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Fiscal year 2014

aNALYTICAL
pERSPECTIVES

budget of the U.S. Government

office of management and budget		

budget.gov

Fiscal year 2014

Analytical
Perspectives

Budget of the U.S. Government

office of management and budget
budget.gov
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THE BUDGET DOCUMENTS
Budget of the United States Government, Fiscal
Year 2014 contains the Budget Message of the President,
information on the President’s priorities, budget overviews organized by agency, and summary tables.
Analytical Perspectives, Budget of the United
States Government, Fiscal Year 2014 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; information on Federal borrowing and debt;
baseline or current services estimates; and other technical presentations.
The Analytical Perspectives volume also contains supplemental material with several detailed tables, including
tables showing the budget by agency and account and by
function, subfunction, and program, that is available on
the Internet and as a CD-ROM in the printed document.
Historical Tables, Budget of the United States
Government, Fiscal Year 2014 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 2014 or 2018.
To the extent feasible, the data have been adjusted to
provide consistency with the 2014 Budget and to provide
comparability over time.
Appendix, Budget of the United States
Government, Fiscal Year 2014 contains detailed information on the various appropriations and funds that constitute the budget and is designed primarily for the use of
the Appropriations Committees. The Appendix contains
more detailed financial information on individual pro-

grams 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; 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 transactions 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:
Internet. All budget documents, including documents
that are released at a future date, spreadsheets of many
of the budget tables, and a public use budget database
are available for downloading in several formats from the
Internet at www.budget.gov/budget. Links to documents
and materials from budgets of prior years are also provided.
Budget CD-ROM. The CD-ROM contains all of the
budget documents in fully indexed PDF format along with
the software required for viewing the documents. The
CD-ROM has many of the budget tables in spreadsheet
format and also contains the materials that are included
on the separate Analytical Perspectives CD-ROM.
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.	 All years referenced for budget data are fiscal years unless otherwise noted. All years referenced for economic data are calendar years unless otherwise noted.
2.	 Detail in this document may not add to the totals due to rounding.
3.	 At the time the President’s 2014 Budget request was developed, none of the full-year appropriations bills for
2013 was enacted; therefore, the programs and activities normally provided for in the full-year appropriations bills were operating under a continuing resolution (Public Law 112–175). For those programs and activities, full-year appropriations data included in the current year column (2013) in the budget Appendix, and
in tables that show details on discretionary spending amounts in the Analytical Perspectives volume, reflect
the annualized level provided by the continuing resolution. In the main Budget volume and the Historical
Tables volume, current year totals by agency and for the total Government will match the President’s 2013
Budget request.
U.S. GOVERNMENT PRINTING OFFICE, WASHINGTON 2013

6-091749-3

90000

For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800
Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001
I S B N 978-0-16-09174 9 -3

Table of Contents
Page
List of Charts and Tables��������������������������������������������������������������������������������������������������������������������� iii
Introduction
1. Introduction �����������������������������������������������������������������������������������������������������������������������������������������3
Economic and Budget Analyses
2.  Economic Assumptions and Interactions with the Budget����������������������������������������������������������������9
3.  Financial Stabilization Efforts and their Budgetary Effects�����������������������������������������������������������23
4.  Long Term Budget Outlook����������������������������������������������������������������������������������������������������������������49
5.  Federal Borrowing and Debt��������������������������������������������������������������������������������������������������������������61
Performance and Management
6.  Social Indicators���������������������������������������������������������������������������������������������������������������������������������79
7.  Delivering a High-Performance Government ����������������������������������������������������������������������������������87
8.  Program Evaluation and Data Analysis ������������������������������������������������������������������������������������������91
9.  Benefit-Cost Analysis�������������������������������������������������������������������������������������������������������������������������97
10.  Improving the Federal Workforce��������������������������������������������������������������������������������������������������103
Budget Concepts and Budget Process
11.  Budget Concepts�����������������������������������������������������������������������������������������������������������������������������117
12.  Coverage of the Budget������������������������������������������������������������������������������������������������������������������141
13.  Budget Process��������������������������������������������������������������������������������������������������������������������������������147
Federal Receipts
14.  Governmental Receipts������������������������������������������������������������������������������������������������������������������171
15.  Offsetting Collections and Offsetting Receipts�����������������������������������������������������������������������������219
16.  Tax Expenditures����������������������������������������������������������������������������������������������������������������������������241
Special Topics
17.  Aid to State and Local Governments���������������������������������������������������������������������������������������������281
18.  Strengthening Federal Statistics���������������������������������������������������������������������������������������������������345
19.  Information Technology������������������������������������������������������������������������������������������������������������������349
20.  Federal Investment������������������������������������������������������������������������������������������������������������������������359
21.  Research and Development������������������������������������������������������������������������������������������������������������369

i

Page
22.  Credit and Insurance���������������������������������������������������������������������������������������������������������������������377
23.  Homeland Security Funding Analysis�������������������������������������������������������������������������������������������415
24.  Federal Drug Control Funding������������������������������������������������������������������������������������������������������423
25.  California Bay-Delta Federal Budget Crosscut����������������������������������������������������������������������������425
Technical Budget Analyses
26.  Current Services Estimates�����������������������������������������������������������������������������������������������������������429
27.  Trust Funds and Federal Funds����������������������������������������������������������������������������������������������������453
28.  National Income and Product Accounts����������������������������������������������������������������������������������������469
29.  Comparison of Actual to Estimated Totals������������������������������������������������������������������������������������475
30.  Budget and Financial Reporting����������������������������������������������������������������������������������������������������483
Detailed Functional Tables������������������������������������������������������������������������������������������������������������������������� *
Federal Programs by Agency and Account������������������������������������������������������������������������������������������������ *

*Available on the Internet at http://www.whitehouse.gov/omb/budget/Analytical_Perspectives/ and on the Budget CD-ROM
ii

List of Charts and Tables

iii

List of Charts and Tables
List of Charts

Page

	

2–1.  Private Job Gains and Losses During Recent Recoveries�������������������������������������������������������10

	

2–2.  Real GDP Growth Following a Recession: 7-Year Average������������������������������������������������������12

	

2–3.  Real GDP: Alternative Projections��������������������������������������������������������������������������������������������20

	

2–4.  Range of Uncertainty for the Budget Deficit����������������������������������������������������������������������������21

	

4–1.  Publicly Held Debt Under 2014 Budget Policy Extended�������������������������������������������������������50

	

4–2.  Alternative Base Assumptions��������������������������������������������������������������������������������������������������53

	

4–3.  Alternative Health Care Costs��������������������������������������������������������������������������������������������������53

	

4–4.  Alternative Discretionary Projections��������������������������������������������������������������������������������������54

	

4–5.  Alternative Revenue Projections�����������������������������������������������������������������������������������������������54

	

4–6.  Alternative Productivity Assumptions�������������������������������������������������������������������������������������55

	

4–7.  Alternative Fertility Assumptions��������������������������������������������������������������������������������������������55

	

4–8.  Alternative Immigration Assumptions�������������������������������������������������������������������������������������56

	

4–9.  Alternative Mortality Assumptions������������������������������������������������������������������������������������������57

	 10–1.  Federal Civilian Workforce as Share of U.S. Population��������������������������������������������������������104
	 10–2.  Pay Raises for Federal vs. Private Workforce�������������������������������������������������������������������������105
	 10–3.  Education Level Distribution in Federal vs. Private Workforce�������������������������������������������107
	 10–4.  Federal Age Distribution in 2001 and 2011 and Federal vs.
Private Age Distribution in 2011�����������������������������������������������������������������������������������������108
	 11–1.  Relationship of Budget Authority to Outlays for 2014����������������������������������������������������������130
	 19-1.  Trends in Federal IT Spending ����������������������������������������������������������������������������������������������350
	 19-2.  Results of Portfolio Stats in 2012 PortfolioStat Commodity IT Reduction Targets�������������351
	 22–1.  Face Value of Federal Credit Outstanding�����������������������������������������������������������������������������399

v

List of Tables
Page
Economic and Budget Analyses
Economic Assumptions and Interactions with the Budget
	 2–1.  Economic Assumptions ����������������������������������������������������������������������������������������������������
	 2–2.  Components of Actual and Potential Real GDP Growth, 1952–2023 ���������������������������
	 2–3.  Comparison of Economic Assumptions ���������������������������������������������������������������������������
	 2–4.  Comparison of Economic Assumptions in the 2013 and 2014 Budgets ������������������������
	 2–5.  Sensitivity of the Budget to Economic Assumptions �����������������������������������������������������
	 2–6.  Forecast Errors, January 1982–Present �������������������������������������������������������������������������
	 2–7.  Budget Effects of Alternative Scenarios �������������������������������������������������������������������������
	 2–8.  The Structural Balance ���������������������������������������������������������������������������������������������������
Financial Stabilization Efforts and their Budgetary Effects
	 3–1.  Change in Programmatic Costs of Troubled Asset Relief Actions
(Excluding Debt Service) ����������������������������������������������������������������������������������������������
	 3–2.  Troubled Asset Relief Program Current Value ��������������������������������������������������������������
	 3–3.  Troubled Asset Relief Program Face Value of TARP Outstanding �������������������������������
	 3–4.  Troubled Asset Relief Program Effects on the Deficit and Debt �����������������������������������
	 3–5.  Troubled Asset Relief Program Effects on the
Deficit and Debt Calculated on a Cash Basis ��������������������������������������������������������������
	 3–6.  Troubled Asset Relief Program Reestimates������������������������������������������������������������������
	 3–7.  Detailed TARP Program Levels and Costs���������������������������������������������������������������������
	 3–8.  Comparison of OMB and CBO TARP Costs��������������������������������������������������������������������
	 3–9.  Comparison of EESA and FCRA TARP Subsidy Costs��������������������������������������������������

11
13
15
16
17
19
20
22

38
39
40
41
42
44
45
46
47

Long Term Budget Outlook
	 4–1.  Long-Run Budget Projections������������������������������������������������������������������������������������������ 51
	 4–2.  75-Year Fiscal Gap (–)/Surplus (+) Under Alternative Budget Scenarios��������������������� 52
	 4–3.  Intermediate Actuarial Projections for OASDI and Hi ��������������������������������������������������58
Federal Borrowing and Debt
	 5–1.  Trends in Federal Debt Held By the Public��������������������������������������������������������������������
	 5–2.  Federal Government Financing and Debt�����������������������������������������������������������������������
	 5–3.  Debt Held by the Public Net of Financial Assets and Liabilities ���������������������������������
	 5–4.  Agency Debt����������������������������������������������������������������������������������������������������������������������
	 5–5.  Debt Held by Government Accounts�������������������������������������������������������������������������������
	 5–6.  Federal Funds Financing and Change in Debt Subject to Statutory Limit������������������
	 5–7.  Foreign Holdings of Federal Debt������������������������������������������������������������������������������������

62
64
67
69
71
75
76

Performance and Management
Social Indicators
	 6–1.  Social Indicators��������������������������������������������������������������������������������������������������������������� 81
	 6–2.  Sources For Social Indicators������������������������������������������������������������������������������������������� 84

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Benefit-Cost Analysis
	 9–1.  Estimates of the Total Annual Benefits and
Costs of Major Rules Reviewed by OMB in 2011��������������������������������������������������������� 98
	 9–2.  Estimates of the Net Costs Per Life Saved of Selected Health and Safety Rules
Reviewed by OMB in Fiscal Years 2010-2011�������������������������������������������������������������� 99
Improving the Federal Workforce
	 10–1.  Occupations of Federal and Private Sector Workforces������������������������������������������������
	 10–2.  Federal Civilian Employment in the Executive Branch�����������������������������������������������
	 10–3.  Total Federal Employment���������������������������������������������������������������������������������������������
	 10–4.  Personnel Compensation and Benefits��������������������������������������������������������������������������

106
112
113
114

Budget Concepts and Budget Process
Budget Concepts
Budget Calendar���������������������������������������������������������������������������������������������������������������������������� 119
	 11–1.  Totals For the Budget and the Federal Government���������������������������������������������������� 123
Coverage of the Budget
	 12–1.  Comparison of Total, On-Budget, and Off-Budget Transactions �������������������������������� 142
Budget Process
	 13–1.  Proposal to Shift to Mandatory Funding for Enacted Cap
Adjustments, Including Mandatory Savings��������������������������������������������������������������
	 13–2.  Proprosals for Discretionary Program Integrity Base Funding and
Cap Adjustments, Including Mandatory and Receipts Savings��������������������������������
	 13–3.  Mandatory and Receipt Savings from Other Program Integrity Initiatives���������������
	 13–4.  Effect of Student Aid Proposals on Discretionary Pell Funding Needs�����������������������

149
150
151
160

Federal Receipts
Governmental Receipts
	 14–1.  Receipts By Source - Summary��������������������������������������������������������������������������������������
	 14–2.  Adjustments to the Balanced Budget and Emergency Deficit Control Act
(BBEDCA) Baseline Estimates of Governmental Receipts ��������������������������������������
	 14–3.  Reserve For Revenue-Neutral Business Tax Reform����������������������������������������������������
	 14–4.  Effect of Budget Proposals���������������������������������������������������������������������������������������������
	 14–5.  Receipts By Source���������������������������������������������������������������������������������������������������������
Offsetting Collections and Offsetting Receipts
	 15–1.  Offsetting Collections and Offsetting Receipts from the Public����������������������������������
	 15–2.  Offsetting Receipts by Type Summary��������������������������������������������������������������������������
	 15–3.  Gross Outlays to the Public, User Charges and Other Offsets
from the Public, and Net Outlays to the Public���������������������������������������������������������
	 15–4.  User Charge Proposals in the Fy 2014 Budget �����������������������������������������������������������
	 15–5  Offsetting Receipts by Type��������������������������������������������������������������������������������������������

171
183
190
211
216
220
221
222
230
233

Tax Expenditures
	 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018����������������� 243
	 16–2.  Estimates of Tax Expenditures for the Corporate and
Individual Income Taxes for Fiscal Years 2012–2018������������������������������������������������ 248
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	 16–3.  Income Tax Expenditures Ranked by Total
Fiscal Year 2014-2018 Projected Revenue Effect������������������������������������������������������� 254
	 16–4.  Present Value of Selected Tax Expenditures for Activity in Calendar Year 2012������ 257
Special Topics
Aid to State and Local Governments
	 17–1.  Federal Grants to State and Local Governments—
Budget Authority and Outlays������������������������������������������������������������������������������������
	 17–2.  Trends in Federal Grants to State and Local Governments����������������������������������������
	 17–3.  Summary of Programs by Agency, Bureau, and Program��������������������������������������������
	 17–4.  Summary of Programs by State�������������������������������������������������������������������������������������
	 17–5.  School Breakfast Program (10.553)�������������������������������������������������������������������������������
	 17–6.  National School Lunch Program (10.555)���������������������������������������������������������������������
	 17–7.  Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC) (10.557)�������������������������������������������������������������������������
	 17–8.  Child and Adult Care Food Program (10.558)���������������������������������������������������������������
	 17–9.  State Administrative Matching Grants for the Supplemental
Nutrition Assistance Program (Food Stamps) (10.561)���������������������������������������������
	17–10.  Title I College-And-Career-Ready Students (Formerly Title I
Grants to Local Educational Agencies) (84.010)��������������������������������������������������������
	17–11.  Improving Teacher Quality State Grants (84.367)�������������������������������������������������������
	17–12.  Effective Teachers and Leaders State Grants���������������������������������������������������������������
	17–13.  Vocational Rehabilitation Grants (84.126)��������������������������������������������������������������������
	17–14.  Special Education-Grants to States (84.027)����������������������������������������������������������������
	17–15.  Children’s Health Insurance Program (93.767)������������������������������������������������������������
	17–16.  Grants to States for Medicaid (93.778)�������������������������������������������������������������������������
	17–17.  Affordable Insurance Exchange Grants (93.525)����������������������������������������������������������
	17–18.  Temporary Assitance for Needy Families (TANF)Family Assistance Grants (93.558)�����������������������������������������������������������������������������
	17–19.  Child Support Enforcement-Federal Share of State and
Local Administrative Costs and Incentives (93.563)�������������������������������������������������
	17–20.  Low Income Home Energy Assistance Program (93.568)���������������������������������������������
	17–21.  Child Care and Development Block Grant (93.575)�����������������������������������������������������
	17–22.  Child Care and Development Fund-Mandatory (93.596A)������������������������������������������
	17–23.  Child Care and Development Fund-Matching (93.596B)���������������������������������������������
	17–24.  Head Start (93.600)��������������������������������������������������������������������������������������������������������
	17–25.  Foster Care-Title IV-E (93.658)��������������������������������������������������������������������������������������
	17–26.  Adoption Assistance (93.659)�����������������������������������������������������������������������������������������
	17–27.  Social Services Block Grant (93.667)�����������������������������������������������������������������������������
	17–28.  Ryan White HIV/AIDS Treatment Modernization
Act-Part B HIV Care Grants (93.917)������������������������������������������������������������������������
	17–29.  Public Housing Operating Fund (14.850)���������������������������������������������������������������������
	17–30.  Section 8 Housing Choice Vouchers (14.871)����������������������������������������������������������������
	17–31.  Public Housing Capital Fund (14.872)��������������������������������������������������������������������������
	17–32.  Community Development Block Grant (14.218; 14.225; 14.228; 14.862)��������������������
	17–33.  Unemployment Insurance (17.225)�������������������������������������������������������������������������������
	17–34.  Pathways Back to Work��������������������������������������������������������������������������������������������������

289
301
303
304
305
306
307
308
309
310
311
312
313
315
317
318
319
320
321
322
324
325
326
327
329
330
331
332
333
334
335
336
337
338
ix

Page
	17–35. 
	17–36. 
	17–37. 
	17–38. 
	17–39. 
	17–40. 

Airport Improvement Program (20.106)������������������������������������������������������������������������
Highway Planning and Construction (20.205)��������������������������������������������������������������
Transit Formula Grants Programs (20.507)�����������������������������������������������������������������
Capitalization Grants for Clean Water State Revolving Fund (66.458)����������������������
Capitalization Grants for Drinking Water State Revolving Fund (66.468)����������������
Universal Service Fund E-Rate�������������������������������������������������������������������������������������

339
340
341
342
343
344

Strengthening Federal Statistics
	 18–1.  2012–2014 Budget Authority for Principal Statistical Agencies ��������������������������������� 348
Information Technology
	 19–1.  Federal IT Spending, President's Budget, FY 2014������������������������������������������������������ 350
Federal Investment
	 20–1.  Composition of Federal Investment Outlays����������������������������������������������������������������
	 20–2.  Federal Investment Budget Authority and Outlays:
Grant and Direct Federal Programs���������������������������������������������������������������������������
	 20–3.  Net Stock of Federally Financed Physical Capital�������������������������������������������������������
	 20–4.  Net Stock of Federally Financed Research and Development ������������������������������������
	 20–5.  Net Stock of Federally Financed Education Capital����������������������������������������������������

360
362
365
366
367

Research and Development
	 21–1.  Federal Research and Development Spending ������������������������������������������������������������ 374
Credit and Insurance
	 22–1.  Top 10 Firms Presenting Claims (1975-2012) �������������������������������������������������������������� 393
	 22–2.  Estimated Future Cost of Outstanding Federal Credit Programs������������������������������ 400
	 22–3.  Reestimates of Credit Subsidies on Loans Disbursed Between 1992-2012 ��������������� 401
	 22–4.  Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2012–2014������������� 404
	 22–5.  Loan Guarantee Subsidy Rates, Budget Authority, and Loan Levels, 2012–2014������ 406
	 22–6.  Summary of Federal Direct Loans and Loan Guarantees ������������������������������������������ 407
	 22–7.  Direct Loan Write-offs and Guaranteed Loan Terminations for Defaults������������������ 408
	 22–8.  Appropriations Acts Limitations On Credit Loan Levels �������������������������������������������� 410
	 22–9.  Face Value of Government-Sponsored Lending ����������������������������������������������������������� 411
	22–10.  Lending and Borrowing by Government-Sponsored Enterprises (GSEs) ������������������ 412
	22–11.  Direct Loan Transactions of the Federal Government ������������������������������������������������������� *
	22–12.  Guaranteed Loan Transactions of the Federal Government ��������������������������������������������� *
Homeland Security Funding Analysis
	 23–1.  Homeland Security Funding by Agency������������������������������������������������������������������������ 415
	 23–2.  Prevent and Disrupt Terrorist Attacks������������������������������������������������������������������������� 417
	 23–3.  Protect the American People, Our Critical Infrastructure, and Key Resources���������� 417
	 23–4.  Respond To and Recover From Incidents���������������������������������������������������������������������� 418
	 23–5.  Discretionary Fee-Funded Homeland Security Activities by Agency�������������������������� 420
	 23–6.  Mandatory Homeland Security Funding by Agency����������������������������������������������������� 420
	 23–7.  Baseline Estimates—Total Homeland Security Funding by Agency��������������������������� 421
	 23–8.  Homeland Security Funding by Budget Function�������������������������������������������������������� 422
	 23–9.  Baseline Estimates—Homeland Security Funding by Budget Function�������������������� 422
Appendix—Homeland Security Mission Funding by Agency and Budget Account ������������������������ *
*Available on the Internet at http://www.whitehouse.gov/omb/budget/Analytical_Perspectives/ and on the Budget CD-ROM
x

Page
Federal Drug Control Funding
	 24–1.  Federal Drug Control Funding, 2012–2014 ����������������������������������������������������������������� 423
California Bay-Delta Federal Budget Crosscut
	 25–1.  Bay-Delta Federal Funding Budget Crosscut��������������������������������������������������������������� 425
Bay-Delta Federal Agency Funding—Summary by Category and Agency Breakout ��������������������� *
Bay-Delta Project Descriptions ������������������������������������������������������������������������������������������������������������� *
Bay-Delta Year by Year Funding ����������������������������������������������������������������������������������������������������������� *
Technical Budget Analyses
Current Services Estimates
	 26–1.  Category Totals for the Adjusted Baseline�������������������������������������������������������������������� 431
	 26–2.  Alternative Baseline Assumptions�������������������������������������������������������������������������������� 432
	 26–3.  Summary of Economic Assumptions����������������������������������������������������������������������������� 433
	 26–4.  Baseline Beneficiary Projections for Major Benefit Programs������������������������������������� 436
	 26–5.  Impact of Regulations, Expiring Authorizations, and
Other Assumptions in the Baseline���������������������������������������������������������������������������� 437
	 26–6.  Receipts By Source in the Projection of Adjusted Baseline������������������������������������������ 446
	 26–7.  Effect on Receipts of Changes in the Social Security Taxable Earnings Base������������ 446
	 26–8.  Change in Outlay Estimates by Category in the Adjusted Baseline��������������������������� 447
	 26–9.  Outlays by Function in the Adjusted Baseline������������������������������������������������������������� 448
	27–10.  Outlays by Agency in the Adjusted Baseline���������������������������������������������������������������� 449
	26–11.  Budget Authority by Function in the Adjusted Baseline��������������������������������������������� 450
	26–12.  Budget Authority by Agency in the Adjusted Baseline ����������������������������������������������� 451
	26–13.  Current Services Budget Authority and Outlays
by Function, Category, and Program ��������������������������������������������������������������������������������� *
Trust Funds and Federal Funds
	 27–1.  Receipts, Outlays and Surplus or Deficit by Fund Group��������������������������������������������
	 27–2.  Comparison of Total Federal Fund and Trust Fund Receipts
to Unified Budget Receipts, Fiscal Year 2012�������������������������������������������������������������
	 27–3.  Income, Outgo, and Balances of Trust Funds Group����������������������������������������������������
	 27–4.  Income, Outgo, and Balance of Major Trust Funds������������������������������������������������������
	 27–5.  Income, Outgo, and Balance of Major Federal Funds���������������������������������������������������

455
456
457
459
466

National Income and Product Accounts
	 28–1.  Federal Transactions in the National Income and Product Accounts, 2003–2014����� 471
	 28–2.  Relationship of the Budget to the Federal Sector, NIPAs�������������������������������������������� 472
Comparison of Actual to Estimated Totals
	 29–1.  Comparison of Actual 2012 Receipts with the Initial Current Services Estimates����
	 29–2.  Comparison of Actual 2012 Outlays with the Initial Current Services Estimates�����
	 29–3.  Comparison of the Actual 2012 Deficit with the Initial Current Services Estimate��
	 29–4.  Comparison of Actual and Estimated Outlays for Mandatory and
Related Programs Under Current Law����������������������������������������������������������������������
	 29–5.  Reconciliation of Final Amounts for 2012���������������������������������������������������������������������
	 29–6.  Comparison of Estimated and Actual Surpluses or Deficits Since 1982���������������������

475
477
477
479
480
481

*Available on the Internet at http://www.whitehouse.gov/omb/budget/Analytical_Perspectives/ and on the Budget CD-ROM
xi

Page
	 29–7.  Differences Between Estimated and Actual Surpluses or
Deficits for Five-Year Budget Estimates Since 1982������������������������������������������������� 482
Budget and Financial Reporting
	 30–1.  2012 Budget and Financial Measures and
CY 2011 Integrated Accounts Measures�������������������������������������������������������������������� 486
Detailed Functional Tables
	 31–1.  Policy Budget Authority and Outlays by
Function, Category, and Program ������������������������������������������������������������������������������������� *
Federal Programs by Agency and Account
	 32–1.  Federal Programs by Agency and Account ������������������������������������������������������������������������� *

*Available on the Internet at http://www.whitehouse.gov/omb/budget/Analytical_Perspectives/ and on the Budget CD-ROM
xii

Introduction

1

1. Introduction

The Analytical Perspectives volume presents analyses
that highlight specific subject areas or provide other significant data that place the Budget in context and assist the public, policymakers, the media, and researchers in better understanding the budget’s effects on the
Nation. This volume complements the main Budget volume, which presents the President’s budget policies and
priorities by agency, and the Budget Appendix volume,
which provides appropriations language, schedules for
budget expenditure accounts, and schedules for selected
receipt accounts.
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 and sometimes more topics. For the 1952 Budget,
the section was expanded to 10 analyses, including many
subjects 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 remained a separate volume since
then, with the exception of the Budgets for 1991–1994,
when all of the budget material was included in one large
volume. Beginning with the 1995 Budget, the volume has
been named Analytical Perspectives.
As in previous years, several large supplemental tables are available at http://www.budget.gov/budget/
Analytical_Perspectives and on the Budget CD-ROM. A
list of these items is in the Table of Contents.

Overview of the Chapters
Economic and Budget Analyses
Economic Assumptions and Interactions Between the
Economy and the Budget. This chapter reviews recent
economic developments; presents the Administration’s
assessment of the economic situation and outlook, including the effects of macroeconomic policies; compares the
economic assumptions on which the Budget is based with
the assumptions for last year’s Budget and those of other forecasters; illustrates how different economic paths
would produce different budget results even if current
law remained unchanged; and provides sensitivity estimates for the effects on the Budget of changes in specified
economic assumptions. It also provides estimates of the
cyclical and structural components of the budget deficit.
Past errors in economic projections are reviewed.
Financial Stabilization Efforts and Their Budgetary
Effects. This chapter focuses on Federal efforts to stabilize the economy and promote financial recovery in the
wake of the deep recession of 2008, including the Troubled
Asset Relief Program (TARP), reform of financial regulation, and other measures. The chapter also includes special analyses of the TARP as described in Section 203(a) of
the Emergency Economic Stabilization Act of 2008.
Long-Term Budget Outlook. This chapter assesses the
long-term budget outlook and the sustainability of current budget policy by focusing on 75-year projections of
the Federal budget and showing how alternative longterm budget assumptions would produce different results.
The chapter presents information on the size of the fiscal
gap, and the budgetary effects of growing health costs.
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 statutory debt limit.
Performance and Management
Social Indicators. This chapter presents a selection
of statistics that offer a numerical picture of the United
States. Included are economic, demographic, socioeconomic and health statistics. There are also indicators of
safety and security, and environment and energy.
Delivering a High-Performance Government. This
chapter describes this Administration’s approach to performance management—the Federal Government’s use
of performance goals, measurement, regular data-driven
reviews, and information dissemination to improve outcomes that matter to the American people and deliver
returns on the taxpayer’s investment. It explains why
this approach was chosen, progress made, and future
plans. It also discusses implementation of the GPRA
Modernization Act.
Program Evaluation and Data Analytics. This chapter
underscores this Administration’s commitment to using
taxpayer dollars effectively and efficiently. It highlights
the role of performance measurement and program evaluation, discusses several of the Administration’s efforts
to use evidence and evaluation in decision-making and
program design, and highlights the Administration’s commitment to use more and better empirical evidence.
Benefit-Cost Analysis. This chapter discusses the use
of benefit-cost analysis to design programs and policies to
ensure that they achieve the maximal benefit to society
and do not impose unjustified or excessive costs.
Improving the Federal Workforce. Strengthening the
Federal workforce is essential to building a high-performing Government. This chapter presents summary data

3

4
on Federal employment and compensation; examines the
challenges posed by an aging Federal workforce; presents
opportunities for strengthening the personnel system to
achieve critical agency missions; and discusses progress
in improving employee performance and human capital
management.
Budget Concepts and Budget Process
Budget Concepts. This chapter includes a basic description of the budget process, concepts, laws, and terminology, and includes a glossary of budget terms.
Coverage of the Budget. This chapter describes those
activities that are included in budget receipts and outlays
(and are therefore classified as “budgetary”), as distinguished from those activities that are not included in the
budget (and are therefore classified as “non-budgetary”).
The chapter also defines the terms “on-budget” and “offbudget.”
Budget Process. This chapter discusses proposals to
improve budgeting and fiscal sustainability within individual programs as well as across Government, describes
the system of scoring mandatory and revenue legislation
for purposes of the Statutory Pay-As-You-Go Act of 2010,
and presents proposals to revise the budget baseline and
improve budget presentation.
Federal Receipts
Governmental Receipts. This chapter presents information on estimates of governmental receipts, which consist of taxes and other compulsory collections. It includes
detailed descriptions of tax legislation enacted in the last
year and the receipts proposals in the Budget.
Offsetting Collections and Offsetting Receipts. This
chapter presents information on collections that offset
outlays, including collections from transactions with the
public and intragovernmental transactions. In addition,
this chapter presents information on “user fees,” charges
associated with market-oriented activities and regulatory
fees. The user fee information includes a description of
each of the user fee proposals in the Budget.
Tax Expenditures. This chapter describes and presents estimates of tax expenditures, which are defined as
revenue losses from special exemptions, credits, or other
preferences in the tax code.
Special Topics
Aid to State and Local Governments. This chapter
presents crosscutting information on Federal grants to
State and local governments, including highlights of
Administration proposals, a table displaying budget authority and outlays for all grant programs, and information on historical trends and data. An appendix to this
chapter includes State-by-State spending estimates of
major grant programs.
Strengthening Federal Statistics. This chapter discusses 2014 Budget proposals for the Government’s principal
statistical programs.
Information Technology. This chapter gives an overview of Federal spending on information technology, and
the major initiatives through which the Administration

Analytical Perspectives

is seeking to improve Federal information technology to
deliver better value to taxpayers through improved program performance, greater efficiency and cost savings,
and extending the transparency of Government and
participation of citizens.  The chapter also discusses the
Administration’s plans to extend its accomplishments in
Federal information technology from its first four years
while continuing to provide strong information security
and protection of privacy.
Federal Investment. This chapter discusses federally
financed spending that yields long-term benefits. It presents information on annual spending on physical capital,
research and development, and education and training,
and on the cumulative capital stocks resulting from that
spending.
Research and Development. This chapter presents a
crosscutting review of research and development funding
in the Budget, including discussions about priorities and
coordination across agencies.
Credit and Insurance. This chapter provides crosscutting analyses of the roles, risks, and performance of
Federal credit and insurance programs and Governmentsponsored enterprises (GSEs). The general portion of the
chapter covers the categories of Federal credit (housing,
education, small business and farming, energy and infrastructure, and international) and insurance programs (deposit insurance, pension guarantees, disaster insurance,
and insurance against terrorism-related risks). It also
offers occasional discussions of special issues. This year,
the chapter includes discussion of issues relating to “fair
value” cost estimates for Federal credit programs. Two
detailed tables, “Table 22–11, Direct Loan Transactions of
the Federal Government” and “Table 22–12, Guaranteed
Loan Transactions of the Federal Government,” are available at the Internet address cited above and on the Budget
CD-ROM.
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 at the Internet address cited above and on the
Budget CD-ROM.
Federal Drug Control Funding. This chapter displays
enacted and proposed drug control funding for Federal departments and agencies.
California Bay-Delta Federal Budget Crosscut. This
chapter presents information on Federal funding for the
environmental restoration of California’s Bay-Delta, one
of the Administration’s priority ecosystems. Additional
detailed tables on Bay-Delta funding and project descriptions are available at the Internet address cited above
and on the Budget CD-ROM.
Technical Budget Analyses
Current Services Estimates. This chapter presents estimates of what receipts, outlays, and the deficit would
be if current policies remained in effect, using modified versions of baseline rules in the Balanced Budget
Emergency Deficit Control Act (BBEDCA), as amended by
the Budget Control Act of 2011. A detailed table, “Table

5

1. Introduction

26–13, Current Services Budget Authority and Outlays
by Function, Category, and Program” is available at the
Internet address cited above and on the Budget CD-ROM.
Trust Funds and Federal Funds. This chapter provides
summary information about the two fund groups in the
budget—Federal funds and trust funds. In addition, for the
major trust funds and several Federal fund programs, the
chapter provides detailed information about income, outgo,
and balances.
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
NIPA 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.
Comparison of Actual to Estimated Totals. This chapter compares the actual receipts, outlays, and deficit for
2012 with the estimates for that year published in the
2012 Budget. It also includes a historical comparison of
the differences between receipts, outlays, and the deficit
as originally proposed with final outcomes.

Budget and Financial Reporting. This chapter summarizes information about the Government’s financial
performance that is provided by three complementary
sources—the Budget, the financial statements, and the
integrated macroeconomic accounts.
The following materials are available at the Internet
address cited above and on the Budget CD-ROM:
Detailed Functional Table
Detailed Functional Table.
Table 31–1, “Budget
Authority and Outlays by Function, Category, and
Program,” displays budget authority and outlays for major Federal program categories, organized by budget function (such as health care, transportation, or national defense), category, and program.
Federal Programs by Agency and Account
Federal Programs by Agency and Account. Table 32–1,
“Federal Programs by Agency and Account,” displays budget authority and outlays for each account, organized by
agency, bureau, fund type, and account.

Economic and Budget Analyses

7

2. Economic Assumptions and Interactions with the Budget

This chapter presents the economic forecast on which
the 2014 Budget projections are based.1 When the
President took office in January 2009, the economy was
in the midst of an historic economic crisis. The first order of business for the new Administration was to arrest
the rapid decline in economic activity that threatened to
plunge the country into a second Great Depression. The
President and the Congress took unprecedented actions
to restore demand, stabilize financial markets, and put
people back to work. These steps included passage of the
American Recovery and Reinvestment Act (ARRA), signed
by the President just 28 days after taking office. They
also included the Financial Stability Plan, announced in
February 2009, which encompassed wide-ranging measures to strengthen the banking system, increase consumer and business lending, and stem foreclosures and
support the housing market. These and a host of other
actions walked the economy back from the brink. The
economy bottomed out in June 2009 and gradually started to recover in late 2009.2 Further measures to aid the
recovery were taken in December 2010, such as cutting
payroll taxes and extending unemployment insurance.
Over the past 14 quarters, through the fourth quarter of
2012, real Gross Domestic Product (GDP) has grown at
an average annual rate of 2.1 percent, and since February
2010, 6.4 million jobs have been added in the private sector. Meanwhile, the unemployment rate has fallen from
its October 2009 peak of 10.0 percent to 7.7 percent (as of
February 2013).
At the start of this year, the American Taxpayer Relief
Act of 2012 (ATRA) prevented income tax increases on the
vast majority of taxpayers in 2013 and provided greater
certainty for the years ahead. With this legislation, the
recovery is projected to gain momentum in 2013 and to
strengthen further in 2014. However, even with healthy
economic growth, unemployment is expected to be higher
than is consistent with full employment for several more
years. The Administration is projecting unemployment to
continue to decline over the next five years, stabilizing at
5.4 percent by 2018.
This chapter contains several sections:
•	

The first section of this chapter reviews recent economic performance.

•	

The second section discusses the Administration’s
economic projections.

•	

The third section compares the Administration’s to

1  In the Budget, economic performance is discussed in terms of calendar years. Budget figures are discussed in terms of fiscal years.
2  The dating of U.S. business cycles is done by the National Bureau of
Economic Research, a private institution that has supported economic
research on business cycles and other topics for many decades.

other forecasts and to the Administration’s projection in last year’s Budget.
•	

The fourth section describes how changes in economic variables result in changes in receipts, outlays, and the deficit.

•	

The fifth section presents information on forecast errors for growth, inflation, and interest rates
and how these forecast errors compare to those in
forecasts made by the Congressional Budget Office
(CBO) and the private-sector Blue Chip Consensus
forecast.

•	

The sixth section presents alternatives to the current Administration forecast—based on both more
optimistic and less optimistic assumptions with respect to real economic growth and unemployment—
and describes the resulting effects on the deficit.

•	

The seventh section shows a probabilistic range of
budget outcomes based on past errors in projecting
the deficit.

•	 The last section discusses the relationship between
structural and cyclical deficits, showing how much
of the actual deficit is related to the economic cycle
(e.g., the recent recession) and how much would persist even if the economy were at full employment.
Recent Economic Performance
The accumulated stresses from a contracting housing
market and the resulting strains on financial markets
brought the 2001-2007 expansion to an end in December
2007. In its early stages, the 2008-2009 recession was
relatively mild, but financial conditions worsened sharply
in the fall of 2008, and from that point forward the recession became much more severe. Before it ended, real GDP
had fallen further and the downturn had lasted longer
than any previous post-World War II recession. Looking
ahead, the likely strength of the recovery is one of the key
issues for the forecast, and the aftermath of the housing
and financial crises has an important bearing on the expected strength of the recovery.
Housing Markets Begin to Show Strength.—The
housing market has shown clear signs of recovery, after
its collapse in 2007 and 2008 which was a major cause of
the financial crisis and recession. In 2006-2007, housing prices peaked, and from 2007 through 2008, housing
prices fell sharply according to all available measures.3
3  There are several measures of national housing prices. Two respected
measures that attempt to correct for variations in housing quality are
the S&P/Case-Shiller Home Price Index and the Federal Housing Finance
Agency (FHFA) Purchase-Only House Price Index. The Case-Shiller
index peaked in 2006, while the FHFA index peaked in 2007.

9

10

Analytical Perspectives

During the downturn, as house prices fell, investment in
housing plummeted, reducing the annualized rate of real
GDP growth by an average of 1 percentage point per quarter. Housing prices started to rise again in 2012, with a
modest gain of 4 percent over the year. Residential investment began to increase steadily in the second quarter
of 2011, and rose by more than 14 percent during 2012.
In April 2009, housing starts fell to an annual rate of
just 478,000 units, the lowest level ever recorded for this
series, which dates from 1959. Housing starts rose modestly over the next two years, but increased 37 percent to
over 950,000 units over the 12 months through December
2012. Typically, at least 1.5 million starts a year are
needed to accommodate the needs of an expanding population and to replace older units, indicating potential for
a substantial housing rebound. Although a large overhang of vacant homes must be reduced before a robust
housing recovery can become firmly established, there are
indications that this is gradually happening with reduced
vacancies and fewer foreclosures. The Administration
forecast assumes a continued recovery in housing activity
that adds moderately to real GDP growth over the forecast horizon.
The Risk of an International Slowdown.—While
the U.S. economy has returned to moderate growth, worldwide recovery is uneven. Europe continues to confront
financial uncertainty stemming from the troubled financial condition of several countries in the Euro zone. After
the Euro was established as the common currency for 17
European countries in 1999, interest rates in those countries moved close together as their inflation rates tended
to converge. However, recent events have led markets to
reassess the long-run solvency of some of the countries
using the Euro, and the result has been a striking divergence in the interest rates charged on sovereign debt of
the various countries. High interest rates on their debt
make it difficult for the most threatened of these countries to address the pressing fiscal issues that have put
some countries’ long-run solvency at risk.

Thousands
8000

At the beginning of 2012, many private forecasters were
expecting the recovery to accelerate over the course of the
year. Instead, 2012 saw subpar growth due to unexpected
headwinds. A persistent source of sluggishness has been
the sovereign debt crisis in Europe, which has curbed
global equity markets and will likely continue to weigh
on confidence and the global recovery going forward. The
European Union and European Central Bank have acted
to confront these issues, and the affected governments
have attempted to cut their budget deficits. Despite these
actions, however, the European recovery remains at risk
because of on-going structural adjustments and because
the necessary austerity measures taken to address the
fiscal crisis have in some cases limited demand and wages, resulting in social unrest. Several European countries
have had slowing or negative growth in recent quarters,
and there also has been a slowdown in growth in many
emerging market economies.
Deleveraging has Slowed Consumption Growth.—
Between the third quarter of 2007 and the first quarter
of 2009, the real net worth of American households declined by $16 trillion (24 percent) – the equivalent of more
than one year’s GDP. A precipitous decline in the stock
market, along with falling house prices over this period,
were the main reasons for the drop in household wealth.
Since then, real household wealth, including financial assets, has risen substantially to near its previous peak,
although total net worth remains below the prior peak
level because housing prices have only recently started
to recover.4
Americans reacted to this massive loss of wealth by saving more. The personal saving rate had been declining
since the 1980s, and it reached a low point of 1.3 percent
in the third quarter of 2005. It remained low, averaging
only 2.2 percent through the end of 2007, but since then,
as wealth has declined, the saving rate has increased to an
average of 4.4 percent over the past three years. A sudden
4  Real wealth is computed by deflating household net worth from
the Flow-of-Funds Accounts by the Chained Price Index for Personal
Consumption Expenditures. Data are available through 2012:Q3.

Chart 2-1. Private Job Gains and Losses
During Recent Recoveries
6,830

7000

6,353

6000
5000
4000

3,318

3000
2000
1000
0
-1000

-425

-819

-1,143

-2000

March 1991

November 2001
First 8 Months

Next 36 Months

June 2009

11

2.  Economic Assumptions and Interactions with the Budget

increase in the desire to save implies a corresponding reduction in consumer demand, and a fall-off in consumption
had a negative effect on the economy during the recession
of 2008 and early 2009. During that period, real consumer
spending fell at an annual rate of 2.3 percent. Since then,
real consumer spending has recovered and now exceeds
its previous peak level, although it has increased only 1.9
percent over the past four quarters. Continued growth in
consumption is essential to a healthy recovery, and, as income also grows, increased consumption is compatible with
a higher but stable saving rate.

Rebound in Business Investment.—Business fixed
investment fell sharply during the 2008-2009 contraction.
It rose rapidly in 2010 through 2012, but even after the
substantial increases in business spending for structures,
equipment and software over the past 10 quarters, real
investment remains well below its pre-recession levels
implying room for further growth. The cost of capital is
low and American corporations at the end of 2012 held
substantial levels of cash reserves, which could provide
funding for future investments as the economy continues
to recover. The main constraint on business investment

Table 2–1.  Economic Assumptions 1
(Calendar years; dollar amounts in billions)
Actual

Projections

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

15,076
13,299

15,705
13,600

16,384
13,907

17,235
14,358

18,181
14,864

19,192
15,399

20,247
15,943

21,275
16,441

22,247
16,873

23,219
17,283

24,216
17,692

25,253
18,104

26,331
18,526

113.4

115.5

117.8

120.1

122.4

124.7

127.0

129.4

131.9

134.4

136.9

139.5

142.2

Percent change, fourth quarter over fourth
quarter:
Current dollars ������������������������������������������������
Real, chained (2005) dollars ���������������������������
Chained price index (2005 = 100) ������������������

4.0
2.0
2.0

4.1
2.0
2.1

4.5
2.6
1.9

5.4
3.4
1.9

5.6
3.6
1.9

5.6
3.6
1.9

5.5
3.5
1.9

4.9
2.9
1.9

4.4
2.4
1.9

4.4
2.4
1.9

4.3
2.3
1.9

4.3
2.3
1.9

4.3
2.3
1.9

Percent change, year over year:
Current dollars ������������������������������������������������
Real, chained (2005) dollars ���������������������������
Chained price index (2005 = 100) ������������������

4.0
1.8
2.1

4.2
2.3
1.9

4.3
2.3
2.0

5.2
3.2
1.9

5.5
3.5
1.9

5.6
3.6
1.9

5.5
3.5
1.9

5.1
3.1
1.9

4.6
2.6
1.9

4.4
2.4
1.9

4.3
2.4
1.9

4.3
2.3
1.9

4.3
2.3
1.9

Incomes, billions of current dollars:
Domestic Corporate Profits ����������������������������
Employee Compensation ��������������������������������
Wages and salaries ����������������������������������������
Other taxable income 2 ������������������������������������

1,388
8,295
6,661
3,252

1,511
8,591
6,902
3,387

1,566
8,903
7,182
3,519

1,743
9,353
7,549
3,643

1,833
9,891
7,970
3,828

1,939
10,460
8,438
4,032

1,950
11,070
8,945
4,300

1,855
11,671
9,435
4,585

1,742
12,253
9,911
4,832

1,658
12,841
10,387
5,054

1,504
13,456
10,879
5,257

1,422
14,065
11,364
5,455

1,328
14,708
11,885
5,666

224.9

229.6

234.5

239.7

244.9

250.3

255.8

261.5

267.2

273.1

279.1

285.2

291.5

3.3
3.1

1.9
2.1

2.2
2.1

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

2.2
2.2

Unemployment rate, civilian, percent:
Fourth quarter level ����������������������������������������
Annual average �����������������������������������������������

8.7
8.9

7.9
8.1

7.5
7.7

7.0
7.2

6.5
6.7

6.0
6.2

5.6
5.7

5.4
5.5

5.4
5.4

5.4
5.4

5.4
5.4

5.4
5.4

5.4
5.4

Federal pay raises, January, percent:
Military 4 ����������������������������������������������������������
Civilian 5 ����������������������������������������������������������

1.4
0.0

1.6
0.0

1.7
0.5

1.0
1.0

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

NA
NA

3.7
4.8

3.7
5.0

3.7
5.0

3.7
5.0

Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars ������������������������������������������������
Real, chained (2005) dollars ���������������������������
Chained price index (2005 = 100), annual
average ������������������������������������������������������

Consumer Price Index (all urban): 3
Level (1982–84 = 100), annual average ���������
Percent change, fourth quarter over fourth
quarter �������������������������������������������������������
Percent change, year over year ����������������������

Interest rates, percent:
91-day Treasury bills 6 �������������������������������������
0.1
0.1
0.1
0.2
0.4
1.3
2.3
3.2
3.6
10-year Treasury notes �����������������������������������
2.8
1.8
2.0
2.6
3.1
3.7
4.1
4.4
4.6
N/A = Not Available
1 Based on information available as of mid-November 2012.
2 Rent, interest, dividend, and proprietors’ income components of personal income.
3 Seasonally adjusted CPI for all urban consumers.
4 Percentages apply to basic pay only; percentages to be proposed for years after 2014 have not yet been determined.
5 Overall average increase, including locality pay adjustments. Percentages to be proposed for years after 2014 have not yet been determined.
6 Average rate, secondary market (bank discount basis).

12

Analytical Perspectives

Percent

8

Chart 2‐2.  Real GDP Growth Following a 
Recession: 7‐Year Average  

7.2

7
6
5

4.9

4.7

5.2
4.3

4

3.4

3.1

3

4.1

3.6
2.7

2.7

2.2

2
1
0

1933

1949

1954

1958

1961

1970

is poor sales expectations, which have been dampened by
the slow pace of recovery. However, if consumption picks
up, businesses are in a good position to expand investment. Nevertheless, the pace of future growth could prove
to be uneven, as investment tends to be volatile.
Steady Progress in the Labor Market.—The unemployment rate peaked in 2009. It has declined since
then, but it remains well above its historical average of
under 6 percent, and the rate of long-term unemployment (those out of work for more than 6 months) remains high. The high rate of unemployment has had
devastating effects on American families, and the recovery will not be real for most Americans until the job market strengthens further. Historically, when the economy
grows, so does employment, and there are signs that this
pattern is repeating itself in the current recovery, albeit
slowly. Private employment has grown for 36 straight
months, although at a relatively modest rate. The positive job growth has far exceeded the job gains in the recovery following the 2001 recession, and is only slightly
less than equivalent in comparison to the 1990s expansion (see Chart 2-1).
Economic Projections
The economic projections underlying the 2014 Budget
estimates are summarized in Table 2–1. The assumptions
are based on information available as of mid-November
2012. This section discusses the Administration’s projections, and the next section compares these projections with
those of the Federal Reserve’s Open Market Committee
(FOMC), the CBO, and the Blue Chip Consensus of private forecasters.
Real GDP.—The Administration projects the economic recovery that began in mid-2009 will continue with real
GDP growing at an average annual rate of 2.9 percent
over the next 10 years. At the beginning of 2013, the enactment of the American Taxpayer Relief Act removed
much of the uncertainty about tax changes that existed
when the Administration finalized its economic assumptions in November.  However, the projected growth rate

1975

1982

1991

2001 Average Forecast

in November was based on policy assumptions that were
similar to ATRA in regard to tax extensions.  The middle
class tax cuts were made permanent, tax rates on regular
income were raised for the wealthiest taxpayers; and rates
were also raised on dividends and capital gains (relative
to 2012 tax law).  The temporary two percentage point
payroll tax cut of 2011-12 expired.  The effective increase
in the payroll tax rate is expected to produce some fiscal drag during 2013, and as a result the Administration
projects 2.6 percent GDP growth over the four quarters
of the year, accelerating to 3.4 percent growth in 2014
when increased private demand is expected to play a
larger role in supporting continued recovery. This economic forecast, as always, is based on the assumption that
the Administration’s budget proposals are enacted in full,
including a proposal for infrastructure spending to boost
the economy and lay a foundation for long-term growth,
and that the sequester that took effect on March 1st of
this year is avoided and the harmful, across-the-board
cuts are reversed. The economy is expected to continue
to grow at a pace of about 3.5 percent over the following
three years. Real GDP growth is projected to return to its
“potential” growth rate of 2.4 percent by 2019, and to grow
at a steady 2.3 percent rate for the remaining four years
of the forecast. The slight drop off in the last few years is
due to demographic factors that lower the labor force participation rate as the baby boom generation retires.
As shown in Chart 2-2, the Administration’s projections for real GDP growth over the first seven years of
the expected recovery imply an average growth rate below the average for historical recoveries. Recent recoveries have been somewhat weaker than average, but the
last two expansions were preceded by mild recessions
with relatively little pent-up demand when conditions
improved. Because of the depth of the recent recession,
there is much more room for a rebound in spending and
production than was true either in 1991 or 2001. On the
other hand, lingering effects from the credit crisis and
other special factors have limited the pace of the recovery
until now.

13

2.  Economic Assumptions and Interactions with the Budget

Box 2–1. Supply-Side Analysis of Long-Term Growth
The growth rate of the economy over the long run is determined by the growth of its supply-side components, demographics,
and technological change. The growth rate that characterizes the long-run trend in real U.S. GDP—or potential GDP—plays
an important role in guiding the Administration’s long-run forecast. Through 2020, potential real GDP is projected to grow at
a 2.4 percent annual rate, before slowing to 2.3 percent during the three years 2021–23, reflecting the increasing size of the
retiring baby-boom cohorts.
Table 2-2 shows the Administration’s forecast for the contribution of each supply-side factor to the growth in potential real
GDP: the working-age population, the rate of labor force participation, the employed share of the labor force, the ratio of nonfarm business employment to household employment, the length of the workweek, labor productivity, and the ratio of real GDP
to nonfarm output. Each column in Table 2-2 shows the average annual growth rate for each factor over a specific period of
time. The first column shows the long-run average growth rates between the business-cycle peak of 1953 and the businesscycle peak of 2007, with business-cycle peaks chosen as end points to remove the substantial fluctuations within cycles so as
to reveal long-run trends. The second column shows average growth rates between the fourth quarter of 2007 and the third
quarter of 2012, a period that includes the 2007–09 recession and the recovery so far. The third column shows the Administration’s projection for the entire 11-year forecast period, from the third quarter of 2012 to the fourth quarter of 2023. And the
fourth column shows average projected growth rates between the fourth quarter of 2020 and the fourth quarter of 2023, that
is, the last three years of the forecast interval when the economy is assumed to settle into steady-state growth.
Summing the growth rates of these components, real GDP is projected to rise at an average 2.8 percent a year over the
projection period (line 8, column 3), somewhat faster than the 2.4 percent annual growth rate for potential real GDP (line 9,
column 3). Actual GDP can and is expected to grow faster than potential GDP primarily because of the projected rise in the
employment rate (line 3, column 3) as millions of currently unemployed workers find jobs. Real potential GDP (line 9, columns
3 and 4) is projected to grow more slowly than the long-term historical growth rate of 3.2 percent a year (line 9, column 1). The
projected slowdown in real potential GDP growth primarily reflects the lower projected growth rate of the working-age population and the retirement of the baby-boom cohort.

Table 2–2. Components of Actual and Potential
Real GDP Growth, 1952–2023
Average Annual Growth rate a
Component

History, peak- Recent history,
to-peak
since peak
1953:Q2 to
2007:Q4 b

2007:Q4 to
2012:Q3

Forecast

Out-year
forecast

2012:Q3 to
2023:Q4

2020:Q4 to
2023:Q4

1

Civilian noninstitutional population aged
16+ ����������������������������������������������������
1.4
1.2
1.0
1.0
2 Labor force participation rate ������������������
0.2
–0.8
–0.1
–0.4
3 Employed share of the labor force ���������
–0.0
–0.7
0.3
0.0
4 Ratio of nonfarm business employment
to household employment �����������������
0.0
–0.7
–0.0
0.0
5 Average weekly hours (nonfarm
business) �������������������������������������������
–0.3
–0.0
–0.1
–0.1
6 Output per hour (productivity, nonfarm
business) �������������������������������������������
2.1
1.6
2.2
2.2
7 Ratio of real GDP to nonfarm business
output �������������������������������������������������
–0.2
0.0
–0.3
–0.4
8 Sum: Actual real GDP ����������������������������
3.2
0.5
2.8
2.3
9 Memo: Potential real GDP ���������������������
3.2
2.0
2.4
2.3
a All contributions are in percentage points at an annual rate, forecast finalized in mid-November 2012.
b 1953:Q2 and 2007:Q4 are business-cycle peaks.
Note: Population, labor force, and household employment have been adjusted for discontinuities in the
population series. Nonfarm business employment, workweek, and productivity come from the Labor Productivity
and Costs database maintained by the Bureau of Labor Statistics.
Source: Bureau of Labor Statistics, Current Population Survey, Labor Productivity and Costs; Bureau of
Economic Analysis, National Income and Product Accounts; Department of the Treasury; Office of Management
and Budget; CEA calculations.

The U.S. economy has enormous room for growth, although there are factors that could continue to limit
that growth in the years ahead. On the positive side,
the unemployment rate has fallen since the recession
trough and further progress is expected in 2013-14,
particularly if the President’s Budget proposals are
adopted. The Federal Reserve’s recent directive states

that a “highly accommodative stance of monetary policy will remain appropriate for a considerable time.”
However, financial markets here and in Europe have
been troubled by weak economic growth and the sustainability of fiscal policy in some European countries.
The drag from a European slowdown could hold back
the U.S. economy.

14
Long-Term Growth.—The Administration’s forecast
does not attempt to project cyclical developments beyond
the next few years. The long-run projection for real economic growth and unemployment assumes that they will
maintain trend values in the years following the return to
full employment. Real GDP, reflecting the slower growth
in productivity outside the nonfarm business sector, grows
at a rate of 2.3 percent in the final years of the projection.
That is markedly slower than the average growth rate of
real GDP since 1947 of 3.2 percent per year. In the 21st
Century, real GDP growth in the United States is likely to
be permanently slower than it was in earlier eras because
of a slowdown in labor force growth initially due to the retirement of the post-World War II baby boom generation,
and later due to a decline in the growth of the workingage population.
Box 2-1 describes the components of long-term growth
rates and how they relate to the Administration’s forecast
in more detail.
Unemployment.—In February 2013, the overall unemployment rate was 7.7 percent. In line with the increased growth in the economy projected after 2013, the
unemployment rate is expected to ease to 5.4 percent
by 2018 and to remain at that level during the period of
trend growth during the last few years of the forecast.
Inflation.—The Consumer Price Index for all urban
consumers (CPI-U) rose by 1.7 percent for the 12 months
ending in December 2012. Over the previous 12 months
it had risen by 3.0 percent. The decrease in inflation in
2012 was due almost entirely to sharp movements in food
and energy prices. The “core” CPI, excluding both food
and energy, was up 1.9 percent through the 12 months
ending in December, little changed from the 2.2 percent
during 2011.
Weak demand continues to hold down prices for many
goods and services, and continued high unemployment is
expected to result in a relatively low inflation rate. As the
economy recovers and the unemployment rate declines, the
rate of inflation should remain near the Federal Reserve’s
target of around 2 percent per year. With the recovery
path assumed in the Administration forecast, the risk of
outright deflation appears minimal. The Administration
assumes that the rate of change in the CPI will average
2.2 percent and that the GDP price index will increase at
a 1.9 percent annual rate in the long run.
Interest Rates.—Interest rates on Treasury securities fell sharply in late 2008, as both short-term and
long-term rates declined to their lowest levels in decades.
Since then Treasury rates have fluctuated, but they have
not returned to the levels before the financial crisis, and
at the end of 2012 long-term rates were especially low. In
the first week of January, the yield on 10-year Treasuries
was just 1.9 percent. Investors have sought the security
of Treasury debt during the heightened financial uncertainty of the last few years, which has kept yields low.
At the short end of the yield curve, the Federal Reserve
is holding short-term rates near zero as it seeks to foster
economic growth and lower unemployment. The Federal
Reserve’s policy of purchasing long-term Treasury securities may also be helping to hold down long-term rates.

Analytical Perspectives

In the Administration projections, interest rates are expected to rise, but only gradually as financial concerns
are alleviated and the economy recovers from recession.
The 91-day Treasury bill rate is projected to remain near
zero into 2015 consistent with the Federal Reserve’s announced intentions, and then to rise to 3.7 percent by
2017. The 10-year rate begins to rise in 2013 and reaches
5.0 percent by 2021. After adjusting for inflation, the projected real interest rates are close to their historical averages.
Income Shares.—The share of labor compensation in
GDP was extremely low by historical standards in 2012.
It is expected to remain low for the next few years falling to a low point of 54.3 percent of GDP in 2013-2014.
As the economy grows faster in the middle years of the
forecast period, and as employment increases as a result,
compensation is projected to rise, reaching 55.9 percent of
GDP in 2023. In the expansion that ended in 2007, labor
compensation tended to lag behind the growth in productivity, and that has also been true for the surge in productivity growth in 2009-2010. The share of taxable wages,
which is strongly affected by changes in health insurance
costs, is expected to rise from 43.8 percent of GDP in 2013
to 45.1 percent in 2023. The share of domestic corporate
profits is expected to decline from 12.4 percent of GDP in
2012 to 8.2 percent in 2023, which is close to its historical
average.
Comparison with Other Forecasts
Table 2–3 compares the economic assumptions for the
2014 Budget with projections by CBO, the Blue Chip
Consensus — an average of about 50 private-sector economic forecasts — and, for some variables, the Federal Reserve
Open Market Committee. These other forecasts differ
from the Administration’s projections, but the forecast differences are relatively small compared with the margin of
error in all economic forecasts. Like the Administration,
the other forecasts project that real GDP will continue to
grow as the economy returns to a normal level of unemployment. The forecasts also agree that inflation will be
low while outright deflation is avoided, and that interest
rates will eventually rise to more normal levels.
There are some conceptual differences between the
Administration forecast and the other economic forecasts.
The Administration forecast assumes that the President’s
Budget proposals will be enacted, and passage of those
proposals will boost growth. The 50 or so private forecasters in the Blue Chip Consensus make differing policy
assumptions, and some may not assume that the sequester will be successfully replaced with balanced deficit reduction or that the Congress will enact other polices the
Administration has proposed to boost growth. CBO is required to assume that current law will continue in making its projections. As a result, their February projections
assumed that the sequester would take place, as well as
other fiscal tightening actions that would lower growth
in 2013. Specifically, CBO stated that its 1.4 percent projection for real GDP growth this year could be as much

15

2.  Economic Assumptions and Interactions with the Budget

Table 2–3. Comparison of Economic Assumptions
(Calendar years)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Nominal GDP:
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������

15,705
15,692
15,682

16,384
16,149
16,239

17,235
16,863
16,993

18,181
17,913
17,888

19,192
19,087
18,793

20,247
20,224
19,725

21,275
21,178
20,684

22,247
22,129
21,667

23,219
23,099
22,676

24,216
24,093
23,730

25,253
25,117
24,835

26,331
26,180
26,002

Real GDP (year-over-year):
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������

2.3
2.3
2.2

2.3
1.4
1.8

3.2
2.6
2.7

3.5
4.1
3.1

3.6
4.4
2.9

3.5
3.8
2.8

3.1
2.6
2.7

2.6
2.4
2.6

2.4
2.3
2.5

2.4
2.2
2.5

2.3
2.2
2.5

2.3
2.2
2.5

2.6
3.4
3.6
1.4
3.4
4.4
2.3
2.8
3.2
2.3 - 2.8 2.9 - 3.4 2.9 - 3.7

3.6
4.3
2.8

3.5
3.2
2.8

2.9
2.5
2.6

2.4
2.4
2.6

2.4
2.2
2.5

2.3
2.2
2.5

2.3
2.2
2.5

2.3
2.2
2.5

Real GDP (fourth-quarter-over-fourth-quarter):
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������
Federal Reserve Central Tendency ��������������������������

2.0
1.9
1.6

GDP Price Index:1
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������

1.9
1.8
1.8

2.0
1.5
1.7

1.9
1.8
1.9

1.9
2.0
2.1

1.9
2.1
2.1

1.9
2.1
2.1

1.9
2.1
2.1

1.9
2.0
2.1

1.9
2.1
2.1

1.9
2.0
2.1

1.9
2.0
2.1

1.9
2.0
2.1

Consumer Price Index (CPI-U):1
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������

2.1
2.1
2.1

2.1
1.6
1.8

2.2
1.9
2.1

2.2
2.1
2.3

2.2
2.1
2.4

2.2
2.2
2.4

2.2
2.3
2.4

2.2
2.3
2.4

2.2
2.3
2.3

2.2
2.3
2.3

2.2
2.3
2.3

2.2
2.3
2.3

7.7
7.2
6.7
7.9
7.8
7.1
7.7
7.3
6.7
7.3 - 7.5 6.7 - 7.0 6.0 - 6.5

6.2
6.3
6.3

5.7
5.6
6.0

5.5
5.5
5.7

5.4
5.5
5.6

5.4
5.4
5.6

5.4
5.4
5.6

5.4
5.3
5.6

5.4
5.3
5.6

1.3
1.5
2.1

2.3
3.4
3.0

3.2
4.0
3.3

3.6
4.0
3.5

3.7
4.0
3.6

3.7
4.0
3.6

3.7
4.0
3.6

3.7
4.0
3.6

Unemployment Rate:2
2014 Budget �������������������������������������������������������������
CBO ��������������������������������������������������������������������������
Blue Chip ������������������������������������������������������������������
Federal Reserve Central Tendency3 �������������������������

8.1
8.1
8.1

Interest Rates:2
91-Day Treasury Bills (discount basis):
2014 Budget ���������������������������������������������������������
CBO ����������������������������������������������������������������������
Blue Chip ��������������������������������������������������������������

0.1
0.1
0.1

0.1
0.1
0.1

0.2
0.2
0.2

0.4
0.2
0.9

10-Year Treasury Notes:
2014 Budget ���������������������������������������������������������
1.8
2.0
2.6
3.1
3.7
4.1
4.4
4.6
4.8
5.0
5.0
5.0
CBO ����������������������������������������������������������������������
1.8
2.1
2.7
3.5
4.3
5.0
5.2
5.2
5.2
5.2
5.2
5.2
Blue Chip ��������������������������������������������������������������
1.8
2.1
2.7
3.4
4.1
4.5
4.7
4.7
4.7
4.7
4.7
4.7
N/A = Not Available
Sources:Administration;CBO, The Budget and Economic Outlook: Fiscal Years 2013 to 2023; March 2013 Blue Chip Economic Indicators, Aspen Publishers, Inc.; Federal Reserve
Open Market Committee, March 20, 2013.
1 Year-over-year percent change.
2 Annual averages, percent.
3 Average of 4th quarter values.

as 1-1/2 percentage points higher if the sequester, payroll
tax increase, and other actions were not taken.
The Administration projections were completed in midNovember. The five-month lag between that date and the
Budget release is due in part because the budget process
requires lead time to complete the estimates for agency
programs that are incorporated in the Budget. Forecasts
made at different dates will differ if economic news between the two dates alters the economic outlook. The
Blue Chip Consensus for 2013-2023 in this table was the
latest available, from early March. The FOMC members’

central tendency of their forecasts are from March 2013.
The CBO forecast is from its February 2013 report.
Real GDP Growth.— In 2013, the Administration
expects more growth than the other forecasters, mainly
because the forecast assumes that all of the Budget proposals will be enacted. Other forecasters make different
assumptions. In 2014, the Administration expects growth
to increase, while most other forecasters also look for an
increase but to a lesser degree.
The Administration projects that real GDP will eventually recover much of the loss from the 2008-2009 recession.

16

Analytical Perspectives

This implies a few years of higher-than-normal growth as
real GDP makes up the lost ground. The Blue Chip average shows only a very limited recovery in this sense. In the
Blue Chip projections, real GDP growth exceeds its longrun average only briefly in the 11-year forecast period, and
much of the loss of real GDP experienced during the recession is permanent. CBO anticipates a stronger recovery
than Blue Chip that would return real GDP to nearly the
same level as in the Administration forecast. In the long
run, the real growth rates projected by the forecasters are
similar, ranging between 2.3 and 2.5 percent.
All economic forecasts are subject to error, and looking
back the forecast errors are usually much larger than the
forecast differences discussed above. As discussed in a
section later in this chapter, past forecast errors among
the Administration, CBO, and the Blue Chip have been
roughly similar.
Unemployment, Inflation, and Interest Rates.—The
Administration forecasts unemployment falling steadily
over the next few years to a level of 5.4 percent. The Blue
Chip and CBO also show a decline in unemployment, but
at a slower rate. By the end of the forecast, CBO and the
Administration have about the same level of unemployment,
while the Blue Chip has it declining to only 6.0 percent.
The Administration’s unemployment projection is within
the range of the Federal Reserve forecast. Nevertheless,
the CBO projection of unemployment is higher than the

Administration in 2013-2015, reflecting the different policy
assumptions underlying the two forecasts. Over time the
Administration projects a return to the average unemployment rate that prevailed in the 1990s and 2000s.
The Administration, CBO, and the Blue Chip Consensus
anticipate a subdued rate of inflation over the next two
years. In the medium term, inflation is projected to return
to a rate of around two percent per year, which is consistent with the Federal Reserve’s long-run policy goal for
inflation. All forecasts all have interest rates increasing
substantially in the long run to similar levels. However,
the path of interest rate adjustment differs substantially,
with the Blue Chip showing a rise in rates that begins
before the other forecasters.
Changes in Economic Assumptions.—The 2014
Budget forecast reflects economic developments over the
past year, but some of the forecast values are similar
to those of the 2013 Budget, especially in the long run
(see Table 2–4). The previous Budget anticipated more
rapid growth in 2013-2017 than the current Budget, and
assumed a slightly higher rate of potential GDP growth
in the long run. The projection for the long-term unemployment rate has remained unchanged, but the forecast
starts from a lower level, reflecting the sharper-than-expected decline in 2012. Projected interest rates are lower
in the medium term, reflecting the additional actions by
the Federal Reserve to keep rates low for an extended

Table 2–4. Comparison of Economic Assumptions in the 2013 and 2014 Budgets
(Calendar years; dollar amounts in billions)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Nominal GDP:
2013 Budget Assumptions1 �����������������������������������������������������������
2014 Budget Assumptions ��������������������������������������������

15,779
15,705

16,522
16,384

17,397
17,235

18,448
18,181

19,533
19,192

20,651
20,247

21,689
21,275

22,666
22,247

23,659
23,219

24,688
24,216

25,760
25,253

Real GDP (2005 dollars):
2013 Budget Assumptions1 �����������������������������������������������������������
2014 Budget Assumptions ��������������������������������������������

13,687
13,600

14,097
13,907

14,606
14,358

15,211
14,864

15,821
15,399

16,431
15,943

16,952
16,441

17,403
16,873

17,844
17,283

18,290
17,692

18,748
18,104

Real GDP (percent change):2
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������

2.7
2.3

3.0
2.3

3.6
3.2

4.1
3.5

4.0
3.6

3.9
3.5

3.2
3.1

2.7
2.6

2.5
2.4

2.5
2.4

2.5
2.3

GDP Price Index (percent change):2
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������

1.7
1.9

1.7
2.0

1.6
1.9

1.8
1.9

1.8
1.9

1.8
1.9

1.8
1.9

1.8
1.9

1.8
1.9

1.8
1.9

1.8
1.9

Consumer Price Index (all-urban; percent change):2
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������

2.2
2.1

1.9
2.1

2.0
2.2

2.0
2.2

2.1
2.2

2.1
2.2

2.1
2.2

2.1
2.2

2.1
2.2

2.1
2.2

2.1
2.2

Civilian Unemployment Rate (percent):3
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������

8.9
8.1

8.6
7.7

8.1
7.2

7.3
6.7

6.5
6.2

5.8
5.7

5.5
5.5

5.4
5.4

5.4
5.4

5.4
5.4

5.4
5.4

91-day Treasury bill rate (percent):3
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������

0.1
0.1

0.2
0.1

1.4
0.2

2.7
0.4

3.9
1.3

4.1
2.3

4.1
3.2

4.1
3.6

4.1
3.7

4.1
3.7

4.1
3.7

2.8
1.8

3.5
2.0

3.9
2.6

4.4
3.1

4.7
3.7

5.0
4.1

5.1
4.4

5.1
4.6

5.1
4.8

5.3
5.0

5.3
5.0

10-year Treasury note rate (percent):3
2013 Budget Assumptions ��������������������������������������������
2014 Budget Assumptions ��������������������������������������������
1 Adjusted for July 2012 NIPA revisions.
2 Calendar year over calendar year.
3 Calendar year average.

17

2.  Economic Assumptions and Interactions with the Budget

period, and they are slightly lower in the long term as
well. As in last year’s projections, inflation is also projected to return to its long-run average consistent with
Federal Reserve policy, now estimated at 0.1 percentage
point higher than last year at 2.2 percent for the CPI-U
and 1.9 percent for the GDP price index.
Sensitivity of the Budget to Economic Assumptions
Both receipts and outlays are affected by changes in
economic conditions. Budget receipts vary with individual and corporate incomes, which respond to both real economic growth and inflation. At the same time, outlays
for many Federal programs are directly linked to developments in the economy. For example, most retirement and
other social insurance benefit payments are tied by law

to consumer price indices. Medicare and Medicaid outlays are affected directly by the price of medical services.
Interest on the debt is linked to market interest rates and
the size of the budget surplus or deficit, both of which in
turn are influenced by economic conditions. Outlays for
certain benefits such as unemployment compensation and
the Supplemental Nutrition Assistance Program vary
with the unemployment rate.
This sensitivity complicates budget planning because
differences in economic assumptions lead to changes in the
budget projections. Economic forecasting inherently entails
uncertainty. 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 general principles or “rules of thumb”
embodying these relationships can aid in estimating how

Table 2–5. Sensitivity of the Budget to Economic Assumptions
(Fiscal years; in billions of dollars)
Budget effect

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Total of
Effects,
2023 2013–2023

Real Growth and Employment
Budgetary effects of 1 percent lower real GDP growth:
(1) For calendar year 2013 only, with real GDP recovery in
2014–15:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������
(2) For calendar year 2013 only, with no subsequent recovery:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������
(3) Sustained during 2013 - 2023, with no change in
unemployment:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������

–16.2
4.0
20.2

–24.5
9.4
33.9

–11.2
4.7
15.9

–1.1
0.8
1.9

0.4
1.2
0.8

0.4
2.0
1.6

0.4
2.4
2.0

0.4
2.6
2.3

0.3
2.7
2.4

0.4
2.8
2.5

0.3
2.9
2.6

–50.5
35.6
86.1

–16.2
4.0
20.2

–32.9
11.4
44.3

–37.8
13.0
50.8

–40.4
15.3
55.7

–43.4
19.3
62.7

–46.2
24.5
70.7

–49.1
29.5
78.6

–51.9
33.7
85.7

–55.0
37.8
92.8

–58.0
42.1
100.1

–61.3
46.6
107.9

–492.3
277.2
769.5

–16.4
–0.3
16.1

–50.6
–0.7
49.9

–93.9 –143.4 –200.4 –262.1 –330.1 –402.1 –480.2 –564.0 –654.4
–0.9
0.1
4.9
14.8
28.0
41.7
57.1
75.6
97.0
93.0 143.6 205.2 276.9 358.2 443.8 537.3 639.6 751.4

–3,197.6
317.2
3,514.9

21.3
22.1
0.8

41.5
39.5
–2.0

41.6
32.0
–9.7

41.1
32.7
–8.4

44.5
32.0
–12.5

47.8
31.9
–15.9

50.9
30.5
–20.5

63.4
29.5
–33.9

523.4
339.4
–184.0

21.3
19.8
–1.5

63.7
68.0
4.3

111.0
111.8
0.8

165.2
155.3
–9.9

229.6
196.2
–33.4

296.7
236.2
–60.5

369.2 448.3 540.3 638.6 741.0
278.4 321.4 363.8 411.8 454.4
–90.8 –126.8 –176.5 –226.8 –286.6

3,624.8
2,617.1
–1,007.6

5.0
11.0
5.9

13.8
41.5
27.7

19.2
64.5
45.3

24.9
83.3
58.5

32.5
101.3
68.8

36.6
119.1
82.6

39.3
135.2
95.9

16.2
8.8
–7.4

49.7
26.8
–22.9

91.3
48.0
–43.4

139.7
73.3
–66.4

Inflation and Interest Rates
Budgetary effects of 1 percentage point higher rate of:
(4) Inflation and interest rates during calendar year 2013 only:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Decrease in deficit (–) ������������������������������������������������������
(5) Inflation and interest rates, sustained during 2013 - 2023:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Decrease in deficit (–) ������������������������������������������������������
(6) Interest rates only, sustained during 2013 - 2023:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Increase in deficit (+) �������������������������������������������������������
(7) Inflation only, sustained during 2013 - 2023:
Receipts ��������������������������������������������������������������������������������
Outlays ����������������������������������������������������������������������������������
Decrease in deficit (–) ��������������������������������������������������������

53.9
30.4
–23.4

381.8
1,237.2
855.4

196.2 259.0 328.5 403.8 488.0 578.8 677.4
97.2 120.9 149.0 178.8 211.2 249.7 285.3
–99.0 –138.1 –179.5 –224.9 –276.9 –329.1 –392.0

3,228.5
1,449.0
–1,779.5

4.0

4.4

50.1
164.0
114.0

60.3
29.8
–30.5

60.6
188.9
128.3

Interest Cost of Higher Federal Borrowing
(8) Outlay effect of $100 billion increase in borrowing in 2013 �����
0.1
0.2
0.3
0.9
2.0
3.2
1 The unemployment rate is assumed to be 0.5 percentage point higher per 1.0 percent shortfall in the level of real GDP.

42.7
151.0
108.3

57.1
29.0
–28.0

4.6

57.2
177.3
120.2

4.8

5.0

29.5

18
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 do not account for potential secondary effects.
The rules of thumb show how the changes in economic
variables affect Administration estimates for receipts and
outlays, holding other factors constant. They are not a
prediction of how receipts or outlays would actually turn
out if the economic changes actually materialized. The
rules of thumb are based on a fixed budget policy that is
not always a good predictor of what might actually happen to the budget should the economic outlook change
substantially. For example, unexpected downturns in
real economic growth, and attendant job losses, usually
give rise to legislative actions to stimulate the economy
with additional countercyclical policies. Also, the rules
of thumb do not reflect certain “technical” changes that
often accompany the economic changes. For example,
changes in capital gains realizations often accompany
changes in the economic outlook. On the spending side
of the budget, the rules of thumb do not capture changes
in deposit insurance outlays, even though bank failures
are generally associated with weak economic growth and
rising unemployment.
Economic variables that affect the budget do not always 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 slow or negative
growth is usually accompanied by rising unemployment,
a relationship known as Okun’s Law. 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 the labor force, and are not necessarily associated with changes in the average rate of unemployment. Expected inflation and interest rates are also
closely interrelated: a higher expected rate of inflation
increases nominal interest rates, while lower expected inflation reduces them.
Changes in real GDP growth or inflation have a much
greater cumulative effect on the budget if they are sustained for several years than if they last for only one year.
However, even temporary changes can have lasting effects if they permanently raise the level of the tax base or
the level of Government spending. Moreover, temporary
economic changes that affect the deficit or surplus change
the level of the debt, affecting future interest payments.
Highlights of the budgetary effects of these rules of thumb
are shown in Table 2-5.
For real growth and employment:
•	 The first block shows the effect of a temporary reduction in real GDP growth by one percentage point sustained for one year, followed by a recovery of GDP to
the base-case level (the Budget assumptions) over the
ensuing two years. In this case, the unemployment
rate is assumed to rise by one-half percentage point
relative to the Budget assumptions by the end of the
first year, then return to the base case rate over the
ensuing two years. After real GDP and the unemploy-

Analytical Perspectives

ment rate have returned to their base case levels, most
budget effects vanish except for persistent out-year interest costs associated with larger near-term deficits.
•	 The second block shows the effect of a reduction in
real GDP growth by one percentage point sustained
for one year, with no subsequent “catch up,” accompanying a permanent increase in the natural rate
of unemployment (and of the actual unemployment
rate) of one-half percentage point relative to the
Budget assumptions. In this scenario, the level of
GDP and taxable incomes are permanently lowered
by the reduced growth rate in the first year. For that
reason and because unemployment is permanently
higher, the budget effects (including growing interest costs associated with larger deficits) continue to
grow in each successive year.
•	 The budgetary effects are much larger if the growth
rate of real GDP is permanently reduced by one percentage point even leaving the unemployment rate
unchanged, as might result from a shock to productivity growth. These effects are shown in the third
block. In this example, the cumulative increase in
the budget deficit is many times larger than the effects in the first and second blocks.
For inflation and interest rates:
•	 The fourth block shows the effect of a one percentage point higher rate of inflation and one percentage
point higher nominal interest rates maintained for
the first year only. In subsequent years, the price
level and nominal GDP would both be one percentage point higher than in the base case, but interest rates and future inflation rates are assumed to
return to their base case levels. Receipts increase
by somewhat more than outlays. This is partly due
to the fact that outlays for annually appropriated
spending are assumed to remain constant when projected inflation changes. Despite the apparent implication of these estimates, inflation cannot be relied upon to lower the budget deficit, mainly because
policy-makers have traditionally prevented inflation
from permanently eroding the real value of spending.
•	 In the fifth block, the rate of inflation and the level
of nominal interest rates are higher by one percentage point in all years. As a result, the price level
and nominal GDP rise by a cumulatively growing
percentage above their base levels. In this case,
again the effect on receipts is more than the effect
on outlays. As in the previous case, these results assume that annually appropriated spending remains
fixed under the discretionary spending limits. Over
the time period covered by the budget, leaving the
discretionary limits unchanged would significantly
erode the real value of this category of spending.
•	 The effects of a one percentage point increase in interest rates alone are shown in the sixth block. The out-

19

2.  Economic Assumptions and Interactions with the Budget

Table 2–6.  Forecast Errors, January 1982–Present
REAL GDP ERRORS
2-Year Average Annual Real GDP Growth
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

Admin.
0.1
1.2
1.6

CBO
–0.1
1.1
1.4

Blue Chip
–0.2
1.1
1.5

6-Year Average Annual Real GDP Growth
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

0.2
0.9
1.1

–0.1
0.8
1.1

–0.1
0.8
1.1

2-Year Average Annual Change in the GDP Price Index
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

Admin.
0.2
0.7
0.8

CBO
0.2
0.7
0.9

Blue Chip
0.4
0.7
0.9

6-Year Average Annual Change in the GDP Price Index
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

0.3
0.7
0.8

0.4
0.8
0.9

0.7
0.9
1.1

2-Year Average 91-Day Treasury Bill Rate
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

Admin.
0.3
1.0
1.3

CBO
0.4
0.9
1.1

Blue Chip
0.6
1.0
1.3

6-Year Average 91-Day Treasury Bill Rate
Mean Error ���������������������������������������������������������������������������������������
Mean Absolute Error ������������������������������������������������������������������������
Root Mean Square Error �����������������������������������������������������������������

0.4
1.0
1.2

0.9
1.1
1.3

1.1
1.2
1.4

INFLATION ERRORS

INTEREST RATE ERRORS

lay effect mainly reflects higher interest costs for Federal debt. The receipts portion of this rule-of-thumb
is due to the Federal Reserve’s deposit of earnings on
its securities portfolio and the effect of interest rate
changes on both individuals’ income (and taxes) and
financial corporations’ profits (and taxes).
•	 The seventh block shows that a sustained one percentage point increase in CPI and GDP price index
inflation decreases cumulative deficits substantially,
due in part to the assumed erosion in the real value of
appropriated spending. Note that the separate effects
of higher inflation and higher interest rates shown in
the sixth and seventh blocks do not sum to the effects
for simultaneous changes in both shown in the fifth
block. This is because the gains in budget receipts
due to higher inflation result in higher debt service
savings when interest rates are also assumed to be
higher in the fifth block than when interest rates are
assumed to be unchanged in the seventh block.
•	 The last entry in the table shows rules of thumb for
the added interest cost associated with changes in the
budget deficit, holding interest rates and other economic assumptions constant.
The effects of changes in economic assumptions in the
opposite direction are approximately symmetric to those

shown in the table. The impact of a one percentage point
lower rate of inflation or higher real growth would have
about the same magnitude as the effects shown in the table, but with the opposite sign.
Forecast Errors for Growth,
Inflation, and Interest Rates
As can be seen in Table 2-5, the single most important
variable that affects the accuracy of the budget projections
is the forecast of the growth rate of real GDP. The rate
of inflation and the level of interest rates also have substantial effects on the accuracy of projections. Table 2-6
shows errors in short- and long-term projections in past
Administration forecasts, and compares these errors to
those of CBO and the Blue Chip Consensus of private forecasts for real GDP, inflation and short-term interest rates.5
5  Two-year errors for real GDP and the GDP price index are the
average annual errors in percentage points for year-over-year growth
rates for the current year and budget year. For interest rates, the error
is based on the average error for the level of the 91-day Treasury bill
rate for the two-year and six-year period. Administration forecasts are
from the budgets released starting in February 1982 (1983 Budget) and
through February 2010 (2011 Budget), so that the last year included in
the projections is 2011. The six-year forecasts are constructed similarly,
but the last forecast used is from February 2006 (2007 Budget). CBO
forecasts are from “The Budget and Economic Outlook” publications in
January each year, and the Blue Chip forecasts are from their January
projections.

20

Analytical Perspectives

Table 2–7.  Budget Effects of Alternative Scenarios
(Fiscal years; in billions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Alternative Budget Deficit Projections:
Administration Economic Assumptions ���������
Percent of GDP ������������������������������������������

973
6.0%

744
4.4%

576
3.2%

528
2.8%

487
2.4%

475
2.3%

498
2.3%

503
2.2%

501
2.1%

519
2.1%

439
1.7%

Alternative Scenario 1 �����������������������������������
Percent of GDP ������������������������������������������

992
6.2%

787
4.7%

640
3.6%

624
3.4%

633
3.3%

663
3.3%

711
3.3%

732
3.3%

742
3.2%

768
3.2%

696
2.8%

Alternative Scenario 2 �����������������������������������
Percent of GDP ������������������������������������������

978
6.1%

744
4.4%

567
3.2%

523
2.8%

504
2.5%

501
2.4%

506
2.3%

481
2.1%

443
1.8%

424
1.7%

304
1.1%

Over both a two-year and six-year horizon, the average
annual real GDP growth rate was very slightly overestimated by the Administration and slightly underestimated by the CBO and Blue Chip in the forecasts made since
1982. Overall, the differences between the three forecasters were minor. The mean absolute error in the annual
average growth rate was about 1.5 percentage point per
year for all forecasters for two-year projections, and was
about one-third smaller for all three for the six-year projections. The greater accuracy in the six-year projections
could reflect a tendency of real GDP to revert at least
partly to trend, though the overall evidence on whether
GDP growth is mean reverting is mixed. Another way
to interpret the result is that it is hard to predict GDP
around turning points in the business cycle, but somewhat easier to project the six-year growth rate based on
assumptions about the labor force, productivity, and other
factors that affect GDP.
Inflation, as measured by the GDP price index, was
overestimated by all forecasters (with Blue Chip having
the largest errors) for both the two-year and six-year projections, with larger errors for the six-year projections.
This reflects the gradual disinflation over the 1980s and
early 1990s, which was greater than most forecasters expected. Average errors for all three sets of forecasts since
1994 were close to zero (not shown).

The interest rate on the 91-day Treasury bill was also
overestimated by all three forecasters, with errors larger for the six-year time horizon. Again this reflects the
secular decline in interest rates over the past 30 years,
reflecting lower inflation for most of the period, as well as
a decline in real interest rates since 2000 resulting from
weakness in the economy and Federal Reserve policy. The
errors were somewhat less for the Administration than
for CBO and the Blue Chip forecasts.
Alternative Scenarios
The rules of thumb described above can be used in combination to show the effect on the budget of alternative
economic scenarios. Considering explicit alternative scenarios can also be useful in gauging some of the risks to
the current budget projections. For example, the strength
of the recovery over the next few years remains highly
uncertain. Those possibilities are explored in the two alternative scenarios presented in this section and shown
in Chart 2-3.
The first alternative scenario assumes that real GDP
growth and unemployment beginning in 2012:Q4 follow
the projections in the March 2013 Blue Chip forecast
through the end of 2023, which includes their semi-annual long-run extension of the Blue Chip forecast. In this

Chart 2‐3. Real GDP: Alternative Projections
Trillions of 2005 dollars

22
21
20
19
18
17
16
15
14
13
12
2007

2009

Admin (Nov‐2012)

2011

2013

2015

Blue Chip (March‐2013)

2017

2019

2021

Blue Chip Top 10 (March‐2013)

2023
Actual

21

2.  Economic Assumptions and Interactions with the Budget

Chart 2‐4. Range of Uncertainty for the 
Budget Deficit

Percent of GDP

10
Percentiles:
95th
90th

5

75th

0

Forecast

‐5

25th
10th
5th

‐10
‐15

2013

2014

2015

case, after 2012, the level of GDP remains lower than the
Administration’s forecast throughout the projection period. This alternative includes a smaller real recovery from
the loss of output during the 2008-2009 recession. Growth
returns to normal, but without a substantial catch-up to
make up for previous output losses.
The second alternative is the average of the highest 10
real GDP projections of the Blue Chip forecasters, also
based on the March forecasts. This forecast is close to the
Administration’s forecast through 2017 with the high-10
Blue Chip growth exceeding the Administration’s in the
out years.
Table 2-7 shows the budget effects of these alternative scenarios compared with the Administration’s economic forecast. Under the first alternative, budget deficits are significantly higher in each year compared to the
Administration’s forecast. In the second alternative, the
deficit is close to the Administration’s projection in the
near term, but results in a lower deficit in the long run
and cumulatively over 10 years.
Many other scenarios are possible, of course, but the
point is that the most important influences on the budget
projections beyond the next year or two are the rate at
which GDP and employment recover from the recession.
Uncertainty and the Deficit Projections
The accuracy of budget projections depends not only on
the accuracy of economic projections, but also on technical
factors and the differences between proposed policy and
enacted legislation. Chapter 29 provides detailed information on these factors for the budget year projections
(Table 29-6), and also shows how the deficit projections
compared to actual outcomes, on average, over a five-year
window using historical data from 1982 to 2012 (Table
29-7). The error measures can be used to show a probabilistic range of uncertainty of what the range of deficit
outcomes may be over the next five years relative to the
Administration’s deficit projection. Chart 2-4 shows this
cone of uncertainty, which is constructed under the as-

2016

2017

2018

sumption that future forecast errors would be governed by
the normal distribution with a mean of zero and standard
error equal to the root mean squared error, as a percent
of GDP, of past forecasts. The deficit is projected to be 2.3
percent of GDP in 2018, but has a 90 percent chance of being within a range of a surplus of 4.8 percent of GDP and
a deficit of 9.4 percent of GDP.
Structural and Cyclical Deficits
As shown above, the budget deficit is highly sensitive
to the business cycle. When the economy is operating below its potential and the unemployment rate exceeds the
level consistent with price stability, receipts are lower,
outlays are higher, and the deficit is larger than it would
be otherwise. These features serve as “automatic stabilizers” for the economy by restraining output when the
economy threatens to overheat and cushioning economic
downturns. They also make it hard to judge the overall
stance of fiscal policy simply by looking at the unadjusted
budget deficit.
An alternative measure of the budget deficit is called
the structural deficit. This measure provides a more useful perspective on the stance of fiscal policy than does the
unadjusted unified budget deficit. The portion of the deficit traceable to the automatic effects of the business cycle
is called the cyclical component. The remaining portion of
the deficit is called the structural deficit. The structural
deficit is a better gauge of the underlying stance of fiscal policy than the unadjusted unified deficit because it
removes most of the effects of the business cycle. So, for
example, the structural deficit would include fiscal policy
changes such as the 2009 Recovery Act, but not the automatic changes in unemployment insurance or reduction
in tax receipts that would have occurred without the Act.
Estimates of the structural deficit, shown in Table 2-8,
are based on the historical relationship between changes
in the unemployment rate and real GDP growth, as well
as relationships of unemployment and real GDP growth
with receipts and outlays. These estimated relationships

22

Analytical Perspectives

Table 2–8. The Structural Balance
(Fiscal years; in billions of dollars)
2007
Unadjusted surplus (–) or deficit ����
Cyclical component ������������������
Structural surplus (–) or deficit ������

161
–107
268

2008
459
–41
499

2009

2010

1,413
311
1,102

1,293
437
857

Unadjusted surplus (–) or deficit ���� 1.2% 3.2% 10.1%
Cyclical component ������������������ –0.8% –0.3% 2.2%
Structural surplus (–) or deficit ������ 1.9% 3.5% 7.9%
NOTE: The NAIRU is assumed to be 5.4%.

9.0%
3.0%
6.0%

2011
1,300
451
849

2012

2013

1,087
454
633

973
522
450

2014
744
482
262

2015

2016

576
404
172

2017

2018

528
291
237

487
169
318

475
64
411

2.8%
1.5%
1.3%

2.4%
0.8%
1.6%

2.3%
0.3%
2.0%

2019
498
10
488

2020
503
–3
506

2021
501
2
499

2022

2023

519
–1
520

439
0
439

2.1% 2.1%
0.0% –0.0%
2.1% 2.1%

1.7%
0.0%
1.7%

(Fiscal years; percent of Gross Domestic Product)
8.7%
3.0%
5.7%

7.0%
2.9%
4.1%

take account of the major cyclical changes in the economy
and their effects on the budget, but they do not reflect all
the possible cyclical effects on the budget, because economists have not been able to identify the cyclical factor
in some of these other effects. For example, the sharp
decline in the stock market in 2008 pulled down capital
gains-related receipts and increased the deficit in 2009
and beyond. Some of this decline is cyclical in nature, but
economists have not identified the cyclical component of
the stock market with any precision, and for that reason,
all of the stock market’s contribution to receipts is counted in the structural deficit.
Another factor that can affect the deficit and is related
to the business cycle is labor force participation. Since
the official unemployment rate does not include workers
who have left the labor force, the conventional measures
of potential GDP, incomes, and Government receipts understate the extent to which potential work hours are
under-utilized because of a decline in labor force participation. The key unresolved question here is to what extent changes in labor force participation are cyclical and
to what extent they are structural. By convention, in estimating the structural budget deficit, all changes in labor
force participation are treated as structural.
There are also lags in the collection of tax revenue that
can delay the impact of cyclical effects beyond the year in
which they occur. The result is that even after the unemployment rate has fallen, receipts may remain cyclically

6.0%
3.2%
2.8%

4.4%
2.8%
1.5%

3.2%
2.3%
1.0%

2.3% 2.2%
0.0% –0.0%
2.2% 2.2%

depressed for some time until these lagged effects have dissipated. The recent recession has added substantially to
the estimated cyclical component of the deficit, but for all
the reasons stated above, the cyclical component is probably understated. As the economy recovers, the cyclical
deficit is projected to decline. After unemployment reaches
5.4 percent, the level assumed to be consistent with stable
inflation, the estimated cyclical component vanishes, leaving only the structural deficit, although some lagged cyclical effects would arguably still be present.
Despite these limitations, the distinction between cyclical and structural deficits is helpful in understanding
the path of fiscal policy. The large increase in the deficit
in 2009 and 2010 is due to a combination of both components of the deficit. There is a large increase in the cyclical component because of the rise in unemployment. That
is what would be expected considering the severity of the
recent recession. Finally, there is a large increase in the
structural deficit because of the policy measures taken
to combat the recession. This reflects the Government’s
decision to make active use of fiscal policy to lessen the
severity of the recession and to hasten economic recovery.
Between 2014 and 2018, the cyclical component of the deficit is projected to decline sharply as the economy recovers at an above-trend rate of GDP growth. The structural
deficit shrinks during 2012–2014, reflecting the measures
of fiscal constraint that have been enacted combined with
the Administration’s policy proposals.

3. Financial Stabilization Efforts and their Budgetary Effects

In response to the financial crisis of 2008, the U.S.
Government took unprecedented and decisive action
to mitigate damage to the U.S. economy and financial
markets. The Department of the Treasury, the Board of
Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the National Credit
Union Administration, the Office of the Comptroller of
the Currency, the Securities and Exchange Commission,
and the Commodity Futures Trading Commission worked
cooperatively with the Administration to expand access
to credit, strengthen financial institutions, restore confidence in U.S. financial markets, and stabilize the housing
sector. In 2010, the President signed into law comprehensive Wall Street reform to ensure that the Government
has the tools and authority to prevent another crisis of
this magnitude, to resolve significant financial institution
failures more effectively, and to protect consumers of financial products. In 2012, the Administration continued
its work to operationalize these Wall Street reforms.
This chapter provides a summary of key Government
programs supporting economic recovery and financial
market reforms, followed by a report analyzing the cost
and budgetary effects of the Treasury’s Troubled Asset
Relief Program (TARP), consistent with Sections 202 and
203 of the Emergency Economic Stabilization Act (EESA)
of 2008 (P.L. 110–343), as amended. This report analyzes transactions as of December 31, 2012, and expected
transactions as reflected in the Budget. The TARP costs
discussed in the report and included in the Budget are
the estimated net present value of the TARP investments,
reflecting the actual and expected dividends, interest, and
principal redemptions the Government receives against
its investments; this credit reform treatment of TARP
transactions is authorized by Section 123 of EESA.
The Treasury’s authority to make new TARP commitments expired on October 3, 2010. However, Treasury
continues to manage the outstanding TARP investments,
and is authorized to expend additional TARP funds pursuant to obligations entered into prior to October 3, 2010.
In July 2010, the Dodd-Frank Wall Street Reform and
Consumer Protection Act (P.L. 111–203) reduced total
TARP purchase authority to $475 billion.
The Administration’s current estimate of TARP’s deficit cost for $457.8 billion in cumulative obligations is
$47.5 billion (see Tables 3–1 and 3–7). This estimated direct impact of TARP on the deficit has been reduced by
$294 billion from the highest cost estimate, published in
the Mid-Session Review of the 2010 Budget (2010 MSR),
due to realized returns on TARP investments that exceeded expectations, and lower overall TARP obligations. The
Treasury has received higher-than-expected repayments
and redemptions from TARP recipients. Notably, a total
of $245 billion was invested in banking institutions, and

as of December 31, 2012, Treasury had recovered more
than $268 billion from these institutions through repayments, dividends, interest, and other income. Section 123
of EESA requires TARP costs to be estimated on a net
present value basis adjusted to reflect a premium for market risk. As investments are liquidated, their actual costs
(including any market risk effects) become known and are
reflected in reestimates. It is likely that the total cost of
TARP to taxpayers will eventually be lower than current
estimates as the market risk premiums are returned, but
the total cost will not be fully known until all TARP investments have been extinguished. (See Table 3–9 for an
estimate of TARP subsidy costs stripped of the marketrisk adjustment.) Additionally, Treasury has benefited
from $17.5 billion in non-TARP AIG receipts.
Progress in Implementation of Wall Street Reforms
On July 21, 2010, just over a year after the
Administration delivered its financial reform proposal to
Congress, the President signed into law the Dodd-Frank
Wall Street Reform and Consumer Protection Act1 (the
“Wall Street Reform Act” or the “Act”). The Act embodies the Administration’s critical objectives for achieving
a more stable financial system, which include: helping
prevent future financial crises in part by filling gaps in
the U.S. regulatory regime; better protecting consumers
of financial products and services; preventing unnecessary and harmful risk-taking that threatens the economy;
and providing the Government with more effective tools
to manage financial crises. Important milestones in the
implementation of the Act include:
Orderly Liquidation Authority (OLA): The Act makes
clear that no financial company will be considered “too big
to fail” in the future, and that taxpayers will not be on the
hook for the costs of those that do fail. Instead, the Federal
Deposit Insurance Corporation (FDIC) now may unwind
failing systemically-significant, nonbank financial institutions in an orderly manner to prevent widespread disruptions to U.S. financial stability. Through its new orderly liquidation authority under the Act, the FDIC serves
as receiver of non-depository financial companies whose
failure and resolution under otherwise applicable law is
determined to pose a significant systemic risk to U.S. financial stability. After issuing a joint final rule in 2011 to
implement resolution plan requirements or “living wills”
for certain nonbank financial companies and bank holding companies, in July of 2012 the Federal Reserve and
the FDIC received the first such plans from covered institutions. On June 12, 2012, the FDIC also approved a revised notice of proposed rulemaking (NPR) that outlines
standards for determining if a company is predominantly
engaged in financial activities and, thus, resolvable under
1  P.L.

111-203.
23

24
OLA. Additionally, on June 22, 2012, the Treasury and
the FDIC, in consultation with the Financial Stability
Oversight Council (FSOC), published a joint final rule
governing the calculation of the Maximum Obligation
Limitation, which limits the aggregate amount of outstanding obligations that the FDIC may issue or incur in
connection with the orderly liquidation of a non-depository financial company. The Act requires that all net costs
of liquidation be recovered by assessing fees after the fact
on large financial companies and certain non-bank financial companies so that taxpayers bear no losses from the
exercise of OLA. According to Title II of the Act, certain
FDIC implementation expenses associated with administering OLA are treated as expenses of the FSOC and are
included in this Budget.
While the Budget includes an estimated cost to the
Government that is based on the probability of default
under this new orderly liquidation authority, the total
costs of any liquidation will be, by law, recovered in full,
so there is no cost to the taxpayer. The displayed cost from
this authority of $20 billion over the budget window is
due to the fact that cost recovery occurs only over a period
of years after liquidation expenses are incurred.
Monitoring Systemic Risk: The Act established the
Financial Stability Oversight Council (FSOC) to identify,
monitor, and respond to emerging threats to U.S. financial stability. The FSOC is also charged with facilitating
information sharing and coordination among Federal and
state agencies regarding domestic financial services policy development and identifying gaps in the U.S. regulatory regime that could pose risks to U.S. financial stability. The FSOC is chaired by the Secretary of the Treasury,
with the heads of the Federal financial regulators and an
independent insurance expert serving as voting members.
The FSOC has held more than 25 meetings, with the initial focus on fulfilling statutory requirements established
by the Wall Street Reform Act. The FSOC has moved
quickly to identify key issues and firms posing risks to
systemic stability, while emphasizing the importance of
transparency and stakeholder collaboration throughout
the process. As part of its macro-prudential mandate, the
FSOC published a final rule and guidance in April 2012
describing how nonbank financial companies will be evaluated for designation for Federal Reserve supervision and
enhanced prudential standards. In addition, on July 18,
2012, the FSOC designated eight systemically important
financial market utilities that will be subject to enhanced
risk management standards. On November 19, 2012, the
FSOC published proposed recommendations for the SEC
to implement structural reforms of money market mutual
funds. The FSOC has also conducted studies and made
recommendations on a number of topics, notably on the
effective implementation of the Volcker Rule under the
Wall Street Reform Act. The Volcker Rule was created to
reduce risk-taking and increase stability in the banking
sector by prohibiting Federally-insured banking institutions, subject to certain exceptions, from engaging in proprietary trading and investing in hedge funds and private
equity firms. Going forward, the FSOC will continue to
monitor emerging threats to financial stability and moni-

Analytical Perspectives

tor risks in the financial system including risks related
to housing, commodity market volatility, the European
financial markets, and the U.S. fiscal position.
The Act established the Financial Research Fund (FRF)
to fund the FSOC, the Office of Financial Research (OFR),
and certain OLA implementation expenses of the FDIC.
The OFR, housed within the Treasury Department, was
created to improve the quality of financial data available
to policymakers and to facilitate more robust and sophisticated analysis of the financial system. The OFR is in the
process of comprehensively cataloguing the data that are
currently collected by U.S. financial regulators in order
to identify deficiencies and redundancies in the existing
regulatory framework, as well as enhancing the quality
of the financial data infrastructure through the development of a global Legal Entity Identifier (LEI) for entities
engaged in financial transactions. As specified in the Act,
for the first two years after the date of the enactment,
funding for the FRF was provided through transfers from
the Federal Reserve; in 2014 and thereafter, the FRF will
be fee-funded through assessments on bank holding companies with total consolidated assets of $50 million or
greater and nonbank financial companies supervised by
the Federal Reserve.
Enhanced Consumer Financial Protection: The Wall
Street Reform Act created a single independent regulator – the Consumer Financial Protection Bureau (CFPB)
– whose sole mission is to look out for consumers in the
increasingly complex financial marketplace. The CFPB
is an independent bureau in the Federal Reserve System
responsible for the regulation and enforcement of existing consumer financial products, services and laws, and
issues and enforces new regulations on nonbank financial
institutions (e.g., payday lenders and credit providers). On
July 21, 2011, as designated by the Treasury Department,
the authorities of seven regulatory agencies were transferred to the CFPB – one year after the agency was created by the Wall Street Reform Act. On January 4, 2012,
Richard Cordray was appointed Director of the CFPB.
The CFPB is authorized to supervise and enforce existing consumer financial protection regulations affecting a
bank and its affiliates if the bank has assets of $10 billion
or more. Notable existing regulations include those issued
under the Fair Credit Reporting Act, Truth in Lending
Act, and the Real Estate Settlement Procedures Act. The
CFPB is also authorized to issue new rules; enforce prohibitions against unfair, deceptive, or abusive practices;
and improve disclosures about the features of consumer
financial products and services. In 2012, the CFPB, working with other Federal banking regulators, acted under
this authority in bringing four enforcement actions that
benefited 5.75 million harmed individuals and resulted
in approximately $536 million in consumer refunds and
penalties.
In addition, the CFPB is charged with supervising
nonbank financial firms in specific markets regardless
of size, such as mortgage lenders and servicers, consumer reporting agencies, debt collectors, private education
lenders, and payday lenders. In 2012, the rules implementing many of these authorities were finalized. In July,

3.  Financial Stabilization Efforts and their Budgetary Effects

the CFPB adopted a rule to begin supervising larger consumer credit reporting agencies; in October, the CFPB
adopted another rule allowing the agency to supervise
large consumer debt collectors. This is the first time either of these types of businesses will be supervised at the
Federal level. In addition, the CFPB proposed rules that
will help consumers better understand mortgage costs
and compare home loans. In 2012, the CFPB also released
reports on student loans, credit scores, and reverse mortgages. In addition to handling consumer complaints about
mortgages and credit cards, in 2012 the Bureau began accepting and responding to consumer complaints about
credit reporting, private student loans, bank accounts
and services, and consumer loans. The CFPB is funded
through transfers from the Federal Reserve and, and until the end of FY 2014, it has authority, in the event of
a funding shortfall, to request that Congress appropriate
additional discretionary funds. No such request is expected over the Budget horizon. The Budget reflects funding
for the CFPB through these authorized transfers from the
Federal Reserve, estimated at $497 million in 2014.
Deposit and Share Insurance and their Coverage: The
Wall Street Reform Act permanently increased the standard maximum deposit and share insurance amounts
from $100,000 to $250,000, which applies to both the
FDIC and the National Credit Union Administration, and
requires the FDIC to base deposit insurance premiums
on an insured depository institution’s total assets less
tangible equity instead of domestic insured deposits. To
strengthen the insurance fund’s resources, the Act requires the reserve ratio of the Deposit Insurance Fund
(DIF) to reach at least 1.35 percent of total insured deposits by September 30, 2020. These changes are reflected
in the Budget and their effects are discussed in greater
detail in the Credit and Insurance chapter in this volume.
Increased Transparency in Financial Markets: As the
regulators of U.S. financial markets, the Securities and
Exchange Commission (SEC) and Commodity Futures
Trading Commission (CFTC) are key components of the
Administration’s efforts to reform dangerous Wall Street
trading practices that increase economic volatility and
undermine market stability. Both agencies continue to
work tirelessly to address many of the root causes of the
crisis, to adapt their organizations to more effectively
monitor ever-changing regulated industries and activities, and to implement enforcement strategies designed to
both punish violators and deter wrongdoing. In 2012, the
SEC brought new sophistication to core agency functions,
began implementing complex and comprehensive Wall
Street Reform Act mandates, advanced an investor-focused agenda, and improved the productivity of its 3,800
member staff.
In 2012, the SEC’s Enforcement Division filed 734 enforcement actions—the second highest number ever in a
single year.  The agency also continued to hold accountable those whose actions contributed to the financial crisis, and has now charged 154 entities and individuals, including 65 CEOs, CFOs, and senior corporate officers, and
obtained nearly $2.7 billion in monetary relief.  The enforcement program also ferreted out insider trading, filing

25

cases against financial professionals, hedge fund managers, and corporate insiders, many with direct ties to some
of the nation’s largest companies, and worked to ensure
the integrity of our financial markets.  The SEC’s strong
performance is due in large part to the Enforcement
Division’s strategic reforms – including an expansion of
in-house expertise, flatter management structure, streamlined processes, increased use of information technology,
and enhanced market intelligence capabilities – that are
now bearing fruit.  As a result, the SEC stands ready to
address increasingly sophisticated misconduct in the rapidly growing and complex financial markets.  
The Wall Street Reform Act tasked the SEC with writing a large number of new rules. In addition to managing the complexity and interrelatedness of the mandated
rules, the SEC has worked to provide certainty to financial markets and participants by finalizing rules as quickly as possible without compromising the agency’s ability
to review, evaluate, and make changes to reflect the large
number of public comments received on its proposed rulemakings. As of February 2013, the SEC had proposed or
adopted more than 80 percent of the rules required by the
Act. For example, the SEC has proposed or adopted substantially all the rules needed to create a new regulatory
system to bring greater efficiency and transparency to
the derivatives market.  Additionally, the SEC announced
that more than 1,400 new advisers to major hedge funds
and other private funds had registered with the agency
and begun reporting information that the SEC will share
with the Financial Stability Oversight Commission.
The Commission also began work on the rulemaking
required under the Jumpstart Our Business Startups
Act (JOBS Act), including proposing rules to eliminate
the prohibition against general solicitation and general
advertising in certain securities offerings, and provided
related guidance on submitting draft registration statements to companies. The agency also approved rules submitted by the Financial Industry Regulatory Authority
(FINRA) and U.S. exchanges that will limit investors’ exposure to unusual volatility in individual securities and
the broader U.S. stock market.  One initiative prevents
trades in individual exchange-listed stocks from occurring outside of a specified price band, while another updates the circuit breakers that, when triggered, halt trading in all exchange-listed securities throughout the U.S.
markets.  In addition, the agency took important steps
to upgrade its institutional capabilities for regulating today’s electronic marketplace by adopting rules that expand available information about the most active traders
in the market and will enhance the ability of the agency
to surveil the markets and enforce trading rules.  The
agency also implemented a new system, MIDAS, to collect and analyze market data offered by the exchanges to
their customers.
In addition to its longstanding responsibility to ensure
fair, open, and efficient future markets, the Wall Street
Reform Act authorized the CFTC to regulate the swaps
marketplace through oversight of swap dealers and open
trading and clearing of standardized derivatives on regulated platforms. Despite its constrained funding due to

26
congressional appropriations that in recent years have
been significantly below the Administration’s request, the
CFTC has adapted its mission to include these new responsibilities, the CFTC has drafted numerous rules required
to implement the Act. Through September 30, 2012, CFTC
issued 64 proposed rules and finalized 40 final rules and
orders, including most of the foundational requirements
for substantive swap market reform. Registration of data
repositories, swap execution facilities, swap dealers and
other swap intermediaries began in 2012 and is expected
to be essentially complete in 2013. Central clearing for
swaps is underway and real-time reporting of swaps trade
data will commence imminently. The CFTC has actively
consulted with other Federal financial regulators, as well
as international counterparts, to ensure harmonization
of new rules. Additionally, the CFTC has demonstrated a
commitment to public transparency in its adoption of Wall
Street Reform Act implementing regulations, requesting
and incorporating input from the public during the earliest stages of rule development, publishing a wide variety
of materials and disclosures on its website, and conducting many Commission reviews of proposed and final rules
in open forums.
While devoting significant resources to timely and
thorough implementation of new Wall Street Reform
Act authorities, the CFTC has continued its market surveillance and enforcement activities in the historicallyregulated futures and options markets. The Commission
continued to increase the annual number of enforcement
actions, filing 102 cases in 2012 and opening 350 new investigations. In addition, the Commission obtained orders
imposing more than $931 million in sanctions, including
more than $475 million in civil monetary penalties and
over $456 million in restitution and disgorgement.
In a landmark case in June 2012, the Commission
filed charges against Barclays PLC and two affiliates
for attempted manipulation and false reporting concerning global benchmark interest rates. The charges were
simultaneously settled pursuant to an Order requiring
Barclays to pay $200 million, then the largest fine ever
imposed by the CFTC, and requiring Barclays to implement a number of measures to ensure the integrity of the
bank’s benchmark submissions.
The Commission filed numerous charges related to
protection of customer funds 2012. In response to these
actions, and other high-profile cases, the Commission
has published a rule, and held a public meeting to receive input on, enhancing protection of customers and
customer funds held by futures commission merchants
and Derivatives Clearing Organizations (DCOs). The
Commission is also seeking resources in order to conduct
periodic reviews of these entities to ensure compliance
with Commission regulations related to segregation and
protection of customer funds.
The CFTC conducts systematic examinations of
Designated Contract Markets (DCOs), and Designated
Self-Regulatory Organizations (and soon, swap data repositories and swap execution facilities) to provide assurance to the public and other regulators of the market
participants’ ongoing compliance with the core principles

Analytical Perspectives

of the Commodities Exchange Act. Resource constraints
have severely limited the Commission’s ability to conduct
annual examinations of even the most significant entities, compromising the Commission’s effectiveness in protecting the public interest. Designation by the FSOC of
two DCOs as systemically important mandates that the
Commission perform annual examinations of these entities, an activity that the Commission cannot adequately
perform given current staffing levels.
The next two years will be critical for the SEC and
the CFTC as the agencies continue to identify and pursue wrongdoing in the markets and to operationalize the
mandates of the Wall Street Reform Act. On top of its traditional market oversight and investor protection responsibilities, the SEC will fully implement the following new
authorities in 2013 and 2014: oversight and examination
of new security-based swap clearing agencies, dealers,
and data repositories; oversight and examination of private fund advisers managing thousands of pooled investment vehicles that will be newly registered with the SEC;
reviewing disclosures of asset-backed securities issuers;
registration of municipal advisers; and enhanced supervision of credit rating agencies.  In addition, the SEC will
continue the work of strengthening its core programs and
operations, including detecting and pursuing securities
fraudsters, reviewing public company disclosures and
financial statements, inspecting the activities of investment advisers, investment companies, broker-dealers,
and other registered entities, and maintaining fair and
efficient markets. Building on its 2009 reorganization and
recommendations from consultants and auditors, the SEC
will focus its efforts on increasing coverage of registered
investment advisory firms by adding new positions to the
examination program; enhancing disclosure reviews of
large or financially significant companies; and leveraging
technology to streamline operations and bolster program
effectiveness. All of these responsibilities are essential to
restoring investor confidence and trust in financial institutions and markets in the wake of the 2008 financial
crisis. In support of the SEC’s mission, the President’s
Budget provides $1,674 million in new resources in 2014.
The Budget also projects that the SEC will obligate $50
million from its mandatory Reserve Fund for investments
in information technology systems and other necessary
improvements.
In 2014, CFTC will have fully integrated the swaps
market into its span of responsibilities, including market,
trade practice, financial and risk surveillance; routine examinations of significant entities and “for cause” examinations as needed on an expanded population of entities; and
both punitive and deterrence-based enforcement actions.
The President’s Budget provides significant increases
for the CFTC in 2014 in support of base regulatory work
as well as Wall Street Reform Act implementation. For
CFTC, $315 million is provided, an increase of $7 million
over the 2013 President’s Budget ($109 million or 50 percent over 2012 levels). Additionally, the Administration
supports legislation authorizing the CFTC to collect user
fees to fund its activities. Such legislation would bring the

3.  Financial Stabilization Efforts and their Budgetary Effects

CFTC into line with other Federal financial regulators,
which are funded in whole or in part through user fees.
Streamlined Insurance Sector Regulation: The Federal
Insurance Office (FIO), housed within the Treasury
Department, was established by the Wall Street Reform
Act to “monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to” systemic risk. The FIO
was created, in part, to streamline what is currently a
decentralized regulatory regime. On October 17, 2011,
the FIO announced that it was seeking public comment
for its first mandatory report under the Act on how to
modernize and improve the country’s insurance regulatory system. The FIO will also play a role in support of
FSOC; it will advise the Secretary on international issues
related to insurance investment risk and regulation, and
it will assist the Secretary in administering Treasury’s
Terrorism Risk Insurance Program. In November 2011,
Treasury launched a fifteen-member Federal Advisory
Committee on Insurance to offer recommendations to the
FIO on issues related to the FIO’s responsibilities. The
Advisory Committee demonstrated its responsiveness
in November 2012, holding a public meeting soon after
Hurricane Sandy struck the East Coast of the U.S. to discuss the future of flood insurance. On June 27, 2012, the
FIO published a notice requesting views from interested
parties on the office’s mandated report on the global reinsurance market. The vision for the FIO is that it will
also provide the Federal Government with the ability to
immediately estimate exposures related to catastrophic
events, such as the September 11th terrorist attacks or
Hurricane Katrina. The FIO is funded with discretionary
resources through the Treasury’s Departmental Offices
(DO) request, and the Budget includes funding for this
office.
International Financial Reform. The financial crisis was an international event not limited to U.S. markets, corporations, and consumers. In addition to its demonstrated commitment to achieving meaningful financial
reform at home, the Administration continues to ensure
coordination of financial reform principles across the
globe. At the G-20 Summit in Pittsburgh in September
2009, President Obama and other G-20 leaders established the G-20 as the premier forum for international
economic cooperation. Over the course of Summits held
in London (April 2009), Pittsburgh (September 2009),
Toronto (June 2010), Seoul (November 2010), and Cannes
(November 2011), and Los Cabos (June 2012), the
Administration and G-20 leaders have committed to an
ambitious agenda for financial regulatory reform. Their
reform commitments have extended the scope of regulation, will improve transparency and disclosure, and will
strengthen banks through increased and higher quality
capital and introduction of a leverage ratio that will limit
the amount banks may lend relative to their capital reserves. In June 2012, the Federal banking regulators invited comment on three joint proposed rules that would
revise and replace the agencies’ current capital rules.
The proposals would implement certain aspects of Basel

27

II and Basel III capital reforms. Together, the U.S. and
its global allies are building effective resolution regimes,
including cross-border resolution frameworks, and are
developing higher prudential standards for systemically
important financial institutions to reflect the greater risk
those institutions pose to financial system stability. To facilitate bilateral discussions and cooperation, the FDIC
is negotiating memoranda of understanding with certain
foreign counterparts that will provide a basis for international information sharing and cooperation relating
to cross-border resolution planning and implementation.
The Treasury Department, working together with other
agencies, has ensured that these commitments are fully
consistent with our domestic financial reform agenda.
The Administration continues to work cooperatively
with its G-20 partners to close regulatory gaps. These efforts reflect the parties’ recognition of the interconnectedness of financial markets and the need to preclude opportunities for regulatory arbitrage, in which firms seek
jurisdictions and financial instruments that are comparatively less regulated and, in doing so, allow risk to build
up covertly, posing a threat to financial stability. In developing regulatory reforms that strengthen the resilience of
the financial system to withstand the level of stress seen
in the crisis, the Administration and its G-20 partners
have remained mindful of the need to undertake reform
in ways consistent with cultivating vibrant, innovative,
and healthy markets that can do what financial markets
do best: allocate scarce resources efficiently.
Federal Reserve Programs
Beginning in August 2007, the Federal Reserve responded to the crisis by implementing a number of programs designed to support the liquidity positions of financial institutions and foster improved conditions in
financial markets. The Federal Reserve actions can be
divided into three groups. The first set of tools involved
the provision of short-term liquidity to banks and other
financial institutions through the traditional discount
window to stem the precipitous decline in interbank lending. The Term Auction Facility (TAF), which was created
in December 2007, allowed depository institutions to access Federal Reserve funds through an auction process,
wherein depository institutions bid for TAF funds at an
interest rate that was determined by the auction. The final TAF auction was held in March 2010 and, in total,
the Federal Reserve disbursed over $3.8 trillion in TAF
loans. All TAF loans were repaid in full, with interest.
The Federal Reserve also initiated the Term Securities
Lending Facility (TSLF) and the Primary Dealer Credit
Facility (PDCF), both of which provided additional liquidity to the system and helped stabilize the broader financial markets. The PDCF and TSLF expired on February
1, 2010, consistent with the Federal Reserve’s June 2009
announcement.
The second set of tools involved the provision of liquidity directly to borrowers and investors in key credit markets. The Commercial Paper Funding Facility (CPFF),
Asset-Backed Commercial Paper Money Market Mutual
Fund Liquidity Facility (AMLF), Money Market Investor

28
Funding Facility (MMIFF), and the Term Asset-Backed
Securities Loan Facility (TALF) fall into this category. As
a third set of instruments, the Federal Reserve expanded
its traditional tool of open market operations to support
the functioning of credit markets through the purchase of
longer-term secondary market securities for the Federal
Reserve’s System Open Market Account portfolio. In light
of improved functioning of financial markets, many of the
new programs have expired or been closed including the
MMIFF (October 30, 2009), AMLF (February 1, 2010),
and CPFF (February 1, 2010).
To address the frozen consumer and commercial credit markets, the Federal Reserve announced
on November 25, 2008, that in conjunction with the
Treasury Department it would lend up to $200 billion to
holders of newly issued AAA-rated asset-backed securities through the TALF. The program was expanded as
part of the Administration’s Financial Stability Plan and
launched in March 2009. The program supported the issuance of asset-backed securities collateralized by student loans, auto loans, credit card loans, Small Business
Administration guaranteed loans, commercial mortgage
loans, and certain other loans. As part of the program,
Treasury provided through TARP authorities protection to the Federal Reserve by originally covering the
first $20 billion in losses on all TALF loans. However,
in July 2010, Treasury, in consultation with the Federal
Reserve, reduced its loss-coverage to $4.3 billion, which
represented approximately 10 percent of the total $43
billion outstanding in the facility when the program was
closed to new lending on June 30, 2010. Borrowers have
continued to repay their loans early at a rapid pace, in
part because interest rates on TALF loans were designed
to be higher than market rates in more-normal conditions. In June 2012, Treasury, in consultation with the
Federal Reserve, further reduced its loss-coverage to
$1.4 billion. Finally, Treasury and the Federal Reserve
announced in January 2013 that Treasury’s commitment of TARP funds to provide credit protection was no
longer necessary due to the fact that the accumulated
fees collected through TALF exceeded the total principal
amount of outstanding TALF loans. As of January 15,
2013, Treasury had recognized a gain of $424 million on
TALF, with additional gains expected in the future.
To support mortgage lending and housing markets, the
Federal Reserve began purchasing up to $175 billion of
Government-Sponsored Enterprise (GSE) debt and up to
$1.25 trillion of GSE mortgage-backed securities (MBS)
beginning in December 2008. The Federal Reserve completed its purchase of $1.25 trillion in GSE MBS in March
2010, and purchased $172.1 billion of GSE debt as of
December 2011. Purchasing GSE debt and MBS provided
liquidity to the mortgage market, which facilitated the issuance of new mortgage loans to homebuyers at affordable interest rates. The Federal Reserve also purchased
$300 billion in longer-term Treasury securities in 2009 to
improve interest rate conditions in mortgage and other
private credit markets.
To support a stronger paced economic recovery in
November 2010 the Federal Reserve announced plans

Analytical Perspectives

to purchase up to $600 billion of additional long-term
Treasury securities as part of its “quantitative easing
two” program. The purchases were extended over an
eight-month period and, ultimately, the program concluded in June 2011. Starting in September 2011, the Federal
Open Market Committee (FOMC) announced “operation
twist” which planned to extend the average maturity of
the Fed’s portfolio by replacing $400 billion in short-term
bonds with longer-term bonds, thereby keeping long-term
interest rates low with less chance of increasing inflation. In a June 2012 FOMC meeting, the program was extended though the end of calendar year 2012. In a significant shift away from the Federal Reserve’s time-limited
approach to monetary policy, on December 12, 2012, the
FOMC announced that the Federal Reserve would continuing to purchase MBS and longer-term Treasury securities every month to keep interest rates low until specified thresholds are met. The FOMC indicated that this
extraordinary support would continue until either unemployment drops below 6.5 percent, or inflation exceeds 2.5
percent.
Earnings resulting from the expansion of the Federal
Reserve’s balance sheet through the purchase of GSE debt,
GSE MBS, and long-term Treasury securities have, over
the last several years increased the surplus the Federal
Reserve deposits in the Treasury, reducing the budget deficit, though various factors in 2012 led to a slight decline
in year-over-year deposits. In 2012, Treasury received $82
billion from the Federal Reserve, which represents a less
than 1 percent decrease below 2011 deposits. The Budget
projects Treasury will receive $82.9 billion and $92.0 billion from the Federal Reserve in 2013 and 2014, respectively.
Federal Deposit Insurance
Corporation (FDIC) Programs
Using its existing authority, the FDIC created the
Temporary Liquidity Guarantee Program (TLGP) in
October 2008, to help restore confidence in the banking sector and prevent large scale deposit flight. There
were two components to the TLGP: the Debt Guarantee
Program and the Transaction Account Guarantee
Program (TAG). The Debt Guarantee Program (DGP) allowed participating institutions (banks and their holding companies and affiliates) to issue FDIC-guaranteed
senior secured debt. Therefore, if a participating institution defaulted on its debt, the FDIC would make required principal and interest payments to holders of
senior unsecured debt. The FDIC charged additional
fees and surcharges for any participating institutions
that voluntarily opted into this program. Originally, the
guarantee was limited to unsecured debt issued between
October 14, 2008, and June 30, 2009, and the FDIC debt
guarantee coverage extended through June 30, 2012. On
March 17, 2009, the FDIC extended coverage to debt issued through October 31, 2009, and extended the guarantee through December 31, 2012. The FDIC also levied
a surcharge on debt issued between April 1, 2009, and
October 31, 2009, which was transferred to the Deposit
Insurance Fund. On October 23, 2009, the FDIC adopted

3.  Financial Stabilization Efforts and their Budgetary Effects

a final rule reaffirming that the FDIC would not guarantee any debt issued after October 31, 2009. The rule also
established a limited, six-month emergency guarantee
facility upon expiration of the program; however, this facility was never utilized. As of December 31, 2012, there
was no debt outstanding in the senior unsecured debt
guarantee program.
TAG, the second component of the TLGP, extended
an unlimited FDIC guarantee to participating insured
depository institutions on non-interest bearing transaction account deposits, which included low-interest negotiable order of withdrawal (NOW) accounts and Interest
on Lawyers Trust Accounts (IOLTAs). The FDIC charged
additional premiums for any banks that voluntarily opted into this program. This guarantee helped to facilitate
economic recovery by, among other things, promoting
business confidence in the banks that held their payroll
deposits. The original Transaction Account Guarantee expired on December 31, 2010.
The Wall Street Reform Act provided two additional
years of unlimited insurance for non-interest bearing
transaction accounts—starting on December 31, 2010,
and ending on December 31, 2012. The Permanent Federal
Deposit Insurance Coverage for Interest on Lawyers
Trust Accounts Act (P.L. 111-343) enacted on December
29, 2010, extended the two years of unlimited coverage to
IOLTAs as well, though not to NOW accounts. The coverage extended through the Act was provided to all insured
institutions and there were no separate fees associated
with this coverage.
The FDIC has further collaborated with the Treasury
Department and the Federal Reserve to provide exceptional assistance to institutions such as Citigroup.
Alongside the Treasury and the Federal Reserve, the
FDIC guaranteed up to $10 billion of a $301 billion portfolio of residential and commercial mortgage-backed securities at Citigroup. The guarantee was terminated in
December 2009 as part of a larger Citigroup initiative to
repay Federal support.
For a more detailed analysis of active FDIC programs,
see the section titled, “Deposit Insurance” in the Credit
and Insurance chapter in this volume.
National Credit Union Administration
(NCUA) Programs
The NCUA has continued to take aggressive actions, as
well as implement new policies, in response to dislocations
in financial markets in order to maintain member and investor confidence, limit losses, and promote recovery in
the credit union system. These actions have included raising the deposit insurance coverage to $250,000 in 2009,
providing liquidity loans to member credit unions totaling
$24 billion, and stabilizing five credit unions through conservatorship. NCUA has also executed multiple programs
amidst the economic crises to ensure liquidity and ultimately the continued safety and soundness of the credit
union system, including the Corporate System Resolution
Program under the Temporary Corporate Credit Union
Stabilization Fund.

29

For a more detailed analysis of active NCUA programs,
see the section titled, “Deposit Insurance” in the Credit
and Insurance chapter in this volume.
Housing Market Programs under the
Housing and Economic Recovery Act
To avoid a possible collapse of the housing finance
market and further risks to the broader financial market, the Federal Housing Finance Agency (FHFA) placed
the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac) into conservatorship on September 6, 2008.
On the following day, the U.S. Treasury launched three
new programs to provide temporary financial support to
these housing Government-Sponsored Entities (GSEs)
and to stabilize the housing market under the broad authority provided in the Housing and Economic Recovery
Act (HERA) of 2008 (P.L. 110–289). First, the Treasury
Department provided capital to the GSEs through Senior
Preferred Stock Purchase Agreements (PSPAs) to ensure
that the GSEs maintain a positive net position (i.e., assets are greater than or equal to liabilities). On December
24, 2009, Treasury announced that the funding commitments in the purchase agreements would be modified to
the greater of $200 billion or $200 billion plus cumulative
net worth deficits experienced during calendar years 2010
through 2012, less any surplus remaining as of December
31, 2012. Second, the Treasury established a line of credit
for Fannie Mae, Freddie Mac, and the Federal Home Loan
Banks to ensure they have adequate funding on a shortterm, as-needed basis. This line of credit was never used.
The Treasury also initiated purchases of GSE guaranteed
mortgage-backed securities (MBS) in the open market
(separate from the Federal Reserve’s MBS purchase program discussed above), with the goal of increasing liquidity in the secondary mortgage market. In December 2009,
the Treasury initiated two additional purchase programs
under HERA authority to support housing assistance provided through new and existing State and local Housing
Financing Agencies (HFAs) revenue bonds. Treasury’s
authority to enter new obligations under the GSE PSPA
agreement, MBS purchase, and HFA support programs
expired on December 31, 2009. However, Treasury’s existing commitments continue to support any needed capital infusions through PSPAs, and new and existing HFA
housing bond issuances, and Treasury will continue to
collect proceeds from the sale or repayment of the securities that it owns.
As of December 31, 2012, Treasury has provided
$187.5 billion to Fannie Mae and Freddie Mac under the
PSPAs. The PSPAs also require that the GSEs pay quarterly dividends to Treasury. Prior to calendar year 2013,
the quarterly dividend amount was based on an annual
rate of 10 percent of the redemption value of Treasury’s
senior preferred stock. Amendments to the PSPAs effected on August 17th, 2012, replace the 10 percent dividend with an amount equivalent to the GSE’s positive
net worth above a capital reserve amount. The capital
reserve amount for each company is initially set at $3.0
billion for calendar year 2013, and declines by $600 mil-

30
lion at the beginning of each calendar year thereafter
until it reaches zero. GSEs have paid $55.2 billion in
dividends as of December 31, 2012. The Budget estimates
additional net dividend receipts of $183.3 billion from
January 1, 2013 through 2023. The cumulative budgetary impact of the PSPA agreements from the first PSPA
purchase through 2023 is estimated to be savings of $51
billion. The Temporary Payroll Tax Cut Continuation Act
of 2011 signed into law on December 23, 2011, required
that the GSEs increase their fees by an average of at
least 0.10 percentage points above the average guarantee fee imposed in 2011. Revenues generated by this fee
increase are remitted directly to the Treasury for deficit
reduction and are not included in the PSPA amounts. The
Budget estimates resulting deficit reductions from this
fee of $21 billion from 2012 through 2023.In addition,
significant assistance has been provided to the mortgage
market through the Federal Housing Administration,
through Federal Reserve Bank purchases of GSE MBS
(as described above), and through the Department of the
Treasury (as described below). A more detailed analysis of
these housing assistance programs and the future of the
GSEs is provided in the “Credit and Insurance” chapter of
this volume.
Treasury Programs
Small Business Lending Programs. To increase the
availability and affordability of credit to help small businesses drive economic recovery and create jobs, the Small
Business Jobs Act of 2010 (P.L. 111-240) created two
new programs proposed by the Administration that are
being administered by the Department of the Treasury:
the State Small Business Credit Initiative (SSBCI),
which provides capital through grants to State programs
that support lending to small businesses, and the Small
Business Lending Fund (SBLF), which was authorized to
provide up to $30 billion in capital to qualified community
banks and other targeted lenders with assets of less than
$10 billion to encourage their lending to small businesses.
The SSBCI authorizes Treasury to disburse $1.5 billion to new and existing State programs such as Capital
Access Programs (CAPs) and Other Credit Support
Programs (OCSPs) that will leverage private financing to
spur up to $15 billion in new lending to small businesses and small manufacturers. For every dollar of Federal
funding, SSBCI requires at least $10 in private lending. A
total of 53 States and territories (out of a possible 56)
applied to take part in the SSBCI. A total of 5 municipalities in the three States that did not apply (Wyoming,
North Dakota, and Alaska) submitted their applications
directly to SSBCI by the statutory deadline of September
27, 2011, for a total of 58 applications received by the
program. Through 2012, SSBCI approved funding for 47
States, the District of Columbia, five U.S. territories and
four municipalities. SSBCI estimates that approximately
$1.46 billion will be disbursed by the end of September
2014, with $1.1 billion disbursed by the end of September
2013. (Note: SSBCI funds States in three equal tranches.
States, territories, and municipalities must prove that
they have disbursed at least 80 percent of prior funds be-

Analytical Perspectives

fore receiving the remaining tranches.) Treasury expects
to disburse nearly all of the $1.5 billion funds. While it is
still too early to measure the success of the SSBCI program, initial reports are promising, with 54 Participating
States, territories, and municipalities reporting using
SSBCI funds to support loans and investments. SSBCI
receives quarterly reports from Participating States showing the gross amount of funds used and more detailed annual reports on a transaction level basis. Annual reports
for the period ending December 31, 2012, are due March
31, 2013 and will represent the first full year of activity
for most Participating States. SSBCI uses the reports to
assess performance and provide tailored technical assistance, including assessment and communication across
states of “best practices” to maximize the effectiveness of
funding. In 2013 and 2014 Treasury will provide more
intensive technical assistance.
The SBLF authorized Treasury to lend up to $30 billion
of capital to eligible financial institutions (those having
less than $10 billion in assets) and participating institutions are required to pay dividends based on the volume
growth of their small business lending portfolio. Providing
this low-cost capital to lenders is designed to increase their
loans to small businesses. The application period closed in
June 2011 and all awards were made by September 27,
2011, the statutory end of the funding phase of the program. Treasury received 933 applications totaling $11.8
billion. Of these, 332 institutions were approved for over
$4.0 billion, with some institutions screened out due in
part to stringent credit requirements aimed at protecting
taxpayer dollars and avoiding lending to institutions that
were likely to default on their SBLF obligations. Banks ineligible for the program included: (1) institutions listed on
the regulator’s problem bank list with expected CAMELS
score greater than 4; and (2)  TARP Capital Purchase
Program (CPP) participants with more than one missed
CPP dividend payment. As of September 30, 2012, SBLF
participants had increased their small business lending
by $7.4 billion over the baseline with 78 percent of SBLF
participants increasing small business lending by 10 percent or more. SBLF is expected to create a positive return
for taxpayers given the prudent lending standards established by the program. For more information on SSBCI
and SBLF, please see the “Credit and Insurance” chapter,
in this volume.
Troubled Asset Relief Program (TARP). The 2008
EESA authorized the Treasury to purchase or guarantee troubled assets and other financial instruments to
restore liquidity and stability to the financial system of
the United States while protecting taxpayers. Treasury
has used its authority under EESA to provide capital to
and restore confidence in U.S. financial institutions, to restart markets critical to financing American households
and businesses, and to address housing market problems
and the foreclosure crisis.  Under EESA, the Secretary’s
authority was originally limited to $700 billion in obligations at any one time, as measured by the total purchase
price paid for assets and guaranteed amounts outstanding.  The Helping Families Save Their Homes Act of 2009
(P.L. 111-22) reduced total TARP purchase authority by

3.  Financial Stabilization Efforts and their Budgetary Effects

$1.3 billion, and in July 2010, the Wall Street Reform Act
further reduced total TARP purchase authority to a maximum of $475 billion in cumulative obligations. 
On December 9, 2009, and as authorized by EESA, the
Secretary of the Treasury certified to Congress that an extension of TARP purchase authority until October 3, 2010,
was necessary “to assist American families and stabilize
financial markets because it will, among other things, enable us to continue to implement programs that address
housing markets and needs of small businesses, and to
maintain the capacity to respond to unforeseen threats.” 
On October 3, 2010, the Treasury’s authority to make new
TARP commitments expired.  The Treasury continues to
manage existing investments and is authorized to expend
previously committed TARP funds pursuant to obligations entered into prior to October 3, 2010.
In extending TARP authority through October 3, 2010,
the Secretary outlined the Government’s four elements of
its strategy to wind down TARP and related programs:
First, the Treasury would wind down those programs that
are no longer necessary, such as the Capital Purchase
Program (CPP); funding for the CPP ended on December
31, 2009. Second, new planned programs in 2010 under
the extension of the purchase authority would be limited to three areas: (1) continued foreclosure mitigation
for responsible American homeowners and stabilization
of the housing market; (2) initiatives to provide capital
to small and community banks; and (3) potentially increased commitment to the Term Asset-Backed Securities
Loan Facility (TALF) to improve securitization markets
that facilitate consumer and small business loans, as well
as commercial mortgage loans. Third, the Government
would maintain the capacity to respond to unforeseen
threats. The Government would not use remaining TARP
funds unless necessary to respond to an immediate and
substantial threat to the economy stemming from financial instability. Fourth, the Government would manage
equity investments acquired through TARP while protecting taxpayer interests.  It would continue to manage
those investments in a commercial manner and seek to
dispose of them as soon as practicable.
Section 202 of EESA requires the Office of Management
and Budget (OMB) to report the estimated cost of TARP
assets purchased and guarantees issued pursuant to
EESA. The most recent report was issued August 31,
2012.2 Consistent with the requirement to analyze transactions occurring no less than thirty days before publication, the 2014 Budget data presented in this report reflect
revised subsidy costs for the TARP programs using actual
performance and updated market information through
December 31, 2012. For information on subsequent TARP
program developments, please consult the Treasury
Department’s Troubled Asset Relief Program Monthly
105(a) Reports.

2  See “OMB Report under the Economic Stabilization Act, Section
202,” August 31, 2012. http://www.whitehouse.gov/sites/default/files/
omb/reports/tarp_report_august_2012.pdf

31

TARP Market Impact
Although challenges in the economy remain, TARP’s
support to the banking sector through the Capital
Purchase Program (CPP), Targeted Investment Program
(TIP), Asset Guarantee Program, and the Community
Development Capital Initiative (CDCI) helped stabilize
the financial system and strengthen the financial position
of the Nation’s banking institutions. Net income of insured
financial institutions for the quarter ending September
30, 2012, was $37.6 billion, which marked the highest
quarterly net income reported by the industry since the
third quarter (calendar year) of 2006.3 This growth in
earnings is attributable to financial institutions reducing the loan loss provisions on their balance sheets based
on improved forecasts of their asset quality and higher
revenues in the form of non-interest income and gains on
asset sales. As of September 30, 2012, total provisions for
loan losses for all insured depository institutions declined
year over year for a 12th consecutive quarter, falling to
$14.8 billion from $18.6 billion in the prior year. This continued reduction in loan loss reserves points to improving
credit and market conditions.
The on-going healing of the banking sector, coupled with
the TARP programs aimed at reviving the credit markets,
have facilitated the improved flow of credit in both the commercial and consumer markets. Together, the Term Asset
Backed Securities Loan Facility (TALF) and the Public
Private Investment Program (PPIP) helped to improve
the overall credit climate for businesses, as evidenced by
the declining cost of long-term investment grade borrowing, which has fallen from a peak of roughly 570 basis
points over benchmark Treasury securities at the height
of the crisis to just 160 basis points over Treasuries as of
December 31, 2012.4 However, additional progress is needed to increase small businesses’ access to credit, and enable
the economy to achieve its full potential.
Emergency loans to General Motors and Chrysler via
the TARP Automotive Industry Financing Program (AIFP)
spurred the resurgence of the U.S. auto manufacturing industry. The Administration’s assistance to both GM and
Chrysler was conditioned on the requirement that stakeholders make difficult, but necessary restructuring and
reorganization decisions in order for these companies to
emerge from bankruptcy and achieve long-term viability.
Although AIFP is still estimated to result in a net cost to
taxpayers, the Government has been able to recover much
more from auto companies than originally estimated, and
far sooner, while reinvigorating one of America’s critical
industries. New Chrysler has posted eleven consecutive
quarters of operating profit and has announced more
than $8.9 billion in investments in plants and technology
since emerging from bankruptcy in 2009.5 The story has
3  Federal Deposit Insurance Corporation, Quarterly Banking Profile,
September 2012. http://www2.fdic.gov/qbp/2012sep/qbp.pdf
4  Spreads for the cost of long-term investment grade borrowing are
based upon 10-year Treasury yield and FINRA/Bloomberg Investment
Grade U.S. Corporate Bond Index yield.
5  Chrysler, Third Quarter 2012 Financial Results Webcast, October,
30, 2012
http://www.chryslergroupllc.com/Investor/presentations/
QAWebcasts/ChryslerDocuments/Q3_2012_Presentation.pdf

32
been similar for New GM—and the industry as a whole.
In January 2012, GM announced that it had regained its
spot as the world’s largest global seller of automobiles and
as of November 2012, auto sales are the highest they have
been in more than four years. The auto industry is leading a resurgence in American manufacturing that translates to the creation of more American jobs, with nearly
250,000 jobs created in the American auto industry over
the past three years.
Although the housing market is still recovering, the
Administration’s housing programs implemented through
the TARP have helped stabilize the market and kept millions of borrowers in their homes. As of December 31, 2012,
more than 1.1 million borrowers have received permanent
modifications through the Home Affordable Modification
Program (HAMP), which amounts to an estimated $17.3
billion in realized monthly mortgage payment savings for
these homeowners. In addition to helping these borrowers,
the Administration’s TARP housing programs have been
a catalyst to private sector mortgage modifications. Since
April 2009, HAMP, FHA, and the private sector HOPE
Now alliance have initiated more than 6.2 million mortgage modifications, which is nearly double the number of
foreclosure completions that were executed in the same
period. The Administration has continued to respond to
the evolving housing crisis by implementing programs
that provide mortgage relief to unemployed homeowners and those with negative home equity. Furthermore,
through the HFA Hardest Hit Fund, the Administration
has allocated $7.6 billion to eligible States to implement
innovative housing programs to bring stability to local
housing markets and meet the unique needs of their communities.

Analytical Perspectives

by $6.63 (or 30 percent), relative to the share prices used
to formulate the May 31st valuation.7
There has been a notable reduction in TARP’s projected
deficit impact from the $341 billion estimate published in
the 2010 MSR (see graph below). The Budget reflects a
total TARP deficit impact of $47.5 billion, a $294 billion
reduction from the 2010 MSR and a $309 billion reduction from the Congressional Budget Office’s March 2009
estimate of $356 billion.
A description of the TARP programs, followed by a detailed analysis of the programmatic changes to the TARP
and the cost estimates since the publication of the 2013
MSR, is provided below.
Description of Assets Purchased
Through the TARP, by Program

Over four years after the first TARP dollars were disbursed, the TARP has not only helped to stabilize financial markets and set the foundation for economic recovery,
but it has done so at a much lower cost than originally estimated. As of December 31, 2012, total repayments and
income on TARP investments were approximately $387
billion, which is 93 percent of the $418 billion in total
disbursements to date. The projected total lifetime deficit impact of TARP programmatic costs, reflecting recent
activity and revised subsidy estimates based on market
data as of December 31, 2012, is now estimated at $47.5
billion (see Table 3–1).6
Compared to the 2013 MSR estimate of $68 billion, the
estimated deficit impact of TARP decreased by $20.5 billion. This decrease was largely attributable to the higher valuation of the AIG and GM common stock sold via
public offering or held by Treasury as well as lower expected costs associated with TARP’s support of the FHA
Refinance Program. In 2012, Treasury sold its remaining
AIG common stock holdings via 5 public offerings at prices ranging from $29.00 to $32.50, representing a weighted average share price increase of $2.36 from the May
31st valuation. Additionally, GM’s share price increased

Capital Purchase Program (CPP). Pursuant to
EESA, the Treasury created the CPP in October 2008 to
restore confidence throughout the financial system by ensuring that the Nation’s banking institutions have a sufficient capital cushion against potential future losses and
to support lending to creditworthy borrowers. All eligible
CPP recipients completed funding by December 31, 2009,
and Treasury purchased $204.9 billion in preferred stock
in 707 financial institutions under the CPP program. As of
December 31, 2012, Treasury had received approximately
$194 billion in principal repayments (i.e., redemptions of
common and preferred stock, CDCI conversions, and refinances to SBLF) and $26.5 billion in revenues from dividends, interest, warrants, gains/other interest and fees.
Total redemptions and income now exceed Treasury’s initial investment by $15.5 billion. As of December 31, 2012,
$7.4 billion remained outstanding under the program.
Community Development Capital Initiative
(CDCI). The CDCI program invests lower-cost capital in
Community Development Financial Institutions (CDFIs),
which operate in markets underserved by traditional financial institutions. In February 2010, Treasury released
program terms for the CDCI program, under which participating institutions received capital investments of up
to 5 percent of risk-weighted assets and pay dividends to
Treasury of as low as 2 percent per annum. The dividend
rate increases to 9 percent after eight years. CDFI credit
unions were able to apply to TARP for subordinated debt
at rates equivalent to those offered to CDFI banks and
thrifts. These institutions could apply for capital investments of up to 3.5 percent of total assets — an amount approximately equivalent to the 5 percent of risk-weighted
assets available under the CDCI program to banks and
thrifts. TARP capital of $570 million has been committed
to this program. As of December 31, 2012, approximately
$530 million remained outstanding under the program.
Capital Assistance Program and Other Programs
(CAP). In 2009, Treasury worked with federal banking
regulators to develop a comprehensive “stress test” known
as the Supervisory Capital Assessment Program (SCAP)
to assess the health of the nation’s 19 largest bank holding companies. In conjunction with SCAP, Treasury

6  Note, including proceeds from Treasury’s non-TARP holdings in
AIG, the total deficit impact is estimated at $30 billion.

7  The 2014 Budget valuation used the December 31, 2012 share price
of $28.83 for Treasury’s GM common stock.

Deficit Impact

3.  Financial Stabilization Efforts and their Budgetary Effects

announced that it would provide capital under TARP
through the Capital Assistance Program (CAP) to institutions that participated in the stress tests as well as others. Only one TARP institution (Ally Financial) required
additional funds under the stress tests, but received them
through the Automotive Industry Financing Program, not
CAP. CAP closed on November 9, 2009, without making
any investments and did not incur any losses to taxpayers. Following the release of the stress test results, banks
were able to raise hundreds of billions of dollars in private
capital.
American International Group (AIG) Investments.
The Federal Reserve Bank of New York (FRBNY) and the
Treasury provided financial support to AIG in order to
mitigate broader systemic risks that would have resulted
from the disorderly failure of the company. To prevent the
company from entering bankruptcy and to resolve the liquidity issues it faced, the FRBNY provided an $85 billion
line of credit to AIG in September 2008 and received preferred shares that entitled it to 79.8 percent of the voting
rights of AIG’s common stock. After TARP was enacted,
the Treasury and FRBNY continued to work to facilitate
AIG’s execution of its plan to sell certain of its businesses in an orderly manner, promote market stability, and
protect the interests of the U.S. Government and taxpayers. As of December 31, 2008, when purchases ended, the
Treasury had purchased $40 billion in preferred shares
from AIG through TARP, which were subsequently converted into common stock. In April 2009, Treasury also
extended a $29.8 billion line of credit, of which AIG drew
down $27.8 billion, in exchange for additional preferred
stock. The remaining $2 billion obligation was subsequently canceled.
AIG executed a recapitalization plan with FRBNY,
Treasury, and the AIG Credit Facility Trust in midJanuary 2011 that allowed for the acceleration of the
Government’s exit from AIG. Following the restructuring and AIG’s ensuing public offering in May of 2011,
the Treasury had a 77 percent ownership (or 1.45 billion
shares) stake in AIG, which represented a 15 percentage
point reduction from Treasury’s 92 percent ownership
stake in January 2011. Throughout 2012, Treasury completed public offerings to further reduce its AIG ownership stake. In December 2012, Treasury sold its remaining balance of AIG common in a public offering that
reduced Treasury’s AIG common stock position to zero.
With this final sale, the Treasury and the FRBNY have
fully recovered all funds committed to stabilize AIG during the financial crisis and realized an additional $22.7
billion positive return.8 In March 2013, Treasury sold its
remaining 2.7 million warrants for $25.2 million and has
fully exited its investment in AIG. A summary of the deal
terms and recent transactions is provided below:
•	 On March 7, 2012, Treasury announced an agreement with AIG that provided for the repayment of
8  Treasury’s investment in AIG common shares consisted of shares
acquired in exchange for preferred stock purchased with TARP funds
(TARP shares) and shares received from the trust created by the FRBNY for the benefit of Treasury as a result of its loan to AIG (non-TARP
shares).

33

the government’s remaining $8.5 billion preferred
equity investment in the AIG-owned entity AIA Aurora LLC (AIA SPV) from the following sources: (1)
$5.6 billion in proceeds from AIG’s sale of ordinary
shares of AIA (2) $1.6 billion in proceeds from the
FRBNY’s final disposition of Maiden Lane II LLC
securities announced on February 28, 2012 and (3)
$1.6 billion in escrowed cash proceeds resulting from
AIG’s sale of its American Life Insurance Co. (ALICO) subsidiary to MetLife, Inc.
•	 On March 8, 2012, Treasury sold approximately 207
million shares of AIG common stock through a public offering at $29.00 per share, netting $6.0 billion
in proceeds for taxpayers. As part of the offering,
AIG agreed to purchase approximately 103.5 million shares at $29.00 per share, representing $3.0
billion of Treasury’s expected proceeds from the sale.
Approximately two-thirds of the proceeds are attributable to shares received as a result of the TARP
assistance to AIG, while the remaining one-third is
attributable to the shares transferred to the Treasury from the FRBNY.
•	 On March 22, 2012, AIG made the final $1.5 billion
payment to Treasury to retire Treasury’s preferred
interest in the AIG-owned entity AIA Aurora LLC
(AIA SPV) ­ a special purpose vehicle that holds
—
ordinary shares in AIA Group Limited (AIA), more
than one year ahead of schedule. With this payment,
Treasury’s preferred equity investment related to
AIG has been repaid in full.
•	 On May 10, 2012 Treasury sold approximately 188.5
million shares of AIG common stock through a public offering at $30.50 per share, netting $5.75 billion
in proceeds for taxpayers.
•	 On August 8, 2012 Treasury sold approximately
188.5 million shares of AIG common stock through a
public offering at $30.50 per share, for an additional
$5.75 billion in proceeds.
•	 On September 14, 2012 Treasury sold approximately
636.9 million shares of AIG common stock through a
public offering at $32.50 per share, netting $20.7 billion in proceeds for taxpayers.
•	 On December 14, 2012 Treasury sold its entire remaining position of approximately 234 million
shares of AIG common stock through a public offering at $32.50 per share, netting $7.6 billion in proceeds for taxpayers.
Targeted Investment Program (TIP). The goal of
the TIP was to stabilize the financial system by making investments in institutions that are critical to the
functioning of the financial system.  Investments made
through the TIP sought to avoid significant market disruptions resulting from the deterioration of one financial
institution that could threaten other financial institutions and impair broader financial markets, and thereby
pose a threat to the overall economy. Under the TIP, the

34
Treasury purchased $20 billion in preferred stock from
Citigroup and $20 billion in preferred stock from Bank
of America. The Treasury also received stock warrants
from each company. Both Citigroup and Bank of America
repaid their TIP investments in full in December 2009,
along with dividend payments of approximately $3.0
billion. In March 2010, Treasury sold all of its Bank of
America warrants for $1.2 billion, and in January 2011,
the Treasury sold Citigroup warrants acquired through
the TIP for $190.4 million. The TIP is closed and has no
remaining assets.
Asset Guarantee Program (AGP). The TARP created the AGP to provide Government assurances for assets held by financial institutions that were critical to the
functioning of the nation’s financial system. In January
2009, the Treasury, the Federal Reserve, and the FDIC
negotiated a potential loss-sharing arrangement under
the AGP on up to $118 billion of financial instruments
owned by Bank of America. In May 2009, Bank of America
announced its intention to terminate negotiations with
respect to the loss-sharing arrangement. In September
2009, the Treasury, the Federal Reserve, the FDIC, and
Bank of America entered into a termination agreement
pursuant to which Bank of America agreed to pay a termination fee of $425 million to the Government parties.
Of this amount, $276 million was paid to the TARP in
2009 for the value Bank of America received from the announcement of the government’s willingness to guarantee
and share losses on the pool of assets.
The Treasury, the Federal Reserve and the FDIC entered into a final agreement for a loss-sharing arrangement with Citigroup on January 15, 2009. Under the
agreement, the Treasury guaranteed up to $5 billion of potential losses incurred on a $301 billion portfolio of financial assets held by Citigroup. The agreement was terminated, effective December 23, 2009. The U.S. Government
parties did not pay any losses under the agreement, and
retained $5.2 billion of the $7 billion in trust preferred
securities that were part of the initial agreement with
Citigroup.9 TARP retained $2.2 billion of the trust preferred securities, as well as warrants for common stock
shares that were issued by Citigroup as consideration for
the guarantee. Treasury sold the trust preferred securities on September 30, 2010, and the warrants on January
25, 2011. On December 28, 2012, Treasury received $800
million in additional Citigroup trust preferred securities
from the FDIC as contemplated by the agreements entered into by Treasury and the FDIC. The AGP program
will generate a positive return to the taxpayers from the
preferred securities and other considerations.
Automotive Industry Financing Program (AIFP).
In December 2008, the Treasury established the AIFP to
prevent a disruption of the domestic automotive industry, in order to mitigate a systemic threat to the Nation’s
economy and a potential loss of thousands of jobs.
Through TARP, the Treasury originally committed $84.8
billion through loans and equity investments to partici9  Trust Preferred Securities (TruPS) are financial instruments that
have the following features: they are taxed like debt; counted as equity
by regulators; are generally longer term; have  early redemption features; make quarterly fixed interest payments; and mature at face value.

Analytical Perspectives

pating domestic automotive manufacturers, auto finance
companies, and auto parts manufacturers and suppliers.
As of December 31, 2012, Treasury had recouped nearly
58 percent of its investments in GM and had fully exited
its Chrysler Group LLC investments. Below is a summary
of the securities TARP received in exchange for the assistance provided to automotive manufacturers and recent
transactions:
•	 Treasury received 60.8 percent of the common equity and $2.1 billion in preferred stock in “New GM”
when the sale of assets from the old GM to the new
GM took place on July 10, 2009. In April 2010, GM
fully repaid its $7 billion loan, ahead of its publicly
stated goal to repay the entire loan by June 2010.
As part of New GM’s initial public offering (IPO)
in November 2010, Treasury sold nearly 359 million shares of New GM common stock at $33.00 per
share, and subsequently sold an additional 53.7
million shares in December 2010 at the same price.
In total, TARP raised $13.5 billion in net proceeds
from the New GM IPO and reduced its ownership
stake by nearly half, to approximately 32 percent.
New GM also repurchased $2.1 billion in preferred
stock from TARP in December 2010. In December
2012, GM purchased 200 million shares of GM common stock from Treasury at $27.50 per share (a 10
percent premium) for proceeds of $5.5 billion and
Treasury also announced its intent to fully exit its
investment in GM within the next 12-15 months. As
of December 31, 2012, TARP had recouped $29.5 billion of the $51.03 billion in aid extended to GM.
•	 Treasury also received a $7.1 billion debt security
and a 9.9 percent share of the equity in the newly formed, post-bankruptcy Chrysler Group LLC
(New Chrysler). As part of the bankruptcy proceedings, New Chrysler also assumed $500 million of
debt from TARP’s original $4 billion loan to Chrysler Holding (Old Chrysler). Therefore, TARP held a
$3.5 billion loan with Old Chrysler in addition to
investments in New Chrysler. In April 2010, TARP
received a $1.9 billion repayment of its investments
in Old Chrysler. This repayment, while less than the
amount Treasury invested, was significantly more
than the Administration had previously estimated
to recover. As part of the repayment agreement,
Treasury agreed to write off the $1.6 billion balance
remaining under the $3.5 billion TARP loan to Old
Chrysler. On May 24, 2011, six years ahead of schedule, Chrysler Group LLC repaid the remaining $5.1
billion in TARP loans and terminated the remaining $2.1 billion TARP loan commitment. Finally, on
June 2, 2011, Treasury reached an agreement to sell
to Fiat Treasury’s 6 percent fully diluted equity interest in New Chrysler and Treasury’s interest in
an agreement with the UAW retiree trust for $560
million. The closing of this transaction in July 2011
marked Treasury’s full exit from its TARP investments in Chrysler. In total, Chrysler repaid $11.1

3.  Financial Stabilization Efforts and their Budgetary Effects

billion10 of the $12.4 billion in aid provide by the U.S.
Government, which far exceeded expectations when
the program was first unveiled in December 2008.
•	 Treasury has also purchased investments totaling
$16.3 billion in Ally Financial (formerly GMAC). On
December 30, 2010, Treasury converted $5.5 billion
of its $11.4 billion in convertible preferred stock in
Ally Financial into common stock. On March 2, 2011,
Treasury sold all of its trust preferred securities for
approximately $2.7 billion. In May 2012, Ally Financial began exploring strategic alternatives for its
international businesses in a manner that Ally believes will maximize value for its shareholders and
Residential Capital, its mortgage subsidiary, filed
for Chapter 11 bankruptcy. As of December 31, 2012,
Treasury had recouped $5.8 billion of its $16.3 billion in Ally-related investments, including $3.1 billion in dividends and interest.
Both the Auto Supplier Support Program (ASSP) and
the Auto Warranty Commitment Program (AWCP) have
closed and, in aggregate, these investments did not result
in losses. The Government originally committed $5 billion
in loans to ASSP, ensuring the auto suppliers received
compensation for products and services purchased by automakers. Through the AWCP, the Government extended
support to protect consumer warranties on purchased
GM and Chrysler vehicles while the companies worked
through their restructuring plans. Treasury no longer
holds warranties under the AWCP.
Credit Market Programs. The Credit Market
programs are designed to facilitate lending that supports consumers and small businesses, through the
Term Asset-Backed Securities Loan Facility (TALF),
the CDCI discussed previously, and the Small Business
Administration’s guaranteed loan program (SBA 7(a)).
TALF: The TALF was a joint initiative with the Federal
Reserve that provides financing (TALF loans) to private
investors to help facilitate the restoration of efficient and
robust secondary markets for various types of credit.
The Treasury provided protection to the Federal Reserve
through a loan to the TALF’s special purpose vehicle
(SPV), which was originally available to purchase up to
$20 billion in assets that would be acquired in the event
of default on Federal Reserve financing. The Treasury
has disbursed $0.1 billion of this amount to the TALF
SPV to implement the program, representing a notional
amount used to establish the SPV. Treasury’s total TALF
purchases were designed to be dependent on actual TALF
loan defaults, and to date none has occured. In July 2010,
Treasury, in consultation with the Federal Reserve, reduced the maximum amount of assets Treasury would acquire to $4.3 billion, or 10 percent of the total $43 billion
outstanding in the facility when the program was closed
to new lending on June 30, 2010. In June 2012, Treasury,
in consultation with the Federal Reserve, further reduced
its loss-coverage to $1.4 billion. Finally, Treasury and
10  Chrysler repayments of $11.1 billion include $560 million in proceeds from the sale of Treasury’s 6 percent fully diluted equity interest
in Chrysler to Fiat and Treasury’s interest in an agreement with the
UAW retiree trust that were executed on July 21, 2011.

35

the Federal Reserve announced in January 2013 that
Treasury’s commitment of TARP funds to provide credit
protection was no longer necessary due to the fact that
the accumulated fees collected through TALF exceeded
the total principal amount of TALF loans outstanding. As
of January 15, 2013, Treasury had recognized a cash gain
of $424 million on TALF, with additional gains expected
in the future.
SBA 7(a): In March 2009, Treasury and the Small
Business Administration announced a Treasury program
to purchase SBA-guaranteed securities (“pooled certificates”) to re-start the secondary market in these loans.
Treasury subsequently developed a pilot program to purchase SBA-guaranteed securities, and purchased 31 securities with an aggregate face value of approximately $368
million. Treasury reduced its commitment to the Small
Business 7(a) program from $1 billion to $370 million, as
demand for the program waned due to significantly improved secondary market conditions for these securities
following the original announcement of the program. In
January 2012, Treasury completed the final disposition of
its SBA 7(a) securities portfolio. The SBA 7(a) program received total proceeds of $376 million, representing a gain
of approximately $8 million to taxpayers.
Public Private Investment Program (PPIP).
The Treasury announced the Legacy Securities Public
-Private Investment Partnership (PPIP) on March 23,
2009 to help restart the market for legacy mortgagebacked securities, thereby helping financial institutions
begin to remove these assets from their balance sheets
and allowing for a general increase in credit availability
to consumers and small businesses. Under the program,
Public-Private Investment Funds (PPIFs) are established
by private sector fund managers for the purchase of eligible legacy securities from banks, insurance companies,
mutual funds, pension funds, and other eligible sellers
as defined under EESA. PPIP closed for new funding on
June 30, 2010 and the PPIFs can no longer deploy capital and make new investments as of December 2012 although they may continue to manage these investments
for up to five additional years following the termination of
their investment period. As of December 31, 2012, $18.6
billion of the $21.9 billion in funds originally committed
to PPIP had been disbursed and $15.0 billion had been
repaid. Additionally, five of the nine PPIFs had completely
wound down, returning their funds to Treasury and their
private investors at a profit.
TARP Housing Programs. To mitigate foreclosures and preserve homeownership, in February 2009
the Administration announced a comprehensive housing program utilizing up to $50 billion in funding
through the TARP. The Government-Sponsored Entities
(GSEs) Fannie Mae and Freddie Mac participated in
the Administration’s program both as the Treasury
Department’s financial agents for Treasury’s contracts
with servicers, and by implementing similar policies for
their own mortgage portfolios.11 These housing programs
are focused on creating sustainably affordable mortgages
11  For additional information on MHA programs, visit: http://www.
makinghomeaffordable.gov/.

36
for responsible homeowners who are making a good faith
effort to make their mortgage payments, while mitigating the spillover effects of foreclosures on neighborhoods,
communities, the financial system and the economy.
Following the enactment of the Wall Street Reform Act,
Treasury reduced its commitments to the TARP Housing
programs to $45.6 billion. These programs fall into three
initiatives:
1.	 Making Home Affordable (MHA);
2.	 Housing Finance Agency (HFA) Hardest-Hit Fund
(HHF); and
3.	 Federal Housing Administration (FHA) Refinance
Program.12
The MHA initiative includes among its components
the Home Affordable Modification Program (HAMP),
FHA-HAMP, the Second Lien Modification Program
(2MP), and the second lien extinguishment portion of
the FHA-Refinance Program, and Rural DevelopmentHAMP.13 Under MHA programs, the Treasury contracts
with servicers to modify loans in accordance with the
program’s guidelines, and to make incentive payments
to the borrowers, servicers, and investors for those modification or other foreclosure alternatives. As of December
31, 2012, 78 non-GSE mortgage servicers had signed
up to participate in the HAMP. Over 1.5 million MHA
homeowner assistance actions, including over 1.1 million HAMP permanent modifications, were initiated as
of the end of December 2012. Through HAMP, homeowners have saved approximately $17.3 billion in reduced
mortgage payments. Program implementation has continually improved since its inception in February 2009.
As of December 2012, 87 percent of homeowners who
started a trial modification after June 1, 2010, had converted to permanent modifications within an average of
3.5 months – a higher conversion rate and shorter time
to convert than earlier in the program. In addition to
providing responsible homeowners with sustainable
mortgages, the MHA initiative has also, for the first
time, made significant progress in offering consumer
protections for homeowners and standardizing the mortgage modification process across the servicing industry,
which has contributed to over 6 million Government
and private sector modifications and loss mitigation actions occurring since April 2009. In January 2012, the
Administration extended the deadline to apply for MHA
programs until December 31, 2013. Additionally, in June
2012, the Administration expanded MHA eligibility to
include (1) homeowners who are applying for a modification on a home that is not their primary residence,
but the property is currently rented or the homeowner
intends to rent it, (2) homeowners who previously did
12  This program has also been referred to as the FHA Short Refinance
Program or Option in other reporting. The FHA Refinance Program is
not a Treasury program, but is supported through the TARP with $1 billion to cover a share of any losses on FHA Refinance loans.
13  For additional information on MHA programs, visit: http://www.
makinghomeaffordable.gov/.

Analytical Perspectives

not qualify for HAMP because their mortgage debt-toincome ratio was 31.0 percent or lower, and (3) homeowners who previously received a HAMP permanent
modification, but defaulted on their payments, therefore
losing good standing.
Treasury also offers other forms of incentives to encourage mortgage loan modifications, or prevent foreclosure under the HAMP, as part of its MHA program. For
example, Treasury provides payments to servicers and
investors to protect against declining home prices as part
of encouraging mortgage modifications in communities
that have experienced continued home price depreciation.
When a mortgage modification is not possible, Treasury
contracts with servicers to provide incentives that encourage borrower short sales (sales for less than the value
of the mortgage in satisfaction of the mortgage) or deedsin-lieu (when the homeowner voluntarily transfers ownership of the property to the servicer in full satisfaction
of the total amount due on the mortgage) via the Home
Affordable Foreclosure Alternatives Program (HAFA), in
order to provide a means for borrowers to avoid foreclosure. Since the inception of the program, over 101,000
HAFA transactions have been completed.
As part of its ongoing effort to continuously refine the
targeting of mortgage assistance to address the sector’s
greatest needs, the Administration created several programs that will give a greater number of responsible borrowers an opportunity to remain in their homes and reduce costly foreclosures. Major programs announced since
December 31, 2009, include:
Home Affordable Unemployment Program (part of
HAMP): Unemployed borrowers that meet eligibility criteria will receive temporary mortgage payment assistance
while they look for a new job. In an effort to keep more
unemployed borrowers in their homes and allow them an
opportunity to find new employment, Treasury extended
the minimum period for which unemployed borrowers receive temporary payment assistance from 3 months to 12
months in July 2011. In response to the Administration’s
efforts, 12-month forbearance is becoming an industry
standard, with Fannie Mae and Freddie Mac now applying it to mortgages they own and Wells Fargo and Bank
of America now offering it as their default approach for
unemployed borrowers.
Principal Reduction Alternative (PRA, part of HAMP):
Servicers who have signed up for this program are required to consider an alternative mortgage modification
that emphasizes principal relief for borrowers who owe
more than their home is worth. Under the alternative
approach, if the servicer reduces borrower loan principal
using this program, investors will receive incentive payments based on a percentage of each dollar of loan principal written off. Borrowers and investors will receive principal reduction and the incentives, respectively, through
a pay-for-success structure. In February 2012, Treasury
issued guidance that tripled the amount of financial incentives under PRA for investors who agree to reduce
principal for eligible underwater homeowners. There have
been nearly 114,000 PRA trial modifications initiated as

3.  Financial Stabilization Efforts and their Budgetary Effects

of December 31, 2012, with the median principal amount
reduced for active permanent modifications of $72,900.
HFA Hardest-Hit Fund (HHF): The $7.6 billion HHF
provides the eligible entities of Housing Finance Agencies
from 18 states and the District of Columbia with funding to design and implement innovative programs to
prevent foreclosures and bring stability to local housing
markets. The Administration targeted areas hardest hit
by unemployment and home price declines through the
program. Approximately 70 percent of the HHF funds are
dedicated to programs that help unemployed borrowers
stay in their homes, while the remaining 30 percent of
HHF funds facilitate principal write-downs for borrowers
who owe more than their home is worth. The flexibility
of the HHF funds has allowed States to design and tailor
innovative programs to meet the unique needs of their
community. For example, Nevada recently implemented
a principal reduction program that leverages refinances
under the Home Affordable Refinance Program (HARP)
while California recently implemented a program that
uses principal reduction in conjunction with a modification or recast.
FHA Refinance Program: This program, which is administered by the Federal Housing Administration and
supported by TARP, was initiated in September 2010
and allows eligible borrowers who are current on their
mortgage but owe more than their home is worth, to
re-finance into an FHA-guaranteed loan if the lender
writes off at least 10 percent of the existing loan. Nearly
$3.0 billion in TARP funds allocated under the MHA are
available to provide incentive payments to extinguish
second lien mortgages to facilitate refinancing the first
liens into an FHA-insured mortgage, and an additional
$8.1 billion was originally committed to cover a share
of any losses on the loans and administrative expenses.
In January 2012, the Administration extended the FHA
Refinance Program until December 31, 2014. In 2013,
Treasury’s commitment to cover a share of any losses
under the FHA Refinance Program was reduced from
$8.1 billion to $1.0 billion.
Method for Estimating the Cost
of TARP Transactions
Exercising its authority under EESA, the Treasury
has purchased financial instruments with varying terms
and conditions. Consistent with the provisions of Section
123 of EESA, the costs of equity purchases, loans, guarantees, and loss sharing under the FHA Refinance program through the TARP are reflected on a net present
value basis, as determined under the Federal Credit
Reform Act (FCRA) of 1990 (2 U.S.C. 661 et seq.), with
an EESA-required adjustment to the discount rate for
market risks.  The budgetary cost of these transactions
is reflected as the net present value of estimated cash
flows to and from the Government, excluding administrative costs. Costs for the incentive payments under TARP
Housing programs, other than loss sharing under the
FHA Refinance program, involve financial instruments

37

without any provision for future returns, and are recorded
on a cash basis.14
The costs of each transaction reflect the underlying
structure of the instruments, which may include direct
loans, structured loans, equity, loan guarantees, or direct
incentive payments.  For each of these instruments, cash
flow models are used to estimate future cash flows to and
from the Government over the life of a program or facility.
Further, each cash flow model reflects the specific terms
and conditions of the program, technical assumptions
regarding the underlying assets, risk of default or other
losses, actual transactions to date, and other factors as appropriate. Models generate cash flows for original subsidy
rate estimates; calculate changes in cost due to changes in
contract terms or other Government actions (modification
cost estimates); and calculate changes in cost due to updated economic or performance assumptions, and actual
cash flows to date. The risk adjustments to the discount
rates for TARP equity, loan, and guarantee transactions
were made using available data and methods to capture
additional potential costs related to uncertainty about
the expected cash flows to and from the public. The basic
methods for each of these models are outlined below.
Direct Loans. Direct loan model cash flows include the
scheduled principal, interest, and other payments to the
Government, including estimated income from warrants
or additional notes. These models include estimates of delinquencies, default and recoveries, based on loan-specific
factors including the value of any collateral provided by
the contract. The probability and timing of default and
recoveries are estimated using applicable historical data
and econometric projections, where available, or publicly
available proxy data including aggregated credit rating
agency historical performance data.
Structured Loans. Structured loans such as the
TALF are modeled according to the program structure,
where an intermediary special purpose vehicle (SPV) is
established to purchase or commit to purchase assets
from beneficiaries. In general, TARP structured loans are
a hybrid of guarantees and direct loans. The Treasury
makes a direct loan to a SPV; the SPV in turn enters into
a contract with a beneficiary that resembles a guaranteed
loan. Estimated cash flow assumptions reflect the anticipated behavior of the beneficiaries and the cash flows to
and from the SPV and the Treasury. The Treasury projects cash flows to and from the Government based on
estimated SPV performance, the estimated mix of assets
funded through the facility, the terms of the contracts,
and other factors.
In the case of the TALF, the New York Federal Reserve
created an SPV to purchase and manage assets received
in connection with any TALF loans. The Federal Reserve
14  Section 123 of the EESA provides the Administration the authority
to record TARP equity purchases pursuant to the FCRA, with required
adjustments to the discount rate for market risks. The Making Home
Affordable programs and HFA Hardest Hit Fund involve the purchase
of financial instruments which have no provision for repayment or other
return on investment, and do not constitute direct loans or guarantees
under FCRA. Therefore these purchases are recorded on a cash basis.
Administrative expenses are recorded for all of TARP under the Office
of Financial Stability and the Special Inspector General for TARP on a
cash basis, consistent with other Federal administrative costs.

38

Analytical Perspectives

Table 3–1. Change in Programmatic Costs of Troubled Asset Relief Actions (Excluding Debt Service)
(In billions of dollars)

TARP Actions

2013 MSR

Change from 2013 MSR to
2014 Budget

2014 Budget

Estimated Cost
TARP
Estimated Cost
TARP
Estimated Cost
TARP
Obligations 1 (+) / Savings (–) Obligations 1 (+) / Savings (–) Obligations 1 (+) / Savings (–)

Equity Purchases �������������������������������������������������������������������������������������������������������
Structured & direct loans and asset-backed security purchases �������������������������������
Guarantees of troubled asset purchases 2������������������������������������������������������������������

337.1
82.4

17.5
19.1

336.8
77.5

10.2
17.4

–0.3
–5.0

–7.3
–1.6

TARP Housing Programs 3 �����������������������������������������������������������������������������������������

5.0
45.6

–3.6
45.6

5.0
38.5

–3.8
37.6

.........
–7.1

–0.2
–8.0

Total programmatic costs 4 �������������������������������������������������������������������������������

470.1

78.6

457.8

61.5

–12.3

–17.1

Memorandum:
5 47.5
Deficit impact before administrative costs and interest effects ��������������������
68.0
–20.5
1 TARP obligations are net of cancellations.
2 The total assets supported by the Asset Guarantee Program were $301 billion.
3 TARP obligations under the FHA Refinance Letter of Credit provide first loss coverage of eligible FHA insured mortgages.
4 Total programmatic costs of the TARP exclude interest on reestimates.
5 The total deficit impact of TARP includes $18.1 billion in subsidy cost for TARP investments in AIG. Including proceeds from Treasury’s non-TARP holdings in AIG, the net cost to the
Government of AIG is $0.5 billion.

acquires assets either when a TALF participant defaults
on the Federal Reserve financing or chooses to turn over
the securing assets in lieu of the scheduled repayment at
the end of the term. The SPV has committed, for a fee,
to purchase all assets securing a TALF loan that are received by the New York Federal Reserve at a price equal
to the TALF loan amount at the time of acquisition, plus
accrued but unpaid interest. The Treasury made an initial allotment to the SPV of $0.1 billion to fund the SPV,
and committed to purchase subordinated debt issued by
the SPV to finance asset purchases; no further purchases
by Treasury were made. The Treasury receives fees and
interest income on the entire outstanding TALF facility,
and amounts collected in the SPV.
Guarantees. Cost estimates for guarantees reflect
the net present value of estimated claim payments by
the Government, net of income from fees, recoveries on
defaults, or other sources. Under EESA, asset guarantees provided through TARP must be structured such
that fees and other income must completely offset estimated losses at the time of commitment. In TARP’s
Asset Guarantee Program, fees were paid in the form
of preferred stock and termination fees. The value of
preferred stock is modeled using the same methodology discussed for other equity purchase programs below. Claim payments were modeled consistent with the
terms of the guarantee contract, and reflected historical performance data on similar assets and estimates
of future economic conditions such as unemployment
rates, gross domestic product, and home price appreciation. However, the AGP was terminated with no claim
payments made by the Treasury. The budget reflects
actual and estimated collections from preferred stock
proceeds.
Equity Purchases. Preferred stock cash flow projections reflect the risk of losses associated with adverse
events, likely failure of an institution, or increases in
market interest rates. Estimated cash flows vary depending on: 1) current interest rates, which affect the insti-

tution’s decision to repay the preferred stock; and 2) the
strength of a financial institution’s assets. The model also
estimates the values and projects the cash flows of warrants using an option-pricing approach based on the current stock price and its volatility. Common equity is valued at market prices as of a fixed date, such as December
31, 2012, for the 2014 Budget. For the purposes of this
calculation, common equity is assumed to be sold to the
public as soon as is practicable and advisable.
FHA Refinance Program. Under this program, the
cost estimates reflect the present value of estimated claim
payments made from the letter of credit (LOC) provider to
the lenders of FHA-guaranteed loans, adjusted for market
risks. Treasury signed a LOC with Citigroup, originally
committing $8.1 billion of TARP funds to cover a portion
of default claims of FHA Refinance mortgages, plus administrative expenses. Following changes to the FHA program fee structure anticipated to start in 2013, the LOC is
planned to be reduced from a $8.1 billion commitment to
a $1.0 billion commitment. Through the LOC agreement,
Treasury is committed to make claim payments to private
lenders to cover a portion of defaulted debt obligations
of non-Federal borrowers. Therefore, the program costs
are estimated according to the principles of FCRA, with
a risk adjustment to the discount rate as prescribed by
EESA. The model projects TARP claim payments based
on projected FHA Refinance volumes and net claim rates.
The full commitment was obligated at the point the LOC
contract was signed, and outlays of subsidy are recorded
as the underlying FHA Refinance loans are made.
Other TARP Housing. Foreclosure mitigation incentive payments occur when the Government makes incentive payments to borrowers and servicers for certain actions such as: successful modifications of first and second
liens, on-schedule borrower payments on those modified
loans, protection against further declines in home prices,
completing a short sale, or receiving a deed in lieu of foreclosure. The method for estimating these cash flows includes
forecasting the total eligible loans, the timing of the loans

39

3.  Financial Stabilization Efforts and their Budgetary Effects

Table 3–2.  Troubled Asset Relief Program Current Value 1
(In billions of dollars)
Actual

Estimate

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Financing Account Balances:
Troubled Asset Relief Program Equity Purchase Financing Account  105.4 76.9
Troubled Asset Relief Program Direct Loan Financing Account ������ 23.9 42.7
Troubled Assets Insurance Financing Fund Guaranteed Loan
Financing Account �����������������������������������������������������������������������
0.6
2.4
Troubled Assets Relief Program FHA Refinance Letter of Credit
Financing Account ����������������������������������������������������������������������� ......... .........

74.9
28.5
0.8

10.3
7.8

5.0
1.6

1.0
0.9

0.8
0.9

0.7
0.9

0.6
0.9

0.5
0.9

0.5
0.9

0.4
0.9

0.4
0.9

0.4
0.9

0.8 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
–0.1

–0.1

–0.1

–*

–*

–*

–*

–*

–*

Total Financing Account Balances ������������������������������������������� 129.9 122.0 104.1 32.2 18.0
6.5
1.7
* $50 million or less.
1 Current value as reflected in the 2014 Budget. Amounts exclude HAMP activities that are reflected on a cash basis.

1.5

1.5

1.4

1.3

1.3

1.3

1.3

1.3

entering into the program, loan characteristics, the overall
participation rate in the program, the re-default rate, home
price appreciation, and the size of the incentive payments.
For the HFA Hardest-Hit Fund (HHF), the Government
provides a cash infusion, similar to a grant, to the eligible
entities of state Housing Financing Agencies (HFAs) to design and implement innovative programs to prevent foreclosures and bring stability to local housing markets. The
estimated cash flows for the HHF are based on the plans
submitted by the HFAs and approved by Treasury, which
detail program design and anticipated activity.
TARP Program Costs and Current Value of Assets
This section provides the special analysis required under Sections 202 and 203 of EESA, including estimates of
the cost to taxpayers and the budgetary effects of TARP
transactions as reflected in the Budget.15 This section
explains the changes in TARP costs, including whether
such changes are due to actual performance, or changes
in future expectations. The analysis also includes an estimate of what the budgetary effects would have been had
all TARP transactions been reflected on a cash basis, and
also shows the estimated cost for transactions using the
standard methodology required under the FCRA, without
the adjustment to the discount rate for market risks prescribed by EESA. It also includes a comparison of the cost
estimates with previous estimates provided by OMB and
the Congressional Budget Office (CBO).
Table 3–1, above, summarizes the current and anticipated activity under TARP, and the estimated lifetime
budgetary cost reflected in the Budget, compared to estimates from the 2013 MSR. The direct impact of TARP
on the deficit, including interest on reestimates, and
the risk-adjustment to the discount rate required under
EESA, is projected to be $47.5 billion, down $20.5 billion
from $68 billion as projected in the 2013 MSR. The subsidy cost represents the lifetime net present value cost
of TARP obligations from the date of disbursement. The

15  The analysis does not assume the effects on net TARP costs of a
recoupment proposal authorized under Section 134 of EESA.

–*

13.6
17.9

–*

–0.1

–0.1

subsidy cost for TARP excluding interest on reestimates
is now estimated to be $61.5 billion.16 The final subsidy
cost of TARP is likely to be lower than the current estimate, because projected cashflows are discounted using a
risk adjustment to the discount rate as required by EESA.
This requirement adds a premium to current estimates
of TARP costs on top of market and other risks already
reflected in cash flows with the public. Over time, the risk
premium added to TARP costs is essentially returned to
the General Fund via downward subsidy reestimates.
TARP’s overall cost to taxpayers will not be fully known
until all TARP investments are extinguished.
Current Value of Assets. The current value of future
cash flows related to TARP transactions can also be measured by the balances in the program’s non-budgetary
credit financing accounts. Under the FCRA budgetary accounting structure, the net debt or cash balances in nonbudgetary credit financing accounts at the end of each
fiscal year reflect the present value of anticipated cashflows to and from the public.17 So, the net debt or cash
balances reflect the expected present value of the asset
or liability. Future collections from the public—such as
proceeds from stock sales, or payments of principal and
interest—are financial assets, just as future payments to
the public are financial liabilities. The current year reestimates effectively true-up the net debt or cash balance
in the financing account, with updated estimates of the
present value of these financial assets or liabilities. For
example, if an asset is valued at $100 million and the net
debt in the financing account is $90 million, there will
be a downward reestimate, returning the $10 million in
excess subsidy to the General Fund. Accordingly, the net
debt balance in the financing account after the reestimate
will be $100 million—equal to the reestimated value of
the asset. The larger the subsidy cost for a given loan
disbursed or equity purchased, the lower the estimated
16  With the exception of the Making Home Affordable and HFA Hardest-Hit Fund programs, all the other TARP investments are reflected on
a present value basis pursuant to the FCRA and the EESA.
17  For example, to finance a loan disbursement to a borrower, a direct
loan financing account receives the subsidy cost from the program account, and borrows the difference between the face value of the loan and
the subsidy cost from the Treasury. As loan and interest payments from
the public are received, the value is realized and these amounts are used
to repay the financing account’s debt to Treasury.

40

Analytical Perspectives

Table 3–3.  Troubled Asset Relief Program Face Value of TARP Outstanding 1
(In billions of dollars)
Actual
2009
Troubled Asset Relief Program Equity Purchases ��������������������������������������������������������������
Troubled Asset Relief Program Direct Loans ����������������������������������������������������������������������
Troubled Assets Insurance Financing Fund Guaranteed Assets ����������������������������������������
FHA Refinance Letter of Credit �����������������������������������������������������������������������������������������

229.6
60.5
251.4
.........

2010
119.0
15.7
.........
.........

Estimate
2011
88.2
11.5
.........
0.1

2012

2013

33.8
6.6
.........
0.3

18.4
1.1
.........
5.5

2014
9.3
0.9
.........
5.5

Total Face Value of TARP Outstanding ����������������������������������������������������������������������
541.5
134.7
99.8
40.7
25.1
15.7
reflects face value of TARP outstanding direct loans, preferred stock equity purchases, guaranteed assets, and the face value of FHA Refinance mortgages supported by
the TARP Letter of Credit. Financial instrument purchases under the Making Home Affordable Program and Hardest Hit Fund are reflected in the budget on a cash basis, and are not
included here.
1 Table

value of the cash flows from the public and asset value to
the Government.18
Table 3–2 shows the actual balances of TARP financing
accounts as of the end of 2012, and projected balances for
each subsequent year through 2023.19 Based on actual
net balances in financing accounts at the end of 2009, the
value of TARP assets totaled $129.9 billion. By the end
of 2012, total TARP net asset value decreased to $32.2
billion, reflecting the realization of the value of TARP assets as repayments, primarily from large banks, exceeded
amounts TARP paid for financial assets. Estimates in
2013 and beyond reflect estimated TARP net asset values over time as of December 31, 2012, and all other anticipated transactions. The overall balance of the financing accounts is estimated to continue to fall significantly
over the next few years, as TARP investments wind down,
from $18 billion at the end of 2013, to $6.5 billion in 2014,
and $1.7 billion in 2015 as the assets and loans acquired
under the TARP program wind down.
The value of TARP equity purchases reached $76.9
billion in 2010, and fell $2 billion in 2011 reflecting the
2011 downward reestimate, final AIG funding, and repayments from large financial institutions. The value of the
TARP equity portfolio is anticipated to continue declining
as participants repurchase stock and assets are sold. The
value of TARP direct loans is expected to decrease to $7.8
billion in 2013, gradually declining to $0.9 billion by 2015
as loans are repaid and warrants and other assets are
sold. The $0.8 billion value under the Asset Guarantee
Program (AGP) in 2012 reflects the estimated value of the
expected receipt of trust preferred shares from the FDIC
following termination of the guarantee on Citigroup assets which was subsequently sold in February 2013 for
$894 million20. The FHA Refinance program reflects net
cash balances, showing the reserves set aside to cover
18  As an extreme example, a direct loan program with 100 percent
subsidy cost would require budget authority for the full amount of the
loan. The financing account would receive the entire amount of a loan
disbursement from the budgetary program account, and would not have
to borrow from the Treasury. In this case, the loan would be estimated to
have a zero asset value.
19  Reestimates for TARP are calculated using actual data through
September 30, 2012, and updated projections of future activity. Thus,
the full impacts of TARP reestimates are reflected in the 2013 financing
account balances.
20  Transactions that occurred after December 31, 2012 are described
for narrative continuity, but are not included in the reestimate of TARP
program costs contained in the 2014 Budget.

TARP’s share of default claims for FHA Refinance mortgages over the 10-year letter of credit facility. These cash
balances fall as claims are paid and as the TARP coverage
expires.
Where Table 3–2 displays the estimated value of TARP
investments, guarantees, and loss share agreements
over time, Table 3–3 shows the estimated face value of
outstanding TARP investments at the end of each year
through 2013. For equity investments, the par value of
Treasury’s remaining investment is reflected. The outstanding amount of equity investments and direct loans
decreased in 2012, as Treasury continued to wind down its
equity investments and receive repayments on outstanding loans.. Under FCRA, the total outstanding reflects the
full face value of loans supported by a Federal guarantee,
any portion of which may be guaranteed. TARP’s liability
under the Asset Guarantee Program was only a fraction of
the face value of the underlying loans (see Table 3–6), and
was extinguished with the termination of the Citibank
guarantee in 2009. Likewise, the full face value of FHA
Refinance mortgages supported by the letter of credit facility far exceeds TARP’s liability, which is capped at $1.0
billion (including $100 million set aside for administrative
fees). The TARP coverage ratio or share of default losses
was 15.17 percent in 2012 and is estimated to be 9.82 percent in 2013 for covered FHA Short Refinancing loans.
The overall outstanding face value of mortgages supported by the FHA Refinance Letter of Credit is projected to
reach $5.5 billion in 2013. Currently it is not anticipated
that additional guarantees will require TARP loss coverage after 2013, though a reserve is maintained to support
the program through December 31, 2014.21 The face value of TARP FHA Refinance Letter of Credit instruments
in table 3–3 does not include new FHA Refinancing guarantees expected to be provided after 2013 that do not need
TARP loss coverage.
Estimate of the Deficit, Debt Held by
the Public, and Gross Federal Debt,
Based on the EESA Methodology
The estimates of the deficit and debt in the Budget reflect the impact of TARP as estimated under FCRA and
Section 123 of EESA. The deficit estimates include the
21  Changes to the FHA program fee structure anticipated to start in
2013 are sufficient to cover anticipated losses. As a result, TARP firstloss coverage is not anticipated on FHA Short Refi loans after the revised fee structure is implemented.

41

3.  Financial Stabilization Efforts and their Budgetary Effects

Table 3–4.  Troubled Asset Relief Program Effects on the Deficit and Debt 1
(Dollars in billions)
Actual
2009

2010

Estimate

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

.........
.........
.........
7.8
.........
7.8
0.2
*
8.0

.........
.........
.........
6.2
.........
6.2
0.2
*
6.5

.........
.........
.........
3.1
.........
3.1
0.2
*
3.3

.........
.........
.........
1.6
.........
1.6
0.1
*
1.7

.........
.........
.........
0.3
.........
0.3
0.1
*
0.4

.........
.........
.........
*
.........
*
0.1
*
0.1

.........
.........
.........
*
.........
*
*
*
0.1

.........
.........
.........
.........
.........
.........
*
*
0.1

.........
.........
.........
.........
.........
.........
*
*
0.1

.........
.........
.........
.........
.........
.........
*
*
0.1

Deficit Effect:
Programmatic and administrative expenses:
Programmatic expenses:
Equity purchases �������������������������������������������������������������
Direct loans and purchases of asset-backed securities ���
Guarantees of troubled asset purchases �������������������������
TARP housing programs ��������������������������������������������������
Reestimates of credit subsidy costs ��������������������������������
Subtotal, programmatic expenses ������������������������������
Administrative expenses �������������������������������������������������������
Special Inspector General for TARP �������������������������������������
Subtotal, programmatic & administrative expenses ���������
Interest effects:
Interest transactions with credit financing accounts 2 �����������
Debt service 3 ������������������������������������������������������������������������
Subtotal, interest effects ��������������������������������������������������
Total deficit impact ��������������������������������������������������

115.3
8.4 19.1
1.0
*
36.9 –0.9 –0.3 –0.1
*
–1.0 –1.4 ......... ......... .........
*
0.5
1.9
3.1 13.1
......... –116.5 –58.5 20.3 –12.5
151.2 –109.9 –37.7 24.3
0.6
0.1
0.2
0.4
0.3
0.4
*
*
*
*
*
151.3 –109.6 –37.3 24.6
1.1
–2.8
2.8
*

–4.7
4.7
*

–3.0
3.0
*

–1.6
1.9
0.2

–3.8
1.1
–2.8

–1.7
0.4
–1.3

–0.1
0.1
*

–0.1
0.5
0.5

–0.1
1.1
1.0

–0.1
1.7
1.6

–0.1
2.0
2.0

–*
2.2
2.1

–*
2.3
2.3

–*
2.4
2.4

–*
2.5
2.5

151.3 –109.6 –37.3

24.9

–1.7

6.7

6.5

3.7

2.8

2.0

2.1

2.2

2.4

2.5

2.6

Other TARP transactions affecting borrowing from the public
— net disbursements of credit financing accounts:
Troubled Asset Relief Program Equity Purchase Financing
Account �������������������������������������������������������������������������������� 105.4 –28.5 –2.0 –61.3 –3.2 –5.4 –4.0 –0.2 –0.1 –0.1 –0.1
–*
–*
–*
–*
Troubled Asset Relief Program Direct Loan Financing Account  23.9 18.8 –14.2 –10.6 –10.1 –6.2 –0.8 ......... ......... ......... ......... ......... ......... ......... .........
Troubled Assets Insurance Financing Fund Guaranteed Loan
Financing Account ���������������������������������������������������������������
0.6
1.8 –1.6
–* –0.8 ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
Troubled Assets Relief Program FHA Refinance Letter of
Credit Financing Account ���������������������������������������������������� ......... .........
–*
–* –0.1
*
*
*
*
*
*
* ......... ......... .........
Total, other transactions affecting borrowing from the public  129.9 –7.9 –17.8 –71.9 –14.2 –11.5 –4.8 –0.2
–*
–* –0.1
–*
–*
–*
–*
Change in debt held by the public ���������������������������������������������

–4.8

1.8

3.6

2.7

2.0

2.0

2.2

2.3

2.4

2.5

Debt held by the public ��������������������������������������������������������������� 281.2 163.6 108.5
As a percent of GDP ����������������������������������������������������������������� 2.0% 1.1% 0.7%

281.2 –117.5 –55.1 –47.0 –15.9
61.5
0.4%

45.6
0.3%

40.8
0.2%

42.6
0.2%

46.1
0.2%

48.8
0.2%

50.8
0.2%

52.8
0.2%

55.0
0.2%

57.3
0.2%

59.7
0.2%

62.3
0.2%

Debt held by the public net of financial assets:
Debt held by the public ������������������������������������������������������������� 281.2 163.6 108.5

61.5

45.6

40.8

42.6

46.1

48.8

50.8

52.8

55.0

57.3

59.7

62.3

13.6

10.3

5.0

1.0

0.8

0.7

0.6

0.5

0.5

0.4

0.4

0.4

17.9

7.8

1.6

0.9

0.9

0.9

0.9

0.9

0.9

0.9

0.9

0.9

Less financial assets net of liabilities — credit financing
account balances:
Troubled Assets Relief Program Equity Purchase Financing
Account ���������������������������������������������������������������������������� 105.4 76.9 74.9
Troubled Asset Relief Program Direct Loan Financing
Account ���������������������������������������������������������������������������� 23.9 42.7 28.5
Troubled Assets Insurance Financing Fund Guaranteed
Loan Financing Account ��������������������������������������������������
0.6
2.4
0.8
Troubled Assets Relief Program FHA Refinance Letter of
Credit Financing Account ������������������������������������������������� ......... .........
–*
Total, financial assets net of liabilities ������������������������������ 129.9 122.0 104.1

0.8 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
–*
32.2

–0.1
18.0

–0.1
6.5

–0.1
1.7

–0.1
1.5

–0.1
1.5

–*
1.4

–*
1.3

–*
1.3

–*
1.3

–*
1.3

–*
1.3

Debt held by the public net of financial assets �������������������� 151.3 41.6
4.4 29.3 27.6 34.3 40.9 44.6 47.3 49.4 51.4 53.7 56.0 58.5 61.0
As a percent of GDP �������������������������������������������������������� 1.1% 0.3% 0.0% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
* $50 million or less.
1 Table reflects the deficit effects of the TARP program, including administrative costs and interest effects.
2 Projected Treasury interest transactions with credit financing accounts are based on the market-risk adjusted rates. Actual credit financing account interest transactions reflect the
appropriate Treasury rates under the FCRA.
3 Includes estimated debt service effects of all TARP transactions that affect borrowing from the public.

42

Analytical Perspectives

Table 3–5.  Troubled Asset Relief Program Effects on the Deficit and Debt Calculated on a Cash Basis 1
(Dollars in billions)
Actual
2009

2010

2011

Estimate
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Deficit Effect:
Programmatic and administrative expenses:
Programmatic expenses:
Equity purchases ������������������������������������������������������������� 217.6 –121.9 –36.8 –47.2 –14.1 –6.5 –4.4 –0.3 –0.1 –0.1 –0.2 –0.1 –0.1
–*
–*
Direct loans and purchases of asset-backed securities ��� 61.1 –1.0 –21.3 –5.0 –15.4 –6.8 –0.5 ......... ......... ......... ......... ......... ......... ......... .........
Guarantees of troubled asset purchases ������������������������� –0.5 –0.3 –2.3
–* –1.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... .........
TARP housing programs ��������������������������������������������������
*
0.5
1.9
3.1 13.0
7.8
6.3
3.1
1.6
0.3
*
* ......... ......... .........
Subtotal, programmatic expenses ������������������������������ 278.3 –122.6 –58.6 –49.2 –17.4 –5.5
1.4
2.8
1.5
0.2 –0.2 –0.1 –0.1
–*
–*
Administrative expenses �������������������������������������������������������
0.1
0.2
0.4
0.3
0.4
0.2
0.2
0.2
0.1
0.1
0.1
*
*
*
*
Special Inspector General for TARP ��������������������������������
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Subtotal, programmatic & administrative expenses ��������� 278.4 –122.3 –58.1 –48.9 –17.0 –5.2
1.6
3.0
1.6
0.3 –0.1
*
*
*
0.1
Debt service 2 ������������������������������������������������������������������������
2.8
4.7
3.0
1.9
1.1
0.4
0.1
0.5
1.1
1.7
2.0
2.2
2.3
2.4
2.5
Total deficit impact �������������������������������������������������������

281.2 –117.5 –55.1 –47.0 –15.9

–4.8

1.8

3.6

2.7

2.0

2.0

2.2

2.3

2.4

Change in debt held by the public ���������������������������������������������

281.2 –117.5 –55.1 –47.0 –15.9

–4.8

1.8

3.6

2.7

2.0

2.0

2.2

2.3

2.4

2.5
2.5

Debt held by the public ��������������������������������������������������������������� 281.2 163.6 108.5
As a percent of GDP ����������������������������������������������������������������� 2.0% 1.1% 0.7%

61.5
0.4%

45.6
0.3%

40.8
0.2%

42.6
0.2%

46.1
0.2%

48.8
0.2%

50.8
0.2%

52.8
0.2%

55.0
0.2%

57.3
0.2%

59.7
0.2%

62.3
0.2%

Debt Held by the Public Net of Financial Assets:
Debt held by the public ������������������������������������������������������������� 281.2 163.6 108.5

61.5

45.6

40.8

42.6

46.1

48.8

50.8

52.8

55.0

57.3

59.7

62.3

13.6

10.3

5.0

1.0

0.8

0.7

0.6

0.5

0.5

0.4

0.4

0.4

17.9

7.8

1.6

0.9

0.9

0.9

0.9

0.9

0.9

0.9

0.9

0.9

0.8 .........
–* –0.1
32.2 18.0

–0.1
6.5

Less financial assets net of liabilities — credit financing
account balances:
Troubled Asset Relief Program Equity Purchase Financing
Account ���������������������������������������������������������������������������� 105.4 76.9 74.9
Troubled Asset Relief Program Direct Loan Financing
Account ���������������������������������������������������������������������������� 23.9 42.7 28.5
Troubled Assets Insurance Financing Fund Guaranteed
Loan Financing Account ��������������������������������������������������
0.6
2.4
0.8
FHA Refinance Letter of Credit Financing Account �������������� ......... .........
–*
Total, financial assets net of liabilities ������������������������������ 129.9 122.0 104.1

......... ......... ......... ......... ......... ......... ......... ......... .........
–0.1 –0.1 –0.1
–*
–*
–*
–*
–*
–*
1.7
1.5
1.5
1.4
1.3
1.3
1.3
1.3
1.3

Debt held by the public net of financial assets �������������������� 151.3 41.6
4.4 29.3 27.6 34.3 40.9 44.6 47.3 49.4 51.4 53.7
As a percent of GDP �������������������������������������������������������� 1.1% 0.3% 0.0% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
* $50 million or less.
1 Table reflects deficit effect of budgetary costs, substituting estimates calculated on a cash basis for estimates calculated under FCRA and Sec. 123 of EESA.
2 Includes estimated debt service effects of all TARP transactions affecting borrowing from the public.

budgetary costs for each program under TARP, administrative expenses, certain indirect interest effects of credit
programs, and the debt service cost to finance the program.
Direct activity under the TARP is expected to increase the
2013 deficit by $1.1 billion. This reflects estimated TARP
housing outlays of $13.1 billion, offset by $12.5 billion in
downward reestimates of subsidy costs, including interest on reestimates. The estimates of U.S. Treasury debt
attributable to TARP include both borrowing to finance
the deficit impacts of TARP activity and the cash flows to
and from the Government, reflected as a means of financing in the TARP financing accounts. Estimated debt due
to TARP at the end of 2013 is $45.6 billion. Even as the
TARP program is winding down, the debt due to TARP
increases annually starting in 2015, with additional borrowing to finance TARP housing programs and debt service on TARP costs.
Debt held by the public net of financial assets reflects
the cumulative amount of money the Federal Government
has borrowed from the public for the program and not re-

56.0
0.2%

58.5
0.2%

61.0
0.2%

paid, minus the current value of financial assets acquired
with the proceeds of this debt, such as loan assets, or equity held by the Government. While debt held by the public
is one useful measure for examining the impact of TARP,
it provides incomplete information on the program’s effect on the Government’s financial condition. Debt held
by the public net of financial assets provides a more complete picture of the U.S. Government’s financial position
because it reflects the net change in the government’s balance sheet due to the program.
Debt net of financial assets due to the TARP program
is estimated to be $27.6 billion as of the end of 2013. This
is $12 billion lower than the projected 2013 debt held net
of financial assets reflected in the 2013 MSR. However,
debt net of financial assets is anticipated to increase annually starting in 2014, due to the realization of the value
of TARP assets, as investments continue to wind down
and debt is incurred to finance TARP housing costs and
debt service.

