates on average during 2003 through 2009 are likely to be lower than during any other seven-year period since the mid-1960s. Adjusted for inflation, the outyear real interest rates are close to their historical averages. Income Shares: The share of taxable income in nominal GDP is projected to rise through 2005 and decline thereafter. The wage and salary share is projected to rise steadily through 2007 from a relatively low level ANALYTICAL PERSPECTIVES in the third quarter of 2003. The share of the nontaxable component of labor compensation in GDP is expected to rise significantly over the forecast horizon. This component, called supplements to wages and salaries in the national income accounts, is composed of employer contributions for social insurance and employer-paid benefits, such as health insurance and pension contributions. Both health insurance and pension contributions are projected to rise more rapidly than taxable wages and salaries. The cost of health insurance purchased by employers rose at a double-digit pace in both 2002 and 2003. Employers have shifted some of the rise in insurance costs on to employees, and are likely to continue to do so. Nonetheless, the upward pressure on the employers’ share of insurance premiums is expected to be substantial. Also, employers’ contributions to defined-benefit pension plans are expected to increase significantly over the next few years. Firms must reduce the large underfunding of plans created by the fall in the stock market between 2000 and 2003, lower assumed rates of return on fund assets, and the ongoing obligations for their workforce. The share of corporate profits before tax will be affected by the strength of the economy and the end of the temporary expensing provisions for qualified capital by the end of 2004. Healthy economic growth will help sustain the corporate profits share. On the other hand, the expensing provision will lower profits before tax this year compared to what they otherwise would have been by allowing firms to write off more of their investment sooner. After 2004, however, corporate profits before tax will increase both because new investments will not qualify for the temporary expensing provision and because the remaining depreciation on expensed investments will be lower. Taking these various factors into account, the corporate profits share is expected to increase slightly this year, jump sharply in 2005 when the receipts payback for expensing will begin, and then decline gradually thereafter. Among the other components of the tax base, the share of personal interest income in GDP is projected to decline significantly reflecting the relatively low nominal interest rates during the next six years. The remaining shares of the tax base (proprietors’ income, rental income, and dividend income) are projected to remain relatively stable at around their 2003 levels. Summary: The economic news since the assumptions were finalized has generally been favorable, although job growth in December fell well below expectations. On balance, at the start of 2004, the upside risks to the near-term forecast may exceed the downside risks. Moreover, if the strong productivity performance of recent years continues at even a somewhat more moderate pace, then long-run growth may also be stronger than assumed here. On the other hand, growth may also be weaker than forecast if, for example, the economy is subjected to additional and significant adverse shocks. 175 11. ECONOMIC ASSUMPTIONS Comparison with CBO and Private-Sector Forecasts In addition to the Administration, the Congressional Budget Office (CBO) and many private-sector forecasters also make economic projections. CBO develops its projections to aid Congress in formulating budget policy. In the executive branch, this function is performed jointly by the Treasury, the Council of Economic Advisers, and the Office of Management and Budget. Private-sector forecasts are often used by businesses for long-term planning. Table 11–2 compares the 2005 Budget assumptions with projections by the CBO and the Blue Chip Consensus, an average of about 50 private-sector forecasts. The three sets of economic assumptions are based on different underlying assumptions concerning economic policies. The private-sector forecasts are based on their appraisals of the most likely policy outcomes, which vary among the forecasters. The Administration forecast assumes that all Budget proposals will be enacted. The CBO baseline projection assumes that current law as of the time the estimates are made will remain forever unchanged. Despite their differing policy Table 11–2. assumptions, the three sets of economic projections, shown in Table 11–2, are very close. The similarity of the Budget economic projection to both the CBO baseline projection and the Consensus forecast underscores the cautious nature of the Administration forecast. For real GDP, the Administration, CBO, and the Blue Chip consensus anticipate strong growth this year. The Administration projects 4.4 percent growth, slightly below the CBO and private sector consensus. For calendar year 2005, the Administration, at 3.6 percent, is again slightly below the Consensus (at 3.7 percent), and significantly less than CBO’s 4.2 percent. Thereafter, the Administration’s forecast remains close to the consensus growth rate. Over the six-year span as a whole, the Administration and the private sector consensus both project an average 3.5 percent annual growth rate, CBO 3.4 percent. All three forecasts anticipate continued low inflation of between 1 and 2 percent as measured by the GDP chain-weighted price index, and between 11 2 and 21 2 percent as measured by the CPI. The unemployment rate projections are also similar. All three forecasts en- COMPARISON OF ECONOMIC ASSUMPTIONS (Calendar years) Projections Average, 2004 2005 2006 2007 2008 2009 GDP (billions of current dollars): CBO January ............................................................................................. Blue Chip Consensus January 2 ............................................................... 