3.  Financial Stabilization Efforts and their Budgetary Effects

In 2013, Table 3–4 shows total TARP activity including interest effects reducing the deficit by $1.7 billion.
However, the $3.8 billion in interest transactions with financing accounts is primarily due to the risk-adjustment
to the discount rate required under EESA. Actual financing account interest transactions are estimated to be
roughly $1.9 billion, which suggests an overall deficit effect of TARP in 2013 of $0.2 billion. Under the FCRA, the
financing account earns and pays interest on its Treasury
borrowings at the same rate used to discount cash flows
for the credit subsidy cost. Section 123 of EESA requires
an adjustment to the discount rate used to value TARP
subsidy costs, to account for market risks.
However, actual cash flows as of September 30, 2012,
already reflect the effect of any incurred market risks to
that point, and therefore actual financing account interest transactions reflect the FCRA Treasury interest rates
present in these years, with no additional risk adjustment.22 Future cash flows reflect a risk adjusted discount
rate and the corresponding financing account interest
rate, consistent with the EESA requirement. For on-going
TARP credit programs, the risk adjusted discount rates
on future cash flows result in subsidy costs that are higher than subsidy costs estimated under FCRA.
Estimates on a Cash Basis
The value to the Federal Government of the assets acquired through TARP is the same whether the costs of
acquiring the assets are recorded in the budget on a cash
basis, or a credit basis. As noted above, the budget records the cost of equity purchases, direct loans, and guarantees as the net present value cost to the Government,
discounted at the rate required under the FCRA and adjusted for market risks as required under Section 123 of
EESA. Therefore, the net present value cost of the assets
is reflected on-budget, and the gross value of these assets is reflected in the financing accounts.23 If these purchases were instead presented in the Budget on a cash
basis, the Budget would reflect outlays for each disbursement (whether a purchase, a loan disbursement, or a default claim payment), and offsetting collections as cash
is received from the public, with no obvious indication of
whether the outflows and inflows leave the Government
in a better or worse financial position, or what the net
value of the transaction is.
Revised Estimate of the Deficit, Debt Held
by the Public, and Gross Federal Debt
Based on the Cash-basis Valuation
Estimates of the deficit and debt under TARP transactions calculated on a cash basis are reflected in Table 3–5,
22  As TARP transactions wind down, the final lifetime cost estimates
under the requirements of Section 123 of EESA will reflect no adjustment to the discount rate for market risks, as these risks have already
been realized in the actual cash flows. Therefore, the final subsidy cost
for TARP transactions will equal the cost per FCRA, where the net present value costs are estimated by discounting cashflows using Treasury
rates.
23  For the Making Home Affordable programs and the HFA Hardest
Hit Fund, Treasury’s purchase of financial instruments does not result
in the acquisition of an asset with potential for future cash flows, and
therefore are recorded on a cash basis.

43

for comparison to those estimates in Table 3–4 reported
above in which TARP transactions are calculated consistent with FCRA and Section 123 of EESA.
If TARP transactions were reported on a cash basis, the
annual budgetary effect would include the full amount of
government disbursements for activities such as equity
purchases and direct loans, offset by cash inflows from
dividend payments, redemptions, and loan repayments
occurring in each year. For loan guarantees, the deficit
would show fees, claim payouts, or other cash transactions associated with the guarantee as they occurred.
Updates to estimates of future performance would impact
the deficit in the year that they occur, and there would not
be credit reestimates.
Under cash reporting, TARP would decrease the deficit
in 2013 by an estimated $15.9 billion, so the 2013 deficit
would be $14.2 billion lower if TARP were reflected on a
cash basis than the estimate in the Budget. The deficit
would be lower because repayments and proceeds of sales
that are now included in non-budgetary financing accounts for TARP would be reflected as offsetting receipts
when they occur. Under FCRA, the marginal change in
the present value attributable to better-than-expected future inflows from the public would be recognized up front
in a downward reestimate, in contrast with a cash-based
treatment that would show the annual marginal changes
in cash flows. However, the impact of TARP on the Federal
debt, and on debt held net of financial assets, is the same
on a cash basis as under FCRA.
Portion of the Deficit Attributable to
TARP, and the Extent to Which the Deficit
Impact is Due to a Reestimate
Table 3–4 shows the portion of the deficit attributable
to TARP transactions. The largest changes in the overall
TARP effects on the deficit are the result of reestimates
of TARP activity outstanding as of September 30, 2012,
and December 31, 2012. The specific effects are as follows:
•	 TARP reestimates and interest on reestimates will
decrease the deficit by $12.5 billion in 2013, including $9.1 billion in decreased subsidy costs for TARP
programs, and $3.4 billion in interest on reestimates.
•	 Outlays for the TARP Housing Programs are estimated at $13.1 billion in 2013, which includes payments under the MHA program, Hardest Hit Fund,
and subsidy costs for the FHA Refinance program.
Outlays for TARP Housing Program are estimated
to increase peak in 2013, and then decline gradually
through 2020.
•	 Administrative outlays for TARP are estimated at
$0.4 billion in 2013, and expected to decrease annually thereafter as TARP winds down through 2023.
Costs for the Special Inspector General for TARP are
estimated at $48 million in 2014, and are expected to
remain relatively stable through 2023.
•	 Interest transactions with credit financing accounts
include interest paid to Treasury on borrowing by
the financing accounts, offset by interest paid by

44

Analytical Perspectives

Table 3–6.  Troubled Asset Relief Program Reestimates
(Dollars in billions)
TARP Program and Cohort Year

Net lifetime
TARP
Current reestimate Current reestimate reestimate amount, disbursements as
rate
amount
excluding interest
of 12/31/2012 1

Original subsidy
rate

Equity Programs:
Automotive Industry Financing Program (Equity)
2009 �����������������������������������������������������������������������������������������������������������������
2010 �����������������������������������������������������������������������������������������������������������������

54.52%
30.25%

40.14%
3.99%

–0.4
–0.1

–3.2
–0.8

12.5
3.8

Capital Purchase Program
2009 �����������������������������������������������������������������������������������������������������������������
2010 �����������������������������������������������������������������������������������������������������������������

26.99%
5.77%

–6.35%
11.90%

–1.8
–*

–65.0
*

204.6
0.3

AIG Investments
2009 �����������������������������������������������������������������������������������������������������������������
Legacy Securities Public-Private Investment Program
2009 �����������������������������������������������������������������������������������������������������������������
2010 �����������������������������������������������������������������������������������������������������������������

82.78%

22.89%

–7.1

–37.8

67.8

34.62%
22.97%

–20.41%
–42.16%

*
0.4

–0.3
–3.2

0.7
5.5

Targeted Investment Program
2009 �����������������������������������������������������������������������������������������������������������������

48.85%

–8.47%

*

–23.2

40.0

Community Development Capital Initiative
2010 �����������������������������������������������������������������������������������������������������������������

48.06%

25.09%

–*

–0.1

0.6

–9.0

Subtotal equity program reestimates ����������������������������������������������������������

–133.7

335.8

Structured and Direct Loan Programs:
Automotive Industry Financing Program (AIFP)
2009 �����������������������������������������������������������������������������������������������������������������

58.75%

23.97%

–3.0

–19.3

63.4

Legacy Securities Public Private Investment Program
2009 �����������������������������������������������������������������������������������������������������������������
2010 �����������������������������������������������������������������������������������������������������������������

–2.52%
–10.85%

–0.29%
2.63%

–*
–0.1

*
1.4

1.4
11.0

Small Business Lending Initiative 7(a) purchases
2010 �����������������������������������������������������������������������������������������������������������������

0.48%

–1.35%

–*

–*

0.4

Term-Asset Backed Securities Loan Facility 2
2009 �����������������������������������������������������������������������������������������������������������������

–104.23%

–501.79%

–0.1

–0.4

0.1

–3.3

–18.2

76.2

Subtotal direct loan program reestimates ���������������������������������������������������
Guarantee Programs:
Asset Guarantee Program 3
2009 �����������������������������������������������������������������������������������������������������������������

–0.25%

–1.16%

–0.2

–1.3

301.0

FHA Refinance Letter of Credit
2011 �����������������������������������������������������������������������������������������������������������������
2012 �����������������������������������������������������������������������������������������������������������������

1.26%
4.00%

0.96%
3.95%

–*
–*

–*
–*

0.1
0.2

–0.2

–1.3

301.3

Subtotal guarantee program reestimates ����������������������������������������������������

Total TARP Reestimates ���������������������������������������������������������������������������
–12.5
–153.3
713.4
* $50 million or less.
1 Disbursements do not reflect cancelled or closed out facilities.
2 The Term-Asset Backed Securities Loan Facility 2009 subsidy rate reflects the anticipated collections for Treasury’s $20 billion commitment, as a percent of estimated lifetime
disbursements of roughly $0.3 billion.
3 Disbursement amount reflects the face value of guarantees of assets supported by the guarantee. The TARP obligation for this program was $5 billion, the maximum contingent
liability while the guarantee was in force.

Treasury on the financing accounts’ uninvested
balances. Although the financing accounts are nonbudgetary, Treasury payments to these accounts and
receipt of interest from them are budgetary transactions and therefore affect net outlays and the deficit. For TARP financing accounts, projected interest
transactions are based on the market risk adjusted
rates used to discount the cash flows. The projected
net financing account interest paid to Treasury at
market risk adjusted rates is $3.8 billion in 2013

and declines over time as the financing accounts repay borrowing from Treasury through investment
sale proceeds and repayments on TARP equity purchases and direct loans.
The full impact of TARP on the deficit includes the
estimated cost of Treasury borrowing from the public –
debt service – for the outlays listed above. Debt service
is estimated at $1.1 billion for 2013 (as shown in Table

45

3.  Financial Stabilization Efforts and their Budgetary Effects

Table 3–7.  Detailed TARP Program Levels and Costs
(In billions of dollars)
May 31st Valuation
Program

TARP
Obligations

2014 Budget

Subsidy Costs

TARP
Obligations

Subsidy Costs

Equity Purchases
Capital Purchase Program ��������������������������������������������������������������������������
AIG Investments ����������������������������������������������������������������������������������������
Targeted Investment Program ��������������������������������������������������������������������
Automotive Industry Financing Program (AIFP) �����������������������������������������
Public-Private Investment Program - Equity �����������������������������������������������
Community Development Capital Initiative �������������������������������������������������
Subtotal equity purchases ��������������������������������������������������������������������

204.9
67.8
40.0
16.3
7.5
0.6
337.1

–7.4
21.9
–3.6
5.8
–2.3
0.1
14.6

204.9
67.8
40.0
16.3
7.2
0.6
336.8

–7.7
18.1
–3.6
5.3
–2.0
0.2
10.2

Direct Loan Programs
Automotive Industry Financing Program (AIFP) ����������������������������������������
Term Asset-Backed Securities Loan Facility (TALF) �����������������������������������
Public-Private Investment Program - Debt ��������������������������������������������������
Small Business 7(a) Program ���������������������������������������������������������������������
Subtotal direct loan programs ����������������������������������������������������������������

63.4
4.3
14.4
0.4
82.4

19.6
–0.4
–0.3
*
18.9

63.4
0.1
13.6
0.4
77.5

17.7
–0.5
0.2
*
17.4

Guarantee Programs under Section 102
Asset Guarantee Program 1 ����������������������������������������������������������������������
Subtotal asset guarantees ���������������������������������������������������������������������

5.0
5.0

–3.7
–3.7

5.0
5.0

–3.8
–3.8

TARP Housing Programs
Making Home Affordable (MHA) Programs ������������������������������������������������
Hardest Hit Fund ����������������������������������������������������������������������������������������
Subtotal non-credit programs ����������������������������������������������������������������
FHA Refinance Letter of Credit 2 ���������������������������������������������������������������
Subtotal TARP housing programs ����������������������������������������������������������

29.9
7.6
37.5
8.1
45.6

29.9
7.6
37.5
8.1
45.6

29.9
7.6
37.5
1.0
38.5

29.9
7.6
37.5
0.1
37.6

Totals �����������������������������������������������������������������������������������������������

470.1

75.4

457.8

61.5

Memorandum:
Interest on reestimates 3 �����������������������������������������������������������������������������
–11.9
–13.9
Deficit impact before administrative costs and interest effects �������������
63.5
47.5
* $50 million or less
1 The total assets supported by the Asset Guarantee Program were $301 billion.
2 TARP obligations under the FHA Refinance Letter of Credit provide first loss coverage of eligible FHA insured mortgages.
3 Total programmatic costs of the TARP exclude interest on reestimates of $11.9 billion in “May 31st Valuation” and $13.9 billion in “2014 Budget.”
Interest on reestimates is an adjustment that accounts for the time between the original subsidy costs and current estimates; such adjustments
impact the deficit but are not direct programmatic costs.

3–4), and then expected to increase to $2.5 billion by 2023,
largely due to outlays for TARP housing programs. Total
debt service will continue over time after the TARP winds
down, due to the financing of past TARP costs.
Analysis of TARP Reestimates. The costs of outstanding TARP assistance are reestimated annually by
updating cash flows for actual experience and new assumptions, and adjusting for any changes by either recording additional subsidy costs (an upward technical
and economic reestimate) or by reducing subsidy costs (a
downward reestimate). The reestimated dollar amounts to
be recorded in 2013 reflect TARP disbursements through
December 31, 2012, while reestimated subsidy rates reflect the full lifetime costs, including anticipated future
disbursements. As noted above, the total decrease in the
deficit attributable to TARP reestimates in 2013 is $12.5
billion, reflecting a $9.1 billion net downward reestimate

of the subsidy cost and $3.4 billion in net downward interest on the reestimates. Detailed information on upward
and downward reestimates to program costs are reflected
in Table 3–6.
The current reestimate reflects a significant decrease
in estimated TARP costs from the 2013 Budget. This decrease was due in large part improved market conditions
and significant progress winding down TARP investments
over the past year, most notably the higher valuations of
AIG common stock and realized sale proceeds, and higher
valuation of GM common stock.
Differences Between Current and
Previous OMB Estimates
As shown in Table 3–7, the Budget reflects a total
TARP deficit impact of $47.5 billion before administra-

46

Analytical Perspectives

Table 3–8. Comparison of OMB and CBO TARP Costs
(In billions of dollars)
Estimates of Deficit Impact
Program

CBO Cost
Estimate 1

Capital Purchase Program �����������������������������������������������������������������������������
Targeted Investment Program ������������������������������������������������������������������������
AIG Assistance �����������������������������������������������������������������������������������������������
Automotive Industry Financing Program ��������������������������������������������������������
Term Asset-Backed Securities Loan Facility ���������������������������������������������������
Other Programs 2 ��������������������������������������������������������������������������������������������
TARP Housing Programs ��������������������������������������������������������������������������������

–18
–8
14
20
*
–1
16

OMB Cost
Estimate
–15
–4
15
20
–1
–6
38

Total ����������������������������������������������������������������������������������������������������������
24
47
* Amounts round to less than $1 billion.
1 CBO estimates from October 2012, available online at http://www.cbo.gov/sites/default/files/cbofiles/
attachments/TARP10–2012_0.pdf
2 “Other Programs” reflects an aggregate cost for PPIP (debt and equity purchases), CDCI, AGP, and small
business programs.

tive costs and interest effects. This is a decrease of $20.5
billion from the 2013 MSR projection of $68.0 billion and
$16.0 billion from the May 31st valuation of $63.5 billion.
The estimates included in MSR do not include updates
to estimated subsidy rates or market valuations, such as
for common stock held by Treasury. While the May 31st
valuation is not reflected in the deficit, it is more comparable to budget estimates because it includes adjustments
to reflect recent market performance, and is presented in
Table 3–7 as for comparison to 2014 Budget estimates.
The estimated TARP deficit impact reflected in 3–7 differs from the subsidy cost of $61.5 billion in the Budget
because the deficit impact reflects a $13.9 billion cumulative downward adjustment for interest on reestimates.
These adjustments account for the time between when
the subsidy cost was originally estimated and the time
when the reestimate is booked.
Differences Between OMB and CBO Estimates
Table 3–8 compares the subsidy cost for TARP reflected
in MSR against the costs estimated by the Congressional
Budget Office in its “Report on the Troubled Asset Relief
Program – October 2012.” 24
CBO estimates the total cost of TARP at $24 billion,
based on estimated lifetime TARP obligations of $431
billion. The Budget reflects current estimates of roughly
$457.8 billion in program obligations, and $61.5 billion
in programmatic costs, excluding interest on reestimates.
Differences in the estimated cost of the TARP Housing
programs, which stem from divergent demand and participation rate assumptions, are the main difference between OMB and CBO cost estimates. The CBO projects
$16 billion in total TARP Housing expenditures, while
the Budget reflects a $37.6 billion estimate. CBO and
OMB cost estimates for the Capital Purchase Program
are $10 billion apart because of different assumptions
for the remaining institutions with investments in the
24 United

States. Congressional Budget Office. Report on the Troubled
Asset Relief Program – October 2012. Washington: CBO, 2012. http://
www.cbo.gov/sites/default/files/cbofiles/attachments/TARP102012_0.pdf

program. Similarly, CBO and OMB cost estimates for the
Automotive Industry Financing Program are $3 billion
apart due to different assumptions for the future performance of equity investments in the program.
Differences Between EESA and FCRA Cost
Estimates
EESA directs that for asset purchases and guarantees
under TARP, the cost shall be determined pursuant to the
FCRA, except that the discount rate shall be adjusted for
market risks.  EESA’s directive to adjust the FCRA discount rate for market risks effectively assumes higher
losses on these transactions than those estimated under
FCRA guidelines, which require that Treasury rates be
used to discount expected cashflows.  In implementing
this requirement of EESA, the market risk adjustment is
intended to capture the cost of the extra return on investment that a private investor would seek in compensation
for uncertainty surrounding risks of default and other
losses reflected in the cashflows.25
Table 3–9 compares the subsidy costs and subsidy
rates of TARP programs discounted at the Treasury rate
adjusted for market risk (EESA), and discounted at the
unadjusted Treasury rate (FCRA) using 2014 Budget
estimated cashflows with the public.  Now that the bulk
of TARP financial assets have wound down, removing
the market risk adjustment from the discount rate for
TARP direct, guaranteed, and equity programs (excluding housing programs) decreases subsidy costs by only
1.6 percent ($0.4 billion). Programs that have fully wound
down reflect no difference between the EESA and FCRA
estimates, as there are no future cashflows which would
be discounted using a risk-adjusted rate under EESA.
Treasury holdings within the AIFP program include a
significant amount of common stock, the value of which
is based on the closing December 31, 2012, share price.
The share price of common stock is inherently adjusted
25  For example, if there were a 100 percent default expectation on a
loan, and losses given default were projected at 100 percent, the market
risk adjustment to the discount rate would be zero. This reflects the
fact that there are no unexpected losses if losses are expected to be 100
percent of the face value of the loan.

47

3.  Financial Stabilization Efforts and their Budgetary Effects

Table 3–9. Comparison of EESA and FCRA TARP Subsidy Costs
(In billions of dollars)
TARP
Obligations

Program

Subsidy Cost
ESSA

FCRA

Capital Purchase Program ����������������������������������������������������������
Targeted Investment Program �����������������������������������������������������
Asset Guarantee Program 1 ��������������������������������������������������������
Community Development Capital Initiative ����������������������������������
Term Asset-Backed Securities Loan Facility ��������������������������������
Small Business 7(a) Program ������������������������������������������������������
Public Private Investment Program 2 �������������������������������������������
AIG Investments ��������������������������������������������������������������������������
Automotive Industry Financing Program 2 �����������������������������������
Subtotal TARP equity and direct loans ������������������������������

204.9
40.0
5.0
0.6
0.1
0.4
20.8
67.8
79.7
424.5

–7.7
–3.6
–3.8
0.2
–0.5
–*
–1.8
18.1
23.0
23.8

–7.9
–3.6
–3.8
0.2
–0.5
–*
–1.9
18.1
23.0
23.4

TARP Housing Programs
Making Home Affordable Programs 3 �������������������������������������
Hardest Hit Fund 3 ������������������������������������������������������������������
Subtotal Non-Credit Programs �������������������������������������������
FHA Refinance Letter of Credit 4 ��������������������������������������������
Subtotal TARP Housing �����������������������������������������������������

29.9
7.6
37.5
1.0
38.5

29.9
7.6
37.5
0.1
37.6

29.9
7.6
37.5
0.1
37.6

Total 5 ��������������������������������������������������������������������������������
457.8
61.5
61.0
* $50 million or less
1 The total assets supported by the Asset Guarantee Program were $301 billion.
2 Rates for PPIP and AIFP reflect weighted average subsidy costs across various instruments.
3 TARP Making Home Affordable Programs and Hardest Hit Fund involve financial instruments without any provision
for income or other returns, and are recorded on a cash basis. The table reflects 100 percent subsidy cost for these
programs.
4 TARP obligations under the FHA Refinance Letter of Credit provide first loss coverage of eligible FHA insured
mortgages.
5 Total subsidy costs do not include interest effects or administrative costs. Costs at EESA and FCRA discount rates
are the same for common stock programs and for programs that are closed or awaiting a closing reestimate.

for market risk and, therefore, there is no additional market risk adjustment necessary for the EESA directive. As
a result, there is no difference in the cost of AIFP between
values calculated using the Treasury and risk adjusted
rate. The non-credit TARP Housing programs are reflected on a cash basis and, therefore, costs are not discounted,
which is why there is no difference in the subsidy cost
estimate. Using December 31, 2012, valuations, TARP
investments discounted at a risk adjusted rate will cost
an estimated $61.5 billion, which suggests a net subsidy
rate of 13.4 percent. TARP investments discounted under
FCRA are estimated to have a lifetime cost of $61 billion,
or a net subsidy rate of 13.3 percent.
TARP OVERSIGHT AND ACCOUNTABILITY
Ensuring effective internal controls and monitoring
of TARP programs and funds to protect taxpayer investments remains a top priority of TARP staff and those offices charged with TARP oversight and accountability. The
Treasury has implemented a comprehensive set of assessments geared toward identifying risks, evaluating their
potential impact, and prioritizing resource assignments
to manage risks based on a combined top-down and bottom-up assessment of risk.  The Internal Control Review
organization within the Office of Financial Stability (OFS)
utilizes the assessments to ensure appropriate coverage
of high-impact areas. A Senior Assessment Team and the

Internal Control Program Office guide OFS efforts to meet
all applicable requirements for a sound system of internal
controls, and to review and respond to all recommendations made by the four TARP oversight bodies—the Special
Inspector General for TARP (SIGTARP), the Government
Accountability Office (GAO), the Financial Stability
Oversight Board, and the Congressional Oversight Panel
(terminated April 3, 2011). The soundness of Treasury’s
TARP compliance monitoring, internal control, and risk
management policies and processes are reflected in the
clean opinions issued by GAO after its audit of TARP financial statements for 2009, 2010, 2011, and 2012 and the
associated internal control over financial reporting.
The Treasury has issued regulations governing executive compensation and conflicts of interest related to TARP
program administration and participation.  Compliance
with these rules is monitored on an ongoing basis, and reviews of participant conduct and program administration
are conducted as appropriate.  In executing its responsibility for monitoring compliance with executive compensation requirements, the Treasury has also created an
Office of the Special Master for TARP to review TARP
participant compliance with applicable legal and regulatory authority, and to recommend action to the Secretary
when compensation is found to be awarded in a manner
or amount deemed contrary to the public interest. 

48
Special Inspector General for TARP (SIGTARP)
Section 121 of EESA created the Special Inspector
General for the Troubled Asset Relief Program (SIGTARP)
to prevent fraud, waste, and abuse in the administration
of TARP programs through audits and investigations of

Analytical Perspectives

the purchase, management, and sales of TARP assets.
SIGTARP is required to submit quarterly reports to
Congress, and as of its latest report released on October
25, 2012, it has issued 19 reports and led over 150 investigations since its inception.

4. Long Term Budget Outlook

The horizon for the detailed estimates of receipts and
outlays in the President’s Budget is 10 years. This 10year horizon balances consideration of the future impacts
of budget decisions made today and a practical limit on
the construction of detailed budget projections for years
in the future.
Decisions made today can have important repercussions beyond the 10-year horizon. It is important to
anticipate budgetary requirements beyond the 10-year
horizon, and the effects of changes in policy on those requirements, despite the uncertainty surrounding the assumptions needed for such estimates. Long-run budget
projections can be useful in drawing attention to potential
problems that could become unmanageable if allowed to
grow.
To this end, the budget projections in this chapter extend the 2014 Budget for 75 years through 2088. Because
of the uncertainties involved in making long-run projections, results are presented for a base case and for several
alternative scenarios.
Recent legislation has led to significant improvements
in the Nation’s long-term fiscal health. First, the passage
of the Affordable Care Act (ACA) in 2010 enacted cost-reduction mechanisms in the health sector that will reduce
deficits by more than $1 trillion over the first two decades,
according to the Congressional Budget Office (CBO), and
have the potential to significantly reduce the trajectory
of health spending, and future budget deficits, over the
long run. Second, the Budget Control Act of 2011 (BCA)
reduced the long-term path of discretionary spending by
placing such spending under tight limits through 2021.
Most recently, enactment of the American Taxpayer Relief
Act of 2012 this past January increased income tax rates
on the highest-income taxpayers, increasing tax receipts
above prior projections.
The 2014 Budget includes further initiatives that
would help control future deficits. The projections in this
chapter include several methodological changes that highlight the fact that simply extending current laws and the
Budget’s policies puts the country on a course to balance
the budget, with the publicly held debt falling relative to
the economy even sooner. While additional reforms may
be required to ensure that programs like Medicare Part
A and Social Security, which are financed from dedicated
revenue sources, remain self-sustaining, overall budgetary resources would be sufficient to support future spending over the long term if Budget policies and assumptions
are carried forward. Nonetheless, there is considerable
uncertainty in the Administration’s long-term projections, and future challenges will require policy responses
that have yet to be formulated.
When the current Administration took office, the budget deficit was rising sharply because of the declining

economy and measures taken to revive it. Revenues had
fallen, as a share of GDP, to their lowest level since 1950.
Spending on countercyclical programs like unemployment
insurance had also risen sharply. The measures taken by
the Administration to revive economic growth are helping
to increase revenues, and the tax increases on high-income taxpayers will boost revenues further. Meanwhile,
as noted above, measures like the ACA and the BCA along
with the proposals in this Budget will constrain future
spending and help narrow the deficit. By the end of the
10-year period, the primary budget—receipts and noninterest spending—is estimated to be in surplus with the
debt-to-GDP ratio declining. Beyond the 10-year horizon,
however, demographic pressures and continued high costs
for health care are likely to begin gradually pushing up
the deficit and the ratio of debt to GDP for an additional
15 years before the easing of baby boom retirements, continued control in Government discretionary spending and
health costs, and gradually rising revenues due to growing household income turn the country on a course toward
reducing the debt-to-GDP ratio and balancing the budget
in 2055.
The key to long-range fiscal sustainability is balancing the Government’s commitments for major health and
retirement programs—Medicare, Medicaid and Social
Security—with sufficient tax receipts along with control
in discretionary and non-entitlement spending, while allowing for additional entitlement reforms as appropriate.
•	 Medicare’s growth has generally exceeded that of
other Federal spending for decades, tracking the
rapid growth in overall health care costs. The ACA
is curtailing this cost growth, but Medicare spending
is still projected to reach higher levels relative to the
economy and the rest of the budget than those that
prevail today, due both to rising health costs and the
aging population.
•	 Medicaid’s growth has, like Medicare, generally
tracked the growth in overall health costs, and
therefore historically exceeded that of other Federal
spending. Medicaid assistance will expand further
beginning in 2014 because of broadened coverage
provided by the ACA. However, the ACA’s reforms
are also expected to reduce Medicaid per beneficiary spending growth in the long-run projections, as
Medicare cost containment spills over into the rest
of the health sector.
•	 Outlays for Social Security benefits will rise as a
share of the economy as the population ages, putting
pressure on the long-term budget.
•	 Discretionary spending for both defense and nondefense programs will continue to shrink relative to
49

50

Analytical Perspectives

the economy as discretionary spending limits hold
this form of spending to growth rates lower than inflation. It is unlikely that the growth in discretionary spending will continuously remain lower than
inflation over the very long term, so after the end of
the 10-year budget window, the projections allow for
growth with inflation and population growth to effectively hold discretionary spending constant on a
real per capita basis.
•	 Without any further changes in tax law, revenues
will gradually rise as a share of the economy over
the 75-year horizon, as individuals’ real incomes rise
into higher tax brackets (which are indexed for inflation). Without future legislative action to cut taxes,
revenues will continue to gradually rise as a share
of the economy.
Future budget outcomes depend on a host of unknowns—changing economic conditions, unforeseen
international developments, unexpected demographic
shifts, the unpredictable forces of technological advance,
and evolving political preferences, to name a few reasons
that the budget outcomes could change for reasons other
than the inevitability of future legislated changes. These
uncertainties make even short-run budget forecasting
quite difficult, and the uncertainties increase the further
into the future projections are extended. A full treatment
of all the relevant risks is beyond the scope of this chapter,
but the chapter does show how sensitive long-run budget
projections are to changes in some of key economic and
demographic assumptions.
The Long-Run Budget Projections
The 2014 Budget includes nearly $1.8 trillion in net
deficit reduction over the next 10 years. Combined with
the more than $2.5 trillion in savings from the discretionary spending limits enacted in the BCA and the revenue
increases enacted in ATRA, this would generate more

Percent of GDP
120

than $4.3 trillion in deficit reduction over the next decade.
These savings would bring the Nation to the point where
current non-interest expenditures are no longer adding to
debt and where debt is decreasing as a share of the economy—a key metric of fiscal sustainability. The base case
long-run projections begin with the 10-year estimates of
revenues and outlays under 2014 Budget policies, which
result in a primary surplus of 1.2 percent of GDP and an
overall deficit of 1.7 percent of GDP in 2023. In the decade
and a half beyond 2023, the fiscal position gradually deteriorates mainly because of the aging of the population and
the high continuing cost of health care driving up outlays
for Social Security, Medicare, and Medicaid as a share of
GDP. Revenues also increase as a share of GDP, but more
gradually, due to economic growth. By 2033, the deficit
is projected to peak at 2.8 percent of GDP, but thereafter
rising revenues and controlled spending along with stabilized entitlement growth cause the deficit to begin to
fall rapidly—falling below 2 percent of GDP in 2045, and
below 1 percent of GDP in 2051. The Budget reaches balance in 2055, when revenues and outlays are 21.5 percent
of GDP, slightly higher than their levels during the budget surpluses of 1998-2001. The Federal Government is
then projected to run surpluses over the remainder of the
projection window, with publicly-held debt falling rapidly
until it reaches zero in 2074 (see Chart 4–1). The 75-year
fiscal gap disappears in the base case, becoming a fiscal
surplus of 1.6 percent of GDP.
These projections are not intended to be a prediction of
future legislative action, nor are they intended to reflect
explicit policy proposals for the years beyond 2023; rather,
they are a mechanical extrapolation of the Budget policies.
Relative to last year’s projections, the base case projections
make two methodological changes, both of which are intended to provide a baseline forecast under the assumption
that there are no future legislative changes in policy.
First, the projections allow revenues to rise as a share
of GDP, as will occur automatically under current law as
real household incomes grow. Allowing revenues to rise

Chart 4-1. Publicly Held Debt Under
2014 Budget Policy Extended

100
80
60
40
20
0
-20
-40
-60
-80
1940

1969

1998

2027

2056

2085

51

4. Long Term Budget Outlook

Table 4–1. Long-Run Budget Projections
(Receipts, Outlays, Surplus or Deficit, and Debt as Percent of GDP)
1980
Receipts �������������������������������������������������������������������

19.0

1990
18.0

2000
20.6

2010
15.1

2020
19.4

2030
20.1

2040
20.5

2050
21.2

2060
21.9

2070
22.7

2080
23.4

2085
23.8

Outlays:
Discretionary ��������������������������������������������������������
10.1
8.7
6.3
9.1
5.5
4.5
4.1
3.5
3.1
2.7
2.4
2.3
Mandatory:
Social Security ������������������������������������������������
4.3
4.3
4.1
4.9
5.3
6.2
6.4
6.2
6.2
6.1
6.2
6.3
Medicare ���������������������������������������������������������
1.1
1.7
2.0
3.1
3.1
3.8
4.1
4.2
4.3
4.4
4.5
4.5
Medicaid ���������������������������������������������������������
0.5
0.7
1.2
1.9
1.9
2.2
2.6
2.8
2.8
2.9
2.9
2.9
Other ���������������������������������������������������������������
3.7
3.2
2.4
3.7
3.2
3.0
2.7
2.6
2.4
2.3
2.1
2.1
Subtotal, mandatory ����������������������������������
9.6
9.9
9.7
13.6
13.5
15.2
15.8
15.8
15.6
15.7
15.7
15.7
Net interest ����������������������������������������������������������
1.9
3.2
2.3
1.4
2.7
2.9
3.1
2.8
2.0
0.6
–1.1
–2.2
Total outlays ����������������������������������������������������
21.7
21.9
18.2
24.1
21.6
22.7
22.9
22.1
20.7
19.1
17.0
15.8
Surplus (+) or deficit (–) �������������������������������������������
–2.7
–3.9
2.4
–9.0
–2.2
–2.6
–2.5
–0.9
1.2
3.6
6.4
8.0
Primary Surplus (+) or deficit (–) �����������������������������
–0.8
–0.6
4.7
–7.6
0.5
0.4
0.6
1.9
3.2
4.2
5.3
5.8
Federal debt (+) or asset (–) held by the public, end
of period ��������������������������������������������������������������
26.1
42.1
34.7
62.9
74.9
72.9
76.1
68.5
47.3
13.9
–30.6
–57.1
Note: The figures shown in this table beyond 2020 are the product of a long-range forecasting model maintained by OMB. This model is separate from the models and capabilities that
produce detailed programmatic estimates in the Budget. It was designed to produce long-range projections based on additional assumptions regarding growth in the economy, the longrange evolution of specific programs, and the demographic and economic forces affecting those programs. The model, its assumptions, and sensitivity testing of those assumptions are
presented in this chapter.

is methodologically consistent with the approach for the
projections of Social Security, Medicare, and other mandatory spending programs in that it projects the levels
of revenues that would result under extrapolation of the
Budget policies. Under that approach, revenues would
rise as a share of GDP because household income is projected to rise in real terms. Real income growth will push
households into higher tax brackets (which are indexed to
inflation), resulting in taxes that gradually rise as a share
of the economy.
Second, after 2023, the new projections increase discretionary spending to keep pace with inflation and population growth, rather than GDP growth. Growing these
programs at the rate of inflation plus population growth
reflects the growth rate that would be needed to maintain
current services per capita. This growth rate is higher
than the growth rate for these programs in the baselines
assumed by the Office of Management and Budget (OMB)
and the CBO in the absence of discretionary spending
limits.
As shown in Table 4–2, other assumptions lead to substantially different projections. Under a scenario that instead assumes that future policymakers enact additional
tax cuts and spending increases such that income tax revenues remain roughly flat as a share of the economy and
discretionary spending grows with GDP, deficits and debt
rise quickly throughout the 2020s and 2030s before the
pace of increase slows around 2040. Deficits ultimately
reach 5.6 percent of GDP and debt continues to rise gradually throughout the projection horizon. Under this alternative scenario, there is an overall fiscal gap of 0.7 percent
of GDP over the 75-year projection horizon (see Chart 4–2
and Table 4–2). Importantly, however, this alternative scenario effectively assumes that Congress passes substantial new tax cuts in future years. Equivalently, it assumes
that households with a given level of income – adjusted

for inflation – would pay significantly lower taxes in the
future than they do today. Likewise, that scenario allows
for significant increases in discretionary spending beyond
what would be needed to support current services in per
capita terms. In effect, the additional deficits forecast
under this scenario are entirely a reflection of projected
future Congressional action to reduce taxes and increase
discretionary spending, rather than the result of continuation of current policies.
As noted, the base case is neither a prediction nor a recommendation but is instead a mechanical extrapolation.
In particular, it would be unrealistic and undesirable for
revenues to continue to increase and discretionary spending to continue to fall as a share of GDP over the long
run even as the Federal Government ran large surpluses,
paid off its entire debt, and began accumulating assets, as
shown in Table 4–1. The purpose of the long-run forecast
shown here is simply to provide an extension of budget
policies against which to evaluate the nation’s fiscal condition and potential changes in policy. That base forecast
shows that under 2014 Budget policies, in the long run
the budget does not run deficits or increase the debt. On
the other hand, in an alternative scenario, holding down
revenue growth and allowing discretionary spending to
keep pace with GDP growth, there is a modest long-run
fiscal gap, as shown in Table 4–2.
Key Drivers of Program Growth: Health
Costs and Demographic Changes
Health Costs.—Health care costs have risen faster
than inflation for decades. This rising cost trend has
contributed to steady increases in the amounts spent on
Medicare and Medicaid, while also making it more difficult for people to afford private health insurance. The
ACA tackles both problems by extending health insur-

52

Analytical Perspectives

Table 4–2.  75-Year Fiscal Gap (–)/Surplus (+)
Under Alternative Budget Scenarios
(percent of GDP)
2014 Base Case �����������������������������������������������������������������������������������������������
2014 Budget policies plus assumed future tax cuts and spending increases ������

1.6
–0.7

Health:
Excess cost growth averages 0% ����������������������������������������������������������������
Excess cost growth averages 1% ����������������������������������������������������������������

2.9
0.8

Discretionary Outlays:
Grow with inflation ���������������������������������������������������������������������������������������
Grow with GDP ��������������������������������������������������������������������������������������������

2.0
0.5

Revenues:
Income tax brackets are regularly increased �����������������������������������������������

0.4

Productivity:
Productivity grows by 0.25 percent per year faster than the base case ������
Productivity grows by 0.25 percent per year slower than the base case �����

3.5
–0.4

Population:
Fertility:
2.3 births per woman �������������������������������������������������������������������������������
1.7 births per woman �������������������������������������������������������������������������������

2.4
0.7

Immigration:
1.3 million immigrants per year ����������������������������������������������������������������
0.8 million immigrants per year ����������������������������������������������������������������

2.2
1.0

Mortality:
Female life expectancy 83.8; male life expectancy 80.1 ��������������������������
Female life expectancy 89.8; male life expectancy 87.3 ��������������������������

2.0
1.5

ance coverage to millions of Americans who currently
lack insurance, while making reforms that will slow future growth in medical costs. When the law is fully implemented, Medicare spending per beneficiary will rise
at rates substantially below those at which spending has
grown for four decades. Even with these changes, however, overall health care costs are likely to continue to rise
faster than inflation as the population ages.
The base case projections assume that the provisions of
the ACA are fully implemented, limiting health care costs
in the long run compared with prior law. The long-run
Medicare assumptions for the years following the 10-year
budget window are essentially the same as those in the
latest Medicare Trustees’ report (April 2012), except in
cases where those projections exceed the target growth
rate of 0.5 percentage points above growth in GDP per
capita set by the Budget’s proposal to strengthen the
Independent Payment Advisory Board (IPAB).1 Generally,
this constraint helps to control excess cost growth in the
two decades after the budget window, before excess cost
growth dips below the proposed threshold. The Trustees’
projections imply that average long-range annual growth
in Medicare spending per enrollee is 0.4 percentage points
per year faster than the projected growth rate in GDP per
1 

The ACA established an Independent Payment Advisory Board
(IPAB) that is required to propose changes in Medicare should Medicare
costs exceed target growth rates specified in law; such IPAB-proposed
changes would take effect automatically, unless overridden by the Congress. The Budget includes a proposal that would strengthen IPAB by
lowering the target growth rate applicable for 2020 onward from GDP +
1.0 percentage points to GDP + 0.5 percentage points.

capita, but the growth rate is less than 0.3 percentage
points with the IPAB constraint imposed This growth
rate for Medicare is significantly smaller than previous
projections prior to the passage of the ACA—a reduction
the Trustees largely attribute to the ACA—but is higher
than the projections in the 2013 Budget due to increased
cost rates recommended by the Medicare Technical
Review Panel and included in the 2012 Trustees’ report.
Along with the rules for Medicare, there are a number
of reforms in the ACA that experts believe could produce
significant savings relative to the historical trend and
that would affect medical costs more broadly. One is an
excise tax on the highest-cost insurance plans, which will
encourage substitution of plans with lower costs, while
raising take-home pay. There is also an array of delivery system reforms, including incentives for accountable
care organizations and payment reform demonstrations
that have the potential to re-orient the medical system
toward providing higher quality care, not just more care,
and thus reduce cost growth in the future.2 Because of
these broader reforms, Medicaid spending per beneficiary
and private health spending per capita are also projected
to slow, though not as much as Medicare.3
Elderly Population.—An aging population also
poses a serious long-run budgetary challenge. Because
of lower expected fertility and improved longevity, the
Social Security actuaries project that under current law
in which the normal retirement age rises to 67, the ratio
of workers to Social Security beneficiaries will fall from
around 2.8 currently to a level of 2.0 by the time most of
the baby boomers have retired. From that point forward,
the ratio of workers to beneficiaries is expected to continue to decline slowly due to increased longevity of retirees.
With fewer workers to pay the taxes needed to support
the retired population, budgetary pressures will steadily
mount, and without reforms, trust fund exhaustion is projected by the Social Security Trustees to occur in 2033, after which time the Trustees project annual resources will
be sufficient to pay about 75 percent of scheduled benefits.
Other Programs.—Though smaller in size and facing
fewer long-run fiscal challenges, smaller mandatory programs are also included in the projections and contribute
to the long-run fiscal picture. Other mandatory programs
generally decline relative to the size of the economy. These
include Federal pension benefits for Government workers. The shift in the 1980s from the traditional Federal
pension benefit of the Civil Service Retirement System
(CSRS) to the much smaller defined benefit pension plan
of the Federal Employees Retirement System (FERS)
is having a marked effect on Federal civilian pensions,
which is expected to continue as FERS comes to dominate future pension projections. As a result, spending
for Federal retirement is expected to permanently shrink
2  Groups of providers meeting certain criteria can be recognized as
accountable care organizations (ACOs), which allow them to coordinate
care and manage chronic disease more easily thereby improving the
quality of care for patients. ACOs can then share in any cost savings
they achieve for Medicare if they meet quality standards.
3  The projections assume that growth in Medicaid spending per enrollee and private health spending per capita exceeds growth in GDP
per capita by 0.7 percentage points.

53

4. Long Term Budget Outlook

Chart 4-2. Alternative Base Assumptions
Surplus(+)/Deficit(-) as a percent of GDP
10
2014 Budget Policy Extended

5

0

-5
2014 Budget Policies Plus Assumed
Future Tax Cuts and Spending Increases

-10

-15
2000

2017

2034

relative to the size of the economy over the next 75 years.
Most other entitlement programs are also expected to
grow more slowly than GDP due mainly to falling poverty
and population growth rates over the very long run.
The Fiscal Gap
The present value fiscal gap is one measure of the size
of the adjustment needed to preserve fiscal sustainability
in the long run.4 It is defined as the present value increase in taxes or reduction in non-interest expenditures
over a finite time period required to keep the long-run
ratio of Government debt-to-GDP at its current level if
implemented immediately. The gap can be measured in
4  Alan J. Auerbach, “The U.S. Fiscal Problem: Where We Are, How
We Got Here, and Where We’re Going,” NBER: Macroeconomics Annual
1994, pp 141 – 175.

2051

2068

2085

present value dollars or as a percentage of GDP. Since the
fiscal gap is calculated over a finite time period, it may
understate the adjustment needed to achieve permanent
sustainability. If future publicly-held debt is projected to
be lower than current debt, than there is a fiscal surplus
rather than a fiscal gap. Table 4–2 shows present value
fiscal gap or surplus calculations calculated over a 75-year
horizon for the base case as well those under different assumptions. This value can be interpreted as the average
level of deficit change needed each year from 2014 to 2088
to maintain the current level of debt held by the public as
a percentage of GDP. Since the base case reaches balance,
it has a fiscal surplus of 1.6 percent of GDP, which means
that deficit reduction is not needed to maintain the current level of debt over 75 years.

Chart 4-3. Alternative Health Care Costs
Surplus(+)/Deficit(-) as a percent of GDP
20

15

Lower Average Cost Growth

10

2014 Budget Policy Extended

5
0
Higher Average Cost Growth

-5
-10
-15
2000

2017

2034

2051

2068

2085

54

Analytical Perspectives

Chart 4-4. Alternative Discretionary Projections
Surplus(+)/Deficit(-) as a percent of GDP
15
Discretionary Spending
Grows with Inflation

10

2014 Budget Policy Extended

5
0
Discretionary Grows with GDP

-5
-10
-15
2000

2017

2034

Alternative Policy, Economic, and
Technical Assumptions
The quantitative results discussed above are sensitive
to changes in underlying policy, economic, and technical
assumptions. Some of the most important of these assumptions and their effects on the budget outlook are discussed below. It is important to note that these paths are
merely illustrative; they are not intended to represent the
policy preferences of this Administration or the predicted
actions of future Administrations and Congresses.
Health Spending.—The base projections for Medicare
and Medicaid over the next 75 years assume an extension
of current law and the policies in the 2014 Budget. The
health cost alternatives illustrated in Chart 4–3 assume
that medical costs rise more rapidly or more slowly than
in the base case. The first alternative assumes that costs

2051

2068

2085

per beneficiary rise at one percentage points per year
above GDP per capita in the entire health sector, while
the second alternative assumes zero growth above GDP
per capita in the health sector. Table 4–2 shows the effect
of these alternatives on the 75-year present value fiscal
surplus, which falls from 1.6 percent of 75-year present
value GDP in the base case to 0.8 percent of GDP in the
high health cost growth scenario and rises to 2.9 percent
of GDP in the low health cost growth scenario.
Discretionary Spending.— The current base projection for discretionary spending assumes that after 2023,
discretionary spending grows with inflation and population (see Chart 4–4). An alternative assumption would
be to allow discretionary spending to keep pace with the
economy and grow with GDP. Yet another possible assumption is to only allow discretionary spending to grow
with inflation. As shown in Table 4–2, the 75-year fis-

Chart 4-5. Alternative Revenue Projections
Surplus(+)/Deficit(-) as a percent of GDP
10
2014 Budget Policy Extended

5

0
Tax Brackets Regularly Increased

-5

-10

-15
2000

2017

2034

2051

2068

2085

55

4. Long Term Budget Outlook

Chart 4-6. Alternative Productivity Assumptions
Surplus(+)/Deficit(-) as a percent of GDP
20
Higher Productivity Growth

15
10

2014 Budget Policy Extended

5
0
-5

Lower Productivity Growth

-10
-15

2000

2017

2034

cal surplus falls from 1.6 percent of 75-year present value
GDP in the base case to 0.5 percent of GDP in the growth
with GDP scenario, and rises to 2.0 percent of GDP in the
growth with inflation scenario.
Alternative Revenue Projections.—In the base projection, tax receipts rise gradually relative to GDP as real
incomes rise. Chart 4–5 shows alternative receipts assumptions. Assuming that Congress will act to cut taxes
to avoid the revenue increases associated with rising incomes would bring about higher deficits and publicly-held
debt throughout the 75-year horizon. The 75-year fiscal
surplus falls from 1.6 percent of 75-year present value
GDP in the base case to 0.4 percent of GDP in the alternative scenario.
Productivity.—The rate of future productivity growth
has a major effect on the long-run budget outlook (see
Chart 4–6). It is also highly uncertain. Over the next few

2051

2068

2085

decades, an increase in productivity growth would reduce
projected budget deficits. Higher productivity growth
adds directly to the growth of the major tax bases, while
it has a smaller immediate effect on outlay growth. For
much of the last century, output per hour in nonfarm business grew at an average rate of around 2.2 percent per
year, despite long periods of sustained output growth at
notably higher and lower rates than the long term average.
The base projections assume that output per hour in
nonfarm business will increase at an average annual rate
of around 2.3 percent per year, close to its long-run average and slightly below its average growth rate since 1995
of 2.5 percent. Overall, real GDP per hour worked will
grow at an average annual rate of 1.7 percent per year.
The difference is reconciled by the tendency of the sectors of the economy that are counted in GDP outside of

Chart 4-7. Alternative Fertility Assumptions
Surplus(+)/Deficit(-) as a percent of GDP
15
Higher Fertility

10
2014 Budget Policy Extended

5
0

Lower Fertility

-5
-10
-15
2000

2017

2034

2051

2068

2085

56

Analytical Perspectives

Chart 4-8. Alternative Immigration Assumptions
Surplus(+)/Deficit(-) as a percent of GDP
15
Higher Net Immigration

10

2014 Budget Policy Extended

5
0

Lower Net Immigration

-5
-10
-15
2000

2017

2034

the nonfarm business sector to have lower productivity
growth than those counted in the nonfarm business sector. The alternative scenarios highlight the effect of raising and lowering the projected productivity growth rate
by 1/4 percentage point. The 75-year fiscal surplus rises
from 1.6 percent of 75-year present value GDP in the base
case to 3.5 percent of GDP in the faster productivity scenario, but falls to a fiscal gap of -0.4 percent of GDP in the
slower productivity scenario.
Population.—The key assumptions for projecting
long-run demographic developments are fertility, immigration, and mortality.
•	 The demographic projections assume that fertility will average about 2.0 total lifetime births per
woman in the future, just slightly below the replacement rate needed to maintain a constant population
in the absence of immigration (see Chart 4–7). The
alternatives are those in the latest Social Security
trustees’ report (1.7 and 2.3 births per woman). The
75-year fiscal surplus rises from 1.6 percent of 75year present value GDP in the base case to 2.4 percent of GDP in the high fertility scenario, but falls to
0.7 percent of GDP in the low fertility scenario.
•	 The rate of net immigration is assumed to average
around 1 million immigrants per year in the long
run (see Chart 4–8). Higher net immigration relieves some of the downward pressure on population
growth from low fertility and allows total population
to expand throughout the projection period, although
at a much slower rate than has prevailed historically. The alternatives are taken from the Social Security Trustees’ Report (1.3 million total immigrants
per year in the high alternative and 0.8 million in
the low alternative). The 75-year fiscal surplus rises
from 1.6 percent of 75-year present value GDP in the
base case to 2.2 percent of GDP in the faster net immigration scenario, but falls to 1.0 percent of GDP in
the slower net immigration scenario.

2051

2068

2085

•	 Mortality is projected to decline as people live longer
in the future (see Chart 4–9). These assumptions
parallel those in the latest Social Security Trustees’ Report. The average life expectancy at birth for
women is projected to rise from 80.6 years in 2012
to 86.7 years in 2088, and the average for men is
expected to increase from 76.1 years in 2012 to 83.6
years in 2088. The variations show the high and low
alternatives from the latest Trustees’ report, with
average female and male life expectancy reaching
83.8 and 80.1 in the shorter life expectancy alternative and 89.8 and 87.3 in the longer life expectancy
alternative. The 75-year fiscal surplus rises from 1.6
percent of 75-year present value GDP in the base
case to 2.0 percent of GDP in the shorter life expectancy scenario, but falls to 1.5 percent of GDP in the
longer life expectancy scenario.
The long-run budget outlook is highly uncertain. With
pessimistic assumptions, the fiscal picture can quickly deteriorate back into deficits and rising debt. More optimistic assumptions imply an even earlier return to surpluses
and declining debt. These projections highlight the need
for policy awareness and potential action to address the
main drivers of future budgetary costs.
Actuarial Projections for Social
Security and Medicare
The Trustees for the Medicare Federal Hospital Insurance
(HI) and Social Security trust funds issue annual reports
that include projections of income and outgo for these funds
over a 75-year period. These projections are based on different methods and assumptions than the long-run budget
projections presented above. Even with these differences,
the message is similar: the ACA is projected to curtail the
projected growth in per capita health care costs, but even
with this reform the retirement of the baby-boom generation

57

4. Long Term Budget Outlook

Chart 4-9. Alternative Mortality Assumptions
Surplus(+)/Deficit(-) as a percent of GDP
15
Shorter Life Expectancy

10

2014 Budget Policy Extended

5
Longer Life
Expectancy

0
-5
-10
-15

2000

2017

2034

and continuing high medical costs will eventually exhaust
the trust funds unless further action is taken.
The Trustees’ reports feature the actuarial balance of
the trust funds as a summary measure of their financial
status. For each trust fund, the balance is calculated as
the change in receipts or program benefits (expressed as
a percentage of taxable payroll) that would be needed to
preserve a small positive balance in the trust fund at the
end of a specified time period. The estimates cover periods ranging in length from 25 to 75 years. These balance
calculations show what it would take to achieve a positive trust fund balance at the end of a specified period of
time, not what it would take to maintain a positive balance indefinitely. To maintain a positive balance forever
requires a larger adjustment than is needed to maintain
a positive balance over 75 years when the annual balance
in the program is negative at the end of the 75-year projection period, as it is expected to be for Social Security
and Medicare without future reforms.
Table 4–3 shows the projected income rate, cost rate,
and annual balance for the Medicare HI and combined
OASDI Trust Funds at selected dates under the Trustees’
intermediate assumptions. Data from the 2010 and the
2011 reports are shown along with the latest data from
the 2012 reports. Even following the passage of the ACA
in 2010, there is a continued imbalance in the long-run
projections of the HI program due to demographic trends
and continued high per-person costs. Additionally, following two years of significant ACA-related improvement,
the 2012 Trustees’ Report reflects an increase in the longrun deficit compared to 2011 due to the implementation
of recommendations of the Medicare Technical Review
Panel on long-term health care cost growth rates. While
these projections still assume full implementation of the
cost reductions under current law over the entire long-run
projection period, the entire long-run cost growth calculation has been modified following the Panel’s findings. In
the 2011 Trustees’ report, which was largely unchanged

2051

2068

2085

from 2010, Medicare HI trust fund costs as a percentage
of Medicare covered payroll were projected to rise from
3.8 percent to 5.0 percent between 2010 and 2080 and the
HI trust fund imbalance was projected to be -0.7 percent
in 2080. In the 2012 report, costs rise from 3.7 percent of
Medicare taxable payroll in 2010 to 6.3 percent in 2080
and the imbalance in the HI trust fund in 2080 is -2.0
percent.
Medicare Funding Warning. Under the Medicare
Modernization Act (MMA) of 2003, the Medicare Trustees
must issue a “warning” when in two consecutive Trustees’
reports they project that the share of Medicare funded by
general revenues will exceed 45 percent in the current
year or any of the subsequent six years. Such a warning was included in the 2012 Trustees Report. The MMA
requires that the President submit legislation, within 15
days of submitting the Budget, which will reduce general
revenue funding to 45 percent of overall Medicare outlays or lower in the immediate seven-fiscal-year window.
In accordance with the Recommendations Clause of the
Constitution and as the Executive Branch has noted in
prior years, the Executive Branch considers this requirement to be advisory and not binding. However, the proposals in this Budget would further strengthen Medicare’s
finances and extend its solvency.
As a result of reforms legislated in 1983, Social Security
had been running a cash surplus with taxes exceeding
costs up until 2009. This surplus in the Social Security
trust fund helped to hold down the unified budget deficit.
The cash surplus ended in 2009. The 2012 Social Security
trustees report projects that the trust fund will not return
to cash surplus without further reforms. Even so, the program will continue to experience an overall surplus for
some years because of the Trust Funds’ interest earnings.
Eventually, however, Social Security will begin to draw
on its trust fund balances to cover current expenditures.
Over time, as the ratio of workers to retirees falls, costs
are projected to rise further from 13.8 percent of Social

58

Analytical Perspectives

Table 4–3. Intermediate Actuarial Projections for OASDI and Hi
2012

2020

2030

2050

2080

Percent of Payroll
Medicare Hospital Insurance (HI)
Income Rate
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������

3.2
3.2
3.2

3.4
3.5
3.5

3.6
3.6
3.7

3.9
3.9
3.9

4.3
4.3
4.3

Cost Rate
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������

3.6
3.8
3.7

3.5
3.6
3.6

4.3
4.4
4.7

5.0
5.1
5.8

4.9
5.0
6.3

-0.4
-0.6
-0.5

-0.0
-0.2
-0.2

-0.7
-0.8
-1.0
25 years
-0.3
-0.5
-0.7

-1.1
-1.2
-1.9
50 years
-0.6
-0.8
-1.2

-0.7
-0.7
-2.0
75 years
-0.7
-0.8
-1.4

Annual Balance
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������
Projection Interval: �����������������������������������������������������������������������������������������������
Actuarial Balance: 2010 Trustees’ Report ���������������������������������������������������
Actuarial Balance: 2011 Trustees’ Report ���������������������������������������������������
Actuarial Balance: 2012 Trustees’ Report ���������������������������������������������������

Percent of Payroll
Old Age Survivors and Disability Insurance (OASDI)
Income Rate
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������

12.9
12.9
12.9

13.1
13.1
13.1

13.2
13.2
13.3

13.2
13.2
13.3

13.3
13.3
13.3

Cost Rate
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������

12.8
13.2
13.8

14.2
14.2
14.4

16.4
16.7
17.0

16.3
16.7
17.1

17.3
17.4
17.6

0.0
-0.4
-0.9

-1.1
-1.1
-1.3

-3.2
-3.5
-3.8
25 years
-0.3
-0.6
-1.2

-3.1
-3.4
-3.8
50 years
-1.5
-1.8
-2.3

-4.0
-4.1
-4.3
75 years
-1.9
-2.2
-2.7

Annual Balance
2010 Trustees’ Report ���������������������������������������������������������������������������������
2011 Trustees’ Report ���������������������������������������������������������������������������������
2012 Trustees’ Report ���������������������������������������������������������������������������������
Projection Interval: �����������������������������������������������������������������������������������������������
Actuarial Balance: 2010 Trustees’ Report ���������������������������������������������������
Actuarial Balance: 2011 Trustees’ Report ���������������������������������������������������
Actuarial Balance: 2012 Trustees’ Report ���������������������������������������������������

Security covered payroll in 2012 to 14.4 percent of payroll
in 2020, 17.0 percent of payroll in 2030 and 17.6 percent
of payroll in 2080. Revenues excluding interest are projected to rise only slightly from 12.9 percent of payroll today to 13.3 percent in 2080. Thus the annual balance is
projected to decline from -0.9 percent of payroll in 2012 to
-1.3 percent of payroll in 2020, -3.8 percent of payroll in
2030, and -4.3 percent of payroll in 2080. On a 75-year
basis, the actuarial deficit is projected to be -2.7 percent
of payroll. In the process, the Social Security trust fund,
which was built up since 1983, would be drawn down and

eventually be exhausted in 2033. These projections assume that benefits would continue to be paid in full despite the projected exhaustion of the trust fund to show
the long-run implications of current benefit formulas.
Under current law, not all scheduled benefits would be
paid after the trust funds are exhausted. However, benefits could still be partially funded from current revenues.
The 2012 Trustees’ report presents projections on this
point. Beginning in 2033, 75 percent of projected Social
Security scheduled benefits would be funded. This percentage would eventually decline to 73 percent by 2086.

TECHNICAL NOTE: SOURCES OF DATA AND METHODS OF ESTIMATING
The long-range budget projections are based on demographic and economic assumptions. A simplified model of

the Federal budget, developed at OMB, is used to compute
the budgetary implications of these assumptions.

4. Long Term Budget Outlook

Demographic and Economic Assumptions.—For
the years 2013-2023, the assumptions are drawn from
the Administration’s economic projections used for the
2014 Budget. These budget assumptions reflect the
President’s policy proposals. The economic assumptions
are extended beyond this interval by holding inflation, interest rates, and the unemployment rate constant at the
levels assumed in the final year of the budget forecast.
Population growth and labor force growth are extended
using the intermediate assumptions from the 2012 Social
Security Trustees’ report. The projected rate of growth
for real GDP is built up from the labor force assumptions
and an assumed rate of productivity growth. Productivity
growth, measured as real GDP per hour, is assumed to
equal its average rate of growth in the Budget’s economic
assumptions—1.7 percent per year.
CPI inflation holds stable at 2.2 percent per year, the
unemployment rate is constant at 5.4 percent, the yield
on 10-year Treasury notes is steady at 5.0 percent, and
the 91-day Treasury bill rate is 3.7 percent. Consistent
with the demographic assumptions in the Trustees’ reports, U.S. population growth slows from around 1 percent per year to about two-thirds that rate by 2030, and
slower rates of growth beyond that point. By the end of
the projection period total population growth is nearly as
low as 0.4 percent per year. Real GDP growth is projected
to be less than its historical average of around 3.2 percent
per year because the slowdown in population growth and
the increase in the population over age 65 reduce labor
supply growth. In these projections, average real GDP

59
growth averages between 2.3 percent and 2.4 percent per
year for the period following the end of the 10-year budget
window in 2023.
The economic and demographic projections described
above are set by assumption and do not automatically
change in response to changes in the budget outlook. This
is unrealistic, but it simplifies comparisons of alternative
policies.
Budget Projections.—For the period through 2023,
receipts follow the 2014 Budget’s policy projections. After
2023, total tax receipts rise gradually relative to GDP as
real incomes also rise. Discretionary spending follows the
path in the Budget over the next 10 years and grows at
the rate of growth in inflation plus population afterwards.
Other spending also aligns with the Budget through the
budget horizon. Long-run Social Security spending is
projected by the Social Security actuaries using this chapter’s long-range economic and demographic assumptions.
Medicare benefits are projected based on a projection of
beneficiary growth and excess health care cost growth
from the 2012 Medicare Trustees’ report, as adjusted to
account for the Budget’s IPAB proposal, and the general
inflation assumptions described above. Medicaid outlays
are based on the economic and demographic projections
in the model. Other entitlement programs are projected
based on rules of thumb linking program spending to elements of the economic and demographic projections such
as the poverty rate.

5. Federal Borrowing and Debt

Debt is the largest legally and contractually binding
obligation of the Federal Government. At the end of 2012,
the Government owed $11,281 billion of principal to the
individuals and institutions who had loaned it the money
to fund past deficits. During that year, the Government
paid the public approximately $232 billion of interest on
this debt. At the same time, the Government also held
financial assets, net of other liabilities, of $999 billion.
Therefore, debt net of financial assets was $10,282 billion.
The $11,281 billion debt held by the public at the end of
2012 represents an increase of $1,153 billion over the level
at the end of 2011. In 2012, the $1,087 billion deficit and
other financing transactions totaling $66 billion caused
the Government to increase its borrowing from the public
by $1,153 billion. Debt held by the public increased from
67.8 percent of Gross Domestic Product (GDP) at the end of
2011 to 72.6 percent of GDP at the end of 2012. Meanwhile,
financial assets net of liabilities grew by $41 billion in 2012.
Debt held by the public net of financial assets increased
from 61.4 percent of GDP at the end of 2011 to 66.1 percent
of GDP at the end of 2012. The deficit is estimated to fall
to $973 billion in 2013, and then continue to decrease as
a percent of GDP in subsequent years. Declining deficits
and continued GDP growth are estimated to significantly
reduce growth in debt as a percentage of GDP; debt held by
the public is projected to reach 76.6 percent of GDP at the
end of 2013 and 78.2 percent at the end of 2014 and 2015
and then to begin to decline gradually after 2015. Debt net
of financial assets is expected to follow a similar path, increasing to 70.5 percent of GDP at the end of 2014 and then
decreasing in each of the following years.
Trends in Debt Since World War II
Table 5–1 depicts trends in Federal debt held by the
public from World War II to the present and estimates
from the present through 2018. (It is supplemented for
earlier years by Tables 7.1–7.3 in Historical Tables, which
is published as a separate volume of the Budget.) Federal
debt peaked at 108.7 percent of GDP in 1946, just after
the end of the war. From then until the 1970s, Federal
debt as a percentage of GDP decreased almost every
year because of relatively small deficits, an expanding
economy, and inflation. With households borrowing large
amounts to buy homes and consumer durables, and with
businesses borrowing large amounts to buy plant and
equipment, Federal debt also decreased almost every year
as a percentage of total credit market debt outstanding.
The cumulative effect was impressive. From 1950 to 1975,
debt held by the public declined from 80.2 percent of GDP
to 25.3 percent, and from 53.3 percent of credit market
debt to 18.4 percent. Despite rising interest rates, interest
outlays became a smaller share of the budget and were
roughly stable as a percentage of GDP.

Federal debt relative to GDP is a function of the Nation’s
fiscal policy as well as overall economic conditions. During
the 1970s, large budget deficits emerged as spending grew
faster than receipts and as the economy was disrupted
by oil shocks and rising inflation. The nominal amount of
Federal debt more than doubled, and Federal debt relative to GDP and credit market debt stopped declining after the middle of the decade. The growth of Federal debt
accelerated at the beginning of the 1980s, due in large
part to a deep recession, and the ratio of Federal debt to
GDP grew sharply. It continued to grow throughout the
1980s as large tax cuts, enacted in 1981, and substantial
increases in defense spending were only partially offset
by reductions in domestic spending. The resulting deficits
increased the debt to almost 50 percent of GDP by 1993.
The ratio of Federal debt to credit market debt also rose,
though to a lesser extent. Interest outlays on debt held
by the public, calculated as a percentage of either total
Federal outlays or GDP, increased as well.
The growth of Federal debt held by the public was slowing by the mid-1990s. In addition to a growing economy,
three major budget agreements were enacted in the 1990s,
implementing spending cuts and revenue increases and
significantly reducing deficits. The debt declined markedly relative to both GDP and total credit market debt, from
1997 to 2001, as surpluses emerged. Debt fell from 49.3
percent of GDP in 1993 to 32.5 percent of GDP in 2001.
Over that same period, debt fell from 26.4 percent of total
credit market debt to 17.5 percent. Interest as a share of
outlays peaked at 16.5 percent in 1989 and then fell to 8.9
percent by 2002; interest as a percentage of GDP fell by a
similar proportion.
The impressive progress in reducing the debt burden
stopped and then reversed course beginning in 2002. A
decline in the stock market, a recession, and the initially
slow recovery from that recession all reduced tax receipts.
The tax cuts of 2001 and 2003 had a similarly large and
longer-lasting effect, as did the growing costs of the wars
in Iraq and Afghanistan. Deficits ensued and debt began
to rise, both in nominal terms and as a percentage of GDP.
There was a small temporary improvement in 2006 and
2007 as economic growth led to a short-lived revival of
receipt growth.
As a result of the most recent recession, which began in
December 2007, and the massive financial and economic
challenges it imposed on the Nation, the deficit began
increasing rapidly in 2008. The deficit increased more
substantially in 2009 as the Government continued to
take aggressive steps to restore the health of the Nation’s
economy and financial markets. The deficit fell somewhat
in 2010, increased only slightly in 2011, and fell in 2012.
With the proposals in the Budget, the deficit is projected
to fall in 2013, both in nominal terms and as a share of

61

62

Analytical Perspectives

Table 5–1.  Trends in Federal Debt Held By the Public
(Dollar amounts in billions)

Fiscal Year

Debt held by the
public:
Current
dollars

FY 2012
dollars 1

Interest on the debt
Debt held by the public held by the public as a
as a percent of:
percent of:3

GDP

Credit
market
debt2

Total
outlays

GDP

1946 �����������������������������������������������������������������������������������������������������

241.9

2,368.9

108.7

N/A

7.4

1.8

1950 �����������������������������������������������������������������������������������������������������
1955 �����������������������������������������������������������������������������������������������������

219.0
226.6

1,745.4
1,586.9

80.2
57.2

53.3
43.2

11.4
7.6

1.8
1.3

1960 �����������������������������������������������������������������������������������������������������
1965 �����������������������������������������������������������������������������������������������������

236.8
260.8

1,472.4
1,516.0

45.6
37.9

33.7
26.9

8.5
8.1

1.5
1.4

1970 �����������������������������������������������������������������������������������������������������
1975 �����������������������������������������������������������������������������������������������������

283.2
394.7

1,368.9
1,404.0

28.0
25.3

20.8
18.4

7.9
7.5

1.5
1.6

1980 �����������������������������������������������������������������������������������������������������
1985 �����������������������������������������������������������������������������������������������������

711.9
1,507.3

1,751.3
2,826.5

26.1
36.4

18.6
22.3

10.6
16.2

2.3
3.7

1990 �����������������������������������������������������������������������������������������������������
1995 �����������������������������������������������������������������������������������������������������

2,411.6
3,604.4

3,873.0
5,099.7

42.1
49.1

22.6
26.4

16.2
15.8

3.5
3.3

2000 �����������������������������������������������������������������������������������������������������
2001 �����������������������������������������������������������������������������������������������������
2002 ����������������������������������������������������������������������������������������������������
2003 �����������������������������������������������������������������������������������������������������
2004 �����������������������������������������������������������������������������������������������������

3,409.8
3,319.6
3,540.4
3,913.4
4,295.5

4,441.4
4,224.3
4,432.1
4,801.0
5,139.5

34.7
32.5
33.6
35.6
36.8

19.0
17.5
17.4
17.8
17.4

13.0
11.6
8.9
7.5
7.3

2.4
2.1
1.7
1.5
1.4

2005 �����������������������������������������������������������������������������������������������������
2006 �����������������������������������������������������������������������������������������������������
2007 �����������������������������������������������������������������������������������������������������
2008 �����������������������������������������������������������������������������������������������������
2009 �����������������������������������������������������������������������������������������������������

4,592.2
4,829.0
5,035.1
5,803.1
7,544.7

5,321.5
5,412.0
5,480.9
6,173.6
7,924.1

36.9
36.6
36.3
40.5
54.0

17.0
16.4
15.8
17.1
21.4

7.7
8.9
9.2
8.7
5.7

1.5
1.8
1.8
1.8
1.4

2010 �����������������������������������������������������������������������������������������������������
2011 �����������������������������������������������������������������������������������������������������
2012 �����������������������������������������������������������������������������������������������������
2013 estimate ���������������������������������������������������������������������������������������
2014 estimate ���������������������������������������������������������������������������������������

9,018.9
10,128.2
11,281.1
12,403.5
13,295.9

9,377.3
10,314.0
11,281.1
12,149.9
12,781.7

62.9
67.8
72.6
76.6
78.2

24.8
26.9
28.7
N/A
N/A

6.6
7.4
6.6
7.2
7.1

1.6
1.8
1.5
1.6
1.6

2015 estimate ��������������������������������������������������������������������������������������� 14,032.2 13,238.7
78.2
N/A
7.4
1.6
2016 estimate ��������������������������������������������������������������������������������������� 14,714.1 13,624.0
77.7
N/A
8.3
1.8
2017 estimate ��������������������������������������������������������������������������������������� 15,343.5 13,942.5
76.8
N/A
9.8
2.1
2018 estimate ��������������������������������������������������������������������������������������� 15,954.1 14,227.7
75.9
N/A
11.5
2.4
N/A = Not available.
1 Debt in current dollars deflated by the GDP chain-type price index with fiscal year 2012 equal to 100.
2 Total credit market debt owed by domestic nonfinancial sectors, modified in some years to be consistent with budget concepts for the
measurement of Federal debt. Financial sectors are omitted to avoid double counting, since financial intermediaries borrow in the credit
market primarily in order to finance lending in the credit market. Source: Federal Reserve Board flow of funds accounts. Projections are not
available.
3 Interest on debt held by the public is estimated as the interest on Treasury debt securities less the “interest received by trust funds”
(subfunction 901 less subfunctions 902 and 903). The estimate of interest on debt held by the public does not include the comparatively small
amount of interest paid on agency debt or the offsets for interest on Treasury debt received by other Government accounts (revolving funds
and special funds).

the economy, and continue to fall as a percentage of GDP
throughout the 10-year budget window before ending at
1.7 percent in 2023. Debt held by the public as a percent
of GDP is estimated to grow to 76.6 percent at the end of
2013 and 78.2 percent at the end of 2014 and 2015 and

then to begin to decline slowly after 2015, reaching 73.0
percent of GDP in 2023. Debt net of financial assets as a
percent of GDP is estimated to grow to 69.5 percent at the
end of 2013 and 70.5 percent at the end of 2014 and then
to decline thereafter.

5.  Federal Borrowing and Debt

Debt Held by the Public and Gross Federal Debt
The Federal Government issues debt securities for
two principal purposes. First, it borrows from the public to finance the Federal deficit.1 Second, it issues debt
to Federal Government accounts, primarily trust funds,
which accumulate surpluses. By law, trust fund surpluses must generally be invested in Federal securities. The
gross Federal debt is defined to consist of both the debt
held by the public and the debt held by Government accounts. Nearly all the Federal debt has been issued by
the Treasury and is sometimes called “public debt,’’ but a
small portion has been issued by other Government agencies and is called “agency debt.’’2
Borrowing from the public, whether by the Treasury
or by some other Federal agency, is important because
it represents the Federal demand on credit markets.
Regardless of whether the proceeds are used for tangible
or intangible investments or to finance current consumption, the Federal demand on credit markets has to be financed out of the saving of households and businesses,
the State and local sector, or the rest of the world. Federal
borrowing thereby competes with the borrowing of other
sectors of the economy for financial resources in the credit
market. Borrowing from the public thus affects the size
and composition of assets held by the private sector and
the amount of saving imported from abroad. It also increases the amount of future resources required to pay
interest to the public on Federal debt. Borrowing from the
public is therefore an important concern of Federal fiscal
policy.3 Borrowing from the public, however, is an incomplete measure of the Federal impact on credit markets.
Different types of Federal activities can affect the credit
markets in different ways. For example, under its direct
loan programs, the Government uses borrowed funds to
acquire financial assets that might otherwise require financing in the credit markets directly. (For more information on other ways in which Federal activities impact
the credit market, see the discussion at the end of this
chapter.)
Issuing debt securities to Government accounts performs an essential function in accounting for the operation
of these funds. The balances of debt represent the cumulative surpluses of these funds due to the excess of their tax
receipts, interest receipts, and other collections over their
1  For the purposes of the Budget, “debt held by the public” is defined
as debt held by investors outside of the Federal Government, both domestic and foreign, including U.S. State and local governments and foreign governments. It also includes debt held by the Federal Reserve.
2  The term “agency debt’’ is defined more narrowly in the budget
than customarily in the securities market, where it includes not only
the debt of the Federal agencies listed in Table 5–4, but also the debt
of the Government-Sponsored Enterprises listed in Table 22–9 at the
end of Chapter 22, “Credit and Insurance,” and certain Governmentguaranteed securities.
3  The Federal subsector of the national income and product accounts
provides a measure of “net government saving’’ (based on current expenditures and current receipts) that can be used to analyze the effect of
Federal fiscal policy on national saving within the framework of an integrated set of measures of aggregate U.S. economic activity. The Federal
subsector and its differences from the budget are discussed in Chapter
28, “National Income and Product Accounts.’’

63
spending. The interest on the debt that is credited to these
funds accounts for the fact that some earmarked taxes and
user charges will be spent at a later time than when the
funds receive the monies. The debt securities are assets of
those funds but are a liability of the general fund to the
funds that hold the securities, and are a mechanism for
crediting interest to those funds on their recorded balances. These balances generally provide the fund with authority to draw upon the U.S. Treasury in later years to make
future payments on its behalf to the public. Public policy
may result in the Government’s running surpluses and accumulating debt in trust funds and other Government accounts in anticipation of future spending.
However, issuing debt to Government accounts does not
have any of the credit market effects of borrowing from the
public. It is an internal transaction of the Government,
made between two accounts that are both within the
Government itself. Issuing debt to a Government account
is not a current transaction of the Government with the
public; it is not financed by private saving and does not
compete with the private sector for available funds in the
credit market. While such issuance provides the account
with assets—a binding claim against the Treasury—
those assets are fully offset by the increased liability of
the Treasury to pay the claims, which will ultimately be
covered by the collection of revenues or by borrowing.
Similarly, the current interest earned by the Government
account on its Treasury securities does not need to be financed by other resources.
Furthermore, the debt held by Government accounts
does not represent the estimated amount of the account’s
obligations or responsibilities to make future payments to
the public. For example, if the account records the transactions of a social insurance program, the debt that it
holds does not necessarily represent the actuarial present value of estimated future benefits (or future benefits
less taxes) for the current participants in the program;
nor does it necessarily represent the actuarial present
value of estimated future benefits (or future benefits less
taxes) for the current participants plus the estimated
future participants over some stated time period. The
future transactions of Federal social insurance and employee retirement programs, which own 93 percent of the
debt held by Government accounts, are important in their
own right and need to be analyzed separately. This can be
done through information published in the actuarial and
financial reports for these programs.4
This Budget uses a variety of information sources to
analyze the condition of Social Security and Medicare,
the Government’s two largest social insurance programs.
Table 4-1 in Chapter 4, “Long-Term Budget Outlook,’’ projects Social Security and Medicare outlays to the year 2085
relative to GDP. The excess of future Social Security and
Medicare benefits relative to their dedicated income is
4  Extensive actuarial analyses of the Social Security and Medicare
programs are published in the annual reports of the boards of trustees
of these funds. The actuarial estimates for Social Security, Medicare, and
the major Federal employee retirement programs are summarized in
the Financial Report of the United States Government, prepared annually by the Department of the Treasury in coordination with the Office
of Management and Budget.

64

Analytical Perspectives

Table 5–2.  Federal Government Financing and Debt
(In billions of dollars)
Actual
2012
Financing:
Unified budget deficit ���������������������������������������������������������
Other transactions affecting borrowing from the public:
Changes in financial assets and liabilities: 1
Change in Treasury operating cash balance �����������
Net disbursements of credit financing accounts:
Direct loan accounts �������������������������������������������
Guaranteed loan accounts ����������������������������������
Troubled Asset Relief Program equity purchase
accounts ��������������������������������������������������������
Subtotal, net disbursements �����������������������
Net purchases of non-Federal securities by the
National Railroad Retirement Investment Trust ��
Net change in other financial assets and liabilities 2 ���
Subtotal, changes in financial assets and
liabilities ���������������������������������������������������������
Seigniorage on coins ����������������������������������������������������
Total, other transactions affecting borrowing from
the public �������������������������������������������������������
Total, requirement to borrow from the public
(equals change in debt held by the public) ���
Changes in Debt Subject to Statutory Limitation:
Change in debt held by the public �������������������������������������
Change in debt held by Government accounts �����������������
Less: change in debt not subject to limit and other
adjustments ������������������������������������������������������������������
Total, change in debt subject to statutory limitation ������

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

1,087.0

972.9

744.2

576.5

528.4

486.9

475.3

498.1

503.1

500.8

518.7

439.1

27.4

–5.4

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

85.7
12.3

144.2
15.1

138.2
16.7

153.3
12.0

143.5
12.0

132.8
11.0

124.0
12.7

119.0
13.3

118.2
9.1

119.6
4.8

119.1
0.4

120.0
–1.8

–61.3
36.7

–3.2
156.1

–5.4
149.6

–4.0
161.2

–0.2
155.3

–0.1
143.7

–0.1
136.6

–0.1
132.1

–*
127.3

–*
124.4

–*
119.5

–*
118.2

1.4
0.5

–1.1
.........

–1.3
.........

–1.3
.........

–1.7
.........

–1.1
.........

–1.2
.........

–1.2
.........

–1.1
.........

–1.4
.........

–1.0
.........

–0.3
.........

66.0
.........

149.6
–0.1

148.3
–0.1

160.0
–0.1

153.7
–0.1

142.6
–0.1

135.4
–0.1

130.9
–0.1

126.2
–0.2

123.1
–0.2

118.4
–0.2

117.9
–0.2

66.0

149.5

148.1

159.9

153.5

142.5

135.3

130.8

126.0

122.9

118.2

117.7

1,152.9

1,122.4

892.3

736.3

681.9

629.4

610.5

628.9

629.1

623.7

636.9

556.9

1,152.9
133.8

1,122.4
75.9

892.3
105.3

736.3
164.6

681.9
196.9

629.4
220.5

610.5
209.1

628.9
139.6

629.1
129.8

623.7
124.4

636.9
93.6

556.9
94.1

–6.2
1,280.5

1.3
1,199.6

0.4
998.0

*
901.0

0.6
879.4

0.3
850.2

–*
819.6

–0.5
768.0

–1.4
757.5

–0.9
747.2

–0.8
729.8

0.1
651.1

Debt Subject to Statutory Limitation, End of Year:
Debt issued by Treasury ���������������������������������������������������� 16,023.7 17,221.5 18,218.1 19,118.1 19,996.2 20,845.7 21,664.7 22,432.1 23,189.5 23,936.7 24,666.5 25,317.7
–8.1
–6.2
–4.8
–3.8
–2.5
–1.8
–1.2
–0.5
–0.5
–0.5
–0.5
–0.5
Less: Treasury debt not subject to limitation (–) 3 ��������������
Agency debt subject to limitation ���������������������������������������
*
*
*
*
*
*
*
*
*
*
*
*
Adjustment for discount and premium 4 �����������������������������
11.4
11.4
11.4
11.4
11.4
11.4
11.4
11.4
11.4
11.4
11.4
11.4
Total, debt subject to statutory limitation 5 ��������������������� 16,027.0 17,226.7 18,224.7 19,125.7 20,005.1 20,855.3 21,674.9 22,442.9 23,200.4 23,947.6 24,677.4 25,328.5
Debt Outstanding, End of Year:
Gross Federal debt: 6
Debt issued by Treasury ����������������������������������������������� 16,023.7 17,221.5 18,218.1 19,118.1 19,996.2 20,845.7 21,664.7 22,432.1 23,189.5 23,936.7 24,666.5 25,317.7
Debt issued by other agencies �������������������������������������
27.2
27.7
28.7
29.7
30.4
30.8
31.4
32.5
34.0
34.8
35.6
35.5
Total, gross Federal debt ����������������������������������������� 16,050.9 17,249.2 18,246.8 19,147.8 20,026.6 20,876.5 21,696.1 22,464.6 23,223.5 23,971.6 24,702.1 25,353.1
Held by:
Debt held by Government accounts ����������������������������� 4,769.8 4,845.7 4,951.0 5,115.6 5,312.5 5,533.0 5,742.1 5,881.6 6,011.5 6,135.9 6,229.5 6,323.6
Debt held by the public 7 ����������������������������������������������� 11,281.1 12,403.5 13,295.9 14,032.2 14,714.1 15,343.5 15,954.1 16,583.0 17,212.1 17,835.7 18,472.7 19,029.5
*$50 million or less.
1 A decrease in the Treasury operating cash balance (which is an asset) is a means of financing a deficit and therefore has a negative sign. An increase in checks outstanding (which
is a liability) is also a means of financing a deficit and therefore also has a negative sign.
2 Includes checks outstanding, accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liability accounts; and, as
an offset, cash and monetary assets (other than the Treasury operating cash balance), other asset accounts, and profit on sale of gold.
3 Consists primarily of debt issued by or held by the Federal Financing Bank.
4 Consists mainly of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discount on Government
account series securities.
5 Legislation enacted February 4, 2013, (P.L. 113-3) temporarily suspended the debt limit through May 18, 2013.
6 Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at sales price plus amortized discount or less amortized
premium. Agency debt securities are almost all measured at face value. Treasury securities in the Government account series are otherwise measured at face value less unrealized
discount (if any).
7 At the end of 2012, the Federal Reserve Banks held $1,645.3 billion of Federal securities and the rest of the public held $9,635.8 billion. Debt held by the Federal Reserve Banks is
not estimated for future years.

5.  Federal Borrowing and Debt

very different in concept and much larger in size than the
amount of Treasury securities that these programs hold.
For all these reasons, debt held by the public and debt
net of financial assets are both better gauges of the effect of
the budget on the credit markets than gross Federal debt.
Government Deficits or Surpluses
and the Change in Debt
Table 5–2 summarizes Federal borrowing and debt
from 2012 through 2023.5 In 2012 the Government borrowed $1,153 billion, increasing the debt held by the
public from $10,128 billion at the end of 2011 to $11,281
billion at the end of 2012. The debt held by Government
accounts increased $134 billion, and gross Federal debt
increased by $1,287 billion to $16,051 billion.
Debt held by the public.—The Federal Government
primarily finances deficits by borrowing from the public,
and it primarily uses surpluses to repay debt held by the
public.6 Table 5–2 shows the relationship between the
Federal deficit or surplus and the change in debt held by
the public. The borrowing or debt repayment depends on
the Government’s expenditure programs and tax laws, on
the economic conditions that influence tax receipts and
outlays, and on debt management policy. The sensitivity of the budget to economic conditions is analyzed in
Chapter 2, “Economic Assumptions and Interaction with
the Budget,’’ in this volume.
The total or unified budget surplus consists of two
parts: the on-budget surplus or deficit; and the surplus of
the off-budget Federal entities, which have been excluded
from the budget by law. Under present law, the off-budget
Federal entities are the Social Security trust funds (OldAge and Survivors Insurance and Disability Insurance)
and the Postal Service Fund.7 The on-budget and off-budget surpluses or deficits are added together to determine
the Government’s financing needs.
Over the long run, it is a good approximation to say
that “the deficit is financed by borrowing from the public’’ or “the surplus is used to repay debt held by the public.’’ However, the Government’s need to borrow in any
given year has always depended on several other factors
besides the unified budget surplus or deficit, such as the
change in the Treasury operating cash balance. These
other factors—“other transactions affecting borrowing
from the public’’—can either increase or decrease the
Government’s need to borrow and can vary considerably
in size from year to year. The other transactions affecting
borrowing from the public are presented in Table 5–2 (an
5  For projections of the debt beyond 2023, see Chapter 4, “Long-Term
Budget Outlook.”
6  Treasury debt held by the public is measured as the sales price plus
the amortized discount (or less the amortized premium). At the time of
sale, the book value equals the sales price. Subsequently, it equals the
sales price plus the amount of the discount that has been amortized
up to that time. In equivalent terms, the book value of the debt equals
the principal amount due at maturity (par or face value) less the unamortized discount. (For a security sold at a premium, the definition
is symmetrical.) For inflation-indexed notes and bonds, the book value
includes a periodic adjustment for inflation. Agency debt is generally
recorded at par.
7  For further explanation of the off-budget Federal entities, see Chapter 12, “Coverage of the Budget.’’

65
increase in the need to borrow is represented by a positive
sign, like the deficit).
In 2012 the deficit was $1,087 billion while these other
factors—primarily the change in the Treasury operating
cash balance and the net activity of credit financing accounts—increased the need to borrow by $66 billion. As a
result, the Government borrowed $1,153 billion from the
public. The other factors are estimated to increase borrowing by $150 billion in 2013 and $148 billion in 2014.
In 2015–2023, these other factors are expected to increase
borrowing by annual amounts ranging from $118 billion
to $160 billion.
As a result of the Government’s extraordinary efforts
to stabilize the Nation’s credit markets that began in
2008, the other factors have had significantly increased
effects on borrowing from the public in recent years. In
the 20 years between 1988 and 2007, the cumulative deficit was $2,956 billion, the increase in debt held by the
public was $3,145 billion, and other factors added a total
of $190 billion of borrowing, 6 percent of total borrowing
over this period. By contrast, the other factors resulted in
more than 40 percent of the total increase in borrowing
from the public for 2008, nearly 20 percent of the increase
for 2009, and over 12 percent of the increase for 2010. In
2011, the other factors reduced borrowing by about 17
percent. In 2012, with the financial stabilization activities largely winding down, the impacts of the other factors
returned to historical levels, accounting for 6 percent of
the increase in borrowing.
Three specific factors presented in Table 5–2 are especially important.
Change in Treasury operating cash balance.—In 2012,
the cash balance increased by $27 billion, to $85 billion. In
the preceding three years, 2008-2011, changes in the cash
balance were largely driven by fluctuations in the temporary Supplementary Financing Program (SFP). Under
the SFP, Treasury issued short-term debt and deposited
the cash proceeds with the Federal Reserve for use by the
Federal Reserve in its actions to stabilize the financial
markets. The cash balance increased by a record $296 billion in 2008, primarily as a result of the creation of the SFP.
In 2009, the cash balance decreased by $96 billion, due to
a $135 billion reduction in the SFP balance offset by a $38
billion increase in the non-SFP cash balance. In 2010, the
cash balance increased by $35 billion, to $310 billion, due
nearly entirely to an increase in the SFP balance. In 2011,
the cash balance decreased by $252 billion to $58 billion,
due largely to reducing the SFP balance from $200 billion
to zero as the Federal Government neared the debt ceiling. In the 10 years preceding 2008, changes in the cash
balance had been much smaller, ranging from a decrease
of $26 billion in 2003 to an increase of $23 billion in 2007.
The operating cash balance is projected to fall by $5 billion,
to $80 billion at the end of 2013. Changes in the operating cash balance, while occasionally large, are inherently
limited over time. Decreases in cash—a means of financing
the Government—are limited by the amount of past accumulations, which themselves required financing when they
were built up. Increases are limited because it is generally
more efficient to repay debt.

66
Net financing disbursements of the direct loan and
guaranteed loan financing accounts.—Under the Federal
Credit Reform Act of 1990 (FCRA), the budgetary program account for each credit program records the estimated subsidy costs–the present value of estimated net
losses–at the time when the direct or guaranteed loans
are disbursed. The individual cash flows to and from the
public associated with the loans or guarantees, such as
the disbursement and repayment of loans, the default
payments on loan guarantees, the collection of interest
and fees, and so forth, are recorded in the credit program’s
non-budgetary financing account. Although the non-budgetary financing account’s cash flows to and from the public are not included in the deficit (except for their impact
on subsidy costs), they affect Treasury’s net borrowing
requirements.8
In addition to the transactions with the public, the
financing accounts include several types of intragovernmental transactions. In particular, they receive payment
from the credit program accounts for the subsidy costs of
new direct loans and loan guarantees and for any upward
reestimate of the costs of outstanding direct and guaranteed loans. The financing accounts also pay any downward reestimate of costs to budgetary receipt accounts.
The total net collections and gross disbursements of the
financing accounts, consisting of transactions with both
the public and the budgetary accounts, are called “net financing disbursements.’’ They occur in the same way as
the “outlays’’ of a budgetary account, even though they
do not represent budgetary costs, and therefore affect the
requirement for borrowing from the public in the same
way as the deficit.
The intragovernmental transactions of the credit program, financing, and downward reestimate receipt accounts do not affect Federal borrowing from the public.
Although the deficit changes because of the budgetary account’s outlay to, or receipt from, a financing account, the
net financing disbursement changes in an equal amount
with the opposite sign, so the effects are cancelled out.
On the other hand, financing account disbursements to
the public increase the requirement for borrowing from
the public in the same way as an increase in budget outlays that are disbursed to the public in cash. Likewise,
receipts from the public collected by the financing account
can be used to finance the payment of the Government’s
obligations, and therefore they reduce the requirement
for Federal borrowing from the public in the same way as
an increase in budgetary receipts.
The impact of the net financing disbursements on
borrowing increased significantly in 2009, largely as a
result of Government actions to address the Nation’s financial and economic challenges including through the
Troubled Asset Relief Program (TARP), purchases of
mortgage-backed securities issued or guaranteed by the
Government-Sponsored Enterprises (GSEs), and the
Temporary Student Loan Purchase Program. Net financ8  The FCRA (sec. 505(b)) requires that the financing accounts be nonbudgetary. As explained in Chapter 12, “Coverage of the Budget,’’ they
are non-budgetary in concept because they do not measure cost. For additional discussion of credit programs, see Chapter 22, “Credit and Insurance,” and Chapter 11, “Budget Concepts.’’

Analytical Perspectives

ing disbursements increased from $33 billion in 2008 to
a record $406 billion in 2009. With the wind-down of the
financial stabilization activities, borrowing due to financing accounts has decreased significantly, falling to $153
billion in 2010, $58 billion in 2011, and $37 billion in
2012. In 2013 credit financing accounts are projected to
increase borrowing by $156 billion. After 2013, the credit
financing accounts are expected to increase borrowing by
amounts ranging from $118 billion to $161 billion over
the next 10 years.
In some years, large net upward or downward reestimates in the cost of outstanding direct and guaranteed
loans may cause large swings in the net financing disbursements. In 2012, there was a net upward reestimate
of $12 billion, due largely to upward reestimates in the
TARP, Federal Direct Student Loan, and Federal Housing
Administration (FHA) Mutual Mortgage Insurance programs, partly offset by downward reestimates for guaranteed student loans. In 2013, there is a net upward reestimate of $1 billion. Large upward reestimates in the FHA
housing programs are mostly offset by large downward reestimates in the TARP and direct student loan programs.
Net purchases of non-Federal securities by the National
Railroad Retirement Investment Trust (NRRIT).—This
trust fund was established by the Railroad Retirement
and Survivors’ Improvement Act of 2001. In 2003, most of
the assets in the Railroad Retirement Board trust funds
were transferred to the NRRIT trust fund, which invests
its assets primarily in private stocks and bonds. The Act
required special treatment of the purchase or sale of nonFederal assets by this trust fund, treating such purchases
as a means of financing rather than outlays. Therefore,
the increased need to borrow from the public to finance
NRRIT’s purchases of non-Federal assets is part of the
“other transactions affecting borrowing from the public’’
rather than included as an increase in the deficit. While
net purchases and redemptions affect borrowing from the
public, unrealized gains and losses on NRRIT’s portfolio
are included in both the other factors and, with the opposite sign, in NRRIT’s net outlays in the deficit, for no
net impact on borrowing from the public. The increased
borrowing associated with the initial transfer expanded
publicly held debt by $20 billion in 2003. Net transactions
in subsequent years have been much smaller. In 2012, net
increases, including purchases and gains, were $1 billion.
Net redemptions of roughly $1 billion annually are projected for 2013 and subsequent years.9
Debt held by Government accounts.—The amount
of Federal debt issued to Government accounts depends
largely on the surpluses of the trust funds, both on-budget and off-budget, which owned 92 percent of the total
Federal debt held by Government accounts at the end of
2012. In 2012, the total trust fund surplus was $90 billion,
and trust funds invested $121 billion in Federal securities. Investment may differ somewhat from the surplus
due to changes in the amount of cash assets not currently
invested. The remainder of debt issued to Government accounts is owned by a number of special funds and revolv9  The budget treatment of this fund is further discussed in Chapter
11, “Budget Concepts.’’

67

5.  Federal Borrowing and Debt

Table 5–3.  Debt Held by the Public Net of Financial Assets and Liabilities
(Dollar amounts in billions)
Actual
2012

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Debt Held by the Public:
Debt held by the public ������������������������������������������������������ 11,281.1 12,403.5 13,295.9 14,032.2 14,714.1 15,343.5 15,954.1 16,583.0 17,212.1 17,835.7 18,472.7 19,029.5
As a percent of GDP �����������������������������������������������������
72.6% 76.6% 78.2% 78.2% 77.7% 76.8% 75.9% 75.3% 74.9% 74.4% 73.9% 73.0%
Financial Assets Net of Liabilities:
Treasury operating cash balance ���������������������������������������

85.4

Credit financing account balances:
Direct loan accounts �����������������������������������������������������
Guaranteed loan accounts �������������������������������������������
TARP equity purchase accounts �����������������������������������
Subtotal, credit financing account balances ������������
Government-sponsored enterprise preferred stock �����������
Non-Federal securities held by NRRIT ������������������������������
Other assets net of liabilities ����������������������������������������������
Total, financial assets net of liabilities ���������������������������

803.2
–9.8
13.6
807.0
109.2
22.9
–25.3
999.1

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

80.0

947.5 1,085.7 1,239.0 1,382.6 1,515.3 1,639.3 1,758.3 1,876.5 1,996.1 2,115.2 2,235.2
5.3
22.0
34.0
46.0
57.0
69.7
83.0
92.1
96.9
97.3
95.5
10.3
5.0
1.0
0.8
0.7
0.6
0.5
0.5
0.4
0.4
0.4
963.1 1,112.7 1,273.9 1,429.3 1,573.0 1,709.6 1,841.8 1,969.1 2,093.5 2,212.9 2,331.2
109.2
109.2
109.2
109.2
109.2
109.2
109.2
109.2
109.2
109.2
109.2
21.8
20.4
19.2
17.5
16.4
15.2
14.0
12.9
11.5
10.5
10.1
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
–25.3
1,148.8 1,297.0 1,457.0 1,610.7 1,753.3 1,888.7 2,019.6 2,145.8 2,268.9 2,387.3 2,505.2

Debt Held by the Public Net of Financial Assets and
Liabilities:
Debt held by the public net of financial assets ������������������� 10,282.0 11,254.8 11,998.9 12,575.2 13,103.4 13,590.2 14,065.3 14,563.3 15,066.3 15,566.9 16,085.4 16,524.3
As a percent of GDP �����������������������������������������������������
66.1% 69.5% 70.5% 70.1% 69.2% 68.0% 66.9% 66.2% 65.6% 65.0% 64.4% 63.4%

ing funds. The debt held in major accounts and the annual
investments are shown in Table 5–5.
Debt Held by the Public Net of
Financial Assets and Liabilities
While debt held by the public is a key measure for examining the role and impact of the Federal Government
in the U.S. and international credit markets and for other purposes, it provides incomplete information on the
Government’s financial condition. The U.S. Government
holds significant financial assets, which must be offset against debt held by the public and other financial
liabilities to achieve a more complete understanding of
the Government’s financial condition. The acquisition of
those financial assets represents a transaction with the
credit markets, broadening those markets in a way that
is analogous to the demand on credit markets that borrowing entails. For this reason, debt held by the public is
also an incomplete measure of the impact of the Federal
Government in the U.S. and international credit markets.
One transaction that can increase both borrowing
and assets is an increase to the Treasury operating cash
balance. When the Government borrows to increase
the Treasury operating cash balance, that cash balance
also represents an asset that is available to the Federal
Government. Looking at both sides of this transaction—
the borrowing to obtain the cash and the asset of the cash
holdings—provides much more complete information
about the Government’s financial condition than looking
at only the borrowing from the public. Another example
of a transaction that simultaneously increases borrowing
from the public and Federal assets is Government borrowing to issue direct loans to the public. When the direct loan is made, the Government is also acquiring an

asset in the form of future payments of principal and
interest, net of the Government’s expected losses on the
loans. Similarly, when the National Railroad Retirement
Investment Trust increases its holdings of non-Federal
securities, the borrowing to purchase those securities is
offset by the value of the asset holdings.
The acquisition or disposition of Federal financial assets very largely explains the difference between the
deficit for a particular year and that year’s increase in
debt held by the public. Debt net of financial assets is a
measure that is conceptually closer to the measurement
of Federal deficits or surpluses; cumulative deficits and
surpluses over time more closely equal the debt net of financial assets than they do the debt held by the public.
The magnitude and the significance of the Government’s
financial assets increased greatly from the later part of
2008 through 2010, as a result of Government actions,
such as implementation of TARP, to address the challenges facing the Nation’s financial markets and economy. 10
In 2011, as some of these activities continued to wind
down, the Government’s net financial assets decreased
from $1,125 billion to $958 billion. In 2012, net financial
assets increased by $41 billion, to $999 billion.
Table 5–3 presents debt held by the public net of the
Government’s financial assets and liabilities, or “net
debt.” Treasury debt is presented in the Budget at book
value, with no adjustments for the change in economic
value that results from fluctuations in interest rates. The
balances of credit financing accounts are based on projections of future cash flows. For direct loan financing accounts, the balance generally represents the net present
value of anticipated future inflows such as principal and
10  For more information on these activities, see Chapter 3, “Financial
Stabilization Efforts and Their Budgetary Effects.”

68

Analytical Perspectives

interest payments from borrowers. For guaranteed loan
financing accounts, the balance generally represents the
net present value of anticipated future outflows, such as
default claim payments net of recoveries and other collections, such as program fees. NRRIT’s holdings of non-Federal securities are marked to market on a monthly basis.
GSE preferred stock is measured at market value.
At the end of 2012, debt held by the public was $11,281
billion, or 72.6 percent of GDP. The Government held $999
billion in net financial assets, including a cash balance of
$85 billion, net credit financing account balances of $807
billion,11 and other assets and liabilities that aggregated
to a net asset of $107 billion. Therefore, debt net of financial assets was $10,282 billion, or 66.1 percent of GDP. As
shown in Table 5–3, the value of the Government’s net
financial assets is projected to increase to $1,149 billion in
2013, due to increases in the net balances of credit financing accounts. While debt held by the public is expected to
increase from 72.6 percent to 76.6 percent of GDP during
2013, net debt is expected to increase from 66.1 percent to
69.5 percent of GDP.
Debt securities and other financial assets and liabilities do not encompass all the assets and liabilities of the
Federal Government. For example, accounts payable occur in the normal course of buying goods and services;
Social Security benefits are due and payable as of the end
of the month but, according to statute, are paid during the
next month; and Federal employee salaries are paid after
they have been earned. Like debt securities sold in the
credit market, these liabilities have their own distinctive
effects on the economy. The Federal Government also has
significant holdings of non-financial assets, such as land,
mineral deposits, buildings, and equipment. A unique and
important asset is the Government’s sovereign power to
tax. The different types of assets and liabilities are reported annually in the financial statements of Federal
agencies and in the Financial Report of the United States
Government, prepared by the Treasury Department in
coordination with the Office of Management and Budget
(OMB). The relationship of assets, liabilities, and other
measures in the financial statements to budget measures is analyzed in Chapter 30, “Budget and Financial
Reporting,’’ in this volume.
Treasury Debt
Nearly all Federal debt is issued by the Department
of the Treasury. Treasury meets most of the Federal
Government’s financing needs by issuing marketable securities to the public. These financing needs include both
the change in debt held by the public and the refinancing—or rollover—of any outstanding debt that matures
11  Consistent with the presentation in the Monthly Treasury Statement of Receipts and Outlays of the United States Government (Monthly
Treasury Statement), Table 5-3 presents the net financial assets associated with direct and guaranteed loans in the financing accounts created
under the Federal Credit Reform Act of 1990. Therefore, the figures differ by relatively small amounts from the figures in Chapter 30, “Budget
and Financial Reporting,” which reflect all loans made or guaranteed by
the Federal Government, including loans originated prior to implementation of the FCRA.

during the year. Treasury marketable debt is sold at
public auctions on a regular schedule and can be bought
and sold on the secondary market. Treasury also sells to
the public a relatively small amount of nonmarketable
securities, such as savings bonds and State and Local
Government Series securities (SLUGs).12 Treasury nonmarketable debt cannot be bought or sold on the secondary market.
Treasury issues marketable securities in a wide range
of maturities, and issues both nominal (non-inflation-indexed) and inflation-indexed securities. Treasury’s marketable securities include:
Treasury Bills—Treasury bills have maturities of one
year or less from their issue date. In addition to the regular auction calendar of bill issuance, Treasury issues
cash management bills on an as-needed basis for various reasons such as to offset the seasonal patterns of the
Government’s receipts and outlays.
Treasury Notes—Treasury notes have maturities of
more than one year and up to 10 years.
Treasury Bonds—Treasury bonds have maturities of
more than 10 years. The longest-maturity securities issued by Treasury are 30-year bonds.
Treasury Inflation-Protected Securities (TIPS)—
Treasury inflation-protected—or inflation-indexed—securities are coupon issues for which the par value of the security rises with inflation. The principal value is adjusted
daily to reflect inflation as measured by changes in the
Consumer Price Index (CPI-U-NSA, with a two-month
lag). Although the principal value may be adjusted downward if inflation is negative, at maturity, the securities
will be redeemed at the greater of their inflation-adjusted
principal or par amount at original issue.
Historically, the average maturity of outstanding debt
issued by Treasury has been about five years. The average maturity of outstanding debt was 65 months at the
end of 2012.
Traditionally, Treasury has issued securities with a
fixed interest rate. In 2012, Treasury began to develop a
floating rate securities program to complement its existing suite of securities and to support Treasury’s broader
debt management objectives. Floating rate securities have
a fixed par value but bear interest rates that fluctuate
based on movements in a specified benchmark market interest rate. The initial offerings of floating rate securities
are expected to have a maturity of two years. In February
2013, Treasury estimated that the first floating rate securities auction was about a year away.
In addition to quarterly announcements about the
overall auction calendar, Treasury publicly announces
in advance the auction of each security. Individuals can
participate directly in Treasury auctions or can purchase
securities through brokers, dealers, and other financial institutions. Treasury accepts two types of auction
bids—competitive and noncompetitive. In a competitive
bid, the bidder specifies the yield. A significant portion of
competitive bids are submitted by primary dealers, which
12  Under the State and Local Government Series program, the Treasury offers special low-yield securities to State and local governments
and other entities for temporary investment of proceeds of tax-exempt
bonds.

69

5.  Federal Borrowing and Debt

Table 5–4.  Agency Debt
(In millions of dollars)
2012 Actual
Borrowing/
Repayment(–)

2013 Estimate

Debt, End-ofYear

Borrowing/
Repayment(–)

2014 Estimate

Debt, End-ofYear

Borrowing/
Repayment(–)

Debt, End-ofYear

Borrowing from the public:
Housing and Urban Development:
Federal Housing Administration �������������������������������������������������������
Architect of the Capitol ������������������������������������������������������������������������
National Archives ���������������������������������������������������������������������������������

–10
–6
–15

19
128
151

*
–7
–17

19
121
134

.........
–7
–18

19
114
116

Tennessee Valley Authority:
Bonds and notes �������������������������������������������������������������������������������
Lease/leaseback obligations �������������������������������������������������������������
Prepayment obligations ��������������������������������������������������������������������

–556
916
–105

24,098
2,198
611

1,116
–456
–101

25,214
1,742
510

420
668
–101

25,634
2,409
410

Total, borrowing from the public ���������������������������������������������

223

27,204

536

27,740

962

28,703

Borrowing from other funds:
Tennessee Valley Authority 1 �����������������������������������������������������������������

–1

5

.........

5

.........

5

Total, borrowing from other funds ������������������������������������������

–1

5

.........

5

.........

5

Total, agency borrowing ������������������������������������������������������

222

27,209

536

27,745

962

28,707

24,103

1,116

25,219

420

25,639

Memorandum:
Tennessee Valley Authority bonds and notes, total ������������������������������
–557
* $500,000 or less.
1 Represents open market purchases by the National Railroad Retirement Investment Trust.

are banks and securities brokerages that have been designated to trade in Treasury securities with the Federal
Reserve System. In a noncompetitive bid, the bidder
agrees to accept the yield determined by the auction.13
At the close of the auction, Treasury accepts all eligible
noncompetitive bids and then accepts competitive bids in
ascending order beginning with the lowest yield bid until
the offering amount is reached. All winning bidders receive the highest accepted yield bid.
Treasury marketable securities are highly liquid and
actively traded on the secondary market. The liquidity of
Treasury securities is reflected in the ratio of bids received
to bids accepted in Treasury auctions; the demand for the
securities is substantially greater than the level of issuance. Because they are backed by the full faith and credit
of the United States Government, Treasury marketable
securities are considered to be “risk-free.” Therefore, the
Treasury yield curve is commonly used as a benchmark
for a wide variety of purposes in the financial markets.
Whereas Treasury issuance of marketable debt is
based on the Government’s financing needs, Treasury’s
issuance of nonmarketable debt is based on the public’s
demand for the specific types of investments. Increases
in outstanding balances of nonmarketable debt reduce
the need for marketable borrowing. In 2012, there was
net disinvestment in nonmarketables, necessitating additional marketable borrowing to finance the redemption
of nonmarketable debt.14
13  Noncompetitive

bids cannot exceed $5 million.
Detail on the marketable and nonmarketable securities issued by
Treasury is found in the Monthly Statement of the Public Debt, published on a monthly basis by the Department of the Treasury.
14 

Agency Debt
A few Federal agencies, shown in Table 5–4, sell or
have sold debt securities to the public and, at times, to
other Government accounts. Currently, new debt is issued
only by the Tennessee Valley Authority (TVA) and the
Federal Housing Administration; the remaining agencies
are repaying existing borrowing. Agency debt increased
from $27.0 billion at the end of 2011 to $27.2 billion at
the end of 2012, due to increases in debt issued by TVA,
slightly offset by decreases in debt issued by other agencies. Agency debt is less than one-quarter of one percent of
Federal debt held by the public. As a result of new borrowing by TVA, agency debt is estimated to increase by $0.5
billion in 2013 and by $1.0 billion in 2014.
The predominant agency borrower is TVA, which had
borrowed $26.9 billion from the public as of the end of
2012, or 99 percent of the total debt of all agencies. TVA
sells debt primarily to finance capital expenditures.
TVA has traditionally financed its capital construction
by selling bonds and notes to the public. Since 2000, it has
also employed two types of alternative financing methods,
lease/leaseback obligations and prepayment obligations.
Under the lease/leaseback obligations method, TVA signs
contracts to lease some facilities and equipment to private investors and simultaneously leases them back. It
receives a lump sum for leasing out its assets, and then
leases them back at fixed annual payments for a set number of years. TVA retains substantially all of the economic
benefits and risks related to ownership of the assets.15
15  This arrangement is at least as governmental as a “lease-purchase
without substantial private risk.’’ For further detail on the current budgetary treatment of lease-purchase without substantial private risk, see
OMB Circular No. A–11, Appendix B.

70
Under the prepayment obligations method, TVA’s power
distributors may prepay a portion of the price of the power
they plan to purchase in the future. In return, they obtain
a discount on a specific quantity of the future power they
buy from TVA. The quantity varies, depending on TVA’s
estimated cost of borrowing.
The Office of Management and Budget determined that
each of these alternative financing methods is a means of
financing the acquisition of assets owned and used by the
Government, or of refinancing debt previously incurred to
finance such assets. They are equivalent in concept to other
forms of borrowing from the public, although under different terms and conditions. The budget therefore records the
upfront cash proceeds from these methods as borrowing
from the public, not offsetting collections.16 The budget presentation is consistent with the reporting of these obligations as liabilities on TVA’s balance sheet under generally
accepted accounting principles. Table 5–4 presents these
alternative financing methods separately from TVA bonds
and notes to distinguish between the types of borrowing.
Obligations for lease/leasebacks were $2.2 billion at the
end of 2012 and are estimated to fall to $1.7 billion at the
end of 2013 and then increase to $2.4 billion at the end of
2014. Obligations for prepayments were $0.6 billion at the
end of 2012 and are estimated to be $0.5 billion at the end
of 2013 and $0.4 billion at the end of 2014.
Although the FHA generally makes direct disbursements to the public for default claims on FHA-insured
mortgages, it may also pay claims by issuing debentures.
Issuing debentures to pay the Government’s bills is equivalent to selling securities to the public and then paying the
bills by disbursing the cash borrowed, so the transaction is
recorded as being simultaneously an outlay and borrowing.
The debentures are therefore classified as agency debt.
A number of years ago, the Federal Government guaranteed the debt used to finance the construction of buildings for the National Archives and the Architect of the
Capitol, and subsequently exercised full control over
the design, construction, and operation of the buildings.
These arrangements are equivalent to direct Federal construction financed by Federal borrowing. The construction expenditures and interest were therefore classified
as Federal outlays, and the borrowing was classified as
Federal agency borrowing from the public.
A number of Federal agencies borrow from the Bureau
of the Public Debt (BPD) or the Federal Financing Bank
(FFB), both within the Department of the Treasury.
Agency borrowing from the FFB or the BPD is not included in gross Federal debt. It would be double counting to
add together (a) the agency borrowing from the BPD or
16  This budgetary treatment differs from the treatment in the Monthly Treasury Statement Table 6 Schedule C, and the Combined Statement
of Receipts, Outlays, and Balances of the United States Government
Schedule 3, both published by the Department of the Treasury. These
two schedules, which present debt issued by agencies other than Treasury, exclude the TVA alternative financing arrangements. This difference in treatment is one factor causing minor differences between debt
figures reported in the Budget and debt figures reported by Treasury.
The other factors are adjustments for the timing of the reporting of Federal debt held by the National Railroad Retirement Investment Trust
and treatment of the Federal debt held by the Securities Investor Protection Corporation.

Analytical Perspectives

FFB and (b) the Treasury borrowing from the public that
is needed to provide the BPD or FFB with the funds to
lend to the agencies.
Debt Held by Government Accounts
Trust funds, and some special funds and public enterprise revolving funds, accumulate cash in excess of current needs in order to meet future obligations. These cash
surpluses are generally invested in Treasury debt.
New investment by trust funds and other Government
accounts was $134 billion in 2012. Investment by
Government accounts is estimated to be $76 billion in 2013
and $105 billion in 2014, as shown in Table 5–5. The holdings of Federal securities by Government accounts are estimated to increase to $4,951 billion by the end of 2014,
or 27 percent of the gross Federal debt. The percentage is
estimated to decrease gradually over the next 10 years.
The Government account holdings of Federal securities
are concentrated among a few funds: the Social Security
Old-Age and Survivors Insurance (OASI) and Disability
Insurance (DI) trust funds; the Medicare Hospital
Insurance and Supplementary Medical Insurance trust
funds; and four Federal employee retirement funds. These
Federal employee retirement funds include the Military
Retirement Fund and the Civil Service Retirement and
Disability Fund (CSRDF), which are trust funds, and
the uniformed services Medicare-Eligible Retiree Health
Care Fund (MERHCF) and Postal Service Retiree Health
Benefits Fund (PSRHBF), which are special funds. At the
end of 2014, these Social Security, Medicare, and Federal
employee retirement funds are estimated to own 93
percent of the total debt held by Government accounts.
During 2012–2014, the Social Security OASI fund has a
large surplus and is estimated to invest a total of $212
billion, 67 percent of total net investment by Government
accounts. Over this period, the Military Retirement Fund
is projected to invest $146 billion, 46 percent of the total.
Some Government accounts reduce their investments in
Federal securities during 2012–2014. During these years,
the Social Security DI fund disinvests $96 billion, or 30
percent of the total net investment and the Medicare
Hospital Insurance trust fund disinvests $61 billion, or
19 percent of the total.
Technical note on measurement.—The Treasury securities held by Government accounts consist almost entirely
of the Government account series. Most were issued at
par value (face value), and the securities issued at a discount or premium were traditionally recorded at par in
the OMB and Treasury reports on Federal debt. However,
there are two kinds of exceptions.
First, Treasury issues zero-coupon bonds to a very few
Government accounts. Because the purchase price is a
small fraction of par value and the amounts are large, the
holdings are recorded in Table 5–5 at par value less unamortized discount. The only two Government accounts that
held zero-coupon bonds during the period of this table are
the Nuclear Waste Disposal Fund in the Department of
Energy and the Pension Benefit Guaranty Corporation
(PBGC). The total unamortized discount on zero-coupon
bonds was $21.6 billion at the end of 2012.

71

5.  Federal Borrowing and Debt

Table 5–5.  Debt Held by Government Accounts1
(In millions of dollars)
Investment or Disinvestment (–)
Description

2012
Actual

2013
Estimate

Holdings, End
of 2014
Estimate

2014
Estimate

Investment in Treasury debt:
Defense: Host nation support fund for relocation ���������������������������������������������������������������������������������������������������������

–24

195

–152

859

Energy:
Nuclear waste disposal fund 1 �����������������������������������������������������������������������������������������������������������������������������������
Uranium enrichment decontamination fund ��������������������������������������������������������������������������������������������������������������

2,051
–351

2,650
–116

2,650
–116

33,520
3,790

Health and Human Services:
Federal hospital insurance trust fund ������������������������������������������������������������������������������������������������������������������������
Federal supplementary medical insurance trust fund �����������������������������������������������������������������������������������������������
Vaccine injury compensation fund ����������������������������������������������������������������������������������������������������������������������������
Child enrollment contingency fund ���������������������������������������������������������������������������������������������������������������������������

–17,647
–1,122
86
2

–28,369
–1,448
93
–100

–14,884
–1,216
146
–97

185,039
66,660
3,433
1,899

Homeland Security:
Aquatic resources trust fund �������������������������������������������������������������������������������������������������������������������������������������
Oil spill liability trust fund ������������������������������������������������������������������������������������������������������������������������������������������

60
329

–197
867

–95
540

1,650
3,960

Housing and Urban Development:
Federal Housing Administration mutual mortgage fund ��������������������������������������������������������������������������������������������
Guarantees of mortgage-backed securities ��������������������������������������������������������������������������������������������������������������

–1,383
–16

–2,774
5,642

13,166
19

13,166
7,778

Interior:
Abandoned mine reclamation fund ���������������������������������������������������������������������������������������������������������������������������
Environmental improvement and restoration fund ����������������������������������������������������������������������������������������������������
Justice: Assets forfeiture fund ���������������������������������������������������������������������������������������������������������������������������������������

44
40
1,689

19
17
–2,462

–69
1
659

2,702
1,288
2,290

Labor:
Unemployment trust fund �����������������������������������������������������������������������������������������������������������������������������������������
Pension Benefit Guaranty Corporation 1 �������������������������������������������������������������������������������������������������������������������
State: Foreign service retirement and disability trust fund �������������������������������������������������������������������������������������������

4,642
365
496

4,327
1,207
516

2,000
1,580
522

27,000
18,643
17,931

Transportation:
Airport and airway trust fund ������������������������������������������������������������������������������������������������������������������������������������
Transportation trust fund �������������������������������������������������������������������������������������������������������������������������������������������
Aviation insurance revolving fund �����������������������������������������������������������������������������������������������������������������������������

1,784
–6,332
188

–26
–2,870
–34

277
–300
109

10,676
6,800
1,893

Treasury:
Exchange stabilization fund ��������������������������������������������������������������������������������������������������������������������������������������
Treasury forfeiture fund ���������������������������������������������������������������������������������������������������������������������������������������������
Comptroller of the Currency assessment fund ���������������������������������������������������������������������������������������������������������

–41
46
188

70
185
–59

250
144
.........

23,000
1,960
1,300

Veterans Affairs:
National service life insurance trust fund ������������������������������������������������������������������������������������������������������������������
Veterans special life insurance fund �������������������������������������������������������������������������������������������������������������������������
Corps of Engineers: Harbor maintenance trust fund ����������������������������������������������������������������������������������������������������

–629
–28
684

–697
–55
433

–706
–67
250

5,509
1,831
7,569

Other Defense-Civil:
Military retirement trust fund �������������������������������������������������������������������������������������������������������������������������������������
Medicare-eligible retiree health care fund �����������������������������������������������������������������������������������������������������������������
Education benefits fund ��������������������������������������������������������������������������������������������������������������������������������������������

50,399
14,372
–117

47,369
9,175
22

48,603
5,684
–132

472,411
190,972
1,781

Environmental Protection Agency:
Leaking underground storage tank trust fund �����������������������������������������������������������������������������������������������������������
Hazardous substance trust fund �������������������������������������������������������������������������������������������������������������������������������
International Assistance Programs: Overseas Private Investment Corporation ����������������������������������������������������������

–2,191
–259
131

76
539
77

80
–294
34

1,415
3,495
5,353

Office of Personnel Management:
Civil service retirement and disability trust fund �������������������������������������������������������������������������������������������������������
Postal Service retiree health benefits fund ���������������������������������������������������������������������������������������������������������������
Employees life insurance fund ����������������������������������������������������������������������������������������������������������������������������������
Employees health benefits fund ��������������������������������������������������������������������������������������������������������������������������������

22,742
1,640
1,572
2,067

15,721
7,323
272
302

11,513
7,228
1,321
265

853,789
59,898
42,843
21,828

Social Security Administration:
Federal old-age and survivors insurance trust fund2 ������������������������������������������������������������������������������������������������
Federal disability insurance trust fund 2 ��������������������������������������������������������������������������������������������������������������������

94,166
–29,621

65,317
–32,902

52,493
–33,421

2,704,507
66,022

72

Analytical Perspectives

Table 5–5.  Debt Held by Government Accounts1—Continued
(In millions of dollars)
Investment or Disinvestment (–)
Description

2012
Actual

2013
Estimate

Holdings, End
of 2014
Estimate

2014
Estimate

District of Columbia: Federal pension fund �������������������������������������������������������������������������������������������������������������������

–15

18

20

3,681

Farm Credit System Insurance Corporation:
Farm Credit System Insurance fund �������������������������������������������������������������������������������������������������������������������������

–117

246

199

3,540

Federal Communications Commission:
Universal service fund ����������������������������������������������������������������������������������������������������������������������������������������������

726

178

–289

6,430

Federal Deposit Insurance Corporation:
Deposit insurance fund ���������������������������������������������������������������������������������������������������������������������������������������������
Senior unsecured debt guarantee fund ��������������������������������������������������������������������������������������������������������������������
FSLIC resolution fund �����������������������������������������������������������������������������������������������������������������������������������������������

1,573
–6,198
50

–12,976
–1,104
43

6,638
.........
4

30,160
.........
3,471

National Credit Union Administration:
Share insurance fund �����������������������������������������������������������������������������������������������������������������������������������������������
Central liquidity facility ����������������������������������������������������������������������������������������������������������������������������������������������
Postal Service funds 2 ���������������������������������������������������������������������������������������������������������������������������������������������������
Railroad Retirement Board trust funds �������������������������������������������������������������������������������������������������������������������������
Securities Investor Protection Corporation 3 �����������������������������������������������������������������������������������������������������������������
United States Enrichment Corporation fund �����������������������������������������������������������������������������������������������������������������
Other Federal funds ������������������������������������������������������������������������������������������������������������������������������������������������������
Other trust funds �����������������������������������������������������������������������������������������������������������������������������������������������������������
Unrealized discount 1 ����������������������������������������������������������������������������������������������������������������������������������������������������

–435
–155
776
193
176
5
–1,717
–88
–1,031

302
–1,750
–*
–8
227
10
–25
429
.........

219
9
.........
–189
102
10
245
334
.........

10,818
201
2,590
2,138
1,936
1,618
6,178
3,789
–2,038

Total, investment in Treasury debt 1 ����������������������������������������������������������������������������������������������������������������

133,763

75,891

105,287

4,950,971

Investment in agency debt:
Railroad Retirement Board:
National Railroad Retirement Investment Trust ��������������������������������������������������������������������������������������������������������

–1

.........

.........

5

Total, investment in agency debt 1 �������������������������������������������������������������������������������������������������������������������

–1

.........

.........

5

Total, investment in Federal debt 1 �������������������������������������������������������������������������������������������������������������

133,762

75,891

105,287

4,950,976

Memorandum:
Investment by Federal funds (on-budget) ���������������������������������������������������������������������������������������������������������������������
12,668
6,048
38,399
436,184
Investment by Federal funds (off-budget) ��������������������������������������������������������������������������������������������������������������������
776
–*
.........
2,590
Investment by trust funds (on-budget) ��������������������������������������������������������������������������������������������������������������������������
56,804
37,429
47,816
1,743,711
Investment by trust funds (off-budget) ��������������������������������������������������������������������������������������������������������������������������
64,545
32,415
19,072
2,770,529
Unrealized discount 1 ����������������������������������������������������������������������������������������������������������������������������������������������������
–1,031
.........
.........
–2,038
* $500 thousand or less.
¹ Debt held by Government accounts is measured at face value except for the Treasury zero-coupon bonds held by the Nuclear waste disposal fund and the Pension Benefit Guaranty
Corporation (PBGC), which are recorded at market or redemption price; and the unrealized discount on Government account series, which is not distributed by account. Changes are not
estimated in the unrealized discount. If recorded at face value, at the end of 2012 the debt figures would be $21.3 billion higher for the Nuclear waste disposal fund and $0.2 billion higher
for PBGC than recorded in this table.
2 Off-budget Federal entity.
3 Amounts on calendar-year basis.

Second, Treasury subtracts the unrealized discount
on other Government account series securities in calculating “net Federal securities held as investments of
Government accounts.’’ Unlike the discount recorded for
zero-coupon bonds and debt held by the public, the unrealized discount is the discount at the time of issue and is
not amortized over the term of the security. In Table 5–5
it is shown as a separate item at the end of the table and
not distributed by account. The amount was $2.0 billion
at the end of 2012.

Debt Held by the Federal Reserve
The Federal Reserve acquires marketable Treasury
securities as part of its exercise of monetary policy. For
purposes of the Budget and reporting by the Department
of the Treasury, the transactions of the Federal Reserve
are considered to be non-budgetary, and accordingly the
Federal Reserve’s holdings of Treasury securities are included as part of debt held by the public.17 The Federal
Reserve’s holdings of Treasury securities have fluctuated
17  For further detail on the monetary policy activities of the Federal
Reserve and the treatment of the Federal Reserve in the Budget, see
Chapter 12, “Coverage of the Budget.”

5.  Federal Borrowing and Debt

significantly in recent years, due largely to the Federal
Reserve’s financial stabilization activities.18 Federal
Reserve holdings fell from $780 billion (15 percent of debt
held by the public) at the end of 2007 to $491 billion (8
percent of debt held by the public) at the end of 2008, and
then increased to $1,665 billion (16 percent of debt held
by the public) at the end of 2011. Federal Reserve holdings
declined slightly to $1,645 billion (15 percent of debt held
by the public) at the end of 2012. The historical holdings
of the Federal Reserve are presented in Table 7.1 in the
Historical Tables volume of the Budget. The Budget does
not project Federal Reserve holdings for future years.
Limitations on Federal Debt
Definition of debt subject to limit.—Statutory limitations have usually been placed on Federal debt. Until
World War I, the Congress ordinarily authorized a specific
amount of debt for each separate issue. Beginning with the
Second Liberty Bond Act of 1917, however, the nature of
the limitation was modified in several steps until it developed into a ceiling on the total amount of most Federal debt
outstanding. This last type of limitation has been in effect
since 1941. The limit currently applies to most debt issued
by the Treasury since September 1917, whether held by the
public or by Government accounts; and other debt issued by
Federal agencies that, according to explicit statute, is guaranteed as to principal and interest by the U.S. Government.
The third part of Table 5–2 compares total Treasury
debt with the amount of Federal debt that is subject to the
limit. Nearly all Treasury debt is subject to the debt limit.
A large portion of the Treasury debt not subject to the
general statutory limit was issued by the Federal Financing
Bank. The FFB is authorized to have outstanding up to $15
billion of publicly issued debt. It issued $14 billion of securities to the CSRDF on November 15, 2004, in exchange
for an equal amount of regular Treasury securities. The
FFB securities have the same interest rates and maturities as the regular Treasury securities for which they were
exchanged. The securities mature on dates from June 30,
2009, through June 30, 2019. At the end of 2012, $7 billion
of these securities remained outstanding.
The Housing and Economic Recovery Act of 2008 created a new type of debt not subject to limit. This debt,
termed “Hope Bonds,” has been issued by Treasury to the
FFB for the HOPE for Homeowners program. The outstanding balance of Hope Bonds was $493 million at the
end of 2012 and is projected to fall to $45 million at the
end of 2013 and then to increase by very small amounts
annually in subsequent years.
The other Treasury debt not subject to the general limit
consists almost entirely of silver certificates and other currencies no longer being issued. It was $486 million at the
end of 2012 and is projected to gradually decline over time.
The sole agency debt currently subject to the general
limit, $209,000 at the end of 2012, is certain debentures
issued by the Federal Housing Administration.19
18  For more information on the financial stabilization activities of
the Federal Reserve, see Chapter 3, “Financial Stabilization Efforts and
Their Budgetary Effects.”
19  At the end of 2012, there were also $18 million of FHA debentures

73
Some of the other agency debt, however, is subject to
its own statutory limit. For example, the Tennessee Valley
Authority is limited to $30 billion of bonds and notes outstanding.
The comparison between Treasury debt and debt subject to limit also includes an adjustment for measurement
differences in the treatment of discounts and premiums.
As explained earlier in this chapter, debt securities may
be sold at a discount or premium, and the measurement of
debt may take this into account rather than recording the
face value of the securities. However, the measurement
differs between gross Federal debt (and its components)
and the statutory definition of debt subject to limit. An
adjustment is needed to derive debt subject to limit (as
defined by law) from Treasury debt. The amount of the
adjustment was $11.4 billion at the end of 2012 compared
with the total unamortized discount (less premium) of
$42.5 billion on all Treasury securities.
Changes in the debt limit.—The statutory debt limit
has been changed many times. Since 1960, Congress has
passed 80 separate acts to raise the limit, revise the definition, extend the duration of a temporary increase, or
temporarily suspend the limit.20
The Budget Control Act of 2011 created a framework
for increasing the debt limit under the terms of that act.
The act allowed for a total increase in the debt limit of
$2.1 trillion, which came in three tranches based on the
President’s submission of a series of written certifications
that such increases are necessary because the debt subject to limit is within $100 billion of the current limit. The
certification triggering the first two increases was submitted immediately following the Act’s enactment in August
2011. Consequently, the debt limit was first increased by
$400 billion, from $14,294 billion to $14,694 billion, effective August 2, 2011, and then by an additional $500
billion, from $14,694 billion to $15,194 billion, effective
after the close of business on September 21, 2011. The
Act also provided for a third increase of $1,200 billion, to
$16,394 billion, scheduled to occur 15 calendar days after
the President submitted certification to Congress that the
debt subject to limit was within $100 billion of the $15,194
billion limit (unless Congress enacted a joint resolution of
disapproval).21 The certification for the third increase was
submitted on January 12, 2012, and the increase took effect after the close of business on January 27.
The $16,394 billion ceiling was reached on December
31, 2012. The No Budget, No Pay Act of 2013 temporarily
suspends the debt limit from February 4, 2013, through
May 18, 2013. On May 19, 2013, the debt limit will be
not subject to limit.
20  The Acts and the statutory limits since 1940 are listed in Historical Tables, Budget of the United States Government, Fiscal Year 2014,
Table 7.3.
21  Under the Act, if the constitutional amendment voted on pursuant
to Title II of the Act (“Balanced Budget Amendment”) had been submitted to the States for ratification, the increase would have been $1,500
billion. If legislation from the Joint Select Committee on Deficit Reduction had been enacted pursuant to Title IV of the Act, which achieved
an amount of deficit reduction greater than $1,200 billion, the increase
would have been equal to that amount, but not greater than $1,500 billion.

74

Analytical Perspectives

raised by an amount equivalent to the debt that was issued during that period in order to fund commitments requiring payment before May 19.
At many times in the past several decades, including
2013, the Government has reached the statutory debt
limit before an increase has been enacted. When this has
occurred, it has been necessary for the Department of
the Treasury to take administrative actions to meet the
Government’s obligation to pay its bills and invest its
trust funds while remaining below the statutory limit.
One such measure is the partial or full disinvestment of
the Government Securities Investment Fund (G-Fund).
This fund is one component of the Thrift Savings Plan
(TSP), a defined contribution pension plan for Federal employees. The Treasury Secretary has statutory authority
to suspend investment of the G-Fund in Treasury securities as needed to prevent the debt from exceeding the
debt limit. Treasury determines each day the amount of
investments that would allow the fund to be invested as
fully as possible without exceeding the debt limit. At the
end of 2012, the TSP G-Fund had an outstanding balance
of $154 billion. The Secretary is also authorized to suspend investments in the CSRDF and to declare a debt
issuance suspension period, which allows him or her to
redeem a limited amount of securities held by the CSRDF.
The Postal Accountability and Enhancement Act of 2006
provides that investments in the Postal Service Retiree
Health Benefits Fund shall be made in the same manner as investments in the CSRDF.22 Therefore, Treasury
is able to take similar administrative actions with the
PSRHBF. The law requires that when any such actions
are taken with the G-Fund, the CSRDF, or the PSRHBF,
the Secretary is required to make the fund whole after
the debt limit has been raised by restoring the forgone
interest and investing the fund fully. Another measure
for staying below the debt limit is disinvestment of the
Exchange Stabilization Fund. The outstanding balance in
the Exchange Stabilization Fund was $23 billion at the
end of 2012.
As the debt nears the limit, including in 2013, Treasury
has also suspended acceptance of subscriptions to State
and Local Government Series securities to reduce unanticipated fluctuations in the level of the debt.
In addition to these steps, Treasury has previously
exchanged regular Treasury securities with borrowing
by the FFB, which, as explained above, is not subject to
the debt limit. This measure was most recently taken in
November 2004.
In 2011, Treasury also allowed the cash balance in the
temporary Supplementary Financing Program to decline
from $200 billion to zero by not rolling over the bills as
they matured. Because Treasury does not currently have
any plans to resume the SFP, this action is not anticipated to be an available administrative action in the future.
The debt limit has always been increased prior to the
exhaustion of Treasury’s limited available administrative actions to continue to finance Government operations
when the statutory ceiling has been reached. Failure

to enact a debt limit increase before these actions were
exhausted would have significant and long-term negative consequences. Without an increase, Treasury would
be unable to make timely interest payments or redeem
maturing securities. Investors would cease to view U.S.
Treasury securities as free of credit risk and Treasury’s
interest costs would increase. Because interest rates
throughout the economy are benchmarked to the Treasury
rates, interest rates for State and local governments, businesses, and individuals would also rise. Foreign investors
would likely shift out of dollar-denominated assets, driving down the value of the dollar and further increasing
interest rates on non-Federal, as well as Treasury, debt.
In addition, the Federal Government would be forced to
delay or discontinue payments on its broad range of obligations, including Social Security and other payments
to individuals, Medicaid and other grant payments to
States, individual and corporate tax refunds, Federal employee salaries, payments to vendors and contractors, and
other obligations.
The debt subject to limit is estimated to increase to
$17,227 billion by the end of 2013 and to $18,225 billion
by the end of 2014.
Federal funds financing and the change in debt
subject to limit.—The change in debt held by the public, as shown in Table 5–2, and the change in debt net
of financial assets are determined primarily by the total
Government deficit or surplus. The debt subject to limit,
however, includes not only debt held by the public but also
debt held by Government accounts. The change in debt
subject to limit is therefore determined both by the factors that determine the total Government deficit or surplus and by the factors that determine the change in debt
held by Government accounts. The effect of debt held by
Government accounts on the total debt subject to limit
can be seen in the second part of Table 5–2. The change
in debt held by Government accounts results in 17 percent of the estimated total increase in debt subject to limit
from 2013 through 2023.
The budget is composed of two groups of funds, Federal
funds and trust funds. The Federal funds, in the main, are
derived from tax receipts and borrowing and are used for
the general purposes of the Government. The trust funds,
on the other hand, are financed by taxes or other receipts
dedicated by law for specified purposes, such as for paying
Social Security benefits or making grants to State governments for highway construction.23
A Federal funds deficit must generally be financed by
borrowing, which can be done either by selling securities
to the public or by issuing securities to Government accounts that are not within the Federal funds group. Federal
funds borrowing consists almost entirely of Treasury securities that are subject to the statutory debt limit. Very
little debt subject to statutory limit has been issued for
reasons except to finance the Federal funds deficit. The
change in debt subject to limit is therefore determined
primarily by the Federal funds deficit, which is equal to
the difference between the total Government deficit or

22  Both the CSRDF and the PSRHBF are administered by the Office
of Personnel Management.

23  For further discussion of the trust funds and Federal funds groups,
see Chapter 27, “Trust Funds and Federal Funds.’’

75

5.  Federal Borrowing and Debt

Table 5–6.  Federal Funds Financing and Change in Debt Subject to Statutory Limit
(In billions of dollars)
Description
Change in Gross Federal Debt:
Federal funds deficit (+) �����������������������������������������������������
Other transactions affecting borrowing from the public—
Federal funds 1 ��������������������������������������������������������������
Increase (+) or decrease (–) in Federal debt held by
Federal funds ����������������������������������������������������������������
Adjustments for trust fund surplus/deficit not invested/
disinvested in Federal securities 2 ���������������������������������
Change in unrealized discount on Federal debt held by
Government accounts ��������������������������������������������������
Total financing requirements �������������������������������������
Change in Debt Subject to Limit:
Change in gross Federal debt �������������������������������������������
Less: increase (+) or decrease (–) in Federal debt not
subject to limit ���������������������������������������������������������������
Less: change in adjustment for discount and premium 3 ���
Total, change in debt subject to limit ������������������������

Estimate

Actual
2012

2013

1,176.8

1,040.6

821.2

694.6

679.3

663.5

642.7

591.0

581.8

585.0

567.5

487.3

64.5

150.6

149.5

161.1

155.2

143.6

136.5

132.0

127.1

124.3

119.3

118.1

13.4

6.0

38.4

46.5

46.0

43.9

41.6

46.7

51.1

40.2

44.8

45.9

32.9

1.1

–11.5

–1.3

–1.7

–1.1

–1.2

–1.2

–1.1

–1.4

–1.0

–0.3

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

–1.0

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,286.7

1,198.3

997.6

901.0

878.8

849.9

819.6

768.5

758.9

748.1

730.5

651.0

1,286.7

1,198.3

997.6

901.0

878.8

849.9

819.6

768.5

758.9

748.1

730.5

651.0

–1.1
7.3

–1.3
.........

–0.4
.........

–*
.........

–0.6
.........

–0.3
.........

*
.........

0.5
.........

1.4
.........

0.9
.........

0.8
.........

–0.1
.........

1,280.5

1,199.6

998.0

901.0

879.4

850.2

819.6

768.0

757.5

747.2

729.8

651.1

Memorandum:
Debt subject to statutory limit 4 ������������������������������������������ 16,027.0 17,226.7 18,224.7 19,125.7 20,005.1 20,855.3 21,674.9 22,442.9 23,200.4 23,947.6 24,677.4 25,328.5
* $50 million or less.
1 Includes Federal fund transactions that correspond to those presented in Table 5-2, but that are for Federal funds alone with respect to the public and trust funds.
2 Includes trust fund holdings in other cash assets and changes in the investments of the National Railroad Retirement Investment Trust in non-Federal securities.
3 Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds).
4 Legislation enacted February 4, 2013, (P.L. 113-3) temporarily suspended the debt limit through May 18, 2013.

surplus and the trust fund surplus. Trust fund surpluses
are almost entirely invested in securities subject to the
debt limit, and trust funds hold most of the debt held by
Government accounts. The trust fund surplus reduces the
total budget deficit or increases the total budget surplus,
decreasing the need to borrow from the public or increasing the ability to repay borrowing from the public. When
the trust fund surplus is invested in Federal securities,
the debt held by Government accounts increases, offsetting the decrease in debt held by the public by an equal
amount. Thus, there is no net effect on gross Federal debt.
Table 5–6 derives the change in debt subject to limit.
In 2012 the Federal funds deficit was $1,177 billion, and
other factors increased financing requirements by $65 billion. The change in the Treasury operating cash balance
increased financing requirements by $27 billion, the net
financing disbursements of credit financing accounts increased financing requirements by $37 billion, and other
factors increased financing requirements by $1 billion. In
addition, special funds and revolving funds, which are part
of the Federal funds group, invested a net of $13 billion in
Treasury securities. A $33 billion adjustment is also made
for the difference between the trust fund surplus or deficit and the trust funds’ investment or disinvestment in
Federal securities (including the changes in the National
Railroad Retirement Investment Trust’s investments in
non-Federal securities). As a net result of all these factors,
$1,287 billion in financing was required, increasing gross
Federal debt by that amount. Since Federal debt not subject to limit decreased by $1 billion and the adjustment

for discount and premium changed by $7 billion, the debt
subject to limit increased by $1,280 billion, while debt
held by the public increased by $1,153 billion.
Debt subject to limit is estimated to increase by $1,200
billion in 2013 and by $998 billion in 2014. The projected
increases in the debt subject to limit are caused by the continued Federal funds deficit, supplemented by the other
factors shown in Table 5–6. While debt held by the public
increases by $4,673 billion from the end of 2012 through
2018, debt subject to limit increases by $5,648 billion.
Foreign Holdings of Federal Debt
During most of American history, the Federal debt was
held almost entirely by individuals and institutions within the United States. In the late 1960s, foreign holdings
were just over $10 billion, less than 5 percent of the total
Federal debt held by the public. Foreign holdings began
to grow significantly starting in 1970 and now represent
almost half of outstanding debt. This increase has been
almost entirely due to decisions by foreign central banks,
corporations, and individuals, rather than the direct marketing of these securities to foreign residents.
Foreign holdings of Federal debt are presented in Table
5–7. At the end of 2012, foreign holdings of Treasury debt
were $5,475 billion, which was 49 percent of the total debt
held by the public.24 Foreign central banks and foreign official institutions owned 72 percent of the foreign holdings
24  The debt calculated by the Bureau of Economic Analysis, Department of Commerce, is different, though similar in size, because of a different method of valuing securities.

76

Analytical Perspectives

Table 5–7.  Foreign Holdings of Federal Debt
(Dollar amounts in billions)
Debt held by the public
Fiscal Year

Percentage
foreign

Foreign 1

Total

Change in debt held by the public
Total 2

Foreign 1

1965 ����������������������������������������������������

260.8

12.3

4.7

3.9

0.3

1970 ����������������������������������������������������
1975 ����������������������������������������������������

283.2
394.7

14.0
66.0

5.0
16.7

5.1
51.0

3.8
9.2

1980 ����������������������������������������������������
1985 ����������������������������������������������������

711.9
1,507.3

121.7
222.9

17.1
14.8

71.6
200.3

1.4
47.3

1990 ����������������������������������������������������
1995 ����������������������������������������������������

2,411.6
3,604.4

463.8
820.4

19.2
22.8

220.8
171.3

72.0
138.4

2000 ����������������������������������������������������

3,409.8

1,038.8

30.5

-222.6

-242.6

2005 ����������������������������������������������������
2006 ����������������������������������������������������
2007 ����������������������������������������������������
2008 ����������������������������������������������������
2009 ����������������������������������������������������

4,592.2
4,829.0
5,035.1
5,803.1
7,544.7

1,929.6
2,025.3
2,235.3
2,802.4
3,570.6

42.0
41.9
44.4
48.3
47.3

296.7
236.8
206.2
767.9
1,741.7

135.1
95.7
210.0
567.1
768.2

2010 ����������������������������������������������������
9,018.9
4,324.2
47.9
1,474.2
753.6
2011 ����������������������������������������������������
10,128.2
4,912.2
48.5
1,109.3
588.0
2012 ����������������������������������������������������
11,281.1
5,475.4
48.5
1,152.9
563.2
1 Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be small. The
data on foreign holdings are recorded by methods that are not fully comparable with the data on debt held by the public. Projections
of foreign holdings are not available. The estimates include the effects of benchmark revisions in 1984, 1989, 1994, and 2000, and
annual June benchmark revisions for 2002-2010.
2 Change in debt held by the public is defined as equal to the change in debt held by the public from the beginning of the year to the
end of the year.

of Federal debt; private investors owned nearly all the rest.
At the end of 2012, the nations holding the largest shares
of U.S. Federal debt were China and Japan, which each
held 21 percent of all foreign holdings. All of the foreign
holdings of Federal debt are denominated in dollars.
Although the amount of foreign holdings of Federal
debt has grown greatly over this period, the proportion
that foreign entities and individuals own, after increasing
abruptly in the very early 1970s, remained about 15–20
percent until the mid-1990s. During 1995–97, however,
growth in foreign holdings accelerated, reaching 33 percent by the end of 1997. Foreign holdings of Federal debt
resumed growth in the following decade, increasing from
34 percent at the end of 2002 to 42 percent at the end of
2004 and to 48 percent at the end of 2008. Since 2008,
foreign holdings have remained relatively stable as a percentage of Federal debt. Foreign holdings were 49 percent
at the end of 2012. The increase in foreign holdings was
about 49 percent of total Federal borrowing from the public in 2012 and 52 percent over the last five years.
Foreign holdings of Federal debt are around 25 percent
of the foreign-owned assets in the United States, depending on the method of measuring total assets. The foreign
purchases of Federal debt securities do not measure the
full impact of the capital inflow from abroad on the market for Federal debt securities. The capital inflow supplies
additional funds to the credit market generally, and thus
affects the market for Federal debt. For example, the capi-

tal inflow includes deposits in U.S. financial intermediaries that themselves buy Federal debt.
Federal, Federally Guaranteed, and
Other Federally Assisted Borrowing
The Government’s effects on the credit markets arise not
only from its own borrowing but also from the direct loans
that it makes to the public and the provision of assistance
to certain borrowing by the public. The Government guarantees various types of borrowing by individuals, businesses, and other non-Federal entities, thereby providing assistance to private credit markets. The Government is also
assisting borrowing by States through the Build America
Bonds program, which subsidizes the interest that States
pay on such borrowing. In addition, the Government has
established private corporations—Government-Sponsored
Enterprises—to provide financial intermediation for specified public purposes; it exempts the interest on most State
and local government debt from income tax; it permits
mortgage interest to be deducted in calculating taxable income; and it insures the deposits of banks and thrift institutions, which themselves make loans.
Federal credit programs and other forms of assistance,
including the substantial Government efforts to support
the credit markets during the recent financial turmoil,
are discussed in Chapter 22, “Credit and Insurance,’’ in
this volume. Detailed data are presented in tables at the
end of that chapter.

Performance and Management

77

6. Social Indicators

The social indicators presented in this chapter illustrate in broad terms how the Nation is faring in selected
areas in which the Federal Government has significant
responsibilities. Indicators are drawn from six selected
domains: economic, demographic and civic, socioeconomic,
health, security and safety, and environment and energy.
The indicators shown in the tables in this chapter were
chosen in consultation with statistical and data experts
from across the Federal Government. These indicators are
only a subset of the vast array of available data on conditions in the United States. In choosing indicators for these
tables, priority was given to measures that are broadly
relevant to Americans and consistently available over an
extended period. Such indicators provide a current snapshot while also making it easier to draw comparisons and
establish trends.
The measures in these tables are influenced to varying
degrees by many Government policies and programs, as
well as by external factors beyond the Government’s control. They do not measure the outcomes of Government
policies because they do not show the direct results of
Government activities. However, they do provide a quantitative picture of the progress (or lack of progress) toward
some of the ultimate ends that Government policy is intended to promote, and the baseline on which future policies are set. Subsequent chapters in the Performance and
Management section of this volume discuss approaches
toward assessing the impacts of Government programs
and improving the quality of Government.
The President has made it clear that policy decisions
should be based upon evidence—evidence that identifies
the Nation’s greatest needs and challenges and evidence
about which strategies are working to overcome those
challenges. The social indicators in this chapter provide
useful information both for prioritizing budgetary and
policymaking resources and for evaluating how well existing approaches are working.
Economic: The 2008-2009 economic downturn produced the worst labor market in more than a generation.
The employment-population ratio dropped sharply from
its pre-recession level, and real GDP per person also declined. The economy is steadily recovering, with the unemployment rate declining to 7.9 percent in January 2012
from a high of 10 percent in October 2009, and real GDP
per person roughly regaining its level prior to the recession. However, the employment-population ratio remains
low by historical standards, while the continuing effects
of the recession are reflected in high rates of marginally
attached and underemployed workers.

Over the entire period from 1960 to 2012, the primary
pattern has been one of economic growth and rising living standards. Real GDP per person has approximately
tripled as technological progress and the accumulation of
human and physical capital have increased the Nation’s
productive capacity. The stock of physical capital including consumer durable goods like cars and appliances
amounted to $51 trillion in 2011, more than four times
the size of the capital stock in 1960, after accounting for
inflation.
But national saving, a key determinant of future prosperity because it supports capital accumulation, fell from
6.1 percent in 2000 to 2.9 percent in 2005 as Federal budget surpluses turned to deficits, and fell even further in
the recession that followed, turning negative in 2010.
Meanwhile, the labor force participation rate, also critical
for growth, has declined for more than a decade, reflecting the beginning of a trend in which the baby boomer
generation retires.
The United States continues to be a leader in innovation. Patents by U.S. inventors have increased three-fold
since 1960. National Research and Development (R&D)
spending has hovered between 2.3 percent and 2.8 percent of GDP for the past 50 years.
Demographic and Civic: The U.S. population has
steadily increased from 1970, where it numbered 204 million, to 314 million in 2012. The foreign born population
has increased rapidly since 1970, quadrupling from about
10 million in 1970 to over 40 million in 2011. The U.S.
population is getting older, due in part to the aging of the
baby boomers and to improvements in medical technology. From 1970 to 2011, the percent of the population over
age 65 increased from 9.8 to 13.3, and the percent over
age 85 more than doubled.
The composition of American households and families has evolved considerably over time. The percent of
Americans who have ever married continued to decline
as it has over the last five decades. Average family sizes
have also fallen over this period, a pattern that is typical among developed countries. After increasing for over
three decades, births to unmarried women age 15-17 and
the fraction of single parent households reached a turning
point in 1995. From 1995 to 2010, the number of births
per 1,000 unmarried women age 15-17 fell from 30.1 to
16.8, a level below that of 1970. Meanwhile, the fraction
of single parent households stopped increasing in 1995,
stabilizing at a little over 9 percent.
Charitable giving among Americans, measured by the
average charitable contribution per itemized tax return,
79

80

Analytical Perspectives

has generally increased over the past 50 years.1 However,
the effects of the 2008-2009 recession are evident in
the sharp drop in charitable giving from 2005 to 2010.
More Americans are volunteering. In 1990, 20 percent of
Americans volunteered at least once; in 2011, 27 percent
volunteered. The political participation of Americans,
measured by the voting rate in Presidential elections, declined from about 63 percent in 1964 to 57 percent in 1972.
It fell further in the 1996 and 2000 elections, reaching a
low of only 50 percent in 1996. However, the Presidential
voting rate rebounded in the 2004 and 2008 elections, averaging almost 58 percent.
Socioeconomic:
Education is a critical component of the Nation’s economic growth and competitiveness, while also benefiting
society in areas such as health, crime, and civic engagement. Between 1960 and 1980, the percentage of 25-34
year olds who have graduated from high school increased
from 58 percent to 84 percent, a gain of 13 percentage
points per decade. Progress has slowed since then with
only a four percentage point gain over the past 30 years.
But the percentage of 25-34 year olds who have graduated from college continues to rise, from only 11 percent
in 1960 to over 31 percent in 2011. Measures of math and
reading achievement show little if any improvement in
mathematics and reading for American 17-year olds over
the period from 1970 to 2010. The percentage of graduate
degrees in science and engineering fell by half in the period between 1960 to 1980, from 22 percent to 11 percent,
and was only 12 percent in 2011.
While national prosperity has grown considerably
over the past 50 years, these gains have not been shared
equally. Real disposable income per capita roughly tripled
since 1960, and more than doubled since 1970. But real
income for the median household increased only 22 percent from 1970 to 2000, and has declined by 9 percent
since 2000. The income share of the top 1 percent of taxpayers, approximately 9 percent in 1980, rose to 21 percent in 2005 before dipping slightly in 2010. In contrast,
the income share of the bottom 50 percent of taxpayers
declined from 18 percent in 1980 to 12 percent in 2010.
The poverty rate, after falling rapidly in the 1960s due to
a strong economy and large expansions in Social Security,
has since remained relatively steady despite the advances
in real disposable income per capita. From 2005 to 2011,
the poverty rate, the percentage of food-insecure households, and the percentage of Americans receiving benefits
from the Supplemental Nutrition Assistance Program
(formerly known as the Food Stamp Program), increased
as Americans struggled with the economic downturn.
After slowly increasing from 1960 to 2005, homeownership rates dropped somewhat following the 2008 housing crisis, but remain close to the historical average. The

share of families with children and severe housing cost
burdens, however, more than doubled from 8 percent in
1980 to 18 percent in 2011.
Health:
America has by far the most expensive health care system in the world, yet much higher rates of uninsured than
other countries with comparable wealth. National health
expenditures as a share of GDP have increased from
about 5 percent in 1960 to almost 18 percent in 2011. This
increase in health care spending has corresponded with
improvements in medical technology that have improved
health, but the rate of spending increase in the United
States is far greater than that in other Organization for
Economic Cooperation and Development (OECD) countries which have experienced comparable health improvements. Despite high health care costs, over 21 percent
of adults and 9 percent of children were without health
insurance in 2011. In 2010 the President signed the
Affordable Care Act into law. The Affordable Care Act is
expected to reduce the number of uninsured by about 27
million by 2022.2
Some key indicators of national health have improved
since 1960. Life expectancy at birth increased by nine
years over the last five decades, from 69.7 in 1960 to 78.7
in 2011. Infant mortality fell from 26 to approximately 6
per 1,000 live births, with a precipitous decline occurring
in the 1970s.
Improvement in health behaviors among Americans
has been mixed. While the percent of adults who smoke
cigarettes in 2011 was less than half of that in 1970, rates
of obesity have soared. In 1980, 15 percent of adults and
6 percent of children were obese; in 2010, 35 percent of
adults and 17 percent of children were obese. Adult obesity continued to rise even as the share of adults engaging
in regular physical activity increased from 15 percent in
2000 to 21 percent in 2011.
Security and Safety:
The last three decades have witnessed a remarkable
decline in crime. From 1980 to 2011, the property crime
rate dropped by 72 percent while the murder rate was cut
by over half. Road transportation has also become safer.
Safety belt use increased by 15 percentage points from
2000 to 2012, and the annual number of highway fatalities fell by 38 percent from 1970 to 2011 despite the increase in the population.
Environment and Energy:
The Nation’s future well-being and prosperity depend
on stewardship of our natural resources, the environment,
and on our ability to bring about a clean energy economy.
Substantial progress has been made on air quality in
the United States, with the concentration of particulate
matter falling 28 percent from 2000 to 2010. Moving forward, the greatest environmental challenge is reducing

1 
This measure includes charitable giving only among those who claim
itemized deductions. It is therefore influenced by changes in tax laws
and in the characteristics of those who itemize.

2 
Congressional Budget Office. 2013. “The Budget and Economic Outlook: Fiscal Years 2013 to 2023.” Washington, DC: Congressional Budget
Office.

81

6.  Social Indicators

greenhouse gas emissions. The President announced a
target reduction of 17 percent in greenhouse gas emissions between 2005 and 2020, with an ultimate reduction
of 83 percent between 2005 and 2050. From 2005 to 2010,
gross greenhouse gas emissions fell by 5.3 percent. Gross
greenhouse gas emissions per capita and per unit of GDP
have fallen by 9.5 and 8.6 percent, respectively. However,
annual mean CO2 concentration, a global measure of climate change, has increased roughly between three- and
five-fold since 1960.

While technological advances and a shift in production patterns mean that Americans now use about half as
much energy per real dollar of GDP as they did 50 years
ago, rising income levels mean that per capita consumption has remained roughly constant over the last 40 years.
The percent of U.S. electricity production that is from renewable sources has grown since 2005, but remains only
12.7 percent.

Table 6–1. Social Indicators
Calendar Years

1960

1970

1980

1990

1995

2000

2005

2010

2011

2012

Economic
1
2
3
4
5

General Economic Conditions
Real GDP per person (2005 dollars) 1  ����������������������������������������������������������
Real GDP per person change, 5-year annual average ������������������������������
Consumer Price Index 2  ��������������������������������������������������������������������������������
Private goods producing (%) ������������������������������������������������������������������������
Private services producing (%) ���������������������������������������������������������������������

15,648
0.7
15.1
N/A
N/A

20,802
2.3
19.3
N/A
N/A

25,618
2.6
38.5
N/A
N/A

32,085
2.3
59.9
39.7
60.3

34,082
1.2
68.2
37.2
62.8

39,718
3.1
76.6
33.7
66.3

42,646
1.4
86.8
32.1
67.9

42,169
–0.2
96.9
29.5
70.5

42,620
–0.3
100.0
30.8
69.2

43,352
N/A
N/A
N/A
N/A

6
7
8
9
10
11
12
13

Jobs and Unemployment
Labor force participation rate (%) ������������������������������������������������������������������
Employment (millions) �����������������������������������������������������������������������������������
Employment-population ratio (%) ������������������������������������������������������������������
Payroll employment change - December to December (millions) ������������������
Payroll employment change - 5-year annual average (millions) ����������������
Civilian unemployment rate (%) ���������������������������������������������������������������������
Unemployment plus marginally attached and underemployed (%) ���������������
Receiving Social Security disabled-worker benefits (% of population) 3  �������

59.4
65.8
56.1
–0.4
0.7
5.5
N/A
0.9

60.4
78.7
57.4
–0.5
2.0
4.9
N/A
2.0

63.8
99.3
59.2
0.3
2.7
7.1
N/A
2.8

66.5
118.8
62.8
0.3
2.4
5.6
N/A
2.5

66.6
124.9
62.9
2.2
1.6
5.6
10.1
3.3

67.1
136.9
64.4
2.0
2.9
4.0
7.0
3.7

66.0
141.7
62.7
2.5
0.4
5.1
8.9
4.5

64.7
139.1
58.5
1.0
–0.8
9.6
16.7
5.5

64.1
139.9
58.4
1.8
–0.9
8.9
15.9
5.7

63.7
142.5
58.6
1.8
–0.9
8.1
14.7
5.8

1.8
3,907

2.1
4,152

1.1
6,639

1.5
7,934

1.5
7,400

2.8
9,915

3.1
11,112

1.8
12,447

1.8
12,358

N/A
10,725

11,564
N/A
4,202
42.3
10.3
2.6

16,879
41.6
7,486
50.6
8.1
2.5

23,258
56.4
10,076
41.7
7.2
2.3

30,765
63.7
12,170
56.1
3.9
2.6

34,227
61.1
12,594
68.2
4.7
2.5

40,281
71.4
13,475
103.6
6.1
2.7

46,389
74.3
13,723
88.5
2.9
2.6

50,673
72.0
13,335
132.5
–0.7
2.8

51,117
N/A
13,177
131.9
–0.6
2.7

N/A
N/A
N/A
N/A
N/A
N/A

14
15
16
17
18
19
20
21

Infrastructure, Innovation, and Capital Investment
Nonfarm output per hour (average 5 year % change) ����������������������������������
Corn for grain production (billion bushels) �����������������������������������������������������
Real net stock of fixed assets and consumer durable goods (billions of
2010$) 4  ����������������������������������������������������������������������������������������������������
Population served by secondary wastewater treatment or better (%) 5  ���������
Electricity net generation (kWh per capita) ����������������������������������������������������
Patents issued to U.S. residents (per 1,000 population) ��������������������������������
Net national saving rate (% of GDP) ������������������������������������������������������������
R&D spending (% of GDP) ����������������������������������������������������������������������������
Demographic and Civic

22
23
24
25
26

Population
Total population (millions) �����������������������������������������������������������������������������
Foreign born population (millions) 6  ��������������������������������������������������������������
17 years and younger (%) ����������������������������������������������������������������������������
65 years and older (%) ���������������������������������������������������������������������������������
85 years and older (%) ���������������������������������������������������������������������������������

N/A
9.7
N/A
N/A
N/A

204.0
9.6
N/A
9.8
0.7

227.2
14.1
28.0
11.3
1.0

249.6
19.8
25.7
12.5
1.2

266.3
N/A
26.1
12.7
1.4

282.2
31.1
25.7
12.4
1.5

295.5
37.5
24.9
12.4
1.6

309.3
40.0
24.0
13.1
1.8

311.6
40.4
23.7
13.3
1.8

313.9
N/A
23.5
N/A
N/A

27
28
29
30

Household Composition
Ever married (% of age 15 and older) 7  ���������������������������������������������������������
Average family size 8  �������������������������������������������������������������������������������������
Births to unmarried women age 15–17 (per 1,000) ���������������������������������������
Single parent households (%) �����������������������������������������������������������������������

78.0
3.7
N/A
4.4

75.1
3.6
17.1
5.2

74.1
3.3
20.6
7.5

73.8
3.2
29.6
8.3

72.9
3.2
30.1
9.1

71.9
3.2
23.9
8.9

70.9
3.1
19.4
8.9

69.3
3.2
16.8
9.1

69.2
3.1
N/A
9.1

68.8
3.1
N/A
9.3

31
32
33

Civic Engagement
Average charitable contribution per itemized tax return (2010 dollars) 9  �������
Voting for President (% of voting age population) 10  ��������������������������������������
Persons volunteering (% age 16 and older)  11  ���������������������������������������������

2,063
63.4
N/A

2,046
57.0
N/A

2,361
55.1
N/A

2,968
56.4
20.4

3,155
49.8
N/A

4,188
52.1
N/A

4,287
56.7
28.8

3,650
58.3
26.3

N/A
N/A
26.8

N/A
N/A
N/A

82

Analytical Perspectives

TABLE 6–1. SOCIAL INDICATORS—Continued
Calendar Years

1960

1970

1980

1990

1995

2000

2005

2010

2011

2012

Socioeconomic
34
35
36
37
38
39

Education
High school graduates (% of age 25–34) 12  ��������������������������������������������������
College graduates (% of age 25–34) 13  ���������������������������������������������������������
Reading achievement score (age 17) 14  ��������������������������������������������������������
Math achievement score (age 17) 15  �������������������������������������������������������������
Science and engineering graduate degrees (% of total graduate degrees) ������
Receiving special education services (% of age 3–21 public school
students) ���������������������������������������������������������������������������������������������������

58.1
11.0
N/A
N/A
22.0

71.5
15.5
285
304
17.2

84.2
23.3
285
298
11.2

84.1
22.7
290
305
14.7

N/A
N/A
288
306
14.2

83.9
27.5
288
308
12.6

86.4
29.9
283
305
12.7

87.2
31.1
286
306
12.1

87.9
31.5
N/A
N/A
12.4

N/A
N/A
N/A
N/A
N/A

N/A

N/A

10.1

11.4

12.4

13.3

13.7

13.0

N/A

N/A

40
41
42
43
44
45
46
47
48

Income, Savings, and Inequality
Real median income: all households (2011 dollars) ��������������������������������������
Real disposable income per capita average (2011 dollars) 1,  4  ���������������������
Adjusted gross income share of top 1% of all taxpayers �������������������������������
Adjusted gross income share of lower 50% of all taxpayers �������������������������
Personal saving rate (% of disposable personal income) 1  ���������������������������
Poverty rate (%) 16  �����������������������������������������������������������������������������������������
Food-insecure households (% of all households) 17  ��������������������������������������
Supplemental Nutrition Assistance Program (formerly Food Stamps) 18  ������
Median wealth of households, age 55–64 (in thousands of 2011 dollars) 19, 4  �����

N/A
12,457
N/A
N/A
7.2
22.2
N/A
N/A
75

45,146
17,450
N/A
N/A
9.4
12.6
N/A
3.3
N/A

46,024
21,716
8.5
17.7
9.8
13.0
N/A
9.5
148

49,950
27,132
14.0
15.0
6.5
13.5
N/A
8.2
170

49,935
28,724
14.6
14.5
5.2
13.8
11.9
9.9
169

54,841
33,272
20.8
13.0
2.9
11.3
10.5
6.1
234

53,371
36,100
21.2
12.9
1.5
12.6
11.0
8.9
299

50,831
37,242
18.9
11.7
5.1
15.1
14.5
13.5
185

50,054
37,463
N/A
N/A
4.2
15.0
14.9
14.6
N/A

N/A
37,646
N/A
N/A
3.6
N/A
N/A
14.9
N/A

49
50
51

Housing
Homeownership among families with children (%) ����������������������������������������
Families with children and severe housing cost burden (%) 20  ����������������������
Families with children and inadequate housing (%) 21  ����������������������������������

61.9
N/A
N/A

62.9
N/A
N/A

64.4
8.0
9.0

64.2
10.0
9.0

65.0
12.0
7.0

66.2
11.0
7.0

66.9
14.5
5.4

65.1
17.9
5.3

64.6
18.3
5.5

N/A
N/A
N/A

Health
52
53
54
55
56
57

Health Status
Life expectancy at birth 22  ������������������������������������������������������������������������������
Infant mortality (per 1,000 live births) 22  ��������������������������������������������������������
Low birthweight [<2,500 gms] (% of babies) 22  ���������������������������������������������
Activity limitation (% of age 5–17) 23  �������������������������������������������������������������
Activity limitation (% of aged 18 and over) 24  �������������������������������������������������
Difficulties with activities of daily living (% of age 65 and over) 25  �����������������

69.7
26.0
7.7
N/A
N/A
N/A

70.8
20.0
7.9
N/A
N/A
N/A

73.7
12.6
6.8
N/A
N/A
N/A

75.4
9.2
7.0
N/A
N/A
N/A

75.8
7.6
7.3
N/A
N/A
N/A

76.8
6.9
7.6
7.0
27.9
6.3

77.6
6.9
8.2
8.0
29.1
6.2

78.7
6.1
8.1
9.2
29.9
6.8

78.7
6.1
8.1
9.3
29.8
7.3

N/A
N/A
N/A
N/A
N/A
N/A

58
59
60
61
62

Health Behavior
Engaged in regular physical activity (% of age 18 and older) 26  ��������������������
Obesity (% of age 20–74 with BMI 30 or greater) 27  �������������������������������������
Obesity (% of age 2–19) 28  ����������������������������������������������������������������������������
Cigarette smokers (% of age 18 and older) ���������������������������������������������������
Excessive alcohol use (% of age 18 and older) 29  �����������������������������������������

N/A
13.3
N/A
N/A
N/A

N/A
14.6
5.1
39.2
N/A

N/A
15.1
5.5
32.7
N/A

N/A
23.3
10.0
25.3
N/A

N/A
N/A
N/A
24.6
N/A

15.0
31.1
13.9
23.1
8.7

16.6
34.1
15.4
20.8
8.9

20.7
35.3
16.9
19.3
10.1

21.0
N/A
N/A
19.0
9.4

N/A
N/A
N/A
N/A
N/A

63
64
65
66

Access to Health Care
Total national health expenditures (% of GDP) 30  ������������������������������������������
Persons without health insurance (% of age 18–64) �������������������������������������
Persons without health insurance (% of age 17 and younger) ����������������������
Children age 19–35 months with recommended vaccinations (%) 31  ������������

5.2
N/A
N/A
N/A

7.2
N/A
N/A
N/A

9.2
N/A
N/A
N/A

12.5
N/A
N/A
N/A

13.9
N/A
N/A
55.1

13.8
16.4
10.7
72.8

16.1
19.0
10.3
76.1

17.9
21.8
9.8
72.7

17.9
21.2
9.4
73.6

17.9
N/A
N/A
N/A

Security and Safety
67
68
69

Crime
Property crimes (per 100,000 households) 32  �����������������������������������������������
Violent crime victimizations (per 100,000 population age 12 or older)  33  �����
Murder rate (per 100,000 persons) ����������������������������������������������������������������

N/A
N/A
5.1

N/A
N/A
7.9

49,610
4,940
10.2

34,890
4,410
9.4

31,547
7,068
8.2

19,043
3,749
5.5

15,947
2,842
5.6

12,542
1,928
4.8

13,871
2,254
4.7

N/A
N/A
N/A

70
71

Transportation Safety
Safety belt use (%) ����������������������������������������������������������������������������������������
Highway fatalities �������������������������������������������������������������������������������������������

N/A
36,399

N/A
52,627

N/A
51,091

N/A
44,599

N/A
41,817

71
41,945

82
43,510

85
32,999

84
32,367

86
N/A

N/A
N/A

N/A
N/A

0.101
N/A

0.089
N/A

0.090
N/A

0.082
13.6

0.080
13.0

0.073
10.0

N/A
N/A

N/A
N/A

Environment and Energy
72
73

Air Quality and Greenhouse Gases
Ground level ozone (ppm) based on 247 monitoring sites ����������������������������
Particulate matter 2.5 (ug/m3) based on 646 monitoring sites ����������������������

83

6.  Social Indicators

TABLE 6–1. SOCIAL INDICATORS—Continued
Calendar Years
74
75
76
77
78

Annual mean atmospheric CO2 concentration (Mauna Lao, Hawaii; ppm/yr) 
Gross greenhouse gas emissions (teragrams CO2 equivalent) 34  �����������������
Net greenhouse gas emissions, including sinks (teragrams CO2 equivalent) �����
Gross greenhouse gas emissions per capita (metric tons CO2 equivalent) ������
Gross greenhouse gas emissions per 2005$ of GDP (kilograms CO2
equivalent) ������������������������������������������������������������������������������������������������

1960

1970

1980

1990

1995

2000

2005

2010

2011

2012

0.5
N/A
N/A
N/A

1.1
N/A
N/A
N/A

1.7
N/A
N/A
N/A

1.2
6,175
5,293
24.7

2.0
N/A
N/A
N/A

1.6
N/A
N/A
N/A

2.5
7,204
6,118
24.3

2.4
6,822
5,747
22.0

1.8
N/A
N/A
N/A

N/A
N/A
N/A
N/A

N/A

N/A

N/A

0.769

N/A

N/A

0.570

0.521

N/A

N/A

Energy
79
Energy consumption per capita (million Btu) ������������������������������������������������
250
331
344
338
342
350
339
316
312
N/A
80
Energy consumption per 2005$ GDP (thousand Btu per 2005$) ������������������
15.9
15.9
13.4
10.5
10.0
8.8
7.9
7.5
7.3
N/A
81
Electricity net generation from renewable sources, all sectors (% of total) �������
19.7
16.4
12.4
11.8
11.5
9.4
8.8
10.4
12.7
N/A
N/A=Number is not available.
1 
Data for 2012 reflect 2012 Q3.
2 
Adjusted CPI-U. 2011=100.
3 
Gross prevalence rate for persons receiving Social Security disabled-worker benefits among the estimated population insured in the event of disability at end of year. Gross rates do
not account for changes in the age and gender composition of the insured population over time.
4 
Data adjusted by OMB to real 2010 dollars for indicator 16, and to 2011 dollars for indicators 41 and 48.
5 
Data correspond to years 1962, 1972, 1982, 1992, 1996, 2000, 2004, 2008.
6 
Data source for 1960 to 2000 is the decennial census; data source for 2006, 2010, and 2011 is the American Community Survey.
7 
For 1960, age 14 and older.
8 
Average size of family households. Family households are those in which there is someone present who is related to the householder by birth, marriage, or adoption.
9 
Charitable giving reported as itemized deductions on Schedule A.
10 
Data correspond to years 1964, 1972, 1980, 1992, 1996, 2000, 2004, 2008.
11 
Refers to those who volunteered at least once during a one-year period, from September of the previous year to September of the year specified. For 1990, refers to 1989 estimate
from the CPS Supplement on volunteers.
12 
For 1960, includes those who have completed 4 years of high school or beyond. For 1970 and 1980, includes those who have completed 12 years of school or beyond. For 1990
onward, includes those who have completed a high school diploma or the equivalent.
13 
For 1960 to 1980, includes those who have completed 4 or more years of college. From 1990 onward, includes those who have a bachelor’s degree or higher.
14 
Data correspond to years 1971, 1980, 1990, 1994, 1999, 2004, and 2008.
15 
Data correspond to years 1973, 1982, 1990, 1994, 1999, 2004, and 2008.
16 
The poverty rate does not reflect noncash government transfers.
17 
Food-insecure classification is based on reports of three or more conditions that characterize households when they are having difficulty obtaining adequate food, out of a total of 10
such conditions.
18 
2012 reflects average monthly participation from January through September 2012.
19 
Data values shown are 1962, 1983, 1989, 1995, 2001, 2004, and 2010. For 1962, the data source is the SFCC; for subsequent years, the data source is the SCF.
20 
Expenditures for housing and utilities exceed 50 percent of reported income. Some data interpolated.
21 
Inadequate housing has moderate to severe physical problems, usually poor plumbing or heating or upkeep problems. Some data interpolated.
22 
Data for 2011 are preliminary.
23 
Total activity limitation includes special education and other limitations, including limitations in children’s ability to walk, care for themselves, or perform other activities.
24 
Activity limitation among adults aged 18 and over is defined as having a basic action difficulty in one or more of the following: movement, emotional, sensory (seeing or hearing), or
cognitive.
25 
Activities of daily living include include bathing or showering, dressing, getting in or out of bed or a chair, using the toilet, and eating.
26 
Participation in leisure-time aerobic and muscle-strengthening activities that meet 2008 Federal physical activity guidelines.
27 
BMI refers to body mass index.
28 
Percentage at or above the sex-and age-specific 95th percentile BMI cutoff points from the 2000 CDC growth charts.
29 
Percent of age 18 and over who had five or more drinks in a day on at least 12 days in the past year.
30 
2012 values are projected.
31 
Recommended vaccine series changed over time. 1995 and 2000 data correspond with the 4:3:1:3:3 recommended series; 2005 data correspond with the 4:3:1:3:3:1 series; 2010
and 2011 data correspond with the 4:3:1:-:3:1:4 series.
32 
Property crimes, including burglary, motor vehicle theft, and property theft, reported by a sample of households. Includes property crimes both reported and not reported to law
enforcement.
33 
Violent crimes include rape, robbery, aggravated assault, and simple assault. Includes crimes both reported and not reported to law enforcement. Due to methodological changes
in the enumeration method for NCVS estimates from 1993 to present, use caution when comparing 1980 and 1990 criminal victimization estimates to future years. Estimates from 1995
and beyond include a small number of victimizations, referred to as series victimizations, using a new counting strategy. High-frequency repeat victimizations, or series victimizations,
are six or more similar but separate victimizations that occur with such frequency that the victim is unable to recall each individual event or describe each event in detail. Including series
victimizations in national estimates can substantially increase the number and rate of violent victimization; however, trends in violence are generally similar regardless of whether series
victimizations are included. See Methods for Counting High-Frequency Repeat Victimizations in the National Crime Victimization Survey for further discussion of the new counting
strategy and supporting research.
34 
The gross emissions indicator does not include sinks, which are processes (typically naturally occurring) that remove greenhouse gases from the atmosphere. Gross emissions are
therefore more indicative of trends in energy consumption and efficiency than are net emissions.

84

Analytical Perspectives

Table 6–2. Sources For Social Indicators
Indicator

Source

1
2
3
4
5

General Economic Conditions
Real GDP per person (2005 dollars) ������������������������������������������������������������������
Real GDP per person change, 5-year annual average ������������������������������������
Consumer Price Index ����������������������������������������������������������������������������������������
Private goods producing (%) ������������������������������������������������������������������������������
Private services producing (%) ���������������������������������������������������������������������������

Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Bureau of Labor Statistics, BLS Consumer Price Index Program. http://www.bls.gov/cpi/
Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/

6
7
8
9
10
11
12
13

Jobs and Unemployment
Labor force participation rate (%) ������������������������������������������������������������������������
Employment (millions) �����������������������������������������������������������������������������������������
Employment-population ratio (%) ������������������������������������������������������������������������
Payroll employment change - December to December (millions) ������������������������
Payroll employment change - 5-year annual average (millions) ����������������������
Civilian unemployment rate (%) ���������������������������������������������������������������������������
Unemployment plus marginally attached and underemployed (%) ���������������������
Receiving Social Security disabled-worker benefits (% of population) ����������������

Economic

14
15
16
17
18
19
20
21

Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Bureau of Labor Statistics, Current Employment Statistics program. http://www.bls.gov/ces/
Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Bureau of Labor Statistics, Current Population Survey. http://www.bls.gov/cps
Social Security Administration, Office of Research, Evaluation, and Statistics, Annual Statistical
Supplement to the Social Security Bulletin, tables 4.C1 5.A4. http://www.ssa.gov/policy/
docs/statcomps/supplement/

Infrastructure, Innovation, and Capital Investment
Nonfarm output per hour (average 5 year % change) ���������������������������������������� Bureau of Labor Statistics, Major Sector Productivity Program. http://www.bls.gov/lpc/
Corn for grain production (billion bushels) ����������������������������������������������������������� National Agricultural Statistics Service, Agricultural Estimates Program. http://www.nass.usda.
gov/
Real net stock of fixed assets and consumer durable goods (billions of 2010$) ���� Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Population served by secondary wastewater treatment or better (%) ���������������� U.S. Environmental Protection Agency, Clean Watersheds Needs Survey. http://water.epa.gov/
scitech/datait/databases/cwns/index.cfm
Electricity net generation (kWh per capita) ���������������������������������������������������������� U.S. Energy Information Administration, Annual Energy Review Table 8.2a (Col. 16) divided by
Table D1 (Col. 1). http://www.eia.gov/totalenergy/data/annual/index.cfm
Patents issued to U.S. residents (per 1,000 population) �������������������������������������� U.S. Patent and Trademark Office, Electronic Information Products Division, Patent Technology
Monitoring Team. http://www.uspto.gov/products/catalog/ptmd/patent_statistics.jsp
Net national saving rate (% of GDP) ������������������������������������������������������������������ Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
R&D spending (% of GDP) ���������������������������������������������������������������������������������� National Science Foundation, National Patterns of R&D Resources. http://www.nsf.gov/
statistics/natlpatterns/
Demographic and Civic

22

23
24

25

26

27
28
29
30
31

Population
Total population (millions) ����������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2012 Population Estimates (2012), Vintage
2011 Population Estimates (2010-2011), 2000-2010 Intercensal Estimates (2000-2005),
1990-1999 Intercensal Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980),
1970-1980 Intercensal Estimates (1970).
Foreign born population (millions) xx/ ������������������������������������������������������������������ U.S. Census Bureau, Population Division, Decennial Census and American Community Survey.
http://www.census.gov/prod/www/abs/decennial/ and http://www.census.gov/acs
17 years and younger (%) ���������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2012 Population Estimates (2012), Vintage
2011 Population Estimates (2010-2011), 2000-2010 Intercensal Estimates (2000-2005),
1990-1999 Intercensal Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980),
1970-1980 Intercensal Estimates (1970)
65 years and older (%) ��������������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2012 Population Estimates (2012), Vintage
2011 Population Estimates (2010-2011), 2000-2010 Intercensal Estimates (2000-2005),
1990-1999 Intercensal Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980),
1970-1980 Intercensal Estimates (1970)
85 years and older (%) ��������������������������������������������������������������������������������������� U.S. Census Bureau, Population Division, Vintage 2012 Population Estimates (2012), Vintage
2011 Population Estimates (2010-2011), 2000-2010 Intercensal Estimates (2000-2005),
1990-1999 Intercensal Estimates (1990-1995), 1980-1990 Intercensal Estimates (1980),
1970-1980 Intercensal Estimates (1970)
Household Composition
Ever married (% of age 15 and older) ���������������������������������������������������������������� U.S. Census Bureau, Current Population Survey. http://www.census.gov/hhes/families/
Average family size ��������������������������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey. http://www.census.gov/hhes/families/
Births to unmarried women age 15-17 (per 1,000) ���������������������������������������������� Centers for Disease Control and Prevention, National Vital Statistics Report. http://www.cdc.
gov/nchs/nvss.htm
Single parent households (%) ����������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey. http://www.census.gov/hhes/families/
Civic Engagement
Average charitable contribution per itemized tax return (2010 dollars) ��������������� U.S. Internal Revenue Service, Statistics of Income - Individual Income Tax Returns (IRS
Publication 1304). http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-ReturnsPublication-1304-(Complete-Report)

85

6.  Social Indicators

TABLE 6–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
32
33

Source

Voting for President (% of voting age population) ����������������������������������������������� The Office of the Clerk of the U.S. House of Representatives and the U.S. Census Bureau,
Current Population Survey. http://www.census.gov/cps/
Persons volunteering (% age 16 and older) ������������������������������������������������������ U.S. Census Bureau, Current Population Survey. http://www.census.gov/cps/
Socioeconomic

34
35
36
37
38
39

40
41
42
43
44
45
46
47
48

49
50
51

Education
High school graduates (% of age 25-34) ������������������������������������������������������������ U.S. Census Bureau, Decennial Census and American Community Survey. http://www.census.
gov/prod/www/abs/decennial/ and http://www.census.gov/acs
College graduates (% of age 25-34) ������������������������������������������������������������������� U.S. Census Bureau, American Community Survey. http://www.census.gov/acs
Reading achievement score (age 17) ������������������������������������������������������������������ National Center for Education Statistics, National Assessment of Educational Progress. http://
nces.ed.gov/nationsreportcard/
Math achievement score (age 17) ����������������������������������������������������������������������� National Center for Education Statistics, National Assessment of Educational Progress. http://
nces.ed.gov/nationsreportcard/
Science and engineering graduate degrees (% of total graduate degrees) �������� National Center for Education Statistics, Integrated Postsecondary Education Data System.
http://nces.ed.gov/ipeds/
Receiving special education services (% of age 3-21 public school students) ���� National Center for Education Statistics, Digest of Education Statistics, 2012. http://nces.
ed.gov/programs/digest/d12/tables/dt12_046.asp
Income, Savings, and Inequality
Real median income: all households (2011 dollars) �������������������������������������������� U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements.
http://www.census.gov/hhes/www/income/data/historical/household/
Real disposable income per capita average (2005 dollars) �������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Adjusted gross income share of top 1% of all taxpayers ������������������������������������� U.S. Internal Revenue Service, Statistics of Income. http://www.irs.gov/uac/SOI-Tax-StatsIndividual-Statistical-Tables-by-Tax-Rate-and-Income-Percentile
Adjusted gross income share of lower 50% of all taxpayers ������������������������������� U.S. Internal Revenue Service, Statistics of Income. http://www.irs.gov/uac/SOI-Tax-StatsIndividual-Statistical-Tables-by-Tax-Rate-and-Income-Percentile
Personal saving rate (% of disposable personal income) ����������������������������������� Bureau of Economic Analysis, National Economic Accounts Data. http://www.bea.gov/national/
Poverty rate (%) �������������������������������������������������������������������������������������������������� U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements.
http://www.census.gov/hhes/www/poverty/publications/pubs-cps.html
Food-insecure households (% of all households) ����������������������������������������������� Economic Research Service, Household Food Security in the United States report series.
http://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/readings.
aspx
Supplemental Nutrition Assistance Program (formerly Food Stamps) ��������������� Food and Nutrition Service, USDA
Median wealth of households, age 55-64 (in thousands of 2010 dollars) ���������� Board of Governors of the Federal Reserve System, Survey of Consumer Finances Chartbook.
http://www.federalreserve.gov/econresdata/scf/scfindex.htm
Housing
Homeownership among families with children (%) ���������������������������������������������� U.S. Census Bureau, American Housing Survey. http://www.census.gov/housing/ahs
Families with children and severe housing cost burden (%) ������������������������������� U.S. Census Bureau, American Housing Survey as tabulated by the Housing and Urban
Development’s Office of Policy Development and Resesarch. http://www.census.gov/
housing/ahs
Families with children and inadequate housing (%) ������������������������������������������� U.S. Census Bureau, American Housing Survey as tabulated by the Housing and Urban
Development’s Office of Policy Development and Resesarch. http://www.census.gov/
housing/ahs
Health

52
53
54
55
56
57

58

Health Status
Life expectancy at birth ��������������������������������������������������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National Vital
Statistics System (mortality), Health, United States, 2012 forthcoming, Table 18. http://www.
cdc.gov/nchs/nvss.htm
Infant mortality (per 1,000 live births) ����������������������������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National Vital
Statistics System (natality), Health, United States, 2012 forthcoming, Table 13. http://www.
cdc.gov/nchs/nvss.htm
Low birthweight [<2,500 gms] (% of babies) ������������������������������������������������������ Centers for Disease Control and Prevention, National Center for Health Statistics, National Vital
Statistics System (natality), Health, United States, 2012 forthcoming, Table 6. http://www.
cdc.gov/nchs/nvss.htm
Activity limitation (% of age 5-17) ����������������������������������������������������������������������� Office of Special Education and Rehabilitative Services. http://www2.ed.gov/about/offices/list/
osers/osep/index.html
Activity limitation (% of age 18 and over) ������������������������������������������������������������ Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health Interview Survey. http://www.cdc.gov/nchs/nhis.htm
Difficulties with activities of daily living (% of age 65 and over) �������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health Interview Survey (for 2000 and 2005), Health, United States, 2008, Table 58, ageadjusted. http://www.cdc.gov/nchs/nhis.htm
Health Behavior
Engaged in regular physical activity (% of age 18 and older) ����������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health Interview Survey, Health, United States, 2012 forthcoming, Table 67, age adjusted.
http://www.cdc.gov/nchs/nhis.htm

86

Analytical Perspectives

TABLE 6–2. SOURCES FOR SOCIAL INDICATORS—Continued
Indicator
59
60
61
62

63
64
65
66

Source

Obesity (% of age 20-74 with BMI 30 or greater) ����������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health and Nutrition Examination Survey, Health, United States, 2012 forthcoming, Table
68, age adjusted. http://www.cdc.gov/nchs/nhis.htm
Obesity (% of age 2-19) �������������������������������������������������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health and Nutrition Examination Survey. http://www.cdc.gov/nchs/nhis.htm
Cigarette smokers (% of age 18 and older) ��������������������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health Interview Survey, Health, United States, 2012 forthcoming, Table 54, age adjusted.
http://www.cdc.gov/nchs/nhis.htm
Excessive alcohol use (% of age 18 and older) �������������������������������������������������� Centers for Disease Control and Prevention, National Center for Health Statistics, National
Health Interview Survey, Health, United States, 2012 forthcoming, Table 62, age adjusted.
http://www.cdc.gov/nchs/nhis.htm
Access to Health Care
Total national health expenditures (% of GDP) ��������������������������������������������������� Centers for Medicare and Medicaid Services, National Health Expenditures Data. http://
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/index.html
Persons without health insurance (% of age 18-64) �������������������������������������������� U.S. Census Bureau, Current Population Survey Annual Social and Economic Supplement.
http://www.census.gov/hhes/www/poverty/publications/pubs-cps.html
Persons without health insurance (% of age 17 and younger) ���������������������������� U.S. Census Bureau, Current Population Survey Annual Social and Economic Supplement.
http://www.census.gov/hhes/www/poverty/publications/pubs-cps.html
Children age 19-35 months with recommended vaccinations (%) ��������������������� Centers for Disease Control and Prevention, National Immunization Survey. http://www.cdc.gov/
nchs/nis.htm
Security and Safety

67
68
69

70
71

Crime
Property crimes (per 100,000 households) �������������������������������������������������������� Bureau of Justice Statistics, National Crime Victimization Survey. http://bjs.ojp.usdoj.gov/index.
cfm?ty=tp&tid=32
Violent crime victimizations (per 100,000 population age 12 or older) �������������� National Crime Victimization Survey. http://bjs.ojp.usdoj.gov/index.cfm?ty=tp&tid=32
Murder rate (per 100,000 persons) ���������������������������������������������������������������������� Federal Bureau of Investigation, Uniform Crime Reports, Crime in the United States. http://
www.fbi.gov/about-us/cjis/ucr/ucr
Transportation Safety
Safety belt use (%) ���������������������������������������������������������������������������������������������� Bureau of Transportation Statistics, National Transportation Statistics (as compiled from Safety
Belt and Helmet Use in 2002 and Traffic Safety Facts). http://www.rita.dot.gov/bts/sites/rita.
dot.gov.bts/files/publications/national_transportation_statistics/index.html
Highway fatalities ������������������������������������������������������������������������������������������������� Bureau of Transportation Statistics, National Transportation Statistics. http://www.rita.dot.gov/
bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/index.html
Environment and Energy

72
73
74
75
76
77
78

79
80
81

Air Quality and Greenhouse Gases
Ground level ozone (ppm) based on 247 monitoring sites ���������������������������������� U.S. Environmental Protection Agency, Latest Findings on National Air Quality. http://www.epa.
gov/airtrends/reports.html
Particulate matter 2.5 (ug/m3) based on 646 monitoring sites ���������������������������� U.S. Environmental Protection Agency, Latest Findings on National Air Quality. http://www.epa.
gov/airtrends/reports.html
Annual mean atmospheric CO2 concentration (Mauna Lao, Hawaii; ppm/yr) ����� National Oceanic and Atmospheric Administration. http://www.esrl.noaa.gov/gmd/ccgg/
trends/#mlo_data
Gross greenhouse gas emissions (teragrams CO2 equivalent) ������������������������� U.S. Environmental Protection Agency, 2010 Inventory of Greenhouse Gases. http://www.epa.
gov/climatechange/ghgemissions/usinventoryreport.html
Net greenhouse gas emissions, including sinks (teragrams CO2 equivalent) ���� U.S. Environmental Protection Agency, 2010 Inventory of Greenhouse Gases. http://www.epa.
gov/climatechange/ghgemissions/usinventoryreport.html
Gross greenhouse gas emissions per capita (metric tons CO2 equivalent) �������� U.S. Environmental Protection Agency, 2010 Inventory of Greenhouse Gases. http://www.epa.
gov/climatechange/ghgemissions/usinventoryreport.html
Gross greenhouse gas emissions per 2005$ of GDP (kilograms CO2
U.S. Environmental Protection Agency, 2011 Inventory of Greenhouse Gases. http://www.epa.
equivalent) ������������������������������������������������������������������������������������������������������
gov/climatechange/ghgemissions/usinventoryreport.html
Energy
Energy consumption per capita (million BTU) ���������������������������������������������������� U.S. Energy Information Administration, Annual Energy Review, Table 1.5, Col. 2. http://www.
eia.gov/totalenergy/data/annual/index.cfm
Energy consumption per 2005$ GDP (thousand BTU per 2005$) ���������������������� U.S. Energy Information Administration, Annual Energy Review, Table 1.5, Col. 10. http://www.
eia.gov/totalenergy/data/annual/index.cfm
Electricity net generation from renewable sources, all sectors (% of total) ��������� U.S. Energy Information Administration, Annual Energy Review, Table 8.2a. http://www.eia.gov/
totalenergy/data/annual/index.cfm

7. Delivering a High-Performance Government

The Federal government has a positive impact on the
quality of American lives. It influences the safety of the
communities in which we live, the roads on which we drive,
and the airplanes in which we fly. It enables those harmed
by natural disasters to recover faster and increases access
to capital for entrepreneurs and small business owners.
The Federal government enables more young people to go
to college and get jobs, and more seniors to maintain their
quality of life. The men and women of the armed forces
defend our nation and the Federal government, in turn, attends to the needs of military families and the veterans who
so ably served. The responsibilities of agencies are vast,
varied, and significant. The Department of the Interior, for
example, is the largest supplier and manager of water in
17 states, delivers irrigation to 31 million people and one
out of every five western farmers, and manages lands that
produce over 30 percent of the nation’s energy.
The Federal government has the ability and responsibility to improve the quality of the lives of the American
people, the safety of our communities, and the strength of
our economy.
A Culture of Performance Improvement
Because government can have such a positive impact
on the quality of people’s lives, good management of programs is essential. The challenge agencies face is using
their tools of program delivery, such as grants, contracts,
regulation, information collection, and information dissemination, in ways that yield the highest return on taxpayer dollars. The Obama Administration expects agencies to use evidence to set priorities and find increasingly
effective and cost-effective practices. It expects them to
test new practices to identify those that successfully solve
problems, advance opportunities, and boost productivity. It expects agency leaders to adjust and re-allocate
resources or change practices as new evidence is obtained,
and to constantly ask if lower cost options are available
to accomplish the same or higher levels of performance.
Finally, it expects agencies to share information with the
public to enhance accountability and facilitate understanding of the services the government provides.
To fulfill these expectations, the Obama Administration
has emphasized six practices:
1.	 goal-setting;
2.	 frequent measurement of performance and other indicators;
3.	 ongoing analysis;
4.	 use of evidence in decision-making;
5.	 data-driven reviews; and
6.	 information dissemination that is timely, accessible,
and user-friendly.

These six practices are essential for finding what
works and what needs fixing. They support agency efforts
to achieve better outcomes for each dollar spent. These
six practices help clarify what agencies are trying to accomplish, why they are focused on those goals, how they
plan to accomplish those goals, and how well they achieve
them. Effective communication about our performance
goals, progress, and results strengthens democratic decision-making and builds a culture of continuous improvement in government.
To emphasize and enhance these performance practices across the Federal government, in 2009 the Obama
Administration directed agency leaders to set high-priority performance goals (Priority Goals). The Priority Goals
represent a small number of specific, ambitious, outcomefocused goals selected by agency leaders. They are nearterm implementation priorities each agency is working to
accomplish within two years, without new legislation or
funding.
Agencies set new Priority Goals every two years. The
current set was established for FY 2012-2013. The Deputy
Secretary (or Chief Operating Officer) of each agency is
responsible for running quarterly progress reviews and
designating a senior official responsible for driving progress on each Priority Goal. Goal Leaders are expected to
select strategies using appropriately rigorous evidence,
set milestones, and assess progress at least once a quarter. Every quarter, major agencies report progress on their
Priority Goals on Performance.gov.
Complementing
Agency
Priority
Goals,
the
Administration has also selected 14 Federal CrossAgency Priority (CAP) Goals to deliver on the President’s
commitment. CAP Goals have been set for: exports; entrepreneurship and small businesses; energy efficiency;
broadband; science, technology, engineering, math education; job training; and transitioning returning veterans
to civilian jobs. CAP Goals have also been set to improve
sustainability, cybersecurity, and other aspects of Federal
government operations.
Doing What Works; Fixing What Doesn’t
The following examples illustrate how adoption of these
six practices is translating to tangible improvements in
the lives of the American people. These examples represent a small subset of the vast contributions Federal
agencies make to people, communities, and the economy.
Strengthening the Economy with
Faster Patent Processing.
Timely, high-quality processing of patent applications
cultivates and protects innovation and boosts economic
prosperity.  The backlog of patent applications has been
reduced to the lowest level in years despite increases in

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Analytical Perspectives

filings last year and this year. From its peak, of approximately 764,000 in January 2009, the patent backlog has
been reduced to approximately 595,078 in February 2013.
http://goals.performance.gov/goal_detail/DOC/338
Broader Broadband Coverage.
Access to broadband capabilities is growing at a rapid
rate, providing a strong foundation for economic growth,
job creation, and global competitiveness. As of June 2012,
81% of Americans have access to advanced wireless
broadband and the ability to enjoy minimum download
speeds of at least 6 megabits per second, up from 36% in
mid-2010. When wired connections are included, availability jumps to almost 96%. http://goals.performance.
gov/node/38578
Energy Efficiency.
Energy efficiency is one of the least expensive, most
cost-effective ways to enhance the nation’s energy security, save money for American households, reduce dependence on oil, and ensure a clean environment. The
Federal government is pursuing strategic opportunities to
boost energy efficiency in four areas: buildings, industry,
transportation, and federal operations. Energy productivity improved by more than 6 percent from the fourth
quarter of calendar year 2010 through the fourth quarter
of 2012: the total quarterly average energy consumption
held steady at 24.55 quadrillion British Thermal Units
(BTUs), while the quarterly average GDP increased from
$13,181 billion ($2005) to $13,506. As one example of federally supported actions in the buildings sector, over 1.2
million homes of American families have been retrofitted
since 2009, with annual per household energy savings
from each retrofit between $250 to $450 dollars. As a result of this effort, more than 30 trillion BTUs of energy
per year have been saved, and approximately 3 million
metric tons of greenhouse gases (carbon dioxide equivalent) have been reduced annually. http://goals.performance.gov/node/38504

Renewable Energy.
The Federal government continues to support increased renewable energy production capacity on Federal
lands. Since the U.S. Department of the Interior first set
a goal in FY 2010 to develop all appropriate sources of
renewable and conventional energy on U.S. public lands
and waters, the department has authorized over 10,900
megawatts of solar, wind, and geothermal energy projects
on or crossing Interior lands. This approved capacity, if
fully developed, could generate enough energy to power
millions of homes. In contrast, for thirty years prior to setting this goal, between 1978 and 2009, Interior approved
only a small number of wind and geothermal renewable
energy projects, estimated to provide for development of
about 1,500 megawatts of renewable energy. http://goals.
performance.gov/goal_detail/DOI/379
Reducing Water Shortages and Costs.
The Nation faces an increasing set of water resource
challenges: aging infrastructure, rapid population
growth, depletion of groundwater resources, and climate
variability and change. Water issues and challenges are
increasing in the West, even in “normal” years, due in
part to prolonged drought and shifting population patterns. Traditional water management approaches no longer meet today’s need. The Department of the Interior’s
Bureau of Reclamation is working closely with other
governments, private entities, and individuals to identify
practices that will increase water conservation capacity
in western states. Since FY 2010, the Bureau has funded
projects that have increased conservation capability by
over 600,000 acre-feet and will continue this important
work in FY 2014. http://goals.performance.gov/goal_detail/DOI/382
Safer, Lower-Cost Health Care. 
Hospital-acquired infections (HAIs) are a significant
cause of morbidity and mortality in the United States,

A Case Study: The National Highway Transportation and Safety Administration (NHTSA) has
long taken a goal-focused, data-driven, evidence-based approach to reduce traffic fatalities. It integrates performance measurements, retrospective evaluations, and experiments into its operations.
Since its inception, NHTSA has worked with states to code every fatal accident in the country,
noting characteristics of the operator, equipment, environmental situation (e.g., traffic light), and
jurisdiction. It complements this performance information with information about accident costs,
enabling the agency and its delivery partners to detect performance variations and target actions
to situations likely to be the most costly and risky.
NHTSA supports ongoing performance measurement with occasional studies and experiments.
For example, it analyzes how changes in state law, such as allowing police to stop and check drivers for seat belt use, correlate with changes in traffic fatalities. Currently, it is running an experiment to see if lessons learned from its highly successful enforcement-and-marketing campaign to
increase seat belt use, “Click-It-or-Ticket,” can be used to reduce distracted driving in a different
campaign, “Cell Phone in One Hand, Ticket in the Other.” NHTSA initially tested its distracted
driving campaign in two municipalities. Distracted driving dropped by a third in one (Syracuse)
and over 50% in the other (Hartford). NHTSA is now testing if the results can be replicated in
larger areas, an eight-county region of California and the state of Delaware. http://www.distraction.gov/content/dot-action/enforcement.html

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7. Delivering a High-Performance Government

accounting for an estimated 1.7 million infections in hospital patients, 99,000 associated deaths in 2002, and approximately $28 to $33 billion dollars in excess healthcare expenditures. Two of the most serious, common,
and preventable infections are central line-associated
bloodstream infections (CLABSI) and catheter-associated
urinary tract infections.  The Department of Health and
Human Services is working hard with the private sector,
other levels of government, and medical professionals to
cut the number of infections. In October 2012, as part of a
4-year nationwide initiative, over 1,000 hospital intensive
care units achieved a 41 percent reduction in the CLABSI
rates. This equates to more than 2,000 CLABSIs prevented, more than 500 lives saved, and over $34 million in
excess costs avoided. The Budget includes an increase of
$12 million within the Centers for Disease Control and
Prevention (CDC) to expand reporting of HAIs through
CDC’s National Healthcare Safety Network to more than
1,800 additional healthcare sites. http://goals.performance.gov/goal_detail/HHS/375
Fewer Homeless Veterans.
The Departments of Veterans Affairs and the Housing
and Urban Development have been working together to
eliminate veterans’ homelessness by 2015.  The Annual
Homeless Assessment Report to Congress estimates the
number of sheltered and unsheltered homeless persons
on a single night in January. In 2012, the annual homeless count estimated 62,619 homeless veterans, down
7.2 percent from 2011 and 18 percent from 2010. http://
goals.performance.gov/goal_detail/VA/331
Violent Crime Reduction in Tribal Communities.
The Bureau of Indian Affairs in the Department of the
Interior is working with tribal communities to reduce
violent crime. At the end of FY 2011, violent crime had
declined an average of 35 percent across four high-crime
reservations in just two years.    One year later, violent
crime is down across all four tribal communities – an average 55% reduction in violent crime incidents relative to
the 2009 baseline. Interior will continue its community
policing programs, maintaining efforts at the four reservations and focusing on an additional two communities.
To promote adoption of these promising practices by all
tribal communities, the bureau has prepared a “CrimeReduction Best Practices Handbook.” http://www.bia.
gov/cs/groups/xojs/documents/text/idc-018678.pdf.
Saving Taxpayer Dollars with
Paperless Treasury Transactions.
Treasury has cut the number of paper claims it handles
from a high of 195.5 million in 2007 to 41 million in 2012,
saving the Federal government an average of $100 million annually. http://goals.performance.gov/goal_detail/
TREAS/335
Faster Social Security Disability
Hearing Decisions. 
The Social Security Administration has reduced
the average processing time for a hearing before an

Administrative Law Judge from an all-time high of 532
days in August 2008 to 362 days as of September 2012.
http://goals.performance.gov/goal_detail/SSA/357
In addition, the Administration is building on previous
efforts to eliminate waste, reduce duplication, and save
costs. Agencies are making noteworthy progress addressing fragmentation in areas as diverse as exports and veterans’ homelessness. For example, in February 2012, the
President issued a memorandum directing the Export
Promotion Cabinet to work across agencies to identify
overlap and duplication and to maximize the combined
effectiveness of their programs and initiatives in support
of the Administration’s strategic trade and investment
priorities. 
Looking Forward
Experience over the last four years reinforced prior evidence about the benefits of the six management practices.
It is also refining our understanding of smarter ways to
apply these practices:
Goal Ownership Improves Results.
Goals and measures are merely words unless someone
assumes responsibility for managing their progress. The
designation of goal leaders for each Priority Goal, and
quarterly reviews run by Chief Operating Officers, assure
high-level attention to Priority Goal execution. Many goal
leaders, in turn, are clarifying who needs to do what by
when to achieve a national goal. In forthcoming strategic
plans, agencies will expand on this best practice of assigning clear goal ownership by identifying the lead office responsible for each strategic objective.
Improvement is the Objective,
not Target Attainment.
Ambitious goals energize people and encourage creativity, innovation, and cross-organization collaboration that
can lead to better outcomes and higher productivity. By
definition, ambitious goals are hard to meet. Therefore,
when progress on a goal is less than expected, agencies are accountable for understanding why and having a cogent evidence-based strategy to improve. Also,
agencies that meet all of their ambitious targets will
be asked to set more ambitious targets in the future.
Diagnostic Analyses, Experiments, and Other
Studies Make Measurement Actionable.
Analysis turns performance measurement into actionable information. While it is good to know if a national
trend is moving in the right direction, that knowledge
alone does not suggest a next step. Finding variations in
trends or outliers can lead to the discovery of better practices. The Department of Housing and Urban Development
has taken this approach in its efforts to reduce veterans’
homelessness. (See http://goals.performance.gov/delivering-better-results-using-frequent-data-driven-reviews.)
Agencies are applying a variety of data diagnostics to
prepare for quarterly Priority Goal performance reviews,

90
strategy selection, and other data-driven discussions.
They are increasingly complementing analyses of their
performance and operational data with other studies, replication demonstrations, and experiments to find increasingly effective and cost-effective approaches, discussed in
greater detail in the next chapter.
Transparency Motivates, Educates,
and Facilitates Cooperation.
Transparency strengthens accountability to the public, and can also lead to improved outcomes, greater productivity, and better decision-making. Performance.gov
makes it easier for the public to see how, why, and what
the Federal Government is trying to accomplish. The site
also supports collaboration on shared goals and facilitates
learning across and beyond agencies, including soliciting
feedback from the public. In the future, efforts will be
undertaken to test use of the website to facilitate coordination among goal allies, enlist ideas and assistance to
accelerate progress on goals, and enhance public understanding of the work of the Federal government.
Attention to Audience Enables Delivery
Partners and Others To Make Better Choices.
Federal agencies depend on a wide variety of partners
to improve public outcomes. Therefore, agencies must
consider how performance information can best be provided to support their needs. In education, for example,
key audiences for performance information include state
education departments, local school superintendents,
school principals, teachers, parents, non-profit organizations, and for-profit companies. All need performance information but need it delivered, displayed, and analyzed
in different ways, often for different purposes. Agencies
are being asked to think strategically about their delivery
partners’ information needs and to return data to data
suppliers with value added through analyses in order to
achieve better results.
Leveraging Networks Boosts Returns.
Formal and informal networks, both within and outside government, are invaluable resources for leveraging
the impact of government action. The Administration has

Analytical Perspectives

been building and strengthening networks, such as the
Partnership for Patients, to facilitate sharing of actionable data and speed adoption of evidence-based practices. Formal networks within government, such as the
Performance Improvement Council (PIC) and the Chief
Human Capital Officers’ Council (CHCOC), function as
valuable learning networks to identify and exchange information about best practices. Smaller working groups,
such as the PIC working group on quarterly data-driven
progress reviews, tackle shared challenges. The PIC and
CHCOC are working together to use Employee Viewpoint
Survey data to improve employee engagement and organizational performance. Several evidence-building learning networks have also been created and are discussed in
the next chapter.
Emphasizing Outcomes Improves Results.
Alignment to outcome-focused goals helps ensure organizations focus on what matters most to the public.
Maintaining a line of sight toward those outcomes supports an agency’s ability to identify better practices,
rather than assuming its current approach is best. Goals
focused on areas such as reducing hospital-acquired infections or boosting energy efficiency also enlist expertise,
ideas, and assistance from external allies. Building on
the success of Priority Goals, in the coming year, agencies
will identify outcome-focused strategic objectives in their
strategic plans and begin to use them as a mechanism for
improving results across their agency. Each year, agencies
will review progress on the strategic objectives, and, using
the evidence, identify opportunities for improvement.
Conclusion
Smarter Federal performance management practices
are translating to better value for the American people. At
the same time, the Federal government is doing business
smarter, improving quality while cutting costs. By adopting proven management practices, such as ambitious
goals set by leaders combined with frequent data-driven
reviews, Federal agencies are continually improving their
ability to serve the American people.

8. Program Evaluation and Data Analysis

The Administration is committed to using taxpayer
dollars effectively and efficiently. Central to that commitment is a culture where agencies constantly (1) ask and
answer questions that help them find, implement, spread,
and sustain effective programs and practices, (2) identify
and fix or eliminate ineffective programs and practices,
(3) test promising programs and practices to see if they
are effective and can be replicated, and (4) find lower cost
ways to achieve positive impacts. The Federal fiscal situation necessitates improvements in efficiency and at times
doing more with less, not only to reduce budget deficits,
but also to build confidence that Americans are receiving maximum value for their hard-earned tax dollars.
More fundamentally, government programs are typically
designed to address particular policy challenges. Without
measurement and testing, those challenges are more likely to persist and opportunities to try other approaches are
squandered.
OMB’s May 2012 “Use of Evidence and Evaluation in
the 2014 Budget” memo encouraged a broad-based set of
activities to better integrate evidence and rigorous evaluation in budget, management, and policy decisions, such
as adopting more evidence-based structures for grant programs, building evaluation capacity, making better use of
data within government agencies, and developing tools to
better communicate what works. The memo stated that:
“Where evidence is strong, we should act on it. Where evidence is suggestive, we should consider it. Where evidence
is weak, we should build the knowledge to support better
decisions in the future.”
The best government programs use a broad range of
analytical and management tools, i.e. an “evidence infrastructure,” to learn what works (and what doesn’t) and
improve results. In doing so, they create a culture of continuous feedback and improvement.
•	 It is a culture that keeps asking, “How can we do
things better?” and approaches public policy and
management challenges with humility about what
we know or don’t know about what works.
•	 It is a culture that values rapid, operationally-focused experiments that can quickly boost program
efficiency, effectiveness and customer service, while
at the same time equally valuing longer-term evaluation focused on more fundamental questions about
program strategy.
•	 It is a culture that sees program evaluation and performance measurement as valuable, complementary
tools, since each has different strengths.
•	 It is a culture that believes in using data to drive
decision-making and is not satisfied with anecdotal
evidence, since intuition about what works is often
wrong.

•	 It is a culture where people are open to changing
their minds and practices based upon evidence.
•	 It is a culture that is committed to publically disseminating results from evaluations in an open and
transparent manner, never suppressing evidence because it is politically inconvenient.
•	 It is a culture that sees improved program performance not as a destination that can be reached with
the right tool or strategy, but as a process of ongoing
program refinement, since new challenges will always arise and new knowledge and innovations can
always bring better outcomes and efficiencies.
Among the most important analytical tools is program
evaluation, which can produce rigorous evidence about
program effectiveness. For example, evaluations using
experimental or quasi-experimental methods can identify
the effects of programs in situations where doing so is difficult using other tools. Qualitative evidence can complement this work by providing insight into how programs
and practices can be implemented successfully. And less
rigorous tools can shed light on important issues. For example, descriptive regression analyses of administrative
data can reveal important patterns that inform decisions,
such as how to better match recipients with appropriate services. Agencies also often use statistical time series data, such as those presented in Chapter 6, “Social
Indicators,” of this volume, to take a broad look at societal
and economic trends over time. They also use this information to prioritize among policy interests and budgetary
resources, to inform the design of policies, and to provide
the benchmarks that are used to assess the effects of policy changes.
Role of Performance Measurement
Performance measurement is another critical analytical and management tool. By tracking inputs, outputs,
outcomes and measures of efficiency, programs can generate data that managers can then use to improve program
performance. Simply collecting performance data, after
all, is unlikely to change anything in itself. Performance
data are useful when the data is high quality and actively used to ask and answer questions about what’s being
achieved, identify the most pressing program challenges,
set goals, monitor results, and celebrate progress. This is
the process of moving from performance measurement to
performance management.
Too often, though, performance measurement and program evaluation are seen as completely separate tools,
with agency experts housed in separate units that work
independently of each other. Bridging that divide will be
important in order to take advantage of the synergy between the two approaches. For example, evaluation’s main

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strength lies in its ability to generate rigorous insights
about program effectiveness, so that programs can be
adapted and improved. But evaluation, especially when
focused on longer-term outcomes, by definition takes time
to produce insights. Performance measurement, on the
other hand, harnesses readily available program data
and uses it to set goals, track performance and improve
results.
Role of Program Evaluation
Performance measures are an essential resource for
agencies to understand ongoing, real-time program performance so they can use that information to build a culture of continuous improvement, but they often do not tell
us a lot about some key questions. Program evaluations
(of all types) and other data analytics provide context for
the performance measures and help us better understand
what can be learned from them. In addition, rigorous impact evaluations, in particular those with random assignment to program and control groups, can provide better
evidence of whether a program works and whether an
alternative practice might work better. For example, if a
job training program has a high job placement rate, is it
because it is effective or because it attracts those easiest
to place in jobs? An evaluation could compare the employment of participants to comparable individuals who
did not participate in the program in order to isolate the
effects of the training from other factors.
Evaluations can answer a wide-range of germane questions such as whether workers are safer in facilities that
are inspected more frequently, whether one approach to
turning around low-performing schools is more effective
than another, whether outcomes for families are substantially improved in neighborhoods that receive intensive
services, whether no-fee debit cards increase savings
among the unbanked, and whether re-employment services are cost-effective.
This Administration is strongly encouraging appropriately rigorous evaluations to determine the impact of programs and practices on outcomes. In many policy debates,
stakeholders come to the table with deep disagreements
about the effectiveness or ineffectiveness of particular
interventions. Evaluations that are sufficiently rigorous,
relatively straightforward, and free from political interference are especially valuable in such circumstances.
Historically, evaluations have generally not been built
into program designs. And once a program is up and running, building a constituency for evaluation is hard. As a
result, the active use of evidence and evaluation to manage and improve programs is too rare. The Administration
is committed to addressing these challenges, but will need
help from Congress and other stakeholders.
Operationalizing an Evidence Infrastructure
Developing and supporting the use of evidence and
evaluation in decision-making requires a coordinated
effort between those charged with managing the operations of a program and those responsible for using data
and evaluation to understand a program’s effectiveness.
It requires consistent messages from leaders at different

Analytical Perspectives

levels of an agency—e.g., policy officials, program and performance managers, strategic planning and budget staff,
evaluators, and statistical staff—to ensure that evidence
is valued, collected or built, analyzed, understood, and appropriately acted upon. No one individual in an agency
has the knowledge and skills necessary to develop research designs that address actionable questions, understand different types of evidence, interpret evidence, and
develop and implement effective, evidence-based practices. Rather, it takes an agency leadership team to oversee
these efforts and to build and sustain a culture of learning. It also takes a team of “implementers” at the program
level to encourage the use of evidence and data so that it
reaches program management.
Who is on these teams and how their work is divided
depends upon the specific needs, personnel, and structure of a given agency. Success of these teams depends
on including leadership at the agency and bureau level
capable of supporting and requiring programs’ use of
data and evaluation in program operations. This leadership team, working together with OMB and Congress, can
make sure that the right questions are being asked about
the program’s effectiveness and its operations. Program
managers are responsible for creating a culture where
all operational decisions and internal and external communications of progress are based on evidence and data.
In order to do so, the program managers need a team of
both data analysts and evaluators. These individuals can
provide the data and analysis and package it in a way
that helps inform the program’s operational and policy
decisions, including understanding the different types of
evidence available and its implications for decisions, as
well as identifying the need for new descriptive data and
evaluation studies.
The Administration and Congress have made progress
in basing Federal decision-making on data and evidence,
but more progress is needed. Chapter 7, “Delivering HighPerformance Government,” in this volume discusses how
Administration efforts are helping focus agencies on setting high-priority goals and measuring their progress on
those goals.
Tiered-Evidence Grant Programs
and Innovation Funds
Because many Federal dollars flow to States, localities, and other entities through competitive and formula
grants, grant reforms are an important component of
strengthening the use of evidence in government. The
goals include encouraging a greater share of grant funding to be spent on approaches with strong evidence of effectiveness and building more evaluation into grant-making so that we keep learning more about what works.
Among the most exciting advancements in this area
are so-called “tiered-evidence” or “innovation fund” grant
designs. The Administration has adopted multi-tiered
grant programs in the areas of education interventions,
teenage pregnancy prevention, social innovations, voluntary home visitations for parents, workforce interventions, international assistance efforts, and science, technology, engineering, and mathematics programs. These

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8.  Program Evaluation and Data Analysis

initiatives are designed to focus money on practices with
strong evidence but still allow for new innovation. For example, in a three-tiered grant model, grantees that use
practices with strong evidence qualify for the top, “scale
up” tier and receive the most funding. Grantees that use
approaches with more limited evidence qualify for the
middle, “validation” tier. They can receive more limited
funding along with support for evaluation. And grantees
using innovative but untested approaches may qualify for
the third tier, “proof of concept” and receive the least funding, but also support for evaluation.
A good example of this approach is the Department
of Education’s Investing in Innovation Fund (i3). The i3
fund invests in high-impact, potentially transformative
education interventions, ranging from new ideas with
significant potential to those with strong evidence of effectiveness that are ready to be scaled up. Applicants to
i3 are eligible for funding to develop, validate, or scale up
their program. In fact, the Department recently issued
proposed regulations that would allow its other competitive grant programs to adopt this three-tiered model.
With a multi-tiered grant structure, organizations understand that in order to be considered for funding they
must provide credible evaluation results that show promise and/or be ready to subject their models to analysis.
The goal is that, over time, more programs move up tiers
as evidence for new innovations becomes stronger.
Pay for Success
The Administration is also investing in Pay for Success.
In the Pay for Success model, philanthropic and other private investors provide up-front funding for preventive
services and the government does not pay unless and until there are results. The Pay for Success model is particularly well-suited to cost-effective interventions that produce government savings, since those savings can be used
to pay for results. For example, over the past year, the
Department of Justice launched Pay for Success projects
in which more effective prisoner re-entry interventions
can reduce not just recidivism, but also the cost of the
interventions, and a portion of those savings can be used
to pay back the investors. In addition, the Department
of Labor has launched an effort to target effective workforce systems that lead to improvements in a range of
employment and educational outcomes, like job placement and job retention, paying out only after outcomes
are achieved. The Administration is promoting the Pay
for Success model in several other Federal programs, including housing, energy, and education, and is proposing
a new $300 million fund in the Treasury to create incentives for States, localities and not-for-profits to invest in
programs that will produce Federal savings.
Examples of Evaluations and Innovative Pilots
The Administration supports evaluations with rigorous research designs that address questions critical to
program design, and supports strengthened agency capacity to support such evaluations, especially in tight
budget times. The Budget supports new evaluations
across the Federal Government to analyze program im-

pacts, including how to structure student aid in order to
increase college access for low-income students; how to
strengthen the impact of Federal technical assistance
to small businesses; and how to use increased local flexibility in housing assistance to increase employment and
self-sufficiency.
The Departments of Labor and Education are supporting joint pilots to test interventions and systemic reforms
with the potential to improve education and employment
outcomes at lower cost to taxpayers. The Departments of
Education, Labor, and Health and Human Services and
the Social Security Administration have launched a joint
initiative, PROMISE, to test interventions that improve
outcomes for children with disabilities and their families,
which may yield substantial savings through reduced
long-term reliance on the Supplemental Security Income
program and other public services.
In addition, OMB’s Partnership Fund for Program
Integrity Innovation has tested promising solutions developed collaboratively by Federal agencies, States, and
other stakeholders to improve payment accuracy, improve
administrative efficiency, and enhance service delivery in
benefit programs that serve overlapping populations. For
example, a pilot administered by the Centers for Medicare
& Medicaid Services is testing how shared services solutions can reduce administrative costs and potentially
fraud to States and the Federal Government by enabling
multiple States to reuse the same standards and systems
for activities such as enrolling providers. Evaluation of
these pilots will help determine which strategies lead to
better results at lower cost, allowing Federal and State
governments to identify the most promising strategies
that warrant expansion.
Rigorous evaluation will be a central component of the
Administration’s Performance Partnership pilots, which
will enable leading edge States and localities to demonstrate better ways to use resources, by giving them flexibility to pool discretionary funds across multiple Federal
programs serving similar populations and communities
in exchange for greater accountability for results. For example, the 2014 Budget would authorize up to 13 State or
local performance partnership pilots to improve outcomes
for disconnected youth. Pilot projects would support innovative, efficient, outcome-focused strategies using blended funding from separate youth-serving programs in the
Departments of Education, Labor, Health and Human
Services, Housing and Urban Development, Justice, and
other agencies. Evaluations would help us learn whether
these strategies yield better outcomes and would inform
future program reforms.
Evaluation Capacity, Learning
Networks, and Administrative Data
Research and evaluation are part of any comprehensive effort to use data and evidence to serve the American
people in more cost-effective ways. Funding for research
and evaluation should not be viewed as a luxury but
rather as an essential element of running effective government programs. However, new funding for research
and evaluation is only part of the Administration’s efforts

94
to re-invigorate evaluation activities across the Federal
Government. The Administration is also pulling up its
sleeves and working to better utilize existing research
and evaluation resources. It is building agency capacity
for a robust evaluation and data analytics infrastructure
by supporting agencies in standing up central evaluation
offices, empowering existing evaluation offices, institutionalizing policies that lead to strong evaluations, and
hiring evaluation and data analytics experts into key administrative positions.
In addition, an inter-agency working group of evaluators across the Federal Government is sharing best practices, such as helping spread effective procurement practices, developing common evidence standards, and better
integrating evaluation and performance measurement
efforts. Other cross-agency groups are forming learning
networks around related program areas that will share
relevant research about what works and develop tools
and evaluation strategies that can benefit multiple agencies. During development of the President’s 2014 Budget,
multi-agency learning networks involving both program
and evaluation experts have formed around enforcement
programs, economic development activities, and financial
literacy. Each of these groups proposes to invest modest
amounts to create a coordinated, efficient strategy to improve related evaluation activities across agencies. For example, the Department of Transportation plans to lead an
interagency effort to determine how enforcement funding
provided to States best drives positive safety outcomes.
Another part of the evaluation and data analytics infrastructure is helping agencies make better use of “administrative data,” i.e., data collected for the administration
of a program. Administrative data, especially when linked
across programs or to survey data and with strong privacy protections, can sometimes make both performance
measurement and rigorous program evaluations much
more informative and much less costly. For example, data
from an early childhood program linked to the data from
juvenile justice systems or K-16 educational systems shed
light on the long-term effects of interventions in ways that
would be cost-prohibitive in a long-term survey followup. Linking records across programs also enables policy
makers to better understand how families access combinations of government assistance programs, such as food
assistance and unemployment insurance, during times
of economic challenges. The Departments of Health and
Human Services and Housing and Urban Development,
for instance, are sharing data to analyze how housing interventions, including efforts to reduce homelessness, affect the health care use and costs of residents. Also, the
Departments of Veterans Affairs and Housing and Urban
Development are streamlining reporting by homelessness programs to create a more comprehensive picture of
homelessness trends and interventions.
Data linkage can be a powerful tool for improving agency management—looking at available information to find
patterns, relationships, anomalies, and other features to
inform priority-setting, program design, and hypothesis
formulation. Administrative data also can be used in conducting low-cost rigorous evaluations, for example, as dis-

Analytical Perspectives

cussed in the Coalition for Evidence-Based Policy’s 2012
brief, “Rigorous Program Evaluations on a Budget: How
Low-Cost Randomized Controlled Trials Are Possible in
Many Areas of Social Policy.” A number of States and
localities, such as those participating in the Actionable
Intelligence for Social Policy Initiative are creating capacity to link data across multiple systems so that researchers and government decision-makers can work together
to analyze problems. Their pioneering work, which provides strong safeguards to protect privacy, can help other
States, localities, and Federal agencies harness data for
learning and better decision-making.
Rapid Experimentation
This culture of integrating data and evidence into
decision-making is growing not only in the Federal
Government, but also among private sector firms, foundations, and other levels of government. Innovative firms in
the private sector, including a few industry leaders, have
adopted a culture of learning where each year they run
hundreds of rapid, low-cost experiments designed to improve their operations and get better results using data
from their extensive administrative data systems. One of
the lessons of their work is that improving on the status
quo is difficult and that most experiments that test improvements fail, so it is critical to run many tests to learn
what works. There is perhaps great potential in the public
sector to make use of such analytics, although realizing
this potential will also take a concerted effort to hire and
retain skilled data analysts and research method experts,
increased attention to the multiple legal and policy contexts that make data access a continued challenge, infrastructure investments that support this sort of analysis
by more people across the organization, and continued
emphasis on defining and collecting useful outcome data.
Common Evidence Standards and
“What Works” Repositories
To ensure that policymakers, program managers, and
practitioners have reliable information about what works
that is informed by rigorous research, OMB and Federal
agencies are working together to develop common standards for research and evaluation and for using results
from different types of high quality studies to identify effective programs, improve programs, and encourage innovation in the development of new approaches. For example, the Department of Education and National Science
Foundation have developed a set of standards that clarifies how different types of studies contribute to the evidence base, including basic research and impact evaluations, and sets expectations for the evidence that different
types studies should seek to generate. Other agencies
such as the Department of Labor and components of the
Department of Health and Human Services are having
discussions about augmenting these standards and creating a common framework for judging evidence on the effectiveness of programs and practices. Common research
standards and evidence frameworks across agencies can
facilitate evaluation contracting, information collection
clearance, and the strengthening or creation of research

8.  Program Evaluation and Data Analysis

clearinghouses and repositories about “what works.”
“What works” repositories synthesize evaluation findings
in ways that make research useful to decision-makers,
researchers, and practitioners in the field. Furthermore,
as Federal innovation funds and other programs provide
financial incentives for using evidence, these repositories
will continue to evolve and provide useful tools for understanding what interventions are ready for replication,
expansion, and greater investment. Information in the
repositories also indicates the implementation contexts
of programs and strategies evaluated, and areas where
more innovation or more evaluation is needed.
Increasing the Use of Evidence
The Administration is committed to producing more
and better empirical evidence. There is, however, perhaps
an even greater need to increase demand for data and evidence in Federal decision-making processes. One piece of
this is the process of setting high-priority goals and measuring progress towards meeting them, as described in
Chapter 7, “Delivering High-Performance Government,”
in this volume. This goal-setting and performance measurement is beginning to increase the demand for data,
its analysis, and complementary evaluations, as leaders
running frequent data-driven reviews to achieve progress
on ambitious goals search for increasingly effective and
efficient practices to speed progress toward the goals they
have set. But more can be done.
Often the focus is on producing better evidence, but not
on making that evidence useful for busy, non-technical decision-makers. Some policy areas lack rich evidence, but
in areas with rich evidence decision-makers are not able
to sort through the myriad of evaluation reports and analyses, especially when they point in different directions.
There is a tremendous need for careful, systematic, and
credible analyses of which interventions have a high return and which ones do not. At the Federal level, work described above on common evidence standards and improving “what works” repositories, such as the Department of
Education’s What Works Clearinghouse, the Department of
Justice’s CrimeSolutions.gov, Substance Abuse and Mental

95
Health Services Administration’s National Registry of
Evidenced-based Programs and Practices (NREPP), and
the Department of Labor’s new Clearinghouse of Labor
Evaluation and Research (CLEAR) are helpful steps towards making evidence more useful for decision-makers.
State, local, and tribal governments face a similar need
to prioritize programs that achieve the best results. One
particularly interesting model (that has played a role in
shaping state legislative decisions) is the Washington
State Institute for Public Policy. The Institute provides a
good example of how a centralized evaluation and research
entity can conduct systematic reviews of existing evaluation research to identify policies, practices, and strategies
that are most likely to give taxpayers a return on their
investment. It was created by the Washington State legislature to carry out practical, non-partisan research—at
legislative direction—of importance to Washington State.
The Institute has its own policy analysts and economists,
specialists from universities, and consultants with whom
it engages to conduct policy analysis. It conducts a systematic review of evidence and has a methodology for
comparing the relative return-on-investment of alternative interventions. The Institute presents the results of its
analysis in a straightforward, user-friendly manner that
is accessible to politicians, policy-makers, and the public. The Institute provides a potential model for Federal,
State, local, and tribal government, as well as for not-forprofit and for-profit organizations and is currently being
adapted to 13 other States. An example of an assessment
of the evidence for options to improve statewide outcomes
in a variety of areas, including child maltreatment, crime,
and education can be found at the Institute’s website.
The President has made it clear that policy decisions
should be driven by evidence—evidence about what works
and what does not, and evidence that identifies the greatest needs and opportunities to solve great challenges. By
instilling a culture of learning into Federal programs, the
Administration will build knowledge so that spending decisions are based not only on good intentions, but also on
strong evidence that yield the highest social returns on
carefully targeted investments.

9.  Benefit-Cost Analysis
I. Introduction
Federal Government policies and programs make use
of our Nation’s limited resources to achieve important social goals, including economic growth, job creation, education, national security, environmental protection, and
public health. Many Federal programs require governmental expenditures, such as those funding early childhood education or job training. Moreover, many policies
entail social expenditures that are not reflected in budget
numbers. For example, environmental, energy efficiency,
and workplace safety regulations impose compliance costs
on the private sector. In all cases, the American people
expect the Federal Government to design programs and
policies to manage and allocate scarce fiscal resources
prudently, and to ensure that programs achieve the maximum benefit to society and do not impose unjustified or
excessive costs.
A crucial tool used by the Federal Government to achieve
these objectives is benefit-cost analysis, which provides a
systematic accounting of the social benefits and costs of
Government policies. Executive Order 13563, issued in
January 2011, makes a firm commitment to cost-benefit
analysis and to ensuring that the benefits of regulations
justify the costs. It states, among other things, that each
agency must “use the best available techniques to quantify anticipated present and future benefits and costs as
accurately as possible.” It also states that agencies must
“propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing
that some benefits and costs are difficult to quantify.)”
The assessment of benefits and costs of a government
policy is meant to offer a concrete description of the an-

ticipated consequences of the policy. Such an accounting
helps policymakers to design programs to be both efficient
and effective and to avoid unnecessary or unjustified costs
and burdens. That accounting also allows the American
people to see the expected consequences of programs and
to hold policymakers accountable for their actions. While
quantification and monetization of benefits and costs
produce significant analytic challenges, serious efforts
have been made to meet those challenges. Those efforts
are continuing. Executive Order 13563 also states, “each
agency may consider (and discuss qualitatively) values
that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts.”
Importantly, there is a close relationship between open
government and benefit-cost analysis. Because analysis is
often improved by public comments, public participation
and consideration of benefits and costs are tightly connected in practice.
Especially in a difficult economic period, it is important to analyze both benefits and costs and to take steps
to eliminate unnecessary burdens, which may have adverse effects on job creation and growth. Executive Order
13563 calls for such steps with its efforts to discipline the
flow of new regulations and its requirement of retrospective analysis of existing significant rules. Retrospective
analysis has recently become a central part of the regulatory process as agencies identify outdated or redundant regulations and is helping to eliminate billions of
dollars in regulatory burdens, in areas including environmental protection, transportation, labor, health care,
and agriculture.

II. Benefit-Cost Analysis of Federal Regulations
Overview of Benefit-Cost Analysis
of Federal Regulation
For over three decades, benefit-cost analysis has played
a critical role in the evaluation and design of significant
Federal regulatory actions. While there are precursors in
earlier administrations, the Reagan Administration was the
first to establish a broad commitment to benefit-cost analysis in regulatory decision making through its Executive
Order 12291. The Clinton Administration continued that
commitment when it updated the principles and processes
governing regulatory review in Executive Order 12866,
which continues in effect today. Executive Order 12866 requires executive agencies to catalogue and assess the benefits and costs of significant regulatory actions. It also requires agencies (1) to undertake regulatory action only on
the basis of a “reasoned determination” that the benefits justify the costs and (2) to choose the regulatory approach that

maximizes net social benefits, that is, benefits minus costs
(unless the law governing the agency’s action requires another approach). Executive Order 13563, issued in January
2011, reaffirms the requirements of Executive Order 12866
and imposes a set of important additional requirements designed to promote sound analysis, to increase flexibility, to
promote public participation, to harmonize conflicting and
redundant requirements, and to ensure scientific integrity.
Operating under the broad framework established
by Executive Orders 13563 and 12866, the Office of
Management and Budget requires careful analysis of the
benefits and costs of significant rules; identification of the
approach that maximizes net benefits; detailed exploration of reasonable alternatives, alongside assessments of
their costs and benefits; cost-effectiveness; and attention
to unquantifiable benefits and costs as well as to distributive impacts. Central goals are to ensure that regulations

97

98

Analytical Perspectives

will be effective in achieving their purposes and that they
do not impose excessive costs. As noted, it is especially
important to maximize net benefits, and to avoid unjustified burdens, in a period of economic difficulty. Notably,
Executive Order 13563 specifically refers to “job creation,”
and where feasible, agencies have recently devoted a great
deal of attention to the anticipated job impacts (whether
positive or negative) of regulations.
Reviewing agencies’ benefit-cost analyses and working with agencies to improve them, OMB provides a centralized repository of analytical expertise in its Office
of Information and Regulatory Affairs (OIRA). OMB’s
guidance to agencies on how to do benefit-cost analysis
for proposed regulations is contained in its Circular A–4.
OMB Circular A–4 directs agencies to specify the goal of a
regulatory intervention, to consider a range of regulatory
approaches for achieving that goal and to estimate the
benefits and costs of each alternative considered. To the
extent feasible, agencies are required to monetize benefits
and costs, so that they are expressed in comparable units
of value. This process enables the agency to identify (and
generally to choose) the approach that maximizes the total net benefits to society generated by the rule.
For example, consider a regulation that sets a standard
to reduce air pollution emissions. The agency should attempt to quantify both the benefits and costs of reduced
air pollution emissions. It should consider a range of emission reductions to determine the optimal one that maximizes net benefits. Careful benefit-cost analysis enables
the agency to determine the optimal standard. It helps to

show that some approaches would be insufficient and that
others would be excessive.
Quantification and monetization of the relevant variables can present serious analytic challenges. OIRA and
other federal agencies have developed a range of strategies
for meeting those challenges; many of them are sketched in
OMB Circular A–4. Efforts continue to be made to improve
current analyses and to disclose and test their underlying
assumptions. In some cases, identification of benefits and
costs will leave significant uncertainties. But much of the
time, an understanding of benefits and costs will rule out
some possible courses of action, and will show where, and
why, reasonable people might differ. Such an understanding will also help to identify the most effective courses of
action and to eliminate unjustified costs and burdens—in
the process potentially helping to promote competitiveness,
innovation, job creation, and economic growth.
The Benefits and Costs of Federal
Regulation in FY 2011
Each year, OMB reports to Congress agencies’ estimates
of the benefits and costs of major regulations. Table 9–1
presents the benefit and cost estimates for the 234 major
non-budgetary rules reviewed by OMB in FY 2011.1 Of
those, agencies monetized both the benefits and costs for 12. 
1  FY 2011 is the most recent period for which such a summary is
available. These estimates were reported in OMB, 2012 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded
Mandates on State, Local, and Tribal Entities. A detailed description
of the assumptions and calculations underlying these estimates is provided in that Report.

Table 9–1.  Estimates of the Total Annual Benefits and Costs of Major Rules Reviewed by OMB in 2011
(In billions of 2001 dollars)
Rule
Institutional Eligibility under the Higher Education Act of 1965; Student Assistance General Provisions ������������������������������������
Program Integrity: Gainful Employment Measures ����������������������������������������������������������������������������������������������������������������������
Energy Efficiency Standards for Clothes Dryers and Room Air Conditioners ������������������������������������������������������������������������������
Energy Efficiency Standards for Residential Furnaces, Central air conditioners and Heat Pumps ����������������������������������������������
Energy Efficiency Standards for Residential Refrigerators, Refrigerator-Freezers, and Freezers ������������������������������������������������
Regulations to Implement the Equal Employment Provisions of the Americans with Disabilities Act Amendments Act ��������������
Administrative Simplification: Adoption of Authoring Organizations for Operating Rules and Adoption of Operating Rules for
Eligibility and Claims Status (CMS–0032-IFC) ������������������������������������������������������������������������������������������������������������������������
Medical Loss Ratios ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
SAFE Mortgage Licensing Act: Minimum Licensing Standards and Oversight Responsibilities (FR–5271-F–03) ����������������������
Increased Safety Measures for Oil and Gas Operations on the Outer Continental Shelf (OCS) ��������������������������������������������������
Migratory Bird Hunting; 2011–12 Migratory Game Bird Hunting Regulations: Early Season �������������������������������������������������������
Migratory Bird Hunting; 2011–12 Migratory Game Bird Hunting Regulations: Late Season ��������������������������������������������������������
Improved Fee Disclosure for Pension Plan Participants ���������������������������������������������������������������������������������������������������������������
Statutory Exemption for Provision of Investment Advice ��������������������������������������������������������������������������������������������������������������
Wage Methodology for the Temporary Non-Agricultural Employment H–2B Program �����������������������������������������������������������������
Ejection Mitigation ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Real-Time System management Information Program ����������������������������������������������������������������������������������������������������������������
Commercial Medium- and Heavy-Duty On-Highway Vehicles and Work Truck Fuel Effiency Standards �������������������������������������
Management of Federal Agency Disbursements ��������������������������������������������������������������������������������������������������������������������������
Regulations Governing Practice Before the Internal Revenue Service ����������������������������������������������������������������������������������������
Cross State Air Pollution Rule (CAIR Replacement Rule) ������������������������������������������������������������������������������������������������������������
Oil Pollution Prevention: Spill Prevention, Control, and Countermeasure Rule Requirements - Amendments for Milk
Containers �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Water Quality Standards (Numeric Nutrient Criteria) for Florida’s Lakes and Flowing Waters �����������������������������������������������������

Agency

Benefits

Costs

ED
ED
DOE
DOE
DOE
EEOC

Not Estimated
Not Estimated
0.2–0.3
0.7–1.8
1.7–3.0
Not Estimated

0.1
0.1
0.1–0.2
0.5–0.7
0.8–1.3
0.1–0.2

HHS
HHS
HUD
DOI
DOI
DOI
DOL
DOL
DOL
DOT
DOT
DOT and EPA
TREAS
TREAS
EPA

0.9–1.1
Not Estimated
Not Estimated
Not Estimated
0.2–0.3
0.2–0.3
0.8–3.3
5.8–15.1
Not Estimated
1.5–2.4
0.2
2.2–2.6
0.1
Not Estimated
20.5–59.7

0.3–0.6
0.1
0.1–0.6
0.1
Not Estimated
Not Estimated
0.2–0.4
1.6–4.2
Not Estimated
0.4–1.4
0.1
0.3–0.5
Not Estimated
Not Estimated
0.7

EPA
EPA

0
<0.1

–0.1
0.1–0.2

99

9.  Benefit-Cost Analysis

Most of the benefits and costs reported in Table 9–1 are
expressed as ranges, and sometimes as wide ranges, because of uncertainty about the likely consequences of rules.
Quantification and monetization raise difficult conceptual
and empirical questions. Prospective benefit-cost analysis
requires predictions about the future—both about what
will happen if the regulatory action is taken and what will
happen if it is not. What the future holds is typically not
known for certain. A standard goal of the agency’s analysis
is to produce both a central “best estimate,” which reflects
the expected value of the benefits and costs of the rule, as
well as a description of the ranges of plausible values for
benefits, costs, and net benefits. These estimates inform
the decisionmakers and the public of the degree of uncertainty associated with the regulatory decision. The process
of public scrutiny can sometimes reduce that uncertainty.
Despite these uncertainties, benefit-cost analysis often reduces the range of reasonable approaches—and simultaneously helps to inform the decision about which approach is
most reasonable.
Cost-per-life-saved of Health
and Safety Regulation
For regulations intended to reduce mortality risks, another analytic tool that can be used to assess regulations,
and to help avoid unjustified burdens cost-effectiveness
analysis is. Some agencies develop estimates of the “net
cost per life saved” for regulations intended to improve
public health and safety. To calculate this figure, the costs
of the rule minus any monetized benefits other than mor-

tality reduction are placed in the numerator, and the expected reduction in mortality in terms of total number of
lives saved is placed in the denominator. This measure
avoids any assignment of monetary values to reductions
in mortality risk. It still reflects, however, a concern for
economic efficiency, insofar as choosing a regulatory option that reduces a given amount of mortality risk at a
lower net cost to society would conserve scarce resources compared to choosing another regulatory option that
would reduce the same amount of risk at greater net costs.
Table 9–2 presents the net cost per life saved for recent
health and safety rules for which calculation is possible.
The net cost per life saved is calculated using 3 percent
discount rate and using agencies’ best estimates for costs
and expected mortality reduction where those were provided by the agency.
This table is designed to be illustrative rather than definitive, and continuing work must be done to ensure that
estimates of this kind are complete and not misleading.
For example, some mortality-reducing rules have a range
of other benefits, including reductions in morbidity, and it
is important to include these benefits in cost-effectiveness
analysis. Other rules have benefits that are exceedingly
difficult to quantify but nonetheless essential to consider;
consider rules that improve water quality or have aesthetic benefits. Nonetheless, it is clear that some rules
are far more cost-effective than others, and it is valuable
to take steps to catalogue variations and to increase the
likelihood that scarce resources will be used as effectively
as possible.

Table 9–2.  Estimates of the Net Costs Per Life Saved of Selected Health
and Safety Rules Reviewed by OMB in Fiscal Years 2010-2011
(In millions of 2001 dollars)
Rule

Agency

Cranes and Derricks in Construction ���������������������������������������������������������������������

DOL/OSHA

Ejection Mitigation �������������������������������������������������������������������������������������������������

DOT/NHTSA

Pipeline Safety: Distribution Integrity Management �����������������������������������������������

DOT/PHMSA

Positive Train Control ���������������������������������������������������������������������������������������������

DOT/FRA

Cross State Air Pollution Rule (CAIR Replacement) ���������������������������������������������
Lead; Amendments to the Opt-out and Recordkeeping Provisions in the
Renovation, Repair, and Painting Program �������������������������������������������������������
National Emission Standards for Hazardous Air Pollutants from the Portland
Cement Manufacturing Industry and Standards of Performance for Portland
Cement Plants ��������������������������������������������������������������������������������������������������
National Emission Standards for Hazardous Air Pollutants for Reciprocating
Internal Combustion Engines (Diesel) ��������������������������������������������������������������

EPA/AR
EPA/OPPTS

National Emission Standards for Hazardous Air Pollutants for Reciprocating
Internal Combustion Engines (Existing Stationary Spark Ignition Gas Fired) ��

EPA/AR

Review of the National Ambient Air Quality Standards for Sulfur Dioxide �������������

EPA/AR

EPA/AR
EPA/AR

Net Cost per
Life Saved

Notes

$4.9 The agency estimates that the rule will prevent 22 fatalities and 175
nonfatal injuries annually. Total costs associated with the rule are
$150 million annually (using 3% discount rate). The monetized value
of the injuries prevented is $11 million and the property damage
prevented is valued at $7 million.
$0.2 The agency estimates that the rule will prevent 374 equivalent lives
(using 3% discount rate).
Negative Benefits from reduced injuries, reduced property damages, and
reduced lost gas exceeds costs.
$235.1 The agency estimates the present value of fatality reduction benefits is
$267 million over 20 years using a VSL of $6 million. The agency
also estimates the total non-fatality related benefits over 20 years
of $407 million. The total costs associated with the rule are $880
million annually.
Negative Morbidity and visibility benefits exceed costs.
Negative Morbidity benefits exceed costs.
Negative Morbidity benefits exceed costs.
$0.9 - $2.2 The agency estimates that the rule will prevent 110 to 270 fatalities
annually. Total costs associated with the rule are $355 million
annually at 3% discount rate. The monetized value of the morbidity
benefits is $66 million.
$1.2 - $3.1 The agency estimates that the rule will prevent 56 to 140 fatalities in
2013. Total costs associated with the rule are $244 million annually
at 3% discount rate. The monetized value of the morbidity benefits
is $36 million.
Negative Morbidity benefits exceed costs.

100

Analytical Perspectives

III. Benefit-Cost Analysis of Budgetary Programs
As noted, Executive Orders 13563 and 12866 require
agencies, to the extent permitted by law, to “propose or
adopt a regulation only upon a reasoned determination
that the benefits of the intended regulation justify its
costs.” OIRA works actively with agencies to promote
compliance with this requirement.
Historically, benefit-cost analysis of Federal budgetary
programs has been more limited than that of regulatory
policy. Increasingly, though, the Federal Government explicitly employs benefit-cost analysis to ensure that projects and spending programs have benefits in excess of
costs, maximize net benefits, and allocate federal dollars
most efficiently across potential projects.
In the 1936 Flood Control Act, for example, Congress
stated as a matter of policy that the Federal government
should undertake or participate in flood control projects
if the benefits exceeded the costs, where the lives and social security of people are at stake. By the late 1970s,
the Army Corps of Engineers had begun to use benefitcost analysis to improve the return on investment at a
given project site. The Corps did this by designing projects based on increments of work whose benefits exceeded
their costs. More recently, the Budget has used benefits
and costs, along with other criteria, to develop an overall
program for the Corps that yields the greatest net benefits or cost effectiveness.
Benefit-cost analysis can also be used to evaluate programs retrospectively to determine whether they should
be either expanded or discontinued and how they can be
improved. Chapter 8, “Program Evaluation and Data
Analytics”, in this volume discusses current efforts to improve program evaluation. Evidence that an activity can
yield substantial net benefits has motivated the creation
and expansion of a number of programs. For example,

longitudinal studies have shown that each dollar spent on
quality pre-school programs serving disadvantaged children yields substantially more than a dollar (in present
value) in higher wages, reduced crime, and reduced use of
public services. These findings motivated an expansion of
funding for high-quality pre-school programs. Evidence
has also spurred the decision to expand funding for nursefamily partnerships, finding that each dollar spent in the
program leads to more than a dollar of benefits mostly in
reduced government expenditures on health care, educational and social services, and criminal justice, and that
the highest returns were present in serving the most disadvantaged families. Similarly, GAO has concluded that
the Women, Infants, and Children (WIC) program produces monetary benefits that exceed its costs by reducing the
incidence of low birth weight and iron deficiency, which
are linked to children’s behavior and development.
The Regulatory Right-to-Know Act requires OMB to
report the social costs and benefits of the budget rules.
These rules implement Federal budgetary programs
as required or authorized by Congress. Budgetary programs primarily cause income transfers, usually from
taxpayers to program beneficiaries. In FY 2011, OMB reviewed 30 budgetary rules. Of these, the Department of
Health and Human Services promulgated 15 rules, and
the Department of Agriculture seven rules.2 We recognize that markets embed distortions and that the transfers are not lump-sum, thereby creating social benefits or
costs by altering prices.
2  The estimates of budgetary effects were reported in OMB, 2012 Report to Congress on the Benefits and Costs of Federal Regulations and
Unfunded Mandates on State, Local, and Tribal Entities. A detailed
description of the assumptions and calculations underlying these estimates is provided in that Report.

IV. Improving Benefit-Cost Analysis
A Culture of Retrospective Review
Prospective analysis of benefits and costs is an indispensable means of obtaining an understanding of the
likely consequences of regulation. But that analysis, even
if done carefully and subject to public scrutiny, will rest
on assumptions that may change over time. Regulations
should be reviewed retrospectively to ensure that they
are achieving their intended goals and are not producing
excessive costs or unintended adverse effects. Executive
Order 13563 expressly recognizes this by requiring agencies to undertake “retrospective analysis” of existing significant rules.
Building on Executive Order 13563, Executive Order
13610, “Identifying and Reducing Regulatory Burdens”,
issued in May 12, 2012, institutionalizes the regulatory
lookback and requires agencies to prioritize lookback
“initiatives that will produce significant quantifiable
monetary savings or significant quantifiable reductions
in paperwork burdens.”3 The Executive Order calls on
3 

See Executive Order 13610, May 10, 2012, available at <http://

agencies to “give special consideration to initiatives that
would reduce unjustified regulatory burdens or simplify
or harmonize regulatory requirements imposed on small
businesses.” Additionally, agencies are required to focus
on “cumulative burdens” and to “give priority to reforms
that would make significant progress in reducing those
burdens.”
Retrospective review is most naturally understood as a
way of assessing rules that have been in operation and on
the books for a sufficient period to allow careful study. A
retrospective analysis can show that a rule that was welldesigned at the inception is now excessive, redundant,
or producing unintended harm, perhaps as a result of
changed circumstances, such as new technologies or new
regulations. Retrospective review can also be critical in
evaluating the validity of assumptions or methods used in
prospective analysis.
www.whitehouse.gov/the-press-office/2012/05/10/executive-orderidentifying-and-reducing-regulatory-burdens>

101

9.  Benefit-Cost Analysis

For example, the EPA has eliminated the obligation for
many states to require air pollution vapor recovery systems at local gas stations because duplicative vapor recovery system have been built into modern vehicles. The
anticipated annual savings are about $87 million.
Retrospective analysis has long been recommended by
those interested in empirical assessment of regulations,
including Michael Greenstone, former chief economist at
the Council of Economic Advisers: “The single greatest
problem with the current system is that most regulations
are subject to a cost-benefit analysis only in advance of
their implementation. This is the point when the least is
known and any analysis must rest on many unverifiable
and potentially controversial assumptions.”4 To address
this problem, retrospective analysis can help show what
works and what does not, and in the process can promote
the streamlining or elimination of less effective rules as
well as the strengthening or expansion of those rules that
are more effective.
Clear Summaries and Tables with Key Information
In order to improve analysis of the potential effects
of regulations, and simultaneously to improve accountability, OMB has called for a clear, salient, publicly accessible executive summary of both benefits and costs. The
summary should be written in a “plain language” manner designed to be understandable to the public. For all
economically significant regulations, Executive Orders
13563 and 12866 require agencies to provide a description
of the need for the regulatory action and a clear summary
of the analysis of costs and benefits, both qualitative and
quantitative. The summary often includes an accounting of benefits and costs of alternative approaches, and
where relevant, an analysis of distributional impacts on
subpopulations (such as disabled people or those with low
income). As noted, some benefits and costs can be quantified and monetized, while some can be described in qualitative terms.
4  Greenstone, Michael. “Toward a Culture of Persistent Regulatory
Experimentation and Evaluation.” In New Perspectives on Regulation,
David Moss and John Cisternino (Eds.). Cambridge, MA: The Tobin Project, Inc., 2009. P. 113.

Public Participation and Collaboration
in the Regulatory Process
Executive Order 13563 states that “regulations shall
be based, to the extent feasible and consistent with law,
on the open exchange of information and perspectives….”
To promote that open exchange, Executive Order 13563
directs agencies to provide the public with timely access
to regulatory analyses and supporting documents on regulations.gov to ensure a meaningful opportunity for public comment.
The Internet provides an ideal vehicle for making information public and, under Executive Order 13563, the
Administration has committed to publish as much as possible online in a format that can be retrieved, downloaded,
indexed, and searched by commonly-used web search applications. Importantly, this commitment promotes public
accessibility of the analysis of benefits and costs, together
with the supporting materials, in order to ensure that the
analysis is subject to public scrutiny. That process of scrutiny can help to improve the analysis, thereby refining our
understanding of the anticipated effects of regulation.
Agencies now publish a great deal of information relevant to rulemaking and benefit-cost analysis, including
underlying data, online and in downloadable, as well as
traditional, formats. Executive Order 13563 directs agencies to use regulations.gov to make the online record as
complete as possible and to take all necessary steps to
make relevant material available to the public for comment.5
Executive Order 13563 requires that the public should
generally receive a comment period of at least 60 days for
proposed regulatory actions. Even where statutes necessitate shorter comment periods, agencies can seek public
comment and respond in a timely fashion to suggestions
about potential improvements in rules and underlying
analyses.

5  Available at: http://www.whitehouse.gov/omb/assets/inforeg/edocket_final_5–28–2010.pdf

10.  Improving the Federal Workforce

The United States has overcome great challenges
throughout our history because Americans of every generation have stepped forward to aid their Nation through
service, both in civilian Government and in the Armed
Forces. A high-performing government depends on an
engaged, well-prepared, and well-trained workforce with
the right set of skills for the missions the government
needs to achieve. Today’s Federal public servants come
from all walks of life and from every corner of America
to carry forward that proud American tradition. Eightyfive percent of Federal employees live and work outside
of the Washington, D.C. metropolitan area. Many Federal
employees have made remarkable contributions to our society; notably, more than 50 current or former federal employees have received Nobel Prizes. Whether defending
our homeland, restoring confidence in our financial system and supporting a historic economic recovery effort,
providing health care to our veterans, conducting diplomacy abroad, providing relief to Hurricane Sandy victims,
or searching for cures to the most vexing diseases, we are
fortunate to be able to rely upon a skilled workforce committed to public service.
Today’s Federal workforce confronts tight fiscal resources, rapidly changing problems, and new technologies. This chapter discusses trends in Federal employment, composition, and compensation, and presents the
Administration’s plans for achieving the talented Federal
workforce needed to serve the American people effectively
and efficiently.
Trends in Federal Workforce Size
The size of the Federal civilian workforce relative to the
country’s population has declined dramatically over the
last several decades, notwithstanding occasional upticks
due, for example, to military conflicts and the administration of the Census. In overall terms, today’s workforce
remains the size it was under President Reagan.
Since the 1950s and 1960s, the U.S. population increased
by 77 percent, the private sector workforce increased 137
percent, while the size of the Federal workforce rose just 10
percent, with 92 residents for every Federal worker. Since
the 1980s, both the population and private sector workforce has increased 25 percent, but the Federal workforce
has not grown at all, and in the 1980s and 1990s there
were 119 residents for every Federal worker. Except for
employment peaks associated with the decennial census,
Federal employment, in absolute terms, increased slightly
in the 1980s and then dropped in the 1990s. This overall
downward trend began to reverse itself in 2001, following
the September 11 attack. Following that tragic event, the
Federal workforce expanded to deal with national security
and homeland safety issues and to serve our veterans.

Between 2001 and 2010, security agency employment
grew, while non-security employment declined. For example, civilians working for the Department of Defense grew
by more than 92,000; the Department of Veterans Affairs
(VA) grew by 78,000 with much of that increase attributable to medical care to provide for our returning service
members; Customs and Border Protection also grew more
than 30,000 to keep our citizens safe at home.
By 2012, the ratio of residents to Federal workers
had increased to 148. Relative to the private sector, the
Federal workforce is less than half the size it was back
in the 1950s and 1960s. Table 10-2 shows actual Federal
civilian full-time equivalent (FTE) levels in the Executive
Branch by agency for 2011 and 2012, with estimates for
2013 and 2014. Estimated employment levels for 2014
result in an estimated 0.3 percent increase compared
to prior year estimates. Most of the growth is in VA to
continue strengthening medical care for returning service members. Additional increases are expected at the
Department of Justice for enhancements in cybersecurity
and increased background checks for firearm purchases,
and at the Department of Homeland Security to support
the strengthening of border protection and to support immigration reform.
Other increases are narrowly focused and frequently
supported by congressionally authorized fees, not tax payer dollars. Increased fee receipts support timely commercialization of innovative technologies through faster and
higher-quality patent reviews at the Patent and Trade
Office of the Department of Commerce, stronger food safety measures at the Food and Drug Administration of the
Department of Health and Human Services, and enhancements to create stronger, more stable financial markets
consistent with the Wall Street Reform Act. Commitments
to activate new Federal prisons already constructed with
funding appropriated as early as 2001 and as recently as
2010 result in limited necessary personnel increases at
the Department of Justice in 2013 and 2014. And stepping up Internal Revenue Service (Treasury) program integrity efforts to ensure companies and individuals are
paying their fair share is an investment that more than
pays for itself.
In contrast, the workforce decreased in agencies
such as the U.S. Department of Agriculture (USDA), US
Environmental Protection Agency (EPA) and the National
Aeronautics and Space Administration (NASA), to correspond with decreases in funding. The Forest Service and
the Natural Resources Conservation Service at the USDA
are finding workforce efficiencies to meet budget reductions; decreases at the EPA reflect strong efforts in workforce restructuring to better manage and reduce personnel costs; and NASA will reduce its workforce in response

103

104

Analytical Perspectives

to budget reductions from changes in human space flight
missions, including the retirement of the Space Shuttle.
Beneath many of the agency totals are programs that
pursue aggressive actions to reduce and reallocate staff
from lower to higher priority programs. Some agencies
have imposed hiring freezes, and many are offering early
retirement and separation incentives. For example, the
General Services Administration offered more than 2,400
employee buyouts and early retirement packages in order to contain costs and provide the opportunity to better
match employee skills with job requirements.
Chart 10-1 shows Federal civilian employment (excluding the U.S. Postal Service) as a share of the U.S. resident
population from 1958 to 2012. The chart shows overall
declines in both security and non-security agencies.
In recent years, the Executive Branch has had great
success hiring veterans. In November 2009, President
Obama signed Executive Order 13518, establishing the
Veterans Employment Initiative. Through this initiative and the strategies used by the Council on Veterans
Employment, the Executive Branch continues to benefit
from retaining the dedication, leadership, and skills veterans have honed in the fast-paced, dynamic environments of the Army, Marines, Navy, Air Force, and Coast
Guard.
In FY 2009, veterans made up 24 percent of the total
new hires in the Federal Government. By the end of FY
2012, veterans made up 29 percent of new hires. The total
number of veterans employed by the Government also increased. In FY 2009, there were 512,240 veterans in the
Federal Government – 26 percent of our workforce. By
the end of FY 2012, the number of veterans had grown to
611,784, or 30 percent of the Federal workforce.

Percent

Federal Pay Trends
After more than a decade when the percentage increases in annual Federal pay raises did not keep pace with the
percentage increase in private sector pay raises, Congress
passed the Federal Employees Pay Comparability Act of
1990 (FEPCA) pegging Federal pay raises, as a default, to
changes in the Employment Cost Index (ECI). The law
gives the President the authority to propose alternative
pay adjustments for both base and locality pay. Presidents
have regularly supported alternative pay plans.
Chart 10-2 shows how the Federal pay scale has compared
to the ECI since 1976. Prior to FEPCA the Federal pay scale
fell sharply relative to the ECI. The Federal pay scale rose
relative to the ECI in the early 1990s, but fell relative to ECI
during most of the middle and late 1990s. The Federal pay
scale rose quite a bit relative to ECI in the 2000s, but has
fallen sharply relative to ECI in the last few years.
In late 2010, as one of several steps the Administration
took to put the Nation on a sustainable fiscal path, the
President proposed and Congress enacted a two-year freeze
on across-the-board pay adjustments for civilian Federal
employees, saving $60 billion over 10 years. The President
also issued a memorandum directing agencies to freeze
pay schedules and forgo general pay increases for civilian
Federal employees in administratively determined pay systems. Additionally, on his first day in office, the President
froze salaries for all senior political appointees at the White
House, and in 2010, the President eliminated bonuses for
all political appointees across the Administration. The
Office of Personnel Management (OPM) and the Office of
Management and Budget (OMB) directed agencies to limit
individual performance awards for almost all employees
starting in fiscal years 2011 and 2012.

Chart 10-1. Federal Civilian Workforce
as Share of U.S. Population

1.4%

Overall
1.2%

Security Agencies

1.0%

Non-Security Agencies

0.8%
0.6%
0.4%
0.2%
0.0%
1958

1964

1970

1976

1982

1988

1994

2000

2006

2012

Source: Office of Personnel Management.
Notes: Security agencies include the Department of Defense, the Department of Homeland
Security, the Department of State, and the Department of Veterans Affairs. Non-Security
agencies include the remainder of the Executive Branch.

105

10.  Improving the Federal Workforce

For 2014, the President proposes a one percent pay increase for General Schedule employees, which is below
the private sector Employment Cost Index increase of
1.8%. This increase reflects the tight budget constraints
we now face while also recognizing the critical role these
employees play in our everyday lives. In comparison to
the baseline, the 1.0% pay increase saves approximately
$18 billion over 10 years and $1 billion in FY 2014 within
the BCA caps, which can then be reallocated to programs
and services the American people depend on.
The 2014 budget also continues last year’s proposal
to dedicate an additional 1.2 percent of employees’ pay
(phased-in at 0.4 percent over three years) toward their
pensions. This proposal would require existing employees, or those rehired with five or more years of creditable
service, to contribute 1.2 percentage points more to their
pensions. During 2012, the Middle Class Tax Relief and
Job Creation Act increased employee contributions to
Federal defined benefit retirement plans, including the
Federal Employees’ Retirement System, by 2.3 percentage points, effective for individuals joining the Federal
work force after December 31, 2012 who have less than
five years of creditable civilian service. Neither this proposal nor the 2012 Act would change the amount of each
employee’s benefit. This proposal would result in $20 billion in mandatory savings over 10 years.
Composition of the Federal Workforce
and Factors Affecting Pay
Federal worker compensation receives a great deal of
attention, in particular, in how it compares to that of private sector workers. Comparisons of the pay and benefits
of Federal employees and private sector employees, for
example, should account for factors affecting pay, such as

differences in skill levels, complexity of work, scope of responsibility, size of the organization, location, experience
level, and exposure to personal danger.
A series of reports done in January 2012 by the
Congressional Budget Office (CBO) accounted for some,
but not all, of the factors described above. CBO found
that Federal pay, on average, was slightly higher (2.0 percent) than comparable private sector pay. However, this
study was done before Federal employees began a pay
freeze. Overall public sector compensation was, on average, substantially higher, but CBO noted that its findings
about comparative compensation relied on far more assumptions and were less definitive than its pay findings.
The reports also emphasized that focusing on averages
is misleading, because the public/private differentials
varies dramatically by education and complexity of job.
Compensation for higher educated Federal workers (or
those in more complex jobs) is lower than for comparable
workers in the private sector, which were not the CBO
findings for less educated workers.
Some of the factors affecting compensation are:
Type of occupation. The last half century has seen
significant shifts in the composition of the Federal workforce, with related effects on pay. Fifty years ago, most
white-collar Federal employees performed clerical tasks,
such as posting Census figures in ledgers and retrieving taxpayer records from file rooms. Today their jobs
are vastly different, requiring advanced skills to serve
a knowledge-based economy. Professionals such as doctors, engineers, scientists, statisticians, and lawyers now
make up a large portion of the Federal workforce. More
than half (55 percent) of Federal workers work in the
nine highest-paying occupation groups as judges, engineers, scientists, nuclear plant inspectors, etc., compared

Chart 10-2. Pay Raises for Federal vs.
Private Workforce
Year-over-year percent change
10.0%

Federal Pay

9.0%

Employment
Cost Index
(15- month lag)

8.0%
7.0%

FEPCA passed

6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

Source: Public Laws, Executive Orders, and the Bureau of Labor Statistics.
Notes: Federal pay is for civilians and includes base and locality pay. Employment Cost
Index is the wages and salaries, private industry workers series.

2014

106

Analytical Perspectives

Table 10–1. Occupations of Federal and Private Sector Workforces
(Grouped by Average Private Sector Salary)
Percent
Occupational Groups

Federal
Workers

Private Sector
Workers

Highest Paid Occupations Ranked by Private Sector Salary
Lawyers and judges ���������������������������������������������������������������������������������������������������������������������������
Engineers ������������������������������������������������������������������������������������������������������������������������������������������
Scientists and social scientists ����������������������������������������������������������������������������������������������������������
Managers �������������������������������������������������������������������������������������������������������������������������������������������
Doctors, nurses, psychologists, etc. ��������������������������������������������������������������������������������������������������
Miscellaneous professionals �������������������������������������������������������������������������������������������������������������
Administrators, accountants, HR personnel ��������������������������������������������������������������������������������������
Inspectors ������������������������������������������������������������������������������������������������������������������������������������������
Pilots, conductors, and related mechanics ����������������������������������������������������������������������������������������

1.8%
3.9%
4.8%
11.3%
7.5%
15.5%
7.0%
1.4%
2.0%

0.6%
1.9%
0.7%
13.3%
5.4%
8.2%
2.6%
0.3%
0.8%

Total Percentage �����������������������������������������������������������������������������������������������������������������������������������

55.0%

33.8%

Medium Paid Occupations Ranked by Private Sector Salary
Sales including real estate, insurance agents �����������������������������������������������������������������������������������
Other miscellaneous occupations ������������������������������������������������������������������������������������������������������
Automobile and other mechanics ������������������������������������������������������������������������������������������������������
Law enforcement and related occupations ����������������������������������������������������������������������������������������
Office workers ������������������������������������������������������������������������������������������������������������������������������������
Social workers �����������������������������������������������������������������������������������������������������������������������������������

1.2%
3.5%
1.7%
8.9%
2.3%
1.4%

6.4%
4.5%
2.9%
0.8%
6.3%
0.5%

Total Percentage �����������������������������������������������������������������������������������������������������������������������������������

18.9%

21.4%

Lowest Paid Occupations Ranked by Private Sector Salary
Drivers of trucks and taxis �����������������������������������������������������������������������������������������������������������������
Laborers and construction workers ���������������������������������������������������������������������������������������������������
Clerks ������������������������������������������������������������������������������������������������������������������������������������������������
Manufacturing ������������������������������������������������������������������������������������������������������������������������������������
Other miscellaneous service workers ������������������������������������������������������������������������������������������������
Janitors and housekeepers ����������������������������������������������������������������������������������������������������������������
Cooks, bartenders, bakers, and wait staff �����������������������������������������������������������������������������������������

0.7%
4.3%
13.7%
2.5%
2.6%
1.5%
0.9%

3.3%
9.9%
11.3%
7.7%
6.1%
2.4%
4.1%

Total Percentage �����������������������������������������������������������������������������������������������������������������������������������
26.1%
44.9%
Source: 2008-2012 Current Population Survey.
Notes: Federal workers exclude the military and Postal Service, but include all other Federal workers in the Executive, Legislative,
and Judicial Branches. However, the vast majority of these employees are civil servants in the Executive Branch. Private sector
workers exclude the self-employed. Neither category includes state and local government workers. This analysis is limited to fulltime, full-year workers, i.e. those with at least 1,500 annual hours of work.

to about a third (33 percent) of private sector workers in
those same nine highest paying occupation groups. In
contrast, 45 percent of private sector workers work in the
seven lowest-paying occupation groups as cooks, janitors,
service workers, clerks, laborers, manufacturing workers,
etc. About 26 percent of Federal workers work in those
seven lowest-paying occupation groups. Between 1981
and 2011, the proportion of the Federal workforce in clerical occupations fell from 19.4 percent to 5.1 percent of the
workforce, and the proportion of blue-collar workers fell
from 22.0 percent to 9.7 percent.
Today, Federal employees must manage highly sensitive tasks that require great skill, experience, and judgment. They need sophisticated management and negotiation skills to effect change, not just across the Federal
Government, but also with other levels of government,
not-for-profit providers, and for-profit contractors. Using
data from the Current Population Survey 2008-2012 of
full-time, full-year workers, Table 10-1 breaks all Federal

and private sector jobs into 22 occupation groups and
shows that the composition of the Federal and private
workforce are very different.
Education level. The size and complexity of much
Federal work – whether that work is analyzing security and financial risks, forecasting weather, planning
bridges to withstand extreme weather events, conducting research to advance human health and energy efficiency, or advancing science to fuel further economic
growth – necessitates a highly educated workforce.
Chart 10-3 presents the comparative differences in
the education level of the Federal civilian and private
sector workforce. About 22 percent of Federal workers
have a master’s degree, professional degree, or doctorate versus only 10 percent in the private sector. Only
19 percent of Federal employees have not attended college, compared to 40 percent of workers in the private
sector.

107

10.  Improving the Federal Workforce

Size of organization and responsibilities. Another
important difference between Federal workers and private sector workers is the average size of the organization
in which they work. Federal agencies are large and often
face challenges of enormous scale, such as distributing
benefit payments to over 60 million Social Security and
Supplemental Security Income beneficiaries each year,
providing medical care to 8.8 million of the Nation’s veterans, and managing defense contracts costing billions of
dollars. Workers from large firms (those with 1,000 or
more employees) are paid about 13 percent more than
workers from small firms (those with fewer than 100 employees), even after accounting for occupational type, level
of education, and other characteristics. It is reasonable to
assume that the size of these organizations and the larger
salaries associated with their size is also associated with
greater complexity of their work.
Demographic characteristics. Federal workers tend
to have demographic characteristics associated with higher pay in the private sector. They are more experienced,
older and live in higher cost metropolitan areas. For example, 21 percent of Federal workers are 55 or older – up
from 17 percent 10 years ago and significantly more than
the 16 percent in the private sector. Chart 10-4 shows the
difference in age distribution between Federal and private sector workers.
Challenges
The Federal Government faces specific human capital
challenges, including a personnel system that requires
further modernization, an aging and retiring workforce,
and the need to continuously engage and develop person-

nel to maximize performance. If the Government loses
top talent, experience, and institutional memory through
retirements, but cannot recruit, retain, and train highly
qualified workers, Government performance suffers. The
age distribution and potential for a large number of retiring workers poses a challenge, but it also creates an
opportunity to streamline the workforce and to infuse it
with new – and in some cases lower-cost – workers excited
about Government service and equipped with strong technology skills, problem-solving ability, and fresh perspectives to tackle problems that Government must address.
Outdated Personnel System
In the past sixty years, the private sector has innovated towards more flexible personnel management systems,
but the Federal personnel system has not kept up and remains inflexible and outdated. While recent hiring reform
efforts are showing significant progress in simplifying hiring, additional reforms are needed to update the pay, classification, and benefits systems. The General Schedule
(GS) pay system has been in effect since 1949. Enacted in
1951, aspects of the current benefit and leave laws are out
of date and do not always provide adequate flexibility for
the increasing responsibilities of family caregivers in our
workforce. An alternative, cost-effective system needs to
be developed that will allow the Government to compete
for and reward top talent, while rewarding performance
and encouraging adequate flexibility to caregivers. 	
To address issues in the long-term, Federal managers
and employees need a modernized personnel system. To
that end, the Administration proposed to the Joint Select
Committee on Deficit Reduction that the Congress establish a Commission on Federal Public Service Reform

Chart 10-3. Education Level Distribution in
Federal vs. Private Workforce
Doctorate/
Professional

Federal
Private

Masters

Bachelors
Some College/
Associates
High School
Less than High
School

0%

5%

10%

15%

20%

25%

30%

Source: 2008-2012 Current Population Survey.
Notes: Federal workers exclude the military and Postal Service, but include
all other Federal workers in the Executive, Legislative, and Judicial
Branches. However, the vast majority of these employees are civil
servants in the Executive Branch. Private sector workers exclude the selfemployed. Neither category includes state and local government workers.
This analysis is limited to full-time, full-year workers, i.e. those with at least
1,500 hours of work.

35%

108

Analytical Perspectives

Chart 10-4. Federal Age Distribution in 2001 and 2011
and Federal vs. Private Age Distribution in 2011
70%

Federal Workers
in 2011

Federal Workers
in 2001

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

Private Sector in 2011
Federal Workers in 2011

10%

0%

0%
Less than 35

35-54

55 or more

Less than 35

35-54

55 or more

Source: 2002 and 2012 Current Population Survey (covering calendar years 2001 and 2011).
Notes: Federal workers exclude the military and Postal Service, but include all other Federal
workers in the Executive Branch. Private sector workers exclude the self-employed. Neither
category includes State and local government workers. This analysis is limited to full-time,
full-year workers, i.e. those with at least 1,500 annual hours of work.

comprised of Members of Congress, representatives
from the President’s National Council on Federal LaborManagement Relations, members of the private sector,
and academic experts. The purpose of a Congressionally
chartered Commission would be to develop recommendations on reforms to modernize Federal personnel policies
and practices within fiscal constraints, including – but not
limited to – compensation, staff development and mobility, and personnel performance and motivation.
Aging Workforce
The Federal workforce of 2012 is older than Federal
workforces of past decades and older than the private sector workforce. The number of Federal retirements is on
a steady increase, rising from 95,425 in 2009 to 96,133 in
2010 to 98,731 in 2011 and 112,817 in 2012. Increases
in retirement are expected to continue. Nearly twentytwo percent of the over 687,000 respondents to the 2012
Federal Employee Viewpoint Survey (EVS) expressed an
intent to retire during the next five years. Given these
demographics, the Federal Government faces a few immediate challenges: preparing for retirements to maximize
knowledge transfer from one generation to the next, succession planning to assure needed leadership and hiring
and developing the next generation of the Government
workforce to accomplish the varied and challenging missions the Federal Government must deliver.
Developing and Engaging Personnel
to Improve Performance
One well-documented challenge in any organization
is managing a workforce so it is engaged, innovative,

and committed to continuous improvement, while at
the same time dealing with poor performers who fail to
improve as needed or are ill suited to their current positions. Federal employees are generally positive about
the importance of their work and express a high readiness to put in extra effort to accomplish the goals of
their agencies. Results from the 2012 Federal Employee
Viewpoint Survey (EVS) indicate that nearly 97 percent of respondents answer positively to the statement
“When needed I am willing to put in the extra effort
to get the job done.” However in contrast, Federal employees have repeatedly identified the inability to deal
with poor performers as an area of weakness over the
past 10 years. In 2012, only 30 percent of employees
who participated in the EVS answered positively that
“In my work unit, steps are taken to deal with a poor
performer who cannot or will not improve.” In addition,
only 39 percent agreed that “creativity and innovation
are rewarded”.
Addressing the Challenges
The Administration has made considerable progress
improving employee performance and human capital
management. Multiple efforts are underway, including:
building a workforce with the skills necessary to meet
agency missions, developing and using personnel analytics to drive decision making, new programs to infuse
talent into agencies, heightened attention to a diverse
and inclusive workforce, continued focus on the Senior
Executive Service (SES) performance appraisal system,
and strengthened labor-management partnerships.

109

10.  Improving the Federal Workforce

Mission Focused and Data Driven
Personnel Management	
The Administration is committed to strengthening
Federal agencies’ capacity to analyze human resources
data to address workplace problems, improve productivity, and cut costs. OPM, in conjunction with OMB, is implementing several key initiatives that will lead to better
evaluation and management of Federal employees. These
efforts include recasting the EVS as a diagnostic tool to
improve an organization rather than a snapshot that
simply describes it, more agencies conducting data-driven
HRStat review sessions, greater alignment between human capital and mission performance, and quarterly updates of key HR performance indicators on Performance.
gov.
OPM administers the Government-wide EVS to gather employee perceptions about whether, and to what extent, conditions characterizing successful organizations
are present in their agencies. The survey is a valuable
management tool that helps agencies identify areas of
strength and weakness and informs the implementation
of targeted action plans to help improve employee engagement and agency performance. In 2012, for the first
time, OPM administered the survey to nearly all civilian Federal employees and received responses from over
687,000 Federal employees. This is the largest number
of participants since the survey was first administered in
2002, more than double the number of respondents from
any previous EVS survey, making this the most inclusive
survey to date. Even more importantly, agencies now
have greater ability to drill down to understand employee
viewpoints in smaller organizational units; nearly five
times the number of office-level components within agencies received office-specific results in 2012 compared to
the 1,687 components that received results in 2011. The
increased response and reporting granularity enables
agencies to identify areas of strength, offering possible
models for others, and areas of weakness needing attention. Agencies across Government are using EVS data
to develop and implement targeted, mission-driven action
plans to address identified challenges.
One area in which the EVS has given us new insight
is the impact of telework. The 2012 EVS indicates that
teleworkers (82 percent) are more likely than non-teleworkers (79 percent) to know what is expected of them
on the job, more likely to feel empowered (52 percent versus 45 percent), and more likely (75 percent compared to
68 percent of non-teleworkers) to be satisfied with their
jobs. Finally, employees who telework are more likely to
want to stay with their agencies (72 percent compared to
68 percent of non-teleworkers) and to recommend their
agencies to others (74 percent compared to 66 percent
of non-teleworkers). As documented by OPM’s 2012 report on the status of telework, the percentage of eligible
Federal employees who participated in routine telework
grew to 21 percent as of September 2011, compared to 10
percent during calendar year 2009. However, there is still
more work to be done in breaking down barriers to the effective use of telework.

Agencies have also begun testing HRStat (Human
Resources Statistics) reviews. HRStat reviews are data
driven and focus on agency specific human capital performance; key human resources management metrics
that drive agency performance and align with mission
accomplishment. Agencies have incorporated a range of
management metrics into their HR Stat review, including
performance management, succession planning, and strategic workforce planning. The HRStat review is intended
to enable quick course correction, if needed, to help ensure
progress is being made on key human resources issues.
In addition, Performance.gov provides agencies and the
public a window on key human resources data – including
Government-wide and agency specific hiring times, applicant and manager satisfaction, employee engagement and
retention, and hiring rates from diverse candidate pools.
Closing Critical Skills Gaps
The demands of the workplace necessitate new and
agile skill sets in the Federal workforce. OPM’s mission
is to ensure that the Federal Government recruits, retains, and honors the talent agencies require to serve the
American people. In 2011, OPM partnered with the Chief
Human Capital Officers (CHCO) Council to take on the
challenge of closing skills gaps across the Government.
This initiative responds to the President’s Cross-Agency
Priority Goal to close skills gaps, as well as GAO’s designation of human capital as a Government-wide high
risk. The Department of Defense joined OPM in chairing an inter-agency workgroup that designed a sustainable strategic workforce planning method to identify and
close skills gaps in mission-critical occupations. Based
on rigorous data analysis, the workgroup identified the
following mission-critical occupations for gap closure:
IT-Cybersecurity Specialists, Acquisition Specialists,
Economists, Human Resources Specialists, and Auditors.
In addition, the workgroup identified STEM (science,
technology, engineering, and mathematics) as a sixth
functional area covering multiple occupations, which requires sustained strategic attention across Government.
To close skills gaps in these areas, OPM designated
sub-goal leaders from agencies whose missions critically
depend on these occupations. Together with these subgoal leaders, OPM is developing and executing strategies
to close skills gaps in these occupations. The sub-goal
leaders meet quarterly with the OPM Director to apprise
him of their progress, including by providing updated
metrics that will be reported on www.performance.gov.
One of the ways OPM is addressing skills gaps among
human resources professionals is through HR University.
Developed in 2011 by the CHCO Council, HR University
provides an excellent foundation for human resources
professionals to receive training to help them become
more effective. HR University is a source of centralized
training that takes courses and resources Federal agencies have already developed and provides a platform for
cross-agency sharing.
HR University uses an HR Professional Framework,
which helps HR professionals identify where they are in
relation to the roles outlined in the framework. It also

110
helps them think about their desired career path and
provides a mechanism for determining how they need to
develop to achieve their goals. This mechanism leads to
an Individual Development Plan (IDP) designed specifically for the HR professional to create more targeted development plans. HR University also offers a Managers’
Corner to help supervisors and managers with their human resources management responsibilities. Finally, HR
University is working to obtain accreditation as a fullservice university.
HR University has more than 19,000 registered users
who have completed more than 12,000 online training
courses, with a cost savings of over $41.4 million, realized
through the sharing of resources and economies of scale.
In addition, HR University ensures that courses meet
OPM’s high standards by vetting each course through a
very rigorous quality review.
In partnership with the CHCO Council, OPM will continue to expand HR University’s offerings. This effort may
include more partnerships with colleges and universities,
development of HR certifications, accreditation of courses,
greater use of social media, website enhancements, and
more courses on key topics that will close identified skill
and competency gaps in the human resources field.
Individual agencies are also identifying and targeting
critical skills gaps as a priority. The State Department
and US Agency for International Development (USAID)
identified overseas vacancies as an agency Priority Goal
to help achieve operations and consular efficiency and
effectiveness, transparency and accountability; and secure US presence internationally.   This initiative aims
to modernize and strengthen State/USAID so that they
can meet the most pressing development challenges with
a high-quality workforce to move towards the larger goals
of these organizations.
Recruiting and Developing an Agile Workforce
To maximize effectiveness and potential, the Federal
Government must continue to prepare its talent for challenges on the horizon. New cost-effective programs are
being implemented to develop current employees, foster
collaboration with innovators from the private sector, promote career pathways into Federal service, and enhance
institutional knowledge transfer through a phased retirement program. These efforts are essential for developing
a nimble, efficient 21st Century workforce that can help
ensure agencies achieve their important missions under a
tightening fiscal climate.
Leadership Development. In 2011, the President’s
Management Council (PMC) and the Chief Human Capital
Officers (CHCO) Council launched the PMC Interagency
Rotation Program to bolster cross-agency exposure for
high-potential GS 13-15s. Through 6-month developmental
assignments, this program enables emerging Federal leaders to expand their management skills, broaden their organizational experience, and foster networks they can leverage in the future. Now preparing for its fourth cohort, the
program has grown from 10 agencies and 28 participants
to 15 agencies, 4 interagency councils, and 45 participants,
with likely expansion in the upcoming cycle.

Analytical Perspectives

Innovation Fellows. The Presidential Innovation
Fellows program pairs top innovators from the private
sector, non-profits, and academia with top innovators in
government to collaborate on solutions to high-impact
challenges and deliver significant results in six months.
The results of these projects are intended to save taxpayer money, fuel job growth, save lives, and provide tangible
benefit to the American people. Each team of innovators
is tasked with working on a specific high-impact issue using a focused but agile approach. This unique initiative
focuses on tapping into the ingenuity, know-how, and patriotism of Americans from every sectors of our society.
Pathways Programs. Under the Administration’s
leadership, the Government has taken steps to help students and recent graduates join the Federal service. As
part of the Administration’s hiring reform efforts, the
President issued Executive Order 13566, which created
the Pathways programs to create clear paths to Federal
service for students and recent graduates. OPM issued
final regulations implementing Pathways last year and
has been working closely with agencies to help them transition to the new programs. Pathways consists of three
streamlined developmental programs: the Internship
Program for students; the Recent Graduates Program for
people who graduated within the preceding 2 years; and
the Presidential Management Fellows (PMF) Program
for people who obtained a graduate or professional degree
within the preceding two years.  Internship and career
opportunities for students and recent graduates provide
meaningful training and career development opportunities, promote employment opportunities for a new generation of public servants, and help agencies address recruiting challenges and infuse new skills into the Federal
workforce.
Provide phased retirement to eligible Federal
employees. The Administration proposed and Congress
passed a phased retirement law to help facilitate the
transfer of valuable knowledge between retiring and nonretiring employees. The phased retirement program will
make it easier for the most experienced employees to enter into part-time retirement arrangements, providing expertise while mentoring other employees.
A Diverse and Inclusive Workforce
The American people are best served by a Federal
workforce that reflects our rich diversity and encourages collaboration, fairness, and innovation. Under the
President’s Executive Order 13583, of August 2011, the
first Government-wide Diversity and Inclusion Strategic
Plan was issued and provides agencies with the shared
goals of workforce diversity, workplace inclusion, and sustainability. Since the issuance of the Executive Order, the
percentage of people with disabilities who are Federal
employees has increased to 11.86 percent, an all-time
government high. The percentage of Hispanic (8.2 percent) and Asian American/Pacific Islander (6.1 percent)
employees is steadily increasing with all other groups
remaining at the same levels, and the diversity of the
SES has improved. Moreover, the FY 2012 EVS reflected
that 65 percent of Federal employees answered positively

10.  Improving the Federal Workforce

when asked if their supervisor or team leader is committed to a workforce that represents all segments of society.
In addition to supporting a diverse and inclusive workforce, the Federal Government has also made progress
towards pay equality. Pay differentials by gender, after
accounting for education and occupation, tend to be about
half as small in the Federal sector as in the private sector.
Differentials by race are also smaller in the Federal sector
than in the private sector.
Government-wide SES Appraisal Model
Drawing from leading practices in Federal agencies and
the private sector, representatives from 29 organizations
developed a Government-wide Senior Executive Service
(SES) performance appraisal model in 2011. Under this
system, agencies can rely upon a more consistent and uniform framework to communicate expectations and evaluate the performance of SES members.
Anchored to a set of clearly-defined competencies
(OPM’s Executive Core Qualifications) and balancing
achievement of results with demonstration of leadership
behaviors, this approach enhances clarity, transferability,
and equity in performance standards development, feedback delivery, and ratings derivation. Since the introduction of the new SES appraisal model in January 2012,
OPM approved implementation in 38 agencies (51% of all
SES appraisal systems Government-wide). By FY14, it is
anticipated to be 96%.

111
In another case, there was enormous productivity increases at the Naval Sea Systems Command, NAVSEA. 
These are the employees who build, buy and maintain
the Navy’s ships and submarines and their combat systems.   NAVSEA leadership asked their unions and workers, through their labor-management forum, to put forward ideas to save an hour of time out of each workday. 
Workers identified the most wasteful part of their day:
waiting in line to get the tools and parts they needed for
their projects.  Management and labor devised with a solution – a kit, prepared in advance and handed to you on
arrival.  In the kit, workers receive the tools needed and
the exact number of nuts, bolts, and parts for any project
that day.  With this and other changes, NAVSEA projects
to save one hour per day for about 8,000 mechanics and
engineers across four shipyards – which translates into
enormous savings.  It has also helped reduce overtime
hours, further increasing cost savings.  A next challenge
in the labor management partnership is to spread these
successes to other agencies and locations around government.
Goals-Engagement-Accountability-Results (GEAR)

Over the years, there have been numerous attempts to
reform and improve employee performance management
in the Federal sector, with the ultimate goal of improving the performance of the organizations in which the
employees work. Drawing from practices in the Federal
sector and private sector, representatives from various
Strengthening Labor-Management Relations
Federal agencies, labor unions, and management orgaThe Administration continues to fulfill the robust vi- nizations from the National Council on Federal Laborsion laid out in Executive Order 13522, Creating Labor- Management Relations and the CHCO Council developed
Management Forums to Improve Delivery of Government recommendations to strengthen the existing system of
Services.  This Executive Order created a national Council, employee performance management. These recommenwhich meets regularly to coordinate Government-wide ef- dations are known as the GEAR framework. They are
forts, and nearly 1000 forums around government where based on the idea that successful organizations must have
agency management and union representatives work col- clear, aligned goals, engaged employees and supervisors,
laboratively to improve service delivery to the public. 
and accountability for every employee at every level.
In recent Council meetings representatives from both
	
Five agencies are currently implementing the
management and labor have presented on their success- GEAR framework: OPM, the Department of Energy, the
ful efforts to improve productivity at naval shipyards, Department of Housing and Urban Development, and
in VA appeals, and in Securities Exchange Commission components of the Department of Veterans Affairs and
(SEC) enforcement activities.  For example, at the Nuclear the U.S. Coast Guard. The CHCO Council is currently
Regulatory Commission (NRC), they are moving approx- reviewing the progress of GEAR and lessons learned in
imately 1400 workers and managers to a new building these agencies and identifying other leading practices
management involved workers and their unions in the across the Federal sector and private sector with the goal
design process.  Important points for employees were in- of broader application of the GEAR framework across the
cluded in the designs right from the start such as – access Federal Government. The ultimate goal is to ensure that
to natural light, noise levels, and workstation layouts.  Federal employees are engaged and enabled to deliver
These are factors that deeply affect both productivity and and improve Government services.
morale.  By engaging early, the NRC could approach business decisions with a problem-solving attitude. 

112

Analytical Perspectives

Table 10–2.  Federal Civilian Employment in the Executive Branch
(Civilian employment as measured by full-time equivalents (FTE) in thousands, excluding the Postal Service)
Actual

Agency
2011
Cabinet agencies:
Agriculture �����������������������������������������������������
Commerce �����������������������������������������������������
Defense ���������������������������������������������������������
Education �������������������������������������������������������
Energy �����������������������������������������������������������
Health and Human Services ��������������������������
Homeland Security ���������������������������������������
Housing and Urban Development ������������������
Interior �����������������������������������������������������������
Justice �����������������������������������������������������������
Labor �������������������������������������������������������������
State ��������������������������������������������������������������
Transportation ������������������������������������������������
Treasury ���������������������������������������������������������
Veterans Affairs ���������������������������������������������
Other agencies—excluding Postal Service:
Broadcasting Board of Governors �����������������
Corps of Engineers—Civil Works ������������������
Environmental Protection Agency �����������������
Equal Employment Opportunity Comm ���������
Federal Deposit Insurance Corporation ���������
General Services Administration �������������������
International Assistance Programs ����������������
National Aeronautics and Space Admin ��������
National Archives and Records
Administration �������������������������������������������
National Labor Relations Board ���������������������
National Science Foundation �������������������������
Nuclear Regulatory Commission �������������������
Office of Personnel Management ������������������
Railroad Retirement Board ����������������������������
Securities and Exchange Commission ����������
Small Business Administration ����������������������
Smithsonian Institution ����������������������������������
Social Security Administration �����������������������
Tennessee Valley Authority ����������������������������
All other small agencies ���������������������������������
Total, Executive Branch civilian employment * ���
* Totals may not add due to rounding.

Change: 2013 to
2014

Estimate
2012

2013 CR

2014

FTE

Percent

95.9
41.3
771.3
4.4
16.1
68.8
179.5
9.5
70.5
116.3
16.9
32.4
57.4
110.7
295.7

91.7
39.9
765.2
4.3
15.7
69.3
184.0
9.3
70.0
115.1
17.2
33.0
56.9
106.3
301.4

92.4
42.6
777.2
4.2
15.7
71.3
190.1
9.3
69.7
115.7
17.4
33.1
57.3
107.1
311.1

90.7
43.0
765.0
4.3
15.9
72.6
191.0
9.2
69.8
117.7
17.5
33.2
57.6
112.7
319.3

-1.7
0.4
-12.2
0.1
0.2
1.3
0.9
-0.1
0.1
2.0
0.1
0.1
0.3
5.6
8.2

-1.8%
0.9%
-1.6%
2.4%
1.3%
1.8%
0.5%
-1.1%
0.1%
1.7%
0.6%
0.3%
0.5%
5.2%
2.6%

1.9
23.7
17.3
2.5
8.3
12.7
5.2
18.6

1.9
23.1
17.0
2.3
8.1
12.5
5.6
18.1

1.9
22.7
17.0
2.2
8.0
12.8
5.6
18.2

2.0
22.7
16.9
2.3
7.6
12.5
5.8
17.9

0.1
0.0
-0.1
0.1
-0.4
-0.3
0.2
-0.3

5.3%
0.0%
-0.6%
4.5%
-5.0%
-2.3%
3.6%
-1.6%

3.3
1.7
1.4
4.0
5.4
1.0
3.8
3.4
5.2
67.6
12.4
16.3

3.2
1.6
1.4
3.8
5.3
0.9
3.8
3.4
5.0
64.7
12.8
16.9

3.2
1.7
1.4
4.0
5.5
0.9
4.2
3.4
5.2
65.1
13.6
18.0

3.2
1.7
1.5
3.9
5.7
0.9
4.8
3.5
5.3
65.3
13.3
18.6

0.0
0.0
0.1
-0.1
0.2
0.0
0.6
0.1
0.1
0.2
-0.3
0.6

0.0%
0.0%
7.1%
-2.5%
3.6%
0.0%
14.3%
2.9%
1.9%
0.3%
-2.2%
3.3%

2,102.4

2,090.7

2,128.8

2,134.9

6.1

0.3%

113

10.  Improving the Federal Workforce

Table 10–3.  Total Federal Employment
(As measured by Full-Time Equivalents)
Description

2013
2012 Actual

Executive Branch Civilian:
All Agencies, Except Postal Service ��������������������������������������������������������������
Postal Service 1 �������������������������������������������������������������������������������������������������
Subtotal, Executive Branch Civilian ���������������������������������������������������������������

1,501,807
43,027
6,935
1,551,769
4,229,758
30,634
34,523

CR

Request

2,090,679
587,310
2,677,989

Executive Branch Uniformed Military:
Department of Defense 2 �����������������������������������������������������������������������������������
Department of Homeland Security (USCG) ������������������������������������������������������
Commissioned Corps (DOC, EPA, HHS) ����������������������������������������������������������
Subtotal, Uniformed Military �������������������������������������������������������������������������
Subtotal, Executive Branch ����������������������������������������������������������������������������
Legislative Branch 5 �������������������������������������������������������������������������������������������������
Judicial Branch �������������������������������������������������������������������������������������������������������

2014

2,128,768
569,782
2,698,550
3

1,466,664
43,017
7,065
1,516,746
4,215,296
34,260
34,313

Change: 2013 to 2014
FTE

Percent

2,134,948
546,203
2,681,151
4

6,180
–23,579
–17,399

0.3%
–4.1%
–0.6%

1,330,944
42,029
7,062
1,380,035
4,061,186
34,402
34,502

–135,720
–988
–3
–136,711
–154,110
142
189

–9.3%
–2.3%
–0.0%
–9.0%
–3.7%
0.4%
0.6%

Grand total ��������������������������������������������������������������������������������������������������
4,294,915
4,283,869
4,130,090
–153,779
–3.6%
Postal Rate Commission.
2 Includes activated Guard and Reserve members on active duty. Does not include Full-Time Support (Active Guard & Reserve (AGRs)) paid from Reserve Component Appropriations.
3 FY 2013 reflects the FY 2013 President’s Budget request.
4 FY 2014 excludes Overseas Contingency Operations (OCO) funded activated Guard and Reserve members on active duty and OCO funded non-enduring strength of 33,885 for
Army and 9,787 for the Marine Corps.
5 FTE data not available for the Senate (positions filled were used).
1 Includes

114

Analytical Perspectives

Table 10–4. Personnel Compensation and Benefits
(In millions of dollars)
Description

Change: 2013 to 2014
2012 Actual

2013 CR

2014 Request

Dollars

Percent

Civilian Personnel Costs:
Executive Branch (excluding Postal Service):
Direct compensation ���������������������������������������������������������������
Personnel Benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������

176,133
68,117
244,250

178,980
68,723
247,703

185,562
71,842
257,404

6,582
3,119
9,701

3.7%
4.5%
3.9%

Postal Service:
Direct compensation ���������������������������������������������������������������
Personnel benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������

36,398
15,128
51,526

35,059
16,007
51,066

34,141
8,502
42,643

–918
–7,505
–8,423

–2.6%
–46.9%
–16.5%

Legislative Branch: 1
Direct compensation ���������������������������������������������������������������
Personnel benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������

2,053
670
2,723

2,098
654
2,752

2,153
667
2,820

55
13
68

2.6%
2.0%
2.5%

Judicial Branch:
Direct compensation ���������������������������������������������������������������
Personnel benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������
Total, Civilian Personnel Costs ���������������������������������������������������

3,140
1,071
4,211
302,710

3,180
1,147
4,327
305,848

3,244
1,169
4,413
307,280

64
22
86
1,432

2.0%
1.9%
2.0%
0.5%

Department of Defense
Direct compensation ���������������������������������������������������������������
Personnel benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������

100,189
51,505
151,694

101,196
52,113
153,309

93,393
45,350
138,743

–7,803
–6,763
–14,566

–7.7%
–13.0%
–9.5%

All other executive branch, uniformed personnel:
Direct compensation ���������������������������������������������������������������
Personnel benefits ������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������
Total, Military Personnel Costs 2 ��������������������������������������������������

3,234
809
4,043
155,737

3,235
739
3,974
157,283

3,181
706
3,887
142,630

–54
–33
–87
–14,653

–1.7%
–4.5%
–2.2%
–9.3%

Grand total, personnel costs ��������������������������������������������������������

458,447

463,131

449,910

–13,221

–2.9%

76,196

82,087

87,534

5,447

6.6%

10,683
47

10,698
46

11,163
45

465
–1

4.3%
–2.2%

Military personnel costs:

ADDENDUM
Former Civilian Personnel:
Retired pay for former personnel �������������������������������������������������
Government payment for Annuitants:
Employee health benefits ��������������������������������������������������
Employee life insurance �����������������������������������������������������

Former Military personnel:
Retired pay for former personnel �������������������������������������������������
52,495
53,851
55,572
1,721
3.2%
Military annuitants health benefits �����������������������������������������������
8,736
9,283
9,499
216
2.3%
1 Excludes members and officers of the Senate.
2 Amounts in this table for military compensation reflect direct pay and benefits for all service members, including active duty, guard,
and reserve members.

Budget Concepts and Budget Process

115

11.  Budget Concepts

The budget system of the United States Government
provides the means for the President and the Congress
to decide how much money to spend, what to spend it
on, and how to raise the money they have decided to
spend. Through the budget system, they determine the
allocation of resources among the agencies of the Federal
Government and between the Federal Government and
the private sector. The budget system focuses primarily
on dollars, but it also allocates other resources, such as
Federal employment. The decisions made in the budget
process affect the Nation as a whole, State and local governments, and individual Americans. Many budget decisions have worldwide significance. The Congress and the
President enact budget decisions into law. The budget system ensures that these laws are carried out.
This chapter provides an overview of the budget system and explains some of the more important budget concepts. It includes summary dollar amounts to illustrate
major concepts. Other chapters of the budget documents

discuss these amounts and more detailed amounts in
greater depth.
The following section discusses the budget process,
covering formulation of the President’s Budget, action
by the Congress, and execution of enacted budget laws.
The next section provides information on budget coverage, including a discussion of on-budget and off-budget
amounts, functional classification, presentation of budget
data, types of funds, and full-cost budgeting. Subsequent
sections discuss the concepts of receipts and collections,
budget authority, and outlays. These sections are followed
by discussions of Federal credit; surpluses, deficits, and
means of financing; Federal employment; and the basis
for the budget figures. A glossary of budget terms appears at the end of the chapter.
Various laws, enacted to carry out requirements of the
Constitution, govern the budget system. The chapter refers to the principal ones by title throughout the text and
gives complete citations in the section just preceding the
glossary.

THE BUDGET PROCESS
The budget process has three main phases, each of
which is related to the others:
1.	 Formulation of the President’s Budget;
2.	 Action by the Congress; and
3.	 Execution of enacted budget laws.
Formulation of the President’s Budget
The Budget of the United States Government consists
of several volumes that set forth the President’s fiscal
policy goals and priorities for the allocation of resources
by the Government. The primary focus of the Budget is
on the budget year—the next fiscal year for which the
Congress needs to make appropriations, in this case 2014.
(Fiscal year 2014 will begin on October 1, 2013, and end
on September 30, 2014.) The Budget also covers the nine
years following the budget year in order to reflect the effect
of budget decisions over the longer term. It includes the
funding levels provided for the current year, in this case
2013, which allows the reader to compare the President’s
Budget proposals with the most recently enacted levels.
The Budget also includes data on the most recently completed fiscal year, in this case 2012, so that the reader can
compare budget estimates to actual accounting data.
In a normal year, the President begins the process of
formulating the budget by establishing general budget
and fiscal policy guidelines, usually by the spring of each

year, at least nine months before the President transmits
the budget to the Congress and at least 18 months before
the fiscal year begins. (See the “Budget Calendar” later
in this chapter.) Based on these guidelines, the Office of
Management and Budget (OMB) works with the Federal
agencies to establish specific policy directions and planning levels, both for the budget year and for at least the
following four years, and in this case, the following nine
years, to guide the preparation of their budget requests.
Since the Budget Control Act of 2011 (BCA) has set statutory limits on discretionary budget authority, as discussed
below, the President’s budget proposes funding levels for
discretionary programs consistent with those limits.
During the formulation of the budget, the President,
the Director of OMB, and other officials in the Executive
Office of the President continually exchange information,
proposals, and evaluations bearing on policy decisions
with the Secretaries of the departments and the heads
of the other Government agencies. Decisions reflected in
previously enacted budgets, including the one for the fiscal year in progress, reactions to the last proposed budget
(which the Congress is considering at the same time the
process of preparing the forthcoming budget begins), and
evaluations of program performance all influence decisions concerning the forthcoming budget, as do projections
of the economic outlook, prepared jointly by the Council of
Economic Advisers, OMB, and the Treasury Department.
In early fall, agencies submit their budget requests to
OMB, where analysts review them and identify issues
that OMB officials need to discuss with the agencies.
OMB and the agencies resolve many issues themselves.

117

118

Analytical Perspectives

Others require the involvement of White House policy officials and the President. This decision-making process is
usually completed by late December. At that time, the
final stage of developing detailed budget data and the
preparation of the budget documents begins.
The decision-makers must consider the effects of economic and technical assumptions on the budget estimates. Interest rates, economic growth, the rate of inflation, the unemployment rate, and the number of people
eligible for various benefit programs, among other factors,
affect Government spending and receipts. Small changes
in these assumptions can alter budget estimates by many
billions of dollars. (Chapter 2, “Economic Assumptions
and Interactions with the Budget,’’ provides more information on this subject.)
Thus, the budget formulation process involves the simultaneous consideration of the resource needs of individual programs, the allocation of resources among the
agencies and functions of the Federal Government, and
the total outlays and receipts that are appropriate in light
of current and prospective economic conditions.
The law governing the President’s budget requires its
transmittal to the Congress on or after the first Monday in
January but not later than the first Monday in February
of each year for the following fiscal year, which begins on
October 1. The budget is routinely sent to the Congress on
the first Monday in February, giving the Congress eight
months to act on the budget before the fiscal year begins.
Congressional Action1
The Congress considers the President’s budget proposals and approves, modifies, or disapproves them. It can
change funding levels, eliminate programs, or add programs not requested by the President. It can add or eliminate taxes and other sources of receipts or make other
changes that affect the amount of receipts collected.
The Congress does not enact a budget as such. Through
the process of adopting a planning document called a budget resolution (described below), the Congress agrees on
targets for total spending and receipts, the size of the deficit or surplus, and the debt limit. The budget resolution
provides the framework within which individual congressional committees prepare appropriations bills and other
spending and receipts legislation. The Congress provides
spending authority—funding—for specified purposes in
appropriations acts each year. It also enacts changes each
year in other laws that affect spending and receipts. Both
appropriations acts and these other laws are discussed in
the following paragraphs.
In making appropriations, the Congress does not vote
on the level of outlays (spending) directly, but rather on
budget authority, or funding, which is the authority provided by law to incur financial obligations that will result
in outlays. In a separate process, prior to making appropriations, the Congress usually enacts legislation that
1  For a fuller discussion of the congressional budget process, see Bill
Heniff Jr., Introduction to the Federal Budget Process (Congressional
Research Service Report 98–721), and Robert Keith and Allen Schick,
Manual on the Federal Budget Process (Congressional Research Service
Report 98–720, archived).

authorizes an agency to carry out particular programs,
authorizes the appropriations of funds to carry out those
programs, and, in some cases, limits the amount that
can be appropriated for the programs. Some authorizing
legislation expires after one year, some expires after a
specified number of years, and some is permanent. The
Congress may enact appropriations for a program even
though there is no specific authorization for it or its authorization has expired.
The Congress begins its work on its budget resolution
shortly after it receives the President’s budget. Under
the procedures established by the Congressional Budget
Act of 1974, the Congress decides on budget targets before commencing action on individual appropriations.
The Act requires each standing committee of the House
and Senate to recommend budget levels and report legislative plans concerning matters within the committee’s
jurisdiction to the Budget Committee in each body. The
House and Senate Budget Committees then each design
and report, and each body then considers, a concurrent
resolution on the budget—a congressional budget plan,
or budget resolution. The budget resolution sets targets
for total receipts and for budget authority and outlays,
both in total and by functional category (see “Functional
Classification’’ later in this chapter). It also sets targets
for the budget deficit or surplus and for Federal debt subject to statutory limit.
The congressional timetable calls for the House and
Senate to resolve differences between their respective
versions of the congressional budget resolution and adopt
a single budget resolution by April 15 of each year.
In the report on the budget resolution, the Budget
Committees allocate the total on-budget budget authority and outlays set forth in the resolution to the
Appropriations Committees and the other committees
that have jurisdiction over spending. (See “Coverage of
the Budget,” later in this chapter, for more information on
on-budget and off-budget amounts.) Now that the BCA
has set statutory limits on discretionary budget authority, as discussed below, the budget resolution allocation
to the Appropriations Committees will equal those limits. Once the Congress resolves differences between the
House and Senate and agrees on a budget resolution, the
Appropriations Committees are required to divide their
allocations of budget authority and outlays among their
subcommittees. The Congress is not allowed to consider
appropriations bills (so-called “discretionary” spending)
that would breach or further breach an Appropriations
subcommittee’s target. The Congress is not allowed to
consider legislation that would cause the overall spending
target for any such committee to be breached or further
breached. The Budget Committees’ reports may discuss
assumptions about the level of funding for major programs. While these assumptions do not bind the other
committees and subcommittees, they may influence their
decisions.
The budget resolution may also contain “reconciliation
directives’’ (discussed below) to the committees responsible for tax laws and for mandatory spending—programs
not controlled by annual appropriation acts—in order to

119

11.  Budget Concepts

conform the level of receipts and this type of spending to
the targets in the budget resolution.
Since the concurrent resolution on the budget is not a
law, it does not require the President’s approval. However,
the Congress considers the President’s views in preparing budget resolutions, because legislation developed to
meet congressional budget allocations does require the
President’s approval. In some years, the President and
the joint leadership of Congress have formally agreed on
plans to reduce the deficit or balance the budget. These
agreements were then reflected in the budget resolution
and legislation passed for those years.
Once the Congress approves the budget resolution, it
turns its attention to enacting appropriations bills and
authorizing legislation. Appropriations bills are initiated
in the House. They provide the budgetary resources for
the majority of Federal programs, but only a minority of
Federal spending. The Appropriations Committee in each
body has jurisdiction over annual appropriations. These
committees are divided into subcommittees that hold
hearings and review detailed budget justification materials prepared by the Executive Branch agencies within
the subcommittee’s jurisdiction. After a bill has been
drafted by a subcommittee, the full committee and the
whole House, in turn, must approve the bill, sometimes
with amendments to the original version. The House then
forwards the bill to the Senate, where a similar review
follows. If the Senate disagrees with the House on particular matters in the bill, which is often the case, the two
bodies form a conference committee (consisting of some
Members of each body) to resolve the differences. The conference committee revises the bill and returns it to both
bodies for approval. When the revised bill is agreed to,
first in the House and then in the Senate, the Congress
sends it to the President for approval or veto.
Since 1977, when the start of the fiscal year was established as October 1, there have been only three fiscal years (1989, 1995, and 1997) for which the Congress
agreed to and enacted every regular appropriations bill
by that date. When one or more appropriations bills has
not been agreed to by this date, Congress usually enacts
a joint resolution called a “continuing resolution,’’ (CR)
which is an interim or stop-gap appropriations bill that
provides authority for the affected agencies to continue

operations at some specified level until a specific date or
until the regular appropriations are enacted. Occasionally,
a CR has funded a portion or all of the Government for the
entire year.
The Congress must present these CRs to the President
for approval or veto. In some cases, Presidents have rejected CRs because they contained unacceptable provisions. Left without funds, Government agencies were required by law to shut down operations—with exceptions
for some limited activities—until the Congress passed a
CR the President would approve. Shutdowns have lasted
for periods of a day to several weeks.
The Congress also provides budget authority in laws
other than appropriations acts. In fact, while annual appropriations acts fund the majority of Federal programs,
they account for only about a third of the total spending in a typical year. Authorizing legislation controls the
rest of the spending, which is commonly called “mandatory spending.” A distinctive feature of these authorizing
laws is that they provide agencies with the authority or
requirement to spend money without first requiring the
Appropriations Committees to enact funding. This category of spending includes interest the Government pays
on the public debt and the spending of several major programs, such as Social Security, Medicare, Medicaid, unemployment insurance, and Federal employee retirement.
This chapter discusses the control of budget authority and
outlays in greater detail under “Budget Authority and
Other Budgetary Resources, Obligations, and Outlays.”
Almost all taxes and most other receipts also result from
authorizing laws. Article I, Section 7, of the Constitution
provides that all bills for raising revenue shall originate
in the House of Representatives. In the House, the Ways
and Means Committee initiates tax bills; in the Senate,
the Finance Committee has jurisdiction over tax laws.
The budget resolution often includes reconciliation directives, which require authorizing committees to change
laws that affect receipts or mandatory spending. It directs each designated committee to report amendments
to the laws under the committee’s jurisdiction that would
achieve changes in the levels of receipts or reductions in
mandatory spending controlled by those laws. These directives specify the dollar amount of changes that each
designated committee is expected to achieve, but do not

Budget Calendar
The following timetable highlights the scheduled dates for significant budget events during a normal budget year:
Between the 1st Monday in January and
the 1st Monday in February����������������������

President transmits the budget

Six weeks later�����������������������������������������������

Congressional committees report budget estimates to Budget Committees

April 15�������������������������������������������������������������������������

Action to be completed on congressional budget resolution

May 15���������������������������������������������������������������������������

House consideration of annual appropriations bills may begin even if the budget resolution has
not been agreed to.

June 10�����������������������������������������������������������

House Appropriations Committee to report the last of its annual appropriations bills.

June 15�����������������������������������������������������������

Action to be completed on “reconciliation bill” by the Congress.

June 30�����������������������������������������������������������

Action on appropriations to be completed by House

July 15������������������������������������������������������������

President transmits Mid-Session Review of the Budget

October 1���������������������������������������������������������

Fiscal year begins

120

Analytical Perspectives

specify which laws are to be changed or the changes to be
made. However, the Budget Committees’ reports on the
budget resolution frequently discuss assumptions about
how the laws would be changed. Like other assumptions
in the report, they do not bind the committees of jurisdiction but may influence their decisions. A reconciliation instruction may also specify the total amount by which the
statutory limit on the public debt is to be changed.
The committees subject to reconciliation directives
draft the implementing legislation. Such legislation may,
for example, change the tax code, revise benefit formulas
or eligibility requirements for benefit programs, or authorize Government agencies to charge fees to cover some
of their costs. Reconciliation bills are typically omnibus
legislation, combining the legislation submitted by each
reconciled committee in a single act.
Such a large and complicated bill would be difficult
to enact under normal legislative procedures because it
usually involves changes to tax rates or to popular social programs, generally to reduce projected deficits. The
Senate considers such omnibus reconciliation acts under
expedited procedures that limit total debate on the bill.
To offset the procedural advantage gained by expedited
procedures, the Senate places significant restrictions on
the substantive content of the reconciliation measure itself, as well as on amendments to the measure. Any material in the bill that is extraneous or that contains changes
to the Federal Old-Age and Survivors Insurance and the
Federal Disability Insurance programs is not in order under the Senate’s expedited reconciliation procedures. Nongermane amendments are also prohibited. In addition,
the Senate does not allow reconciliation bills as a whole
to increase projected deficits or reduce projected surpluses. This Senate prohibition complements the Statutory
Pay-As-You-Go Act of 2010, discussed below. The House
does not allow reconciliation bills to increase mandatory spending in net, but does allow such bills to increase
deficits by reducing revenues. See “Budget Enforcement”
below for a description of the House special order that
permits the Budget Committee Chairman to certify that
the costs of certain types of legislation are zero.
Reconciliation acts, together with appropriations acts
for the year, are usually used to implement broad agreements between the President and the Congress on those
occasions where the two branches have negotiated a comprehensive budget plan. Reconciliation acts have sometimes included other matters, such as laws providing the
means for enforcing these agreements, as described under
“Budget Enforcement.”
Budget Enforcement
The Statutory Pay-As-You-Go Act of 2010 and the BCA
significantly amended laws pertaining to the budget
process, including the Balanced Budget and Emergency
Deficit Control Act of 1985 (BBEDCA). The Statutory
Pay-As-You-Go Act of 2010, enacted on February 12, 2010,
reestablished a statutory procedure to enforce a rule of
deficit neutrality on new revenue and mandatory spending legislation. The BCA, enacted on August 2, 2011, re-

instated limits (“caps”) on the amount of discretionary
budget authority that can be provided through the annual appropriations process. Similar enforcement mechanisms were established by the Budget Enforcement Act
of 1990, which also amended the BBEDCA, and were extended in 1993 and 1997, but expired at the end of FY
2002. The BCA also created a Joint Select Committee on
Deficit Reduction that was instructed to develop a bill to
reduce the Federal deficit by at least $1.5 trillion over a
10-year period.
The BBEDCA, as amended, divides spending into two
types—discretionary spending and direct or mandatory
spending. Discretionary spending is controlled through
annual appropriations acts. Funding for salaries and
other operating expenses of government agencies, for
example, is generally discretionary because it is usually provided by appropriations acts. Direct spending is
more commonly called mandatory spending. Mandatory
spending is controlled by permanent laws. Medicare
and Medicaid payments, unemployment insurance benefits, and farm price supports are examples of mandatory
spending, because permanent laws authorize payments
for those purposes. Receipts are included under the same
statutory rules that apply to mandatory spending because
permanent laws generally control receipts.
Discretionary cap enforcement. The BBEDCA, as
amended, specifies spending limits (“caps”) on discretionary budget authority for 2012 through 2021. The caps
were divided between security and nonsecurity categories for 2012 and 2013, with a single cap for all discretionary spending established for 2014 through 2021.
The security category includes discretionary budget
authority for the Departments of Defense, Homeland
Security, and Veterans Affairs, the National Nuclear
Security Administration, the Intelligence Community
Management account, and all budget accounts in the
international affairs budget function (budget function
150). The nonsecurity category includes all discretionary
budget authority not included in the security category.
For 2013 through 2021, the failure of the Joint Select
Committee on Deficit Reduction to propose, and Congress
to enact, a bill that reduced the deficit by at least $1.2
trillion resulted in revised security and nonsecurity categories. The “revised security category” (or defense category) includes discretionary budget authority in the
defense budget function 050, which primarily consists of
the Department of Defense. The “revised nonsecurity category” (or non-defense category) includes all discretionary
budget authority not included in the defense budget function 050. Passage of ATRA in January of 2013 restored
the caps for fiscal year 2013 to the security and nonsecurity split, and reduced the levels previously provided in law
by $4 billion in 2013 (split equally between the security
and nonsecurity categories) and $8 billion in 2014 (split
equally between the revised security and nonsecurity, or
defense and nondefense categories).
The BBEDCA, as amended, includes general requirements for OMB to adjust the caps for changes in concepts
and definitions; appropriations designated by Congress
and the President as emergency requirements; and ap-

11.  Budget Concepts

propriations designated by Congress and the President
for Overseas Contingency Operations/Global War on
Terrorism. The BBEDCA, as amended, also specifies
adjustments, which are capped at certain amounts, for
appropriations for continuing disability reviews and redeterminations by the Social Security Administration;
the health care fraud and abuse control program at the
Department of Health and Human Services; and appropriations designated by Congress as being for disaster
relief.
The BBEDCA, as amended, requires OMB to provide
cost estimates of each appropriations act in a report to
Congress within 7 days after enactment of such act and to
publish three sequestration reports—a “preview” report
when the President submits the budget; an “update” report in August, and a “final” report within 15 days after
the end of a session of Congress.
The preview report discusses the status of discretionary sequestration, based on current law. This report also
explains the adjustments that are required by law to the
discretionary caps and publishes the revised caps. The
update and final reports revise the preview report estimates to reflect the effects of newly enacted discretionary
laws. In addition, the update report must contain a preview estimate of the adjustment for disaster funding for
the upcoming fiscal year.
If OMB’s final sequestration report for a given fiscal
year indicates that the amount of discretionary budget
authority provided in appropriations acts for that year exceeds the statutory limit on budget authority for that category in that year, the President must issue a sequestration order canceling budgetary resources in nonexempt
accounts within that category by the amount necessary
to eliminate the breach. If a continuing resolution is in
effect when OMB issues its final sequester report, calculations will be based on the annualized amount provided
by that continuing resolution. Under sequestration, each
nonexempt account within a category is reduced by a dollar amount calculated by multiplying the enacted level of
sequestrable budgetary resources in that account by the
uniform percentage necessary to eliminate a breach within that category. The BBEDCA, as amended, specifies special rules for reducing some programs and exempts some
programs from sequestration entirely. For example, the
BBEDCA, as amended, limits the reduction for certain
health and medical care accounts to 2 percent. During
the 1990s, the threat of sequestration proved sufficient to
ensure compliance with the discretionary spending limits.
In that respect, discretionary sequestration can be viewed
first as an incentive for compliance and second as a remedy for noncompliance. This is also true for mandatory
sequestration under PAYGO, discussed below.
From the end of a session of Congress through the following June 30th, a within-session discretionary sequestration is imposed if appropriations for the current year
cause a cap to be breached. If a breach occurs in the last
quarter of a fiscal year (i.e., July 1 through September
30), instead of causing a sequestration, the breach would
cause the applicable spending limit for the following fiscal year to be reduced by the amount of the breach. These

121
requirements ensure that supplemental appropriations
enacted during the fiscal year are subject to the budget
enforcement provisions.
Direct spending enforcement. The Statutory PayAs-You-Go Act of 2010 requires that new legislation
changing governmental receipts or mandatory spending or collections must be enacted on a “pay-as-you-go”
(PAYGO) basis; that is, that the cumulative effects of
such legislation not increase projected on-budget deficits.
Unlike the budget enforcement mechanism for discretionary programs, PAYGO is a permanent requirement, and it
does not impose a cap on spending or a floor on revenues.
Instead, PAYGO requires that legislation reducing revenues must be fully offset by cuts in mandatory programs
or by revenue increases, and that any bills increasing
mandatory expenditures must be fully offset by revenue
increases or cuts in mandatory programs. This requirement also is enforced by a sequestration process, separate
from that described above in reference to the BCA, which
requires automatic across-the-board cuts in selected mandatory programs in the event that legislation taken as a
whole does not meet the PAYGO standard established by
the law. The PAYGO law establishes special scorecards
and scorekeeping rules.
The budgetary effects of revenue and direct spending
provisions, including both costs and savings, are recorded by OMB on two PAYGO scorecards in which costs or
savings are averaged over rolling five-year and 10-year
periods. The budgetary effects of PAYGO measures may
be directed in legislation by reference to statements inserted into the Congressional Record by the chairmen of
the House and Senate Budget Committees. These statements reflect the estimates of the Budget Committees,
which are usually informed by cost estimates prepared by
the Congressional Budget Office. If this procedure is not
followed, then the budgetary effects of the legislation are
determined by OMB.
Within 14 business days after a congressional session
ends, OMB issues an annual PAYGO report and determines whether a violation of the PAYGO requirement has
occurred. If either scorecard shows net costs in the budget year column, the President is required to issue a sequestration order implementing across-the-board cuts to
nonexempt mandatory programs by an amount sufficient
to offset the net costs on the PAYGO scorecard.
The Statutory Pay-As-You-Go Act of 2010 exempted
the costs of certain legislation from the PAYGO scorecard, as long as that legislation was enacted by December
31, 2011. Extension of the middle-class provisions of the
2001 and 2003 tax cuts, as amended in 2009, did not have
to be offset. In addition, extension through 2014 of relief
from the scheduled deep reduction in Medicare physician
reimbursement rates was also exempt from PAYGO, but
only up to the reimbursement rates in effect in 2009. In
four bills between June 2010 and December of 2011, the
Congress enacted temporary relief to the Sustainable
Growth Rate (SGR) provision of Medicare at payment
rates 2.2 percent above those defined in the Statutory
Pay-As-You-Go Act of 2010, so those incremental costs appeared on the PAYGO scorecards. Congress chose to off-

122
set the entire costs of the relief, even though such offsets
were not required. Because the December 31, 2011 deadline for enacting legislation extending these policies has
passed, current law provides for any further extensions to
be subject to the PAYGO rules.
In addition, if Congress designates a provision of mandatory spending or receipts legislation as an emergency
requirement, the effect of the provision is not scored as
PAYGO.
The PAYGO rules also apply to the outlays resulting
from outyear changes in mandatory programs made in
appropriations acts and to all revenue changes made in
appropriations acts. However, outyear changes to mandatory programs that have zero net outlay effects over the
sum of the current year and the next five fiscal years are
not considered PAYGO.
The PAYGO rules do not apply to increases in mandatory spending or decreases in receipts that result automatically under existing law. For example, mandatory
spending for benefit programs, such as unemployment
insurance, rises when the population of eligible beneficiaries rises, and many benefit payments are automatically
increased for inflation under existing laws. Additional
information on the Statutory Pay-As-You-Go Act of 2010
can be found on OMB’s website at:www.whitehouse.gov/
omb/paygo_description.
The Senate imposes points of order against consideration of tax or mandatory spending legislation that would
violate the PAYGO principle, although the time periods
covered by the Senate’s rule and the treatment of previously enacted costs or savings may differ in some respects
from the requirements of the Statutory Pay-As-You-Go
Act of 2010.
The House, in contrast, imposes points of order on legislation increasing mandatory spending in net, whether
or not those costs are offset by revenue increases, but
the House rule does not constrain the size of tax cuts
or require them to be offset. On January 3, 2013, the
House agreed to a special order that permits the Budget
Committee Chairman to certify that the costs of certain
types of legislation are zero when introducing pay-as-yougo estimates into the Congressional Record:
•	 Repeal of the Affordable Care Act.
•	 Extension of EGTRRA and JGTRRA.
•	 Extension of AMT relief and estate tax repeal.
•	 Creation of a 20 percent deduction in income to
small businesses.
•	 Enactment of legislation implementing trade agreements.
Joint Committee reductions. The failure of the Joint
Select Committee on Deficit Reduction to propose, and the
Congress to enact, legislation to reduce the deficit by at
least $1.2 trillion triggered automatic reductions to budgetary resources in fiscal years 2013 through 2021. In
fiscal year 2013, these reductions were first scheduled to
occur on January 2, 2013. The American Taxpayer Relief

Analytical Perspectives

Act of 2012 postponed the date on which the reductions
must be ordered until March 1, 2013. On that date, the
President was required by law to issue the order to reduce
budgetary resources for fiscal year 2013 as specified in
the BBEDCA.2
The 2014 Budget includes balanced and responsible
deficit reduction proposals that, in total, exceed the $1.2
trillion deficit reduction target. The President will work
with the Congress to enact deficit reduction sufficient to
replace and repeal the Joint Committee reductions required by the BCA in fiscal years 2013 through 2021.
OMB is required to calculate the amount of the deficit
reduction required for each of fiscal years 2013 through
2021. The automatic spending reduction process entails
the following steps:
•	 The statutory discretionary spending limits for 2013
through 2021 are revised by redefining the security
and nonsecurity categories, as outlined in the discretionary cap enforcement section above.3
•	 The $1.2 trillion savings target is to be reduced by 18
percent to account for debt service. The remainder
is spread in equal amounts across the nine years,
2013 through 2021. Then, for fiscal year 2013, that
amount was reduced by $24 billion.
•	 The total amount of spending reductions required
for each year is divided equally between the defense
and nondefense functions.
•	 The annual amounts of spending reductions required each year for each type of spending is to be
divided proportionally between discretionary and direct spending programs, using the discretionary BA
limit and the most recent baseline estimate of nonexempt mandatory outlays as the base.
•	 The reduction each year for mandatory programs
is to be achieved by a sequestration of non-exempt
mandatory spending. The sequestration order for
fiscal year 2013 was released on March 1, 2013, as
described above. The sequestration order for each
of the fiscal years 2014 through 2021 is required to
be issued with the release of the President’s Budget.
The reductions required for 2014 are discussed in
the OMB Sequestration Preview Report for FY 2014,
which is available on the OMB website. The sequestration of budgetary resources goes into effect on the
first day (October 1) of those fiscal years.
The reduction for discretionary programs for 2013,
achieved by a sequestration of non-exempt discretionary
spending, became effective March 1, 2013, as described
above. For fiscal years 2014 through 2021, the reduction
2  OMB’s calculations of the percentage and dollar amount of the required reduction for each non-exempt budget account and an explanation of the calculations can be found in the OMB Report to the Congress
on the Joint Committee Sequestration for Fiscal Year 2013.
3  Although the 2013 caps reflect the original security and nonsecurity
categories for discretionary enforcement, the 2013 sequestration was
calculated using, and applied to, the defense and non-defense categories
pursuant to the American Taxpayer Relief Act.

123

11.  Budget Concepts

of discretionary spending is to be taken by reducing the
discretionary cap year by year. This reduction will be included as an adjustment to the discretionary spending
limits in the sequestration preview report for fiscal year
2014 and subsequent years.
Budget Execution
Government agencies may not spend or obligate
more than the Congress has appropriated, and they
may use funds only for purposes specified in law. The
Antideficiency Act prohibits them from spending or obligating the Government to spend in advance of an appropriation, unless specific authority to do so has been provided in law. Additionally, the Act requires the President
to apportion the budgetary resources available for most
executive branch agencies. The President has delegated
this authority to OMB. Some apportionments are by time
periods (usually by quarter of the fiscal year), some are
by projects or activities, and others are by a combination
of both. Agencies may request OMB to reapportion funds
during the year to accommodate changing circumstances.
This system helps to ensure that funds do not run out
before the end of the fiscal year.

During the budget execution phase, the Government
sometimes finds that it needs more funding than the
Congress has appropriated for the fiscal year because of
unanticipated circumstances. For example, more might
be needed to respond to a severe natural disaster. Under
such circumstances, the Congress may enact a supplemental appropriation.
On the other hand, the President may propose to reduce a previously enacted appropriation. The President
may propose to either “cancel” or “rescind” the amount.
If the President initiates the withholding of funds while
the Congress considers his request, the amounts are apportioned as “deferred” or “withheld pending rescission”
on the OMB-approved apportionment form. Agencies are
instructed not to withhold funds without the prior approval of OMB. When OMB approves a withholding, the
Impoundment Control Act requires that the President
transmit a “special message” to the Congress. The historical reason for the special message is to inform the Congress
that the President has unilaterally withheld funds that
were enacted in regular appropriations acts. The notification allows the Congress to consider the proposed rescission in a timely way. The last time the President initiated
the withholding of funds was in fiscal year 2000.

COVERAGE OF THE BUDGET
Federal Government and Budget Totals
The budget documents provide information on all
Federal agencies and programs. However, because the
laws governing Social Security (the Federal Old-Age and
Survivors Insurance and the Federal Disability Insurance
trust funds) and the Postal Service Fund require that the
receipts and outlays for those activities be excluded from
the budget totals and from the calculation of the deficit
or surplus, the budget presents on-budget and off-budget
totals. The off-budget totals include the Federal transactions excluded by law from the budget totals. The on-budget and off-budget amounts are added together to derive
the totals for the Federal Government. These are sometimes referred to as the unified or consolidated budget
totals.
It is not always obvious whether a transaction or activity should be included in the budget. Where there is
a question, OMB normally follows the recommendation
of the 1967 President’s Commission on Budget Concepts
to be comprehensive of the full range of Federal agencies, programs, and activities. In recent years, for example, the budget has included the transactions of the
Affordable Housing Program funds, the Universal Service
Fund, the Public Company Accounting Oversight Board,
the Securities Investor Protection Corporation, Guaranty
Agencies Reserves, the National Railroad Retirement
Investment Trust, the United Mine Workers Combined
Benefits Fund,
the Federal Financial Institutions
Examination Council, Electric Reliability Organizations
(EROs) established pursuant to the Energy Policy Act of
2005, and the Corporation for Travel Promotion.

In contrast, the budget excludes tribal trust funds
that are owned by Indian tribes and held and managed
by the Government in a fiduciary capacity on the tribes’
behalf. These funds are not owned by the Government,
the Government is not the source of their capital, and the
Government’s control is limited to the exercise of fiduciary duties. Similarly, the transactions of Governmentsponsored enterprises, such as the FHLBs, are not inTable 11–1.  Totals For the Budget and
the Federal Government
(In billions of dollars)
 

2012
Actual

Estimate
2013

2014

Budget authority
Unified ������������������������������������������������������������������������
On-budget ���������������������������������������������������������������
Off-budget ���������������������������������������������������������������

3,576
3,065
512

3,767
3,122
645

3,796
3,072
724

Receipts:
Unified ������������������������������������������������������������������������
On-budget ���������������������������������������������������������������
Off-budget ���������������������������������������������������������������

2,450
1,881
570

2,712
2,039
673

3,034
2,294
739

Outlays:
Unified ������������������������������������������������������������������������
On-budget ���������������������������������������������������������������
Off-budget ���������������������������������������������������������������

3,537
3,030
508

3,685
3,045
640

3,778
3,063
715

Surplus / Deficit (–):
Unified ������������������������������������������������������������������������
On-budget ���������������������������������������������������������������
Off-budget ���������������������������������������������������������������

–1,087
–1,149
62

–973
–1,006
33

–744
–768
24

124

Analytical Perspectives

cluded in the on-budget or off-budget totals. Federal laws
established these enterprises for public policy purposes,
but they are privately owned and operated corporations.
Nevertheless, because of their public charters, the budget
discusses them and reports summary financial data in
the budget Appendix and in some detailed tables.
The budget also excludes the revenues from copyright
royalties and spending for subsequent payments to copyright holders where (1) the law allows copyright owners
and users to voluntarily set the rate paid for the use of
protected material, and (2) the amount paid by users of
copyrighted material to copyright owners is related to the
frequency or quantity of the material used. The budget
excludes license royalties collected and paid out by the
Copyright Office for the retransmission of network broadcasts via cable collected under 17 U.S.C. 111 because these
revenues meet both of these conditions. The budget will
continue to include the royalties collected and paid out for
license fees for digital audio recording technology under
17 U.S.C. 1004, since the amount of license fees paid is
unrelated to usage of the material.
The Appendix includes a presentation for the Board of
Governors of the Federal Reserve System for information
only. The amounts are not included in either the on-budget or off-budget totals because of the independent status of the System within the Government. However, the
Federal Reserve System transfers its net earnings to the
Treasury, and the budget records them as receipts.
Chapter 12 of this volume, “Coverage of the Budget,”
provides more information on this subject.
Functional Classification
The functional classification is used to array budget
authority, outlays, and other budget data according to
the major purpose served—such as agriculture, transportation, income security, and national defense. There
are 20 major functions, 17 of which are concerned with
broad areas of national need and are further divided
into subfunctions. For example, the Agriculture function
comprises the subfunctions Farm Income Stabilization
and Agricultural Research and Services. The functional
array meets the Congressional Budget Act requirement
for a presentation in the budget by national needs and
agency missions and programs. The remaining three
functions—Net Interest, Undistributed Offsetting
Receipts, and Allowances—are also further divided into
subfunctions but these functions are included to ensure
full coverage of the Federal budget.
The following criteria are used in establishing functional categories and assigning activities to them:
•	 A function encompasses activities with similar purposes, emphasizing what the Federal Government
seeks to accomplish rather than the means of accomplishment, the objects purchased, the clientele
or geographic area served (except in the cases of
functions 450 for Community and Regional Development, 570 for Medicare, 650 for Social Security,
and 700 for Veterans Benefits and Services), or the

Federal agency conducting the activity (except in
the case of subfunction 051 in the National Defense
function, which is used only for defense activities
under the Department of Defense—Military).
•	 A function must be of continuing national importance, and the amounts attributable to it must be
significant.
•	 Each basic unit being classified (generally the appropriation or fund account) usually is classified according to its primary purpose and assigned to only
one subfunction. However, some large accounts that
serve more than one major purpose are subdivided
into two or more functions or subfunctions.
Detailed functional tables, which provide information
on Government activities by function and subfunction,
are available online at www.whitehouse.gov/omb/budget/Analytical_Perspectives and on the Budget CD-ROM.
.
Agencies, Accounts, Programs,
Projects, and Activities
Various summary tables in the Analytical Perspectives
volume of the Budget provide information on budget authority, outlays, and offsetting collections and receipts
arrayed by Federal agency. A table that lists budget authority and outlays by budget account within each agency
and the totals for each agency of budget authority, outlays, and receipts that offset the agency spending totals
is available online at www.whitehouse.gov/omb/budget/
Analytical_Perspectives and on the Budget CD-ROM. The
Appendix provides budgetary, financial, and descriptive
information about programs, projects, and activities by
account within each agency.
Types of Funds
Agency activities are financed through Federal funds
and trust funds.
Federal funds comprise several types of funds.
Receipt accounts of the general fund, which is the greater part of the budget, record receipts not earmarked by
law for a specific purpose, such as income tax receipts.
The general fund also includes the proceeds of general
borrowing. General fund appropriations accounts record
general fund expenditures. General fund appropriations
draw from general fund receipts and borrowing collectively and, therefore, are not specifically linked to receipt
accounts. Special funds consist of receipt accounts for
Federal fund receipts that laws have designated for specific purposes and the associated appropriation accounts
for the expenditure of those receipts.
Public enterprise funds are revolving funds used for
programs authorized by law to conduct a cycle of business-type operations, primarily with the public, in which
outlays generate collections.
Intragovernmental funds are revolving funds that
conduct business-type operations primarily within and

125

11.  Budget Concepts

between Government agencies. The collections and the
outlays of revolving funds are recorded in the same budget account.
Trust funds account for the receipt and expenditure
of monies by the Government for carrying out specific
purposes and programs in accordance with the terms of a
statute that designates the fund as a trust fund (such as
the Highway Trust Fund) or for carrying out the stipulations of a trust where the Government itself is the beneficiary (such as any of several trust funds for gifts and donations for specific purposes). Trust revolving funds are
trust funds credited with collections earmarked by law to
carry out a cycle of business-type operations.
The Federal budget meaning of the term “trust,” as applied to trust fund accounts, differs significantly from its
private-sector usage. In the private sector, the beneficiary
of a trust usually owns the trust’s assets, which are managed by a trustee who must follow the stipulations of the
trust. In contrast, the Federal Government owns the assets of most Federal trust funds, and it can raise or lower
future trust fund collections and payments, or change the
purposes for which the collections are used, by changing
existing laws. There is no substantive difference between
a trust fund and a special fund or between a trust revolving fund and a public enterprise revolving fund.
However, in some instances, the Government does
act as a true trustee of assets that are owned or held for
the benefit of others. For example, it maintains accounts
on behalf of individual Federal employees in the Thrift
Savings Fund, investing them as directed by the individual employee. The Government accounts for such funds
in deposit funds, which are not included in the budget.
(Chapter 27 of this volume, “Trust Funds and Federal
Funds,” provides more information on this subject.)

Budgeting for Full Costs
A budget is a financial plan for allocating resources—
deciding how much the Federal Government should spend
in total, program by program, and for the parts of each
program and deciding how to finance the spending. The
budgetary system provides a process for proposing policies, making decisions, implementing them, and reporting
the results. The budget needs to measure costs accurately
so that decision makers can compare the cost of a program with its benefits, the cost of one program with another, and the cost of one method of reaching a specified
goal with another. These costs need to be fully included in
the budget up front, when the spending decision is made,
so that executive and congressional decision makers have
the information and the incentive to take the total costs
into account when setting priorities.
The budget includes all types of spending, including
both current operating expenditures and capital investment, and to the extent possible, both are measured on
the basis of full cost. Questions are often raised about the
measure of capital investment. The present budget provides policymakers the necessary information regarding
investment spending. It records investment on a cash basis, and it requires the Congress to provide budget authority before an agency can obligate the Government to
make a cash outlay. By these means, it causes the total
cost of capital investment to be compared up front in a
rough and ready way with the total expected future net
benefits. Since the budget measures only cost, the benefits with which these costs are compared, based on policy
makers’ judgment, must be presented in supplementary
materials. Such a comparison of total costs with benefits
is consistent with the formal method of cost-benefit analysis of capital projects in government, in which the full cost
of a capital asset as the cash is paid out is compared with
the full stream of future benefits (all in terms of present
values). (Chapter 20 of this volume, “Federal Investment,’’
provides more information on capital investment.)

RECEIPTS, OFFSETTING COLLECTIONS, AND OFFSETTING RECEIPTS
In General

Governmental Receipts

The budget records amounts collected by Government
agencies two different ways. Depending on the nature of
the activity generating the collection and the law that established the collection, they are recorded as either:

Governmental receipts are collections that result from
the Government’s exercise of its sovereign power to tax or
otherwise compel payment. Sometimes they are called receipts, Federal receipts, or Federal revenues. They consist
mostly of individual and corporation income taxes and social
insurance taxes, but also include excise taxes, compulsory
user charges, regulatory fees, customs duties, court fines,
certain license fees, and deposits of earnings by the Federal
Reserve System. Total receipts for the Federal Government
include both on-budget and off-budget receipts (see Table
11–1, “Totals for the Budget and the Federal Government,”
which appears earlier in this chapter.) Chapter 14 of this
volume, “Governmental Receipts,’’ provides more information on governmental receipts.

•	 Governmental receipts, which are compared in total to outlays (net of offsetting collections and offsetting receipts) in calculating the surplus or deficit; or
•	 Offsetting collections or offsetting receipts,
which are deducted from gross outlays to calculate
net outlay figures.

126

Analytical Perspectives

Offsetting Collections and Offsetting Receipts

Offsetting Collections

Offsetting collections and offsetting receipts are recorded as offsets to (deductions from) spending, not as additions on the receipt side of the budget. These amounts
are recorded as offsets to outlays so that the budget totals
represent governmental rather than market activity and
reflect the Government’s net transactions with the public.
They are recorded in one of two ways, based on interpretation of laws and longstanding budget concepts and practice. They are offsetting collections when the collections
are authorized by law to be credited to expenditure accounts and are generally available for expenditure without further legislation. Otherwise, they are deposited in
receipt accounts and called offsetting receipts.
Offsetting collections and offsetting receipts result
from any of the following types of transactions:

Some laws authorize agencies to credit collections directly to the account from which they will be spent and,
usually, to spend the collections for the purpose of the account without further action by the Congress. Most revolving funds operate with such authority. For example,
a permanent law authorizes the Postal Service to use
collections from the sale of stamps to finance its operations without a requirement for annual appropriations.
The budget records these collections in the Postal Service
Fund (a revolving fund) and records budget authority in
an amount equal to the collections. In addition to revolving funds, some agencies are authorized to charge fees to
defray a portion of costs for a program that are otherwise
financed by appropriations from the general fund and
usually to spend the collections without further action by
the Congress. In such cases, the budget records the offsetting collections and resulting budget authority in the
program’s general fund expenditure account. Similarly,
intragovernmental collections authorized by some laws
may be recorded as offsetting collections and budget authority in revolving funds or in general fund expenditure
accounts.
Sometimes appropriations acts or provisions in other
laws limit the obligations that can be financed by offsetting collections. In those cases, the budget records budget
authority in the amount available to incur obligations, not
in the amount of the collections.
Offsetting collections credited to expenditure accounts
automatically offset the outlays at the expenditure account level. Where accounts have offsetting collections,
the budget shows the budget authority and outlays of
the account both gross (before deducting offsetting collections) and net (after deducting offsetting collections).
Totals for the agency, subfunction, and overall budget are
net of offsetting collections.

•	 Business-like transactions or market-oriented
activities with the public—these include voluntary collections from the public in exchange for
goods or services, such as the proceeds from the sale
of postage stamps, the fees charged for admittance
to recreation areas, and the proceeds from the sale
of Government-owned land; and reimbursements
for damages, such as recoveries by the Hazardous
Substance Superfund. The budget records these
amounts as offsetting collections from non-Federal
sources (for offsetting collections) or as proprietary
receipts (for offsetting receipts.
•	 Intragovernmental transactions—collections
from other Federal Government accounts. The budget records collections by one Government account
from another as offsetting collections from Federal
sources (for offsetting collections) or as intragovernmental receipts (for offsetting receipts). For example, the General Services Administration rents
office space to other Government agencies and records their rental payments as offsetting collections
from Federal sources in the Federal Buildings Fund.
These transactions are exactly offsetting and do
not affect the surplus or deficit. However, they are
an important accounting mechanism for allocating
costs to the programs and activities that cause the
Government to incur the costs.
•	 Voluntary gifts and donations—gifts and donations of money to the Government, which are treated
as offsets to budget authority and outlays.
•	 Offsetting governmental transactions—collections
from the public that are governmental in nature and
should conceptually be treated like Federal revenues
and compared in total to outlays (e.g., tax receipts,
regulatory fees, compulsory user charges, custom duties, license fees) but required by law or longstanding
practice to be misclassified as offsetting. The budget
records amounts from non-Federal sources that are
governmental in nature as offsetting governmental collections (for offsetting collections) or as offsetting governmental receipts (for offsetting receipts).

Offsetting Receipts
Collections that are offset against gross outlays but are
not authorized to be credited to expenditure accounts are
credited to receipt accounts and are called offsetting receipts. Offsetting receipts are deducted from budget authority and outlays in arriving at total budget authority
and outlays. However, unlike offsetting collections credited to expenditure accounts, offsetting receipts do not
offset budget authority and outlays at the account level.
In most cases, they offset budget authority and outlays at
the agency and subfunction levels.
Proprietary receipts from a few sources, however, are
not offset against any specific agency or function and
are classified as undistributed offsetting receipts. They
are deducted from the Government-wide totals for budget authority and outlays. For example, the collections of
rents and royalties from outer continental shelf lands are
undistributed because the amounts are large and for the
most part are not related to the spending of the agency
that administers the transactions and the subfunction
that records the administrative expenses.

127

11.  Budget Concepts

Similarly, two kinds of intragovernmental transactions—agencies’ payments as employers into Federal
employee retirement trust funds and interest received
by trust funds—are classified as undistributed offsetting receipts. They appear instead as special deductions
in computing total budget authority and outlays for the
Government rather than as offsets at the agency level.
This special treatment is necessary because the amounts
are so large they would distort measures of the agency’s
activities if they were attributed to the agency.
User Charges
User charges are fees assessed on individuals or organizations for the provision of Government services and
for the sale or use of Government goods or resources. The
payers of the user charge must be limited in the authorizing legislation to those receiving special benefits from, or
subject to regulation by, the program or activity beyond

the benefits received by the general public or broad segments of the public (such as those who pay income taxes
or customs duties). Policy regarding user charges is established in OMB Circular A–25, “User Charges.” The term
encompasses proceeds from the sale or use of Government
goods and services, including the sale of natural resources
(such as timber, oil, and minerals) and proceeds from asset sales (such as property, plant, and equipment). User
charges are not necessarily dedicated to the activity they
finance and may be credited to the general fund of the
Treasury.
The term “user charge” does not refer to a separate
budget category for collections. User charges are classified in the budget as receipts, offsetting receipts, or offsetting collections according to the principles explained
previously.
See Chapter 15, “Offsetting Collections and Offsetting
Receipts,” for more information on the classification of
user charges.

BUDGET AUTHORITY, OBLIGATIONS, AND OUTLAYS
Budget authority, obligations, and outlays are the primary benchmarks and measures of the budget control
system. The Congress enacts laws that provide agencies
with spending authority in the form of budget authority.
Before agencies can use these resources—obligate this
budget authority—OMB must approve their spending
plans. After the plans are approved, agencies can enter
into binding agreements to purchase items or services
or to make grants or other payments. These agreements
are recorded as obligations of the United States and deducted from the amount of budgetary resources available
to the agency. When payments are made, the obligations
are liquidated and outlays recorded. These concepts are
discussed more fully below.
Budget Authority and Other Budgetary Resources
Budget authority is the authority provided in law to
enter into legal obligations that will result in immediate
or future outlays of the Government. In other words, it is
the amount of money that agencies are allowed to commit
to be spent in current or future years. Government officials may obligate the Government to make outlays only
to the extent they have been granted budget authority.
The budget records new budget authority as a dollar
amount in the year when it first becomes available for obligation. When permitted by law, unobligated balances of
budget authority may be carried over and used in the next
year. The budget does not record these balances as budget
authority again. They do, however, constitute a budgetary
resource that is available for obligation. In some cases,
a provision of law (such as a limitation on obligations or
a benefit formula) precludes the obligation of funds that
would otherwise be available for obligation. In such cases,
the budget records budget authority equal to the amount
of obligations that can be incurred. A major exception to
this rule is for the highway and mass transit programs
financed by the Highway Trust Fund, where budget au-

thority is measured as the amount of contract authority
(described later in this chapter) provided in authorizing
statutes, even though the obligation limitations enacted
in annual appropriations acts restrict the amount of contract authority that can be obligated.
In deciding the amount of budget authority to request
for a program, project, or activity, agency officials estimate the total amount of obligations they will need to
incur to achieve desired goals and subtract the unobligated balances available for these purposes. The amount
of budget authority requested is influenced by the nature
of the programs, projects, or activities being financed. For
current operating expenditures, the amount requested
usually covers the needs for the fiscal year. For major procurement programs and construction projects, agencies
generally must request sufficient budget authority in the
first year to fully fund an economically useful segment of
a procurement or project, even though it may be obligated
over several years. This full funding policy is intended
to ensure that the decision-makers take into account all
costs and benefits fully at the time decisions are made
to provide resources. It also avoids sinking money into a
procurement or project without being certain if or when
future funding will be available to complete the procurement or project.
Budget authority takes several forms:
•	 Appropriations, provided in annual appropriations acts or authorizing laws, permit agencies to
incur obligations and make payment;
•	 Borrowing authority, usually provided in permanent laws, permits agencies to incur obligations but
requires them to borrow funds, usually from the general fund of the Treasury, to make payment;
•	 Contract authority, usually provided in permanent
law, permits agencies to incur obligations in advance
of a separate appropriation of the cash for payment

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Analytical Perspectives

or in anticipation of the collection of receipts that
can be used for payment; and
•	 Spending authority from offsetting collections,
usually provided in permanent law, permits agencies to credit offsetting collections to an expenditure
account, incur obligations, and make payment using
the offsetting collections.
Because offsetting collections and offsetting receipts
are deducted from gross budget authority, they are referred to as negative budget authority for some purposes,
such as Congressional Budget Act provisions that pertain
to budget authority.
Authorizing statutes usually determine the form of
budget authority for a program. The authorizing statute
may authorize a particular type of budget authority to be
provided in annual appropriations acts, or it may provide
one of the forms of budget authority directly, without the
need for further appropriations.
An appropriation may make funds available from the
general fund, special funds, or trust funds, or authorize
the spending of offsetting collections credited to expenditure accounts, including revolving funds. Borrowing authority is usually authorized for business-like activities
where the activity being financed is expected to produce
income over time with which to repay the borrowing with
interest. The use of contract authority is traditionally limited to transportation programs.
New budget authority for most Federal programs is normally provided in annual appropriations acts. However,
new budget authority is also made available through
permanent appropriations under existing laws and does
not require current action by the Congress. Much of the
permanent budget authority is for trust funds, interest
on the public debt, and the authority to spend offsetting
collections credited to appropriation or fund accounts. For
most trust funds, the budget authority is appropriated automatically under existing law from the available balance
of the fund and equals the estimated annual obligations
of the funds. For interest on the public debt, budget authority is provided automatically under a permanent appropriation enacted in 1847 and equals interest outlays.
Annual appropriations acts generally make budget authority available for obligation only during the fiscal year
to which the act applies. However, they frequently allow
budget authority for a particular purpose to remain available for obligation for a longer period or indefinitely (that
is, until expended or until the program objectives have
been attained). Typically, budget authority for current operations is made available for only one year, and budget
authority for construction and some research projects is
available for a specified number of years or indefinitely.
Most budget authority provided in authorizing statutes,
such as for most trust funds, is available indefinitely. If
budget authority is initially provided for a limited period
of availability, an extension of availability would require
enactment of another law (see “Reappropriation” later in
this chapter).
Budget authority that is available for more than one
year and not obligated in the year it becomes available is

carried forward for obligation in a following year. In some
cases, an account may carry forward unobligated budget
authority from more than one prior year. The sum of such
amounts constitutes the account’s unobligated balance.
Most of these balances had been provided for specific uses
such as the multi-year construction of a major project and
so are not available for new programs. A small part may
never be obligated or spent, primarily amounts provided
for contingencies that do not occur or reserves that never
have to be used.
Amounts of budget authority that have been obligated
but not yet paid constitute the account’s unpaid obligations. For example, in the case of salaries and wages, one
to three weeks elapse between the time of obligation and
the time of payment. In the case of major procurement
and construction, payments may occur over a period of
several years after the obligation is made. Unpaid obligations (which are made up of accounts payable and undelivered orders) net of the accounts receivable and unfilled
customers’ orders are defined by law as the obligated
balances. Obligated balances of budget authority at the
end of the year are carried forward until the obligations
are paid or the balances are canceled. (A general law provides that the obligated balances of budget authority that
was made available for a definite period is automatically
cancelled five years after the end of the period.) Due to
such flows, a change in the amount of budget authority
available in any one year may change the level of obligations and outlays for several years to come. Conversely,
a change in the amount of obligations incurred from
one year to the next does not necessarily result from an
equal change in the amount of budget authority available
for that year and will not necessarily result in an equal
change in the level of outlays in that year.
The Congress usually makes budget authority available on the first day of the fiscal year for which the appropriations act is passed. Occasionally, the appropriations
language specifies a different timing. The language may
provide an advance appropriation—budget authority
that does not become available until one year or more
beyond the fiscal year for which the appropriations act
is passed. Forward funding is budget authority that is
made available for obligation beginning in the last quarter
of the fiscal year (beginning on July 1) for the financing of
ongoing grant programs during the next fiscal year. This
kind of funding is used mostly for education programs, so
that obligations for education grants can be made prior to
the beginning of the next school year. For certain benefit
programs funded by annual appropriations, the appropriation provides for advance funding—budget authority
that is to be charged to the appropriation in the succeeding year, but which authorizes obligations to be incurred
in the last quarter of the current fiscal year if necessary
to meet benefit payments in excess of the specific amount
appropriated for the year. When such authority is used,
an adjustment is made to increase the budget authority
for the fiscal year in which it is used and to reduce the
budget authority of the succeeding fiscal year.
Provisions of law that extend into a new fiscal year
the availability of unobligated amounts that have ex-

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11.  Budget Concepts

pired or would otherwise expire are called reappropriations. Reappropriations of expired balances that are
newly available for obligation in the current or budget
year count as new budget authority in the fiscal year in
which the balances become newly available. For example,
if a 2013 appropriations act extends the availability of
unobligated budget authority that expired at the end of
2012, new budget authority would be recorded for 2013.
This scorekeeping is used because a reappropriation has
exactly the same effect as allowing the earlier appropriation to expire at the end of 2012 and enacting a new appropriation for 2013.
For purposes of the BBEDCA and the Statutory PayAs-You-Go Act of 2010 (discussed earlier under “Budget
Enforcement’’), the budget classifies budget authority as
discretionary or mandatory. This classification indicates whether an appropriations act or authorizing legislation controls the amount of budget authority that is
available. Generally, budget authority is discretionary if
provided in an annual appropriations act and mandatory
if provided in authorizing legislation. However, the budget authority provided in annual appropriations acts for
certain specifically identified programs is also classified
as mandatory by OMB and the congressional scorekeepers. This is because the authorizing legislation for these
programs entitles beneficiaries—persons, households, or
other levels of government—to receive payment, or otherwise legally obligates the Government to make payment
and thereby effectively determines the amount of budget
authority required, even though the payments are funded
by a subsequent appropriation.
Sometimes, budget authority is characterized as current
or permanent. Current authority requires the Congress to
act on the request for new budget authority for the year
involved. Permanent authority becomes available pursuant to standing provisions of law without appropriations
action by the Congress for the year involved. Generally,
budget authority is current if an annual appropriations
act provides it and permanent if authorizing legislation
provides it. By and large, the current/permanent distinction has been replaced by the discretionary/mandatory
distinction, which is similar but not identical. Outlays are
also classified as discretionary or mandatory according to
the classification of the budget authority from which they
flow (see “Outlays’’ later in this chapter).
The amount of budget authority recorded in the budget
depends on whether the law provides a specific amount or
employs a variable factor that determines the amount. It
is considered definite if the law specifies a dollar amount
(which may be stated as an upper limit, for example, “shall
not exceed …”). It is considered indefinite if, instead of
specifying an amount, the law permits the amount to be
determined by subsequent circumstances. For example,
indefinite budget authority is provided for interest on the
public debt, payment of claims and judgments awarded by
the courts against the United States, and many entitlement
programs. Many of the laws that authorize collections to be
credited to revolving, special, and trust funds make all of
the collections available for expenditure for the authorized
purposes of the fund, and such authority is considered to be

indefinite budget authority because the amount of collections is not known in advance of their collection.
Obligations
Following the enactment of budget authority and the
completion of required apportionment action, Government
agencies incur obligations to make payments (see earlier
discussion under “Budget Execution”). Agencies must record obligations when they enter into binding agreements
that will result in immediate or future outlays. Such obligations include the current liabilities for salaries, wages,
and interest; and contracts for the purchase of supplies
and equipment, construction, and the acquisition of office
space, buildings, and land. For Federal credit programs,
obligations are recorded in an amount equal to the estimated subsidy cost of direct loans and loan guarantees
(see “Federal Credit” later in this chapter).
Outlays
Outlays are the measure of Government spending.
They are payments that liquidate obligations (other than
most exchanges of financial instruments, of which the repayment of debt is the prime example). The budget records outlays when obligations are paid, in the amount
that is paid.
Agency, function and subfunction, and Governmentwide outlay totals are stated net of offsetting collections
and offsetting receipts for most budget presentations.
(Offsetting receipts from a few sources do not offset any
specific function, subfunction, or agency, as explained previously, but only offset Government-wide totals.) Outlay
totals for accounts with offsetting collections are stated
both gross and net of the offsetting collections credited
to the account. However, the outlay totals for special and
trust funds with offsetting receipts are not stated net of
the offsetting receipts; like other offsetting receipts, these
offset the agency, function, and subfunction totals but do
not offset account-level outlays.
The Government usually makes outlays in the form
of cash (currency, checks, or electronic fund transfers).
However, in some cases agencies pay obligations without
disbursing cash, and the budget nevertheless records outlays for the equivalent method. For example, the budget
records outlays for the full amount of Federal employees’
salaries, even though the cash disbursed to employees is
net of Federal and State income taxes withheld, retirement contributions, life and health insurance premiums,
and other deductions. (The budget also records receipts
for the amounts withheld from Federal employee paychecks for Federal income taxes and other payments to
the Government.) When debt instruments (bonds, debentures, notes, or monetary credits) are used in place of cash
to pay obligations, the budget records outlays financed by
an increase in agency debt. For example, the budget records the acquisition of physical assets through certain
types of lease-purchase arrangements as though a cash
disbursement were made for an outright purchase. The
transaction creates a Government debt, and the cash

130

Analytical Perspectives

lease payments are treated as repayments of principal
and interest.
The budget records outlays for the interest on the
public issues of Treasury debt securities as the interest accrues, not when the cash is paid. A small portion
of Treasury debt consists of inflation-indexed securities,
which feature monthly adjustments to principal for inflation and semi­ nnual payments of interest on the inflaa
tion-adjusted principal. As with fixed-rate securities, the
budget records interest outlays as the interest accrues.
The monthly adjustment to principal is recorded, simultaneously, as an increase in debt outstanding and an outlay
of interest.
Most Treasury debt securities held by trust funds and
other Government accounts are in the Government account series. The budget normally states the interest on
these securities on a cash basis. When a Government account is invested in Federal debt securities, the purchase
price is usually close or identical to the par (face) value of
the security. The budget generally records the investment
at par value and adjusts the interest paid by Treasury
and collected by the account by the difference between
purchase price and par, if any.
For Federal credit programs, outlays are equal to the
subsidy cost of direct loans and loan guarantees and
are recorded as the underlying loans are disbursed (see
“Federal Credit” later in this chapter).
The budget records refunds of receipts that result
from overpayments by the public (such as income taxes withheld in excess of tax liabilities) as reductions of
receipts, rather than as outlays. However, the budget
records payments to taxpayers for refundable tax credits (such as earned income tax credits) that exceed the
taxpayer’s tax liability as outlays. Similarly, when the
Government makes overpayments that are later returned
to the Government, those refunds to the Government are
recorded as offsetting collections or offsetting receipts, not
as governmental receipts.

Not all of the new budget authority for 2014 will be
obligated or spent in 2014. Outlays during a fiscal year
may liquidate obligations incurred in the same year or in
prior years. Obligations, in turn, may be incurred against
budget authority provided in the same year or against unobligated balances of budget authority provided in prior
years. Outlays, therefore, flow in part from budget authority provided for the year in which the money is spent and
in part from budget authority provided for prior years.
The ratio of a given year’s outlays resulting from budget
authority enacted in that or a prior year to the original
amount of that budget authority is referred to as the
spendout rate for that year.
As shown in the accompanying chart, $2,858 billion
of outlays in 2014 (76 percent of the outlay total) will be
made from that year’s $3,796 billion total of proposed
new budget authority (a first-year spendout rate of 75
percent). Thus, the remaining $919 billion of outlays in
2014 (24 percent of the outlay total) will be made from
budget authority enacted in previous years. At the same
time, $938 billion of the new budget authority proposed
for 2014 (25 percent of the total amount proposed) will not
lead to outlays until future years.
As described earlier, the budget classifies budget authority and outlays as discretionary or mandatory. This
classification of outlays measures the extent to which actual spending is controlled through the annual appropriations process. About 36 percent of total outlays in 2012
($1,285 billion) are discretionary and the remaining 64
percent ($2,252 billion in 2012) are mandatory spending
and net interest. Such a large portion of total spending
is mandatory because authorizing rather than appropriations legislation determines net interest ($220 billion in
2012) and the spending for a few programs with large
amounts of spending each year, such as Social Security
($768 billion in 2012) and Medicare ($466 billion in 2012).
The bulk of mandatory outlays flow from budget authority recorded in the same fiscal year. This is not necessarily the case for discretionary budget authority and

Chart 11-1. Relationship of Budget Authority
to Outlays for 2014
(Billions of dollars)
New Authority
Recommended
for 2014
3,796

Unspent Authority
Enacted in
Prior Years
2,400

To be spent in 2014
2,858
To b
e
in fu spent
ture
year
s
t
en
sp
be 014
To in 2

-4

Outlays in 2014
3,778

919
93

8

Authority
written off,
expired, and adjusted
(net)

To be spent in
Future Years
1,476

Unspent Authority
for Outlays in
Future Years
2,413

131

11.  Budget Concepts

outlays. For most major construction and procurement
projects and long-term contracts, for example, the budget
authority covers the entire cost estimated when the projects are initiated even though the work will take place and
outlays will be made over a period extending beyond the
year for which the budget authority is enacted. Similarly,

discretionary budget authority for most education and job
training activities is appropriated for school or program
years that begin in the fourth quarter of the fiscal year.
Most of these funds result in outlays in the year after the
appropriation.

FEDERAL CREDIT
Some Government programs provide assistance
through direct loans or loan guarantees. A direct loan
is a disbursement of funds by the Government to a nonFederal borrower under a contract that requires repayment of such funds with or without interest and includes
economically equivalent transactions, such as the sale of
Federal assets on credit terms. A loan guarantee is any
guarantee, insurance, or other pledge with respect to the
payment of all or a part of the principal or interest on
any debt obligation of a non-Federal borrower to a nonFederal lender. The Federal Credit Reform Act of 1990, as
amended (FCRA), prescribes the budgetary treatment for
Federal credit programs. Under this treatment, the budget records obligations and outlays up front, for the net
cost to the Government (subsidy cost), rather than recording the cash flows year by year over the term of the loan.
FCRA treatment allows the comparison of direct loans
and loan guarantees to each other, and to other methods
of delivering assistance, such as grants.
The cost of direct loans and loan guarantees, sometimes called the “subsidy cost,’’ is estimated as the present value of expected payments to and from the public
over the term of the loan, discounted using appropriate
Treasury interest rates.4 (Some advocate for fair value
treatment of loans and guarantees, which would discount
cash flows using market rates. See Chapter 22 of this
volume, “Credit and Insurance,” for a fuller discussion
of this topic.) Similar to most other kinds of programs,
agencies can make loans or guarantee loans only if the
Congress has appropriated funds sufficient to cover the
subsidy costs, or provided a limitation in an appropriations act on the amount of direct loans or loan guarantees
that can be made.
The budget records the subsidy cost to the Government
arising from direct loans and loan guarantees—the budget authority and outlays—in credit program accounts.
When a Federal agency disburses a direct loan or when
a non-Federal lender disburses a loan guaranteed by a
Federal agency, the program account disburses or outlays
an amount equal to the estimated present value cost, or
subsidy, to a non-budgetary credit financing account.
The financing accounts record the actual transactions
with the public. For a few programs, the estimated subsidy cost is negative because the present value of expected
Government collections exceeds the present value of expected payments to the public over the term of the loan.
In such cases, the financing account pays the estimated
subsidy cost to the program’s negative subsidy receipt
account, where it is recorded as an offsetting receipt. In
4  Present value is a standard financial concept that allows for the
time-value of money. That is, it accounts for the fact that a given sum
of money is worth more today than the same sum would be worth in the
future because interest can be earned on money held today.

a few cases, the offsetting receipts of credit accounts are
dedicated to a special fund established for the program
and are available for appropriation for the program.
The agencies responsible for credit programs must reestimate the subsidy cost of the outstanding portfolio of
direct loans and loan guarantees each year. If the estimated cost increases, the program account makes an additional payment to the financing account equal to the
change in cost. If the estimated cost decreases, the financing account pays the difference to the program’s downward reestimate receipt account, where it is recorded as
an offsetting receipt. The FCRA provides permanent indefinite appropriations to pay for upward reestimates.
If the Government modifies the terms of an outstanding direct loan or loan guarantee in a way that increases
the cost as the result of a law or the exercise of administrative discretion under existing law, the program account
records obligations for the increased cost and outlays the
amount to the financing account. As with the original subsidy cost, agencies may incur modification costs only if the
Congress has appropriated funds to cover them. A modification may also reduce costs, in which case the amounts
are generally returned to the general fund, as the financing account makes a payment to the program’s negative
subsidy receipt account.
Credit financing accounts record all cash flows arising from direct loan obligations and loan guarantee commitments. Such cashflows include all cashflows to and
from the public, including direct loan disbursements and
repayments, loan guarantee default payments, fees, and
recoveries on defaults. Financing accounts also record
intragovernmental transactions, such as the receipt of
subsidy cost payments from program accounts, borrowing
and repayments of Treasury debt to finance program activities, and interest paid to or received from the Treasury.
The cash flows of direct loans and of loan guarantees are
recorded in separate financing accounts for programs that
provide both types of credit. The budget totals exclude the
transactions of the financing accounts because they are
not a cost to the Government. However, since financing
accounts record all credit cash flows to and from the public, they affect the means of financing a budget surplus or
deficit (see “Credit Financing Accounts” in the next section). The budget documents display the transactions of
the financing accounts, together with the related program
accounts, for information and analytical purposes.
The FCRA grandfathered the budgetary treatment of
direct loan obligations and loan guarantee commitments
made prior to 1992. The budget records these on a cash
basis in credit liquidating accounts, the same as they
were recorded before FCRA was enacted. However, this
exception ceases to apply if the direct loans or loan guar-

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Analytical Perspectives

antees are modified as described above. In that case, the
budget records the subsidy cost or savings of the modification, as appropriate, and begins to account for the associated transactions under FCRA treatment for direct
loan obligations and loan guarantee commitments made
in 1992 or later.
Under the authority provided in various acts, certain activities that do not meet the definition in FCRA
of a direct loan or loan guarantee are reflected pursuant to FCRA. For example, the Emergency Economic
Stabilization Act of 2008 (EESA) created the Troubled
Asset Relief Program (TARP) under the Department of
the Treasury, and authorized Treasury to purchase or
guarantee troubled assets until October 3, 2010. Under
the TARP, Treasury has purchased equity interests in financial institutions. Section 123 of the EESA provides
the Administration the authority to treat these equity investments on a FCRA basis, recording outlays for the sub-

sidy as is done for direct loans and loan guarantees. The
budget reflects the cost to the Government of TARP direct
loans, loan guarantees, and equity investments consistent
with the FCRA and Section 123 of EESA, which requires
an adjustment to the FCRA discount rate for market risks.
Treasury equity purchases under the Small Business
Lending Fund are treated pursuant to the FCRA, as provided by the Small Business Jobs Act of 2010. In addition,
the 2009 increases to the International Monetary Fund
(IMF) quota and New Arrangements to Borrow enacted in
the Supplemental Appropriations Act of 2009 are treated
on a FCRA basis, with a risk adjustment to the discount
rate, as directed in that Act. However, the Administration
proposes to restate these IMF increases on a consistent
basis with other IMF activity. For more information, see
the discussion on United States Subscriptions to the IMF
in the next section.

BUDGET DEFICIT OR SURPLUS AND MEANS OF FINANCING
When outlays exceed receipts, the difference is a deficit,
which the Government finances primarily by borrowing.
When receipts exceed outlays, the difference is a surplus,
and the Government automatically uses the surplus primarily to reduce debt. The Government’s debt (debt held
by the public) is approximately the cumulative amount of
borrowing to finance deficits, less repayments from surpluses, over the Nation’s history.
Borrowing is not exactly equal to the deficit, and debt
repayment is not exactly equal to the surplus, because of
the other means of financing such as those discussed in
this section. The factors included in the other means of financing can either increase or decrease the Government’s
borrowing needs (or decrease or increase its ability to repay debt). For example, the change in the Treasury operating cash balance is a factor included in other means of
financing. Holding receipts and outlays constant, increases in the cash balance increase the Government’s need
to borrow or reduce the Government’s ability to repay
debt, and decreases in the cash balance decrease the need
to borrow or increase the ability to repay debt. In some
years, the net effect of the other means of financing is minor relative to the borrowing or debt repayment; in other
years, such as 2009, the net effect may be significant, as
explained later in this chapter.
Borrowing and Debt Repayment
The budget treats borrowing and debt repayment as
a means of financing, not as receipts and outlays. If borrowing were defined as receipts and debt repayment as
outlays, the budget would always be virtually balanced by
definition. This rule applies both to borrowing in the form
of Treasury securities and to specialized borrowing in the
form of agency securities. The rule reflects the commonsense understanding that lending or borrowing is just
an exchange of financial assets of equal value—cash for
Treasury securities—and so is fundamentally different
from, say, paying taxes.

In 2012, the Government borrowed $1,153 billion from
the public, bringing debt held by the public to $11,281 billion. This borrowing financed the $1,087 billion deficit in
that year as well as the net cash requirements of the other means of financing, such as changes in cash balances
and other accounts discussed below.
In addition to selling debt to the public, the Treasury
Department issues debt to Government accounts, primarily trust funds that are required by law to invest in
Treasury securities. Issuing and redeeming this debt does
not affect the means of financing, because these transactions occur between one Government account and another
and thus do not raise or use any cash for the Government
as a whole.
(See Chapter 5 of this volume, “Federal Borrowing and
Debt,” for a fuller discussion of this topic.)
Exercise of Monetary Power
Seigniorage is the profit from coining money. It is the
difference between the value of coins as money and their
cost of production. Seigniorage reduces the Government’s
need to borrow. Unlike the payment of taxes or other receipts, it does not involve a transfer of financial assets
from the public. Instead, it arises from the exercise of the
Government’s power to create money and the public’s desire to hold financial assets in the form of coins. Therefore,
the budget excludes seigniorage from receipts and treats
it as a means of financing other than borrowing from the
public. The budget also treats proceeds from the sale of
gold as a means of financing, since the value of gold is
determined by its value as a monetary asset rather than
as a commodity.
Credit Financing Accounts
The budget records the net cash flows of credit programs
in credit financing accounts. These accounts include the
transactions for direct loan and loan guarantee programs,

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11.  Budget Concepts

as well as the equity purchase programs under TARP that
are recorded on a credit basis consistent with Section 123
of EESA. Financing accounts also record the 2009 increase in the U.S. quota in the International Monetary
Fund that are recorded on a credit basis consistent with
the Supplemental Appropriations Act of 2009, and equity
purchases under the Small Business Lending Fund consistent with the Small Business Jobs Act of 2010. Credit
financing accounts are excluded from the budget because
they are not allocations of resources by the Government
(see “Federal Credit” earlier in this chapter). However,
even though they do not affect the surplus or deficit, they
can either increase or decrease the Government’s need to
borrow. Therefore, they are recorded as a means of financing.
Financing account disbursements to the public increase
the requirement for Treasury borrowing in the same way
as an increase in budget outlays. Financing account receipts from the public can be used to finance the payment
of the Government’s obligations and therefore reduce the
requirement for Treasury borrowing from the public in
the same way as an increase in budget receipts.
Deposit Fund Account Balances
The Treasury uses non-budgetary accounts, called
deposit funds, to record cash held temporarily until
ownership is determined (for example, earnest money
paid by bidders for mineral leases) or cash held by the
Government as agent for others (for example, State and
local income taxes withheld from Federal employees’ salaries and not yet paid to the State or local government or
amounts held in the Thrift Savings Fund, a defined contribution pension fund held and managed in a fiduciary
capacity by the Government). Deposit fund balances may
be held in the form of either invested or uninvested balances. To the extent that they are not invested, changes
in the balances are available to finance expenditures and
are recorded as a means of financing other than borrowing from the public. To the extent that they are invested
in Federal debt, changes in the balances are reflected as
borrowing from the public (in lieu of borrowing from other
parts of the public) and are not reflected as a separate
means of financing.
United States Quota Subscriptions to the
International Monetary Fund (IMF)
The United States participates in the IMF through a
quota subscription.  Financial transactions with the IMF
are exchanges of monetary assets.  When the IMF draws
dollars from the U.S. quota, the United States simultaneously receives an equal, offsetting, Special Drawing Right
(SDR)-denominated claim in the form of an increase in
the U.S. reserve position in the IMF.  The U.S. reserve position in the IMF increases when the United States transfers dollars to the IMF and decreases when the United
States is repaid and the cash flows return to the Treasury.
The budgetary treatment of appropriations for IMF
quotas has changed over time. Prior to 1981, the transac-

tions were not included in the budget because they were
viewed as exchanges of cash for a monetary asset (SDRs)
of the same value. This was consistent with the scoring
of other exchanges of monetary assets, such as deposits of
cash in Treasury accounts at commercial banks. As a result of an agreement reached with the Congress in 1980,
the budget began to record budget authority for the quotas, but did not record outlays because of the continuing
view that the transactions were exchanges of monetary
assets of equal value. This scoring convention continued
to be applied through 2008. The 2010 Budget proposed
to change the scoring back to the pre-1981 practice of
showing zero budget authority and outlays for proposed
increases in the U.S. quota subscriptions to the IMF.
In 2009, Congress enacted an increase in the
Supplemental Appropriations Act of 2009 (Public Law
111–2, Title XIV, International Monetary Programs) and
directed that the increase be scored under the requirements of the Federal Credit Reform Act of 1990, with an
adjustment to the discount rate for market risk. The 2014
Budget baseline reflects obligations and outlays for the
quota and NAB increases provided by the Supplemental
Appropriations Act of 2009 under the terms of that Act. 
The cash transactions between the U.S. Treasury and
the IMF are treated as a means of financing (see “Credit
Financing Accounts” earlier in this chapter), which do not
affect the deficit.
In contrast, for increases to the U.S. quota subscriptions made prior to the Supplemental Appropriations Act
of 2009, the 2013 Budget records interest received from
the IMF on U.S. deposits as an offsetting receipt in the
general fund of the Treasury.  Treasury records outlays
in the prior year for financial transactions with the IMF
to the extent there is an unrealized loss in dollar terms
and offsetting receipts to the extent there is an unrealized
gain in dollar terms on the value of the interest-bearing
portion of the U.S. quota actually held at the IMF in SDRs. 
Changes in the value of the portion of the U.S. quota
held at Treasury rather than in the U.S. reserve position
held at the IMF are recorded as a change in obligations.
Under the Administration proposal to implement IMF
reforms agreed to by the G-20 in 2010, increases to the
quota and the NAB provided in the 2009 Supplemental
Appropriations Act would be restated to reflect the pre2009 agreement with Congress on budgetary treatment,
and consolidated into existing quota and NAB accounts.
The Budget assumes enactment of this proposal in 2013.
Investments of the National Railroad
Retirement Investment Trust
Under longstanding rules, the budget has generally
treated investments in non-Federal equities and debt securities as a purchase of an asset, recording an obligation and an outlay in an amount equal to the purchase
price in the year of the purchase. Since investments in
non-Federal equities or debt securities consume cash,
fund balances (of funds available for obligation) are normally reduced by the amounts paid for these purchases.
However, as previously noted, the purchase of equity

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Analytical Perspectives

securities through TARP is recorded on a credit basis,
with an outlay recorded in the amount of the estimated
subsidy cost. In addition, the Railroad Retirement and
Survivors’ Improvement Act of 2001 (Public Law 107–90)
requires purchases or sales of non-Federal assets by the
National Railroad Retirement Investment Trust (NRRIT)
to be treated as a means of financing in the budget, rather
than as an outlay.
Earnings on investments by the NRRIT in private assets pose special challenges for budget projections. Over
long periods, equities and private bonds are expected to
earn a higher return on average than the Treasury rate,
but that return is subject to greater uncertainty. Sound
budgeting principles require that estimates of future trust
fund balances reflect both the average return on investments, and the cost of risk associated with the uncertainty of that return. (The latter is particularly true in cases
where individual beneficiaries have not made a voluntary
choice to assume additional risk.) Estimating both of these
separately is quite difficult. While the gains and losses that
these assets have experienced in the past are known, it is
quite possible that such premiums will differ in the future.
Furthermore, there is no existing procedure for the budget
to record separately the cost of risk from such an investment, even if it could be estimated accurately. Economic
theory suggests, however, that the difference between the

expected return of a risky liquid asset and the Treasury
rate is equal to the cost of the asset’s additional risk as
priced by the market net of administrative and transaction
costs. Following through on this insight, the best way to
project the rate of return on the Fund’s balances is probably to use a Treasury rate. As a result, the Budget treats
equivalently NRRIT investments with equal economic
value as measured by market prices, avoiding the appearance that the budget would be expected to benefit if the
Government bought private sector assets.
The actual and estimated returns to private (debt and
equity) securities are recorded in subfunction 909, other
investment income. The actual-year returns include interest, dividends, and capital gains and losses on private
equities and other securities. The Fund’s portfolio of these
assets is revalued at market prices at the end of each
month to determine capital gains or losses. As a result,
the Fund’s balance at any given point reflects the current
market value of resources available to the Government to
finance benefits. Earnings for the remainder of the current year and for future years are estimated using the 10year Treasury rate and the value of the Fund’s portfolio
at the end of the actual year. No estimates are made of
gains and losses for the remainder of the current year or
for subsequent years.

Federal Employment
The budget includes information on civilian and military employment. It also includes information on related
personnel compensation and benefits and on staffing
requirements at overseas missions. Chapter 10 of this
volume, “Improving the Federal Workforce,’’ provides

employment levels measured in full-time equivalents
(FTE). Agency FTEs are the measure of total hours
worked by an agency’s Federal employees divided by the
total number of one person’s compensable work hours in
a fiscal year.

BASIS FOR BUDGET FIGURES
Data for the Past Year
The past year column (2012) generally presents the actual transactions and balances as recorded in agency accounts and as summarized in the central financial reports
prepared by the Treasury Department for the most recently completed fiscal year. Occasionally, the budget reports corrections to data reported erroneously to Treasury
but not discovered in time to be reflected in Treasury’s
published data. In addition, in certain cases the Budget
has a broader scope and includes financial transactions
that are not reported to Treasury (see Chapter 29 of this
volume, “Comparison of Actual to Estimated Totals,” for a
summary of these differences).
Data for the Current Year
The current year column (2013) includes estimates of
transactions and balances based on the amounts of budgetary resources that were available when the budget
was prepared. In cases where the budget proposes policy

changes effective in the current year, the data will also
reflect the budgetary effect of those proposed changes.
Data for the Budget Year
The budget year column (2014) includes estimates of
transactions and balances based on the amounts of budgetary resources that are estimated to be available, including new budget authority requested under current
authorizing legislation, and amounts estimated to result
from changes in authorizing legislation and tax laws.
The budget Appendix generally includes the appropriations language for the amounts proposed to be appropriated under current authorizing legislation. In a few cases,
this language is transmitted later because the exact requirements are unknown when the budget is transmitted.
The Appendix generally does not include appropriations
language for the amounts that will be requested under
proposed legislation; that language is usually transmitted later, after the legislation is enacted. Some tables in
the budget identify the items for later transmittal and
the related outlays separately. Estimates of the total re-

135

11.  Budget Concepts

quirements for the budget year include both the amounts
requested with the transmittal of the budget and the
amounts planned for later transmittal.
Data for the Outyears
The budget presents estimates for each of the nine
years beyond the budget year (2015 through 2023) in order to reflect the effect of budget decisions on objectives
and plans over a longer period.
Allowances
The budget may include lump-sum allowances to cover
certain transactions that are expected to increase or decrease budget authority, outlays, or receipts but are not,
for various reasons, reflected in the program details. For
example, the budget might include an allowance to show
the effect on the budget totals of a proposal that would affect many accounts by relatively small amounts, in order
to avoid unnecessary detail in the presentations for the
individual accounts.
This year’s Budget, like last year’s, includes an allowance for the costs of possible future natural disasters.
Baseline
The budget baseline is an estimate of the receipts,
outlays, and deficits or surpluses that would occur if no
changes were made to current laws and policies during
the period covered by the budget. The baseline assumes
that receipts and mandatory spending, which generally
are authorized on a permanent basis, will continue in the
future consistent with current law and policy. The baseline assumes that the future funding for most discretionary programs, which generally are funded annually, will
equal the most recently enacted appropriation, adjusted
for inflation.

Baseline outlays represent the amount of resources that
would be used by the Government over the period covered
by the budget on the basis of laws currently enacted.
The baseline serves several useful purposes:
•	 It may warn of future problems, either for Government fiscal policy as a whole or for individual tax
and spending programs.
•	 It may provide a starting point for formulating the
President’s Budget.
•	 It may provide a “policy-neutral’’ benchmark against
which the President’s Budget and alternative proposals can be compared to assess the magnitude of
proposed changes.
A number of significant changes in policies are embedded in the baseline rules specified in the BBEDCA, as
amended. For example, certain provisions relating to the
child tax credit, earned income tax credit, and American
opportunity tax credit that were originally enacted in
the American Recovery and Reinvestment Act (ARRA) of
2009 and recently extended for five years are scheduled
under current law to expire at the end of 2017. As another example, the BBEDCA baseline rules for discretionary
programs would inflate discretionary spending for future
years above the statutory caps that limit such spending.
Because the expiration of the ARRA tax credit provisions
and the inflation of discretionary spending above the statutory caps would create significant differences between
the BBEDCA baseline and policies in effect this year, the
Administration also issues an adjusted baseline that,
unlike the BBEDCA baseline, assumes such changes in
policy will not occur. (Chapter 26 of this volume, “Current
Services Estimates,” provides more information on the
baseline, including the differences between the baseline
as calculated under the rules of the BBEDCA and the adjusted baseline used in this Budget.)

PRINCIPAL BUDGET LAWS
The following basic laws govern the Federal budget
process:
Article 1, section 8, clause 1 of the Constitution,
which empowers the Congress to collect taxes.
Article 1, section 9, clause 7 of the Constitution,
which requires appropriations in law before money may
be spent from the Treasury and the publication of a regular statement of the receipts and expenditures of all public money.
Antideficiency Act (codified in Chapters 13 and 15
of Title 31, United States Code), which prescribes rules
and procedures for budget execution.
Balanced Budget and Emergency Deficit Control
Act of 1985, as amended, which establishes limits on
discretionary spending and provides mechanisms for enforcing discretionary spending limits.

Chapter 11 of Title 31, United States Code, which
prescribes procedures for submission of the President’s
budget and information to be contained in it.
Congressional Budget and Impoundment Control
Act of 1974 (Public Law 93–344), as amended. This Act
comprises the:
•	 Congressional Budget Act of 1974, as amended,
which prescribes the congressional budget process;
and
•	 Impoundment Control Act of 1974, which controls certain aspects of budget execution.
•	 Federal Credit Reform Act of 1990, as amended
(2 USC 661–661f), which the Budget Enforcement
Act of 1990 included as an amendment to the Congressional Budget Act to prescribe the budget treatment for Federal credit programs.

136

Analytical Perspectives

Government Performance and Results Act of 1993
(Public Law 103–62, as amended) which emphasizes
managing for results. It requires agencies to prepare strategic plans, annual performance plans, and annual performance reports.

Statutory Pay-As-You-Go Act of 2010, which establishes a budget enforcement mechanism generally requiring that direct spending and revenue legislation enacted
into law not increase the deficit.

GLOSSARY OF BUDGET TERMS
Account refers to a separate financial reporting unit
used by the Federal government to record budget authority, outlays and income for budgeting or management information purposes as well as for accounting purposes.
All budget (and off-budget) accounts are classified as being either expenditure or receipt accounts and by fund
group. Budget (and off-budget) transactions fall within
either of two fund group: (1) Federal funds and (2) trust
funds. (Cf. Federal funds group and trust funds group.)
Accrual method of measuring cost means an accounting method that records cost when the liability is
incurred. As applied to Federal employee retirement benefits, accrual costs are recorded when the benefits are
earned rather than when they are paid at some time in
the future. The accrual method is used in part to provide
data that assists in agency policymaking, but not used
in presenting the overall budget of the United States
Government.
Advance appropriation means appropriations of
new budget authority that become available one or more
fiscal years beyond the fiscal year for which the appropriation act was passed.
Advance funding means appropriations of budget authority provided in an appropriations act to be used, if
necessary, to cover obligations incurred late in the fiscal
year for benefit payments in excess of the amount specifically appropriated in the act for that year, where the
budget authority is charged to the appropriation for the
program for the fiscal year following the fiscal year for
which the appropriations act is passed.
Agency means a department or other establishment of
the Government.
Allowance means a lump-sum included in the budget
to represent certain transactions that are expected to increase or decrease budget authority, outlays, or receipts
but that are not, for various reasons, reflected in the program details.
Balances of budget authority means the amounts of
budget authority provided in previous years that have not
been outlayed.
Baseline means a projection of the estimated receipts,
outlays, and deficit or surplus that would result from continuing current law or current policies through the period
covered by the budget.
Budget means the Budget of the United States
Government, which sets forth the President’s comprehensive financial plan for allocating resources and indicates
the President’s priorities for the Federal Government.
Budget authority (BA) means the authority provided
by law to incur financial obligations that will result in
outlays. (For a description of the several forms of budget

authority, see “Budget Authority and Other Budgetary
Resources’’ earlier in this chapter.)
Balanced Budget and Emergency Deficit Control
Act of 1985 (BBEDCA) refers to legislation that altered
the budget process, primarily by replacing the earlier fixed
targets for annual deficits with a Pay-As-You-Go requirement for new tax or mandatory spending legislation and
with caps on annual discretionary funding. The Statutory
Pay-As-You-Go Act of 2010, which is a standalone piece of
legislation that did not directly amend the BBEDCA, reinstated a statutory pay-as-you-go rule for revenues and
mandatory spending legislation, and the Budget Control
Act of 2011, which did amend BBEDCA, reinstated discretionary caps on budget authority.
Budget Control Act of 2011 refers to legislation that,
among other things, amended BBEDCA to reinstate discretionary spending limits on budget authority through
2021 and restored the process for enforcing those spending limits.  The legislation also increased the statutory
debt ceiling; created a Joint Select Committee on Deficit
Reduction that was instructed to develop a bill to reduce
the Federal deficit by at least $1.5 trillion over a 10-year
period. It also provided a process to implement alternative spending reductions in the event that legislation
achieving at least $1.2 trillion of deficit reduction was not
enacted.
Budget resolution—see concurrent resolution on the
budget.
Budget totals mean the totals included in the budget
for budget authority, outlays, receipts, and the surplus or
deficit. Some presentations in the budget distinguish onbudget totals from off-budget totals. On-budget totals reflect the transactions of all Federal Government entities
except those excluded from the budget totals by law. The
off-budget totals reflect the transactions of Government
entities that are excluded from the on-budget totals by
law. Under current law, the off-budget totals include
the Social Security trust funds (Federal Old-Age and
Survivors Insurance and Federal Disability Insurance
Trust Funds) and the Postal Service Fund. The budget
combines the on- and off-budget totals to derive unified or
consolidated totals for Federal activity.
Budgetary resources mean amounts available to incur obligations in a given year. The term comprises new
budget authority and unobligated balances of budget authority provided in previous years.
Cap means the legal limits for each fiscal year under
the BBEDCA, as amended, on the budget authority and
outlays (only if applicable) provided by discretionary appropriations.
Cap adjustment means either an increase or a decrease that is permitted to the statutory cap limits for

11.  Budget Concepts

each fiscal year under the BBEDCA, as amended, on the
budget authority and outlays (only if applicable) provided by discretionary appropriations only if certain conditions are met.  These conditions may include providing
for a base level of funding, a designation of the increase
or decrease by the Congress, (and in some circumstances,
the President) pursuant to a section of the BBEDCA, or
a change in concepts and definitions of funding under the
cap.  Changes in concepts and definitions require consultation with the Congressional Appropriations and Budget
Committees.
Cash equivalent transaction means a transaction in
which the Government makes outlays or receives collections in a form other than cash or the cash does not accurately measure the cost of the transaction. (For examples,
see the section on “Outlays’’ earlier in this chapter.)
Collections mean money collected by the Government
that the budget records as a governmental receipt, an offsetting collection, or an offsetting receipt.
Concurrent resolution on the budget refers to the
concurrent resolution adopted by the Congress to set budgetary targets for appropriations, mandatory spending
legislation, and tax legislation. These concurrent resolutions are required by the Congressional Budget Act of
1974, and are generally adopted annually.
Continuing resolution means an appropriations act
that provides for the ongoing operation of the Government
in the absence of enacted appropriations.
Cost refers to legislation or administrative actions that
increase outlays or decrease receipts. (Cf. savings.)
Credit program account means a budget account
that receives and obligates appropriations to cover the
subsidy cost of a direct loan or loan guarantee and disburses the subsidy cost to a financing account.
Current services estimate—see Baseline.
Debt held by the public means the cumulative
amount of money the Federal Government has borrowed
from the public and not repaid.
Debt held by the public net of financial assets
means the cumulative amount of money the Federal
Government has borrowed from the public and not repaid,
minus the current value of financial assets such as loan
assets, bank deposits, or private-sector securities or equities held by the Government and plus the current value of
financial liabilities other than debt.
Debt held by Government accounts means the debt
the Treasury Department owes to accounts within the
Federal Government. Most of it results from the surpluses of the Social Security and other trust funds, which are
required by law to be invested in Federal securities.
Debt limit means the maximum amount of Federal
debt that may legally be outstanding at any time. It includes both the debt held by the public and the debt held
by Government accounts, but without accounting for offsetting financial assets. When the debt limit is reached,
the Government cannot borrow more money until the
Congress has enacted a law to increase the limit.
Deficit means the amount by which outlays exceed receipts in a fiscal year. It may refer to the on-budget, offbudget, or unified budget deficit.

137
Direct loan means a disbursement of funds by the
Government to a non-Federal borrower under a contract
that requires the repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by another lender. The term also
includes the sale of a Government asset on credit terms
of more than 90 days duration as well as financing arrangements for other transactions that defer payment for
more than 90 days. It also includes loans financed by the
Federal Financing Bank (FFB) pursuant to agency loan
guarantee authority. The term does not include the acquisition of a federally guaranteed loan in satisfaction
of default or other guarantee claims or the price support
“loans” of the Commodity Credit Corporation. (Cf. loan
guarantee.)
Direct spending—see mandatory spending.
Disaster funding means an appropriation for a discretionary account that is enacted that the Congress designates as being for disaster relief.  Such amounts are a
cap adjustment to the limits on discretionary spending
under the BBEDCA, as amended.  The total adjustment
for this purpose cannot exceed a ceiling for a particular
year that is defined as the total of the average funding
provided for disaster relief over the previous 10 years
(excluding the highest and lowest years) and the unused
amount of the prior year’s ceiling (excluding the portion of
the prior year’s ceiling that was itself due to any unused
amount from the year before).  Disaster relief is defined
as activities carried out pursuant to a determination under section 102(2) of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act.
Discretionary spending means budgetary resources
(except those provided to fund mandatory spending programs) provided in appropriations acts. (Cf. mandatory
spending.)
Emergency requirement means an amount that the
Congress has designated as an emergency requirement.
Such amounts are not included in the estimated budgetary effects of PAYGO legislation under the requirements
of the Statutory Pay-As-You-Go Act of 2010, if they are
mandatory or receipts. Such a discretionary appropriation that is subsequently designated by the President as
an emergency requirement results in a cap adjustment to
the limits on discretionary spending under the BBEDCA,
as amended.
Entitlement refers to a program in which the Federal
Government is legally obligated to make payments or provide aid to any person who, or State or local government
that, meets the legal criteria for eligibility. Examples
include Social Security, Medicare, Medicaid, and Food
Stamps.
Federal funds group refers to the moneys collected
and spent by the Government through accounts other
than those designated as trust funds. Federal funds include general, special, public enterprise, and intragovernmental funds. (Cf. trust funds group.)
Financing account means a non-budgetary account
(an account whose transactions are excluded from the
budget totals) that records all of the cash flows resulting
from post-1991 direct loan obligations or loan guarantee

138
commitments. At least one financing account is associated with each credit program account. For programs that
make both direct loans and loan guarantees, there are
separate financing accounts for the direct loans and the
loan guarantees. (Cf. liquidating account.)
Fiscal year means the Government’s accounting period. It begins on October 1st and ends on September 30th,
and is designated by the calendar year in which it ends.
Forward funding means appropriations of budget
authority that are made for obligation starting in the
last quarter of the fiscal year for the financing of ongoing
grant programs during the next fiscal year.
General fund means the accounts in which are recorded governmental receipts not earmarked by law for
a specific purpose, the proceeds of general borrowing, and
the expenditure of these moneys.
Government sponsored enterprises mean private
enterprises that were established and sponsored by the
Federal Government for public policy purposes. They are
not included in the budget totals because they are private
companies, and their securities are not backed by the full
faith and credit of the Federal Government. However,
the budget presents statements of financial condition for
certain Government sponsored enterprises such as the
Federal National Mortgage Association. (Cf. off-budget.)
Intragovernmental fund —see Revolving fund.
Liquidating account means a budget account that
records all cash flows to and from the Government resulting from pre-1992 direct loan obligations or loan guarantee commitments. (Cf. financing account.)
Loan guarantee means any guarantee, insurance,
or other pledge with respect to the payment of all or a
part of the principal or interest on any debt obligation
of a non-Federal borrower to a non-Federal lender. The
term does not include the insurance of deposits, shares,
or other withdrawable accounts in financial institutions.
(Cf. direct loan.)
Mandatory spending means spending controlled by
laws other than appropriations acts (including spending for entitlement programs) and spending for the food
stamp program. Although the Statutory Pay-As-You-Go
Act of 2010 uses the term direct spending to mean this,
mandatory spending is commonly used instead. (Cf. discretionary spending.)
Means of financing refers to borrowing, the change
in cash balances, and certain other transactions involved
in financing a deficit. The term is also used to refer to the
debt repayment, the change in cash balances, and certain
other transactions involved in using a surplus. By definition, the means of financing are not treated as receipts or
outlays and so are non-budgetary.
Obligated balance means the cumulative amount of
budget authority that has been obligated but not yet outlayed. (Cf. unobligated balance.)
Obligation means a binding agreement that will result in outlays, immediately or in the future. Budgetary
resources must be available before obligations can be incurred legally.
Off-budget refers to transactions of the Federal
Government that would be treated as budgetary had the

Analytical Perspectives

Congress not designated them by statute as “off-budget.”
Currently, transactions of the Social Security trust fund
and the Postal Service fund are the only sets of transactions that are so designated. The term is sometimes
used more broadly to refer to the transactions of private
enterprises that were established and sponsored by the
Government, most especially “Government sponsored
enterprises” such as the Federal Home Loan Banks. (Cf.
budget totals.)
Offsetting collections mean collections that, by law,
are credited directly to expenditure accounts and deducted from gross budget authority and outlays of the expenditure account, rather than added to receipts. Usually, they
are authorized to be spent for the purposes of the account
without further action by the Congress. They result from
business-like transactions with the public, including payments from the public in exchange for goods and services,
reimbursements for damages, and gifts or donations of
money to the Government and from intragovernmental
transactions with other Government accounts. The authority to spend offsetting collections is a form of budget
authority. (Cf. receipts and offsetting receipts.)
Offsetting receipts mean collections that are credited
to offsetting receipt accounts and deducted from gross
budget authority and outlays, rather than added to receipts. They are not authorized to be credited to expenditure accounts. The legislation that authorizes the offsetting receipts may earmark them for a specific purpose
and either appropriate them for expenditure for that
purpose or require them to be appropriated in annual appropriation acts before they can be spent. Like offsetting
collections, they result from business-like transactions or
market-oriented activities with the public, including payments from the public in exchange for goods and services,
reimbursements for damages, and gifts or donations of
money to the Government and from intragovernmental
transactions with other Government accounts. (Cf. receipts, undistributed offsetting receipts, and offsetting
collections.)
On-budget refers to all budgetary transactions other
than those designated by statute as off-budget (Cf. budget totals.)
Outlay means a payment to liquidate an obligation
(other than the repayment of debt principal or other disbursements that are “means of financing” transactions).
Outlays generally are equal to cash disbursements, but
also are recorded for cash-equivalent transactions, such
as the issuance of debentures to pay insurance claims,
and in a few cases are recorded on an accrual basis such
as interest on public issues of the public debt. Outlays are
the measure of Government spending.
Outyear estimates mean estimates presented in the
budget for the years beyond the budget year of budget authority, outlays, receipts, and other items (such as debt).
Overseas Contingency Operations/Global War on
Terrorism (OCO/GWOT) means an appropriation for a
discretionary account that is enacted that the Congress
and, subsequently, the President have so designated on
an account by account basis.  Such a discretionary appropriation that is designated as OCO/GWOT results in a

11.  Budget Concepts

cap adjustment to the limits on discretionary spending
under the BBEDCA, as amended.  Funding for these purposes has most recently been associated with the wars in
Iraq and Afghanistan.
Pay-as-you-go (PAYGO) refers to requirements of the
Statutory Pay-As-You-Go Act of 2010 that result in a sequestration if the estimated combined result of new legislation affecting direct spending or revenue increases the
on-budget deficit relative to the baseline, as of the end of
a congressional session.
Public enterprise fund —see Revolving fund.
Reappropriation means a provision of law that extends into a new fiscal year the availability of unobligated
amounts that have expired or would otherwise expire.
Receipts mean collections that result from the
Government’s exercise of its sovereign power to tax or
otherwise compel payment. They are compared to outlays
in calculating a surplus or deficit. (Cf. offsetting collections and offsetting receipts.)
Revolving fund means a fund that conducts continuing cycles of business-like activity, in which the fund
charges for the sale of products or services and uses the
proceeds to finance its spending, usually without requirement for annual appropriations. There are two types of
revolving funds: Public enterprise funds, which conduct
business-like operations mainly with the public, and intragovernmental revolving funds, which conduct businesslike operations mainly within and between Government
agencies. (Cf. special fund and trust fund.)
Savings refers to legislation or administrative actions
that decrease outlays or increase receipts. (Cf. cost.)
Scorekeeping means measuring the budget effects
of legislation, generally in terms of budget authority,
receipts, and outlays, for purposes of measuring adherence to the Budget or to budget targets established by the
Congress, as through agreement to a Budget Resolution.
Sequestration means the cancellation of budgetary
resources. The Statutory Pay-As-You-Go Act of 2010 requires such cancellations if revenue or direct spending
legislation is enacted that, in total, increases projected
deficits or reduces projected surpluses relative to the
baseline. The Balanced Budget and Emergency Deficit
Control Act of 1985, as amended, requires such cancellations if discretionary appropriations exceed the statutory
limits on discretionary spending.
Special fund means a Federal fund account for receipts or offsetting receipts earmarked for specific purposes and the expenditure of these receipts. (Cf. revolving
fund and trust fund.)
Statutory Pay-As-You-Go Act of 2010 refers to legislation that reinstated a statutory pay-as-you-go require-

139
ment for new tax or mandatory spending legislation.  The
law is a standalone piece of legislation that cross-references the BBEDCA, as amended, but does not directly
amend that legislation.  This is a permanent law and does
not expire.
Subsidy means the estimated long-term cost to the
Government of a direct loan or loan guarantee, calculated
on a net present value basis, excluding administrative
costs and any incidental effects on governmental receipts
or outlays.
Surplus means the amount by which receipts exceed
outlays in a fiscal year. It may refer to the on-budget, offbudget, or unified budget surplus.
Supplemental appropriation means an appropriation enacted subsequent to a regular annual appropriations act, when the need for additional funds is too urgent
to be postponed until the next regular annual appropriations act.
Trust fund refers to a type of account, designated by
law as a trust fund, for receipts or offsetting receipts dedicated to specific purposes and the expenditure of these
receipts. Some revolving funds are designated as trust
funds, and these are called trust revolving funds. (Cf. special fund and revolving fund.)
Trust funds group refers to the moneys collected and
spent by the Government through trust fund accounts.
(Cf. Federal funds group.)
Undistributed offsetting receipts mean offsetting
receipts that are deducted from the Government-wide
totals for budget authority and outlays instead of being
offset against a specific agency and function. (Cf. offsetting receipts.)
Unified budget includes receipts from all sources and
outlays for all programs of the Federal Government, including both on- and off-budget programs. It is the most
comprehensive measure of the Government’s annual finances.
Unobligated balance means the cumulative amount
of budget authority within a budget account that is not
obligated and that remains available for obligation under
law.
User charges are charges assessed for the provision of
Government services and for the sale or use of Government
goods or resources. The payers of the user charge must be
limited in the authorizing legislation to those receiving
special benefits from, or subject to regulation by, the program or activity beyond the benefits received by the general public or broad segments of the public (such as those
who pay income taxes or custom duties).

12. Coverage of the Budget

The Federal Government’s activities have far-reaching impacts, affecting the economy and society of the
Nation and the world. One of the primary activities of the
Government is to allocate resources in order to provide
public goods and achieve public policy objectives. The budget is the Government’s financial plan for proposing and
deciding the allocation of resources and the Government’s
method for controlling the allocation of resources. Those
financial activities that constitute the direct and measurable allocation of resources are included in the budget’s
measures of receipts and expenditures, and characterized
as “budgetary.”
Federal Government activities that do not involve the
direct and measurable allocation of resources, or are a
means of financing activities whose costs are already reflected in the budget, are characterized as “non-budgetary” and classified outside of the budget. For example,
the budget does not include the transactions of funds
that are privately owned but held and managed by the
Government in a fiduciary capacity, such as the deposit
funds owned by Native American Indians. In addition,
the budget does not include costs that are borne by the
private sector even when those costs result from Federal
regulatory activity. Also, the budget does not include the
cash flows that are a means of financing Federal credit
programs because the cost of credit programs is already
reflected in the subsidy cost, which captures the present
value of these cash flows.1 Non-budgetary activities can
be important instruments of Federal policy and are discussed briefly in this chapter and in more detail in other
parts of the Budget documents.
The term “off-budget” is sometimes used colloquially to
mean non-budgetary. However, as used in the Budget documents the term has a meaning distinct from non-budgetary and, as discussed below, refers to Federal Government
activities that are budgetary but are required by law to be
excluded from the budget totals.
Budgetary Activities
The Federal Government has used the unified budget
concept as the foundation for its budgetary analysis and
presentation since the 1969 Budget, implementing a recommendation made by the President’s Commission on
Budget Concepts in 1967 (“1967 Commission”). The 1967
Commission called for the budget to include the financial transactions of all of the Federal Government’s programs and agencies. For this reason, the budget includes
the financial transactions of all 15 Executive departments, all independent agencies (from all three branch1  Subsidy costs are explained in the section below on “Federal credit
programs.”

es of Government), and all Government corporations.2
Government corporations are distinct from GovernmentSponsored Enterprises (GSEs), which, as discussed below,
are private entities and classified as non-budgetary.
All accounts in Table 33-1, “Federal Programs by
Agency and Account,” in the supplemental materials to
this volume are budgetary.3 The vast majority of budgetary accounts are associated with the departments or
other entities that are clearly Federal agencies. Some
budgetary accounts reflect Government payments to entities that were created by the Government as private or
non-Federal entities and some of these entities receive
all or a majority of their funding from the Government.
These include the Corporation for Public Broadcasting,
Gallaudet University, Howard University, the Legal
Services Corporation, the National Railroad Passenger
Corporation (Amtrak), the Smithsonian Institution, the
State Justice Institute, and the United States Institute
of Peace. Although the Federal payments to these entities
are budgetary, the entities themselves are non-budgetary,
as discussed below.
Whether an entity was created or chartered by the
Government does not alone determine its budgetary status. As noted below, some Government created or chartered entities are classified as non-budgetary because
they receive or were designed to receive the majority of
their funding from non-Federal sources or because they
are not controlled entirely by the Government. The 1967
Commission recommended that the budget be comprehensive, but it also recognized that proper budgetary
classification would require weighing all relevant factors
regarding ownership and control of an entity. Generally,
entities that are primarily owned and controlled by the
Government are classified as budgetary. The budgetary
classification of entities is made jointly by the Office of
Management and Budget (OMB), the Congressional
Budget Office (CBO), and the Budget Committees of the
Congress.
2  Government corporations are Government entities that are defined
as corporations under 31 U.S.C. 9101, the Government Corporation Control Act, and four other entities. The four other entities are the African Development Foundation (which is subject to the Act by 22 U.S.C.
290h-6), the Inter-American Foundation (which is subject to the Act by
22 U.S.C. 290f), the Presidio Trust (which was established as a Government corporation by 16 U.S.C. 460bb note), and the Valles Caldera Trust
(which is classified as a Government corporation by 16 U.S.C. 698v-4).
Many Government corporations engage in a cycle of business activity
with the public, selling services to the public at prices that enable the
entities to be self-sustaining. Examples of Government corporations include the Commodity Credit Corporation, the Export-Import Bank of
the United States, the Federal Crop Insurance Corporation, the Federal
Deposit Insurance Corporation, the Millennium Challenge Corporation, the Overseas Private Investment Corporation, the Pension Benefit
Guaranty Corporation, and the Tennessee Valley Authority.
3  Table 33-1 can be found at www.whitehouse.gov/sites/default/
files/omb/budget/fy2013/assets/33_1.pdf.