2005 Budget .............................................................................................. 11,629 11,660 11,612 12,243 12,291 12,187 12,814 12,929 12,796 13,389 13,588 13,449 14,023 14,292 14,151 14,686 15,045 14,890 Real GDP (chain-weighted): 1 CBO January ............................................................................................. Blue Chip Consensus January 2 ............................................................... 2005 Budget .............................................................................................. 4.8 4.6 4.4 4.2 3.7 3.6 3.1 3.3 3.4 2.7 3.1 3.3 2.8 3.2 3.2 2.8 3.2 3.1 3.4 3.5 3.5 Chain-weighted GDP Price Index: 1 CBO January ............................................................................................. Blue Chip Consensus January 2 ............................................................... 2005 Budget .............................................................................................. 1.1 1.4 1.2 1.1 1.6 1.3 1.5 1.8 1.5 1.8 1.9 1.7 1.9 2.0 2.0 1.9 2.0 2.0 1.5 1.8 1.6 Consumer Price Index (all-urban): 1 CBO January ............................................................................................. Blue Chip Consensus January 2 ............................................................... 2005 Budget .............................................................................................. 1.6 1.7 1.4 1.7 2.1 1.5 2.0 2.3 1.8 2.2 2.4 2.1 2.2 2.4 2.4 2.2 2.4 2.5 2.0 2.2 2.0 Unemployment rate: 3 CBO January ............................................................................................. Blue Chip Consensus January 2 ............................................................... 2005 Budget .............................................................................................. 5.8 5.8 5.6 5.3 5.4 5.4 5.0 5.4 5.2 5.1 5.3 5.1 5.2 5.3 5.1 5.2 5.2 5.1 5.3 5.4 5.3 Interest rates: 3 91-day Treasury bills: CBO January ........................................................................................ Blue Chip Consensus January 2 .......................................................... 2005 Budget .......................................................................................... 1.3 1.3 1.3 3.0 2.6 2.4 4.0 3.7 3.3 4.6 3.9 4.0 4.6 4.1 4.3 4.6 4.1 4.4 3.7 3.3 3.3 10-year Treasury notes: 3 CBO January ........................................................................................ Blue Chip Consensus January 2 .......................................................... 2005 Budget .......................................................................................... 4.6 4.7 4.6 5.4 5.4 5.0 5.5 5.5 5.4 5.5 5.6 5.6 5.5 5.6 5.8 5.5 5.6 5.8 5.3 5.4 5.4 Sources: Congressional Budget Office; Aspen Publishers, Inc., Blue Chip Economic Indicators All forecasts adjusted to reflect December 2003 comprehensive revisions to the National Income and Product Accounts. 1 Year over year percent change. 2 January 2004 Blue Chip Consensus forecast for 2004 and 2005; Blue Chip October 2003 long run extension for 2006 - 2009. 3 Annual averages, percent. 2004-09 176 ANALYTICAL PERSPECTIVES visage slightly rising interest rates during the next few years. For short-term rates, the consensus forecast is slightly below the Administration’s in the outyears, while CBO is higher. The three long-term interest rate projections are very close. Changes in Economic Assumptions As shown in Table 11–3, the economic assumptions underlying this Budget have been revised significantly from those of the 2004 Budget. Real GDP growth accelerated beyond expectation in the latter part of 2003 and for the year as a whole was a bit stronger, overall, than projected in last year’s Budget. A year ago, the economic recovery appeared to be losing momentum; now, it is gaining speed. Consequently, the level of real GDP projected for this year is now a full percentage point higher than anticipated in last year’s Budget, and the year-over-year growth rate is 0.8 percentage points higher. From 2005 onwards, moreover, real GDP growth in this budget is projected to be slightly above last year’s projected rates. The level of nominal GDP is projected to be about one percentage point higher in each year, 2004–2009, than in last year’s budget. That is primarily because actual real GDP was significantly higher in 2003, and is now expected to grow slightly faster during 2004–2008, than in last year’s budget. The unemployment rate is expected to be somewhat higher than in last year’s assumptions but ultimately to decline to 5.1 percent, as before. Interest rates are projected to be lower during the next few years than was envisaged Table 11–3. in last year’s Budget, reflecting their current low levels. The short-term rate is expected to gradually approach last year’s outyear assumptions, but long-term rates are now projected to be slightly higher. Adjusted for inflation, the real long-term rate is the same as in last year’s budget. Sources of Change in the Budget since Last Year The sources of