141

142

Analytical Perspectives

Table 12–1. Comparison of Total, On-Budget, and Off-Budget Transactions 1
(In billions of dollars)
Fiscal Year

Receipts
Total

On-budget

Outlays
Off-budget

Total

On-budget

Surplus or deficit (–)
Off-budget

Total

On-budget

Off-budget

1975 ����������������������������������������������������������
1980 ����������������������������������������������������������
1985 ����������������������������������������������������������
1990 ����������������������������������������������������������
1995 ����������������������������������������������������������

279.1
517.1
734.0
1,032.0
1,351.8

216.6
403.9
547.9
750.3
1,000.7

62.5
113.2
186.2
281.7
351.1

332.3
590.9
946.3
1,253.0
1,515.7

270.8
477.0
769.4
1,027.9
1,227.1

61.6
113.9
176.9
225.1
288.7

–53.2
–73.8
–212.3
–221.0
–164.0

–54.1
–73.1
–221.5
–277.6
–226.4

0.9
–0.7
9.2
56.6
62.4

2000 ����������������������������������������������������������
2005 ����������������������������������������������������������
2010 ����������������������������������������������������������
2011 ���������������������������������������������������������
2012 ���������������������������������������������������������

2,025.2
2,153.6
2,162.7
2,303.5
–2,450.2

1,544.6
1,576.1
1,531.0
1,737.7
–1,880.7

480.6
577.5
631.7
565.8
–569.5

1,789.0
2,472.0
3,456.2
3,603.1
3,537.1

1,458.2
2,069.7
2,901.5
3,104.5
3,029.5

330.8
402.2
554.7
498.6
507.6

236.2
–318.3
–1,293.5
–1,299.6
–1,087.0

86.4
–493.6
–1,370.5
–1,366.8
–1,148.9

149.8
175.3
77.0
67.2
61.9

2013 estimate ��������������������������������������������
2014 estimate ��������������������������������������������
2015 estimate ��������������������������������������������
2016 estimate ��������������������������������������������
2017 estimate ��������������������������������������������

–2,712.0
–3,033.6
–3,331.7
–3,561.5
–3,760.5

–2,038.6
–2,294.5
–2,553.4
–2,735.9
–2,891.8

–673.5
–739.1
–778.3
–825.6
–868.7

3,684.9
3,777.8
3,908.2
4,089.8
4,247.4

3,044.9
3,062.7
3,137.0
3,260.4
3,370.2

640.0
715.1
771.1
829.4
877.3

–972.9
–744.2
–576.5
–528.4
–486.9

–1,006.4
–768.2
–583.6
–524.5
–478.3

33.5
24.0
7.1
–3.9
–8.6

4,449.2
4,724.0
4,966.9
5,209.4
5,469.9
5,659.5

3,516.2
3,734.9
3,915.1
4,096.4
4,286.9
4,404.2

933.1
989.1
1,051.8
1,113.0
1,183.0
1,255.3

–475.3
–498.1
–503.1
–500.8
–518.7
–439.1

–459.6
–474.0
–458.8
–451.0
–449.7
–344.8

–15.6
–24.1
–44.3
–49.8
–69.0
–94.3

2018 estimate ��������������������������������������������
–3,974.0
–3,056.5
–917.5
2019 estimate ��������������������������������������������
–4,225.9
–3,260.8
–965.0
2020 estimate ��������������������������������������������
–4,463.8
–3,456.3
–1,007.5
2021 estimate.
–4,708.6
–3,645.4
–1,063.2
2022 estimate ��������������������������������������������
–4,951.2
–3,837.2
–1,113.9
2023 estimate ��������������������������������������������
–5,220.4
–4,059.3
–1,161.0
1 Off-budget transactions consist of the Social Security trust funds and the Postal Service fund.

Off-budget Federal activities.—Despite the 1967
Commission’s recommendation that the budget be comprehensive, every year since 1971, at least one Federal
program or agency that would otherwise be included in
the budget has been presented as off-budget because of
a requirement in the law. Such off-budget Federal activities are funded by the Government and administered according to Federal legal requirements, but their costs are
excluded, by law, from the rest of the budget totals, which
are also known as the “on-budget” totals. The budget reflects the legal distinction between on-budget activities
and off-budget activities by showing outlays and receipts
for both types of activities separately.
Although there is a legal distinction between on-budget
and off-budget activities, there is no conceptual difference
between the two. The off-budget Federal activities reflect
the same kinds of governmental roles as the on-budget activities, and off-budget activities result in the same kind of
outlays and receipts as on-budget activities. Like on-budget
activities, off-budget activities are funded and controlled by
the Government. The “unified budget” reflects the conceptual similarity between on-budget and off-budget activities
by showing combined totals of outlays and receipts for both.
The off-budget Federal activities currently consist of
the U.S. Postal Service and the two Social Security Trust
Funds: Old-Age and Survivors Insurance and Disability
Insurance. Social Security has been classified as off-budget
since 1986 and the Postal Service has been classified as off-

budget since 1990.4 Other activities that had been declared
off-budget by law at different times before 1986 have been
classified as on-budget by law since at least 1985.
Table 12–1 divides total Federal Government receipts,
outlays, and the surplus or deficit between on-budget and
off-budget amounts. Within this table, the Social Security
and Postal Service transactions are classified as off-budget
for all years in order to provide a consistent comparison
over time. Activities that were off-budget at one time but
are now on-budget are classified as on-budget for all years.
Because Social Security is the largest single program
in the unified budget and is classified by law as off-budget, the off-budget accounts constitute a significant part
of total Federal spending and receipts. In 2014, off-budget
receipts are an estimated 24.4 percent of total receipts
and off-budget outlays are a smaller, but still significant,
percentage of total outlays at 18.9 percent. The estimated
unified budget deficit in 2014 is $744.2 billion—a $768.2
billion on-budget deficit partly offset by a $24.0 billion
off-budget surplus. The off-budget surplus for 2013, 2014,
and 2015 consists almost entirely of the Social Security
4  See 42 U.S.C. 911 and 39 U.S.C. 2009a. The off-budget Postal Service
accounts consist of the Postal Service Fund, which is classified as a mandatory account, and the Office of the Inspector General and the Postal
Regulatory Commission, both of which are classified as discretionary
accounts. The Postal Service Retiree Health Benefits Fund is an on-budget mandatory account with the Office of Personnel Management. The
off-budget Social Security accounts consist of the Federal Old-Age and
Survivors Trust Fund and the Federal Disability Insurance Trust Fund,
both of which have mandatory and discretionary amounts.

12. Coverage of the Budget

surplus.5  Social Security had small deficits or surpluses
from its inception through the early 1980s and large and
growing surpluses from the mid-1980s until 2008. Because
of the economic downturn, the Social Security surplus
has been declining for several years. Over the long term,
without further legislative action, the trust funds will be
depleted in 2033, according to the 2012 Social Security
trustees’ report.
Non-Budgetary Activities
Some important Government activities are characterized as non-budgetary because they do not involve the direct allocation of resources by the Government.6 Some of
the Government’s major non-budgetary activities are discussed below and, as noted below, some of these activities
affect budget outlays or receipts even though they have
components that are non-budgetary.
Federal credit programs: budgetary and non-budgetary transactions.—Federal credit programs make direct loans or guarantee private loans to non-Federal borrowers. The Federal Credit Reform Act of 1990 (FCRA), as
amended by the Balanced Budget Act of 1997, established
the current budgetary treatment for credit programs.
Under FCRA, the budgetary cost of a credit program is
known as the “subsidy cost” and outlays equal to the subsidy cost are recorded in the budget when a loan is made
or guaranteed. The subsidy cost is the estimated lifetime
cost to the Government of a loan or a loan guarantee on a
net present value basis, excluding the Government’s administrative costs. Credit program cash flows to and from
the public other than administrative costs are recorded in
non-budgetary financing accounts.7
To illustrate the budgetary and non-budgetary components of a credit program, consider a portfolio of new
direct loans made to a cohort of college students. To encourage higher education, the Government offers loans
at more favorable terms than private lenders, for example, lower interest rates or longer repayment periods.
Students agree to repay the loans according to the terms
of their promissory notes, but some students are likely
5  The 2013 off-budget surplus reflects a $33.1 billion surplus for Social Security and a $0.4 billion surplus for the Postal Service. The estimated 2014 off-budget surplus reflects a $19.2 billion surplus for Social
Security and a $4.8 billion surplus for the Postal Service, and the projected 2015 off-budget surplus reflects a $7.4 billion surplus for Social
Security and a $0.3 billion deficit for the Postal Service.
6  Tax expenditures, which are discussed in Chapter 16 of this volume,
are an example of Government activities that could be characterized as
either budgetary or non-budgetary. Tax expenditures refer to the reduction in tax receipts resulting from the special tax treatment accorded
certain private activities. Because tax expenditures reduce tax receipts
and receipts are budgetary, tax expenditures clearly have budgetary
effects. However, the size and composition of tax expenditures are not
explicitly recorded in the budget as outlays or as negative receipts and,
for this reason, tax expenditures might be considered a special case of
non-budgetary transactions.
7 Under FCRA, there are additional intragovernmental transfers between budgetary accounts and non-budgetary financing accounts where
one side of the transaction is treated as budgetary. These include “reestimates,” annual updates of the subsidy cost of outstanding direct and
guaranteed loans, as well as intragovernmental interest transactions
with Treasury.

143
to become delinquent or default on their loans, leading
to some Government losses. If the payments of principal
and interest on the portfolio are not sufficient to offset
the expected losses from delinquencies, defaults, or costs
associated with favorable loan terms, the present value
of the expected future cash flows will be less than the
Government disburses in loans and the Government will
incur a cost (known as the subsidy cost). Under FCRA, the
subsidy cost is the difference in present value between
the amount disbursed by the Government and the estimated value of the payments the Government expects
to receive. The remainder of the transaction (beyond the
amount recorded as a subsidy cost) is simply an exchange
of financial assets of equal value and does not result in a
budgetary cost to the Government.
Since FCRA took effect in 1992, the budget outlays for
credit programs have reflected only the subsidy costs to
Government of providing credit assistance, and are reflected up front when the credit assistance was or is expected to be provided. This allows the budget to reflect
more accurately the cost of credit assistance8  and enables
the budget to fulfill its purpose of serving as a financial
plan for allocating resources by allowing comparisons of
the expected cost of credit programs with the cost of other
spending programs, and allowing comparisons of the cost
of one type of credit assistance with other types.9 Credit
programs are discussed in more detail in Chapter 22 of
this volume, “Credit and Insurance.”
Deposit funds.—Deposit funds are non-budgetary
accounts that record amounts held by the Government
temporarily until ownership is determined (such as earnest money paid by bidders for mineral leases) or held
by the Government as an agent for others (such as State
income taxes withheld from Federal employees’ salaries
and not yet paid to the States). The largest deposit fund
is the Government Securities Investment Fund, which
is also known as the G-Fund. It is one of several investment funds managed by the Federal Retirement Thrift
8  Both FCRA accounting and the earlier cash accounting of Federal
credit programs would ultimately show the same costs for credit transactions. For example, cash accounting for direct loans would show the
full disbursement of the loan as an outlay when it was made and then
later show the repayments of principal and interest as an offset to outlays. Over the life of the loan, only the net cost of the loan would ultimately be reflected in the budget. FCRA accounting shows that same
net cost, but shows that cost at the time the loan is made (adjusting the
cash flows for the time-value of money). Under cash accounting, the outlays recorded when a loan was made overstated the lifetime costs of the
loan and the outlays recorded when a guarantee was made understated
the lifetime cost of the guarantee. Some have proposed amending credit
reform to reflect the “fair value” estimate of cost. For more on this, please
see Chapter 22 of this volume, “Credit and Insurance.”
9  For more explanation of the budget concepts for direct loans and
loan guarantees, see the sections on Federal credit and credit financing
accounts in Chapter 11 of this volume, “Budget Concepts.” The structure
of credit reform is further explained in Chapter VIII.A of the Budget of
the United States Government, Fiscal Year 1992, Part Two, pp. 223–226.
The implementation of FCRA through 1995 is reviewed in Chapter 8,
“Underwriting Federal Credit and Insurance,” Analytical Perspectives,
Budget of the United States Government, Fiscal Year 1997, pp. 142–144.
Refinements and simplifications enacted by the Balanced Budget Act
of 1997 or provided by later OMB guidance are explained in Chapter 8,
“Underwriting Federal Credit and Insurance,” Analytical Perspectives,
Budget of the United States Government, Fiscal Year 1999, p. 170.

144
Investment Board, as an agent, for Federal employees
who participate in the Government’s defined contribution
retirement plan, the Thrift Savings Plan (which is similar
to private-sector 401(k) plans). Because the G-Fund assets, which are held by the Department of the Treasury,
are the property of Federal employees and are held by
the Government only in a fiduciary capacity, the transactions of the Fund are not resource allocations by the
Government and are therefore non-budgetary.10 For similar reasons, the budget excludes funds that are owned by
Native American Indians but held and managed by the
Government in a fiduciary capacity.
Government-Sponsored Enterprises (GSEs).—The
Federal Government has chartered GSEs such as the
Federal National Mortgage Association (Fannie Mae), the
Federal Home Loan Mortgage Corporation (Freddie Mac),
the Federal Home Loan Banks, the Farm Credit System,
and the Federal Agricultural Mortgage Corporation to
provide financial intermediation for specified public purposes. Although federally-chartered to serve public-policy
purposes, the GSEs are classified as non-budgetary and
excluded from the Budget. This is because they are intended to be privately owned and controlled, with any
public benefits accruing indirectly from the GSEs’ business transactions. Estimates of the GSEs’ activities are
reported in a separate chapter of the Budget Appendix,
and their activities are discussed in Chapter 22 of this
volume, “Credit and Insurance.”
In September 2008, in response to the financial market
crisis, the director of the Federal Housing Finance Agency
(FHFA)11 placed Fannie Mae and Freddie Mac into conservatorship for the purpose of preserving the assets and
restoring the solvency of these two GSEs. As conservator, FHFA has broad authority to direct the operations of
these GSEs. However, these GSEs remain private companies with Boards of Directors and management responsible for their day-to-day operations. This Budget continues
to treat these two GSEs as non-budgetary private entities
in conservatorship rather than as Government agencies.
By contrast, CBO treats these GSEs as budgetary Federal
agencies. Both treatments include budgetary and nonbudgetary amounts.
Under the approach in the Budget, all of the GSEs’
transactions with the public are non-budgetary because
the GSEs are not considered to be Government agencies.
However, the payments from the Treasury to the GSEs
are recorded as budgetary outlays and dividends received
by the Treasury are recorded as budgetary receipts. Under
CBO’s approach, the subsidy costs, or expected losses over
time, of the GSEs’ past credit activities have already been
recorded in the budget estimates and the subsidy costs
of future credit activities will be recorded when the ac10  The administrative functions of the Federal Retirement Thrift Investment Board are carried out by Government employees and included
in the budget.
11  The Housing and Economic Recovery Act of 2008, enacted on July
30, 2008, created the FHFA as the new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. FHFA reflects the merger
of the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and the Department of Housing and Urban Development’s Government-sponsored enterprise mission team.

Analytical Perspectives

tivities occur. Lending and borrowing activities between
the GSEs and the public apart from the subsidy costs
are treated as non-budgetary by CBO, and Treasury payments to the GSEs are intragovernmental transfers (from
Treasury to the GSEs) that net to zero in CBO’s budget
estimates.
Overall, both the Budget’s accounting and CBO’s accounting present the GSEs’ losses as Government outlays,
which increase Government deficits. The two approaches,
however, reflect the losses as budgetary costs at different
times.
Other federally-created non-budgetary entities.—In addition to chartering the GSEs, the Federal
Government has created a number of other entities that
are classified as non-budgetary. These include federallyfunded research and development centers (FFRDCs),
non-appropriated fund instrumentalities (NAFIs), and
other entities, some of which are incorporated as nonprofit entities and some of which are incorporated as forprofit entities.12
FFRDCs are entities that conduct agency-specific research under contract or cooperative agreement. Most
FFRDCs were created by and conduct research for the
Departments of Defense and Energy, and most are administered by colleges, universities, or other non-profit
entities. Examples of federally-funded research and development centers are the Center for Naval Analysis,
Los Alamos National Laboratory, and the Jet Propulsion
Laboratory.13 FFRDCs are non-budgetary, but the Federal
agency’s payments to the FFRDC are recorded as budget
outlays. In addition to Federal funding, FFRDCs may receive funding from non-Federal sources.
Non-appropriated fund instrumentalities (NAFIs)
are entities that support an agency’s personnel (current
and retired). Virtually all NAFIs are associated with
12  Although most entities created by the Federal Government are
budgetary, as discussed in this section, the GSEs and the Federal Reserve System were created by the Federal Government, but are classified as non-budgetary. In addition, Congress and the President have
chartered, but not necessarily created, approximately 100 nonprofit
entities that are non-budgetary. These include patriotic, charitable,
and educational organizations under Title 36 of the U.S. Code and foundations and trusts chartered under other titles of the Code. Title 36
corporations include the American Legion, the American National Red
Cross, Big Brothers-Big Sisters of America, Boy Scouts of America, Future Farmers of America, Girl Scouts of the United States of America,
the National Academy of Public Administration, the National Academy
of Sciences, and Veterans of Foreign Wars of the United States. Virtually all of the nonprofit entities chartered by the Government existed
under State law prior to the granting of a Government charter, making
the Government charter an honorary rather than governing charter; a
major exception to this is the American National Red Cross. Its Government charter requires it to provide disaster relief and to ensure compliance with treaty obligations under the Geneva Convention. Although
any Government payments (whether made as direct appropriations or
through agency appropriations) to these chartered nonprofits, including
the Red Cross, would be budgetary, the nonprofits themselves are classified as non-budgetary. On March 10, 2011, the Subcommittee on Immigration Policy and Enforcement of the Committee on the Judiciary in
the U.S. House of Representatives adopted a policy prohibiting Congress
from granting new Federal charters to private, non-profit organizations.
This policy has been adopted by every subcommittee with jurisdiction
over charters since the 101st Congress.
13  The National Science Foundation maintains a list of FFRDCs at
www.nsf.gov/statistics/ffrdc.

145

12. Coverage of the Budget

the Departments of Defense, Homeland Security (Coast
Guard), and Veterans Affairs. Most NAFIs are located on
military bases and include the armed forces exchanges
(which sell goods to military personnel and their families),
recreational facilities, and child care centers. NAFIs are financed by the proceeds from the sale of goods or services
and do not receive direct appropriations. As a result, they
have been characterized as non-budgetary and any agency
payments to the NAFIs are recorded as budget outlays.
As noted above in the section on “Budgetary Activities,”
a number of entities created by the Government receive
a significant amount of non-Federal funding. In addition,
some such entities are significantly controlled by non-Federal individuals or organizations. Although not exhaustive, this list of entities includes Gallaudet University,
Howard University, the United States Enrichment
Corporation, and the Universal Services Administrative
Company.14 Most of these entities receive direct appropriations or other recurring payments from the Government,
and the appropriations or other payments are budgetary
and included in Table 33-1, mentioned above. However,
many of these entities are themselves non-budgetary.
Generally, entities that receive a significant portion of
funding from non-Federal sources and that are not controlled by the Government are treated as non-budgetary.
As noted above, classifications for budgetary and nonbudgetary status are made jointly by OMB, CBO, and the
Budget Committees of the Congress.
Regulation.—Federal Government regulation often
requires the private sector or other levels of government
to make expenditures for specified purposes that are intended to have public benefits, such as workplace safety
and pollution control. Although the budget reflects the
Government’s cost of conducting regulatory activities, the
costs imposed on the private sector as a result of regulation are treated as non-budgetary and not included in
the budget. The Government’s regulatory priorities and
plans are described in the annual Regulatory Plan and the
semi-annual Unified Agenda of Federal Regulatory and
Deregulatory Actions.15 
The estimated costs and benefits of Federal regulation have been published annually by OMB since 1997.
In this report, OMB indicates that the estimated annual
benefits of Federal regulations it reviewed from October
1, 2001, to September 30, 2011, range from $141 billion
to $692 billion, while the estimated annual costs range
from $42 to $66 billion. In its report, OMB discusses the
impact of Federal regulation on State, local, and tribal
governments, and agency compliance with the Unfunded
Mandates Reform Act of 1995. The costs and benefits of
14  Under section 415(b) of the Amtrak Reform Act of 1997, Public Law
105-134, Amtrak is required to redeem all of its outstanding common
stock. Once all outstanding common stock is redeemed, Amtrak will be
wholly-owned by the Government and, at that point, its non-budgetary
status may need to be reassessed.
15  The most recent Regulatory Plan and introduction to the Unified
Agenda were issued by the General Services Administration’s Regulatory Information Service Center and were printed in the Federal Register on December 21, 2012. Both the Regulatory Plan and Unified Agenda
are available on-line at www.reginfo.gov and at www.gpoaccess.gov.

Federal regulation are also discussed in Chapter 9 of this
volume, “Benefit-Cost Analysis.”
Monetary policy.—As noted above, the budget is
a financial plan for allocating resources by raising revenues and spending those revenues. As a fiscal policy
tool, the budget is used by elected Government officials
to promote economic growth and achieve other public
policy objectives. Monetary policy is another tool that
governments use to promote public policy objectives. In
the United States, monetary policy is conducted by the
Federal Reserve System, which is composed of a Board of
Governors and 12 regional Federal Reserve Banks. The
Federal Reserve Act provides that the goal of monetary
policy is to “maintain long run growth of the monetary
and credit aggregates commensurate with the economy’s
long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”16  The
dual goals of full employment and price stability were reaffirmed by the Full Employment and Balanced Growth
Act of 1978, also known as the Humphrey-Hawkins Act.17 
By law, the Federal Reserve System is a self-financing
entity that is independent of the Executive Branch and
subject to only broad oversight by the Congress. Consistent
with the recommendations of the 1967 Commission, the
effects of monetary policy and the actions of the Federal
Reserve System are, with two exceptions, non-budgetary.
Although the relatively recent increase in the Federal
Reserve’s balance sheet in response to the financial crisis
has had important macroeconomic consequences, it does
not directly affect the Federal deficit.
The exceptions to the treatment of Federal Reserve
transactions as non-budgetary involve excess earnings of
the Federal Reserve System. The Federal Reserve System
earns income from a variety of sources including interest on
Government securities, foreign currency investments and
loans to depository institutions, and fees for services (e.g.,
check clearing services) provided to depository institutions.
After paying its expenses, the Federal Reserve System remits to Treasury any excess income. This income, which
is classified in the budget as a governmental receipt, was
equal to $82.0 billion in 2012. The recent expansion of the
Federal Reserve’s balance sheet has increased its sources
of income (and potential loss), which in turn has affected
the Federal Reserve’s excess income payment to Treasury.
In addition to remitting excess income to Treasury, the
Dodd-Frank Wall Street Reform and Consumer Protection
Act requires the Federal Reserve to transfer a portion of
its excess earnings to the Consumer Financial Protection
Bureau (CFPB), an independent bureau of the Federal
Reserve, which was created by the Act.18
The Board of Governors is a Federal Government agency, but because of its independent status, its budget is not
subject to Executive Branch review and is included in the
16  See

12 U.S.C. 225a.
15 U.S.C. 3101 et seq.
18  See section 1011 of Public Law 111-203, enacted on July 21, 2010.
The CFPB is an executive agency, led by a director appointed by the
President and reliant on Federal funding, that serves the governmental
function of regulating Federal consumer financial laws. Accordingly, it is
included in the Budget.
17  See

146

Analytical Perspectives

Budget Appendix for informational purposes only. The
Federal Reserve Banks are subject to Board oversight and
managed by boards of directors chosen by the Board of
Governors and member banks, which include all national
banks and state banks that choose to become members.
The budgets of the regional Banks are subject to approval
by the Board of Governors and are not included in the
Budget Appendix.
Indirect macroeconomic effects of Federal activity.—Government activity has many effects on the
Nation’s economy that extend beyond the amounts recorded in the budget. Government expenditures, taxation, tax expenditures, regulation, and trade policy can
all affect the allocation of resources among private uses
and income distribution among individuals. These effects,
resulting indirectly from Federal activity, are generally
not part of the budget, but the most important of these
are discussed in this volume. For example, the effects of
the American Recovery and Reinvestment Act of 2009
(ARRA), among other things, are discussed in Chapter 2
of this volume, “Economic Assumptions and Interactions
with the Budget.”
Financial Stabilization Activity
Since late 2007, the Federal Reserve System, Executive
Branch agencies, and the GSEs Fannie Mae and Freddie
Mac have been engaged in a variety of activities designed
to stabilize the financial markets and restore economic
growth. The actions taken by the Federal Reserve System19 
are non-budgetary for reasons discussed above in the section on “Monetary policy.” However, as also noted above,
Federal Reserve actions may affect the System’s earnings, which ultimately affect governmental receipts. The
placement of Fannie Mae and Freddie Mac into conservatorship, discussed above in the section on “GovernmentSponsored Enterprises,” is not treated as affecting their
non-budgetary status, so the GSEs’ transactions with
the public are not included in the 2014 Budget. However,
as with other transactions between non-budgetary entities and the Government, the transactions of the GSEs
19  The following Federal Reserve liquidity facilities that were created
during the financial market crisis have been allowed to expire: the AssetBacked Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Money Market Investor
Funding Facility, the Primary Dealer Credit Facility, the Term Auction
Facility, and the Term Securities Lending Facility. The Federal Reserve
Bank of New York continues to lend under the Term Asset-Backed Securities Loan Facility, a program administered jointly with Treasury.

with the Government, including all cash payments from
Treasury to the GSEs, are included in the 2014 Budget.
Executive Branch activities in support of financial
market stabilization include actions taken by Treasury,
the Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), and the
FHFA. Treasury activities included three credit market
programs—the Public-Private Investment Partnership
program, the Term Asset-Backed Securities Loan Facility
(administered jointly with the Federal Reserve), and the
Small Business Administration 7(a) Securities Purchase
Program. In addition, Treasury activities include three
housing programs—the Making Home Affordable
Program, the Hardest Hit Fund, and the FHA ShortRefinance Program. Treasury activities also include the
Capital Purchase Program, the Small Business Lending
Fund, the Asset Guarantee Program (administered jointly
with the Federal Reserve and the FDIC), the Automotive
Industry Financing Program, and an investment in
American International Group.20 Actions by the FDIC include the Temporary Liquidity Guarantee Program and
actions by the NCUA include the Temporary Corporate
Credit Union Liquidity Guarantee Program. Actions by
the FHFA include the placement of the GSEs into conservatorship in 2008 and the subsequent and ongoing management of the GSEs. Chapter 3 of this volume, “Financial
Stabilization Efforts and Their Budgetary Effects,” discusses all Government efforts to stabilize the financial
markets and restore economic growth.
As distinct from the activities of the Federal Reserve
and the GSEs, the activities of Treasury, the FDIC, and
the NCUA are budgetary. The total budget impact of all
of the credit market stabilization efforts undertaken by
Treasury, other Executive Branch agencies, the GSEs,
and the Federal Reserve may not be known with certainty
for several years. Nevertheless, actual and estimated outlays and receipts are included in the 2014 Budget. In addition, the actual and estimated impacts of credit market
stabilization efforts on the Federal debt held by the public
are included in the 2014 Budget.

20  Treasury has completed its work on two programs—the Targeted
Investment Program and the Community Development Capital Initiative. In addition, Treasury is in the process of selling off the mortgagebacked securities it purchased from the GSEs.

13.  Budget Process

Since taking office, the Administration has sought to
present budget figures that accurately reflect the present
and future course of the Nation’s finances, and to make
improvements in budget process and enforcement. An
honest and transparent accounting of the Nation’s finances is critical to making decisions about key fiscal policies,
and effective budget enforcement mechanisms are necessary to promote budget discipline.
This chapter begins with a description of three broad
categories of budget reform. First, the chapter discusses
proposals to improve budgeting and fiscal sustainability with respect to individual programs as well as across
Government. These proposals include: legislation that
provides for more than $1.2 trillion in savings (the target for the Joint Select Committee on Deficit Reduction),
repeals the Joint Committee reductions, and restores
amounts that were reduced by the 2013 order; various
initiatives to reduce improper payments; funding requested for disaster relief; reforms to reduce the Federal
Government’s real property inventory; limits on advance
appropriations; structural reforms for surface transportation programs; maximum Pell Grant award funding;
Postal Service reforms; changes to the budgetary treatment of the International Monetary Fund quota; and
fast-track procedures for the Congress to consider certain
rescission requests. Second, the chapter describes the
system of scoring under the Statutory Pay-As-You-Go Act

of legislation affecting receipts and mandatory spending,
and it summarizes the Administration’s commitment to
applying a PAYGO requirement to administrative actions
affecting mandatory spending. Finally, the chapter presents proposals to revise the budget baseline and to improve budget presentation, for example, by including an
allowance for the costs of potential future natural disasters and by projecting the costs of certain major tax and
spending policies currently in effect, even though those
policies are scheduled to expire within the budget window. This revised baseline better captures the likely future costs of operating the Federal Government. This section also discusses the use of debt net of financial assets,
instead of debt held by the public, as a better measure of
the Government’s demand on private credit markets.
Taken together, these reforms generate a Budget that
is more transparent, comprehensive, accurate, and realistic, and is thus a better guidepost for citizens and their
representatives in making decisions about the key fiscal
policy issues that face the Nation.1
1  This chapter typically contains a report which fulfills the requirement under section 254 of the Balanced Budget and Emergency Deficit
Control Act of 1985 (BBEDCA), as amended, for OMB to issue a sequestration preview report for each fiscal year. The OMB Sequestration Preview Report for FY 2014 will be made available on the OMB website.

I. Budget reform proposals
Joint Committee Enforcement
In August 2011, as part of the Budget Control Act
(BCA), bipartisan majorities in both the House and
Senate voted for automatic reductions as a mechanism
to compel the Congress to enact legislation to reduce the
Federal deficit by at least $1.2 trillion over the period of
fiscal years 2012 through 2021. On multiple occasions,
the President has presented comprehensive plans to
cut the deficit through a mix of spending cuts and revenue proposals. However, despite repeated urging by the
President to enact balanced deficit reduction legislation to
achieve the full savings and cancel sequestration, during
the ensuing year and a half the Congress has enacted just
$24 billion of savings toward this goal. The Congress’s
failure to achieve the full savings resulted in a sequestration of $85 billion for fiscal year 2013 beginning on March
1, 2013. Damaging annual reductions of $109 billion will
be required for each of fiscal years 2014 through 2021,
unless the Congress enacts balanced deficit reduction legislation that replaces and repeals the Joint Committee
reductions. As required by the BCA, the reductions for

each year, beginning in fiscal year 2014, are triggered by
the transmittal of the President’s Budget. The reductions
to discretionary spending for fiscal years 2014 through
2021 are to be implemented by reducing the discretionary
caps established in the BCA, while the reductions to mandatory programs are to be implemented by a sequestration of non-exempt mandatory budgetary resources. The
reductions required for 2014 are discussed in the OMB
Sequestration Preview Report for FY 2014, which will be
made available on the OMB website.
The President has warned repeatedly that these reductions will be harmful to national security, domestic investments, and core Government functions. He has been
clear that he is willing to make tough choices to reach an
agreement on further deficit reduction. The 2014 Budget
includes balanced and responsible deficit reduction proposals that, in total, exceed the $1.2 trillion deficit reduction target. The President will work with the Congress to
enact deficit reduction sufficient to replace and repeal the
Joint Committee reductions required by the BCA in fiscal
years 2013 through 2021.

147

148
Program Integrity Funding
Critical programs such as Social Security, Medicare,
and Medicaid, should be run efficiently and effectively.
Still, the Government made an estimated $108 billion in
improper payments last year. Although this amount reflects an improvement in both the payment error amount
and the payment error rate, this level of error is unaffordable and unacceptable. Therefore, the Administration,
proposes to make significant investments in activities to
ensure that taxpayer dollars are spent correctly, by expanding oversight activities in the largest benefit programs and increasing investments in tax compliance and
enforcement activities. In addition, the Administration
supports a number of legislative and administrative reforms in order to reduce improper payments and improve
debt collection. Many of these proposals will provide savings for the Government and taxpayers, and will support
Government-wide efforts to improve the management
and oversight of Federal resources.
The Administration supports efforts to provide Federal
agencies with the necessary resources and incentives to
prevent, reduce, or recover improper payments. With the
enactment of the Improper Payments Elimination and
Recovery Act of 2010 (P. L. 111-204), and the release of
three Presidential directives on improper payments under this Administration, agencies are well positioned to
utilize these new tools and techniques to prevent, reduce,
and recover improper payments. The Administration will
continue to identify areas—in addition to those outlined
in the Budget—where it can work with the Congress to
further improve agency efforts.
Administrative Funding for Program Integrity.—
There is compelling evidence that investments in administrative resources can significantly decrease the rate of
improper payments and recoup many times their initial
investment. For every $1 spent by the Social Security
Administration (SSA) on a disability review, $9 is saved
in erroneous payments. Similarly, for every additional $1
spent on Health Care Fraud and Abuse Control (HCFAC)
program integrity efforts, CMS actuaries conservatively
estimate approximately $1.50 is saved or averted, and the
Internal Revenue Service (IRS) enforcement activities recoup roughly $4 for every $1 spent.
Enacted Adjustments Pursuant to BBEDCA
Converted to Mandatory Funding.—BBEDCA, as
amended, recognized that a multi-year strategy of agencies focusing attention and resources on reducing the rate
of improper payments, commensurate with the large and
growing costs of the programs administered by that agency, is a laudable goal. To support that goal, BBEDCA, as
amended, provided for adjustments to the discretionary
spending limits for additional funding for specific program
integrity activities at SSA to reduce improper payments
in the Social Security program and in the Medicare and
Medicaid programs. These adjustments are increases in
the discretionary caps on budget authority through 2021
and are made only if appropriations bills increase funding
for the specified program integrity purposes above specified base levels. This budget mechanism was intended to

Analytical Perspectives

ensure that the additional funding did not supplant other
Federal spending on these activities and that such spending was not diverted to other purposes.
Despite enactment of these multi-year discretionary
cap adjustments, annual appropriations bills have not
provided the full amount of program integrity funding
authorized in BBEDCA, as amended. Tens of billions
of dollars in deficit savings over the next ten years from
curtailing improper payments will not be realized if the
administrative expenses for program integrity envisioned
by BBEDCA, as amended, are not provided in each year.
To ensure these important program integrity investments
are made, the Budget is proposing to repeal the discretionary cap adjustments beginning in 2014 for SSA and
2013 for HCFAC and instead provide a dedicated, dependable source of mandatory funding that will ensure SSA,
the Department of Health and Human Services (HHS)
and the Department of Justice (DOJ) have the resources
that they need to conduct necessary program integrity
activities and make certain that the right people receive
the right payment for the right reason at the right time.
Providing mandatory funding to SSA and HCFAC will
also avoid delays in annual appropriations that make it
difficult for the agencies to execute their budget plans and
achieve targeted results in each year.
For 2014, the Budget proposes to continue to provide
the base funding ($273 million for SSA and $311 million
for HHS, and DOJ, respectively) through discretionary
appropriations. After 2014, no discretionary funding is
being proposed for this purpose. In addition, the Budget
proposes an annual reduction to the discretionary spending limits in section 251(c) of BBEDCA, as amended, beginning in 2015 to offset the cost of shifting the base funding from discretionary to mandatory. The more stable
mandatory program integrity funding will produce new
net deficit savings of almost $40.1 billion over 11 years.
Social Security Administration Continuing
Disability Reviews and Redeterminations of
Eligibility.—For the Social Security Administration, the
Budget’s proposed $1,227 million in mandatory funding
and $273 million in discretionary base funding will allow
SSA to conduct at least 650,000 Continuing Disability
Reviews (CDRs) and at least 2.6 million Supplemental
Security Income (SSI) redeterminations of eligibility.
CDRs determine whether an individual continues to qualify for Disability Insurance (DI) or SSI. The mandatory
funding provided for the SSA will enable the agency to
work down a backlog of CDRs. As a result of increased
mandatory funding in 2013 through 2023, SSA would recoup more than $51.4 billion in gross savings in the DI
and SSI programs, with additional savings after the 11year period, according to estimates of SSA’s Office of the
Actuary. Taking into account the $13.7 billion cost of the
increased mandatory funding, this would produce new
net deficit savings of $37.7 billion. These costs and savings are reflected in Table 13-1. The cost of shifting the
current SSA base funding of $273 million from discretionary to mandatory in 2015 through 2023 is not reflected in
the new net deficit savings because, as noted above, it is
being offset with an annual reduction to the discretionary

149

13.  Budget Process

Table 13–1. Proposal to Shift to Mandatory Funding for Enacted Cap Adjustments, Including Mandatory Savings
(Outlays in millions of dollars)
2013
SSA Program Integrity
Mandatory Costs1 �����������������������������������������������������������
Mandatory Savings2 ��������������������������������������������������������
Net Savings ����������������������������������������������������������������

266
–76
190

2014
1,227
–559
668

2015

2016

2017

2018

2019

2020

2021

2022

2023

1,477
–2,437
–960

1,527
–3,809
–2,282

1,437
–4,417
–2,980

1,352
–4,824
–3,472

1,270
–5,760
–4,490

1,270
–6,466
–5,196

1,270
–7,040
–5,770

1,270
–7,890
–6,620

1,347
–8,124
–6,777

2013–2023
Total
13,713
–51,402
–37,689

Health Care Fraud and Abuse Control Program
Mandatory Costs1 �����������������������������������������������������������

303
329
361
395
414
434
454
475
496
518
541
4,720
Mandatory Savings 3 �������������������������������������������������������
–450
–496
–546
–599
–628
–659
–690
–722
–755
–789
–824
–7,158
Net Savings. ����������������������������������������������������������������
–147
–167
–185
–204
–214
–225
–236
–247
–259
–271
–283
–2,438
1 The cost of shifting the current SSA and HCFAC base funding ($273 million and $311 million, respectively) from discretionary to mandatory is not reflected above in 2015 through
2023 because it is being offset with an annual reduction to the discretionary spending limits in section 251(c) of the Balanced Budget and Emergency Deficit Control Act of 1985
(BBEDCA), as amended.For 2013, for both SSA and HCFAC, the base amounts were enacted in the annual appropriations bill and, for SSA, an additional $485 million was provided
as a discretionary cap adjustment pursuant to section 251(b)(2)(B) of BBEDCA, as amended.For 2014, the Budget continues to request the SSA and HCFAC base funding through
discretionary appropriations. The mandatory savings from the base funding in every year and any enacted discretionary cap adjustment funding continues to be included in the BBEDCA
baseline.
2 This is based on SSA’s Office of the Actuary estimates of savings. In the first two years, there is no net savings.This is due to the fact that redeterminations of eligibility can uncover
underpayment errors as well as overpayment errors and corrections for underpayments are realized more quickly than corrections for overpayments.
3 These savings are based on estimates from the HHS Office of the Actuary for return on investment (ROI) from program integrity activities.

spending limits in section 251(c) of BBEDCA, as amended
if the mandatory funding proposal is enacted.
SSA is required by law to conduct CDRs for all beneficiaries who are receiving DI benefits, as well as all children under age 18 who are receiving SSI. SSI redeterminations are also required by law, but the frequency is
not specified in statute. For 2013, the base amounts, as
well as an additional $485 million discretionary cap adjustment pursuant to section 251(b)(2)(B) of BBEDCA, as
amended, were enacted in the annual appropriations bill.
The mandatory savings from the base funding in every
year and any enacted discretionary cap adjustment funding in 2013 are included in the BBEDCA baseline because
the baseline assumes the likely frequency of program integrity activities, given the current likely funding levels.
The Budget shows the savings that would result from the
increase in CDRs and redeterminations made possible
by the increased mandatory funding. Although final appropriations action was not yet complete at the time the
Budget went to print, the 2013 appropriations bill had
not fully funded the cap adjustment for 2013 for CDRs
and redeterminations; therefore, the Administration is
proposing to increase mandatory funding for this purpose
by $266 million in 2013. This funding will realize net
savings of $1,941 million, included in the new net deficit savings above, when compared to the current enacted
amount for 2013.
As stated above, the return on investment (ROI) for
CDRs is approximately 9 to 1 in lifetime program savings.
The ROI for redeterminations is approximately 5 to 1.
The savings from one year of program integrity activities
are realized over multiple years because some CDRs find
that beneficiaries have medically improved and are capable of working, which may mean that they are no longer
eligible to receive DI or SSI benefits. Redeterminations
focus on an individual’s eligibility for the means-tested
SSI program and generally result in a revision of the in-

dividual’s benefit level. However, the schedule of savings
resulting from redeterminations will be different for the
base funding and the increased mandatory funding. This
is because redeterminations of eligibility can uncover underpayment errors as well as overpayment errors. SSI
recipients are more likely to initiate a redetermination of
eligibility if they believe there are underpayments, and
these recipient-initiated redeterminations are included in
the base. The estimated lifetime savings per dollar spent
on CDRs and redeterminations was revised downward
last year due to an interaction with a provision in the
Affordable Care Act (ACA) that allows States to expand
Medicaid coverage beginning January 2014 for individuals under age 65 with income less than 133 percent of
poverty. As a result of this provision, many SSI beneficiaries, who would otherwise lose Medicaid coverage due to
a CDR or redetermination, would continue to be covered.
In addition, some of these individuals will be eligible for
the Medicaid ACA enhanced Federal matching rate, resulting in higher Federal Medicaid costs.
Health Care Fraud and Abuse Program.—The proposed additional mandatory funding of $329 million (in
addition to the discretionary base funding of $311 million) for HCFAC activities in 2014 is designed to reduce
the Medicare improper payment rate, support the Health
Care Fraud Prevention & Enforcement Action Team
(HEAT) initiative, and to reduce Medicaid improper payment rates. The increased mandatory funding will also allow the Centers for Medicare & Medicaid Services (CMS)
to deploy innovative efforts that focus on improving the
analysis and application of data, including state-of-theart predictive modeling capabilities, in order to prevent
potentially wasteful, abusive, or fraudulent payments
before they occur. The funding is to be allocated among
CMS, the Health and Human Services Office of Inspector
General, and DOJ. Over 2013 through 2023, as reflected
in Table 13-1, this $4,720 million increase in net HCFAC

150

Analytical Perspectives

Table 13–2. Proprosals for Discretionary Program Integrity Base Funding
and Cap Adjustments, Including Mandatory and Receipts Savings
(budget authority in millions of dollars)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023 2014-2023
Proposed Proposed Proposed Proposed Proposed Proposed Proposed Proposed Proposed Proposed
Total

IRS Tax Enforcement
Proposed Adjustments Pursuant to the Balanced
Budget and Emergency Deficit Control Act of
1985, as Amended:
Enforcement Base. �����������������������������������������������

9,832

10,179

10,592

11,052

11,526

11,995

12,459

12,926

13,384

13,859

BA �����������������������������������������������������������������

412

738

1,030

1,341

1,662

1,639

1,650

1,712

1,773

1,836

13,793

Outlays ����������������������������������������������������������

387

718

1,012

1,322

1,643

1,640

1,649

1,708

1,769

1,832

13,683

-55,000

-55,000

-55,000

-55,000

-55,000

-55,000

-55,000

-55,000

-55,000

-458

-1,252

-2,503

-3,766

-5,052

-5,955

-6,525

-6,816

-7,017

-7,158

Cap Adjustments:

Receipt Savings from Discretionary Program
Integrity Base Funding and Cap Adjustments:1
Enforcement Base 2 ����������������������������������������������
Cap Adjustment 3 �������������������������������������������������

-55,000 -550,000
-46,502

Unemployment Insurance Improper Payments
Proposed Adjustments Pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985, as Amended:
Enforcement Base ������������������������������������������������

60

60

60

60

60

60

60

60

60

60

BA �����������������������������������������������������������������

20

25

30

35

36

37

38

39

40

41

341

Outlays ����������������������������������������������������������

20

25

30

35

36

37

38

39

40

41

341

-125

-250

-252

-256

-258

-262

-266

-268

-271

-271

-2,479

Cap Adjustments:

Mandatory Savings from Discretionary Program
Integrity Base Funding and Cap Adjustments: 4
Enforcement Base ������������������������������������������������

Cap Adjustment. ���������������������������������������������������
-33
-77
-100
-123
-137
-143
-148
-154
-161
-164
-1,240
Savings for IRS are revenue increases rather than spending reductions. They are shown as negatives for consistency in presentation.
2 No official estimate for 2014 enforcement revenue has been produced, so this figure is an approximation and included only for illustrative purposes.
3  The Internal Revenue Service (IRS) cap adjustment funds cost increases for existing enforcement initiatives and activities and new initiatives.  The IRS enforcement program helps
maintain the more than $2 trillion in taxes paid each year without direct enforcement measures.  The cost increases will help maintain the base revenue while generating additional
revenue through targeted program investments. The activities and new initiatives funded out of the cap adjustment will yield more than $46.5 billion in savings over ten years.  Aside from
direct enforcement revenue, the deterrence impact of these activities suggests the potential for even greater savings.
4 The maximum UI benefit period is typically 26 weeks unless temporary extended benefits programs are in effect. As a result, preventing an ineligible individual from collecting UI
benefits would save at most a half year of benefits in the absence of extended benefits. The savings estimates are based on regular UI benefits and spread over two years, reflecting the
fact that reemployment and eligibility assessments conducted late in the year affect individuals whose benefits would have continued into the subsequent fiscal year. As a result of the
benefit savings, many States will be able to reduce their unemployment taxes. The estimated revenue loss from the enforcement base is $604 million, net of the income tax offset. The
estimated revenue increase from the cap adjustment is $570 million, net of the offset.
1

mandatory funding will generate approximately $7,158
million in savings to Medicare and Medicaid, for new net
deficit reduction of $2,438 million over the 11-year period,
reflecting prevention and recoupment of improper payments made to providers, as well as recoveries related to
civil and criminal penalties. The cost of shifting the current HCFAC base funding of $311 million from discretionary to mandatory in 2015 through 2023 is not reflected
in the new net deficit savings because, as noted above,
it is being offset with an annual reduction to the discretionary spending limits in section 251(c) of BBEDCA, as
amended. As with CDRs and redeterminations, the base
amounts for 2013 were enacted in the annual appropriations bill. The mandatory savings from that base funding

and the base funding in every year are included in the
BBEDCA baseline. Also, since the 2013 appropriations
bill did not fully fund the base or the cap adjustment for
2013 for HCFAC, the Administration is proposing to increase mandatory funding for this purpose by $303 million in 2013. This will save an additional $450 million,
included in the new net deficit savings above, when compared to the current enacted amount for 2013.
Proposed Adjustments to BBEDCA Discretionary
Spending Limits.—The Administration also proposes to
amend BBEDCA to enact adjustments to the discretionary spending limits at the IRS and Treasury’s Tax and
Trade Bureau (TTB) for tax code enforcement and the
Department of Labor (DOL) to reduce improper payments

151

13.  Budget Process

Table 13–3. Mandatory and Receipt Savings from Other Program Integrity Initiatives
(Receipts and outlays in millions of dollars)
2014
Department of Health and Human Services:
Cut Waste, Fraud, and Abuse in Medicare and Medicaid 1 ����
Department of Labor:
Implement Unemployment Insurance Integrity ��������������������
Implement Unemployment Insurance Integrity (non-PAYGO
receipt effect) ������������������������������������������������������������������
Disclose Prisoner Data for Improper Payments �������������������
Department of the Treasury:
Increase levy authority for payments to Medicare providers
with delinquent tax debt (receipt effect) ��������������������������
Provide authority to contact delinquent debtors via their
cell phones ��������������������������������������������������������������������
Authorize Treasury to locate and recover assets of the
United States and to retain a portion of amounts
collected to pay for the cost of recovery �������������������������
Disclose Prisoner Data for Improper Payments (includes
receipt effect) ������������������������������������������������������������������
Prevent Improper Use of the Death Master File (includes
receipt effect) ������������������������������������������������������������������
Social Security Administration:
Windfall Elimination Provision/Government Pension Offset
Enforcement Provision (non-PAYGO) �����������������������������
Disclose Prisoner Data for Improper Payments (nonPAYGO) ��������������������������������������������������������������������������
Total, Mandatory and Receipt Savings ����������������������������
PAYGO Savings ��������������������������������������������������������������
Non-PAYGO Savings ������������������������������������������������������
1 Savings estimates may not include all interactions.

2015

2016

2017

2018

2019

2020

2021

2022

2023

10-year
total

–156

–272

–358

–388

–424

–444

–470

–501

–526

–552

–4,091

–10

–40

–43

–44

–40

–37

–35

–33

–33

–31

–346

.........
–5

.........
–10

1
–10

4
–10

9
–10

12
–10

447
–10

34
–11

–28
–11

22
–12

501
–99

–46

–67

–70

–71

–72

–74

–76

–76

–77

–78

–707

–12

–12

–12

–12

–12

–12

–12

–12

–12

–12

–120

–2.5

–2.5

–2.5

–2.5

–2.5

–2.5

–2.5

–2.5

–2.5

–2.5

–25

–24

–35

–36

–37

–38

–39

–40

–41

–42

–43

–375

–65

–131

–132

–135

–138

–137

–137

–140

–143

–145

–1,303

18

28

24

–232

–500

–650

–685

–619

–577

–524

–3,717

15

.........

.........

.........

.........

.........

.........

.........

.........

.........

15

–288
–321
33

–542
–570
28

–639
–664
25

–928
–700
–228

–1,228
–737
–491

–1,394
–756
–638

–1,021
–783
–238

–1,402
–817
–585

–1,452
–847
–605

–1,378
–876
–502

–10,267
–7,066
–3,201

in the Unemployment Insurance (UI) program. As shown
in Table 13-2, the proposed adjustments are estimated to
result in more than $48.3 billion in lower spending and
additional tax revenue over the next 10 years, with further savings after the 10-year period. Both the base level
of funding and the additional funding that would trigger
cap adjustments are also listed in Table 13-2.
Internal Revenue Service and Treasury’s Tax and
Trade Bureau.—For the IRS and TTB, the base funds
current tax administration activities, including all tax
enforcement and compliance program activities, in the
Enforcement and Operations Support accounts at IRS
and the Salaries and Expenses account at TTB. The
additional $412 million cap adjustment funds new and
continuing investments in expanding and improving the
effectiveness and efficiency of the IRS’s and TTB’s overall tax enforcement program. As a result of base tax enforcement and compliance activities, the Government will
collect roughly $55 billion in 2014 in direct enforcement
revenue. The IRS estimates that the proposed new 2014
enforcement initiatives will yield an additional $458 million in revenue from the work done in 2014. Further, once
the new staff are trained and become fully operational
in 2016, the extra revenue brought in by the work done
in each year will rise to nearly $1.7 billion, or roughly $4
in additional revenue for every $1 in IRS expenses. New
investments are also proposed beyond 2014, with cap ad-

justments in fiscal years 2015 through 2018 that include
about $350 million in new revenue-producing enforcement initiatives each year. The activities and new initiatives funded out of the cap adjustments through 2023
will generate more than $46 billion in additional revenue
over 10 years and will cost $13.8 billion for an estimated
net savings of $32.7 billion. Notably, the ROI is likely understated because it only includes amounts received; it
does not reflect the effect enhanced enforcement has on
deterring non-compliance. This indirect deterrence helps
to ensure the continued payment of well over $2 trillion
in taxes paid each year without direct enforcement measures.
Unemployment Insurance.—The Budget proposes a
series of cap adjustments for the Department of Labor’s
(DOL) Unemployment Insurance (UI) State administrative grants program to reduce UI improper payments,
a top management challenge identified by GAO and
DOL’s Inspector General. The proposal would expand
what is now a $60 million Reemployment and Eligibility
Assessment (REA) initiative, begun in 2005 to finance inperson interviews at American Job Centers (also known
as “One-Stop Career Centers”), to assess UI beneficiaries’ need for job finding services and their continued
eligibility for benefits. The current $60 million base effort, if continued through 2023, would result in a savings
in UI benefit payments of an estimated $2,479 million.

152
These benefit savings would allow States to reduce their
UI taxes by over $600 million (net of the income tax offset), reducing the burden on employers. The request for
additional funding for in-person reemployment and eligibility assessments of claimants of unemployment compensation builds upon the success of a number of States
in reducing improper payments and speeding reemployment by using these assessments. Because most unemployment claims are now filed by telephone or online, inperson assessments conducted in the Centers can help
determine the continued eligibility for benefits and the
adequacy of work search, verify the identity of beneficiaries where there is suspicion of possible identity theft,
and provide a referral to reemployment assistance for
those who need additional help. The savings from this
REA initiative are short-term because the maximum UI
benefit period is limited, typically 26 weeks for regular
State UI programs, although durations are currently
longer in response to the elevated unemployment rate.
The proposed cap adjustments would begin at $20 million in 2014 and total $341 million through 2023, providing total gross outlay savings estimated at $1.240 billion.
These outlay savings from the cap adjustments would
result in some States increasing their UI taxes, which
would result in an estimated revenue increase of $570
million (net of the income tax offset). Net savings for
the proposal, including the cost of the cap adjustments,
the mandatory outlay savings, and the revenue increase,
totals $1,469 million.
Partnership Fund for Program Integrity
Innovation.—Funded from fiscal year 2010 through
2013, the Partnership Fund has invested over $29 million
in eleven pilot projects, which are estimated to lead to total savings of up to $200 million or more annually if the
pilots are taken to scale. As evaluations are completed
and results finalized, OMB will work with Federal agencies, States and local governments, and other stakeholders to disseminate lessons learned and apply the tools and
methods tested more broadly across programs and levels
of government.
Pilots that are now evaluating results include:
•	 The Department of Labor is working with States to
test how access to data from financial institutions
could help to detect overpayments in the Unemployment Insurance program;
•	 The Department of the Treasury is partnering with
States to determine how expanding the Treasury
Offset Program (TOP) could help States collect delinquent debt that includes Federal dollars; and
•	 The Centers for Medicare & Medicaid Services and
States are working to better identify provider fraud
and share fraud information through automated
risk assessment tools using integrated data from
State Medicaid programs and the Federal Medicare
program.
Mandatory Program Integrity Initiatives.—Table
13-3 lays out the mandatory and receipt savings from oth-

Analytical Perspectives

er program integrity initiatives that are included in the
2014 Budget, beyond the expansion in resources resulting
from the increases in administrative funding discussed
above. These savings total almost $10.3 billion over ten
years. Almost 69 percent of these savings would be scored
as PAYGO offsets because the legislation would authorize
agencies to use new methods to reduce overpayments and
combat fraud. These mandatory proposals to reduce improper payments and ensure agencies recover debt owed
to the Federal Government reflect the importance of these
issues to the Administration. Through these and other
initiatives outlined in the Budget, the Administration
can improve management efforts across the Federal
Government.
Cut Waste, Fraud, and Abuse in Medicare and
Medicaid.—The Budget includes a robust package of
Medicare and Medicaid program integrity proposals to
help prevent fraud and abuse before they occur; detect
fraud and abuse as early as possible; more comprehensively enforce penalties and other sanctions when fraud and
abuse occur; provide greater flexibility to the Secretary of
Health and Human Services to implement program integrity activities that allow for efficient use of resources and
achieve high returns-on-investment; and promote integrity in Federal-State financing. For example, the Budget
proposes to authorize civil monetary penalties or other
intermediate sanctions for providers who do not update
enrollment records, permit exclusion of individuals affiliated with entities sanctioned for fraudulent or other
prohibited action from Federal health care programs, and
affirm Medicaid’s position as a payer of last resort when
another entity is legally liable to pay claims for beneficiaries. Together, the CMS program integrity authority
would save approximately $4.1 billion over 10 years.
Unemployment Insurance Integrity.—The Budget
includes two proposals that would implement improved
integrity in the Unemployment Insurance program and
would result in PAYGO savings of $346 million over ten
years:
•	 Collection of Past-Due, Legally Enforceable
State Unemployment Compensation Debts.—
The Budget proposes to require States to use the
Treasury Offset Program (TOP) to recover certain
Unemployment Insurance (UI) debts (stemming
from overpayments due to fraud or failure to report
earnings). A number of States already use TOP, and
they have found it an effective debt recovery tool
when other attempts to collect legally enforceable UI
debts have failed. However, many States have not
yet used this tool. A barrier that some States face is
that their entire UI information technology system is
administered through contractors, and they are unable to participate in TOP if those contractors would
be needed to carry it out. Therefore, this proposal
also amends the Internal Revenue Code to allow
State contractors to receive the needed information
solely for the purposes of carrying out TOP. States
are required to provide due process opportunities for
individuals to challenge the validity of the debt, be-

13.  Budget Process

fore seeking to recover the funds through TOP. This
proposal will help to ensure that all States will participate in TOP and recover UI debts.
•	 Electronic Transmission of Unemployment
Compensation Information.—The Budget proposes to require all State agencies to use a system
designated by the Secretary of Labor to obtain information from employers relating to UI claims,
which could be the existing State Information Data
Exchange System (SIDES) or else a successor system. The Department of Labor’s SIDES system is
designed to help employers more quickly provide
to States the information necessary to determine
a claimant’s eligibility by providing a secure electronic data exchange between States and employers
or their third party administrators. SIDES is currently used by about 35 States. The improvements
in speed and accuracy resulting from use of such a
system will help avoid overpayments or underpayments, and provide for more efficient and effective
administration of the UI program.
Improve Treasury Debt Collection.—The Budget
includes two proposals that would increase collections of
delinquent debt:
•	 Increase levy authority for payments to Medicare providers with delinquent tax debt.—The
Budget proposes a change to the Department of the
Treasury’s debt collection procedures that will increase the amount of delinquent taxes collected from
Medicare providers. Through the Federal Payment
Levy Program, Treasury deducts (levies) a portion
of a Government payment to an individual or business in order to collect unpaid taxes. Pursuant to
the Medicare Improvements for Patients and Providers Act of 2008, Medicare provider and supplier
payments are included in the Federal Payment Levy
Program, whereby Treasury is authorized to continuously levy up to 15 percent of a payment to a Medicare provider in order to collect delinquent tax debt.
The Budget proposal will allow Treasury to levy up
to 100 percent of a payment to a Medicare provider
to collect unpaid taxes. This proposal would result
in PAYGO savings of $707 million over ten years.
•	 Provide authority to contact delinquent debtors via their cell phones.—The Budget proposes
to clarify that the use of automatic dialing systems
and prerecorded voice messages is allowed when
contacting wireless phones in the collection of debt
owed to or granted by the United States. In this
time of fiscal constraint, the Administration believes
that the Federal Government should ensure that
all debt owed to the United States is collected as
quickly and efficiently as possible and this provision
could result in millions of defaulted debt being collected. While protections against abuse and harassment are appropriate, changing technology should
not absolve these citizens from paying back the debt
they owe their fellow citizens. The proposal would

153
also allow the Federal Communications Commission
to implement rules to protect consumers from being
harassed and contacted unreasonably. This proposal
would result in PAYGO savings of $120 million over
10 years.
•	 Authorize Treasury to locate and recover assets
of the United States and to retain a portion of
amounts collected to pay for the cost of recovery.—States and other entities hold assets in the
name of the United States or in the name of departments, agencies and other subdivisions of the Federal Government. Many agencies are not recovering
these assets due to lack of expertise and funding.
Under current authority, Treasury collects delinquent debts owed to the United States and retains
a portion of collections, which is the sole source of
funding for its debt collection operations. While unclaimed Federal assets are generally not considered
to be delinquent debts, Treasury’s debt collection
operations personnel have the skills and training to
recover these assets. The Budget proposes to authorize Treasury to use its resources to recover assets
of the United States. This proposal would result in
PAYGO savings of $25 million over 10 years.
Reduction of Identity Theft by Reforming the
Death Master File.—The Budget proposes to amend the
Social Security Act to limit access to the “Death Master
File” to prevent this information from being used to file
fraudulent claims for benefits or tax refunds. This proposal provides that the Commissioner of Social Security
may use, or provide for the use of, records of deceased individuals, subject to such safeguards as the Commissioner
determines are necessary or appropriate to protect the
information from unauthorized use or disclosure, for the
purpose of public health or safety, law enforcement, tax
administration, health oversight, debt collection, payment certification, disbursement of payments, and for the
prevention, identification or recoupment of improper payments. This proposal would result in PAYGO savings of
$1.3 billion over ten years.
Social Security Windfall Elimination Provision/
Government Pension Offset Enforcement Provision.—
The Budget re-proposes legislation that would improve
reporting for non-covered pensions by including up to
$70 million for administrative expenses, $50 million of
which would be available to the States, to develop a mechanism so that the Social Security Administration could
enforce the offsets for non-covered employment, Windfall
Elimination Provision (WEP), and Government Pension
Offset (GPO). The proposal would require State and local governments to provide information on their noncovered pension payments to SSA so that the agency can
apply the WEP and GPO adjustments. Under current
law, the WEP and GPO adjustments are dependent on
self-reported pension data and cannot be independently
verified. This proposal would result in savings in the OldAge, Survivors, and Disability Insurance program of more
than $3.7 billion over 10 years, which would be scored as
non-PAYGO savings because the program is off-budget.

154
Disclose Prisoner Data for Improper Payments.—
The Budget proposes to increase Federal and State access to information contained in the Social Security
Administration’s (SSA’s) Prisoner Update Processing
System (PUPS), which contains Federal, State, and local
prisoner data. The proposal also expands the information the prisons are required to report to SSA to include
release dates, making the system more valuable to users.
The PUPS data will help prevent prisoners from illegally
receiving payments, such as unemployment compensation in the Department of Labor and certain Railroad
Retirement benefits, and identify individuals who are
filing fraudulent tax returns. SSA will transfer PUPS
data to the Department of the Treasury, Bureau of Fiscal
Service on a regular basis, where it will be maintained for
use by other Federal agencies. This proposal would result
in $459 million in net savings over ten years across all of
the affected agencies.
Other Program Integrity Initiatives.— Executive Order
13520 on Reducing Improper Payments and Eliminating
Waste in Federal Programs intensifies agency efforts to
eliminate improper payments (including waste, fraud, and
abuse) in the “high-error” programs (i.e., those programs
with the highest dollar value or majority of improper payments) administered by the Federal Government. There
are three overarching EO requirements:
1.	 Increase transparency and public participation;
2.	 Intensify agency accountability and coordination;
and
3.	 Use incentives to improve contractor and State and
local efforts in eliminating payment errors.
The EO provisions align with the President’s program
integrity initiatives by (1) ensuring that performance
measures exist to assess (either annually or more frequently) whether these actions are reducing errors; (2)
requiring agencies to submit a remediation plan when
reduction targets for those programs with the high dollar value of improper payments are missed two consecutive years; and (3) initiating studies to recommend incentives for reducing error. Agencies are continuing to make
progress in implementing EO 13520, and agency results
can be found on the Federal Government’s improper payments dashboard at http://www.PaymentAccuracy.gov/.
In addition, enactment of the Improper Payments
Elimination and Recovery Act of 2010 and the Improper
Payments Elimination and Recovery Improvement
Act of 2012 (IPERIA) were both important milestones
in the Government’s effort to reduce improper payments. These statutes provide agencies with new tools
to identify and address improper payments and reinforce
Administration efforts underway, including EO 13520
and the Administration’s Do Not Pay Initiative.
Leveraging Technology to Reduce Improper
Payments.—Under this Administration, the Federal
Government has focused on utilizing technology to address
improper payments. Specifically, when the President took

Analytical Perspectives

office, in many cases Federal agencies were either unaware of or unable to utilize technology in a manner that
could help prevent and reduce improper payments. In
addition, approximately 31 percent (or $34 billion) of all
payment errors in 2012 were due to the inability to verify
applicant information such as earnings, income, assets, or
work status. This type of information is frequently available in data sources maintained by Federal agencies and
third parties, but access to these sources is often limited
due to legal, regulatory, or cost impediments.
Recognizing these barriers, the Administration has focused on enhancing agency use of technology to prevent
improper payments in a number of ways, including the
following activities. First, under EO 13520, work groups
were created to analyze the role that cutting-edge forensic technologies could play in identifying and preventing fraud and other improper payments, as well as efforts that could be undertaken to improve data sharing
between agencies. Second, the 2012 Budget requested,
and the Consolidated Appropriations Act, 2012 appropriated $10 million to support expansion of the “Do Not Pay”
list—created by a Presidential memorandum issued June
18, 2010—and to add forensic fraud detection capabilities
to the basic “Do Not Pay” portal. Specifically, the funding
will help expand the number of databases and infrastructure of the “Do Not Pay” list, procure the detection technology and hire staff to support an operations center to
analyze fraud patterns utilizing public and private-sector
information, and refer potential issues to agency management and the relevant agency Inspector General. Third,
to enhance data sharing, the President issued a memorandum that directed that a single portal be established
through which agencies could check multiple eligibility
databases before making an award or payment, and in
November 2010, OMB released a memorandum that encouraged agencies to share high-value data that can be
used to support important Administration initiatives, including preventing improper payments.
When the President signed into law the enacted
Improper Payments and Elimination and Recovery
Improvement Act of 2012 (IPERIA), Public Law 112-248,
he reinforced the Administration’s “Do Not Pay Initiative”
already underway. Spearheaded by the Department of
the Treasury, Do Not Pay now emphasizes Treasury’s online portal that enables Federal Government officials to
access information from multiple data sources through
a central portal. In addition, the Do Not Pay initiative
includes other central portals, such as the Integrated
Acquisition Environment System for Award Management
maintained by the General Services Administration, that
allow agencies to check award and payment information against multiple data sources at once. Do Not Pay
will also incorporate other agency initiatives and activities that best promote program integrity based on program authorities, needs, and benefits to the taxpayer. By
June 1, 2013, agencies will be checking all payments and
awards through a Do Not Pay working system as appropriate.
The Administration is continuing to pursue opportunities to improve information sharing by developing or

155

13.  Budget Process

enhancing policy and guidance and developing legislative
proposals to leverage available information and technology in determining benefit eligibility and other opportunities to prevent improper payments. In particular, the
Budget proposes to give the “Do Not Pay” portal (DNP)
access to the National Directory of New Hires (NDNH)
database, which contains information on newly hired employees. The proposal gives DNP NDNH database access
to perform an eligibility check only for those agencies that
already have NDNH matching authority (IRS, SSA, and
HUD, among others). DNP access to the database will
help to increase the effectiveness of the portal and further reduce Government-wide improper payments. In addition, OMB intends to issue guidance related to IPERIA
implementation in July 2013, as required by the Act.
Social
Security
Workers’
Compensation
Enforcement Provision.—The Budget reproposes a proposal from the 2012 and 2013 Budgets to improve the collection of data on the receipt of Workers’ Compensation
benefits. Similar to WEP/GPO (see description in the
mandatory program integrity initiatives section above),
this information is self-reported to SSA and is used to
offset benefit amounts in the Social Security Disability
Insurance and Supplemental Security Income programs.
This proposal would develop a process to collect this information in a timely manner from States and private insurers to correctly offset Disability Insurance benefits and
reduce SSI payments. The proposal includes $10 million
to help fund States’ implementation costs. While the proposal is expected to generate long-term savings based on
a pilot previously performed by SSA’s Inspector General,
SSA has been unable to develop a savings estimate.
Using Rigorous Evidence to Develop Cost
Estimates.—OMB works with Federal agencies and
CBO to develop PAYGO estimates for mandatory programs. OMB has issued guidance to agencies for scoring legislation under the statutory Pay-As-You-Go Act
of 2010. This guidance states that agencies must score
the effects of program legislation on other programs if
the programs are linked by statute. (For example, effects
on Medicaid spending that are due to statutory linkages
in eligibility for Supplemental Security Income benefits
must be scored.) In addition, even when programs are
not linked by statute, agencies may score effects on other
programs if those effects are significant and well documented. Specifically, the guidance states: “Under certain
circumstances, estimates may also include effects in programs not linked by statute where such effects are significant and well documented. For example, such effects
may be estimated where rigorous experimental research
or past program experience has established a high probability that changes in eligibility or terms of one program
will have significant effects on participation in another
program.”
Rigorous evidence can help policy makers identify policies that reduce government spending overall. Because
PAYGO accounts for long-term mandatory savings, it
creates an incentive to invest in relatively cost-effective
programs. Discretionary programs can save money too,
but discretionary scoring typically does not capture these

savings. For example, research shows investments in
the Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC) reduce Medicaid costs for the
mother and child. Although the interventions can reduce
Federal costs, the appropriations bills are scored with the
discretionary costs but are not credited with the savings
in mandatory spending. As discussed earlier in this chapter, one exception to this is the program integrity cap adjustments, which allow the appropriators to provide money above the discretionary caps for activities that have
been shown to generate cost savings. OMB would like
to work with the Congress and CBO to develop options
to provide similar incentives to use rigorous evidence to
reward discretionary program investments in interventions that reduce government spending in other areas. In
addition to promoting better use of limited discretionary
funding, such incentives would also stimulate better data
collection and evaluation about the impacts of Federal
spending.
Disaster Relief Funding
Section 251(b)(2)(D) of BBEDCA, as amended, includes
a provision to adjust the discretionary caps for appropriations that the Congress designates as being for disaster
relief in statute. The law allows for the discretionary cap
to be increased by no more than the average funding provided for disaster relief over the previous ten years, excluding the highest and lowest years. The ceiling for each
year’s adjustment (as determined by the ten year average) is then increased by the unused amount of the prior
year’s ceiling (excluding the portion of the prior year’s
ceiling that was itself due to any unused amount from the
year before). Disaster relief is defined as activities carried out pursuant to a determination under section 102(2)
of the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5122(2)) for major disasters declared by the President. The request amends BBEDCA to
extend the discretionary cap for disaster funding through
2023.
As required by law, OMB included in its Sequestration
Update Report for FY 2013 a preview estimate of the
2013 adjustment for disaster relief. The ceiling for the
disaster relief adjustment in 2013 was calculated to be
$11,779 million. The Congress has already enacted appropriations in 2013 designated for disaster relief up
to that ceiling in the Federal Emergency Management
Agency’s (FEMA’s) Disaster Relief Fund (DRF). Exactly
$6,400 million was included for the DRF in the regular
appropriations bill for 2013 and $5,379 million was included for the DRF in the FY 2013 Disaster Assistance
Supplemental (P.L. 113-2) for Hurricane Sandy response
and recovery. Additional supplemental funding for disaster assistance for Hurricane Sandy was designated as an
emergency requirement pursuant to section 251(b)(2)(A).
OMB must include in its Sequestration Update Report
for FY 2014 a preview estimate of the ceiling on the adjustment for disaster relief funding for fiscal year 2014.
This estimate will contain an average funding calculation
that incorporates eight years (2004 through 2011) using
the definition of disaster relief from OMB’s September 1,

156
2011 report and two years using the funding the Congress
designated in 2012 and 2013 for disaster relief pursuant
to BBEDCA, as amended, excluding the highest and lowest years.
At this time, the Administration is requesting $5,785
million in funding in two accounts to be designated for
disaster relief by the Congress: more than $5.6 billion in
FEMA’s DRF to cover the costs of Presidentially-declared
major disasters, including identified costs for previously
declared catastrophic events (defined by FEMA as events
with expected costs that total more than $500 million) and
the predictable annual cost of non-catastrophic events expected to obligate in 2014, and almost $159 million in the
Small Business Administration’s Disaster Loans Program
Account for administrative expenses. For these two programs, the Budget requests funding for both known needs
based on expected costs of prior declared disasters and
the typical average expenditures in these programs. This
is consistent with past practice of requesting and funding these as part of regular appropriations bills. For the
DRF, the request does not include additional funding for
Hurricane Sandy, because the funding tail could not yet
be determined at the time of allocation. If necessary, additional funding will be requested in the 2015 Budget. Also
consistent with past practice, the 2014 request level does
not seek to pre-fund anticipated needs in other programs
arising out of disasters that have yet to occur, nor does
the Budget seek funding for potential catastrophic needs.
As additional information about the need to fund prior or
future disasters becomes available, additional requests,
in the form of either 2013 supplemental appropriations
(designated as emergency funding pursuant to BBEDCA,
as amended) or budget amendments to the Budget, may
be transmitted.
Under the principles outlined above, since the
Administration does not have the adequate information
about known or estimated needs that is necessary to state
the total amount that will be requested in future years
to be designated by the Congress for disaster relief, the
Budget does not explicitly request to use the BBEDCA
disaster designation in any year after the budget year.
Instead, a placeholder for disaster relief is included in
both the budget year, to capture unanticipated disasters,
and in each of the outyears. See the discussion of this
placeholder allowance later in this chapter in Section
III (Improved Definition of Baseline) under the heading
titled “Adjustments for Emergency and Disaster Costs”.
Civilian Property Realignment
The Federal Government owns and leases over 1.1 million individual properties.  Within this large inventory
are significant opportunities to be more efficient, reduce
holdings, and save money.  There are hundreds of underperforming properties that could be consolidated or sold,
thereby eliminating ongoing Federal maintenance costs
and reducing substantial energy consumption.  However,
progress is often blocked for different reasons: the variety of stakeholders; the numerous government processes
that extend the timeline for disposing a property; and the
financial disincentives for agencies to dispose of property,

Analytical Perspectives

where they have no ability to recoup the significant upfront cost of preparing properties for sale. 
This proposal would create an independent Civilian
Property Realignment Board of private and public sector
leaders to overcome the obstacles to reducing the Federal
real estate inventory through sales and consolidations. 
The Board would forward to the Congress bundled recommendations of properties or actions to better align the
Federal Government’s real property inventory with our
core missions and programs.  The Board would have to
submit bundled recommendations to the Congress to sell
unneeded high-value assets and consolidate other assets
in the real estate inventory.  Unless the Congress disapproves the package as a whole, the Board’s recommendations would become effective. 
Under the proposal, agencies would use streamlined
authorities to dispose of property.  The Board would utilize a revolving fund, supported by a portion of real estate
sales, to assist agencies in implementing further consolidations and sales to further reduce operating costs.   In
creating its recommendations, the Board would have to
balance a variety of factors, including economic development opportunities, community interests, and homelessness assistance, to direct properties toward their highest
and best use.  The Board’s actions would result in reduced
operating costs and at least $2 billion in net proceeds directed to the Treasury General Fund for deficit reduction.
Limit on Discretionary Advance Appropriations
An advance appropriation first becomes available for
obligation one or more fiscal years beyond the year for
which the appropriations act is passed. Budget authority is recorded in the year the funds become available for
obligation, not in the year the appropriation is enacted.
There are legitimate policy reasons to use advance appropriations to fund programs. For example, funding for
the Corporation for Public Broadcasting is customarily
appropriated two years in advance. This gives the beneficiaries of this funding time to plan their broadcasting
budgets before the broadcast season starts.
However, advance appropriations can also be used in
situations that lack a programmatic justification, as a
gimmick to make room for expanded funding within the
discretionary spending limits on budget authority for a
given year under BBEDCA, as amended. For example,
some education grants are forward funded (available beginning July 1 of the fiscal year) to provide certainty of
funding for an entire school year, since school years straddle Federal fiscal years. This funding is recorded in the
budget year because the funding is first legally available
in that fiscal year. However, more than $22.6 billion of
this funding is advance appropriated (available beginning
three months later, on October 1) rather than forward
funded. Prior Congresses increased advance appropriations and decreased the amounts of forward funding as a
gimmick to free up room in the budget year without affecting the total amount available for a coming school year.
This gimmick works because the advance appropriation
is not recorded in the budget year but rather the following
fiscal year. But it works only in the year in which funds

157

13.  Budget Process

are switched from forward funding to advance appropriations; that is, it works only in years in which the amounts
of advance appropriations for such “straddle” programs
are increased.
To curtail this gimmick, which allows over-budget funding in the budget year and exerts pressure for increased
funding in future years by committing up-front a portion
of the total budget authority limits under the discretionary caps in BBEDCA, as amended, in those years, congressional budget resolutions since the 2001 resolution
have set limits on the amount of advance appropriations.
When the congressional limit equals the amount that had
been advance appropriated in the most recent appropriations bill, there is no additional room to switch forward
funding to advance appropriations, and so no room for
this particular gimmick to operate in that year’s budget.
The Budget includes $28,840 million in advance appropriations for 2015 and freezes them at this level in subsequent years. (One exception is the elimination of 2016
through 2023 advances for the Department of Labor’s dislocated worker program, because the Budget proposes a
new Universal Displaced Worker program that would replace it.) In this way, the Budget does not employ this potential gimmick. Moreover, the Administration supports
limiting advance appropriations to the proposed level
through the congressional budget resolution for 2014,
similar to the limits included as section 402 and 424 of S.
Con. Res. 13, the concurrent resolution on the budget for
2010. Those limits applied only to the accounts explicitly
specified in the joint explanatory statement of managers
accompanying the budget resolution.
In order to account for the Administration’s Elementary
and Secondary Education Act reauthorization proposal,
the Budget eliminates the $1,681 million advance appropriation that was previously in the School Improvement
account (renamed the Education Improvement account)
and replaces it with corresponding increases to advance appropriations in the accounts for Education for
the Disadvantaged ($841 million, renamed Accelerating
Achievement and Ensuring Equity) and Special Education
($841 million). Total advance appropriations for 2014
in the Department of Education remain unchanged at
$22,597 million.
In addition, the Administration would allow advance appropriations for the Corporation for Public Broadcasting,
which is typically enacted two years in advance, and for
Veterans Medical Care, as is required by the Veterans
Health Care Budget Reform and Transparency Act (P.L.
111-81). The advance appropriations funding level for
the veterans medical care accounts (comprising Medical
Services, Medical Support and Compliance, and Medical
Facilities) is largely determined by the Enrollee Health
Care Projection Model of the Department of Veterans
Affairs. This model covers more than 85 percent of the
total medical care funding requirement. The remaining funding requirement is estimated based on other
models and assumptions for services such as readjustment counseling and initiatives. To aid the Government
Accountability Office in meeting a requirement contained
in P.L. 111-81 to develop a report on the adequacy of the

Administration’s advance appropriations request within
120 days of the release of the President’s Budget, the
Department of Veterans Affairs has included detailed
information in its Congressional Budget Justifications
about the overall 2015 VA medical care funding requirement.
Another advance appropriation that the Administration
is proposing to be considered outside of the limit on advance appropriations is for full funding of construction
of Virginia class submarines in the Shipbuilding and
Conversion, Navy account at the Department of Defense
(DOD). The use of advance appropriations will allow
the Navy to procure a tenth submarine as part of the FY
2014 Block IV multiyear procurement contract, thereby
maintaining the health of the industrial base. Moreover,
advance appropriations will help ensure transparency
of costs and full funding. A regular appropriation is requested for the Virginia class submarines in 2014 and an
advance appropriation is requested for 2015.
For a detailed table of accounts that have received discretionary and mandatory advance appropriations since
2012 or for which the Budget requests advance appropriations for 2015 and beyond, please refer to the Advance
Appropriations chapter in the Appendix.
Budgetary Treatment of Surface
Transportation Infrastructure Funding
Overview.—Currently, surface transportation programs financed from the Highway Trust Fund (HTF) are
treated as hybrids: contract authority is classified as
mandatory, while outlays are classified as discretionary.
Broadly speaking, this framework evolved as a mechanism to ensure that collections into the HTF (e.g., motor fuel taxes) were used to pay only for programs that
benefit surface transportation users, and that funding for
those programs would generally be commensurate with
collections. However, HTF collections are no longer adequate to support current law spending levels.
The National Commission on Fiscal Responsibility and
Reform (the “Fiscal Commission”) recommended changing the scorekeeping treatment of surface transportation
programs to close loopholes in the present system:
This hybrid treatment results in less accountability and discipline for transportation spending and
allows for budget gimmicks to circumvent budget
limits to increase spending. The Commission plan
reclassifies spending from the Transportation
Trust Fund to make both contract authority and
outlays mandatory.
Specifically, rather than skirting the two mechanisms
intended to control spending, caps on discretionary budget authority and PAYGO, the Fiscal Commission’s recommendation would establish surface transportation programs as subject to PAYGO.
The Administration’s 2012 and 2013 Budgets included
structural reforms to surface transportation programs
that mirror the recommendation of the Fiscal Commission.
These reforms were put in place to help ensure that the
President and the Congress would work together to en-

158
sure the next surface transportation authorization did
not increase the deficit.
On July 6, 2012 the President signed the Moving
Ahead for Progress in the 21st Century (MAP-21), the
first multiyear reauthorization since the expiration of
the Safe, Accountable, Flexible, Efficient Transportation
Equity Act: A Legacy for Users (SAFETEA-LU) in 2009.
MAP-21 authorizes highway, highway safety, and transit
programs through fiscal year 2014, at baseline funding
levels. While MAP-21 included a number of programmatic reforms sought by the Administration, the Act did not
alter the current hybrid budgetary treatment. However,
MAP-21 did offset the $18.8 billion in transfers from the
General Fund to the Highway Trust Fund with various
revenue provisions. This was the first time that transfers to the Highway Trust Fund were offset, which the
Administration believes is a step in the right direction for
fiscal discipline.
The Administration continues to believe that implementing structural reforms to the budgetary treatment
of surface transportation programs is the right policy, and
will continue to promote such changes as the Congress
begins developing the next authorization bill. However,
MAP-21 did not include such reforms, and as the surface
transportation reauthorization covers fiscal year 2014,
the Appendix does not include the previously proposed
formal reclassification of the spending for MAP-21 programs for the budget year.
While the Administration believes MAP-21 provided
needed certainty for grantees and made important programmatic reforms, the act did not provide necessary
additional investments to ensure the Nation’s infrastructure is in a state of good repair. The Administration continues to champion additional spending above current
service levels, and, the Budget includes a reauthorization
reserve of $88 billion over six years (2015-2020) to provide
for these critical investments. Consistent with previous
reclassification proposals, these funds are shown as mandatory budget authority and mandatory outlays, consistent with the previous reclassification proposals.
Additionally, MAP-21 did not include a rail title, and the
current rail authorization (the Passenger Rail Investment
and Improvement Act of 2008) expires at the conclusion
of 2013. Therefore, the Budget includes a five-year, $40
billion rail authorization. Similar to the last two budgets,
this proposal is being requested under the Trust Fund
umbrella: the HTF is renamed the Transportation Trust
Fund (TTF), and a new rail account is created. Under
this proposal, intercity passenger (including Amtrak) and
freight rail activities would be financed with mandatory
contract authority and associated mandatory outlays.
This is consistent with the reclassification for traditional
HTF programs that the Administration has sought for the
past two years.
This unified scoring framework for the rail proposal
does not radically alter traditional roles and jurisdictional
relationships as they are conceived of under current law
and scorekeeping practice for traditional HTF programs.
Authorizing committees would be scored with the full cost
of contract authority and outlays associated with their

Analytical Perspectives

proposal; discretionary outlays would no longer be a central feature of the scorekeeping system. However, under
the proposal, the Appropriations Committees would continue to set obligation limitations that are legally binding.
In addition, the Appropriations Committees would liquidate contract authority. As under current law, multi-year
authorizing bills would set initial expectations for spending. The new scorekeeping regime would recognize that
fact by fully reflecting the cost of that legislation in terms
of both budget authority and outlays.
The Budget uses savings from ramping down overseas
military operations to offset both the cost of the rail bill
and the out-year reauthorization reserve beyond what the
current funding mechanism can cover. Beyond the next
reauthorization windows for both proposals, the Budget
assumes that spending returns to baseline levels generated based on what was estimated in 2013. This reflects
the assumption that while the Administration has identified a “pay for” that will support the next reauthorization,
those savings will not be available forever. Policy-makers
will need to work together to develop other fiscally responsible solutions beyond the six-year reauthorization
period. As a matter of policy, the Administration believes
that the proceeds from existing Highway Trust Fund excise taxes should be dedicated solely to the highway and
transit accounts; no existing excise taxes would be diverted to rail. Rather, under the Administration’s proposal,
savings from ramping down overseas military operations
would offset General Fund transfers to eliminate the
projected shortfall in the Highway and Mass Transit accounts under baseline and cover the proposed spending
out of the new rail account. Finally, the overseas military
operations savings would cover the full ten-year cost of
the out-year reauthorization reserve that begins in 2015.
Account-by-Account Budgetary Treatment.—For
those trust fund accounts authorized under MAP-21, the
Budget reflects the current hybrid budgetary framework
of mandatory contract authority and discretionary outlays, derived from annual obligation limitations.
Beginning in 2015, the Budget includes a surface
transportation reauthorization reserve totaling $88 billion in mandatory resources. This funding represents
the additional investments the Administration supports
above baseline for highway, highway safety, and transit
programs, and which the Administration plans to work
with the Congress to secure during the next reauthorization.
For intercity passenger and freight rail activities, the
Budget proposes $40 billion over five years, financed
with contract authority.
Consistent with previous
Administration proposals, outlays flowing from that contract authority—which is already mandatory—will be
treated as mandatory. As is the case for all other programs, this aligns outlays with budget authority. By placing outlays on the PAYGO scorecard, it gives real scoring effect to funding increases for the rail proposal. The
Budget proposes that the reauthorization contain annual
obligation limits at the same level as the contract authority, and also that annual appropriations bills include obligation limits at those levels. The obligation limits en-

159

13.  Budget Process

acted by the appropriators enable the Administration and
the Congress to review policies and resource levels on an
annual basis, but under a framework that will continue
to give external stakeholders a high level of certainty regarding the multi-year resource trajectory for highways,
transit, passenger rail, and multimodal activities.
The Budget modifies individual accounts to conform to the proposed budgetary treatment in all years.
Specifically:
•	 For the two Federal Railroad Administration accounts that are presently classified as generating
discretionary budget authority and outlays, but that
the Administration proposes to incorporate into the
TTF (Operating Subsidy Grants to the National
Railroad Passenger Corporation and the Capital and
Debt Service Grants to the National Railroad Passenger Corporation), the Budget includes separate
schedules that:
–– Show baseline budget authority and outlays as
discretionary, consistent with current classifications.
–– Reclassify baseline budget authority and outlays
as mandatory in all years, including 2012 and
2013, for comparability purposes (i.e., to enable a
comparison of funding levels across years in an
account).
–– Show adjustments (subject to PAYGO) to the reclassified mandatory amounts so that the proposal properly accounts for requested program
growth in the new trust fund accounts.
•	 For proposed new Federal Railroad Administration accounts supported by the TTF (Rail Service
Improvement Program, Current Passenger Rail
Service, and Railroad Research, Development, and
Technology), the Budget includes a schedule that includes new mandatory contract authority and outlays requested to support those programs.
Amounts in these accounts total $1.4 billion in discretionary budget authority for 2013. The baseline levels for
these amounts are what constitute the discretionary cap
adjustment as noted in the OMB Sequestration Preview
Report for FY 2014 available on the OMB website. Note
that activities under the two existing Amtrak accounts
are requested as part of the new accounts of the Rail
Account of the TTF. Therefore, the PAYGO impact of the
Administration’s reauthorization proposal must be calculated at the aggregate level rather than the individual account level (i.e., the change between the reclassified baseline amounts in the existing General Fund accounts and
the proposed levels in the successor account).
Outyear Assumptions.—Beyond the reauthorization
reserve windows for these proposals, the Budget assumes
that contract authority will return to baseline levels. While
the Administration has identified savings to offset the presently-pending reauthorization proposals, policy-makers will
need to develop alternative fiscally responsible solutions beyond the periods of the reauthorization proposals.

Transportation Trust Fund Mechanics.—As discussed earlier, the Budget proposes a successor to the
Highway Trust Fund, the Transportation Trust Fund,
containing three accounts:
•	 The Highway Account continues to finance the highway and highway safety activities currently in the
Highway Trust Fund.
•	 The Mass Transit Account continues to finance the
transit activities currently in the Highway Trust
Fund.
•	 The Rail Account focuses on developing high-speed
rail and also subsumes activities currently financed
from the General Fund: Capital Assistance for HighSpeed Rail Corridors; Capital and Debt service
grants to AMTRAK; and Operating Grants to AMTRAK.
The goal of a broader Trust Fund is to allow policy-makers to review surface transportation policy and spending
in a more comprehensive way.
Offsets.—The President is committed to working with
the Congress on a bipartisan basis to ensure that funding
increases for surface transportation do not increase the
deficit. The 2014 Budget fully pays for the rail proposal
and the reauthorization of MAP-21 by applying a portion
of the savings from the drawdown of the wars overseas to
cover outlays associated with: 1) new spending associated
with the Administration’s rail proposal and out-year reauthorization reserve, and 2) shortfalls between revenue
and spending that exist under current law for the same
time period. As discussed above, the Budget proposes to
make surface transportation spending subject to PAYGO
rules, under which PAYGO costs must be offset with corresponding PAYGO savings.
Because the Budget retains the Trust Fund concept,
fully-offset transfers from the General Fund to the TTF
are reflected to maintain TTF solvency through the reauthorization reserve period (through 2020) and to cover
outlays generated from funding increases but projected
to occur beyond the reauthorization period. Offsets from
the drawdown of overseas military operations are only
used to cover the structural deficit for reauthorization of
MAP-21 (through 2020) and all new outlays associated
with the reauthorization proposal for the 10-year window.
Since the Administration’s proposed offset is finite, after
the reauthorization period spending levels drop back to
baseline levels calculated from 2013 and spending again
exceeds revenue.
Pell Grants
The Pell Grant program includes features that make
it unlike other discretionary programs. In recent years,
the program’s costs have risen significantly, though demand has slowed since 2010. This section provides some
background on the unique nature of the Pell Grant program and explains how the Budget accommodates these
rising discretionary costs. A later section of this chapter
discusses the treatment of Pell in the adjusted baseline.

160

Analytical Perspectives

Table 13–4.  Effect of Student Aid Proposals on Discretionary Pell Funding Needs
(Dollars in Billions)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Full Funding, Discretionary Pell �������������������������������������������

20.4

29.2

29.4

29.6

29.9

30.4

30.7

31.1

31.4

31.7

Mandatory Funding Previously Provided �����������������������������

(0.6)

.........

.........

(1.6)

(1.4)

(1.4)

(1.4)

(1.1)

(1.1)

20142023

(1.1)

Discretionary Need ��������������������������������������������������������������

22.8

22.8

19.8

29.2

29.4

28.0

28.5

28.9

29.2

29.9

30.2

30.6

Fund Pell at 2014 Full Funding Estimate �����������������������������

22.8

22.8

19.8

19.8

19.8

19.8

19.8

19.8

19.8

19.8

19.8

19.8

Discretionary Funding Gap ��������������������������������������������������

.........

(9.4)

(9.6)

(8.2)

(8.7)

(9.1)

(9.4)

(10.1)

(10.4)

(10.8)

Fund Pell at 2012 Enacted Level �����������������������������������������

3.0

3.0

3.0

3.0

3.0

3.0

3.0

3.0

3.0

3.0

Remaining Funding Gap ������������������������������������������������������

3.0

(6.4)

(6.6)

(5.2)

(5.6)

(6.1)

(6.4)

(7.1)

(7.4)

(7.8)

Carry Forward 2014 BA Request to Help Fund 2014 ����������

(3.0)

3.0

.........

.........

.........

.........

.........

.........

.........

.........

Remaining Funding Gap ������������������������������������������������������

.........

(3.3)

(6.6)

(5.2)

(5.6)

(6.1)

(6.4)

(7.1)

(7.4)

(7.8)

3.3

4.5

2.9

3.1

0.9

0.8

1.1

1.1

1.1

.........

(2.1)

(2.3)

(2.6)

(5.3)

(5.6)

(6.0)

(6.3)

(6.6)

Proposed Mandatory Funding in the Budget �����������������������
Remaining Funding Gap ������������������������������������������������������

.........

Under current law, the Pell program has several notable features:
•	 The Pell program acts like an entitlement program,
such as the Supplemental Nutrition Assistance Program or Supplemental Security Income, where the
size of the individual award and the number of eligible applicants together determine the cost in any
given year. Specifically, Pell Grant costs depend on
the maximum award set in statute, the number of eligible applicants, and the award for which those applicants are eligible based on their needs and costs
of attendance. The maximum Pell award for the academic year 2013-2014 is $5,645, of which $4,860 will
be established in the annual appropriations act and
the remaining $785 is provided automatically by the
College Cost Reduction and Access Act (CCRAA), as
amended.
•	 The cost of each Pell Grant is funded by discretionary budget authority provided in annual appropriations acts, along with mandatory budget authority
provided not only by the CCRAA, as amended, and
the BCA, but also by amendments to the Higher Education Act of 1965 contained in the 2011 and 2012
appropriations acts. There is no programmatic difference between the mandatory and discretionary
funding.
•	 If valid applicants are more numerous than expected, or if these applicants are eligible for higher
awards, the Pell Grant program will cost more than
the appropriations provided, and vice versa. If the
costs during one academic year are higher than expected, the Department of Education funds the extra
costs with the subsequent year’s appropriation.2
2  This ability to “borrow” from a subsequent appropriation is unique
to the Pell program. It comes about for two reasons. First, like many
education programs, Pell is “forward-funded”—the budget authority
enacted in the fall of one year is intended for the subsequent academ-

(85.8)

(55.5)

(55.5)

(36.8)

•	 To prevent deliberate underfunding of Pell costs, in
2006 the congressional and Executive Branch scorekeepers agreed to a special scorekeeping rule for
Pell. Under this rule, the annual appropriations bill
is charged with the full estimated cost of the Pell
Grant program for the budget year, plus or minus
any cumulative shortfalls or surpluses from prior
years. This scorekeeping rule was adopted by the
Congress as §406(b) of the Concurrent Resolution
on the Budget for Fiscal Year 2006 (H. Con. Res. 95,
109th Congress).
Given the nature of the program, it is reasonable to
consider Pell Grants an individual entitlement for purposes of budget analysis and enforcement, and in the
2010 and 2011 Budgets, the Administration requested
that Pell Grants be converted into a mandatory program.
The Congress has chosen to continue treating the portion
funded in annual appropriations acts as discretionary,
counting that budget authority for Pell Grants against
the discretionary spending caps pursuant to section 251
of BBEDCA, as amended, and appropriations allocations
established annually under §302 of the Congressional
Budget Act. The Budget maintains this discretionary
treatment.
The total cost of Pell Grants can fluctuate from year
to year, even with no change in the maximum Pell Grant
award. In addition, since 2009 the program has relied
on temporary mandatory or emergency appropriations
ic year, which begins in the following July. Second, even though the
amount of funding is predicated on the expected cost of Pell during one
academic year, the money is made legally available for the full 24-month
period covering the current fiscal year and the subsequent fiscal year.
This means that, if the funding for an academic year proves inadequate,
the following year’s appropriation will legally be available to cover the
funding shortage for the first academic year. The 2014 appropriation,
for instance, will support the 2014-2015 academic year beginning in July
2014 but will become available in October 2013 and can therefore help
cover any shortages that may arise in funding for the 2013-2014 academic year.

161

13.  Budget Process

to fund the program well above the level that could have
been provided by the regular discretionary appropriation.
In 2015, those extra mandatory funds in large part run
out, and the program faces a significant funding gap (see
Table 13-4).
Administration policy is to fully fund the maximum
award. The Budget provides sufficient resources to fully fund the 2014-2015 and 2015-2016 award years. The
Budget provides $22.8 billion in discretionary budget authority in 2014, the same level of discretionary budget
authority provided in 2012. Level-funding Pell in 2014
provides $3.0 billion more than is needed to fully fund
the program in the 2014-15 award year, thanks to mandatory funding provided in prior legislation. This surplus
budget authority serves as the first step in addressing
the funding cliff in 2015. Cutting the budget authority
in Pell to only the level needed to fund the program in
2014 would have a doubly detrimental impact on the 2015
cliff; it would reduce the budget authority carried forward
from 2014, while simultaneously reducing the discretionary base funding level in the program.
In addition, this Budget makes a down payment toward addressing the long term Pell gap, financed by two
reforms in the student loan programs, discussed in the
Appendix: expanding and reforming the Perkins loan program and reducing excessive payments to guaranty agencies that rehabilitate student loans. The total mandatory
budget authority and outlay savings from these reforms
in the student loan programs amount to a $17.9 billion,
10-year reduction. This savings allows $18.8 billion in
budget authority to be appropriated as part of proposed
authorizing legislation, with outlays of $17.9 billion during the budget window, toward paying for the discretionary portion of Pell. This is analogous to SAFRA’s one-time
$13.5 billion appropriation for discretionary Pell enacted
in March 2010, which was financed by mandatory savings
in student loan programs. With minimal adjustments
to budget authority, the proposed Pell package could
also be enacted as part of an appropriations act within
Congressional scorekeeping rules, as was done in 2011
and 2012.
These important student aid reforms will provide full
funding of Pell through the 2015-2016 award year. The
Administration continues to believe that, in order to avoid
the risk of deep and unnecessary cuts in the Pell Grant
program in future years, the Congress should act sooner
rather than later to address the Pell funding gap (currently estimated at $3.3 billion in 2015 if Pell is funded in
2013 and 2014 at the same level of discretionary budget
authority provided in 2012). While recent reductions in
program costs have allowed mandatory budget authority
provided in prior years to stretch further than expected,
that extra budget authority will run out, and the program
will face a permanent, structural shortfall in the near future. If the Congress does not act in fiscal year 2014 and
instead waits until fiscal year 2015 to confront a 20152016 Pell Grant funding gap, and if the Congress again
concludes – as it did in the 2012 appropriations process
– that savings from the subsequent fiscal year cannot be
used to cover a current-year problem, then deep reduc-

tions in Pell Grants may be required in 2015. These reductions will be much more severe than the reductions
needed if the Congress tackles the 2015-2016 problem in
fiscal year 2014, using savings from multiple years. In
addition, if the Congress delays, it will not be able to use
savings from student aid reforms that are deferred in
time in order to allow institutions to adjust or to protect
students’ settled expectations. The result could be a decision not to implement justified program changes, because
they will not yield savings that meet an immediate need
or a decision to impose hardships for students and schools
that could have been avoided by acting sooner. The
Administration is therefore committed to working with
the Congress to achieve two goals: first, enacting in fiscal
year 2014 the changes needed to fully fund Pell through
the 2015-2016 award year; and second, in 2014 or 2015,
taking further steps to ensure the long term stability of
this vital program.
Postal Service Reforms
The Administration proposes reform of the Postal
Service, necessitated by the serious financial condition
of the Postal Service Fund. The policy proposals are
discussed in the Postal Service and Office of Personnel
Management sections of the Appendix.
As a matter of law, the Postal Service is designated as
an off-budget independent establishment of the Executive
Branch. This designation and budgetary treatment was
most recently mandated in 1989, in part to reflect the
policy agreement that the Postal Service should pay for
its own costs through its own revenues and should operate more like an independent business entity. Statutory
requirements on Postal Service expenses and restrictions
that impede the Postal Service’s ability to adapt to the
ongoing evolution to paperless written communications
have made this goal increasingly difficult to achieve. To
address its current financial and structural challenges,
the Administration proposes specific financial relief and
reform measures to ensure that USPS can continue to operate in the short term and work toward viability in the
long run. The Administration also proposes PAYGO scoring of Postal legislation on a unified budget basis to better
reflect how and when such legislation will affect overall
deficits and debt. That is, for the purposes of entering
amounts on the statutory PAYGO scorecards, the applicable estimates should include both the off-budget and
the on-budget costs and savings produced by the legislation. This scorekeeping change would be accomplished
by a provision contained within Postal reform legislation.
Budgetary Treatment of IMF Quota
The United States participates in the International
Monetary Fund (IMF) through a quota subscription, denominated in Special Drawing Rights (SDRs). Quotas
are the main metric used by the Fund to assign voting
shares, and to determine countries’ contributions to the
IMF’s general resources and access to IMF financing. The
United States also participates in the New Arrangements
to Borrow (NAB), which is a standing arrangement among
certain IMF members to supplement IMF resources to

162
forestall or cope with an impairment of the international
monetary system or to deal with an exceptional situation
that poses a threat to the stability of the system.
Beginning with the establishment of the IMF through
1980, IMF quota increases were treated as an exchange
of monetary assets, similar to purchases of gold and to
U.S. deposits in commercial bank accounts. When the
United States transfers dollars or other reserve assets
to the IMF under the U.S. quota subscription, the United
States receives an equal, offsetting, and interest-bearing
claim on the IMF, which is reflected as an increase in U.S.
international monetary reserves. As a result of a compromise reached in 1980 between the Administration and the
Appropriations Committees, appropriations for IMF increases were recorded as budget authority, reflecting the
appropriations language, but no outlays were recorded,
reflecting the principle that these transactions are monetary exchanges.3 The same scoring was applied to the
NAB when it was established in 1998.
This agreement remained in place through 2009, when
the President’s Budget proposed to return to the pre1980 practice of recording IMF quota increases solely as
a means of financing. The Congress did not accept the
proposed scoring change. Instead, reflecting a negotiated
agreement between the Administration and the Congress,
the Supplemental Appropriations Act of 2009 (Public Law
111-32) directed that the 2009 appropriation to increase
the U.S. quota in the IMF be scored on a credit reform basis, per the Federal Credit Reform Act of 1990, as amended (FCRA), with an additional adjustment to the discount
rate for market risk.
The application of FCRA by operation of law to the
2009 quota appropriation was a significant change in the
budgetary treatment of the U.S. quota to the IMF, and is
not a useful method for measuring cost for both conceptual and technical reasons. In particular, the use of the U.S.
quota by the IMF constitutes an exchange of monetary
assets and does not result in the net budget outlays, while
FCRA is intended for debt obligations. For example, the
U.S. reserve position in the IMF holds U.S. international
monetary reserves that are readily available to meet a
U.S. balance-of-payments financing need. However under
FCRA, these funds are treated as a loan. Further discussion is included in the Appendix under the heading
“International Monetary Programs” in the Department of
State and Other International Programs chapter.
Even having gone through the worst financial crisis
since the Great Depression, since its inception nearly seventy years ago, the IMF has never defaulted on any U.S.
reserve claims on the IMF. The IMF is also recognized by
its entire membership as the preferred creditor, with the
unique ability to set conditions to assure repayment. U.S.
reserve claims on the IMF are backed by the IMF’s sound
financial management and a balance sheet with reserves
of $15 billion and 90 million ounces of gold worth more
than $140 billion at current market prices.
3  However, the budget records actual remunerations from the IMF
and changes in the exchange rate of the dollar relative to Special Drawing Rights (in which the U.S. quota is denominated) as receipts or outlays.

Analytical Perspectives

To implement the terms of a 2010 agreement reached
by the G-20 leaders and the IMF membership, the Budget
proposes an increase to the U.S. quota and an equivalent rollback in U.S. participation in the NAB, with no
net change in overall U.S. financial participation in the
IMF. Under the Administration’s proposal, the increases
to the quota and NAB provided in the 2009 Supplemental
Appropriations Act would be restated to reflect the pre2009 agreement on budgetary treatment for the IMF, and
the proposed revisions to the quota and NAB would be
scored on that basis. For the reasons discussed above, the
pre-2009 scoring is a better representation of the budgetary impact of these transactions.
Expedited Rescission
In order to make it easier to eliminate unnecessary
spending, the Administration requests that the Congress
enact the President’s proposal for expedited rescission,
transmitted May 24, 2010. That legislation would create an important tool for reducing unneeded funding. In
short, the bill would provide the President with additional
authority to propose a package of rescissions that would
then receive expedited consideration in the Congress and
a guaranteed up-or-down vote.
The proposal includes several components:
•	 Scope.—Under this new authority, the President
can propose fast-track consideration of rescissions of
new discretionary and non-entitlement mandatory
spending.4 The President is limited to proposing
changes that reduce funding levels and cannot use
this authority to propose other changes in law, including new transfer authority, supplemental funding, or changes in authorizing legislation. The fasttrack process is thus limited only to simple funding
reductions, for which a straight up-or-down vote is
desirable.
•	 Proposing a rescission package.—After enactment of funding, the President has 45 days during
which the Congress is in session (excluding weekends and national holidays) to decide whether to
submit a rescission package using this expedited
procedure. The President is also limited to a single
package of rescissions per bill under this procedure,
and the requested rescissions must be limited to provisions in that bill.5
•	 Congressional procedure.—A rescission package
submitted under this authority receives fast-track
consideration in the Congress. Debate is limited in
both houses and the package is guaranteed an up4  In almost every case, “non-entitlement mandatory funding” exists
where an agency has the authority to spend the proceeds of fees or other offsetting collections to run the agency. The spending in question
is generally indistinguishable from other funding for administering the
Government that is typically provided through discretionary appropriations.
5  There is one exception to the packaging rule: when a single appropriations bill includes funding that is in the jurisdiction of more than
one appropriations subcommittee such as in an omnibus appropriations
bill. In that case, the President may submit up to two packages.

163

13.  Budget Process

or-down vote without amendment. The package is
first introduced and considered in the House and, if
approved there, is taken up in the Senate. From the
package’s introduction to its final vote in the Senate,
the process will take no more than 25 days. Note
that, while the Congress cannot amend the package,
the proposal enables the Congress to omit from the
bill any proposed rescission that it believes goes beyond the scope allowed.
•	 Withholding funding.—Following submission
of a rescission request using this expedited procedure, the President may withhold funding for up to
25 days, after which the funding must be released
if the Congress has not approved the request. This
ensures that agencies do not obligate funds before
the Congress has had an opportunity to consider the
rescission package.
In sum, the proposal provides the President with important, but limited, powers that will allow the President
and the Congress to work together more effectively to
eliminate unnecessary funding. Knowing this procedure
exists may also discourage policymakers from providing
such funding in the first place.
The proposal is crafted in a way that preserves the
constitutional balance of power between the President
and the Congress. In 1996, the Congress granted the
President “line item veto” power over certain spending
and tax bills, allowing the President to use his veto authority to strip out select provisions of legislation while
signing the rest into law. The Supreme Court found this

to violate the Constitutional procedure for presenting a
bill to the President for approval or veto of the entire bill.
The Administration’s proposal is, however, fundamentally different. Under the proposal, the Congress, which is
empowered to set its own rules, changes those rules for
rescission packages proposed by the President—using
well-established fast-track procedures. Most importantly,
rescissions only occur if the Congress affirmatively enacts
them into law. In other words, the proposal does not expand the Presidential veto authority in any way.
The proposal also preserves the President’s two existing
authorities for proposing rescissions. First, the President
retains the Constitutional authority to recommend legislation such as cancellation packages to be considered under regular order in the Congress. Second, the President
retains the power to recommend rescissions under the
procedure already established under the Impoundment
Control Act of 1974. This existing authority provides more
limited fast-track protections to a Presidential rescission
package than what the Administration has proposed and,
specifically, allows committee and floor amendments and
so does not guarantee a clean up-or-down vote on a package submitted by the President.
The President’s proposal lifts procedural barriers; however, the President and the Congress will still have to
make the difficult choices to cut back unnecessary funding. Furthermore, restoring fiscal sustainability in the
medium and long term will require not only targeting
unnecessary funding in specific programs, which the proposal aids, but also making larger choices about overall
budget priorities and revenue levels.

II. Statutory PAYGO
The Statutory Pay-As-You-Go Act of 2010 (PAYGO, or
“the Act”) was enacted on February 12, 2010. The Act
significantly strengthens the rules of budget discipline,
which is a key priority for the Administration.
Drawing upon the version of the law enacted as part
of the 1990 Budget Enforcement Act, the Act requires
that, subject to specific exceptions, all legislation enacted during each session of the Congress changing taxes
or mandatory expenditures and collections not increase
projected deficits. Mandatory spending encompasses any
spending except that controlled by the annual appropriations process.6
PAYGO established 5- and 10-year scorecards to record
the budgetary effects of legislation; these scorecards are
maintained by OMB and are published on the OMB web
site (http://www.whitehouse.gov/omb/paygo_default).
PAYGO also established special scorekeeping rules that
affect whether all estimated budgetary effects of PAYGO
bills are entered on the scorecards. Off-budget programs
and provisions designated by the Congress in law as
emergencies are not included. In addition, legislation affecting mandatory revenues or receipts has been enacted
6  Mandatory spending is termed direct spending in the PAYGO Act.
The term mandatory encompasses entitlement programs, e.g., Medicare
and Medicaid, and any funding not controlled by annual appropriations
bills, such as the automatic availability of immigration examination fees
to the Department of Homeland Security.

with provisions that directed that laws be held off of the
PAYGO scorecard. In the most recent Congressional session, for example, three significant pieces of legislation
were enacted with such provisions.
Also, if an act uses timing shifts to move costs outside of
the 10-year PAYGO scorecard window or to shift revenues
into the 10-year window, those timing shifts are ignored.
The requirement of budget neutrality is enforced by an
accompanying requirement of automatic across-the-board
cuts in selected mandatory programs if enacted legislation taken as a whole does not meet that standard. If
the Congress adjourns at the end of a session with net
costs—that is, more costs than savings—in the budgetyear column of either the 5- or 10-year scorecard, OMB
is required to prepare, and the President is required to
issue, a sequestration order implementing across-theboard cuts to a select group of mandatory programs in an
amount sufficient to offset the net costs on the PAYGO
scorecards.
Exemptions from a PAYGO sequestration order generally include Social Security; most unemployment benefits;
veterans’ benefits; interest on the debt; Federal retirement; and the low-income entitlements such as Medicaid,
the Supplemental Nutrition Assistance Program (SNAP,
formerly known as food stamps), and Supplemental

164

Analytical Perspectives

Security Income (SSI).7 The major remaining mandatory programs, which are subject to sequestration, include
most Medicare payments (limited to a maximum sequestration of 4 percent), farm price supports, vocational rehabilitation basic State grants, mineral leasing payments
to States, the Social Services Block Grant, and many
smaller programs. The list of exempt programs and the
special sequestration rules for certain programs are contained in sections 255 and 256 of BBEDCA, as amended,
and the exemptions and special rules generally apply to
the following sequestrations: the sequestration pursuant
to the PAYGO Act, the sequestration to eliminate excess
spending above discretionary caps specified in section 251
of BBEDCA, as amended, and the sequestration currently
required by the BCA as a result of the failure of the Joint
Committee process.
Even though sequestration is calculated to fully offset
any net costs on the PAYGO scorecard, it historically has
acted as a successful deterrent to enacting legislation
with net costs, and so has not been implemented. During
the 1990s, under the first statutory PAYGO law, the sequestration rules and exemptions were almost identical
to those in the current Act. The Congress complied with
PAYGO throughout that decade. As a result, no PAYGO
sequestration ever occurred.
7  Although

many programs are exempt from sequestration, those programs are rarely exempt from PAYGO. For example, a bill to increase
veterans’ disability benefits or Medicaid benefits must be offset, even
though a sequestration, if it is required, will not reduce those benefits.

As was the case during 1990s PAYGO, sequestration has
not been required during the three Congressional sessions
since the PAYGO Act reinstated the statutory PAYGO requirement. In each of those sessions, OMB’s end-of-session
PAYGO reports showed net savings in the budget year column of both the 5- and 10-year scorecards. The reports for
the two most recent Congressional sessions note that four
laws with significant effects on mandatory revenues or receipts were enacted with provisions that directed that the
laws be held off of the PAYGO scorecard.8
Administrative PAYGO
The Administration continues to review potential administrative actions by Executive Branch agencies affecting entitlement programs, as stated in a memorandum
issued on May 23, 2005, by the Director of the Office of
Management and Budget. This effectively establishes a
PAYGO requirement for administrative actions involving
mandatory spending programs. Exceptions to this requirement are only provided in extraordinary or compelling circumstances.9 
8  For more information, see OMB’s annual PAYGO reports, available
at www.whitehouse.gov/omb/reports_default.
9  For a review of the application of Administrative PAYGO, see USDA’s Application of Administrative PAYGO to Its Mandatory Spending
Programs, GAO, October 31, 2011, GAO-11-921R.

III. improved BasEline AND Budget presentation
Improved Definition of Baseline
The Administration suggests changes to the concepts
used in formulating baseline projections to make the resulting product more useful to the public and to policymakers: extending certain major expiring tax and mandatory provisions, using a more meaningful method for
reflecting future disaster costs, and reflecting the cost of
fully funding the Pell Grant program. In addition, as explained above, the proposal to provide mandatory funding for a rail authorization proposal involves adjusting
presentations, including baselines, so that corresponding
funding and spending levels will be displayed on a comparable basis. The Administration also makes modifications
to the baseline to reflect the discretionary caps on budget
authority enacted in BBEDCA, as amended, including
the cap adjustments permitted by the Act for Overseas
Contingency Operations (OCO) inflated at the inflation
rates in the baseline, and to reflect the Joint Committee
enforcement procedures.
For years, the baseline used by the Congress has followed the definition contained in section 257 of BBEDCA,
as amended. However, the BBEDCA baseline does not accurately reflect a continuation of current policy. In each of
its Budgets, this Administration has built its budget proposals starting from a baseline that adjusts the BBEDCA
baseline to better represent the thrust of current policy in
certain major cases, and recommends that the Congress,

the Congressional Budget Office, and the public use such
a baseline in their own analyses as well. The deficit impacts of the adjustments to the BBEDCA baseline are
summarized in Summary Table S-8 of the Budget. The
adjustments are described below. Further detail about
the adjusted baseline is provided in Chapter 26, “Current
Services Estimates,” in this volume.
While the adjusted baseline provides a more realistic
basis for analyzing budgets, it is not intended to replace
the BBEDCA baseline with respect to mandatory programs and revenues, either for legal purposes or to alter the application of the Statutory PAYGO Act of 2010.
Specifically, the costs or savings from legislation affecting
mandatory spending or revenues are measured relative
to the BBEDCA baseline for purpose of entries on the
PAYGO scorecards, discussed earlier in the chapter.10
Adjustments to Reflect Certain Expiring
Provisions Affecting Middle Class Tax Credits.—In
recent years, the Congress has repeatedly extended provisions of the tax code that have a large deficit impact or
signaled its intention that a provision be extended when
it enacted the provision for a limited number of years.
The Administration’s adjusted baseline assumes permanent extension of the following tax credits provided to in10  The PAYGO Act originally provided for “current policy adjustments” that exempted the extension of certain tax and mandatory policies from being counted on the PAYGO scorecard. These adjustments
applied only for legislation enacted through December 31, 2011, and are
no longer in force.

13.  Budget Process

dividuals and families under the American Recovery and
Reinvestment Act of 2009 (ARRA), which were extended
through 2017 by the American Taxpayer Relief Act of 2012
(ATRA): increased refundability of the child tax credit, expansions in the earned income tax credit (EITC) for larger
families and married taxpayers filing a joint return, and
the American opportunity tax credit (AOTC).
Adjustments to Reflect Medicare Physician
Payment Relief.—As with the tax provisions noted in
the previous paragraph, in recent years, the Congress has
repeatedly extended relief from scheduled reductions in
Medicare physician payment rates that would otherwise
take place under the Sustainable Growth Rate (SGR) formula. The Administration’s adjusted baseline assumes
permanent extension of current Medicare physician payment rates, as opposed to the large reductions in physician payment rates that would take place under current
law. This adjustment is similar, although not identical,
to a current policy adjustment previously provided under
the PAYGO Act for SGR relief through 2014.
Adjustments for Emergency and Disaster Costs.—
Because the BBEDCA baseline extends all appropriations
already enacted for the year in progress, it can be subject to huge swings as a result of funding enacted as an
emergency requirement or as disaster relief funding pursuant to the cap adjustments for these items permitted by
section 251(b)(2) of BBEDCA, as amended. At times, the
BBEDCA baseline could extend large one-time emergency
or disaster appropriations for the next 10 years; at other
times it might extend very little. The Administration’s
baseline includes adjustments to account for these swings.
Specifically, the Administration’s adjusted baseline removes the extension of enacted appropriations that were
designated by the Congress in 2013 as either an emergency requirement or as disaster relief funding for Hurricane
Sandy and other disasters.
In addition, the Administration’s adjusted baseline
substitutes an allowance for disaster costs in the budget
year and future fiscal years. This allowance reflects the
fact that the disaster relief cap adjustment has already
allowed funding for nearly $11.8 billion in the BBEDCAdesignated disasters in 2013, the Budget is specifically
requesting almost $5.8 billion in 2014 for major disasters, and major natural or man-made disasters are likely
to occur at some point in subsequent years. Obviously,
both the timing and amounts are unknowable in advance. In addition to the inclusion of this entry in the
baseline, the Administration includes the same allowance in its Budget.
The baseline and Budget figures are not a “reserve
fund,” nor are they a request for discretionary budget authority or congressional legislation of any kind. Instead,
they are placeholders that represent a meaningful down
payment on potential future disaster relief requirements
that are not for known needs in the budget year. For more
information, see the discussion of disaster relief funding earlier in this chapter in Section I (Budget Reform
Proposals) under the heading titled “Disaster Relief
Funding.” Including a meaningful down payment for the

165
future costs of potential disaster relief funding makes the
budget totals more honest and realistic.
Adjustments to Reflect the Full Cost of Existing
Pell Grants.—As explained earlier in this chapter, the
discretionary portion of the Pell Grant program has attributes that make it unique among programs classified
as discretionary: it annually receives both mandatory
and discretionary funding but the two types are indistinguishable in purpose or effect; the amount of discretionary funding has little or no effect on the size or cost of the
program; and in recognition of this fact, congressional and
Executive Branch scorekeepers agreed in 2006 to a special scorekeeping rule under which appropriations acts
would be scored as providing the amount of discretionary
budget authority estimated to fully fund the cost of Pell
Grants in the budget year (which includes covering any
shortfalls from prior years), even if the appropriations bill
in question provides a lower amount.
Under these circumstances, the Administration believes
that the BBEDCA baseline, which projects discretionary
programs by adjusting current-year budget authority for
inflation, is inconsistent with both the reality and the
existing budgetary scorekeeping for Pell Grants. Since
the special scorekeeping rule charges the Appropriations
Committees with the full cost of providing Pell Grants to
all eligible applicants plus covering any shortfalls from
prior years, the baseline should do the same. This is especially the case because adhering to the BBEDCA baseline
level of budget authority for Pell makes no difference to
the actual size and cost of the program in the budget year;
funding “cuts” or “increases” from such a baseline do not
represent actual reductions or increases in costs, at least
in the budget year. Therefore, the Administration adjusts
the BBEDCA baseline to follow the existing scorekeeping
rule, reflecting the full cost of funding the discretionary
portion of Pell while covering any prior shortfalls.
As described earlier, an estimate of the full cost of Pell
in any year depends in part on the size of the maximum
award for that year. The current maximum award for
the discretionary portion of Pell is $4,860 per student per
year. The adjusted baseline assumes that award level
will remain constant in nominal terms over the next ten
years. The baseline projection of the discretionary portion of Pell therefore changes from year to year primarily
because of estimated changes in the number of valid applicants. Changes in student income and level of tuition
can also make a difference in the size of an individual
student’s award and therefore the cost of the program.
The Administration believes that baselines prepared
by the Congressional Budget Office and others would likewise be more realistic and better reflect the congressional scorekeeping rule if they projected the discretionary
portion of Pell Grants in this way. This adjustment does
not produce a net increase in the amount of discretionary
budget authority in the baseline, because total discretionary budget authority remains limited by the BBEDCA
caps.
Adjustment to Reflect the Anticipated Postal
Service Default on 2013 Retiree Health Benefit
Prefunding.—Under the Postal Accountability and

166
Enhancement Act of 2006 (P.L. 109-435), the United States
Postal Service (USPS) is required to make specified annual payments through 2016 to the Postal Service Retiree
Health Benefits (RHB) Fund in the Office of Personnel
Management. These payments are designed to prefund
unfunded liabilities for health costs for future Postal retirees. Starting in 2017, the USPS’s remaining unfunded
liability is amortized over a 40-year period. Because of its
current financial challenges, the USPS defaulted on two
statutory RHB payments due in 2012, totaling $11.1 billion. In its notification letter to the White House and the
Congress, the USPS also indicated that, absent changes
to its financial forecast (largely dependent on legislative
action), it would likely default on its $5.6 billion payment
due September 30, 2013. While the BBEDCA baseline
shows USPS making this $5.6 billion payment in 2013 as
required, the adjusted baseline does not reflect the payment being made, given the likelihood of additional default. While defaulted payments remain as outstanding
statutory liabilities, any default is factored into the 40year amortization schedule mentioned above.
Nuclear Waste Fund Settlements and
the Judgment Fund Baseline
The Nuclear Waste Policy Act of 1982 (NWPA) established a broad policy framework for the permanent disposal of used nuclear fuel and high-level radioactive waste
derived from nuclear power generation. The NWPA authorized the Government to enter into contracts with reactor operators – the generators and current owners of
used nuclear fuel – providing that, in exchange for the
payment of fees, the Government would assume responsibility for permanent disposal. The fees were to ensure
that the reactor owners and power generators pay the full
cost of the disposal of their used nuclear fuel and highlevel radioactive waste.
The Federal Government did not meet its contractual
obligation to begin accepting used nuclear fuel by 1998. As
a result of litigation by contract holders, the Government
was found in partial breach of contract, and is now liable
for damages to some utilities to cover the costs of on-site,
at-reactor storage.
The cost of the Government’s growing liability for
partial breach of contracts with nuclear utilities is paid
from the Judgment Fund of the U.S. Government. While
payments are extensively reviewed by Department of
Energy, and must be authorized by the Attorney General
prior to disbursement by the Department of the Treasury,
as mandatory spending they are not subject to Office of
Management and Budget or Congressional approval. Past
payments are included in full in the Budget, but until now
the Budget has included only a partial estimate of the potential future cost of continued insufficient action.  To improve budget projections, the baseline for the Judgment
Fund in this Budget reflects a more complete estimate of
potential future cost of these liabilities. By reflecting a
more complete estimate of the liability payments in the
baseline, costs over the life of the nuclear waste management and disposal program would eventually be offset by

Analytical Perspectives

reductions in liabilities as the Government begins to pick
up sufficient waste from commercial sites.
National Flood Insurance Fund
In the Budget, the Administration’s baseline for the
National Flood Insurance Fund is revised to reflect longterm expected losses, including from catastrophic flood
events, and to include the timely payment of all claims on
policies in force throughout the 10-year budget window.
The purpose of the flood insurance program is to identify those areas within communities with the most risk of
flooding, to reduce the impact of flooding through a combination of mitigation and floodplain management, and to
help property owners protect themselves by making flood
insurance available.
The revision in the baseline to reflect long-term expected losses reflects the fact that, although the flood insurance program runs a surplus in most years, this surplus
is outweighed by the periodic deficits that the fund runs
in years with catastrophic flood events. When the flood
insurance program was created in 1968, some categories
of buildings were provided subsidized rates in order to
encourage participation in the new program. Because
premium collections have been insufficient, claims from
major events like Hurricanes Katrina, Rita, and Wilma
in 2005 and, more recently, Superstorm Sandy in 2012
have exceeded available funds and the program has borrowed from Treasury in order to pay claims. Public Law
113-1, enacted in January 2013, increased the borrowing
authority for the National Flood Insurance Program to
$30,425 million in order for the program to pay claims
resulting from Superstorm Sandy.
The revision in the baseline to reflect full payment of
claims in force is derived from the recognition that the
Federal Government has a contractual obligation to all
policy holders and can be held liable whether or not the
fund has the balances to pay full claims. The revised
baseline presentation shows all expected claims payments in each year of the budget window, including the
amounts that can be paid from estimated collections,
amounts that could be paid from borrowing, and remaining amounts that could not be paid from these sources.
The baseline also reflects the effects of the Biggert-Waters
Flood Insurance Reform Act of 2012, enacted in July 2012
as Title II of Public Law 112-141. This act phases out
most premium subsidies and reforms the premium rate
structure so that in the long term, the program’s collections should cover expected losses, including those from
catastrophic events such as Superstorm Sandy.
Fannie Mae and Freddie Mac
The Budget continues to present Fannie Mae and
Freddie Mac, the housing Government-Sponsored
Enterprises (GSEs) currently in Federal conservatorship,
as non-Federal entities. However, Treasury equity investments in the GSEs are recorded as budgetary outlays, and
the dividends on those investments are recorded as offsetting receipts. In addition, the budget estimates reflect
collections from the 10 basis point increase in GSE guarantee fees that was enacted under the Temporary Payroll

167

13.  Budget Process

Tax Cut Continuation Act of 2011 (P.L. 112-78). The
Administration’s February 2011 white paper outlined a
commitment to wind down the GSEs, facilitate the return
of private capital to the housing market, and work with
the Congress to reform the larger housing finance system.
The Budget continues the Administration’s commitment
to reduce the size of the GSEs’ investment portfolios by at
least 15 percent a year. The GSEs are discussed in more
detail in Chapter 22, “Credit and Insurance”.

conceptual and implementation issues that would exceed
the potential benefits from such estimates.  Chapter 22,
“Credit and Insurance,” discusses some of these issues.
Debt Net of Financial Assets

In the Summary Tables included in the main Budget
volume, Tables S-1 and S-13 display both debt held by the
public and debt held by the public net of financial assets.
Borrowing from the public is normally a good approximation of the Federal demand on credit markets. However,
Fair Value for Credit Programs
it provides an incomplete picture of the financial condiThe Federal Credit Reform Act of 1990 (FCRA) tion of the Government and under some circumstances
changed the budget measure of cost for Federal direct may misrepresent the net effect of Federal activity on
loans and loan guarantees provided to individuals and credit markets. Some transactions that increase the
non-Federal entities.  Prior to the enactment of FCRA, Federal debt also increase the financial assets held by the
the Government’s credit programs were reflected in the Government. For example, when the Government lends
budget on a cash basis, which was a poor measure of cost money to a private firm or individual, the Government
for these programs.  The costs of direct loans were over- acquires a financial asset that provides a stream of future
stated, as the budget reflected outlays for the initial cash payments of principal and interest. At the time the loan
disbursement to make the loan, but did not properly ac- is made, debt held by the public reflects only Treasury’s
count for the expected future income from the borrowers borrowing to finance the loan, failing to reflect the value
in the form of repayments, interest, and fees, net of losses.  of the loan asset acquired by the Government. Similarly,
For loan guarantees, costs were understated because out- the estimate of debt held by the public does not reflect
lays were only recorded when the Government disbursed estimated liabilities on loan guarantees. In contrast, debt
cash to make good on the guarantees-- generally years held by the public net of financial assets provides a more
after the borrower receives the loan, which is long after accurate measure of the Government’s net financial posithe Government incurs the cost.  FCRA significantly im- tion by including the value of loans and other financial
proved the budget measure of cost for Federal credit pro- assets held by the Government.
grams by recording the estimated lifetime cost up front,
This measure is especially useful during times, like the
on a present value basis, taking into account all of the present, when the Government has borrowed large sums
cash flows associated with the credit instrument, and the of money to address difficulties faced by the economy and
Government’s cost of financing these cashflows (by using financial markets. As shown in Summary Table S-15, a
the Treasury rate to do the discounting).
large share of the Government’s recent borrowing has fiIn recent years, the Congressional Budget Office (CBO) nanced the purchase of financial assets, so that the inand others have argued that credit programs impose costs crease in debt held by the public net of financial assets is
on taxpayers that are not reflected under FCRA, such as noticeably smaller than the overall increase in debt held
the risk that assets may perform worse than expected, by the public. Likewise, while Federal borrowing reduces
and would propose to amend FCRA to require that the the amount of private saving that is available through
budget use fair value estimates to capture these costs.  financial markets for private-sector investment, Federal
Under fair value, comparable market rates would be used acquisition of financial assets has the opposite effect—it
to discount expected cash flows, instead of Treasury rates.  injects cash into financial markets. Thus, the change in
While fair value may offer some useful insights and in- debt net of financial assets can better indicate the effect of
form decision-making in some cases, using fair value for the Federal Government on the financial markets.
budgetary cost estimates of credit programs raise serious

Federal Receipts

169

14. Governmental Receipts

During his first term in office, President Obama
signed several major tax bills designed to jumpstart the
economy and provide tax relief. These bills started with
the American Recovery and Reinvestment Act of 2009
(ARRA), which was signed by the President during his
first month in office, and culminated with the American
Taxpayer Relief Act of 2012 (ATRA), which passed with
bipartisan support on January 1, 2013. ATRA protects
98 percent of Americans and 97 percent of small business owners from a middle class tax hike, and grows the
economy and shrinks our deficits in a balanced way by
investing in our middle class and by asking the wealthy
to pay a little more.
The Administration recognizes that more needs to be
done to expand the economy and create jobs and that tax
reform is critical to rebuilding the economy to be stronger and more stable than in the past. Two of the biggest
economic challenges facing the Nation – creating jobs and
reducing long-term deficits – depend on a tax system that
is fairer, simpler, and more efficient than the one we have
today.

As a first step toward balanced deficit reduction and
tax reform, the President proposes that Congress immediately enact two measures that would raise $580 billion
in receipts by broadening the tax base and reducing tax
benefits for those who need them the least: a limitation on
the value of tax deductions and preferences for the highest-income families and compliance with the Buffett rule
so that the wealthiest American families pay no less than
30 percent of their income in taxes. The President is also
offering a detailed set of specific tax loophole closers and
measures to broaden the tax base, as well as expanded
incentives for lower- and middle-income families to earn
income, save for retirement, and attend college - activities
that will strengthen the middle class and help to ensure
that the United States remains a land of opportunity for
all, not just for the most well off.
Beyond these measures, the President is committed to
working with Congress and other stakeholders to build on
the foundation laid by this Budget to enact a tax system
that is fair, simple, and efficient, one that is right for the
21st century American economy.

Table 14–1.  Receipts By Source - Summary
(In billions of dollars)
2012
Actual
Individual income taxes ���������������������������������
Corporation income taxes ������������������������������
Social insurance and retirement receipts ������
(On-budget) ����������������������������������������������
(Off-budget) ����������������������������������������������
Excise taxes ��������������������������������������������������
Estate and gift taxes ��������������������������������������
Customs duties ����������������������������������������������
Miscellaneous receipts ����������������������������������

1,132.2
242.3
845.3
(275.8)
(569.5)
79.1
14.0
30.3
107.0

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

1,234.0
287.7
951.1
(277.6)
(673.5)
85.3
12.9
33.6
107.3

1,383.2
332.8
1,030.7
(291.5)
(739.1)
104.9
13.0
38.8
130.3

1,551.8
376.1
1,084.6
(306.3)
(778.3)
113.9
14.0
41.9
149.4

1,700.0
401.3
1,160.3
(334.7)
(825.6)
114.8
15.5
46.0
123.6

1,843.6
430.1
1,218.3
(349.6)
(868.7)
118.2
16.9
49.3
84.1

1,977.1
450.4
1,280.1
(362.6)
(917.5)
125.1
18.4
52.5
70.3

2,104.5 2,240.7 2,379.7 2,517.4 2,683.9
469.9
481.0
494.0
511.5
530.5
1,340.9 1,397.6 1,473.1 1,542.7 1,606.3
(375.9)
(390.0)
(409.9)
(428.8)
(445.3)
(965.0) (1,007.5) (1,063.2) (1,113.9) (1,161.0)
137.7
142.0
148.8
156.1
165.6
31.0
33.4
36.0
38.3
40.8
55.3
58.4
61.4
64.7
68.3
86.5
110.9
115.6
120.4
124.9

Total, receipts ������������������������������������������
2,450.2 2,712.0 3,033.6 3,331.7 3,561.5 3,760.5 3,974.0 4,225.9 4,463.8 4,708.6 4,951.2 5,220.4
(On-budget) ������������������������������������������ (1,880.7) (2,038.6) (2,294.5) (2,553.4) (2,735.9) (2,891.8) (3,056.5) (3,260.8) (3,456.3) (3,645.4) (3,837.2) (4,059.3)
(Off-budget) ������������������������������������������
(569.5)
(673.5)
(739.1)
(778.3)
(825.6)
(868.7)
(917.5)
(965.0) (1,007.5) (1,063.2) (1,113.9) (1,161.0)
Total receipts as a percentage of GDP �����
15.8
16.7
17.8
18.6
18.8
18.8
18.9
19.2
19.4
19.6
19.8
20.0

Estimates of governmental Receipts
Governmental receipts (on-budget and off-budget) are
taxes and other collections from the public that result
from the exercise of the Federal Government’s sovereign
or governmental powers. The difference between governmental receipts and outlays is the surplus or deficit.
The Federal Government also collects income from the
public from market-oriented activities. Collections from
these activities, which are subtracted from gross outlays,

rather than added to taxes and other governmental receipts, are discussed in the next Chapter.
Total governmental receipts (hereafter referred to as
“receipts”) are estimated to be $2,712.0 billion in 2013, an
increase of $261.9 billion or 10.7 percent from 2012. The
estimated increase in 2013 is partly attributable to the
growth in personal income and corporate profits as the
economy continues to recover from the recession. These

171

172

Analytical Perspectives

sources of income affect payroll taxes and individual
and corporation income taxes, the three largest sources
of receipts. The expiration of the temporary reduction
in the Social Security payroll tax rate for employees and
self-employed individuals, and the increases in taxes on
higher-income individuals that became effective January
1, 2013, also contribute to the growth in 2013 receipts.
Receipts in 2013 are estimated to be 16.7 percent of Gross
Domestic Product (GDP), which is higher than in 2012,
when receipts were 15.8 percent of GDP.
Receipts are estimated to rise to $3,033.6 billion in
2014, an increase of $321.6 billion or 11.9 percent relative

to 2013. Receipts are projected to grow at an average annual rate of 7.0 percent between 2014 and 2018, rising to
$3,974.0 billion. Receipts are projected to rise to $5,220.4
billion in 2023, growing at an average annual rate of 5.6
percent between 2018 and 2023. This growth is largely
due to assumed increases in incomes resulting from both
real economic growth and inflation.
As a share of GDP, receipts are projected to increase
from 16.7 percent in 2013 to 17.8 percent in 2014, and to
rise to 20.0 percent in 2023. However, as a share of GDP,
receipts would still be lower than in 2000, when the receipts share of GDP reached 20.6 percent.

LEGISLATION ENACTED IN 2012 and 2013 THAT AFFECTS GOVERNMENTAL
RECEIPTS
Legislation enacted during the past year kept taxes
low for middle-income taxpayers, reduced the deficit by
increasing taxes on the highest-income taxpayers and
the wealthiest estates, extended the temporary reduction
in the Social Security payroll tax rate for employees and
self-employed individuals through December 31, 2012,
repealed special rules modifying the timing of estimated
tax payments by large corporations, modified the interest
rate used for purposes of determining required contributions by employers to defined benefit pension plans, and
temporarily extended the authority to collect taxes that
fund the Airport and Airway Trust Fund and the Highway
Trust Fund.
The major provisions of legislation enacted in 2012 and
early 2013 that affect receipts are described below. 1
AIRPORT AND AIRWAY EXTENSION ACT OF 2012
(Public Law 112-91)
This Act, which was signed into law by President
Obama on January 31, 2012, extended the authority to
collect taxes that fund the Airport and Airway Trust Fund
through February 17, 2012. These taxes had been scheduled to expire after January 31, 2012, under prior law.
FAA MODERNIZATION AND
REFORM ACT OF 2012
(Public Law 112-95)
This Act, which was signed into law by President
Obama on February 14, 2012, extended the authority
to collect taxes that fund the Airport and Airway Trust
Fund through September 30, 2015. These taxes had been
scheduled to expire after February 17, 2012, under prior
law. Several other provisions of this Act affect receipts
and are described below.
Levy a surtax on fuel used in fractional aircraft
(planes with multiple owners).—Fractional ownership
aircraft flights were treated as commercial aviation under
prior law and were subject to the excise taxes levied on
commercial aviation (an ad valorem tax equal to 7.5 percent of the amount paid for the transportation of a person
plus $3.80 per domestic flight segment, a 4.4-cents-per1 In the discussions of enacted legislation, years referred to are calendar years, unless otherwise noted.

gallon tax on fuel, an ad valorem tax equal to 6.25 percent of the amount paid for the domestic transportation
of air cargo, and a $16.70 international travel facilities
tax). This Act exempted certain fractional aircraft flights
from commercial aviation taxes, effective for transportation provided after March 31, 2012, and before October 1,
2015, and instead treated these flights as noncommercial
aviation, subject to the tax on fuel used in noncommercial aviation (19.4 cents per gallon for aviation fuel and
21.9 cents per gallon for jet fuel) and a fuel surtax of 14.1
cents per gallon. The surtax, which sunsets September
30, 2021, applies to fuel used in a fractional program aircraft for the transportation of a qualified fractional owner
with respect to the fractional aircraft program of which
such aircraft is a part, and with respect to the use of such
aircraft on the account of such a qualified owner, including the positioning of flights (flights in deadhead service).
Terminate the exemption from air transportation
excise taxes for small jet aircraft operated on nonestablished lines or for the sole purpose of sightseeing.—Under prior law, transportation of persons or cargo
by aircraft with a certified maximum takeoff weight of
6,000 pounds or less on a nonestablished line (including
a flight the sole purpose of which was sightseeing) was
exempt from commercial aviation excise taxes. This Act
repealed this exemption, effective for transportation provided after March 31, 2012.
Modify the definition of “control” for purposes of
section 249 of the Internal Revenue Code.—In general, if a corporation repurchases a debt instrument that
is convertible into its stock, or into stock of a corporation
in control of, or controlled by, the corporation, section 249
may disallow or limit the issuer’s deduction for any premium paid to repurchase the debt instrument. For this
purpose, “control” is determined by reference to section
368(c), which encompasses only direct relationships (e.g.,
a parent corporation and its wholly-owned, first tier subsidiary). The definition of “control” in section 249 is narrow and has allowed the limitation in section 249 to be
too easily avoided. Indirect control relationships (e.g., a
parent corporation and a second-tier subsidiary) present
the same economic identity of interests as direct control
relationships and should be treated in a similar manner.
This Act amended the definition of “control” for purposes
of section 249, effective for repurchases after February 14,

14.  Governmental Receipts

2012, by referencing the definition of a controlled group
in section 1563(a)(1), which includes indirect control relationships.
Allow tax-exempt financing for fixed-wing emergency medical aircraft.—Under this Act, the proceeds
from tax-exempt private activity bonds issued after
February 14, 2012, may be used to finance the purchase of
fixed-wing emergency medical aircraft equipped for, and
exclusively dedicated to, providing acute care emergency
medical services.
Expand choices for the rollover of amounts received in airline carrier bankruptcy.—Under prior
law, an employee or former employee who was a participant in a qualified defined benefit pension plan terminated by a commercial airline carrier generally was allowed
to contribute any portion of a payment received from the
carrier under the approval of an order of a Federal bankruptcy court in a case filed after September 11, 2001, and
before January 1, 2007, to a Roth Individual Retirement
Account (IRA) within 180 days of receipt of such amount.
Such a contribution was treated as a qualified rollover
contribution to the Roth IRA and was includible in gross
income to the extent that such payment would be includible were it not part of the rollover contribution. This Act
expanded the choices for recipients of such airline payments by allowing the rollover of amounts received to
a traditional IRA. All or part of such airline payments
rolled over to a Roth IRA under prior law may be recharacterized as a rollover contribution to a traditional IRA
within 180 days of February 14, 2012. All or part of such
payments not rolled over into a Roth IRA under prior law
(including earnings) may be rolled over to a traditional
IRA within 180 days of the receipt of the payment or, if
later, within 180 days of February 14, 2012. An individual
making a rollover contribution of an airline payment to a
traditional IRA (including any amount recharacterized as
a rollover contribution to a traditional IRA) may exclude
the amount contributed from gross income in the taxable
year in which the airline payment was made to the employee.
MIDDLE CLASS TAX RELIEF AND JOB
CREATION ACT OF 2012
(Public Law 112-96)
This Act, which was signed into law by President
Obama on February 22, 2012, affected receipts by extending the temporary two-percentage point reduction in the
employee Social Security payroll tax rate, repealing certain shifts in the timing of estimated tax payments by
corporations, increasing the contributions of new employees to Federal defined benefit retirement plans, expanding the Short-Time Compensation (STC) unemployment
insurance program, and extending and modifying the
Emergency Unemployment Compensation (EUC) program These provisions are described in greater detail
below.
Extend temporary reduction in the Social Security
payroll tax rate for employees and self-employed individuals.—The Tax Relief, Unemployment Insurance

173
Reauthorization, and Job Creation Act of 2010 reduced
the employee Social Security payroll tax rate from 6.2
percent to 4.2 percent of the first $106,800 of taxable wages received after December 31, 2010, and before January
1, 2012. A similar reduction applied to the employee
portion of Tier 1 Railroad Retirement payroll taxes. For
self-employed individuals, the Social Security payroll tax
rate was reduced from 12.4 percent to 10.4 percent of the
first $106,800 of net taxable self-employment income for
taxable years beginning in 2011. The Social Security
Trust Fund was held harmless and received transfers
from the General Fund of the Treasury equal to the reduction in payroll taxes attributable to these reductions
in the payroll tax rate. The Temporary Payroll Tax Cut
Continuation Act of 2011 extended these reductions in
the Social Security and Tier 1 Railroad Retirement payroll tax rates to apply to the first $18,350 of taxable wages
received after December 31, 2011, and before March 1,
2012, and to net taxable self-employment income received
during the first two months of taxable years beginning in
2012.
This Act extended the temporary two-percentage point
reduction in the employee Social Security payroll tax rate
to apply to the first $110,100 of taxable wages received
after December 31, 2011, and before January 1, 2013. A
similar reduction applied to the employee portion of Tier
1 Railroad Retirement payroll taxes. For self-employed individuals, the Social Security payroll tax rate was reduced
from 12.4 percent to 10.4 percent of the first $110,100
of net taxable self-employment income received in taxable years beginning in 2012. The Social Security Trust
Fund was held harmless and received transfers from the
General Fund of the Treasury equal to any reduction in
payroll taxes attributable to these reductions in payroll
tax rates.
Repeal special rules modifying the amount of estimated tax payments by corporations with assets
of at least $1 billion.—Corporations generally are required to pay their income tax liability in quarterly estimated payments.  For corporations that keep their
accounts on a calendar year basis, these payments are
generally due on or before April 15, June 15, September
15, and December 15 of the particular taxable year.  The
amount due each quarter is generally one-quarter (25
percent) of the amount due for the year.  A number of legislative acts modified the standard rules with regard to
the amount due by corporations with assets of at least
$1 billion, increasing the amount due in July, August,
or September to: 100.5 percent of the amount otherwise
due in 2012, 174.25 percent of the amount otherwise due
in 2014, 163.75 percent of the amount otherwise due in
2015, 103.5 percent of the amount otherwise due in 2016,
and 106.5 percent of the amount otherwise due in 2019.
This Act repealed these legislative changes, reducing the
amount due by these corporations to 100 percent of the
amount that would have been due prior to enactment of
these changes.
Increase the contributions of new employees to
Federal defined benefit retirement plans.—This Act
increased employee contributions to Federal defined ben-

174
efit retirement plans, including the Federal Employee
Retirement System (FERS), by 2.3 percentage points, effective for individuals joining the Federal work force after
December 31, 2012 (other than such individuals with five
or more years of creditable civilian service as of December
31, 2012). The effect of the increase was to reduce the
employing-agency contributions by an equal amount.
Pension benefits for such employees were unchanged.
Expand STC unemployment program.—Work sharing is a voluntary employer program designed to help
employers maintain their staff by reducing the weekly
hours of their employees, instead of temporarily laying off
workers, when the employer is faced with a temporary
slowdown in business. Workers with reduced hours under
an approved STC plan receive a partial unemployment
check to supplement the reduced paycheck. This Act established a new definition of STC. States with existing
STC programs were given up to two years and six months
to conform to the new definition. States that adopt an
STC program that conforms with Federal law are eligible
for 100 percent Federal financing of STC benefits for a
maximum of 156 weeks. States without an existing STC
program may provide STC benefits through a temporary
Federal STC program and are eligible to receive 50 percent Federal financing of the cost of STC benefits for up to
two years. If they adopt a conforming STC program, they
are eligible to receive full Federal financing of benefits for
an additional year for a maximum of 156 weeks of Federal
financing.
Extend and modify the EUC program.—This Act
reauthorized the EUC program, extending the final date
for entering a Federal-State agreement under the program through January 2, 2013. Under prior law, the EUC
program would have expired on March 6, 2012. Under
the EUC program, this Act provided 34 to 53 weeks of
benefits through May 2012, depending on the State; 20 to
53 weeks of benefits through August 2012; and 14 to 47
weeks of benefits through December 2012.
SURFACE TRANSPORTATION EXTENSION ACT
OF 2012
(Public Law 112-102)
This Act, which was signed into law by President
Obama on March 30, 2012, extended the authority to collect taxes that fund the Highway Trust Fund, the Leaking
Underground Storage Tank (LUST) Trust Fund, and the
Sport Fish Restoration and Boating Trust Fund through
June 30, 2012. These taxes had been scheduled to expire
after March 31, 2012, under prior law.
TEMPORARY SURFACE TRANSPORTATION
EXTENSION ACT OF 2012
(Public Law 112-140)
This Act, which was signed into law by President
Obama on June 29, 2012, extended the authority to collect taxes that fund the Highway Trust Fund, the LUST
Trust Fund, and the Sport Fish Restoration and Boating

Analytical Perspectives

Trust Fund through July 6, 2012. These taxes had been
scheduled to expire after June 30, 2012, under prior law.
MOVING AHEAD FOR PROGRESS IN THE 21st
CENTURY ACT (MAP-21)
(Public Law 112-141)
This Act, which was signed into law by President
Obama on July 6, 2012, extended the authority to collect
taxes that fund the Highway Trust Fund, the LUST Trust
Fund, and the Sport Fish Restoration and Boating Trust
Fund through September 30, 2016. These taxes had been
scheduled to expire after July 6, 2012, under prior law.
Several other provisions of this Act affect receipts and are
described below.
Modify the interest rate used for purposes of determining required contributions by employers to
defined benefit pension plans.—Pension plan sponsors are required to fully fund the pension liabilities of
their defined benefit pension plans under the Employee
Retirement Income Security Act of 1974 (ERISA) and the
Internal Revenue Code. A specified interest rate, based
on a corporate bond yield curve, must be used to calculate
the present value of pension liabilities for the purpose of
determining the required contributions. Under this Act,
the interest rates used for this purpose are adjusted so
that they fall within a specified corridor around the 25year average of the applicable rates. For plan years beginning in 2012, the corridor is 90 to 110 percent of the
25-year average and the corridor gradually widens until
it is 70 to 130 percent for plan years beginning after 2015.
Because the 25-year average as of the end of 2011 is significantly higher than current interest rates, the adjusted
interest rates are also higher. This results in a lower calculation of plan liabilities, thereby reducing required contributions. The provision is effective with respect to plan
years beginning after December 31, 2011; however, a plan
sponsor can elect to defer application of the new interest
rates for certain purposes until the plan year beginning
in 2013.
Expand the definition of manufacturer of tobacco products for tobacco excise tax purposes.—
Manufacturers of certain tobacco products are liable for
Federal excise taxes imposed on those products. Under
prior law, the term “manufacturer of tobacco products”
included any entity that manufactures cigars, cigarettes,
smokeless tobacco, pipe tobacco, or roll-your-own tobacco.
This Act amended the definition of manufacturer of tobacco products to make clear that it includes any entity
that, for commercial purposes only, makes available for
consumer use a machine capable of making cigarettes, cigars, or other tobacco products.
Provide phased retirement to certain retirementeligible Federal employees.—Under prior law, Federal
agencies were permitted to offer part-time employment
to retirement-eligible employees, but those who participated in pension plans could not begin collecting pension
benefits until they retired. In some circumstances, this
policy provided an economic disincentive for employees to
engage in part-time work necessary to facilitate the ef-

175

14.  Governmental Receipts

ficient transfer of knowledge. Under this Act, and upon
the Office of Personnel Management’s issuance of governing regulations, Federal agencies would be permitted to
allow certain retirement-eligible Federal employees to
continue to work part-time while receiving prorated salary and annuity payments. Such employees (except for
Postal Service employees) would be required to spend at
least 20 percent of their time mentoring less experienced
employees. Retirement-eligible employees participating
in this phased retirement program under 59 1/2 years of
age are exempt from the 10-percent tax on early distributions from a qualified retirement plan that would otherwise apply.
Extend the ability of employers to transfer excess
pension assets to retiree health accounts.—Under prior law, employers were allowed to transfer excess assets of
a defined benefit plan covered by ERISA to a retiree medical account within the plan in order to fund retiree health
benefits. Such transferred assets were not includable in
the gross income of the employer and were not subject to
the excise tax on reversions. This Act extended the ability to transfer excess pension assets to a retiree medical
account for eight years, to apply to such transfers made
after December 31, 2013, and before January 1, 2022.
Allow employers to transfer excess pension assets
to retiree group term life insurance accounts.—This
Act expanded the ability of employers to transfer excess
assets of a defined benefit plan covered by ERISA to apply
to the transfer of such assets to a retiree life insurance
account within the plan in order to fund group-term life
insurance for retirees. Transferred assets are not includable in the gross income of the employer and are not subject to the excise tax on reversions. This provision applies
to excess pension assets transferred after July 6, 2012,
and before January 1, 2022.
TO AMEND THE AFRICAN GROWTH AND
OPPORTUNITY ACT TO EXTEND THE THIRDCOUNTRY FABRIC PROGRAM AND TO ADD
SOUTH SUDAN TO THE LIST OF COUNTRIES
ELIGIBLE FOR DESIGNATION UNDER THAT
ACT, TO MAKE TECHNICAL CORRECTIONS TO
THE HARMONIZED TARIFF SCHEDULE OF THE
UNITED STATES RELATING TO THE TEXTILE
AND APPAREL RULES OF ORIGIN FOR THE
DOMINICAN REPUBLIC-CENTRAL AMERICAUNITED STATES FREE TRADE AGREEMENT,
TO APPROVE THE RENEWAL OF IMPORT
RESTRICTIONS CONTAINED IN THE BURMESE
FREEDOM AND DEMOCRACY ACT OF 2003, AND
FOR OTHER PURPOSES
(Public Law 112-163)
This Act, which was signed into law by President
Obama on August 10, 2012, extended for three years,
through September 30, 2015, the preferential tariff treatment accorded to certain textile products from lesserdeveloped sub-Saharan African countries in the African

Growth Opportunity Act program; expanded the list of
eligible sub-Saharan African countries to include the
Republic of South Sudan; and modified the rules of origin
for products imported from countries who are members of
the Dominican Republic and Central America Free Trade
Agreement. This Act also extended the ban on all imports
from Burma, including a ban on imports of certain gemstones originating from Burma and on jewelry containing
such gemstones, effective retroactive to July 26, 2012, and
through July 28, 2013.
In addition, this Act increased the estimated tax payments due in July through September by corporations
with assets of at least $1 billion to 100.25 percent of the
amount otherwise due in 2017. For corporations affected
by this provision, the next required estimated tax payment is reduced accordingly.
THE AMERICAN TAXPAYER RELIEF ACT OF 2012
(Public Law 112-240)
This Act, which was signed into law by President
Obama on January 2, 2013, ensured that individual income taxes did not rise for 98 percent of Americans and
97 percent of small business owners as scheduled under
prior law. In addition to permanently extending the 2001
and 2003 tax cuts for most Americans, this Act temporarily extended key tax relief provided to middle-income
taxpayers in ARRA, and extended a number of other provisions that had expired or were scheduled to expire. The
major provisions of this Act that affect receipts are described below.
Tax Relief for Individuals
Permanently extend 2001 individual income tax
relief for middle-income taxpayers.—Most of the individual income tax reductions enacted in 2001 were
scheduled to expire on December 31, 2012. This tax relief included reductions in marginal individual income
tax rates; repeal of the limitations on itemized deductions
and personal exemptions; special provisions for married
couples; and expansions in the child tax credit, the earned
income tax credit (EITC), the dependent care credit, and
the adoption credit. This Act permanently extended these
provisions, with the following modifications: (1) for single
taxpayers with taxable income above $400,000, for estates
and trusts with income above $11,950, and for married
taxpayers filing a joint return with taxable income above
$450,000, the 35-percent tax rate bracket enacted in 2001
was increased to 39.6 percent, effective for taxable years
beginning after December 31, 2012; and (2) for single taxpayers with adjusted gross income (AGI) above $250,000
and for married taxpayers filing a joint return with AGI
above $300,000, the limitations on itemized deductions
and personal exemptions that were in effect prior to 2001
were reinstated, effective for taxable years beginning after December 31, 2012.
Permanently extend 2003 tax cuts on capital
gains and dividends for middle-income taxpayers.—
This Act permanently extended the maximum tax rates of

176
15 percent and zero percent on net capital gains and dividends realized after December 31, 2012, for single taxpayers with taxable income below $400,000 and for married
taxpayers filing a joint return with taxable income below
$450,000. The maximum tax rate on net capital gains
and dividends was increased to 20 percent for all other
taxpayers, effective for net capital gains and dividends realized after December 31, 2012.
Permanently extend and index for inflation
the parameters of the Alternative Minimum Tax
(AMT).—This Act permanently extended or increased the
following AMT parameters, which, under the Act, will be
annually indexed for inflation beginning in taxable year
2013: (1) AMT exemption amounts of $50,600 for single
taxpayers, $78,750 for married taxpayers filing a joint
return and surviving spouses, $39,375 for married taxpayers filing a separate return, and $22,500 for estates
and trusts; (2) income thresholds for the 28-percent AMT
rate of $87,500 for married taxpayers filing a separate return and $175,000 for all other taxpayers; and (3) income
thresholds for the phaseout of the exemption amounts of
$150,000 for married taxpayers filing a joint return and
surviving spouses, $112,500 for single taxpayers, and
$75,000 for married taxpayers filing a separate return
and for estates and trusts. This Act also permanently extended AMT relief for nonrefundable personal tax credits,
effective for taxable years beginning after December 31,
2011.
Permanently extend and modify the estate, gift,
and generation-skipping transfer (GST) tax parameters in effect in 2012.—Under prior law, the estates of
decedents dying in 2012, as well as gifts and GSTs made
in 2012, were taxed at a maximum tax rate of 35 percent
and were provided a lifetime exclusion of $5 million, indexed for inflation. Unused exclusion amounts were portable between spouses for estate and gift tax purposes.
This Act permanently extended the $5 million exclusion
amount applicable to estates, gifts, and GSTs (indexed
for inflation), but increased the maximum tax rate to 40
percent, effective for the estates of decedents dying after
December 31, 2012, and for gifts and GSTs made after
that date. The portability of unused estate and gift tax
exclusion amounts between spouses also was made permanent and applies to decedents dying after December
31, 2010.
Extend American opportunity tax credit (AOTC).—
The AOTC provides taxpayers a credit of up to $2,500 per
eligible student per year for qualified tuition and related
expenses (expanded to include course materials) paid for
each of the first four years of the student’s post-secondary education in a degree or certification program. The
student must be enrolled at least half-time to receive
the credit. The credit is equal to 100 percent of the first
$2,000 in qualified tuition and related expenses, and 25
percent of the next $2,000 of qualified tuition and related
expenses. The credit is phased out ratably for single taxpayers with modified AGI between $80,000 and $90,000
($160,000 and $180,000 for married taxpayers filing a
joint return). The credit is partially (40 percent) refundable. This Act extended the credit for five years, effective

Analytical Perspectives

for taxable years beginning after December 31, 2012, and
before January 1, 2018.
Extend increased refundability of the child tax
credit.—Prior to enactment of ARRA, if the child tax
credit exceeded the taxpayer’s individual income tax liability, the taxpayer was eligible for a refundable credit
(the additional child credit) equal to the lesser of: (1) 15
percent of earned income in excess of a threshold dollar
amount ($12,550 for 2009), indexed annually for inflation;
or (2) any child credit unclaimed due to insufficient tax liability. ARRA increased the refundability of the child tax
credit by reducing the threshold dollar amount to $3,000.
This Act extended the $3,000 threshold dollar amount
for five years, effective for taxable years beginning after
December 31, 2012, and before January 1, 2018.
Extend the EITC for larger families.—The EITC
generally equals a specified percentage of earned income,
up to a maximum dollar amount, which is reduced by the
product of a specified phaseout rate and the amount of
earned income or AGI, if greater, in excess of a specified
income threshold. Three separate credit schedules apply,
depending on whether the eligible taxpayer has no, one,
or more than one qualifying child. Under ARRA a fourth
credit schedule was added for families with three or more
qualifying children. This Act extended the fourth credit
schedule for five years, effective for taxable years beginning after December 31, 2012, and before January 1, 2018.
Extend EITC marriage penalty relief.—ARRA provided marriage penalty relief to married couples filing a
joint return (regardless of the number of qualifying children) by increasing the income thresholds for the phaseout of the EITC to $5,000 above the income thresholds for
the phaseout for other taxpayers; the $5,000 amount was
indexed for inflation after 2009. This Act extended the
$5,000 increase in the thresholds for the phaseout of the
EITC for five years, to apply to taxable years beginning
after December 31, 2012, and before January 1, 2018. For
taxable years beginning after December 31, 2017, the
phaseout for married filers will begin at $3,000 above the
income thresholds for other taxpayers, indexed for inflation after 2008.
Extend the above-the-line deduction for qualified
out-of-pocket classroom expenses.—Certain teachers
and other elementary and secondary school professionals
are permitted to deduct up to $250 in annual qualified
out-of-pocket classroom expenses. This Act extended this
above-the-line deduction for two years, effective for such
expenses incurred after December 31, 2011, and before
January 1, 2014.
Extend the ability to exclude discharges of indebtedness on principal residences from gross income.—
Discharged indebtedness on a principal residence may be
excluded from gross income. The debt whose discharge
can be excluded may be up to $2 million (or up to $1 million per spouse for married taxpayers filing separate returns), but non-excludable amounts are treated as being
excluded before excludable amounts. This Act extended
the exclusion for one year, to apply to indebtedness discharged after December 31, 2012, and before January 1,
2014.

177

14.  Governmental Receipts

Extend parity for exclusion from income for
employer-provided mass transit and parking benefits.—Qualified transportation fringe benefits provided
by an employer through transit passes and vanpooling
can be excluded from an employee’s income up to a statutory maximum of $100 per month in combined transit
pass and vanpool benefits and $175 per month in qualified parking benefits (both amounts are adjusted annually for inflation after 1998). Prior law temporarily provided parity in these benefits by increasing the monthly
exclusion for combined employer-provided transit pass
and vanpool benefits to the same level as the exclusion for
employer-provided parking benefits. This Act extended
parity for two years, effective for benefits provided after
December 31, 2011, and before January 1, 2014. Under
this provision the monthly limit on the exclusion for combined transit pass and vanpool benefits increases to $240
in 2012 and to $245 in 2013.
Extend deduction for mortgage insurance premiums.—Certain premiums paid or accrued for qualified
mortgage insurance by a taxpayer in connection with
acquisition indebtedness on a qualified residence are deductible for income tax purposes. This Act extended the
deduction for two years, to apply to amounts paid or accrued in 2012 and 2013 that are not properly allocable to
any period after December 31, 2013.
Extend optional deduction for State and local
general sales taxes.—A taxpayer is allowed to elect to
take an itemized deduction for State and local general
sales taxes in lieu of the itemized deduction for State
and local income taxes. This Act extended this deduction
for two years, effective for taxable years beginning after
December 31, 2011, and before January 1, 2014.
Extend increased limits on contributions of partial interest in real property for conservation purposes.—Special rules for the deductibility of qualified
conservation contributions were temporarily enhanced,
applicable for qualified conservation contributions made
in taxable years beginning after December 31, 2005, and
before January 1, 2012. These enhancements: (1) increased the cap on deductions for qualified conservation
contributions from 30 percent to 50 percent of the excess
of the donor’s contribution base over the amount of all
other allowable charitable contributions; (2) increased the
cap on deductions for qualified conservation contributions
applicable to qualified ranchers and farmers to 100 percent of the excess of the donor’s contribution base over the
amount of all other allowable charitable contributions in
the case of individuals and to 100 percent of the excess
of taxable income over the amount of all other allowable
charitable contributions in the case of corporations; and
(3) increased the number of years qualified conservation
contributions in excess of the 50- and 100-percent caps
may be carried forward from five to 15 years. This Act
extended these enhanced special rules for two years, applicable for qualified conservation contributions made in
taxable years beginning after December 31, 2011, and before January 1, 2014.
Extend deduction for qualified tuition and related expenses.—An above-the-line deduction of up to

$4,000 is provided for qualified higher education expenses
paid by a qualified taxpayer during the taxable year. For
a given taxable year, the deduction may not be claimed:
(1) if an education tax credit is claimed for the same student, (2) for amounts taken into account in determining
the amount excludable from income due to a distribution
from a Coverdell education savings account or the amount
of interest excludable from income with respect to education savings bonds, and (3) for the amount of a distribution from a qualified tuition plan that is excludable from
income, except that the deduction may be claimed for the
amount not attributable to earnings. This Act extended
the deduction for two years, to apply to expenses incurred
in taxable years beginning after December 31, 2011, and
before January 1, 2014.
Extend tax-free distributions from IRAs for charitable contributions.—An exclusion from gross income is
provided for otherwise taxable distributions from a traditional or a Roth IRA made directly to a qualified charitable organization. The exclusion for these qualified charitable distributions may not exceed $100,000 per taxpayer
per taxable year and is applicable only to distributions
made on or after the date the IRA owner attains age 70
1/2. This Act extended the exclusion for two years, to apply to distributions made in taxable years beginning after
December 31, 2011, and before January 1, 2014. This Act
also included special transition rules that enable taxpayers to have amounts distributed after November 30, 2012,
and donated by January 31, 2013, treated as qualified
charitable distributions for 2012.
Permanently extend and modify authority of the
Internal Revenue Service (IRS) to disclose certain
tax returns and return information to certain prison officials.—Tax returns and tax return information
generally are confidential and may not be disclosed by
the IRS, other Federal employees, State employees, and
certain others having access to the information except as
provided in the Internal Revenue Code. Under prior law,
the Secretary of the Treasury was allowed to disclose the
return information of prisoners who may have filed or facilitated the filing of false or fraudulent tax returns to
officers and employees of the Federal Bureau of Prisons
and State prisons. This Act modified and permanently
extended this authority, which had expired on December
31, 2011.
Tax Relief for Businesses
Extend and modify research and experimentation
(R&E) tax credit.—A tax credit of 20 percent is provided
for qualified research and experimentation expenditures
above a base amount. An alternative simplified credit of
14 percent is also provided. This Act extended these tax
credits for two years, to apply to expenditures incurred
in taxable years beginning after December 31, 2011, and
before January 1, 2014. This Act also modified the special
rules provided under prior law concerning: (1) the computation of the credit when a major portion of a trade or
business changes hands, and (2) the amount of credit allowable to each member of a controlled group of corpo-

178
rations or each member of a group of businesses under
common control.
Extend 50-percent first-year depreciation deduction for certain property.—This Act extended the additional first-year depreciation deduction equal to 50 percent of the adjusted basis of the property for one year, to
apply to qualifying property acquired and placed in service in calendar year 2013. The placed-in-service deadline was extended through 2014 for certain longer-lived
and transportation property. Corporations otherwise eligible for additional first-year depreciation are allowed to
claim additional AMT credits in lieu of claiming the additional depreciation.
Extend increased expensing for small business.—
Business taxpayers are allowed to expense up to $500,000
in annual investment expenditures for qualifying property (including off-the-shelf computer software) placed in
service in taxable years beginning in 2010 and 2011. The
maximum amount that can be expensed is reduced by the
amount by which the taxpayer’s cost of qualifying property exceeds $2,000,000. In addition, for taxable years
beginning in 2010 and 2011, the definition of qualifying
property is expanded to include certain real property,
such as qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property; however, the maximum amount of such
real property that can be expensed is $250,000. This Act
extended for two years, effective for qualifying property
placed in service in taxable years beginning in 2012 and
2013 (including off-the-shelf computer software and certain real property), the annual expensing and investment
limits that were in effect in 2010 and 2011.
Extend temporary minimum Low-Income Housing
tax credit (LIHTC) rate for non-Federally subsidized new buildings.—The LIHTC is provided to owners of qualified low-income rental units. The credit may
be claimed over a ten-year period for a portion of the cost
of rental housing occupied by tenants having incomes below specified levels. Under the Housing and Economic
Recovery Act of 2008, a temporary minimum credit percentage of nine percent was provided for newly constructed non-Federally subsidized buildings placed in service
before December 31, 2013. This Act extended the nine
percent rate to apply to projects that have received an allocation before January 1, 2014.
Extend treatment of basic housing allowances for
the purpose of LIHTC income eligibility rules.—In
order to be eligible for the LIHTC or to be financed with
exempt facility bonds, a qualified low-income building
must be part of a qualified low-income housing project. In
general, a qualified low-income housing project is defined
as a project that satisfies one of two tests at the election
of the taxpayer. The first test is met if 20 percent or more
of the residential units in the project are both rent-restricted, and occupied by individuals whose income is 50
percent or less of area median gross income. The second
test is met if 40 percent or more of the residential units in
the project are both rent-restricted, and occupied by individuals whose income is 60 percent or less of area median
gross income. These income requirements are adjusted

Analytical Perspectives

for family size. Effective for income determinations made
after July 30, 2008, and before January 1, 2012, the basic housing allowance (payments provided under section
403 of title 37, United State Code) provided to military
personnel was not included in income for the purpose of
LIHTC income eligibility rules. This Act extended the disregard of basic housing allowances for purposes of LIHTC
income eligibility rules for two years, effective for income
determinations made before January 1, 2014.
Extend tax incentives for employment and investment on Indian reservations.—This Act extended for
two years, through December 31, 2013, the employment
tax credit for qualified workers employed on an Indian
reservation and the accelerated depreciation rules for
qualified property used in the active conduct of a trade
or business within an Indian reservation. The employment tax credit is not available for employees involved in
certain gaming activities or who work in a building that
houses certain gaming activities. Similarly, property used
to conduct or house certain gaming activities is not eligible for the accelerated depreciation rules.
Extend the New Markets tax credit (NMTC).—The
NMTC is a 39-percent credit for qualified equity investments made in qualified community development entities
that are held for a period of seven years. This Act extended the NMTC, which expired at the end of 2011, for
two years, to apply to 2012 and 2013. Up to $3.5 billion in
qualifying investment is allowed in each year.
Extend railroad track maintenance credit.—A
50-percent business tax credit is provided for qualified
railroad track maintenance expenditures paid by an eligible taxpayer. The credit is limited to the product of
$3,500 times the number of miles of railroad track owned
or leased by an eligible taxpayer as of the close of the taxable year. This Act extended the credit for two years, to
apply to qualified expenses incurred in taxable years beginning after December 31, 2011, and before January 1,
2014.
Extend credit for mine rescue training.—An eligible taxpayer may claim a general business tax credit
with respect to each qualified mine rescue team employee
equal to the lesser of: (1) 20 percent of the amount paid
or incurred by the taxpayer during the taxable year with
respect to the training program costs of the qualified mine
rescue team employee; or (2) $10,000. This Act extended
the credit for two years, to apply to costs incurred in taxable years beginning after December 31, 2011, and before
January 1, 2014.
Extend expensing of advanced mine safety equipment.—Taxpayers are allowed to immediately expense
50 percent of the cost of underground mine safety equipment that is above and beyond existing safety equipment requirements. This Act extended this provision
for two years, to apply to property placed in service after
December 31, 2011, and before January 1, 2014.
Extend expensing for certain qualified film and
television production.—Taxpayers are allowed to elect
to deduct up to $15 million ($20 million for productions
in certain areas) of the aggregate costs of any qualifying
film and television production in the year in which the

14.  Governmental Receipts

expenses are incurred, in lieu of capitalizing the cost and
recovering it through depreciation allowances. This Act
extended this provision for two years, to apply to qualified film and television productions commencing after
December 31, 2011, and before January 1, 2014.
Extend the domestic production activities deduction for activities in Puerto Rico.—A deduction is provided for a portion of a taxpayer’s qualified production
activities income. Qualified production activities income
generally is equal to domestic production gross receipts
reduced by the sum of the costs of goods sold and other
expenses, losses, or deductions that are properly allocable to those receipts. Domestic production gross receipts
generally only include receipts from activities performed
within the United States, and do not include receipts from
activities performed in Puerto Rico. For taxable years beginning after May 17, 2006, the amount of the deduction
for a taxable year is limited to 50 percent of the wages
paid by the taxpayer and properly allocable to domestic
production gross receipts during the calendar year that
ends in such taxable year. Wages paid to bona fide residents of Puerto Rico generally are not included in the
wage limitation amounts. However, effective for the first
six taxable years of a taxpayer beginning after December
31, 2005, and before January 1, 2012, a taxpayer with
gross receipts from sources within the Commonwealth of
Puerto Rico can treat production activities performed in
Puerto Rico as performed in the United States for purposes of determining qualified production activities income, and can take into account wages paid to bona fide
residents of Puerto Rico for services performed in Puerto
Rico in computing the 50-percent wage limitation, provided all of the taxpayer’s gross receipts are subject to
the Federal income tax. This Act extended this provision
for two years, to apply to the first eight taxable years of a
taxpayer beginning after December 31, 2005, and before
January 1, 2014.
Extend employer wage credit for employees who
are active duty members of the uniformed services.—Some employers voluntarily pay their employees
who are called to active duty in the armed forces of the
United States the difference between the compensation
that they would have paid the employee during the period of military service and the amount of pay received
by the employee from the military. This payment by the
employer is often referred to as “differential pay.” Eligible
small business employers are provided a tax credit equal
to 20 percent of up to $20,000 in annual eligible differential wage payments made to each qualified employee.
This Act extended the credit for two years, making it
available for eligible differential wage payments made to
a qualified employee after December 31, 2011, and before
January 1, 2014.
Extend the work opportunity tax credit (WOTC).—
The WOTC provides incentives to employers for hiring
individuals from one or more of nine targeted groups.
This Act extended the credit for two years (one year with
respect to qualified veterans), to apply to wages paid to
qualified individuals who begin work for the employer af-

179
ter December 31, 2011 (after December 31, 2012 for qualified veterans), and before January 1, 2014.
Extend the issuance of qualified zone academy
bonds.—This Act extended the qualified zone academy
bond program for two years, authorizing the issuance of
$400 million in such bonds in each calendar year, 2012
and 2013.
Extend modified recovery period for qualified
leasehold improvement property, qualified restaurant property, and qualified retail improvement
property.—This Act extended the 15-year recovery period for qualified leasehold improvement property, qualified
restaurant property, and qualified retail improvement
property for two years, effective for such property placed
in service after December 31, 2011, and before January
1, 2014.
Extend seven-year recovery period for motorsports
entertainment complexes.—Under this Act, the sevenyear recovery period applicable to motorsports entertainment complexes placed in service before January 1, 2012,
was extended for two years, to apply to such facilities
placed in service before January 1, 2014.
Extend the enhanced charitable deduction for
contributions of food inventory.—A taxpayer’s deduction for charitable contributions of inventory generally is
limited to the taxpayer’s basis (typically cost) in the inventory or, if less, the fair market value of the inventory.
For certain contributions of inventory, C corporations may
claim an enhanced deduction equal to the lesser of: (1)
basis plus one-half of the item’s appreciation, or (2) two
times basis. However, any taxpayer (not just a C corporation) engaged in a trade or business is eligible to claim the
enhanced deduction for donations of food inventory. To
qualify for the enhanced deduction, the donated food inventory must meet certain quality and labeling standards
and cannot exceed 10 percent of the taxpayer’s net income
from the related trade or business. This Act extended the
enhanced charitable deduction for contributions of food
inventory for two years, to apply to contributions made
after December 31, 2011, and before January 1, 2014.
Extend New York Liberty Zone tax-exempt bond
financing.—This Act extended for two years, through
December 31, 2013, the time for issuing New York Liberty
Zone bonds for the financing of certain nonresidential
real property, residential rental property and public utility property.
Extend Subpart F “active financing” and “lookthrough” exceptions.—Under Subpart F, U.S. shareholders of a controlled foreign corporation (CFC) are subject to
U.S. tax currently on certain income earned by the CFC,
whether or not such income is distributed. Exceptions
from Subpart F are provided for: (1) certain income derived in the active conduct of a banking, financing, insurance, or similar business (active financing exception), and
(2) dividends, interest, rents, and royalties received by
one CFC from a related CFC to the extent attributable
or properly allocable to income of the related CFC that
is neither Subpart F income nor income treated as effectively connected with the conduct of a trade or business
in the United States (look-through exception). This Act

180
extended both the Subpart F active financing and lookthrough exceptions to apply to taxable years beginning
after December 31, 2011, and before January 1, 2014.
Extend special tax rules applicable to regulated
investment companies (RICs).—This Act extended for
two years, through December 31, 2013, the following special tax rules applicable to RICs: (1) the exemption from
U.S. withholding tax for certain interest-related dividends
and short-term capital gain dividends paid by a RIC to
a foreign shareholder; and (2) the treatment of RICs as
“qualified investment entities.”
Extend special rule regarding tax treatment of
certain payments to controlling exempt organizations.—Interest, rents, royalties, and annuities generally
are excluded from the tax on unrelated business income of
tax-exempt organizations, unless such income is received
from a taxable or tax-exempt subsidiary that is 50-percent controlled by the parent tax-exempt organization.
However, such income received by a tax-exempt parent organization from a controlled subsidiary before January 1,
2012, is taxable only to the extent that it exceeds amounts
that would have been received if such payments had been
determined under the arm’s length principles of section
482 of the Internal Revenue Code. This Act extended this
provision for two years, to apply to such income received
before January 1, 2014.
Extend tax incentives for empowerment zones.—
This Act extended the tax incentives provided to businesses located in the 40 federally-designated empowerment zones (30 in urban areas and 10 in rural areas) for
two years, through December 31, 2013.
Extend exclusion of 100 percent of gain on certain
small business stock.—Capital gains realized on the
sale of certain small business stock held by an individual
for more than five years are excluded from tax, effective
for stock issued after September 27, 2010, and before
January 1, 2012. This Act extended the 100 percent exclusion for two years, to apply to qualified small business
stock issued after December 31, 2011, and before January
1, 2014.
Extend reduction in recognition period for
S-corporation built-in gains tax.—A “small business
corporation” may elect to be treated as an S corporation.
Unlike C corporations, S corporations generally pay no
corporate-level tax; instead, items of income and loss of
an S corporation pass through to its shareholders. A corporate level tax, at the highest marginal tax rate applicable to corporations (currently 35 percent), is imposed on
the net recognized built-in gain of an S corporation that
arose prior to the conversion of a C corporation to the S
corporation and that is recognized by the S corporation
during the “recognition period.” The “recognition period”
is the 10-year period beginning with the first day of the
first taxable year for which the election to be treated as
an S corporation is in effect; however, the “recognition period” was reduced to five years for dispositions of property
in taxable years beginning in 2011. This Act extended the
five-year recognition period for two years, to apply to dispositions of property in taxable years beginning in 2012
and 2013.

Analytical Perspectives

Extend basis adjustment to stock of S corporations contributing appreciated property.—Each
shareholder of an S corporation must take into account
his or her pro rata share of a charitable contribution by
the S corporation in determining his or her income tax
liability. For donations of property, this generally is the
pro rata share of the property’s fair market value; the
shareholder’s basis in the stock of the company is reduced by the amount of the charitable contribution that
flows through to the shareholder. However, effective for
charitable contributions made by an S corporation in taxable years beginning after December 31, 2005, and before
January 1, 2012, shareholders are allowed to adjust their
basis in the stock of the company by their pro rata share
of the adjusted basis of the contributed property instead
of by their pro rata share of the market value of the contributed property. This Act extended this provision for
two years, to apply to charitable contributions made by an
S corporation in taxable years beginning before January
1, 2014.
Extend and modify the economic development
credit for American Samoa.—Under prior law, a domestic corporation that was an existing possessions tax
credit claimant with respect to American Samoa and
elected the application of the tax credit for its last taxable year beginning before January 1, 2006, was allowed
to claim a possession tax credit based on the economic activity-based limitation rules for the first six taxable years
beginning after December 31, 2005, and before January
1, 2012. This Act extended the ability of such domestic
corporations to claim a possession tax credit based on the
economic activity-based limitation rules for two years,
to apply to the first eight taxable years beginning after
December 31, 2005, and before January 1, 2014. This Act
also allowed domestic corporations that did not elect the
application of the tax credit for their last taxable year
beginning before January 1, 2006, but who were existing
credit claimants, to claim a possession tax credit based on
the economic activity-based limitation rules for the first
two taxable years beginning after December 31, 2011, and
before January 1, 2014.
Energy Tax Relief
Extend credit for the construction of energy-efficient new homes.—An eligible contractor is provided
a tax credit for each qualified new energy-efficient home
that is constructed and acquired from the contractor by
a person for use as a residence. This Act extended the
credit for two years, to apply to homes purchased after
December 31, 2011, and before January 1, 2014.
Extend credit for energy-efficient appliances.—A
credit is provided for the production of certain energyefficient dishwashers, clothes washers, and refrigerators.
This Act extended the credit for two years, to apply to
such appliances produced after December 31, 2011, and
before January 1, 2014.
Extend credit for nonbusiness energy property.—
A tax credit is provided for the purchase of qualified energy efficient improvements to existing homes located in

14.  Governmental Receipts

the United States and owned and used by the taxpayer
as the taxpayer’s principal residence. This Act extended
the credit for two years, to apply to property purchased
and placed in service after December 31, 2011, and before
January 1, 2014.
Extend credit for alternative fuel vehicle refueling property.—A tax credit is provided for the cost of
qualified clean-fuel vehicle refueling property to be used
in a trade or business of the taxpayer or installed at the
principal residence of the taxpayer. Under prior law, the
credit is available for hydrogen refueling property placed
in service before January 1, 2015, and for non-hydrogen
refueling property placed in service before December 31,
2011. This Act extended the credit for non-hydrogen refueling property for two years, to apply to property placed
in service after December 31, 2011, and before January
1, 2014.
Extend credit for qualified plug-in electric drive
motor vehicles with low-speed or two or three
wheels.—This Act extended for two years the credit for
new qualified plug-in electric drive motor vehicles with
low speed, or two or three wheels (having a battery capacity of at least 2.5 kilowatt-hours), to apply to vehicles
acquired by the taxpayer after December 31, 2011, and
before January 1, 2014. The credit is 10 percent of the
cost of the qualified vehicle or $2,500, whichever is less.
Extend and modify cellulosic biofuel producer
credit.—An income tax credit (generally equal to $1.01
per gallon) is provided to producers of cellulosic biofuel.
This Act extended the credit for one year, to apply to fuel
produced after December 31, 2012, and before January 1,
2014. This Act also: (1) clarified that the credit may only
be carried forward three years after the credit is terminated; and (2) expanded qualified cellulosic biofuel production to include algae-based fuel.
Extend and modify special allowance for cellulosic biofuel plant property.—This Act extended the
additional first-year depreciation deduction, equal to 50
percent of the adjusted basis of qualified cellulosic biofuel plant property, for one year, to apply to such property
placed in service before January 1, 2014. This Act also expanded the definition of qualified cellulosic biofuel plant
property to include property used in the United States
solely to produce algae-based fuel.
Extend credits for renewable diesel and biodiesel fuels.—An excise tax credit (or a payment) of $1.00
is provided for each gallon of biodiesel and agri-biodiesel
used by a taxpayer in producing a biodiesel mixture for
sale or use in a trade or business. An income tax credit for
biodiesel fuels (the biodiesel fuels credit) is also provided.
The biodiesel fuels income tax credit is the sum of three
credits: (1) the biodiesel mixture credit, which is $1.00 for
each gallon of biodiesel and agri-diesel used by the taxpayer in the production of a qualified biodiesel mixture;
(2) the biodiesel credit, which is $1.00 for each gallon of
biodiesel and agri-diesel that is not in a mixture with diesel when used as a fuel or sold at retail; and (3) the small
agri-biodiesel producer credit, which is a 10-cents-pergallon credit for up to 15 million gallons of agri-biodiesel
produced by small producers. Renewable diesel is eligible

181
for the excise tax credit (or payment) and the income tax
credit provided to biodiesel fuels at a rate of $1.00 per gallon. This Act extended for two years, through December
31, 2013, these credits and payments for biodiesel and renewable diesel fuels.
Extend credit for the production of Indian coal.—
This Act extended for one year, through December 31,
2013, the credit for the production of coal from reserves
owned by Indian tribes at facilities placed in service before January 1, 2009.
Extend and modify the tax credit for energy produced from certain renewable sources.—Taxpayers
are allowed a tax credit for electricity produced from
wind, closed-loop biomass, open-loop biomass, geothermal
energy, solar energy, small irrigation power, municipal
solid waste, qualified hydropower, and marine and hydrokinetic renewable energy at qualified facilities (the
renewable electricity production credit). The credit rate
is 1.5 cents per kilowatt hour for electricity produced from
wind, closed-loop biomass, geothermal, and solar power,
and 0.75 cents per kilowatt hour for electricity produced
from open-loop biomass, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic renewable energy (both rates are adjusted for
inflation sine 1992). To qualify for the credit, electricity
generally must be sold by the taxpayer to an unrelated
person and must be produced at qualified facilities placed
in service before January 1, 2014 (January 1, 2013, for
wind facilities; October 3, 2008, for small irrigation power
facilities; and January 1, 2006 for solar energy facilities).
This Act: (1) excluded paper that is commonly recycled
from the definition of municipal solid waste; (2) modified
the definition of qualified facility to apply to facilities on
which construction begins before January 1, 2014, for facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal energy, municipal
solid waste, qualified hydropower, geothermal energy, and
marine and hydrokinetic renewable energy; and (3) extended for one year, through December 31, 2013, the election to treat qualified facilities as energy property eligible
for the 30-percent energy production credit, in lieu of the
renewable electricity production credit.
Extend special rules for sales or dispositions to
implement Federal Energy Regulatory Commission
(FERC) or State electric restructuring rules for
qualified electric utilities.—Under a special provision
of prior law, taxpayers were allowed to elect to recognize
gain from the sale or disposition of qualifying electric
transmission property ratably over an eight-year period
beginning in the year of sale if the amount realized from
such sale was used to purchase exempt utility property
(reinvestment property) within the applicable period.
Any gain realized in excess of the amount used to purchase the reinvestment property was recognized as income in the year of the qualifying electric transmission
transaction. This Act extended this special rule for two
years, to apply to the sale or disposition of qualifying electric transmission property after December 31, 2011, and
before January 1, 2014.

182

Analytical Perspectives

Extend alternative fuels excise tax credits.—Two
per-gallon excise tax credits are available for the production of alternative fuel: the alternative fuel credit and the
alternative fuel mixture credit. Alternative fuel means
liquefied petroleum gas, P Series fuels, compressed or
liquefied natural gas, liquefied hydrogen, liquid fuel derived from coal through the Fischer-Tropsch process, compressed or liquefied gas derived from biomass, or liquefied
fuel derived from biomass. The alternative fuel credit is
50 cents per gallon of alternative fuel or gasoline gallon
equivalents of nonliquid alternative fuel sold by the taxpayer for use as a motor fuel in a motor vehicle or motorboat, sold for use in aviation or so used by the taxpayer.
The alternative fuel mixture credit is 50 cents per gallon
of alternative fuel used in producing an alternative fuel
mixture for sale or use in a trade or business of the taxpayer. A taxpayer is also allowed to file a claim for payment equal to the amount of the alternative fuel credit or
the alternative fuel mixture credit. Under prior law, the
credits and payments for non-hydrogen fuels expired with
respect to fuel used or sold after December 31, 2011; the

credits and payments with respect to liquefied hydrogen
expired with respect to fuel used or sold after September
30, 2014. This Act extended the alternative fuel credit, the
alternative fuel mixture credit, and related payments for
non-hydrogen fuels for two years, to apply to fuel sold or
used before January 1, 2014.
Other Tax Provisions
Provide special rule for certain transfers to designated Roth IRAs.—Under this Act, an applicable retirement plan that includes a qualified Roth contribution program may allow individuals to elect to transfer amounts
not otherwise distributable under the plan to the plan’s
designated Roth account maintained for the benefit of the
individual. Such an amount transferred after December
31, 2012, is treated as a distribution that was contributed
in a qualified rollover contribution so that the amount
transferred is included in income but not subject to an additional tax that generally applies to early distributions.

proposals
Adjustments to the Balanced Budget and Emergency
Deficit Control Act (BBEDCA) Baseline
The BBEDCA baseline, which is commonly used in budgeting and is defined in the statute, reflects, with some
exceptions, the projected receipts level under current law.
However, current law includes a number of scheduled tax
changes that are unlikely to occur and that prevent the
BBEDCA baseline from serving as a realistic benchmark
for judging the effect of new legislation. For example,
ATRA permanently extended most of the 2001/2003 tax
cuts (as amended by subsequent legislation), but extended some tax relief provided to individuals and families under ARRA only through taxable year 2017. This tax relief
includes increased refundability of the child tax credit,
expansions in the EITC for larger families and married
taxpayers filing a joint return, and increased assistance
for qualified tuition and related expenses provided by the
AOTC.
This Budget uses an adjusted baseline that is intended
to be more realistic. This adjusted baseline does not reflect the totality of the President’s policy proposals, but
is rather a realistic and fair benchmark from which to
measure the effects of those policies. This baseline permanently continues the tax relief provided to individuals
and families under ARRA that was extended only through
taxable year 2017 under ATRA. 2
Permanently extend increased refundability of
the child tax credit.—ARRA increased the refundability of the child tax credit by reducing the earnings threshold for refundability to $3,000 (unindexed) from $10,000
(indexed after 2001). The adjusted baseline permanently

2  A more general explanation of the adjusted baseline concept is provided in Chapter 26 of this volume, “Current Services Estimates.”

extends the $3,000 earnings threshold, effective for taxable years beginning after December 31, 2017.
Permanently extend EITC marriage penalty relief.—ARRA provided marriage penalty relief to married
couples filing a joint return (regardless of the number of
qualifying children) by increasing the amount by which
the income thresholds for the phaseout of the EITC exceed
the thresholds for other taxpayers from $3,000 (indexed
for inflation after 2008) to $5,000 (indexed for inflation
after 2009). The adjusted baseline permanently extends
the $5,000 increase in the thresholds for the phaseout
of the EITC, effective for taxable years beginning after
December 31, 2017.
Permanently extend EITC for larger families.—
Under ARRA, a fourth credit schedule was added providing a larger credit for families with three or more
qualifying children. This fourth schedule is permanently
extended under the adjusted baseline, effective for taxable years beginning after December 31, 2017.
Permanently extend AOTC.—The AOTC, which was
created under ARRA, provides taxpayers a credit of up to
$2,500 per eligible student per year for qualified tuition
and related expenses paid for each of the first four years of
the student’s post-secondary education in a degree or certification program. The student must be enrolled at least
half-time to receive the credit, which is partially refundable and phased out above specified income thresholds.
The adjusted baseline extends the credit permanently,
effective for taxable years beginning after December 31,
2017.

183

14.  Governmental Receipts

Table 14–2.  Adjustments to the Balanced Budget and Emergency Deficit Control
Act (Bbedca) Baseline Estimates of Governmental Receipts
(In billions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

BBEDCA baseline receipts �������������������������

2,712.2

3,000.3

3,276.8

3,476.0

3,660.2

3,866.4

4,107.5

4,335.8

4,570.3

4,797.5

5,057.6 17,279.6 40,148.2

Adjustments to BBEDCA baseline:
Extend increased refundability of the child
tax credit 1 �������������������������������������������
Extend EITC marriage penalty relief 1 ������
Extend EITC for larger families 1 ��������������
Extend AOTC 1 �����������������������������������������

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

.........
–0.1
–*
–0.9

.........
–1.5
–*
–9.3

.........
–1.5
–*
–9.7

.........
–1.5
–*
–10.1

.........
–1.6
–*
–10.7

Total, adjustments to BBEDCA
baseline �����������������������������������������

.........

.........

.........

.........

.........

–1.0

–10.8

–11.2

–11.7

–12.2

Adjusted baseline receipts ������������������������� 2,712.2 3,000.3 3,276.8 3,476.0 3,660.2 3,865.3 4,096.7 4,324.6
* $50 million or less.
1 This provision affects both receipts and outlays. Only the receipt effect is shown here. The outlay effects are listed below:

4,558.6

4,785.2

5,045.0 17,278.6 40,088.7

2021

2022

2023

2013

2014

2015

2016

2017

2018

2019

2020

2014–18 2014–23

.........
–1.6
–*
–11.0

.........
–0.1
–*
–0.9

.........
–7.8
–*
–51.7

–12.6

–1.0

–59.6

2014–18 2014–23

Extend increased refundability of the child
tax credit ����������������������������������������������
Extend EITC marriage penalty relief ���������
Extend EITC for larger families �����������������
Extend AOTC ��������������������������������������������

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
.........
.........

0.5
*
0.1
.........

10.1
0.1
1.6
7.3

10.2
0.1
1.7
8.1

10.2
0.1
1.7
8.3

10.2
0.1
1.7
8.5

10.3
0.1
1.8
8.7

0.5
*
0.1
.........

51.5
0.4
8.6
40.8

Total, outlay effects of adjustments to
BBEDCA baseline ���������������������������

.........

.........

.........

.........

.........

0.6

19.0

20.0

20.2

20.5

20.8

0.6

101.2

RESERVE FOR REVENUE-NEUTRAL BUSINESS TAX REFORM
The number of special deductions, credits, and other
tax preferences provided to businesses in the Internal
Revenue Code has expanded significantly since the
last comprehensive tax reform effort nearly three decades ago. Such tax preferences help well-connected
special interests, but do little for economic growth.
To be successful in an increasingly competitive global economy, the Nation cannot afford a tax code burdened with such special interest tax breaks; instead,
the tax code needs to ensure that the United States
is the most attractive place for entrepreneurship and
business growth. The President is therefore calling on
the Congress to immediately begin work on business
tax reform and has laid out a framework that contains
the following five elements: (1) Eliminate loopholes
and subsides, broaden the base and cut the corporate
tax rate; (2) Strengthen American manufacturing and
innovation; (3) Strengthen the international tax system; (4) Simplify and cut taxes for small businesses;
and (5) Restore fiscal responsibility and not add a
dime to the deficit. Consistent with this framework,
the Administration is offering a detailed set of business proposals that close loopholes and provide incentives for growth in a fiscally responsible manner. The
Administration proposes that these proposals be enacted as part of revenue-neutral business tax reform.
As a result, the net savings from these proposals, which
are described below, are not reflected in the budget estimates of receipts and are not counted toward meeting
the Administration’s deficit reduction goals.

Incentives for Manufacturing, Research, Clean
Energy, and Insourcing and Creating Jobs
Provide tax incentives for locating jobs and business activity in the United States and remove tax
deductions for shipping jobs overseas.—To provide
a tax incentive for U.S. companies to move jobs into the
United States from offshore, the Administration proposes
to create a credit against income tax equal to 20 percent
of the expenses paid or incurred in connection with insourcing a U.S. trade or business. In addition, to reduce
incentives for U.S. companies to move jobs offshore, the
proposal would disallow deductions for expenses paid or
incurred in connection with outsourcing a U.S. trade or
business. For this purpose, insourcing (outsourcing) a
U.S. trade or business means reducing or eliminating a
trade or business or line of business currently conducted
outside (inside) the United States and starting up, expanding, or otherwise moving the same trade or business
within (outside) the United States. Also for this purpose,
expenses paid or incurred in connection with insourcing
or outsourcing a U.S. trade or business are limited solely
to expenses associated with the relocation of the trade or
business and do not include capital expenditures, severance pay, or other assistance to displaced workers.
Provide new Manufacturing Communities tax
credit.—The Administration proposes to provide new
tax credit authority to support qualified investments in
communities affected by military base closures or mass
layoffs, such as those arising from plant closures. This
would provide about $2 billion in credits for qualified

184
investments approved in each of the three years, 2014
through 2016.
Enhance and make permanent the R&E tax
credit.—A tax credit of 20 percent is provided for qualified research and experimentation expenditures above a
base amount. An alternative simplified credit of 14 percent is also provided. These tax credits will expire with
respect to expenditures paid or incurred after December
31, 2013. The Administration proposes to permanently
extend these tax credits and to raise the rate of the alternative simplified credit to 17 percent.
Extend certain employment tax credits, including
incentives for hiring veterans.—The WOTC provides
incentives to employers for hiring individuals from one or
more of nine targeted groups and the Indian employment
tax credit provides incentives to employers for hiring individuals who are members of an Indian tribe. The Indian
employment tax credit applies to increases in qualified
wages and health insurance costs over qualified wages
and health insurance costs incurred in calendar year 1993
(the base year). The Administration proposes to permanently extend both credits, which include the Returning
Heroes and Wounded Warrior credits enacted in 2011.
In addition, the Administration proposes to modify the
Indian employment tax credit by changing the base year
wages and health insurance costs to the average of those
costs in the two years prior to the year for which the credit is being claimed.
Provide a tax credit for the production of advanced technology vehicles.—Current law provides a
tax credit for plug-in electric drive motor vehicles. The
Administration proposes to replace this credit with a
credit for advanced technology vehicles. The credit would
be available for a vehicle that meets the following criteria:
(1) the vehicle operates primarily on an alternative to petroleum; (2) as of January 1, 2013, there are few vehicles
in operation in the United States using the same technology as such vehicle; and (3) the technology used by the
vehicle substantially exceeds the footprint-based target
miles per gallon gasoline equivalent (MPGe). In general,
the credit would be scalable based on the vehicle’s MPGe,
but would be capped at $10,000 ($7,500 for vehicles with
a manufacturer’s suggested retail price (MSRP) above
$45,000). The credit for a battery-powered vehicle would
be determined under current law rules for the credit for
plug-in electric drive motor vehicles if that computation
results in a greater credit. The credit would be allowed
for vehicles placed in service after December 31, 2013, and
before January 1, 2021. The credit would be limited to
75 percent of the otherwise allowable amount for vehicles
placed in service in 2018, to 50 percent of such amount
for vehicles placed in service in 2019, and to 25 percent of
such amount for vehicles placed in service in 2020. The
credit would be allowed to the person that sold the vehicle
to the person placing the vehicle in service (or, at the election of the seller, to the person financing the sale) but only
if the amount of the credit is disclosed to the purchaser.
Provide a tax credit for medium- and heavy-duty
alternative-fuel commercial vehicles.—Current law
provides no tax incentive for alternative-fuel vehicles

Analytical Perspectives

(other than fuel-cell vehicles) weighing more than 14,000
pounds. The Administration proposes to provide a tax
credit for dedicated alternative-fuel commercial vehicles
weighing more than 14,000 pounds. The credit would be
equal to 50 percent of the incremental cost of such vehicles
compared to the cost of a comparable diesel fuel or gasoline vehicle. The credit would be limited to $25,000 for
vehicles weighing up to 26,000 pounds and to $40,000 for
vehicles weighing more than 26,000 pounds. In the case
of fuel-cell vehicles, the proposed credit would be reduced
by the amount of the credit allowed with respect to the vehicle under current law. The credit would be allowed for
vehicles placed in service after December 31, 2013, and
before January 1, 2020. For vehicles placed in service in
calendar year 2018, the credit would be limited to 50 percent of the otherwise allowable amount. The credit would
be allowed to the person placing the vehicle in service or,
in the case of a vehicle placed in service by a tax-exempt
or governmental entity, to the person that sold the vehicle
to such entity (or, at the election of the seller, to the person
financing the sale), but only if the amount of the credit is
disclosed to the purchaser.
Modify and permanently extend renewable electricity production tax credit.—Current law provides
production tax credits for renewable energy facilities
the construction of which begins before the end of 2013.
Current law also provides an investment tax credit for
energy property. Energy property is: (1) property that is
part of a facility that, but for the election to claim an investment tax credit, would qualify for a production tax
credit; and (2) certain other listed property (including solar energy property). In addition, current law provides
grants for energy property on which construction began
in 2009, 2010, or 2011. The grant is available for: (1) wind
facility property if the property is placed in service in
2012; (2) all other property that is part of a facility otherwise eligible for the renewable electricity production tax
credit if the property is placed in service before 2014; and
(3) any other property that is eligible for the investment
tax credit for energy property if the property is placed
in service before 2017. The Administration proposes to
permanently extend the production tax credit for renewable energy property and to make it refundable. The refundable credit would be allowed with respect to property
the construction of which begins in 2014 or thereafter for
property that is part of a facility otherwise eligible for the
renewable electricity production tax credit and for solar
property.
Modify and permanently extend the deduction for
energy-efficient commercial building property.—The
Administration proposes to increase both the maximum
deduction and the partial deduction available for the installation of energy-efficient commercial building property. In addition, the proposal would enable existing buildings to qualify for a deduction, by reference to measured
and verified energy savings over the baseline for that
structure’s energy performance prior to the retrofit project. The new deductions would be permanent and would
be available for property placed in service after calendar
year 2013.

14.  Governmental Receipts

Tax Relief for Small Business
Extend increased expensing for small business.—
Business taxpayers are allowed to expense up to $500,000
in annual investment expenditures for qualifying property (including off-the-shelf computer software) placed in
service in taxable years beginning in 2010 through 2013.
The maximum amount that can be expensed is reduced
by the amount by which the taxpayer’s cost of qualifying property exceeds $2,000,000. The Administration
proposes to permanently extend these expensing and investment limits, effective for qualifying property placed
in service in taxable years beginning after December 31,
2013. These limits would be indexed for inflation in taxable years beginning after 2013. Qualifying property
would permanently include off-the-shelf computer software, but would not include certain real property.
Eliminate capital gains taxation on investments
in small business stock.—Current law provides a
100-percent exclusion from tax for capital gains realized
on the sale of qualified small business stock issued after
September 27, 2010, and before January 1, 2014, and held
for more than five years. The amount of gain eligible for
the exclusion is limited to the greater of $10 million or
ten times the taxpayer’s basis in the stock. For stock acquired prior to September 28, 2010, a portion of the excluded gain is subject to the AMT. A taxpayer may elect to
roll over capital gain from the sale of qualified small business stock held for more than six months if other qualified
small business stock is purchased during the 60-day period beginning on the date of sale. The exclusion is limited
to individual investments and not the investments of a
corporation. The Administration proposes to permanently extend the 100-percent exclusion, extend the rollover
period from 60 days to six months for stock held at least
three years, and eliminate the AMT preference for the excluded gain. Reporting requirements would be tightened
to ensure compliance. These proposals would be effective
for qualified small business stock issued after December
31, 2013.
Double the amount of expensed start-up expenditures.—A taxpayer generally is allowed to elect to deduct
up to $5,000 of start-up expenditures (amounts otherwise
deductible as expenses had they not been paid or incurred
before business begins) in the taxable year in which the
active trade or business begins. The $5,000 amount is
reduced (but not below zero), by the amount by which the
cumulative cost of start-up expenditures exceeds $50,000.
Effective only for taxable years beginning in 2010, the
Small Business Jobs Act of 2010 increased the amount
of start-up expenditures a taxpayer may elect to deduct
to $10,000; that amount is reduced (but not below zero)
by the amount by which the cumulative cost of start-up
expenditures exceeds $60,000. The Administration proposes to double permanently, from $5,000 to $10,000, the
amount of start-up expenditures that a taxpayer may
elect to deduct, effective for tax years ending on or after
the date of enactment. That amount would be reduced
(but not below zero) by the amount by which the cumulative cost of start-up expenditures exceeds $60,000.

185
Expand and simplify the tax credit provided to
qualified small employers for non-elective contributions to employee health insurance.—The Affordable
Care Act provided a tax credit to help small employers
provide health insurance for their employees and their
families. To claim the credit, a qualified employer must
have fewer than 25 full-time equivalent employees during
the taxable year with annual full-time equivalent employee wages that average less than $50,000 and make nonelective uniform contributions of at least 50 percent of the
premium. For taxable years beginning in 2010 through
2013, the credit is available for health insurance coverage purchased from an insurance company licensed under
State law. For taxable years beginning after 2013, the
credit is available only for health insurance purchased
through an Affordable Insurance Exchange and only for
a maximum coverage period of two consecutive taxable
years beginning with the first year in which the employer or any predecessor first offers one or more qualified
plans to its employees through an exchange. The maximum credit, which is a specified percentage of premiums
the employer pays during the taxable year, is reduced on
a sliding scale between 10 and 25 full-time equivalent
employees as well as between average annual wages of
$25,000 and $50,000. Because the reductions are additive, an employer with fewer than 25 full-time equivalent
employees paying average wages of less than $50,000
might not be eligible for any tax credit. For taxable years
beginning in 2010 through 2013, the qualified amount of
the employer contribution is reduced if the premium for
the coverage purchased exceeds the State average premium. For taxable years beginning after 2013, the qualified amount of the employer contribution is reduced if the
premium for the coverage purchased exceeds the average
premium for the small group market in the rating areas
in which the employee enrolls for coverage.
The Administration proposes to expand the credit to
employers with up to 50 (rather than 25) full-time equivalent employees and to begin the phaseout of the maximum credit at 20 full-time equivalent employees (the
credit would be reduced on a sliding scale between 20 and
50, rather than between 10 and 25, full-time equivalent
employees). In addition, there would be a change to the
coordination of the phaseouts of the credit that apply as
the number of employees and average wages increase (using a formula that is multiplicative rather than additive)
so as to provide a more gradual combined phaseout and to
ensure that employers with fewer than 50 employees and
an average wage less than $50,000 may be eligible for the
credit, even if they are nearing the end of both phaseouts.
The Administration also proposes to reduce taxpayer complexity by eliminating the requirement that an employer
make a uniform contribution on behalf of each employee
(although applicable nondiscrimination laws will still apply), and eliminating the reduction in the qualifying contribution for premiums that exceed the average premium
in the State or rating area. The proposal would be effective for taxable years beginning after December 31, 2012.

186

Analytical Perspectives

Incentives to Promote Regional Growth
Extend and modify the NMTC.—The NMTC is a
39-percent credit for qualified equity investments made
in qualified community development entities that are
held for a period of seven years. The NMTC provisions
expire at the end of 2013. The Administration proposes to
permanently extend the NMTC. Up to $5 billion in qualifying investment would be allowed in each year beginning
in 2014. The proposal would also permit the NMTC to
permanently offset AMT liability.
Restructure assistance to New York City, provide
tax incentives for transportation infrastructure.—
Some of the tax benefits that were provided to New York
following the attacks of September 11, 2001, likely will
not be usable in the form in which they were originally
provided. State and local officials in New York have concluded that improvements to transportation infrastructure and connectivity in the Liberty Zone would have a
greater impact on recovery and continued development
than would some of the existing tax incentive provisions.
The Administration proposes to provide tax credits to New
York State and New York City for expenditures relating to
the construction or improvement of transportation infrastructure in or connecting to the New York Liberty Zone.
New York State and New York City each would be eligible
for a tax credit for expenditures relating to the construction or improvement of transportation infrastructure in
or connecting to the New York Liberty Zone. The tax
credit would be allowed in each year from 2014 to 2023,
inclusive, subject to an annual limit of $200 million (for
a total of $2 billion in tax credits), and would be divided
evenly between the State and the City. Any credits not
used in a given year would be added to the $200 million
annual limit for the following year, including years after
2023. Similarly, any expenditures that exceeded the limit
would be carried forward and subtracted from the annual
limit in the following years. The credit would be allowed
against any payments (other than payments of excise taxes and Social Security and Medicare payroll taxes) made
by the State and City under any provision of the Internal
Revenue Code, including income tax withholding.
Modify tax-exempt bonds for Indian tribal governments.—In general, current law limits Indian tribal
governments in their use of tax-exempt bonds to the financing of certain “essential governmental function” activities that are customarily performed by State and local governments. ARRA provided a limited $2 billion
authorization of “Tribal Economic Development Bonds,”
which gives Indian tribal governments more flexibility
to use tax-exempt bonds under standards that are more
comparable to those applied to State and local governments in their use of tax-exempt bonds (subject to certain express targeting restrictions that require financed
projects to be located on Indian reservations and that
prohibit the financing of certain gaming facilities). In
December 2011, the Department of the Treasury submitted a required report to the Congress regarding its study
of the Tribal Economic Development Bond provision and
its recommendations for Indian tribal governmental tax-

exempt bond financing. The Administration proposes to
modify the standards for Indian tribal governmental taxexempt bond financing to reflect the recommendations in
this report. In particular, the Administration’s proposal
generally would adopt the State or local government standard for tax-exempt governmental bonds without a bond
volume cap on such governmental bonds for purposes of
Indian tribal governmental eligibility to issue tax-exempt
governmental bonds. The proposal would repeal the existing essential governmental function standard for Indian
tribal governmental tax-exempt bond financing. In addition, the proposal would allow Indian tribal governments
to issue tax-exempt private activity bonds for the same
types of projects and activities as are allowed for State
and local governments, under a modified national bond
volume cap to be administered by the Department of the
Treasury. Further, the proposal generally would continue
an existing targeting restriction that would require projects financed with Indian tribal governmental bonds to
be located on Indian reservations, with some additional
flexibility to finance projects that have a requisite nexus
to Indian reservations and that serve resident populations of Indian reservations. Finally, the proposal would
continue an existing targeting restriction that prohibits
financing of certain gaming projects. This proposal would
be effective as of the date of enactment.
Reform and expand the LIHTC.—The Administration
proposes several changes to the rules governing LIHTCs.
First, States would be empowered to convert some private-activity-bond volume cap into authority to allocate
additional LIHTCs. This proposal would give each State
more flexibility to address its highest affordable housing
priorities.
Second, to serve households in greater need and to provide incentives for creating mixed-income housing, the
Administration proposes to allow projects to comply with
an income-averaging rule under which the income limits
for at least 40 percent of the units in a project could average to not greater than 60 percent of area median income (AMI). None of these units could be occupied by an
individual with income greater than 80  percent of AMI.
A special rule would apply to rehabilitation projects that
contain units that receive ongoing subsidies (e.g., rental
assistance, operating subsidies, or interest subsidies)
administered by the Department of Housing and Urban
Development or the Department of Agriculture. If a tenant, when admitted to such a property, had an income not
more than the current income limit for the building and
if, when the tenant’s income is measured for purposes of
LIHTC qualification, the income is greater than the current income limit for the building but not more than 80
percent of AMI, then the proposal would make it possible
for that tenant to remain in residence without impairing
the LIHTCs earned by the project. The provision would
apply to elections under section 42(g)(1) of the Internal
Revenue Code that are made after the date of enactment.
Third, the Administration proposes to change the formulas that produce the rates for the 70-percent-presentvalue credits and for those 30-percent-present-value credits that are subject to the LIHTC allocation cap. In lieu

14.  Governmental Receipts

of the nine-percent floor that is scheduled to sunset for
allocations made after 2013, the revised formulas would
produce annual allocated-credit rates that are somewhat
higher than the rates that today’s present-value formulas produce and would result in a more consistent benefit over the interest rate spectrum than under current
law. The proposal would apply to allocations made after
December 31, 2013.
Fourth, the Administration proposes to add preservation of federally assisted affordable housing to the selection criteria for LIHTC allocation. This factor would join
the ten criteria that State housing agencies must include
in the qualified allocation plans that they follow in deciding which applicants receive LIHTCs. The proposal
would apply to allocations made in calendar years beginning after the date of enactment.
Finally, to increase the demand for LIHTCs, the
Administration proposes to make them beneficial to real
estate investment trusts (REITs). If a REIT is entitled to
LIHTCs for a taxable year, the REIT would be able to designate as tax exempt some of the dividends that it distributes to its shareholders. The maximum amount of dividends that could be designated in this fashion would be
the quotient of the REIT’s LIHTCs for the year, divided by
the highest corporate tax rate. Thus, the after-tax result
for the REIT’s shareholders would resemble the result as
if the REIT had distributed both a taxable dividend and
the LIHTCs themselves. If the REIT does not have sufficient earnings and profits to support a dividend for this
entire amount, it could carry forward indefinitely the ability to make the designation. A RIC that receives such
a tax-exempt dividend would itself be able to distribute
to its shareholders that amount of tax-exempt dividends.
The proposal would be effective for taxable years that end
after the date of enactment.
Reform U.S. International Tax System
Defer deduction of interest expense related to deferred income of foreign subsidiaries.—Under current law, a taxpayer that incurs interest expense properly
allocable and apportioned to foreign-source income may
be able to deduct that expense even if some or all of the
foreign-source income is not subject to current U.S. taxation. To provide greater matching of the timing of interest expense deductions and recognition of associated income, the Administration proposes to defer the deduction
of interest expense properly allocable and apportioned to
stock of foreign subsidiaries to the extent the taxpayer’s
share of the income of such subsidiaries is deferred.
Determine the foreign tax credit on a pooling basis.—Under current law, a taxpayer may choose to claim a
credit against its U.S. income tax liability for income, war
profits, and excess profits taxes paid or accrued during
the taxable year to any foreign country or any possession
of the United States, subject to certain limitations. The
reduction to two foreign tax credit limitation categories,
for passive category income and general category income
under the American Jobs Creation Act of 2004, enhanced
U.S. taxpayers’ ability to reduce the residual U.S. tax on

187
foreign-source income through “cross-crediting.” Under
the Administration’s proposal, a taxpayer would be required to determine foreign tax credits from the receipt of
income with respect to stock of a foreign subsidiary on a
consolidated basis for all its foreign subsidiaries. Foreign
tax credits from the receipt of income with respect to
stock of a foreign subsidiary would be based on the consolidated earnings and profits and foreign taxes of all the
taxpayer’s foreign subsidiaries.
Tax currently excess returns associated with
transfers of intangibles offshore.—The IRS has broad
authority to allocate income among commonly controlled
businesses under section 482 of the Internal Revenue
Code. Notwithstanding the transfer pricing rules, there
is evidence of income shifting offshore, including through
transfers of intangible rights to subsidiaries that bear little or no foreign income tax. Under the Administration’s
proposal, if a U.S parent transfers an intangible to a CFC
in circumstances that demonstrate excessive income shifting from the United States, then an amount equal to the
excessive return would be treated as subpart F income.
Limit shifting of income through intangible property transfers.—The Administration proposes to clarify
the definition of intangible property for purposes of the
special rules relating to transfers of intangibles by a
U.S. person to a foreign corporation (section 367(d) of the
Internal Revenue Code) and the allocation of income and
deductions among taxpayers (section 482) to prevent inappropriate shifting of income outside the United States.
Disallow the deduction for non-taxed reinsurance premiums paid to foreign affiliates.—Under
the Administration’s proposal, a U.S. insurance company
would be denied a deduction for certain non-taxed reinsurance premiums paid to foreign affiliates, offset by an
exclusion for return premiums, ceding commissions, reinsurance recovered, or other amounts received from such
affiliates.
Limit earnings stripping by expatriated entities.—Under the Administration’s proposal, the rules
that limit the deductibility of interest paid to related persons subject to low or no U.S. tax on that interest would
be amended to prevent inverted companies from using
foreign-related-party and certain guaranteed debt to reduce inappropriately the U.S. tax on income earned from
their U.S. operations.
Modify tax rules for dual capacity taxpayers.—
The Administration proposes to tighten the foreign tax
credit rules that apply to taxpayers that are subject to a
foreign levy and that also receive (directly or indirectly)
a specific economic benefit from the levying country (socalled “dual capacity” taxpayers).
Tax gain from the sale of a partnership interest
on look-through basis.—Under the Administration’s
proposal, gain or loss from the sale of a partnership interest would be treated as effectively connected with the
conduct of a trade or business in the United States and
subject to U.S. income taxation to the extent attributable
to the partner’s share of the partnership’s unrealized gain
or loss from property used in a trade or business in the
United States. The proposal would also require the pur-

188
chaser of a partnership interest to withhold 10 percent of
the purchase price to ensure the seller’s compliance.
Prevent use of leveraged distributions from related
foreign corporations to avoid dividend treatment.—
To address concerns that taxpayers may repatriate offshore
earnings through a related corporation and avoid current
taxation, the Administration proposes to tax immediately
a non-dividend distribution from a foreign corporation to
the extent the distribution was funded by a related foreign
corporation with a principal purpose of avoiding dividend
treatment from distributions to a U.S. shareholder.
Extend section 338(h)(16) of the Internal Revenue
Code to certain asset acquisitions.—Under section
338, taxpayers can elect to treat the acquisition of the
stock of a corporation in a taxable transaction as an acquisition of the corporation’s assets for U.S. tax purposes.
Because this election does not alter the foreign tax consequences of the transaction, section 338(h)(16) limits the
ability of taxpayers to claim additional foreign tax credits
by generally requiring the seller to continue to treat the
gain recognized on the transaction as gain from the sale of
stock for foreign tax credit purposes. The Administration
proposes to extend the rules limiting the ability of taxpayers to claim additional foreign tax credits as a result of
a section 338 election to other similar transactions that
are treated as asset acquisitions for U.S. tax purposes but
that are treated as acquisitions of an equity interest in an
entity for foreign tax purposes.
Remove foreign taxes from a section 902 corporation’s foreign tax pool when earnings are eliminated.—Under the Administration’s proposal, foreign income
taxes paid by a foreign corporation would be reduced for
U.S. tax purposes if a redemption transaction results in
the elimination of earnings and profits of the foreign corporation. The foreign income taxes reduced under the
proposal would be the foreign income taxes that are associated with the eliminated earnings and profits.
Reform Treatment of Financial and Insurance
Industry Institutions and Products
Require that derivative contracts be marked to
market with resulting gain or loss treated as ordinary.—Under current law, derivative contracts are
subject to various rules on timing and character. The
Administration’s proposal would require that gain or loss
from a derivative contract be reported on an annual basis as if the contract were sold for its fair market value
no later than the last business day of the taxpayer’s taxable year. Gain or loss resulting from the contract would
be treated as ordinary and as attributable to a trade or
business of the taxpayer. A derivative contract would be
broadly defined to include (1) any contract the value of
which is determined, directly or indirectly, in whole or
in part, by actively traded property; and (2) any contract
with respect to a contract described in (1). A derivative
contract that is embedded in another financial instrument or contract is subject to mark to market if the derivative by itself would be marked. In addition, a financial instrument (e.g., stock) that is not otherwise marked

Analytical Perspectives

to market that is part of (or becomes part of) a straddle
transaction with a derivative contract would be marked
to market, with preexisting gain recognized at that time
and loss recognized when the financial instrument is otherwise disposed of. An exception from mark-to-market
treatment would be provided for business hedging transactions. The proposal would apply to contracts entered
into after December 31, 2013.
Modify rules that apply to sales of life insurance
contracts.—The seller of a life insurance contract generally must report as taxable income the difference between
the amount received from the buyer and the adjusted basis
of the contract. When death benefits are received under
the contract, the buyer is taxed on the excess of those benefits over the amounts paid for the contract, unless an exception to a “transfer-for-value” rule applies. Information
reporting may not always be required in circumstances
involving the purchase of a life insurance contract. In
response to the growth in the number and size of life
settlement transactions, the Administration proposes to
expand information reporting on the sale of life insurance
contracts and the payment of death benefits on contracts
that were sold, and would modify the transfer-for-value
exceptions to prevent purchasers of policies from avoiding tax on death benefits that are received. The proposal
would apply to sales or assignments of interests in life
insurance policies and payments of death benefits for taxable years beginning after December 31, 2013.
Modify proration rules for life insurance company general and separate accounts.—Under current
law, a life insurance company is required to “prorate” its
net investment income between a company’s share and a
policyholder’s share. The result of this proration calculation is used to limit the funding of tax-deductible reserve
increases with tax-preferred income, such as certain corporate dividends and tax-exempt interest. The complexity of this regime has generated significant controversy
between life insurance companies and the IRS. In some
cases, the existing regime produces a company’s share
that exceeds the company’s actual economic interest in
the underlying income. The Administration proposes to
replace this regime with one that is much simpler. Under
the proposal, the general account dividends received deduction (DRD), tax-exempt interest, and increases in certain policy cash values would be subject to the same flat
policyholders’ proration percentage that applies to nonlife insurance companies (15 percent under current law);
the DRD with regard to separate account dividends would
be based on the proportion of reserves to total assets of
the account. The proposal would be effective for taxable
years beginning after December 31, 2013.
Expand pro rata interest expense disallowance
for corporate-owned life insurance (COLI).—The interest deductions of a business other than an insurance
company are reduced to the extent the interest is allocable to unborrowed policy cash values on life insurance and
annuity contracts. The purpose of this pro rata disallowance is to prevent the deduction of interest expense that
is allocable to inside buildup that is either tax-deferred
or not taxed at all. A similar disallowance applies with

14.  Governmental Receipts

regard to reserve deductions of an insurance company.
A current-law exception to this rule applies to contracts
covering the lives of officers, directors, employees, and
20-percent owners. The Administration proposes to repeal the exception for officers, directors, and employees
unless those individuals are also 20-percent owners of the
business that is the owner or beneficiary of the contracts.
Thus, purchases of life insurance by small businesses and
other taxpayers that depend heavily on the services of a
20-percent owner would be unaffected, but the funding
of deductible interest expenses with tax-exempt or taxdeferred inside buildup would be curtailed. The proposal
would apply to contracts issued after December 31, 2013,
in taxable years ending after that date.
Eliminate Fossil Fuel Preferences
Eliminate fossil fuel tax preferences.—Current
law provides a number of credits and deductions that are
targeted towards certain oil, gas, and coal activities. In
accordance with the President’s agreement at the G-20
Summit in Pittsburgh to phase out subsidies for fossil fuels so that the Nation can transition to a 21st century
energy economy, the Administration proposes to repeal a
number of tax preferences available for fossil fuels. The
following tax preferences available for oil and gas activities are proposed to be repealed beginning in 2014: (1) the
enhanced oil recovery credit for eligible costs attributable
to a qualified enhanced oil recovery project; (2) the credit
for oil and gas produced from marginal wells; (3) the expensing of intangible drilling costs; (4) the deduction for
costs paid or incurred for any tertiary injectant used as
part of a tertiary recovery method; (5) the exception to
passive loss limitations provided to working interests in
oil and natural gas properties; (6) the use of percentage
depletion with respect to oil and gas wells; (7) the ability
to claim the domestic production manufacturing deduction against income derived from the production of oil and
gas; and (8) two-year amortization of independent producers’ geological and geophysical expenditures, instead allowing amortization over the same seven-year period as
for integrated oil and gas producers. The following tax
preferences available for coal activities are proposed to be
repealed beginning in 2014: (1) expensing of exploration
and development costs; (2) percentage depletion for hard
mineral fossil fuels; (3) capital gains treatment for royalties; and (4) the ability to claim the domestic manufacturing deduction against income derived from the production
of coal and other hard mineral fossil fuels.
Other Revenue Changes and Loophole Closers
Repeal the excise tax credit for distilled spirits
with flavor and wine additives.—Distilled spirits are
taxed at a rate of $13.50 per proof-gallon. Some distilled
spirits are flavored with wine or other additives. Current
law allows a credit against the $13.50 per proof gallon
excise tax on distilled spirits for flavor and wine additives.
As a result of the credit, flavorings of up to 2.5 percent of
the distilled spirit mixture are tax exempt, and wine in a

189
distilled spirits mixture is taxed at the lower rate on wine.
Thus, the credit reduces the effective excise tax rate paid
on distilled spirits with such content. The proposal would
repeal this credit effective for all spirits produced in or
imported into the United States after December 31, 2013.
Repeal last-in, first-out (LIFO) method of accounting for inventories.—Under the LIFO method of
accounting for inventories, it is assumed that the cost of
the items of inventory that are sold is equal to the cost
of the items of inventory that were most recently purchased or produced. The Administration proposes to repeal the use of the LIFO accounting method for Federal
tax purposes, effective for taxable years beginning after
December 31, 2013. Assuming inventory costs rise over
time, taxpayers required to change from the LIFO method
under the proposal generally would experience a permanent reduction in their deductions for cost of goods sold
and a corresponding increase in their annual taxable income as older, cheaper inventory is taken into account in
computing taxable income. Taxpayers required to change
from the LIFO method also would be required to change
their method of accounting for inventory and report their
beginning-of-year inventory at its first-in, first-out (FIFO)
value in the year of change. Taxpayers would recognize
any resulting income ratably over ten years.
Repeal lower-of-cost-or-market inventory accounting method.—The Administration proposes to prohibit
the use of the lower-of-cost-or-market and subnormal
goods methods of inventory accounting, which currently
allow certain taxpayers to take cost-of-goods-sold deductions on certain merchandise before the merchandise is
sold.  The proposed prohibition would be effective for the
first taxable year beginning after December 31, 2013, and
any resulting income inclusion would be recognized ratably over four years.
Modify depreciation rules for purchases of general aviation passenger aircraft.—Under current
law, airplanes used in commercial and contract carrying of passengers and freight generally are depreciated
over seven years. Airplanes not used in commercial or
contract carrying of passengers or freight, such as corporate jets, generally are depreciated over five years. The
Administration proposes to increase the depreciation recovery period for general aviation airplanes that carry
passengers to seven years, effective for such airplanes
placed in service after December 31, 2013.
Repeal gain limitation for dividends received in
reorganization exchanges.—If, as part of a corporate
reorganization, a taxpayer receives both stock and other
property that cannot be received without the recognition
of gain (often referred to as “boot”), the exchanging shareholder recognizes gain but it is limited to the lesser of the
gain realized or the amount of boot received. This limit
can result in distributions of property with minimal U.S.
tax consequences. The Administration proposes to repeal
this limitation in reorganization transactions in which
the acquiring corporation is either domestic or foreign
and the shareholder’s exchange has the effect of the distribution of a dividend. The proposal would be effective
for taxable years beginning after December 31, 2013.

190

Analytical Perspectives

Table 14–3.  Reserve For Revenue-Neutral Business Tax Reform
(In millions of dollars)
2013
Incentives for manufacturing, research,
clean energy, and insourcing and
creating jobs:
Provide tax incentives for locating jobs
and business activity in the United
States and remove tax deductions for
shipping jobs overseas ������������������������
Provide new Manufacturing Communities
tax credit ����������������������������������������������
Enhance and make permanent the R&E
tax credit ����������������������������������������������
Extend certain employment tax credits,
including incentives for hiring veterans 
Provide a tax credit for the production of
advanced technology vehicles �������������
Provide a tax credit for medium- and
heavy-duty alternative-fuel commercial
vehicles ������������������������������������������������
Modify and permanently extend renewable
electricity production tax credit 1 ���������
Modify and permanently extend the
deduction for energy-efficient
commercial building property ���������������
Total, incentives for manufacturing,
research, clean energy, and
insourcing and creating jobs ������������
Tax relief for small business:
Extend increased expensing for small
business �����������������������������������������������
Eliminate capital gains taxation on
investments in small business stock ����
Double the amount of expensed start-up
expenditures ����������������������������������������
Expand and simplify the tax credit
provided to qualified small employers
for non-elective contributions to
employee health insurance 1 ���������������
Total, tax relief for small business ���������
Incentives to promote regional growth:
Extend and modify the NMTC ������������������
Restructure assistance to New York City,
provide tax incentives for transportation
infrastructure ����������������������������������������
Modify tax-exempt bonds for Indian tribal
governments ����������������������������������������
Reform and expand the LIHTC �����������������
Total, incentives to promote regional
growth ����������������������������������������������
Reform U.S. international tax system:
Defer deduction of interest expense
related to deferred income of foreign
subsidiaries ������������������������������������������
Determine the foreign tax credit on a
pooling basis ����������������������������������������
Tax currently excess returns associated
with transfers of intangibles offshore ���
Limit shifting of income through intangible
property transfers ��������������������������������
Disallow the deduction for non-taxed
reinsurance premiums paid to foreign
affiliates �����������������������������������������������
Limit earnings stripping by expatriated
entities �������������������������������������������������
Modify tax rules for dual capacity
taxpayers ���������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

.........

–5

–10

–10

–10

–12

–12

–12

–13

–14

–14

–47

–112

.........

–19

–103

–240

–392

–516

–618

–701

–729

–641

–452

–1,270

–4,411

.........

–3,893

–7,282

–8,121

–8,975

–9,832 –10,669 –11,439 –12,225 –13,052 –13,890 –38,103 –99,378

.........

–359

–817

–1,006

–1,060

–1,049

–1,009

–968

–943

–936

–939

–4,291

–9,086

.........

–50

–283

–461

–784

–1,079

–1,175

–933

–144

352

345

–2,657

–4,212

.........

–71

–362

–411

–488

–471

–247

–217

108

66

37

–1,803

–2,056

.........

–43

–177

–664

–1,160

–1,543

–1,915

–2,320

–2,778

–3,192

–3,651

.........

–83

–217

–350

–489

–575

–624

–701

–736

–729

–718

.........

–4,523

–9,251 –11,263 –13,358 –15,077 –16,269 –17,291 –17,460 –18,146 –19,282 –53,472 –141,920

.........

–6,839

–9,626

–7,732

–6,974

–6,543

–6,344

–6,182

–6,064

–6,130

–6,227 –37,714 –68,661

.........

.........

.........

.........

.........

.........

–262

–730

–1,163

–1,615

–2,040

.........

–5,810

–223

–251

–311

–310

–308

–304

–300

–297

–296

–294

–292

–1,484

–2,963

–720 –1,386
–7,810 –11,323

–1,453
–9,495

–1,299
–8,581

–1,167
–8,014

–1,044
–7,950

–972
–8,181

–857
–8,380

–796
–8,835

–802 –6,025 –10,496
–9,361 –45,223 –87,930

.........
–223

–3,587 –17,443
–1,714

–5,222

–20

–47

–109

–231

–393

–588

–809

–1,023

–1,240

–1,416

–1,507

–1,368

–7,363

.........

–200

–200

–200

–200

–200

–200

–200

–200

–200

–200

–1,000

–2,000

–4
.........

–12
–12

–12
–38

–12
–67

–12
–96

–12
–127

–12
–157

–12
–188

–12
–208

–12
–238

–12
–256

–60
–340

–120
–1,387

–24

–271

–359

–510

–701

–927

–1,178

–1,423

–1,660

–1,866

–1,975

.........

2,612

4,466

4,653

4,840

5,025

5,196

5,361

2,662

836

869

21,596

36,520

.........

3,478

5,948

6,197

6,447

6,693

6,920

7,140

7,373

7,630

7,926

28,763

65,752

.........

1,552

2,612

2,659

2,667

2,605

2,512

2,433

2,358

2,315

2,292

12,095

24,005

.........

47

96

126

157

189

222

257

295

336

383

615

2,108

.........

312

532

556

591

630

650

681

717

752

788

2,621

6,209

.........

234

401

421

442

464

488

512

538

565

593

1,962

4,658

.........

552

946

998

1,054

1,109

1,162

1,214

1,268

1,302

1,359

4,659

10,964

–2,768 –10,870

191

14.  Governmental Receipts

Table 14–3.  Reserve For Revenue-Neutral Business Tax Reform—Continued
(In millions of dollars)
2013
Tax gain from the sale of a partnership
interest on look-through basis �������������
Prevent use of leveraged distributions
from related foreign corporations to
avoid dividend treatment ����������������������
Extend section 338(h)(16) to certain asset
acquisitions ������������������������������������������
Remove foreign taxes from a section 902
corporation’s foreign tax pool when
earnings are eliminated �����������������������
Total, reform U.S. international tax
system ���������������������������������������������
Reform treatment of financial and
insurance industry institutions and
products:
Require that derivative contracts be
marked to market with resulting gain or
loss treated as ordinary ����������������������
Modify rules that apply to sales of life
insurance contracts ������������������������������
Modify proration rules for life insurance
company general and separate
accounts ����������������������������������������������
Extend pro rata interest expense
disallowance for corporate-owned life
insurance ���������������������������������������������
Total, reform treatment of financial and
insurance industy institutions and
products �������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

.........

133

229

240

252

265

278

292

307

322

338

1,119

2,656

.........

172

293

306

318

330

341

352

364

376

391

1,419

3,243

.........

60

100

100

100

100

100

100

100

100

100

460

960

.........

10

20

27

36

46

50

50

50

50

50

139

389

.........

9,162

15,643

16,283

16,904

17,456

17,919

18,392

16,032

14,584

15,089

.........

2,419

4,576

4,148

2,614

1,682

1,148

705

510

532

555

15,439

18,889

.........

17

54

58

62

66

70

73

77

80

84

257

641

.........

294

515

532

552

566

549

526

500

465

602

2,459

5,101

.........

26

60

131

278

478

651

817

986

1,158

1,334

973

5,919

.........

2,756

5,205

4,869

3,506

2,792

2,418

2,121

2,073

2,235

2,575

19,128

30,550

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........
.........

1,663
8

2,460
12

2,125
12

1,639
11

1,099
11

748
11

514
11

366
11

289
10

90
10

8,986
54

10,993
107

.........

7

10

9

8

8

7

7

6

6

6

42

74

.........

1,039

1,044

1,042

1,041

1,045

1,052

1,067

1,091

1,121

1,181

5,211

10,723

.........

1,119

1,926

1,951

1,944

1,884

1,783

1,717

1,703

1,705

1,715

8,824

17,447

.........

60

220

333

304

221

141

64

11

2

7

1,138

1,363

.........

3,896

5,672

5,472

4,947

4,268

3,742

3,380

3,188

3,133

3,009

24,255

40,707

.........

25

43

45

47

49

48

47

44

44

40

209

432

.........

113

193

196

198

201

206

209

216

222

228

901

1,982

.........

14

31

37

42

45

48

50

53

55

57

169

432

.........
.........

33
185

34
301

36
314

39
326

40
335

41
343

44
350

45
358

48
369

49
374

182
1,461

409
3,255

.........

4,081

5,973

5,786

5,273

4,603

4,085

3,730

3,546

3,502

3,383

25,716

43,962

75,448 157,464

Eliminate fossil fuel preferences:
Eliminate oil and gas preferences:
Repeal enhanced oil recovery credit 3 �
Repeal credit for oil and gas produced
from marginal wells 3 �����������������������
Repeal expensing of intangible drilling
costs ������������������������������������������������
Repeal deduction for tertiary injectants 
Repeal exception to passive loss
limitations for working interests in oil
and natural gas properties ���������������
Repeal percentage depletion for oil and
natural gas wells ������������������������������
Repeal domestic manufacturing
deduction for oil and natural gas
production ����������������������������������������
Increase geological and geophysical
amortization period for independent
producers to seven years �����������������
Subtotal, eliminate oil and gas
preferences ���������������������������������
Eliminate coal preferences:
Repeal expensing of exploration and
development costs ���������������������������
Repeal percentage depletion for hard
mineral fossil fuels ���������������������������
Repeal capital gains treatment for
royalties �������������������������������������������
Repeal domestic manufacturing
deduction for the production of coal
and other hard mineral fossil fuels ���
Subtotal, eliminate coal preferences 
Total, eliminate fossil fuel tax
preferences ����������������������������

192

Analytical Perspectives

Table 14–3.  Reserve For Revenue-Neutral Business Tax Reform—Continued
(In millions of dollars)
2013
Other revenue changes and loophole
closers:
Repeal the excise tax credit for distilled
spirits with flavor and wine additives 2 
Repeal LIFO method of accounting for
inventories �������������������������������������������
Repeal lower-of-cost-or-market inventory
accounting method ������������������������������
Modify depreciation rules for purchases of
general aviation passenger aircraft ������
Repeal gain limitation for dividends
received in reorganization exchanges �
Expand the definition of built-in loss for
purposes of partnership loss transfers 
Extend partnership basis limitation rules
to nondeductible expenditures �������������
Limit the importation of losses under
related party loss limitation rules ���������
Deny deduction for punitive damages ������
Eliminate section 404(k) ESOP dividend
deduction for large C corporations ������
Total, other revenue changes and
loophole closers �������������������������������

1

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

.........

85

112

112

112

112

112

112

112

112

112

533

1,093

.........

3,493

7,595

8,538

8,287

8,290

8,732

8,739

8,402

9,045

9,701

36,203

80,822

.........

617

1,344

1,460

1,470

864

259

270

283

296

309

5,755

7,172

.........

65

201

299

334

404

437

341

231

197

193

1,303

2,702

.........

146

252

259

267

275

283

292

300

309

319

1,199

2,702

.........

5

6

7

7

7

7

8

8

8

10

32

73

.........

56

77

85

91

95

98

102

107

114

123

404

948

.........
.........

53
25

71
35

79
36

84
36

88
38

92
39

95
39

99
41

105
41

113
42

375
170

879
372

.........

407

614

665

674

682

691

699

707

716

722

3,042

6,577

.........

4,952

10,307

11,540

11,362

10,855

10,750

10,697

10,290

10,943

11,644

Total, reserve for revenue-neutral
business tax reform �����������������
–247
8,347 16,195 17,210 14,405 11,688
9,775
8,045
4,441
2,417
This proposal affects both receipts and outlays. Both effects are shown here. The outlay effects included in these estimates are listed below:

2,073

2013

2014

2015

2016

2017

2018

2019

Modify and permanently extend renewable
electricity production tax credit �����������������
.........
21
88
332
580
771
957
Expand and simplify the tax credit provided
to qualified small employers for nonelective contributions to employee health
insurance ��������������������������������������������������
.........
92
177
186
166
149
134
Total, outlay effects of reserve for revenueneutral business tax reform �����������������
.........
113
265
518
746
920
1,091
2 Net of income offsets.
3 This provision is estimated to have zero receipt effect under the Adminstration’s current economic projections.

2020

2021

2022

2023

49,016 103,340
67,845

94,596

2014–18 2014–23

1,159

1,388

1,595

1,825

1,792

8,716

124

109

102

103

770

1,342

1,283

1,497

1,697

1,928

2,562

10,058

193

14.  Governmental Receipts

Expand the definition of built-in loss for purposes
of partnership loss transfers.—Upon a sale or exchange
of a partnership interest, a partnership that either has a
section 754 election in effect or has a substantial built-in
loss in its assets must adjust the bases of its assets. A substantial built-in loss is defined by reference to the partnership’s adjusted basis – that is, there is a substantial built-in
loss if the partnership’s adjusted basis in its assets exceeds
by more than $250,000 the fair market value of such property. Although the provision prevents the duplication of
losses where the partnership has a substantial built-in loss
in its assets, it does not prevent the duplication of losses
where the transferee partner would be allocated a loss in
excess of $250,000 if the partnership sold all of its assets,
but the partnership itself does not have a substantial builtin loss in its assets. Accordingly, the Administration proposes to measure a substantial built-in loss also by reference to whether the transferee would be allocated a loss in
excess of $250,000 if the partnership sold all of its assets
immediately after the sale or exchange.
Extend partnership basis limitation rules to nondeductible expenditures.—A partner’s distributive
share of loss is allowed as a deduction only to the extent
of the partner’s adjusted basis in its partnership interest
at the end of the partnership year in which such loss occurred. Any excess is allowed as a deduction at the end
of the partnership year in which the partner has sufficient basis in its partnership interest to take the deductions. This basis limitation does not apply to partnership
expenditures that are not deductible in computing its
taxable income and not properly chargeable to capital account. Thus, even though a partner’s distributive share
of nondeductible expenditures reduces the partner’s basis
in its partnership interest, such items are not subject to
the basis limitation and the partner may deduct or credit
them currently even if the partner’s basis in its partnership interest is zero. The Administration proposes to allow a partner’s distributive share of expenditures not deductible in computing the partnership’s taxable income
and not properly chargeable to capital account only to the
extent of the partner’s adjusted basis in its partnership
interest at the end of the partnership year in which such
expenditure occurred.
Limit the importation of losses under related party
loss limitation rules.—If a loss sustained by a transferor
is disallowed under section 267(a)(1) or section 707(b)(1)

because the transferor and transferee are related, then
the transferee may reduce any gain the transferee later
recognizes on a disposition of the transferred asset by the
amount of the loss disallowed to the transferor. This has
the effect of shifting the benefit of the loss from the transferor to the transferee. Thus, losses can be imported where
gain or loss with respect to the property is not subject to
Federal income tax in the hands of the transferor immediately before the transfer but any gain or loss with respect to the property is subject to Federal income tax in
the hands of the transferee immediately after the transfer.
To prevent this, the Administration proposes to limit application of the gain reduction rule to the extent gain or
loss with respect to the property is not subject to Federal
income tax in the hands of the transferor immediately before the transfer but any gain or loss with respect to the
property is subject to Federal income tax in the hands of
the transferee immediately after the transfer.
Deny deduction for punitive damages.—The
Administration proposes to deny tax deductions for punitive damages paid or incurred by a taxpayer, whether
upon a judgment or in settlement of a claim. Where the
liability for punitive damages is covered by insurance,
such damages paid or incurred by the insurer would be
included in the gross income of the insured person. This
proposal would apply to damages paid or incurred after
December 31, 2014.
Eliminate section 404(k) employee stock ownership plan (ESOP) dividend deduction for large C
corporations.—Generally, corporations do not receive
a corporate income tax deduction for dividends paid to
their shareholders. However, a deduction for dividends
paid on employer securities is allowed under a special
rule for ESOPs, including, for example, on employer stock
held in an “ESOP account” that is one of the investment
options available to employees under a typical 401(k)
plan. Dividends on stock of corporations other than the
employer that are held in retirement plans are not deductible by the paying corporation. This difference in
treatment creates an artificial preference for investment
in employer stock that is at best difficult to justify. The
Administration’s proposal would repeal the special 404(k)
dividend deduction for employer stock held in an ESOP
that is sponsored by a C corporation with annual receipts
of more than $5 million. This proposal would be effective
with respect to dividends paid after the date of enactment.

BUDGET proposals
The Administration’s proposals, which begin the process of reducing the deficit and reforming the Internal
Revenue Code, will strengthen the economy and provide
support to middle-income families. These proposals provide support for job creation and incentives for investment in infrastructure, and help families save for retirement and pay for college and child care. They also reduce
the deficit and make the tax system fairer by eliminating
a number of tax loopholes and reducing tax benefits for
higher-income taxpayers. The Administration’s proposals
that affect receipts are described below.

Tax Relief to Create Jobs and Jumpstart Growth
Provide small businesses a temporary 10-percent
tax credit for new jobs and wage increases.—Under
current law, there is no generally available income tax
credit for job creation or increasing employees’ wages.
The Administration proposes to provide a temporary income tax credit for small employers for increases in wage
expense, whether driven by job creation, increased wages
or both. The credit would be equal to 10 percent of the
increase in the employer’s eligible wages paid over the eligible wages paid in the comparable period. Eligible wag-

194
es are the employer’s Old Age, Survivors, and Disability
Insurance (OASDI) wages paid in the relevant period.
The maximum amount of the increase in eligible wages
would be $5 million per employer, for a maximum credit
of $500,000. For employers with no OASDI wages in the
comparable period, eligible wages would be deemed to be
80 percent of their OASDI wages. The credit also would
be available to tax exempt organizations and public institutions of higher education. This credit will be available to small employers with eligible wages in 2012 of less
than $20 million.
Provide additional tax credits for investment in
qualified property used in a qualified advanced
energy manufacturing project.—ARRA provided a
30-percent credit for investment in eligible property used
in a qualified advanced energy manufacturing project.
A qualified advanced energy manufacturing project reequips, expands, or establishes a manufacturing facility
for the production of: (1) property designed to be used to
produce energy from the sun, wind, geothermal deposits,
or other renewable resources; (2) fuel cells, microturbines,
or an energy storage system for use with electric or hybrid-electric motor vehicles; (3) electric grids to support
the transmission of intermittent sources of renewable
energy, including the storage of such energy; (4) property designed to capture and sequester carbon dioxide;
(5) property designed to refine or blend renewable fuels
(excluding fossil fuels) or to produce energy conservation
technologies; (6) new qualified plug-in electric drive motor vehicles or components that are designed specifically
for use with such vehicles; or (7) other advanced energy
property designed to reduce greenhouse gas emissions as
may be determined by the Department of the Treasury.
Eligible property must be depreciable (or amortizable)
property used in a qualified advanced energy project
and does not include property designed to manufacture
equipment for use in the refining or blending of any transportation fuel other than renewable fuels. The credit is
available only for projects certified by the Department
of the Treasury (in consultation with the Department of
Energy); the total amount of credits certified may not exceed $2.3 billion. The Administration proposes to provide
an additional $2.5 billion in credits, thereby increasing
the amount of credits certified by the Department of the
Treasury to $4.8 billion.
Designate Promise Zones.—The Administration proposes to designate 20 Promise Zones (14 in urban areas
and 6 in rural areas). The zones would be designated in
four rounds of five zones each, which would become effective at the beginning of 2015, 2016, 2017, and 2018. Zone
designations would last for 10 years. The zones would be
chosen through a competitive application process based
on the strength of the applicant’s “competitiveness plan,”
economic indicators, and other criteria. Two tax incentives would be applicable to promise zones designated
after the incentives’ enactment. First, an employment
credit would be provided to businesses that employ zone
residents that would apply to the first $15,000 of qualifying wages annually. The credit rate would be 20 percent for zone residents who are employed within the zone

Analytical Perspectives

and 10 percent for zone residents employed outside of the
zone. Second, qualifying property placed in service within
the zone would be eligible for additional first-year depreciation of 100 percent of the adjusted basis of the property.
Qualifying property would generally consist of depreciable property with a recovery period of 20 years or less.
Incentives for Investment in Infrastructure
Provide America Fast Forward Bonds.—ARRA created the Build America Bond program as an optional new
lower cost borrowing incentive for State and local governments on taxable bonds issued in 2009 and 2010 to finance
new investments in governmental capital projects.  Under
the original program applicable to Build America Bonds
issued in 2009 and 2010, the Department of the Treasury
makes direct subsidy payments (called “refundable tax
credits”) to State and local governmental issuers in a subsidy amount equal to 35 percent of the coupon interest
on the bonds.  The Administration proposes to create a
new permanent America Fast Forward Bond program,
which would be an optional alternative to traditional taxexempt bonds. Like Build America Bonds, America Fast
Forward Bonds would be conventional taxable bonds issued by State and local governments in which the Federal
government makes direct payments to State and local
governmental issuers (refundable tax credits). The subsidy rate would be 28 percent, which is approximately
revenue neutral in comparison to the Federal tax losses
from traditional tax-exempt bonds. The proposal would
be effective for bonds issued beginning in 2014.
Allow eligible uses of America Fast Forward
Bonds to include financing all qualified private activity bond categories.— The Administration proposes
to include as an eligible use for America Fast Forward
Bonds, financing for governmental capital projects, current refundings of prior public capital project financings,
short-term governmental working capital financings for
governmental operating expenses subject to a 13-month
maturity limitation, and financing for the types of projects and programs that can be financed with qualified
private activity bonds (including financing for section
501(c)(3) nonprofit entities), subject to applicable State
bond volume caps for the qualified private activity bond
category. The subsidy rate would be set at 28 percent,
which is approximately revenue neutral in comparison to
the Federal tax losses from traditional tax-exempt bonds.
The proposed program would be effective for bonds issued
beginning in 2014.
Increase the Federal subsidy rate for America
Fast Forward Bonds for school construction.— The
Administration proposes to provide a 50 percent Federal
subsidy rate for America Fast Forward Bonds issued for
original financings of governmental capital projects for
public schools and State universities and new money financings for Section 501(c)(3) nonprofit educational entities, such as nonprofit schools and universities that could
be financed with qualified 501(c)(3) bonds. The 50 percent
Federal subsidy rate would not apply to current refundings of prior public capital projects for public schools and

14.  Governmental Receipts

State universities or current refundings of prior financings of section 501(c)(3) educational entities. The proposal
would be effective for bonds issued in 2014 and 2015.
Allow current refundings of State and local governmental bonds.—Current law provides Federal tax
subsidies for lower borrowing costs on debt obligations issued by State and local governments for eligible purposes
under various programs. These programs include traditional tax-exempt bonds and other temporary or targeted
qualified tax credit bond programs (e.g., qualified school
construction bonds) and direct borrowing subsidy payment programs (e.g., Build America Bonds). State and local bond programs have varied in the extent to which they
expressly allow or treat refinancings (as distinguished
from original financings to fund eligible program purposes). In a “current refunding” of State and local bonds,
the refunded bonds are retired promptly within 90 days
after issuance of the refinancing bonds. These refundings
generally reduce borrowing costs for State and local governmental issuers, and they also reduce Federal revenue
losses due to the Federal borrowing subsidies for State
and local bonds. A general authorization for current refundings of State and local bonds not currently covered by
specific refunding authority would promote greater uniformity, tax certainty, and borrowing cost savings. The
Administration proposes to allow current refundings of
these State and local bonds if: (1) the principal amount of
the current refunding bonds is no greater than the outstanding principal amount of the refunded bonds; and (2)
the weighted average maturity of the current refunding
bonds is no longer than the remaining weighted average
maturity of the refunded bonds. This proposal would be
effective as of the date of enactment.
Repeal the $150 million nonhospital bond limitation on all qualified 501(c)(3) bonds.—The Tax
Reform Act of 1986 established a $150 million limit on
the volume of outstanding nonhospital, tax-exempt bonds
used for the benefit of a section 501(c)(3) organization.
The provision was repealed in 1997 with respect to bonds
issued after August 5, 1997, at least 95 percent of the net
proceeds of which are used to finance capital expenditures
incurred after that date. The limitation continues to apply to bonds more than five percent of the net proceeds
of which finance or refinance (1) working capital expenditures or (2) capital expenditures incurred on or before
August 5, 1997. The Administration proposes to repeal in
its entirety the $150 million limit on the volume of outstanding, nonhospital, tax-exempt bonds for the benefit of
a section 501(c)(3) organization, effective for bonds issued
after the date of enactment.
Increase national limitation amount for qualified
highway or surface freight transfer facility bonds.—
Tax-exempt private activity bonds may be used to finance
qualified highway or surface freight transfer facilities. A
qualified highway or surface freight transfer facility is
any surface transportation, international bridge, or tunnel project that receives Federal assistance under title 23
of the United States Code or any facility for the transfer of
freight from truck or rail to truck which receives Federal
assistance under title 23 or title 49 of the United States

195
Code. Tax-exempt bonds issued to finance qualified highway or surface freight transfer facilities are not subject to
State volume cap limitations. Instead, the Secretary of
Transportation is authorized to allocate a total of $15 billion of issuance authority to qualified highway or surface
freight transfer facilities in such manner as the Secretary
determines appropriate. The Administration proposes to
increase the $15 billion aggregate amount permitted to
be allocated by the Secretary of Transportation to $19 billion.
Eliminate the volume cap for private activity
bonds for water infrastructure.—Under current law,
private activity bonds may be issued on a tax-exempt basis only if they meet the general requirements for governmental bonds and the additional requirements for qualified private activity bonds. Most qualified private activity
bonds are subject to an annual unified State volume cap.
The Administration proposes to provide an exception to
the annual unified State volume cap on tax-exempt qualified private activity bonds for exempt water or sewage facilities. The proposal would be effective for bonds issued
after the date of enactment.
Increase the 25-percent limit on land acquisition
restriction on private activity bonds.— Under current
law, for qualified private activity bonds, only an amount
equal to less than 25 percent of the net proceeds may be
used for the acquisition of land or an interest in land (other than certain exceptions such as the exception for firsttime farmers). The Administration proposes to increase
the 25-percent land acquisition restriction to 35 percent.
The proposal would be effective for bonds issued after the
date of enactment.
Allow more flexible research arrangements for
purposes of private business use limits.—Under current law, the IRS provides safe harbors that allow certain
research arrangements with private businesses at tax-exempt bond financed research facilities. The existing safe
harbors generally impose constraints on these research
arrangements. The Administration proposes to remove
certain of these constraints to provide additional flexibility for these research arrangements relating to basic research entered into after the date of enactment.
Repeal the government ownership requirement
for certain types of exempt facility bonds.—Current
law permits tax-exempt financing with respect to certain
categories of exempt facilities, including airports, docks
and wharves, and mass commuting facilities. Airports,
docks and wharves, and mass commuting facilities are
treated as exempt facilities only if all of the property to
be financed with the net proceeds of the issue is to be
owned by a governmental unit. Existing rules provide a
safe harbor for ownership by a governmental unit where
such facilities are leased or subject to management contracts with nongovernmental units. The Administration
proposes to repeal the requirement under the tax-exempt
bond rules that airports, docks and wharves, and mass
commuting facilities must be owned by a governmental
unit. The proposal would be effective for bonds issued
after the date of enactment.

196

Analytical Perspectives

Exempt certain foreign pension funds from the application of the Foreign Investment in Real Property
Tax Act (FIRPTA).—Under current law, gains of foreign
investors from the disposition of U.S. real property interests are generally subject to U.S. tax under FIRPTA.
Gains of U.S. pension funds from the disposition of U.S.
real property interests are generally exempt from U.S.
tax. The Administration proposes to exempt from U.S.
tax under FIRPTA certain gains of foreign pension funds
from the disposition of U.S. real property interests. The
proposal would be effective for dispositions of U.S. real
property interests occurring on or after the date of enactment.
Tax Cuts for Families and Individuals
Provide for automatic enrollment in IRAs, including a small employer tax credit, and double the
tax credit for small employer plan start-up costs.—
The Administration proposes to encourage saving and increase participation in retirement savings arrangements
by requiring employers that do not currently offer a retirement plan to their employees to provide automatic
enrollment in an IRA, effective after December 31, 2014.
Employers with ten or fewer employees and employers in
existence for less than two years would be exempt. An
employee not providing a written participation election
would be enrolled at a default rate of three percent of
the employee’s compensation in a Roth IRA. Employees
would always have the option of opting out, opting for
a lower or higher contribution within the IRA limits, or
opting for a traditional IRA. Contributions by employees
to automatic payroll-deposit IRAs would qualify for the
saver’s credit (to the extent the contributor and the contributions otherwise qualified).
Small employers (those that have no more than 100
employees) that offer an automatic IRA arrangement (including those that are not required to do so) would be entitled to a temporary business tax credit for the employer’s
expenses associated with the arrangement up to $500 for
the first year and $250 for the second year. Furthermore,
these employers would be entitled to an additional credit
of $25 per participating employee up to a total of $250 per
year for six years.
Under current law, small employers (those that have
no more than 100 employees) that adopt a new qualified
retirement SEP or SIMPLE plan are entitled to a temporary business tax credit equal to 50 percent of the employer’s expenses of establishing or administering the plan,
including expenses of retirement-related employee education with respect to the plan. The credit is limited to a
maximum of $500 per year for three years. In conjunction
with the automatic IRA proposal, to encourage small employers not currently sponsoring a qualified retirement
SEP or SIMPLE plan to do so, the Administration proposes to double this tax credit to a maximum of $1,000 per
year for three years (effective for taxable years beginning
after December 31, 2014) and to extend it to four years
(rather than three) for any small employer that adopts
a new qualified retirement SEP or SIMPLE plan during

the three years beginning when it first offers or first is
required to offer an automatic IRA arrangement.
Expand child and dependent care tax credit.—
Taxpayers with child or dependent care expenses who
are working or looking for work are eligible for a nonrefundable tax credit that partially offsets these expenses.
To qualify for this benefit, the child and dependent care
expenses must be for either a child under age 13 when
the care was provided or a disabled dependent of any age
with the same place of abode as the taxpayer. Any allowable credit is reduced by the aggregate amount excluded
from income under a dependent care assistance program.
Eligible taxpayers may claim the credit for up to 35 percent of up to $3,000 in eligible expenses for one child or
dependent and up to $6,000 in eligible expenses for more
than one child or dependent. The percentage of expenses
for which a credit may be taken decreases by one percentage point for every $2,000 of AGI over $15,000 until the
percentage of expenses reaches 20 percent (at incomes
above $43,000). The income phasedown and the credit
are not indexed for inflation. The proposal would increase
the beginning of the phasedown to $75,000 (and thus, the
end of the phasedown range to $103,000). The proposal
would be effective for tax years beginning after December
31, 2013.
Extend exclusion from income for cancellation
of certain home mortgage debt.—The Administration
proposes to extend the provision that excludes from gross
income amounts that are realized from discharges of
qualified principal residence indebtedness. The exclusion would be extended for two years, to apply to amounts
that are discharged after December 31, 2013, and before
January 1, 2016, or that are discharged pursuant to an
agreement entered into before that date.
Provide exclusion from income for student loan
forgiveness for students in certain income-based or
income-contingent repayment programs who have
completed payment obligations.—The Federal Family
Education Loan and Federal Direct Loan programs provide borrowers with various options for making payments
that are related to their income and student loan debt
levels after college. Under these options borrowers complete their repayment obligation when they have repaid
the loan in full, with interest, or have made those payments that are required under the terms of their plan.
For those who reach this point, any remaining loan balance is forgiven. Under current law, any debt forgiven
is considered gross income to the borrower and subject
to individual income tax. The potential tax consequence
may be making some student loan borrowers reluctant
to avail themselves of these loan repayment options. To
address that problem, the Administration proposes to exclude from gross income amounts forgiven at the end of
the repayment period for certain borrowers using these
methods of repayment. The provision would be effective
for discharges of loans after December 31, 2013.
Provide exclusion from income for student loan
forgiveness and for certain scholarship amounts
for participants in the Indian Health Service (IHS)
Health Professions Programs.—Under current law,

197

14.  Governmental Receipts

debt forgiven or otherwise discharged is generally considered gross income to the borrower and subject to income
tax. There are certain exceptions, including for individuals who receive payments under the National Health
Service Corps Loan Repayment Program or certain
similar State loan repayment programs. Furthermore,
although scholarship amounts for tuition and related
expenses are generally excluded from income under current law, scholarship amounts that represent payment
for teaching, research, and other services are not. There
are exceptions for participants in the National Health
Service Corps Scholarship Program and the Armed Forces
Health Professions Scholarship and Financial Assistance
Program. The IHS Health Professions Programs are very
similar to those programs whose participants are permitted to exclude discharged loan amounts and certain scholarship amounts from income. The Administration proposes to extend this exception to the IHS Health Professions
Loan Repayment Program and the IHS Health Professions
Scholarship Program. These provisions would be effective
for discharges of loans after December 31, 2013, and for
qualifying scholarship amounts received after December
31, 2013.
Upper-Income Tax Provisions
Reduce the value of certain tax expenditures.—
The Administration proposes to limit the tax rate at which
upper-income taxpayers can use itemized deductions and
other tax preferences to reduce tax liability to a maximum
of 28 percent. This limitation would reduce the value of
the specified exclusions and deductions that would otherwise reduce taxable income in the top three individual
income tax rate brackets of 33, 35, and 39.6 percent to
28 percent. The limit would apply to all itemized deductions, interest on tax-exempt bonds, employer-sponsored
health insurance, deductions and income exclusions for
employee retirement contributions, and certain abovethe-line deductions. If a deduction or exclusion for contributions to retirement plans or individual retirement
arrangements is limited by this proposal, the taxpayer’s
basis would be adjusted to reflect the additional tax paid.
The limit would be effective for taxable years beginning
after December 31, 2013.
Implement the Buffett Rule by imposing a new
“Fair Share Tax”.—The Administration proposes a new
minimum tax, called the Fair Share Tax (FST), for highincome taxpayers. The tentative FST equals 30 percent
of AGI less a charitable credit. The charitable credit
equals 28 percent of itemized charitable contributions allowed after the overall limitation on itemized deductions
(Pease). The final FST is the excess, if any, of the tentative FST over regular income tax (after certain credits,
including the AMT and the 3.8 percent surtax on investment income) and the employee portion of payroll taxes.
The set of certain credits subtracted from regular income
tax excludes the foreign tax credit, the credit for tax withheld on wages, and the credit for certain uses of gasoline
and special fuels. The tax is phased in linearly starting
at $1 million of AGI ($500,000 in the case of a married in-

dividual filing a separate return). The tax is fully phased
in at $2 million of AGI ($1 million in the case of a married individual filing a separate return). The threshold
is indexed for inflation beginning after 2014. The proposal would be effective for taxable years beginning after
December 31, 2013.
Modify Estate and Gift Tax Provisions
Restore the estate, gift, and GST tax parameters
in effect in 2009.—Under current law, estates, gifts, and
GSTs are taxed at a maximum tax rate of 40 percent with
a lifetime exclusion of $5 million, indexed for inflation after 2011. The Administration proposes to restore and permanently extend estate, gift, and GST tax parameters as
they applied for calendar year 2009. Under those parameters, estates and GSTs would be taxed at a maximum
tax rate of 45 percent with a life-time exclusion of $3.5
million. Gifts would be taxed at a maximum tax rate of
45 percent with a lifetime exclusion of $1 million. These
parameters would be effective for the estates of decedents
dying and transfers made after December 31, 2017, and
would not be indexed for inflation.
Require consistency in value for transfer and income tax purposes.—Current law provides generally
that the basis of property inherited from a decedent is the
property’s fair market value at the decedent’s death, and
of property received by gift is the donor’s adjusted basis in
the property, increased by the gift tax paid on the transfer. A special limitation based on fair market value at
the time of the gift applies if the property subsequently is
sold by the donee at a loss. Although generally the same
standards apply to determine the value subject to estate
or gift tax, there is no explicit consistency rule that would
require the recipient of the property to use for income tax
purposes the value used for estate or gift tax purposes as
the recipient’s basis in that property when the basis is determined by reference to the fair market value on the date
of death or gift. The Administration proposes to require
that, for decedents dying and gifts made after enactment,
the recipient’s basis generally must equal (but in no event
may exceed) the value of the property as determined for
estate or gift tax purposes, and a reporting requirement
would be imposed on the decedent’s executor or the donor
to provide the necessary information to both the recipient
and the IRS. The proposal also would grant regulatory
authority for the development of rules to govern situations in which this general rule would not be appropriate.
Require a minimum term for grantor retained
annuity trusts (GRATs).—Current law provides that
the value of the remainder interest in a GRAT for gift
tax purposes is determined by deducting the present value of the annuity to be paid during the GRAT term from
the fair market value of the property contributed to the
GRAT. If the grantor of the GRAT dies during that term,
the portion of the trust assets needed to produce the annuity is included in the grantor’s gross estate for estate
tax purposes. In practice, grantors commonly use brief
GRAT terms (often of less than two years) and significant
annuities to minimize both the risk of estate tax inclusion

198
and the value of the remainder for gift tax purposes. The
Administration proposes to require that, for all trusts created after the date of enactment, the GRAT must have
a minimum term of ten years and a maximum term of
ten years more than the annuitant’s life expectancy, the
value of the remainder at the creation of the trust must
be greater than zero, and the annuity must not decrease
during the GRAT term.
Limit duration of GST tax exemption.—Current
law provides that each person has a lifetime GST tax
exemption ($5,250,000 in 2013) that may be allocated to
the person’s transfers to or for the benefit of transferees
who are two or more generations younger than the transferor (“skip persons”). The allocation of a person’s GST
exemption to such a transfer made in trust exempts from
the GST tax not only the amount of the transfer (up to
the amount of exemption allocated), but also all future
appreciation and income from that amount during the
existence of the trust. At the time of the enactment of
the GST tax provisions, the law of almost all States included a Rule Against Perpetuities (RAP) that required
the termination of every trust after a certain period of
time. Because many States now either have repealed or
limited the application of their RAP laws, trusts subject
to the laws of those States may continue in perpetuity.
As a result of this change in State laws, the transfer tax
shield provided by the GST exemption effectively has
been expanded from trusts funded with $1 million and a
maximum duration limited by the RAP, to trusts funded
with $5,250,000 and continuing (and growing) in perpetuity. The Administration proposes to limit the duration
of the benefit of the GST tax exemption by imposing a
bright-line test, more clearly administrable than the common law RAP, that, in effect, would terminate the GST
tax exclusion on the 90th anniversary of the creation of
the trust. An exception would be made for trusts that
are distributed to another trust for the sole benefit of one
individual if the distributee trust will be includable in the
individual’s gross estate for Federal estate tax purposes
to the extent it is not distributed to that individual during
his or her life.
Coordinate certain income and transfer tax rules
applicable to grantor trusts.—A grantor trust is ignored for income tax purposes, even though the trust may
be irrevocable and the deemed owner may have no beneficial interest in the trust or its assets. The lack of coordination between the income tax and transfer tax rules applicable to a grantor trust creates opportunities to structure
transactions between the trust and its deemed owner
that are ignored for income tax purposes and can result
in the transfer of significant wealth by the deemed owner
without transfer tax consequences. The Administration
proposes to change certain transfer tax rules regarding
grantor trusts. If a person who is a deemed owner of all
or a portion of a trust engages in a transaction with that
trust that constitutes a sale, exchange, or comparable
transaction that is disregarded for income tax purposes
by reason of the person’s treatment as a deemed owner
of the trust under the grantor trust rules, then the portion of the trust attributable to the property received by

Analytical Perspectives

the trust in that transaction, net of the consideration received by the person in the transaction, will be (1) subject
to estate tax as part of the deemed owner’s gross estate,
(2) subject to gift tax at any time during the deemed owner’s life when his or her treatment as a deemed owner of
the trust is terminated, and (3) treated as a gift by the
deemed owner to the extent any distribution is made to
another (except in discharge of the deemed owner’s obligation to the distributee) during the deemed owner’s life.
The transfer taxes would be payable from the trust.
Extend the lien on estate tax deferrals provided
under section 6166 of the Internal Revenue Code.—
There is a lien on nearly all estate assets for the ten-year
period immediately following a decedent’s death to secure
the full payment of the Federal estate tax. However, when
the estate tax payments on interests in certain closely
held businesses are deferred under section 6166, this lien
expires approximately five years before the due date of
the final payment of the deferred tax. Existing methods
of protecting the Federal government’s interest in collecting the amounts due are expensive and may be harmful
to businesses. The Administration proposes to extend
the existing estate tax lien throughout the section 6166
deferral period to eliminate the need for any additional
security in most cases in a manner that is economical and
efficient for both taxpayers and the Federal government.
Clarify GST tax treatment of Health and
Education Exclusion Trusts (HEETs).—Payments
made by a donor directly to the provider of medical care
for another or directly to a school for another’s tuition are
exempt from gift tax. These direct transfers also are exempt from the GST tax. However, payments made to a
trust, to be expended by the trust for the same purposes,
are not exempt from the gift tax. Some contributors to
HEETs interpret the GST tax exclusion to apply also to
distributions made from the HEET in payment of medical
expenses or tuition, and claim that those distributions are
exempt from the GST tax. The Administration proposes
to clarify that the GST tax exclusion for transfers exempt
from the gift tax is limited to outright transfers by the
donor to the provider of the medical care or education and
does not apply to distributions for those same purposes
from a trust. The proposal would apply to trusts created
after the introduction of the bill enacting this change and
to transfers after that date made to pre-existing trusts.
Reform Treatment of Financial Industry
Institutions and Products
Impose a financial crisis responsibility fee.—The
Administration proposes to impose a fee on U.S.-based
bank holding companies, thrift holding companies, and
certain broker-dealers, as well as companies that control
insured depositories and certain broker-dealers, with assets in excess of $50 billion. U.S. subsidiaries of international firms that fall into these categories with assets in
excess of $50 billion would also be covered. The fee would
raise approximately $60 billion over ten years and would
be effective on January 1, 2015.

14.  Governmental Receipts

Require current inclusion in income of accrued
market discount and limit the accrual amount for
distressed debt.—Much as original issue discount (OID)
is part of the yield of a debt instrument purchased at
original issuance, market discount generally enhances
the yield to a purchaser of debt in the secondary market. Unlike OID, however, market discount is deferred
until a debt instrument matures or is otherwise sold or
transferred. The Administration’s proposal would require taxpayers to accrue market discount into income
currently, in the same manner as original issue discount.
To prevent over-accrual of market discount on distressed
debt, the accrual would be limited to the greater of (1)
an amount equal to the bond’s yield to maturity at issuance plus five percentage points, or (2) an amount equal
to the Applicable Federal Rate plus 10 percentage points.
The proposal would apply to debt securities acquired after
December 31, 2013.
Require that the cost basis of stock that is a covered security must be determined using an average
cost basis method.—Current regulations permit taxpayers to use “specific identification” when they sell or
otherwise dispose of stock. Specific identification allows
taxpayers who hold identical shares of stock that have
different tax basis to select the amount of gain or loss to
recognize on the disposition. The Administration’s proposal would require the use of average cost basis for all
identical securities held by a taxpayer that have a longterm holding period. The proposal would apply to covered
securities acquired after December 31, 2013.
Other Revenue Changes and Loophole Closers
Levy a fee on the production of hardrock minerals
to restore abandoned mines.—Until 1977, there were
no Federal requirements to restore land after mining for
coal, leaving nearly $4 billion worth of abandoned coal
mine hazards remaining today. The Department of the
Interior collects a fee on every ton of coal produced in the
United States to finance the reclamation of these abandoned coal mines. Historic mining of hardrock minerals,
such as gold and copper, also left numerous abandoned
mine lands (AML); however, there is no similar source of
Federal funding to reclaim these sites. Just as the coal
industry is held responsible for the actions of its predecessors, the Administration proposes to hold the hardrock
mining industry responsible for abandoned hardrock
mines. The proposed fee on the production of hardrock
minerals would be charged per volume of material displaced after December 31, 2014, and the receipts would
be distributed through a set allocation between Federal
and non-Federal lands. Funds would be used to restore
the most hazardous hardrock AML sites, on both public
and private lands. The receipts allocated to restoration
of non-Federal lands would be distributed to States and
Tribes based on need, with each State and Tribe selecting
its own priority projects within certain national criteria.
Return fees on the production of coal to pre-2006
levels to restore abandoned mines.—Since October 1,
1977, the Department of the Interior has collected fees

199
on every ton of coal produced in the United States to finance the reclamation of abandoned coal mines. The
fees levied on mine operators were originally $0.35 per
ton for surfaced mined coal and $0.15 per ton for underground mined coal. The 2006 amendments to the Surface
Mining Control and Reclamation Act instituted a phased
reduction in these fees beginning in 2006. However, nearly $4 billion worth of abandoned coal mine hazards remain today. The Administration proposes to restore the
fees to their original level, effective for coal mined after
September 30, 2013, to provide additional resources to
continue addressing the legacy of abandoned coal mines.
Increase Oil Spill Liability Trust Fund financing rate by one cent and update the law to include
other sources of crudes.—An excise tax is imposed on:
(1) crude oil received at a U.S. refinery; (2) imported petroleum products entered into the United States for consumption, use, or warehousing; and (3) any domestically
produced crude oil that is used (other than on the premises where produced for extracting oil or natural gas) in
or exported from the United States if, before such use
or exportation, no taxes were imposed on the crude oil.
Under current law, the tax does not apply to crudes such
as those produced from bituminous deposits as well as
kerogen-rich rock. The tax is deposited in the Oil Spill
Liability Trust Fund. Amounts in the trust fund are used
for several purposes, including the payment of costs associated with responding to and removing oil spills. The tax
imposed on crude oil and imported petroleum products is
eight cents per barrel, effective for periods after December
31, 2008, and before January 1, 2017, and nine cents per
barrel, effective for periods after December 31, 2016. The
Administration proposes to increase these taxes by one
cent per barrel, to nine cents per barrel for periods after
December 31, 2013, and to 10 cents per barrel for periods
after December 31, 2016. In addition, the Administration
proposes to update the law to include other sources of
crudes such as those produced from bituminous deposits
as well as kerogen-rich rock. The tax would cover, at the
applicable rate, other sources of crudes received at a U.S.
refinery, entered into the United State, or used or exported as described above after December 31, 2013.
Reinstate Superfund taxes.—The Administration
proposes to reinstate the taxes that were deposited in the
Hazardous Substance Superfund prior to their expiration
on December 31, 1995. These taxes, which contributed to
financing the cleanup of the nation’s highest risk hazardous waste sites, are proposed to be reinstated for periods
(excise taxes) or tax years (income tax) beginning after
2013, with expiration for periods and tax years after 2023.
The proposed taxes include the following: (1) an excise tax
of 9.7 cents per barrel on crude oil and imported petroleum
products; (2) an excise tax on specified hazardous chemicals at rates that vary from 22 cents to $4.87 per ton; (3)
an excise tax on imported substances that use the specified hazardous chemicals as a feedstock (in an amount
equivalent to the tax that would have been imposed on
domestic production of the chemicals); and (4) a corporate
environmental income tax imposed at a rate of 0.12 percent on the amount by which the modified AMT income

200
of a corporation exceeds $2 million. Consistent with the
Administration’s proposal regarding taxes deposited in
the Oil Spill Liability Trust Fund, the Superfund excise
tax on crude oil and petroleum products would cover other
sources of crudes such as those produced from bituminous
deposits as well as kerogen-rich rock.
Increase tobacco taxes and index for inflation.—
Under current law, cigarettes are taxed at a rate of $50.33
per 1,000 cigarettes. This is equivalent to just under $1.01
per pack, or approximately $22.88 per pound of tobacco.
Taxes on other tobacco products range from $0.5033 per
pound for chewing tobacco to $24.78 per pound of rollyour-own tobacco. The Administration proposes to increase the tax on cigarettes to $97.65 per 1,000 cigarettes,
or about $1.95 per pack, increase all other tobacco taxes
by about the same proportion, and index the taxes for inflation after 2014. The Administration also proposes to
clarify that roll-your-own tobacco includes any processed
tobacco that is removed for delivery to anyone other than
a manufacturer of tobacco products or exporter. The rate
increases would be effective for articles held for sale or
removed after December 31, 2013.
Make unemployment insurance (UI) surtax permanent.—The net Federal UI tax on employers dropped
from 0.8 percent to 0.6 percent with respect to wages paid
after June 30, 2011. The Administration proposes to permanently reinstate the 0.8 percent rate, effective with respect to wages paid on or after January 1, 2014.
Provide short-term tax relief to employers and
expand Federal Unemployment Tax Act (FUTA)
base.—The economic downturn continues to severely test
the adequacy of States’ UI systems, forcing many States
to borrow from the Federal Unemployment Account
within the Unemployment Insurance Trust Fund to continue paying benefits. These debts are now being repaid
through additional taxes on employers, which undermine
much-needed job creation. To provide short-term relief to
employers in these States, the Administration proposes a
suspension of interest on State UI borrowing in 2013 and
2014 along with a suspension of the FUTA credit reduction, which is an automatic debt repayment mechanism.
The Administration also proposes to increase the FUTA
taxable wage base to $15,000 starting in 2016, to index it
to inflation, and to reduce the FUTA tax rate. States with
lower wage bases will need to adjust their UI tax structures. This will put State UI systems on a firmer financial
footing for the future.
Tax carried (profits) interests as ordinary
income.—A partnership does not pay Federal income
tax; instead, an item of income or loss of the partnership
and associated character flows through to the partners
who must include such items on their income tax returns.
Certain partners receive partnership interests, typically
interests in future profits, in exchange for services (commonly referred to as “profits interests” or “carried interests”). Current law taxes the recipient of a carried interest on the value at the time granted, which may be based
on the value the partner would receive if the partnership
were liquidated immediately (for example, the value of an
interest only in future profits would be zero). Because the

Analytical Perspectives

partners, including partners who provide services, reflect
their share of partnership items on their tax return in
accordance with the character of the income at the partnership level, long-term capital gains and qualifying dividends attributable to carried interests may be taxed at a
maximum 20-percent rate (the maximum tax rate on capital gains) rather than at ordinary income tax rates. The
Administration proposes to designate a carried interest
in an investment partnership as an “investment services
partnership interest” (ISPI) and to tax a partner’s share
of income from an ISPI that is not attributable to invested capital as ordinary income, regardless of the character
of the income at the partnership level. In addition, the
partner would be required to pay self-employment taxes
on such income, and the gain recognized on the sale of
an ISPI that is not attributable to invested capital would
generally be taxed as ordinary income, not as capital gain.
However, any allocation of income or gain attributable to
invested capital on the part of the partner would be taxed
as ordinary income or capital gain based on its character
to the partnership and any gain realized on a sale of the
interest attributable to such partner’s invested capital
would be treated as capital gain or ordinary income as
provided under current law. The proposal would be effective for tax years ending after December 31, 2013.
Eliminate the deduction for contributions of conservation easements on golf courses.—Under current
law, a charitable contribution deduction is generally not
allowed for a contribution of a partial interest in property.
However, a donor may deduct the value of a conservation
easement donated to a qualified charitable organization
exclusively for conservation purposes. The value of the
deduction for any contribution that produces a return benefit to the donor must be reduced by the value of the benefit received. Contributions of easements on golf courses
have raised concerns that the deduction amounts claimed
for such easements are excessive, and also that the conservation easement deduction is not narrowly tailored to
promote only bona fide conservation activities, as opposed
to the private interests of donors. The Administration
proposes to amend the charitable contribution deduction
provision to prohibit a deduction for any contribution of
a partial interest in property that is, or is intended to be,
used as a golf course. The proposal would apply to contributions made after the date of enactment.
Restrict deductions and harmonize the rules for
contributions of conservation easements for historic
preservation.—Under current law, a charitable contribution deduction is generally not allowed for a contribution of a partial interest in property. However, a donor
may deduct the value of a historic preservation easement
donated to a qualified charitable organization exclusively
for conservation purposes, provided that the value of the
deduction is reduced for any return benefit to the donor.
Concerns have been raised that the deduction amounts
claimed for such easements are excessive and may not appropriately take into account existing limitations on the
property.
The Administration proposes to disallow a deduction
for any value associated with forgone upward develop-

14.  Governmental Receipts

ment above an historic building. The Administration also
proposes to require contributions of conservation easements on all historic buildings, including those listed in
the National Register of Historic Places, to comply with
a 2006 amendment that requires contributions of historic preservation easements on buildings in registered
historic districts to comply with special rules relating to
the preservation of the entire exterior of the building and
the documentation of the easement contribution. These
changes would apply to contributions made after the date
of enactment.
Require non-spouse beneficiaries of IRA owners
and retirement plan participants to take inherited
distributions over no more than five years.—Under
current law, owners of IRAs and employees with tax-favored retirement plans generally must take distributions
from those retirement accounts beginning at age 70-1/2.
The minimum amount required to be distributed is based
on the life expectancy of the owner or plan participant,
calculated at the end of each year. Minimum distribution
rules also apply to balances remaining after a participant
or IRA owner has died. Heirs who are designated as beneficiaries under IRAs and qualified retirement plans may
receive distributions over their lifetimes, no matter what
the age difference between the deceased IRA owner or
plan participant and the beneficiary. The Administration
proposes to require non-spouse beneficiaries of IRA owners and retirement plan participants to take inherited
distributions over no more than five years. Exceptions
would be provided for disabled beneficiaries and beneficiaries within 10 years of age of the deceased IRA owner
or plan participant. Minor children would be allowed to
receive payments up to five years after they attain the age
of majority. This proposal would be effective for distributions with respect to participants or IRA owners who die
after December 31, 2013.
Limit the total accrual of tax-favored retirement
benefits.—The Administration proposes to limit the deduction or exclusion for contributions to defined contribution plans, defined benefit plans, or IRAs for an individual
who has total balances or accrued benefits under those
plans that are sufficient to provide an annuity equal to
the maximum allowable defined benefit plan benefit. This
maximum, currently an annual benefit of $205,000 payable in the form of a joint and survivor benefit commencing at age 62, is indexed for inflation, and the maximum
accumulation that would apply for an individual at age
62 is approximately $3.4 million. The proposal would be
effective for taxable years beginning after December 31,
2013.
Reduce the Tax Gap and Make Reforms
Expand Information Reporting
Require information reporting for private separate accounts of life insurance companies.—Earnings
from direct investments in assets generally result in taxable income to the holder, whereas investment in compa-

201
rable assets through a separate account of a life insurance
company generally gives rise to tax-free or tax-deferred
income. This favorable tax treatment is unavailable if the
policyholder has so much control over the investments in
the account that the policyholder, rather than the company, should be treated as the owner of those investments.
The proposal would require information reporting with
regard to each life insurance or annuity contract whose
investment in a separate account represents at least 10
percent of the value of the account. The proposal would
be effective for taxable years beginning after December
31, 2013.
Require a certified Taxpayer Identification
Number (TIN) from contractors and allow certain
withholding.—Currently, withholding is not required or
permitted for payments to contractors. Since contractors
are not subject to withholding, they may be required to
make quarterly payment of estimated income taxes and
self-employment (SECA) taxes near the end of each calendar quarter. An optional withholding method for contractors would reduce the burdens of having to make quarterly payments, would help contractors automatically set
aside funds for tax payments, and would help increase
compliance. Under the Administration’s proposal, a contractor receiving payments of $600 or more in a calendar year from a particular business would be required
to furnish to the business the contractor’s certified TIN.
A business would be required to verify the contractor’s
TIN with the IRS, which would be authorized to disclose,
solely for this purpose, whether the certified TIN-name
combination matches IRS records. Contractors receiving
payments of $600 or more in a calendar year from a particular business could require the business to withhold
a flat rate percentage of their gross payments. This proposal would be effective for payments made to contractors
after December 31, 2013.
Modify reporting of tuition expenses and scholarships on Form 1098-T.—Under current law, institutions
of higher education file Form 1098-T to report tuition
expenses to students and to the IRS. The educational
institution has the choice of filling out Box 1 (payments
received for qualified tuition and related expenses) or
Box 2 (amounts billed for qualified tuition and related expenses). Box 2 reporting makes Form 1098-T less useful
for the student and for the IRS in determining what expenses the student has already paid, and thus the amount
of education tax credit that may be claimed for the current tax year. Institutions of higher education are also
required to report scholarships and grants (Box 5) that
they administer or distribute (for instance, Pell grants).
Only expenses paid net of scholarships qualifies for education tax benefits. In addition, scholarships that are not
used to pay for eligible education expenses are taxable.
Entities other than institutions of higher learning that
provide scholarships and grants are not required to file
Form 1098-T to report these amounts to students or to
the IRS. The Administration proposes to improve Form
1098-T reporting to make the information more useful to
students and to the IRS. The proposal would require institutions of higher learning to report amounts paid and

202

Analytical Perspectives

not amounts billed on Form 1098-T. It would also require
any entity issuing a scholarship or grant in excess of $500
that is not processed or administered by an institution
of higher learning to report the scholarship or grant on
Form 1098-T. The threshold amount is indexed for inflation after 2014. The proposal would be effective for tax
years beginning after December 31, 2013.
Provide for reciprocal reporting of information in connection with the implementation of the
Foreign Account Tax Compliance Act (FATCA).—In
many cases, foreign law would prevent foreign financial
institutions from complying with the FATCA provisions of
the Hiring Incentives to Restore Employment Act of 2010
by reporting to the IRS information about U.S. accounts.
Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by
FATCA to the IRS. Requiring U.S. financial institutions
to report similar information to the IRS with respect to
nonresident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in
appropriate circumstances by exchanging similar information with cooperative foreign governments to support
their efforts to address tax evasion by their residents. The
proposal would provide the Secretary of the Treasury with
authority to prescribe regulations that would require reporting of information with respect to nonresident alien
individuals, entities that are not U.S. persons, and certain
U.S. entities held in substantial part by non-U.S. owners,
including information regarding account balances and
payments made with respect to accounts held by such
persons and entities.
Improve Compliance by Businesses
Require greater electronic filing of returns.—
Generally, compliance increases when taxpayers are required to provide better information to the IRS in usable
form. The Administration proposes that regulatory authority be granted to the Department of the Treasury to
require that information returns be filed electronically.
Also, corporations and partnerships with assets of $10
million or more that are required to file Schedule M-3
would be required to file their tax returns electronically.
In the case of certain other large taxpayers not required
to file Schedule M-3, but that have assets of $10 million
or more, the regulatory authority to require electronic
filing would allow reduction of the current threshold of
filing 250 or more returns during a calendar year. The
proposal would be effective for taxable years ending after
December 31, 2013.
Make e-filing mandatory for exempt organizations.—The Administration proposes to require that
all Form 990 series tax and information returns be filed
electronically. The proposal would also require the IRS
to make the electronically filed Form 990 series returns
publicly available in a machine readable format in a timely manner. The proposal would generally be effective for
taxable years beginning after the date of enactment.

Authorize the Department of the Treasury to require additional information to be included in
electronically filed Form 5500 Annual Reports and
electronic filing of certain other employee benefit
plan reports.—The annual report filing for tax-qualified
employee benefit plans (as well as certain other types of
plans) is a joint IRS and Department of Labor (DOL) filing requirement and is submitted electronically to both
agencies on one form. This filing serves as the primary
tool for gathering information and for targeting enforcement activity. (It also serves to satisfy certain requirements for filing with the Pension Benefit Guaranty
Corporation.) The DOL mandates electronic filing of this
form, but the IRS lacks general statutory authority to require electronic filing of returns unless the person subject
to the filing requirement must file at least 250 returns
during the year. As a result, information relevant only to
tax code requirements (such as data on coverage needed
to test compliance with nondiscrimination rules) and not
to DOL’s ERISA Title I jurisdiction cannot be requested
on the joint form and currently is not collected. Collecting
it would require a separate “IRS only” form that could be
filed on paper, a process that would be neither simple
nor efficient for taxpayers or for the IRS and DOL. The
Administration proposes to provide the IRS authority to
require the inclusion of information that is relevant only
to employee benefit plan tax requirements in the electronically filed annual reports to the same extent that DOL
can require such electronic reporting. Additionally, the
IRS would be allowed to require electronic filing of a separate form that reports information to IRS and the Social
Security Administration concerning plan participants
who terminate employment with a right to future benefits
under the plan. The proposal would be effective for plan
years beginning after December 31, 2013.
Implement standards clarifying when employee
leasing companies can be held liable for their clients’ Federal employment taxes.—Under current law,
there is often uncertainty whether an employee leasing
company or its client is liable for unpaid Federal employment taxes arising with respect to wages paid to the
client’s workers. Providing standards for when an employee leasing company and its clients will be held liable
for Federal employment taxes will facilitate the assessment, payment, and collection of those taxes and will preclude taxpayers who have control over withholding and
payment of those taxes from denying liability when the
taxes are not paid. The Administration proposes to set
forth standards for holding employee leasing companies
jointly and severally liable with their clients for Federal
employment taxes. The proposal would also provide standards under which leasing companies would be solely liable for such taxes if they meet specified requirements.
The proposal would be effective for employment tax returns required to be filed with respect to wages paid after
December 31, 2013.
Increase certainty with respect to worker classification.—Under current law, worker classification as
an employee or as a self-employed person (independent
contractor) is generally based on a common-law test for

14.  Governmental Receipts

determining whether an employment relationship exists.
Under a special provision (section 530 of the Revenue
Act of 1978), a service recipient may treat a worker who
may actually be an employee as an independent contractor for Federal employment tax purposes if, among other
things, the service recipient has a reasonable basis for
treating the worker as an independent contractor. If a
service recipient meets the requirements of this special
provision with respect to a class of workers, the IRS is
prohibited from reclassifying the workers as employees,
even prospectively. The special provision also prohibits
the IRS from issuing generally applicable guidance about
the proper classification of workers. The Administration
proposes to permit the IRS to issue generally applicable
guidance about the proper classification of workers and
to permit the IRS to require prospective reclassification
of workers who are currently misclassified and whose reclassification is prohibited under the special provision.
Penalties would be waived for service recipients with
only a small number of employees and a small number
of misclassified workers, if the service recipient had consistently filed all required information returns reporting
all payments to all misclassified workers and the service
recipient agreed to prospective reclassification of misclassified workers. It is anticipated that after enactment, new
enforcement activity would focus mainly on obtaining the
proper worker classification prospectively, since in many
cases the proper classification of workers may not be clear.
Repeal special estimated tax payment provision
for certain insurance companies.—The deductible unpaid loss reserves of insurance companies are required
to be computed on a discounted basis to reflect the time
value of money. However, a taxpayer may elect to deduct
an additional amount equal to the difference between
discounted and undiscounted reserves, if it also makes a
“special estimated tax payment” equal to the tax benefit
attributable to the extra deduction. The special estimated tax payments are applied against the company’s tax liability in future years as reserves are released. This provision requires complex record keeping yet, by design, is
revenue neutral. The Administration proposes to repeal
the provision effective for taxable years beginning after
December 31, 2013.
Strengthen Tax Administration
Impose liability on shareholders participating in
“Intermediary Transaction Tax Shelters” to collect
unpaid corporate income taxes.— Certain shareholders, corporate officers and directors, and their advisors
have engaged in “Intermediary Transaction Tax Shelters.”
These transactions are structured so that when the corporation’s assets are sold, the corporation is ultimately left
with insufficient assets from which to pay the tax owed
from the asset sale. In a typical case, an intermediary
entity purportedly purchases the shareholders’ stock, either after or shortly before the corporation sells its assets.
The corporate cash from the asset sale effectively finances
the purchase of the shareholders’ stock and no assets are
left to pay the corporate tax liability. Existing law does

203
not adequately protect the Federal government’s interest
in collecting the amounts due as a result of these transactions. The Administration therefore proposes to add
a new section to the Internal Revenue Code that would
identify the elements of “Intermediary Transaction Tax
Shelters” (to be further defined in regulations) and impose liability on the selling shareholders for the unpaid
corporate taxes to the extent they received proceeds, directly or indirectly, for their shares. This proposal would
be effective upon enactment.
Increase levy authority for payments to Medicare
providers with delinquent tax debt.—The Administration
proposes a change to the Department of the Treasury’s debt
collection procedures that will increase the amount of delinquent taxes collected from Medicare providers. Through
the Federal Payment Levy Program, Treasury deducts (levies) a portion of a Government payment to an individual
or business in order to collect unpaid taxes. Pursuant to
the Medicare Improvements for Patients and Providers
Act of 2008, Medicare provider and supplier payments are
included in the Federal Payment Levy Program, whereby
Treasury is authorized to continuously levy up to 15 percent of a payment to a Medicare provider in order to collect
delinquent tax debt. The proposal would allow Treasury to
levy up to 100 percent of a payment to a Medicare provider
to collect unpaid taxes, effective for payments made after the
date of enactment.
Implement a program integrity statutory cap adjustment for tax administration.—The Administration
proposes an adjustment to the discretionary spending
limits, as established in the BBEDCA, and amended by
the Budget Control Act of 2011, for IRS tax enforcement,
compliance, and related activities, including tax administration activities at the Alcohol and Tobacco Tax and
Trade Bureau (TTB). In general, such cap adjustments
help protect increases above a base level for activities
that generate benefits that exceed programmatic costs.
The proposed 2014 cap adjustment for the IRS and TTB
will fund over $400 million in new revenue-producing initiatives above current levels of enforcement and compliance activity. Beyond 2014, the Administration proposes
further increases in additional new tax enforcement initiatives each year from 2015 through 2018 and to sustain
all of the new initiatives plus inflationary costs through
2023. The total cost of starting and sustaining the new
initiatives above current levels of enforcement and compliance activity would be roughly $13.8 billion over the
budget window, and is estimated to generate an additional $46.5 billion in revenue over that same period for
a net savings of over $32.7 billion. These resources will
help the IRS and TTB continue to work on closing the
tax gap, defined as the difference between taxes owed and
those paid on time and estimated at $450 billion in 2006.
Enforcement funds provided through the 2014 cap adjustment will continue to target international tax compliance,
identify and prevent refund fraud, and restore previously
reduced enforcement levels.
Enhance UI program integrity.—The Administration
proposes to make investments in UI program integrity
by increasing funding for Reemployment and Eligibility

204
Assessments (REAs), which are conducted by the States.
These assessments help ensure that benefits go only to
eligible claimants and also provide help with work-search
strategies. The Administration’s proposal provides additional funding for REAs for regular UI recipients, which
will reduce UI outlays by cutting down on improper payments and getting claimants back to work more quickly.
Reduced outlays will allow States to keep UI taxes lower,
reducing overall receipts in the UI trust funds. In addition, legislation will be proposed to expand State use of
the Treasury Offset Program (TOP) and the Separation
Information Data Exchange System (SIDES), which already improve program integrity. TOP allows States to
recover UI overpayments from claimants’ tax refunds
when the claimant is at fault. SIDES allows States and
employers to exchange information on reasons for a claimant’s separation from employment, which helps States determine UI eligibility; separation issues are the second
largest cause of UI improper payments.
Streamline audit and adjustment procedures for
large partnerships.—Under current law, large partnerships, other than electing large partnerships (ELPs),
are subject to the unified audit rules established under
the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA). ELPs are subject to streamlined audit and
adjustment procedures. ELPs are generally defined
as partnerships that have 100 or more partners during
the preceding taxable year and elect to be treated as an
ELP. Since the enactment of the ELP regime, few large
partnerships have elected into the ELP regime. Thus, the
more complex and inefficient TEFRA partnership audit
and adjustment procedures apply for most large partnerships. The Administration proposes to create a new mandatory Required Large Partnership (RLP) regime for any
partnership that has 1,000 or more partners at any time
during the taxable year. The RLP regime would provide
many of the same streamlined audit and adjustment procedures as apply to ELPs. The proposal would apply to
a partnership’s taxable year ending on or after the date
that is two years from the date of enactment.
Revise offer-in-compromise application rules.—
Current law provides that the IRS may compromise
with a taxpayer to settle any civil or criminal case arising under the Internal Revenue Code prior to a referral
to the Department of Justice for prosecution or defense.
In 2006, a provision was enacted to require taxpayers to
make certain nonrefundable payments with any initial
offer-in-compromise of a tax case. Requiring nonrefundable payments with an offer-in-compromise may substantially reduce access to the offer-in-compromise program.
Reducing access to the offer-in-compromise program
makes it more difficult and costly for the IRS to obtain the
collectable portion of existing tax liabilities. Accordingly,
the Administration proposes eliminating the requirements that an initial offer-in-compromise include a nonrefundable payment of any portion of the taxpayer’s offer.
Expand IRS access to information in the National
Directory of New Hires (NDNH) for tax administration purposes.—Employment data are useful to the
IRS in administering a wide range of tax provisions, in-

Analytical Perspectives

cluding verifying taxpayer claims and identifying levy
sources. Currently, the IRS may obtain employment and
unemployment data on a State-by-State basis, which is a
costly and time-consuming process. The Administration
proposes to amend the Social Security Act to expand IRS
access to the NDNH data for general tax administration
purposes, including data matching, verification of taxpayer claims during return processing, preparation of substitute returns for non-compliant taxpayers, and identification of levy sources. Data obtained by the IRS from the
NDNH would be protected by existing taxpayer privacy
law, including civil and criminal sanctions.
Make repeated willful failure to file a tax return
a felony.—Current law provides that willful failure to file
a tax return is a misdemeanor punishable by a term of
imprisonment for not more than one year, a fine of not
more than $25,000 ($100,000 in the case of a corporation), or both. The Administration would modify this rule
such that any person who willfully fails to file tax returns
in any three years within any period of five consecutive
years, if the aggregated tax liability for such period is
at least $50,000, would be subject to a new aggravated
failure to file criminal penalty. The proposal would classify such failure as a felony and, upon conviction, impose
a fine of not more than $250,000 ($500,000 in the case
of a corporation) or imprisonment for not more than five
years, or both. The proposal would be effective for returns
required to be filed after December 31, 2013.
Facilitate tax compliance with local jurisdictions.—Although Federal tax returns and return information (FTI) generally are confidential, the IRS and
Department of the Treasury may share FTI with States
as well as certain local government entities that are treated as States for this purpose. IRS and Department of the
Treasury compliance activity, especially with respect to
alcohol, tobacco, and fuel excise taxes, may necessitate
information sharing with Indian Tribal Governments
(ITGs). The Administration’s proposal would specify that
ITGs that impose alcohol, tobacco, or fuel excise taxes,
or income or wage taxes, would be treated as States for
purposes of information sharing to the extent necessary
for ITG tax administration. The ITG that receives FTI
would be required to safeguard it according to prescribed
protocols.
Extend statute of limitations where State adjustment affects Federal tax liability.—In general, additional Federal tax liabilities in the form of tax, interest,
penalties, and additions to tax must be assessed by the
IRS within three years after the date a return is filed.
Pursuant to agreement, the IRS and State and local revenue agencies exchange reports of adjustments made
through examination so that corresponding adjustments
can be made by each taxing authority. The general statute of limitations for assessment of Federal tax liabilities
serves as a barrier to the effective use by the IRS of State
and local tax adjustment reports when the reports are
provided by the State or local revenue agency to the IRS
with little time remaining for assessments to be made at
the Federal level. The Administration therefore proposes
an additional exception to the general three-year stat-

14.  Governmental Receipts

ute of limitations for assessment of Federal tax liability
resulting from adjustments to State or local tax liability.
The statute of limitations would be extended to the greater of: (1) one year from the date the taxpayer first files an
amended tax return with the IRS reflecting adjustments
to the State or local tax return; or (2) two years from the
date the IRS first receives information from the State or
local revenue agency under an information sharing agreement in place between the IRS and a State or local revenue agency. The statute of limitations would be extended
only with respect to the increase in Federal tax attributable to the State or local tax adjustment. The statute of
limitations would not be further extended if the taxpayer
files additional amended returns for the same tax periods
as the initial amended return or the IRS receives additional information from the State or local revenue agency
under an information sharing agreement. The proposal
would be effective for returns required to be filed after
December 31, 2013.
Improve investigative disclosure statute.—
Generally, tax return information is confidential, unless
a specific exception in the Internal Revenue Code applies.
In the case of tax administration, the Internal Revenue
Code permits the Department of the Treasury and IRS
officers and employees to disclose return information to
the extent necessary to obtain information not otherwise
reasonably available, in the course of an audit or investigation, as prescribed by regulation. Department of the
Treasury regulations effective since 2003 state that the
term “necessary” in this context does not mean essential
or indispensable, but rather appropriate and helpful in
obtaining the information sought. Determining if an investigative disclosure is “necessary” is inherently factual,
leading to inconsistent opinions by the courts. Eliminating
this uncertainty from the statute would facilitate investigations by IRS officers and employees, while setting forth
clear guidance for taxpayers, thus enhancing compliance
with the Internal Revenue Code. The Administration proposes to clarify the taxpayer privacy law by stating that
it does not prohibit Department of the Treasury and IRS
officers and employees from identifying themselves, their
organizational affiliation, and the nature and subject of
an investigation, when contacting third parties in connection with a civil or criminal tax investigation.
Require taxpayers who prepare their returns electronically but file their returns on paper to print
their returns with a 2-D bar code.—Taxpayers can
prepare their returns electronically (by meeting with a
tax return preparer or using tax preparation software)
but may file their return on paper by printing it out and
mailing it to the IRS. Electronically filed tax returns
are processed more efficiently and more accurately than
paper tax returns. However, when tax returns are filed
on paper—even if that paper return was prepared electronically—the IRS must manually enter the information contained on the return into the IRS’s systems. The
Administration proposes to require all taxpayers who
prepare their tax returns electronically but print their returns and file them on paper to print their returns with
a 2-D bar code that can be scanned by the IRS to convert

205
the paper return into an electronic format. The proposal
would be effective for tax returns filed after December 31,
2013.
Allow the IRS to absorb credit and debit card processing fees for certain tax payments.—Taxpayers
may make credit or debit card payments by phone
through IRS-designated third-party service providers,
who charge taxpayers a convenience fee for processing
the payment over and above the taxes due. Under current law, if the IRS were to accept credit or debit card
payments directly from taxpayers, the IRS would be prohibited from absorbing credit and debit card processing
fees. The Administration recognizes that it is inefficient
for both the IRS and taxpayers to require credit and debit
card payments to be made through a third-party service
provider, and that charging an additional convenience fee
increases taxpayers’ costs. The proposal would permit the
IRS to accept credit and debit card payments directly from
taxpayers and to absorb the credit and debit card processing fees, but only in situations authorized by regulations.
Provide the Secretary of the Treasury authority
to access and disclose prisoner data to prevent and
identify improper payments.—The Administration
proposes to provide the Secretary of the Treasury access to information contained in the Social Security
Administration’s (SSA’s) Prisoner Update Processing
System (PUPS) for tax administration purposes and for
identifying, preventing, and recovering improper payments. The PUPS database contains local prison data
and is more complete than the information that the
Department of the Treasury currently receives under section 6116 of the Internal Revenue Code for tax administration purposes. The proposal also expands the information the prisons are required to report to SSA to include
release dates and prison assigned inmate numbers, which
are disclosed pursuant to section 6116 but are not currently part of the PUPS database. This data will allow
the Department of the Treasury to compare prisoner information with data about persons requesting or receiving Federal payments and to identify individuals who are
ineligible to receive payments or who are receiving erroneous or fraudulent payments and/or filing fraudulent tax
returns. SSA will transfer PUPS data to the Department
of the Treasury Fiscal Service on a regular basis, where it
will be maintained for use by other Federal agencies.
Extend IRS math error authority in certain circumstances.—The IRS may correct certain mathematical or clerical errors made on tax returns to reflect the
taxpayer’s correct tax liability (this authority is generally referred to as “math error authority”). The Internal
Revenue Code specifically identifies a list of circumstances where the IRS has math error authority. The
Administration proposes adding the following two items
to this list of circumstances: (1) when there is a lifetime
limit on (a) the total amount of a credit or deduction that
may be claimed or (b) the total number of years that a
credit or deduction may be claimed; and (2) when the taxpayer claimed the EITC during a period in which the taxpayer was previously prohibited by the IRS from claiming
the EITC because, in a prior year, the taxpayer’s EITC

206
claim was due to fraud or reckless or intentional disregard of the rules and regulations. The proposal would increase the efficiency of tax administration by allowing the
IRS to disallow clearly erroneous claims, reduce the need
for audits, and promote fairness by limiting such claims to
taxpayers who are entitled to them. The proposal would
be effective for taxable years beginning after December
31, 2013.
Impose a penalty on failure to comply with electronic filing requirements.—Certain corporations and
tax-exempt organizations (including certain charitable
trusts and private foundations) are required to file their
returns electronically. Although there are additions to
tax for the failure to file returns, there is no specific penalty in the Internal Revenue Code for a failure to comply with a requirement to file electronically. Electronic
filing increases efficiency of tax administration because
the provision of tax return information in an electronic
form enables the IRS to focus audit activities where they
can have the greatest impact. This also assists taxpayers
where the need for audit is reduced. The Administration
is proposing an assessable penalty for a failure to comply with a requirement of electronic (or other machinereadable) format for a return that is filed. The amount of
the penalty would be $25,000 for a corporation or $5,000
for a tax-exempt organization. The proposal would be effective for returns required to be electronically filed after
December 31, 2013.
Restrict access to the Death Master File (DMF).—
The DMF, which is publicly available and updated weekly
by the Social Security Administration (SSA), contains the
full name, Social Security number (SSN), date of birth,
date of death, and the county, state, and zip code of the
last address on record for decedents. Although some
DMF users need immediate access to the DMF for fraud
prevention purposes, others are using the DMF for illegitimate purposes, including identity thieves who use
the DMF to steal the names and SSNs of recent decedents, which information identity thieves then use to file
fraudulent tax returns. The Administration is proposing
to restrict immediate access to the DMF to those users
who legitimately need the information for fraud prevention purposes and to delay the release of the DMF to all
other users. This proposal would reduce opportunities for
identity theft and restrict information sources used to file
fraudulent tax returns. The proposal would be effective
upon enactment.
Provide whistleblowers with protection from retaliation.—Under current law, the Internal Revenue
Code does not protect whistleblowers from retaliatory actions; therefore, potential whistleblowers may be discouraged from filing claims with the IRS. The Administration
proposes to amend the Internal Revenue Code to protect
whistleblowers from retaliation, which should incentivize
potential whistleblowers to file claims and increase the
tax administration benefit of the whistleblower program.
Provide stronger protection from improper disclosure of taxpayer information in whistleblower
actions.—The Whistleblower Office may disclose tax
return information, which is generally confidential, to

Analytical Perspectives

whistleblowers and their legal representatives as part
of a whistleblower administrative proceeding. Although
whistleblowers and their legal representatives must sign
a confidentiality agreement before tax return information
is shared, the statutory prohibitions on redisclosure of tax
return information and safeguarding requirements do not
apply. The Administration proposes to amend the taxpayer information protections to extend the safeguarding requirements and prohibition on redisclosure of tax return
information to whistleblowers and their legal representatives. In addition, the Administration proposes to extend penalties for unauthorized redisclosure of tax return
information to whistleblowers and their legal representatives. This proposal will improve the efficiency of the
whistleblower award determination proceedings, while
increasing the protection available to taxpayers.
Index all penalties to inflation.—Currently, the
amount of tax penalties that are a set dollar amount are
established when the penalty is added to the Internal
Revenue Code and are only increased by amendments to
the Internal Revenue Code.  As a result, under current
practices, the amount of the penalty is often not increased
until significant time has passed and the penalty amount
is too low to continue serving as an effective deterrent. 
The Administration proposes to index all penalties for
inflation and round the indexed amount to the next hundred dollars.  This proposal would increase the penalty
regime’s effectiveness in deterring negative behavior and
would increase efficiency by eliminating the need to enact
increases to individual penalties. This proposal would be
effective upon enactment.
Extend paid preparer EITC due diligence requirements to the child tax credit.—Under current law, paid
tax return preparers completing a tax return with a claim
for the EITC must complete a checklist of the EITC eligibility criteria and exercise due diligence in preparing
the EITC claim. Preparers who fail to exercise due diligence are subject to a $500 fine for each failure. The due
diligence requirement educates preparers and improves
EITC compliance. The eligibility criteria for the child
tax credit and in particular, the definition of a qualifying
child, are nearly identical for purposes of the EITC and
child tax credit. The Administration proposes to extend
the due diligence requirement to claims of the child tax
credit, including the additional child tax credit.
Extend IRS authority to require truncated SSNs
on Form W-2.—Employers are required to file Form W-2
with the IRS, indicating the SSN, wages paid, taxes withheld and other information for each employee. Employers
must also provide a copy of Form W-2 to each employee.
If a copy of Form W-2 is lost or misdirected, the SSN may
be used to steal the worker’s identity. The proposal would
allow IRS to require employers to show only the last four
digits of the SSN on the employees’ copies of Form W-2 to
prevent identity theft.
Add tax crimes to the Aggravated Identity Theft
Statute.—Tax refund-related identity theft has expanded exponentially in recent years. The Aggravated
Identity Theft Statute contains a list of felony violations
that constitute predicate offenses for aggravated identity

14.  Governmental Receipts

theft but the list does not currently include any tax offenses. The Administration proposes to add tax-related
offenses to the list of predicate offenses contained in the
Aggravated Identity Theft Statute. This proposal would
be effective upon enactment.
Impose a civil penalty on tax identity theft
crimes.—The Administration proposes to impose a
$5,000 civil penalty in tax identity theft cases. The penalty would be effective upon enactment.
Simplify the Tax System
Simplify the rules for claiming the EITC for workers without qualifying children.—The EITC generally
equals a specified percentage of earned income, up to a
maximum dollar amount, that is reduced by the product
of a specified phaseout rate and the amount of earned income or AGI, if greater, in excess of a specified income
threshold. Different credit schedules apply for taxpayers
based on the number of qualifying children the taxpayer
claims. In general, taxpayers with low wages who do not
have a qualifying child may be eligible to claim the small
EITC for workers without qualifying children. However,
if the taxpayer resides with a qualifying child whom the
taxpayer does not claim (perhaps because that child is
claimed by another individual within the household), the
taxpayer is not eligible for any EITC. The Administration
proposes to allow otherwise eligible taxpayers residing
with qualifying children to claim the EITC for workers
without qualifying children. This proposal would be effective for tax years beginning after December 31, 2013.
Modify adoption credit to allow tribal determination of special needs.—Current law allows a more
generous credit for the adoption of children with special
needs. To claim this credit, a State must have made a
determination that the child has special needs. Like
States, many Indian Tribal Governments facilitate adoptions involving special needs children; however, currently,
a tribe is not permitted to make the determination of special needs. The Administration proposes to allow Indian
Tribal Governments to make this determination, effective
for tax years beginning after December 31, 2013
Eliminate minimum required distribution (MRD)
requirements for IRA/plan balances of $75,000 or
less.—The MRD rules generally require that participants
in tax-favored retirement plans and owners of IRAs commence distributions shortly after attaining age 70-1/2 and
that these retirement assets be distributed to them (or
their spouses or other beneficiaries) over a period based on
life expectancy. The penalty for failure to take a minimum
required distribution by the applicable deadline is 50 percent of the amount not withdrawn. The Administration
proposes to simplify tax compliance for retirees of modest means by exempting an individual from the MRD requirements if the aggregate value of the individual’s IRA
and tax-favored retirement plan accumulations does not
exceed $75,000 on a measurement date. The MRD requirements would phase in for individuals with aggregate
retirement balances between $75,000 and $85,000. The
initial measurement date for the dollar threshold would

207
be the beginning of the year in which the individual turns
70-1/2 or dies, with additional measurement dates only
if the individual is subsequently credited with amounts
(other than earnings) that were not previously taken into
account. The proposal would be effective for taxpayers
attaining age 70-1/2 and taxpayers who die before age 701/2 on or after December 31, 2013.
Allow all inherited plan and IRA accounts to be
rolled over within 60 days.—Generally, most amounts
distributed from qualified plans or IRAs may be rolled
over into another IRA or into an eligible retirement plan.
However, the movement of assets from a plan or IRA account inherited by a non-spouse beneficiary cannot be accomplished by means of a 60-day rollover. This difference
in treatment between plan and IRA accounts inherited
by a non-spouse beneficiary and accounts of living participants serves little if any purpose, generates confusion
among plan and IRA administrators, and creates a trap
for unwary beneficiaries. The Administration proposes
to permit rollovers of distributions to all designated beneficiaries of inherited IRA and plan accounts, subject to
inherited IRA treatment, under the same rules that apply
to other IRA accounts, beginning January 1, 2014. 
Repeal non-qualified preferred stock designation.—In 1997, a provision was added to the Internal
Revenue Code that treats as taxable “boot” the receipt of
certain types of preferred stock known as non-qualified
preferred stock (NQPS), where NQPS is issued in a corporate organization or reorganization exchange. Since
enactment, taxpayers have often exploited the hybrid
nature of NQPS, issuing NQPS in transactions that are
inconsistent with the purpose of the 1997 provision. The
Administration proposes to repeal the NQPS designation,
and no longer treat the receipt of such stock as taxable
boot. The proposal would be effective for stock issued after
December 31, 2013.
Repeal preferential dividend rule for publicly offered REITs.—REITs and RICs may claim a deduction
for dividends paid. Historically, however, a dividends paid
deduction was not available for a “preferential dividend.”
A dividend is “preferential” unless it is distributed pro
rata to shareholders, with no preference to any share of
stock as compared with other shares of the same class,
and with no preference to one class compared with another except to the extent the class is entitled to such preference. There are no exceptions for de minimis or accidental violations. The Administration proposes to repeal the
preferential dividend rule for publicly offered REITs. The
Department of the Treasury would also be given explicit
authority to provide for cures of inadvertent violations of
the preferential dividend rule where it continues in effect
and, where appropriate, to require consistent treatment of
shareholders. The proposal would apply to distributions
in taxable years beginning after the date of enactment.
Reform excise tax based on investment income of
private foundations.—Under current law, private foundations that are exempt from Federal income tax are subject to a two-percent excise tax on their net investment income (one-percent if certain requirements are met). The
excise tax on private foundations that are not exempt from

208
Federal income tax, such as certain charitable trusts, is
equal to the excess of the sum of the excise tax that would
have been imposed if the foundation were tax exempt and
the amount of the unrelated business income tax that
would have been imposed if the foundation were tax exempt, over the income tax imposed on the foundation. To
simplify the tax laws and encourage increased charitable
activity, the Administration proposes to replace the two
rates of tax on the net investment income of private foundations that are exempt from Federal income tax with a
single tax rate of 1.35 percent. The excise tax on private
foundations not exempt from Federal income tax would be
equal to the excess of the sum of the 1.35-percent excise
tax that would have been imposed if the foundation were
tax exempt and the amount of the unrelated business
income tax that would have been imposed if the foundation were tax exempt, over the income tax imposed on the
foundation. The proposed change would be effective for
taxable years beginning after the date of enactment.
Remove bonding requirements for certain taxpayers subject to Federal excise taxes on distilled
spirits, wine, and beer.—The Administration proposes
to exempt from current law bond requirements taxpayers subject to Federal excise taxes on alcoholic beverages (manufacturers, producers, and importers of distilled
spirits, wine, and beer) with an expected tax liability for
these taxes of not more than $50,000 in the current year,
who had a tax liability for these taxes of not more than
$50,000 in the prior year. The Administration also proposes to change the excise tax filing and payment period
for these taxpayers to quarterly rather than semi-monthly. A substantial number of these taxpayers continue to
file and pay their taxes semi-monthly even though they
are currently eligible for quarterly filing and payment because quarterly filing raises their deferral bond amounts.
Eliminating the bond requirement would make quarterly
filing less burdensome for these taxpayers and would reduce the burden of processing tax returns and payments
for the Alcohol and Tobacco Tax and Trade Bureau. The
Administration also proposes to allow taxpayers subject
to Federal excise taxes on alcoholic beverages with an expected tax liability for these taxes of not more than $1,000
in the current year to file and pay their taxes annually.
The provision would be effective 90 days after the date of
enactment.
Simplify arbitrage investment restrictions.—
Current law arbitrage investment restrictions imposed
on investments of tax-exempt bond proceeds create unnecessary complexity and compliance burdens for State
and local governments. These restrictions generally
limit investment returns that exceed the effective interest rate on the tax-exempt bonds. One type of restriction, called “yield restriction,” limits arbitrage earnings
in the first instance, and the second type of restriction,
called “rebate,” requires repayment of arbitrage earnings
to the Federal government at periodic intervals. The two
types of arbitrage restrictions are duplicative and overlapping and they address the same tax policy goal to limit
arbitrage profit incentives for excess use of tax-exempt
bonds. The Administration proposes to simplify the ar-

Analytical Perspectives

bitrage investment restrictions on tax-exempt bonds in
several respects. First, the Administration proposes to
unify the arbitrage restrictions to rely primarily on the
rebate requirement and to repeal yield restriction in most
circumstances. Second, recognizing that limited arbitrage potential exists if issuers spend bond proceeds fairly promptly, the Administration proposes a streamlined
broad three-year prompt spending exception to the arbitrage rebate requirement on tax-exempt bonds. Finally,
recognizing the particular compliance burdens for small
issuers, the Administration proposes to increase the small
issuer exception to the arbitrage rebate requirement from
$5 million to $10 million, index the size limit for inflation,
and remove the general taxing power constraint on small
issuer eligibility.
Simplify single-family housing mortgage bond
targeting requirements.—Current law allows use of
tax-exempt private activity bonds to finance qualified
mortgages for single-family residences, subject to a number of targeting requirements, including, among others:
(1) a mortgagor income limitation (generally not more
than 115 percent of applicable median family income, increased to 140 percent of such income for certain targeted
areas, and also increased for certain high-cost areas); (2)
a purchase price limitation (generally not more than 90
percent of average area purchase prices, increased to 110
percent in targeted areas); (3) a refinancing limitation
(generally only new mortgages for first-time homebuyers
are permitted); and (4) a targeted area availability requirement. The Administration proposes to simplify the
targeting requirements for tax-exempt qualified mortgage
bonds by repealing the purchase price limitation and the
refinancing limitation. This proposal would be effective
for bonds issued after the date of enactment.
Streamline private business limits on governmental bonds.—Tax-exempt bonds issued by State and local governments are treated as governmental bonds if
the issuer limits private business use and other private
involvement sufficiently to avoid treatment as “private
activity bonds.” Bonds generally are classified as private
activity bonds under a two-part test if more than 10 percent of the bond proceeds are both: (1) used for private
business use; and (2) payable or secured from property
or payments derived from private business use. A subsidiary restriction further reduces the private business
limits on governmental bonds to 5 percent in the case of
private business use that is unrelated or disproportionate to governmental use. This unrelated or disproportionate use test introduces undue complexity associated
with factual determinations of relatedness, a narrow disqualification trigger, and attendant compliance burdens
for State and local governments. The general 10-percent
private business limit represents a sufficient and workable boundary for private involvement for governmental
bonds. The Administration proposes to streamline the
private business limits on governmental bonds by repealing the 5 percent unrelated or disproportionate private
business limit. This proposal would be effective for bonds
issued after the date of enactment.

209

14.  Governmental Receipts

Exclude self-constructed assets of small taxpayers
from the uniform capitalization (UNICAP) rules.—
Under the UNICAP rules, taxpayers that produce property or acquire property for resale are required to capitalize
direct and indirect costs to the property produced or acquired. Compliance with this requirement is significantly
burdensome for taxpayers that are not otherwise subject
to the rules as producers or resellers of inventory (i.e., for
self-constructed assets). The Administration proposes
an exclusion for these small business taxpayers, which
would relieve both taxpayers and tax administrators from
spending resources on compliance for this group of taxpayers. This proposal would be effective for expenses incurred for self-constructed property by eligible taxpayers
after the date of enactment.
Repeal technical terminations of partnerships.—
A partnership will terminate when 50 percent or more of
the total interest in partnership capital and profits is sold
or exchanged within a 12-month period. This is referred
to as a “technical termination.” This provision serves little purpose and is a trap for the unwary taxpayer. The
Administration proposes eliminating technical terminations effective for transfers after December 31, 2013.
Repeal anti-churning rules of section 197 of the
Internal Revenue Code.—Section 197 was enacted in
1993 to allow amortization of certain intangibles (such as
goodwill and going concern value) that had not been amortizable under prior law. Anti-churning rules were enacted
at that time to prevent taxpayers from engaging in transactions with related parties soon after the enactment of section 197 solely to generate amortizable basis. Because it
has been 19 years since the enactment of section 197, the
anti-churning rules are no longer necessary, and the complexity of the provision outweighs the potential application.
The Administration proposes eliminating the anti-churning
rules effective for acquisitions after December 31, 2013.
User Fees
Reform inland waterways funding.—The Administration
has proposed legislation to reform the laws governing the
Inland Waterways Trust Fund, including establishing an
annual per vessel fee to increase the amount paid by commercial navigation users sufficiently to meet their share of
the costs of activities financed from this fund. The additional
revenue will enable a more robust level of funding for safe,
reliable, highly cost-effective, and environmentally sustainable waterways, and contribute to economic growth. In 1986,
the Congress provided that commercial traffic on the inland
waterways would be responsible for 50 percent of the capital costs of the locks and dams, and other features that make
barge transportation possible on the inland waterways. The
current excise tax of 20 cents per gallon on diesel fuel used
in inland waterways commerce does not produce the revenue
needed to cover the required 50 percent of these costs.
Increase fees for Migratory Bird Hunting and
Conservation Stamps.—Federal Migratory Bird
Hunting and Conservation Stamps, commonly known as
“Duck Stamps,” were originally created in 1934 as the
Federal licenses required for hunting migratory water-

fowl. Today, 98 percent of the receipts generated from the
sale of these stamps ($15 per stamp per year) are used to
acquire important migratory bird breeding areas, migration resting places, and wintering areas. The land and
water interest located and acquired with the Duck Stamp
funds establish or add to existing migratory bird refuges
and waterfowl production areas. The price of the Duck
Stamp has not increased since 1991; however, the cost of
land and water has increased significantly over the past
20 years. The Administration proposes to increase these
fees to $25 per stamp per year, effective beginning in 2014.
Establish a mandatory surcharge for air traffic
services.—All flights that use controlled air space require
a similar level of air traffic services. However, commercial and general aviation can pay very different aviation
fees for those same air traffic services. To more equitably
share the cost of air traffic services across the aviation
user community, the Administration proposes to establish
a new surcharge for air traffic services of $100 per flight.
Military aircraft, public aircraft, piston aircraft, air ambulances, aircraft operating outside of controlled airspace,
and Canada-to-Canada flights would be exempted. The
surcharge would be effective for flights beginning after
September 30, 2013. Assuming the enactment of the fee,
total charges collected from aviation users would finance
roughly three-fourths of airport investments and air traffic control system costs. To ensure appropriate input from
stakeholders on the design of the fee, the proposal would
also establish an expert Commission that could recommend to the President a replacement charge, or charges,
that would raise no less in revenue than the enacted fee.
Reauthorize special assessment on domestic nuclear utilities.—The Administration proposes to reauthorize
the special assessment on domestic nuclear utilities, for
deposit in the Uranium Enrichment Decontamination and
Decommissioning Fund. Established in 1992, the Fund
pays, subject to appropriations, the decontamination and
decommissioning costs of the Department of Energy’s gaseous diffusion plants in Tennessee, Ohio, and Kentucky.
Additional resources from the proposed special assessment
are required due to higher-than-expected cleanup costs.
Trade Initiative
Extend Generalized System of Preferences (GSP).—
This program provides preferential, duty-free entry to the
United States for nearly 5,000 products from 127 designated beneficiary countries and territories. Many GSP imports are used as inputs by U.S. companies to manufacture
goods in the United States. The Administration proposes
to extend GSP, which expires on July 31, 2013.
Other Initiatives
Increase employee contributions to Federal defined benefit retirement plans .—The Middle Class Tax
Relief and Job Creation Act of 2012 increased employee
contributions to Federal defined benefit retirement plans,
including FERS, by 2.3 percentage points, effective for individuals joining the Federal work force after December

210
31, 2012, who have less than five years of creditable civilian service as of December 31, 2012. Benefits for these
employees were not changed. The Administration proposes to increase contributions to Federal defined benefit plans, including the Civil Service Retirement System
(CSRS) and FERS, for existing employees hired before
January 1, 2013, and those joining the Federal work force
after December 31, 2012, with five or more years of creditable service. The proposal would increase contributions
for these employees by 0.4 percent of pay per year over
three years, beginning in 2014, for a total increase of 1.2
percent. Employee benefits would not change.
Allow offset of Federal income tax refunds to collect delinquent State income taxes for out-of-stateresidents.—Under current law, Federal tax refunds may
be offset to collect delinquent State income tax obligations,
but only if the delinquent taxpayer resides in the State
collecting the tax. The Administration proposes to allow
Federal tax refunds to be offset to collect delinquent State
tax obligations regardless of where the debtor resides. The
proposal would be effective on the date of enactment.
Authorize the limited sharing of business tax return information to improve the accuracy of important measures of the economy.—Synchronization of
business lists among the Bureau of Economic Analysis
(BEA), the Bureau of Labor Statistics (BLS), and the
Bureau of the Census (Census Bureau) would significantly improve the consistency and quality of sensitive
economic statistics including productivity, payroll, employment, and average hourly earnings. The availability
of accurate economic statistics is crucial to policy makers.
Current law authorizes IRS disclosure of certain Federal
tax information (FTI) for governmental statistical use.
Business FTI may be disclosed to officers and employees
of the Census Bureau for all businesses. Similarly, business FTI may be disclosed to BEA officers and employees,
but only for corporate businesses. Currently, BLS is not
authorized to receive FTI. The Census Bureau’s Business
Register is constructed using both FTI and non-tax business data derived from the Economic Census and current economic surveys, so that under current law it is not
possible for the Census Bureau to share data with BEA
and BLS in any meaningful way, making synchronizing of their business lists impossible. In addition, given
the growth of non-corporate businesses, especially in the
service sector, the current limitation on BEA’s access to
corporate FTI impedes the measurement of income and
international transactions in the National Accounts. The
Administration proposes to give officers and employees
of BEA and BLS access to certain FTI of corporate and
non-corporate businesses. Additionally, for the purpose
of synchronizing BLS and Census Bureau business lists,
the proposal would permit employees of State agencies
to receive certain business FTI from BLS. No BEA, BLS,
or State agency contractor would have access to FTI.
Additionally, the Census Bureau, BEA, BLS, and the State
agencies would be subject to the confidentiality safeguard
procedures in the Confidential Information Protection
and Statistical Efficiency Act (CIPSEA), as well as tax-

Analytical Perspectives

payer privacy law and related safeguards and penalties.
The proposal would be effective upon enactment.
Eliminate certain reviews conducted by the U.S.
Treasury Inspector General for Tax Administration
(TIGTA).—Under current law, TIGTA conducts reviews to
comply with reporting requirements. The Administration
proposes to eliminate TIGTA’s obligation to report information regarding any administrative or civil actions related to
Fair Tax Collection Practices violations in one of TIGTA’s
Semiannual Reports, review and certify annually that the
IRS is complying with the requirements of section 6103(e)(8)
regarding information on joint filers, and annually report on
the IRS’s compliance with sections 7521(b)(2) and (c) requiring IRS employees to stop a taxpayer interview whenever
a taxpayer requests to consult with a representative and to
obtain their immediate supervisor’s approval to contact the
taxpayer instead of the representative if the representative
has unreasonably delayed the completion of an examination or investigation. The proposal would revise the annual
reporting requirement for all remaining provisions in the
IRS Restructuring and Reform Act of 1998 to a biennial reporting requirement. The proposal would be effective after
December 31, 2013.
Modify indexing to prevent deflationary adjustments.—Many parameters of the tax system – including
the size of personal exemptions and standard deductions,
the width of income tax rate brackets, the amount of other deductions and credits, and the maximum amount of
various saving and retirement deductions – may be adjusted annually for the effects of inflation, based on annual changes in the Consumer Price Index (CPI). Under
current law, if price levels decline, most (but not all) of the
inflation adjustment provisions would permit tax parameters to become smaller, so long as they do not decline to
less than their base period values. The Administration
proposes to modify inflation adjustment provisions to prevent the size of all indexed tax parameters from decreasing from the previous year’s levels if the underlying price
index falls. Subsequent inflation-related increases would
be based on the highest previous level of the price index
relevant for adjusting the particular tax parameter. The
proposal would be effective as of the date of enactment.
Replace the CPI with the chained CPI for purposes
of indexing tax provisions for inflation.—Under current law, a number of parameters of the Internal Revenue
Code are indexed for inflation to protect taxpayers from
the effects of rising prices. Such parameters include the
dollar value of the personal exemption and the standard
deduction, the income thresholds for the individual income tax rate brackets, and the income thresholds and
phaseout ranges for a number of tax credits. These parameters are currently indexed to the CPI, which overstates increases in the cost of living because it does not
fully account for the fact that consumers generally adjust
their spending patterns as some prices change relative to
other prices. The Administration proposes to index tax
provisions to the chained CPI, which more accurately reflects how consumers react to changes in relative prices,
effective for tax years beginning after December 31, 2014.

211

14.  Governmental Receipts

Table 14–4.  Effect of Budget Proposals
(In millions of dollars)
2013
Tax relief to create jobs and jumpstart
growth:
Provide small businesses a temporary
10-percent tax credit for new jobs and
wage increases 1 ���������������������������������
Provide additional tax credits for
investment in qualified property
used in a qualified advanced energy
manufacturing project ��������������������������
Designate Promise Zones 1 ���������������������
Total, tax relief to create jobs and
jumpstart growth ������������������������������
Incentives for investment in infrastructure:
Provide America Fast Forward Bonds 1 ���
Allow eligible uses of America Fast
Forward Bonds to include financing
all qualified private activity bond
categories 1 �����������������������������������������
Increase the Federal subsidy rate for
America Fast Forward Bonds for
school construction 1 ���������������������������
Allow current refundings of State and local
governmental bonds 3 �������������������������
Repeal the $150 million nonhospital bond
limitation on all qualified 501(c)(3)
bonds ���������������������������������������������������
Increase national limitation amount for
qualified highway or surface freight
transfer facility bonds ��������������������������
Eliminate the volume cap for private activity
bonds for water infrastructure ����������������
Increase the 25-percent limit on land
acquisition restriction on private activity
bonds ���������������������������������������������������
Allow more flexible research
arrangements for purposes of private
business use limits �������������������������������
Repeal the government ownership
requirement for certain types of exempt
facility bonds ����������������������������������������
Exempt certain foreign pension funds from
the application of FIRPTA ��������������������
Total, incentives for investment in
infrastructure ������������������������������������
Tax cuts for families and individuals:
Provide for automatic enrollment in IRAs,
including a small employer tax credit,
and double the tax credit for small
employer plan start-up costs 1 ������������
Expand child and dependent care tax
credit 1 �������������������������������������������������
Extend exclusion from income for
cancellation of certain home mortgage
debt ������������������������������������������������������
Provide exclusion from income for student
loan forgiveness for students in certain
income-based or income-contingent
repayment programs who have
completed payment obligations �����������
Provide exclusion from income for student
loan forgiveness and for certain
scholarship amounts for participants in
the IHS Health Professions Programs �����
Total, tax cuts for families and
individuals ����������������������������������������

2014

2015

2016

2017

–9,446

–2,752

–1,648

–932

–444

–179

–40

.........

......... –25,134 –25,797

–85
.........

–390
–107

–640
–316

–614
–522

–261
–697

6
–769

64
–757

54
–744

29
–734

10
–730

......... –10,441

–9,943

–3,708

–2,784

–1,890

–1,207

–872

–730

–705

–720 –28,766 –33,000

......... –10,356

.........
.........

2018

2019

2020

2021

2022

2023

2014–18 2014–23

–1,990
–1,642

–1,827
–5,376

.........

1

1

.........

–1

.........

.........

.........

.........

.........

.........

1

1

.........

–2

–4

–8

–15

–20

–25

–30

–37

–44

–49

–49

–234

.........

–251

–794

–1,117

–1,147

–1,147

–1,147

–1,147

–1,147

–1,147

–1,147

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

–1

–3

–5

–7

–9

–11

–13

–16

–17

–18

–25

–100

.........

.........

.........

–3

–16

–34

–52

–72

–92

–113

–133

–53

–515

.........

–3

–5

–9

–14

–20

–27

–33

–41

–49

–57

–51

–258

.........

–2

–4

–8

–11

–15

–19

–23

–27

–32

–35

–40

–176

.........

.........

.........

–1

–1

–1

–1

–3

–3

–3

–3

–3

–16

–16

–71

–152

–238

–330

–410

–459

–488

–518

–549

–549

–1,201

–3,764

.........

–109

–187

–196

–206

–216

–227

–238

–250

–263

–276

–914

–2,168

–16

–438

–1,148

–1,585

–1,748

–1,872

–1,968

–2,047

–2,131

–2,217

–2,267

–6,791 –17,421

.........

.........

–1,086

–1,303

–1,434

–1,584

–1,809

–2,098

–2,383

–2,734

–3,195

–5,407 –17,626

.........

–251

–953

–954

–946

–957

–955

–949

–947

–937

–926

–4,061

–8,775

.........

–1,058

–1,252

–300

.........

.........

.........

.........

.........

.........

.........

–2,610

–2,610

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

–2

.........

–2

.........

–5

–13

–14

–14

–15

–16

–18

–19

–20

–21

–61

–155

.........

–1,314

–3,304

–2,571

–2,394

–2,556

–2,780

–3,065

–3,349

–3,691

–4,456 –10,191

–4,144 –12,139 –29,168

212

Analytical Perspectives

Table 14–4.  Effect of Budget Proposals—Continued
(In millions of dollars)
2013
Upper-income tax provisions:
Reduce the value of certain tax
expenditures ����������������������������������������
Implement the Buffett Rule by imposing a
new “Fair Share Tax” ����������������������������
Total, upper-income tax provisions �������
Modify estate and gift tax provisions:
Restore the estate, gift and GST tax
parameters in effect in 2009 ���������������
Require consistency in value for transfer
and income tax purposes ��������������������
Require a minimum term for GRATs ���������
Limit duration of GST tax exemption ��������
Coordinate certain income and transfer
tax rules applicable to grantor trusts ����
Extend the lien on estate tax deferrals
provided under section 6166 ���������������
Clarify GST tax treatment of HEETs ���������
Total, modify estate and gift tax
provisions �����������������������������������������
Reform treatment of financial industry
institutions and products:
Impose a financial crisis responsibility fee �����
Require current inclusion in income of
accrued market discount and limit the
accrual amount for distressed debt ������
Require that the cost basis of stock that is
a covered security must be determined
using an average cost basis method ���
Total, reform treatment of financial
industry institutions and products ����
Other revenue changes and loophole
closers:
Levy a fee on the production of hardrock
minerals to restore abandoned mines ���
Return fees on the production of coal to
pre–2006 levels to restore abandoned
mines ���������������������������������������������������
Increase Oil Spill Liability Trust Fund
financing rate by one cent and update
the law to include other sources of
crudes 2 �����������������������������������������������
Reinstate Superfund taxes 2 ��������������������
Increase tobacco taxes and index for
inflation 2 ���������������������������������������������
Make UI surtax permanent 2 ��������������������
Provide short-term tax relief to employers
and expand FUTA base 2 ��������������������
Tax carried (profits) interests as ordinary
income �������������������������������������������������
Eliminate the deduction for contributions
of conservation easements on golf
courses ������������������������������������������������
Restrict deductions and harmonize the
rules for contributions of conservation
easements for historic preservation �����
Require non-spouse beneficiaries
of IRA owners and retirement
plan participants to take inherited
distributions over no more than five
years ����������������������������������������������������
Limit the total accrual of tax-favored
retirement benefits �������������������������������
Total, other revenue changes and
loophole closers �������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

.........

24,568

39,800

43,014

46,800

51,100

55,639

60,271

64,995

69,214

73,860 205,282 529,261

.........
.........

5,327
29,895

1,726
41,526

3,486
46,500

5,542
52,342

6,177
57,277

5,967
61,606

5,968
66,239

6,146
71,141

6,393
75,607

6,655 22,258 53,387
80,515 227,540 582,648

.........

.........

.........

.........

.........

.........

12,235

13,284

14,343

15,356

16,475

.........

71,693

.........
.........
.........

.........
.........
.........

158
131
.........

171
194
.........

183
261
.........

197
335
.........

210
412
.........

223
494
.........

237
581
.........

251
683
.........

266
803
.........

709
921
.........

1,896
3,894
.........

.........

.........

36

47

62

79

102

129

164

207

261

224

1,087

.........
.........

.........
47

12
–30

15
–29

16
–27

17
–26

18
–24

19
–23

20
–21

21
–20

22
–18

60
–65

160
–171

.........

47

307

398

495

602

12,953

14,126

15,324

16,498

17,809

1,849

78,559

.........

.........

2,991

6,066

6,321

6,581

6,839

7,159

7,470

7,794

8,128

21,959

59,349

.........

6

21

42

67

95

126

160

197

236

276

231

1,226

–91

–75

61

126

200

248

266

284

301

319

339

560

2,069

–91

–69

3,073

6,234

6,588

6,924

7,231

7,603

7,968

8,349

8,743

22,750

62,644

.........

.........

200

200

200

200

200

200

200

200

200

800

1,800

.........

53

52

53

53

53

53

55

55

.........

.........

264

427

.........
.........

64
1,369

88
1,818

92
1,899

102
1,970

106
2,053

109
2,123

116
2,152

121
2,206

127
2,257

133
2,358

452
9,109

1,058
20,205

.........
.........

7,725
1,044

9,844
1,459

9,264
1,489

8,718
1,520

8,205
1,551

7,723
1,576

7,268
1,597

6,842
1,618

6,440
1,641

6,062
1,660

43,756
7,063

78,091
15,155

.........

–2,467

–2,746

6,910

9,324

7,227

6,848

5,495

4,925

8,036

7,929

18,248

51,481

.........

3,407

3,096

2,389

1,718

1,247

1,105

1,065

864

612

406

11,857

15,909

.........

37

53

55

59

61

64

68

71

74

77

265

619

.........

8

11

16

22

26

27

28

31

32

33

83

234

.........

86

224

369

517

668

699

660

612

563

513

1,864

4,911

.........

802

831

839

876

964

1,010

1,054

923

1,082

961

4,312

9,342

.........

12,128

14,930

23,575

25,079

22,361

21,537

19,758

18,468

21,064

20,332

98,073 199,232

213

14.  Governmental Receipts

Table 14–4.  Effect of Budget Proposals—Continued
(In millions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

Reduce the tax gap and make reforms:
Expand information reporting:
Require information reporting for
private separate accounts of life
insurance companies �����������������������
Require a certified TIN from contractors
and allow certain withholding �����������
Modify reporting of tuition expenses
and scholarships on Form 1098-T 1 
Provide for reciprocal reporting of
information in connection with the
implementation of FATCA ����������������
Subtotal, expand information
reporting �������������������������������������
Improve compliance by businesses:
Require greater electronic filing of
returns ���������������������������������������������
Make e-filing mandatory for exempt
organizations �����������������������������������
Authorize the Department of the
Treasury to require additional
information to be included in
electronically filed Form 5500
Annual Reports and electronic filing
of certain other employee benefit
plan reports ��������������������������������������
Implement standards clarifying when
employee leasing companies can be
held liable for their clients’ Federal
employment taxes ����������������������������
Increase certainty with respect to
worker classification �������������������������
Repeal special estimated tax payment
provision for certain insurance
companies ���������������������������������������
Subtotal, improve compliance by
businesses ����������������������������������
Strengthen tax administration:
Impose liability on shareholders
participating in “Intermediary
Transaction Tax Shelters” to collect
unpaid corporate income taxes ��������
Increase levy authority for payments to
Medicare providers with delinquent
tax debt �������������������������������������������
Implement a program integrity
statutory cap adjustment for tax
administration ����������������������������������
Enhance UI program integrity 2 ������������
Streamline audit and adjustment
procedures for large partnerships ����
Revise offer-in-compromise application
rules �������������������������������������������������
Expand IRS access to information in
the NDNH for tax administration
purposes ������������������������������������������
Make repeated willful failure to file a tax
return a felony ����������������������������������
Facilitate tax compliance with local
jurisdictions ��������������������������������������
Extend statute of limitations where
State adjustment affects Federal tax
liability ����������������������������������������������
Improve investigative disclosure statute �����
Require taxpayers who prepare their
returns electronically but file their
returns on paper to print their
returns with a 2-D bar code �������������

.........

.........

.........

.........

1

1

1

1

1

1

1

2

7

.........

25

58

99

135

141

147

154

161

168

176

458

1,264

.........

8

105

111

114

117

120

124

128

132

136

455

1,095

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

33

163

210

250

259

268

279

290

301

313

915

2,366

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

5

6

6

6

7

7

8

8

8

8

30

69

4

73

361

706

857

945

1,035

1,129

1,226

1,328

1,437

2,942

9,097

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

4

78

367

712

863

952

1,042

1,137

1,234

1,336

1,445

2,972

9,166

.........

304

421

444

469

493

517

540

562

586

611

2,131

4,947

.........

46

67

70

71

72

74

76

76

77

78

326

707

.........
.........

458
.........

1,252
.........

2,503
–5

3,766
–14

5,052
–30

5,955
–737

6,525
–571

6,816
–49

7,017
1,361

7,158
111

13,031
–49

46,502
66

.........

78

114

138

174

208

227

232

233

234

235

712

1,873

.........

1

1

1

1

1

1

1

1

1

1

5

10

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

1

1

1

1

2

2

2

2

10

.........

1

1

1

1

1

2

2

2

2

2

5

15

.........
.........

.........
.........

.........
.........

1
.........

4
1

4
1

4
1

4
1

4
2

4
2

4
2

9
2

29
10

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

214

Analytical Perspectives

Table 14–4.  Effect of Budget Proposals—Continued
(In millions of dollars)
2013
Allow the IRS to absorb credit and debit
card processing fees for certain tax
payments �����������������������������������������
Provide the Secretary of the Treasury
authority to access and disclose
prisoner data to prevent and identify
improper payments ��������������������������
Extend IRS math error authority in
certain circumstances 1 �������������������
Impose a penalty on failure to comply
with electronic filing requirements ����
Restrict access to the DMF 1 ���������������
Provide whistleblowers with protection
from retaliation ���������������������������������
Provide stronger protection from
improper disclosure of taxpayer
information in whistleblower actions 
Index all penalties to inflation ����������������
Extend paid preparer EITC due
diligence requirements to the child
tax credit ������������������������������������������
Extend IRS authority to require
truncated SSNs on Form W–2 ���������
Add tax crimes to the Aggravated
Identity Theft Statute ������������������������
Impose a civil penalty on tax identity
theft crimes ��������������������������������������
Subtotal, strengthen tax
administration �����������������������������
Total, reduce the tax gap and
make reforms �������������������������
Simplify the tax system:
Simplify the rules for claiming the EITC for
workers without qualifying children 1 ���
Modify adoption credit to allow tribal
determination of special needs ������������
Eliminate MRD requirements for IRA/plan
balances of $75,000 or less �����������������
Allow all inherited plan and IRA accounts
to be rolled over within 60 days �����������
Repeal non-qualified preferred stock
designation ������������������������������������������
Repeal preferential dividend rule for
publicly offered REITs ��������������������������
Reform excise tax based on investment
income of private foundations ��������������
Remove bonding requirements for certain
taxpayers subject to Federal excise taxes
on distilled spirits, wine, and beer ������������
Simplify arbitrage investment restrictions ���
Simplify single-family housing mortgage
bond targeting requirements ����������������
Streamline private business limits on
governmental bonds ����������������������������
Exclude self-constructed assets of small
taxpayers from the UNICAP rules ��������
Repeal technical terminations of
partnerships �����������������������������������������
Repeal anti-churning rules of section 197 
Total, simplify the tax system ����������������
User fees:
Reform inland waterways funding 2 ���������
Increase fees for Migratory Bird Hunting
and Conservation Stamps �������������������
Establish a mandatory surcharge for air
traffic services 2 ����������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

.........

1

2

2

2

2

2

2

2

2

2

9

19

.........

24

35

36

37

38

39

40

41

42

43

170

375

.........

16

17

16

17

18

19

19

21

21

21

84

185

.........
.........

.........
65

.........
131

.........
132

1
135

1
138

1
137

1
137

2
140

2
143

2
145

2
601

10
1,303

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........
.........

.........
349

.........
544

.........
699

.........
844

.........
995

.........
1,147

.........
1,303

.........
1,462

.........
1,625

.........
1,791

.........
3,431

.........
10,759

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,343

2,585

4,038

5,510

6,995

7,390

8,313

9,317

11,121

10,208

20,471

66,820

4

1,454

3,115

4,960

6,623

8,206

8,700

9,729

10,841

12,758

11,966

24,358

78,352

.........

–42

–562

–576

–589

–599

–578

–590

–604

–617

–632

–2,368

–5,389

.........

.........

.........

.........

.........

.........

–1

–1

–1

–1

–1

.........

–5

.........

–4

–7

–9

–14

–17

–23

–29

–35

–39

–45

–51

–222

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

29

49

48

45

42

37

33

29

26

23

213

361

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

–4

–4

–5

–5

–5

–5

–6

–6

–7

–7

–23

–54

.........
–2

.........
–9

.........
–18

.........
–26

.........
–37

.........
–46

.........
–57

.........
–66

.........
–76

.........
–86

.........
–97

.........
–136

.........
–518

.........

.........

.........

.........

–1

–1

–1

–3

–3

–3

–3

–2

–15

–1

–3

–5

–7

–9

–11

–13

–15

–17

–19

–20

–35

–119

.........

–46

–48

–51

–69

–80

–92

–97

–101

–105

–110

–294

–799

.........
.........
–3

7
–23
–95

14
–95
–676

17
–187
–796

18
–250
–911

19
–281
–979

20
–295
–1,008

21
–298
–1,051

22
–298
–1,090

22
–298
–1,127

23
–298
–1,167

75
–836
–3,457

183
–2,323
–8,900

.........

82

113

113

113

113

113

113

113

113

114

534

1,100

.........

14

14

14

14

14

14

14

14

14

14

70

140

.........

605

632

660

690

719

745

766

790

812

836

3,306

7,255

215

14.  Governmental Receipts

Table 14–4.  Effect of Budget Proposals—Continued
(In millions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

Reauthorize special assessment on
domestic nuclear utilities ���������������������
Total, user fees �������������������������������������

.........
.........

200
901

204
963

209
996

213
1,030

218
1,064

223
1,095

228
1,121

233
1,150

238
1,177

243
1,207

1,044
4,954

2,209
10,704

Trade initiative:
Extend GSP 2 �������������������������������������������

.........

–394

–613

.........

.........

.........

.........

.........

.........

.........

.........

–1,007

–1,007

.........

800

1,569

2,325

2,300

2,273

2,237

2,197

2,153

2,104

2,050

9,267

20,008

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........
.........

.........
800

1,000
2,569

3,000
5,325

6,000
8,300

8,000
10,273

10,000
12,237

13,000
15,197

16,000
18,153

20,000
22,104

23,000
25,050

Other initiatives:
Increase employee contributions to
Federal defined benefit retirement
plans ����������������������������������������������������
Allow offset of Federal income tax refunds
to collect delinquent State income
taxes for out-of-state-residents ������������
Authorize the limited sharing of business
tax return information to improve the
accuracy of important measures of the
economy ����������������������������������������������
Eliminate certain reviews conducted by
the U.S. TIGTA �������������������������������������
Modify indexing to prevent deflationary
adjustments �����������������������������������������
Replace the CPI with the chained CPI for
purposes of indexing tax provisions for
inflation ������������������������������������������������
Total, other initiatives ����������������������������
1

18,000 100,000
27,267 120,008

Total, effect of proposals �������������
–106 32,474 50,799 79,328 92,620 99,410 118,396 126,738 135,745 149,817 157,324 354,631 1,042,651
This proposal affects both receipts and outlays. Both effects are shown here. The outlay effects included in these estimates are listed below:
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2014–18 2014–23

Provide small businesses a temporary
10-percent tax credit for new jobs
and wage increases �������������������������

3

133

417

.........

.........

.........

.........

.........

.........

.........

.........

550

550

.........

.........

13

28

30

30

33

35

37

40

41

101

287

Provide America Fast Forward Bonds ��
Allow eligible uses of America Fast
Forward Bonds to include financing
all qualified private activity bond
categories ����������������������������������������
Increase the Federal subsidy rate for
America Fast Forward Bonds for
school construction ��������������������������
Provide for automatic enrollment in
IRAs, including a small employer tax
credit, and double the tax credit for
small employer plan start-up costs �
Expand child and dependent care tax
credit ������������������������������������������������
Modify reporting of tuition expenses
and scholarships on Form 1098-T ���
Extend IRS math error authority in
certain circumstances ����������������������

2

.........

Designate Promise Zones ��������������������

.........

230

1,022

2,117

3,202

4,372

5,656

7,029

8,476

9,977

11,511

10,943

53,592

.........

47

213

460

723

999

1,288

1,589

1,902

2,224

2,552

2,442

11,997

.........

409

1,522

2,512

2,799

2,799

2,799

2,799

2,799

2,799

2,799

10,041

24,036

.........

.........

203

209

212

216

222

228

231

234

239

840

1,994

.........

.........

331

344

357

371

383

393

407

415

421

1,403

3,422

.........

.........

–29

–33

–34

–35

–36

–37

–38

–39

–40

–131

–321

.........

–7

–7

–7

–7

–8

–8

–8

–9

–9

–9

–36

–79

Restrict access to the DMF ������������������
.........
.........
–44
–43
–44
–45
–46
Simplify the rules for claiming the
EITC for workers without qualifying
children ��������������������������������������������
.........
25
494
506
518
528
510
Total, outlay effects of receipt
6,093
7,756
9,227 10,801
proposals ������������������������������������
.........
837
4,135
Net of income offsets.
This provision is estimated to have zero receipt effect under the Adminstration’s current economic projections.

–45

–46

–47

–48

–176

–408

521

533

544

558

2,071

4,737

12,504

14,292

16,138

18,024

28,048

99,807

216

Analytical Perspectives

Table 14–5.  Receipts By Source
(In millions of dollars)
Source

2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Individual income taxes:
Federal funds
1,132,206 1,234,103 1,358,165 1,511,773 1,644,560 1,776,010 1,899,786 2,017,467 2,143,957 2,273,830 2,402,072 2,559,458
Legislative proposal, not subject to
PAYGO �����������������������������������������
.........
.........
458
1,252
2,503
3,767
5,054
5,999
6,558
6,819
6,937
7,151
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
–91
24,549
38,749
52,959
63,792
72,302
81,047
90,148
99,071 108,421 117,252
Total, Individual income taxes ���������������������� 1,132,206 1,234,012 1,383,172 1,551,774 1,700,022 1,843,569 1,977,142 2,104,513 2,240,663 2,379,720 2,517,430 2,683,861
Corporation income taxes:
Federal funds:
Federal funds
Legislative proposal, subject to
PAYGO �����������������������������������������
Total, Federal funds
Trust funds:
Legislative proposal, subject to
PAYGO �����������������������������������������
Total, Corporation income taxes ������������������

242,289

287,740

335,119

376,448

398,702

427,006

446,224

464,821

475,139

487,410

504,269

522,612

.........
242,289

–24
287,716

–3,066
332,053

–1,373
375,075

1,532
400,234

1,985
428,991

2,916
449,140

3,783
468,604

4,528
479,667

5,190
492,600

5,813
510,082

6,427
529,039

.........

.........

766

1,016

1,090

1,157

1,237

1,300

1,322

1,373

1,416

1,496

242,289

287,716

332,819

376,091

401,324

430,148

450,377

469,904

480,989

493,973

511,498

530,535

Social insurance and retirement receipts
(trust funds):
Employment and general retirement:
Old-age survivors insurance (off-budget) 486,783 575,726 632,294 665,824 707,384 744,512 785,847 826,298 862,430 910,024 953,912 993,955
Legislative proposal, not subject to
PAYGO �����������������������������������������
.........
.........
.........
.........
.........
2
3
97
75
6
–180
–15
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
2
–445
–540
–1,664
–1,904
–1,572
–1,468
–1,241
–1,128
–1,486
–1,439
Disability insurance (off-budget) ������������
82,718
97,759 107,367 113,064 120,122 126,427 133,446 140,315 146,450 154,533 161,985 168,785
Legislative proposal, not subject to
PAYGO �����������������������������������������
.........
.........
.........
.........
.........
.........
1
17
13
1
–30
–3
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
.........
–76
–92
–282
–322
–267
–250
–211
–191
–252
–243
Hospital Insurance
201,143 208,412 223,574 237,084 253,099 267,316 282,804 297,567 310,916 328,591 344,959 360,232
Legislative proposal, not subject to
PAYGO �����������������������������������������
.........
.........
.........
.........
.........
.........
1
26
20
2
–49
–4
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
7
224
694
952
1,097
1,295
1,425
1,586
1,667
1,707
1,772
Railroad retirement:
Social security equivalent account ���������
1,764
2,135
2,186
2,262
2,327
2,399
2,463
2,527
2,595
2,665
2,728
2,795
Rail pension & supplemental annuity �����
2,519
2,751
2,794
3,002
3,124
3,220
3,309
3,395
3,637
3,773
4,024
4,659
Total, Employment and general retirement �� 774,927 886,792 967,918 1,021,298 1,085,062 1,142,747 1,207,330 1,269,949 1,326,270 1,399,943 1,467,318 1,530,494
On-budget ���������������������������������������������� (205,426) (213,305) (228,778) (243,042) (259,502) (274,032) (289,872) (304,940) (318,754) (336,698) (353,369) (369,454)
Off-budget ���������������������������������������������� (569,501) (673,487) (739,140) (778,256) (825,560) (868,715) (917,458) (965,009) (1,007,516) (1,063,245) (1,113,949) (1,161,040)
Unemployment insurance:
Deposits by States 1 �������������������������������
59,378
52,586
51,494
50,396
49,125
47,435
46,529
45,639
46,245
47,380
47,676
49,477
Legislative proposal, not subject to
PAYGO �����������������������������������������
.........
.........
.........
.........
–5
–17
–37
–921
–712
–61
1,700
140
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
.........
7
206
9,842
10,758
9,509
11,373
10,264
9,705
9,143
8,670
Federal unemployment receipts 1 ����������
7,059
7,862
8,442
9,076
9,256
7,909
8,441
8,738
9,684
10,207
6,160
6,242
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
.........
–1,778
–1,783
717
2,866
1,536
–767
–1,317
–1,443
3,038
3,405
210
107
39
89
155
158
115
88
110
148
152
125
Railroad unemployment receipts 1 ���������
Total, Unemployment insurance �����������������
66,647
60,555
58,204
57,984
69,090
69,109
66,093
64,150
64,274
65,936
67,869
68,059
Other retirement:
Federal employees retirement- employee
share �������������������������������������������������
3,712
3,727
3,716
3,698
3,792
4,148
4,341
4,558
4,806
5,086
5,393
5,724
Legislative proposal, subject to
PAYGO �����������������������������������������
.........
.........
800
1,569
2,325
2,300
2,273
2,237
2,197
2,153
2,104
2,050

217

14.  Governmental Receipts

Table 14–5.  Receipts By Source—Continued
(In millions of dollars)
Source
Non-Federal employees retirement 2 �����
Total, Other retirement ��������������������������������

2012
Actual
28
3,740

Estimate
2013
19
3,746

2014

2015

17
4,533

2016

17
5,284

2017

17
6,134

2018

17
6,465

2019

17
6,631

2020

17
6,812

2021

17
7,020

2022

17
7,256

2023

17
7,514

17
7,791

Total, Social insurance and retirement
receipts (trust funds) �������������������������������� 845,314 951,093 1,030,655 1,084,566 1,160,286 1,218,321 1,280,054 1,340,911 1,397,564 1,473,135 1,542,701 1,606,344
On-budget ��������������������������������������������������� (275,813) (277,606) (291,515) (306,310) (334,726) (349,606) (362,596) (375,902) (390,048) (409,890) (428,752) (445,304)
Off-budget ��������������������������������������������������� (569,501) (673,487) (739,140) (778,256) (825,560) (868,715) (917,458) (965,009) (1,007,516) (1,063,245) (1,113,949) (1,161,040)
Excise taxes:
Federal funds:
Alcohol ���������������������������������������������������
Tobacco �������������������������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Transportation fuels �������������������������������
Telephone and teletype services �����������
High-cost health insurance coverage �����
Health insurance providers ��������������������
Indoor tanning services �������������������������
Medical devices �������������������������������������
Other Federal fund excise taxes ������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Total, Federal funds ������������������������������������
Trust funds:
Transportation ����������������������������������������
Airport and airway ����������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Sport fish restoration and boating safety 
Tobacco assessments ���������������������������
Black lung disability insurance ���������������
Inland waterway �������������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Hazardous substance superfund
(Legislative proposal subject to
PAYGO) ���������������������������������������������
Oil spill liability ���������������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Vaccine injury compensation �����������������
Leaking underground storage tank ��������
Supplementary medical insurance ��������
Patient-centered outcomes research �����
Total, Trust funds �����������������������������������������

9,765
16,351

9,713
15,928

9,920
15,525

9,963
15,209

9,991
15,000

10,163
14,867

10,388
14,796

10,624
14,700

10,866
14,542

11,116
14,361

11,371
14,190

11,607
14,096

.........
–5,751
757
.........
.........
102
.........
–865

.........
–3,044
645
.........
.........
111
2,124
1,792

10,299
–1,810
547
.........
6,400
121
2,955
1,631

13,125
–971
462
.........
10,640
133
3,129
1,634

12,352
–937
389
.........
11,300
145
3,273
1,640

11,624
–910
326
.........
13,380
158
3,449
1,688

10,940
–890
273
5,099
14,220
154
3,658
1,748

10,297
–880
227
17,747
14,954
177
3,892
1,818

9,691
–868
188
21,019
15,857
195
4,147
1,886

9,122
–859
155
26,113
16,804
208
4,412
1,959

8,587
–842
127
31,498
17,813
221
4,690
2,036

8,082
–821
103
39,179
18,880
225
4,987
2,119

.........
20,359

.........
27,269

–3
45,585

–3
53,321

–3
53,150

–3
54,742

–2
60,384

–1
73,555

–2
77,521

–1
83,390

–2
89,689

–1
98,456

40,169
12,532

38,652
11,921

39,009
12,199

39,406
12,648

39,775
13,209

40,049
13,804

40,290
14,363

40,468
14,742

40,582
15,184

40,965
15,645

41,349
16,089

41,445
16,590

.........
614
939
629
90

.........
545
960
580
87

807
561
960
566
90

842
581
960
545
93

881
604
960
547
96

921
634
960
551
99

959
663
960
559
102

992
694
960
351
104

1,022
725
960
263
107

1,053
754
960
272
109

1,083
785
960
284
112

1,114
817
960
290
115

.........

.........

2

2

2

2

2

2

2

2

2

2

.........
497

.........
504

803
506

1,070
501

1,077
495

1,084
532

1,089
539

1,098
533

1,105
529

1,111
523

1,121
521

1,149
536

.........
254
170
2,808
.........
58,702

.........
262
181
4,207
178
58,077

85
271
180
2,960
365
59,364

118
280
181
3,000
391
60,618

123
287
182
3,000
418
61,656

135
295
182
3,800
447
63,495

141
303
182
4,080
476
64,708

147
311
180
3,060
506
64,148

154
318
179
2,800
538
64,468

161
327
178
2,800
572
65,432

169
337
178
2,800
608
66,398

178
346
176
2,800
648
67,166

Total, Excise taxes ����������������������������������������

79,061

85,346

104,949

113,939

114,806

118,237

125,092

137,703

141,989

148,822

156,087

165,622

Estate and gift taxes:
Federal funds �����������������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������

13,973

12,932

12,967

13,645

15,097

16,416

17,807

18,953

20,055

21,239

22,277

23,329

.........

.........

47

307

400

497

605

12,095

13,352

14,720

16,045

17,479

Total, Estate and gift taxes ��������������������������

13,973

12,932

13,014

13,952

15,497

16,913

18,412

31,048

33,407

35,959

38,322

40,808

Customs duties and fees:
Federal funds:
Federal funds �����������������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������

28,696

31,890

37,440

40,827

43,975

47,197

50,355

52,989

55,966

58,913

62,129

65,736

.........

.........

–526

–817

.........

.........

.........

.........

.........

.........

.........

.........

218

Analytical Perspectives

Table 14–5.  Receipts By Source—Continued
(In millions of dollars)
Source

2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Total, Federal funds ������������������������������������
Trust funds:
Trust funds ���������������������������������������������

28,696

31,890

36,914

40,010

43,975

47,197

50,355

52,989

55,966

58,913

62,129

65,736

1,611

1,739

1,841

1,932

1,990

2,078

2,193

2,301

2,405

2,507

2,591

2,591

Total, Customs duties and fees �������������������

30,307

33,629

38,755

41,942

45,965

49,275

52,548

55,290

58,371

61,420

64,720

68,327

512

508

504

506

506

507

508

509

510

512

513

513

81,957
374

82,853
522

92,037
497

79,006
560

50,838
571

11,624
583

.........
594

10,415
606

29,769
618

33,432
631

36,510
643

39,239
656

13,789

13,897

13,911

36,607

36,578

33,149

28,926

32,685

35,633

34,555

34,259

33,937

.........
9,468

.........
7,427

267
21,328

470
30,759

476
33,226

480
36,338

485
38,581

490
40,506

497
42,508

502
44,610

452
46,767

457
48,774

.........
–47
106,053

.........
–51
105,156

11
–33
128,522

11
–32
147,887

33
–32
122,196

44
–32
82,693

56
–32
69,118

68
–32
85,247

80
–32
109,583

92
–32
114,302

105
–32
119,217

117
–32
123,661

35
100

32
296

29
133

27
211

24
213

22
215

21
217

15
219

14
221

13
223

12
119

11
121

.........
826
961

.........
1,833
2,161

80
1,490
1,732

111
1,185
1,534

111
1,007
1,355

111
1,038
1,386

111
882
1,231

111
892
1,237

111
922
1,268

111
943
1,290

111
965
1,207

112
976
1,220

107,014

107,317

130,254

149,421

123,551

84,079

70,349

86,484

110,851

115,592

120,424

124,881

Miscellaneous receipts:
Federal funds:
Miscellaneous taxes ������������������������������
Deposit of earnings, Federal Reserve
System ����������������������������������������������
Transfers from the Federal Reserve ������
Fees for permits and regulatory and
judicial services ��������������������������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Fines, penalties, and forfeitures �������������
Legislative proposal, subject to
PAYGO �����������������������������������������
Refunds and recoveries �������������������������
Total, Federal funds ������������������������������������
Trust funds:
United Mine Workers of America,
combined benefit fund ����������������������
Defense cooperation ������������������������������
Inland waterways (Legislative proposal,
subject to PAYGO) ����������������������������
Fines, penalties, and forfeitures �������������
Total, Trust funds �����������������������������������������
Total, Miscellaneous receipts ����������������������

Total, budget receipts ������������������������������������ 2,450,164 2,712,045 3,033,618 3,331,685 3,561,451 3,760,542 3,973,974 4,225,853 4,463,834 4,708,621 4,951,182 5,220,378
On-budget ���������������������������������������������� (1,880,663) (2,038,558) (2,294,478) (2,553,429) (2,735,891) (2,891,827) (3,056,516) (3,260,844) (3,456,318) (3,645,376) (3,837,233) (4,059,338)
Off-budget ���������������������������������������������� (569,501) (673,487) (739,140) (778,256) (825,560) (868,715) (917,458) (965,009) (1,007,516) (1,063,245) (1,113,949) (1,161,040)
1 Deposits by States cover the benefit part of the program. Federal unemployment receipts cover administrative costs at both the Federal and State levels. Railroad unemployment
receipts cover both the benefits and administrative costs of the program for the railroads.
2 Represents employer and employee contributions to the civil service retirement and disability fund for covered employees of Government-sponsored, privately owned enterprises and
the District of Columbia municipal government.

15. Offsetting Collections and Offsetting Receipts
I. Introduction and Background
The Government records money collected in one of
two ways. It is either recorded as a governmental receipt and included in the amount reported on the receipts
side of the budget or it is recorded as an offsetting collection or offsetting receipt, which reduces (or “offsets”)
the amount reported on the outlay side of the budget.
Governmental receipts are discussed in the previous
chapter, “Governmental Receipts.” The first section of
this chapter broadly discusses offsetting collections and
offsetting receipts. The second section discusses user
charges, which consist of a subset of offsetting collections
and offsetting receipts and a small share of governmental
receipts. The third and final section of this chapter describes the Administration’s user charge proposals.
As discussed below, offsetting collections and offsetting receipts are cash inflows to a budget account that
are used to finance Government activities. The spending associated with these activities is included in total or
“gross outlays.” For 2012, gross outlays to the public were
$4,027 billion,1 or 25.9 percent of gross domestic product
(GDP). Offsetting collections and offsetting receipts from
the public are subtracted from gross outlays to the public
to yield “net outlays,” which is the most common measure
of outlays cited and generally referred to as simply “outlays.” For 2012, net outlays were $3,537 billion or 22.8
percent of GDP. Government-wide net outlays reflect
the Government’s net disbursements to the public and
are subtracted from governmental receipts to derive the
Government’s deficit or surplus. For 2012, governmental
receipts were $2,450 billion or 15.8 percent of GDP and
the deficit was $1,087 billion, or 7.0 percent of GDP.
There are two sources of offsetting receipts and offsetting collections: from the public and from other budget
accounts. In 2012, offsetting receipts and offsetting collections from the public were $490 billion, while intragovernmental offsetting receipts and offsetting collections
were $1,090 billion. Regardless of how it is recorded (as
governmental receipts, offsetting receipts, or offsetting
collections), money collected from the public reduces the
deficit or increases the surplus. In contrast, intragovernmental collections from other budget accounts exactly
offset the payments, with no net impact on the deficit or
surplus (see Table 15-1).
When measured by the magnitude of the dollars collected, most offsetting collections and offsetting receipts
from the public arise from business-like transactions
with the public. Unlike governmental receipts, which are
1  Gross outlays to the public are derived by subtracting intragovernmental outlays from gross outlays. For 2012, gross outlays were $5,117
billion. Intragovernmental outlays are payments from one Government
account to another Government account. For 2012, intragovernmental
outlays totaled $1,090 billion.

derived from the Government’s exercise of its sovereign
power, these offsetting collections and offsetting receipts
arise primarily from voluntary payments from the public
for goods or services provided by the Government. They
are classified as offsets to outlays for the cost of producing
the goods or services for sale, rather than as governmental receipts on the receipts side of the budget. Treating
offsetting collections and offsetting receipts as offsets to
outlays produces budget totals for receipts, (net) outlays,
and budget authority that reflect the amount of resources
allocated by the Government through collective political
choice, rather than through the marketplace. 2 These activities include the sale of postage stamps, land, timber,
and electricity, and services provided to the public (e.g.,
admission to national parks); and premiums for health
care benefits (e.g., Medicare Parts B and D).
A relatively small portion ($8.6 billion in 2012) of offsetting collections and offsetting receipts from the public
is derived from the Government’s exercise of its sovereign power. From a conceptual standpoint, these should
be classified as governmental receipts. However, they are
classified as offsetting rather than governmental receipts
either because this classification has been specified in law
or because these collections have traditionally been classified as offsets to outlays.3 Most of the offsetting collections and offsetting receipts in this category derive from
fees from Government regulatory services or Government
licenses, and include, for example, charges for regulating
the nuclear energy industry, bankruptcy filing fees, immigration fees, food inspection fees, passport fees, and patent and trademark fees.
A third source of offsetting collections and offsetting
receipts is intragovernmental transfers. Examples of intragovernmental transfers include interest payments to
funds that hold Government securities (such as the Social
Security trust funds), general fund transfers to civilian
2  Showing collections from business-type transactions as offsets on
the spending side of the budget follows the concept recommended by the
Report of the President’s Commission on Budget Concepts in 1967 and is
discussed in Chapter 11 of this volume, “Budget Concepts.’’
3  Offsetting governmental receipts, which are a subset of offsetting
receipts and were $8.6 billion in 2012, result from the Government’s
exercise of its sovereign power to tax, but by law are required to be subtracted from outlays rather than added to governmental receipts. Some
argue that regulatory or licensing fees should be viewed as payments
for a particular service or for the right to engage in a particular type
of business. However, these fees are conceptually much more similar
to taxes because they are compulsory, and they fund activities that are
intended to provide broadly dispersed benefits, such as protecting the
health of the public. Reclassifying these fees as governmental receipts
could require a change in law, and because of traditional conventions for
scoring appropriations bills, would make it impossible for fees that are
controlled through annual appropriations acts to be scored as offsets to
discretionary spending.

219

220

Analytical Perspectives

Table 15–1. Offsetting Collections and Offsetting Receipts from the Public
(In billions of dollars)
Estimate

Actual
2012

2013

2014

Offsetting collections (credited to expenditure accounts):
User charges:
Postal Service stamps and other USPS fees (off-budget) ���������������������������������������������������������������������������������������������
Defense Commissary Agency ���������������������������������������������������������������������������������������������������������������������������������������
Employee contributions for employees and retired employees health benefits funds ���������������������������������������������������
Sale of energy:
Tennessee Valley Authority ���������������������������������������������������������������������������������������������������������������������������������������
Bonneville Power Administration �������������������������������������������������������������������������������������������������������������������������������
All other user charges ����������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, user charges ���������������������������������������������������������������������������������������������������������������������������������������������

65.4
6.1
13.1

63.6
6.1
13.4

64.0
6.2
14.2

44.0
3.3
53.7
185.5

42.2
4.1
63.5
192.9

41.2
4.2
85.0
214.8

Other collections credited to expenditure accounts:
Commodity Credit Corporation fund ������������������������������������������������������������������������������������������������������������������������������
Supplemental Security Income (collections from the States) ����������������������������������������������������������������������������������������
Other collections ������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, other collections �����������������������������������������������������������������������������������������������������������������������������������������
Subtotal, offsetting collections ���������������������������������������������������������������������������������������������������������������������������������������

4.9
3.3
13.5
21.8
207.3

6.8
3.3
10.7
20.9
213.8

6.8
3.4
8.8
19.1
233.9

User charges:
Medicare premiums �������������������������������������������������������������������������������������������������������������������������������������������������������
Outer Continental Shelf rents, bonuses, and royalties ���������������������������������������������������������������������������������������������������
All other user charges ����������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, user charges deposited in receipt accounts ���������������������������������������������������������������������������������������������

64.7
6.6
26.4
97.7

69.6
6.8
25.6
102.1

72.5
7.0
27.4
106.9

Other collections deposited in receipt accounts:
Military assistance program sales ���������������������������������������������������������������������������������������������������������������������������������
Interest received from credit financing accounts �����������������������������������������������������������������������������������������������������������
All other collections deposited in receipt accounts ��������������������������������������������������������������������������������������������������������
Subtotal, other collections deposited in receipt accounts �����������������������������������������������������������������������������������������
Subtotal, offsetting receipts �����������������������������������������������������������������������������������������������������������������������������������������������

26.3
58.6
100.0
184.9
282.6

31.4
64.5
93.6
189.6
291.7

33.0
83.5
56.5
173.1
280.0

Total, offsetting collections and offsetting receipts from the public ��������������������������������������������������������������������������������
Total, offsetting collections and offsetting receipts excluding off-budget ��������������������������������������������������������������������������������

489.9
424.3

505.5
441.7

513.9
449.7

ADDENDUM:
User charges that are offsetting collections and offsetting receipts 1 �������������������������������������������������������������������������������
Other offsetting collections and offsetting receipts from the public �����������������������������������������������������������������������������������
1 Excludes user charges that are classified on the receipts side of the budget. For total user charges, see Table 15–3.

283.2
206.6

295.0
210.4

321.7
192.2

Offsetting receipts (deposited in receipt accounts):

and military retirement pension and health benefits
funds, and agency payments to funds for employee health
insurance and retirement benefits. Although these intragovernmental collections exactly offset the payments so
there is no net effect on the deficit or surplus, it is important to record these transactions in the budget to show
how much the Government is allocating to fund various
programs. For example, in the case of civilian retirement
pensions, Government agencies make accrual payments
to the Civil Service Retirement and Disability Fund on
behalf of current employees to fund their future retirement benefits; the receipt of these payments to the Fund
is shown in a single receipt account. Recording the receipt of these payments is important because it demonstrates the total cost to the Government of providing this
future benefit.
The final source of offsetting collections and offsetting
receipts is gifts. Gifts are voluntary contributions to the

Government to support particular purposes or reduce the
amount of Government debt held by the public.
Although both offsetting collections and offsetting receipts are subtracted from gross outlays to derive net
outlays, they are treated differently when it comes to accounting for specific programs and agencies. Offsetting
collections are usually authorized to be spent for the purposes of an expenditure account and are generally available for use when collected, without further action by the
Congress. Therefore, offsetting collections are recorded as
offsets to spending within expenditure accounts, so that
the account total highlights the net flow of funds.
Like governmental receipts, offsetting receipts are
credited to receipt accounts, and any spending of the receipts is recorded in separate expenditure accounts. As
a result, the budget separately displays the flow of funds
into and out of the Government. Offsetting receipts may
or may not be designated for a specific purpose, depending

221

15. Offsetting Collections and Offsetting Receipts

Table 15–2. Offsetting Receipts by Type Summary
(In millions of dollars)
Receipt Type

Estimate
2012 Actual

2013

2014

2015

2016

2017

2018

Intragovernmental ��������������������������������������������������������������������������������������

731,557

716,079

694,589

749,626

804,961

833,715

851,499

Receipts from Non-Federal Sources:
Proprietary ��������������������������������������������������������������������������������������������
Offsetting Governmental �����������������������������������������������������������������������
Total, receipts from non-Federal sources �����������������������������������������
Total Offsetting Receipts �����������������������������������������������������������������������

273,940
8,620
282,560
1,014,117

282,658
8,996
291,654
1,007,733

269,830
10,127
279,957
974,546

263,335
16,143
279,478
1,029,104

269,359
21,279
290,638
1,095,599

269,802
20,988
290,790
1,124,505

275,631
14,998
290,629
1,142,128

on the legislation that authorizes their collection. If designated for a particular purpose, the offsetting receipts
may, in some cases, be spent without further action by the
Congress. When not designated for a particular purpose,
offsetting receipts are credited to the general fund, which
contains all funds not otherwise allocated and which is
used to finance Government spending that is not financed
out of dedicated funds. In some cases where the receipts
are designated for a particular purpose, offsetting receipts are reported in a particular agency and reduce or
offset the outlays reported for that agency. In other cases,
the offsetting receipts are “undistributed,” which means
they reduce total Government outlays, but not the outlays
of any particular agency.
Table 15–1 summarizes offsetting collections and offsetting receipts from the public. Note that this table does
not include intragovernmental transactions. The amounts
shown in the table are not evident in the commonly cited budget measure of (net) outlays. For 2014, the table
shows that total offsetting collections and offsetting receipts from the public are estimated to be $513.9 billion or
3.0 percent of GDP. Of these, an estimated $233.9 billion
are offsetting collections and an estimated $280.0 billion
are offsetting receipts. Table 15–1 also identifies those
offsetting collections and offsetting receipts that are considered user charges, as defined and discussed below.
As shown in the table, major offsetting collections from
the public include proceeds from Postal Service sales,

electrical power sales, loan repayments to the Commodity
Credit Corporation for loans made prior to enactment of
the Federal Credit Reform Act, and Federal employee payments for health insurance. As also shown in the table,
major offsetting receipts from the public include Medicare
Part B premiums, proceeds from military assistance program sales, rents and royalties from Outer Continental
Shelf oil extraction, and interest income.
Tables 15–2 and 15-5 provide further detail about offsetting receipts, including both offsetting receipts from
the public (as summarized in Table 15–1) and intragovernmental transactions. In total, offsetting receipts are
estimated to be $974.5 billion in 2014; $694.6 billion are
from intragovernmental transactions and $280.0 billion
are from the public. The offsetting receipts from the public
consist of proprietary receipts ($269.8 billion) and those
classified as offsetting receipts by law or long-standing
practice ($10.1 billion) (shown as offsetting governmental
receipts in the table). Proprietary receipts from the public result from business-like transactions such as the sale
of goods or services, or the rental or use of Government
land. Offsetting governmental receipts are composed of
fees from Government regulatory services or Government
licenses that, absent a specification in law or a longstanding practice, would be classified on the receipts side
of the budget.

II. User Charges
fees4

refer generally to those
User charges or user
monies that the Government receives from the public for
market-oriented activities and regulatory activities. In
combination with budget concepts, laws that authorize
user charges determine whether a user charge is classified as an offsetting collection, an offsetting receipt, or a
governmental receipt. Almost all user charges, as defined
below, are classified as offsetting collections or offsetting
receipts; for 2014, only an estimated 1.5 percent of user
charges are classified as governmental receipts. As sum4  In this chapter, the term “user charge” is generally used and has the
same meaning as the term “user fee.” The term “user charge” is the one
used in OMB Circular No. A–11, “Preparation, Submission, and Execution of the Budget;” OMB Circular No. A–25, “User Charges;” and Chapter 11 of this volume, “Budget Concepts.” In common usage, the terms
“user charge” and “user fee” are often used interchangeably; and in A
Glossary of Terms Used in the Federal Budget Process, GAO provides
the same definition for both terms.

marized in Table 15-3, total user charges for 2014 are estimated to be $326.5 billion with $321.7 billion being offsetting collections or offsetting receipts, and accounting for
more than half of all offsetting collections and offsetting
receipts from the public.
Definition. In this chapter, user charges refer to fees,
charges, and assessments levied on individuals or organizations directly benefiting from or subject to regulation
by a Government program or activity, where the payers do
not represent a broad segment of the public such as those
who pay income taxes.
Examples of business-type or market-oriented user
charges and regulatory and licensing user charges include
those charges listed in Table 15-1 for offsetting collections
and offsetting receipts. User charges exclude certain offsetting collections and offsetting receipts from the public,
such as repayments received from credit programs, inter-

222

Analytical Perspectives

est and dividends, and also exclude payments from one
part of the Federal Government to another. In addition,
user charges do not include dedicated taxes (such as taxes
paid to social insurance programs or excise taxes on gasoline) or customs duties, fines, penalties, or forfeitures.
Alternative definitions.
The definition for user
charges used in this chapter follows the definition used in
OMB Circular No. A–25, “User Charges,’’ which provides
policy guidance to Executive Branch agencies on setting
the amount for user charges. Alternative definitions may
be used for other purposes. Much of the discussion of user
charges below – their purpose, when they should be levied, and how the amount should be set – applies to these
alternative definitions as well.
The definition of user charges could be narrower than
the one used in this chapter by being limited to proceeds from the sale of goods and services, excluding the
proceeds from the sale of assets, and by being limited to
proceeds that are dedicated to financing the goods and
services being provided. This definition is similar to one
the House of Representatives uses as a guide for purposes
of committee jurisdiction. (See the Congressional Record,
January 3, 1991, p. H31, item 8.) The definition of user
charges could be even narrower by excluding regulatory
fees and focusing solely on business-type transactions.
Alternatively, the user charge definition could be broader
than the one used in this chapter by including beneficiary- or liability-based excise taxes.5
What is the purpose of user charges? User charges
are intended to improve the efficiency and equity of financing certain Government activities. Charging users
for activities that benefit a relatively limited number of
people and charging for regulatory activities reduces the
burden on the general taxpayer.
User charges that are set to cover the costs of production of goods and services can result in more efficient resource allocation within the economy. When buyers are
5  Beneficiary- and liability-based taxes are terms taken from the Congressional Budget Office, The Growth of Federal User Charges, August
1993, and updated in October 1995. Gasoline taxes are an example of
beneficiary-based taxes. An example of a liability-based tax is the excise
tax that formerly helped fund the hazardous substance superfund in the
Environmental Protection Agency. This tax was paid by industry groups
to finance environmental cleanup activities related to the industry activity but not necessarily caused by the payer of the fee.

charged the cost of providing goods and services, they
make better cost-benefit calculations regarding the size of
their purchase, which in turn signals to the Government
how much of the goods or services it should provide. Prices
in private, competitive markets serve the same purposes.
User charges for goods and services that do not have special social or distributional benefits may also improve equity or fairness by requiring those who benefit from an
activity to pay for it and by not requiring those who do not
benefit from an activity to pay for it.
When should the Government impose a charge?
Discussions of whether to finance spending with a tax
or a fee often focus on whether the benefits of the activity accrue to the public in general or to a limited group
of people. In general, if the benefits of spending accrue
broadly to the public or have special social or distributional benefits, then the program should be financed by taxes
paid by the public. In contrast, if the benefits accrue to
a limited number of private individuals or organizations
and do not have special social or distributional benefits,
then the program should be financed by charges paid by
the private beneficiaries. For Federal programs where the
benefits are entirely public or entirely private, applying
this principle can be relatively easy. For example, the benefits from national defense accrue to the public in general, and according to this principle should be (and are)
financed by taxes. In contrast, the benefits of electricity
sold by the Tennessee Valley Authority accrue primarily
to those using the electricity, and should be (and are) financed by user charges.
In many cases, however, an activity has benefits that
accrue to both public and private groups, and it may be
difficult to identify how much of the benefits accrue to
each. Because of this, it can be difficult to know how much
of the program should be financed by taxes and how much
by fees. For example, the benefits from recreation areas
are mixed. Fees for visitors to these areas are appropriate because the visitors benefit directly from their visit,
but the public in general also benefits because these areas protect the Nation’s natural and historic heritage now
and for posterity. For this reason, visitor recreation fees
do not generally cover the full cost to the Government of
maintaining the recreation property. Where a fee may be
appropriate to finance all or part of an activity, the extent
to which a fee can be easily administered must be con-

Table 15–3.  Gross Outlays to the public, User Charges and other
offsets from the Public, and Net Outlays to the public
(In billions of dollars)
Actual
2012
Gross outlays to the public ������������������������������������������������������������������������������������������������������

4,027.0

Estimate
2013
4,190.4

2014
4,291.7

Offsetting collections and offsetting receipts from the public:
User charges 1 �������������������������������������������������������������������������������������������������������������������
283.2
295.0
321.7
Other �����������������������������������������������������������������������������������������������������������������������������������
206.6
210.4
192.2
Subtotal, offsetting collections and offsetting receipts from the public ��������������������������
489.9
505.5
513.9
Net outlays to the public ����������������������������������������������������������������������������������������������������������
3,537.1
3,684.9
3,777.8
1 $4.1 billion of the total user charges for 2012 were classified as governmental receipts, and the remainder were classified as offsetting
collections and offsetting receipts.  $4.3 billion and $4.8 billion of the total user charges for 2013 and 2014 are classified as governmental
receipts, respectively.

223

15. Offsetting Collections and Offsetting Receipts

sidered. For example, if fees are charged for entering or
using Government-owned land then there must be clear
points of entry onto the land and attendants patrolling
and monitoring the land’s use.
What amount should be charged? When the
Government is acting in its capacity as sovereign and
where user charges are appropriate, such as for some
regulatory activities, current policy supports setting fees
equal to the full cost to the Government, including both
direct and indirect costs. When the Government is not
acting in its capacity as sovereign and engages in a purely business-type transaction (such as leasing or selling
goods, services, or resources), market price is generally
the basis for establishing the fee.6 If the Government is
engaged in a purely business-type transaction and economic resources are allocated efficiently, then this market
price should be equal to or greater than the Government’s
full cost of production.
6  Policies for setting user charges are promulgated in OMB Circular
No. A–25: “User Charges’’ (July 8, 1993).

Classification of user charges in the budget. As
shown in the note to Table 15-3, most user charges are
classified as offsets to outlays on the spending side of the
budget, but a few are classified on the receipts side of the
budget. An estimated $4.8 billion in 2014 of user charges
are classified on the receipts side and are included in the
governmental receipts totals described in the previous
chapter, “Governmental Receipts.’’ They are classified as
receipts because they are regulatory charges collected by
the Federal Government by the exercise of its sovereign
powers. Examples include filing fees in the United States
courts and agricultural quarantine inspection fees.
The remaining user charges, an estimated $321.7 billion in 2014, are classified as offsetting collections and
offsetting receipts on the spending side of the budget. As
discussed above in the context of all offsetting collections
and offsetting receipts, some of these user charges are collected by the Federal Government by the exercise of its
sovereign powers and conceptually should appear on the
receipts side of the budget, but they are required by law
or a long-standing practice to be classified on the spending side.

III. USER CHARGE PROPOSALS
As shown in Table 15–1, an estimated $214.8 billion of
user charges for 2014 will be credited directly to expenditure accounts and will generally be available for expenditure when they are collected, without further action by
the Congress. An estimated $106.9 billion of user charges
for 2014 will be deposited in offsetting receipt accounts
and will be available to be spent only according to the
legislation that established the charges.
As shown in Table 15-4, the Administration is proposing new or increased user charges that would, in the
aggregate, increase collections by an estimated $3.2 billion in 2014 and an average of $16.9 billion per year from
2015–23. These estimates reflect only the amounts to
be collected; they do not include related spending. Each
proposal is classified as either discretionary or mandatory, as those terms are defined in the Balanced Budget
and Emergency Deficit Control Act of 1985 as amended.
“Discretionary’’ refers to user charges controlled through
annual appropriations acts and generally under the jurisdiction of the appropriations committees in the Congress.
“Mandatory’’ refers to user charges controlled by permanent laws and under the jurisdiction of the authorizing
committees. These and other terms are discussed further
in this volume in Chapter 11, “Budget Concepts.’’
A. Discretionary User Charge Proposals
1. Offsetting collections
Department of Agriculture
Forest Service: Grazing administrative processing fee.
The Budget proposes, beginning on March 1, 2014, and
in each subsequent year through February 28, 2018, to
recover some of the costs of issuing grazing permits and

leases on Forest Service lands. The Forest Service would
charge a fee of $1 per head month for cattle and its equivalent for other livestock, which would be collected along
with current grazing fees. The fee would allow the Forest
Service to more expeditiously address pending applications for grazing permit renewals and perform other necessary grazing activities.
Department of Defense (DoD)
TRICARE pharmacy benefit co-payments increase. The
Budget includes a proposal that would repeal sections
712 and 716 of the National Defense Authorization Act
(NDAA) 2013 and provide alternative pharmacy fees. To
encourage the use of less expensive mail order pharmacies
and military treatment facility pharmacies, the Budget
includes a proposal to increase the fixed fee prescription
drug co-payments for active duty families and all retirees
regardless of the age of the beneficiary. The increased fees
from active duty military families and retirees under age
65 and their families would yield discretionary savings
in the Defense Health Program of $127 million in 2014
and $4.1 billion over the 10-year budget horizon. The
increased fees from the retirees under age 65 and their
families would reduce accrual costs by $528 million in
2014 and $10.2 billion over the 10-year budget horizon;
these costs are classified as discretionary and result in
reduced contributions to the Medicare Eligible Retiree
Health Care Fund (MERHCF). In addition, the increased
fees from retirees and their families would yield $4.6 billion in mandatory savings in the MERHCF over the 10year budget horizon and $0.1 billion in mandatory savings for Coast Guard, Public Health Service, and National
Oceanic and Atmospheric Administration.
TRICARE Prime enrollment fee increase, Standard/
Extra annual enrollment fee, and deductible/catastrophic

224
cap adjustments. The Budget includes a proposal (1) to
phase in increases in Prime enrollment fees, slight increases in deductibles, and adjustments to the catastrophic cap, and (2) to impose new annual fees on Standard and
Extra enrollees. The Prime fee increases would be phased
in over four years and based on the amount of beneficiary
retired pay. The new annual Standard/Extra fees would
be phased in over five years, but not based on retired pay.
The fee adjustments would apply only to retirees under
age 65 and their family members and together with the
deductible increases and cap adjustments would generate
savings in the Defense Health Program of $170 million
in 2014 and $9.4 billion over the 10-year budget horizon.
The catastrophic cap adjustments include indexing the
cap and excluding all enrollment fees from the cap. In addition, the increased fees would yield $0.3 billion in mandatory savings over the 10-year budget horizon for Coast
Guard, Public Health Service, and National Oceanic and
Atmospheric Administration.
Department of Health and Human Services
FDA: Reinspection fee for medical products. FDA conducts post-market inspections of manufacturers of human
drugs, biologics, animal drugs, and medical devices to assess their compliance with Good Manufacturing Practice
and other regulatory requirements. The Budget includes
a proposal to enable FDA to assess fees for follow-up reinspections that are required when violations are found
during initial inspections.
FDA: Food facilities registration, inspection, and import
fees.  The Budget includes a proposed fee to finance activities that support the safety and security of America’s food
supply and help meet the requirements of the FDA Food
Safety Modernization Act.
FDA: International courier fees. The volume of imports,
predominantly medical products, being brought into the
United States by international couriers is growing substantially. To ensure the safety of these FDA-regulated
products through increased surveillance efforts, the
Budget includes a new charge to international couriers.
FDA: Cosmetic facility registration fees. FDA promotes
the safety of cosmetics and other health and beauty products. The Budget includes a new facility registration fee
for cosmetic and other health and beauty product facilities that will improve FDA’s capacity to promote greater
safety and understanding of these products.
FDA: Food contact substances notification fee. Food
contact substances include components of food packaging and food processing equipment that come in contact
with food. This new fee will allow FDA to promote greater
safety and understanding of the products that come into
contact with food when used.
Health Resources and Services Administration: 340B
Pharmacy Affairs fee.  To improve the administration and
oversight of the 340B Drug Discount Program, the Budget
includes a new charge to those entities participating in
the program.
Substance Abuse and Mental Health Services
Administration: Data request and publication request fee.
This new fee to perform special data analysis and mate-

Analytical Perspectives

rial publication services will allow SAMHSA to provide
these services for entities that are not current grantees.
Office of the National Coordinator for Health
Information Technology Standards and Certification Fee.
This new fee will support ONC’s administration of its
certification program for health information technology
(health IT), including costs related to health information
technology standards, testing and certification, and improving the efficiency of certification programs. In order
to qualify for the Medicare and Medicaid and Electronic
Health Record (EHR) Incentive Programs, health care
providers must use certified EHR technology.  An efficient,
but rigorous, certification process ensures that health IT
will be certified in a timely manner and gives providers
assurance that certified health IT has met certification
criteria and associated standards.
Department of Homeland Security
Transportation Security Administration (TSA):
Aviation passenger security fee increase. Since its establishment in 2001, under the Aviation and Transportation
Security Act, the aviation passenger security fee has been
limited to $2.50 per passenger enplanement with a maximum fee of $5.00 per one-way trip. This fee covers less
than 30 percent of TSA’s aviation security costs, including overhead and the Federal Air Marshal Service, which
have risen over the years while the fee has remained the
same. The Budget proposes to replace the current “perenplanement” fee structure with a “per one-way trip” fee
structure so that passengers pay the fee only one time
when traveling to their destination. It also removes the
current statutory fee limit and replaces it with a statutory fee minimum of $5.00 in 2014, with annual incremental increases of 50 cents from 2015 to 2019, resulting
in a fee of $7.50 in 2019 and thereafter. The proposed fee
would increase collections by an estimated $25.9 billion
over 10 years. Of this amount, $7.9 billion will be applied
to increase offsets to the discretionary costs of aviation
security and the remaining $18 billion will be treated as
mandatory savings and deposited in the general fund for
deficit reduction.
Customs and Border Protection (CBP): Reimbursements
under public-private partnership MOUs at Ports of Entry.
The Budget includes a proposal to allow the Commissioner
of Customs and Border Protection (CBP) to approve requests from interested parties to reimburse CBP for enhanced inspectional services.  Under current law, 19 U.S.C.
58b, CBP is authorized to receive reimbursement only if
the Secretary of Homeland Security determines that the
volume or value of business cleared through the facility
at issue is insufficient to justify the availability of CBP
services and if the governor of the State in which the facility is located approves such designation. The proposed
legislation would authorize CBP to (1) receive reimbursement from corporations, government agencies, and other
interested parties for inspection services in the air, land
and sea environments at both the domestic and foreign
locations; (2) receive reimbursement at international and
landing rights airports that already receive inspection
services; and (3) collect reimbursable expenses including

225

15. Offsetting Collections and Offsetting Receipts

salaries, benefits, temporary duty costs, relocation and, as
applicable, housing, infrastructure, equipment and training.  This would allow CBP to provide services to requesting parties that it could not provide in the absence of reimbursement.
Department of the Interior
Bureau of Land Management (BLM): Public lands oil
and gas lease inspection fees. The Budget proposes new
inspection fees for oil and gas facilities that are subject to
inspection by BLM. The fees would be based on the number of oil and gas wells per facility, providing for costs to be
shared equitably across the industry. According to agency
data, BLM currently spends more than $40 million on
managing the compliance inspection program. Inspection
costs include, among other things, the salaries and travel
expenses of inspectors. In 2014, the Budget proposes a
$10 million increase in funding to strengthen the BLM
inspections and enforcement program, with these costs to
be offset by higher fees on industry users. In addition, in
2014, the Budget proposes to charge industry users fees to
offset $38 million in existing inspection and enforcement
program costs, resulting in a $38 million reduction in general fund appropriations for BLM. The proposed fees will
generate approximately $48 million in 2014, thereby requiring energy developers on Federal lands to fund the
majority of compliance costs incurred by BLM.
BLM: Grazing administrative processing fee. The
Budget proposes a three-year pilot project to allow BLM
to recover some of the costs of issuing grazing permits
and leases on BLM lands. BLM would charge a fee of $1
per Animal Unit Month, which would be collected along
with current grazing fees. The fee would allow BLM to
address pending applications for grazing permit renewals
more expeditiously. BLM would promulgate regulations
for the continuation of the grazing administrative fee as a
cost recovery fee after the pilot expires.
Department of Justice
Antitrust Division: Increase Hart-Scott-Rodino fees.
The Federal Trade Commission and the Department of
Justice Antitrust Division are responsible for reviewing
corporate mergers to ensure they do not promote anticompetitive practices. Revenue collected from pre-merger filing fees, known as Hart-Scott-Rodino (HSR) fees, are split
evenly between the two agencies. The Budget proposes
to increase the HSR fees and index them to the annual
change in the gross national product. The fee proposal
would also create a new merger fee category for mergers valued at over $1 billion. Under the proposal, the fee
increase would take effect in 2015, and it is estimated
that annual HSR fees would total $300.9 million ($150.4
million for each of Federal Trade Commission and DOJ
Antitrust Division), an increase of $96 million per year
($48 million for each of Federal Trade Commission and
DOJ Antitrust Division). 

Department of Labor
Mine Safety and Health Administration (MSHA): Rock
dust analysis fee. MSHA conducts rock dust sampling
and analyses to determine whether mines are in compliance with regulations intended to prevent the build-up of
combustible dust. The Administration proposes to establish a fee on mine operators to fund these activities.
Employment and Training Administration (ETA):
National Agricultural Workers Survey fee. ETA conducts
the National Agricultural Workers Survey, which collects information annually about the demographic, employment, and health characteristics of the U.S. crop
labor force. The information is obtained directly from
farm workers through face-to-face interviews.
The
Administration proposes to charge non-Federal entities
on a case-by-case basis the cost of conducting specifically
requested data collection or analysis. For example, State
and local governments, educational institutions, or nonprofit organizations may pay a fee to fund the addition of
a question to the standard survey.
Department of State
Western Hemisphere Travel Initiative surcharge extension. The Administration proposes to extend the authority for the Department of State to collect the Western
Hemisphere Travel Initiative surcharge for one year,
through September 30, 2014. The surcharge was initially
enacted by the Passport Services Enhancement Act of
2005 (P.L. 109–167) to cover the Department’s costs of
meeting increased demand for passports, which resulted
from the implementation of the Western Hemisphere
Travel Initiative. 
Border Crossing Card fee increase. The Budget includes
a proposal to increase certain Border Crossing Card (BCC)
fees.  The proposal would allow the fee charged for BCC
minor applicants to be set administratively rather than
statutorily.  Administrative fee setting will allow the fee
charged BCC applicants to better reflect the associated
cost of service, similar to other fees charged for consular
services.  The proposal would set the BCC fee for minors
equal to one half the fee for adults by amending current
law, which sets the fee at $13.  Annual BCC fee collections
are projected to increase by $17 million (from $4 million to
$21 million) beginning in 2014 as a result of this change.
Commodity Futures Trading Commission (CFTC)
CFTC fee: The Budget proposes an amendment to the
Commodity Exchange Act, effective in 2015, authorizing the CFTC to collect fees from its regulated community equal to the agency’s annual appropriation. This will
make CFTC funding more consistent with the funding
mechanisms in place for other Federal financial regulators. 
Federal Trade Commission
Increase Hart-Scott-Rodino fees. See description under
Department of Justice.

226
2. Offsetting receipts

Analytical Perspectives

B. Mandatory User Charge Proposals

Department of Homeland Security

1. Offsetting collections

Customs and Border Protection (CBP): Immigration inspection user fee increase. The Budget includes a proposal
to increase the Immigration Inspection User Fee (IUF)
by $2.  The current fees are $7 for air and commercial
vessel passengers and $3 for partially-exempted commercial vessel passengers.  IUF is paid by air and sea passengers and is used to recover some of the costs relating
to determining admissibility for passengers entering the
U.S.  Specifically, the fees collected support immigration
inspections, personnel, the maintenance and updating of
systems to track criminal and illegal aliens in areas with
high apprehensions, asylum hearings, and the repair and
maintenance of equipment.  The additional revenue collected from this increase would fund 974 new CBP officers
which will reduce waiting times at air and sea ports of
entry. Future budget requests will include an annual increase to these fees to adjust them for inflation.
Customs and Border Protection (CBP): COBRA
and Express Consignment Courier Facilities Fees. The
Budget includes a proposal to increase COBRA fees
(statutorily set under the Consolidated Omnibus Budget
Reconciliation Act of 1985) and the Express Consignment
Courier Facilities (ECCF) fee created under the Trade Act
of 2002.  COBRA created a series of user fees for air and
sea passengers, commercial trucks, railroad cars, private
aircraft and vessels, commercial vessels, dutiable mail
packages, broker permits, barges and bulk carriers from
Canada and Mexico, cruise vessel passengers, and ferry
vessel passengers.  This proposal would increase the customs inspection fee by $2 and increase other COBRA fees
by a proportional amount.  The ECCF fee was created
to reimburse CBP for inspection costs related to express
consignment and the proposal would increase the fee by
$0.36.  The additional revenue raised from these fee increases will allow CBP to recover more costs associated
with customs related inspections, and reduce waiting
times by supporting the hiring of 903 new CBP officers.
Future budget requests will include an annual increase
to these fees to adjust them for inflation.

Department of Agriculture (USDA)

Department of Transportation
Pipeline
and
Hazardous
Materials
Safety
Administration (PHMSA): Hazardous materials special
permits and approvals fees. The Administration proposes
to collect new fees from companies and individuals involved in the transport of hazardous materials who seek
waivers from the Hazardous Materials Regulations. The
fees will offset some of the PHMSA’s costs associated with
the special permit and approvals processes.