the change in the budget outlook from the 2004 Budget to the 2005 Budget are shown in Table 11–4. The second block shows that proposed and enacted legislation increases the deficit in 2004 and 2005 but has little effect thereafter. The third block shows the effects on receipts and outlays from changes in economic assumptions. These include the effects of changes in assumptions for real growth, inflation, interest rates, unemployment, and the various taxable incomes. Technical factors (block 4) are all changes in budget estimates that are not due to changes in economic assumptions or legislation. Examples of technical factors are revised demographic data from the 2000 Census and changes in estimating methodologies, including changes in the relationship between economic variables, income reported on tax returns, and actual tax collections. COMPARISON OF ECONOMIC ASSUMPTIONS IN THE 2004 AND 2005 BUDGETS (Calendar years; dollar amounts in billions) Nominal GDP: 1 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ Real GDP (1996 dollars): 1 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ Real GDP (percent change): 2 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ GDP price index (percent change): 2 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ Consumer Price Index (percent change): 2 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ Civilian unemployment rate (percent): 3 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ 91-day Treasury bill rate (percent): 3 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ 10-year Treasury note rate (percent): 3 2004 Budget assumptions ........................................................................ 2005 Budget assumptions ........................................................................ 1 Not 2003 2004 2005 2006 2007 2008 2009 10,884 10,939 11,447 11,566 12,031 12,139 12,637 12,746 13,263 13,396 13,919 14,096 14,608 14,831 9,710 9,730 10,061 10,163 10,414 10,528 10,760 10,886 11,102 11,248 11,446 11,607 11,801 11,969 2.9 3.1 3.6 4.4 3.5 3.6 3.3 3.4 3.2 3.3 3.1 3.2 3.1 3.1 1.3 1.6 1.5 1.2 1.5 1.3 1.7 1.5 1.7 1.7 1.8 2.0 1.8 2.0 2.2 2.3 2.1 1.4 2.1 1.5 2.2 1.8 2.2 2.1 2.3 2.4 2.3 2.5 5.7 6.0 5.5 5.6 5.2 5.4 5.1 5.2 5.1 5.1 5.1 5.1 5.1 5.1 2.0 1.0 3.6 1.3 4.3 2.4 4.4 3.3 4.4 4.0 4.5 4.3 4.5 4.4 4.2 4.0 5.0 4.6 5.3 5.0 5.4 5.4 5.5 5.6 5.6 5.8 5.6 5.8 adjusted for December 2003 comprehensive revisions to the National Income and Product Accounts. over year. year average. 2 Year 3 Calendar 177 11. ECONOMIC ASSUMPTIONS Table 11–4. SOURCES OF CHANGE IN BUDGET TOTALS (In billions of dollars) 2004 2005 2006 2007 2008 2009 (1) 2004 Budget Receipts ......................................................................................................................... Outlays ........................................................................................................................... 1,922 2,229 2,135 2,343 2,263 2,464 2,398 2,576 2,521 2,711 2,649 2,843 Unified budget deficit (-) ........................................................................................... –307 –208 –201 –178 –190 –194 (2) Changes due to policy: Receipts ......................................................................................................................... Outlays ........................................................................................................................... –17 92 15 62 38 34 33 39 23 27 19 14 Deficit increase (-), policy ......................................................................................... –109 –48 4 –5 –5 4 (3) Changes due to economic assumptions: Receipts ......................................................................................................................... Outlays ........................................................................................................................... –39 –22 –37 –37 –41 –33 –27 –24 –10 –14 4 –6 Deficit increase (-), economic ................................................................................... –18 1 –8 –4 4 10 (4) Changes due to technical factors: Receipts ......................................................................................................................... Outlays ........................................................................................................................... –68 19 –77 31 –55 8 –53 –1 –48 1 –56 2 Deficit increase (-), technical .................................................................................... –87 –108 –63 –54 –48 –57 (5) Total changes from 2004 Budget: Receipts ......................................................................................................................... Outlays ........................................................................................................................... –124 89 –99 56 –57 10 –47 16 –36 14 –33 10 Total deficit increase (-) ............................................................................................ (6) 2005 Budget Receipts ......................................................................................................................... Outlays ........................................................................................................................... –213 –155 –67 –63 –49 –43 1,798 2,319 2,036 2,400 2,206 2,473 2,351 2,592 2,485 2,724 2,616 2,853 Unified budget deficit (-) ........................................................................................... –521 –364 –268 –241 –239 –237 Note: Changes in interest costs due to receipts changes included in outlay lines. Structural and Cyclical Balances When the economy is operating below potential and the unemployment rate exceeds the long-run sustainable average, as is projected to be the case for the next few years, receipts are lower than they would be if resources were more fully employed, and outlays for unemployment-sensitive programs (such as unemployment compensation and food stamps) are higher. As a result, the deficit is larger (or the surplus is smaller) than would be the case if the unemployment rate were at the sustainable long-run average. The portion of the deficit (or surplus) that can be traced to this factor is called the cyclical component. The portion that would remain if the unemployment rate was at its long-run value is called the structural deficit (or structural surplus). The structural balance can often provide a clearer understanding of the stance of fiscal policy than the unadjusted budget balance including the cyclical component. The structural balance shows the surplus or deficit that will persist even when the economy is operating at the sustainable level of unemployment. The estimates of the structural balance are based on the relationship between changes in the unemployment rate and real GDP growth on the one hand, and receipts and outlays on the other. As such, the relationships do not take into account other possible changes in the economy that might also be cyclically related. For example, the sharply rising stock market during the second half of the 1990s boosted capital gains-related receipts, and the subsequent fall in the stock market reduced receipts. Some of this rise and fall was cyclical in nature. It is not possible, however, to estimate this cyclical component accurately. As a result, both the unadjusted and structural balances are affected by cyclical stock market movements. From 1998 to 2001, the unemployment rate appears to have been lower than could be sustained in the long run. Therefore, as shown in Table 11–5, in 1998 the structural surplus of $22 billion was less than the actual surplus of $69 billion. Likewise, in 1999–2001, the structural surplus continued to be smaller than the actual surplus, which was enlarged by the boost to receipts and the reduction in outlays associated with the low level of unemployment. On the other hand, in 2002, the unemployment rate was above what is currently thought to be the sustainable level and the actual deficit of $158 billion exceeded the structural deficit of $104 billion. Similarly in 2003, the actual deficit of $375 billion contained a cyclical component of about $74 billion. The structural deficit for that year was $302 billion. As the projected unemployment rate declines toward the sustainable level in the next few years, the projected unadjusted deficit is 178 ANALYTICAL PERSPECTIVES expected to decline to be about equal to the structural deficit in 2007 and thereafter. In the early 1990s, large swings in net outlays for deposit insurance (the saving and loan bailouts) had substantial impacts on deficits, but had little concurrent impact on economic performance. It therefore became customary to estimate an adjusted structural balance that removed deposit insurance outlays as well as the cyclical component of the budget balance from the actual balance. Deposit insurance net outlays are projected to be very small negative numbers in the coming years. Therefore, the adjusted structural deficit and the structural deficit are nearly identical over the forecast horizon. Sensitivity of the Budget to Economic Assumptions Both receipts and outlays are affected by changes in economic conditions. This sensitivity complicates budget planning because errors in economic assumptions lead to errors in the budget projections. It is therefore useful to examine the implications of possible changes in economic assumptions. Many of the budgetary effects of such changes are fairly predictable, and a set of rules of thumb embodying these relationships can aid in estimating how changes in the economic assumptions would alter outlays, receipts, and the surplus or deficit. These rules of thumb should be understood as suggesting orders of magnitude; they ignore a long list of secondary effects that are not captured in the estimates. Economic variables that affect the budget do not usually change independently of one another. Output and employment tend to move together in the short run: a high rate of real GDP growth is generally associated with a declining rate of unemployment, while moderate or negative growth is usually accompanied by rising unemployment. In the long run, however, changes in the average rate of growth of real GDP are mainly due to changes in the rates of growth of productivity and labor force, and are not necessarily associated with changes in the average rate of unemployment. Inflation and interest rates are also closely interrelated: a higher expected rate of inflation increases interest rates, while lower expected inflation reduces rates. Changes in real GDP growth or inflation have a much greater cumulative effect on the budget over time if they are sustained for several years than if they last Table 11–5. for only one year. Highlights of the budgetary effects of the above rules of thumb are shown in Table 11–6. For real growth and employment: • As shown in the first block, if in 2004 for one year only, real GDP growth is lower by one percentage point and the unemployment rate permanently rises by one-half percentage point relativ
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