Biobased labeling fee. Biobased products are industrial products (other than food or feed) that are composed, in
whole or in part, of biological products, including renewable domestic agricultural materials and forestry materials or an intermediate ingredient or feedstock. In 2011,
USDA released a final rule implementing the use of a label for biobased products that producers can use in advertising their products. To ensure the integrity of the label,
the Budget requests authority for USDA to: (1) impose
civil penalties on companies who misuse the label and (2)
assess each producer who applies for the label a $500 fee
to fund a program audit. This fee, which will begin to
be collected once authorizing legislation is enacted, was
broadly supported by potential users who commented on
the label’s proposed rule, which was issued in May 2010.
Department of Defense
TRICARE pharmacy benefit co-payment increase.
As discussed above in the section on discretionary user
charge proposals, the Budget includes a proposal that repeals sections 712 and 716 of the NDAA 2013 and encourages the use of less expensive mail order pharmacies and
military treatment facility pharmacies by increasing the
prescription drug co-payments for active duty families and
all retirees regardless of the age of the beneficiary. These
fees would yield $4.6 billion in savings in the MERHCF
over the 10-year budget horizon and $0.1 billion in mandatory savings for Coast Guard, Public Health Service,
and National Oceanic and Atmospheric Administration.
TRICARE-For-Life (TFL) annual enrollment fee. The
Budget includes a proposal to charge military retirees
age 65 and older and their families a modest annual premium, based on annual retirement pay, for TFL coverage. All current military retirees age 65 and older and
their families would be grandfathered from the TFL fees.
These annual fees would be phased in over four years and
then indexed, and would yield $1.0 billion in mandatory
savings in the MERHCF over the 10-year budget horizon.
In addition, the proposal would reduce accrual costs by
$1.1 billion over 10 years; these costs are classified as
discretionary and result in reduced contributions to the
MERHCF.
TRICARE Prime enrollment fee increase, Standard/
Extra annual enrollment fee and deductible/catastrophic cap adjustments. As discussed above in the section
on discretionary user charge proposals, these increased
fees would yield $0.3 billion in mandatory savings over
the 10-year budget horizon for the Coast Guard, Public
Health Service, and National Oceanic and Atmospheric
Administration.
Department of Homeland Security
TSA: Aviation passenger security fee increase. As discussed above in the section on discretionary user charge

227

15. Offsetting Collections and Offsetting Receipts

proposals, the budget includes a proposal to increase the
aviation passenger security fee by 50 cents per year for
five years beginning in 2015. The fee would be $7.50 per
one-way trip beginning in 2019 and would generate $18
billion in mandatory collections over the 10-year budget
window, which would be deposited in the general fund for
deficit reduction.
Department of Labor
Pension Benefit Guaranty Corporation (PBGC):
Premium increases. The Deficit Reduction Act of 2005
and the Pension Protection Act of 2006 made significant
structural changes to the Nation’s pension and pension
insurance systems, but did not address fully the longterm financial challenges facing PBGC. Further reforms
are needed to address the current $34 billion gap between
PBGC’s liabilities and assets. The Administration proposes to give the PBGC’s Board the authority to adjust
the premiums companies pay and to direct PBGC to account for the risk plans pose to PBGC. Better aligning
risk with premium levels will encourage high-risk companies to fully fund their employees’ promised pension benefits and will improve the solvency of PBGC. To ensure
that these reforms are phased in only after challenging
economic times have passed, the Budget calls for giving
the PBGC Board premium setting authority beginning in
2015.
Department of Transportation
Federal Aviation Administration: Aviation warrisk insurance. The authority of the Department of
Transportation (DOT) to provide aviation war risk insurance expires on December 31, 2013.  With the goal of
building private capacity to manage aviation war risk, the
Administration proposes to transform the program into a
co-insurance arrangement in which DOT and a private
insurer would jointly underwrite a common policy.  In
the case of a claim, DOT would pay an established fraction of the losses, and the private partner would pay the
remainder.  The Federal share would be slightly reduced
each year as private capacity expands.  The proposal
would extend the existing program through 2014, during
which time DOT would propose changes to its underlying
statutory authority and work with the private insurance
industry to develop co-insurance policies.  The Budget
proposes that a co-insurance arrangement would begin to
reduce the government’s share of any losses, starting in
2015.  The proposal would result in collection of an estimated $772 million in insurance premiums through 2018.
2. Offsetting receipts
Department of Agriculture
Food Safety and Inspection Service (FSIS): Performance
and other charges.   This fee would be charged to those
meat processing plants that have sample failures that result in retesting, have recalls, or are linked to an outbreak.
This arrangement will offset the Federal Government’s

costs for resampling and retesting, while encouraging better food safety practice for processing plants. This fee is
expected to generate $4 million in 2014.
Grain
Inspection,
Packers,
and
Stockyards
Administration (GIPSA): Standardization and Licensing
Activities. These fees would recover the full cost for the
development, review, and maintenance of official U.S.
grain standards and also for licensing fees to livestock
market agencies, dealers, stockyards, packers, and swine
contractors. The fees are expected to generate $27 million
in 2014.
Animal and Plant Health Inspection Service (APHIS):
Inspection and licensing charges. The Administration
proposes to establish charges for: (1) animal welfare inspections for animal research facilities, carriers, and intransit handlers of animals, (2) licenses for individuals or
companies who seek to market a veterinary biologic, and
(3) reviews and inspections that may allow APHIS to issue permits that acknowledge that regulated entities are
providing sufficient safeguards in the testing of biotechnologically derived products.
Natural Resources Conservation Service (NRCS): User
charges. NRCS assists farmers and ranchers in developing and implementing plans to protect, conserve, and
enhance natural resources (soil, water, air, plants, and
wildlife habitat). The Budget includes a proposal to begin
charging for general conservation planning services.
Department of Health and Human Services
Centers for Medicare and Medicaid Services (CMS):
Income-related premium increase under Medicare Parts
B and D.  The Budget contains a proposal to increase
income-related premiums under Medicare Parts B and
D. Beginning in 2017, this proposal would restructure income-related premiums by increasing the lowest incomerelated premium 5 percentage points and also increasing
other income brackets until the highest tier is capped
at 90 percent. The proposal also maintains the income
thresholds associated with income-related premiums until 25 percent of beneficiaries under Parts B and D are
subject to these premiums.  This will help improve the financial stability of the Medicare program by reducing the
Federal subsidy of Medicare costs for those beneficiaries
who can most afford them.
CMS: Medicare Part B premium surcharge. Medigap
policies are private insurance policies that provide supplemental coverage for certain costs not covered by Medicare
such as co-pays and deductibles.  Medigap policies with
low cost-sharing requirements, those that provide nearly
first-dollar Medigap coverage, reduce the effectiveness of
Medicare cost-sharing provisions intended to promote efficient health care choices. The Budget proposes a Part
B premium surcharge on new Medicare beneficiaries beginning in 2017 who purchase Medigap policies with particularly low cost-sharing requirements.  The surcharge
would be equal to approximately 15 percent of the average
Medigap premium or 30 percent of the Part B premium.
CMS: Survey and certification revisit fee. The Budget
proposes a fee for revisits of health care facilities in the
Survey and Certification program to build greater ac-

228
countability by creating an incentive for facilities to correct deficiencies and ensure quality of care.
Department of the Interior
Federal oil and gas management reforms. The Budget
includes a package of legislative reforms to bolster and
backstop administrative actions being taken to reform
the management of DOI’s onshore and offshore oil and
gas programs, with a key focus on improving the return
to taxpayers from the sale of these Federal resources.
Proposed statutory and administrative changes fall into
three general categories: (1) advancing royalty reforms,
(2) encouraging diligent development of oil and gas leases,
and (3) improving revenue collection processes. Royalty
reforms include: establishing minimum royalty rates for
oil, gas, and similar products; increasing the standard
onshore oil and gas royalty rate; piloting a price-based
sliding scale royalty rate; and repealing legislativelymandated royalty relief for “deep gas” wells. Diligent
development requirements include shorter primary lease
terms, stricter enforcement of lease terms, and monetary
incentives to move leases into production (e.g., a new
statutory per-acre fee on nonproducing leases). Revenue
collection improvements include simplification of the royalty valuation process, elimination of interest accruals
on company overpayments of royalties, and permanent
repeal of DOI’s authority to accept in-kind royalty payments. Collectively, these reforms will generate roughly
$2.5 billion in net revenue to the Treasury over 10 years,
of which about $1.7 billion would result from statutory
changes. Many States will also benefit from higher
Federal revenue sharing payments.
BLM: Reform of Hardrock Mineral Production on
Federal Lands. The Administration proposes to institute a leasing process under the Mineral Leasing Act of
1920 for certain minerals (gold, silver, lead, zinc, copper,
uranium, and molybdenum) currently covered by the
General Mining Law of 1872. After enactment, mining
for these metals on Federal lands would be governed by
the new leasing process and subject to annual rental payments and a royalty of not less than 5 percent of gross
proceeds. Half of the receipts would be distributed to the
States in which the leases are located and the remaining
half would be retained by the Treasury. Existing mining
claims would be exempt from the change to the leasing
system, but would be subject to increases in the annual
maintenance fees under the General Mining Law of 1872.
BLM: Reauthorize and restructure helium sales program. The Budget includes a legislative proposal to reauthorize BLM’s Federal helium program in order to
facilitate a gradual exit from the helium market, while
ensuring the short-term availability of sufficient helium
supplies to meet Government and industry demand. 
Under current law, once the helium program debt is retired, the authority to collect revenues from the sale of
helium and to place them in the helium production fund
terminates.  The Secretary will be making the final repayment on the helium debt at the beginning of 2014. 
BLM: Reauthorize the Federal Land Transaction
Facilitation Act (FLTFA).  The Budget proposes to reau-

Analytical Perspectives

thorize the FLTFA, which expired in July 2011, and allow
lands identified as suitable for disposal in recent land use
plans to be sold using the FLTFA authority.  The FLTFA
sales revenues would continue to be used to fund the acquisition of environmentally sensitive lands and to cover
BLM’s administrative costs associated with conducting
sales.
DOI:
Implement
U.S.-Mexico
Agreement
on
Transboundary Hydrocarbon Reservoirs.  The Budget
proposes to authorize the United States to undertake
activities to implement the Agreement between the
United States of America and the United Mexican States
Concerning Transboundary Hydrocarbon Reservoirs in
the Gulf of Mexico (Agreement), signed by representatives of the United States and Mexico on February 20,
2012.  Implementing the Agreement would establish
a framework for the cooperative exploration and development of hydrocarbon resources that cross the United
States-Mexico maritime boundary in the Gulf of Mexico. 
The proposal would also end the moratorium on development along the boundary in the Western Gap.  It would
make an area along the U.S.-Mexico boundary in the Gulf
of Mexico that is roughly the size of Delaware more accessible for oil and gas exploration and production activities. 
That area is estimated to contain up to 172 million barrels of oil and 304 billion cubic feet of natural gas.  Making
these resources accessible is expected to increase receipts
from upcoming lease sales in 2014.
Federal Communications Commission (FCC)
Spectrum license fee authority. To promote efficient
use of the electromagnetic spectrum, the Administration
proposes to provide the FCC with new authority to use
other economic mechanisms, such as fees, as a spectrum
management tool. The Commission would be authorized
to set charges for unauctioned spectrum licenses based on
spectrum-management principles. Fees would be phased
in over time as part of an ongoing rulemaking process to
determine the appropriate application and level for fees.
Auction domestic satellite service spectrum licenses. The
FCC would be allowed to assign licenses for certain satellite services that are predominantly domestic through
competitive bidding, as had been done before a 2005 court
decision called the practice into question on technical
grounds.  The proposal is expected to raise $50 million
from 2013-2023.
Auction or assign via fee 1675-1680 megahertz:  The
Budget would direct that the Federal Communications
Commission either auction or use fee authority to assign
spectrum frequencies between 1675-1680 megahertz for
wireless broadband use by 2017, subject to sharing arrangements with Federal weather satellites.  Currently,
the spectrum is being used for radiosondes (weather
balloons) and is slated for use by a new weather satellite that is scheduled for launch in 2015.  Before 2015,
the National Oceanic and Atmospheric Administration
(NOAA) plans to alter the radiosondes operations to not
interfere with weather satellite transmissions.  If this
proposal is enacted, NOAA would move the radiosondes

229

15. Offsetting Collections and Offsetting Receipts

to another frequency, allowing the spectrum to be repurposed for commercial use with limited protection zones
for the remaining weather satellite downlinks.  Without
this proposal, these frequencies are unlikely to be auctioned and repurposed to commercial use.  The proposal
is expected to raise $300 million in receipts and incur $70
million in relocation costs, leaving net savings of $230
million over 10 years.
C. User Charge Proposals that are
Governmental Receipts
Department of Energy
Reauthorize special assessment on domestic nuclear
facilities. The Administration proposes to reauthorize
the special assessment on domestic utilities for deposit
into the Uranium Enrichment Decontamination and
Decommissioning Fund. Established in 1992, the Fund
pays, subject to appropriations, the decontamination and
decommissioning costs of the Department of Energy’s gaseous diffusion plants in Tennessee, Ohio, and Kentucky.
Additional resources, from the proposed special assessment, are required due to higher-than-expected cleanup
costs.
Department of the Interior
Migratory bird hunting and conservation stamp fees.
Federal Migratory Bird Hunting and Conservation
Stamps, commonly known as “Duck Stamps,” were originally created in 1934 as the Federal licenses required for
hunting migratory waterfowl. Today, ninety-eight percent
of the receipts generated from the sale of these stamps
($15 per stamp per year) are used to acquire important
migratory bird breeding areas, migration resting places,
and wintering areas.7 The land and water interests located and acquired with the Duck Stamp funds establish
or add to existing migratory bird refuges and waterfowl
production areas. The price of the Duck Stamp has not
increased since 1991; however, the cost of land and water
has increased significantly over the past 20 years. The
Administration proposes to increase these fees to $25 per
stamp per year, effective beginning in 2014.
7  By law, duck stamp proceeds are available for use without further
action by Congress, and, in this way, are similar to offsetting collections.

Department of Transportation
Federal Aviation Administration: Mandatory surcharge for air traffic services. All flights that use controlled
air space require a similar level of air traffic services.
However, commercial and general aviation can pay very
different aviation fees for those same services. To more
equitably share the cost of air traffic services across the
aviation user community, the Administration proposes to
establish a new surcharge for air traffic services of $100
per flight. Military aircraft, public aircraft, piston aircraft,
air ambulances, aircraft operating outside of controlled
airspace, and Canada-to-Canada flights would be exempt.
The surcharge would be effective for flights beginning after September 30, 2013. Assuming the enactment of the
fee, total charges collected from aviation users would finance roughly three-fourths of airport investments and
air traffic control system costs. To ensure appropriate input from stakeholders on the design of the fee, the proposal would also establish an expert Commission that
could recommend to the President a replacement charge,
or charges, that would raise no less in revenue than the
enacted fee. 
Corps of Engineers—Civil Works
Reform inland waterways funding. The Administration
proposes legislation to reform the laws governing the
Inland Waterways Trust Fund, including an annual per
vessel fee to increase the amount paid by commercial navigation users sufficiently to meet their share of the costs
of activities financed from this fund. The additional revenue will enable a more robust level of funding for safe,
reliable, highly cost-effective, and environmentally sustainable waterways, and contribute to economic growth.
In 1986, the Congress provided that commercial traffic
on the inland waterways would be responsible for 50 percent of the capital costs of the locks and dams, and other
features that make barge transportation possible on the
inland waterways. The current excise tax of 20 cents per
gallon on diesel fuel used in inland waterways commerce
does not produce the revenue needed to cover the required
50 percent of these costs.

230

Analytical Perspectives

Table 15–4. User Charge Proposals in the Fy 2014 Budget 1
(Estimated collections in millions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2014– 2014–
2018 2023

2023

OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS
DISCRETIONARY:
1. Offsetting collections
Department of Agriculture
Forest Service Grazing Fee ����������������������������������������������������������������������
Department of Defense
TRICARE pharmacy benefit co-payments increase ���������������������������������
TRICARE Prime enrollment fee increase, Standard/Extra annual
enrollment fee, and deductible/catastrophic cap adjustments �������������
Department of Justice
Antitrust Division, Increase Hart-Scott-Rodino Fees ��������������������������������
Department of Health and Human Services
Food and Drug Administration (FDA): Reinspection fee for medical
products �����������������������������������������������������������������������������������������������
FDA: Food facilities Registration, Inspection, and Import fees �����������������
FDA: International courier fees �����������������������������������������������������������������
FDA: Cosmetic facility registration fees ����������������������������������������������������
FDA: Food Contact Substances Notification Fee ��������������������������������������
Health Resources and Services Adminisration: 340B Pharmacy Affairs fee �����
Substance Abuse and Mental Health Services Administration: Data
request and publication request fee������������������������������������������������������
ONC Standards and Certification User Fee ���������������������������������������������

.........

5

5

5

5

5

......... ......... ......... ......... .........

.........

127

260

292

327

402

.........

170

440

641

848

994 1,079 1,163 1,253 1,351 1,458 3,093 9,396

......... .........

48

49

51

51

52

54

54

56

453

498

542

579

25

25

624 1,408 4,104

57

199

472

.........
.........
.........
.........
.........
.........

15
225
6
19
5
6

15
231
6
20
5
6

15
235
6
20
5
6

15
240
6
20
5
6

15
245
6
20
5
6

15
250
6
20
5
6

15
255
6
20
5
6

15
260
6
20
5
6

15
267
6
20
5
6

.........
.........

2
1

2
15

2
15

2
4

2
1

2
1

2
1

2
1

2
1

Department of Homeland Security
Transportation Security Administration (TSA): Aviation passenger
security fee increase ����������������������������������������������������������������������������
Customs and Border Protection (CBP): Inspection services fee ��������������

.........
.........

122
25

507
25

606
26

726
26

850
27

979
27

Department of the Interior
Bureau of Land Management (BLM): Public lands oil and gas lease
inspection fees �������������������������������������������������������������������������������������
BLM: Grazing administrative processing fee ��������������������������������������������

.........
.........

48
7

48
9

48
9

......... .........

2

2

2

2

2

2

2

2

.........

1

1

1

1

1

1

1

1

1

Department of State
Western Hemisphere Travel Initiative surcharge extension ����������������������
Border Crossing Card fee increase ����������������������������������������������������������

.........
.........

186
17

Federal Trade Commission
Increase Hart-Scott-Rodino Fees �������������������������������������������������������������

......... .........

48

49

51

51

52

54

54

56

Commodity Futures Trading Commission
Commodity Futures Trading Commission (CFTC) ������������������������������������

......... .........

323

329

336

343

351

359

367

376

385 1,331 3,169

Department of Department of Homeland Security
CBP: COBRA Fee and Express Consignment Courier Facilities Fee
Increase �����������������������������������������������������������������������������������������������
CBP: Immigration Inspection User Fee increase ��������������������������������������

.........
.........

201
183

208
190

215
196

222
203

229
211

236
218

244
226

18
234

......... 1,041 1,768
243
938 2,070

Department of Transportation
PHMSA: Hazardous materials special permits and approvals fees ����������
Subtotal, discretionary user charge proposals ��������������������������������

.........
12
12
12
12
13
13
13
14
14
14
61
129
......... 1,359 2,429 2,788 3,159 3,529 3,819 3,999 4,185 4,143 4,325 13,265 33,736

Department of Labor
Mine Safety and Health Administration: Rock dust analysis fee ���������������
Employment and Training Administration (ETA): National Agricultural
Workers Survey fee �����������������������������������������������������������������������������

15
75
150
274 1,176 2,482
6
30
60
21
99
200
5
25
50
6
30
60
2
1

10
36

20
41

999 1,020 1,040 1,061 2,811 7,910
27
28
29
29
129
269

48
48
48
48
48
48
48
......... ......... ......... ......... ......... ......... .........

240
25

480
25

2

8

18

1

5

10

......... ......... ......... ......... ......... ......... ......... ......... .........
17
17
17
17
17
17
17
17
17

186
85

186
170

199

472

57

2. Offsetting receipts

194
166

231

15. Offsetting Collections and Offsetting Receipts

Table 15–4. User Charge Proposals in the Fy 2014 Budget 1—Continued
(Estimated collections in millions of dollars)
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2014– 2014–
2018 2023

2023

MANDATORY:
Offsetting collections
Department of Agriculture
Biobased labeling fee �������������������������������������������������������������������������������
Department of Defense
TRICARE pharmacy benefit co-payment increase 2 ��������������������������������
TRICARE-For-Life enrollment fee �������������������������������������������������������������
TRICARE Prime enrollment fee increase, Standard/Extra annual
enrollment fee, and deductible/catastrophic cap adjustments �������������

.........

1

1

1

1

1

1

1

1

.........
4
......... .........

81
4

141
21

220
53

405
80

525
109

637
138

781
169

.........

13

19

25

30

32

35

37

5

1

1

917 1,051
201
234
40

43

5

10

851 4,762
158 1,009
92

279

Department of Homeland Security
TSA: Aviation passenger security fee increase ����������������������������������������

.........

Department of Labor
Pension Benefit Guaranty Corporation: Premium increases ��������������������

......... ......... 2,778 2,778 2,778 2,778 2,778 2,778 2,778 2,778 2,778 11,112 25,002

Department of Transportation
Federal Aviation Administration: Aviation war-risk insurance �������������������

.........

128

172

173

175

124

Department of Agriculture
Food Safety and Inspection Service: User charges ����������������������������������
Grain, Inspection, Packers, and Stockyards Administration: User charges �
Animal and Plant Health Inspection Service: User charges ���������������������
Natural Resource Conservation Service: User charges ���������������������������

.........
.........
.........
.........

4
27
20
22

4
27
27
22

4
28
27
22

5
28
28
22

5
28
29
22

Department of Health and Human Services
Centers for Medicare and Medicaid Services (CMS): Income-related
premium increase under Medicare Parts B and D �������������������������������
CMS: Medicare Part B premium surcharge ����������������������������������������������
CMS: Survey and certification revisit fee ��������������������������������������������������

......... ......... ......... ......... 3,000 3,000 4,000 7,000 9,000 11,000 13,000 6,000 50,000
......... ......... ......... .........
70
180
290
410
540
670
750
250 2,910
......... .........
1
5
10
10
15
20
25
25
25
26
136

200 1,139 1,410 1,675 1,950 2,235 2,279 2,324 2,370 2,418 6,374 18,000

......... ......... ......... ......... .........

772

772

22
138
131
110

47
285
291
220

Offsetting receipts

Department of the Interior
Federal oil and gas management reforms ������������������������������������������������
BLM: Reform of hardrock mineral production on Federal lands ���������������
BLM: Reauthorize and restructure helium sales program ������������������������
BLM: Reauthorize the Federal Land Transaction Facilitation Act (FLTFA)
program �����������������������������������������������������������������������������������������������
Implement U.S.-Mexico Agreement on Transboundary Hydrocarbon
Reservoirs �������������������������������������������������������������������������������������������
Federal Communications Commission
Spectrum license fee authority �����������������������������������������������������������������
Auction domestic satellite service spectrum licenses �������������������������������
Auction or assign via fee 1675 –1680 megahertz ������������������������������������
Subtotal, mandatory user charge proposals �����������������������������������������
Subtotal, user charge proposals that are offsetting collections and
offsetting receipts ���������������������������������������������������������������������������������

.........
50
......... .........
.........
152
.........

3

.........

50

120
2
110

125
4
94

150
5
64

170
5
33

5

8

9

3

5
29
30
22

185
6
21

5
29
31
22

200
6
6

5
29
32
22

5
30
33
22

5
30
34
22

215
225
240
11
17
24
......... ......... .........

615 1,680
16
80
453
480

......... ......... ......... ......... .........

28

28

......... ......... ......... ......... ......... ......... ......... ......... .........

50

50

50
200
300
425
550
550
550
550
550
550
550 2,025 4,775
.........
25
25 ......... ......... ......... ......... ......... ......... ......... .........
50
50
......... ......... ......... .........
80
150 ......... ......... ......... ......... .........
230
230
50
891 4,831 5,285 8,948 9,553 10,833 14,147 16,519 18,884 21,205 29,508 111,096
50 2,250 7,260 8,073 12,107 13,082 14,652 18,146 20,704 23,027 25,530 42,773 144,832

GOVERNMENTAL RECEIPTS
Department of Energy
Reauthorize special assessment on domestic nuclear facilities ���������������

.........

200

204

209

213

218

223

228

233

238

Department of the Interior
Migratory bird hunting and conservation stamp fees ��������������������������������

.........

14

14

14

14

14

14

14

14

14

Department of Transportation:
Federal Aviation Administration: Mandatory surcharge for air traffic
services �����������������������������������������������������������������������������������������������

.........

605

632

660

690

719

745

766

790

812

243 1,044 2,209
14

70

140

836 3,306 7,255

232

Analytical Perspectives

Table 15–4. User Charge Proposals in the Fy 2014 Budget 1—Continued
(Estimated collections in millions of dollars)
2013
Corps of Engineers - Civil Works
Reform inland waterways funding �������������������������������������������������������������
Subtotal, governmental receipts user charge proposals �����������������������

.........
.........

2014
82
901

2015
113
963

2016

2017

2018

2019

2020

2021

2022

2023

2014– 2014–
2018 2023

113
113
113
113
113
113
113
114
534 1,100
996 1,030 1,064 1,095 1,121 1,150 1,177 1,207 4,954 10,704

Total, user charge proposals �����������������������������������������������������������������������
50 3,151 8,223 9,069 13,137 14,146 15,747 19,267 21,854 24,204 26,737 47,727 155,536
1 A positive sign indicates an increase in collections.
2 Budgetary effects of the fee increase are displayed, which include savings to the Department of Defense due to changes in behavioral assumptions.

233

15. Offsetting Collections and Offsetting Receipts

Table 15–5 Offsetting Receipts by Type
(In millions of dollars)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Intragovernmental Receipts
On Budget
Interfund Receipts
Federal Fund Payments to Trust
Funds
Distributed by Agency
Contributions to retirement and
insurance programs
Military retirement fund ���������������
Supplementary medical
insurance 1������������������������������
Hospital insurance 1���������������������
Proposed Legislation (NonPAYGO) ����������������������������������
Railroad social security
equivalent benefit fund �����������
Civilian supplementary retirement
contributions
Proposed Legislation (NonPAYGO) ����������������������������������
Unemployment insurance �����������
Other contributions ���������������������
Rail industry pension fund ����������
Subtotal, Contributions to
retirement and insurance
programs �������������������������
Other miscellaneous
transactions
Miscellaneous payments �������������
Proposed Legislation (PAYGO) ���
Other �������������������������������������������
Subtotal, Other
miscellaneous
transactions ���������������������
Subtotal, Distributed by Agency

64,751

67,733

70,272

72,906

75,640

78,478

81,421

84,474

87,641

90,928

94,338

97,876

210,509
19,432

232,979
15,627

255,542
20,667

277,527
23,159

299,524
25,793

313,297
28,425

329,220
31,235

360,930
34,224

392,285
37,331

424,706
40,474

468,729
43,737

496,606
47,275

.........

127

136

149

163

171

179

187

196

205

214

223

291

222

210

232

252

278

304

333

363

393

424

456

33,434

32,810

33,610

34,422

35,434

36,246

37,160

37,876

38,492

39,214

39,633

39,334

.........
42,117
627
480

.........
31,929
601
425

–34
8,239
457
339

–104
985
437
349

–209
931
425
359

–320
896
418
369

–434
873
410
376

–554
882
408
382

–678
906
404
387

–807
934
400
392

–941
963
398
395

–1,079
991
398
398

371,641

382,453

389,438

410,062

438,312

458,258

480,744

519,142

557,327

596,839

647,890

682,478

3,274
.........
152

9,040
.........
151

15,198
2,552
151

2,576
37,156
151

2,614
58,464
151

2,658
65,508
150

2,703
50,769
150

2,749
.........
151

2,796
.........
1

2,842
.........
1

2,896
.........
1

2,948
.........
1

3,426
375,067

9,191
391,644

17,901
407,339

39,883
449,945

61,229
499,541

68,316
526,574

53,622
534,366

2,900
522,042

2,797
560,124

2,843
599,682

2,897
650,787

2,949
685,427

21,484

21,824

22,190

22,650

23,332

24,075

24,813

25,544

26,275

27,003

27,728

28,453

.........

.........

–17

–31

–46

–61

–78

–96

–114

–133

–153

–174

3,510
27,426

3,586
27,667

3,690
27,733

3,844
27,134

4,035
27,248

4,178
27,429

4,325
27,831

4,540
28,607

4,733
29,408

4,934
30,232

5,181
31,078

5,378
31,948

320

326

339

345

355

365

376

387

399

411

423

435

583
3,879

595
3,600

623
3,524

649
3,489

675
3,467

703
4,163

732
4,287

762
4,358

794
4,433

826
4,529

860
4,640

898
4,755

57,202

57,598

58,082

58,080

59,066

60,852

62,286

64,102

65,928

67,802

69,757

71,693

14,753

50,985

50,135

54,179

55,719

54,363

55,761

60,685

64,454

70,853

75,147

76,692

.........

.........

.........

21

61

135

243

371

511

655

795

938

Undistributed by Agency
Employer share, employee
retirement (on-budget)
Civil service retirement and
disability insurance
Proposed Legislation (NonPAYGO) ���������������������������
Hospital insurance (contribution
as employer) ��������������������������
Military retirement fund
Other federal employees
retirements �����������������������������
Postal Service contributions to
FHI �����������������������������������������
CSRDI from Postal Service ���������
Subtotal, Employer share,
employee retirement (onbudget) ����������������������������
Other miscellaneous
transactions
Interest received by on-budget
trust funds
Proposed Legislation (NonPAYGO) ���������������������������

234

Analytical Perspectives

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012
Subtotal, Other
miscellaneous
transactions ���������������������
Subtotal, Undistributed by
Agency �����������������������������������

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

14,753

50,985

50,135

54,200

55,780

54,498

56,004

61,056

64,965

71,508

75,942

77,630

71,955

108,583

108,217

112,280

114,846

115,350

118,290

125,158

130,893

139,310

145,699

149,323

447,022

500,227

515,556

562,225

614,387

641,924

652,656

647,200

691,017

738,992

796,486

834,750

2,284

1,902

1,788

1,677

1,585

1,589

1,620

1,506

1,482

1,466

1,520

1,561

.........

.........

3

3

3

3

3

3

3

3

3

3

2,284
2,284

1,902
1,902

1,791
1,791

1,680
1,680

1,588
1,588

1,592
1,592

1,623
1,623

1,509
1,509

1,485
1,485

1,469
1,469

1,523
1,523

1,564
1,564

Subtotal, Trust fund Payments to
Federal Funds ������������������������

2,284

1,902

1,791

1,680

1,588

1,592

1,623

1,509

1,485

1,469

1,523

1,564

Subtotal, Interfund Receipts ����������������

449,306

502,129

517,347

563,905

615,975

643,516

654,279

648,709

692,502

740,461

798,009

836,314

–12,720

10,298

9,589

9,994

10,556

11,257

13,250

14,070

14,784

15,486

16,207

16,495

.........
.........
.........

.........
.........
.........

–1,858
5,700
–5,700

–1,983
5,700
.........

–2,128
5,800
.........

–2,293
2,346
349

–2,744
2,346
349

–2,935
2,346
349

–3,095
2,346
349

–3,260
2,346
349

–3,418
2,346
349

–3,520
2,346
349

482

502

501

508

493

474

484

509

528

555

515

516

–12,238

10,800

8,232

14,219

14,721

12,133

13,685

14,339

14,912

15,476

15,999

16,186

494

416

554

920

1,050

1,170

2,026

2,098

2,151

2,325

2,338

2,377

1,671

1,244

1,817

2,237

2,740

2,851

3,393

3,864

4,074

4,180

4,259

4,237

52
2,217

74
1,734

83
2,454

93
3,250

104
3,894

115
4,136

124
5,543

133
6,095

141
6,366

152
6,657

162
6,759

169
6,783

3,710

5,656

4,334

4,631

5,043

5,596

6,375

7,099

7,717

8,367

9,000

9,254

.........

.........

120

240

360

900

240

120

120

120

120

120

3,710
–6,311

5,656
18,190

4,454
15,140

4,871
22,340

5,403
24,018

6,496
22,765

6,615
25,843

7,219
27,653

7,837
29,115

8,487
30,620

9,120
31,878

9,374
32,343

11,145

8,529

7,472

7,878

8,328

8,809

9,317

9,855

10,422

11,020

11,653

12,323

Subtotal, Federal Fund Payments
to Trust Funds �����������������������������
Trust fund Payments to Federal Funds
Distributed by Agency
Other miscellaneous
transactions
Other �������������������������������������������
Proposed Legislation
(PAYGO) ��������������������������
Subtotal, Other
miscellaneous
transactions ���������������������
Subtotal, Distributed by Agency ��

Federal Intrafund Receipts
Distributed by Agency
General fund payments to
retirement and health
benefits funds
DOD retiree health care fund ���������
Proposed Legislation (NonPAYGO) ����������������������������������
Employees health benefits fund �����
Proposed Legislation (PAYGO) ���
Miscellaneous Federal retirement
funds �����������������������������������������
Subtotal, General fund payments
to retirement and health
benefits funds �������������������������
Interest
Interest on Government capital in
enterprises ��������������������������������
Interest from the Federal Financing
Bank ������������������������������������������
Interest received by retirement and
health benefits funds �����������������
Subtotal, Interest �������������������������
Other miscellaneous
transactions
Other ����������������������������������������������
Proposed Legislation
(PAYGO) ��������������������������
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency ����
Undistributed by Agency
Employing agency contributions
DOD retiree health care fund ���������

235

15. Offsetting Collections and Offsetting Receipts

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012
Proposed Legislation (NonPAYGO) ����������������������������������
Employees health benefits �������������
Proposed Legislation
(PAYGO) ��������������������������
Subtotal, Employing agency
contributions ���������������������������
Subtotal, Undistributed by Agency ��
Subtotal, Federal Intrafund
Receipts ���������������������������������������

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

.........
.........

.........
.........

–594
.........

–943
.........

–998
.........

–1,055
2,909

–1,115
3,038

–1,179
3,165

–1,248
3,321

–1,319
3,516

–1,394
3,724

–1,474
3,944

.........

3,339

3,521

3,737

3,965

.........

.........

.........

.........

.........

.........

.........

11,145
11,145

11,868
11,868

10,399
10,399

10,672
10,672

11,295
11,295

10,663
10,663

11,240
11,240

11,841
11,841

12,495
12,495

13,217
13,217

13,983
13,983

14,793
14,793

4,834

30,058

25,539

33,012

35,313

33,428

37,083

39,494

41,610

43,837

45,861

47,136

6,677
6,677

6,010
6,010

6,364
6,364

6,792
6,792

6,889
6,889

6,873
6,873

7,106
7,106

7,229
7,229

7,203
7,203

7,139
7,139

7,226
7,226

6,507
6,507

2,401

53

108

117

126

137

148

160

1

1

1

1

2,401
9,078

53
6,063

108
6,472

117
6,909

126
7,015

137
7,010

148
7,254

160
7,389

1
7,204

1
7,140

1
7,227

1
6,508

Subtotal, Trust Intrafund Receipts ��

9,078

6,063

6,472

6,909

7,015

7,010

7,254

7,389

7,204

7,140

7,227

6,508

Subtotal, On Budget ����������������������������������

463,218

538,250

549,358

603,826

658,303

683,954

698,616

695,592

741,316

791,438

851,097

889,958

140,354
140,354
140,354

56,073
56,073
56,073

28,387
28,387
28,387

32,499
32,499
32,499

36,007
36,007
36,007

39,611
39,611
39,611

43,278
43,278
43,278

47,265
47,265
47,265

51,338
51,338
51,338

55,448
55,448
55,448

59,785
59,785
59,785

64,483
64,483
64,483

15,592
15,592

16,178
16,178

16,804
16,804

17,656
17,656

18,637
18,637

19,425
19,425

20,251
20,251

21,336
21,336

22,325
22,325

23,347
23,347

24,544
24,544

25,537
25,537

112,393

105,578

100,040

95,645

92,014

90,725

89,354

90,631

89,131

89,939

86,844

85,493

112,393
127,985

105,578
121,756

100,040
116,844

95,645
113,301

92,014
110,651

90,725
110,150

89,354
109,605

90,631
111,967

89,131
111,456

89,939
113,286

86,844
111,388

85,493
111,030

Subtotal, Federal Fund Payments to
Trust Funds ���������������������������������

268,339

177,829

145,231

145,800

146,658

149,761

152,883

159,232

162,794

168,734

171,173

175,513

Trust Intrafund Receipts
Distributed by Agency
Personnel benefits
Payment to railroad retirement
(from off-budget) �����������������������
Subtotal, Personnel benefits �������
Other miscellaneous
transactions
Other ����������������������������������������������
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency �����

Off Budget
Interfund Receipts
Federal Fund Payments to Trust
Funds
Distributed by Agency
Personnel benefits
Old-age, survivors and disablitity,
insurance ����������������������������������
Subtotal, Personnel benefits �������
Subtotal, Distributed by Agency ��
Undistributed by Agency
Personnel benefits
Employer share, employee
retirement (off-budget) ��������������
Subtotal, Personnel benefits �������
Other miscellaneous
transactions
Interest received by off-budget trust
funds �����������������������������������������
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Undistributed by Agency ��

Subtotal, Interfund Receipts ����������������

268,339

177,829

145,231

145,800

146,658

149,761

152,883

159,232

162,794

168,734

171,173

175,513

Subtotal, Off Budget ����������������������������������

268,339

177,829

145,231

145,800

146,658

149,761

152,883

159,232

162,794

168,734

171,173

175,513

Subtotal, Intragovernmental Receipts ����������

731,557

716,079

694,589

749,626

804,961

833,715

851,499

854,824

904,110

960,172 1,022,270 1,065,471

236

Analytical Perspectives

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Receipts from Non-Federal Sources
On Budget
Proprietary Receipts
Federal Fund Receipts
Distributed by Agency
Fees and other charges for
services and special benefits
Nuclear waste disposal revenues ��
Proposed Legislation (PAYGO) ���
Other ����������������������������������������������
Proposed Legislation (NonPAYGO) ����������������������������������
Proposed Legislation (PAYGO) ���
Subtotal, Fees and other
charges for services and
special benefits ���������������
Interest
Interest on foreign loans and
deferred foreign collections ����
Interest on deposits and loan
accounts ���������������������������������
Other interest ������������������������������
Dividends and other earnings �����
Subtotal, Interest ������������������
Realization upon loans and
investments
Negative subsidies and
downward reestimates �����������
Proposed Legislation (NonPAYGO) ����������������������������������
Proposed Legislation (PAYGO) ���
Other ����������������������������������������������
Subtotal, Realization upon loans
and investments ���������������������
Sale of Government property
Sale of land and other real property 
Proposed Legislation (PAYGO) ���
Other sales of government
property �������������������������������������
Subtotal, Sale of Government
property ����������������������������������

753
.........
4,386

755
.........
4,433

775
.........
4,661

782
.........
4,927

783
.........
5,255

785
.........
5,471

790
.........
5,565

795
.........
5,655

795
.........
5,764

798
.........
5,854

804
2,194
5,978

804
350
6,023

.........
.........

.........
.........

129
51

168
58

172
59

186
61

192
62

197
64

204
65

210
66

212
68

222
69

5,139

5,188

5,616

5,935

6,269

6,503

6,609

6,711

6,828

6,928

9,256

7,468

48

48

48

48

48

48

48

48

48

48

48

48

.........
35,491
18,379
53,918

.........
48,458
15,419
63,925

.........
53,256
29,662
82,966

.........
43,936
25,414
69,398

187
45,581
23,483
69,299

587
48,552
15,332
64,519

881
51,572
12,802
65,303

1,052
54,537
12,099
67,736

1,088
57,527
12,592
71,255

1,085
60,592
13,026
74,751

1,082
63,576
13,661
78,367

1,082
66,550
14,504
82,184

64,889

76,663

40,321

36,750

31,066

25,280

20,158

16,691

14,386

12,486

9,860

9,367

.........
.........
58

–25
–8,952
63

.........
–8,213
65

.........
–7,160
66

.........
–3,204
66

.........
–33
67

.........
2,577
66

.........
5,332
66

.........
7,859
66

.........
9,769
66

.........
10,944
66

.........
11,848
66

64,947

67,749

32,173

29,656

27,928

25,314

22,801

22,089

22,311

22,321

20,870

21,281

162
.........

274
.........

237
5

231
10

231
19

224
29

229
29

235
29

246
29

250
29

255
29

260
29

77

49

21

21

21

21

21

21

21

21

21

21

239

323

263

262

271

274

279

285

296

300

305

310

Sale of products
Sale of timber and other natural
land products ����������������������������
Proposed Legislation (PAYGO) ���
Sale of minerals and mineral
products ������������������������������������
Proposed Legislation (PAYGO) ���
Sale of power and other utilities �����
Other ����������������������������������������������
Subtotal, Sale of products �����������

218
.........

163
.........

197
8

196
8

197
8

198
8

199
8

199
10

198
10

198
10

198
10

198
11

65
.........
674
157
1,114

55
.........
774
137
1,129

69
145
726
150
1,295

69
113
753
154
1,293

72
98
739
139
1,253

74
67
713
154
1,214

75
37
678
158
1,155

77
29
703
142
1,160

76
13
667
158
1,122

79
11
650
162
1,110

83
17
694
145
1,147

84
24
647
162
1,126

Other miscellaneous
transactions
Royalties and rents ������������������������
Proposed Legislation (PAYGO) ���

4,484
.........

4,542
.........

4,618
–49

4,693
1

4,681
1

4,552
1

4,690
1

4,844
1

5,017
1

5,269
1

5,570
1

5,692
1

237

15. Offsetting Collections and Offsetting Receipts

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012
Recoveries and refunds �����������������
Proposed Legislation (PAYGO) ���
Gifts and contributions �������������������
Miscellaneous receipt accounts �����
Proposed Legislation (PAYGO) ���
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency �����

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

4,516
.........
12
2,317
.........

4,826
.........
13
3,330
.........

4,999
4
13
3,703
22

5,187
7
12
4,075
22

5,297
–23
12
4,379
22

5,418
–23
12
4,659
22

5,539
–44
12
4,917
22

5,622
–61
12
5,152
22

5,752
–77
12
5,296
22

5,884
–75
12
5,388
22

5,976
–72
12
5,160
22

6,118
–69
12
4,812
22

11,329
136,686

12,711
151,025

13,310
135,623

13,997
120,541

14,369
119,389

14,641
112,465

15,137
111,284

15,592
113,573

16,023
117,835

16,501
121,911

16,669
126,614

16,588
128,957

681
.........
5,924
.........
6,605

1,107
.........
5,736
.........
6,843

1,201
100
5,833
–150
6,984

1,012
104
6,145
–200
7,061

1,009
123
6,404
–200
7,336

941
150
6,337
–200
7,228

889
170
6,165
–200
7,024

884
185
6,744
–200
7,613

899
200
7,301
–200
8,200

924
215
7,522
–200
8,461

934
225
7,710
–200
8,669

933
240
7,390
–200
8,363

.........

1

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

12,992
.........

2,588
.........

.........
.........

.........
.........

.........
.........

350
150

350
150

4,400
.........

4,400
.........

.........
.........

.........
.........

.........
.........

12,992
19,597

2,589
9,432

.........
6,984

.........
7,061

.........
7,336

500
7,728

500
7,524

4,400
12,013

4,400
12,600

.........
8,461

.........
8,669

.........
8,363

156,283

160,457

142,607

127,602

126,725

120,193

118,808

125,586

130,435

130,372

135,283

137,320

64,686
71
9,060

69,640
65
9,411

72,538
55
9,689

78,300
47
9,966

84,606
39
10,501

91,444
32
11,198

99,567
27
11,968

108,410
23
12,800

116,126
18
13,814

125,370
14
14,987

135,905
11
16,305

147,162
8
17,713

73,817

79,116

82,282

88,313

95,146

102,674

111,562

121,233

129,958

140,371

152,221

164,883

1,538
.........
3,139
4,677

701
–606
520
615

587
–455
400
532

487
.........
460
947

382
.........
498
880

344
.........
518
862

314
.........
521
835

274
.........
505
779

219
.........
482
701

171
.........
453
624

162
.........
412
574

245
.........
385
630

71
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

.........
1

72

1

1

1

1

1

1

1

1

1

1

1

26,310

31,399

33,035

34,998

35,030

34,388

32,698

30,095

28,781

28,404

27,826

27,985

26,310

31,399

33,035

34,998

35,030

34,388

32,698

30,095

28,781

28,404

27,826

27,985

Undistributed by Agency
Outer Continental Shelf
Outer Continental Shelf rents and
bonuses ������������������������������������
Proposed Legislation (PAYGO) ���
Outer Continental Shelf royalties ���
Proposed Legislation (PAYGO) ���
Subtotal, Outer Continental Shelf��
Other miscellaneous
transactions
Sale of major assets ����������������������
Other undistributed offsetting
receipts �������������������������������������
Proposed Legislation (PAYGO) ���
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Undistributed by Agency �
Subtotal, Federal Fund Receipts
Trust Fund Receipts
Distributed by Agency
Fees and other charges for
services and special benefits
Medicare premiums and other
charges 1������������������������������������
Veterans life insurance (trust funds)��
Other ����������������������������������������������
Subtotal, Fees and other charges
for services and special
benefits ����������������������������������
Interest
Other interest ���������������������������������
Proposed Legislation (PAYGO) ���
Dividends and other earnings ��������
Subtotal, Interest �������������������������
Realization upon loans and
investments
Negative subsidies and downward
reestimates �������������������������������
Other ����������������������������������������������
Subtotal, Realization upon loans
and investments ���������������������
Sale of Government property
Military assistance program sales
(trust funds) �������������������������������
Subtotal, Sale of Government
property �������������������������������������

238

Analytical Perspectives

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Other miscellaneous
transactions
Royalties and rents�������������������������
Proposed Legislation (PAYGO) ���
Recoveries and refunds �����������������
Gifts and contributions �������������������
Miscellaneous receipt accounts �����
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency �����

.........
.........
12,184
397
95

.........
.........
10,545
339
96

.........
200
10,666
318
99

.........
200
10,766
315
102

.........
200
10,866
315
105

.........
200
10,966
315
111

.........
200
11,006
314
115

.........
200
11,106
313
120

.........
200
11,206
313
126

.........
200
11,306
313
132

.........
200
11,306
313
138

.........
200
11,406
313
146

12,676
117,552

10,980
122,111

11,283
127,133

11,383
135,642

11,486
142,543

11,592
149,517

11,635
156,731

11,739
163,847

11,845
171,286

11,951
181,351

11,957
192,579

12,065
205,564

Subtotal, Trust Fund Receipts ��������

117,552

122,111

127,133

135,642

142,543

149,517

156,731

163,847

171,286

181,351

192,579

205,564

Subtotal, Proprietary Receipts ������������

273,835

282,568

269,740

263,244

269,268

269,710

275,539

289,433

301,721

311,723

327,862

342,884

.........
8,366
251
.........

.........
8,675
268
.........

.........
9,427
268
200

.........
9,640
271
1,139

.........
9,748
273
1,410

1
9,880
275
1,675

1
10,013
276
1,950

1
10,131
277
2,235

1
10,272
278
2,279

1
10,409
280
2,324

1
7,442
169
2,370

1
7,335
160
2,418

8,617
8,617

8,943
8,943

9,895
9,895

11,050
11,050

11,431
11,431

11,831
11,831

12,240
12,240

12,644
12,644

12,830
12,830

13,014
13,014

9,982
9,982

9,914
9,914

.........
.........

.........
50

.........
225

1,750
325

.........
425

.........
550

.........
550

.........
550

.........
550

.........
550

.........
550

.........
550

.........
.........

50
50

225
225

2,075
2,075

425
425

550
550

550
550

550
550

550
550

550
550

550
550

550
550

8,617

8,993

10,120

13,125

11,856

12,381

12,790

13,194

13,380

13,564

10,532

10,464

3

3

7

7

7

1,257

8

8

8

8

8

9

3
3

3
3

7
7

7
7

7
7

1,257
1,257

8
8

8
8

8
8

8
8

8
8

9
9

.........

.........

.........

3,011

9,416

7,350

2,200

.........

.........

.........

.........

.........

.........
.........

.........
.........

.........
.........

3,011
3,011

9,416
9,416

7,350
7,350

2,200
2,200

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

Subtotal, Trust Fund Receipts ��������

3

3

7

3,018

9,423

8,607

2,208

8

8

8

8

9

Subtotal, Offsetting Governmental
Receipts ��������������������������������������������

8,620

8,996

10,127

16,143

21,279

20,988

14,998

13,202

13,388

13,572

10,540

10,473

Subtotal, On Budget ����������������������������������

282,455

291,564

279,867

279,387

290,547

290,698

290,537

302,635

315,109

325,295

338,402

353,357

Offsetting Governmental Receipts
Federal Fund Receipts
Distributed by Agency
Other miscellaneous
transactions
Defense Cooperation ���������������������
Regulatory Fees ����������������������������
Other ����������������������������������������������
Proposed Legislation (PAYGO) ���
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency �����
Undistributed by Agency
Other miscellaneous transactions
Spectrum auction proceeds �����������
Proposed Legislation (PAYGO) ���
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Undistributed by Agency ��
Subtotal, Federal Fund Receipts ����
Trust Fund Receipts
Distributed by Agency
Other miscellaneous
transactions
Regulatory Fees ����������������������������
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Distributed by Agency �����
Undistributed by Agency
Other miscellaneous
transactions
Spectrum auction proceeds �����������
Subtotal, Other miscellaneous
transactions ����������������������������
Subtotal, Undistributed by Agency �

239

15. Offsetting Collections and Offsetting Receipts

Table 15–5 Offsetting Receipts by Type—Continued
(In millions of dollars)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Off Budget
Proprietary Receipts
Trust Fund Receipts
Distributed by Agency
Fees and other charges for
services and special benefits
Other ����������������������������������������������
Subtotal, Fees and other charges
for services and special
benefits ����������������������������������

31

30

30

31

31

32

32

33

34

35

36

37

31

30

30

31

31

32

32

33

34

35

36

37

Other miscellaneous
transactions
Recoveries and refunds ��������������
Subtotal, Other
miscellaneous
transactions ���������������������
Subtotal, Distributed by Agency ��

74

60

60

60

60

60

60

60

60

60

60

60

74
105

60
90

60
90

60
91

60
91

60
92

60
92

60
93

60
94

60
95

60
96

60
97

Subtotal, Trust Fund Receipts ���

90

90

91

91

92

92

93

94

95

96

97

105

90

90

91

91

92

92

93

94

95

96

97

Subtotal, Off Budget �����������������������������

105

90

90

91

91

92

92

93

94

95

96

97

Subtotal, Receipts from Non-Federal
Sources ��������������������������������������������������
1

105

Subtotal, Proprietary Receipts �������

282,560

291,654

279,957

279,478

290,638

290,790

290,629

302,728

315,203

325,390

338,498

353,454

Grand Total Offsetting Receipts �������������������� 1,014,117 1,007,733
Excludes the effects of 2014 Budget Medicare savings proposals.

974,546 1,029,104 1,095,599 1,124,505 1,142,128 1,157,552 1,219,313 1,285,562 1,360,768 1,418,925

16. Tax Expenditures

The Congressional Budget Act of 1974 (Public Law 93–
344) requires that a list of “tax expenditures’’ be included
in the budget. Tax expenditures are defined in the law as
“revenue losses attributable to provisions of the Federal
tax laws which allow a special exclusion, exemption, or
deduction from gross income or which provide a special
credit, a preferential rate of tax, or a deferral of tax liability.’’ These exceptions may be viewed as alternatives to
other policy instruments, such as spending or regulatory
programs.
Identification and measurement of tax expenditures
depends crucially on the baseline tax system against
which the actual tax system is compared. The tax expenditure estimates presented in this chapter are patterned
on a comprehensive income tax, which defines income as
the sum of consumption and the change in net wealth in
a given period of time.
An important assumption underlying each tax expenditure estimate reported below is that other parts of the

Tax Code remain unchanged. The estimates would be different if tax expenditures were changed simultaneously
because of potential interactions among provisions. For
that reason, this chapter does not present a grand total
for the estimated tax expenditures.
Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2012–
2018 using two methods of accounting: current revenue
effects and present value effects. The present value approach provides estimates of the revenue effects for tax
expenditures that generally involve deferrals of tax payments into the future.
A discussion of performance measures and economic
effects related to the assessment of the effect of tax expenditures on the achievement of program performance
goals is presented in Appendix A. This section is a complement to the Government-wide performance plan required
by the Government Performance and Results Act of 1993.

TAX EXPENDITURES IN THE INCOME TAX
Tax Expenditure Estimates
All tax expenditure estimates presented here are based
upon current tax law enacted as of December 31, 2012.
Thus, the estimates assume that the Bush era tax cuts
expire as scheduled under the Tax Relief, Unemployment,
Insurance Reauthorization, and Job Creation Act of 2010.
In most cases, expired or repealed provisions are not listed if their revenue effects result only from taxpayer activity occurring before fiscal year 2012. The estimates are
based on the economic assumptions from the Mid-Session
Review of the 2013 Budget. The estimates do not reflect
the “American Taxpayer Relief Act of 2012” (ATRA), enacted into law on January 2, 2013, which extended many
tax expenditures, changed income tax rates, and provided
Alternative Minimum Tax relief. Given the late passage
of the legislation, revised estimates will be included in the
tax expenditure tables for the 2015 Budget. The tax-related provisions of ATRA are summarized in chapter 14 of
this volume, “Governmental Receipts.” In contrast to the
general rule which drops expired provisions, and for the
sake of continuity, the tables below show provisions that
expired at the end of 2011 but were extended by ATRA.
The total revenue effects for tax expenditures for fiscal
years 2012–2018 are displayed according to the Budget’s
functional categories in Table 16–1. Descriptions of the
specific tax expenditure provisions follow the tables of estimates and the discussion of general features of the tax
expenditure concept.

Two baseline concepts—the normal tax baseline and
the reference tax law baseline—are used to identify and
estimate tax expenditures.1 For the most part, the two
concepts coincide. However, items treated as tax expenditures under the normal tax baseline, but not the reference
tax law baseline, are indicated by the designation “normal
tax method’’ in the tables. The revenue effects for these
items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail following
the tables.
Table 16–2 reports separately the respective portions
of the total revenue effects that arise under the individual
and corporate income taxes separately. The location of the
estimates under the individual and corporate headings
does not imply that these categories of filers benefit from
the special tax provisions in proportion to the respective
tax expenditure amounts shown. Rather, these breakdowns show the form of tax liability that the various provisions affect. The ultimate beneficiaries of corporate tax
expenditures could be shareholders, employees, customers, or other providers of capital, depending on economic
forces.
Table 16–3 ranks the major tax expenditures by the
size of their 2014–2018 revenue effect. The first column
provides the number of the provision in order to cross reference this table to Tables 16–1 through 16–3, as well as
to the descriptions below.
1  These baseline concepts are thoroughly discussed in Special Analysis G of the 1985 Budget, where the former is referred to as the pre-1983
method and the latter the post-1982 method.

241

242

Analytical Perspectives

Interpreting Tax Expenditure Estimates
The estimates shown for individual tax expenditures in
Tables 16–1, 16–2, and 16–3 do not necessarily equal the
increase in Federal revenues (or the change in the budget
balance) that would result from repealing these special
provisions, for the following reasons.
First, eliminating a tax expenditure may have incentive effects that alter economic behavior. These incentives
can affect the resulting magnitudes of the activity or of
other tax provisions or Government programs. For example, if capital gains were taxed at ordinary rates, capital
gain realizations would be expected to decline, resulting
in lower tax receipts. Such behavioral effects are not reflected in the estimates.
Second, tax expenditures are interdependent even
without incentive effects. Repeal of a tax expenditure provision can increase or decrease the tax revenues associated with other provisions. For example, even if behavior
does not change, repeal of an itemized deduction could
increase the revenue costs from other deductions because
some taxpayers would be moved into higher tax brackets.
Alternatively, repeal of an itemized deduction could lower
the revenue cost from other deductions if taxpayers are
led to claim the standard deduction instead of itemizing.
Similarly, if two provisions were repealed simultaneously,
the increase in tax liability could be greater or less than
the sum of the two separate tax expenditures, because
each is estimated assuming that the other remains in
force. In addition, the estimates reported in Table 16–1
are the totals of individual and corporate income tax
revenue effects reported in Table 16–2 and do not reflect
any possible interactions between individual and corporate income tax receipts. For this reason, the estimates in
Table 16–1 should be regarded as approximations.
Present-Value Estimates
The annual value of tax expenditures for tax deferrals
is reported on a cash basis in all tables except Table 16–4.
Cash-based estimates reflect the difference between taxes
deferred in the current year and incoming revenues that
are received due to deferrals of taxes from prior years.
Although such estimates are useful as a measure of cash
flows into the Government, they do not accurately reflect
the true economic cost of these provisions. For example,
for a provision where activity levels have changed, so that
incoming tax receipts from past deferrals are greater than
deferred receipts from new activity, the cash-basis tax expenditure estimate can be negative, despite the fact that
in present-value terms current deferrals have a real cost
to the Government. Alternatively, in the case of a newly
enacted deferral provision, a cash-based estimate can
overstate the real effect on receipts to the Government
because the newly deferred taxes will ultimately be received.
Discounted present-value estimates of revenue effects
are presented in Table 16–4 for certain provisions that
involve tax deferrals or other long-term revenue effects.

These estimates complement the cash-based tax expenditure estimates presented in the other tables.
The present-value estimates represent the revenue effects, net of future tax payments, that follow from activities undertaken during calendar year 2012 which cause
the deferrals or other long-term revenue effects. For instance, a pension contribution in 2012 would cause a deferral of tax payments on wages in 2012 and on pension
fund earnings on this contribution (e.g., interest) in later
years. In some future year, however, the 2012 pension
contribution and accrued earnings will be paid out and
taxes will be due; these receipts are included in the present-value estimate. In general, this conceptual approach
is similar to the one used for reporting the budgetary effects of credit programs, where direct loans and guarantees in a given year affect future cash flows.
Tax Expenditure Baselines
A tax expenditure is an exception to baseline provisions of the tax structure that usually results in a reduction in the amount of tax owed. The 1974 Congressional
Budget Act, which mandated the tax expenditure budget,
did not specify the baseline provisions of the tax law. As
noted previously, deciding whether provisions are exceptions, therefore, is a matter of judgment. As in prior years,
most of this year’s tax expenditure estimates are presented using two baselines: the normal tax baseline and the
reference tax law baseline. Tax expenditures may take
the form of credits, deductions, special exceptions and allowances, and reduce tax liability below the level implied
by the baseline tax system.
The normal tax baseline is patterned on a practical
variant of a comprehensive income tax, which defines income as the sum of consumption and the change in net
wealth in a given period of time. The normal tax baseline
allows personal exemptions, a standard deduction, and
deduction of expenses incurred in earning income. It is
not limited to a particular structure of tax rates, or by a
specific definition of the taxpaying unit.
The reference tax law baseline is also patterned on
a comprehensive income tax, but it is closer to existing
law. Reference law tax expenditures are limited to special
exceptions from a generally provided tax rule that serve
programmatic functions in a way that is analogous to
spending programs. Provisions under the reference law
baseline are generally tax expenditures under the normal
tax baseline, but the reverse is not always true.
Both the normal and reference tax baselines allow several major departures from a pure comprehensive income
tax. For example, under the normal and reference tax
baselines:
•	 Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded as a tax expenditure. Accrued income would be taxed under a comprehensive
income tax.
•	 There is a separate corporate income tax.

243

16. Tax Expenditures

Table 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018
(in millions of dollars)
Total from corporations and individuals
2012

2013

2014

2015

2016

2017

2018

2014–18

National Defense
1 Exclusion of benefits and allowances to armed forces personnel �����������������������������������

14,140

14,640

15,150

14,170

14,350

14,840

15,430

73,940

International affairs:
2 Exclusion of income earned abroad by U.S. citizens �������������������������������������������������������
3 Exclusion of certain allowances for Federal employees abroad ��������������������������������������
4 Inventory property sales source rules exception �������������������������������������������������������������
5 Deferral of income from controlled foreign corporations (normal tax method) ����������������
6 Deferred taxes for financial firms on certain income earned overseas ����������������������������

5,400
1,070
3,310
42,000
2,510

5,800
1,120
3,610
41,810
0

6,140
1,180
3,940
41,770
0

6,430
1,240
4,300
43,020
0

6,730
1,300
4,690
44,240
0

7,050
1,370
5,120
45,180
0

7,380
1,430
5,590
46,160
0

33,730
6,520
23,640
220,370
0

General science, space, and technology:
7 Expensing of research and experimentation expenditures (normal tax method) ������������
8 Credit for increasing research activities ���������������������������������������������������������������������������

3,740
4,390

4,810
2,320

5,040
2,130

5,530
1,970

6,560
1,820

7,610
1,680

8,470
1,530

33,210
9,130

470
890
20
10
90
20
1,500
1,040
140
10
100
270
70

790
900
10
10
80
30
1,730
1,270
110
0
180
250
70

880
940
0
10
60
30
1,770
1,360
50
0
260
250
70

630
940
0
10
80
30
1,730
1,670
30
0
400
250
70

390
950
0
10
90
30
1,640
1,880
10
0
610
250
70

260
950
0
10
100
40
1,440
1,110
10
0
670
250
70

180
950
0
10
110
40
1,100
240
0
0
500
240
70

2,340
4,730
0
50
440
170
7,680
6,260
100
0
2,440
1,240
350

–70
380
680
110
90
70
70
780
210
910
20
580
0

–180
400
610
100
110
70
40
0
300
1,010
30
460
0

–190
420
–90
100
110
40
20
0
130
1,140
30
110
0

–180
500
–700
100
90
20
0
0
120
1,270
30
0
0

–150
320
–830
110
80
0
0
0
100
1,420
30
–30
0

–120
170
–880
120
70
0
0
0
0
600
30
–50
165

–80
170
–800
120
70
–20
0
0
0
0
30
–50
440

–720
1,580
–3,300
550
420
40
20
0
350
4,430
150
–20
605

Natural resources and environment:
35 Expensing of exploration and development costs, nonfuel minerals �������������������������������
36 Excess of percentage over cost depletion, nonfuel minerals ������������������������������������������
37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities ����������
38 Capital gains treatment of certain timber income ������������������������������������������������������������
39 Expensing of multiperiod timber growing costs ���������������������������������������������������������������
40 Tax incentives for preservation of historic structures �������������������������������������������������������
41 Exclusion of gain or loss on sale or exchange of certain brownfield sites �����������������������
42 Industrial CO2 capture and sequestration tax credit �������������������������������������������������������
43 Deduction for endangered species recovery expenditures ����������������������������������������������

50
560
420
90
270
540
40
60
20

60
580
470
80
280
550
30
60
20

60
600
550
60
300
570
10
70
20

80
600
600
80
310
580
0
80
20

80
610
650
90
320
590
0
110
30

80
620
680
100
330
600
0
210
30

90
630
730
110
350
610
0
160
30

390
3,060
3,210
440
1,610
2,950
10
630
130

Agriculture:
44 Expensing of certain capital outlays ��������������������������������������������������������������������������������
45 Expensing of certain multiperiod production costs ����������������������������������������������������������

70
130

100
160

110
160

120
160

130
160

130
170

130
160

620
810

Energy:
9 Expensing of exploration and development costs, fuels ��������������������������������������������������
10 Excess of percentage over cost depletion, fuels �������������������������������������������������������������
11 Alternative fuel production credit �������������������������������������������������������������������������������������
12 Exception from passive loss limitation for working interests in oil and gas properties ����
13 Capital gains treatment of royalties on coal ���������������������������������������������������������������������
14 Exclusion of interest on energy facility bonds ������������������������������������������������������������������
15 Energy production credit 1 �����������������������������������������������������������������������������������������������
16 Energy investment credit 1 �����������������������������������������������������������������������������������������������
17 Alcohol fuel credits 2 ��������������������������������������������������������������������������������������������������������
18 Bio-Diesel and small agri-biodiesel producer tax credits 3 �����������������������������������������������
19 Tax credit and deduction for clean-fuel burning vehicles �������������������������������������������������
20 Exclusion of utility conservation subsidies �����������������������������������������������������������������������
21 Credit for holding clean renewable energy bonds 4 ���������������������������������������������������������
22 Deferral of gain from dispositions of transmission property to implement FERC
restructuring policy �����������������������������������������������������������������������������������������������������
23 Credit for investment in clean coal facilities ���������������������������������������������������������������������
24 Temporary 50% expensing for equipment used in the refining of liquid fuels ������������������
25 Natural gas distribution pipelines treated as 15-year property ����������������������������������������
26 Amortize all geological and geophysical expenditures over 2 years �������������������������������
27 Allowance of deduction for certain energy efficient commercial building property ����������
28 Credit for construction of new energy efficient homes �����������������������������������������������������
29 Credit for energy efficiency improvements to existing homes �����������������������������������������
30 Credit for energy efficient appliances ������������������������������������������������������������������������������
31 Credit for residential energy efficient property �����������������������������������������������������������������
32 Qualified energy conservation bonds 5 ����������������������������������������������������������������������������
33 Advanced energy property credit ������������������������������������������������������������������������������������
34 Advanced nuclear power production credit ����������������������������������������������������������������������

244

Analytical Perspectives

Table 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018—Continued
(in millions of dollars)
Total from corporations and individuals
2012
46
47
48
49
50

Treatment of loans forgiven for solvent farmers ���������������������������������������������������������������
Capital gains treatment of certain income �����������������������������������������������������������������������
Income averaging for farmers ������������������������������������������������������������������������������������������
Deferral of gain on sale of farm refiners ��������������������������������������������������������������������������
Expensing of reforestation expenditures �������������������������������������������������������������������������

2013

2014

2015

2016

2017

2018

2014–18

40
880
130
20
60

40
830
130
20
70

40
630
130
20
80

40
760
130
20
80

40
910
140
20
80

40
1,030
140
20
90

40
1,110
140
20
100

200
4,440
680
100
430

Commerce and housing:
51
52
53
54
55
56

Financial institutions and insurance:
Exemption of credit union income ������������������������������������������������������������������������������
Exclusion of interest on life insurance savings �����������������������������������������������������������
Special alternative tax on small property and casualty insurance companies �����������
Tax exemption of certain insurance companies owned by tax-exempt organizations 
Small life insurance company deduction ��������������������������������������������������������������������
Exclusion of interest spread of financial institutions ���������������������������������������������������

1,440
17,580
10
800
20
150

1,560
18,350
10
830
20
1,400

1,660
21,010
10
830
20
2,330

1,750
23,130
10
830
20
2,660

1,940
24,670
10
850
20
2,910

1,890
24,870
10
850
20
3,170

2,220
26,190
10
850
20
3,400

9,460
119,870
50
4,210
100
14,470

57
58
59
60
61
62
63
64
65
66
67

Housing:
Exclusion of interest on owner-occupied mortgage subsidy bonds ����������������������������
Exclusion of interest on rental housing bonds ������������������������������������������������������������
Deductibility of mortgage interest on owner-occupied homes ������������������������������������
Deductibility of State and local property tax on owner-occupied homes ��������������������
Deferral of income from installment sales �������������������������������������������������������������������
Capital gains exclusion on home sales ����������������������������������������������������������������������
Exclusion of net imputed rental income ����������������������������������������������������������������������
Exception from passive loss rules for $25,000 of rental loss ��������������������������������������
Credit for low-income housing investments 6 ��������������������������������������������������������������
Accelerated depreciation on rental housing (normal tax method) ������������������������������
Discharge of mortgage indebtedness �������������������������������������������������������������������������

1,040
880
81,890
15,460
900
30,900
68,230
10,200
7,670
1,220
1,930

1,170
990
93,090
20,310
1,080
38,130
74,080
12,250
7,410
1,680
650

1,370
1,170
101,470
25,160
1,160
45,870
75,520
14,420
8,310
2,130
0

1,520
1,290
112,730
26,110
1,350
48,790
80,880
16,070
8,280
2,570
0

1,630
1,370
126,950
27,330
1,560
52,310
88,260
16,950
8,330
3,060
0

1,740
1,470
142,040
28,690
1,730
56,070
93,330
17,730
8,730
3,570
0

1,850
1,570
156,990
29,740
1,850
60,160
98,690
18,510
9,080
4,130
0

8,110
6,870
640,180
137,030
7,650
263,200
436,680
83,680
42,730
15,460
0

68
69
70
71
72
73
74
75
76
77
78
79
80
81
82

Commerce:
Cancellation of indebtedness �������������������������������������������������������������������������������������
Exceptions from imputed interest rules ����������������������������������������������������������������������
Treatment of qualified dividends ���������������������������������������������������������������������������������
Capital gains (except agriculture, timber, iron ore, and coal) ��������������������������������������
Capital gains exclusion of small corporation stock �����������������������������������������������������
Step-up basis of capital gains at death �����������������������������������������������������������������������
Carryover basis of capital gains on gifts ���������������������������������������������������������������������
Ordinary income treatment of loss from small business corporation stock sale ���������
Accelerated depreciation of buildings other than rental housing (normal tax method) ������
Accelerated depreciation of machinery and equipment (normal tax method) ������������
Expensing of certain small investments (normal tax method) ������������������������������������
Graduated corporation income tax rate (normal tax method) �������������������������������������
Exclusion of interest on small issue bonds �����������������������������������������������������������������
Deduction for US production activities ������������������������������������������������������������������������
Special rules for certain film and TV production ���������������������������������������������������������

150
50
29,750
65,360
50
15,490
2,830
60
–7,120
69,500
1,270
4,270
240
11,570
130

110
50
20,240
61,840
130
21,170
3,550
60
–7,540
14,750
–530
4,300
270
12,860
80

90
50
0
46,690
370
27,100
3,540
60
–7,570
17,850
–610
4,210
320
13,630
50

70
50
0
56,700
720
28,460
4,230
60
–7,370
40,260
530
4,180
350
14,370
20

50
50
0
68,130
750
29,870
4,980
60
–7,210
57,660
1,120
4,170
370
14,790
10

–10
50
0
76,860
500
31,370
5,620
60
–7,130
72,300
1,510
4,240
400
15,510
0

–70
50
0
82,640
410
32,970
6,100
60
–7,100
85,660
1,800
4,250
420
16,620
0

130
250
0
331,020
2,750
149,770
24,470
300
–36,380
273,730
4,350
21,050
1,860
74,920
80

Transportation:
83 Tonnage tax election for certain international shipping income 7 �������������������������������������
84 Exclusion of reimbursed employee parking expenses �����������������������������������������������������
85 Exclusion for employer-provided transit passes ��������������������������������������������������������������
86 Tax credit for certain expenditures for maintaining railroad tracks �����������������������������������
87 Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities ������

60
2,640
590
130
240

60
2,880
660
80
230

70
3,010
700
50
220

70
3,140
760
20
210

70
3,290
820
10
200

80
3,450
870
0
190

80
3,610
930
0
170

370
16,500
4,080
80
990

Community and regional development:
88 Investment credit for rehabilitation of structures (other than historic) ������������������������������
89 Exclusion of interest for airport, dock, and similar bonds ������������������������������������������������
90 Exemption of certain mutuals’ and cooperatives’ income ������������������������������������������������
91 Empowerment zones, the DC enterprise zone, and renewal communities ���������������������

30
690
130
620

30
780
130
420

30
920
140
470

30
1,010
140
460

30
1,090
140
420

30
1,160
150
360

30
1,230
150
310

150
5,410
720
2,020

245

16. Tax Expenditures

Table 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018—Continued
(in millions of dollars)
Total from corporations and individuals
2012
92
93
94
95
96

New markets tax credit ����������������������������������������������������������������������������������������������������
Expensing of environmental remediation costs ���������������������������������������������������������������
Credit to holders of Gulf Tax Credit Bonds. ����������������������������������������������������������������������
Recovery Zone Bonds 8 ���������������������������������������������������������������������������������������������������
Tribal Economic Development Bonds ������������������������������������������������������������������������������

2013

2014

2015

2016

2017

2018

2014–18

930
–20
90
10
0

930
–180
100
10
30

910
–180
120
20
50

880
–170
130
30
50

840
–160
140
30
50

710
–160
150
30
50

460
–160
160
30
60

3,800
–830
700
140
260

Education, training, employment, and social services:
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114

Education:
Exclusion of scholarship and fellowship income (normal tax method) �����������������������
HOPE tax credit ����������������������������������������������������������������������������������������������������������
Lifetime Learning tax credit ����������������������������������������������������������������������������������������
American Opportunity Tax Credit 9 �����������������������������������������������������������������������������
Education Individual Retirement Accounts �����������������������������������������������������������������
Deductibility of student-loan interest ���������������������������������������������������������������������������
Deduction for higher education expenses ������������������������������������������������������������������
Qualified tuition programs �������������������������������������������������������������������������������������������
Exclusion of interest on student-loan bonds ���������������������������������������������������������������
Exclusion of interest on bonds for private nonprofit educational facilities �������������������
Credit for holders of zone academy bonds 10 �������������������������������������������������������������
Exclusion of interest on savings bonds redeemed to finance educational expenses ����
Parental personal exemption for students age 19 or over ������������������������������������������
Deductibility of charitable contributions (education) ���������������������������������������������������
Exclusion of employer-provided educational assistance ��������������������������������������������
Special deduction for teacher expenses ���������������������������������������������������������������������
Discharge of student loan indebtedness ��������������������������������������������������������������������
Qualified school construction bonds 11 �����������������������������������������������������������������������

2,760
0
2,000
15,580
60
1,450
720
1,980
470
2,150
200
10
2,800
3,960
670
170
20
400

3,020
430
2,290
14,400
80
1,460
0
2,020
530
2,440
200
10
2,700
4,590
240
0
20
580

3,470
4,310
4,450
0
90
880
0
2,270
620
2,870
180
10
2,810
5,080
0
0
20
650

3,600
4,270
4,420
0
100
880
0
2,520
680
3,160
160
10
2,550
5,450
0
0
20
650

3,740
4,150
4,340
0
110
910
0
2,690
730
3,400
130
20
2,300
5,920
0
0
20
650

3,890
4,180
4,260
0
120
940
0
2,870
770
3,610
120
20
2,080
6,430
0
0
20
650

4,040
4,030
4,160
0
130
910
0
3,060
830
3,870
110
20
1,870
6,940
0
0
20
650

18,740
20,940
21,630
0
550
4,520
0
13,410
3,630
16,910
700
80
11,610
29,820
0
0
100
3,250

115
116
117
118
119
120
121
122
123
124
125
126
127

Training, employment, and social services:
Work opportunity tax credit �����������������������������������������������������������������������������������������
Employer provided child care exclusion ����������������������������������������������������������������������
Employer-provided child care credit ���������������������������������������������������������������������������
Assistance for adopted foster children ������������������������������������������������������������������������
Adoption credit and exclusion 12 ���������������������������������������������������������������������������������
Exclusion of employee meals and lodging (other than military) ���������������������������������
Child credit 13 ��������������������������������������������������������������������������������������������������������������
Credit for child and dependent care expenses �����������������������������������������������������������
Credit for disabled access expenditures ���������������������������������������������������������������������
Deductibility of charitable contributions, other than education and health ������������������
Exclusion of certain foster care payments ������������������������������������������������������������������
Exclusion of parsonage allowances ���������������������������������������������������������������������������
Employee retention credit for employers in certain federal disaster areas �����������������

1,130
1,360
10
530
62
5,591
24,790
3,410
20
33,770
420
700
10

970
1,570
10
530
330
6,109
18,430
1,550
20
39,610
420
760
0

660
1,620
0
560
110
6,592
8,650
1,290
20
44,060
420
820
0

370
1,720
0
590
80
6,903
8,380
1,250
20
47,330
430
890
0

160
1,840
0
630
80
7,113
8,020
1,200
20
51,550
430
960
0

80
1,980
0
670
80
7,336
7,670
1,150
20
56,130
420
1,040
0

30
2,120
0
710
80
7,750
7,240
1,090
20
60,840
420
1,120
0

1,300
9,280
0
3,160
430
35,694
39,960
5,980
100
259,910
2,120
4,830
0

184,320
5,210
1,520
7,230
3,040
0
190
3,820
840
420
10

202,530
6,140
1,600
8,990
3,430
0
250
4,470
1,000
500
10

212,820
6,740
1,680
10,270
4,040
0
950
4,980
1,190
500
0

224,610
7,160
1,760
10,820
4,440
–2,660
1,660
5,350
1,410
510
0

239,620
7,650
1,880
11,180
4,760
–3,810
1,690
5,820
1,680
490
0

256,850
8,240
2,000
11,360
5,070
–4,670
1,480
6,340
2,010
510
0

330

360

400

440

490

510

Health:
128 Exclusion of employer contributions for medical insurance premiums and medical care 14 ����
129 Self-employed medical insurance premiums �������������������������������������������������������������������
130 Medical Savings Accounts / Health Savings Accounts ����������������������������������������������������
131 Deductibility of medical expenses �����������������������������������������������������������������������������������
132 Exclusion of interest on hospital construction bonds �������������������������������������������������������
133 Refundable Premium Assistance Tax Credit 15 ����������������������������������������������������������������
134 Credit for employee health insurance expenses of small business 16 ������������������������������
135 Deductibility of charitable contributions (health) ��������������������������������������������������������������
136 Tax credit for orphan drug research ��������������������������������������������������������������������������������
137 Special Blue Cross/Blue Shield deduction ����������������������������������������������������������������������
138 Tax credit for health insurance purchased by certain displaced and retired individuals 17 ������
139 Distributions from retirement plans for premiums for health and long-term care
insurance ��������������������������������������������������������������������������������������������������������������������

272,360 1,206,260
8,860
38,650
2,130
9,450
12,370
56,000
5,430
23,740
–4,930 –16,070
1,310
7,090
6,880
29,370
2,390
8,680
510
2,520
0
0
530

2,370

246

Analytical Perspectives

Table 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018—Continued
(in millions of dollars)
Total from corporations and individuals
2012

2013

2014

2015

2016

2017

2018

2014–18

Income security:
140 Exclusion of railroad retirement system benefits �������������������������������������������������������������
141 Exclusion of workers’ compensation benefits ������������������������������������������������������������������
142 Exclusion of public assistance benefits (normal tax method) ������������������������������������������
143 Exclusion of special benefits for disabled coal miners �����������������������������������������������������
144 Exclusion of military disability pensions ��������������������������������������������������������������������������

350
10,080
720
40
110

430
9,120
750
40
150

510
11,440
780
40
160

510
11,570
810
40
160

510
11,680
840
40
160

500
11,800
870
40
160

490
11,950
910
40
160

2,520
58,440
4,210
200
800

145
146
147
148
149

Net exclusion of pension contributions and earnings:
Defined benefit employer plans ����������������������������������������������������������������������������������
Defined contribution employer plans ��������������������������������������������������������������������������
Individual Retirement Accounts ����������������������������������������������������������������������������������
Low and moderate income savers credit ��������������������������������������������������������������������
Self-Employed plans ���������������������������������������������������������������������������������������������������

38,740
51,830
16,180
1,110
15,930

47,410
68,820
21,240
1,180
19,380

53,060
79,720
19,260
1,220
23,260

57,400
90,870
19,370
1,243
25,490

61,810
98,650
20,620
1,250
28,030

66,150
103,140
21,970
1,270
30,800

69,970
105,490
23,360
1,270
33,760

308,390
477,870
104,580
6,253
141,340

150
151
152
153
154
155
156
157
158

Exclusion of other employee benefits:
Premiums on group term life insurance ����������������������������������������������������������������������
Premiums on accident and disability insurance ����������������������������������������������������������
Income of trusts to finance supplementary unemployment benefits �������������������������������
Special ESOP rules ���������������������������������������������������������������������������������������������������������
Additional deduction for the blind ������������������������������������������������������������������������������������
Additional deduction for the elderly ���������������������������������������������������������������������������������
Tax credit for the elderly and disabled �����������������������������������������������������������������������������
Deductibility of casualty losses ����������������������������������������������������������������������������������������
Earned income tax credit 18 ���������������������������������������������������������������������������������������������

1,870
340
20
810
30
2,080
10
300
1,610

1,910
350
20
1,190
40
2,870
10
350
4,040

1,940
360
30
1,260
40
3,260
10
370
5,640

1,970
360
40
1,330
50
3,330
10
390
5,920

2,030
370
50
1,410
50
3,400
10
410
6,060

2,080
370
60
1,500
50
3,490
0
430
6,310

2,140
380
70
1,580
50
3,540
0
450
6,520

10,160
1,840
250
7,080
240
17,020
30
2,050
30,450

Exclusion of social security benefits:
Social Security benefits for retired workers ����������������������������������������������������������������
Social Security benefits for disabled workers �������������������������������������������������������������
Social Security benefits for spouses, dependents and survivors �������������������������������

22,170
7,510
3,740

27,920
8,960
3,970

32,910
9,970
4,130

34,330
10,280
4,230

35,550
10,560
4,370

36,830
10,810
4,490

38,340
11,060
4,550

177,960
52,680
21,770

Veterans benefits and services:
162 Exclusion of veterans death benefits and disability compensation ����������������������������������
163 Exclusion of veterans pensions ���������������������������������������������������������������������������������������
164 Exclusion of GI bill benefits ���������������������������������������������������������������������������������������������
165 Exclusion of interest on veterans housing bonds ������������������������������������������������������������

4,240
360
940
10

5,210
430
1,200
10

6,880
550
1,610
10

7,480
570
1,720
20

8,140
580
1,830
20

8,860
600
1,950
30

9,640
620
2,080
30

41,000
2,920
9,190
110

Social Security:
159
160
161

General purpose fiscal assistance:
166 Exclusion of interest on public purpose State and local bonds ���������������������������������������
167 Build America Bonds 19 ���������������������������������������������������������������������������������������������������
168 Deductibility of nonbusiness State and local taxes other than on owner-occupied
homes �������������������������������������������������������������������������������������������������������������������������

25,950
0

29,270
0

34,420
0

37,920
0

40,680
0

43,330
0

46,340
0

202,690
0

29,480

43,940

51,560

54,520

58,200

62,200

65,660

292,140

Interest:
169 Deferral of interest on U.S. savings bonds �����������������������������������������������������������������������

980

1,020

1,080

1,090

1,100

1,120

1,130

5,520

Deductibility of:
Property taxes on owner-occupied homes �����������������������������������������������������������������
Nonbusiness State and local taxes other than on owner-occupied homes ����������������

15,460
29,480

20,310
43,940

25,160
51,560

26,110
54,520

27,330
58,200

28,690
62,200

29,740
65,660

137,030
292,140

Exclusion of interest on State and local bonds for:
Public purposes ����������������������������������������������������������������������������������������������������������
Energy facilities ����������������������������������������������������������������������������������������������������������
Water, sewage, and hazardous waste disposal facilities ��������������������������������������������
Small-issues ���������������������������������������������������������������������������������������������������������������
Owner-occupied mortgage subsidies �������������������������������������������������������������������������
Rental housing ������������������������������������������������������������������������������������������������������������
Airports, docks, and similar facilities ���������������������������������������������������������������������������

25,950
20
420
240
1,040
880
690

29,270
30
470
270
1,170
990
780

34,420
30
550
320
1,370
1,170
920

37,920
30
600
350
1,520
1,290
1,010

40,680
30
650
370
1,630
1,370
1,090

43,330
40
680
400
1,740
1,470
1,160

46,340
40
730
420
1,850
1,570
1,230

202,690
170
3,210
1,860
8,110
6,870
5,410

Addendum: Aid to State and local governments:

247

16. Tax Expenditures

Table 16–1.  Estimates of Total Income Tax Expenditures For Fiscal Years 2012–2018—Continued
(in millions of dollars)
Total from corporations and individuals
2012

2013

2014

2015

2016

2017

2018

2014–18

Student loans ��������������������������������������������������������������������������������������������������������������
470
530
620
680
730
770
830
3,630
Private nonprofit educational facilities ������������������������������������������������������������������������
2,150
2,440
2,870
3,160
3,400
3,610
3,870
16,910
Hospital construction ��������������������������������������������������������������������������������������������������
3,040
3,430
4,040
4,440
4,760
5,070
5,430
23,740
Veterans’ housing �������������������������������������������������������������������������������������������������������
10
10
10
20
20
30
30
110
GO Zone and GO Zone mortgage ������������������������������������������������������������������������������
90
100
120
130
140
150
160
700
Credit for holders of zone academy bonds ����������������������������������������������������������������������
200
200
180
160
130
120
110
700
1 Firms can tax an energy grant in lieu of the energy production credit or the energy investment credit for facilities placed in service in 2009 and 2010 or whose construction
commenced in 2009 and 2010. The effect of the grant on outlays (in millions of dollars) is as follows: 2012 $5,080; 2013 $8,080; 2014 $4,710; 2015 $2,520; 2016 $1,580; 2017 $330;
2018 $0.
2 In addition, the alcohol fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $3,540; 2013 $0; 2014 $0; 2015 $0; 2016 $0; 2017 $0;
2018 $0.
The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $310; 2013 $10; 2014 $10; 2015 $0; 2016 $0; 2017 $0; 2018 $0.
3 In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $800; 2013 $0; 2014 $0; 2015 $0; 2016 $0; 2017: $0;
2018 $0.
4 In addition, the provision has outlay effects of (in millions of dollars): 2012 $40; 2013 $50; 2014 $50; 2015 $50; 2016 $50; 2017 $50; 2018 $50.
5 In addition, the provision has outlay effects of (in millions of dollars): 2012 $50; 2013 $60; 2014 $60; 2015 $60; 2016 $60; 2017 $60; 2018 $60.
6 In addition, the credit for low-income housing investments has outlay effects (in millions of dollars) as follows: 2012 $180.
7 These figures do not account for the tonnage tax which shipping companies may opt into in lieu of the corporate income tax.
The tonnage tax reduces the cost of this tax expenditure by $20 per year in each year of the budget.
8 In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows: 2012 $160, 2013 $160, 2014 $160, 2015 $160, 2016 $160; and 2017 $160; 2018 $160.
9 The figures in the table indicate the effect of the American opportunity tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $5,850; 2013
$6,450; 2014 $970
10 In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars): 2012 $20; 2013 $30; 2014 $30; 2015 $30; 2016 $30; 2017 $30; and 2018 $30.
11 In addition, the provision for school construction bonds has outlay effects of (in millions of dollars): 2012 $780; 2013 $940; 2014 $940; 2015 $940; 2016 $940; 2017 $940, and 2018
$940.
12 The figures in the table indicate the effect of the adoption tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $700; and 2013 $50.
13 The figures in the table indicate the effect of the child tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $22,620; 2013 $22,510; 2014
$1,750; 2015 $1,720; 2016 $1,720; 2017 $1,690; and 2018 1,660.
14 The figures in the table indicate the effect on income taxes of the employer contributions for health. In addition, the effect on payroll tax receipts (in millions of dollars) is as follows:
2012 $107,760; 2013 $111,120; 2014 $112,620; 2015 $116,500; 2016 $122,730; 2017 $130,170; 2018 $135,170.
15 In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows: 2014 $32,270; 2015 $58,130; 2016 $71,470; 2017 $78,130; 2018 $82,150.
16 In addition, the small business credit provision has outlay effects (in millions of dollars) as follows: 2012 $70; 2013 $60; 2014 $140; 2015 $240; 2016 $250; 2017 $220; 2018 $190.
17 The figures in the table indicate the effect of the health coverage tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $130; 2013
$120; 2014 $30.
18 The figures in the table indicate the effect of the earned income tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $54,840; 2013
$54,360; 2014 $47,700; 2015 $49,000; 2016 $49,870; 2017 $50,740; and 2018 $51,510.
19 In addition, Build America Bonds have outlay effects of (in millions of dollars): 2012 $3,190; 2013 $3,190; 2014 $3,190; 2015 $3,190; 2016 $3,190; 2017 $3,190; and 2018 $3,190.
Note: Provisions with estimates denoted normal tax method have no revenue loss under the reference tax law method.
All estimates have been rounded to the nearest $10 million. Provisions with estimates that rounded to zero in each year are not included in the table.

248

Analytical Perspectives

Table 16–2.  Estimates of Tax Expenditures for the Corporate and
Individual Income Taxes for Fiscal Years 2012–2018
(in millions of dollars)
Corporations
2012

2013

2014

2015

2016

Individuals
2017

2018 2014–18 2012

National Defense
1 Exclusion of benefits and allowances to
armed forces personnel �������������������������

2014

2015

2016

2017

2018 2014–18

14,140 14,640 15,150 14,170 14,350 14,840 15,430 73,940

International affairs:
2 Exclusion of income earned abroad by U.S.
citizens ���������������������������������������������������
3 Exclusion of certain allowances for Federal
employees abroad ���������������������������������
4 Inventory property sales source rules
exception ����������������������������������������������� 3,310 3,610 3,940 4,300 4,690 5,120 5,590 23,640
5 Deferral of income from controlled foreign
corporations (normal tax method) ��������� 42,000 41,810 41,770 43,020 44,240 45,180 46,160 220,370
6 Deferred taxes for financial firms on certain
income earned overseas ����������������������� 2,510
0
0
0
0
0
0
0
General science, space, and technology:
7 Expensing of research and experimentation
expenditures (normal tax method) ���������
8 Credit for increasing research activities ������

2013

3,600 4,610 4,820 5,300 6,280 7,290 8,100 31,790
4220 2320 2130 1970 1820 1680 1530 9,130

Energy:
9 Expensing of exploration and development
costs, fuels ���������������������������������������������
410
690
770
550
340
230
160 2,050
10 Excess of percentage over cost depletion,
fuels �������������������������������������������������������
750
750
770
770
780
780
780 3,880
11 Alternative fuel production credit ����������������
20
10
0
0
0
0
0
0
12 Exception from passive loss limitation
for working interests in oil and gas
properties ����������������������������������������������
13 Capital gains treatment of royalties on coal 
14 Exclusion of interest on energy facility
bonds �����������������������������������������������������
10
10
10
10
10
10
10
50
15 Energy production credit 1 �������������������������� 1,480 1,710 1,750 1,710 1,620 1,420 1,080 7,580
16 Energy investment credit 1 ��������������������������
920 1150 1240 1550 1750 1030
210 5,780
17 Alcohol fuel credits 2 �����������������������������������
110
80
40
20
10
10
0
80
18 Bio-Diesel and small agri-biodiesel
10
0
0
0
0
0
0
0
producer tax credits 3 �����������������������������
19 Tax credit and deduction for clean-fuel
burning vehicles �������������������������������������
20
30
60
90
110
110
70
440
20 Exclusion of utility conservation subsidies ��
20
10
10
10
10
10
10
50
21 Credit for holding clean renewable energy
20
20
20
20
20
20
20
100
bonds 4 ���������������������������������������������������
22 Deferral of gain from dispositions of
transmission property to implement
FERC restructuring policy ���������������������
–70 –180 –190 –180 –150 –120
–80
–720
23 Credit for investment in clean coal facilities 
360
380
400
480
310
160
160 1,510
24 Temporary 50% expensing for equipment
used in the refining of liquid fuels ����������
680
610
–90 –700 –830 –880 –800 –3,300
25 Natural gas distribution pipelines treated as
15-year property ������������������������������������
110
100
100
100
110
120
120
550
26 Amortize all geological and geophysical
expenditures over 2 years ���������������������
70
80
80
70
60
50
50
310
27 Allowance of deduction for certain energy
efficient commercial building property ���
30
30
20
10
0
0
–10
20
28 Credit for construction of new energy
efficient homes ��������������������������������������
30
20
10
0
0
0
0
10
29 Credit for energy efficiency improvements
to existing homes �����������������������������������
0
0
0
0
0
0
0
0
30 Credit for energy efficient appliances ���������
210
150
130
120
100
0
0
350
31 Credit for residential energy efficient
property �������������������������������������������������
0
0
0
0
0
0
0
0
32 Qualified energy conservation bonds 5 �������
10
10
10
10
10
10
10
50

5400

5800

6140

6430

6730

7050

7380 33,730

1070

1120

1180

1240

1300

1370

1430

6,520

140
170

200

220

230

280

320

370

1,420
0

60

100

110

80

50

30

20

290

140
0

150
0

170
0

170
0

170
0

170
0

170
0

850
0

10
90

10
80

10
60

10
80

10
90

10
100

10
110

50
440

10
20
120
30

20
20
120
30

20
20
120
10

20
20
120
10

20
20
130
0

30
20
80
0

30
20
30
0

120
100
480
20

0

0

0

0

0

0

0

0

80
250

150
240

200
240

310
240

500
240

560
240

430
230

2,000
1,190

50

50

50

50

50

50

50

250

20

20

20

20

10

10

10

70

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

20

30

30

20

20

20

20

110

40

40

20

10

0

0

–10

20

40

20

10

0

0

0

0

10

780
0

0
150

0
0

0
0

0
0

0
0

0
0

0
0

910 1,010 1,140 1,270 1,420
10
20
20
20
20

600
20

0
20

4,430
100

249

16. Tax Expenditures

Table 16–2.  Estimates of Tax Expenditures for the Corporate and Individual
Income Taxes for Fiscal Years 2012–2018—Continued
(in millions of dollars)
Corporations
2012
33 Advanced Energy Property Credit ��������������
34 Advanced nuclear power production credit �
Natural resources and environment:
35 Expensing of exploration and development
costs, nonfuel minerals ��������������������������
36 Excess of percentage over cost depletion,
nonfuel minerals ������������������������������������
37 Exclusion of interest on bonds for water,
sewage, and hazardous waste facilities �
38 Capital gains treatment of certain timber
income ���������������������������������������������������
39 Expensing of multiperiod timber growing
costs ������������������������������������������������������
40 Tax incentives for preservation of historic
structures �����������������������������������������������
41 Exclusion of gain or loss on sale or
exchange of certain brownfield sites �����
42 Industrial CO2 capture and sequestration
tax credit ������������������������������������������������
43 Deduction for endangered species recovery
expenditures ������������������������������������������
Agriculture:
44 Expensing of certain capital outlays �����������
45 Expensing of certain multiperiod production
costs ������������������������������������������������������
46 Treatment of loans forgiven for solvent
farmers ��������������������������������������������������
47 Capital gains treatment of certain income ����
48 Income averaging for farmers ���������������������
49 Deferral of gain on sale of farm refiners �����
50 Expensing of reforestation expenditures ����

2013

2014

2015

2016

Individuals
2017

2018 2014–18 2012

2013

2014

2015

2016

2017

2018 2014–18

500
0

390
0

80
0

0
0

–20
0

–40
165

–40
440

–20
605

80
0

70
0

30
0

0
0

–10
0

–10
0

–10
0

0
0

50

60

60

70

70

70

80

350

0

0

0

10

10

10

10

40

530

540

550

550

560

570

580

2,810

30

40

50

50

50

50

50

250

110

110

120

140

150

150

160

720

310

360

430

460

500

530

570

2,490

90

80

60

80

90

100

110

440

170

170

180

180

190

200

210

960

100

110

120

130

130

130

140

650

490

500

510

520

530

540

550

2,650

50

50

60

60

60

60

60

300

30

20

10

0

0

0

0

10

10

10

0

0

0

0

0

0

60

60

70

80

110

210

160

630

0

0

0

0

0

0

0

0

10

10

10

10

10

10

10

50

10

10

10

10

20

20

20

80

0

10

10

10

10

10

0

40

70

90

100

110

120

120

130

580

10

10

10

10

10

10

0

40

120

150

150

150

150

160

160

770

40
880
130

40
830
130

40
630
130

40
760
130

40
40
40
910 1,030 1,110
140
140
140

200
4,440
680

40

50

60

60

20
20

20
20

20
20

20
20

20
20

20
20

20
30

100
110

60

70

70

320

Commerce and housing:
Financial institutions and insurance:
Exemption of credit union income ��������� 1,440 1,560 1,660 1,750 1,940 1,890 2,220 9,460
Exclusion of interest on life insurance
savings ���������������������������������������������� 2500 3310 3710 4000 4270 4680 4970 21,630 15080 15040 17300 19130 20400 20190 21220 98,240
53 Special alternative tax on small property
and casualty insurance companies ��
10
10
10
10
10
10
10
50
54 Tax exemption of certain insurance
companies owned by tax-exempt
organizations ������������������������������������
800
830
830
830
850
850
850 4,210
55 Small life insurance company deduction 
20
20
20
20
20
20
20
100
56 Exclusion of interest spread of financial
institutions �����������������������������������������
150 1,400 2,330 2,660 2,910 3,170 3,400 14,470
51
52

57
58
59
60
61
62
63
64

Housing:
Exclusion of interest on owner-occupied
mortgage subsidy bonds ������������������
Exclusion of interest on rental housing
bonds ������������������������������������������������
Deductibility of mortgage interest on
owner-occupied homes ��������������������
Deductibility of State and local property
tax on owner-occupied homes ����������
Deferral of income from installment
sales �������������������������������������������������
Capital gains exclusion on home sales ���
Exclusion of net imputed rental income ��
Exception from passive loss rules for
$25,000 of rental loss �����������������������

270

270

300

350

370

390

410

1,820

770

900 1,070 1,170 1,260 1,350 1,440

6,290

230

230

260

300

310

330

350

1,550

650

760

5,320

910

990 1,060 1,140 1,220

81,890 93,090 101,470 112,730 126,950 142,040 156,990 640,180
15,460 20,310 25,160 26,110 27,330 28,690 29,740 137,030
900 1,080 1,160 1,350 1,560 1,730 1,850 7,650
30,900 38,130 45,870 48,790 52,310 56,070 60,160 263,200
68,230 74,080 75,520 80,880 88,260 93,330 98,690 436,680
10,200 12,250 14,420 16,070 16,950 17,730 18510 83,680

250

Analytical Perspectives

Table 16–2.  Estimates of Tax Expenditures for the Corporate and Individual
Income Taxes for Fiscal Years 2012–2018—Continued
(in millions of dollars)
Corporations
2012
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82

Credit for low-income housing
investments 6 ������������������������������������
Accelerated depreciation on rental
housing (normal tax method) ������������
Discharge of mortgage indebtedness ����

2013

2014

2015

Community and regional development:
88 Investment credit for rehabilitation of
structures (other than historic) ���������������
89 Exclusion of interest for airport, dock, and
similar bonds �����������������������������������������
90 Exemption of certain mutuals’ and
cooperatives’ income �����������������������������
91 Empowerment zones, the DC enterprise
zone, and renewal communities ������������
92 New markets tax credit �������������������������������
93 Expensing of environmental remediation
costs ������������������������������������������������������
94 Credit to holders of Gulf Tax Credit Bonds. �
95 Recovery Zone Bonds 8 ������������������������������
96 Tribal Economic Development Bonds ���������

Individuals
2017

2018 2014–18 2012

7,290 7,040 7,890 7,870 7,910 8,290 8,630 40,590
210

260

320

390

Commerce:
Cancellation of indebtedness ����������������
Exceptions from imputed interest rules ���
Treatment of qualified dividends ������������
Capital gains (except agriculture, timber,
iron ore, and coal) �����������������������������
Capital gains exclusion of small
corporation stock ������������������������������
Step-up basis of capital gains at death ���
Carryover basis of capital gains on gifts ����
Ordinary income treatment of loss from
small business corporation stock sale ���
Accelerated depreciation of buildings
other than rental housing (normal tax
method) �������������������������������������������� –3,380 –3,310 –3,250 –3,200
Accelerated depreciation of machinery
and equipment (normal tax method) � 45,950 7,940 9,330 24,160
Expensing of certain small investments
(normal tax method) �������������������������
60 –160 –160
10
Graduated corporation income tax rate
(normal tax method) ������������������������� 4,270 4,300 4,210 4,180
Exclusion of interest on small issue
bonds ������������������������������������������������
60
60
70
80
Deduction for US production activities ��� 8750 9730 10310 10870
Special rules for certain film and TV
production �����������������������������������������
100
60
40
20

Transportation:
83 Tonnage tax election for certain
international shipping income 7 ��������������
84 Exclusion of reimbursed employee parking
expenses �����������������������������������������������
85 Exclusion for employer-provided transit
passes ���������������������������������������������������
86 Tax credit for certain expenditures for
maintaining railroad tracks ���������������������
87 Exclusion of interest on bonds for Highway
Projects and rail-truck transfer facilities ���

2016

60

60

70

70

470

560

660

380

2013
370

2014
420

2015

2016

410

2017

420

2018 2014–18

440

450

2,140

2,400 1,010 1,420 1,810 2,180 2,590 3,010 3,470 13,060
1,930
650
0
0
0
0
0
0
150
110
50
50
29,750 20,240

90
50
0

70
50
0

50
50
0

–10
50
0

–70
50
0

130
250
0

65,360 61,840 46,690 56,700 68,130 76,860 82,640 331,020
50
130
370
720
750
500
410 2,750
15,490 21,170 27,100 28,460 29,870 31,370 32,970 149,770
2,830 3,550 3,540 4,230 4,980 5,620 6,100 24,470
60

60

60

60

60

60

60

300

–3,160 –3,150 –3,200 –15,960 –3,740 –4,230 –4,320 –4,170 –4,050 –3,980 –3,900 –20,420
35,810 45,840 55,410 170,550 23,550 6,810 8,520 16,100 21,850 26,460 30,250 103,180
100

160

210

320 1,210

–370

–450

520 1,020 1,350 1,590

4,030

4,170 4,240 4,250 21,050
80
90
90
410
180
210
250
270
290
310
11190 11730 12570 56,670 2,820 3,130 3,320 3,500 3,600 3,780
10

0

0

70

70

80

80

30

20

10

0

0

0

330 1,450
4050 18,250
0

10

370
2,640 2,880 3,010 3,140 3,290 3,450 3,610 16,500
590

660

700

760

820

870

930

4,080

100

60

40

20

10

0

0

70

30

20

10

0

0

0

0

10

60

60

50

50

50

50

40

240

180

170

170

160

150

140

130

750

10

10

10

10

10

10

10

50

20

20

20

20

20

20

20

100

180

180

200

230

250

260

270

1,210

510

600

720

780

840

900

960

4,200

130

130

140

140

140

150

150

720

230
910

140
910

150
890

140
860

120
820

100
690

80
450

590
3,710

390
20

280
20

320
20

320
20

300
20

260
20

230
10

1,430
90

–20
20
0
0

–150
20
0
10

–150
30
0
10

–140
30
10
10

–130
30
10
10

–130
30
10
10

–130
40
10
10

–680
160
40
50

0
70
10
0

–30
80
10
20

–30
90
20
40

–30
100
20
40

–30
110
20
40

–30
120
20
40

–30
120
20
50

–150
540
100
210

251

16. Tax Expenditures

Table 16–2.  Estimates of Tax Expenditures for the Corporate and Individual
Income Taxes for Fiscal Years 2012–2018—Continued
(in millions of dollars)
Corporations
2012

2013

2014

2015

2016

Individuals
2017

2018 2014–18 2012

2013

2014

2015

2016

2017

2018 2014–18

Education, training, employment,
and social services:
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127

Education:
Exclusion of scholarship and fellowship
income (normal tax method) �������������
HOPE tax credit �������������������������������������
Lifetime Learning tax credit �������������������
American Opportunity Tax Credit 9 ��������
Education Individual Retirement
Accounts �������������������������������������������
Deductibility of student-loan interest ������
Deduction for higher education
expenses ������������������������������������������
Qualified tuition programs ����������������������
Exclusion of interest on student-loan
bonds ������������������������������������������������
Exclusion of interest on bonds for private
nonprofit educational facilities ������������
Credit for holders of zone academy
bonds 10 ��������������������������������������������
Exclusion of interest on savings bonds
redeemed to finance educational
expenses ������������������������������������������
Parental personal exemption for
students age 19 or over ��������������������
Deductibility of charitable contributions
(education) ����������������������������������������
Exclusion of employer-provided
educational assistance ���������������������
Special deduction for teacher expenses 
Discharge of student loan indebtedness 
Qualified school construction bonds 11 ����

2,760 3,020 3,470 3,600 3,740 3,890 4,040 18,740
0
430 4,310 4,270 4,150 4,180 4,030 20,940
2,000 2,290 4,450 4,420 4,340 4,260 4,160 21,630
15,580 14,400
0
0
0
0
0
0
60
80
1,450 1,460

100
880

110
910

120
940

130
910

550
4,520

720
0
0
0
0
0
0
0
1,980 2,020 2,270 2,520 2,690 2,870 3,060 13,410
120

120

140

160

170

170

180

560

560

630

720

770

800

850

200

200

180

160

130

120

110

820

350

410

480

520

560

600

650

2,810

3,770 1,590 1,880 2,240 2,440 2,630 2,810 3,020 13,140
700
10

10

10

10

20

20

20

80

2,800 2,700 2,810 2,550 2,300 2,080 1,870 11,610
690

110

740

150

790

160

840

160

890

160

940

160

Training, employment, and social services:
Work opportunity tax credit ��������������������
870
820
600
330
150
70
Employer provided child care exclusion ����
Employer-provided child care credit ������
10
10
0
0
0
0
Assistance for adopted foster children ���
Adoption credit and exclusion 12 ������������
Exclusion of employee meals and
lodging (other than military) ��������������
0
0
0
0
0
0
Child credit 13 �����������������������������������������
Credit for child and dependent care
expenses ������������������������������������������
Credit for disabled access expenditures 
10
10
10
10
10
10
Deductibility of charitable contributions,
other than education and health ������� 1,510 1,600 1,690 1,770 1,860 1,940
Exclusion of certain foster care
payments ������������������������������������������
Exclusion of parsonage allowances ������
Employee retention credit for employers
in certain federal disaster areas �������
10
0
0
0
0
0

Health:
128 Exclusion of employer contributions for
medical insurance premiums and
medical care 14 ��������������������������������������
129 Self-employed medical insurance premiums ���
130 Medical Savings Accounts / Health Savings
Accounts ������������������������������������������������
131 Deductibility of medical expenses ��������������

90
880

980

4,440 3,270 3,850 4,290 4,610 5,030 5,490 5,960 25,380

800

30

1,180

0

240
0
20
430

0
0
20
490

0
0
20
490

0
0
20
490

0
0
20
490

0
0
20
490

0
0
100
2,450

260
1360

150
1570

60
1620

40
1720

10
1840

10
1980

0
2120

530
62

160

670
170
20
290

530
330

560
110

590
80

630
80

670
80

710
80

120
9,280
0
3,160
430

0

0

10
2020

0 5,591 6,109 6,592 6,903 7,113 7,336 7,750 35,694
24,790 18,430 8,650 8,380 8,020 7,670 7,240 39,960

50

3,410 1,550 1,290 1,250 1,200 1,150 1,090
10
10
10
10
10
10
10

9,280 32,260 38,010 42,370 45,560 49,690 54,190 58,820 250,630
420
700

0

5,980
50

0

420
760

420
820

430
890

0

0

0

0

430
420
420
960 1,040 1,120
0

0

0

2,120
4,830
0

184,320 202,530 212,820 224,610 239,620 256,850 272,360 1,206,260
5,210 6,140 6,740 7,160 7,650 8,240 8,860 38,650
1,520 1,600 1,680 1,760 1,880 2,000 2,130 9,450
7,230 8,990 10,270 10,820 11,180 11,360 12,370 56,000

252

Analytical Perspectives

Table 16–2.  Estimates of Tax Expenditures for the Corporate and Individual
Income Taxes for Fiscal Years 2012–2018—Continued
(in millions of dollars)
Corporations
2012
132 Exclusion of interest on hospital
construction bonds ��������������������������������
133 Refundable Premium Assistance Tax
Credit 15 �������������������������������������������������
134 Credit for employee health insurance
expenses of small business 16 ���������������
135 Deductibility of charitable contributions
(health) ��������������������������������������������������
136 Tax credit for orphan drug research �����������
137 Special Blue Cross/Blue Shield deduction ���
138 Tax credit for health insurance purchased
by certain displaced and retired
individuals 17 ������������������������������������������
139 Distributions from retirement plans for
premiums for health and long-term care
insurance �����������������������������������������������

2013

790

2014

790

2015

2016

Individuals
2017

2018 2014–18 2012

890 1,020 1,080 1,130 1,200

150
151

0
70

90

330

580

590

520

460

200
210
230
240
250
260
280
840 1,000 1,190 1,410 1,680 2,010 2,390
420
500
500
510
490
510
510

2,480

152
153
154
155
156
157
158

2015

2016

2017

2018 2014–18

0

120

160

0 –2,660 –3,810 –4,670 –4,930 –16,070
620 1,080 1,100

960

850

4,610

1,260 3,620 4,260 4,750 5,110 5,570 6,080 6,600 28,110
8,680
2,520
10

10

0

0

0

0

0

0

330

360

400

440

490

510

530

2,370

350

430

510

510

510

500

490

2,520

10,080 9,120 11,440 11,570 11,680 11,800 11,950 58,440
720

750

780

810

840

870

910

4,210

40
110

40
150

40
160

40
160

40
160

40
160

40
160

200
800

38,740
51,830
16,180
1,110
15930

Net exclusion of pension contributions and
earnings:
Defined benefit employer plans �������������
Defined contribution employer plans �����
Individual Retirement Accounts �������������
Low and moderate income savers credit 
Self-Employed plans ������������������������������
Exclusion of other employee benefits:
Premiums on group term life insurance ���
Premiums on accident and disability
insurance ������������������������������������������
Income of trusts to finance supplementary
unemployment benefits �������������������������
Special ESOP rules ������������������������������������
Additional deduction for the blind ���������������
Additional deduction for the elderly ������������
Tax credit for the elderly and disabled ��������
Deductibility of casualty losses �������������������
Earned income tax credit 18 ������������������������

2014

5,320 2,250 2,640 3,150 3,420 3,680 3,940 4,230 18,420

Income security:
140 Exclusion of railroad retirement system
benefits ��������������������������������������������������
141 Exclusion of workers’ compensation
benefits ��������������������������������������������������
142 Exclusion of public assistance benefits
(normal tax method) ������������������������������
143 Exclusion of special benefits for disabled
coal miners ��������������������������������������������
144 Exclusion of military disability pensions �����

145
146
147
148
149

2013

47,410
68,820
21,240
1,180
19380

53,060
79,720
19,260
1,220
23260

57,400
90,870
19,370
1,243
25490

61,810
98,650
20,620
1,250
28030

66,150 69,970
103,140 105,490
21,970 23,360
1,270 1,270
30800 33760

308,390
477,870
104,580
6,253
141,340

1,870 1,910 1,940 1,970 2,030 2,080 2,140 10,160
340

740 1,090 1,160 1,230 1,310 1,390 1,470

6,560

350

360

360

370

370

380

1,840

20
20
30
40
50
60
70
250
70
100
100
100
100
110
110
520
30
40
40
50
50
50
50
240
2,080 2,870 3,260 3,330 3,400 3,490 3,540 17,020
10
10
10
10
10
0
0
30
300
350
370
390
410
430
450 2,050
1,610 4,040 5,640 5,920 6,060 6,310 6,520 30,450

Social Security:
Exclusion of social security benefits:
Social Security benefits for retired
workers ���������������������������������������������
160 Social Security benefits for disabled
workers ���������������������������������������������
161 Social Security benefits for spouses,
dependents and survivors ����������������
159

Veterans benefits and services:
162 Exclusion of veterans death benefits and
disability compensation �������������������������
163 Exclusion of veterans pensions ������������������
164 Exclusion of GI bill benefits ������������������������
165 Exclusion of interest on veterans housing
bonds �����������������������������������������������������

22,170 27,920 32,910 34,330 35,550 36,830 38,340 177,960
7,510 8,960 9,970 10,280 10,560 10,810 11,060 52,680
3,740 3,970 4,130 4,230 4,370 4,490 4,550 21,770

4,240 5,210 6,880 7,480 8,140 8,860 9,640 41,000
360
430
550
570
580
600
620 2,920
940 1,200 1,610 1,720 1,830 1,950 2,080 9,190
0

0

0

0

0

10

10

20

10

10

10

20

20

20

20

90

253

16. Tax Expenditures

Table 16–2.  Estimates of Tax Expenditures for the Corporate and Individual
Income Taxes for Fiscal Years 2012–2018—Continued
(in millions of dollars)
Corporations
2012
General purpose fiscal assistance:
166 Exclusion of interest on public purpose
State and local bonds ����������������������������
167 Build America Bonds 19 ������������������������������
168 Deductibility of nonbusiness State and local
taxes other than on owner-occupied
homes ����������������������������������������������������
Interest:
169 Deferral of interest on U.S. savings bonds ���

2013

2014

2015

2016

Individuals
2017

2018 2014–18 2012

2013

2014

2015

2016

2017

2018 2014–18

6,750 6,720 7,570 8,720 9,240 9,670 10,240 45,440 19,200 22,550 26,850 29,200 31,440 33,660 36,100 157,250
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
29,480 43,940 51,560 54,520 58,200 62,200 65,660 292,140
980 1,020 1,080 1,090 1,100 1,120 1,130

5,520

Addendum: Aid to State and
local governments:
Deductibility of:
Property taxes on owner-occupied
homes �����������������������������������������������
Nonbusiness State and local taxes other
than on owner-occupied homes �������

15,460 20,310 25,160 26,110 27,330 28,690 29,740 137,030
29,480 43,940 51,560 54,520 58,200 62,200 65,660 292,140

Exclusion of interest on State and local
bonds for:
Public purposes ������������������������������������� 6,750 6,720 7,570 8,720 9,240 9,670 10,240 45,440 19,200 22,550 26,850 29,200 31,440 33,660 36,100 157,250
Energy facilities �������������������������������������
10
10
10
10
10
10
10
50
10
20
20
20
20
30
30
120
Water, sewage, and hazardous waste
disposal facilities �������������������������������
110
110
120
140
150
150
160
720
310
360
430
460
500
530
570 2,490
Small-issues ������������������������������������������
60
60
70
80
80
90
90
410
180
210
250
270
290
310
330 1,450
Owner-occupied mortgage subsidies ����
270
270
300
350
370
390
410 1,820
770
900 1,070 1,170 1,260 1,350 1,440 6,290
Rental housing ���������������������������������������
230
230
260
300
310
330
350 1,550
650
760
910
990 1,060 1,140 1,220 5,320
Airports, docks, and similar facilities ������
180
180
200
230
250
260
270 1,210
510
600
720
780
840
900
960 4,200
Student loans �����������������������������������������
120
120
140
160
170
170
180
820
350
410
480
520
560
600
650 2,810
Private nonprofit educational facilities ���
560
560
630
720
770
800
850 3,770 1,590 1,880 2,240 2,440 2,630 2,810 3,020 13,140
Hospital construction �����������������������������
790
790
890 1,020 1,080 1,130 1,200 5,320 2,250 2,640 3,150 3,420 3,680 3,940 4,230 18,420
Veterans’ housing ����������������������������������
0
0
0
0
0
10
10
20
10
10
10
20
20
20
20
90
GO Zone and GO Zone mortgage ���������
20
20
30
30
30
30
40
160
70
80
90
100
110
120
120
540
Credit for holders of zone academy bonds ���
200
200
180
160
130
120
110
700
1 Firms can tax an energy grant in lieu of the energy production credit or the energy investment credit for facilities placed in service in 2009 and 2010 or whose construction commenced in
2009 and 2010. The effect of the grant on outlays (in millions of dollars) is as follows: 2012 $5,080; 2013 $8,080; 2014 $4,710; 2015 $2,520; 2016 $1,580; 2017 $330; 2018 $0.
2 In addition, the alcohol fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $3,540; 2013 $0; 2014 $0; 2015 $0; 2016 $0; 2017 $0; 2018
$0. The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $310; 2013 $10; 2014 $10; 2015 $0; 2016 $0; 2017 $0; 2018 $0.
3 In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2012 $800; 2013 $0; 2014 $0; 2015 $0; 2016 $0; 2017: $0; 2018 $0.
4 In addition, the provision has outlay effects of (in millions of dollars): 2012 $40; 2013 $50; 2014 $50; 2015 $50; 2016 $50; 2017 $50; 2018 $50.
5 In addition, the provision has outlay effects of (in millions of dollars): 2012 $50; 2013 $60; 2014 $60; 2015 $60; 2016 $60; 2017 $60; 2018 $60.
6 In addition, the credit for low-income housing investments has outlay effects (in millions of dollars) as follows: 2012 $180.
7 These figures do not account for the tonnage tax which shipping companies may opt into in lieu of the corporate income tax. The tonnage tax reduces the cost of this tax expenditure
by $20 per year in each year of the budget.
8 In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows: 2012 $160, 2013 $160, 2014 $160, 2015 $160, 2016 $160; and 2017 $160; 2018 $160.
9 The figures in the table indicate the effect of the American opportunity tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $5,850; 2013
$6,450; 2014 $970
10 In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars): 2012 $20; 2013 $30; 2014 $30; 2015 $30; 2016 $30; 2017 $30; and 2018 $30.
11 In addition, the provision for school construction bonds has outlay effects of (in millions of dollars): 2012 $780; 2013 $940; 2014 $940; 2015 $940; 2016 $940; 2017 $940, and 2018 $940.
12 The figures in the table indicate the effect of the adoption tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $700; and 2013 $50.
13 The figures in the table indicate the effect of the child tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $22,620; 2013 $22,510; 2014
$1,750; 2015 $1,720; 2016 $1,720; 2017 $1,690; and 2018 1,660.
14 The figures in the table indicate the effect on income taxes of the employer contributions for health. In addition, the effect on payroll tax receipts (in millions of dollars) is as follows:
2012 $107,760; 2013 $111,120; 2014 $112,620; 2015 $116,500; 2016 $122,730; 2017 $130,170; 2018 $135,170.
15 In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows: 2014 $32,270; 2015 $58,130; 2016 $71,470; 2017 $78,130; 2018 $82,150.
16 In addition, the small business credit provision has outlay effects (in millions of dollars) as follows: 2012 $70; 2013 $60; 2014 $140; 2015 $240; 2016 $250; 2017 $220; 2018 $190.
17 The figures in the table indicate the effect of the health coverage tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $130; 2013 $120; 2014 $30.
18 The figures in the table indicate the effect of the earned income tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2012 $54,840; 2013
$54,360; 2014 $47,700; 2015 $49,000; 2016 $49,870; 2017 $50,740; and 2018 $51,510.
19 In addition, Build America Bonds have outlay effects of (in millions of dollars): 2012 $3,190; 2013 $3,190; 2014 $3,190; 2015 $3,190; 2016 $3,190; 2017 $3,190; and 2018 $3,190.

254

Analytical Perspectives

Table 16–3. Income Tax Expenditures Ranked by Total Fiscal Year 2014-2018 Projected Revenue Effect
(in millions of dollars)
Provision
128
59
146
63
71
145
168
77
62
124
5
166
159
73
149
60
52
147
64
81
1
141
131
160
65
162
121
129
120
2
7
158
110
135
74
132
4
161
99
79
98
97
155
106
84
66
56
104
109
150
51
130
116
164
8
136

Exclusion of employer contributions for medical insurance premiums and medical care �����������������������������������������������������������������������������������������������������
Deductibility of mortgage interest on owner-occupied homes ����������������������������������������������������������������������������������������������������������������������������������������������
Defined contribution employer plans ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of net imputed rental income ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Capital gains (except agriculture, timber, iron ore, and coal) ������������������������������������������������������������������������������������������������������������������������������������������������
Defined benefit employer plans ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of nonbusiness State and local taxes other than on owner-occupied homes ��������������������������������������������������������������������������������������������������
Accelerated depreciation of machinery and equipment (normal tax method) ����������������������������������������������������������������������������������������������������������������������
Capital gains exclusion on home sales ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of charitable contributions, other than education and health �����������������������������������������������������������������������������������������������������������������������������
Deferral of income from controlled foreign corporations (normal tax method) ���������������������������������������������������������������������������������������������������������������������
Exclusion of interest on public purpose State and local bonds ��������������������������������������������������������������������������������������������������������������������������������������������
Social Security benefits for retired workers ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Step-up basis of capital gains at death ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Self-Employed plans �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of State and local property tax on owner-occupied homes ������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on life insurance savings ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Individual Retirement Accounts ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exception from passive loss rules for $25,000 of rental loss ������������������������������������������������������������������������������������������������������������������������������������������������
Deduction for US production activities �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of benefits and allowances to armed forces personnel ����������������������������������������������������������������������������������������������������������������������������������������
Exclusion of workers’ compensation benefits ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of medical expenses ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Social Security benefits for disabled workers ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for low-income housing investments ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of veterans death benefits and disability compensation ���������������������������������������������������������������������������������������������������������������������������������������
Child credit �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Self-employed medical insurance premiums �������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of employee meals and lodging (other than military) �������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of income earned abroad by U.S. citizens ������������������������������������������������������������������������������������������������������������������������������������������������������������
Expensing of research and experimentation expenditures (normal tax method) �����������������������������������������������������������������������������������������������������������������
Earned income tax credit �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of charitable contributions (education) ��������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of charitable contributions (health) ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Carryover basis of capital gains on gifts �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on hospital construction bonds �������������������������������������������������������������������������������������������������������������������������������������������������������������
Inventory property sales source rules exception �������������������������������������������������������������������������������������������������������������������������������������������������������������������
Social Security benefits for spouses, dependents and survivors ������������������������������������������������������������������������������������������������������������������������������������������
Lifetime Learning tax credit ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Graduated corporation income tax rate (normal tax method) �����������������������������������������������������������������������������������������������������������������������������������������������
HOPE tax credit ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of scholarship and fellowship income (normal tax method) ���������������������������������������������������������������������������������������������������������������������������������
Additional deduction for the elderly ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on bonds for private nonprofit educational facilities �����������������������������������������������������������������������������������������������������������������������������
Exclusion of reimbursed employee parking expenses ����������������������������������������������������������������������������������������������������������������������������������������������������������
Accelerated depreciation on rental housing (normal tax method) ����������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest spread of financial institutions ��������������������������������������������������������������������������������������������������������������������������������������������������������������
Qualified Tuition Programs �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Parental personal exemption for students age 19 or over ����������������������������������������������������������������������������������������������������������������������������������������������������
Premiums on group term life insurance ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exemption of credit union income ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Medical Savings Accounts / Health Savings Accounts ����������������������������������������������������������������������������������������������������������������������������������������������������������
Employer provided child care exclusion ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of GI bill benefits ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for increasing research activities ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Tax credit for orphan drug research �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2014
212,820
101,470
79,720
75,520
46,690
53,060
51,560
17,850
45,870
44,060
41,770
34,420
32,910
27,100
23,260
25,160
21,010
19,260
14,420
13,630
15,150
11,440
10,270
9,970
8,310
6,880
8,650
6,740
6,592
6,140
5,040
5,640
5,080
4,980
3,540
4,040
3,940
4,130
4,450
4,210
4,310
3,470
3,260
2,870
3,010
2,130
2,330
2,270
2,810
1,940
1,660
1,680
1,620
1,610
2,130
1,190

2014-18
1,206,260
640,180
477,870
436,680
331,020
308,390
292,140
273,730
263,200
259,910
220,370
202,690
177,960
149,770
141,340
137,030
119,870
104,580
83,680
74,920
73,940
58,440
56,000
52,680
42,730
41,000
39,960
38,650
35,694
33,730
33,210
30,450
29,820
29,370
24,470
23,740
23,640
21,770
21,630
21,050
20,940
18,740
17,020
16,910
16,500
15,460
14,470
13,410
11,610
10,160
9,460
9,450
9,280
9,190
9,130
8,680

255

16. Tax Expenditures

Table 16–3. Income Tax Expenditures Ranked by Total Fiscal Year 2014-2018 Projected Revenue Effect—Continued
(in millions of dollars)
Provision
57
15
61
134
153
58
3
16
148
122
169
89
126
10
102
47
31
78
54
142
85
92
105
114
37
118
36
40
163
72
137
140
19
139
9
125
157
91
80
151
39
23
115
20
87
45
144
90
94
107
48
42
44
34
25
101

Exclusion of interest on owner-occupied mortgage subsidy bonds ��������������������������������������������������������������������������������������������������������������������������������������
New technology credit ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferral of income from installment sales ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for employee health insurance expenses of small business. ��������������������������������������������������������������������������������������������������������������������������������������
Special ESOP rules ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on rental housing bonds �����������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of certain allowances for Federal employees abroad ��������������������������������������������������������������������������������������������������������������������������������������������
Energy investment credit �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Low and moderate income savers credit �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for child and dependent care expenses ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferral of interest on U.S. savings bonds ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest for airport, dock, and similar bonds ������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of parsonage allowances �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Excess of percentage over cost depletion, fuels ������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of student-loan interest ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Capital gains treatment of certain income ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
30% credit for residential purchases/installations of solar and fuel cells �������������������������������������������������������������������������������������������������������������������������������
Expensing of certain small investments (normal tax method) ����������������������������������������������������������������������������������������������������������������������������������������������
Tax exemption of certain insurance companies owned by tax-exempt organizations �����������������������������������������������������������������������������������������������������������
Exclusion of public assistance benefits (normal tax method) �����������������������������������������������������������������������������������������������������������������������������������������������
Exclusion for employer-provided transit passes �������������������������������������������������������������������������������������������������������������������������������������������������������������������
New markets tax credit ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on student-loan bonds �������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Qualified school construction bonds ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on bonds for water, sewage, and hazardous waste facilities ����������������������������������������������������������������������������������������������������������������
Assistance for adopted foster children �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Excess of percentage over cost depletion, nonfuel minerals �����������������������������������������������������������������������������������������������������������������������������������������������
Tax incentives for preservation of historic structures ������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of veterans pensions ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Capital gains exclusion of small corporation stock ����������������������������������������������������������������������������������������������������������������������������������������������������������������
Special Blue Cross/Blue Shield deduction ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of railroad retirement system benefits ������������������������������������������������������������������������������������������������������������������������������������������������������������������
Tax credit and deduction for clean-fuel burning vehicles �������������������������������������������������������������������������������������������������������������������������������������������������������
Distributions from retirement plans for premiums for health and long-term care insurance ��������������������������������������������������������������������������������������������������
Expensing of exploration and development costs, fuels �������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of certain foster care payments ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deductibility of casualty losses ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Empowerment zones, Enterprise communities, and Renewal communities �������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on small issue bonds ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Premiums on accident and disability insurance ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Expensing of multiperiod timber growing costs ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for investment in clean coal facilities ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Work opportunity tax credit ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of utility conservation subsidies �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities ����������������������������������������������������������������������������������������
Expensing of certain multiperiod production costs ���������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of military disability pensions �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exemption of certain mutuals’ and cooperatives’ income �����������������������������������������������������������������������������������������������������������������������������������������������������
Credit to holders of Gulf Tax Credit Bonds. ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for holders of zone academy bonds ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Income averaging for farmers ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Industrial CO2 capture and sequestration tax credit �������������������������������������������������������������������������������������������������������������������������������������������������������������
Expensing of certain capital outlays �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Advanced nuclear power production credit ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Natural gas distribution pipelines treated as 15-year property ����������������������������������������������������������������������������������������������������������������������������������������������
Education Individual Retirement Accounts ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2014
1,370
1,770
1,160
950
1,260
1,170
1,180
1,360
1,220
1,290
1,080
920
820
940
880
630
1,140
-610
830
780
700
910
620
650
550
560
600
570
550
370
500
510
260
400
880
420
370
470
320
360
300
420
660
250
220
160
160
140
120
180
130
70
110
0
100
90

2014-18
8,110
7,680
7,650
7,090
7,080
6,870
6,520
6,260
6,253
5,980
5,520
5,410
4,830
4,730
4,520
4,440
4,430
4,350
4,210
4,210
4,080
3,800
3,630
3,250
3,210
3,160
3,060
2,950
2,920
2,750
2,520
2,520
2,440
2,370
2,340
2,120
2,050
2,020
1,860
1,840
1,610
1,580
1,300
1,240
990
810
800
720
700
700
680
630
620
605
550
550

256

Analytical Perspectives

Table 16–3. Income Tax Expenditures Ranked by Total Fiscal Year 2014-2018 Projected Revenue Effect—Continued
(in millions of dollars)
Provision
13
38
50
119
26
35
83
21
30
75
96
69
152
154
46
143
14
32
88
95
43
68
165
17
49
55
113
123
82
86
108
12
53
27
156
28
41
6
11
18
29
67
70
100
103
111
112
117
127
138
167
33
22
93
24
133
76

Capital gains treatment of royalties on coal ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Capital gains treatment of certain timber income �����������������������������������������������������������������������������������������������������������������������������������������������������������������
Expensing of reforestation expenditures �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Adoption credit and exclusion ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Amortize all geological and geophysical expenditures over 2 years �������������������������������������������������������������������������������������������������������������������������������������
Expensing of exploration and development costs, nonfuel minerals ������������������������������������������������������������������������������������������������������������������������������������
Deferral of tax on shipping companies ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for holding clean renewable energy bonds �����������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for energy efficient appliances ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Ordinary income treatment of loss from small business corporation stock sale �������������������������������������������������������������������������������������������������������������������
Tribal Economic Development Bonds ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exceptions from imputed interest rules ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Income of trusts to finance supplementary unemployment benefits ������������������������������������������������������������������������������������������������������������������������������������
Additional deduction for the blind �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Treatment of loans forgiven for solvent farmers ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of special benefits for disabled coal miners ����������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on energy facility bonds �����������������������������������������������������������������������������������������������������������������������������������������������������������������������
Qualified energy conservation bonds ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Investment credit for rehabilitation of structures (other than historic) �����������������������������������������������������������������������������������������������������������������������������������
Recovery Zone Bonds �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deduction for endangered species recovery expenditures ����������������������������������������������������������������������������������������������������������������������������������������������������
Cancellation of indebtedness �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on veterans housing bonds ������������������������������������������������������������������������������������������������������������������������������������������������������������������
Alcohol fuel credits ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferral of gain on sale of farm refiners ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Small life insurance company deduction ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Discharge of student loan indebtedness �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for disabled access expenditures �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Special rules for certain film and TV production ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Tax credit for certain expenditures for maintaining railroad tracks �����������������������������������������������������������������������������������������������������������������������������������������
Exclusion of interest on savings bonds redeemed to finance educational expenses ������������������������������������������������������������������������������������������������������������
Exception from passive loss limitation for working interests in oil and gas properties ���������������������������������������������������������������������������������������������������������
Special alternative tax on small property and casualty insurance companies ���������������������������������������������������������������������������������������������������������������������
Allowance of deduction for certain energy efficient commercial building property ����������������������������������������������������������������������������������������������������������������
Tax credit for the elderly and disabled ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for construction of new energy efficient homes �����������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of gain or loss on sale or exchange of certain brownfield sites �����������������������������������������������������������������������������������������������������������������������������
Deferred taxes for financial firms on certain income earned overseas ����������������������������������������������������������������������������������������������������������������������������������
Alternative fuel production credit ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Bio-Diesel and small agri-biodiesel producer tax credits �������������������������������������������������������������������������������������������������������������������������������������������������������
Credit for energy efficiency improvements to existing homes �����������������������������������������������������������������������������������������������������������������������������������������������
Discharge of mortgage indebtedness ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Treatment of qualified dividends ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Lifetime Learning tax credit ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deduction for higher education expenses �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Exclusion of employer-provided educational assistance ������������������������������������������������������������������������������������������������������������������������������������������������������
Special deduction for teacher expenses ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Employer-provided child care credit ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Employee retention credit for employers affected by Hurricane Katrina, Rita, and Wilma �����������������������������������������������������������������������������������������������������
Tax credit for health insurance purchased by certain displaced and retired individuals ��������������������������������������������������������������������������������������������������������
Build America Bonds �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Advanced Energy Property Credit �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferral of gain from dispositions of transmission property to implement FERC restructuring policy �����������������������������������������������������������������������������������
Expensing of environmental remediation costs ���������������������������������������������������������������������������������������������������������������������������������������������������������������������
Temporary 50% expensing for equipment used in the refining of liquid fuels ������������������������������������������������������������������������������������������������������������������������
Refundable Premium Assistance Tax Credit �������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Accelerated depreciation of buildings other than rental housing (normal tax method) ���������������������������������������������������������������������������������������������������������

2014
60
60
80
110
110
60
70
70
130
60
50
50
30
40
40
40
30
30
30
20
20
90
10
50
20
20
20
20
50
50
10
10
10
40
10
20
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
110
-190
-180
-90
0
-7,570

2014-18
440
440
430
430
420
390
370
350
350
300
260
250
250
240
200
200
170
150
150
140
130
130
110
100
100
100
100
100
80
80
80
50
50
40
30
20
10
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-20
-720
-830
-3,300
-16,070
-36,380

257

16. Tax Expenditures

•	 Noncorporate tax rates vary by level of income.
•	 Individual tax rates, including brackets, standard
deduction, and personal exemptions, are allowed to
vary with marital status.
•	 Values of assets and debt are not generally adjusted for inflation. A comprehensive income tax would
adjust the cost basis of capital assets and debt for
changes in the general price level. Thus, under a
comprehensive income tax baseline, the failure to
take account of inflation in measuring depreciation,
capital gains, and interest income would be regarded
as a negative tax expenditure (i.e., a tax penalty),
and failure to take account of inflation in measuring
interest costs would be regarded as a positive tax
expenditure (i.e., a tax subsidy).
Although the reference law and normal tax baselines
are generally similar, areas of difference include:
Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law
baseline. Thus, corporate tax rates below the maximum
statutory rate do not give rise to a tax expenditure. The
normal tax baseline is similar, except that, by convention,
it specifies the current maximum rate as the baseline for
the corporate income tax. The lower tax rates applied to
the first $10 million of corporate income are thus regarded as a tax expenditure under the normal tax. By convenTable 16–4. 

tion, the Alternative Minimum Tax is treated as part of
the baseline rate structure under both the reference and
normal tax methods.
Income subject to the tax. Income subject to tax is defined as gross income less the costs of earning that income. Under the reference tax rules, gross income does
not include gifts defined as receipts of money or property that are not consideration in an exchange nor does
gross income include most transfer payments from the
Government.2 The normal tax baseline also excludes gifts
between individuals from gross income. Under the normal
tax baseline, however, all cash transfer payments from
the Government to private individuals are counted in
gross income, and exemptions of such transfers from tax
are identified as tax expenditures. The costs of earning income are generally deductible in determining taxable income under both the reference and normal tax baselines.3
2  Gross income does, however, include transfer payments associated
with past employment, such as Social Security benefits.
3  In the case of individuals who hold “passive’’ equity interests in businesses, the pro-rata shares of sales and expense deductions reportable
in a year are limited. A passive business activity is defined generally to
be one in which the holder of the interest, usually a partnership interest,
does not actively perform managerial or other participatory functions.
The taxpayer may generally report no larger deductions for a year than
will reduce taxable income from such activities to zero. Deductions in
excess of the limitation may be taken in subsequent years, or when the
interest is liquidated. In addition, costs of earning income may be limited under the Alternative Minimum Tax.

Present Value of Selected Tax Expenditures
for Activity in Calendar Year 2012
(in millions of dollars)
Provision

5
7
21
9
35
39
45
44
50
52
66
76
77
78
107
65
104
145
146
147
147
147
149
166

Deferral of income from controlled foreign corporations (normal tax method) �����������������������������������������������������������������������
Expensing of research and experimentation expenditures (normal tax method) �������������������������������������������������������������������
Credit for holding clean renewable energy bonds ������������������������������������������������������������������������������������������������������������������
Expensing of exploration and development costs - fuels ��������������������������������������������������������������������������������������������������������
Expensing of exploration and development costs - nonfuels ��������������������������������������������������������������������������������������������������
Expensing of multiperiod timber growing costs ����������������������������������������������������������������������������������������������������������������������
Expensing of certain multiperiod production costs - agriculture ���������������������������������������������������������������������������������������������
Expensing of certain capital outlays - agriculture �������������������������������������������������������������������������������������������������������������������
Expensing of reforestation expenditures ��������������������������������������������������������������������������������������������������������������������������������
Deferral of income on life insurance and annuity contracts ����������������������������������������������������������������������������������������������������
Accelerated depreciation on rental housing ���������������������������������������������������������������������������������������������������������������������������
Accelerated depreciation of buildings other than rental housing ��������������������������������������������������������������������������������������������
Accelerated depreciation of machinery and equipment ���������������������������������������������������������������������������������������������������������
Expensing of certain small investments (normal tax method) ������������������������������������������������������������������������������������������������
Credit for holders of zone academy bonds �����������������������������������������������������������������������������������������������������������������������������
Credit for low-income housing investments ����������������������������������������������������������������������������������������������������������������������������
Deferral for state prepaid tuition plans ������������������������������������������������������������������������������������������������������������������������������������
Defined benefit employer plans ����������������������������������������������������������������������������������������������������������������������������������������������
Defined contribution employer plans ��������������������������������������������������������������������������������������������������������������������������������������
Exclusion of IRA contributions and earnings ��������������������������������������������������������������������������������������������������������������������������
Exclusion of Roth earnings and distributions �������������������������������������������������������������������������������������������������������������������������
Exclusion of non-deductible IRA earnings ������������������������������������������������������������������������������������������������������������������������������
Exclusion of contributions and earnings for Self-Employed plans ������������������������������������������������������������������������������������������
Exclusion of interest on public-purpose bonds �����������������������������������������������������������������������������������������������������������������������
Exclusion of interest on non-public purpose bonds ����������������������������������������������������������������������������������������������������������������
169 Deferral of interest on U.S. savings bonds ������������������������������������������������������������������������������������������������������������������������������

2012 Present
Value of
Revenue Loss
21,000
2380
310
220
60
130
-140
-100
30
16,530
7,270
-17,740
4,750
-220
160
6,630
3,510
92,570
64,170
1,030
3,160
100
2,540
15,170
5,460
223

258

Analytical Perspectives

Capital recovery. Under the reference tax law baseline
no tax expenditures arise from accelerated depreciation.
Under the normal tax baseline, the depreciation allowance for property is computed using estimates of economic depreciation.
Treatment of foreign income. Both the normal and reference tax baselines allow a tax credit for foreign income
taxes paid (up to the amount of U.S. income taxes that
would otherwise be due), which prevents double taxation
of income earned abroad. Under the normal tax method,
however, controlled foreign corporations (CFCs) are not
regarded as entities separate from their controlling U.S.
shareholders. Thus, the deferral of tax on income received by CFCs is regarded as a tax expenditure under
this method. In contrast, except for tax haven activities,
the reference law baseline follows current law in treating CFCs as separate taxable entities whose income is
not subject to U.S. tax until distributed to U.S. taxpayers.
Under this baseline, deferral of tax on CFC income is not
a tax expenditure because U.S. taxpayers generally are
not taxed on accrued, but unrealized, income.
Descriptions of Income Tax Provisions
Descriptions of the individual and corporate income tax
expenditures reported on in this chapter follow. These descriptions relate to current law as of December 31, 2012.
National Defense
1.  Benefits and allowances to Armed Forces personnel.—Under the baseline tax system, all compensation,
including dedicated payments and in-kind benefits, should
be included in taxable income because they represent accretions to wealth that do not materially differ from cash
wages. As an example, a rental voucher of $100 is (approximately) equal in value to $100 of cash income. In contrast
to this treatment, certain housing and meals, in addition to
other benefits provided military personnel, either in cash
or in kind, as well as certain amounts of pay related to combat service, are excluded from income subject to tax.
2.  Income earned abroad.—Under the baseline
tax system, all compensation received by U.S. citizens is
properly included in their taxable income. It makes no
difference whether the compensation is a result of working abroad or whether it is labeled as a housing allowance. In contrast to this treatment, U.S. tax law allows
U.S. citizens who live abroad, work in the private sector,
and satisfy a foreign residency requirement to exclude
up to $80,000, plus adjustments for inflation since 2004,
in foreign earned income from U.S. taxes. In addition, if
these taxpayers receive a specific allowance for foreign
housing from their employers, then they may also exclude
such expenses to the extent that they do not exceed 30
percent of the earned income inclusion, with geographical
adjustments, over 16 percent of the earned income limit.
If taxpayers do not receive a specific allowance for housing expenses, they may deduct housing expenses up to the
amount by which foreign earned income exceeds their foreign earned income exclusion.

3.  Exclusion of certain allowances for Federal
employees abroad.—In general, all compensation received by U.S. citizens is properly included in their taxable
income. It makes no difference whether the compensation
is a result of working abroad or whether it is labeled as an
allowance for the high cost of living abroad. In contrast to
this treatment, U.S. Federal civilian employees and Peace
Corps members who work outside the continental United
States are allowed to exclude from U.S. taxable income
certain special allowances they receive to compensate
them for the relatively high costs associated with living
overseas. The allowances supplement wage income and
cover expenses such as rent, education, and the cost of
travel to and from the United States.
4.  Sales source rule exceptions.—The United
States generally taxes the worldwide income of U.S. persons and business entities. Under the baseline tax system, taxpayers receive a credit for foreign taxes paid
which is limited to the pre-credit U.S. tax on the foreign
source income. In contrast, the sales source rules for inventory property under current law allow U.S. exporters
to use more foreign tax credits by allowing the exporters
to attribute a larger portion of their earnings abroad than
would be the case if the allocation of earnings was based
on actual economic activity.
5.  Income of U.S.-controlled foreign corporations.—Under the baseline tax system, the United States
generally taxes the worldwide income of U.S. persons and
business entities. In contrast, certain active income of
foreign corporations controlled by U.S. shareholders is not
subject to U.S. taxation when it is earned. The income becomes taxable only when the controlling U.S. shareholders
receive dividends or other distributions from their foreign
stockholding. The reference law tax baseline reflects this
tax treatment where only realized income is taxed. Under
the normal tax method, however, the currently attributable foreign source pre-tax income from such a controlling interest is considered to be subject to U.S. taxation,
whether or not distributed. Thus, the normal tax method
considers the amount of controlled foreign corporation
income not yet distributed to a U.S. shareholder as taxdeferred income.
6.  Exceptions under subpart F for active financing income.—The United States generally taxes the
worldwide income of U.S. persons and business entities.
The baseline tax system would not allow the deferral of
tax or other relief targeted at particular industries or
activities. In contrast, under current law, financial firms
may defer taxes on income earned overseas in an active
business. This provision expired at the end of 2011, but
ATRA extended it through December 31, 2013 (extension
not shown in the tables).
General Science, Space, and Technology
7.  Expensing R&E expenditures.—The baseline
tax system allows a deduction for the cost of producing
income. It requires taxpayers to capitalize the costs associated with investments over time to better match the
streams of income and associated costs, Research and

259

16. Tax Expenditures

experimentation (R&E) projects can be viewed as investments because, if successful, their benefits accrue for several years. It is often difficult, however, to identify whether a specific R&E project is successful and, if successful,
what its expected life will be. Because of this ambiguity,
the reference law baseline tax system would allow of expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is
viewed as a tax expenditure. The baseline assumed for
the normal tax method is that all R&E expenditures are
successful and have an expected life of five years.
8.  R&E credit.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In
contrast, the Tax Code allows an R&E credit of 20 percent of qualified research expenditures in excess of a base
amount.
The base amount of the credit is generally determined
by multiplying a “fixed-base percentage” by the average amount of the company’s gross receipts for the prior
four years. The taxpayer’s fixed base percentage generally is the ratio of its research expenses to gross receipts
for 1984 through 1988. Taxpayers can elect the alternative simplified credit regime, which is equal to 14 percent
(12 percent prior to 2009) of qualified research expenses
that exceed 50 percent of the average qualified research
expenses for the three preceding taxable years. Prior to
January 1, 2009, taxpayers could also elect an alternative incremental credit regime. Under the alternative
incremental credit regime the taxpayer was assigned a
three-tiered fixed base percentage that is lower than the
fixed-base percentage that would otherwise apply, and
the credit rate was reduced. The rates for the alternative
incremental credit ranged from 3 percent to 5 percent.
Under current law as of December 31, the research credit
expired on December 31, 2011.  However, ATRA extended
the provision through December 31, 2013 (extension not
shown in the tables.)
Energy
9.  Exploration and development costs.—Under
the baseline tax system, the costs of exploring and developing oil and gas wells would be capitalized and then amortized (or depreciated) over an estimate of the economic
life of the well. This insures that the net income from the
well is measured appropriately each year.
In contrast to this treatment, current law allows intangible drilling costs for successful investments in domestic oil and gas wells (such as wages, the cost of using
machinery for grading and drilling, and the cost of unsalvageable materials used in constructing wells) to be
deducted immediately, i.e., expensed. Because it allows
recovery of costs sooner, expensing is more generous for
the taxpayer than would be amortization. Integrated oil
companies may deduct only 70 percent of such costs and
must amortize the remaining 30 percent over five years.
The same rule applies to the exploration and development
costs of surface stripping and the construction of shafts
and tunnels for other fuel minerals.

10.  Percentage depletion.—The baseline tax system would allow recovery of the costs of developing certain oil and mineral properties using cost depletion. Cost
depletion is similar in concept to depreciation, in that the
costs of developing or acquiring the asset are capitalized
and then gradually reduced over an estimate of the asset’s productive life, as is appropriate for measuring net
income.
In contrast, the Tax Code generally allows independent fuel and mineral producers and royalty owners to
take percentage depletion deductions rather than cost depletion on limited quantities of output. Under percentage
depletion, taxpayers deduct a percentage of gross income
from mineral production. In certain cases the deduction
is limited to a fraction of the asset’s net income. Over the
life of an investment, percentage depletion deductions can
exceed the cost of the investment. Consequently, percentage depletion offers more generous tax treatment than
would cost depletion, which would limit deductions to an
investment’s cost.
11.  Alternative fuel production credit.—The
baseline tax system would not allow credits for particular
activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides
a credit of $3 per oil-equivalent barrel of production (in
2004 dollars) for coke or coke gas during a four-year period for qualified facilities. Qualifying facilities producing
coke and coke gas must be placed in service by December
31, 2009.
12.  Oil and gas exception to passive loss limitation.—The baseline tax system accepts current law’s
general rule limiting taxpayers’ ability to deduct losses
from passive activities against nonpassive income (e.g.,
wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not
materially participate, and there are numerous additional considerations brought to bear on the determination of
which activities are passive for a given taxpayer. Losses
are limited in an attempt to limit tax sheltering activities.
Passive losses that are unused may be carried forward
and applied against future passive income.
An exception from the passive loss limitation is provided for a working interest in an oil or gas property that
the taxpayer holds directly or through an entity that does
not limit the liability of the taxpayer with respect to the
interest.  Thus, taxpayers can deduct losses from such
working interests against nonpassive income without regard to whether they materially participate in the activity.
13.  Capital gains treatment of royalties on
coal.— The baseline tax system generally would tax all
income under the regular tax rate schedule. It would
not allow preferentially low tax rates to apply to certain
types or sources of income. For individuals in 2012, tax
rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. In contrast,
current law allows capital gains realized by individuals

260
to be taxed at a preferentially low rate that is no higher
than 15 percent. Certain sales of coal under royalty contracts qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low
15 percent maximum tax rate on capital gains. Beginning
in 2013, the top statutory preferential tax rate on capital
gains will be 20 percent.
14.  Energy facility bonds.—The baseline tax system generally would tax all income under the regular tax
rate schedule. It would not allow preferentially low (or
zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on
State and local bonds used to finance construction of certain energy facilities to be exempt from tax. These bonds
are generally subject to the State private-activity-bond
annual volume cap.
15.  Energy production credit.—The baseline tax
system would not allow credits for particular activities,
investments, or industries. Instead, it generally would
seek to tax uniformly all returns from investment-like
activities. In contrast, the Tax Code provides a credit for
certain electricity produced from wind energy, biomass,
geothermal energy, solar energy, small irrigation power,
municipal solid waste, or qualified hydropower and sold to
an unrelated party. In addition to the electricity production credit, an income tax credit is allowed for the production of refined coal and Indian coal at qualified facilities.
16.  Energy investment credit.—The baseline tax
system would not allow credits for particular activities,
investments, or industries. Instead, it generally would
seek to tax uniformly all returns from investment-like
activities. However, the Tax Code provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine power
plants, geothermal heat pumps, small wind property and
combined heat and power property. Owners of renewable
power facilities that qualify for the energy production
credit may instead elect to take an energy investment
credit.
17.  Alcohol fuel credits.—The baseline tax system
would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to
tax uniformly all returns from investment-like activities.
In contrast, the Tax Code provides an income tax credit
for ethanol derived from renewable sources and used as
fuel. In lieu of the alcohol mixture credit, the taxpayer
may claim a refundable excise tax credit. In addition,
small ethanol producers are eligible for a separate income
tax credit for ethanol production and a separate income
tax credit is available for qualified cellulosic biofuel production. With the exception of the cellulosic biofuel credit,
these provisions expired on December 31, 2011. However,
ATRA extended the provision through December 31, 2013
(extension not shown in the tables).
18.  Bio-Diesel tax credit.—The baseline tax system
would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to
tax uniformly all returns from investment-like activities.
However, the Tax Code allows an income tax credit for biodiesel used or sold and for bio-diesel derived from virgin

Analytical Perspectives

sources. In lieu of the bio-diesel credit, the taxpayer may
claim a refundable excise tax credit. In addition, small
agri-biodiesel producers are eligible for a separate income
tax credit for ethanol production and a separate credit
is available for qualified renewable diesel fuel mixtures.
This provision expired on December 31, 2011. However,
ATRA extended the provision through December 31, 2013
(extension not shown in the tables).
19.  Credit for alternative motor vehicles and
refueling property.—The baseline tax system would
not allow credits or deductions for particular activities,
investments, or industries. Instead, it generally would
seek to tax uniformly all returns from investment-like
activities. In contrast, the Tax Code allows a number of
credits for certain types of vehicles and property. These
are available for hydrogen alternative fuel vehicle refueling property, fuel cell vehicles and plug-in electric-drive
motor vehicles. The credits for non-hydrogen alternative
fuel vehicle refueling property, plug-in conversions, and
low-speed, motorcycle, and three-wheeled plug-in electric
vehicles expire on December 31, 2011. However, ATRA
extended the provision through December 31, 2013 (extension not shown in the tables).
20.  Exclusion of utility conservation subsidies.—The baseline tax system generally takes a comprehensive view of taxable income that includes a wide
variety of (measurable) accretions to wealth. In certain
circumstances, public utilities offer rate subsidies to nonbusiness customers who invest in energy conservation
measures. These rate subsidies are equivalent to payments from the utility to its customer, and so represent
accretions to wealth, income, that would be taxable to the
customer under the baseline tax system. In contrast, the
Tax Code exempts these subsidies from the non-business
customer’s gross income.
21.  Credit to holders of clean renewable energy
bonds.—The baseline tax system would uniformly tax all
returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the
Tax Code provides for the issuance of Clean Renewable
Energy Bonds which entitles the bond holder to a Federal
income tax credit in lieu of interest. The limit on the
volume issued in 2009–2010 is $2.4 billion. As of March
2010, issuers of the unused authorization of such bonds
could opt to receive direct payment with the yield becoming fully taxable.
22.  Deferral of gain from dispositions of transmission property to implement FERC restructuring
policy.—The baseline tax system generally would tax
gains from sale of property when realized. It would not
allow an exception for particular activities or individuals.
However, the Tax Code allows utilities to defer gains from
the sale of their transmission assets to a FERC-approved
independent transmission company. The sale of property
must be made prior to January 1, 2012. However, ATRA
extended the provision through December 31, 2013 (extension not shown in the tables).
23.  Credit for investment in clean coal facilities.—The baseline tax system would uniformly tax all
returns to investments and not allow credits for particu-

261

16. Tax Expenditures

lar activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides
investment tax credits for clean coal facilities producing
electricity and for industrial gasification combined cycle
projects.
24.  Temporary 50 percent expensing for equipment used in the refining of liquid fuels.—The baseline tax system allows the taxpayer to deduct the decline
in the economic value of an investment over its economic
life. However, the Tax Code provides for an accelerated
recovery of the cost of certain investments in refineries by
allowing partial expensing of the cost, thereby giving such
investments a tax advantage.
25.  Natural gas distribution pipelines treated
as 15-year property.—The baseline tax system allows
taxpayers to deduct the decline in the economic value of
an investment over its economic life. However, the Tax
Code allows depreciation of natural gas distribution pipelines (placed in service between 2005 and 2011) over a 15
year period. These deductions are accelerated relative to
deductions based on economic depreciation.
26.  Amortize all geological and geophysical expenditures over two years.—The baseline tax system
allows taxpayers to deduct the decline in the economic
value of an investment over time. However, the Tax Code
allows geological and geophysical expenditures incurred
in connection with oil and gas exploration in the United
States to be amortized over two years for non-integrated
oil companies.
27.  Allowance of deduction for certain energy efficient commercial building property.—The baseline
tax system would not allow deductions in addition to normal depreciation allowances for particular investments in
particular industries. Instead, it generally would seek to
tax uniformly all returns from investment-like activities.
In contrast, the Tax Code allows a deduction, per square
foot, for certain energy efficient commercial buildings.
28.  Credit for construction of new energy efficient homes.—The baseline tax system would not allow
credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all
returns from investment-like activities. However, the Tax
Code allows contractors a tax credit of $2,000 for the construction of a qualified new energy-efficient home that has
an annual level of heating and cooling energy consumption at least 50 percent below the annual consumption
of a comparable dwelling unit. The credit equals $1,000
in the case of a new manufactured home that meets a 30
percent standard. This provision expired on December
31, 2011. However, ATRA extended the provision through
December 31, 2013 (extension not shown in the tables).
29.  Credit for energy efficiency improvements
to existing homes.—The baseline tax system would not
allow credits for particular activities, investments, or industries. However, the Tax Code provides an investment
tax credit for expenditures made on insulation, exterior
windows, and doors that improve the energy efficiency of
homes and meet certain standards. The Tax Code also provides a credit for purchases of advanced main air circulat-

ing fans, natural gas, propane, or oil furnaces or hot water
boilers, and other qualified energy efficient property. This
provision expired on December 31, 2011. However, ATRA
extended the provision through December 31, 2013 (extension not shown in tables.)
30.  Credit for energy efficient appliances.—The
baseline tax system would not allow credits for particular
activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides
tax credits for the manufacture of efficient dishwashers,
clothes washers, and refrigerators. The size of the credit
depends on the efficiency of the appliance. This provision
expired on December 31, 2011. However, ATRA extended
the provision through December 31, 2013 (extension not
shown in the tables).
31.  Credit for residential energy efficient property.—The baseline tax system would uniformly tax all
returns to investments and not allow credits for particular activities, investments, or industries. However, the
Tax Code provides a credit for the purchase of a qualified
photovoltaic property and solar water heating property, as
well as for fuel cell power plants, geothermal heat pumps
and small wind property.
32.  Credit for qualified energy conservation
bonds.—The baseline tax system would uniformly tax
all returns to investments and not allow credits for particular activities, investments, or industries. However, the
Tax Code provides for the issuance of energy conservation
bonds which entitle the bond holder to a Federal income
tax credit in lieu of interest. The limit on the volume issued in 2009–2010 is $3.2 billion. As of March 2010, issuers of the unused authorization of such bonds could opt
to receive direct payment with the yield becoming fully
taxable.
33.  Advanced energy property credit.—The baseline tax system would not allow credits for particular
activities, investments, or industries. However, the Tax
Code provides a 30 percent investment credit for property used in a qualified advanced energy manufacturing
project. The Treasury Department may award up to $2.3
billion in tax credits for qualified investments.
34.  Advanced nuclear power facilities production credit.—The baseline tax system would not allow
credits or deductions for particular activities, investments, or industries. Instead, it generally would seek to
tax uniformly all returns from investment-like activities.
In contrast, the Tax Code allows a tax credit equal to 1.8
cents times the number of kilowatt hours of electricity
produced at a qualifying advanced nuclear power facility. A taxpayer may claim no more than $125 million per
1,000 MW of capacity. The Treasury Department may allocate up to 6,000 megawatts of credit-eligible capacity.
Natural Resources and Environment
35.  Exploration and development costs.—The
baseline tax system allows the taxpayer to deduct the depreciation of an asset according to the decline in its economic value over time. However, certain capital outlays

262
associated with exploration and development of nonfuel
minerals may be expensed rather than depreciated over
the life of the asset.
36.  Percentage depletion.—The baseline tax system allows the taxpayer to deduct the decline in the economic value of an investment over time. Under current
law, however, most nonfuel mineral extractors may use
percentage depletion (whereby the deduction is fixed as a
percentage of revenue and can exceed total costs) rather
than cost depletion, with percentage depletion rates ranging from 22 percent for sulfur to 5 percent for sand and
gravel. Over the life of an investment, percentage depletion deductions can exceed the cost of the investment.
Consequently, percentage depletion offers more generous
tax treatment than would cost depletion, which would
limit deductions to an investment’s cost.
37.  Sewage, water, solid and hazardous waste
facility bonds.—The baseline tax system generally
would tax all income under the regular tax rate schedule.
It would not allow preferentially low (or zero) tax rates to
apply to certain types or sources of income. In contrast,
the Tax Code allows interest earned on State and local
bonds used to finance construction of sewage, water, or
hazardous waste facilities to be exempt from tax. These
bonds are generally subject to the State private-activitybond annual volume cap.
38.  Capital gains treatment of certain timber.—
The baseline tax system generally would tax all income
under the regular tax rate schedule. It would not allow
preferentially low tax rates to apply to certain types or
sources of income. However, under current law certain
timber sales can be treated as a capital gain rather than
ordinary income and therefore subject to the lower capital-gains tax rate. For individuals in 2012, tax rates on
regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. In contrast, current
law allows capital gains to be taxed at a preferentially
low rate that is no higher than 15 percent. Beginning
in 2013, the top statutory preferential tax rate on capital
gains will be 20 percent.
39.  Expensing multi-period timber growing
costs.—The baseline tax system requires the taxpayer
to capitalize costs associated with investment property.
However, most of the production costs of growing timber
may be expensed under current law rather than capitalized and deducted when the timber is sold, thereby accelerating cost recovery.
40.  Historic preservation.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, expenditures to preserve and restore certified historic structures qualify for
an investment tax credit of 20 percent under current
law for certified rehabilitation activities. The taxpayer’s
recoverable basis must be reduced by the amount of the
credit. Qualified GO (Gulf Opportunity) Zone expenditures qualify for a 26 percent credit.
41.  Exclusion of gain or loss on sale or exchange
of certain brownfield sites.—In general, a tax-exempt
organization must pay taxes on income from activities
unrelated to its nonprofit status. The Tax Code, however,

Analytical Perspectives

provides a special exclusion from unrelated business taxable income of the gain or loss from the sale or exchange
of certain qualifying brownfield properties.
42.  Industrial CO2 capture and sequestration
tax credit.—The baseline tax system would uniformly
tax all returns to investments and not allow credits for
particular activities, investments, or industries. In contrast, the Tax Code allows a credit of $20 per metric ton
for qualified carbon dioxide captured at a qualified facility
and disposed of in secure geological storage. In addition,
the provision allows a credit of $10 per metric ton of qualified carbon dioxide that is captured at a qualified facility
and as a tertiary injectant in a qualified enhanced oil or
natural gas recovery project.
43.  Deduction for endangered species recovery expenditures.—The baseline tax system generally
would tax all income under the regular tax rate schedule.
It would not allow preferentially low tax rates to apply
to certain types or sources of income. In contrast, under
current law farmers can deduct up to 25 percent of their
gross income for expenses incurred as a result of site and
habitat improvement activities that will benefit endangered species on their farm land, in accordance with site
specific management actions included in species recovery
plans approved pursuant to the Endangered Species Act
of 1973.
Agriculture
44.  Expensing certain capital outlays.—The
baseline tax system requires the taxpayer to capitalize
costs associated with investment property. However, farmers may expense certain expenditures for feed and fertilizer as well as for soil and water conservation measures
as well as other capital improvements under current law.
45.  Expensing multi-period livestock and crop
production costs.—The baseline tax system requires
the taxpayer to capitalize costs associated with an investment over time. However, the production of livestock and
crops with a production period greater than two years
(e.g., establishing orchards or constructing barns) is exempt from the uniform cost capitalization rules, thereby
accelerating cost recovery.
46.  Loans forgiven solvent farmers.—The baseline tax system requires debtors to include the amount of
loan forgiveness as income or else reduce their recoverable
basis in the property related to the loan. If the amount
of forgiveness exceeds the basis, the excess forgiveness
is taxable. However, for bankrupt debtors, the amount of
loan forgiveness reduces carryover losses, unused credits,
and then basis, with the remainder of the forgiven debt
excluded from taxation.
47.  Capital gains treatment of certain income.—
For individuals in 2012, tax rates on regular income vary
from 10 percent to 35 percent, depending on the taxpayer’s income. The baseline tax system generally would tax
all income under the regular tax rate schedule. It would
not allow preferentially low tax rates to apply to certain
types or sources of income. In contrast, current law as of
December 31, 2012 allowed capital gains to be taxed at a

16. Tax Expenditures

preferentially low rate that was no higher than 15 percent. Certain agricultural income, such as unharvested
crops, qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low
15 percent maximum tax rate on capital gains. Under
ATRA, beginning in 2013, the top statutory preferential
tax rate on capital gains will be 20 percent. However, the
tables do not show the changes under ATRA.
48.  Income averaging for farmers.—The baseline
tax system generally taxes all earned income each year at
the rate determined by the income tax. However, taxpayers may average their taxable income from farming and
fishing over the previous three years.
49.  Deferral of gain on sales of farm refiners.—
The baseline tax system generally subjects capital gains
to taxes the year that they are realized. However, the Tax
Code allows a taxpayer who sells stock in a farm refiner
to a farmers’ cooperative to defer recognition of the gain
if the proceeds are re-invested in a qualified replacement
property.
50.  Expensing of reforestation expenditures.—
The baseline tax system requires the taxpayer to capitalize costs associated with an investment over time. In
contrast, the Tax Code provides for the expensing of the
first $10,000 in reforestation expenditures with 7-year
amortization of the remaining expenses.
Commerce and Housing
This category includes a number of tax expenditure
provisions that also affect economic activity in other
functional categories. For example, provisions related to
investment, such as accelerated depreciation, could be
classified under the energy, natural resources and environment, agriculture, or transportation categories.
51.  Credit union income exemption.—Under the
baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. It would not allow
preferentially low (or zero) tax rates to apply to certain
types or sources of income. However, in the Tax Code the
earnings of credit unions not distributed to members as
interest or dividends are exempt from the income tax.
52.  Deferral of income on life insurance and
annuity contracts.—Under the baseline tax system,
individuals and corporations pay taxes on their income
when it is (actually or constructively) received or accrued,
depending on their method of accounting. Nevertheless,
the Tax Code provides favorable tax treatment for investment income earned within qualified life insurance and
annuity contracts. In general, investment income earned
on qualified life insurance contracts held until death is
permanently exempt from income tax. Investment income distributed prior to the death of the insured is taxexempt to the extent that investment in the contract is
overstated (because premiums paid for the cost of life insurance protection are credited to investment in the contract), while the remaining distributed amounts are taxdeferred because income is not taxed on a current basis,
but is recognized only when distributed from the contract.

263
Investment income earned on annuities benefits from tax
deferral.
53.  Small property and casualty insurance companies.—Under the baseline tax system, corporations pay
taxes on their profits under the regular tax rate schedule.
It would not allow preferentially low (or zero) tax rates to
apply to certain types or sources of income. Under current
law, however, stock non-life insurance companies are generally exempt from tax if their gross receipts for the taxable year do not exceed $600,000 and more than 50 percent of such gross receipts consist of premiums. Mutual
non-life insurance companies are generally tax-exempt if
their annual gross receipts do not exceed $150,000 and
more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with no more
than $1.2 million of annual net premiums may elect to
pay tax only on their taxable investment income.
54.  Insurance companies owned by exempt organizations.—Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate
schedule. It would not allow preferentially low (or zero)
tax rates to apply to certain types or sources of income.
Generally the income generated by life and property and
casualty insurance companies is subject to tax, albeit by
special rules. Insurance operations conducted by such exempt organizations as fraternal societies, voluntary employee benefit associations, and others, however, are exempt from tax.
55.  Small life insurance company deduction.—
Under the baseline tax system, corporations pay taxes on
their profits under the regular tax rate schedule. It would
not allow preferentially low (or zero) tax rates to apply to
certain types or sources of income. However, under current law small life insurance companies (with gross assets of less than $500 million) can deduct 60 percent of
the first $3 million of otherwise taxable income. The deduction phases out for otherwise taxable income between
$3 million and $15 million.
56.  Exclusion of interest spread of financial institutions.—The baseline tax system generally would tax
all income under the regular tax rate schedule. It would
not allow preferentially low (or zero) tax rates to apply to
certain types or sources of income. Consumers and nonprofit organizations pay for some deposit-linked services,
such as check cashing, by accepting a below-market interest rate on their demand deposits. If they received a
market rate of interest on those deposits and paid explicit
fees for the associated services, they would pay taxes on
the full market rate and (unlike businesses) could not deduct the fees. The Government thus foregoes tax on the
difference between the risk-free market interest rate and
below-market interest rates on demand deposits, which
under competitive conditions should equal the value added of deposit services.
57.  Mortgage housing bonds.—The baseline tax
system generally would tax all income under the regular tax rate schedule. It would not allow preferentially
low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest
earned on State and local bonds used to finance homes

264
purchased by first-time, low-to-moderate-income buyers
to be exempt. These bonds are generally subject to the
State private-activity-bond annual volume cap.
58.  Rental housing bonds.—The baseline tax system generally would tax all income under the regular tax
rate schedule. It would not allow preferentially low (or
zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on
State and local government bonds used to finance multifamily rental housing projects to be tax-exempt.
59.  Interest on owner-occupied homes.—Under
the baseline tax system, expenses incurred in earning income would be deductible. However, such expenses would
not be deductible when the income or the return on an
investment is not taxed. In contrast, the Tax Code allows
an exclusion from a taxpayer’s taxable income for the
value of owner-occupied housing services and also allows
the owner-occupant to deduct mortgage interest paid on
his or her primary and secondary residences as an itemized non-business deduction. In general, the mortgage interest deduction is limited to interest on debt no greater
than the owner’s basis in the residence, and is also limited
to interest on debt of no more than $1 million. Interest on
up to $100,000 of other debt secured by a lien on a principal or second residence is also deductible, irrespective of
the purpose of borrowing, provided the total debt does not
exceed the fair market value of the residence. As an alternative to the deduction, holders of qualified Mortgage
Credit Certificates issued by State or local governmental
units or agencies may claim a tax credit equal to a proportion of their interest expense.
60.  Taxes on owner-occupied homes.—Under the
baseline tax system, expenses incurred in earning income
would be deductible. However, such expenses would not
be deductible when the income or the return on an investment is not taxed. In contrast, the Tax Code allows an
exclusion from a taxpayer’s taxable income for the value
of owner-occupied housing services and also allows the
owner-occupant to deduct property taxes paid on his or
her primary and secondary residences.
61.  Installment sales.—The baseline tax system
generally would tax all income under the regular tax rate
schedule. It would not allow preferentially low (or zero)
tax rates, or deferral of tax, to apply to certain types or
sources of income. Dealers in real and personal property
(i.e., sellers who regularly hold property for sale or resale)
cannot defer taxable income from installment sales until
the receipt of the loan repayment. Nondealers (i.e., sellers
of real property used in their business) are required to
pay interest on deferred taxes attributable to their total
installment obligations in excess of $5 million. Only properties with sales prices exceeding $150,000 are includable in the total. The payment of a market rate of interest
eliminates the benefit of the tax deferral. The tax exemption for nondealers with total installment obligations of
less than $5 million is, therefore, a tax expenditure.
62.  Capital gains exclusion on home sales.—The
baseline tax system would not allow deductions and exemptions for certain types of income. In contrast, the Tax
Code allows homeowners to exclude from gross income up

Analytical Perspectives

to $250,000 ($500,000 in the case of a married couple filing a joint return) of the capital gains from the sale of
a principal residence. To qualify, the taxpayer must have
owned and used the property as the taxpayer’s principal
residence for a total of at least two of the five years preceding the date of sale. In addition, the exclusion may not
be used more than once every two years.
63.  Imputed net rental income on owner-occupied housing.—Under the baseline tax system, the
taxable income of a taxpayer who is an owner-occupant
would include the implicit value of gross rental income on
housing services earned on the investment in owner-occupied housing and would allow a deduction for expenses,
such as interest, depreciation, property taxes, and other
costs, associated with earning such rental income.  In contrast, the Tax Code allows an exclusion from taxable income for the implicit gross rental income on housing services, while in certain circumstances allows a deduction
for some costs associated with such income, such as for
mortgage interest and property taxes.
64.  Passive loss real estate exemption.—The baseline tax system accepts current law’s general rule limiting
taxpayers’ ability to deduct losses from passive activities
against nonpassive income (e.g., wages, interest, and dividends). Passive activities generally are defined as those
in which the taxpayer does not materially participate and
there are numerous additional considerations brought to
bear on the determination of which activities are passive
for a given taxpayer. Losses are limited in an attempt to
limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future
passive income.
In contrast to the general restrictions on passive losses, the Tax Code exempts owners of rental real estate activities from “passive income’’ limitations. The exemption
is limited to $25,000 in losses and phases out for taxpayers with income between $100,000 and $150,000.
65.  Low-income housing credit.—The baseline tax
system would uniformly tax all returns to investments
and not allow credits for particular activities, investments,
or industries. However, under current law taxpayers who
invest in certain low-income housing are eligible for a tax
credit. The credit rate is set so that the present value of
the credit is equal to 70 percent for new construction and
30 percent for (1) housing receiving other Federal benefits
(such as tax-exempt bond financing), or (2) substantially rehabilitated existing housing. The credit can exceed
these levels in certain statutorily defined and State designated areas where project development costs are higher.
The credit is allowed in equal amounts over 10 years and
is generally subject to a volume cap.
66.  Accelerated depreciation of residential rental property.—Under an economic income tax, the costs of
acquiring a building are capitalized and depreciated over
time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This
insures that the net income from the rental property is
measured appropriately each year. However, the depreciation provisions of the Tax Code are part of the reference

16. Tax Expenditures

law rules, and thus do not give rise to tax expenditures
under reference law. Under normal law, however, depreciation allowances reflect estimates of economic depreciation.
67.  Discharge of mortgage indebtedness.—Under
the baseline tax system, all income would generally be
taxed under the regular tax rate schedule. The baseline
tax system would not allow preferentially low (or zero)
tax rates to apply to certain types or sources of income.
In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for any discharge of indebtedness
of up to $2 million ($1 million in the case of a married individual filing a separate return) from a qualified principal
residence. The provision applies to debt discharged after
January 1, 2007, and before January 1, 2013. However,
ATRA extended the provision through December 31, 2013
(extension not shown in the tables.)
68.  Cancellation of indebtedness.—The baseline
tax system generally would tax all income under the
regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or
sources of income. In contrast, under current law individuals are not required to report the cancellation of certain indebtedness as current income. If the canceled debt
is not reported as current income, however, the basis of
the underlying property must be reduced by the amount
canceled.
69.  Imputed interest rules.—Under the baseline
tax system, holders (issuers) of debt instruments are generally required to report interest earned (paid) in the period it accrues, not when paid. In addition, the amount of
interest accrued is determined by the actual price paid,
not by the stated principal and interest stipulated in the
instrument. But under current law, and in general, any
debt associated with the sale of property worth less than
$250,000 is excepted from the general interest accounting rules. This general $250,000 exception is not a tax expenditure under reference law but is under normal law.
Exceptions above $250,000 are a tax expenditure under
reference law; these exceptions include the following: (1)
sales of personal residences worth more than $250,000,
and (2) sales of farms and small businesses worth between $250,000 and $1 million.
70.  Treatment of qualified dividends.— The baseline tax system generally would tax all income under the
regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources
of income. For individuals in 2012, tax rates on regular
income vary from 10 percent to 35 percent, depending on
the taxpayer’s income. In contrast, qualified dividends
were taxed at a preferentially low rate that is no higher than 15 percent. Beginning in 2013, dividends would
have been once again taxed as ordinary income. However,
ATRA set a permanent statutory maximum tax rate of 20
percent (change not shown in the tables.)
71.  Capital gains (other than agriculture, timber, and coal).— The baseline tax system generally
would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For individuals

265
in 2012, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income.
In contrast, capital gains on assets held for more than
one year were taxed at a preferentially low rate that is
no higher than 15 percent. Beginning in 2013, the top
statutory preferential tax rate on capital gains will be
20 percent.
72.  Capital gains exclusion for small business
stock.—The baseline tax system would not allow deductions and exemptions, or provide preferential treatment
of certain sources of income or types of activities. In contrast, the Tax Code provides an exclusion of 50 percent
(from a 28 percent tax rate) for capital gains from qualified small business stock held by individuals for more
than 5 years; 75 percent for stock issued after February
17, 2009 and before September 28, 2010; and 100 percent for stock issued after September 27, 2010 and before
January 1, 2012. A qualified small business is a corporation whose gross assets do not exceed $50 million as of the
date of issuance of the stock. ATRA extended the provision through December 31, 2013 (extension not shown in
the tables).
73.  Step-up in basis of capital gains at death.—
Under the baseline tax system, unrealized capital gains
would be taxed when assets are transferred at death or by
gift. It would not allow for exempting gains upon transfer
of the underlying assets to the heirs. In contrast, capital
gains on assets held at the owner’s death are not subject
to capital gains tax under current law. The cost basis of
the appreciated assets is adjusted to the market value at
the owner’s date of death which becomes the basis for the
heirs.
74.  Carryover basis of capital gains on gifts.—
Under the baseline tax system, unrealized capital gains
would be taxed when assets are transferred at death or by
gift. In contrast, when a gift of appreciated asset is made
under current law, the donor’s basis in the transferred
property (the cost that was incurred when the transferred
property was first acquired) carries over to the donee. The
carryover of the donor’s basis allows a continued deferral
of unrealized capital gains.
75.  Ordinary income treatment of losses from
sale of small business corporate stock shares.—The
baseline tax system limits to $3,000 the write-off of losses
from capital assets, with carryover of the excess to future
years. In contrast, the Tax Code allows up to $100,000
in losses from the sale of small business corporate stock
(capitalization less than $1 million) to be treated as ordinary losses and fully deducted.
76.  Depreciation of non-rental-housing buildings.—Under an economic income tax, the costs of acquiring a building are capitalized and depreciated over time
in accordance with the decline in the property’s economic
value due to wear and tear or obsolescence. This insures
that the net income from the property is measured appropriately each year. However, the depreciation provisions
of the Tax Code are part of the reference law rules, and
thus do not give rise to tax expenditures under reference
law. Under normal law, however, depreciation allowances
reflect estimates of economic depreciation.

266
77.  Accelerated depreciation of machinery and
equipment.—Under an economic income tax, the costs
of acquiring machinery and equipment are capitalized
and depreciated over time in accordance with the decline
in the property’s economic value due to wear and tear or
obsolescence. This insures that the net income from the
property is measured appropriately each year. However,
the depreciation provisions of the Tax Code are part of the
reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, however,
depreciation allowances reflect estimates of economic depreciation.
78.  Expensing of certain small investments.—
Under the reference law baseline, the costs of acquiring
tangible property and computer software would be depreciated using the Tax Code’s depreciation provisions.
Under the normal tax baseline, depreciation allowances
are estimates of economic depreciation. However, the Tax
Code allows qualifying investments by small businesses
in tangible property and certain computer software to be
expensed rather than depreciated over time.
79.  Graduated corporation income tax rate
schedule.—Because the corporate rate schedule is part
of reference tax law, it is not considered a tax expenditure
under the reference method. A flat corporation income
tax rate is taken as the baseline under the normal tax
method; therefore the lower rate is considered a tax expenditure under this concept.
80.  Small issue industrial development bonds.—
The baseline tax system generally would tax all income
under the regular tax rate schedule. It would not allow
preferentially low (or zero) tax rates to apply to certain
types or sources of income. In contrast, the Tax Code allows interest earned on small issue industrial development bonds (IDBs) issued by State and local governments
to finance manufacturing facilities to be tax exempt.
Depreciable property financed with small issue IDBs
must be depreciated, however, using the straight-line
method. The annual volume of small issue IDBs is subject
to the unified volume cap discussed in the mortgage housing bond section above.
81.  Deduction for U.S. production activities.—
The baseline tax system generally would tax all income
under the regular tax rate schedule. It would not allow
preferentially low (or zero) tax rates to apply to certain
types or sources of income. In contrast, the Tax Code allows for a deduction equal to a portion of taxable income
attributable to domestic production.
82.  Special rules for certain film and TV production.—The baseline tax system generally would tax
all income under the regular tax rate schedule. It would
not allow deductions and exemptions or preferentially low
(or zero) tax rates to apply to certain types or sources of
income. In contrast, under current law taxpayers may
deduct up to $15 million per production ($20 million in
certain distressed areas) in non-capital expenditures incurred during the year..

Analytical Perspectives

Transportation
83.  Deferral of tax on U.S. shipping companies.—The baseline tax system generally would tax all
profits and income under the regular tax rate schedule.
It would not allow preferentially low (or zero) tax rates to
apply to certain types or sources of income. In contrast,
the Tax Code allows certain companies that operate U.S.
flag vessels to defer income taxes on that portion of their
income used for shipping purposes, primarily construction, modernization and major repairs to ships, and repayment of loans to finance these investments. U.S. shipping companies may choose to be subject to a tonnage tax
based on gross shipping weight in lieu of an income tax,
in which case profits would not be subject to tax under the
regular tax rate schedule.
84.  Exclusion of employee parking expenses.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, would be
included in taxable income. Dedicated payments and inkind benefits represent accretions to wealth that do not
differ materially from cash wages. In contrast, the Tax
Code allows an exclusion from taxable income for employee parking expenses that are paid for by the employer or
that are received by the employee in lieu of wages. In
2012, the maximum amount of the parking exclusion is
$240 per month. The tax expenditure estimate does not
include any subsidy provided through employer-owned
parking facilities.
85.  Exclusion of employee transit pass expenses.—Under the baseline tax system, all compensation,
including dedicated payments and in-kind benefits, would
be included in taxable income. Dedicated payments and
in-kind benefits represent accretions to wealth that do
not differ materially from cash wages. In contrast, the
Tax Code allows an exclusion from a taxpayer’s taxable
income for passes, tokens, fare cards, and vanpool expenses that are paid for by an employer or that are received
by the employee in lieu of wages to defray an employee’s
commuting costs. Under current law as of December
31, 2012, the maximum amount of the transit exclusion
was $125 per month. However, ATRA extended parity of
employer-provided parking and transit benefits through
2013 (retroactive through 2012), meaning that the maximum amount of transit exclusion is $240 per month in
2012 and 2013 (extension not shown in tables.)
86.  Tax credit for certain expenditures for maintaining railroad tracks.—The baseline tax system
would not allow credits for particular activities, investments, or industries. However, under current law eligible
taxpayers may claim a credit equal to the lesser of 50
percent of maintenance expenditures and the product of
$3,500 and the number of miles of track owned or leased.
87.  Exclusion of interest on bonds for financing
of highway projects and rail-truck transfer facilities.—The baseline tax system generally would tax all
income under the regular tax rate schedule. It would
not allow preferentially low (or zero) tax rates to apply to
certain types or sources of income. In contrast, the Tax
Code provides for $15 billion of tax-exempt bond author-

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16. Tax Expenditures

ity to finance qualified highway or surface freight transfer
facilities. The authority to issue these bonds expires on
December 31, 2015.
Community and Regional Development
88.  Rehabilitation of structures.—The baseline
tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code allows a
10-percent investment tax credit for the rehabilitation of
buildings that are used for business or productive activities and that were erected before 1936 for other than residential purposes. The taxpayer’s recoverable basis must
be reduced by the amount of the credit. Qualified GO Zone
expenditures qualify for a 13 percent credit.
89.  Airport, dock, and similar facility bonds.—
The baseline tax system generally would tax all income
under the regular tax rate schedule. It would not allow
preferentially low (or zero) tax rates to apply to certain
types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds issued to
finance high-speed rail facilities and Government-owned
airports, docks, wharves, and sport and convention facilities to be tax-exempt. These bonds are not subject to a
volume cap.
90.  Exemption of income of mutuals and cooperatives.—Under the baseline tax system, corporations pay
taxes on their profits under the regular tax rate schedule.
In contrast, the Tax Code provides for the incomes of mutual and cooperative telephone and electric companies to
be exempt from tax if at least 85 percent of their revenues
are derived from patron service charges.
91.  Empowerment zones and renewal communities.—The baseline tax system generally would tax all
income under the regular tax rate schedule. It would not
allow preferentially low (or zero) tax rates to apply to certain types or sources of income, tax credits, and write-offs
faster than economic depreciation. In contrast, under current law qualifying businesses in designated economically
depressed areas can receive tax benefits such as an employer wage credit, increased expensing of investment in
equipment, special tax-exempt financing, accelerated depreciation, and certain capital gains incentives. A taxpayer’s ability to accrue new tax benefits for Empowerment
Zones and the DC Enterprise Zone expired December 31,
2011. However, ATRA extended the provision through
December 31, 2013 (extension not shown in the tables).
92.  New markets tax credit.—The baseline tax
system would not allow credits for particular activities,
investments, or industries. However, under current law
taxpayers who make qualified equity investments in a
community development entity (CDE), which then makes
qualified investments in low-income communities, are eligible for a tax credit received over 7 years. A CDE must
first receive an allocation of tax credit from Treasury before it can sell the tax credit to the investor in exchange for
the equity investment. The total equity investment available for the credit across all CDEs is $5 billion in 2011,
the last year for which allocations can be made. However,

ATRA extended the provision for two more years (extension not shown in tables.)
93.  Expensing of environmental remediation
costs.—Under the baseline tax system, the costs would
be amortized (or depreciated) over an estimate of the economic life of the building. This insures that the net income from the buildings is measured appropriately each
year. However, the Tax Code allows taxpayers who clean
up certain hazardous substances at a qualified site to expense the clean-up costs, even though the expenses will
generally increase the value of the property significantly
or appreciably prolong the life of the property.
94.  Credit to holders of Gulf and Midwest Tax
Credit Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, under current law taxpayers that own Gulf
and Midwest Tax Credit bonds receive a non-refundable
tax credit rather than interest. The credit is included in
gross income.
95.  Recovery Zone Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. In addition, it would tax all income under the regular tax rate schedule. It would not
allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code
allows local governments to issue up $10 billion in taxable
Recovery Zone Economic Development Bonds in 2009 and
2010 and receive a direct payment from Treasury equal to
45 percent of interest expenses. In addition, they would
be allowed to allocate up to $15 billion in tax exempt
Recovery Zone Facility Bonds. These bonds finance certain kinds of business development in areas of economic
distress.
96.  Tribal Economic Development Bonds.—The
baseline tax system generally would tax all income under
the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or
sources of income. In contrast, the Tax Code was modified
in 2009 to allow Indian tribal governments to issue tax
exempt “tribal economic development bonds.” There is a
national bond limitation of $2 billion.
Education, Training, Employment,
and Social Services
97.  Scholarship and fellowship income.—
Scholarships and fellowships are excluded from taxable
income to the extent they pay for tuition and course-related expenses of the grantee. Similarly, tuition reductions
for employees of educational institutions and their families are not included in taxable income. From an economic
point of view, scholarships and fellowships are either gifts
not conditioned on the performance of services, or they
are rebates of educational costs. Thus, under the baseline
tax system of the reference law method, this exclusion is
not a tax expenditure because this method does not include either gifts or price reductions in a taxpayer’s gross
income. The exclusion, however, is considered a tax expenditure under the normal tax method, which includes
gift-like transfers of Government funds in gross income

268
(many scholarships are derived directly or indirectly from
Government funding).
98.  HOPE tax credit.—The baseline tax system
would not allow credits for particular activities, investments, or industries. Under current law, however, the
non-refundable HOPE tax credit allows a credit for 100
percent of an eligible student’s first $1,200 of tuition and
fees and 50 percent of the next $1,200 of tuition and fees.
The credit only covers tuition and fees paid during the
first two years of a student’s post-secondary education. In
2012, the credit is phased out ratably for taxpayers with
modified AGI between $104,000 and $124,000 if married
filing jointly ($52,000 and $62,000 for other taxpayers),
indexed.
99.  Lifetime Learning tax credit.—The baseline
tax system would not allow credits for particular activities, investments, or industries. Under current law, however, the non-refundable Lifetime Learning tax credit allows a credit for 20 percent of an eligible student’s tuition
and fees, up to a maximum credit per return of $2,000. In
2012, the credit is phased out ratably for taxpayers with
modified AGI between $104,000 and $124,000 if married
filing jointly ($52,000 and $62,000 for other taxpayers),
indexed. The credit applies to both undergraduate and
graduate students.
100.  American Opportunity Tax Credit.—The
baseline tax system would not allow credits for particular
activities, investments, or industries. Under current law
in 2012, however, the American Opportunity tax credit
allows a partially refundable credit of up to $2,500 per
eligible student for qualified tuition and related expenses
paid during each of the first four years of the student’s
post-secondary education. The credit is phased out for
taxpayers with modified adjusted gross income between
$80,000 and $90,000 ($160,000 and $180,000 for married
taxpayers filing a joint return). The credit expired at the
end of 2012, but was extended for five years under ATRA
(extension not shown in tables.)
101.  Education Individual Retirement Accounts
(IRA).—The baseline tax system generally would tax all
income under the regular tax rate schedule. It would not
allow preferentially low (or zero) tax rates to apply to certain types or sources of income. While contributions to
an education IRA are not tax-deductible under current
law, investment income earned by education IRAs is not
taxed when earned, and investment income from an education IRA is tax-exempt when withdrawn to pay for a
student’s education expenses. The maximum contribution
to an education IRA in 2012 is $2,000 per beneficiary. In
2012, the maximum contribution is phased down ratably
for taxpayers with modified AGI between $190,000 and
$220,000 if married filing jointly ($95,000 and $110,000
for other taxpayers).
102.  Student-loan interest.—The baseline tax system accepts current law’s general rule limiting taxpayers’
ability to deduct non-business interest expenses. In contrast, taxpayers may claim an above-the-line deduction
of up to $2,500 on interest paid on an education loan. In
general, interest may only be deducted for the first five
years in which interest payments are required, and the

Analytical Perspectives

maximum deduction is phased down ratably for taxpayers
with modified AGI between $60,000 and $75,000 if married filing jointly ($40,000 to $55,000 for other taxpayers),
indexed from 2001. However, for tax years beginning on
January 1, 2001 and before December 31, 2011, the first
five year requirement is suspended, and the phase down
range for the deduction is raised. In 2012, the maximum
deduction is phased down ratably for taxpayers with modified AGI between $125,000 and $155,000 if married filing
jointly ($60,000 and $75,000 for other taxpayers).
103.  Deduction for higher education expenses.—
The baseline tax system would not allow a deduction for
personal expenditures. In contrast, the Tax Code provides a maximum annual deduction of $4,000 in 2011 for
qualified higher education expenses for taxpayers with
adjusted gross income up to $130,000 on a joint return
($65,000 for other taxpayers). Taxpayers with adjusted
gross income up to $160,000 on a joint return ($80,000
for other taxpayers) may deduct up to $2,000. This provision expired on December 31, 2011. However, ATRA extended the provision through December 2013 (extension
not shown in the tables.)
104.  Qualified tuition programs.—The baseline
tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially
low (or zero) tax rates to apply to certain types or sources
of income. Some States have adopted prepaid tuition plans
prepaid room and board plans, and college savings plans,
which allow persons to pay in advance or save for college
expenses for designated beneficiaries. Under current law,
investment income, or the return on prepayments, is not
taxed when earned, and is tax-exempt when withdrawn
to pay for qualified expenses.
105.  Student-loan bonds.—The baseline tax system generally would tax all income under the regular
tax rate schedule. It would not allow preferentially low
(or zero) tax rates to apply to certain types or sources of
income. In contrast, interest earned on State and local
bonds issued to finance student loans is tax-exempt under
current law. The volume of all such private activity bonds
that each State may issue annually is limited.
106.  Bonds for private nonprofit educational institutions.—The baseline tax system generally would tax
all income under the regular tax rate schedule. It would
not allow preferentially low (or zero) tax rates to apply to
certain types or sources of income. In contrast, under current law interest earned on State and local Government
bonds issued to finance the construction of facilities used
by private nonprofit educational institutions is not taxed.
107.  Credit for holders of zone academy bonds.—
The baseline tax system would not allow credits for particular activities, investments, or industries. Under current
law, however, financial institutions that own zone academy bonds receive a non-refundable tax credit rather than
interest. The credit is included in gross income. Proceeds
from zone academy bonds may only be used to renovate,
but not construct, qualifying schools and for certain other
school purposes. Under current law, the total amount of
zone academy bonds that may be issued is limited to $1.4
billion in 2009 and 2010. As of March 2010, issuers of the

16. Tax Expenditures

unused authorization of such bonds could opt to receive
direct payment with the yield becoming fully taxable. An
additional $0.4 billion of these bonds with a tax credit was
authorized to be issued before January 1, 2011. However,
ATRA extended the provision through December 31, 2013
(extension not shown in the tables).
108.  U.S. savings bonds for education.—The
baseline tax system generally would tax all income under
the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types
or sources of income. Under current law, however, interest earned on U.S. savings bonds issued after December
31, 1989 is tax-exempt if the bonds are transferred to an
educational institution to pay for educational expenses.
The tax exemption is phased out for taxpayers with AGI
between $109,250 and $139,250 if married filing jointly
($72,850 and $87,850 for other taxpayers) in 2012.
109.  Dependent students age 19 or older.—Under
the baseline tax system, a personal exemption for the
taxpayer is allowed. However, additional exemptions for
targeted groups within a given filing status would not be
allowed. In contrast, the Tax Code allows taxpayers to
claim personal exemptions for dependent children who
are over the age of 18 and under the age of 24 and who
(1) reside with the taxpayer for over half the year (with
exceptions for temporary absences from home, such as for
school attendance), (2) are full-time students, and (3) do
not claim a personal exemption on their own tax returns.
110.  Charitable contributions to educational institutions.—The baseline tax system would not allow a
deduction for personal expenditures. In contrast, the Tax
Code provides taxpayers a deduction for contributions to
nonprofit educational institutions. Moreover, taxpayers
who donate capital assets to educational institutions can
deduct the asset’s current value without being taxed on
any appreciation in value. An individual’s total charitable
contribution generally may not exceed 50 percent of adjusted gross income; a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax
income.
111.  Employer-provided
educational
assistance.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits,
should be included in taxable income because they represent accretions to wealth that do not materially differ
from cash wages. Under current law, however, employerprovided educational assistance is excluded from an employee’s gross income even though the employer’s costs
for this assistance are a deductible business expense. The
maximum exclusion is $5,250 per taxpayer.
112.  Special deduction for teacher expenses.—
The baseline tax system would not allow a deduction for
personal expenditures. In contrast, under current law educators in both public and private elementary and secondary schools, who work at least 900 hours during a school
year as a teacher, instructor, counselor, principal or aide,
may subtract up to $250 of qualified expenses when figuring their adjusted gross income (AGI). This provision
expired on December 31, 2011. However, ATRA extended

269
the provision through December 31, 2013 (extension not
shown in the tables.)
113.  Discharge of student loan indebtedness.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. In contrast, the Tax Code allows certain professionals who perform in underserved
areas or specific fields, and as a consequence have their
student loans discharged, not to recognize such discharge
as income.
114.  Qualified school construction bonds.—The
baseline tax system would not allow credits for particular
activities, investments, or industries. Instead, it generally
would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code was modified in
2009 to provide a tax credit in lieu of interest to holders
of qualified school construction bonds. The national volume limit is $22.4 billion over 2009 and 2010. As of March
2010, issuers of such bonds could opt to receive direct payment with the yield becoming fully taxable.
115.  Work opportunity tax credit (WOTC).—The
baseline tax system would not allow credits for particular
activities, investments, or industries. Instead, it generally
would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code provides employers with a tax credit for qualified wages paid to individuals. The credit applies to employees who begin work on or
before December 31, 2011 and who are certified as members of various targeted groups. The amount of the credit
that can be claimed is 25 percent of qualified wages for
employment less than 400 hours and 40 percent for employment of 400 hours or more. Generally, the maximum
credit per employee is $2,400 and can only be claimed on
the first year of wages an individual earns from an employer. However, the credit for long-term welfare recipients can be claimed on second year wages as well and has
a $9,000 maximum. Employees must work at least 120
hours to be eligible for the credit. Employers must reduce
their deduction for wages paid by the amount of the credit
claimed. The credit was extended to certain recently discharged unemployed veterans through December 31, 2012
with a maximum credit of $9,600 for hiring eligible veterans. ATRA extended the provision through December 31,
2013 (extension not shown in the tables).
116.  Employer-provided child care exclusion.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. In contrast, under current
law up to $5,000 of employer-provided child care is excluded from an employee’s gross income even though the
employer’s costs for the child care are a deductible business expense.
117.  Employer-provided child care credit.—The
baseline tax system would not allow credits for particular activities, investments, or industries. Instead, current
law provides a credit equal to 25 percent of qualified expenses for employee child care and 10 percent of qualified expenses for child care resource and referral services.
Employer deductions for such expenses are reduced by

270
the amount of the credit. The maximum total credit is limited to $150,000 per taxable year.
118.  Assistance for adopted foster children.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. Taxpayers who adopt eligible
children from the public foster care system can receive
monthly payments for the children’s significant and varied needs and a reimbursement of up to $2,000 for nonrecurring adoption expenses; special needs adoptions receive the maximum benefit even if that amount not spent.
These payments are excluded from gross income under
current law.
119.  Adoption credit and exclusion.—The baseline tax system would not allow credits for particular
activities. Instead, taxpayers can receive a tax credit for
qualified adoption expenses under current law. The maximum credit is $12,650 per child for 2012, and is phasedout ratably for taxpayers with modified AGI between
$189,710 and $229,710. The credit amounts and the
phase-out thresholds are indexed for inflation. Taxpayers
may also exclude qualified adoption expenses provided or
reimbursed by an employer from income, subject to the
same maximum amounts and phase-out as the credit. The
same expenses cannot qualify for tax benefits under both
programs; however, a taxpayer may use the benefits of the
exclusion and the tax credit for different expenses.
120.  Employer-provided meals and lodging.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. In contrast, under current law
employer-provided meals and lodging are excluded from
an employee’s gross income even though the employer’s
costs for these items are a deductible business expense.
121.  Child credit.—The baseline tax system would
not allow credits for particular activities or targeted at
specific groups. Under current law, however, taxpayers
with children under age 17 can qualify for a $1,000 partially refundable per child credit. Any unclaimed credit
due to insufficient tax liability may be refundable – taxpayers may claim a refund for 15 percent of earnings in
excess of a $3,000 floor, up to the amount of unused credit.
Alternatively, taxpayers with three or more children may
claim a refund of the amount of payroll taxes paid in excess of EITC received (up to the amount of unused credit)
if this results in a larger refund. The credit is phased out
for taxpayers at the rate of $50 per $1,000 of modified AGI
above $110,000 ($75,000 for single or head of household
filers and $55,000 for married taxpayers filing separately). The maximum credit had been scheduled to decline to
$500 in 2013 under current law as of December 31 2012,
but ATRA made the $1,000 maximum credit permanent. 
However, the tables do not show the changes under ATRA.
122.  Child and dependent care expenses.—The
baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast,
the Tax Code provides parents who work or attend school
and who have child and dependent care expenses a tax
credit. In 2012, expenditures up to a maximum $3,000 for
one dependent and $6,000 for two or more dependents are

Analytical Perspectives

eligible for the credit. The credit is equal to 35 percent
of qualified expenditures for taxpayers with incomes of
$15,000. The credit is reduced to a minimum of 20 percent by one percentage point for each $2,000 of income in
excess of $15,000.
123.  Disabled access expenditure credit.—The
baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the
Tax Code provides small businesses (less than $1 million
in gross receipts or fewer than 31 full-time employees)
a 50-percent credit for expenditures in excess of $250 to
remove access barriers for disabled persons. The credit is
limited to $5,000.
124.  Charitable contributions, other than education and health.—The baseline tax system would not
allow a deduction for personal expenditures. In contrast,
the Tax Code provides taxpayers a deduction for contributions to charitable, religious, and certain other nonprofit
organizations. Taxpayers who donate capital assets to
charitable organizations can deduct the assets’ current
value without being taxed on any appreciation in value.
An individual’s total charitable contribution generally
may not exceed 50 percent of adjusted gross income; a
corporation’s total charitable contributions generally may
not exceed 10 percent of pre-tax income.
125.  Foster care payments.—The baseline tax system generally would tax all income under the regular tax
rate schedule. It would not allow preferentially low (or
zero) tax rates to apply to certain types or sources of income. Foster parents provide a home and care for children
who are wards of the State, under contract with the State.
However, compensation received for this service is excluded from the gross incomes of foster parents; the expenses
they incur are nondeductible.
126.  Parsonage allowances.—Under the baseline
tax system, all compensation, including dedicated payments and in-kind benefits, would be included in taxable
income. Dedicated payments and in-kind benefits represent accretions to wealth that do not differ materially
from cash wages. In contrast, the Tax Code allows an exclusion from a clergyman’s taxable income for the value of
the clergyman’s housing allowance or the rental value of
the clergyman’s parsonage.
127.  Provide an employee retention credit to employers affected by certain natural disasters. -- The
baseline tax system would not allow credits for particular
activities, investments, or industries. In contrast, the Tax
Code provides tax credits against the wages paid to eligible employees in selected areas affected by natural disasters such as hurricanes Katrina, Rita, Wilma, and Ike.
Health
128.  Employer-paid medical insurance and expenses.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits,
should be included in taxable income. In contrast, under
current law, employer-paid health insurance premiums
and other medical expenses (including long-term care)

16. Tax Expenditures

are deducted as a business expense by employers, but
they are not included in employee gross income.
129.  Self-employed medical insurance premiums.—Under the baseline tax system, all compensation
and remuneration, including dedicated payments and
in-kind benefits, should be included in taxable income.
In contrast, under current law self-employed taxpayers
may deduct their family health insurance premiums.
Taxpayers without self-employment income are not eligible for this special deduction. The deduction is not available for any month in which the self-employed individual
is eligible to participate in an employer-subsidized health
plan and the deduction may not exceed the self-employed
individual’s earned income from self-employment.
130.  Medical and health savings accounts.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. Also, the baseline tax system
would not allow a deduction for personal expenditures.
In contrast, individual contributions to Archer Medical
Savings Accounts (Archer MSAs) and Health Savings
Accounts (HSAs) are allowed as a deduction in determining adjusted gross income whether or not the individual
itemizes deductions. Employer contributions to Archer
MSAs and HSAs are excluded from income and employment taxes. Archer MSAs and HSAs require that the individual have coverage by a qualifying high deductible
health plan. Earnings from the accounts are excluded
from taxable income. Distributions from the accounts
used for medical expenses are not taxable. The rules for
HSAs are generally more flexible than for Archer MSAs
and the deductible contribution amounts are greater (in
2012, $3100 for taxpayers with individual coverage and
$6,250 for taxpayers with family coverage). Thus, HSAs
have largely replaced MSAs.
131.  Medical care expenses.—The baseline tax
system would not allow a deduction for personal expenditures. In contrast, under current law personal expenditures for medical care (including the costs of prescription
drugs) exceeding 7.5 percent of the taxpayer’s adjusted
gross income are deductible. For tax years beginning after 2012, only medical expenditures exceeding 10 percent
of the taxpayer’s adjusted gross income are deductible.
However, for the years 2013, 2014, 2015 and 2016, if either the taxpayer or the taxpayer’s spouse turns 65 before
the end of the taxable year, the threshold remains at 7.5
percent of adjusted income.
132.  Hospital construction bonds.—The baseline
tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially
low (or zero) tax rates to apply to certain types or sources
of income. In contrast, under current law interest earned
on State and local government debt issued to finance hospital construction is excluded from income subject to tax.
133.  Refundable Premium Assistance Tax
Credit.—The baseline tax system would not allow credits for particular activities or targeted at specific groups.
In contrast, for taxable years ending after 2013, the Tax
Code provides a premium assistance credit to any eligible
taxpayer for any qualified health insurance purchased

271
through a Health Insurance Exchange. In general, an
eligible taxpayer is a taxpayer with annual household
income between 100% and 400% of the federal poverty
level for a family of the taxpayer’s size and that does not
have access to affordable minimum essential health care
coverage. The amount of the credit equals the lesser of (i)
the actual premiums paid by the taxpayer for such coverage or (ii) the difference between the cost of a statutorilyidentified benchmark plan offered on the exchange and
a required payment by the taxpayer that increases with
income.
134.  Credit for employee health insurance expenses of small business.—The baseline tax system
would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides a tax credit to qualified small employers that make
a certain level of non-elective contributions towards the
purchase of certain health insurance coverage for its
employees. To receive a credit, an employer must have
fewer than 25 full-time-equivalent employees whose average annual full-time-equivalent wages from the employer are less than $50,000 (indexed for taxable years
after 2013). However, to receive a full credit, an employer
must have no more than 10 full-time employees, and the
average wage paid to these employees must be no more
than $25,000 (indexed for taxable years after 2013). A
qualifying employer may claim the credit for any taxable
year beginning in 2010, 2011, 2012, and 2013 and for up
to two years for insurance purchased through a Health
Insurance Exchange thereafter. For taxable beginning
in 2010, 2011, 2012, and 2013, the maximum credit is 35
percent of premiums paid by qualified taxable employers
and 25 percent of premiums paid by qualified tax-exempt
organizations. For taxable years beginning in 2014 and
later years, the maximum tax credit will increase to 50
percent of premiums paid by qualified taxable employers
and 35 percent of premiums paid by qualified tax-exempt
organizations.
135.  Charitable contributions to health institutions.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code
provides individuals and corporations a deduction for contributions to nonprofit health institutions. Tax expenditures resulting from the deductibility of contributions to
other charitable institutions are listed under the education, training, employment, and social services function.
136.  Orphan drugs.—The baseline tax system would
not allow credits for particular activities, investments, or
industries. In contrast, under current law drug firms can
claim a tax credit of 50 percent of the costs for clinical
testing required by the Food and Drug Administration for
drugs that treat rare physical conditions or rare diseases.
137.  Blue Cross and Blue Shield.—The baseline
tax system generally would tax all profits under the regular tax rate schedule. It would not allow preferentially
low tax rates to apply to certain types or sources of income.
In contrast, Blue Cross and Blue Shield health insurance
providers in existence on August 16, 1986 and certain
other nonprofit health insurers are provided exceptions
from otherwise applicable insurance company income tax

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Analytical Perspectives

accounting rules that substantially reduce their tax liabilities, provided that their percentage of total premium
revenue expended on reimbursement for clinical services
provided to enrollees is not less than 85 percent for the
taxable year.
138.  Tax credit for health insurance purchased
by certain displaced and retired individuals.—The
baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the
Trade Act of 2002 provides a refundable tax credit of 65
percent for the purchase of health insurance coverage by
individuals eligible for Trade Adjustment Assistance and
certain Pension Benefit Guarantee Corporation pension
recipients. The American Recovery and Reinvestment
Act and a subsequent extension increased the credit to 80
percent in coverage months preceding March 2011. The
Trade Adjustment Assistance Extension Act of 2011 extended an enhanced credit of 72.5% through December
2013, but eliminated the credit entirely beginning
January 1, 2014.
139.  Distributions for premiums for health and
long-term care insurance.—Under the baseline tax
system, all compensation, including dedicated and deferred payments, should be included in taxable income.
In contrast, the Tax Code provides for tax-free distributions of up to $3,000 from governmental retirement plans
for premiums for health and long term care premiums of
public safety officers.
Income Security
140.  Railroad retirement benefits.—Under the
baseline tax system, all compensation, including dedicated and deferred payments, should be included in taxable income. In contrast, railroad retirement benefits are
not generally subject to the income tax unless the recipient’s gross income reaches a certain threshold under current law. The threshold is discussed more fully under the
Social Security function.
141.  Workers’ compensation benefits.—Under the
baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included
in taxable income. However, workers compensation is not
subject to the income tax under current law.
142.  Public assistance benefits.—Under the reference law baseline tax system, gifts and transfers are
not treated as income to the recipients. In contrast, the
normal tax method considers cash transfers from the
Government as part of the recipients’ income, and thus,
treats the exclusion for public assistance benefits under
current law as a tax expenditure.
143.  Special benefits for disabled coal miners.—
Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be
included in taxable income. However, disability payments
to former coal miners out of the Black Lung Trust Fund,
although income to the recipient, are not subject to the
income tax.
144.  Military disability pensions.—Under the
baseline tax system, all compensation, including dedicat-

ed payments and in-kind benefits, should be included in
taxable income. In contrast, most of the military pension
income received by current disabled retired veterans is
excluded from their income subject to tax.
145.  Defined benefit employer plans.—Under the
baseline tax system, all compensation, including deferred
and dedicated payments, should be included in taxable
income. In contrast, under current law certain contributions to defined benefit pension plans are excluded from
an employee’s gross income even though employers can
deduct their contributions. In addition, the tax on the investment income earned by defined benefit pension plans
is deferred until the money is withdrawn.
146.  Defined contribution employer plans.—
Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included
in taxable income. In contrast, under current law individual taxpayers and employers can make tax-preferred contributions to employer-provided 401(k) and similar plans
(e.g. 403(b) plans and the Federal Government’s Thrift
Savings Plan). In 2012, an employee could exclude up to
$17,000 (indexed) of wages from AGI under a qualified
arrangement with an employer’s 401(k) plan. Employees
age 50 or over could exclude up to $22,500 in contributions (indexed). The defined contribution plan limit, including both employee and employer contributions, is
$50,000 in 2012 (indexed). The tax on contributions made
by both employees and employers and the investment income earned by these plans is deferred until withdrawn.
147.  Individual Retirement Accounts (IRAs).—
Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included
in taxable income. In contrast, under current law individual taxpayers can take advantage of traditional and Roth
IRAs to defer or otherwise reduce the tax on the return
to their retirement savings. The IRA contribution limit
is $5,000 in 2012 (indexed); taxpayers age 50 or over are
allowed to make additional “catch-up’’ contributions of
$1,000. Contributions to a traditional IRA are generally
deductible but the deduction is phased out for workers
with incomes above certain levels who, or whose spouses,
are active participants in an employer-provided retirement plan. Contributions and account earnings are includible in income when withdrawn from traditional IRAs.
Roth IRA contributions are not deductible, but earnings
and withdrawals are exempt from taxation. Income limits
also apply to Roth IRA contributions.
148.  Low and moderate-income savers’ credit.—
The baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides an additional incentive for
lower-income taxpayers to save through a nonrefundable
credit of up to 50 percent on IRA and other retirement
contributions of up to $2,000. This credit is in addition
to any deduction or exclusion. The credit is completely
phased out by $57,500 for joint filers, $43,125 for head of
household filers, and $28,750 for other filers in 2012.
149.  Self-Employed plans.—Under the baseline
tax system, all compensation, including deferred and dedicated payments, should be included in taxable income.

16. Tax Expenditures

In contrast, under current law self-employed individuals
can make deductible contributions to their own retirement plans equal to 25 percent of their income, up to a
maximum of $50,000 in 2012. Total plan contributions
are limited to 25 percent of a firm’s total wages. The tax
on the investment income earned by self-employed SEP,
SIMPLE, and qualified plans is deferred until withdrawn.
150.  Employer-provided life insurance benefits.—Under the baseline tax system, all compensation,
including deferred and dedicated payments, should be included in taxable income. In contrast, under current law
employer-provided life insurance benefits are excluded
from an employee’s gross income even though the employer’s costs for the insurance are a deductible business
expense, but only to the extent that the employer’s share
of the total costs does not exceed the cost of $50,000 of
such insurance.
151.  Employer-provided accident and disability
benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits,
should be included in taxable income. In contrast, and under current law, employer-provided accident and disability benefits are excluded from an employee’s gross income
even though the employer’s costs for the benefits are a
deductible business expense.
152.  Employer-provided supplementary unemployment benefits.—Under the baseline tax system, all
compensation, including dedicated payments and in-kind
benefits, should be included in taxable income. Employers
may establish trusts to pay supplemental unemployment benefits to employees separated from employment.
Investment income earned by such trusts is exempt from
taxation.
153.  Employer Stock Ownership Plan (ESOP)
provisions.—ESOPs are a special type of tax-exempt
employee benefit plan. Under the baseline tax system,
all compensation, including dedicated payments and inkind benefits, should be included in taxable income. In
contrast, employer-paid contributions (the value of stock
issued to the ESOP) are deductible by the employer as
part of employee compensation costs. They are not included in the employees’ gross income for tax purposes,
however, until they are paid out as benefits. In addition,
the following special income tax provisions for ESOPs are
intended to increase ownership of corporations by their
employees: (1) annual employer contributions are subject
to less restrictive limitations than other qualified retirement plans; (2) ESOPs may borrow to purchase employer
stock, guaranteed by their agreement with the employer
that the debt will be serviced by his payment (deductible
by him) of a portion of wages (excludable by the employees) to service the loan; (3) employees who sell appreciated company stock to the ESOP may defer any taxes due
until they withdraw benefits; and (4) dividends paid to
ESOP-held stock are deductible by the employer.
154.  Additional deduction for the blind.—Under
the baseline tax system, the standard deduction is allowed. An additional standard deductions for targeted

273
groups within a given filing status would not be allowed.
In contrast, the Tax Code allows taxpayers who are blind
to claim an additional $1,450 standard deduction if single, or $1,150 if married in 2012.
155.  Additional deduction for the elderly.—
Under the baseline tax system, the standard deduction is
allowed. An additional standard deductions for targeted
groups within a given filing status would not be allowed.
In contrast, the Tax Code allows taxpayers who are 65
years or older to claim an additional $1,450 standard deduction if single, or $1,150 if married in 2012.
156.  Tax credit for the elderly and disabled.—
Under the baseline tax system, a credit targeted at a specific group within a given filing status or for particular
activities would not be allowed. In contrast, the Tax Code
allows taxpayers who are 65 years of age or older, or who
are permanently disabled, to claim a tax credit equal to 15
percent of the sum of their earned and retirement income.
The amount to which the 15 percent rate is applied is limited to no more than $5,000 for single individuals or married couples filing a joint return where only one spouse is
65 years of age or older and disabled, and up to $7,500 for
joint returns where both spouses are 65 years of age or
older and disabled. These limits are reduced by one-half
of the taxpayer’s adjusted gross income over $7,500 for
single individuals and $10,000 for married couples filing
a joint return.
157.  Casualty losses.—Under the baseline tax system, neither the purchase of property nor insurance premiums to protect its value are deductible as costs of earning income. Therefore, reimbursement for insured loss of
such property is not included as a part of gross income,
and uninsured losses are not deductible. In contrast, the
Tax Code provides a deduction for uninsured casualty and
theft losses of more than $100 each, to the extent that
total losses during the year exceed 10 percent of the taxpayer’s adjusted gross income.
158.  Earned income tax credit (EITC).—The
baseline tax system would not allow credits for particular
activities or targeted at specific groups. In contrast, the
Tax Code provides an EITC to low-income workers at a
maximum rate of 45 percent of income. For a family with
one qualifying child, the credit is 34 percent of the first
$9,320 of earned income in 2012. The credit is 40 percent
of the first $13,090 of income for a family with two qualifying children, and it is 45 percent of the first $13,090 of
income for a family with three or more qualifying children. Low-income workers with no qualifying children
are eligible for a 7.65 percent credit on the first $6,210 of
earned income. The credit is phased out at income levels and rates which depend upon how many qualifying
children are eligible and marital status. Earned income
tax credits in excess of tax liabilities owed through the
individual income tax system are refundable to individuals. After 2012, the additional benefit for families with
three or more children was to be eliminated. However,
ATRA permanently extended this provision (extension
not shown in the tables).

274

Analytical Perspectives

Social Security

do not materially differ from cash wages. Under current
law, however, pension payments made by the Veterans
159.  Social Security benefits for retired work- Administration are excluded from gross income.
ers.—Under the baseline tax system, all compensation,
164.  G.I. Bill benefits.—Under the baseline tax sysincluding dedicated payments and in-kind benefits, would tem, all compensation, including dedicated payments and
be included in taxable income because they represent ac- in-kind benefits, should be included in taxable income becretions to wealth that do not materially differ from cash cause they represent accretions to wealth that do not mawages. Thus, the portion of Social Security benefits that terially differ from cash wages. Under current law, howevis attributable to employer contributions and earnings on er, G.I. Bill benefits paid by the Veterans Administration
employer and employee contributions (and not attribut- are excluded from gross income.
able to employee contributions) would be subject to tax. 
165.  Tax-exempt mortgage bonds for veterans.—
In contrast, the Tax Code may not tax all of the Social The baseline tax system generally would tax all income
Security benefits that exceed the beneficiary’s contribu- under the regular tax rate schedule. It would not allow
tions from previously taxed income. Actuarially, previous- preferentially low (or zero) tax rates to apply to certain
ly taxed contributions generally do not exceed 15 percent types or sources of income. In contrast, under current
of benefits, even for retirees receiving the highest levels law, interest earned on general obligation bonds issued by
of benefits. Up to 85 percent of recipients’ Social Security State and local governments to finance housing for veterand tier 1 railroad retirement benefits are included in ans is excluded from taxable income.
(phased into) the income tax base if the recipient’s provisional income exceeds certain base amounts. (Provisional
General Government
income is equal to other items included in adjusted gross
income plus foreign or U.S. possession income, tax-exempt
166.  Public purpose State and local bonds.—The
interest, and one half of Social Security and tier 1 railroad baseline tax system generally would tax all income under the
retirement benefits.) The untaxed portion of the benefits regular tax rate schedule. It would not allow preferentially
received by taxpayers who are below the income amounts low (or zero) tax rates to apply to certain types or sources of
at which 85 percent of the benefits are taxable is counted income. In contrast, under current law interest earned on
as a tax expenditure.
State and local government bonds issued to finance public160.  Social Security benefits for the disabled.— purpose construction (e.g., schools, roads, sewers), equipUnder the baseline tax system, all compensation, including ment acquisition, and other public purposes is tax-exempt.
dedicated payments and in-kind benefits, should be includ- Interest on bonds issued by Indian tribal governments for
ed in taxable income because they represent accretions to essential governmental purposes is also tax-exempt.
wealth that do not materially differ from cash wages. Under
167.  Build America Bonds—The baseline tax syscurrent law, however, benefit payments from the Social tem would not allow credits for particular activities or
Security Trust Fund for disability are fully or partially ex- targeted at specific group. In contrast, the Tax Code in
cluded from a beneficiary’s gross incomes. (See provision 2009 allowed State and local governments to issue taxnumber 161, Social Security benefits for retired workers.)
able bonds through 2010 and receive a direct payment
161.  Social Security benefits for dependents and from Treasury equal to 35 percent of interest expenses.
survivors.—Under the baseline tax system, all compen- Alternatively, State and local governments may issue taxsation, including dedicated payments and in-kind ben- able bonds and the private lenders receive the 35 percent
efits, should be included in taxable income because they credit which is included in taxable income.
represent accretions to wealth that do not materially dif168.  Deductibility of certain nonbusiness State
fer from cash wages. Under current law, however, benefit and local taxes.—Under the baseline tax system, a depayments from the Social Security Trust Fund for depen- duction for personal consumption expenditures would not
dents and survivors are fully or partially excluded from a be allowed. In contrast, the Tax Code allows taxpayers
beneficiary’s gross income.
who itemize their deductions to claim a deduction for
State and local income taxes (or, at the taxpayer’s election, state and local sales taxes) and property taxes, even
Veterans Benefits and Services
though these taxes primarily pay for services that, if pur162.  Veterans death benefits and disability com- chased directly by taxpayers, would not be deductible.
pensation.—Under the baseline tax system, all compen- ATRA extended the provision through December 31, 2013
sation, including dedicated payments and in-kind ben- (extension not shown in the tables.)
efits, should be included in taxable income because they
represent accretions to wealth that do not materially difInterest
fer from cash wages. In contrast, all compensation due to
death or disability paid by the Veterans Administration is
169.  U.S. savings bonds.—The baseline tax system
excluded from taxable income under current law.
would uniformly tax all returns to investments and not
163.  Veterans pension payments.—Under the base- allow an exemption or deferral for particular activities,
line tax system, all compensation, including dedicated pay- investments, or industries. In contrast, taxpayers may dements and in-kind benefits, should be included in taxable fer paying tax on interest earned on U.S. savings bonds
income because they represent accretions to wealth that until the bonds are redeemed.

275

16. Tax Expenditures

APPENDIX
Performance Measures and the Economic
Effects of Tax Expenditures
The Government Performance and Results Act of 1993
(GPRA) directs Federal agencies to develop annual and
strategic plans for their programs and activities. These
plans set out performance objectives to be achieved over a
specific time period. Most of these objectives are achieved
through direct expenditure programs. Tax expenditures –
spending programs implemented through the tax code by
reducing tax obligations for certain activities -- contribute
to achieving these goals in a manner similar to direct expenditure programs.
Tax expenditures by definition work through the tax
system and, particularly, the income tax. Thus, they may
be relatively advantageous policy approaches when the
benefit or incentive is related to income and is intended to
be widely available.4 Because there is an existing public
administrative and private compliance structure for the
tax system, income based programs that require little
oversight might be efficiently run through the tax system.
In addition, some tax expenditures actually simplify the
operation of the tax system (for example, the exclusion
for up to $500,000 of capital gains on home sales). Tax
expenditures also implicitly subsidize certain activities
in a manner similar to direct expenditures. For example,
exempting employer-sponsored health insurance from
income taxation is equivalent to a direct spending subsidy equal to the forgone tax obligations for this type of
compensation. Spending, regulatory or tax-disincentive
policies can also modify behavior, but may have different economic effects. Finally, a variety of tax expenditure
tools can be used, e.g., deductions; credits; exemptions;
deferrals; floors; ceilings; phase-ins; phase-outs; and these
can be dependent on income, expenses, or demographic
characteristics (age, number of family members, etc.).
This wide range of policy instruments means that tax
expenditures can be flexible and can have very different
economic effects.
Tax expenditures also have limitations. In many cases
they add to the complexity of the tax system, which raises
both administrative and compliance costs. For example,
personal exemptions, deductions, credits, and phase-outs
can complicate filing and decision-making. The income
tax system may have little or no contact with persons who
have no or very low incomes, and does not require information on certain characteristics of individuals used in
some spending programs, such as wealth or duration of
employment. These features may reduce the effectiveness
of tax expenditures for addressing socioeconomic disparities. Tax expenditures also generally do not enable the
4  Although this chapter focuses upon tax expenditures under the income tax, tax expenditures also arise under the unified transfer, payroll,
and excise tax systems. Such provisions can be useful when they relate
to the base of those taxes, such as excise tax exemption for certain types
of consumption deemed meritorious.

same degree of agency discretion as an outlay program.
For example, grant or direct Federal service delivery programs can prioritize activities to be addressed with specific resources in a way that is difficult to emulate with
tax expenditures.
Outlay programs have advantages where the direct
provision of government services is particularly warranted, such as equipping and maintaining the armed forces
or administering the system of justice. Outlay programs
may also be specifically designed to meet the needs of
low-income families who would not otherwise be subject
to income taxes or need to file a tax return. Outlay programs may also receive more year-to-year oversight and
fine tuning through the legislative and executive budget
process. In addition, many different types of spending
programs include direct Government provision; credit
programs; and payments to State and local governments,
the private sector, or individuals in the form of grants or
contracts provide flexibility for policy design. On the other
hand, certain outlay programs may rely less directly on
economic incentives and private-market provision than
tax incentives, thereby reducing the relative efficiency
of spending programs for some goals. Finally, spending
programs, particularly on the discretionary side, may respond less rapidly to changing activity levels and economic conditions than tax expenditures.
Regulations may have more direct and immediate effects than outlay and tax-expenditure programs because
regulations apply directly and immediately to the regulated party (i.e., the intended actor), generally in the
private sector. Regulations can also be fine-tuned more
quickly than tax expenditures because they can often
be changed as needed by the Executive Branch without
legislation. Like tax expenditures, regulations often rely
largely on voluntary compliance, rather than detailed inspections and policing. As such, the public administrative
costs tend to be modest relative to the private resource
costs associated with modifying activities. Historically,
regulations have tended to rely on proscriptive measures,
as opposed to economic incentives. This reliance can diminish their economic efficiency, although this feature
can also promote full compliance where (as in certain
safety-related cases) policymakers believe that trade-offs
with economic considerations are not of paramount importance. Also, regulations generally do not directly affect
Federal outlays or receipts. Thus, like tax expenditures,
they may escape the degree of scrutiny that outlay programs receive. Some policy objectives are achieved using
multiple approaches. For example, minimum wage legislation, the earned income tax credit, and the food stamp
program (SNAP) are regulatory, tax expenditure, and direct outlay programs, respectively, all having the objective
of improving the economic welfare of low-wage workers
and families.

276

Analytical Perspectives

A Framework for Evaluating the
Effectiveness of Tax Expenditures
Across all major budgetary categories – from housing
and health to space, technology, agriculture, and national
defense tax expenditures make up a significant portion of
Federal activity and affect every area of the economy. For
these reasons, a comprehensive evaluation framework
that examines incentives, direct results, and spillover effects will benefit the budgetary process by informing decisions on tax expenditure policy.
As described above, tax expenditures, like spending
and regulatory programs, have a variety of objectives and
economic effects. These include: encouraging certain types
of activities (e.g., saving for retirement or investing in certain sectors); increasing certain types of after-tax income
(e.g., favorable tax treatment of Social Security income);
and reducing private compliance costs and Government
administrative costs (e.g., the exclusion for up to $500,000
of capital gains on home sales). Some of these objectives
are well suited to quantitative measurement and evaluation, while others are less well suited.
Performance measurement is generally concerned with
inputs, outputs, and outcomes. In the case of tax expenditures, the principal input is usually the revenue effect.
Outputs are quantitative or qualitative measures of goods
and services, or changes in income and investment, directly produced by these inputs. Outcomes, in turn, represent the changes in the economy, society, or environment
that are the ultimate goals of programs. Evaluations assess whether programs are meeting intended goals, but
may also encompass analyzing whether initiatives are
superior to other policy alternatives.
The Administration is working towards examining the
objectives and effects of the wide range of tax expenditures in our budget, despite challenges related to data
availability, measurement, and analysis. Evaluations
include an assessment of whether tax expenditures are
achieving intended policy results in an efficient manner,
with minimal burdens on individual taxpayers, consumers, and firms; and an examination of possible unintended
effects and their consequences.
As an illustration of how evaluations can inform budgetary decisions, consider education and research and investment credits.
Education. There are millions of individuals taking
advantage of tax credits designed to help pay for educational expenses. There are a number of different credits
available as well as other important forms of Federal support for higher education such as subsidized loans and
grants. An evaluation would explore the possible relationships between use of the credits and the use of loans
and grants, seeking to answer, for examples, whether the
use of credits reduce or increase the likelihood of the students applying for loans. Such an evaluation would allow
stakeholders to determine the most effective program –
whether it is a tax credit, a subsidized loan, or a grant.
Investment. A series of tax expenditures reduce the
cost of investment, both in specific activities such as research and experimentation, extractive industries, and

certain financial activities and more generally throughout
the economy, through accelerated depreciation for plant
and equipment. These provisions can be evaluated along
a number of dimensions. For example, it is useful to consider the strength of the incentives by measuring their effects on the cost of capital (the return which investments
must yield to cover their costs) and effective tax rates. The
impact of these provisions on the amounts of corresponding forms of investment (e.g., research spending, exploration activity, equipment) might also be estimated. In some
cases, such as research, there is evidence that the investment can provide significant positive externalities—that
is, economic benefits that are not reflected in the market
transactions between private parties. It could be useful
to quantify these externalities and compare them with
the size of tax expenditures. Measures could also indicate
the effects on production from these investments such
as numbers or values of patents, energy production and
reserves, and industrial production. Issues to be considered include the extent to which the preferences increase
production (as opposed to benefiting existing output) and
their cost-effectiveness relative to other policies. Analysis
could also consider objectives that are more difficult to
measure but still are ultimate goals, such as promoting
the Nation’s technological base, energy security, environmental quality, or economic growth. Such an assessment
is likely to involve tax analysis as well as consideration of
non-tax matters such as market structure, scientific, and
other information (such as the effects of increased domestic fuel production on imports from various regions, or the
effects of various energy sources on the environment).
The tax proposals subject to these analyses include
items that indirectly affect the estimated value of tax
expenditures (such as changes in income tax rates), proposals that make reforms to improve tax compliance and
administration, as well as proposals which would change,
add, or delete tax expenditures.
Barriers to Evaluation. Developing a framework that
is sufficiently comprehensive, accurate, and flexible is a
significant challenge. Evaluations are constrained by the
availability of appropriate data and challenges in economic modeling:
1.	 Data availability. Data may not exist, or may not exist in an analytically appropriate form, to conduct
rigorous evaluations of certain types of expenditures.
For example, measuring the effects of tax expenditures designed to achieve tax neutrality for individuals and firms earning income abroad, and foreign
firms could require data from foreign governments
or firms which are not readily available.
2.	 Analytical constraints. Evaluations of tax expenditures face analytical constraints even when data
are available. For example, individuals might have
access to several tax expenditures and programs
aimed at improving the same outcome. Isolating the
effect of a single tax credit is challenging absent a
well-specified research design.

16. Tax Expenditures

3.	 Resources. Tax expenditure analyses are seriously
constrained by staffing considerations. Evaluations
typically require expert analysts who are often engaged in other more competing areas of work related
to the budget.
The Executive Branch is focused on addressing these
challenges in order to lay the foundation for the analysis
of tax expenditures comprehensively, alongside evaluations of the effectiveness of direct spending initiatives.
Current Administration Proposals
on Tax Expenditures
The Administration considers performance measurement, evaluations, and the economic effects of tax expenditures each year in its deliberation for the Budget and
proposals are informed by these analyses. The President’s
National Commission on Fiscal Responsibility and Reform
submitted a report in 2010 in which they said that the income tax system is unduly complicated and that the government should “sharply reduce rates, broaden the base,
simplify the tax code, and reduce the many ‘tax expenditures’ —another name for spending through the tax code.”
The current Budget and enacted Administration policies include several proposals that would change existing
tax expenditures to raise revenue, eliminate ineffective
or counterproductive tax expenditures, and enhance effective tax expenditures. The tax expenditure proposals in
the budget further the Administration’s goals of economic
recovery and growth, clean and secure energy, a worldclass education for all Americans, and fairness in the tax
code. Some of these proposals are highlighted below.
Reduce the value of certain tax expenditures. The
Administration proposes to limit the tax rate at which
upper-income taxpayers can use itemized deductions and
other tax preferences to reduce tax liability to a maximum
of 28 percent.  This limitation would affect only married
taxpayers filing a joint return with income adjusted for
these tax preferences of over $250,000 (at 2014 levels)
and single taxpayers with income over $200,000 (at 2014
levels).  The limit would apply to all itemized deductions,
tax-exempt interest, employer-sponsored health insurance, deductions and income exclusions for employee retirement contributions, and certain above-the-line deduc-

277
tions, effective for taxable years beginning after December
31, 2013. These are among the largest tax expenditures.
This proposal would make the tax code more equitable
because the value of the tax expenditure as a percentage
of the deduction is proportional to one’s tax bracket, so it
is less valuable to those in lower brackets.
Reduce preferences for oil, gas, and coal. Current law
provides a number of credits and deductions that are targeted towards certain oil, gas, and coal activities. These
tax preferences run counter to our policies for reducing greenhouse gas emissions. In accordance with the
President’s agreement at the G–20 summit in 2009 to
phase out subsidies for fossil fuels so that we can transition to a 21st century energy economy, the Administration
proposes to repeal a number of tax preferences available
for fossil fuels.
Enhance and make permanent the Research and
Experimentation (R&E) credit. The extension of this credit every year creates uncertainty reducing firms’ incentive
to expand their research activities. For this reason, and
more generally to achieve the President’s R&D goals, the
Budget proposes making the R&E credit permanent.
Make permanent the American Opportunity Tax Credit
(AOTC), the expansion of the EITC for larger families,
EITC marriage penalty relief, and the refundability of the
child tax credit. These provisions were extended through
2017 in ATRA and the Budget assumes in its baseline
that these provisions would be permanently extended.
Although permanent extension would increase the cost of
these tax expenditures, it would increase the equity of the
overall tax system and provide benefits to low and middle
income families.
Allow a range of tax expenditures to expire. The
Tax
Reconciliation,
Unemployment
Insurance
Reauthorization, the Job Creation Act of 2010, and ATRA,
have extended many provisions of the tax code, including many provisions identified as tax expenditures in this
chapter. However, a number of provisions identified as tax
expenditures have been allowed to expire. For instance,
the Making Work Pay Credit, the sales tax deduction for
new cars and trucks, the above-the-line deduction for
property taxes up to $500 for taxpayers who to not itemize, and the exemption from taxes for the first $2,400 of
unemployment benefits were allowed to expire.

Special Topics

279

17. Aid to State and Local Governments

State and local governments serve a vital role in providing services to their residents. The Federal Government
contributes to that role by aiding State and local governments through grants, loans, and the tax system. This
chapter focuses on Federal grants-in-aid in the FY 2014
Budget and provides information on historical grant spending. Information on Federal credit programs may be found
in Chapter 22, “Credit and Insurance,” in this volume.
Chapter 16, “Tax Expenditures,” in this volume, includes a
display of tax expenditures that particularly aid State and
local governments at the end of Tables 16-1 and 16-2.
Federal grants-in-aid are assistance provided to State
and local governments, U.S. territories, and American
Indian Tribal governments to support government operations or provision of services to the public. Most often
grants are awarded as direct cash assistance, but Federal
grants-in-aid can also include payments for grants-inkind—non-monetary aid such as commodities purchased
for the National School Lunch Program. Federal revenues shared with State and local governments are also
considered grants-in-aid.
Federal grants generally fall into one of two broad categories—categorical grants or block grants—depending on the
requirements of the grant program. In addition, grants may
be characterized by how the funding is awarded such as by
formula, by project, or by matching State and local funds.
Categorical grants have a narrowly defined purpose
and may be awarded on a formula basis or as a project
grant. An example of a categorical grant is the Special
Supplemental Nutrition Program for Women, Infants,
and Children, also known as WIC, administered by the
Department of Agriculture. The program targets the nutrition needs of lower-income pregnant and postpartum
women, infants, and children. Applicants to this program
must meet defined categorical, residential, income, and
nutrition risk eligibility requirements.

In contrast to categorical grants, block grants provide
the recipient with more latitude to define the use of the
funding and are awarded on a formula basis specified in
law. The Department of Health and Human Services’
Temporary Assistance for Needy Families (TANF) program is an example of a block grant. States may use
TANF funds in a variety of ways to meet any of four purposes set out in law. Each State also has broad discretion
to determine eligibility requirements for TANF benefits.
In addition, TANF has a matching requirement known
as “maintenance of effort” which specifies a minimum
amount that States must spend to assist low-income families in order to receive the full Federal grant.
Project grants can be awarded competitively and are
typified by a specified end product or duration. They can
include grants for research, training, evaluation, planning,
technical assistance, survey work, and construction. The
Government Accountability Office describes categorical
and project grants as striking “a different balance between
the interests of the [F]ederal grant-making agency that
funds be used efficiently and effectively to meet [N]ational objectives, and the interests of the recipient to use the
funds to meet local priorities and to minimize the administrative burdens associated with accepting the grant.” 1
As recipients of Federal grant funding, State and local
governments may provide services directly to beneficiaries or States may act as a pass-through, disbursing grant
funding to localities using a formula or a competitive process. This pass-through structure allows States to set priorities and determine the allocation methodology within
the rules of the Federal grant guidance. 2
1  United States Government Accountability Office. “Grants to State
and Local Governments, An Overview of Federal Funding Levels and
Selected Challenges.” September 2012.
2  Keegan, Natalie. “Federal Grants-in-Aid Administration: A Primer.”
Congressional Research Service. October 3, 2012.

STATE AND LOCAL FISCAL OUTLOOK
States experienced the effects of the deep recession in
2008 and 2009 to varying degrees, but all States had to
cope with a sharp drop in revenues and a higher demand
for services. The Federal Government used the existing
grants structure to provide swift fiscal relief to States
during the 2008 and 2009 recession when States faced severe and unforeseen economic conditions. It primarily did
so through the American Recovery and Reinvestment Act
(Recovery Act), Public Law 111-5, enacted in February
2009. The Recovery Act provided enhanced grant funding in the areas of income security, education, transportation, energy, and water, and for Medicaid and other
programs. In addition, for many programs, the Recovery
Act required increased oversight and reporting for recipi-

ents and grant-making agencies. Most of the temporary
provisions in the Recovery Act expired in 2010, but some
Recovery Act programs were extended in subsequent legislation because economic growth remained slow.
The impact of and recovery from the recession has been
uneven across States; broadly speaking, economic conditions at the State level, as evidenced by State fiscal year
2013 3, show signs of improvement over 2012. According
3  According to the Fall 2012 edition of The Fiscal Survey of States,
published by the National Governors Association and the National Association of State Budget Officers, “forty-six states begin their fiscal
years in July and end them in June. The exceptions are Alabama and
Michigan, with October to September fiscal years; New York, with an
April to March fiscal year; and Texas, with a September to August fiscal
year” (page vi).

281

282
to the Fall 2012 Fiscal Survey of States (FSS), published
by the National Governors Association and the National
Association of State Budget Officers, for the first time
since the recession general fund revenues are expected to
be higher than in 2008 and State general fund4 spending
overall is expected to be 2.2 percent higher than in 2012.
In addition, more than half of States increased spending
for K-12 education and Medicaid in State fiscal year 2013
budgets. However, the FSS also reports that 24 States
enacted a 2013 budget with general fund spending still
lower than 2008. By State fiscal year 2013, general fund
revenues, which are comprised primarily of sales, personal income, and corporate income taxes, are expected to be
$12.5 billion greater than in 2008. The FSS survey found
that States are also beginning to build up reserves or
rainy day funds, which is another sign of financial health.
In State fiscal year 2013, reserves are expected to be a
combined $61.3 billion or 9 percent of general fund expenditures, although almost half of this will be held by two
States: Texas and Alaska. High unemployment has also
put a strain on States’ budgets. The National unemployment rate peaked at the end of 2009 and remained high
throughout 2010 but it has since been declining. As of
January 2013, individual States had unemployment rates
ranging from 9.8 percent in both California and Rhode
Island to 3.3 percent in North Dakota. Over the past
12 months, the unemployment rate fell in 40 States and
the District of Columbia, remained unchanged in three
States, and rose in seven States.
Fiscal conditions at the city level are not as encouraging. According to the National League of Cities, general fund revenues are projected to decline again in city
fiscal year 2012 for the sixth straight year and general
5
fund expenditures are expected to grow only slightly. 
Variability in tax revenue collections is seen among cities because of differences in local tax structures and re4 

“General fund spending represents the primary component of discretionary expenditures of revenue derived from general sources which
have not been earmarked for specific items.” “Fiscal Survey of States.”
The National Governors Association and the National Association of
State Budget Officers. Fall 2012. p. 1.
5  Hoene, Christopher W., McFarland, Christina, and Pagano, Michael.
“City Fiscal Conditions in 2012.” National League of Cities. September
2012.

Analytical Perspectives

liance. However, the vast majority of cities rely heavily
on revenue from property tax collections and have been
greatly affected by the steep decline in housing prices. 6
Property tax revenues in 2011 dropped by 3.9 percent
compared to 2010 and are projected to decline another
7
2.1 percent in 2012.  Local governments also rely on
grants from States to fund services. According to the
Bureau of Economic Analysis, grants by States to local
governments increased from between 3.1 percent to 6.3
percent in each year between 2003 and 2008. However,
in 2009, grants from States essentially remained flat and
in 2010 decreased by 0.6 percent. In 2011, grants from
8
States increased by 1.6 percent.  The Fiscal Survey of
FSS found more States included increases in funding to
local governments in their 2013 budgets than in the past
several years. 9
Federal grant spending increased greatly in 2009 and
2010 in response to the recession, as mentioned above,
then decreased from those levels in 2011 and 2012 as
the bulk of funds from the Recovery Act and its extensions were spent out. Outlays from Federal grants-inaid increased by $76.7 billion in 2009 to total $538.0
billion, and increased by another $70.4 billion in 2010
to total $608.4 billion. In 2011, outlays from Federal
grants-in-aid decreased by $1.6 billion and decreased
again in 2012 to $544.6 billion. 10 As a percentage of total Federal outlays, aid to State and local governments
was 15.5 percent in 2008, 17.6 percent in 2010, and 15.7
percent in 2012. However, a better measure of the size
of these expenditures may be as a percentage of GDP.
In 2008, Federal grants to State and local governments
were equivalent to 3.2 percent of GDP, compared to 4.2
percent in 2010, and 3.5 in 2012. 11
6  Ibid.

p. 3.

7  Ibid.
8  U.S. Department of Commerce, Bureau of Economic Analysis (BEA),
National Income and Product Accounts, Table 3.20, State Government
Current Receipts and Expenditures. BEA reports annual data on a calendar year basis. Calendar year 2011 is the most recent year for which
annual data are available.
9  “The Fiscal Survey of States.” The National Governors Association
and the National Association of State Budget Officers. Fall 2012. p. 59.
10  See Table 12.2 in the Historical Tables volume of the Budget.
11  See Table 12.1 in the Historical Tables volume of the Budget

283

17.  Aid to State and Local Governments

HIGHLIGHTS OF FEDERAL AID TO STATES AND LOCALITIES
The Budget provides $643.3 billion in outlays for aid to
State and local governments in 2014, an increase of $98.7
billion from 2012. The distribution of grant spending in
2014 among functions remains similar to 2012. As shown
in Table 17-1, 50.3 percent of this aid is for health programs, with most of the funding going to Medicaid, a program which makes health insurance accessible for low-income Americans. Beyond health programs, 16.8 percent
of Federal aid will go to income security programs; 15.0
percent to education, training, and social services; 11.1
percent to transportation; 3.3 percent to community and
regional development; and 1.0 percent each to justice and
to natural resources and environment.
Highlights of proposals and changes in the Budget are
presented below by functional category. Each section begins with the overall spending level for that category followed by a discussion of significant proposals or changes
to programs in that category. The funding level for every
Federal grant program can be found in Table 17-1, in this
section, organized by functional category and by Federal
agency. The next section, Historical Perspectives, presents a history of Federal grants-in-aid and includes Table
17-2, which illustrates trends over time. An Appendix to
this chapter includes tables of State-by-State obligations
of major grant programs.
Natural Resources and Environment
Grant outlays for natural resources and environment
programs are estimated to be $6.5 billion in 2014.
The Budget strengthens resource management on nonFederal lands by incorporating better data on grantee
accomplishments and natural resource outcomes to help
guide future Federal investment in State forestry grants.
This approach by the U.S. Forest Service advances the
recent shift toward cross-program and competitive-based
grant allocations already underway by institutionalizing
better data collection and rewarding innovative projects
that increase natural resource outcomes, including benefits to water quality from improved forest stewardship
and innovative uses of urban forestry in emerging green
infrastructure approaches.
The Budget proposes $383 million, a $119 million increase above the 2012 enacted level, for competitive research grants made through the Agriculture and Food
Research Initiative (AFRI). AFRI grants address key
problems of National, regional, and multi-State importance in sustaining all components of agriculture, including farm efficiency and profitability, ranching, renewable
energy, forestry (both urban and agroforestry), aquaculture, rural communities and entrepreneurship, human
nutrition, food safety, biotechnology, and conventional
breeding.
The America’s Great Outdoors (AGO) initiative supports Federal, State, local, and tribal conservation efforts,
while reconnecting Americans, particularly young people,
to the outdoors. Investments for AGO programs support
conservation and outdoor recreation activities nationwide
that create millions of jobs, generate hundreds of mil-

lions of dollars in tax revenue, and spur billions in total
national economic activity. For the first time ever, the
Budget proposes mandatory funding for Land and Water
Conservation Fund (LWCF) programs in the Departments
of the Interior and Agriculture, including $200 million in
mandatory funds out of $600 million overall for LWCF
programs in 2014. This mandatory funding will provide
the stability needed for agencies and States to make strategic, long-term investments to preserve natural and cultural resources, bolster outdoor recreation opportunities,
and protect wildlife. Starting in 2015, the Budget proposes $900 million annually in mandatory funding equal to
the amount of oil and gas receipts deposited in the LWCF
each year. In 2014, $351 million is proposed to conserve
lands within national parks, refuges, and forests, including $169 million in collaborative funds for Interior and
the U.S. Forest Service to jointly and strategically conserve the most critical landscapes. The Budget also proposes $15 million in LWCF funding to revive the Urban
Park Recreation and Recovery Program, which can help
revitalize urban parks and increase access to trails, green
space, and other recreational areas in the most underserved urban communities. Other AGO programs include
operating national parks, refuges, and public lands, which
are critical for conserving natural and cultural resources; protecting wildlife; and drawing recreational tourists
from across the country and the world. They also include
grant programs that assist States, Tribes, local governments, landowners, and private groups (such as sportsmen) in preserving wildlife habitat, wetlands, historic
battlefields, regional parks, and the countless other sites
that form the mosaic of our cultural and natural legacy.
The Administration proposes $1.1 billion for grants
within the Environmental Protection Agency (EPA) to
support State and tribal implementation of delegated environmental programs. The support includes $257 million in State grant funding for air programs, an increase
of $22 million to assist States in addressing additional
responsibilities associated with greenhouse gas reduction
efforts, and $259 million in State water pollution control grants, a $25 million increase, including $15 million
to improve nutrient management. The Administration
also proposes to increase funding for the Tribal General
Assistance Program (Tribal GAP) by $5 million. Tribal
GAP funding builds Tribal capacity and assists tribes in
leveraging other EPA and federal funding to contribute
towards a higher level of environmental and health protection.
The Budget includes a combined $1.9 billion for federal
capitalization of the State Revolving Funds (SRFs), representing a reduction of $472 million from the 2012 enacted level. The Budget proposes a gradual reduction to
focus on communities in most need of assistance, but will
still allow the SRFs to finance approximately $6 billion
in wastewater and drinking water infrastructure projects
annually. The Administration has strongly supported the
SRFs, having received and/or requested funding for them
totaling approximately $19.8 billion since 2009. Since

284
their inception, the SRFs have been provided over $52.6
billion. Going forward, EPA will work to target SRF assistance to small and underserved communities with limited
ability to repay loans. The Administration strongly supports efforts to expand the use of green infrastructure to
meet Clean Water Act goals. To further these efforts, the
Budget will better target the funding intended for green
infrastructure practices, which will help communities improve water quality while creating green space, mitigating flooding, and enhancing air quality.
The Budget also leverages funding from across the
Federal government as well as State, local, and private
investment in order to promote job creation and economic
growth in communities with Brownfields sites through
initiatives such as the Partnership for Sustainable
Communities and Strong Cities, Strong Communities
with the EPA. Brownfields are lightly contaminated sites,
many in economically hard-hit areas, where the presence
or potential presence of contamination may keep these
sites from being used productively. In order to support
initiatives to rehabilitate these sites and communities
around the country while recognizing fiscal constraints,
the Budget increases funding for technical assistance but
slightly reduces the competitive grant funds.
Transportation
Grant outlays in support of transportation programs
are estimated to be $71.1 billion in 2014.
The Moving Ahead for Progress in the 21st Century
Act, enacted in July 2012, reauthorized the Federal Aid
Highways grants, Transit Formula Grants, and highway
safety grants. The Budget provides $50.1 billion in obligation limitations for those programs, equal to the contract authority levels authorized in the act.
To spur job growth and allow States to initiate sound
multi-year investments, the Budget provides an additional $50.0 billion for transportation investments in 2014
with a “fix-it-first” policy focus. Although infrastructure
projects take time to get underway, these investments
would create hundreds of thousands of jobs in the first few
years—and in industries suffering from protracted unemployment. This includes $40.0 billion in “fix-it-first” investments to improve existing infrastructure assets most
in need of repair and $10.0 billion to help spur States and
local innovation in infrastructure development and leveraging leverage State, local, tribal and private funds. Not
only will making these investments now put workers back
on the job and support local transportation programs in
the near-term, but the return on investment for Federal
taxpayers will benefit from historically low interest rates
and construction costs. To help these funds flow into communities without delay, key Federal agencies have been
directed to find ways to expedite permitting and approvals for infrastructure projects.
The Budget provides $40.0 billion over five years to
fund the development of high-speed rail and other passenger rail programs as part of an integrated national
transportation strategy. This system will provide 80 percent of Americans with convenient access to a passenger
rail system, featuring high-speed service, within 25 years.

Analytical Perspectives

The proposal also benefits freight rail and significantly
restructures Federal support for Amtrak, to increase
transparency, accountability, and performance.
In order to ensure the highest safety standards for
the U.S. pipeline system, the Budget proposes a Pipeline
Safety Reform (PSR) initiative to both enhance and revamp the Department of Transportation’s Pipeline Safety
program. The Budget maintains the size of the State
Pipeline Safety Grant program and institutes several reforms to the Federal program. It funds the second phase
of a three-year effort to more than double the number of
Federal pipeline safety inspectors. There are currently
only 135 inspectors responsible, in collaboration with
State partners, for annually inspecting 2.6 million miles
of pipeline and ensuring incident investigations following
explosions occur promptly. In addition, the Budget modernizes pipeline data collection and analysis, improves
Federal investigation of pipeline accidents of all sizes, and
expands the public education and outreach program.
In support of the President’s call for spending restraint, the Budget lowers funding for the airport grants
program to $2.4 billion by eliminating guaranteed funding for large- and medium-hub airports.  The Budget focuses Federal grants to support smaller commercial and
general aviation airports that do not have access to additional revenue or other outside sources of capital.  At
the same time, the Budget would allow larger airports to
increase non-Federal passenger facility charges, thereby
giving larger airports greater flexibility to generate their
own revenue.
Community and Regional Development
Grant outlays for community and regional development programs are estimated to be $21.0 billion in 2014.
The Budget provides $3.0 billion for the Community
Development Block Grant (CDBG) program and neighborhood stabilization activities within the Department of
Housing and Urban Development (HUD), and proposes
reforms to better target CDBG investments to address local community development goals. This funding level includes $200 million in new competitive funds to continue
mitigating the impacts of the foreclosure crisis. The funding will provide essential new resources to help communities hardest hit by the foreclosure crisis while creating
jobs through rehabilitating, repurposing, and demolishing
vacant and blighted properties. The Budget also continues to support the $15.0 billion Project Rebuild program,
which will leverage private capital to bring the benefits of
neighborhood stabilization to national scale.
The Budget provides $950 million for the HOME
Investment Partnerships Program, five percent below
the 2012 enacted level. At this funding level, HOME will
provide grants to State and local governments to supply
almost 40,000 additional units of affordable housing for
low-income families. This funding reduction is mitigated
by the investment of $1 billion in mandatory funding for
the Housing Trust Fund to finance the development, rehabilitation, and preservation of affordable housing for
extremely-low income families.

17.  Aid to State and Local Governments

As part of the Administration’s multiagency partnership between HUD, the Department of Transportation,
and the Environmental Protection Agency, the Budget provides $75 million in Integrated Planning and Investment
Grants to create incentives for communities to develop
and implement comprehensive housing and transportation plans, such as updates to building codes, land use
and zoning ordinances, that result in more resilient economic development, reduce energy consumption and
greenhouse gas emissions, and increase affordable housing near public transit. This funding would support about
30 additional regional and neighborhood planning and
implementation grants to enable communities to align
public and private investments in housing, transportation, and infrastructure. These efforts also align with a
broader Administration commitment to help communities
improve their resilience to extreme weather and other climate change impacts through direct technical assistance,
data and tools on projected impacts, and other support.
The Budget requests $55 million for a new economic development grant program administered by the
Department of Agriculture designed to target small and
emerging private businesses and cooperatives in rural
areas. Relying on evidence about what works to create
jobs and growth, this new program will award funding
to grantees that agree to be tracked against performance
targets. The new program will also improve upon the
agency’s current grant allocation and evaluation process.
The Budget provides $2.4 billion for State and local
grant programs within the Department of Homeland
Security to hire, equip, and train first responders. To better target these funds, the Budget proposes eliminating
duplicative, stand-alone grant programs, consolidating
them into the National Preparedness Grant Program.
This initiative is designed to build, sustain, and leverage core capabilities as established in the National
Preparedness Goal. Using a competitive risk-based model, the National Preparedness Grant Program will apply a
comprehensive process that identifies and prioritizes deployable capabilities; puts funding to work more quickly;
and requires grantees to regularly report progress in the
acquisition and development of these capabilities.
Education, Training, Employment,
and Social Services
Grant outlays for education, training, employment, and
social service programs are estimated to be $96.5 billion
in 2014.
The Administration believes that all children should
have access to a high-quality preschool education. A
child’s early years are the most critical for building the
foundation needed for success in life. Research has conclusively shown that supporting children at this stage
leads to significant benefits in school and beyond. This
is particularly true for low-income children, who often
start kindergarten academically behind their peers by
many months. Providing high-quality early childhood
education to all children will enable them to start school
ready to learn and realize their full potential. The Budget
outlines a proposal to ensure that four-year-olds across

285
the country have access to high-quality preschool programs, which would be financed through mandatory resources fully paid for elsewhere in the Budget. This proposal consists of a Federal-State partnership to provide
all low- and moderate-income four-year-old children with
high-quality preschool, while also providing States with
incentives to expand these programs to reach additional
children from middle class families and to put in place
full-day kindergarten policies. To support this effort, the
Budget also proposes a $750 million discretionary investment in Preschool Development Grants in 2014. These
grants will ensure that States willing to commit to expanding preschool access are able to make the critical investments necessary to serve their four-year-old children
in high-quality programs. The preschool initiative is coupled with a companion investment in voluntary home visiting and high-quality care for infants and toddlers within
the Department of Health and Human Services (HHS).
The Budget provides $659 million for School
Turnaround Grants within the Department of Education
to support the Administration’s commitment to help turn
around America’s persistently lowest-performing schools.
This includes $125 million for a new competitive grant
program to expand the capacity of districts to implement
effective and sustainable school reform.
One of the Department of Education’s trademark grant
programs, Investing in Innovation (i3), uses an evidencebased approach to test new ideas, validate what works,
and scale up the most effective approaches. The Budget
builds on the success of i3 by providing $215 million, an
increase of $66 million above the 2012 enacted level, to
support growing the evidence base in high-need areas, including identifying and supporting effective teachers and
leaders, improving low-performing schools, and encouraging parent engagement.
Teachers and principals have enormous impacts on
students’ learning. The Budget continues significant investment to ensure that there is an effective teacher in every classroom through programs such as the Teacher and
Leader Innovation Fund and the Effective Teachers and
Leaders State Formula Grant Program and its 25 percent
set-aside for competitive grants. The Administration also
recognizes the need to equip school leaders to implement
Elementary and Secondary Education Act (ESEA) reforms by providing nearly $100 million for a competition
to develop high-quality, large-scale professional development for current school leaders. The Budget also invests
$12.5 billion in mandatory funds to help school districts
prevent additional teacher layoffs and hire teachers as
the economy continues to recover. In addition, the Budget
proposes a $5 billion one-time mandatory investment
in the Recognizing Educational Success, Professional
Excellence, and Collaborative Teaching (RESPECT)
Project, to support States and districts that commit to
bold, comprehensive reforms to transform every stage of
the teaching profession.
The Budget provides $1.3 billion for 21st Century
Community Learning Centers to States and other entities for projects that provide students, particularly those
in high-need schools, the additional time, support, and en-

286
richment activities that can improve their achievement.
The Budget places a particular focus on programs that
support high-quality expanded learning models, which
add time to the school day or school year to improve student outcomes.
The Budget sustains the Department of Education’s
commitment to supporting education for disadvantaged students and students with disabilities, providing
$14.5 billion for ESEA Title I Grants and $11.6 billion
for Individuals with Disabilities Education Act (IDEA)
Grants to States. These investments provide the resources needed by districts to pay teacher salaries and fund
other educational interventions for these groups.
Building on the success of Race to the Top (RTT) program in both early education and K-12 education, the
Department of Education will shift the focus of RTT in
2014 to promoting comprehensive reforms in postsecondary education. The Budget provides $1 billion to support
competitive grants to States that commit to driving comprehensive change in their higher education policies and
practices, while doing more to contain their tuition and
make it easier for students to afford a college education.
This change establishes RTT as a fund that promotes system-wide reform and can shift its focus each year to support the most promising and comprehensive solutions to
strengthen public education and improve outcomes from
preschool through college.
A large share of the nation’s vocational training is delivered at community colleges. The Budget funds an $8
billion Community College to Career Fund jointly administered by the Departments of Labor and Education
to support State and community college partnerships
with businesses to build the skills of American workers.
The Fund will build on the Trade Adjustment Assistance
Community College and Career Training Grants, for
which 2014 is the final year of funding.
The Administration is committed to doing everything
we can to make it easier for people who need help to
find a job or build their skills for a better one, and for
employers who need to find well-qualified workers. The
Administration is exploring opportunities to revisit how
the Federal government funds job training and employment services, including the possibility of reorganizing
some of the existing training programs that serve overlapping populations. For example, the Budget proposes a
universal displaced worker program that will reach up to
a million workers a year with a set of core services, combining the best elements of two more narrowly-targeted
programs. Any reform must ensure that the needs of particularly vulnerable job-seekers and workers continue to
be met and ensure greater accountability and transparency about the performance of federally-supported job
training providers and programs.
The Budget also provides $80 million to increase the
set-aside for governors in the Workforce Investment Act
formula grants from 5 percent to 7.5 percent in order
to boost States’ capacity to engage in program improvements and reform.

Analytical Perspectives

Health
Grant outlays for health related programs are estimated to be $323.6 billion in 2014.
The Budget expands access to HIV/AIDS prevention
and treatment activities and supports the goals of the
National HIV/AIDS Strategy to reduce HIV incidence;
increase access to care and optimizing health outcomes
for people living with HIV; and reduce HIV-related health
disparities. By providing resources for Affordable Care
Act implementation, the Budget will support increased
health care coverage for thousands of people living with
HIV/AIDS. The Budget increases funding for the Ryan
White HIV/AIDS program by $20 million, including an
additional $10 million for the AIDS Drug Assistance
Program (ADAP) to ensure that individuals living with
HIV can access their medications and an additional $10
million for HIV medical clinics to expand access to care
and improve systems for connecting individuals to care
and retaining them in care over time. The Budget includes
an increase of $10 million for CDC HIV/ AIDS prevention
activities to expand surveillance activities and improve
timeliness of data. The Budget redirects $40 million from
less effective activities to support a new $40 million initiative to improve systems that link persons recently diagnosed with HIV to care. The Budget also invests $10
million in building the infrastructure and capacity that
State public health departments and community based
organizations will need to bill private insurers for infectious disease testing.
The Budget maintains the Community Mental Health
Services Block Grant and increases the Substance Abuse
Prevention and Treatment Block Grant to support States
in an effective transition in the first year of the Affordable
Care Act, which will include expanded coverage for mental health and substance abuse treatment services. The
Budget also proposes funding within the Block Grants to
encourage States to build provider capacity to bill public and private insurance and to promote the adoption of
evidence-based programs.
Medicaid is critically important to providing health
care coverage to the neediest Americans, and the
Administration strongly supports State efforts to expand
Medicaid with the increased Federal funding provided in
the Affordable Care Act. The Budget seeks to preserve
the existing partnership between States and the Federal
government while making Medicaid more efficient and
sustainable through sensible, targeted, Medicaid reforms.
For example, the Budget helps States and the Federal
government leverage more efficient reimbursement rates
for durable medical equipment based on Medicare rates.
The Budget also better aligns Medicaid Disproportionate
Share Hospital (DSH) payments with expected levels of
uncompensated care by beginning the scheduled reductions in 2015 and basing future State DSH allotments on
States’ actual DSH allotments as reduced by the ACA.
Finally, the Budget would improve rebate and payment
policies for Medicaid prescription drugs.
Finally, the Budget invests $15 billion over the next
10 years to extend and expand evidence-based, voluntary

17.  Aid to State and Local Governments

home visiting. These investments will be paired with a
new initiative in the Department of Education to expand
preschool to all low- and moderate-income four year olds.
Income Security
Grant outlays for income security programs are estimated to be $107.9 billion in 2014.
The Budget proposes a $4 billion Reemployment NOW
program, which incorporates a number of reforms to help
UI claimants and other long-term unemployed individuals
get back to work more quickly. The Budget also includes
a $12.5 billion Pathways Back to Work Fund to make it
easier for workers to remain connected to the workforce
and gain new skills for long-term employment. This initiative will support summer- and year-round jobs for lowincome youth, subsidized employment opportunities for
unemployed and low-income adults, and other promising
strategies designed to lead to employment.
The Budget provides $400 million for Choice
Neighborhoods to continue to transform neighborhoods
of concentrated poverty into opportunity-rich, mixedincome neighborhoods. The Budget will reach 10 to 13
neighborhoods with implementation grants that fund the
revitalization of HUD-assisted housing and also engage
local governments, nonprofits, and for-profit developers in
partnerships to improve economic conditions in surrounding communities. These funds will be targeted to designated Promise Zones—high-poverty communities where
the Federal government will work with local leadership
to invest and engage more intensely to create jobs, leverage private investment, increase economic activity, and
expand educational opportunities.
The Budget requests $20 billion for the Housing Choice
Voucher program to help more than 2.2 million low-income
families afford decent housing in neighborhoods of their
choice. This funding level supports all existing vouchers and
provides 10,000 new vouchers targeted to homeless veterans. The Budget also includes $10.3 billion for the ProjectBased Rental Assistance program to maintain affordable
rental housing for 1.2 million families, and provides $6.6
billion in operating and capital subsidies to preserve affordable public housing for an additional 1.1 million families.
A portion of this funding will support implementation of
the Rental Assistance Demonstration, which will upgrade
over 150,000 public housing and other HUD-assisted units
by converting them to long-term Section 8 contracts that
can leverage private financing for capital repairs.
The Budget provides $2.4 billion for Homeless
Assistance Grants, $480 million above the 2012 enacted
level. This funding maintains the approximately 325,000
HUD-funded beds that assist the homeless nationwide
and expands rapid re-housing and permanent supportive housing. Backed with new data and emerging best
practices across the country, this evidence-based investment will make further progress towards the goals laid
out in the Federal Strategic Plan to Prevent and End
Homelessness.
The Budget proposes to update the Housing
Opportunities for Persons with AIDS (HOPWA) program
to better reflect the current case concentration and un-

287
derstanding of HIV/AIDS and ensure that funds are directed in a more equitable and effective manner. This
modernization includes a new formula that will distribute
HOPWA funds based on the current population of HIVpositive individuals, fair market rents, and poverty rates
in order to target funds to areas with the most need. It
also makes the program more flexible, giving local communities more options to provide targeted, timely, and
cost-effective interventions. The Budget’s $330 million
investment in HOPWA, in combination with the proposed
modernization, will assist local communities in keeping
individuals with HIV/AIDS housed, making it easier for
them to stay connected to treatment, and therefore improving health outcomes for this vulnerable population.
At a time of continued need, the Administration
strongly supports the Supplemental Nutrition Assistance
Program (SNAP) and the Child Nutrition Programs,
which help families improve their nutrition and reduce
hunger.  SNAP is the cornerstone of our Nation’s nutrition assistance safety net, touching the lives of more than
47 million people. The Budget provides $7.6 billion for
discretionary nutrition programs, including $7.1 billion
to support the 8.9 million individuals expected to participate in the Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC), which is critical to
the health of pregnant women, new mothers, infants, and
young children. The Budget also provides resources for
program integrity and again proposes to continue certain
temporary SNAP benefits.
The Budget supports the implementation of the
Healthy, Hunger-Free Kids Act of 2010 with $35 million in school equipment grants to aid in the provision
of healthy meals and continued support for other schoolbased resources through the Department of Agriculture.
The Budget provides $3 billion for the Low Income
Home Energy Assistance Program (LIHEAP) to help
struggling families with residential heating and cooling
expenses. The Budget targets funds to States with vulnerable households facing high home heating costs. The
Budget also provides $50 million for competitive grants to
help reduce energy burdens for LIHEAP households that
rely on persistently high-cost systems.
Research has shown that effective early childhood
programs help children succeed in school and beyond.
Increasing Federal investments in high-quality early education is a key part of a broader education agenda that
will strengthen the Nation’s competiveness and help every
child reach his or her potential. The Budget invests $1.4
billion in new Early Head Start-Child Care Partnerships
to support States and communities in expanding the
availability of high-quality learning opportunities for our
youngest children. The Budget also provides an additional
$200 million for States to support high-quality child care
in 2014 and $7 billion over the next 10 years to maintain
the availability of child care subsidies.
The Budget proposes policy changes to modernize the
Child Support Enforcement Program, which touches the
lives of one-quarter of the Nation’s children. These policy changes will encourage non-custodial parents to take
greater responsibility for their children while maintaining

288
rigorous enforcement efforts. The Budget supports States
in providing access and visitation services that can improve
a non-custodial parent’s relationship with his or her family
and increases support for States that pass child support
payments through to families rather than retaining them.
The program will continue to evaluate the effectiveness of
providing employment services aimed at increasing child
support payments from noncustodial parents. In addition,
the Budget provides $35 million for States to test strategies to overcome financial deterrents to marriage.
Administration of Justice
Grant outlays for justice programs are estimated to be
$6.6 billion in 2014.
The Budget provides $413 million to reinforce efforts to
combat and respond to violent crimes against women. These
grants play a critical role in helping to create a coordinated
community response to this problem. As a result of prior investments in this area, civil and criminal justice systems are
more responsive to victims. Crimes of violence committed
against women have declined in recent years. Yet, reducing
such violence and meeting the needs of the almost 1.3 million women victimized by rape and sexual assault annually,
and the nearly seven million victims of intimate partner violence each year, remains a critical priority.
The Budget provides $440 million to support evidencebased community policing in the Nation’s local law enforcement agencies. While a portion of this funding will
support the Comprehensive School Safety Program and
be used to hire school resource officers and mental health
professionals and make other investments in school safety,
$257 million is provided for the hiring and retention of police officers and sheriffs’ deputies across the country, and
includes a preference for the hiring of post-9/11 military
veterans and school resource officers. Of the total, $35
million is set aside for Tribal Law Enforcement to help
ensure the safety and security of tribal residents. The
Budget also includes $4 billion in immediate assistance
for the retention, rehiring, and hiring of police officers, as
requested by the President in the American Jobs Act.
The Budget provides $332 million for the Department’s
Juvenile Justice Programs and includes evidence-based
investments to prevent youth violence, including $25 million to fund the Community-Based Violence Prevention
Initiative, which would provide grants to replicate successful community-based interventions to control shootings and other serious gang violence, and $4 million for
the National Forum on Youth Violence Prevention, which
provides assistance for selected communities across the
country to develop and implement youth violence strategies. The Budget also includes $20 million for the Juvenile
Justice Realignment Incentive Grants, which, in tandem
with the $30 million reserved for Juvenile Accountability
Block Grants, will assist States that are pursuing evidence-based, juvenile justice system alignment to foster
better outcomes for young people, less costly use of incarceration, and increased public safety. Further, the Budget
makes available $23 million for research and pilot proj-

Analytical Perspectives

ects focused on developing appropriate responses to youth
exposed to violence.
The Budget includes $222 million to help State
and local governments continue implementing the
Administration’s proposals for increasing firearms safety
and supporting programs that help keep communities
safe from mass casualty violence. Included in these initiatives are $150 million for the Comprehensive School
Safety Program, $55 million in grants to improve the submission of state criminal and mental health records to the
National Instant Criminal Background Check System,
$15 million to improve police officer safety, and $2 million
to develop better gun safety mechanisms to prevent the
use of firearms by unauthorized users.
The Budget provides $119 million for the Second
Chance Act Grant programs to reduce re-offending and
help ex-offenders return to productive lives, $19 million
for Residential Substance Abuse Training in the Nation’s
prisons and jails to help break the cycle of drug offending, and $10 million to expand Hawaii’s HOPE Probation
project with “swift and certain” sanctions to other sites.
The Budget also invests in several programs to promote better public safety and help reduce State and local corrections system costs. For example, the Budget
invests $44 million in Problem-Solving Grants, which
support drug courts, mentally ill offender assistance, and
other problem-solving approaches to work with special
needs offenders while minimizing costly incarceration.
The Justice Reinvestment Initiative, funded at $85 million, works with States to reduce unnecessary incarceration and reinvest the savings in efforts that promote
public safety. In coordination with the Department of
Education’s School Climate Transformation Grants, the
Budget also requests $20 million for a Juvenile Justice
and Education Collaboration Assistance program to help
reduce juvenile arrests (and the “school-to-prison pipeline”) while improving school safety. With 2.3 million individuals in U.S. prisons, 1 in 32 American adults under
correctional supervision, and 71,000 juveniles held in juvenile facilities, these programs aim to achieve improved
public safety using evidence-based strategies and datadriven approaches.
The Budget bolsters the Administration’s efforts to ensure that more Federal grant funding flows to evidencebased activities and helps to advance knowledge of what
works in State and local criminal justice. To accomplish
this objective, the Budget increases set-asides for research,
evaluation, and statistics; couples the formula Byrne
Justice Assistance Grant and Juvenile Accountability
Block Grant programs with competitive incentive grants
that provide “bonus” funds to States and localities for
better, evidence-based use of formula funds; expands the
Pay for Success initiative; adopts a more evidence-based,
data-driven use of competitive grant funds; and invests
in the expansion of CrimeSolutions.gov, a “what works”
clearinghouse for best practices in criminal justice, juvenile justice, and crime victim services.

289

17.  Aid to State and Local Governments

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

Energy
Discretionary:
Department of Energy:
Energy Programs:
Race to the Top for Energy Efficiency and Grid Modernization �������������
Energy Efficiency and Renewable Energy ���������������������������������������������

.........
128

.........
129

200
248

.........
3,605

.........
779

20
246

Total, discretionary ���������������������������������������������������������������������������������������

128

129

448

3,605

779

266

Mandatory:
Tennessee Valley Authority:
Tennessee Valley Authority Fund �����������������������������������������������������������

618

550

536

618

550

536

Total, Energy �������������������������������������������������������������������������������������������������

746

679

984

4,223

1,329

802

4

4

.........

4

4

.........

Natural Resources and Environment
Discretionary:
Department of Agriculture:
Farm Service Agency:
Grassroots Source Water Protection Program ��������������������������������������
Natural Resources Conservation Service:
Watershed Rehabilitation Program ��������������������������������������������������������
Watershed and Flood Prevention Operations ����������������������������������������
Forest Service:
State and Private Forestry ���������������������������������������������������������������������
Management of National Forest Lands for Subsistence Uses ���������������

7
116

7
96

.........
.........

5
23

3
39

.........
14

239
3

248
3

172
.........

240
2

240
3

217
1

Department of Commerce:
National Oceanic and Atmospheric Administration:
Operations, Research, and Facilities �����������������������������������������������������
Pacific Coastal Salmon Recovery ����������������������������������������������������������

159
65

163
65

159
50

96
79

98
79

96
86

67
.........

68
.........

57
.........

48
18

49
27

41
27

7

6

1

7

6

1

Department of the Interior:
Office of Surface Mining Reclamation and Enforcement:
Regulation and Technology ��������������������������������������������������������������������
Abandoned Mine Reclamation Fund �����������������������������������������������������
United States Geological Survey:
Surveys, Investigations, and Research ��������������������������������������������������
United States Fish and Wildlife Service:
Cooperative Endangered Species Conservation Fund ��������������������������
State Wildlife Grants ������������������������������������������������������������������������������
Landowner Incentive Program ���������������������������������������������������������������
National Park Service:
Urban Park and Recreation Fund ����������������������������������������������������������
National Recreation and Preservation ���������������������������������������������������
Land Acquisition and State Assistance ��������������������������������������������������
Historic Preservation Fund ��������������������������������������������������������������������

48
61
.........

48
62
.........

56
61
.........

50
65
9

88
75
12

82
78
5

.........
60
45
56

.........
60
45
106

10
52
40
59

.........
64
38
89

.........
59
36
68

1
58
48
85

Environmental Protection Agency:
State and Tribal Assistance Grants ��������������������������������������������������������
Hazardous Substance Superfund ����������������������������������������������������������
Leaking Underground Storage Tank Trust Fund ������������������������������������

3,568
19
91

4,190
19
96

3,154
18
87

5,223
220
129

4,489
198
95

3,893
189
90

Total, discretionary ���������������������������������������������������������������������������������������

4,615

5,286

3,976

6,409

5,668

5,012

44

46

5

47

40

14

Mandatory:
Department of the Interior:
Bureau of Land Management:
Miscellaneous Permanent Payment Accounts ���������������������������������������

290

Analytical Perspectives

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program
United States Fish and Wildlife Service:
Coastal Impact Assistance ��������������������������������������������������������������������
Office of Surface Mining Reclamation and Enforcement:
Payments to States in Lieu of Coal Fee Receipts ����������������������������������
Abandoned Mine Reclamation Fund �����������������������������������������������������
United States Fish and Wildlife Service:
Federal Aid in Wildlife Restoration ���������������������������������������������������������
Cooperative Endangered Species Conservation Fund ��������������������������
Coastal Impact Assistance ��������������������������������������������������������������������
Sport Fish Restoration ���������������������������������������������������������������������������
National Park Service:
Urban Park and Recreation Fund ����������������������������������������������������������
Land Acquisition and State Assistance ��������������������������������������������������
Departmental Offices:
National Forests Fund, Payment to States ��������������������������������������������
Leases of Lands Acquired for Flood Control, Navigation, and Allied
Purposes ������������������������������������������������������������������������������������������
States Share from Certain Gulf of Mexico Leases ��������������������������������

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

.........

.........

.........

8

.........

.........

85
220

85
210

85
188

156
172

82
118

99
178

398
53
.........
434

571
63
.........
462

611
90
.........
421

377
53
85
427

467
63
122
460

544
65
130
427

.........
.........

.........
.........

5
20

.........
1

.........
4

.........
4

10

8

8

10

8

8

24
.........

26
.........

27
3

24
.........

26
.........

27
3

Corps of Engineers--Civil Works:
South Dakota Terrestrial Wildlife Habitat Restoration Trust Fund ����������

3

4

4

8

7

5

Total, mandatory �������������������������������������������������������������������������������������������

1,271

1,475

1,467

1,368

1,397

1,504

Total, Natural Resources and Environment ������������������������������������������������

5,886

6,761

5,443

7,777

7,065

6,516

Agriculture
Discretionary:
Department of Agriculture:
Departmental Management:
Departmental Administration �����������������������������������������������������������������
National Institute of Food and Agriculture:
Extension Activities ��������������������������������������������������������������������������������
Research and Education Activities ��������������������������������������������������������
Agricultural Marketing Service:
Payments to States and Possessions ����������������������������������������������������
Farm Service Agency:
State Mediation Grants ��������������������������������������������������������������������������

20

.........

.........

20

.........

.........

405
324

407
327

405
320

427
132

410
407

589
488

1

1

1

1

1

1

4

4

4

4

4

4

Total, discretionary ���������������������������������������������������������������������������������������

754

739

730

584

822

1,082

55

55

.........

47

54

55

4

.........

.........

4

.........

.........

Mandatory:
Department of Agriculture:
Agricultural Marketing Service:
Payments to States and Possessions ����������������������������������������������������
Farm Service Agency:
Commodity Credit Corporation Fund �����������������������������������������������������
Total, mandatory �������������������������������������������������������������������������������������������

59

55

.........

51

54

55

Total, Agriculture ������������������������������������������������������������������������������������������

813

794

730

635

876

1,137

1

132

132

6

–25

–3

.........

125

10

.........

13

78

Commerce and Housing Credit
Mandatory:
Department of Commerce:
National Oceanic and Atmospheric Administration:
Promote and Develop Fishery Products and Research Pertaining to
American Fisheries ���������������������������������������������������������������������������
National Telecommunications and Information Administration:
State and Local Implementation Fund ���������������������������������������������������

291

17.  Aid to State and Local Governments

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

Department of the Treasury:
Departmental Offices:
State Small Business Credit Initiative ����������������������������������������������������
Financial Research Fund �����������������������������������������������������������������������

.........
168

.........
.........

.........
.........

172
42

551
.........

380
.........

Federal Communications Commission:
Universal Service Fund �������������������������������������������������������������������������

1,843

1,996

2,077

1,843

1,996

2,077

Total, mandatory �������������������������������������������������������������������������������������������

2,012

2,253

2,219

2,063

2,535

2,532

Total, Commerce and Housing Credit ���������������������������������������������������������

2,012

2,253

2,219

2,063

2,535

2,532

480

483

480

207

319

406

.........

.........

.........

3,012

3,810

3,525

3,350

3,371

2,900

.........

.........

.........

1,662
.........
.........
.........
.........
39,144
.........
.........

2,022
.........
.........
.........
.........
37,844
.........
.........

.........
.........
.........
.........
.........
38,956
.........
.........

1,026
3,028
186
16
39,032
.........
87
11

874
1,285
135
27
39,657
.........
84
35

1,048
277
80
30
40,065
.........
69
36

.........
307

.........
309

.........
313

274
.........

283
.........

311
.........

.........
550

.........
554

.........
562

490
.........

402
.........

434
.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

4
8
12

5
13
20

.........
20
20

.........

.........

.........

508

1,089

2,246

.........
.........
.........
150
.........
.........
1,886
.........

.........
.........
.........
151
.........
.........
1,923
10,894

.........
.........
.........
150
.........
.........
1,981
25

1,039
128
5
91
171
11
2,443
.........

658
90
7
188
224
25
2,452
1,089

334
3
7
232
143
25
2,569
2,731

.........
.........
9,904

.........
.........
9,712

.........
.........
9,895

13
8,197
.........

9
9,252
.........

9
9,886
.........

34
5

37
5

56
5

25
5

42
5

47
5

Transportation
Discretionary:
Department of Transportation:
Office of the Secretary:
National Infrastructure Investments �������������������������������������������������������
Federal Aviation Administration:
Grants-in-aid for Airports (Airport and Airway Trust Fund) ��������������������
Grants-in-aid for Airports (Airport and Airway Trust Fund) (non-add
obligation limitations) 1 ���������������������������������������������������������������������
Federal Highway Administration:
Emergency Relief Program ��������������������������������������������������������������������
Highway Infrastructure Investment, Recovery Act ���������������������������������
Highway Infrastructure Programs ����������������������������������������������������������
Appalachian Development Highway System �����������������������������������������
Federal-aid Highways ����������������������������������������������������������������������������
Federal-aid Highways (non-add obligation limitations) 1 �����������������������
Miscellaneous Appropriations ����������������������������������������������������������������
Miscellaneous Transportation Trust Funds ���������������������������������������������
Federal Motor Carrier Safety Administration:
Motor Carrier Safety Grants �������������������������������������������������������������������
Motor Carrier Safety Grants (non-add obligation limitations) 1 �������������
National Highway Traffic Safety Administration:
Highway Traffic Safety Grants ����������������������������������������������������������������
Highway Traffic Safety Grants (non-add obligation limitations) 1 �����������
Federal Railroad Administration:
Emergency Railroad Rehabilitation and Repair �������������������������������������
Intercity Passenger Rail Grant Program ������������������������������������������������
Rail Line Relocation and Improvement Program �����������������������������������
Capital Assistance for High Speed Rail Corridors and Intercity
Passenger Rail Service ��������������������������������������������������������������������
Federal Transit Administration:
Transit Capital Assistance, Recovery Act ����������������������������������������������
Fixed Guideway Infrastructure Investment, Recovery Act ���������������������
Job Access and Reverse Commute Grants �������������������������������������������
Washington Metropolitan Area Transit Authority ������������������������������������
Formula Grants ��������������������������������������������������������������������������������������
Grants for Energy Efficiency and Greenhouse Gas Reductions ������������
Capital Investment Grants ���������������������������������������������������������������������
Public Transportation Emergency Relief Program ���������������������������������
Discretionary Grants (Transportation Trust Fund, Mass Transit
Account) ��������������������������������������������������������������������������������������������
Transit Formula Grants ��������������������������������������������������������������������������
Transit Formula Grants (non-add obligation limitations) 1 ���������������������
Pipeline and Hazardous Materials Safety Administration:
Pipeline Safety ���������������������������������������������������������������������������������������
Trust Fund Share of Pipeline Safety ������������������������������������������������������

292

Analytical Perspectives

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program
Total, discretionary ���������������������������������������������������������������������������������������
Total, obligation limitations (non-add) 1 ����������������������������������������������������������

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

4,217
53,255

15,515
51,790

2,697
52,626

60,029
.........

62,079
.........

64,558
.........

108

116

104

113

141

118

.........

.........

50,000

.........

.........

5,600

3,205

3,203

2,748

.........

.........

.........

38,199
5

38,695
63

39,251
.........

602
5

596
63

616
.........

306

310

313

.........

.........

.........

525

528

536

.........

.........

.........

.........

.........

3,660

.........

.........

225

Mandatory:
Department of Homeland Security:
United States Coast Guard:
Boat Safety ��������������������������������������������������������������������������������������������
Department of Transportation:
Immediate Transportation Investments ��������������������������������������������������
Federal Aviation Administration:
Grants-in-aid for Airports (Airport and Airway Trust Fund) 1 ������������������
Federal Highway Administration:
Federal-aid Highways 1 ��������������������������������������������������������������������������
Miscellaneous Appropriations ����������������������������������������������������������������
Federal Motor Carrier Safety Administration:
Motor Carrier Safety Grants 1 ����������������������������������������������������������������
National Highway Traffic Safety Administration:
Highway Traffic Safety Grants 1 ��������������������������������������������������������������
Federal Railroad Administration:
Rail Service Improvement Program �������������������������������������������������������
Federal Transit Administration:
Transit Formula Grants 1 ������������������������������������������������������������������������

9,889

9,778

9,895

.........

.........

.........

Total, mandatory �������������������������������������������������������������������������������������������

52,237

52,693

106,507

720

800

6,559

Total, Transportation �������������������������������������������������������������������������������������

56,454

68,208

109,204

60,749

62,879

71,117

37
456

85
436

39
304

587
836

739
1,000

647
782

Community and Regional Development
Discretionary:
Department of Agriculture:
Rural Utilities Service:
Distance Learning, Telemedicine, and Broadband Program ������������������
Rural Water and Waste Disposal Program Account ������������������������������
Rural Housing Service:
Rural Community Facilities Program Account ���������������������������������������
Rural Business Cooperative Service:
Rural Business and Cooperative Grants �����������������������������������������������
Rural Business Program Account ����������������������������������������������������������

43

29

17

84

72

49

.........
253

.........
75

18
.........

.........
210

.........
206

.........
39

Department of Commerce:
Economic Development Administration:
Economic Development Assistance Programs ��������������������������������������

417

221

282

393

446

360

Department of Homeland Security:
Federal Emergency Management Agency:
State and Local Programs ���������������������������������������������������������������������
United States Fire Administration and Training ��������������������������������������
Disaster Relief Fund ������������������������������������������������������������������������������
National Flood Insurance Fund ��������������������������������������������������������������

2,282
3
7,076
.........

2,301
3
7,080
10

2,123
1
1,204
10

3,857
3
6,346
.........

3,360
3
3,132
10

3,150
3
4,818
10

3,408
6
.........

19,308
6
.........

3,128
.........
.........

6,794
4
16

6,402
8
12

10,066
8
12

120

121

119

148

130

130

Department of Housing and Urban Development:
Community Planning and Development:
Community Development Fund �������������������������������������������������������������
Community Development Loan Guarantees Program Account �������������
Brownfields Redevelopment ������������������������������������������������������������������
Office of Lead Hazard Control and Healthy Homes:
Lead Hazard Reduction �������������������������������������������������������������������������

293

17.  Aid to State and Local Governments

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

2012 Actual

Outlays
2013 CR

2014 Estimate

Department of the Interior:
Bureau of Indian Affairs and Bureau of Indian Education:
Operation of Indian Programs ����������������������������������������������������������������
Indian Guaranteed Loan Program Account �������������������������������������������
Appalachian Regional Commission ����������������������������������������������������������������
Delta Regional Authority ���������������������������������������������������������������������������������
Denali Commission �����������������������������������������������������������������������������������������

159
10
60
11
16

159
7
62
12
11

159
5
57
11
7

159
10
76
14
37

157
7
73
30
59

164
7
75
15
2

Total, discretionary ���������������������������������������������������������������������������������������

14,357

29,926

7,484

19,574

15,846

20,337

Department of Homeland Security:
Federal Emergency Management Agency:
First Responder Stabilization Fund ��������������������������������������������������������
National Flood Insurance Fund ��������������������������������������������������������������

.........
.........

1,000
173

.........
106

.........
.........

.........
173

50
108

Department of Housing and Urban Development:
Community Planning and Development:
Community Development Loan Guarantees Program Account �������������
Neighborhood Stabilization Program �����������������������������������������������������

7
.........

8
15,000

.........
.........

7
677

8
1,030

.........
379

Department of the Treasury:
Fiscal Service:
Gulf Coast Restoration Trust Fund ��������������������������������������������������������

.........

120

120

.........

60

180

Total, mandatory �������������������������������������������������������������������������������������������

7

16,301

226

684

1,271

717

Total, Community and Regional Development �������������������������������������������

14,364

46,227

7,710

20,258

17,117

21,054

.........
–2

.........
–1

.........
.........

10
.........

6
.........

.........
.........

.........
125
1,286
196
15,677
4,416
.........

.........
126
1,292
198
15,728
4,436
.........

750
125
1,219
1,532
14,839
2,632
.........

.........
120
1,302
329
17,047
4,823
1,583

.........
112
1,420
358
17,375
4,543
1,865

38
125
1,299
257
16,518
4,394
1,000

1,233

1,240

4,977

748

1,380

2,152

689

692

685

684

713

735

11,730
147
25

12,456
150
25

11,617
118
25

13,335
145
25

12,864
168
30

12,995
132
26

1,719

1,720

1,717

1,846

1,747

1,457

301

453

451

396

309

386

.........
38

.........
53

.........
53

6
101

6
44

.........
46

Mandatory:

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:
School Readiness ����������������������������������������������������������������������������������
Indian Student Education ����������������������������������������������������������������������
Impact Aid ����������������������������������������������������������������������������������������������
Supporting Student Success �����������������������������������������������������������������
Accelerating Achievement and Ensuring Equity ������������������������������������
Education Improvement Programs ��������������������������������������������������������
State Fiscal Stabilization Fund, Recovery Act ���������������������������������������
Office of Innovation and Improvement:
Innovation and Instructional Teams �������������������������������������������������������
Office of English Language Acquisition:
English Learner Education ��������������������������������������������������������������������
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:
Career, Technical and Adult Education ��������������������������������������������������
Office of Postsecondary Education:
Higher Education �����������������������������������������������������������������������������������
Office of Federal Student Aid:
Student Financial Assistance �����������������������������������������������������������������
Institute of Education Sciences ������������������������������������������������������������������

294

Analytical Perspectives

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program
Hurricane Education Recovery �������������������������������������������������������������������
Department of Health and Human Services:
Administration for Children and Families:
Supporting Healthy Families and Adolescent Development ������������������
Children and Families Services Programs ���������������������������������������������
Administration for Community Living:
Aging and Disability Services Programs ������������������������������������������������

2012 Actual
.........

Budget Authority
2013 CR
2014 Estimate
.........
.........

Outlays
2013 CR

2012 Actual
15

8

2014 Estimate
.........

61
9,550

62
9,698

62
10,712

55
9,492

63
9,437

63
10,056

1,470

1,480

2,043

1,484

1,474

1,830

Department of the Interior:
Bureau of Indian Affairs and Bureau of Indian Education:
Operation of Indian Programs ����������������������������������������������������������������

111

111

111

106

103

106

Department of Labor:
Employment and Training Administration:
Training and Employment Services �������������������������������������������������������
Community Service Employment for Older Americans ��������������������������
State Unemployment Insurance and Employment Service Operations �
States Paid Leave Fund �������������������������������������������������������������������������
Unemployment Trust Fund ���������������������������������������������������������������������

2,824
.........
87
.........
955

2,831
.........
87
.........
995

2,924
.........
113
5
995

3,040
299
64
.........
951

2,939
11
44
.........
925

2,662
.........
125
.........
953

Corporation for National and Community Service:
Operating Expenses ������������������������������������������������������������������������������
Corporation for Public Broadcasting ���������������������������������������������������������������

496
444

496
445

496
445

363
444

266
445

270
445

District of Columbia:
District of Columbia General and Special Payments:
Federal Payment for Resident Tuition Support ��������������������������������������
Federal Payment for School Improvement ���������������������������������������������

30
60

30
60

35
52

30
60

30
60

35
52

Institute of Museum and Library Services:
Office of Museum and Library Services: Grants and Administration �����

217

217

210

235

261

258

National Endowment for the Arts:
National Endowment for the Arts: Grants and Administration ����������������

45

46

50

50

46

48

Total, discretionary ���������������������������������������������������������������������������������������

53,930

55,126

58,993

59,188

59,052

58,463

.........
.........
.........

.........
.........
12,500

.........
1,300
.........

3,484
.........
.........

229
.........
625

.........
130
11,875

Mandatory:
Department of Education:
Office of Elementary and Secondary Education:
Education Jobs Fund �����������������������������������������������������������������������������
School Readiness ����������������������������������������������������������������������������������
American Jobs Act ���������������������������������������������������������������������������������
Office of Innovation and Improvement:
Innovation and Instructional Teams �������������������������������������������������������
Office of Special Education and Rehabilitative Services:
Rehabilitation Services and Disability Research �����������������������������������

.........

5,000

.........

.........

100

2,650

3,121

3,231

3,302

2,917

3,350

3,778

Department of Health and Human Services:
Administration for Children and Families:
Supporting Healthy Families and Adolescent Development ������������������
Social Services Block Grant ������������������������������������������������������������������

476
1,785

478
2,285

463
1,785

413
1,715

439
1,964

451
2,062

Department of Labor:
Employment and Training Administration:
American Jobs Act and Community College to Career Fund ����������������
TAA Community College and Career Training Grant Fund ��������������������
Universal Displaced Workers Program ��������������������������������������������������
Federal Unemployment Benefits and Allowances ���������������������������������

.........
500
.........
575

16,500
500
.........
575

.........
500
2,202
196

.........
40
.........
369

825
219
.........
335

13,750
832
2,202
300

Total, mandatory �������������������������������������������������������������������������������������������

6,457

41,069

9,748

8,938

8,086

38,030

Total, Education, Training, Employment, and Social Services ������������������

60,387

96,195

68,741

68,126

67,138

96,493

295

17.  Aid to State and Local Governments

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

Health
Discretionary:
Department of Agriculture:
Food Safety and Inspection Service:
Salaries and Expenses ��������������������������������������������������������������������������

50

51

52

47

50

52

2,847

2,923

2,871

2,648

2,487

2,503

1,471

2,195

2,271

1,895

746

810

2,823

2,615

2,663

2,741

3,233

3,068

380
.........

382
.........

255
.........

395
14

443
.........

128
.........

Department of Labor:
Occupational Safety and Health Administration:
Salaries and Expenses ��������������������������������������������������������������������������
Mine Safety and Health Administration:
Salaries and Expenses ��������������������������������������������������������������������������

115

116

116

115

116

116

9

9

1

9

9

1

Total, discretionary ���������������������������������������������������������������������������������������

7,695

8,291

8,229

7,864

7,084

6,678

350

400

400

122

401

318

.........
1,655
270,724
8,659
528
.........

.........
2,751
269,384
11,083
530
3

.........
1,343
284,052
15,368
532
4

22
167
250,534
9,065
477
.........

100
1,457
266,565
9,897
788
125

80
2,061
303,634
9,992
749
100

Department of Health and Human Services:
Health Resources and Services Administration:
Health Resources and Services ������������������������������������������������������������
Centers for Disease Control and Prevention:
CDC-Wide Activities and Program Support �������������������������������������������
Substance Abuse and Mental Health Services Administration:
Susbstance Abuse and Mental Health Services Administration ������������
Departmental Management:
Public Health and Social Services Emergency Fund ����������������������������
Prevention and Wellness Fund, Recovery Act ���������������������������������������

Mandatory:
Department of Health and Human Services:
Health Resources and Services Administration:
Maternal, Infant, and Early Childhood Home Visiting Programs ������������
Centers for Medicare and Medicaid Services:
Rate Review Grants �������������������������������������������������������������������������������
Affordable Insurance Exchange Grants �������������������������������������������������
Grants to States for Medicaid ����������������������������������������������������������������
Children’s Health Insurance Fund ����������������������������������������������������������
State Grants and Demonstrations ���������������������������������������������������������
Child Enrollment Contingency Fund ������������������������������������������������������
Departmental Management:
Pregnancy Assistance Fund ������������������������������������������������������������������

25

25

25

26

27

21

Total, mandatory �������������������������������������������������������������������������������������������

281,941

284,176

301,724

260,413

279,360

316,955

Total, Health ��������������������������������������������������������������������������������������������������

289,636

292,467

309,953

268,277

286,444

323,633

.........

–300

–166

.........

–300

–166

Income Security
Discretionary:
Department of Agriculture:
Agricultural Marketing Service:
Funds for Strengthening Markets, Income, and Supply (section 32) �����
Food and Nutrition Service:
Commodity Assistance Program �����������������������������������������������������������
Special Supplemental Nutrition Program for Women, Infants, and
Children (WIC) ����������������������������������������������������������������������������������

244

260

272

238

259

271

7,018

6,659

7,142

6,837

6,670

7,007

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 ��

3,472
504
2,269

3,493
625
2,283

3,020
635
2,469

3,817
633
2,191

3,704
722
2,277

2,936
716
2,433

296

Analytical Perspectives

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program
Department of Homeland Security:
Federal Emergency Management Agency:
Emergency Food and Shelter ����������������������������������������������������������������

2012 Actual

Budget Authority
2013 CR
2014 Estimate

Outlays
2013 CR

2012 Actual

2014 Estimate

120

121

100

90

226

106

3,962
.........
13
18,264
289
1,875
650
120
.........
.........

3,986
.........
13
19,006
260
1,886
654
121
.........
.........

4,560
.........
13
19,996
265
1,979
647
398
75
10

4,220
129
3
17,952
167
2,631
751
.........
.........
.........

3,923
130
13
18,919
260
2,500
650
8
.........
.........

4,399
130
16
19,956
265
2,388
673
36
.........
.........

703
1,000
332
.........
.........

902
1,006
334
.........
.........

1,123
945
332
.........
.........

1,171
1,781
334
11
10

810
1,624
325
20
12

779
1,392
316
7
7

Department of Labor:
Employment and Training Administration:
Unemployment Trust Fund ���������������������������������������������������������������������

3,421

3,421

3,446

2,128

1,591

1,623

Total, discretionary ���������������������������������������������������������������������������������������

44,256

44,730

47,261

45,094

44,343

45,290

Department of Housing and Urban Development:
Public and Indian Housing Programs:
Public Housing Operating Fund �������������������������������������������������������������
Revitalization of Severely Distressed Public Housing (HOPE VI) ����������
Native Hawaiian Housing Block Grant ���������������������������������������������������
Tenant Based Rental Assistance �����������������������������������������������������������
Project-based Rental Assistance �����������������������������������������������������������
Public Housing Capital Fund �����������������������������������������������������������������
Native American Housing Block Grant ��������������������������������������������������
Choice Neighborhoods ��������������������������������������������������������������������������
Family Self-Sufficiency ��������������������������������������������������������������������������
Rental Assistance Demonstration ����������������������������������������������������������
Community Planning and Development:
Homeless Assistance Grants �����������������������������������������������������������������
Home Investment Partnership Program �������������������������������������������������
Housing Opportunities for Persons with AIDS ���������������������������������������
Rural Housing and Economic Development ������������������������������������������
Permanent Supportive Housing �������������������������������������������������������������

Mandatory:
Department of Agriculture:
Agricultural Marketing Service:
Funds for Strengthening Markets, Income, and Supply (section 32) �����
Food and Nutrition Service:
Supplemental Nutrition Assistance Program �����������������������������������������
Commodity Assistance Program �����������������������������������������������������������
Child Nutrition Programs ������������������������������������������������������������������������

795

1,043

1,052

791

1,071

1,052

6,888
21
18,284

6,956
21
19,696

7,238
21
20,526

6,832
21
18,287

6,949
21
20,844

7,123
21
20,557

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 for Foster Care and Permanency ������������������������������������������
Child Care Entitlement to States ������������������������������������������������������������
Temporary Assistance for Needy Families ���������������������������������������������

3,836
612
7,006
2,917
16,739

4,004
612
6,920
2,917
16,739

4,075
293
7,011
3,417
17,058

3,957
678
6,846
2,828
16,136

3,994
876
6,744
2,908
16,848

4,045
487
6,901
3,322
17,271

Department of Housing and Urban Development:
Public and Indian Housing Programs:
Public Housing Capital Fund �����������������������������������������������������������������
Community Planning and Development:
Housing Trust Fund ��������������������������������������������������������������������������������

.........

.........

.........

88

.........

.........

.........

.........

1,000

.........

.........

10

Department of Labor:
Employment and Training Administration:
Universal Displaced Workers Program ��������������������������������������������������
Unemployment Trust Fund ���������������������������������������������������������������������

.........
389

.........
.........

1,843
.........

.........
389

.........
.........

1,843
.........

Department of the Treasury:
Departmental Offices:
Grants to States for Low-Income Housing Projects in Lieu of LowIncome Housing Credit Allocations ���������������������������������������������������

.........

.........

.........

627

.........

.........

297

17.  Aid to State and Local Governments

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

Total, mandatory �������������������������������������������������������������������������������������������

57,487

58,908

63,534

57,480

60,255

62,632

Total, Income Security ����������������������������������������������������������������������������������

101,743

103,638

110,795

102,574

104,598

107,922

15

19

18

29

19

18

852

975

1,066

852

975

1,066

85
46

86
46

83
45

201
28

105
33

93
32

Social Security
Mandatory:
Social Security Administration:
Federal Disability Insurance Trust Fund �������������������������������������������������
Veterans Benefits and Services
Discretionary:
Department of Veterans Affairs:
Veterans Health Administration:
Medical Services �����������������������������������������������������������������������������������
Departmental Administration:
Grants for Construction of State Extended Care Facilities ��������������������
Grants for Construction of Veterans Cemeteries �����������������������������������
Total, discretionary ���������������������������������������������������������������������������������������

983

1,107

1,194

1,081

1,113

1,191

Total, Veterans Benefits and Services ��������������������������������������������������������

983

1,107

1,194

1,081

1,113

1,191

71

71

71

70

72

79

Administration of Justice
Discretionary:
Department of Housing and Urban Development:
Fair Housing and Equal Opportunity:
Fair Housing Activities ���������������������������������������������������������������������������
Department of Justice:
Legal Activities and U.S. Marshals:
Assets Forfeiture Fund ���������������������������������������������������������������������������
Office of Justice Programs:
Research, Evaluation, and Statistics �����������������������������������������������������
State and Local Law Enforcement Assistance ��������������������������������������
Juvenile Justice Programs ���������������������������������������������������������������������
Community Oriented Policing Services �������������������������������������������������
Violence against Women Prevention and Prosecution Programs ����������

21

21

21

18

20

–1

83
1,014
211
162
388

42
1,038
208
163
382

73
884
280
426
392

124
1,560
335
611
396

158
1,575
342
655
478

101
1,170
328
367
523

Equal Employment Opportunity Commission:
Salaries and Expenses ��������������������������������������������������������������������������

30

30

30

30

30

30

Federal Drug Control Programs:
High-intensity Drug Trafficking Areas Program ��������������������������������������

219

240

193

217

304

192

State Justice Institute:
State Justice Institute: Salaries and Expenses ��������������������������������������

5

5

5

4

7

6

Total, discretionary ���������������������������������������������������������������������������������������

2,204

2,200

2,375

3,365

3,641

2,795

839

589

573

524

560

197

.........
655

3,992
649

.........
750

.........
648

.........
712

2,392
920

Mandatory:
Department of Justice:
Legal Activities and U.S. Marshals:
Assets Forfeiture Fund ���������������������������������������������������������������������������
Office of Justice Programs:
Community Oriented Policing Stabilization Fund �����������������������������������
Crime Victims Fund �������������������������������������������������������������������������������
Department of the Treasury:
Departmental Offices:
Treasury Forfeiture Fund �����������������������������������������������������������������������

139

961

305

153

464

271

Total, mandatory �������������������������������������������������������������������������������������������

1,633

6,191

1,628

1,325

1,736

3,780

Total, Administration of Justice ������������������������������������������������������������������

3,837

8,391

4,003

4,690

5,377

6,575

298

Analytical Perspectives

Table 17–1.  Federal Grants to State and Local Governments—Budget Authority and Outlays—Continued
(in millions of dollars)
Function, Category, Agency and Program

Budget Authority
2013 CR
2014 Estimate

2012 Actual

Outlays
2013 CR

2012 Actual

2014 Estimate

General Government
Discretionary:
Department of the Interior:
United States Fish and Wildlife Service:
National Wildlife Refuge Fund ���������������������������������������������������������������
Insular Affairs:
Assistance to Territories �������������������������������������������������������������������������
Trust Territory of the Pacific Islands �������������������������������������������������������
District of Columbia:
District of Columbia Courts:
Federal Payment to the District of Columbia Courts ������������������������������
Defender Services in District of Columbia Courts ���������������������������������
District of Columbia General and Special Payments:
Federal Support for Economic Development and Management
Reforms in the District ����������������������������������������������������������������������

14

14

.........

14

14

.........

60
.........

61
.........

61
.........

54
1

42
.........

72
.........

243
45

234
55

223
50

260
51

211
62

229
59

23

23

33

23

23

33

Election Assistance Commission:
Election Reform Programs ���������������������������������������������������������������������

.........

.........

.........

6

5

5

Total, discretionary ���������������������������������������������������������������������������������������

385

387

367

409

357

398

Department of Agriculture:
Forest Service:
Forest Service Permanent Appropriations ���������������������������������������������

365

300

347

383

255

340

Department of Energy:
Energy Programs:
Payments to States under Federal Power Act ���������������������������������������

3

3

3

5

3

3

Department of Homeland Security:
Customs and Border Protection:
Refunds, Transfers, and Expenses of Operation, Puerto Rico ��������������

107

103

99

121

127

99

180

44

.........

.........

339

137

8

8

8

7

6

8

2,050
5
4

2,017
3
4

2,100
.........
.........

2,050
5
4

2,017
3
4

2,100
.........
.........

28
313

28
340

28
315

21
313

29
340

36
315

Mandatory:

Department of the Interior:
Office of Surface Mining Reclamation and Enforcement:
Payments to States in Lieu of Coal Fee Receipts ����������������������������������
United States Fish and Wildlife Service:
National Wildlife Refuge Fund ���������������������������������������������������������������
Departmental Offices:
Mineral Leasing and Associated Payments �������������������������������������������
National Petroleum Reserve, Alaska �����������������������������������������������������
Geothermal Lease Revenues, Payment to Counties �����������������������������
Insular Affairs:
Assistance to Territories �������������������������������������������������������������������������
Payments to the United States Territories, Fiscal Assistance ����������������
Department-Wide Programs:
Payments in Lieu of Taxes ���������������������������������������������������������������������

393

401

410

393

401

410

Department of the Treasury:
Alcohol and Tobacco Tax and Trade Bureau:
Internal Revenue Collections for Puerto Rico ����������������������������������������

376

616

433

376

616

433

Total, mandatory �������������������������������������������������������������������������������������������

3,832

3,867

3,743

3,678

4,140

3,881

Total, General Government ��������������������������������������������������������������������������

4,217

4,254

4,110

4,087

4,497

4,279

Total, Grants ��������������������������������������������������������������������������������������������������

541,093

630,993

625,104

544,569

560,987

643,269

Discretionary ������������������������������������������������������������������������������
Transportation obligation limitations (non-add) 1 �������������������������

133,524
53,255

163,436
51,790

133,754
52,626

207,202
.........

200,784
.........

206,070
.........

Mandatory �����������������������������������������������������������������������������������
407,569
467,557
491,350
337,367
360,203
437,199
contract authority provides budget authority for these programs, but program levels are set by discretionary obligation limitations in appropriations bills and outlays are
recorded as discretionary. This table shows the obligation limitations as non-additive items to avoid double counting.
1 Mandatory

299

17.  Aid to State and Local Governments

HISTORICAL PERSPECTIVES
The 19th century witnessed national expansion and a
growth in Federal aid. With westward development and
population growth, Congress recognized a great need for
internal improvement projects. Many early grants came
in the form of land and were used for canals, waterways,
roads and railroads, although, at that time, grants were
made to individuals, corporations, and territories since
most of the States of the trans-Mississippi west did not
enter the Union until after the Civil War.
The rudiments of the present system of State grantsin-aid date back to the Civil War. After the War, key
Supreme Court decisions expanded Federal powers under the Necessary and Proper Clause of the Constitution.
Congress supported westward expansion with the Pacific
Railroad Act of 1862, which enabled the government to
charter railroad corporations that constructed a transcontinental railroad. 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 present-day grant programs.
The Weeks Act of 1911 is an early example of the modern grant-in-aid program model because it contained several mechanisms that became common in future grants,
including conditioning the receipt of Federal funds on
approval of State plans, requiring matching State funds,
12
and specifying the oversight role of Federal officials. 
In 1914, Congress passed the Smith-Lever Act, another
early grant-in-aid program which distributed millions of
dollars in agricultural assistance to States for extension
services by the land grant universities.
During the Great Depression, the reach of Federal
grants-in-aid expanded to meet income security and other social welfare needs. The Federal Emergency Relief
Act of 1933 was the first piece of legislation that specifi13
cally provided fiscal relief to States through grants. 
However, Federal grants did not become a significant
portion of Federal Government expenditures until after
World War II. During the mid-part of the 20th century,
the Eisenhower Administration made great investments
in the national infrastructure system through the creation of the Interstate Highway program.
14
As shown in Table 17-2,  Federal grants for transportation were $3.0 billion, or 43 percent of all Federal
grants, in 1960 due to the initiation of aid-to-States to
build the Interstate Highway System in the late 1950s.
Transportation is now the fourth largest grant category
and accounted for 11 percent of total grant outlays in
2012.
12  Canada, Ben. February 19, 2003. Federal Grants to State and Local Governments: A Brief History. Congressional Re-search Service, The
Library of Congress.
13  Ibid.
14  Table 17–2 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 grant funding are broken out on
separate lines. Grants for national defense, energy, social security, and
veterans benefits and services functions are combined on the “Other’’
line.

By 1970 there had been significant increases in grant
funding for education, training, employment, and social
services. This function was the largest grant category in
1970 and accounted for 27 percent of total grant outlays.
In 2012, education, training, employment, and social services constituted 12 percent of total grant outlays. Also, in
the early and mid-1970s, major new grants were created
for community and regional development (e.g. community
development block grants), natural resources and environment (e.g. construction of sewage treatment plants),
and general government (e.g. general revenue sharing).
In 2012, outlays for community and regional development
grants were 3.7 percent of total grant spending. Outlays
for natural resources and environment grants were 1.4
percent in the same year, and outlays for grants in the
general government category made up less than one percent of total grant outlays.
Since 1980, changes in the relative amounts among
functions reflect steady growth of grants for health (primarily Medicaid) and income security. In 1980, grants
for health programs composed 17 percent of total grant
spending. This amount grew to 32 percent in 1990 and 48
percent in 2010. In 2012, expenditures for health grants
were $268.3 billion and 49 percent of total Federal grant
spending.
Grants for income security programs accounted for 20
percent of grant funding in 1980, 27 percent in 1990 and
19 percent in 2010. Expenditures for income security
grants were $102.6 billion and 19 percent of Federal grant
spending in 2012.
Section B of Table 17-2 distributes grants between
mandatory and discretionary spending. Programs whose
funding is provided directly in authorizing legislation
are categorized as mandatory. Funding levels for most
mandatory programs can only be changed by changing eligibility criteria or benefit formulas established in
law and are usually not limited by the annual appro15
Outlays for mandatory grant propriations process. 
grams were $337.4 billion in 2012. As shown in Table
17-1, the three largest mandatory grant programs in 2012
were Medicaid, with outlays of $250.5 billion; Temporary
Assistance for Needy Families, $16.1 billion; and Child
Nutrition Programs, which include the School Breakfast
Program, the National School Lunch Program and others, $18.3 billion. In 2014 grants-in-aid with mandatory
funding are estimated to have outlays of $437.2 billion, an
increase of $99.8 billion from 2012.
Funding levels for discretionary grant programs are determined annually through appropriations acts. Outlays
for discretionary grant programs were $207.2 billion in
2012. As shown in Table 17-1, the three largest discretionary programs in 2012 were Federal-aid Highways,
$39.0 billion; Tenant Based Rental Assistance, $18.0 billion; and Accelerating Achievement and Ensuring Equity
(Education for the Disadvantaged), $17.0 billion. In 2014,
grants-in-aid with discretionary funding are estimated to
15  For more information on these categories, see Chapter 12, “Budget
Concepts,’’ in this volume.

300
have outlays of $206.1 billion, a decrease of $1.1 billion
from 2012.
Section C of Table 17–2 divides grants among three
major categories: payments for individuals, grants for
physical capital, and other grants. Grant outlays for
payments for individuals, which are primarily 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 about a
third of the total in 1960 to slightly less than two-thirds
in the mid-1990s, and have remained about that proportion since. 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, child nutrition programs,
and housing assistance are also large grants in this category. Grant spending in the payments for individuals
category equaled $387.8 billion in 2012 or 64 percent of
total grant spending.
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

Analytical Perspectives

plant construction, and community development. 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 2012, grants for physical capital were $85.2
billion, 16 percent of total grants.
All other grants are captured in the “other” category.
These grants were 18 percent of total grants in 2012 and
totaled $99.3 billion.
Section D of Table 17-2 shows grants as a percent of
Federal outlays, State and local expenditures, and gross
domestic product. Grants have increased as a percent of
total Federal outlays from 11 percent in 1990 to 18 percent
in 2010 and were 15 percent in 2012. Grants as a percent
of domestic programs were 16 percent in 2012. Federal
grants have increased as a percent of total State and local
expenditures since 1990 when they were 19 percent. In
2010, spending for grants was 28 percent of total State
and local expenditures and in 2012 it was 24 percent.
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 27
percent of State and local gross investment in 2012.

301

17.  Aid to State and Local Governments

Table 17–2.  Trends in Federal Grants to State and Local Governments
(Outlays in billions of dollars)
Actual
1960

1970

1980

1990

2000

Estimate
2005

2010

2011

2012

2013 CR

2014

A. Distribution of grants by function:
Natural resources and environment ��������������������������������������������
Agriculture �����������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������
Community and regional development ����������������������������������������
Education, training, employment, and social services �����������������
Health ������������������������������������������������������������������������������������������
Income security ���������������������������������������������������������������������������
Administration of justice ���������������������������������������������������������������
General government ��������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������

0.1
0.2
3.0
0.1
0.5
0.2
2.6
.........
0.2
0.0

0.4
0.6
4.6
1.8
6.4
3.8
5.8
0.0
0.5
0.1

5.4
0.6
13.0
6.5
21.9
15.8
18.5
0.5
8.6
0.7

3.7
1.3
19.2
5.0
21.8
43.9
36.8
0.6
2.3
0.8

4.6
0.7
32.2
8.7
36.7
124.8
68.7
5.3
2.1
2.1

5.9
0.9
43.4
20.2
57.2
197.8
90.9
4.8
4.4
2.6

9.1
0.8
61.0
18.8
97.6
290.2
115.2
5.1
5.2
5.4

8.3
0.9
61.0
19.9
89.1
292.8
113.6
4.9
7.6
8.5

7.8
0.6
60.7
20.3
68.1
268.3
102.6
4.7
4.1
7.4

7.1
0.9
62.9
17.1
67.1
286.4
104.6
5.4
4.5
5.0

6.5
1.1
71.1
21.1
96.5
323.6
107.9
6.6
4.3
4.5

Total ���������������������������������������������������������������������������������������

7.0

24.1

91.4

135.3

285.9

428.0

608.4

606.8

544.6

561.0

643.3

B. Distribution of grants by BEA category:
Discretionary �������������������������������������������������������������������������������
Mandatory �����������������������������������������������������������������������������������

N/A
N/A

10.2
13.9

53.3
38.1

63.3
72.0

116.7
169.2

181.7
246.3

207.7
400.7

189.8
416.9

207.2
337.4

200.8
360.2

206.1
437.2

Total ���������������������������������������������������������������������������������������

7.0

24.1

91.4

135.3

285.9

428.0

608.4

606.8

544.6

561.0

643.3

Current dollars:
Payments for individuals 1 �������������������������������������������������������
Physical capital 1 ���������������������������������������������������������������������
Other grants ����������������������������������������������������������������������������

2.5
3.3
1.2

8.7
7.1
8.3

32.6
22.6
36.2

77.3
27.2
30.9

182.6
48.7
54.6

273.9
60.8
93.3

384.5
93.3
130.6

387.8
96.5
122.4

360.1
85.2
99.3

382.2
83.1
95.7

421.3
92.7
129.3

C. Composition:

Total ����������������������������������������������������������������������������������

7.0

24.1

91.4

135.3

285.9

428.0

608.4

606.8

544.6

561.0

643.3

Percentage of total grants:
Payments for individuals 1 �������������������������������������������������������
Physical capital 1 ���������������������������������������������������������������������
Other grants ����������������������������������������������������������������������������

35.3%
47.3%
17.4%

36.2%
29.3%
34.5%

35.7%
24.7%
39.6%

57.1%
20.1%
22.8%

63.9%
17.0%
19.1%

64.0%
14.2%
21.8%

63.2%
15.3%
21.5%

63.9%
15.9%
20.2%

66.1%
15.6%
18.2%

68.1%
14.8%
17.1%

65.5%
14.4%
20.1%

Total ����������������������������������������������������������������������������������

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Constant (FY 2005) dollars:
Payments for individuals 1 ������������������������������������������������������
Physical capital 1 ���������������������������������������������������������������������
Other grants ����������������������������������������������������������������������������

13.3
19.6
12.3

37.3
31.4
55.0

71.1
44.9
111.1

107.6
37.6
53.0

203.2
56.5
67.0

273.9
60.8
93.3

344.0
76.0
112.5

339.6
76.9
103.2

307.6
66.4
81.7

320.1
63.0
76.7

345.3
68.1
100.3

Total ����������������������������������������������������������������������������������

45.3

123.7

227.1

198.1

326.8

428.0

532.5

519.7

455.7

459.9

513.7

Federal outlays:
Total ����������������������������������������������������������������������������������������
Domestic programs 2 ��������������������������������������������������������������
State and local expenditures �������������������������������������������������������
Gross domestic product ���������������������������������������������������������������

7.6%
18.0%
14.8%
1.4%

12.3%
23.2%
20.1%
2.4%

15.5%
22.2%
27.4%
3.4%

10.8%
17.1%
18.9%
2.4%

16.0%
22.0%
22.2%
2.9%

17.3%
23.5%
24.5%
3.4%

17.6%
23.3%
28.4%
4.2%

16.8%
22.4%
27.5%
4.1%

15.4%
16.2%
24.5%
3.5%

15.2%
16.1%
N/A
3.5%

17.0%
18.0%
N/A
3.8%

E. As a share of total State and local gross investments:
Federal capital grants ������������������������������������������������������������������
State and local own-source financing ������������������������������������������

24.6%
75.4%

25.4%
74.6%

35.4%
64.6%

21.9%
78.1%

22.0%
78.0%

22.0%
78.0%

27.5%
72.5%

29.7%
70.3%

26.8%
73.2%

25.5%
74.5%

27.2%
72.8%

Total ��������������������������������������������������������������������������������������� 100.0% 100.0% 100.0% 100.0%
N/A: Not available at publishing.
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.

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

D. Total grants as a percent of:

302

Analytical Perspectives

OTHER INFORMATION ON FEDERAL AID TO STATE AND LOCAL GOVERNMENTS
Over the past two years, the Administration has worked
with stakeholders to better direct financial assistance to
achieve outcomes by reforming administrative procedures
to reduce the risk of waste, fraud, and abuse, and lessen
the administrative burdens. In February 2013, OMB
published a proposal to this effect that would streamline
eight previously overlapping sets of guidance into one.
The proposal is available for public comment until June
2, 2013 on regulations.gov under docket OMB-2013-0001.
Additional information regarding aid to State and local governments can be found elsewhere in this Budget.
Major public physical capital investment programs providing Federal grants to State and local governments
are identified in Chapter 20, “Federal Investment,’’ in
this volume. Summary and detailed data for grants
to State and local governments can be found in many
sections of a separate volume of the Budget 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 Major Public 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, a number of other sources provide Stateby-State spending data, information on how to apply for
Federal aid, or display information about audits but use a
slightly difference concept of grants.
The website Grants.gov is a primary source of information for communities wishing to apply for grants and
other domestic assistance. Grants.gov hosts all open notices of opportunities to apply for Federal grants. The
Catalog of Federal Domestic Assistance hosted by the
General Services Administration contains detailed list-

ings 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 www.cfda.gov.
Current and updated grant receipt information by
State and local governments and other non-Federal entities can be found on USAspending.gov. This public website also contains contract and loan information and is updated twice per month. Additionally, information about
grants provided specifically by the Recovery Act can be
found on Recovery.gov.
Prior to the creation of USAspending.gov, the Bureau
of the Census in the Department of Commerce provided
data on public finances and has published data on Federal
aid to State and local governments in the Consolidated
Federal Funds Report and the Federal Aid to States report. However, the Federal Financial Statistics program
was terminated so there are no new reports after 2010.
The Federal Audit Clearinghouse maintains an
on-line database (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.
The Bureau of Economic Analysis, also in the
Department of Commerce, publishes the monthly Survey
of Current Business, which 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 28, “National Income and Product
Accounts.’’

APPENDIX: SELECTED GRANT DATA BY STATE
This Appendix displays State-by-State spending for select grant programs to State and local governments with
summary information in the first two tables. The programs selected here cover almost 84 percent of total grant
spending.
The first summary table, “Summary of Programs by
Agency, Bureau, and Program” shows obligations for each
program by agency and bureau. The second summary table, “Summary of Grant Programs by State,’’ shows total
obligations for each State across all programs.
The individual program tables display obligations for
each program on a State-by-State basis, consistent with
the estimates in this Budget. Each table reports the following information:

•	 The Treasury budget account number from which
the program is funded.
•	 Actual 2012 obligations for States, Federal territories, or Indian Tribes in thousands of dollars. Undistributed obligations are generally project funds
that are not distributed by formula, or programs for
which State-by-State data are not available.
•	 Obligations in 2013 from previous budgeted authority distributed by State. For discretionary programs,
obligations by State in 2013 are determined by calculating the full year rate under the continuing resolution enacted in P.L. 112-175.

•	 The Federal agency that administers the program.

•	 Estimates of 2014 obligations by State, which are
based on the 2014 Budget request, unless otherwise
noted.

•	 The program title and number as contained in the
Catalog of Federal Domestic Assistance.

•	 The percentage share of 2014 estimated program
funds distributed to each State.

303

17.  Aid to State and Local Governments

Table 17–3. Summary of Programs by Agency, Bureau, and Program
(Obligations in millions of dollars)
Agency, Bureau, and Program

FY 2012
(actual)

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority New authority
Total

FY 2014
(estimated)

Department of Agriculture, Food and Nutrition Service:
School Breakfast Program (10.553) ����������������������������������������������������������������������������������������������������������������������
National School Lunch Program (10.555) �������������������������������������������������������������������������������������������������������������
Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557) ��������������������������������
Child and Adult Care Food Program (10.558) �������������������������������������������������������������������������������������������������������
State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (Food Stamps) (10.561) ����

3,351
10,427
7,074
2,846
3,958

.........
618
364
.........
10

3,605
10,846
6,660
2,937
4,561

3,605
11,463
7,024
2,937
4,571

3,843
11,718
7,128
3,052
4,839

Department of Education, Office of Elementary and Secondary Education:
Title I College-And-Career-Ready Students (Formerly Title I Grants to Local Educational Agencies) (84.010) ���
Improving Teacher Quality State Grants (84.367) �������������������������������������������������������������������������������������������������
Effective Teachers and Leaders State Grants �������������������������������������������������������������������������������������������������������

14,516
2,467
.........

.........
.........
.........

14,539
2,471
.........

14,539
2,471
.........

14,516
.........
2,467

Department of Education, Office of Special Education and Rehabilitative Services:
Vocational Rehabilitation Grants (84.126) �������������������������������������������������������������������������������������������������������������
Special Education-Grants to States (84.027) ��������������������������������������������������������������������������������������������������������

3,122
11,578

.........
.........

3,231
11,649

3,231
11,649

3,302
11,578

Department of Health and Human Services, Centers for Medicare and Medicaid Services:
Children’s Health Insurance Program (93.767) �����������������������������������������������������������������������������������������������������
Grants to States for Medicaid (93.778) ������������������������������������������������������������������������������������������������������������������
Affordable Insurance Exchange Grants (93.525) ��������������������������������������������������������������������������������������������������

14,982
270,914
1,625

.........
.........
.........

17,406
269,169
2,698

17,406
269,169
2,698

19,147
306,708
1,292

Department of Health and Human Services, Administration for Children and Families:
Temporary Assitance 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) ������������������������������������������������������������������������������������������������������������������������������
Adoption Assistance (93.659) ��������������������������������������������������������������������������������������������������������������������������������
Social Services Block Grant (93.667) ��������������������������������������������������������������������������������������������������������������������

16,721
4,134
3,472
2,278
1,239
1,678
7,968
4,180
2,296
1,700

.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

16,739
4,268
3,493
2,292
1,239
1,678
8,017
4,286
2,369
1,700

16,739
4,268
3,493
2,292
1,239
1,678
8,017
4,286
2,369
1,700

17,058
4,339
3,020
2,478
1,253
2,164
9,616
4,281
2,463
1,700

Department of Health and Human Services, HIV/AIDS Bureau:
Ryan White HIV/AIDS Treatment Modernization Act-Part B HIV Care Grants (93.917) ����������������������������������������

1,306

.........

1,329

1,329

1,371

Department of Housing and Urban Development, Public and Indian Housing Programs:
Public Housing Operating Fund (14.850) ��������������������������������������������������������������������������������������������������������������
Section 8 Housing Choice Vouchers (14.871) �������������������������������������������������������������������������������������������������������
Public Housing Capital Fund (14.872) �������������������������������������������������������������������������������������������������������������������

3,957
18,316
1,880

4
154
76

3,986
19,006
1,866

3,990
19,159
1,942

4,560
19,996
1,999

Department of Housing and Urban Development, Community Planning and Development:
Community Development Block Grant (14.218; 14.225; 14.228; 14.862) ��������������������������������������������������������������

3,715

617

9,578

10,195

12,971

Department of Labor, Employment and Training Administration:
Unemployment Insurance (17.225) �����������������������������������������������������������������������������������������������������������������������
Pathways Back to Work �����������������������������������������������������������������������������������������������������������������������������������������

3,159
.........

.........
.........

3,165
10,500

3,165
10,500

3,845
.........

Department of Transportation, Federal Aviation Administration:
Airport Improvement Program (20.106) �����������������������������������������������������������������������������������������������������������������

3,304

.........

3,184

3,184

2,725

Department of Transportation, Federal Highway Administration:
Highway Planning and Construction (20.205) �������������������������������������������������������������������������������������������������������

37,633

.........

41,287

41,287

41,895

Department of Transportation, Federal Transit Administration:
Transit Formula Grants Programs (20.507) �����������������������������������������������������������������������������������������������������������

9,604

5,470

4,086

9,556

10,125

Environmental Protection Agency, Office of Water:
Capitalization Grants for Clean Water State Revolving Fund (66.458) ������������������������������������������������������������������
Capitalization Grants for Drinking Water State Revolving Fund (66.468) ��������������������������������������������������������������

1,682
1,199

91
75

1,366
843

1,456
918

1,095
817

Federal Communications Commission:
Universal Service Fund E-Rate �����������������������������������������������������������������������������������������������������������������������������
Total ����������������������������������������������������������������������������������������������������������������������������������������������������������������������

1,831
480,110

1,383
8,861

437
496,484

1,820
505,346

1,882
541,244

304

Analytical Perspectives

Table 17–4. 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 ����������������������������������������������������������������������������������������������������������
Freely Associated States �������������������������������������������������������������������������������������
Virgin Islands �������������������������������������������������������������������������������������������������������
Indian Tribes ��������������������������������������������������������������������������������������������������������
Total, programs distributed by State in all years ���������������������������������������
MEMORANDUM:
Not distributed by State in all years 1 ��������������������������������������������������������������
Total, including undistributed ��������������������������������������������������������������������������
* $500 or less or 0.005 percent or less.
1 The sum of programs not distributed by State in all years.

All programs FY
2012 (actual)

Estimated FY 2013 obligations from:
Previous
2013 CR or New
authority
authority
Total

FY 2014
(estimated)

FY 2014
Percentage of
distributed total

7,428
2,118
9,023
5,554
55,210
5,044
5,864
1,501
2,680
19,949
11,990
1,845
2,063
15,391
8,782
4,031
3,179
7,166
8,599
2,497
7,389
12,063
14,884
7,634
6,091
9,354
1,589
2,195
2,467
1,332
11,700
4,352
45,415
13,720
1,432
17,860
5,519
5,391
19,766
2,076
5,809
1,204
9,944
31,843
2,922
1,713
7,530
8,643
3,605
7,888
711
66
173
69
2,959
7
171
983
458,381

111
37
162
31
1,077
56
345
37
219
460
321
34
28
296
96
41
45
74
166
21
243
267
204
107
51
85
15
41
49
19
247
56
1,443
176
16
172
65
69
368
50
73
13
100
513
33
20
154
128
37
93
10
3
6
4
142
.........
10
7
8,749

6,884
2,069
9,296
5,130
61,383
5,200
5,795
1,471
2,542
21,201
11,921
1,761
2,186
15,666
8,758
4,062
3,162
7,425
7,902
2,428
7,543
12,076
15,284
7,831
6,036
9,302
1,632
2,171
2,546
1,359
14,022
4,192
53,678
14,094
1,081
18,998
5,655
6,117
19,664
2,008
6,060
1,138
10,471
35,629
2,784
1,530
7,944
8,250
3,672
7,911
831
81
195
78
3,793
7
190
1,167
483,263

6,995
2,106
9,458
5,161
62,461
5,256
6,140
1,508
2,761
21,661
12,242
1,795
2,214
15,962
8,855
4,103
3,207
7,499
8,069
2,450
7,785
12,343
15,488
7,938
6,087
9,387
1,647
2,212
2,596
1,378
14,269
4,248
55,121
14,270
1,097
19,171
5,720
6,186
20,032
2,058
6,134
1,151
10,571
36,143
2,817
1,550
8,099
8,378
3,709
8,004
840
83
201
82
3,935
7
200
1,174
492,011

6,917
2,074
9,264
5,253
56,895
5,020
6,504
1,506
2,852
21,758
11,898
1,779
2,208
15,272
9,258
4,081
3,144
7,387
7,938
2,445
7,743
12,072
15,141
8,095
5,634
9,347
1,606
2,232
2,517
1,370
13,229
4,464
51,765
14,245
1,321
19,617
5,759
6,528
19,885
2,034
5,965
1,143
10,960
35,426
2,826
1,531
8,079
8,632
3,629
7,652
802
67
180
74
3,722
7
187
1,045
479,981

1.44
0.43
1.93
1.09
11.85
1.05
1.35
0.31
0.59
4.53
2.48
0.37
0.46
3.18
1.93
0.85
0.66
1.54
1.65
0.51
1.61
2.51
3.15
1.69
1.17
1.95
0.33
0.47
0.52
0.29
2.76
0.93
10.78
2.97
0.28
4.09
1.20
1.36
4.14
0.42
1.24
0.24
2.28
7.38
0.59
0.32
1.68
1.80
0.76
1.59
0.17
0.01
0.04
0.02
0.78
*
0.04
0.22
100.00

21,730
480,110

115
8,864

13,222
496,484

13,337
505,348

61,269
541,249

N/A
N/A

305

17.  Aid to State and Local Governments
Department of Agriculture, Food and Nutrition Service	

12-3539-0-1-605

Table 17–5. School Breakfast Program (10.553)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

57,618
8,249
71,763
41,340
385,737
34,753
23,354
9,105
8,452
184,870
155,917
10,992
16,971
110,475
64,639
20,788
25,043
64,683
65,720
10,459
45,475
39,881
94,357
38,541
56,654
62,231
6,709
13,987
23,985
4,755
57,625
37,085
169,785
108,275
4,381
100,787
52,876
33,238
82,177
8,701
67,844
6,532
83,546
468,286
17,603
5,032
63,516
48,455
24,612
40,702
3,329
.........
2,338
.........
32,367
.........
1,341
.........
72,647
3,350,583

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

63,372
9,073
78,929
45,468
424,256
38,223
25,686
10,014
9,296
203,331
171,486
12,090
18,666
121,507
71,094
22,864
27,544
71,142
72,283
11,503
50,016
43,863
103,779
42,390
62,311
68,445
7,379
15,384
26,380
5,230
63,379
40,788
186,739
119,087
4,818
110,851
58,156
36,557
90,383
9,570
74,619
7,184
91,889
515,048
19,361
5,534
69,859
53,294
27,070
44,766
3,661
.........
2,571
.........
35,599
.........
1,475
.........
.........
3,605,262

63,372
9,073
78,929
45,468
424,256
38,223
25,686
10,014
9,296
203,331
171,486
12,090
18,666
121,507
71,094
22,864
27,544
71,142
72,283
11,503
50,016
43,863
103,779
42,390
62,311
68,445
7,379
15,384
26,380
5,230
63,379
40,788
186,739
119,087
4,818
110,851
58,156
36,557
90,383
9,570
74,619
7,184
91,889
515,048
19,361
5,534
69,859
53,294
27,070
44,766
3,661
.........
2,571
.........
35,599
.........
1,475
.........
.........
3,605,262

FY 2014
(estimated)
67,549
9,671
84,131
48,465
452,219
40,743
27,379
10,674
9,909
216,733
182,789
12,886
19,896
129,515
75,780
24,371
29,359
75,831
77,047
12,262
53,313
46,755
110,620
45,184
66,418
72,957
7,865
16,398
28,119
5,575
67,557
43,477
199,048
126,936
5,136
118,158
61,989
38,967
96,340
10,201
79,537
7,658
97,945
548,996
20,637
5,899
74,463
56,806
28,854
47,717
3,903
.........
2,741
.........
37,945
.........
1,572
.........
.........
3,842,895

FY 2014
Percentage of
distributed total
1.76
0.25
2.19
1.26
11.77
1.06
0.71
0.28
0.26
5.64
4.76
0.34
0.52
3.37
1.97
0.63
0.76
1.97
2.00
0.32
1.39
1.22
2.88
1.18
1.73
1.90
0.20
0.43
0.73
0.15
1.76
1.13
5.18
3.30
0.13
3.07
1.61
1.01
2.51
0.27
2.07
0.20
2.55
14.29
0.54
0.15
1.94
1.48
0.75
1.24
0.10
.........
0.07
.........
0.99
.........
0.04
.........
.........
1 100.00

306

Analytical Perspectives

Department of Agriculture, Food and Nutrition Service	

12-3539-0-1-605

Table 17–6. National School Lunch Program (10.555)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

183,351
30,183
239,953
120,251
1,357,783
121,566
82,493
28,301
19,608
630,089
435,189
41,327
49,653
390,969
226,654
90,108
93,903
168,123
191,580
31,552
138,262
146,793
282,313
138,576
151,112
186,373
24,123
60,688
81,692
21,995
217,342
85,807
600,836
333,739
16,846
325,715
142,228
99,426
302,360
27,119
171,178
25,453
227,131
1,241,109
87,531
13,638
204,526
175,315
58,896
154,345
13,198
.........
6,844
.........
124,364
.........
5,851
.........
1,471
10,426,831

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New authority
Total
10,864
1,788
14,217
7,125
80,449
7,203
4,888
1,677
1,162
37,333
25,785
2,449
2,942
23,165
13,429
5,339
5,564
9,961
11,351
1,869
8,192
8,698
16,727
8,211
8,953
11,043
1,429
3,596
4,840
1,303
12,878
5,084
35,600
19,774
998
19,299
8,427
5,891
17,915
1,607
10,142
1,508
13,458
73,536
5,186
808
12,118
10,388
3,490
9,145
782
.........
406
.........
7,369
.........
347
.........
.........
617,708

190,742
31,400
249,625
125,098
1,412,515
126,466
85,818
29,442
20,398
655,488
452,731
42,993
51,655
406,729
235,790
93,740
97,688
174,900
199,303
32,824
143,835
152,710
293,693
144,162
157,203
193,886
25,095
63,134
84,985
22,882
226,103
89,266
625,056
347,192
17,525
338,845
147,961
103,434
314,548
28,212
178,078
26,479
236,287
1,291,138
91,059
14,188
212,770
182,382
61,270
160,567
13,730
.........
7,120
.........
129,377
.........
6,087
.........
.........
10,845,604

201,606
33,188
263,842
132,223
1,492,964
133,669
90,706
31,119
21,560
692,821
478,516
45,442
54,597
429,894
249,219
99,079
103,252
184,861
210,654
34,693
152,027
161,408
310,420
152,373
166,156
204,929
26,524
66,730
89,825
24,185
238,981
94,350
660,656
366,966
18,523
358,144
156,388
109,325
332,463
29,819
188,220
27,987
249,745
1,364,674
96,245
14,996
224,888
192,770
64,760
169,712
14,512
.........
7,526
.........
136,746
.........
6,434
.........
.........
11,463,312

FY 2014
(estimated)
206,077
33,924
269,695
135,156
1,526,080
136,634
92,718
31,809
22,038
708,189
489,131
46,449
55,808
439,430
254,748
101,277
105,542
188,962
215,326
35,463
155,400
164,988
317,306
155,753
169,842
209,474
27,113
68,210
91,818
24,721
244,282
96,443
675,310
375,106
18,934
366,087
159,857
111,750
339,838
30,480
192,396
28,608
255,284
1,394,945
98,380
15,328
229,877
197,045
66,196
173,476
14,834
.........
7,692
.........
139,779
.........
6,576
.........
.........
11,717,584

FY 2014
Percentage of
distributed total
1.76
0.29
2.30
1.15
13.02
1.17
0.79
0.27
0.19
6.04
4.17
0.40
0.48
3.75
2.17
0.86
0.90
1.61
1.84
0.30
1.33
1.41
2.71
1.33
1.45
1.79
0.23
0.58
0.78
0.21
2.08
0.82
5.76
3.20
0.16
3.12
1.36
0.95
2.90
0.26
1.64
0.24
2.18
11.90
0.84
0.13
1.96
1.68
0.56
1.48
0.13
.........
0.07
.........
1.19
.........
0.06
.........
.........
1 100.00

307

17.  Aid to State and Local Governments
Department of Agriculture, Food and Nutrition Service	

12-3510-0-1-605

Table 17–7. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

119,898
23,328
129,787
72,623
1,261,722
78,986
48,026
16,537
14,919
376,083
297,011
36,220
30,480
231,311
113,887
49,354
52,694
106,755
126,363
19,116
112,025
89,440
198,697
103,325
88,193
104,594
16,714
33,306
52,374
11,362
150,002
44,325
466,238
205,028
11,293
189,028
70,301
81,227
217,724
20,253
101,387
18,054
128,405
561,225
47,923
13,622
102,411
154,380
38,541
93,033
8,773
7,626
8,864
5,658
246,978
.........
7,855
58,626
512
7,074,422

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New authority
Total
6,165
1,200
6,674
3,734
64,879
4,062
2,470
850
767
19,338
15,272
1,862
1,567
11,894
5,856
2,538
2,710
5,489
6,498
983
5,760
4,599
10,217
5,313
4,535
5,378
859
1,713
2,693
584
7,713
2,279
23,974
10,543
581
9,720
3,615
4,177
11,196
1,041
5,213
928
6,603
28,859
2,464
700
5,266
7,938
1,982
4,784
451
392
456
291
12,700
.........
404
3,015
.........
363,744

112,883
21,963
122,193
68,374
1,187,896
74,364
45,216
15,569
14,046
354,078
279,632
34,101
28,697
217,777
107,223
46,466
49,611
100,509
118,969
17,997
105,470
84,207
187,071
97,279
83,033
98,474
15,736
31,357
49,309
10,697
141,225
41,731
438,958
193,031
10,632
177,968
66,188
76,474
204,985
19,068
95,455
16,998
120,892
528,387
45,119
12,825
96,419
145,347
36,286
87,589
8,260
7,180
8,345
5,327
232,527
.........
7,395
55,196
.........
6,660,004

119,048
23,163
128,867
72,108
1,252,775
78,426
47,686
16,419
14,813
373,416
294,904
35,963
30,264
229,671
113,079
49,004
52,321
105,998
125,467
18,980
111,230
88,806
197,288
102,592
87,568
103,852
16,595
33,070
52,002
11,281
148,938
44,010
462,932
203,574
11,213
187,688
69,803
80,651
216,181
20,109
100,668
17,926
127,495
557,246
47,583
13,525
101,685
153,285
38,268
92,373
8,711
7,572
8,801
5,618
245,227
.........
7,799
58,211
.........
7,023,748

FY 2014
(estimated)
120,811
23,506
130,775
73,176
1,271,328
79,587
48,392
16,663
15,033
378,946
299,272
36,496
30,712
233,072
114,754
49,730
53,095
107,568
127,325
19,262
112,878
90,121
200,210
104,112
88,864
105,390
16,841
33,560
52,773
11,449
151,144
44,662
469,788
206,589
11,379
190,467
70,836
81,845
219,382
20,407
102,159
18,191
129,383
565,498
48,288
13,726
103,191
155,555
38,834
93,741
8,840
7,684
8,931
5,701
248,858
.........
7,915
59,072
.........
7,127,767

FY 2014
Percentage of
distributed total
1.69
0.33
1.83
1.03
17.84
1.12
0.68
0.23
0.21
5.32
4.20
0.51
0.43
3.27
1.61
0.70
0.74
1.51
1.79
0.27
1.58
1.26
2.81
1.46
1.25
1.48
0.24
0.47
0.74
0.16
2.12
0.63
6.59
2.90
0.16
2.67
0.99
1.15
3.08
0.29
1.43
0.26
1.82
7.93
0.68
0.19
1.45
2.18
0.54
1.32
0.12
0.11
0.13
0.08
3.49
.........
0.11
0.83
.........
1 100.00

308

Analytical Perspectives

Department of Agriculture, Food and Nutrition Service	

12-3539-0-1-605

Table 17–8. Child and Adult Care Food Program (10.558)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

37,816
8,439
43,146
47,209
280,517
22,954
14,972
14,581
7,889
173,839
101,264
6,325
6,300
128,026
46,829
28,006
33,354
32,875
71,991
9,813
45,856
57,319
61,993
64,236
37,281
48,909
10,397
31,921
6,701
4,170
64,407
32,886
208,117
82,424
10,596
88,894
55,005
31,162
92,879
7,590
27,613
9,014
57,169
280,487
26,029
4,959
44,647
41,716
15,390
40,276
5,455
.........
366
.........
27,083
.........
977
.........
106,335
2,846,404

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

40,539
9,047
46,253
50,609
300,719
24,607
16,050
15,631
8,457
186,358
108,557
6,780
6,754
137,246
50,201
30,023
35,756
35,243
77,175
10,520
49,158
61,447
66,457
68,862
39,966
52,431
11,146
34,220
7,184
4,470
69,045
35,254
223,105
88,360
11,359
95,296
58,966
33,406
99,568
8,137
29,602
9,663
61,286
300,686
27,903
5,316
47,862
44,720
16,498
43,177
5,848
.........
392
.........
29,033
.........
1,047
.........
.........
2,937,395

40,539
9,047
46,253
50,609
300,719
24,607
16,050
15,631
8,457
186,358
108,557
6,780
6,754
137,246
50,201
30,023
35,756
35,243
77,175
10,520
49,158
61,447
66,457
68,862
39,966
52,431
11,146
34,220
7,184
4,470
69,045
35,254
223,105
88,360
11,359
95,296
58,966
33,406
99,568
8,137
29,602
9,663
61,286
300,686
27,903
5,316
47,862
44,720
16,498
43,177
5,848
.........
392
.........
29,033
.........
1,047
.........
.........
2,937,395

FY 2014
(estimated)
42,123
9,400
48,061
52,586
312,469
25,569
16,677
16,242
8,788
193,640
112,798
7,045
7,018
142,609
52,163
31,196
37,153
36,620
80,191
10,931
51,079
63,848
69,054
71,553
41,527
54,480
11,581
35,557
7,464
4,645
71,743
36,632
231,823
91,812
11,803
99,019
61,270
34,712
103,458
8,455
30,758
10,041
63,681
312,436
28,994
5,524
49,733
46,468
17,143
44,864
6,076
.........
408
.........
30,168
.........
1,088
.........
.........
3,052,176

FY 2014
Percentage of
distributed total
1.38
0.31
1.57
1.72
10.24
0.84
0.55
0.53
0.29
6.34
3.70
0.23
0.23
4.67
1.71
1.02
1.22
1.20
2.63
0.36
1.67
2.09
2.26
2.34
1.36
1.78
0.38
1.16
0.24
0.15
2.35
1.20
7.60
3.01
0.39
3.24
2.01
1.14
3.39
0.28
1.01
0.33
2.09
10.24
0.95
0.18
1.63
1.52
0.56
1.47
0.20
.........
0.01
.........
0.99
.........
0.04
.........
.........
1 100.00

309

17.  Aid to State and Local Governments
Department of Agriculture, Food and Nutrition Service	

12-3505-0-1-605

Table 17–9. State Administrative Matching Grants for the Supplemental
Nutrition Assistance Program (Food Stamps) (10.561)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

41,390
12,999
56,933
30,177
771,730
45,405
34,288
12,654
12,513
90,696
80,134
13,839
9,966
109,653
44,738
23,801
23,000
46,494
64,896
12,962
52,017
51,375
152,213
57,022
25,937
48,075
10,380
14,584
18,584
8,140
128,909
33,219
376,324
83,174
8,180
92,681
47,635
75,480
175,283
9,428
20,527
5,970
53,006
224,281
24,015
9,908
93,540
74,440
16,711
48,117
5,212
.........
1,295
.........
.........
.........
5,131
.........
368,749
3,957,810

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New authority
Total
120
38
164
87
2,229
131
99
37
36
262
231
40
29
317
129
69
66
134
187
37
150
148
440
165
75
139
30
42
54
24
372
96
1,087
240
24
268
138
218
506
27
59
17
153
648
69
29
270
215
48
139
15
.........
4
.........
.........
.........
15
.........
.........
10,366

52,596
16,518
72,347
38,347
980,667
57,698
43,571
16,080
15,901
115,251
101,829
17,586
12,664
139,340
56,850
30,245
29,227
59,082
82,466
16,471
66,100
65,284
193,423
72,460
32,959
61,091
13,190
18,532
23,615
10,344
163,810
42,213
478,209
105,692
10,395
117,773
60,532
95,915
222,739
11,981
26,084
7,586
67,357
285,002
30,517
12,590
118,865
94,594
21,235
61,144
6,623
.........
1,646
.........
.........
.........
6,520
.........
.........
4,560,756

52,716
16,556
72,511
38,434
982,896
57,829
43,670
16,117
15,937
115,513
102,060
17,626
12,693
139,657
56,979
30,314
29,293
59,216
82,653
16,508
66,250
65,432
193,863
72,625
33,034
61,230
13,220
18,574
23,669
10,368
164,182
42,309
479,296
105,932
10,419
118,041
60,670
96,133
223,245
12,008
26,143
7,603
67,510
285,650
30,586
12,619
119,135
94,809
21,283
61,283
6,638
.........
1,650
.........
.........
.........
6,535
.........
.........
4,571,122

FY 2014
(estimated)
55,808
17,527
76,765
40,689
1,040,560
61,222
46,232
17,062
16,872
122,290
108,048
18,660
13,438
147,850
60,322
32,092
31,012
62,690
87,502
17,477
70,137
69,271
205,236
76,885
34,972
64,822
13,996
19,664
25,058
10,976
173,814
44,791
507,415
112,147
11,029
124,966
64,228
101,773
236,342
12,712
27,678
8,050
71,470
302,409
32,381
13,359
126,124
100,371
22,532
64,878
7,028
.........
1,746
.........
.........
.........
6,918
.........
.........
4,839,296

FY 2014
Percentage of
distributed total
1.15
0.36
1.59
0.84
21.50
1.27
0.96
0.35
0.35
2.53
2.23
0.39
0.28
3.06
1.25
0.66
0.64
1.30
1.81
0.36
1.45
1.43
4.24
1.59
0.72
1.34
0.29
0.41
0.52
0.23
3.59
0.93
10.49
2.32
0.23
2.58
1.33
2.10
4.88
0.26
0.57
0.17
1.48
6.25
0.67
0.28
2.61
2.07
0.47
1.34
0.15
.........
0.04
.........
.........
.........
0.14
.........
.........
1 100.00

310

Analytical Perspectives

Department of Education, Office of Elementary and Secondary Education 	

91–0900–0–1–501

Table 17–10.  Title I College-And-Career-Ready Students (Formerly
Title I Grants to Local Educational Agencies) (84.010)
(Obligations in thousands of dollars)
State or Territory
FY 2012 Actual
Alabama ��������������������������������������������������������������������������������������������������������������
231,031
Alaska ������������������������������������������������������������������������������������������������������������������
37,233
Arizona ����������������������������������������������������������������������������������������������������������������
316,464
Arkansas �������������������������������������������������������������������������������������������������������������
155,888
California �������������������������������������������������������������������������������������������������������������
1,653,832
Colorado ��������������������������������������������������������������������������������������������������������������
147,719
Connecticut ����������������������������������������������������������������������������������������������������������
105,099
Delaware �������������������������������������������������������������������������������������������������������������
43,432
District of Columbia ���������������������������������������������������������������������������������������������
46,618
Florida �����������������������������������������������������������������������������������������������������������������
735,661
Georgia ����������������������������������������������������������������������������������������������������������������
504,100
Hawaii ������������������������������������������������������������������������������������������������������������������
45,748
Idaho �������������������������������������������������������������������������������������������������������������������
55,351
Illinois �������������������������������������������������������������������������������������������������������������������
649,219
Indiana �����������������������������������������������������������������������������������������������������������������
264,026
Iowa ���������������������������������������������������������������������������������������������������������������������
84,247
Kansas �����������������������������������������������������������������������������������������������������������������
106,197
Kentucky ��������������������������������������������������������������������������������������������������������������
221,012
Louisiana �������������������������������������������������������������������������������������������������������������
288,746
Maine �������������������������������������������������������������������������������������������������������������������
51,753
Maryland ��������������������������������������������������������������������������������������������������������������
189,937
Massachusetts �����������������������������������������������������������������������������������������������������
210,778
Michigan ��������������������������������������������������������������������������������������������������������������
538,112
Minnesota ������������������������������������������������������������������������������������������������������������
157,517
Mississippi �����������������������������������������������������������������������������������������������������������
188,747
Missouri ���������������������������������������������������������������������������������������������������������������
233,377
Montana ���������������������������������������������������������������������������������������������������������������
45,166
Nebraska �������������������������������������������������������������������������������������������������������������
70,015
Nevada ����������������������������������������������������������������������������������������������������������������
106,495
New Hampshire ���������������������������������������������������������������������������������������������������
39,232
New Jersey ����������������������������������������������������������������������������������������������������������
302,806
New Mexico ���������������������������������������������������������������������������������������������������������
119,524
New York ��������������������������������������������������������������������������������������������������������������
1,132,022
North Carolina �����������������������������������������������������������������������������������������������������
399,659
North Dakota �������������������������������������������������������������������������������������������������������
35,556
Ohio ���������������������������������������������������������������������������������������������������������������������
588,309
Oklahoma ������������������������������������������������������������������������������������������������������������
161,487
Oregon �����������������������������������������������������������������������������������������������������������������
146,694
Pennsylvania �������������������������������������������������������������������������������������������������������
574,504
Rhode Island �������������������������������������������������������������������������������������������������������
49,141
South Carolina �����������������������������������������������������������������������������������������������������
214,969
South Dakota �������������������������������������������������������������������������������������������������������
43,595
Tennessee �����������������������������������������������������������������������������������������������������������
280,706
Texas �������������������������������������������������������������������������������������������������������������������
1,386,573
Utah ���������������������������������������������������������������������������������������������������������������������
93,205
Vermont ���������������������������������������������������������������������������������������������������������������
34,501
Virginia �����������������������������������������������������������������������������������������������������������������
230,018
Washington ����������������������������������������������������������������������������������������������������������
213,060
West Virginia ��������������������������������������������������������������������������������������������������������
94,601
Wisconsin ������������������������������������������������������������������������������������������������������������
228,653
Wyoming ��������������������������������������������������������������������������������������������������������������
33,628
American Samoa �������������������������������������������������������������������������������������������������
11,140
Guam �������������������������������������������������������������������������������������������������������������������
11,759
Northern Mariana Islands ������������������������������������������������������������������������������������
4,047
Puerto Rico ����������������������������������������������������������������������������������������������������������
481,385
Freely Associated States �������������������������������������������������������������������������������������
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
14,970
Indian Tribes ��������������������������������������������������������������������������������������������������������
98,209
Undistributed �������������������������������������������������������������������������������������������������������
.........
Other Non-State Allocations ��������������������������������������������������������������������������������
8,984
Total ��������������������������������������������������������������������������������������������������������������������
14,516,457
1 2013 includes an undistributed 0.612 percent across-the-board increase provided by P.L. 112–175.
2 Excludes undistributed obligations.

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

227,279
39,278
327,396
153,156
1,640,259
147,958
116,392
43,995
44,614
755,820
519,276
53,547
57,651
662,757
264,759
89,710
103,395
221,854
294,931
51,498
196,409
218,130
534,774
152,208
182,322
237,617
44,558
67,453
110,784
40,987
290,470
119,679
1,122,226
404,282
33,600
577,626
152,222
155,302
558,289
49,681
220,043
42,677
278,582
1,380,824
91,670
33,112
237,638
213,541
95,099
217,905
33,636
10,668
13,683
6,448
458,479
.........
13,473
95,852
1 22,493
8,984
14,538,951

227,279
39,278
327,396
153,156
1,640,259
147,958
116,392
43,995
44,614
755,820
519,276
53,547
57,651
662,757
264,759
89,710
103,395
221,854
294,931
51,498
196,409
218,130
534,774
152,208
182,322
237,617
44,558
67,453
110,784
40,987
290,470
119,679
1,122,226
404,282
33,600
577,626
152,222
155,302
558,289
49,681
220,043
42,677
278,582
1,380,824
91,670
33,112
237,638
213,541
95,099
217,905
33,636
10,668
13,683
6,448
458,479
.........
13,473
95,852
22,493
8,984
14,538,951

FY 2014
(estimated)
227,372
39,161
328,354
151,747
1,651,856
147,359
117,644
43,925
43,422
767,010
519,982
54,522
58,117
669,492
264,838
90,415
103,106
221,692
294,750
51,286
199,587
219,449
529,391
150,938
179,278
236,646
44,317
67,926
112,809
40,987
290,416
119,371
1,105,596
407,996
33,559
575,566
150,106
156,098
557,944
49,475
222,138
42,676
279,577
1,386,784
92,648
33,112
238,362
213,855
95,216
215,417
33,636
10,782
13,829
6,517
440,406
.........
12,125
96,872
.........
9,000
14,516,457

FY 2014
Percentage of
distributed total
1.57
0.27
2.26
1.05
11.38
1.02
0.81
0.30
0.30
5.28
3.58
0.38
0.40
4.61
1.82
0.62
0.71
1.53
2.03
0.35
1.37
1.51
3.65
1.04
1.23
1.63
0.31
0.47
0.78
0.28
2.00
0.82
7.62
2.81
0.23
3.96
1.03
1.08
3.84
0.34
1.53
0.29
1.93
9.55
0.64
0.23
1.64
1.47
0.66
1.48
0.23
0.07
0.10
0.04
3.03
.........
0.08
0.67
.........
0.06
2 100.00

311

17.  Aid to State and Local Governments
Department of Education, Office of Elementary and Secondary Education	

91-1000-0-1-501

Table 17–11. Improving Teacher Quality State Grants (84.367)
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:

State or Territory
FY 2012 Actual
Alabama ��������������������������������������������������������������������������������������������������������������
38,660
Alaska ������������������������������������������������������������������������������������������������������������������
11,494
Arizona ����������������������������������������������������������������������������������������������������������������
38,321
Arkansas �������������������������������������������������������������������������������������������������������������
23,383
California �������������������������������������������������������������������������������������������������������������
270,254
Colorado ��������������������������������������������������������������������������������������������������������������
27,122
Connecticut ����������������������������������������������������������������������������������������������������������
22,557
Delaware �������������������������������������������������������������������������������������������������������������
11,494
District of Columbia ���������������������������������������������������������������������������������������������
11,494
Florida �����������������������������������������������������������������������������������������������������������������
109,848
Georgia ����������������������������������������������������������������������������������������������������������������
64,203
Hawaii ������������������������������������������������������������������������������������������������������������������
11,494
Idaho �������������������������������������������������������������������������������������������������������������������
11,494
Illinois �������������������������������������������������������������������������������������������������������������������
98,761
Indiana �����������������������������������������������������������������������������������������������������������������
41,589
Iowa ���������������������������������������������������������������������������������������������������������������������
18,836
Kansas �����������������������������������������������������������������������������������������������������������������
19,285
Kentucky ��������������������������������������������������������������������������������������������������������������
37,817
Louisiana �������������������������������������������������������������������������������������������������������������
54,187
Maine �������������������������������������������������������������������������������������������������������������������
11,494
Maryland ��������������������������������������������������������������������������������������������������������������
34,863
Massachusetts �����������������������������������������������������������������������������������������������������
43,678
Michigan ��������������������������������������������������������������������������������������������������������������
95,607
Minnesota ������������������������������������������������������������������������������������������������������������
33,022
Mississippi �����������������������������������������������������������������������������������������������������������
35,697
Missouri ���������������������������������������������������������������������������������������������������������������
41,652
Montana ���������������������������������������������������������������������������������������������������������������
11,494
Nebraska �������������������������������������������������������������������������������������������������������������
11,771
Nevada ����������������������������������������������������������������������������������������������������������������
12,431
New Hampshire ���������������������������������������������������������������������������������������������������
11,494
New Jersey ����������������������������������������������������������������������������������������������������������
54,956
New Mexico ���������������������������������������������������������������������������������������������������������
19,147
New York ��������������������������������������������������������������������������������������������������������������
195,518
North Carolina �����������������������������������������������������������������������������������������������������
53,878
North Dakota �������������������������������������������������������������������������������������������������������
11,494
Ohio ���������������������������������������������������������������������������������������������������������������������
90,809
Oklahoma ������������������������������������������������������������������������������������������������������������
27,960
Oregon �����������������������������������������������������������������������������������������������������������������
23,566
Pennsylvania �������������������������������������������������������������������������������������������������������
98,149
Rhode Island �������������������������������������������������������������������������������������������������������
11,494
South Carolina �����������������������������������������������������������������������������������������������������
30,488
South Dakota �������������������������������������������������������������������������������������������������������
11,494
Tennessee �����������������������������������������������������������������������������������������������������������
41,694
Texas �������������������������������������������������������������������������������������������������������������������
200,180
Utah ���������������������������������������������������������������������������������������������������������������������
16,138
Vermont ���������������������������������������������������������������������������������������������������������������
11,494
Virginia �����������������������������������������������������������������������������������������������������������������
43,067
Washington ����������������������������������������������������������������������������������������������������������
39,718
West Virginia ��������������������������������������������������������������������������������������������������������
20,418
Wisconsin ������������������������������������������������������������������������������������������������������������
39,886
Wyoming ��������������������������������������������������������������������������������������������������������������
11,494
American Samoa �������������������������������������������������������������������������������������������������
2,845
Guam �������������������������������������������������������������������������������������������������������������������
4,374
Northern Mariana Islands ������������������������������������������������������������������������������������
1,360
Puerto Rico ����������������������������������������������������������������������������������������������������������
74,162
Freely Associated States �������������������������������������������������������������������������������������
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
3,692
Indian Tribes ��������������������������������������������������������������������������������������������������������
12,271
Undistributed �������������������������������������������������������������������������������������������������������
.........
Other Non-State Allocations ��������������������������������������������������������������������������������
49,331
Total ��������������������������������������������������������������������������������������������������������������������
2,466,573
1 2013 includes an undistributed 0.612 percent across-the-board increase provided by P.L. 112-175.

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2013 CR or
New Authority
38,556
11,451
38,661
23,360
270,091
27,137
22,681
11,451
11,451
110,125
64,484
11,451
11,520
99,039
41,583
18,880
19,243
37,849
54,336
11,451
34,900
43,772
95,584
32,908
35,610
41,759
11,451
11,728
12,481
11,451
54,788
19,127
195,690
53,874
11,451
90,684
27,777
23,673
97,884
11,451
30,603
11,451
41,641
200,215
16,089
11,451
43,196
39,695
20,404
39,663
11,451
2,830
4,713
1,744
73,993
.........
2,985
12,271
1 4,805
49,331
2,471,374

Total
38,556
11,451
38,661
23,360
270,091
27,137
22,681
11,451
11,451
110,125
64,484
11,451
11,520
99,039
41,583
18,880
19,243
37,849
54,336
11,451
34,900
43,772
95,584
32,908
35,610
41,759
11,451
11,728
12,481
11,451
54,788
19,127
195,690
53,874
11,451
90,684
27,777
23,673
97,884
11,451
30,603
11,451
41,641
200,215
16,089
11,451
43,196
39,695
20,404
39,663
11,451
2,830
4,713
1,744
73,993
.........
2,985
12,271
4,805
49,331
2,471,374

FY 2014
(estimated)
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FY 2014
Percentage of
distributed total
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312

Analytical Perspectives

Department of Education, Office of Elementary and Secondary Education	

91-0204-0-1-501

Table 17–12.  Effective Teachers and Leaders State Grants
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:
State or Territory
FY 2012 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 Non-State Allocations ��������������������������������������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

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Previous
authority
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2013 CR or
New Authority
.........
.........
.........
.........
.........
.........
.........
.........
.........
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.........
.........
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.........
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FY 2014
(estimated)

Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
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28,817
8,558
28,894
17,459
201,862
20,282
16,952
8,558
8,558
82,305
48,194
8,558
8,610
74,020
31,078
14,111
14,382
28,288
40,610
8,558
26,084
32,714
71,438
24,595
26,614
31,210
8,558
8,765
9,328
8,558
40,948
14,295
146,256
40,265
8,558
67,775
20,760
17,693
73,157
8,558
22,872
8,558
31,122
149,638
12,024
8,558
32,284
29,667
15,250
29,644
8,558
3,336
4,599
2,123
55,301
.........
2,274
12,333
.........
653,640
2,466,564

FY 2014
Percentage of
distributed total
1.17
0.35
1.17
0.71
8.18
0.82
0.69
0.35
0.35
3.34
1.95
0.35
0.35
3.00
1.26
0.57
0.58
1.15
1.65
0.35
1.06
1.33
2.90
1.00
1.08
1.27
0.35
0.36
0.38
0.35
1.66
0.58
5.93
1.63
0.35
2.75
0.84
0.72
2.97
0.35
0.93
0.35
1.26
6.07
0.49
0.35
1.31
1.20
0.62
1.20
0.35
0.14
0.19
0.09
2.24
.........
0.09
0.50
.........
26.50
1 100.00

313

17.  Aid to State and Local Governments
Department of Education, Office of Special Education and Rehabilitative Services	

91-0301-0-1-506

Table 17–13. Vocational Rehabilitation Grants (84.126)
(Obligations in thousands of dollars)
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 ����������������������������������������������������������������������������������������������������������
Freely Associated States �������������������������������������������������������������������������������������
Virgin Islands �������������������������������������������������������������������������������������������������������

FY 2012 Actual
54,912
11,479
62,823
44,874
294,858
40,548
32,287
10,779
12,859
139,415
98,771
12,885
16,264
111,622
62,188
25,630
28,478
46,150
35,543
16,608
47,259
62,794
104,509
48,252
44,516
65,513
13,478
19,872
12,437
11,880
57,356
23,957
147,634
106,173
12,127
96,890
44,257
39,356
121,561
13,019
56,012
10,592
65,913
238,193
36,873
16,079
71,532
54,274
43,245
55,648
9,255
959
2,900
752
72,425
.........
1,979

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
63,443
63,443
.........
10,639
10,639
.........
65,635
65,635
.........
39,130
39,130
.........
306,588
306,588
.........
42,329
42,329
.........
21,884
21,884
.........
10,639
10,639
.........
14,028
14,028
.........
176,230
176,230
.........
107,691
107,691
.........
12,210
12,210
.........
18,721
18,721
.........
115,009
115,009
.........
78,768
78,768
.........
34,229
34,229
.........
29,409
29,409
.........
58,766
58,766
.........
56,281
56,281
.........
16,387
16,387
.........
42,700
42,700
.........
49,082
49,082
.........
116,045
116,045
.........
49,723
49,723
.........
44,233
44,233
.........
68,665
68,665
.........
11,953
11,953
.........
19,183
19,183
.........
23,133
23,133
.........
11,878
11,878
.........
59,688
59,688
.........
25,658
25,658
.........
151,137
151,137
.........
110,284
110,284
.........
10,639
10,639
.........
136,727
136,727
.........
44,675
44,675
.........
40,861
40,861
.........
135,269
135,269
.........
10,754
10,754
.........
59,347
59,347
.........
10,639
10,639
.........
77,102
77,102
.........
253,092
253,092
.........
32,320
32,320
.........
10,639
10,639
.........
69,234
69,234
.........
56,581
56,581
.........
27,469
27,469
.........
63,397
63,397
.........
10,639
10,639
.........
987
987
.........
2,980
2,980
.........
888
888
.........
74,019
74,019
.........
.........
.........
.........
2,112
2,112

FY 2014
FY 2014
Percentage of
(estimated)
distributed total
63,821
1.93
10,939
0.33
69,628
2.11
39,431
1.19
322,105
9.75
44,087
1.34
22,184
0.67
10,939
0.33
14,345
0.43
185,087
5.61
111,485
3.38
12,510
0.38
19,412
0.59
117,074
3.55
79,573
2.41
34,530
1.05
29,746
0.90
59,111
1.79
56,641
1.72
16,687
0.51
43,160
1.31
49,601
1.50
117,432
3.56
50,144
1.52
44,533
1.35
69,447
2.10
12,253
0.37
19,483
0.59
25,979
0.79
12,178
0.37
60,995
1.85
25,959
0.79
152,671
4.62
113,008
3.42
10,939
0.33
137,637
4.17
45,111
1.37
41,967
1.27
136,273
4.13
11,054
0.33
60,523
1.83
10,939
0.33
77,607
2.35
256,711
7.77
33,655
1.02
10,939
0.33
69,872
2.12
58,606
1.77
27,770
0.84
63,848
1.93
10,939
0.33
1,018
0.03
3,020
0.09
901
0.03
74,319
2.25
.........
.........
2,140
0.06

314

Analytical Perspectives

Department of Education, Office of Special Education and Rehabilitative Services	

91-0301-0-1-506

Table 17–13. Vocational Rehabilitation Grants (84.126)—Continued
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:
State or Territory
Indian Tribes ��������������������������������������������������������������������������������������������������������
Undistributed �������������������������������������������������������������������������������������������������������

FY 2012 Actual
37,898
1 95,370

Previous
2013 CR or
authority
New Authority
.........
39,224
.........
.........

Total
39,224
.........

FY 2014
FY 2014
Percentage of
(estimated)
distributed total
40,087
1.21
.........
.........

2 100.00
Total ��������������������������������������������������������������������������������������������������������������������
3,121,712
.........
3,230,972
3,230,972
3,302,053
NOTE: In the FY 2014 request, the Administration is proposing to eliminate separate funding authorities for the smaller vocational rehabilitation related programs under the
Rehabilitation Act. To lessen the potential impact of the Administration’s proposal on States, the request includes language that would ensure that no State’s fiscal year 2014 allocation
under the Vocational Rehabilitation State Grants program would be less than the total amount allocated to a State under the distribution formulas for the VR State grants program and the
Supported Employment State Grants program for fiscal year 2013.
1 The fiscal year 2012 appropriations bill included language that allows the Secretary to use amounts that remain available subsequent to the reallotment of funds to States under
the VR State Grants program pursuant to section 110(b) of the Rehabilitation Act for improving the education and employment outcomes of children receiving SSI and their families. In
fiscal year 2013, these funds, which remain available for Federal obligation until September 30, 2013, will be used to support State model demonstration projects under the Promoting
Readiness of Minors in Social Security Income (PROMISE) pilot program.
2 Excludes undistributed obligations.

315

17.  Aid to State and Local Governments
Department of Education, Office of Special Education and Rehabilitative Services	

91-0300

Table 17–14. Special Education-Grants to States (84.027)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������

181,562
36,472
188,006
111,980
1,224,662
154,234
132,768
34,446
17,320
631,152
328,078
39,852
55,222
505,652
257,576
121,910
104,506
157,888
188,962
54,642
199,916
283,466
399,884
189,532
119,980
226,830
37,222
74,564
70,702
47,390
360,946
91,006
758,002
326,078
27,970
436,958
147,674
128,760
426,428
43,668
140,626
33,320
236,470
980,678
109,454
26,968
281,476
220,954
75,838
207,862
28,292
6,358
14,098
4,832
114,924
6,580

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

181,562
36,472
188,006
111,980
1,224,662
154,234
132,768
34,446
17,320
631,152
328,078
39,852
55,222
505,652
257,576
121,910
106,692
157,888
188,962
54,642
199,916
283,466
399,884
189,532
119,980
226,830
37,222
74,564
70,702
47,390
360,946
91,006
758,002
326,078
27,970
436,958
147,674
128,760
426,428
43,668
176,828
33,320
236,470
980,678
109,454
26,968
281,476
220,954
75,838
207,862
28,292
6,358
14,098
4,832
114,924
6,580

181,562
36,472
188,006
111,980
1,224,662
154,234
132,768
34,446
17,320
631,152
328,078
39,852
55,222
505,652
257,576
121,910
106,692
157,888
188,962
54,642
199,916
283,466
399,884
189,532
119,980
226,830
37,222
74,564
70,702
47,390
360,946
91,006
758,002
326,078
27,970
436,958
147,674
128,760
426,428
43,668
176,828
33,320
236,470
980,678
109,454
26,968
281,476
220,954
75,838
207,862
28,292
6,358
14,098
4,832
114,924
6,580

FY 2014
(estimated)
181,562
36,472
188,006
111,980
1,224,662
154,234
132,768
34,446
17,320
631,152
328,078
39,852
55,222
505,652
257,576
121,910
106,692
157,888
188,962
54,642
199,916
283,466
399,884
189,532
119,980
226,830
37,222
74,564
70,702
47,390
360,946
91,006
758,002
326,078
27,970
436,958
147,674
128,760
426,428
43,668
176,828
33,320
236,470
980,678
109,454
26,968
281,476
220,954
75,838
207,862
28,292
6,358
14,098
4,832
114,924
6,580

FY 2014
Percentage of
distributed total
1.57
0.32
1.62
0.97
10.58
1.33
1.15
0.30
0.15
5.45
2.83
0.34
0.48
4.37
2.22
1.05
0.92
1.36
1.63
0.47
1.73
2.45
3.45
1.64
1.04
1.96
0.32
0.64
0.61
0.41
3.12
0.79
6.55
2.82
0.24
3.77
1.28
1.11
3.68
0.38
1.53
0.29
2.04
8.47
0.95
0.23
2.43
1.91
0.66
1.80
0.24
0.05
0.12
0.04
0.99
0.06

316

Analytical Perspectives

Department of Education, Office of Special Education and Rehabilitative Services	

91-0300

Table 17–14. Special Education-Grants to States (84.027)—Continued
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:
State or Territory
Virgin Islands �������������������������������������������������������������������������������������������������������
Indian Tribes ��������������������������������������������������������������������������������������������������������
Undistributed �������������������������������������������������������������������������������������������������������
Technical Assistance Set Aside ���������������������������������������������������������������������������

FY 2012 Actual
8,960
92,910
38,390
25,000

Previous
2013 CR or
authority
New Authority
.........
8,960
.........
92,910
2 70,856
.........
.........
25,000

Total
8,960
92,910
70,856
25,000

FY 2014
FY 2014
Percentage of
(estimated)
distributed total
8,960
0.08
92,910
0.80
.........
.........
25,000
0.22

1 11,577,856
3 100.00
Total ��������������������������������������������������������������������������������������������������������������������
.........
11,648,710
11,648,710
11,577,854
* $500 or less or 0.005 percent or less.
NOTE: Assumes that the amount by which a State’s allocation under section 611(d) of the IDEA was reduced under section 612(a)(18)(B) in fiscal year 2012 will not be considered in
calculating the awards under section 611(d) for fiscal years 2013 and 2014.
NOTE: Totals do not reflect reductions in awards made pursuant to 20 U.S.C. 1412(a)(18)(B) for fiscal years 2013 and 2014.
1 Reflects reductions to South Carolina and Kansas under section 612(a)(18)(B).
2 Fiscal year 2013 includes an undistributed 0.612 percent across-the-board increase provided by P.L. 112-175.
3 Excludes undistributed obligations.

317

17.  Aid to State and Local Governments
Department of Health and Human Services, Centers for Medicare and Medicaid Services	

75-0515-0-1-551

Table 17–15. Children’s Health Insurance Program (93.767)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

168,108
21,005
64,635
95,364
1,314,260
130,420
32,686
14,162
12,611
339,812
250,874
34,803
37,945
285,132
98,664
115,252
58,771
135,474
195,190
37,038
176,289
330,784
126,248
21,392
167,658
117,629
40,144
50,106
25,129
13,380
618,026
258,655
556,754
401,229
16,064
290,093
126,870
95,355
335,890
31,669
102,467
21,119
145,620
882,578
67,820
6,934
184,004
47,620
43,069
107,215
10,443
1,253
4,360
899
103,911
.........
.........
.........
6,011,118
14,982,000

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

162,846
20,558
25,392
103,118
1,296,015
131,841
41,328
15,738
14,867
359,047
282,709
25,809
35,957
275,566
144,858
92,496
55,399
147,886
171,875
31,479
160,475
330,876
54,797
32,082
176,877
122,948
59,390
42,464
31,454
18,195
640,184
124,226
579,751
304,201
17,311
336,051
114,193
143,895
305,718
39,507
98,283
19,438
200,235
891,518
62,494
13,037
186,576
96,942
48,276
103,003
10,764
1,302
4,532
934
132,659
.........
.........
.........
8,466,628
17,406,000

162,846
20,558
25,392
103,118
1,296,015
131,841
41,328
15,738
14,867
359,047
282,709
25,809
35,957
275,566
144,858
92,496
55,399
147,886
171,875
31,479
160,475
330,876
54,797
32,082
176,877
122,948
59,390
42,464
31,454
18,195
640,184
124,226
579,751
304,201
17,311
336,051
114,193
143,895
305,718
39,507
98,283
19,438
200,235
891,518
62,494
13,037
186,576
96,942
48,276
103,003
10,764
1,302
4,532
934
132,659
.........
.........
.........
8,466,628
17,406,000

FY 2014
(estimated)
169,269
21,369
26,393
107,185
1,347,135
137,666
42,959
16,359
15,920
373,209
294,317
26,872
37,376
286,435
150,572
96,144
57,584
153,719
178,906
32,720
166,804
343,927
56,958
33,347
183,854
127,797
61,733
44,248
32,695
18,913
665,436
129,553
602,619
316,911
18,151
349,306
119,403
149,571
317,776
41,065
102,340
20,259
208,133
936,060
65,511
13,551
194,039
101,067
50,180
107,066
11,188
1,353
4,711
971
137,892
.........
.........
.........
9,840,503
19,147,000

FY 2014
Percentage of
distributed total
1.82
0.23
0.28
1.15
14.48
1.48
0.46
0.18
0.17
4.01
3.16
0.29
0.40
3.08
1.62
1.03
0.62
1.65
1.92
0.35
1.79
3.70
0.61
0.36
1.98
1.37
0.66
0.48
0.35
0.20
7.15
1.39
6.48
3.41
0.20
3.75
1.28
1.61
3.41
0.44
1.10
0.22
2.24
10.06
0.70
0.15
2.08
1.09
0.54
1.15
0.12
0.01
0.05
0.01
1.48
.........
.........
.........
.........
1 100.00

318

Analytical Perspectives

Department of Health and Human Services, Centers for Medicare and Medicaid Services	

75-0512-0-1-551

Table 17–16.  Grants to States for Medicaid (93.778)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 ��������������������������������������������������������������������������������������
Vaccines For Children �����������������������������������������������������������������������������������������
Fraud Control Units ����������������������������������������������������������������������������������������������
Medicare Part B premiums ����������������������������������������������������������������������������������
Incurred But Not Reported ����������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
* $500 or less or 0.005 percent or less.
1 Excludes undistributed obligations.

4,449,073
923,647
5,791,413
3,558,608
28,047,760
2,521,861
3,359,024
874,890
1,559,468
10,834,635
6,153,684
834,588
1,177,221
7,111,553
5,205,355
2,156,259
1,649,795
4,334,765
5,246,734
1,618,018
3,968,555
7,041,214
8,889,577
4,679,605
3,799,483
5,827,091
687,618
1,085,993
1,071,192
666,780
5,736,239
2,675,871
28,391,280
8,576,362
462,176
10,734,663
3,127,782
3,080,954
11,918,827
1,133,514
3,422,344
505,288
6,387,082
17,541,559
1,507,169
828,055
3,745,735
4,723,818
2,194,989
4,636,985
148,215
9,901
14,640
5,047
333,505
.........
16,312
.........
7,812,117
207,628
4,000,453
215,973
602,303
1,091,446
270,913,691

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

3,868,295
903,464
6,012,030
3,228,304
33,038,381
2,688,130
3,305,323
867,722
1,650,505
11,726,955
5,903,411
841,897
1,313,436
7,342,706
5,046,072
2,305,914
1,643,190
4,330,106
4,600,044
1,543,487
4,257,845
7,195,771
9,109,191
4,815,169
3,819,220
5,815,956
719,753
1,083,170
1,133,066
687,387
5,956,958
2,700,195
32,993,896
8,714,029
460,383
11,630,374
3,304,601
3,410,220
11,800,286
1,103,400
3,514,267
502,410
6,779,258
20,831,020
1,410,720
934,525
4,054,732
4,372,927
2,308,223
4,705,262
313,461
12,224
24,994
17,118
1,025,547
.........
42,677
.........
(11,214,582)
230,280
3,607,256
222,201
645,000
1,959,000
269,168,762

3,868,295
903,464
6,012,030
3,228,304
33,038,381
2,688,130
3,305,323
867,722
1,650,505
11,726,955
5,903,411
841,897
1,313,436
7,342,706
5,046,072
2,305,914
1,643,190
4,330,106
4,600,044
1,543,487
4,257,845
7,195,771
9,109,191
4,815,169
3,819,220
5,815,956
719,753
1,083,170
1,133,066
687,387
5,956,958
2,700,195
32,993,896
8,714,029
460,383
11,630,374
3,304,601
3,410,220
11,800,286
1,103,400
3,514,267
502,410
6,779,258
20,831,020
1,410,720
934,525
4,054,732
4,372,927
2,308,223
4,705,262
313,461
12,224
24,994
17,118
1,025,547
.........
42,677
.........
(11,214,582)
230,280
3,607,256
222,201
645,000
1,959,000
269,168,762

FY 2014
(estimated)
3,948,547
960,342
6,061,532
3,393,627
30,050,657
2,639,248
3,901,442
895,073
1,773,318
12,553,752
5,885,947
881,108
1,357,615
7,329,626
5,607,615
2,349,613
1,662,046
4,587,818
4,588,703
1,533,151
4,369,226
7,316,268
9,310,739
5,237,487
3,466,530
6,008,470
748,641
1,104,948
1,213,247
716,723
7,395,361
2,909,675
34,495,561
9,244,891
458,357
12,474,987
3,438,048
4,175,639
12,163,757
1,167,380
3,521,016
513,761
7,385,036
20,872,459
1,491,614
920,321
4,266,901
4,922,824
2,260,244
4,620,878
308,134
12,224
24,749
17,118
1,058,182
.........
42,677
.........
17,259,595
240,600
4,293,383
226,067
705,000
2,369,000
306,708,498

FY 2014
Percentage of
distributed total
1.36
0.33
2.09
1.17
10.38
0.91
1.35
0.31
0.61
4.34
2.03
0.30
0.47
2.53
1.94
0.81
0.57
1.59
1.59
0.53
1.51
2.53
3.22
1.81
1.20
2.08
0.26
0.38
0.42
0.25
2.55
1.01
11.92
3.19
0.16
4.31
1.19
1.44
4.20
0.40
1.22
0.18
2.55
7.21
0.52
0.32
1.47
1.70
0.78
1.60
0.11
*
0.01
0.01
0.37
.........
0.01
.........
.........
0.08
1.48
0.08
0.24
0.82
1 100.00

319

17.  Aid to State and Local Governments
Department of Health and Human Services, Centers for Medicare and Medicaid Services	

75-0115-0-1-551

Table 17–17.  Affordable Insurance Exchange Grants (93.525)
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:

FY 2014
Previous
2013 CR or
FY 2014
Percentage of
FY 2012 Actual
authority
New Authority
Total
(estimated)
distributed total
Alabama ��������������������������������������������������������������������������������������������������������������
8,772
.........
.........
.........
.........
.........
Alaska ������������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Arizona ����������������������������������������������������������������������������������������������������������������
29,877
.........
.........
.........
.........
.........
Arkansas �������������������������������������������������������������������������������������������������������������
26,461
.........
.........
.........
.........
.........
California �������������������������������������������������������������������������������������������������������������
196,480
.........
673,705
673,705
.........
.........
Colorado ��������������������������������������������������������������������������������������������������������������
61,438
.........
.........
.........
.........
.........
Connecticut ����������������������������������������������������������������������������������������������������������
108,900
.........
2,141
2,141
.........
.........
Delaware �������������������������������������������������������������������������������������������������������������
3,400
.........
8,537
8,537
.........
.........
District of Columbia ���������������������������������������������������������������������������������������������
72,985
.........
.........
.........
.........
.........
Florida �����������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Georgia ����������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Hawaii ������������������������������������������������������������������������������������������������������������������
76,256
.........
.........
.........
.........
.........
Idaho �������������������������������������������������������������������������������������������������������������������
20,377
.........
.........
.........
.........
.........
Illinois �������������������������������������������������������������������������������������������������������������������
32,861
.........
.........
.........
.........
.........
Indiana �����������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Iowa ���������������������������������������������������������������������������������������������������������������������
34,377
.........
6,845
6,845
.........
.........
Kansas �����������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Kentucky ��������������������������������������������������������������������������������������������������������������
62,320
.........
182,708
182,708
.........
.........
Louisiana �������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Maine �������������������������������������������������������������������������������������������������������������������
5,878
.........
.........
.........
.........
.........
Maryland ��������������������������������������������������������������������������������������������������������������
123,049
.........
.........
.........
.........
.........
Massachusetts �����������������������������������������������������������������������������������������������������
62,219
.........
80,226
80,226
.........
.........
Michigan ��������������������������������������������������������������������������������������������������������������
9,849
.........
30,668
30,668
.........
.........
Minnesota ������������������������������������������������������������������������������������������������������������
68,675
.........
39,326
39,326
.........
.........
Mississippi �����������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Missouri ���������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Montana ���������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Nebraska �������������������������������������������������������������������������������������������������������������
5,482
.........
.........
.........
.........
.........
Nevada ����������������������������������������������������������������������������������������������������������������
69,709
.........
.........
.........
.........
.........
New Hampshire ���������������������������������������������������������������������������������������������������
.........
.........
894
894
.........
.........
New Jersey ����������������������������������������������������������������������������������������������������������
7,897
.........
.........
.........
.........
.........
New Mexico ���������������������������������������������������������������������������������������������������������
34,279
.........
.........
.........
.........
.........
New York ��������������������������������������������������������������������������������������������������������������
143,971
.........
185,822
185,822
.........
.........
North Carolina �����������������������������������������������������������������������������������������������������
.........
.........
73,961
73,961
.........
.........
North Dakota �������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Ohio ���������������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Oklahoma ������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Oregon �����������������������������������������������������������������������������������������������������������������
8,878
.........
238,263
238,263
.........
.........
Pennsylvania �������������������������������������������������������������������������������������������������������
33,832
.........
.........
.........
.........
.........
Rhode Island �������������������������������������������������������������������������������������������������������
58,516
.........
9,251
9,251
.........
.........
South Carolina �����������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
South Dakota �������������������������������������������������������������������������������������������������������
5,880
.........
.........
.........
.........
.........
Tennessee �����������������������������������������������������������������������������������������������������������
8,110
.........
.........
.........
.........
.........
Texas �������������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Utah ���������������������������������������������������������������������������������������������������������������������
.........
.........
1,000
1,000
.........
.........
Vermont ���������������������������������������������������������������������������������������������������������������
126,786
.........
2,168
2,168
.........
.........
Virginia �����������������������������������������������������������������������������������������������������������������
.........
.........
4,320
4,320
.........
.........
Washington ����������������������������������������������������������������������������������������������������������
127,852
.........
.........
.........
.........
.........
West Virginia ��������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Wisconsin ������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Wyoming ��������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
American Samoa �������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Guam �������������������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Northern Mariana Islands ������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Puerto Rico ����������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Indian Tribes ��������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
1 1,160,165
2 1,292,000
Undistributed �������������������������������������������������������������������������������������������������������
.........
.........
1,160,165
.........
3 100.00
Total ��������������������������������������������������������������������������������������������������������������������
1,635,366
.........
2,700,000
2,700,000
1,292,000
1 Exchange Grants are distributed based on state grant applications and reflect individual states needs for establishing Exchanges. Current totals show grants awarded through
February 2013.
2 Funding awards are based on applications, so the award amount per State cannot be predicted.
3 Excludes undistributed obligations.
State or Territory

320

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1552-0-1-609

Table 17–18.  Temporary Assitance for Needy Families (TANF)-Family Assistance Grants (93.558)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 ��������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

93,315
45,260
217,660
61,699
3,659,390
147,966
266,788
32,291
100,716
562,340
330,742
107,562
30,413
585,057
206,799
131,030
101,931
181,288
163,972
78,121
249,151
499,580
843,220
263,434
86,768
236,050
38,039
57,105
43,908
38,521
417,164
120,291
2,656,762
328,695
26,400
727,968
145,281
181,427
719,499
95,022
108,718
21,280
208,288
528,819
82,228
47,353
158,285
414,278
110,176
342,029
18,501
.........
3,327
.........
68,937
.........
2,847
181,679
.........
149,907
7,535
17,332,812

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

93,315
46,733
201,384
56,733
3,663,130
136,057
266,788
32,291
92,610
562,340
330,742
98,905
30,413
585,057
206,799
130,994
101,931
181,288
163,972
78,121
229,098
459,371
775,353
263,434
86,768
217,052
38,039
57,514
43,908
38,521
404,035
110,578
2,442,931
302,240
26,400
727,968
145,860
166,799
719,499
95,022
99,968
21,280
191,524
486,257
75,609
47,353
158,285
380,954
110,176
314,499
18,501
.........
3,465
.........
71,563
.........
2,847
174,273
.........
150,000
22,633
16,739,180

93,315
46,733
201,384
56,733
3,663,130
136,057
266,788
32,291
92,610
562,340
330,742
98,905
30,413
585,057
206,799
130,994
101,931
181,288
163,972
78,121
229,098
459,371
775,353
263,434
86,768
217,052
38,039
57,514
43,908
38,521
404,035
110,578
2,442,931
302,240
26,400
727,968
145,860
166,799
719,499
95,022
99,968
21,280
191,524
486,257
75,609
47,353
158,285
380,954
110,176
314,499
18,501
.........
3,465
.........
71,563
.........
2,847
174,273
.........
150,000
22,633
16,739,180

FY 2014
(estimated)
93,315
46,733
201,384
56,733
3,663,130
136,057
266,788
32,291
92,610
562,340
330,742
98,905
30,413
585,057
206,799
130,994
101,931
181,288
163,972
78,121
229,098
459,371
775,353
263,434
86,768
217,052
38,039
57,514
43,908
38,521
404,035
110,578
2,442,931
302,240
26,400
727,968
145,860
166,799
719,499
95,022
99,968
21,280
191,524
486,257
75,609
47,353
158,285
380,954
110,176
314,499
18,501
.........
3,465
.........
71,563
.........
2,847
174,273
.........
150,000
342,083
17,058,630

FY 2014
Percentage of
distributed total
0.55
0.27
1.18
0.33
21.47
0.80
1.56
0.19
0.54
3.30
1.94
0.58
0.18
3.43
1.21
0.77
0.60
1.06
0.96
0.46
1.34
2.69
4.55
1.54
0.51
1.27
0.22
0.34
0.26
0.23
2.37
0.65
14.32
1.77
0.15
4.27
0.86
0.98
4.22
0.56
0.59
0.12
1.12
2.85
0.44
0.28
0.93
2.23
0.65
1.84
0.11
.........
0.02
..
0.42
.........
0.02
1.02
.........
0.88
2.01
1 100.00

321

17.  Aid to State and Local Governments
Department of Health and Human Services, Administration for Children and Families	

75-1501-0-1-609

Table 17–19. Child Support Enforcement-Federal Share of State and
Local Administrative Costs and Incentives (93.563)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

46,957
19,014
47,360
35,318
583,157
53,522
45,079
32,361
18,417
205,024
74,812
13,577
16,149
135,566
83,803
40,749
39,427
50,795
54,442
19,709
94,185
83,239
161,533
123,769
24,747
58,033
11,235
22,216
36,892
14,139
199,137
33,200
293,239
98,314
9,782
204,336
55,399
47,605
183,637
10,770
52,992
6,951
62,256
235,762
28,412
9,760
69,525
90,171
31,148
74,443
10,622
.........
3,666
.........
33,449
.........
4,106
40,121
.........
4,134,029

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

48,491
19,635
48,907
36,472
602,210
55,271
46,552
33,419
19,018
211,722
77,256
14,020
16,677
139,995
86,541
42,080
40,715
52,455
56,220
20,353
97,262
85,959
166,811
127,812
25,555
59,929
11,602
22,942
38,097
14,601
205,643
34,285
302,820
101,526
10,102
211,012
57,209
49,160
189,636
11,122
54,723
7,178
64,290
243,465
29,340
10,079
71,797
93,117
32,165
76,876
10,969
.........
3,786
.........
34,542
.........
4,240
40,522
.........
4,268,183

48,491
19,635
48,907
36,472
602,210
55,271
46,552
33,419
19,018
211,722
77,256
14,020
16,677
139,995
86,541
42,080
40,715
52,455
56,220
20,353
97,262
85,959
166,811
127,812
25,555
59,929
11,602
22,942
38,097
14,601
205,643
34,285
302,820
101,526
10,102
211,012
57,209
49,160
189,636
11,122
54,723
7,178
64,290
243,465
29,340
10,079
71,797
93,117
32,165
76,876
10,969
.........
3,786
.........
34,542
.........
4,240
40,522
.........
4,268,183

FY 2014
(estimated)
49,299
19,962
49,721
37,079
612,236
56,191
47,327
33,975
19,335
215,247
78,542
14,254
16,955
142,326
87,982
42,780
41,393
53,328
57,156
20,692
98,881
87,390
169,588
129,940
25,981
60,927
11,795
23,324
38,732
14,844
209,067
34,856
307,862
103,216
10,270
214,525
58,161
49,979
192,794
11,307
55,634
7,297
65,360
247,518
29,828
10,247
72,992
94,667
32,701
78,156
11,151
.........
3,849
.........
35,117
.........
4,310
41,151
.........
4,339,197

FY 2014
Percentage of
distributed total
1.14
0.46
1.15
0.85
14.11
1.29
1.09
0.78
0.45
4.96
1.81
0.33
0.39
3.28
2.03
0.99
0.95
1.23
1.32
0.48
2.28
2.01
3.91
2.99
0.60
1.40
0.27
0.54
0.89
0.34
4.82
0.80
7.09
2.38
0.24
4.94
1.34
1.15
4.44
0.26
1.28
0.17
1.51
5.70
0.69
0.24
1.68
2.18
0.75
1.80
0.26
.........
0.09
.........
0.81
.........
0.10
0.95
.........
1 100.00

322

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1502-0-1-609

Table 17–20. Low Income Home Energy Assistance Program (93.568)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������

47,081
10,641
21,904
28,538
153,261
47,309
79,533
11,957
10,687
78,020
61,703
6,107
19,578
185,686
80,000
54,813
32,119
46,424
43,422
38,521
69,791
132,680
172,431
116,840
31,531
68,232
19,916
30,208
11,203
26,055
136,747
15,715
375,514
81,535
20,555
165,465
32,788
36,013
209,551
23,176
36,270
17,508
55,406
129,833
24,101
19,529
80,437
57,968
29,700
105,173
9,502
77
169
59
4,196
.........

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

49,438
10,831
22,109
28,124
153,775
47,647
80,419
13,158
10,756
78,748
62,279
5,644
19,705
172,384
77,888
55,205
33,122
46,356
42,709
38,796
73,763
140,955
176,126
117,675
30,802
71,423
20,045
30,403
11,307
26,224
132,661
15,817
376,679
90,052
20,479
155,581
34,159
36,273
205,158
25,355
39,536
18,019
59,766
131,044
24,257
19,656
83,080
58,552
29,892
105,924
9,559
78
170
59
4,222
.........

49,438
10,831
22,109
28,124
153,775
47,647
80,419
13,158
10,756
78,748
62,279
5,644
19,705
172,384
77,888
55,205
33,122
46,356
42,709
38,796
73,763
140,955
176,126
117,675
30,802
71,423
20,045
30,403
11,307
26,224
132,661
15,817
376,679
90,052
20,479
155,581
34,159
36,273
205,158
25,355
39,536
18,019
59,766
131,044
24,257
19,656
83,080
58,552
29,892
105,924
9,559
78
170
59
4,222
.........

FY 2014
(estimated)
39,155
8,666
17,510
23,508
123,207
38,348
66,020
11,152
8,586
62,369
49,325
4,844
15,728
138,465
62,686
44,431
27,275
37,197
36,334
31,225
62,275
112,928
139,698
94,710
25,654
56,169
16,000
24,264
8,955
20,932
106,556
12,625
303,168
76,562
16,346
122,493
28,976
29,116
162,933
20,667
31,313
14,383
50,001
103,787
19,350
15,689
69,343
47,123
23,860
85,252
7,631
63
137
48
3,402
.........

FY 2014
Percentage of
distributed total
1.30
0.29
0.58
0.78
4.08
1.27
2.19
0.37
0.28
2.07
1.63
0.16
0.52
4.58
2.08
1.47
0.90
1.23
1.20
1.03
2.06
3.74
4.63
3.14
0.85
1.86
0.53
0.80
0.30
0.69
3.53
0.42
10.04
2.54
0.54
4.06
0.96
0.96
5.40
0.68
1.04
0.48
1.66
3.44
0.64
0.52
2.30
1.56
0.79
2.82
0.25
*
*
*
0.11
.........

323

17.  Aid to State and Local Governments

Department of Health and Human Services, Administration for Children and Families	

75-1502-0-1-609

Table 17–20. Low Income Home Energy Assistance Program (93.568)—Continued
(Obligations in thousands of dollars)
State or Territory
Virgin Islands �������������������������������������������������������������������������������������������������������
Indian Tribes ��������������������������������������������������������������������������������������������������������
Undistributed �������������������������������������������������������������������������������������������������������
Training and Technical Assistance �����������������������������������������������������������������������
2 Discretionary Funds ������������������������������������������������������������������������������������������
3 Other �����������������������������������������������������������������������������������������������������������������

FY 2012 Actual
160
38,429
.........
2,994
26,949
.........

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
161
161
.........
38,791
38,791
.........
.........
.........
.........
3,013
3,013
.........
27,114
27,114
.........
.........
.........

FY 2014
FY 2014
Percentage of
(estimated)
distributed total
130
*
31,430
1.04
.........
.........
3,000
0.10
77,000
2.55
150,000
4.97

1 3,471,710
4 100.00
.........
3,492,923
3,492,923
3,020,000
Total ��������������������������������������������������������������������������������������������������������������������
* $500 or less or 0.005 percent or less.
1 The FY 2012 State allocations are subject to change based on tribal agreements, therefore the final State allocation will be included on the HHS/ACF Office of Community Services
web site. In addition to FY 2012 appropriated funding, this column also includes $35,933 allocated to States from prior year block grant appropriations.
2 In 2014, discretionary funds consist of $23,985,000 for the Leveraging Incentive (Leveraging) program, $3,015,000 for the Residential Energy Assistance Challenge (REACH)
program, and $50,000,000 for Energy Burden Reduction activities.
3 In 2014, other consists of $150,000,000 available to release to states in FY 2014 for LIHEAP Contingency Fund for unanticipated home-energy related emergencies, such as extreme
weather related events and high fuel prices.
4 Excludes undistributed obligations.

324

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1515-0-1-609

Table 17–21. Child Care and Development Block Grant (93.575)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Training andTechnical Assistance ������������������������������������������������������������������������
Discretionary Funds ��������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

42,842
4,533
56,867
28,143
244,005
28,442
14,940
5,530
2,962
121,010
92,991
7,683
14,245
80,079
52,761
21,098
21,640
39,581
42,491
7,791
27,564
27,066
70,025
30,691
33,335
44,385
6,771
13,439
16,530
5,353
40,080
20,077
101,521
76,128
4,156
80,389
33,887
26,225
69,645
5,622
41,233
6,221
52,890
242,999
27,266
3,204
43,445
39,115
14,362
36,035
2,982
3,002
4,296
1,905
32,513
.........
2,189
45,566
.........
5,459
996
9,864
2,278,065

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

43,104
4,561
57,215
28,316
245,498
28,617
15,032
5,564
2,980
121,750
93,561
7,730
14,332
80,569
53,084
21,227
21,772
39,823
42,751
7,839
27,733
27,232
70,454
30,879
33,539
44,656
6,813
13,521
16,632
5,386
40,326
20,200
102,143
76,594
4,182
80,881
34,094
26,386
70,072
5,656
41,485
6,259
53,214
244,486
27,433
3,223
43,711
39,354
14,450
36,256
3,000
3,020
4,322
1,917
32,712
.........
2,202
45,845
.........
5,731
1,004
9,932
2,292,260

43,104
4,561
57,215
28,316
245,498
28,617
15,032
5,564
2,980
121,750
93,561
7,730
14,332
80,569
53,084
21,227
21,772
39,823
42,751
7,839
27,733
27,232
70,454
30,879
33,539
44,656
6,813
13,521
16,632
5,386
40,326
20,200
102,143
76,594
4,182
80,881
34,094
26,386
70,072
5,656
41,485
6,259
53,214
244,486
27,433
3,223
43,711
39,354
14,450
36,256
3,000
3,020
4,322
1,917
32,712
.........
2,202
45,845
.........
5,731
1,004
9,932
2,292,260

FY 2014
(estimated)
42,731
4,521
56,720
28,071
243,374
28,369
14,902
5,515
2,955
120,697
92,751
7,663
14,208
79,872
52,625
21,043
21,584
39,478
42,381
7,771
27,493
26,996
69,844
30,612
33,249
44,270
6,754
13,404
16,488
5,339
39,977
20,025
101,259
75,931
4,146
80,181
33,799
26,158
69,465
5,607
41,126
6,205
52,753
242,371
27,196
3,195
43,333
39,014
14,325
35,942
2,974
3,002
4,296
1,905
32,429
.........
2,189
45,566
.........
11,392
1,000
209,871
2,478,312

FY 2014
Percentage of
distributed total
1.72
0.18
2.29
1.13
9.82
1.14
0.60
0.22
0.12
4.87
3.74
0.31
0.57
3.22
2.12
0.85
0.87
1.59
1.71
0.31
1.11
1.09
2.82
1.24
1.34
1.79
0.27
0.54
0.67
0.22
1.61
0.81
4.09
3.06
0.17
3.24
1.36
1.06
2.80
0.23
1.66
0.25
2.13
9.78
1.10
0.13
1.75
1.57
0.58
1.45
0.12
0.12
0.17
0.08
1.31
.........
0.09
1.84
.........
0.46
0.04
8.47
1 100.00

325

17.  Aid to State and Local Governments
Department of Health and Human Services, Administration for Children and Families	

75-1550-0-1-609

Table 17–22. Child Care and Development Fund-Mandatory (93.596A)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Training and Technical Assistance �����������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

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
101,984
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
.........
.........
.........
.........
.........
.........
58,340
.........
3,093
1,238,961

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

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
101,984
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
.........
.........
.........
.........
.........
.........
58,340
.........
3,097
1,238,965

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
101,984
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
.........
.........
.........
.........
.........
.........
58,340
.........
3,097
1,238,965

FY 2014
(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
101,984
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
.........
.........
.........
.........
.........
.........
68,340
.........
7,256
1,253,124

FY 2014
Percentage of
distributed total
1.31
0.28
1.58
0.42
6.83
0.81
1.50
0.41
0.36
3.43
2.92
0.40
0.23
4.54
2.09
0.68
0.78
1.33
1.11
0.24
1.86
3.59
2.56
1.86
0.50
1.97
0.25
0.85
0.21
0.37
2.10
0.66
8.14
5.56
0.20
5.60
1.99
1.55
4.42
0.53
0.79
0.14
3.01
4.78
1.00
0.31
1.70
3.34
0.70
1.96
0.22
.........
.........
.........
.........
.........
.........
5.45
.........
0.58
1 100.00

326

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1550-0-1-609

Table 17–23. Child Care and Development Fund-Matching (93.596B)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Training and Technical Assistance �����������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

25,484
4,281
37,308
16,247
207,709
28,270
17,932
4,637
2,327
89,449
56,911
6,940
9,919
70,175
36,396
16,557
16,707
23,304
25,502
6,026
30,267
31,410
51,730
29,154
17,152
32,231
5,046
10,586
15,187
6,242
46,025
11,827
96,030
52,213
3,425
61,124
21,443
19,605
61,743
4,921
24,611
4,664
33,931
157,929
20,665
2,815
42,013
35,814
8,705
30,116
3,137
.........
.........
.........
.........
.........
.........
.........
.........
4,190
1,678,032

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

25,484
4,281
37,308
16,247
207,709
28,270
17,932
4,637
2,327
89,449
56,911
6,940
9,919
70,175
36,396
16,557
16,707
23,304
25,502
6,026
30,267
31,410
51,730
29,154
17,152
32,231
5,046
10,586
15,187
6,242
46,025
11,827
96,030
52,213
3,425
61,124
21,443
19,605
61,743
4,921
24,611
4,664
33,931
157,930
20,665
2,815
42,013
35,814
8,705
30,116
3,137
.........
.........
.........
.........
.........
.........
.........
.........
4,195
1,678,038

25,484
4,281
37,308
16,247
207,709
28,270
17,932
4,637
2,327
89,449
56,911
6,940
9,919
70,175
36,396
16,557
16,707
23,304
25,502
6,026
30,267
31,410
51,730
29,154
17,152
32,231
5,046
10,586
15,187
6,242
46,025
11,827
96,030
52,213
3,425
61,124
21,443
19,605
61,743
4,921
24,611
4,664
33,931
157,930
20,665
2,815
42,013
35,814
8,705
30,116
3,137
.........
.........
.........
.........
.........
.........
.........
.........
4,195
1,678,038

FY 2014
(estimated)
32,796
5,509
48,011
20,908
267,299
36,381
23,077
5,967
2,995
115,111
73,239
8,931
12,764
90,307
46,837
21,307
21,500
29,990
32,818
7,755
38,950
40,421
66,571
37,517
22,073
41,478
6,493
13,623
19,544
8,033
59,229
15,220
123,580
67,192
4,408
78,659
27,595
25,230
79,456
6,332
31,671
6,002
43,665
203,238
26,593
3,622
54,067
46,089
11,202
38,756
4,037
.........
.........
.........
.........
.........
.........
.........
.........
9,829
2,163,877

FY 2014
Percentage of
distributed total
1.52
0.25
2.22
0.97
12.35
1.68
1.07
0.28
0.14
5.32
3.38
0.41
0.59
4.17
2.16
0.98
0.99
1.39
1.52
0.36
1.80
1.87
3.08
1.73
1.02
1.92
0.30
0.63
0.90
0.37
2.74
0.70
5.71
3.11
0.20
3.64
1.28
1.17
3.67
0.29
1.46
0.28
2.02
9.39
1.23
0.17
2.50
2.13
0.52
1.79
0.19
.........
.........
.........
.........
.........
.........
.........
.........
0.45
1 100.00

327

17.  Aid to State and Local Governments
Department of Health and Human Services, Administration for Children and Families	

75-1536-0-1-506

Table 17–24. Head Start (93.600)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Palau �������������������������������������������������������������������������������������������������������������������
Training and Technical Assistance �����������������������������������������������������������������������
1 Discretionary Funds ������������������������������������������������������������������������������������������
2 Other �����������������������������������������������������������������������������������������������������������������

125,718
14,374
121,747
75,176
957,972
80,799
58,756
15,342
27,867
313,311
198,596
25,594
27,253
314,325
115,223
59,268
59,801
125,506
167,981
31,534
89,394
122,725
267,669
83,787
180,316
138,965
23,986
42,188
29,960
15,541
149,580
62,551
493,984
171,736
20,060
286,669
97,667
70,305
261,802
25,044
99,208
21,605
137,123
559,621
45,113
15,143
115,287
117,459
58,201
105,184
13,438
2,265
2,480
1,753
278,051
.........
9,424
223,891
.........
1,405
198,126
.........
86,505

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

126,487
14,462
122,492
75,637
963,813
81,293
59,115
15,436
28,038
315,228
199,812
25,751
27,419
316,249
115,928
59,631
60,167
126,274
169,009
31,727
89,941
123,476
269,307
84,300
181,419
139,816
24,132
42,446
30,144
15,636
150,496
62,933
497,007
172,787
20,183
288,423
98,264
70,735
263,404
25,197
99,815
21,738
137,962
563,046
45,389
15,236
115,992
118,178
58,557
105,828
13,521
2,279
2,495
1,764
279,753
.........
9,482
225,261
.........
1,413
200,433
.........
86,781

126,487
14,462
122,492
75,637
963,813
81,293
59,115
15,436
28,038
315,228
199,812
25,751
27,419
316,249
115,928
59,631
60,167
126,274
169,009
31,727
89,941
123,476
269,307
84,300
181,419
139,816
24,132
42,446
30,144
15,636
150,496
62,933
497,007
172,787
20,183
288,423
98,264
70,735
263,404
25,197
99,815
21,738
137,962
563,046
45,389
15,236
115,992
118,178
58,557
105,828
13,521
2,279
2,495
1,764
279,753
.........
9,482
225,261
.........
1,413
200,433
.........
86,781

FY 2014
(estimated)
128,890
14,736
124,819
77,074
982,126
82,838
60,238
15,729
28,570
321,218
203,608
26,240
27,940
322,258
118,131
60,764
61,310
128,673
172,220
32,330
91,650
125,822
274,424
85,902
184,866
142,472
24,591
43,253
30,716
15,933
153,355
64,129
506,450
176,070
20,566
293,903
100,131
72,079
268,409
25,676
101,712
22,151
140,584
573,744
46,252
15,526
118,196
120,423
59,670
107,839
13,777
2,323
2,543
1,798
285,068
.........
9,662
229,541
.........
1,440
204,853
1,446,620
87,252

FY 2014
Percentage of
distributed total
1.34
0.15
1.30
0.80
10.21
0.86
0.63
0.16
0.30
3.34
2.12
0.27
0.29
3.35
1.23
0.63
0.64
1.34
1.79
0.34
0.95
1.31
2.85
0.89
1.92
1.48
0.26
0.45
0.32
0.17
1.59
0.67
5.27
1.83
0.21
3.06
1.04
0.75
2.79
0.27
1.06
0.23
1.46
5.97
0.48
0.16
1.23
1.25
0.62
1.12
0.14
0.02
0.03
0.02
2.96
.........
0.10
2.39
.........
0.01
2.13
15.04
0.91

328

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1536-0-1-506

Table 17–24. Head Start (93.600)—Continued
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:
FY 2014
Previous
2013 CR or
FY 2014
Percentage of
FY 2012 Actual
authority
New Authority
Total
(estimated)
distributed total
Migrant Program ��������������������������������������������������������������������������������������������������
326,375
.........
328,373
328,373
334,612
3.48
3 100.00
Total ��������������������������������������������������������������������������������������������������������������������
7,967,729
.........
8,017,310
8,017,310
9,615,695
1 In 2014, discretionary funds include 1) $25 million requested in FY 2014 to minimize disruptions in Head Start services to children and families during the implementation of the
Designation Renewal System. Funds will be awarded to grantees on an as-needed basis during the transition period, and 2) $1.4 billion for the Early Head Start-Child Care Partnership
program to expand the availability of high quality comprehensive services for infants and toddlers.
2 Totals for “other” include funding for Research/Evaluation, Monitoring Support and Program Support.
3 Excludes undistributed obligations.
State or Territory

329

17.  Aid to State and Local Governments
Department of Health and Human Services, Administration for Children and Families	

75-1545-0-1-609

Table 17–25.  Foster Care-Title IV-E (93.658)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Training andTechincal Assistance ������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

32,230
15,227
86,780
37,484
1,170,068
56,264
41,263
4,205
37,807
177,283
69,353
17,634
9,324
197,116
115,448
21,071
24,180
39,316
38,584
15,150
49,336
48,351
117,220
37,589
15,307
48,360
9,625
16,053
34,807
15,172
88,032
20,288
382,520
77,411
10,591
187,113
32,326
77,077
166,418
11,999
24,856
4,787
34,852
222,156
21,151
8,075
51,483
78,361
13,291
49,600
2,142
.........
.........
.........
.........
.........
.........
3,080
.........
13,069
1,630
4,179,915

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

32,937
15,562
88,686
38,308
1,186,168
57,500
42,169
4,298
38,637
181,176
70,876
18,021
9,529
201,444
117,984
21,533
24,711
40,180
39,431
15,483
50,419
49,413
119,795
38,414
15,644
49,422
9,836
16,406
35,571
15,505
89,965
20,733
390,920
79,111
10,823
191,222
33,036
78,770
170,072
12,262
25,402
4,892
35,618
227,035
21,615
8,252
52,613
85,071
13,583
55,296
2,189
.........
.........
.........
.........
.........
.........
19,000
.........
13,000
.........
4,285,538

32,937
15,562
88,686
38,308
1,186,168
57,500
42,169
4,298
38,637
181,176
70,876
18,021
9,529
201,444
117,984
21,533
24,711
40,180
39,431
15,483
50,419
49,413
119,795
38,414
15,644
49,422
9,836
16,406
35,571
15,505
89,965
20,733
390,920
79,111
10,823
191,222
33,036
78,770
170,072
12,262
25,402
4,892
35,618
227,035
21,615
8,252
52,613
85,071
13,583
55,296
2,189
.........
.........
.........
.........
.........
.........
19,000
.........
13,000
.........
4,285,538

FY 2014
(estimated)
32,639
15,421
87,882
37,960
1,175,421
56,979
41,787
4,259
38,287
179,535
70,234
17,858
9,442
199,619
116,915
21,338
24,487
39,816
39,074
15,342
49,962
48,965
118,709
38,066
15,502
48,974
9,747
16,257
35,249
15,365
89,150
20,545
387,378
78,394
10,725
189,490
32,737
78,056
168,531
12,151
25,172
4,848
35,295
224,978
21,419
8,177
52,137
84,300
13,460
54,795
2,170
.........
.........
.........
.........
.........
.........
38,000
.........
26,000
2,000
4,280,999

FY 2014
Percentage of
distributed total
0.76
0.36
2.05
0.89
27.46
1.33
0.98
0.10
0.89
4.19
1.64
0.42
0.22
4.66
2.73
0.50
0.57
0.93
0.91
0.36
1.17
1.14
2.77
0.89
0.36
1.14
0.23
0.38
0.82
0.36
2.08
0.48
9.05
1.83
0.25
4.43
0.76
1.82
3.94
0.28
0.59
0.11
0.82
5.26
0.50
0.19
1.22
1.97
0.31
1.28
0.05
.........
.........
.........
.........
.........
.........
0.89
.........
0.61
0.05
1 100.00

330

Analytical Perspectives

Department of Health and Human Services, Administration for Children and Families	

75-1545-0-1-609

Table 17–26.  Adoption Assistance (93.659)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 ��������������������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

9,725
10,446
89,822
15,788
430,063
20,324
35,169
1,220
12,041
95,725
37,995
13,104
6,185
80,493
58,625
35,291
15,008
43,961
19,821
14,880
26,148
29,416
113,800
23,636
8,343
38,817
6,682
10,462
17,752
4,322
59,929
17,167
179,868
49,075
5,041
167,879
29,409
47,859
95,221
7,589
13,016
3,667
40,023
98,369
6,901
8,010
32,831
50,753
19,135
36,424
837
.........
.........
.........
.........
.........
.........
.........
.........
2,027
2,296,094

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

10,041
10,786
92,744
16,302
444,050
20,985
36,313
1,260
12,432
98,838
39,231
13,530
6,386
83,111
60,532
36,439
15,496
45,391
20,465
15,364
26,998
30,373
117,501
24,405
8,614
40,079
6,899
10,802
18,330
4,463
61,878
17,726
185,718
50,671
5,205
173,339
30,366
49,416
98,318
7,836
13,440
3,787
41,325
101,569
7,125
8,271
33,898
52,403
19,758
37,609
864
.........
.........
.........
.........
.........
.........
.........
.........
.........
2,368,682

10,041
10,786
92,744
16,302
444,050
20,985
36,313
1,260
12,432
98,838
39,231
13,530
6,386
83,111
60,532
36,439
15,496
45,391
20,465
15,364
26,998
30,373
117,501
24,405
8,614
40,079
6,899
10,802
18,330
4,463
61,878
17,726
185,718
50,671
5,205
173,339
30,366
49,416
98,318
7,836
13,440
3,787
41,325
101,569
7,125
8,271
33,898
52,403
19,758
37,609
864
.........
.........
.........
.........
.........
.........
.........
.........
.........
2,368,682

FY 2014
(estimated)
10,441
11,216
96,437
16,951
461,732
21,821
37,759
1,310
12,927
102,774
40,793
14,069
6,640
86,420
62,942
37,890
16,113
47,198
21,280
15,975
28,073
31,582
122,180
25,377
8,957
41,675
7,174
11,232
19,060
4,641
64,342
18,431
193,113
52,688
5,412
180,241
31,575
51,383
102,233
8,148
13,975
3,937
42,970
105,613
7,409
8,600
35,248
54,490
20,544
39,107
899
.........
.........
.........
.........
.........
.........
.........
.........
.........
2,462,997

FY 2014
Percentage of
distributed total
0.42
0.46
3.92
0.69
18.75
0.89
1.53
0.05
0.52
4.17
1.66
0.57
0.27
3.51
2.56
1.54
0.65
1.92
0.86
0.65
1.14
1.28
4.96
1.03
0.36
1.69
0.29
0.46
0.77
0.19
2.61
0.75
7.84
2.14
0.22
7.32
1.28
2.09
4.15
0.33
0.57
0.16
1.74
4.29
0.30
0.35
1.43
2.21
0.83
1.59
0.04
.........
.........
.........
.........
.........
.........
.........
.........
.........
1 100.00

331

17.  Aid to State and Local Governments
Department of Health and Human Services, Administration for Children and Families	

75.1534-0-1-506

Table 17–27. Social Services Block Grant (93.667)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 ��������������������������������������������������������������������������������������������������������������������
* $500 or less or 0.005 percent or less.
1 Excludes undistributed obligations.

26,171
3,889
34,999
15,966
203,980
27,537
19,570
4,917
3,295
102,944
53,044
7,448
8,583
70,253
35,501
16,679
15,622
23,760
24,822
7,273
31,612
35,851
54,117
29,041
16,247
32,792
5,417
10,000
14,787
7,208
48,139
11,275
106,103
52,210
3,683
63,167
20,540
20,977
69,550
5,763
25,326
4,458
34,747
137,682
15,133
3,426
43,809
36,819
10,146
31,138
3,086
60
293
59
8,793
.........
293
.........
.........
1,700,000

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

26,057
3,921
35,170
15,940
204,493
27,760
19,427
4,922
3,353
103,394
53,251
7,458
8,599
69,820
35,357
16,614
15,578
23,705
24,820
7,206
31,621
35,740
53,582
28,998
16,160
32,610
5,416
9,997
14,775
7,152
47,858
11,297
105,606
52,390
3,711
62,636
20,570
21,006
69,135
5,704
25,386
4,471
34,740
139,295
15,284
3,399
43,927
37,055
10,066
30,988
3,082
60
293
59
8,793
.........
293
.........
.........
1,700,000

26,057
3,921
35,170
15,940
204,493
27,760
19,427
4,922
3,353
103,394
53,251
7,458
8,599
69,820
35,357
16,614
15,578
23,705
24,820
7,206
31,621
35,740
53,582
28,998
16,160
32,610
5,416
9,997
14,775
7,152
47,858
11,297
105,606
52,390
3,711
62,636
20,570
21,006
69,135
5,704
25,386
4,471
34,740
139,295
15,284
3,399
43,927
37,055
10,066
30,988
3,082
60
293
59
8,793
.........
293
.........
.........
1,700,000

FY 2014
(estimated)
26,057
3,921
35,170
15,940
204,493
27,760
19,427
4,922
3,353
103,394
53,251
7,458
8,599
69,820
35,357
16,614
15,578
23,705
24,820
7,206
31,621
35,740
53,582
28,998
16,160
32,610
5,416
9,997
14,775
7,152
47,858
11,297
105,606
52,390
3,711
62,636
20,570
21,006
69,135
5,704
25,386
4,471
34,740
139,295
15,284
3,399
43,927
37,055
10,066
30,988
3,082
60
293
59
8,793
.........
293
.........
.........
1,700,000

FY 2014
Percentage of
distributed total
1.53
0.23
2.07
0.94
12.03
1.63
1.14
0.29
0.20
6.08
3.13
0.44
0.51
4.11
2.08
0.98
0.92
1.39
1.46
0.42
1.86
2.10
3.15
1.71
0.95
1.92
0.32
0.59
0.87
0.42
2.82
0.66
6.21
3.08
0.22
3.68
1.21
1.24
4.07
0.34
1.49
0.26
2.04
8.19
0.90
0.20
2.58
2.18
0.59
1.82
0.18
*
0.02
*
0.52
.........
0.02
.........
.........
1 100.00

332

Analytical Perspectives

Department of Health and Human Services, HIV/AIDS Bureau	

75-0350-0-1-550

Table 17–28.  Ryan White HIV/AIDS Treatment Modernization Act-Part B HIV Care Grants (93.917)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Marshall Islands ���������������������������������������������������������������������������������������������������
Republic of Palau �������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 FY 2013 data for each State and territory is not available.
2 FY 2014 data for each State and territory is not available.
3 Excludes undistributed obligations.

22,944
1,320
16,322
8,488
163,449
15,445
14,789
5,791
20,025
142,770
56,650
3,661
1,926
50,281
12,067
3,733
3,609
11,862
27,643
1,829
39,512
20,485
18,499
8,121
14,133
14,055
1,307
3,792
8,437
1,515
52,562
4,077
164,499
39,319
755
25,380
8,537
6,811
43,143
4,177
26,000
1,231
23,573
88,187
4,957
892
31,509
15,556
2,551
9,493
727
40
287
57
34,287
58
2,361
.........
.........
17
53
1,305,556

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
1 1,328,722
.........
.........
1,328,722

.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
1,328,722
.........
.........
1,328,722

FY 2014
(estimated)
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
2 1,370,827
.........
.........
1,370,827

FY 2014
Percentage of
distributed total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
3 100.00

333

17.  Aid to State and Local Governments
Department of Housing and Urban Development, Public and Indian Housing Programs	

86-0163-0-1-604

Table 17–29. Public Housing Operating Fund (14.850)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

114,876
8,949
18,814
21,821
124,861
26,736
61,362
11,703
45,317
113,178
102,931
25,253
969
228,085
40,681
3,425
16,675
47,647
55,314
12,073
104,465
140,850
58,335
44,863
22,114
27,659
3,572
10,740
14,132
8,389
156,560
8,002
987,734
112,848
2,085
194,113
25,743
14,460
262,963
27,695
37,742
1,302
88,520
137,224
3,613
4,039
69,097
35,953
10,695
17,162
1,046
.........
829
.........
221,425
.........
20,609
.........
.........
3,957,248

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
124
10
20
23
134
29
66
13
49
122
111
27
1
245
44
4
18
51
60
13
112
152
63
48
24
30
4
12
15
9
168
9
1,063
121
2
209
28
16
283
30
41
1
95
148
4
4
74
39
12
18
1
.........
1
.........
238
.........
22
.........
.........
4,260

115,714
9,014
18,951
21,980
125,771
26,931
61,809
11,788
45,647
114,003
103,681
25,437
976
229,748
40,977
3,450
16,796
47,994
55,718
12,161
105,227
141,877
58,760
45,190
22,275
27,860
3,598
10,818
14,235
8,450
157,701
8,060
994,935
113,671
2,100
195,528
25,931
14,566
264,880
27,897
38,018
1,311
89,166
138,224
3,639
4,068
69,600
36,215
10,772
17,287
1,053
.........
835
.........
223,039
.........
20,759
.........
.........
3,986,091

115,838
9,024
18,971
22,003
125,905
26,960
61,875
11,801
45,696
114,125
103,792
25,464
977
229,993
41,021
3,454
16,814
48,045
55,778
12,174
105,339
142,029
58,823
45,238
22,299
27,890
3,602
10,830
14,250
8,459
157,869
8,069
995,998
113,792
2,102
195,737
25,959
14,582
265,163
27,927
38,059
1,312
89,261
138,372
3,643
4,072
69,674
36,254
10,784
17,305
1,054
.........
836
.........
223,277
.........
20,781
.........
.........
3,990,351

FY 2014
(estimated)
132,374
10,312
21,680
25,145
143,880
30,809
70,709
13,486
52,219
130,417
118,609
29,100
1,116
262,827
46,877
3,946
19,214
54,904
63,740
13,912
120,377
162,303
67,220
51,697
25,482
31,871
4,117
12,375
16,285
9,666
180,406
9,220
1,138,182
130,036
2,403
223,680
29,665
16,663
303,017
31,913
43,491
1,500
102,003
158,125
4,163
4,654
79,622
41,429
12,324
19,776
1,205
.........
956
.........
255,152
.........
23,748
.........
.........
4,560,002

FY 2014
Percentage of
distributed total
2.90
0.23
0.48
0.55
3.16
0.68
1.55
0.30
1.15
2.86
2.60
0.64
0.02
5.76
1.03
0.09
0.42
1.20
1.40
0.31
2.64
3.56
1.47
1.13
0.56
0.70
0.09
0.27
0.36
0.21
3.96
0.20
24.96
2.85
0.05
4.91
0.65
0.37
6.65
0.70
0.95
0.03
2.24
3.47
0.09
0.10
1.75
0.91
0.27
0.43
0.03
.........
0.02
.........
5.60
.........
0.52
.........
.........
1 100.00

334

Analytical Perspectives

Department of Housing and Urban Development, Public and Indian Housing Programs	

86-0302-0-1-604

Table 17–30. Section 8 Housing Choice Vouchers (14.871)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

185,490
36,377
169,064
91,521
3,343,024
230,287
371,754
38,996
184,168
851,786
481,807
107,050
37,380
890,679
197,130
93,379
63,159
190,193
315,615
86,379
488,947
845,838
347,416
224,017
125,046
239,697
30,185
67,295
136,467
83,629
665,167
65,583
2,299,097
346,840
31,645
552,456
126,234
214,832
585,889
81,634
144,639
27,842
220,038
991,187
70,292
49,172
378,593
437,922
65,320
156,879
13,803
.........
35,259
3,919
187,169
.........
10,868
.........
.........
18,316,054

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
1,557
305
1,419
768
28,055
1,933
3,120
327
1,546
7,148
4,043
898
314
7,475
1,654
784
530
1,596
2,649
725
4,103
7,098
2,916
1,880
1,049
2,012
253
565
1,145
702
5,582
550
19,294
2,911
266
4,636
1,059
1,803
4,917
685
1,214
234
1,847
8,318
590
413
3,177
3,675
548
1,317
116
.........
296
33
1,571
.........
91
.........
.........
153,712

192,474
37,747
175,429
94,967
3,468,887
238,957
385,750
40,464
191,101
883,856
499,947
111,080
38,787
924,213
204,552
96,894
65,537
197,353
327,498
89,632
507,356
877,684
360,496
232,451
129,754
248,721
31,322
69,828
141,605
86,778
690,211
68,052
2,385,657
359,898
32,836
573,256
130,987
222,921
607,948
84,708
150,084
28,890
228,322
1,028,504
72,939
51,023
392,847
454,409
67,779
162,786
14,323
.........
36,587
4,067
194,216
.........
11,277
.........
.........
19,005,647

194,031
38,052
176,848
95,735
3,496,942
240,890
388,870
40,791
192,647
891,004
503,990
111,978
39,101
931,688
206,206
97,678
66,067
198,949
330,147
90,357
511,459
884,782
363,412
234,331
130,803
250,733
31,575
70,393
142,750
87,480
695,793
68,602
2,404,951
362,809
33,102
577,892
132,046
224,724
612,865
85,393
151,298
29,124
230,169
1,036,822
73,529
51,436
396,024
458,084
68,327
164,103
14,439
.........
36,883
4,100
195,787
.........
11,368
.........
.........
19,159,359

FY 2014
(estimated)
202,283
39,670
184,370
99,806
3,645,669
251,134
405,409
42,526
200,840
928,898
525,425
116,741
40,764
971,313
214,977
101,833
68,877
207,411
344,188
94,199
533,212
922,412
378,867
244,298
136,367
261,397
32,918
73,387
148,822
91,201
725,385
71,520
2,507,236
378,239
34,509
602,471
137,663
234,281
638,930
89,024
157,733
30,362
239,958
1,080,919
76,655
53,624
412,867
477,567
71,233
171,082
15,053
.........
38,451
4,274
204,114
.........
11,852
.........
22,000
19,996,216

FY 2014
Percentage of
distributed total
1.01
0.20
0.92
0.50
18.25
1.26
2.03
0.21
1.01
4.65
2.63
0.58
0.20
4.86
1.08
0.51
0.34
1.04
1.72
0.47
2.67
4.62
1.90
1.22
0.68
1.31
0.16
0.37
0.75
0.46
3.63
0.36
12.55
1.89
0.17
3.02
0.69
1.17
3.20
0.45
0.79
0.15
1.20
5.41
0.38
0.27
2.07
2.39
0.36
0.86
0.08
.........
0.19
0.02
1.02
.........
0.06
.........
.........
1 100.00

335

17.  Aid to State and Local Governments
Department of Housing and Urban Development, Public and Indian Housing Programs	

86-0304-0-1-604

Table 17–31. Public Housing Capital Fund (14.872)
(Obligations in thousands of dollars)
State or Territory
FY 2012 Actual

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total

Alabama ��������������������������������������������������������������������������������������������������������������
57,961
1,478
55,887
Alaska ������������������������������������������������������������������������������������������������������������������
2,301
58
2,219
Arizona ����������������������������������������������������������������������������������������������������������������
7,745
197
7,468
Arkansas �������������������������������������������������������������������������������������������������������������
21,719
554
20,941
California �������������������������������������������������������������������������������������������������������������
74,710
1,905
72,036
Colorado ��������������������������������������������������������������������������������������������������������������
10,474
267
10,099
Connecticut ����������������������������������������������������������������������������������������������������������
21,963
560
21,176
Delaware �������������������������������������������������������������������������������������������������������������
4,140
106
3,992
District of Columbia ���������������������������������������������������������������������������������������������
14,662
374
14,138
Florida �����������������������������������������������������������������������������������������������������������������
52,990
1,352
51,093
Georgia ����������������������������������������������������������������������������������������������������������������
66,264
1,690
63,892
Hawaii ������������������������������������������������������������������������������������������������������������������
9,819
250
9,468
Idaho �������������������������������������������������������������������������������������������������������������������
922
24
889
Illinois �������������������������������������������������������������������������������������������������������������������
132,856
3,388
128,101
Indiana �����������������������������������������������������������������������������������������������������������������
22,402
571
21,601
Iowa ���������������������������������������������������������������������������������������������������������������������
5,095
130
4,912
Kansas �����������������������������������������������������������������������������������������������������������������
10,236
261
9,869
Kentucky ��������������������������������������������������������������������������������������������������������������
33,067
843
31,884
Louisiana �������������������������������������������������������������������������������������������������������������
43,781
1,116
42,214
Maine �������������������������������������������������������������������������������������������������������������������
5,248
134
5,061
Maryland ��������������������������������������������������������������������������������������������������������������
27,798
709
26,803
Massachusetts �����������������������������������������������������������������������������������������������������
53,466
1,363
51,553
Michigan ��������������������������������������������������������������������������������������������������������������
32,288
823
31,133
Minnesota ������������������������������������������������������������������������������������������������������������
29,250
746
28,203
Mississippi �����������������������������������������������������������������������������������������������������������
21,069
537
20,316
Missouri ���������������������������������������������������������������������������������������������������������������
28,530
728
27,508
Montana ���������������������������������������������������������������������������������������������������������������
2,674
68
2,578
Nebraska �������������������������������������������������������������������������������������������������������������
8,333
213
8,035
Nevada ����������������������������������������������������������������������������������������������������������������
5,457
139
5,261
New Hampshire ���������������������������������������������������������������������������������������������������
4,753
121
4,583
New Jersey ����������������������������������������������������������������������������������������������������������
64,253
1,638
61,954
New Mexico ���������������������������������������������������������������������������������������������������������
5,709
145
5,504
New York ��������������������������������������������������������������������������������������������������������������
330,956
8,439
319,111
North Carolina �����������������������������������������������������������������������������������������������������
49,997
1,275
48,208
North Dakota �������������������������������������������������������������������������������������������������������
2,153
55
2,076
Ohio ���������������������������������������������������������������������������������������������������������������������
80,830
2,061
77,937
Oklahoma ������������������������������������������������������������������������������������������������������������
15,007
382
14,470
Oregon �����������������������������������������������������������������������������������������������������������������
8,824
225
8,508
Pennsylvania �������������������������������������������������������������������������������������������������������
124,199
3,167
119,755
Rhode Island �������������������������������������������������������������������������������������������������������
12,549
320
12,099
South Carolina �����������������������������������������������������������������������������������������������������
21,079
538
20,325
South Dakota �������������������������������������������������������������������������������������������������������
1,666
42
1,607
Tennessee �����������������������������������������������������������������������������������������������������������
54,973
1,402
53,006
Texas �������������������������������������������������������������������������������������������������������������������
75,406
1,923
72,707
Utah ���������������������������������������������������������������������������������������������������������������������
2,459
63
2,371
Vermont ���������������������������������������������������������������������������������������������������������������
2,004
51
1,932
Virginia �����������������������������������������������������������������������������������������������������������������
29,618
755
28,558
Washington ����������������������������������������������������������������������������������������������������������
27,600
704
26,612
West Virginia ��������������������������������������������������������������������������������������������������������
8,287
211
7,990
Wisconsin ������������������������������������������������������������������������������������������������������������
15,668
399
15,107
Wyoming ��������������������������������������������������������������������������������������������������������������
854
22
823
American Samoa �������������������������������������������������������������������������������������������������
.........
.........
.........
Guam �������������������������������������������������������������������������������������������������������������������
1,220
31
1,176
Northern Mariana Islands ������������������������������������������������������������������������������������
.........
.........
.........
Puerto Rico ����������������������������������������������������������������������������������������������������������
109,284
2,786
105,373
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
5,597
143
5,397
Indian Tribes ��������������������������������������������������������������������������������������������������������
.........
.........
.........
1 Undistributed �����������������������������������������������������������������������������������������������������
.........
.........
70,000
2 Other Program Activities �����������������������������������������������������������������������������������
18,000
29,000
.........
Total ���������������������������������������������������������������������������������������������������������������������
1,880,165
76,482
1,865,519
1 Includes obligations for the Emergency/Disaster Reserve, Resident Opportunities and Self-Sufficiency, and/or Jobs-Plus.
2 Includes obligations for Technical Assistance, Administrative Receiverships, and Real Estate Assessment Center.
3 Excludes undistributed obligations.

57,365
2,277
7,665
21,495
73,941
10,366
21,736
4,098
14,512
52,445
65,582
9,718
913
131,489
22,172
5,042
10,130
32,727
43,330
5,195
27,512
52,916
31,956
28,949
20,853
28,236
2,646
8,248
5,400
4,704
63,592
5,649
327,550
49,483
2,131
79,998
14,852
8,733
122,922
12,419
20,863
1,649
54,408
74,630
2,434
1,983
29,313
27,316
8,201
15,506
845
.........
1,207
.........
108,159
.........
5,540
.........
70,000
29,000
1,942,001

FY 2014
(estimated)
60,259
2,392
8,052
22,581
77,672
10,889
22,833
4,305
15,244
55,091
68,892
10,209
959
138,124
23,290
5,297
10,641
34,379
45,515
5,457
28,901
55,586
33,568
30,411
21,905
29,661
2,780
8,664
5,673
4,941
66,801
5,935
344,079
51,980
2,239
84,034
15,602
9,174
129,124
13,046
21,916
1,732
57,153
78,395
2,556
2,083
30,792
28,694
8,615
16,290
888
.........
1,268
.........
113,617
.........
5,819
.........
35,000
28,000
1,999,003

FY 2014
Percentage of
distributed total
3.07
0.12
0.41
1.15
3.95
0.55
1.16
0.22
0.78
2.81
3.51
0.52
0.05
7.03
1.19
0.27
0.54
1.75
2.32
0.28
1.47
2.83
1.71
1.55
1.12
1.51
0.14
0.44
0.29
0.25
3.40
0.30
17.52
2.65
0.11
4.28
0.79
0.47
6.57
0.66
1.12
0.09
2.91
3.99
0.13
0.11
1.57
1.46
0.44
0.83
0.05
.........
0.06
.........
5.78
.........
0.30
.........
.........
1.43
3 100.00

336

Analytical Perspectives

Department of Housing and Urban Development, Community Planning and Development	

86-0162-0-1-451

Table 17–32. Community Development Block Grant (14.218; 14.225; 14.228; 14.862)
(Obligations in thousands of dollars)
State or Territory
FY 2012 Actual

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total

FY 2014
(estimated)

FY 2014
Percentage of
distributed total

Alabama ��������������������������������������������������������������������������������������������������������������
94,656
2,867
44,005
46,872
37,475
1.26
Alaska ������������������������������������������������������������������������������������������������������������������
3,843
.........
4,473
4,473
3,810
0.13
Arizona ����������������������������������������������������������������������������������������������������������������
55,467
.........
50,748
50,748
21,896
0.74
Arkansas �������������������������������������������������������������������������������������������������������������
23,434
.........
25,711
25,711
43,218
1.46
California �������������������������������������������������������������������������������������������������������������
425,397
32,813
390,018
422,831
332,143
11.20
Colorado ��������������������������������������������������������������������������������������������������������������
39,508
2,878
36,777
39,655
31,320
1.06
Connecticut ����������������������������������������������������������������������������������������������������������
24,710
14,905
110,678
125,583
33,092
1.12
Delaware �������������������������������������������������������������������������������������������������������������
6,234
.........
7,050
7,050
12,971
0.44
District of Columbia ���������������������������������������������������������������������������������������������
16,329
13,905
15,231
29,136
6,004
0.20
Florida �����������������������������������������������������������������������������������������������������������������
133,790
83,998
138,135
222,133
117,637
3.97
Georgia ����������������������������������������������������������������������������������������������������������������
73,414
2,089
80,747
82,836
68,765
2.32
Hawaii ������������������������������������������������������������������������������������������������������������������
12,204
.........
13,558
13,558
11,546
0.39
Idaho �������������������������������������������������������������������������������������������������������������������
10,473
2,328
11,934
14,262
30,693
1.03
Illinois �������������������������������������������������������������������������������������������������������������������
151,273
22,518
161,325
183,843
10,163
0.34
Indiana �����������������������������������������������������������������������������������������������������������������
54,823
6,889
65,815
72,704
137,385
4.63
Iowa ���������������������������������������������������������������������������������������������������������������������
31,350
1,507
36,041
37,548
56,049
1.89
Kansas �����������������������������������������������������������������������������������������������������������������
23,628
2,028
25,844
27,872
22,009
0.74
Kentucky ��������������������������������������������������������������������������������������������������������������
38,295
.........
42,545
42,545
36,232
1.22
Louisiana �������������������������������������������������������������������������������������������������������������
100,917
80,817
49,214
130,031
153,912
5.19
Maine �������������������������������������������������������������������������������������������������������������������
15,640
1,994
18,118
20,112
84,933
2.86
Maryland ��������������������������������������������������������������������������������������������������������������
54,086
1,390
56,175
57,565
40,482
1.36
Massachusetts �����������������������������������������������������������������������������������������������������
77,785
17,261
99,732
116,993
15,430
0.52
Michigan ��������������������������������������������������������������������������������������������������������������
120,148
39,413
122,239
161,652
104,099
3.51
Minnesota ������������������������������������������������������������������������������������������������������������
46,695
860
52,571
53,431
44,770
1.51
Mississippi �����������������������������������������������������������������������������������������������������������
28,042
2,157
29,790
31,947
53,158
1.79
Missouri ���������������������������������������������������������������������������������������������������������������
110,631
212
62,421
62,633
25,370
0.86
Montana ���������������������������������������������������������������������������������������������������������������
7,348
.........
8,346
8,346
7,108
0.24
Nebraska �������������������������������������������������������������������������������������������������������������
14,544
1,854
17,983
19,837
63,328
2.13
Nevada ����������������������������������������������������������������������������������������������������������������
31,444
.........
20,109
20,109
4,632
0.16
New Hampshire ���������������������������������������������������������������������������������������������������
9,605
1,822
12,169
13,991
15,314
0.52
New Jersey ����������������������������������������������������������������������������������������������������������
85,473
32,219
1,916,253
1,948,472
10,364
0.35
New Mexico ���������������������������������������������������������������������������������������������������������
14,165
.........
15,894
15,894
73,862
2.49
New York ��������������������������������������������������������������������������������������������������������������
344,772
57,687
3,799,531
3,857,218
13,536
0.46
North Carolina �����������������������������������������������������������������������������������������������������
65,386
.........
74,363
74,363
17,125
0.58
North Dakota �������������������������������������������������������������������������������������������������������
84,284
.........
5,439
5,439
266,342
8.98
Ohio ���������������������������������������������������������������������������������������������������������������������
157,314
4,546
149,612
154,158
127,411
4.30
Oklahoma ������������������������������������������������������������������������������������������������������������
24,592
4,770
27,510
32,280
23,428
0.79
Oregon �����������������������������������������������������������������������������������������������������������������
30,259
.........
33,685
33,685
28,687
0.97
Pennsylvania �������������������������������������������������������������������������������������������������������
214,334
55,033
185,713
240,746
158,155
5.33
Rhode Island �������������������������������������������������������������������������������������������������������
12,975
2,905
20,018
22,923
14,288
0.48
South Carolina �����������������������������������������������������������������������������������������������������
33,027
.........
37,315
37,315
31,777
1.07
South Dakota �������������������������������������������������������������������������������������������������������
6,553
.........
7,117
7,117
6,061
0.20
Tennessee �����������������������������������������������������������������������������������������������������������
44,564
.........
49,704
49,704
42,329
1.43
Texas �������������������������������������������������������������������������������������������������������������������
278,901
89,629
236,685
326,314
201,563
6.80
Utah ���������������������������������������������������������������������������������������������������������������������
16,694
2,122
20,480
22,602
17,441
0.59
Vermont ���������������������������������������������������������������������������������������������������������������
28,497
.........
7,711
7,711
46,279
1.56
Virginia �����������������������������������������������������������������������������������������������������������������
46,224
15,578
54,343
69,921
6,567
0.22
Washington ����������������������������������������������������������������������������������������������������������
49,107
901
54,833
55,734
46,696
1.57
West Virginia ��������������������������������������������������������������������������������������������������������
17,546
1,697
20,734
22,431
52,191
1.76
Wisconsin ������������������������������������������������������������������������������������������������������������
79,680
2,882
61,283
64,165
17,859
0.60
Wyoming ��������������������������������������������������������������������������������������������������������������
3,196
.........
3,605
3,605
3,071
0.10
American Samoa �������������������������������������������������������������������������������������������������
1,159
.........
1,036
1,036
1,035
0.03
Guam �������������������������������������������������������������������������������������������������������������������
3,086
3,158
3,014
6,172
3,013
0.10
Northern Mariana Islands ������������������������������������������������������������������������������������
824
793
969
1,762
968
0.03
Puerto Rico ����������������������������������������������������������������������������������������������������������
66,984
.........
69,664
69,664
59,326
2.00
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
1,873
1,890
1,984
3,874
1,983
0.07
Indian Tribes ��������������������������������������������������������������������������������������������������������
56,402
938
60,000
60,938
70,000
2.36
Undistributed �������������������������������������������������������������������������������������������������������
110,954
3,882
850,000
853,882
10,005,000
.........
1 100.00
Total ��������������������������������������������������������������������������������������������������������������������
3,714,538
617,135
9,577,997
10,195,132
12,971,301
NOTE: 2013 obligations include $5.4 billion of announced funding from P.L. 113-2 and an estimated $850 million of funding expected to be obligated that has not yet been announced.
The remainder of the disaster funds provided by P.L. 113-2 are expected to be obligated in 2014.
1 Excludes undistributed obligations.

17.  Aid to State and Local Governments

337

Department of Labor, Employment and Training Administration	

16-0179-0-1-603

Table 17–33. Unemployment Insurance (17.225)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 �������������������������������������������������������������������������������������������������������
Dept of Health and Human Services �������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
1 Excludes undistributed obligations.

37,038
24,207
41,057
24,903
439,524
45,633
61,690
11,279
13,996
95,151
72,584
16,956
21,733
171,890
45,199
28,845
21,229
35,174
36,215
27,450
63,193
69,836
128,886
44,219
96,553
39,410
9,632
17,659
35,847
17,908
124,947
21,596
235,470
65,887
7,452
103,585
26,189
55,579
153,955
30,067
34,250
5,669
42,163
145,770
26,051
8,010
47,354
105,935
15,844
72,581
9,070
.........
.........
.........
21,484
.........
3,220
.........
4
2,236
3,159,264

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

38,030
28,256
42,165
26,189
468,307
45,605
60,542
12,010
12,205
99,393
80,087
17,188
20,878
178,271
50,381
30,106
23,161
33,054
35,732
17,591
68,014
72,697
142,654
49,831
24,574
41,709
10,047
16,772
35,190
16,543
129,304
15,853
203,643
68,988
8,110
105,580
27,659
58,005
162,351
15,029
35,101
6,485
42,965
155,972
29,010
9,184
49,761
115,537
16,226
77,728
10,091
.........
.........
.........
21,003
.........
2,137
.........
.........
2,240
3,165,144

76,060
56,512
84,330
52,378
936,614
91,210
121,084
24,020
24,410
198,786
160,174
34,376
41,756
356,542
100,762
60,212
46,322
66,108
71,464
35,182
136,028
145,394
285,308
99,662
49,148
83,418
20,094
33,544
70,380
33,086
258,608
31,706
407,286
137,976
16,220
211,160
55,318
116,010
324,702
30,058
70,202
12,970
85,930
311,944
58,020
18,368
99,522
231,074
32,452
155,456
20,182
.........
.........
.........
42,006
.........
4,274
.........
.........
4,480
6,330,288

FY 2014
(estimated)
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
3,842,895
2,240
3,845,135

FY 2014
Percentage of
distributed total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
100.00
1 100.00

338

Analytical Perspectives

Department of Labor, Employment and Training Administration	

16-0171-4-504

Table 17–34. Pathways Back to Work
(Obligations in thousands of dollars)
Estimated FY2013 obligations from:
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 ����������������������������������������������������������������������������������������������������������
Freely Associated States �������������������������������������������������������������������������������������
Virgin Islands �������������������������������������������������������������������������������������������������������
Indian Tribes ��������������������������������������������������������������������������������������������������������
Undistributed �������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
NOTE: All appropriations and obligations for this program would be in 2013.

FY 2012 Actual
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

Previous
2013 CR or
authority
New Authority
.........
146,004
.........
18,909
.........
215,575
.........
87,033
.........
1,619,096
.........
155,030
.........
107,836
.........
21,553
.........
27,239
.........
673,754
.........
344,887
.........
31,943
.........
48,441
.........
454,569
.........
206,195
.........
51,225
.........
65,725
.........
163,892
.........
125,896
.........
37,965
.........
137,105
.........
162,470
.........
341,460
.........
123,630
.........
116,902
.........
175,085
.........
28,682
.........
23,493
.........
130,497
.........
19,672
.........
296,029
.........
57,663
.........
637,430
.........
363,230
.........
6,778
.........
346,278
.........
82,503
.........
135,735
.........
365,912
.........
46,482
.........
167,405
.........
12,013
.........
209,262
.........
716,785
.........
54,784
.........
10,422
.........
167,206
.........
220,053
.........
52,458
.........
152,885
.........
8,751
.........
2,825
.........
9,588
.........
5,239
.........
239,422
.........
715
.........
7,884
.........
157,500
.........
105,000
.........
10,500,000

Total
146,004
18,909
215,575
87,033
1,619,096
155,030
107,836
21,553
27,239
673,754
344,887
31,943
48,441
454,569
206,195
51,225
65,725
163,892
125,896
37,965
137,105
162,470
341,460
123,630
116,902
175,085
28,682
23,493
130,497
19,672
296,029
57,663
637,430
363,230
6,778
346,278
82,503
135,735
365,912
46,482
167,405
12,013
209,262
716,785
54,784
10,422
167,206
220,053
52,458
152,885
8,751
2,825
9,588
5,239
239,422
715
7,884
157,500
105,000
10,500,000

FY 2014
FY 2014
Percentage of
(estimated)
distributed total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

17.  Aid to State and Local Governments

339

Department of Transportation, Federal Aviation Administration	

69-8106-0-7-402

Table 17–35.  Airport Improvement Program (20.106)
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

64,220
228,163
78,617
67,886
264,136
88,610
23,085
5,684
300
147,886
83,067
44,166
26,673
166,422
55,659
63,815
55,464
47,643
42,676
21,088
34,304
43,343
79,288
51,496
34,481
48,340
35,229
28,326
41,919
17,107
34,126
22,978
112,272
98,925
52,027
62,111
43,762
65,560
56,339
8,263
48,120
26,267
83,751
171,445
61,130
17,393
92,225
75,714
19,069
77,244
25,027
871
8,197
18,501
25,733
.........
7,540
.........
.........
3,303,679

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

53,021
212,503
71,020
47,991
243,067
90,290
19,317
4,614
324
154,554
82,589
31,840
19,192
133,940
60,302
43,027
35,943
42,592
54,053
25,361
22,438
55,323
80,477
53,853
43,926
53,893
39,491
36,704
45,081
16,502
42,139
24,117
115,964
82,555
32,432
74,858
39,194
59,383
68,536
8,981
47,827
30,821
79,148
213,400
46,825
16,605
71,191
95,911
19,747
63,849
22,961
5,554
11,742
11,909
16,957
.........
7,918
.........
.........
3,183,753

53,021
212,503
71,020
47,991
243,067
90,290
19,317
4,614
324
154,554
82,589
31,840
19,192
133,940
60,302
43,027
35,943
42,592
54,053
25,361
22,438
55,323
80,477
53,853
43,926
53,893
39,491
36,704
45,081
16,502
42,139
24,117
115,964
82,555
32,432
74,858
39,194
59,383
68,536
8,981
47,827
30,821
79,148
213,400
46,825
16,605
71,191
95,911
19,747
63,849
22,961
5,554
11,742
11,909
16,957
.........
7,918
.........
.........
3,183,753

FY 2014
(estimated)
45,782
186,571
63,244
42,834
204,344
75,409
16,851
3,677
270
130,834
70,416
27,070
17,431
120,238
50,628
38,079
30,793
36,662
44,220
21,223
17,613
48,707
67,257
44,479
38,130
44,286
32,755
32,849
38,257
15,823
39,168
21,778
102,041
70,501
30,208
64,495
34,237
50,377
54,445
7,256
40,397
27,147
66,709
172,036
43,311
15,295
61,381
81,461
17,155
54,410
19,186
3,943
8,993
10,618
16,005
.........
5,381
.........
.........
2,724,667

FY 2014
Percentage of
distributed total
1.68
6.85
2.32
1.57
7.50
2.77
0.62
0.13
0.01
4.80
2.58
0.99
0.64
4.41
1.86
1.40
1.13
1.35
1.62
0.78
0.65
1.79
2.47
1.63
1.40
1.63
1.20
1.21
1.40
0.58
1.44
0.80
3.75
2.59
1.11
2.37
1.26
1.85
2.00
0.27
1.48
1.00
2.45
6.31
1.59
0.56
2.25
2.99
0.63
2.00
0.70
0.14
0.33
0.39
0.59
.........
0.20
.........
.........
1 100.00

340

Analytical Perspectives

Department of Transportation, Federal Highway Administration	

69-8083-0-7-401

Table 17–36. Highway Planning and Construction (20.205)
(Obligations in thousands of dollars)
Estimated FY 2013 obligations from:
State or Territory
FY 2012 Actual

Previous
authority

2013 CR or
New Authority

Total

FY 2014
(estimated)

FY 2014
Percentage of
distributed total

Alabama ��������������������������������������������������������������������������������������������������������������
665,999
.........
709,620
709,620
711,202
1.98
Alaska ������������������������������������������������������������������������������������������������������������������
461,507
.........
469,054
469,054
449,520
1.25
Arizona ����������������������������������������������������������������������������������������������������������������
654,796
.........
665,653
665,653
671,203
1.86
Arkansas �������������������������������������������������������������������������������������������������������������
568,443
.........
463,184
463,184
474,378
1.32
California �������������������������������������������������������������������������������������������������������������
3,423,175
.........
3,511,409
3,511,409
3,371,887
9.37
Colorado ��������������������������������������������������������������������������������������������������������������
505,742
.........
492,642
492,642
501,242
1.39
Connecticut ����������������������������������������������������������������������������������������������������������
464,944
.........
471,182
471,182
460,960
1.28
Delaware �������������������������������������������������������������������������������������������������������������
172,943
.........
151,518
151,518
155,183
0.43
District of Columbia ���������������������������������������������������������������������������������������������
234,274
.........
142,903
142,903
146,359
0.41
Florida �����������������������������������������������������������������������������������������������������������������
1,835,563
.........
1,749,704
1,749,704
1,776,095
4.93
Georgia ����������������������������������������������������������������������������������������������������������������
1,225,049
.........
1,181,778
1,181,778
1,210,359
3.36
Hawaii ������������������������������������������������������������������������������������������������������������������
154,955
.........
165,138
165,138
151,719
0.42
Idaho �������������������������������������������������������������������������������������������������������������������
282,279
.........
261,848
261,848
262,210
0.73
Illinois �������������������������������������������������������������������������������������������������������������������
1,301,370
.........
1,301,211
1,301,211
1,332,693
3.70
Indiana �����������������������������������������������������������������������������������������������������������������
924,228
.........
835,752
835,752
854,042
2.37
Iowa ���������������������������������������������������������������������������������������������������������������������
509,363
.........
437,287
437,287
440,881
1.22
Kansas �����������������������������������������������������������������������������������������������������������������
389,314
.........
345,882
345,882
354,244
0.98
Kentucky ��������������������������������������������������������������������������������������������������������������
632,595
.........
629,846
629,846
622,845
1.73
Louisiana �������������������������������������������������������������������������������������������������������������
705,343
.........
640,778
640,778
628,060
1.74
Maine �������������������������������������������������������������������������������������������������������������������
179,128
.........
169,293
169,293
169,287
0.47
Maryland ��������������������������������������������������������������������������������������������������������������
561,049
.........
525,623
525,623
538,336
1.50
Massachusetts �����������������������������������������������������������������������������������������������������
608,725
.........
619,950
619,950
569,289
1.58
Michigan ��������������������������������������������������������������������������������������������������������������
1,028,154
.........
963,623
963,623
986,935
2.74
Minnesota ������������������������������������������������������������������������������������������������������������
641,842
.........
646,600
646,600
597,879
1.66
Mississippi �����������������������������������������������������������������������������������������������������������
550,698
.........
436,945
436,945
443,132
1.23
Missouri ���������������������������������������������������������������������������������������������������������������
900,435
.........
856,359
856,359
867,459
2.41
Montana ���������������������������������������������������������������������������������������������������������������
435,319
.........
400,175
400,175
376,050
1.04
Nebraska �������������������������������������������������������������������������������������������������������������
300,700
.........
273,562
273,562
264,921
0.74
Nevada ����������������������������������������������������������������������������������������������������������������
366,811
.........
325,398
325,398
333,270
0.93
New Hampshire ���������������������������������������������������������������������������������������������������
168,096
.........
154,486
154,486
154,877
0.43
New Jersey ����������������������������������������������������������������������������������������������������������
809,025
.........
1,145,171
1,145,171
935,897
2.60
New Mexico ���������������������������������������������������������������������������������������������������������
351,933
.........
321,072
321,072
328,830
0.91
New York ��������������������������������������������������������������������������������������������������������������
1,538,148
.........
1,877,092
1,877,092
1,573,368
4.37
North Carolina �����������������������������������������������������������������������������������������������������
1,021,850
.........
990,968
990,968
933,055
2.59
North Dakota �������������������������������������������������������������������������������������������������������
483,525
.........
248,539
248,539
232,725
0.65
Ohio ���������������������������������������������������������������������������������������������������������������������
1,258,632
.........
1,200,652
1,200,652
1,229,690
3.42
Oklahoma ������������������������������������������������������������������������������������������������������������
635,292
.........
575,543
575,543
581,029
1.61
Oregon �����������������������������������������������������������������������������������������������������������������
419,252
.........
465,963
465,963
458,169
1.27
Pennsylvania �������������������������������������������������������������������������������������������������������
1,605,452
.........
1,507,553
1,507,553
1,537,996
4.27
Rhode Island �������������������������������������������������������������������������������������������������������
217,840
.........
214,629
214,629
200,518
0.56
South Carolina �����������������������������������������������������������������������������������������������������
572,634
.........
575,534
575,534
588,529
1.63
South Dakota �������������������������������������������������������������������������������������������������������
311,084
.........
246,739
246,739
252,702
0.70
Tennessee �����������������������������������������������������������������������������������������������������������
845,746
.........
768,365
768,365
774,665
2.15
Texas �������������������������������������������������������������������������������������������������������������������
2,767,779
.........
2,888,901
2,888,901
2,958,150
8.22
Utah ���������������������������������������������������������������������������������������������������������������������
324,325
.........
288,353
288,353
295,324
0.82
Vermont ���������������������������������������������������������������������������������������������������������������
350,238
.........
199,994
199,994
186,138
0.52
Virginia �����������������������������������������������������������������������������������������������������������������
916,199
.........
920,431
920,431
933,141
2.59
Washington ����������������������������������������������������������������������������������������������������������
674,886
.........
607,015
607,015
621,693
1.73
West Virginia ��������������������������������������������������������������������������������������������������������
475,243
.........
392,976
392,976
400,503
1.11
Wisconsin ������������������������������������������������������������������������������������������������������������
718,236
.........
690,333
690,333
705,327
1.96
Wyoming ��������������������������������������������������������������������������������������������������������������
287,563
.........
236,600
236,600
229,526
0.64
American Samoa �������������������������������������������������������������������������������������������������
6,952
.........
15,185
15,185
4,708
0.01
Guam �������������������������������������������������������������������������������������������������������������������
24,818
.........
23,042
23,042
16,807
0.05
Northern Mariana Islands ������������������������������������������������������������������������������������
11,371
.........
7,580
7,580
7,700
0.02
Puerto Rico ����������������������������������������������������������������������������������������������������������
138,249
.........
135,879
135,879
129,793
0.36
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
13,622
.........
9,081
9,081
9,225
0.03
Indian Tribes ��������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
1 4,735,593
1 5,893,274
Undistributed �������������������������������������������������������������������������������������������������������
.........
.........
4,735,593
.........
2 100.00
Total ��������������������������������������������������������������������������������������������������������������������
37,632,733
.........
41,287,186
41,287,186
41,894,999
NOTE: This table also includes budget account numbers 69-0500-0-1-401, 69-0504-0-1-401, and 69-0548-0-1-401.
NOTE: The FY 2013 and FY 2014 columns are estimated distributions of Federal-aid highways obligation limitation plus estimated exempt contract authority and Emergency Relief
Program amounts.
1 This amount includes funding for allocated programs, which has not been identified as being provided to a specific State at this time.
2 Excludes undistributed obligations.

341

17.  Aid to State and Local Governments
Department of Transportation, Federal Transit Administration	

69-8350-0-7-401

Table 17–37.  Transit Formula Grants Programs (20.507)
(Obligations in thousands of dollars)
State or Territory
FY 2012 Actual

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total

Alabama ��������������������������������������������������������������������������������������������������������������
48,404
54,072
19,747
Alaska ������������������������������������������������������������������������������������������������������������������
52,307
13,218
22,259
Arizona ����������������������������������������������������������������������������������������������������������������
139,534
97,272
59,378
Arkansas �������������������������������������������������������������������������������������������������������������
27,301
2,924
11,618
California �������������������������������������������������������������������������������������������������������������
1,735,156
648,017
738,389
Colorado ��������������������������������������������������������������������������������������������������������������
154,553
18,993
65,770
Connecticut ����������������������������������������������������������������������������������������������������������
157,639
306,249
67,083
Delaware �������������������������������������������������������������������������������������������������������������
7,310
31,060
3,111
District of Columbia ���������������������������������������������������������������������������������������������
95,998
192,587
40,852
Florida �����������������������������������������������������������������������������������������������������������������
398,766
255,938
169,693
Georgia ����������������������������������������������������������������������������������������������������������������
185,766
201,284
79,052
Hawaii ������������������������������������������������������������������������������������������������������������������
82,325
25,290
35,033
Idaho �������������������������������������������������������������������������������������������������������������������
21,916
11,630
9,326
Illinois �������������������������������������������������������������������������������������������������������������������
574,213
156,682
244,354
Indiana �����������������������������������������������������������������������������������������������������������������
111,645
40,504
47,510
Iowa ���������������������������������������������������������������������������������������������������������������������
49,888
18,796
21,230
Kansas �����������������������������������������������������������������������������������������������������������������
24,827
20,242
10,565
Kentucky ��������������������������������������������������������������������������������������������������������������
59,379
28,125
25,269
Louisiana �������������������������������������������������������������������������������������������������������������
35,764
28,196
15,219
Maine �������������������������������������������������������������������������������������������������������������������
25,663
9,116
10,921
Maryland ��������������������������������������������������������������������������������������������������������������
123,652
189,925
52,620
Massachusetts �����������������������������������������������������������������������������������������������������
688,475
213,366
292,978
Michigan ��������������������������������������������������������������������������������������������������������������
170,329
95,464
72,483
Minnesota ������������������������������������������������������������������������������������������������������������
116,620
68,253
49,627
Mississippi �����������������������������������������������������������������������������������������������������������
23,298
16,474
9,914
Missouri ���������������������������������������������������������������������������������������������������������������
113,316
38,050
48,221
Montana ���������������������������������������������������������������������������������������������������������������
10,856
8,488
4,620
Nebraska �������������������������������������������������������������������������������������������������������������
23,785
24,867
10,121
Nevada ����������������������������������������������������������������������������������������������������������������
32,250
36,725
13,724
New Hampshire ���������������������������������������������������������������������������������������������������
18,179
10,987
7,736
New Jersey ����������������������������������������������������������������������������������������������������������
628,441
146,109
267,431
New Mexico ���������������������������������������������������������������������������������������������������������
29,911
28,684
12,729
New York ��������������������������������������������������������������������������������������������������������������
1,360,211
1,207,164
578,833
North Carolina �����������������������������������������������������������������������������������������������������
111,366
100,771
47,392
North Dakota �������������������������������������������������������������������������������������������������������
9,462
10,344
4,027
Ohio ���������������������������������������������������������������������������������������������������������������������
202,302
76,831
86,089
Oklahoma ������������������������������������������������������������������������������������������������������������
37,042
8,261
15,763
Oregon �����������������������������������������������������������������������������������������������������������������
158,389
43,178
67,402
Pennsylvania �������������������������������������������������������������������������������������������������������
311,765
229,446
132,670
Rhode Island �������������������������������������������������������������������������������������������������������
36,748
37,621
15,638
South Carolina �����������������������������������������������������������������������������������������������������
49,281
28,662
20,971
South Dakota �������������������������������������������������������������������������������������������������������
12,167
5,860
5,178
Tennessee �����������������������������������������������������������������������������������������������������������
74,729
45,063
31,801
Texas �������������������������������������������������������������������������������������������������������������������
498,377
172,380
212,082
Utah ���������������������������������������������������������������������������������������������������������������������
70,433
9,636
29,972
Vermont ���������������������������������������������������������������������������������������������������������������
10,688
15,261
4,548
Virginia �����������������������������������������������������������������������������������������������������������������
125,701
94,522
53,492
Washington ����������������������������������������������������������������������������������������������������������
296,518
81,120
126,182
West Virginia ��������������������������������������������������������������������������������������������������������
18,053
18,252
7,682
Wisconsin ������������������������������������������������������������������������������������������������������������
141,281
50,334
60,122
Wyoming ��������������������������������������������������������������������������������������������������������������
7,140
6,018
3,038
American Samoa �������������������������������������������������������������������������������������������������
.........
282
.........
Guam �������������������������������������������������������������������������������������������������������������������
2,051
134
873
Northern Mariana Islands ������������������������������������������������������������������������������������
.........
1,435
.........
Puerto Rico ����������������������������������������������������������������������������������������������������������
51,738
108,328
22,017
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
2,730
1,570
1,161
Indian Tribes ��������������������������������������������������������������������������������������������������������
.........
.........
.........
148,466
2 79,659
320,873
Undistributed �������������������������������������������������������������������������������������������������������
Total ��������������������������������������������������������������������������������������������������������������������
9,604,104
5,469,719
4,086,389
* $500 or less or 0.005 percent or less.
1 FY 2012 Undistributed is the Oversight takedown.
2 FY 2013 Undistributed includes the Oversight takedown $60,352 and a Undistributed amount of $19,307 thousands.
3 FY 2013 new authority Undistributed line is the Oversight takedown.
4 FY 2013 Undistributed includes the Oversight takedown of 61,506 and a undistirbuted amount of $19,385 thousands.
5 Excludes undistributed obligations.

73,819
35,477
156,650
14,542
1,386,406
84,763
373,332
34,171
233,439
425,631
280,336
60,323
20,956
401,036
88,014
40,026
30,807
53,394
43,415
20,037
242,545
506,344
167,947
117,880
26,388
86,271
13,108
34,988
50,449
18,723
413,540
41,413
1,785,997
148,163
14,371
162,920
24,024
110,580
362,116
53,259
49,633
11,038
76,864
384,462
39,608
19,809
148,014
207,302
25,934
110,456
9,056
282
1,007
1,435
130,345
.........
2,731
.........
100,532
9,556,108

FY 2014
(estimated)
78,416
37,687
166,406
15,447
1,472,749
90,042
396,582
36,299
247,976
452,138
297,795
64,080
22,261
426,011
93,495
42,518
32,725
56,719
46,119
21,285
257,650
537,878
178,406
125,222
28,032
91,644
13,925
37,168
53,591
19,888
439,293
43,992
1,897,223
157,389
15,266
173,066
25,520
117,467
384,668
56,576
52,724
11,726
81,650
408,406
42,075
21,043
157,231
220,213
27,550
117,335
9,620
300
1,070
1,524
138,463
.........
2,902
.........
480,891
10,125,337

FY 2014
Percentage of
distributed total
0.78
0.38
1.66
0.15
14.66
0.90
3.95
0.36
2.47
4.50
2.96
0.64
0.22
4.24
0.93
0.42
0.33
0.56
0.46
0.21
2.57
5.35
1.78
1.25
0.28
0.91
0.14
0.37
0.53
0.20
4.37
0.44
18.89
1.57
0.15
1.72
0.25
1.17
3.83
0.56
0.52
0.12
0.81
4.07
0.42
0.21
1.57
2.19
0.27
1.17
0.10
*
0.01
0.02
1.38
.........
0.03
.........
.........
5 100.00

342

Analytical Perspectives

Environmental Protection Agency, Office of Water	

68-0103-0-1-304

Table 17–38. Capitalization Grants for Clean Water State Revolving Fund (66.458)
(Obligations in thousands of dollars)
State or Territory
FY 2012 Actual

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total

Alabama ��������������������������������������������������������������������������������������������������������������
32,474
992
14,968
Alaska ������������������������������������������������������������������������������������������������������������������
8,544
531
8,012
Arizona ����������������������������������������������������������������������������������������������������������������
15,776
599
9,042
Arkansas �������������������������������������������������������������������������������������������������������������
9,341
580
8,757
California �������������������������������������������������������������������������������������������������������������
104,839
6,344
95,739
Colorado ��������������������������������������������������������������������������������������������������������������
11,305
709
10,707
Connecticut ����������������������������������������������������������������������������������������������������������
35,623
1,087
16,399
Delaware �������������������������������������������������������������������������������������������������������������
34,058
435
6,572
District of Columbia ���������������������������������������������������������������������������������������������
17,010
435
6,572
Florida �����������������������������������������������������������������������������������������������������������������
48,189
2,994
45,186
Georgia ����������������������������������������������������������������������������������������������������������������
24,137
1,500
22,633
Hawaii ������������������������������������������������������������������������������������������������������������������
11,057
687
10,368
Idaho �������������������������������������������������������������������������������������������������������������������
7,008
435
6,572
Illinois �������������������������������������������������������������������������������������������������������������������
65,240
4,012
60,542
Indiana �����������������������������������������������������������������������������������������������������������������
34,392
2,138
32,261
Iowa ���������������������������������������������������������������������������������������������������������������������
39,209
1,200
18,117
Kansas �����������������������������������������������������������������������������������������������������������������
12,886
801
12,083
Kentucky ��������������������������������������������������������������������������������������������������������������
18,169
1,129
17,037
Louisiana �������������������������������������������������������������������������������������������������������������
32,560
975
14,716
Maine �������������������������������������������������������������������������������������������������������������������
11,051
687
10,362
Maryland ��������������������������������������������������������������������������������������������������������������
34,528
2,145
32,376
Massachusetts �����������������������������������������������������������������������������������������������������
48,488
3,012
45,449
Michigan ��������������������������������������������������������������������������������������������������������������
61,384
3,814
57,559
Minnesota ������������������������������������������������������������������������������������������������������������
26,239
1,630
24,604
Mississippi �����������������������������������������������������������������������������������������������������������
129
799
12,061
Missouri ���������������������������������������������������������������������������������������������������������������
80,444
2,459
37,109
Montana ���������������������������������������������������������������������������������������������������������������
7,122
435
6,572
Nebraska �������������������������������������������������������������������������������������������������������������
7,276
454
6,847
Nevada ����������������������������������������������������������������������������������������������������������������
7,008
435
6,572
New Hampshire ���������������������������������������������������������������������������������������������������
14,268
886
13,377
New Jersey ����������������������������������������������������������������������������������������������������������
57,755
3,625
54,702
New Mexico ���������������������������������������������������������������������������������������������������������
16,753
435
6,572
New York ��������������������������������������������������������������������������������������������������������������
162,069
9,791
147,753
North Carolina �����������������������������������������������������������������������������������������������������
26,908
1,601
24,159
North Dakota �������������������������������������������������������������������������������������������������������
14,130
435
6,572
Ohio ���������������������������������������������������������������������������������������������������������������������
80,368
4,994
75,359
Oklahoma ������������������������������������������������������������������������������������������������������������
19,067
717
10,815
Oregon �����������������������������������������������������������������������������������������������������������������
16,127
1,002
15,122
Pennsylvania �������������������������������������������������������������������������������������������������������
56,549
3,514
53,025
Rhode Island �������������������������������������������������������������������������������������������������������
9,586
596
8,988
South Carolina �����������������������������������������������������������������������������������������������������
15,273
909
13,713
South Dakota �������������������������������������������������������������������������������������������������������
7,108
435
6,572
Tennessee �����������������������������������������������������������������������������������������������������������
20,738
1,289
19,446
Texas �������������������������������������������������������������������������������������������������������������������
65,414
4,054
61,183
Utah ���������������������������������������������������������������������������������������������������������������������
7,522
467
7,053
Vermont ���������������������������������������������������������������������������������������������������������������
7,008
435
6,572
Virginia �����������������������������������������������������������������������������������������������������������������
29,216
1,815
27,396
Washington ����������������������������������������������������������������������������������������������������������
24,826
1,542
23,279
West Virginia ��������������������������������������������������������������������������������������������������������
22,254
1,383
20,867
Wisconsin ������������������������������������������������������������������������������������������������������������
78,515
2,398
36,190
Wyoming ��������������������������������������������������������������������������������������������������������������
7,014
435
6,572
American Samoa �������������������������������������������������������������������������������������������������
7,734
480
7,252
Guam �������������������������������������������������������������������������������������������������������������������
7,045
348
5,247
Northern Mariana Islands ������������������������������������������������������������������������������������
3,595
233
3,371
Puerto Rico ����������������������������������������������������������������������������������������������������������
38,074
1,157
17,459
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
4,781
279
4,209
Indian Tribes ��������������������������������������������������������������������������������������������������������
16,859
1,810
27,319
Undistributed �������������������������������������������������������������������������������������������������������
.........
.........
.........
Total ���������������������������������������������������������������������������������������������������������������������
1,682,041
90,518
1,365,938
1 FY2013 totals do not include supplemental funding provided by Public Law 113-2, the Disaster Relief Appropriations Act, 2013.
2 Excludes undistributed obligations.

15,960
8,543
9,641
9,337
102,083
11,416
17,486
7,007
7,007
48,180
24,133
11,055
7,007
64,554
34,399
19,317
12,884
18,166
15,691
11,049
34,521
48,461
61,373
26,234
12,860
39,568
7,007
7,301
7,007
14,263
58,327
7,007
157,544
25,760
7,007
80,353
11,532
16,124
56,539
9,584
14,622
7,007
20,735
65,237
7,520
7,007
29,211
24,821
22,250
38,588
7,007
7,732
5,595
3,604
18,616
.........
4,488
29,129
.........
1 1,456,456

FY 2014
(estimated)
11,999
6,423
7,248
7,020
76,749
8,584
13,146
5,268
5,268
36,223
18,144
8,311
5,268
48,533
25,862
14,524
9,686
13,658
11,797
8,307
25,954
36,434
46,142
19,724
9,668
29,749
5,268
5,489
5,268
10,724
43,852
5,268
118,445
19,367
5,268
60,412
8,670
12,122
42,508
7,206
10,993
5,268
15,589
49,048
5,654
5,268
21,962
18,662
16,728
29,011
5,268
5,814
4,207
2,702
13,996
.........
3,374
21,900
.........
1,095,000

FY 2014
Percentage of
distributed total
1.10
0.59
0.66
0.64
7.01
0.78
1.20
0.48
0.48
3.31
1.66
0.76
0.48
4.43
2.36
1.33
0.88
1.25
1.08
0.76
2.37
3.33
4.21
1.80
0.88
2.72
0.48
0.50
0.48
0.98
4.00
0.48
10.82
1.77
0.48
5.52
0.79
1.11
3.88
0.66
1.00
0.48
1.42
4.48
0.52
0.48
2.01
1.70
1.53
2.65
0.48
0.53
0.38
0.25
1.28
.........
0.31
2.00
..
2 100.00

343

17.  Aid to State and Local Governments
Environmental Protection Agency, Office of Water	

68-0103-0-1-304

Table 17–39. Capitalization Grants for Drinking Water State Revolving Fund (66.468)
(Obligations in thousands of dollars)
State or Territory

FY 2012 Actual

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total

FY 2014
(estimated)

FY 2014
Percentage of
distributed total

Alabama ��������������������������������������������������������������������������������������������������������������
22,799
906
10,219
11,125
9,899
1.21
Alaska ������������������������������������������������������������������������������������������������������������������
9,001
731
8,244
8,975
7,987
0.98
Arizona ����������������������������������������������������������������������������������������������������������������
22,181
1,467
16,559
18,026
16,040
1.96
Arkansas �������������������������������������������������������������������������������������������������������������
27,834
1,106
12,476
13,582
12,086
1.48
California �������������������������������������������������������������������������������������������������������������
85,058
6,834
77,123
83,957
74,702
9.14
Colorado ��������������������������������������������������������������������������������������������������������������
16,186
1,296
14,624
15,920
14,166
1.73
Connecticut ����������������������������������������������������������������������������������������������������������
18,393
731
8,244
8,975
7,987
0.98
Delaware �������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
District of Columbia ���������������������������������������������������������������������������������������������
18,758
731
8,244
8,975
7,987
0.98
Florida �����������������������������������������������������������������������������������������������������������������
29,306
2,385
26,921
29,306
26,077
3.19
Georgia ����������������������������������������������������������������������������������������������������������������
46,793
1,726
19,482
21,208
18,872
2.31
Hawaii ������������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
Idaho �������������������������������������������������������������������������������������������������������������������
9,081
731
8,244
8,975
7,987
0.98
Illinois �������������������������������������������������������������������������������������������������������������������
33,879
2,758
31,121
33,879
30,146
3.69
Indiana �����������������������������������������������������������������������������������������������������������������
14,970
1,219
13,751
14,970
13,321
1.63
Iowa ���������������������������������������������������������������������������������������������������������������������
16,077
1,247
14,075
15,322
13,633
1.67
Kansas �����������������������������������������������������������������������������������������������������������������
11,330
894
10,087
10,981
9,771
1.20
Kentucky ��������������������������������������������������������������������������������������������������������������
12,956
1,055
11,901
12,956
11,529
1.41
Louisiana �������������������������������������������������������������������������������������������������������������
34,760
1,381
15,581
16,962
15,093
1.85
Maine �������������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
Maryland ��������������������������������������������������������������������������������������������������������������
14,795
1,134
12,792
13,926
12,392
1.52
Massachusetts �����������������������������������������������������������������������������������������������������
17,012
1,362
15,370
16,732
14,889
1.82
Michigan ��������������������������������������������������������������������������������������������������������������
27,263
2,219
25,044
27,263
24,259
2.97
Minnesota ������������������������������������������������������������������������������������������������������������
15,062
1,226
13,836
15,062
13,403
1.64
Mississippi �����������������������������������������������������������������������������������������������������������
19,143
760
8,581
9,341
8,312
1.02
Missouri ���������������������������������������������������������������������������������������������������������������
53,968
1,412
15,936
17,348
15,437
1.89
Montana ���������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
Nebraska �������������������������������������������������������������������������������������������������������������
8,717
731
8,244
8,975
7,987
0.98
Nevada ����������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
New Hampshire ���������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
New Jersey ����������������������������������������������������������������������������������������������������������
20,174
1,561
17,613
19,174
17,061
2.09
New Mexico ���������������������������������������������������������������������������������������������������������
21,406
731
8,244
8,975
7,987
0.98
New York ��������������������������������������������������������������������������������������������������������������
61,322
4,814
54,324
59,138
52,622
6.44
North Carolina �����������������������������������������������������������������������������������������������������
24,698
1,916
21,621
23,537
20,944
2.56
North Dakota �������������������������������������������������������������������������������������������������������
18,393
731
8,244
8,975
7,987
0.98
Ohio ���������������������������������������������������������������������������������������������������������������������
30,821
2,347
26,492
28,839
25,662
3.14
Oklahoma ������������������������������������������������������������������������������������������������������������
11,337
908
10,243
11,151
9,923
1.21
Oregon �����������������������������������������������������������������������������������������������������������������
9,864
731
8,244
8,975
7,987
0.98
Pennsylvania �������������������������������������������������������������������������������������������������������
26,737
2,140
24,157
26,297
23,399
2.86
Rhode Island �������������������������������������������������������������������������������������������������������
18,393
731
8,244
8,975
7,987
0.98
South Carolina �����������������������������������������������������������������������������������������������������
9,418
731
8,244
8,975
7,987
0.98
South Dakota �������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
Tennessee �����������������������������������������������������������������������������������������������������������
10,142
812
9,163
9,975
8,876
1.09
Texas �������������������������������������������������������������������������������������������������������������������
116,946
4,643
52,398
57,041
50,755
6.21
Utah ���������������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
Vermont ���������������������������������������������������������������������������������������������������������������
18,396
731
8,244
8,975
7,987
0.98
Virginia �����������������������������������������������������������������������������������������������������������������
15,469
1,238
13,977
15,215
13,539
1.66
Washington ����������������������������������������������������������������������������������������������������������
22,914
1,865
21,049
22,914
20,389
2.50
West Virginia ��������������������������������������������������������������������������������������������������������
9,278
731
8,244
8,975
7,987
0.98
Wisconsin ������������������������������������������������������������������������������������������������������������
34,115
1,260
14,214
15,474
13,769
1.69
Wyoming ��������������������������������������������������������������������������������������������������������������
9,125
731
8,244
8,975
7,987
0.98
American Samoa �������������������������������������������������������������������������������������������������
1,447
111
1,249
1,360
1,210
0.15
Guam �������������������������������������������������������������������������������������������������������������������
3,018
277
3,121
3,398
3,023
0.37
Northern Mariana Islands ������������������������������������������������������������������������������������
4,007
331
3,734
4,065
3,618
0.44
Puerto Rico ����������������������������������������������������������������������������������������������������������
18,393
731
8,244
8,975
7,987
0.98
Freely Associated States �������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
Virgin Islands �������������������������������������������������������������������������������������������������������
4,869
378
4,262
4,640
4,128
0.51
Indian Tribes ��������������������������������������������������������������������������������������������������������
18,394
1,494
16,864
18,358
16,341
2.00
Undistributed �������������������������������������������������������������������������������������������������������
.........
.........
.........
.........
.........
.........
1 Unregulated Contaminant Monitoring Role (UCMR) ����������������������������������������
1,840
163
1,837
2,000
2,000
0.24
1 843,165
2 917,892
3 817,000
4 100.00
Total ��������������������������������������������������������������������������������������������������������������������
1,199,237
74,727
1 EPA is required by Section 1452(o) of the Safe Drinking Water Act (SDWA), as amended, to annually set-aside $2 million of State Revolving Funds to pay the costs of small system
monitoring and sample analysis for contaminants for each cycle of the UCMR. EPA uses the Unregulated Contaminant Monitoring (UCM) program to collect data for contaminants
suspected to be present in drinking water, but that do not have health-based standards set under the Safe Drinking Water Act (SDWA).
2 FY2013 totals do not include supplemental funding provided by Public Laws 113-2, the Disaster Relief Appropriations Act, 2013.
3 Since the results of the FY2011 Needs Survey have not yet been released, the FY2014 state allocations are currently based on the 2007 Needs Survey, which was used for both
FY2012 and FY2013. The FY2014-2018 state allocations will ultimately be based on the most recent needs survey, which EPA will release separately.
4 Excludes undistributed obligations.

344

Analytical Perspectives

Federal Communications Commission	

27-5183-0-2-376

Table 17–40. Universal Service Fund E-Rate
(Obligations in thousands of dollars)
State or Territory
FY 2012 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 undistributed obligations.

42,628
25,340
53,557
18,645
272,316
24,224
14,238
1,963
9,654
65,201
89,690
2,002
10,394
83,874
31,740
12,800
15,167
33,919
43,880
6,660
38,236
13,655
42,591
24,543
21,334
31,399
3,508
9,153
3,470
1,801
47,096
23,369
98,071
49,187
3,185
62,884
48,680
15,189
52,818
5,602
34,282
4,340
39,316
171,089
15,137
1,820
25,582
25,650
11,159
27,175
1,876
2,146
674
558
9,559
.........
7,088
.........
.........
1,831,114

Estimated FY 2013 obligations from:
Previous
2013 CR or
authority
New Authority
Total
32,197
19,140
40,451
14,082
205,679
18,296
10,754
1,483
7,292
49,246
67,743
1,512
7,851
63,350
23,973
9,668
11,456
25,619
33,142
5,031
28,880
10,313
32,169
18,537
16,114
23,715
2,649
6,913
2,621
1,361
35,571
17,651
74,073
37,151
2,406
47,496
36,768
11,472
39,893
4,231
25,893
3,278
29,695
129,223
11,433
1,375
19,322
19,373
8,428
20,525
1,417
1,621
509
421
7,220
.........
5,354
.........
.........
1,383,036

10,167
6,044
12,774
4,447
64,951
5,778
3,396
468
2,303
15,551
21,392
478
2,479
20,005
7,570
3,053
3,618
8,090
10,466
1,589
9,120
3,257
10,159
5,854
5,088
7,489
837
2,183
828
430
11,233
5,574
23,391
11,732
760
14,999
11,611
3,623
12,598
1,336
8,177
1,035
9,377
40,807
3,610
434
6,102
6,118
2,662
6,482
447
512
161
133
2,280
.........
1,691
.........
.........
436,749

42,364
25,184
53,225
18,529
270,630
24,074
14,150
1,951
9,595
64,797
89,135
1,990
10,330
83,355
31,543
12,721
15,074
33,709
43,608
6,620
38,000
13,570
42,328
24,391
21,202
31,204
3,486
9,096
3,449
1,791
46,804
23,225
97,464
48,883
3,166
62,495
48,379
15,095
52,491
5,567
34,070
4,313
39,072
170,030
15,043
1,809
25,424
25,491
11,090
27,007
1,864
2,133
670
554
9,500
.........
7,045
.........
.........
1,819,785

FY 2014
(estimated)
43,815
26,046
55,048
19,164
279,901
24,898
14,635
2,018
9,923
67,017
92,188
2,058
10,684
86,210
32,624
13,157
15,590
34,864
45,102
6,846
39,301
14,035
43,777
25,226
21,928
32,273
3,605
9,407
3,567
1,852
48,407
24,020
100,803
50,557
3,274
64,635
50,036
15,612
54,289
5,758
35,237
4,461
40,411
175,854
15,559
1,871
26,295
26,364
11,470
27,932
1,928
2,206
693
574
9,825
.........
7,286
.........
.........
1,882,116

FY 2014
Percentage of
distributed total
2.33
1.38
2.92
1.02
14.87
1.32
0.78
0.11
0.53
3.56
4.90
0.11
0.57
4.58
1.73
0.70
0.83
1.85
2.40
0.36
2.09
0.75
2.33
1.34
1.17
1.71
0.19
0.50
0.19
0.10
2.57
1.28
5.36
2.69
0.17
3.43
2.66
0.83
2.88
0.31
1.87
0.24
2.15
9.34
0.83
0.10
1.40
1.40
0.61
1.48
0.10
0.12
0.04
0.03
0.52
.........
0.39
.........
.........
1 100.00

18. Strengthening Federal Statistics

Federal statistical programs produce key information to illuminate public and private decisions on a
range of topics, including the economy, the population,
the environment, agriculture, crime, education, energy,
health, science, and transportation. The share of budget
resources spent on supporting Federal statistics is relatively modest—about 0.04 percent of GDP in non-decennial census years and roughly double that in decennial
census years—but that funding is leveraged to inform
crucial decisions in a wide variety of spheres. The ability of governments, businesses, and the general public
to make appropriate decisions about budgets, employment, investments, taxes, and a host of other important
matters depends critically on the ready and equitable
availability of objective, relevant, accurate, and timely
Federal statistics.
The Federal statistical community is attentive to opportunities to improve these measures of our Nation’s
performance, which is critical to fostering long-term global competitiveness. For example, during 2012, Federal
statistical agencies:
•	 initiated data collection for the 2012 Economic Census from over 29 million business establishments
covering 84 percent of economic activity in the Gross
Domestic Product (Census Bureau);

•	 published, on an experimental basis, a new aggregation structure that includes Producer Price Indexes (PPI) for intermediate and final demand that
measure inflation for U.S. services as well as goods,
thereby greatly expanding PPI coverage of the United States economy (Bureau of Labor Statistics);
•	 improved public access to 1.4 million data points of
annual time-series data summarizing energy production, consumption, prices, and expenditures back
to 1960 (Energy Information Administration);
•	 expanded use of administrative records for statistical purposes by entering into two new agreements
to link administrative data to survey data in other
agencies, thus avoiding investments in more costly
surveys (Office of Research, Evaluation, and Statistics, SSA);
•	 provided current national and State-specific (for the
largest States) data to track health insurance coverage, including coverage under both traditional and
consumer-directed insurance arrangements (National Center for Health Statistics);
•	 launched a new tool providing a direct and userfriendly way to work with 19 years of data about victims of crime (Bureau of Justice Statistics);

•	 released reports updating information about how
U.S. students compared to their counterparts
in other nations in terms of math, reading, and
science skills (National Center for Education
Statistics);

•	 provided Commodity Flow Survey respondents, for
the first time, with the option to report electronically
via the Internet, resulting in reduced costs and overall improvement of data quality (Bureau of Transportation Statistics);

•	 released new measures of household expenditures
on health care classified by disease that facilitate
the assessment of benefits and costs of treatment
and provide a better understanding of factors driving growth in health care spending (Bureau of Economic Analysis);

•	 improved the timeliness, quality and efficiency of its
Scientists and Engineers Statistical Data System by
increasing the sample size of the National Survey
of College Graduates for young graduates, thereby
improving understanding of the transition to employment of science and engineering graduates (National Center for Science and Engineering Statistics);
and

•	 developed statistical techniques and processes to improve the accuracy and coverage of the Census of Agriculture (National Agricultural Statistics Service);
•	 provided timely information and analysis on the impacts of one of the most severe and extensive U.S.
droughts in 25 years in order to assess its potential
effects on food prices and consumers, farms, and the
crop and livestock sectors (Economic Research Service);
•	 reviewed and strengthened methods used to prevent
disclosure of taxpayer information in tabulated data
disseminated over the Internet in order to preserve
taxpayer confidentiality (Statistics of Income Division, IRS);

•	 significantly increased the data quality of the American Community Survey by expanding its sample
size to 3.5 million households (Census Bureau).
For Federal statistical programs to be useful to their
wide range of users, the underlying data systems must
be credible. To foster this credibility, Federal statistical
programs seek to adhere to high-quality standards and
to maintain integrity, transparency, and efficiency in the
production of data. As the collectors and providers of
these basic statistics, the responsible agencies act as data
stewards—balancing public information demands and
decision-makers’ needs for information with legal and

345

346
ethical obligations to minimize reporting burden, respect
respondents’ privacy, and protect the confidentiality of the
data provided to the Government. The Administration remains committed to unlocking the power of Government
data to improve the quality of information available to the
American people while maximizing the cost-effective use
of resources for the collection of Federal statistics within
a constrained fiscal environment. This chapter presents
highlights of principal statistical agencies’ 2014 budget
proposals.

Analytical Perspectives

cords data in police and correctional agencies to provide
new statistics in these areas, including recidivism information, arrests, and offenses known to the police; (3) expand the surveys of inmates of prisons and jails to inform the process of re-entry; (4) improve the availability
of justice statistics for Indian country; and (5) continue
to support the enhancement of criminal justice statistics
available through State statistical analysis centers.
Bureau of Labor Statistics (BLS), Department of
Labor: Funding is requested to provide support for ongoing BLS programs and to: (1) add an annual supplement
to the Current Population Survey to capture data on conHighlights of 2014 Program Budget Proposals
tingent work and alternative work arrangements in even
The programs that provide essential statistical informa- years, and on other topics in odd years; and (2) modify
tion for use by governments, businesses, researchers, and the Consumer Expenditure Survey to support the Census
the public are carried out by agencies spread across every Bureau in its development of a supplemental statistical
department and several independent agencies. Excluding poverty measure. In order to preserve funding for core
cyclical funding for the decennial census, approximately statistical programs, the funding request also includes
40 percent of the total budget for these programs pro- four reductions that would produce savings: (1) eliminate
vides resources for 13 agencies or units that have statisti- the Green Jobs initiative; (2) eliminate the Mass Layoff
cal activities as their principal mission (see Table 18–1). Statistics program; (3) eliminate the International Labor
The remaining funding supports work in approximately Comparisons program; and (4) consolidate BLS IT help
90 agencies or units that carry out statistical activities in desk services.
conjunction with other missions such as providing services,
Bureau of Transportation Statistics (BTS),
conducting research, or implementing regulations. More Department of Transportation: Funding is requested
comprehensive budget and program information about the to provide support for ongoing BTS programs and to: (1)
Federal statistical system, including its core programs, will continue product dissemination for the 2012 Commodity
be available in OMB’s annual report, Statistical Programs Flow Survey; (2) expand work on performance measures
of the United States Government, Fiscal Year 2014, when as required by MAP-21 (Moving Ahead for Progress in the
it is published later this year. The following highlights the 21st Century Act); (3) identify opportunities to integrate
Administration’s proposals for the programs of the princi- and improve safety data across transportation modes; (4)
pal Federal statistical agencies, giving particular attention support collection of data on passenger travel; and (5) deto new initiatives and to other program changes, including velop estimates of the value of transportation infrastructerminations or reductions.
ture and facilities to inform DOT investment strategies.
Bureau of Economic Analysis (BEA), Department
Census Bureau, Department of Commerce:
of Commerce:  Funding is requested to provide support Funding is requested to provide support for ongoing
for ongoing BEA programs and to better capture and Census Bureau programs and to: (1) continue critical remeasure the impacts of foreign direct investment (FDI) in search and testing for the 2020 Census program to support
the U.S. economy.  BEA will improve overall coverage and fundamental changes to program, business, operational,
measurement of FDI by implementing a new survey that and technical processes; (2) complete data collection and
will identify and quantify new investment in the U.S. by the review and publication of industry reports for the
foreign investors.  In addition, BEA plans to: (1) continue five-year benchmarking Economic Census; (3) complete
to implement a critical modernization of the Bureau’s in- data processing and development of data products for the
formation technology system that will lead to an increase Census of Governments; (4) deepen and broaden an existin operational efficiency and security of BEA’s statistical ing Statistical Community of Practice and Engagement
production and analysis and (2) continue to develop new test bed to identify effective automated methods to immeasures of Gross Domestic Product (GDP) by industry prove the interoperability of cross-agency statistical and
on a quarterly basis to provide real-time information on administrative data; and (5) pilot increased collaborathe health and stability of sectors within the U.S. econo- tion between Census and other Federal agencies, where
my.  BEA will replace its “Advance” GDP by industry mea- Census would provide a secure mechanism for restricted
sures, which are currently available only on an annual ba- access to those agencies’ confidential data through its
sis, with the new quarterly measures of GDP by industry.  research data centers and possibly establish additional
Bureau of Justice Statistics (BJS), Department data linkage and disclosure procedures.
of Justice: Funding is requested to provide support for
Economic Research Service (ERS), Department of
ongoing BJS programs and to: (1) improve BJS’ criminal Agriculture: Funding is requested to provide support
victimization statistics derived from the National Crime for ongoing ERS programs, including research that: (1)
Victimization Survey with special emphasis on exploring explores how investments in rural people, businesses,
the feasibility of generating sub-national estimates and and communities affect the capacity of rural economies
enhancing data on the crimes of rape and sexual assault; to prosper in the new and changing global marketplace;
(2) continue exploration of the use of administrative re- (2) improves agricultural competitiveness and economic

18.  Strengthening Federal Statistics

growth related to natural resource policies and programs that respond to the challenges of climate change
and environmental protection; (3) analyzes the U.S. food
and agriculture sector’s performance in the context of increasingly globalized markets; (4) evaluates the Nation’s
nutrition assistance programs to study the relationship
among the many factors that influence food choices and
health outcomes including obesity; and (5) values societal
benefits associated with reducing food safety risks. In addition, funding is requested for the Research Innovations
for Improving Policy Effectiveness initiative, which will
strengthen ERS’ ability to conduct research through the
use of behavioral economics and the statistical use of administrative data in order to address critical information
gaps that hinder policy effectiveness.
Energy Information Administration (EIA),
Department of Energy: Funding is requested to provide
support for ongoing EIA programs and to: (1) complete the
2012 Commercial Buildings Energy Consumption Survey,
including release of data that provide U.S. benchmarks
used to inform investments in new technologies, performance labeling, and energy management practices; (2)
launch the 2014 Residential Energy Consumption Survey,
which collects information from a nationally representative sample of housing units, including data on energy
characteristics of homes, usage patterns, and household
demographics; (3) resume modernizing and streamlining
data collection processes across energy supply surveys to
yield significant efficiencies in the agency’s largest operational area; (4) enhance EIA’s ability to monitor, forecast,
and report on international energy developments; (5) resume upgrades to EIA’s forecasting capabilities through
the modernization of the National Energy Modeling
System; and (6) improve and expand customer internet
access to EIA data and information.
National Agricultural Statistics Service (NASS),
Department of Agriculture: Funding is requested to
provide support for ongoing NASS programs and to: (1)
publish Census of Agriculture products by congressional
district, watershed, zip code, and Indian reservation; (2)
conduct a Farm and Ranch Irrigation Survey to provide
one of the most complete and detailed profiles of irrigation
in the United States; (3) field a Census of Aquaculture to
provide a comprehensive picture of the aquaculture sector
at the State and national levels; and (4) produce four of
the Current Industrial Reports, previously issued by the
Census Bureau.
National Center for Education Statistics (NCES),
Department of Education: Funding is requested to
provide support for ongoing NCES programs and to: (1)
pilot a State-representative sample of the Program of
International Student Assessment of 15 year-olds in reading, mathematics, and science for a limited number of
participating States; (2) collect student-level institutional
administrative data on a 2-year cycle to supplement the
National Postsecondary Student Aid Study 4-year student
survey data with more frequent information on educational costs, financial aid, enrollment, and progress; and (3)
conduct the National Adult Training and Education Pilot
Study, in partnership with the Census Bureau, Bureau

347
of Labor Statistics, and Council of Economic Advisers, to
develop a methodology for collecting information on all
postsecondary certificates and training, not just on those
provided by institutions of higher education.
National Center for Health Statistics (NCHS),
Department of Health and Human Services: Funding
is requested to provide support for ongoing NCHS programs and to: (1) expand information from NCHS’ family
of provider surveys in order to monitor health care utilization more closely; and (2) support expansion within
base resources of automated National Vital Statistics
that are collected by the States and compiled by NCHS
in order to fully implement electronic birth records in
the two remaining jurisdictions and gradually phase in
electronic death records in the 21 remaining jurisdictions
over four years. The vital statistics information will be
used to improve tracking of priority health initiatives related to births to unmarried women, teenage pregnancy,
and causes of death.
National Center for Science and Engineering
Statistics (NCSES), National Science Foundation:
Funding is requested to provide support for ongoing
NCSES programs and to: (1) conduct an R&D survey of nonprofit institutions; (2) conduct the State level
R&D survey more frequently; (3) develop and test successful data collection strategies for the Microbusiness
Innovation Science and Technology Survey; (4) expand the
use of administrative records sources to augment existing
survey information on the relationship of Federal grants
to Science, Technology, Engineering, and Mathematics
(STEM) education and outcomes, innovation, and other
R&D information; (5) expand measures on the Survey of
Doctorate Recipients to understand the role of, and better
target funding of, Federal research support for graduate
education and outcomes; and (6) plan and design program
modifications to support the development of new science
and technology indicators.
Office of Research, Evaluation, and Statistics
(ORES), Social Security Administration: Funding is
requested to provide support for ongoing ORES programs
and to continue to: (1) support outside surveys and linkage of SSA administrative data to surveys; (2) field a topical module for the redesign of the Survey of Income and
Program Participation to address Social Security’s data
needs for microsimulation models, program evaluation,
and analysis; (3) strengthen microsimulation models that
estimate the distributional effects of proposed changes in
Social Security programs; (4) provide enhanced statistical and analytical support for initiatives to improve Social
Security and other government agency programs; (5)
fund retirement-related research through a Retirement
Research Consortium; and (6) fund two Disability
Research Centers to conduct disability-related research,
focusing on collaborative efforts with other government
agencies and interagency groups.
Statistics of Income Division (SOI), Department
of the Treasury: Funding is requested to provide support for ongoing SOI programs and to: (1) further modernize tax data collection systems by efficiently assimilating data captured from the electronic filing of tax and

348

Analytical Perspectives

information returns to the SOI program; (2) integrate
population and information return data with SOI-edited
data to provide rich longitudinal and/or cross-sector data
that can be used to better understand the complex interaction between taxes and economic behavior; (3) develop
improved statistical techniques for identifying and cor-

recting outliers and data anomalies in Internal Revenue
Service administrative population files; (4) partner with
tax policy experts within and outside government to produce top quality research on important tax administration issues; and (5) enhance the design, quality and number of SOI’s products and resources.

Table 18–1.  2012–2014 Budget Authority for
Principal Statistical Agencies 1
(in millions of dollars)
Estimate

2012
Actual
Bureau of Economic Analysis ������������������������������������������������������������������
Bureau of Justice Statistics 2 ��������������������������������������������������������������������

2013 CR
92

93

52
609
26
972
283
689
78
105
159
264
125
130
9
159
43
29
39

56
613
26
940
285
655
78
106
160
265
126
130
9
159
43
26
37

2014
100

64
Bureau of Labor Statistics �����������������������������������������������������������������������
610
Bureau of Transportation Statistics ����������������������������������������������������������
26
Census Bureau 3 ��������������������������������������������������������������������������������������
1013
Salaries and Expenses 3 ���������������������������������������������������������������������
286
Periodic Censuses and Programs ������������������������������������������������������
727
Economic Research Service �������������������������������������������������������������������
79
Energy Information Administration ����������������������������������������������������������
117
160
National Agricultural Statistics Service 4 ��������������������������������������������������
National Center for Education Statistics 5 ������������������������������������������������
273
Statistics 5 �������������������������������������������������������������������������������������������
140
Assessment ����������������������������������������������������������������������������������������
125
National Assessment Governing Board ����������������������������������������������
8
181
National Center for Health Statistics 6 ������������������������������������������������������
National Center for Science and Engineering Statistics , NSF 7 ��������������
49
Office of Research, Evaluation, and Statistics, SSA �������������������������������
30
Statistics of Income Division, IRS ������������������������������������������������������������
37
1 Reflects any rescissions.
2 Includes reimbursable funding to BJS ($3.7 million) and funds for management and administrative costs ($7.2
million) totaling $10.9, $10.9, and $10.9 million in 2012, 2013, 2014, respectively, that were previously displayed
separately.
3 Salaries and Expenses funds include discretionary and mandatory funds.
4 Includes funds for the periodic Census of Agriculture of $42, $42, and $42 million in 2012, 2013, and 2014,
respectively. The 2014 Census of Agriculture request will be used for publishing the 2012 Census data and
conducting follow-on surveys.
5 Includes funds for salaries and expenses of $17, $17, and $17 million in 2012, 2013, and 2014, respectively,
that are displayed in the Budget Appendix under the Institute of Education Sciences (IES). In addition, NCES
manages the IES grant program for the State Longitudinal Data System which is funded at $38 million, $38 million,
and $85 million in 2012, 2013, and 2014, respectively.
6 All funds from the Public Health Service Evaluation Fund. The estimates do not include resources from the
Prevention and Public Health Fund. The estimates appear larger than previously reported because the FY
2012–2014 levels are comparably adjusted for FY 12 and 13 to reflect business support services formerly shown
separately but now included in the FY 2014 budget estimates.
7 Includes funds for salaries and expenses of approximately $7 million each year.

19.  Information Technology

The Administration is committed to building a 21st
century Government that is more efficient and effective
for the American people. The strategic use of information technology (IT) is critical to the Administration’s success in achieving that goal. The Federal Government for
2014 plans to invest over $82 billion a year in IT. To ensure that this investment in IT is optimized, the Federal
Chief Information Officer (CIO) is focused on policy and
oversight activities in three key areas: maximizing the
return on investment in Federal IT; driving innovation
to meet customer needs; and securing and protecting the
Government’s data. All Federal agencies will be tasked to:
•	 Deliver by Maximizing the Return on Investment
of Federal IT – In order to innovate with less, the
Government must better manage and integrate IT
services. This means consolidating redundant applications, systems, and services and using enterprisewide solutions. It also means establishing common
testing platforms to foster interoperability and portability, streamlining the creation of new IT infrastructure, and shifting from an asset-ownership to
a service-orientation model via cloud computing.
Initiatives such as the IT Dashboard, TechStat,
PortfolioStat,1 the Federal Data Center Consolidation Initiative (FDCCI), and cloud computing efforts
support this objective.
•	 Innovate to Better Serve Customers – The interconnectedness of our digital world dictates that the
Government buy, build and manage IT in a new way.
Rapidly adopting innovative technologies, improving the efficiency and effectiveness of the Federal
workforce through technology, and fostering a more
participatory and citizen-centric Government are
critical to providing the services that citizens expect
from a 21st Century Government. Initiatives such
as the Digital Government Strategy2 support this
objective.
•	 Protect Federal IT Assets and Data Through Improved Cybersecurity – The President has identified
the Cybersecurity threat as one of the most serious
national security, public safety, and economic challenges we face as a nation. Ultimately, the Cybersecurity challenge in Federal government is not just a
technology issue. It is also an organizational, people, and performance issue requiring creative solutions to address emerging and increasingly sophis1  OMB

Memorandum M-12-10, “Implementing PortfolioStat.” (March
30,
2012)—http://www.whitehouse.gov/sites/default/files/omb/
memoranda/2012/m-12-10_1.pdf.
2  Presidential Directive “Building a 21st Century Digital Government” (May 23, 2012)—http://www.whitehouse.gov/sites/default/
files/uploads/2012digital_mem_rel.pdf.

ticated threats, and new vulnerabilities introduced
by rapidly changing technology.  To overcome this
challenge, Federal agencies must improve cybersecurity capabilities to provide safe, secure, and effective mission execution and services, with a focus on
accountability.  Specifically, agencies must continue
to  implement initiatives such as the Cybersecurity
Cross-Agency Priority (CAP) Goal, which is part of
the Administration’s broader performance management improvement initiative (encompassing Trusted Internet Connections, continuous monitoring
and strong authentication), the Federal Information
Security Management Act (FISMA), and the Federal Risk Authorization and Management Program
(FedRAMP), and continuously measure agency progress in improving information security performance
through CyberStat reviews.
This chapter describes details on the Federal IT budget
and on the Administration’s Federal IT initiatives.
THE FEDERAL INFORMATION
TECHNOLOGY (IT) PORTFOLIO
Federal Spending on IT—To innovate in an era of
flat or declining budgets, it is critical for agencies to view
IT as a strategic asset, and as a driver to deliver better
customer service to taxpayers. When properly managed
and applied, IT frees up resources from costly and inefficient business processes and enables the funding of new,
innovative IT solutions. To encourage these efforts, in
2014 agencies have been directed in OMB Memorandum
M-12-13 to implement a cut and reinvest strategy-- cutting duplicative commodity, business and enterprise IT
investments and underperforming projects to fund more
strategic investments.3 Strategic reinvestments will focus on systems that demonstrably improve citizen services or administrative efficiencies, increase the adoption of
shared services, improve the Government’s cybersecurity
posture, reduce Federal IT’s energy consumption, and enhance analytical capabilities.
Total planned spending on IT in 2014 estimated for
agencies represented on the IT Dashboard4 is $82.0 billion, 2.1 percent above the 2012 estimated level of $80.3
billion, as shown in Table 19-1. Spending estimates in
Chart 19-1 depict how growth in IT spending of 7.1 percent per year over 2001-2009 has been slowed to 0.78 percent per year for 2009-2014.
3  OMB guidance to agencies regarding the FY 2014 Budget,
in OMB Memorandum M-12-13, “Fiscal Year 2014 Budget Guidance”—http://www.whitehouse.gov/sites/default/files/omb/
memoranda/2012/m-12-13.pdf
4  The IT Dashboard, first launched in June, 2009, is a Federal website
designed to provide real-time information on the status of Federal agencies’ IT spending. It is located at: http://itdashboard.gov .

349

350

Analytical Perspectives

Table 19–1.  Federal IT Spending, President's Budget, FY 2014
(Spending in millions of dollars)
2012
Defense 1

IT Spending, Department of
���������������������������������������������������������������������������������������
IT Spending, non-Defense 2 ��������������������������������������������������������������������������������������������������������

2013 CR

39,588
40,690

38,810
41,766

2014
39,599
42,397

Total IT Investment Spending ���������������������������������������������������������������������������������������������
80,278
80,576
81,996
levels on information technology investments shown here for DoD include estimates for IT investments for which details are classified.
Totals shown here for DoD are higher than totals reflected on the IT Dashboard, which cannot reflect classified details.
2  Non-Defense agencies for which IT investment information is displayed on the IT Dashboard are: 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 State,
Department of Transportation, Department of the Treasury, Department of Veterans Affairs, Environmental Protection Agency, General Services
Administration, National Aeronautics and Space Administration, National Archives and Records Administration, National Science Foundation, Nuclear
Regulatory Commission, Office of Personnel Management, Small Business Administration, Smithsonian Institution, Social Security Administration,
U.S. Agency for International Development, and U.S. Army Corps of Engineers.
1  Spending

DELIVERING MAXIMUM RETURN
ON INVESTMENT (ROI) FOR IT
Focusing IT Oversight on Comprehensive IT
Portfolio Reviews and Planning—In 2013-2014, the
Administration will continue to broaden its approach to
managing IT by encouraging a more rigorous application
of its PortfolioStat model.
In the initial PortfolioStat assessments in 2012, agencies collected and analyzed baseline data on 13 common
types of commodity IT investments, spanning infrastructure, business systems, and enterprise IT. There are
significant opportunities for reducing spending in these
areas through consolidation and shared services. OMB
worked with agencies to review their data and compare
their spending with other agencies and private-sector
benchmarks to assess the agency’s current posture and
develop a list of opportunities to reduce inefficiency, duplication, and unnecessary spending. Based on this analysis, agencies drafted PortfolioStat plans, which were then

reviewed in Deputy Secretary-led PortfolioStat sessions
with the Federal CIO. Incorporating OMB feedback from
the sessions, agencies’ final plans identified 98 opportunities to consolidate or eliminate commodity IT areas,
ranging from the consolidation of multiple email systems
across an agency to the reduction of duplicative mobile or
desktop contracts.5
5  While some opportunities for commodity IT savings must be addressed over several years, FY 2013 IT operating plans and the FY 2014
Budget include many efficiency improvements that were identified in
the PortfolioStat process. Examples of potential savings which may be
realized relatively soon include as much as $200 million in gross savings
in some agencies. In the Department of Homeland Security, consolidations of infrastructure, including in mobile technology and other telecommunications, may range this high. Other savings achieved may be
smaller -- such as potentially $10-15 million in gross savings for e-mail
system consolidations at the Department of Transportation. Note that
there may be costs associated with achieving efficiencies resulting in net
savings which are significantly less than gross savings. Examples cited
here are taken from agency-identified initiatives which could commence
in FY 2013.

Chart 19-1. Trends in Federal IT Spending
Billions of dollars
120
Department of Defense

$111 Billion
(at 7.09% CAGR)

Major Civilian Agencies

100

Total for Major Agencies
Total CAGR Projection

$82 Billion

80
7.09% CAGR*
2001-2009

60

0.78% CAGR*
2009-2014

40
20

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

* Compound Annual Growth Rate
Source: Total IT spending from the IT Dashboard. Estimates of classified
Dept. of Defense IT investments provided by DOD. Agency 2014 IT budgets reported February 2013.

351

19.  Information Technology

Chart 19–2. Results of Portfolio Stats in 2012
PortfolioStat Commodity IT Reduction Targets
Government Wide Gross Reduction Targets
Total Cost Savings and Avoidance Targets, 2013-2015

$2.53 Billion
Consolidation Areas

Gross Reduction Targets, Millions of Dollars (2013-2015)
Mainframes & Servers

738.6

Mobile

IT
Infrastructure

387.8

Telecommunications

298.3

Desktop Computers

122.9

Other IT Infrastructure 8.2
Other Enterprise IT

290.7

Email

Enterprise IT
Systems

183.8

Web Infrastructure

106.1

Collaboration Tools

27.0

Identity & Access Mgmt.

16.4

Security 0.3

Business
Systems

Finance

201.6

Other Admin. Functions

139.2

Human Resources 5.9
0

100

200

300

400

500

600

700

800

Reduction Targets Over Time

Gross Reduction Targets by Year, Millions of Dollars
$1,002.4

1,000

$934.4

800

600

$590.0

400

200

0

2013

PortfolioStat efforts resulted in ambitious, forwardlooking plans with the potential to save the Government
$2.5 billion over the next three years by consolidating duplicative systems, buying in bulk, and ending or streamlining off-track projects. In these initial agency assessments
of planned savings, agencies focused on key categories of
commodity IT spending, specifically purchases of IT assets or services that have become commonplace and that
are not highly-customized for specific program support.
Potential savings identified in the 2012 PortfolioStat process are illustrated in Chart 19-2 below.
Consolidating and Optimizing Commodity IT—
PortfolioStat has played a pivotal role in accelerating
agency adoption of shared services. Under the Shared
First initiative agencies were tasked with identifying opportunities to shift to intra-agency commodity, support,
and mission IT shared services, maximizing the use of
strategic sourcing, and increasing the number of shared
services that they provide or use. Following direction

2014

2015

from the Federal CIO in May 2012, agencies completed
the migration of at least two IT service areas to a shared
delivery model, and agencies will work in 2013 toward
more comprehensive shared services plans.
One other particularly large component of commodity
IT spending is represented by the infrastructure investments in agency data centers. In 2012, agencies expanded
their efforts under the FDCCI to include data centers of
all sizes. Since agencies began executing their data center consolidation plans in 2011, they have closed over 400
data centers. During 2013, OMB will continue working
with agencies to categorize the Federal data center inventory and refine plans and metrics to continue consolidation of the remaining data centers, while implementing
measures to optimize the data centers that remain open.
Looking ahead to 2014, agencies will incorporate their
data center consolidation efforts into a broader enterprise-wide approach to address commodity IT in an integrated, comprehensive manner. The FDCCI will play a

352
significant role in supporting and achieving the goals of
PortfolioStat. As these efforts converge, agencies will continue to focus on optimizing those data centers that are
pivotal to delivering critical services, while closing duplicative and inefficient data centers.
Strengthening CIO Authorities – One finding from
2012 PortfolioStat sessions was that agencies with empowered CIOs tended to have less fragmented IT portfolios and better visibility into how IT was being spent.
The role of agency CIOs will continue to strengthen as
agencies implement OMB’s 2011 Memorandum M-1129 aimed at enhancing their authority to better manage
Federal IT investments.6 Already, fundamental changes
to the role of the CIO have occurred at some agencies.
At the General Services Administration (GSA), for example, the need to improve information technology services
and ease access to agency data resulted in the consolidation of all information technology personnel, budgets,
and systems under the Chief Information Officer. The
result will be a new technology office that has the ability to provide the IT services and support needed. CIO
authorities have been further reinforced by the broader
OMB Memorandum M-11-31, on delivering a more efficient and accountable Government,7 the implementation
of PortfolioStat, and also the May 2012 release of guidance to agencies on Shared Services IT Strategy with
milestones for 2012 and 2013.8
Cloud Computing—Under the Federal Cloud
Computing Initiative, cloud computing has now become
an accepted and integral part of the Federal IT environment. Agencies no longer question the utility and feasibility of cloud computing; but instead are seeking out
opportunities to use cloud computing to reshape their IT
portfolios to drive innovation, maximize ROI, and improve
cybersecurity. In 2011-2012, implementing the 25 Point
Implementation Plan to Reform Federal IT Management,9
agencies successfully migrated nearly 70 services to the
cloud, supporting Government-wide efforts to expand access to open data, drive a more transparent and participatory Government, and move toward more environmentally sustainable platforms. With the ability to expand
capacity at a moment’s notice without having to procure
new servers, add new data centers, and hire new staff, the
cloud is essential to the Federal Government’s ability to
be flexible as demands change.
In order to accelerate the safe and secure adoption of
cloud solutions, GSA is making tools available so that
agencies can migrate high value solutions to the cloud. 
Last year, GSA awarded blanket purchase agreements for
6  OMB memorandum M-11-29, “Chief Information Officer Authorities” (August 8, 2011)—http://www.whitehouse.gov/sites/default/files/
omb/memoranda/2011/m11-29.pdf.
7  OMB Memorandum M-11-31, “Delivering and Efficient, Effective
and Accountable Government” (August 17, 2011)—http://www.whitehouse.gov/sites/default/files/omb/memoranda/2011/m11-31.pdf.
8  “Federal Information Technology Shared Services Strategy” (May
2, 2012)—http://www.whitehouse.gov/sites/default/files/omb/assets/
egov_docs/shared_services_strategy.pdf
9  “25 Point Implementation Plan to Reform Federal IT Management”—http://www.whitehouse.gov/sites/default/files/omb/assets/
egov_docs/25-point-implementation-plan-to-reform-federal-it.pdf

Analytical Perspectives

17 vendors to provide Federal, State, local and tribal governments with the ability to buy cloud-based email, office
automation, electronic records management, migration,
and integration services.  GSA is also working to provide
agencies tools under existing contracts to purchase cloud
data center services and cloud migration services, to help
agencies ready legacy environments to migrate to the
cloud.  The latter will be especially important for smaller
and independent Federal entities, which may not have the
resources to grow or redeploy their staff to manage the
migration to the cloud. Looking ahead to 2014, GSA will
continue to explore whether a cloud brokerage concept,
similar to that provided in the financial services industry,
would help to increase cloud adoption.
Improved IT Dashboard—The IT Dashboard was
initially launched in June of 2009, to facilitate realtime monitoring of agency IT investment performance
by Federal officials, Congress, and the American people.
As experience with the IT Dashboard has grown, OMB
(in collaboration with agencies and with input from the
Government Accountability Office) has worked to improve the quality and focus of data collection for this flagship transparency site. The IT Dashboard continues to
set an example for a more open, accessible approach to
the evolution of Federal Government systems, through
its open source policy. IT Dashboard application code has
been available since March 31, 2011 at the Sourceforge
site,10 a site dedicated to the sharing of open source code,
where open discussion forums were later added.
In 2012, the IT Dashboard was updated with new data
structures and historical trend data, building on the
recommendations of an interagency working group and
providing even greater transparency into the Federal IT
investment portfolio. More targeted and detailed data
on major IT development activities will allow closer oversight, and assist agencies to deliver key functionality
needed by Federal programs on time and within budget.
OMB continues to require that CIOs rate all major IT
investments in the IT Dashboard, assessing how well the
risks for major development efforts are being addressed.
Based on preliminary analysis of these ratings for FY
2012, there is little evident trend up or down overall in
major IT investment ratings by CIOs. Across this period, CIOs have rated almost ¾ of major investments as
“Low Risk” or “Moderately Low Risk” (“green” in the IT
Dashboard). But in looking at specifics by agency, some
have experienced larger than average increases and decreases in ratings. For example, the U.S. Department
of Agriculture CIO “green” ratings over this period
dropped from 37 to 21. Over the same time interval, the
Department of Transportation’s “green” CIO ratings increased from 28 to 36. These ratings are one factor used
to inform PortfolioStat and TechStat processes.
IT Investment Oversight (TechStats)—In 2010,
OMB launched TechStat accountability sessions for major
Federal IT investments, which helped improve oversight
of major IT investments. A TechStat is a face-to-face, evidence-based accountability review of an IT investment.
It enables the Federal Government to intervene, and turn
10  http://sourceforge.net/projects/it-dashboard

19.  Information Technology

around, halt, or terminate IT projects that are failing to
deliver results for key requirements on schedule. By accelerating intervention in troubled IT projects, TechStat
reviews helped avoid significant costs, particularly in cases where projects were halted or terminated.
Since January 2010, OMB has led over 60 TechStat sessions, including 38 high-priority reviews between August
and December 2010.  These reviews resulted in remediation actions with cost implications for investments reviewed. The TechStats also resulted in an average acceleration of deliverables from over 24 months to 8 months
for the investments reviewed.
When the Congress in December, 2011 enacted the
appropriation for the Integrated, Efficient and Effective
Uses of IT (IEEUIT) Fund11 in the Executive Office of the
President, to assist in supporting IT reform, OMB began
reporting quarterly to the Congress on the savings from
IT reform. In its Jan. 31, 2013 report, OMB estimated
$489.1 million in cost savings and cost avoidance for the
period since the IEEUIT appropriation was enacted, stemming principally from commodity IT acquisition efficiencies and consolidations, cloud migrations, and the results
of the agency-led TechStat sessions which were initiated
in 2011. In agency-led TechStats, agency CIOs lead their
own TechStats at the agency level, reporting the results
to OMB. To date, including the period before quarterly
IEEUIT reporting began, CIOs across the Government
have held over 300 agency-led TechStats.
Information Technology Acquisition—OMB will focus
on the work of the Strategic Sourcing Leadership Council
(SSLC) to drive greater efficiency in commodity IT acquisition and use of shared services. Through the PortfolioStat
process, OMB achieves better insight into the acquisition and execution of commodity IT at the agency and
sub-agency level. OMB will work through Federal CIO
Council channels to identify opportunities to procure commodity IT at lower cost and more efficiently, while creating new opportunities for small businesses.
THE INNOVATION AGENDA—GOVERNMENT
IN THE INFORMATION AGE
Changes in technology—such as the large increase in
the number of mobile devices, the greater availability of
data, the growth of cloud computing, and the evolution
of social media and collaboration tools—are driving rapid
changes in the way we consume information. This presents both opportunities and challenges, as growing expectations require the Federal Government to be ready
11  P.L. 112-74, Div. C, Title II appropriated funds to advance IT efficiency: “For necessary expenses for the furtherance of integrated, efficient and effective uses of information technology in the Federal Government, $5,000,000, to remain available until expended: Provided, That
the Director of the Office of Management and Budget may transfer these
funds to one or more other agencies to carry out projects to meet these
purposes: Provided further, That the Director of the Office of Management and Budget shall submit quarterly reports to the Committees on
Appropriations of the House and the Senate identifying the savings
achieved by the Office of Management and Budget’s Government-wide
information technology reform efforts: Provided further, That such report shall include savings identified by fiscal year, agency and appropriation.

353
to deliver and receive digital information and services
anytime, anywhere and on any device. It must also do
so safely, securely, and with fewer resources. To build
for the future despite constrained budgets, the Federal
Government needs to innovate with less and enable entrepreneurs and others in the public to better leverage
Government data, simultaneously improving the quality
of services to the American people.
The Administration’s innovation agenda will build on
the following initiatives:
Digital Government Strategy—On May 23, 2012,
the President issued a directive entitled “Building a 21st
Century Digital Government.” It launched a comprehensive Digital Government Strategy aimed at delivering
better digital services to the American people. The strategy has three main objectives: (1) enabling the American
people and an increasingly mobile workforce to access
high-quality, digital Government information and services anywhere, anytime, on any device; (2) ensuring that
as the Government adjusts to this new digital world, we
seize the opportunity to procure and manage devices, applications, and data in smart, secure and affordable ways;
and (3) unlocking the power of Government data to spur
innovation across our Nation and improve the quality of
services for Federal employees and the American people.
Presidential Innovation Fellows—The Presidential
Innovation Fellows program12 pairs entrepreneurs from
the private sector, non-profits, and academia with top
innovators in Government to collaborate on solutions to
high-impact challenges and deliver significant results in
six months. The results of these projects are intended to
save taxpayer money, fuel job growth, bring private sector
best practices to Government, and provide tangible benefits to the American people. Each team of innovators is
tasked with working on a specific high-impact issue using a focused, agile approach. In a time of constrained
budgets, we need to find innovative ways to do more with
less. What makes this initiative unique is its focus on
tapping into the ingenuity, know-how, and patriotism of
Americans from every sector of our society.
Managing Information—Open Data—The information maintained by the Federal Government is a national
asset with tremendous potential value to the public, entrepreneurs, and to our own Government programs. The
innovation agenda includes multiple initiatives that will
open Government data to enhance information exchanges, interoperability, and public release (subject to valid restrictions). As a model, decades ago, the National Oceanic
and Atmospheric Administration (NOAA) began making weather data available for free electronic download
by anyone. Entrepreneurs utilized this data to create
weather newscasts, websites, mobile applications, insurance, and much more, resulting in a multi-billion dollar
industry. Similarly, the Government’s decision to make
the Global Positioning System (GPS) freely available resulted in private sector innovations ranging from navigation systems to precision crop farming, creating massive
public benefits and contributing significantly to economic
12  Program description at: http://www.whitehouse.gov/innovationfellows.

354
growth. To harness the value of Government open data to
the fullest extent possible, OMB and the Office of Science
and Technology Policy (OSTP), in conjunction with the
Presidential Innovation Fellows Program, have launched
six open data initiatives affecting diverse sectors including: health, energy, education, public safety, and global
development. These efforts aim to make Government
data available to entrepreneurs who will use this data to
create tools, such as those that help Americans find the
right health care providers, identify colleges that provide
the best value for tuition costs, save money on electricity bills through smarter shopping for the right rate plan,
and keep their families safe by knowing which products
have been recalled.
Accelerating Federal Use of Mobile Devices—The
Federal Government currently spends approximately $1.2
billion annually for mobile and wireless services and devices, maintaining an inventory of approximately 1.5 million active accounts. These figures will only increase as
agencies accelerate their adoption of new mobile technologies, and as the public increasingly expects Government
services to be made available anywhere, anytime, on
any device. The Digital Government Strategy established a set of discrete actions to ensure that the Federal
Government capitalizes on mobile solutions in smart, secure, and affordable ways. Actions included the release of
bring-your-own-device (BYOD) guidance based on lessons
learned from successful pilots at Federal agencies13; a requirement that agencies develop an enterprise-wide inventory of mobile devices and wireless service contracts14;
the establishment of a Government-wide contract vehicle
for mobile devices and wireless services15; a gap analysis
and mobile security report to be generated by the Chief
Information Officers Council16; and the development of a
Government-wide mobile and wireless security baseline
and reference architectures.17
Future-Ready
Architecture—Agencies
continue to face the challenge of having to provide new
or updated business and technology services with
limited resources. 
In May 2012, OMB released
“The Common Approach to Federal Enterprise
Architecture,” providing guidance to help agencies promote more agile and standardized architecture methods.18 This common architecture approach included an
emphasis on modular development and contracting practices, and the utilization of cloud-based services to speed
the delivery of value and lower the risk of failure in IT
projects.  In promulgating the common approach, OMB
also required agencies to develop and submit an enterprise roadmap by August 31, 2012.  The roadmap in13  Item 3.3 in the Digital Government Strategy, http://www.whitehouse.gov/sites/default/files/omb/egov/digital-government/digitalgovernment.html.
14  Ibid. Items 5.2 and 5.3 respectively.
15  Ibid. Item 5.1.
16  Ibid. Items 10.2 and 10.3 respectively.
17  Ibid. Item 9.1.
18 http://www.whitehouse.gov/sites/default/files/omb/assets/egov_
docs/common_approach_to_federal_ea.pdf

Analytical Perspectives

cluded an IT asset inventory, commodity IT consolidation
plan (tied to PortfolioStat reviews), and plans for improving the quality and uptake of Government-wide Line of
Business services.19  In the future, Federal IT architects
will also be called upon to address further methodology
improvements supporting better analytical capabilities
across all Federal IT assets.
Transition to Internet Protocol Version 6
(IPv6)—In September 2010, OMB issued a memorandum20 requiring Executive branch agencies to deploy native Internet Protocol Version 6 (IPv6) for public Internet
servers and internal applications that communicate with
public servers.   This directive builds upon an August
2005 memorandum,21 “Transition Planning for Internet
Protocol Version 6 (IPv6),” which led to the key early step
of IPv6 being deployed in all Federal Government agency
networks in 2008.  In July 2012, the Federal Government
released a roadmap for transitioning to the next-generation Internet networking technology.  This Roadmap, “The
Planning Guide/Roadmap Toward IPv6 Adoption within
the U.S. Government”22 was jointly developed with industry and provides best practices on how to successfully implement the next version of IPv6.  Agency status regarding the transition to IPv6-enabling public Internet servers
is available on the National Institute of Standards and
Technology (NIST) IPv6 Deployment Monitor web site.23
Modular Software Development—While OMB requires agencies to implement shared-first strategies,
some unique mission capabilities must still be developed
which may require custom software development. One of
the key lessons learned during TechStat reviews, however, is that investments that spend long periods of time
defining requirements and designing components before
realizing value are at significantly increased risk of failure. To help align the acquisition team and the IT team in
reducing this risk, OMB published Contracting Guidance
to Support Modular Development.24 OMB will use the
IT Dashboard to identify investments in which “time-tovalue” measures are inconsistent with policy. Agencies
should also be identifying these risky investments
through the implementation of their internal TechStat
processes and they should undertake corrective actions
to deploy capabilities to the production environment in
months instead of years. OMB will continue to monitor
agency performance in this area.
19  Line of Business initiatives, most of which continue from previous
Administration efforts, represent established inter-agency shared services with a lead agency and numerous partner agencies participating
in governance.
20  OMB Memorandum “Transition to Internet Protocol Version 6
(IPv6)” (Sept. 28, 2011)—http://www.whitehouse.gov/sites/default/
files/omb/assets/egov_docs/transition-to-ipv6.pdf.
21  OMB Memorandum “Transition Planning for Internet Protocol
Version 6 (IPv6)” (Aug. 5, 2005)—see: http://www.whitehouse.gov/
sites/default/files/omb/assets/omb/memoranda/fy2005/m05-22.pdf.
22  https://cio.gov/wp-content/uploads/downloads/2012/09/2012_IPv6_
Roadmap_FINAL_20120712.pdf
23  See: http://fedv6-deployment.antd.nist.gov/.
24  See OMB guidance “Contracting Guidance to Support Modular
Development,” page 2—at: http://www.whitehouse.gov/sites/default/
files/omb/procurement/guidance/modular-approaches-for-information-technology.pdf.

355

19.  Information Technology

BusinessUSA—On
January
13,
2012,
the
Administration articulated a strategy to break down the
stovepipes that have prevented the Government from delivering a comprehensive suite of services and capabilities
to American businesses. Based on the President’s premise of “…one website, one phone number, one mission,”
BusinessUSA, was launched on February 17, 2012.25 For
American entrepreneurs, interacting with the Federal
Government should feel like they are working with one
organization that puts them and their needs first, and
does not force them to understand a complex Federal bureaucracy. BusinessUSA will continue to grow and evolve,
becoming the single entry point for businesses to connect
with Government programs to help them launch new endeavors and grow. Services offered through BusinessUSA
are not limited to the Federal sector; the site includes
links to State and local programs and services, so that
businesses can connect with resources they need to
start up, grow, and export their goods and services. In
2014, all Federal agencies with business-facing capabilities will be participating in integrating and expanding
BusinessUSA’s capabilities.
Geospatial Data—Consistent with the Digital
Government Strategy, the guidance on Modular
Development, and in support of the principle of open
data,26 agencies will continue to review their geospatial
data and make it available to other agencies and the public. The progress of geospatial data being opened will be
reflected on the Geospatial Platform – a Federal internetbased platform providing shared, trusted geospatial data,
services and applications at http://www.geoplatform.gov.
Health Information Technology (Health IT)—The
technologies collectively known as health IT enable the
secure collection and exchange of vast amounts of health
data about individuals. Health IT includes electronic
health records (EHRs), personal health records, telehealth devices, remote monitoring technologies, and mobile health applications.
The Federal Government’s health IT vision is a health
system that uses information to empower individuals and
to improve the health of the population. To improve the
Federal Government’s overall effectiveness, all investments in health IT share the following common policy and
technology principles:
•	 Putting individuals and their interests first.
In order to enhance the health and well-being of all
Americans, the Government must meet the needs
and protect the rights of each individual.
•	 Being a worthy steward of the country’s money and trust. The Government seeks to use its resources judiciously. This means relying, to the extent
possible, on private markets to accomplish important societal objectives, and acting to correct market
failures when necessary. It also means developing
25  See remarks by the President on Government Reform—http://
www.whitehouse.gov/the-press-office/2012/01/13/remarks-presidentgovernment-reform.
26  Open data is now a key principle guiding Federal IT -- that is, the
principle that the Government’s data should be provided in a manner
that facilitates the use of this data by everyone.

Governmental policies through open and transparent processes.
•	 Supporting health IT benefits for all. All Americans should have equal access to quality health care.
This includes the benefits conferred by health IT.
The Government will endeavor to ensure that underserved and at-risk individuals enjoy these benefits to the same extent as all other citizens.
•	 Focusing on outcomes. Federal health IT policy
will constantly focus on improving the outcomes of
care, so as to advance the health of Americans and
the performance of their health care system.
•	 Building boldly on what works. The Government
will set ambitious goals and then work methodically
to achieve them, monitoring health IT successes,
and looking for ways to expand upon programs that
work. It will seek to be nimble and action-oriented:
evaluating existing Government activities, learning
from experience, and changing course if necessary.
•	 Encouraging innovation. The Government is
working to create an environment of testing, learning, and improving, thereby fostering breakthroughs
that quickly and radically transform health care.
The Government will support innovation in health
IT.
With the Office of the National Coordinator for Health
IT charged with the coordination of nationwide efforts
to implement and use the most advanced health information technology, agencies such as the Department of
Agriculture, Department of Commerce, Department of
Defense, Department of Health and Human Services,
Department of Veterans Affairs, Social Security
Administration, and Office of Personnel Management are
working together to maximize the benefits health IT has
to offer providers and patients by accelerating Electronic
Health Record (EHR) adoption and secure electronic exchange of health information.
PROTECTING DATA AND ASSETS—
CYBERSECURITY AND PRIVACY
America depends on Federal agencies for essential services, ranging from disaster assistance to Social Security
to national defense. These services, in turn, rely on a safe,
secure, and resilient Government information and communications infrastructure. Threats to this infrastructure—whether from domestic or international criminal
elements or nation-states— continue to grow in number
and sophistication, creating the potential that essential
services could be degraded or interrupted, and confidential information stolen or compromised, with serious effects. To combat these threats, the Administration will
act on many fronts, while protecting individual privacy
and civil liberties.
•	 Secure Federal Networks—The Administration’s
cybersecurity team will continue its vigorous and
extensive build-out of technical and policy protec-

356

Analytical Perspectives

tion capabilities for Government systems, expand its
partnerships with the private sector, and work with
Congress to clarify roles and authorities. The Administration will assist and strengthen the abilities
of Federal agencies to protect their infrastructure
and data.
•	 Improve Federal Cybersecurity Defenses. The
Department of Homeland Security (DHS) will assess
the state of operational readiness and cybersecurity
risk of unclassified Federal networks and systems.
DHS proactively engages with agencies to improve
their cybersecurity posture by assessing capabilities, identifying vulnerabilities, evaluating risks and
providing prioritized guidance that optimizes the remediation activities needed to close capability gaps,
limit exposure, reduce exploitation, and increase the
speed and effectiveness of cyber-attack responses.
•	 Implement Cybersecurity Cross-Agency Priority (CAP) Goal. The Administration selected
cybersecurity as one of its 14 CAP goals required
under the Government Performance and Results Act
Modernization Act (GPRAMA) of 2010. The goal is to
achieve 95% use of the Administration’s priority cybersecurity capabilities on Federal executive branch
information systems by the end of FY 2014. In order
to achieve this goal, Federal spending will focus on
two-factor authentication in accordance with Homeland Security Presidential Directive 12 (HSPD-12),
Federal Trusted Internet Connections (TICs), and
Continuous Monitoring policies.
•	 Conduct CyberStat Sessions. DHS will continue
to work with agencies to identify and correct weaknesses in cybersecurity programs and ensure agencies are on track to meet the Cyber CAP goal through
Cyberstat reviews. The reviews provide the opportunity for agencies to identify the cybersecurity capability areas where they may be facing implementation
maturity roadblocks (e.g. technology, organizational
culture, internal process, or human capital/financial
resource challenges). CyberStat reviews will continue to focus on identifying prospects and strategies to
improve cybersecurity performance.
•	 Enhance Cybersecurity Program Monitoring,
Management, and Reporting Under the Federal Information Security Management Act
(FISMA).27 The Federal cybersecurity defensive posture is a constantly evolving environment because
of the relentless and dynamic threat environment,
emerging technologies, and new vulnerabilities.
Many threats can be mitigated by following established cybersecurity best practices, but attackers often search for organizations with poor cybersecurity
practices and target associated vulnerabilities. DHS
will continue to improve FISMA metrics to focus on
outcome-oriented measures that are quantitative,
27  Title III of the E-Government Act of 2002 (P.L. 107-347, enacted
Dec. 17, 2002) is known as the “Federal Information Security Management Act of 2002” (FISMA).

specific, automated when possible, and focused on
reduction of risk. The FISMA metrics focus agency
efforts on what data and information is entering
and exiting their networks, what components are
on their information networks, when security status changes, and who is on their systems. The Administration will focus agency efforts on improving
the security of their networks by implementing the
Cross-Agency Priority Goals for cybersecurity (i.e.
Continuous Monitoring, Trusted Internet Connections, and HSPD-12).
•	 Enhance the Cybersecurity Workforce. The
Administration will maintain a strong cadre of cybersecurity professionals to design, operate, and research cyber technologies, enabling success against
current and future threats. As part of this effort,
the National Initiative for Cybersecurity Education
(NICE) developed the National Cybersecurity Workforce Framework to define the cybersecurity workforce and provide a common taxonomy and lexicon
by which to classify and categorize the workforce.
The Framework was developed as a direct result of
the Administration’s need to identify, quantify, and
develop an effective cybersecurity workforce to develop our Nation’s critical cyber infrastructure. In
addition, the Administration will work to provide cybersecurity professionals with tools, tips, education,
training, awareness, and other resources appropriate to their positions.
•	 Implement Continuous Monitoring.  The Administration will work to design, build, and operate
information and communication technology to specifically reduce the risk of exploitable weaknesses
and enable technology to sense, react to, and communicate changes in its security or its surroundings
in a way that preserves or enhances its security posture. Continuous monitoring is an integral part of
an enterprise-wide risk management process that
allows agencies to establish the context of their risk
management programs, and subsequently assess
risk, respond to risk, and monitor risk on an ongoing
basis.
Continuous monitoring programs are most effective
when combined with other department and agency
initiatives to strengthen the underlying information
technology infrastructure by integrating security
requirements into organizational processes (e.g., enterprise architecture, acquisition/procurement, systems engineering, and the system development life
cycle). An example is the DHS Continuous Diagnostics and Mitigation (CDM) program, which will provide tested continuous monitoring, diagnosis, and
mitigation activities designed to increase visibility
into the security status of Federal information systems and environments of operation. The program
can also enhance DHS’s ability to assess agency security control effectiveness, and assist organizational personnel in identifying and responding to intrusions in their operational environments.

19.  Information Technology

Under this program, DHS will centrally oversee
the procurement, operations, and maintenance of
diagnostic sensors (tools) and dashboards deployed
to each agency. Using input from the sensors and
agency-level dashboards, officials at each agency
will be able to quickly identify which problems to fix
first, and empower technical managers to prioritize
and mitigate risks. In addition, DHS will maintain
a dashboard to provide situational awareness at the
Federal level.
•	 Improve Incident Reporting and Response.
The 2012 National Level Exercise (NLE) simulated
what would happen if a series of significant cyber
incidents occurred within the United States. The
NLE demonstrated the need for the Federal Government to improve preparedness for Significant Cyber
Incidents. The growing numbers of cyber attacks on
our Federal networks are sophisticated, aggressive
and dynamic. During FY 2012, the United States
Computer Emergency Readiness Team (US-CERT)
processed 157,850 incidents including cyber exploits
that injected viruses, stole information or disrupted
Federal network operations. The Administration
will work to unify efforts to collaboratively respond
to and rapidly recover from significant cyber incidents that threaten public health or safety, undermine public confidence, have a debilitating effect on
the national economy, or diminish the security posture of the Nation.
•	 Ensure Information Sharing and Safeguarding. This continuing initiative ensures coordinated
interagency development and reliable implementation of structural reforms to ensure responsible sharing and safeguarding of classified information on
computer networks that shall be consistent with appropriate protections for privacy and civil liberties,
pursuant to Presidential Executive Order 13587.
•	 Improve Identity Management. Version 2.0 of
the “Federal Identity, Credential and Access Management (FICAM) Roadmap and Implementation
Guidance” was issued by the Federal CIO Council in
December 2011.28 This guidance helps steer agency
efforts as they plan and upgrade their architectures,
aiming to leverage existing investments and promoting efficiency in designing, deploying, and operating
IT systems. As of September 1, 2012, more than 5.2
million Personal Identity Verification (PIV) credentials (96 percent of those needed) were issued to the
Federal workforce, and over 5 million background
investigations (91 percent of those needed) were
completed, in accordance with Homeland Security
Presidential Directive 12 (HSPD-12). Agencies are
expected in 2013 to accelerate the use of PIV credentials in securing Federal facilities and IT systems.
Charged with revising the HSPD-12 standard (FIPS
28  Federal Identity, Credential, and Access Management (FICAM)
Roadmap and Implementation Guidance Version 2.0, December 2,
2011—
http://www.idmanagement.gov/documents/FICAM_Roadmap_ and_Implementation_Guidance_v2%200_20111202.pdf.

357
201), NIST is also moving to address the integration
of PIV credentials with mobile devices and related
advances in technology. The Administration also released the National Strategy for Trusted Identities
in Cyberspace (NSTIC) in April 2011,29 to promote
public-private collaboration on an online identity
environment to facilitate secure, efficient, easy-touse, and interoperable identity solutions to access
online services.
•	 Federal Risk Authorization Management Program (FedRAMP). To support the Federal Cloud
Computing Initiative, FedRAMP was launched during 2012. FedRAMP is changing the way cloud is
bought within the Federal Government through a
standardized approach for agencies to assess and
authorize the security of cloud systems. This standardized approach strengthens security practices
associated with cloud computing solutions, and in
turn, builds greater trust between cloud providers
and consumers. As a result, agencies can quickly deploy cloud solutions in support of delivering
taxpayers services at a significantly reduced cost.
As part of reaching its initial operating capability, FedRAMP published a baseline set of security
controls, developed a comprehensive concept of operations, and a conformity assessment process to
independently verify that providers are meeting
the Government’s security needs. In 2013-2014,
FedRAMP will integrate lessons learned from
initial efforts to achieve full operating capability,
thereby accelerating the adoption of secure cloud
solutions in Government through the reuse of assessments and authorizations.
•	 Protect Privacy and Confidentiality—The Administration will ensure that protecting individual
privacy and confidentiality remains a top priority.
The importance of protecting privacy has become
even greater as new technologies emerge. Federal
agencies must take steps to analyze and address privacy and confidentiality issues at the earliest stages
of the planning process, and they must continue to
manage information responsibly throughout the life
cycle of the information. In addition, Federal agencies are expected to demonstrate continued progress
in all aspects of privacy and confidentiality protection and to ensure compliance with all privacy and
confidentiality requirements in law, regulation, and
policy. Agencies must review their information systems to ensure that they eliminate unnecessary
holdings of personally identifiable information, such
as unnecessary collection and use of Social Security
numbers. Moreover, agencies will continue to develop and implement policies that outline rules of
behavior, detail training requirements for personnel,
and identify consequences and corrective actions to
address non-compliance.
29  Document released April 15, 2011. Title: National Strategy for
Trusted Identities in Cyberspace. See: http://www.whitehouse.gov/
sites/default/files/rss_viewer/NSTICstrategy_041511.pdf.

358

Analytical Perspectives

CONCLUSION
The Administration is committed to continuously improving how its services are provided to the public. This
will be accomplished by implementing a Federal IT strategy that focuses on delivering maximum return on IT in-

vestments, driving an innovation agenda, and promoting
cybersecurity and privacy policies to protect data and assets across all Federal agencies.

20. Federal Investment

Federal investment is the portion of Federal spending intended to yield long-term benefits for the economy
and the country. It promotes improved efficiency within
Federal agencies, as well as growth in the national economy by increasing the overall stock of capital. Investment
spending can take the form of direct Federal spending or
of grants to State and local governments. It can be designated for physical capital, which creates a tangible asset that yields a stream of services over a period of years.
It also can be for research and development, education,
or training, all of which are intangible but still increase
income in the future or provide other long-term benefits.
Most presentations in this volume combine investment spending with spending intended for current use.
This chapter focuses solely on Federal and federally fi-

nanced investment. It provides a comprehensive picture
of Federal investment spending, but because it disregards
spending for non-investment activities, it provides only
a partial picture of Federal support for specific national
needs, such as defense, transportation, or environmental
protection.
In this chapter, investment is discussed in the following sections:
•	 a description of the size and composition of Federal
investment spending; and
•	 a presentation of trends in the stock of federally financed physical capital, research and development,
and education.

PART I: DESCRIPTION OF FEDERAL INVESTMENT
The distinction between investment spending and
current outlays is a matter of judgment. The budget
has historically employed a relatively broad classification of investment, 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, and all other investments, or
“direct Federal programs.” This “direct Federal’’ category consists primarily of spending for assets owned by
the Federal Government, such as weapons systems and
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.
The definition of investment in a particular presentation can vary depending on specific considerations:
•	 Taking the approach of a traditional balance sheet
would limit investment to 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.
•	 Examining 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.

•	 Considering a “social investment’’ perspective would
broaden the coverage of investment beyond what is
included in this chapter to include programs such
as maternal health, certain nutrition programs, and
substance abuse treatment, which are designed in
part to prevent more costly health problems in future years.
This analysis takes the relatively broad approach of
including all investment in physical assets, research and
development, and education and training, regardless of
ultimate ownership of the resulting asset or the purpose
it serves. It does not include “social investment” items
like health care or social services where it is difficult to
separate out the degree to which the spending provides
current versus future benefits. The 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
20–2 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: the treatment of grants to State and local governments, and the classification of spending that could be
shown in multiple categories.
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 into the category in which the
recipient jurisdictions are expected to spend a majority of
the money. Hence, the Community Development Block
Grants are classified as physical investment, although

359

360

Analytical Perspectives

some may be spent for current purposes. General purpose fiscal assistance is classified as current spending,
although some may be spent by recipient jurisdictions on
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 hierarchically in the category that is most commonly recognized as investment: physical assets, followed
by research and development, followed by education and
training. Consequently, outlays for the conduct of research
and development do not include outlays for the construction of research facilities, because these outlays are included in the category for investment in physical assets.
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 the section on Federal
credit in Chapter 11, “Budget 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 20–1. They include major public physical investment, the conduct of research and development, and the conduct of education and training.
Combined defense and nondefense investment outlays
were $503.3 billion in 2012. They are estimated to increase slightly to $503.7 billion in 2013 and increase to
$568.4 billion in 2014. The major factors contributing to
these changes are described below.
Major Federal investment outlays will comprise an
estimated 15.0 percent of total Federal outlays in 2014
and 3.3 percent of the Nation’s gross domestic product.
Greater detail on Federal investment is available in Table
20–2 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”) were $267.7 billion in 2012 and are
estimated to rise to $272.3 billion in 2013 and continue
to rise to $311.6 billion in 2014. Physical investment
outlays are for construction and rehabilitation, the pur-

Table 20–1. Composition of Federal Investment Outlays
(In billions of dollars)
Federal Investment

Estimate

Actual
2012

2013

2014

Major public physical capital investment:
Direct Federal:
National defense ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Nondefense �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, direct major public physical capital investment ������������������������������������������������������������������������������������������������������
Grants to State and local governments �����������������������������������������������������������������������������������������������������������������������������������������
Subtotal, major public physical capital investment ���������������������������������������������������������������������������������������������������������������������

138.1
44.4
182.5
85.2
267.7

132.1
57.1
189.2
83.1
272.3

163.6
55.3
218.9
92.7
311.6

Conduct of research and development:
National defense ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Nondefense �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, conduct of research and development �����������������������������������������������������������������������������������������������������������������������

75.1
63.7
138.8

75.0
64.5
139.5

71.6
64.4
136.0

Conduct of education and training:
Grants to State and local governments �����������������������������������������������������������������������������������������������������������������������������������������
Direct Federal ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Subtotal, conduct of education and training ������������������������������������������������������������������������������������������������������������������������������

63.9
33.0
96.9

62.3
29.8
92.0

76.2
44.6
120.8

Total, major Federal investment outlays ���������������������������������������������������������������������������������������������������������������������������

503.3

503.7

568.4

Major Federal investment outlays:
National defense ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Nondefense �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, major Federal investment outlays ������������������������������������������������������������������������������������������������������������������������������������

213.2
290.1
503.3

207.1
296.6
503.7

235.2
333.2
568.4

Miscellaneous physical investment:
Commodity inventories ������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other physical investment (direct) �������������������������������������������������������������������������������������������������������������������������������������������������
Total, miscellaneous physical investment ����������������������������������������������������������������������������������������������������������������������������������
Total, Federal investment outlays, including miscellaneous physical investment �������������������������������������������������������������������������������

–0.1
2.5
2.4
505.8

–0.0
2.7
2.7
506.4

–0.2
2.8
2.7
571.0

MEMORANDUM

361

20.  Federal Investment

chase of major equipment, and the purchase or sale of
land and structures. Approximately two-thirds 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 $163.6
billion in 2014. This amount is up significantly from 2012
and 2013, largely because the entire placeholder for
Overseas Contingency Operations (OCO) in 2014 is classified as physical investment. Two-thirds of defense physical investment outlays, or an estimated $99.6 billion, are
for the procurement of weapons and other defense equipment, and the remainder is primarily for construction on
military bases, family housing for military personnel, and
Department of Energy defense facilities. Defense outlays
for physical investment decrease from $138.1 billion in
2012 to $132.1 billion in 2013, primarily due to reduced
spending for the wars in Iraq and Afghanistan, and slowdowns in base budget Defense procurement.
Outlays for direct physical investment for nondefense
purposes are estimated to be $55.3 billion in 2014. This
is a reduction from the $57.1 billion in outlays in 2013,
attributable largely to deadlines for project construction
and completion for applications for grants for specified
energy property in lieu of tax credits. Outlays for 2014
include $37.2 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 Indian Health Service
hospitals and clinics; facilities for space and science programs; Postal Service facilities; energy conservation projects in the Department of Energy; construction for the administration of justice programs (largely in Customs and
Border Protection within the Department of Homeland
Security); construction of office buildings by the General
Services Administration; and construction for embassy security. Outlays for the acquisition of major equipment are
estimated to be $17.5 billion in 2014. The largest amounts
are for the air traffic control system; railroad system preservation; weather and climate monitoring in the National
Oceanic and Atmospheric Administration; law enforcement activities, largely in the Department of Homeland
Security and the Federal Bureau of Investigation; and information systems in the Department of Veterans Affairs.
Grants to State and local governments for physical
investment are estimated to be $92.7 billion in 2014, up
from $83.1 billion in 2013. Over 75 percent of these outlays, or $70.1 billion, are to assist States and localities
with transportation infrastructure, primarily highways;
this category represents the majority of the increase in
physical investment grants from 2013 to 2014. Other major grants for physical investment fund sewage treatment
plants and other State and tribal assistance grants, community and regional development, and public housing.
Conduct of research and development. Outlays for
the conduct of research and development are estimated

to be $136.0 billion in 2014. 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
$71.6 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 $64.4 billion in 2014. These
are largely for the National Institutes of Health, National
Aeronautics and Space Administration, the Department
of Energy, and the National Science Foundation.
A more complete and detailed discussion of research
and development funding can be found in Chapter 21,
“Research and Development,’’ in this volume.
Conduct of education and training. Outlays for the
conduct of education and training were $92.0 billion in
2013 and are estimated to rise to $120.8 billion in 2014.
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 $76.2 billion in 2014, roughly 63 percent of
the total. They include education programs for the disadvantaged and individuals with disabilities, training programs in the Department of Labor, Head Start, and other
education programs. Grants for education and training
rise from $62.3 billion in 2013 to $76.2 billion in 2014,
largely due to grants to States for teacher stabilization.
Direct Federal education and training outlays are estimated to be $44.6 billion in 2014, up from the levels in
2012 and 2013. Programs in this category primarily consist of aid for higher education through student financial
assistance, loan subsidies, and veterans’ education, training, and rehabilitation. Downward reestimates of student
loan subsidies reduced net outlays for direct Federal education and training in 2012 and by greater amounts in
2013, leading to an increase in this category in 2014.
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.
Miscellaneous Physical Investment
In addition to the categories of major Federal investment,
several miscellaneous categories of investment outlays are
shown at the bottom of Table 20–1. These items, all for
physical investment, are generally unrelated to improving
Government operations or enhancing economic activity.
Outlays for commodity inventories are for the purchase
or sale of agricultural products pursuant to farm price
support programs and other commodities. Purchases are
estimated to exceed sales by $158 million in 2014.
Outlays for other miscellaneous physical investment
are estimated to be $2.8 billion in 2014. This category
consists entirely of direct Federal outlays and includes
primarily conservation programs.

362

Analytical Perspectives

Detailed Table on Investment Spending
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.

Table 20–2.  Federal Investment Budget Authority and Outlays: Grant and Direct Federal Programs
(in millions of dollars)
Description

Budget Authority
2012 Actual

Outlays

2013 Estimate 2014 Estimate

2012 Actual

2013 Estimate 2014 Estimate

GRANTS TO STATE AND LOCAL GOVERNMENTS
Major public physical investment:
Construction and rehabilitation:
Transportation:
Highways ����������������������������������������������������������������������������������������������������
Mass transportation ������������������������������������������������������������������������������������
Rail transportation ��������������������������������������������������������������������������������������
Air and other transportation ������������������������������������������������������������������������
Subtotal, transportation �������������������������������������������������������������������������
Other construction and rehabilitation:
Pollution control and abatement �����������������������������������������������������������������
Community and regional development �������������������������������������������������������
Housing assistance �������������������������������������������������������������������������������������
Other �����������������������������������������������������������������������������������������������������������
Subtotal, other construction and rehabilitation ���������������������������������������
Subtotal, construction and rehabilitation �����������������������������������������������������
Other physical assets ������������������������������������������������������������������������������������������
Subtotal, major public physical investment ������������������������������������������������������

39,723
11,925
.........
3,685
55,333

40,647
22,746
.........
3,686
67,079

39,118
12,051
3,660
53,228
108,057

43,896
12,098
532
3,219
59,745

42,636
13,994
1,127
4,129
61,886

42,101
15,939
2,511
9,531
70,082

2,545
4,738
3,658
543
11,484
66,817
1,560
68,377

3,194
35,228
3,680
574
42,676
109,755
1,819
111,574

2,123
3,869
4,982
544
11,518
119,575
1,711
121,286

4,100
9,222
6,031
4,044
23,397
83,142
2,070
85,212

3,393
9,405
4,957
1,114
18,869
80,755
2,358
83,113

3,179
11,844
4,659
596
20,278
90,360
2,331
92,691

Conduct of research and development:
Agriculture �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Subtotal, conduct of research and development ���������������������������������������������

324
164
488

327
320
647

320
312
632

132
124
256

407
144
551

488
167
655

Conduct of education and training:
Elementary, secondary, and vocational education �����������������������������������������������
Higher education �������������������������������������������������������������������������������������������������
Research and general education aids �����������������������������������������������������������������
Training and employment �������������������������������������������������������������������������������������
Social services ����������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Subtotal, conduct of education and training ����������������������������������������������������

37,249
331
744
3,899
11,331
405
2,164
56,123

55,569
483
761
3,906
11,594
407
2,243
74,963

41,564
486
758
3,620
12,678
405
2,395
61,906

45,489
432
830
3,449
11,074
427
2,150
63,851

43,516
345
796
3,493
11,441
410
2,253
62,254

55,794
421
797
3,794
12,460
589
2,381
76,236

Subtotal, grants for investment ������������������������������������������������������������������������

124,988

187,184

183,824

149,319

145,918

169,582

11,060

11,078

12,667

14,623

65
12,732

55
14,678

51
63,519

1,064
838
4,182
1,529
9,563

808
805
3,106
1,322
12,783

1,070
864
3,701
1,316
10,265

DIRECT FEDERAL PROGRAMS
Major public physical investment:
Construction and rehabilitation:
National defense:
Military construction and family housing �����������������������������������������������������
Overseas Contingency Operations placeholder �����������������������������������������
Atomic energy defense activities and other ������������������������������������������������
Subtotal, national defense ���������������������������������������������������������������������
Nondefense:
International affairs �������������������������������������������������������������������������������������
General science, space, and technology ����������������������������������������������������
Water resources projects ����������������������������������������������������������������������������
Other natural resources and environment ��������������������������������������������������
Energy ��������������������������������������������������������������������������������������������������������

79
11,139

56
11,134

8,849
88,482
82
97,413

1,049
896
2,686
1,073
8,391

1,024
712
6,153
1,604
10,775

1,907
999
2,246
1,053
8,355

1

10,963
1 52,505

363

20.  Federal Investment

Table 20–2.  Federal Investment Budget Authority and Outlays: Grant and Direct Federal Programs—Continued
(in millions of dollars)
Description
Postal service ���������������������������������������������������������������������������������������������
Transportation ���������������������������������������������������������������������������������������������
Veterans hospitals and other health facilities ����������������������������������������������
Administration of justice ������������������������������������������������������������������������������
GSA real property activities ������������������������������������������������������������������������
Other construction ��������������������������������������������������������������������������������������
Subtotal, nondefense �����������������������������������������������������������������������������
Subtotal, construction and rehabilitation �����������������������������������������������������

Budget Authority
2012 Actual

Outlays

2013 Estimate 2014 Estimate

2012 Actual

2013 Estimate 2014 Estimate

320
568
3,423
572
343
1,948
21,269
32,408

373
6,783
3,478
535
332
6,863
38,632
49,766

669
12,677
2,674
1,249
2,119
11,135
45,083
142,496

241
600
3,497
849
2,877
2,955
28,195
40,927

490
6,627
3,376
701
1,980
7,779
39,777
54,455

605
13,002
2,566
316
1,568
1,931
37,204
100,723

Acquisition of major equipment:
National defense:
Department of Defense ������������������������������������������������������������������������������
Atomic energy defense activities ����������������������������������������������������������������
Subtotal, national defense ���������������������������������������������������������������������
Nondefense:
General science and basic research ����������������������������������������������������������
Postal service ���������������������������������������������������������������������������������������������
Air transportation ����������������������������������������������������������������������������������������
Water transportation (Coast Guard) �����������������������������������������������������������
Other transportation (railroads) ������������������������������������������������������������������
Hospital and medical care for veterans �������������������������������������������������������
Federal law enforcement activities ��������������������������������������������������������������
Department of the Treasury (fiscal operations) �������������������������������������������
National Oceanic and Atmospheric Administration �������������������������������������
Other �����������������������������������������������������������������������������������������������������������
Subtotal, nondefense �����������������������������������������������������������������������������
Subtotal, acquisition of major equipment ����������������������������������������������������

118,445
614
119,059

115,178
534
115,712

99,431
575
100,006

124,915
442
125,357

116,931
466
117,397

99,583
503
100,086

861
205
3,705
1,240
1,418
2,620
1,073
330
1,830
3,828
17,110
136,169

834
627
4,207
1,252
1,545
1,901
1,048
332
1,842
3,816
17,404
133,116

940
1,666
3,520
884
2,700
1,310
1,035
303
2,006
4,467
18,831
118,837

1,007
266
3,389
1,077
1,421
1,720
1,360
358
1,315
4,063
15,976
141,333

1,034
516
3,972
1,381
1,552
1,850
1,272
376
1,182
3,831
16,966
134,363

871
963
3,621
1,243
1,585
1,639
1,260
348
1,548
4,442
17,520
117,606

Purchase or sale of land and structures:
National defense ����������������������������������������������������������������������������������������������
Natural resources and environment �����������������������������������������������������������������
General government ����������������������������������������������������������������������������������������
Other ����������������������������������������������������������������������������������������������������������������
Subtotal, purchase or sale of land and structures ��������������������������������������
Subtotal, major public physical investment ������������������������������������������������������

–33
229
133
–131
198
168,775

–35
304
128
1,702
2,099
184,981

–27
420
113
–153
353
261,686

–12
224
133
–132
213
182,473

24
283
130
–93
344
189,162

–16
346
129
82
541
218,870

72,811
4,051
76,862

73,740
4,496
78,236

68,235
4,742
72,977

71,146
3,975
75,121

70,371
4,610
74,981

66,856
4,711
71,567

269

265

259

253

252

246

10,622
5,101
3,839
19,562
2,197

10,567
5,137
3,959
19,663
2,388

10,883
5,600
4,053
20,536
3,186

10,027
5,124
4,012
19,163
3,019

10,620
5,969
4,107
20,696
2,532

10,974
5,293
4,122
20,389
2,933

758
553
27
1,338

705
546
28
1,279

775
553
20
1,348

720
566
21
1,307

717
494
39
1,250

713
555
23
1,291

29,879
1,407

30,097
1,700

30,356
1,960

31,671
1,185

30,709
1,679

30,389
1,167

Conduct of research and development:
National defense:
Defense military �����������������������������������������������������������������������������������������������
Atomic energy and other ���������������������������������������������������������������������������������
Subtotal, national defense ��������������������������������������������������������������������������
Nondefense:
International affairs ������������������������������������������������������������������������������������������
General science, space, and technology:
NASA ����������������������������������������������������������������������������������������������������������
National Science Foundation ����������������������������������������������������������������������
Department of Energy ��������������������������������������������������������������������������������
Subtotal, general science, space, and technology ���������������������������������
Energy �������������������������������������������������������������������������������������������������������������
Transportation:
Department of Transportation ���������������������������������������������������������������������
NASA ����������������������������������������������������������������������������������������������������������
Other transportation ������������������������������������������������������������������������������������
Subtotal, transportation �������������������������������������������������������������������������
Health:
National Institutes of Health ������������������������������������������������������������������������
Other health ������������������������������������������������������������������������������������������������

364

Analytical Perspectives

Table 20–2.  Federal Investment Budget Authority and Outlays: Grant and Direct Federal Programs—Continued
(in millions of dollars)
Description

Budget Authority
2012 Actual

Outlays

2013 Estimate 2014 Estimate

2012 Actual

2013 Estimate 2014 Estimate

Subtotal, health ��������������������������������������������������������������������������������������
Agriculture �������������������������������������������������������������������������������������������������������
Natural resources and environment �����������������������������������������������������������������
National Institute of Standards and Technology ����������������������������������������������
Hospital and medical care for veterans �����������������������������������������������������������
All other research and development ����������������������������������������������������������������
Subtotal, nondefense ����������������������������������������������������������������������������������
Subtotal, conduct of research and development ���������������������������������������������

31,286
1,556
2,137
466
1,160
1,281
61,252
138,114

31,797
1,504
2,179
480
1,170
1,318
62,043
140,279

32,316
1,612
2,423
1,530
1,172
1,729
66,111
139,088

32,856
1,772
2,046
533
1,168
1,281
63,398
138,519

32,388
1,641
2,066
557
1,150
1,391
63,923
138,904

31,556
1,681
2,222
618
1,152
1,701
63,789
135,356

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 �������������������������������������������������������������������
International affairs ����������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������
Subtotal, conduct of education and training ����������������������������������������������������

1,444
20,254
2,098
2,812
1,526
12,527
952
651
905
43,169

1,480
8,305
2,142
2,255
1,631
11,559
947
624
819
29,762

1,690
16,596
2,305
2,306
1,446
13,489
991
583
800
40,206

1,276
12,108
2,192
2,456
1,644
10,734
945
670
977
33,002

1,367
5,711
2,269
2,306
1,804
13,512
1,087
631
1,066
29,753

1,372
20,032
2,213
2,492
1,562
14,063
1,027
786
1,016
44,563

Subtotal, direct Federal investment �����������������������������������������������������������������

350,058

355,022

440,980

353,994

357,819

398,789

Total, Federal investment ����������������������������������������������������������������������������������������
475,046
542,206
624,804
503,313
503,737
568,371
1 Includes the entire placeholder amount for Department of Defense Overseas Contingency Operations in 2014. The amended OCO request will be distributed across a range of
investment and non-investment activities.

PART II: FEDERALLY FINANCED CAPITAL STOCKS
Federal investment spending creates a “stock’’ of capital that is available for future 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 R&D 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, R&D
or education can be carried out by Federal or State government laboratories, universities and other nonprofit organizations, local governments, or private industry. R&D
covers a wide range of activities, from the investigation
of subatomic particles to the exploration of new frontiers
of science; 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.
Conversely, the year-to-year change in the capital stock
estimates is annual net investment. 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 spend-

365

20.  Federal Investment

ing 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. Details about the methods used to estimate capital stocks appeared in a methodological note in 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 20–3 shows the value of the net federally
financed physical capital stock since 1960, in constant fiscal year 2005 dollars. The total stock grew at a 2.5 percent average annual rate from 1960 to 2012, with periods
of faster growth during the late 1960s, the 1980s, as well
as presently since the mid-2000s. The stock amounted
to $3,134 billion in 2012 and is estimated to increase to
$3,307 billion by 2014. In 2012, the national defense capital stock accounted for $950 billion, or 30 percent of the
total, and nondefense stocks for $2,130 billion, or 70 percent of the total.
Real stocks of defense and nondefense capital show
very different trends. Nondefense stocks have grown consistently since 1970, increasing from $531 billion in 1970
to $2,185 billion in 2012. With the investments proposed

in the Budget, nondefense stocks are estimated to grow to
$2,306 billion in 2014. From 1970-1979, the nondefense
capital stock grew at an average annual rate of 4.4 percent. Over the 1980s, however, the growth rate slowed
to 3.0 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 during the Vietnam
War 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. By 1993, 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 a low of $637 billion in 2001 to $1,001 billion in 2014.
Another trend in the Federal physical capital stocks is
the shift from direct Federal assets to grant-financed assets. In 1960, 37 percent of federally financed nondefense
capital was owned by the Federal Government, and 63
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 2012, 25 percent of the federally financed
nondefense stock was owned by the Federal Government
and 75 percent by State and local governments.

Table 20–3. Net Stock of Federally Financed Physical Capital
(In billions of 2005 dollars)
Direct Federal Capital
Fiscal Year
Total

National
Defense

Total
Nondefense

Capital Financed by Federal Grants

Water
and Power

Community
and
Natural
Transportation Regional Resources

Total

Other

Total

Other

Five year intervals:
1960 �����������������������������������������������
1965 �����������������������������������������������
1970 �����������������������������������������������
1975 �����������������������������������������������
1980 �����������������������������������������������
1985 �����������������������������������������������
1990 �����������������������������������������������
1995 �����������������������������������������������
2000 �����������������������������������������������

890
993
1,182
1,224
1,333
1,583
1,902
2,058
2,162

619
602
650
553
475
579
752
737
641

270
391
531
671
858
1,004
1,150
1,320
1,522

99
128
152
173
200
229
265
307
349

62
77
92
106
126
140
151
161
165

37
51
60
67
74
89
114
146
184

171
263
379
498
658
775
885
1,013
1,173

104
185
269
330
396
460
537
621
720

31
38
55
89
140
169
184
195
213

24
26
31
49
91
116
131
143
152

12
15
24
30
31
30
33
53
88

Annual data:
2005 �����������������������������������������������
2006 �����������������������������������������������
2007 �����������������������������������������������
2008 �����������������������������������������������
2009 �����������������������������������������������
2010 �����������������������������������������������
2011 �����������������������������������������������
2012 �����������������������������������������������
2013 est. ���������������������������������������
2014 est. ���������������������������������������

2,481
2,550
2,627
2,716
2,823
2,945
3,054
3,134
3,208
3,307

693
717
747
788
837
887
924
950
963
1,001

1,788
1,833
1,880
1,928
1,986
2,058
2,130
2,185
2,245
2,306

414
425
435
449
474
499
523
541
569
594

173
174
175
177
180
187
197
206
217
226

241
250
260
272
294
312
326
335
351
367

1,373
1,408
1,444
1,479
1,512
1,559
1,607
1,644
1,676
1,712

860
887
911
935
960
990
1,018
1,044
1,070
1,100

230
233
239
244
246
250
254
258
261
266

160
161
162
163
163
166
169
171
172
174

123
128
133
137
142
153
166
171
172
173

366

Analytical Perspectives

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 water infrastructure
projects. The value of the stock of grants for physical
capital that are federally financed has increased by over
twofold since the mid-1980s.
The Stock of Research and Development Capital
This section presents data on the stock of research and
development (R&D) capital, taking into account adjustments for its depreciation.
Trends. As shown in Table 20–4, the R&D capital stock
financed by Federal outlays is estimated to be $1,572 billion in 2012 in constant 2005 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 threefifths of the total federally financed R&D stock in 2012.
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 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 $475 billion. Renewed spending for defense R&D
in recent years has begun to increase the stock, and it is
projected to increase to $1,634 billion in 2014.
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 the early 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.

Table 20–4. Net Stock of Federally Financed Research and Development 1
(In billions of 2005 dollars)
National Defense
Fiscal Year
Basic
Research

Total
Five year intervals:
1960 ��������������������������������������������������������������������������
1965 ��������������������������������������������������������������������������
1970 ��������������������������������������������������������������������������
1975 ��������������������������������������������������������������������������
1980 ��������������������������������������������������������������������������
1985 ��������������������������������������������������������������������������
1990 ��������������������������������������������������������������������������
1995 ��������������������������������������������������������������������������
2000 ��������������������������������������������������������������������������

137
237
294
311
315
362
454
476
484

6
11
18
23
28
34
41
48
55

Nondefense

Applied
Research
and
Development

Basic
Research

Total

Total Federal
Applied
Research
and
Development

Total

Basic
Research

Applied
Research
and
Development

132
226
276
288
287
328
413
428
429

41
130
242
296
350
382
431
519
611

18
40
75
109
148
196
258
331
414

22
90
166
186
202
186
173
188
197

178
367
535
607
665
743
884
995
1,095

24
51
93
133
176
230
298
379
469

154
316
443
474
489
513
586
616
626

Annual data:
2005 ��������������������������������������������������������������������������
543
63
480
2006 ��������������������������������������������������������������������������
561
64
496
2007 ��������������������������������������������������������������������������
579
66
513
2008 ��������������������������������������������������������������������������
594
67
527
2009 ��������������������������������������������������������������������������
605
69
536
2010 ��������������������������������������������������������������������������
615
70
545
2011 ��������������������������������������������������������������������������
625
72
553
2012 ��������������������������������������������������������������������������
632
74
559
2013 est. �������������������������������������������������������������������
638
75
563
2014 est. �������������������������������������������������������������������
639
77
563
1 Excludes stock of physical capital for research and development, which is included in Table 20–3.

747
773
798
822
851
883
911
939
967
994

531
554
577
600
626
651
675
702
729
755

217
219
221
223
226
232
235
237
238
239

1,291
1,334
1,377
1,416
1,456
1,498
1,535
1,572
1,605
1,634

594
618
642
667
694
721
747
776
804
832

697
716
734
749
762
776
788
796
801
802

367

20.  Federal Investment

The Stock of Education Capital
This section presents estimates of the stock of education capital financed by the Federal Government.
As shown in Table 20–5, the federally financed education stock is estimated at $2,108 billion in 2012 in constant
2005 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 fi-

nanced portion of the stock represents about 3.5 percent
of the Nation’s total education stock. About three-quarters is for elementary and secondary education, while the
remainder is for higher education.
The federally financed education stock has grown
steadily in the last few decades, with an average annual
growth rate of 5.0 percent from 1970 to 2012. The expansion of the education stock is projected to continue under
this budget, with the stock rising to $2,242 billion in 2014.

Table 20–5. Net Stock of Federally Financed Education Capital
(In billions of 2005 dollars)
Fiscal Year

Total Education
Stock

Elementary and
Secondary Education

Higher Education

Five year intervals:
1960 �������������������������������������������
1965 �������������������������������������������
1970 �������������������������������������������
1975 �������������������������������������������
1980 �������������������������������������������
1985 �������������������������������������������
1990 �������������������������������������������
1995 �������������������������������������������
2000 �������������������������������������������

80
115
264
393
544
651
825
988
1,275

58
83
207
318
427
489
614
721
929

22
31
57
75
117
162
211
267
346

Annual data:
2005 �������������������������������������������
2006 �������������������������������������������
2007 �������������������������������������������
2008 �������������������������������������������
2009 �������������������������������������������
2010 �������������������������������������������
2011 �������������������������������������������
2012 �������������������������������������������
2013 est. �����������������������������������
2014 est. �����������������������������������

1,529
1,623
1,721
1,833
1,911
1,970
2,001
2,108
2,162
2,242

1,117
1,169
1,239
1,328
1,412
1,479
1,516
1,606
1,655
1,726

413
454
482
505
500
491
484
502
506
516

21. Research and Development

The President is committed to making investments
in research and development (R&D) that will grow our
economy and enable America to remain competitive. In
the same way that past federal R&D investments led to
American leadership in biotechnology and the development of the Internet, the President’s focus on science and
innovation will help create the industries and jobs of the
future and address the challenges and opportunities of the
21st Century. Investing in science and technology-based
innovation will let us do things like map the human brain,
help find new answers in the fight against Alzheimer’s and
other diseases, devise new clean energy technologies, and
promote new advanced manufacturing opportunities.
The President’s 2014 Budget provides $143 billion for
Federal research and development (R&D), including the
conduct of R&D and investments in R&D facilities and
equipment. Even in the current highly constrained budget
environment, the Administration continues to champion
R&D, providing a 1 percent funding increase over 2012 levels for all R&D, and an increase of 9 percent for non-defense
R&D. This investment reinforces the Administration’s
commitment to science, technology, and innovation that
will help the country make progress toward increasing
U.S. productivity and competitiveness, and underpin the
industries and jobs of the future. In conjunction with

this investment, the 2014 Budget’s proposed expanded,
simplified, and permanent extension of the Research and
Experimentation tax credit will spur private investment
in R&D by providing certainty that the credit will be available for the duration of the R&D investment.
The 2014 Budget continues to strengthen U.S. international leadership by investing in the high-tech knowledgebased economy and innovation-fueled growth industries,
such as advanced manufacturing. These investments will
enable us to lead the world in clean energy, agriculture,
and healthcare while protecting the environment for future generations. The Budget will help ensure that the
U.S. continues its long-standing and robust leadership in
public and private sector R&D and maintains the high
quality of our R&D institutions and entrepreneurial nature of our R&D enterprise.
As required by the America COMPETES Act of 2007,
the Budget’s priorities generally align with the conclusions of the report from the National Science and
Technology Summit held in August 2008. In January 2011,
the President signed into law the America COMPETES
Reauthorization Act of 2010, reauthorizing various programs intended to strengthen research and education in
the U.S. related to science, technology, engineering, and
mathematics.

I. PRIORITIES FOR FEDERAL RESEARCH AND DEVELOPMENT 1
The Budget1 provides support for a broad spectrum of
research and development, including multidisciplinary
research and exploratory, potentially transformative,
high-risk research proposals that could fundamentally
improve our understanding of nature, revolutionize fields
of science, and lead to radically new technologies. The
Budget will fund key programs to improve our productivity and to develop new technologies that can meet our
Nation’s needs better, cheaper, and with fewer environmental consequences.
Promoting Sustainable Economic
Growth and Job Creation
The Administration recognizes the Government’s role
in fostering scientific and technological breakthroughs,
and has committed significant resources to ensure
America leads the world in the innovations of the future.
The Budget provides $68 billion for basic and applied research, an increase of 8 percent over the 2012 levels because such research is a reliable source of new knowledge
to drive job creation and lasting economic growth.
The 2014 Budget maintains the commitment to increase total Federal investment in the combined budgets
of three key basic research agencies: the National Science
1  Note that some numbers in the text include non-R&D activities and
thus will be different from the R&D numbers reflected in Table 21-1. 

Foundation (NSF), the Department of Energy (DOE)
Office of Science, and the laboratories of the Department
of Commerce (DOC) National Institute of Standards and
Technology (NIST), as endorsed in the America COMPETES
Reauthorization Act of 2010. The Budget proposes $13.5
billion in 2014 for these three agencies, an increase of $1.0
billion (8.0 percent) over 2012 funding. These investments
will expand the frontiers of human knowledge and establish the foundation for the industries and jobs of the future, including in clean energy, advanced manufacturing,
biotechnology, Big Data, and new materials.
Private sector R&D investments remain essential to
foster and deploy innovation as they provide a much wider range of technology options than the Government alone
can provide and play a critical role in translating scientific discoveries into commercially successful, innovative
products and services. In order to provide businesses
with greater confidence to invest, innovate, and grow the
Budget proposes to simplify and expand the Research and
Experimentation tax credit, and make it permanent.
Moving Toward Cleaner American Energy
The Administration is committed to enabling a future
where the Unites States leads the world in research, development, demonstration, and deployment of clean-energy technologies to reduce dependence on oil and other

369

370
energy imports, reduce potential impacts on the environment, and respond to the threat of climate change, while
creating high-paying clean energy jobs and new businesses. The Budget reflects the Administration’s energy
strategy, which includes: basic and applied research to
address some of the fundamental unknowns to advancing
clean energy technologies, such as understanding and developing new approaches to energy storage; research and
development to create and dramatically improve clean
energy products, like solar panels, batteries and electric
vehicles, wind turbines, and modular nuclear reactors;
and appropriate assistance to American entrepreneurs
and businesses to commercialize the technologies that
will lead the world in new clean energy technologies.
The Budget requests approximately $7.9 billion for
clean energy technology programs government-wide to
accelerate the transition to a low-carbon economy and
position the United States as the world leader in clean
energy. DOE will invest an additional $1.8 billion or 43
percent above 2012 levels, to advance the state of the art
in clean energy technologies such as advanced vehicles
and biofuels, industrial and building energy efficiency,
and renewable electricity generation from solar, wind,
water, and geothermal resources.
For example, the 2014 Budget invests $2 billion over the
next ten years from Federal oil and gas development revenue in a new Energy Security Trust that would provide a
reliable stream of mandatory funding for R&D on cost-effective transportation alternatives that reduce our dependence on oil. It would be designed to invest in research that
will improve and reduce the cost of technologies that will
allow us to run our cars and trucks on electricity, homegrown biofuels, renewable hydrogen, and domestically produced natural gas. In addition, the Budget provides a total
of $957 million in discretionary funding for sustainable
transportation activities in the Office of Energy Efficiency
and Renewable Energy (EERE) at the Department of
Energy, including $575 million for development of the next
generation of advanced vehicles, $100 million for hydrogen
and fuel cell technologies, and $282 million for advanced
biofuel and biorefinery activities, which, combined with
complementary U.S. Department of Agriculture efforts,
support development of next-generation biofuels like cellulosic and algae-based biofuels. The Budget proposes $885
million in EERE for energy efficiency and advanced manufacturing activities to help reduce energy use and costs in
commercial and residential buildings, in the industrial and
business sectors, and in Federal buildings and fleets. And
it provides $615 million for innovative projects to make
clean, renewable power, such as solar energy and off-shore
wind, more easily integrated into the electric grid and as
affordable as electricity from conventional sources. It also
includes $735 million to support nuclear energy, including research and development in areas of fuel cycle and
reactor technologies, and $266 million for an R&D portfolio
of carbon capture and storage technologies and advanced
power systems that reduce the carbon emission intensity
of fossil fuel-based power systems. The Budget includes
funding to maintain and expand new models of energy research pioneered in the last several years, including $379

Analytical Perspectives

million for the Advanced Research Projects Agency-Energy
(ARPA-E), a program that seeks to fund transformational
energy R&D.
Defeating Diseases and Improving
Americans’ Health Outcomes
The Administration is committed to funding Federal
R&D investments in biomedical and health research and
supporting policies to improve health. The 2014 Budget
strongly supports research that has the potential to accelerate the pace of discovery in the life sciences, especially
imaging, neuroscience, bioinformatics, and high-throughput biology. These discoveries will help support the bioeconomy of the future.
The 2014 Budget proposes $31.3 billion for the National
Institutes of Health (NIH) to support high-quality, innovative biomedical research both on-campus and at research
institutions across the country. The Budget supports basic
and translational research to increase understanding of
the causes of disease and spur development of diagnostic
tests, treatments, and cures. By increasing the number
of new grants, the Budget maintains the pace and scope
of research and stimulates the development of new ideas.
The Budget includes funding for projects to increase understanding of the brain, create a national patient-powered research network to improve clinical trials, maximize
the impact of the Big Data revolution on biomedicine, and
increase the diversity of biomedical researchers. To fund
these new grants and ensure the highest-quality science
is supported, the Budget includes policies to collect better
information on administrative costs.
The Budget includes $40 million for a new advanced molecular diagnostics (AMD) initiative within the Centers for
Disease Control and Prevention (CDC). The AMD initiative
will allow CDC to more quickly determine where emerging
diseases come from, whether microbes are resistant to antibiotics, and how microbes are moving through a population. This new whole-genome sequencing technology will
also allow CDC to increase the timeliness and accuracy,
and decrease the cost, of culture based analysis. These new
investments will strengthen CDC’s epidemiologic and laboratory expertise to guide public health actions.
The Budget includes approximately $498 million in
mandatory R&D funding for the independent PatientCentered Outcomes Research Institute (PCORI) to conduct clinical comparative effectiveness research, as authorized by the Affordable Care Act.
The Budget also proposes more than $1 billion for
medical and prosthetic research across the Department
of Veterans Affairs.
The Budget for the Department of Agriculture includes about $82 million for research on zoonotic animal
diseases such as Rift Valley Fever, Bovine Spongiform
Encephalopathy, Avian Influenza, Bovine Tuberculosis,
and Brucellosis, that could spread to humans. In addition, about $119 million would be spent on food safety
research to reduce the incidence of bacteria such as salmonella, E coli, Campylobacter and Listeria; food borne
parasites; and natural toxins such as aflatoxins that affect public health.

371

21. Research and Development

Advanced Manufacturing
The Budget supports the Advanced Manufacturing
Partnership (AMP), a national effort that brings together industry, universities, and the Federal government to
develop and commercialize the emerging technologies
that will create high-quality manufacturing jobs and
enhance our global competitiveness. The 2014 Budget
provides $2.9 billion for Federal R&D directly supporting advanced manufacturing at NSF, DOD, DOE, DOC,
and other agencies. For example, the Budget provides
DOE with $365 million for important technology efforts
on innovative manufacturing processes and advanced
industrial materials. These innovations will enable U.S.
companies to cut manufacturing costs and reduce the life
cycle energy consumption of technologies, while improving product quality and accelerating product development. The Budget also includes a $25 million increase for
the Hollings Manufacturing Extension Partnership to establish Manufacturing Technology Acceleration Centers
to assist manufacturers in adopting new technologies and
$1 billion in mandatory funding to establish the National
Network of Manufacturing Innovation, which will develop cutting-edge manufacturing technologies and capabilities.  In addition, as part of the broader effort, the Budget
invests in the National Robotics Initiative (NRI) to develop robots that work with or beside people to extend or
augment human capabilities. In addition to having applications in space, biology, and security, robots have the potential to increase the productivity of workers in the manufacturing sector. Another important component of the
advanced manufacturing R&D strategy is the Materials
Genome Initiative: by leveraging advances in computer
simulations and the overall material knowledge-base,
this initiative aims to increase the rate by which we understand and characterize new materials, providing a
wealth of practical information that entrepreneurs and
innovators will be able to use to develop new products and
processes for U.S. firms.
Understanding Global Climate
Change and Its Impacts
The U.S. Global Change Research Program (USGCRP)
coordinates and integrates Federal research and applications to assist the Nation and the world to understand, assess, predict, and respond to human-induced and natural
processes of global change. Within coordinated USGCRP
interagency investments, the 2014 Budget supports the
goals set forth in the program’s 2012-2021 strategic plan,
which include: advancing scientific knowledge of the integrated natural and human components of the Earth system; providing the scientific basis to inform and enable
timely decisions on adaptation and mitigation; building
sustained assessment capacity that improves the United
States’ ability to understand, anticipate, and respond to
global change impacts and vulnerabilities; and advancing
communications and education to broaden public understanding of global change. The 2014 Budget also supports
an integrated and ongoing National Climate Assessment
of climate change science, impacts, vulnerabilities, and re-

sponse strategies. The 2014 Budget provides $2.7 billion
for USGCRP programs.
Stewardship of Natural Resources
Sustainable stewardship of natural resources requires
strong investments in research and development in the
natural sciences to inform decision-making. The 2014
Budget provides $2.8 billion in R&D funding to support
resource decision making and environmental stewardship
at the Department of the Interior (DOI), Environmental
Protection Agency (EPA), National Oceanic and
Atmospheric Administration (NOAA), and Department of
Agriculture (USDA). The Budget provides strong support
for R&D related to the management of public lands, ecosystems, energy permitting, Earth observations (such as
earth observing satellites and monitoring of water, wildlife, and invasive species), and expanded investments in
natural resource management by American Indian tribes.
The Budget also provides strong support for science to
inform ocean and coastal stewardship, with investments
in ocean observations and exploration, coastal mapping
and assessment, coastal ecosystem research, and coastal
habitat restoration. The Budget strengthens investments
in the safety and security of the Nation through research
and development related to hazards such as earthquakes, floods, and extreme weather. Responding to the
President’s Council of Advisors on Science and Technology
(PCAST) recent report, “Agricultural Preparedness & the
United States Agricultural Research Enterprise”, the
2014 Budget invests $383 million in USDA’s Agriculture
and Food Research Initiative (AFRI) which will be distributed through competitively awarded extramural research
grants to support breakthrough research in national priorities including water quantity and quality, sustainable
agricultural production, and climate change adaptation,
as well as other USDA priorities such as bioenergy, food
safety, and human nutrition.
Science and Technology for Security
Federal R&D investments in security aim to protect
our nation from current and emerging threats. The development of technologies that allow our government to
detect, counter and defeat threats is critical to our military’s success and our national security. The Department
of Defense’s (DOD) R&D investments in the 2014 Budget
focus on areas deemed to have the greatest impact on our
nation and future military requirements. To this end, the
2014 Budget provides $68.3 billion for DOD R&D, a 6 percent decrease from the 2012 enacted level. The decrease
represents reductions in development activities as programs mature and transition to production.
The 2014 Budget proposes $12.0 billion for DOD’s
Science & Technology (S&T) program, which consists of
basic research, applied research and advanced technology development. Although this proposal represents a
1.8 percent decrease from the 2012 enacted level, but it
is a 1.0 percent increase above the 2013 Budget Proposal.
This year’s proposal places special emphasis on basic research, the most fundamental type of research, which increases by 2.3 percent from the previous year’s proposed

372
level. DOD’s increased investment in S&T demonstrates
its continued commitment to researching and developing
forward looking capabilities.
The 2014 Budget also maintains DOD’s critical role in
fostering promising technologies with $2.9 billion for the
Defense Advanced Research Projects Agency (DARPA).
This funding level represents an increase of $50 million (1.8 percent) from the 2012 enacted level. Investing
in DARPA’s high-risk and high-reward science is an
Administration priority and critical to maintaining the
technological superiority of the U.S. military.
For DOE, the Budget proposes $4.9 billion for investments in R&D for the Nation’s nuclear stockpile, naval
nuclear propulsion, and nonproliferation goals.
The Budget increases investments to develop state-ofthe-art technologies and solutions for Federal, State, and
local homeland security operators. The Budget proposes
$574 million in funding for the Department of Homeland
Security R&D programs that protect the Nation’s people
and critical infrastructure from chemical, biological, and
cyber attacks. The Budget also proposes $714 million to
construct a state-of-the-art facility to study and develop
countermeasures for emerging zoonotic diseases that
threaten human health and our agricultural industry.
Strengthening the R&D enterprise with related investments
In order to address these priorities effectively, the
Administration recognizes the need to strengthen key
cross-cutting areas.
Science, technology, engineering, and mathematics (STEM) education: Students need to master science, technology, engineering, and mathematics (STEM)
in order to thrive in the 21st Century economy. That is
why the Administration proposes a comprehensive reorganization of STEM education programs to increase the
impact of Federal investments in four areas: K-12 instruction; undergraduate education; graduate fellowships; and
education activities that typically take place outside the
classroom, all with a focus on increasing participation
and opportunities for individuals from groups historically underrepresented in these fields. The reorganization involves a consolidation of nearly 90 programs across
11 different agencies and realignment of ongoing STEM
education activities to improve the delivery, impact, and
visibility of STEM efforts. Nearly $180 million will be
redirected from these consolidated programs towards
the Department of Education, NSF, and the Smithsonian
Institution to implement core initiatives in these four priority areas.
The Department of Education will restructure its own
existing efforts to lead a cohesive and robust initiative
around improving K-12 instruction and working effectively toward the President’s goal of generating 100,000
effective STEM teachers over the next decade.  The
Budget invests $265 million, redirected from within the
Department and from other agencies, to support STEM
Innovation Networks, which would be districts or consortia of districts working in partnership with universities,
science agencies, museums, businesses, and other edu-

Analytical Perspectives

cational entities. These public-private partnerships will
work to harness local, regional, and national resources
to dramatically transform teaching and learning by implementing research-based practices, supporting innovation, and building capacity at both school and district
levels. Additionally, Networks will leverage the expertise
of the Nation’s most talented science and math teachers—through a new STEM Master Teachers Corps—to
help improve instruction in their schools and districts,
and to serve as a national resource for best practices in
math and science teaching. The new investment also
includes $80 million to support the President’s goal of
preparing 100,000 highly-effective teachers. To reinforce
the Department’s transformation of STEM teaching and
learning, the Budget continues support for the joint K-16
Math Initiative. 
NSF will enhance STEM undergraduate education and
reform graduate fellowships so they reach more students
and address national needs. The Budget proposes to consolidate disparate science and engineering undergraduate education activities across government into a new
consolidated program at NSF. This reform will increase
the efficiency and effectiveness of these streamlined investments by implementing evidence-based instructional
practices and supporting an expanded evidence base. It
also supports research on how new technologies can facilitate adoption and use of new approaches to instruction.
The Budget provides $123 million for this new program.
The Budget also provides $325 million for a newly consolidated NSF graduate research fellowship program.
Many agencies currently engage in various informal education activities to get the public, students, and
teachers interested in their missions and research. The
Budget also redirects $25 million from these agencies to
the Smithsonian Institution to improve the reach of informal education activities by ensuring that they are aligned
with State standards and are relevant to the classroom.
Aerospace capabilities:
The Budget provides
$17.7 billion for the National Aeronautics and Space
Administration (NASA) to support NASA’s efforts to drive
innovation through the aerospace sector and enhance our
capabilities in space. Such capabilities are essential for
communications, geopositioning, intelligence gathering,
Earth observation, and national defense.  As part of these
efforts, NASA will embark on technology development
and test programs aimed at increasing these capabilities
and reducing the cost of NASA, other government, and
U.S. commercial space activities. NASA will also support innovative fundamental research and systems-level
applications to reduce fuel needs, noise, and emissions
of aircraft.  Within NASA, the Budget provides $1.8 billion for Earth Science to sustain progress toward important satellite missions and research to advance climate
science and to sustain vital space-based Earth observations. Also included in the NASA Budget is $821 million
for the Commercial Crew program, an innovative partnership with American industry to transport crew to the
International Space Station. The Budget provides $2.0
billion for NOAA to fund development of the next generation of polar-orbiting and geostationary satellite sys-

373

21. Research and Development

tems, which are critical to weather forecasting, as well as
satellite-borne measurements of sea level and potentially
damaging solar storms.
Infrastructure: The Administration places a high
priority on improving and protecting our information,
communication, and transportation infrastructure, which
is essential to our commerce, science, and security alike.
The 2014 Budget prioritizes infrastructure in support
of Earth observation systems from all platforms (spacebased, terrestrial, airborne, and marine) that contribute
to clearly-defined societal benefit areas, such as managing agriculture and understanding climate change. These
earth-observation systems provide the scientific data underpinning environmental research, weather forecasting,
natural resource and land management, and geopositioning, among many other uses. The 2014 Budget makes in-

vestments to sustain earth-observation systems identified as high priority in the forthcoming National Earth
Observations Strategy, including satellites, stream gages,
light detection and ranging (LiDAR), and ocean observing systems. The Budget also includes support to make
the output of the U.S.’s unparalleled Earth observing
systems more accessible and usable, which will increase
the utility of these investments for public good and foster
private investment in innovative uses this information.
Maintaining high quality federal research to serve the
public requires up-to-date laboratory facilities. Therefore
the Budget includes $155 million for the full cost of renovation and construction of a USDA poultry disease bio
surveillance and research facility to reduce poultry diseases that could affect human health and the agricultural
sector.

II. Federal R&D Data
R&D is the collection of efforts directed toward 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. The Office of Management
and Budget has used those or similar categories in its collection of R&D data since 1949.
Federal R&D Funding
More than 20 Federal agencies fund R&D in the United
States. 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 21–1 shows agency-byagency spending on basic and applied research, development, and R&D equipment and facilities.
Basic research is systematic study directed toward
a fuller knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products
in mind. Basic research, however, may include activities
with broad applications 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.
Development is systematic application of knowledge
or understanding, directed 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, research satellites, detectors, and
other instruments. At a minimum, this category should
include programs devoted to the purchase or construction
of R&D equipment.
Research and development facilities include the
acquisition, design, and construction of, or major repairs
or alterations to, all physical facilities for use 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.

III. Multi-Agency R&D Activities
Many research investments into the most promising
areas for future industry, scientific discovery, and job creation are being addressed through multi-agency research
activities coordinated through the National Science and
Technology Council (NSTC) and other interagency forums.
Most of these challenges simply cannot be addressed effectively by a single agency. Moreover, innovation often
arises from combining the tools, techniques, and insights
from multiple agencies. Details of two such interagency
efforts – networking and information technology R&D
and nanotechnology R&D– are described below.
Networking
and
Information
Technology
R&D: The multi-agency Networking and Information
Technology Research and Development (NITRD) Program
provides strategic planning for and coordination of agency
research efforts in cyber security, high-end computing systems, advanced networking, software development, high-

confidence systems, health IT, wireless spectrum sharing,
cloud computing, and other information technologies.
The 2014 Budget includes a focus on research to improve our ability to derive value and scientific inferences
from unprecedented quantities of data (“big data”) and
continues to emphasize foundations for assured computing and secure hardware, software, and network design
and engineering to address the goal of making Internet
communications more secure and reliable. Budget information for NITRD is available at www.nitrd.gov.
Nanotechnology R&D: To accelerate nanotechnology development the National Nanotechnology Initiative
(NNI) member agencies focus on R&D of materials, devices, and systems that exploit the unique physical, chemical, and biological properties that emerge in materials
at the nanoscale (approximately 1 to 100 nanometers).
Participating agencies continue to support fundamental

374

Analytical Perspectives

research for nanotechnology-based innovation, technology
transfer, and nanomanufacturing through individual investigator awards; multidisciplinary centers of excellence;
education and training; and infrastructure and standards
development, including openly-accessible user facilities
and networks. Furthermore, agencies have identified
and are pursuing Nanotechnology Signature Initiatives

in the national priority areas of nanomanufacturing, solar energy, sustainable design of nanoengineered materials, nanoscale sensors, and nanoelectronics through close
alignment of existing and planned research programs,
public-private partnerships, and research roadmaps (for
details see nano.gov/initiatives/government/signature).
Budget information is available at nano.gov.

Table 21–1.  Federal Research and Development Spending
(Budget authority, dollar amounts in millions)

2012 Actual

2013 CR

Percent
Dollar Change: Change: 2014
2014 Proposed 2014 to 2012
to 2012

By Agency
Defense ���������������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services ��������������������������������������������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������������������������������������������������������������������������
NASA �������������������������������������������������������������������������������������������������������������������������������������������������
National Science Foundation �������������������������������������������������������������������������������������������������������������
Commerce �����������������������������������������������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������������������������������������
Homeland Security ����������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������������������������������������������������������������������������
Interior �����������������������������������������������������������������������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������������������������������������������������������������
Environmental Protection Agency �����������������������������������������������������������������������������������������������������
Patient-Centered Outcomes Research Trust Fund ����������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������������
Smithsonian Institution ����������������������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������������������������

72,916
31,377
10,811
11,315
5,636
1,254
2,331
481
1,160
820
921
568
120
397
243
562

73,839
31,734
11,406
11,282
5,643
1,338
2,249
514
1,170
841
852
571
304
342
241
577

68,291
32,046
12,739
11,605
6,148
2,682
2,523
1,374
1,172
963
942
560
498
352
250
628

–4,625
669
1,928
290
512
1,428
192
893
12
143
21
–8
378
–45
7
66

–6%
2%
18%
3%
9%
114%
8%
186%
1%
17%
2%
–1%
315%
–11%
3%
12%

TOTAL ������������������������������������������������������������������������������������������������������������������������������������������

140,912

142,903

142,773

1,861

1%

Basic Research
Defense ���������������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services ��������������������������������������������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������������������������������������������������������������������������
NASA �������������������������������������������������������������������������������������������������������������������������������������������������
National Science Foundation �������������������������������������������������������������������������������������������������������������
Commerce �����������������������������������������������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������������������������������������
Homeland Security ����������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������������������������������������������������������������������������
Interior �����������������������������������������������������������������������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������������������������������������������������������������
Environmental Protection Agency �����������������������������������������������������������������������������������������������������
Patient-Centered Outcomes Research Trust Fund ����������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������������
Smithsonian Institution ����������������������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������������������������

2,014
16,195
3,912
3,181
4,584
163
927
15
470
54
.........
.........
.........
6
200
19

1,874
16,096
4,034
3,360
4,657
165
847
19
476
55
.........
.........
.........
7
205
31

2,134
16,182
4,129
3,656
5,120
217
891
44
478
64
.........
.........
.........
7
214
26

120
–13
217
475
536
54
–36
29
8
10
.........
.........
.........
1
14
7

6%
–0%
6%
15%
12%
33%
–4%
193%
2%
19%
.........
.........
.........
17%
7%
37%

SUBTOTAL �����������������������������������������������������������������������������������������������������������������������������������

31,740

31,826

33,162

1,422

4%

Applied Research
Defense ���������������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services ��������������������������������������������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������������������������������������������������������������������������
NASA �������������������������������������������������������������������������������������������������������������������������������������������������
National Science Foundation �������������������������������������������������������������������������������������������������������������

4,728
14,933
3,584
2,650
517

4,237
15,434
4,031
2,689
480

4,602
15,660
4,405
2,645
480

–126
727
821
–5
–37

–3%
5%
23%
–0%
–7%

375

21. Research and Development

Table 21–1.  Federal Research and Development Spending—Continued
(Budget authority, dollar amounts in millions)

2012 Actual
Commerce 1 ���������������������������������������������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������������������������������������
Homeland Security ����������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������������������������������������������������������������������������
Interior �����������������������������������������������������������������������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������������������������������������������������������������
Environmental Protection Agency �����������������������������������������������������������������������������������������������������
Patient-Centered Outcomes Research Trust Fund ����������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������������
Smithsonian Institution ����������������������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������������������������
SUBTOTAL 
Development
Defense ���������������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services ��������������������������������������������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������������������������������������������������������������������������
NASA �������������������������������������������������������������������������������������������������������������������������������������������������
National Science Foundation �������������������������������������������������������������������������������������������������������������
Commerce �����������������������������������������������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������������������������������������
Homeland Security ����������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������������������������������������������������������������������������
Interior �����������������������������������������������������������������������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������������������������������������������������������������
Environmental Protection Agency �����������������������������������������������������������������������������������������������������
Patient-Centered Outcomes Research Trust Fund ����������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������������
Smithsonian Institution ����������������������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������������������������
SUBTOTAL 
Facilities and Equipment
Defense ���������������������������������������������������������������������������������������������������������������������������������������������
Health and Human Services ��������������������������������������������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������������������������������������������������������������������������
NASA �������������������������������������������������������������������������������������������������������������������������������������������������
National Science Foundation �������������������������������������������������������������������������������������������������������������
Commerce �����������������������������������������������������������������������������������������������������������������������������������������
Agriculture �����������������������������������������������������������������������������������������������������������������������������������������
Homeland Security ����������������������������������������������������������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������������������������������������������������������������������������
Interior �����������������������������������������������������������������������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������������������������������������������������������������������������
Environmental Protection Agency �����������������������������������������������������������������������������������������������������
Patient-Centered Outcomes Research Trust Fund ����������������������������������������������������������������������������
Education ������������������������������������������������������������������������������������������������������������������������������������������
Smithsonian Institution ����������������������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������������������������������������������

2013 CR

Percent
Dollar Change: Change: 2014
2014 Proposed 2014 to 2012
to 2012

778
1,124
146
618
650
651
480
120
227
.........
412

839
1,127
153
622
668
633
482
304
202
.........
417

2,061
1,190
230
622
767
658
473
498
205
.........
467

1,283
66
84
4
117
7
–7
378
–22
.........
55

165%
6%
58%
1%
18%
1%
–1%
315%
–10%
.........
13%

31,618

32,318

34,963

3,345

11%

66,069
81
2,446
5,344
.........
82
191
223
72
113
245
83
.........
164
.........
131

67,629
35
2,669
5,064
.........
105
184
232
72
114
200
84
.........
133
.........
129

61,499
35
3,338
5,135
.........
145
188
322
72
127
245
82
.........
140
.........
135

–4,570
–46
892
–209
.........
63
–3
99
0
14
0
–1
.........
–24
.........
4

–7%
–57%
36%
–4%
.........
77%
–2%
44%
0%
12%
0%
–1%
.........
–15%
.........
3%

75,244

76,650

71,463

–3,781

–5%

105
168
869
140
535
231
89
97
.........
3
25
5
.........
.........
43
.........

99
169
672
169
506
229
91
110
.........
4
19
5
.........
.........
36
.........

56
169
867
169
548
259
254
778
.........
5
39
5
.........
.........
36
.........

–49
1
–2
29
13
28
165
681
.........
2
14
0
.........
.........
–7
.........

–47%
1%
–0%
21%
2%
12%
185%
702%
.........
67%
56%
0%
.........
.........
–16%
.........

SUBTOTAL 
2,310
2,109
3,185
875
38%
amounts reported for applied research and total R&D at the Department of Commerce were corrected. Therefore these amounts are not consistent with those reported in the
investment tables in Chapter 20.
1 The

22. Credit and Insurance

The Federal Government offers direct loans and loan
guarantees to support a wide range of activities including home ownership, education, small business, farming, energy, infrastructure investment, and exports. Also,
Government-Sponsored Enterprises (GSEs) operate under Federal charters for the purpose of enhancing credit
availability for targeted sectors. Through its insurance
programs, the Federal Government insures deposits at
depository institutions, guarantees private defined-benefit pensions, and insures against some other risks such
as flood and terrorism. Over the last few years, many of
these programs have been playing more active roles to
address financing difficulties triggered by the recent financial crisis.
This chapter discusses the roles of these diverse programs:

•	 The first section emphasizes the roles of Federal
credit and insurance programs in addressing market imperfections that may prevent the private market from efficiently providing credit and insurance.
•	 The second section discusses individual credit programs and the GSEs. Credit programs are broadly
classified into five categories: housing, education,
small business and farming, energy and infrastructure, and international lending.
•	 The third section reviews Federal deposit insurance,
pension guarantees, disaster insurance, and insurance
against terrorism and other security-related risks.
•	 The last section discusses current issues in credit
budgeting. This year, the section is devoted to “fair
value” cost estimates for Federal credit programs.

I. THE FEDERAL ROLE
Credit and insurance markets sometimes fail to function smoothly due to market imperfections. Relevant market imperfections include information failures, monitoring
problems, limited ability to secure resources, insufficient
competition, externalities, and financial market instability. Federal credit and insurance programs may improve
economic efficiency if they effectively fill the gaps created
by market imperfections. The presence of a market imperfection, however, does not mean that Government intervention will always be effective. To be effective, a credit or
insurance program should be carefully designed to reduce
inefficiencies in the targeted area without disturbing efficiently functioning areas. In addition to correcting market failures, Federal credit and insurance programs may
provide subsidies to serve other policy purposes, such as
reducing inequalities and extending opportunities to disadvantaged regions or segments of the population. The
effectiveness of the use of credit assistance should be
carefully compared with that of other policy tools, such as
grants and tax credits.
Information Failures. When lenders have insufficient
information about borrowers, they may fail to evaluate
the creditworthiness of borrowers accurately. As a result,
some creditworthy borrowers may fail to obtain credit at
a reasonable interest rate, while some high-risk borrowers obtain credit at an attractive interest rate. The problem becomes more serious when borrowers are much better
informed about their own creditworthiness than lenders
(asymmetric information). With asymmetric information,
raising the interest rate can disproportionately draw highrisk borrowers who care less about the interest rate (adverse selection). Thus, if adverse selection is likely for a borrower group, lenders may limit the amount of credit to the
group instead of raising the interest rate or even exclude

the group all together. In this situation, many creditworthy
borrowers may fail to obtain credit even at a high interest
rate. Ways to deal with this problem in the private sector
include equity financing and pledging collateral. Federal
credit programs play a crucial role for those populations
that are vulnerable to this information failure and do not
have effective means to deal with it. Start-up businesses
lacking a credit history, for example, are vulnerable to the
information failure, but most of them do not have access to
equity financing or sufficient collateral. Another example
is students who have little income, little credit experience,
and no collateral to pledge. Without Federal credit assistance, many in these groups may be unable to pursue their
goals. In addition, a moderate subsidy provided by the
Government can alleviate adverse selection by attracting
more low-risk borrowers, although an excessive subsidy
can cause economic inefficiency by attracting many borrowers with unworthy projects.
Monitoring Needs. Monitoring is a critical part of
credit and insurance businesses. Once the price (the interest rate or the insurance premium) is set, borrowers
and policyholders may have incentives to engage in risky
activities. Insured banks, for example, might take more
risk to earn a higher return. Although private lenders
and insurers can deter risk-taking through covenants, repricing, and cancellation, Government regulation and supervision can be more effective in some cases, especially
where covering a large portion of the target population is
important. For a complex business like banking, close examination may be necessary to deter risk-taking. Without
legal authority, close examination may be impractical.
When it is difficult to prevent risk-taking, private insurers
may turn down many applicants and often cancel policies,
which is socially undesirable in some cases. To the extent

377

378

Analytical Perspectives

possible, bank failures should be prevented because they
can disrupt the financial market. If private-sector pensions were unprotected, many retirees could experience
financial hardships and strain other social safety nets.
Limited Ability to Secure Resources. The ability of
private entities to absorb losses is more limited than that
of the Federal Government. For some events potentially
involving a very large loss concentrated in a short time
period, therefore, Government insurance can be more reliable. Such events include large bank failures and some
natural and man-made disasters that can threaten the
solvency of private insurers. In addition, some lenders
may have limited funding sources. Small local banks, for
example, may have to rely largely on local deposits.
Insufficient Competition. Competition can be insufficient in some markets because of barriers to entry or economies of scale. Insufficient competition may result in unduly
high prices of credit and insurance in those markets.
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. Education, for
example, generates positive externalities because the
general public benefits from the high productivity and
good citizenship of a well-educated person. Pollution, in
contrast, is a negative externality, from which other people suffer. Without Government intervention, people may
engage less than the socially optimal level in activities
that generate positive externalities and more in activities
that generate negative externalities.
Financial Market Instability. Another rationale
for Federal intervention is to prevent instability in the
financial market. Without deposit insurance, for example,
the financial market would be much less stable. When an
economic shock impairs the financial structure of many
banks, depositors may find it difficult to distinguish between solvent banks and insolvent ones. In this situation,
a large number of bank failures might prompt depositors
to withdraw deposits from all banks (bank runs). Bank
runs would make bank failures contagious and harm the
entire economy. Deposit insurance is critical in preventing bank runs.

II. Credit in VARIOUS Sectors
Housing Credit Programs and GSEs
Through housing credit programs, the Federal Government
promotes homeownership and housing among various target groups, including low-income people, veterans, and rural
residents. Recently, the target market served has expanded
dramatically due to the financial crisis.
The consequences of inflated house prices and loose
mortgage underwriting during the housing bubble that
peaked in 2007 created perilous conditions for many
American homeowners. As broader economic conditions
soured and home prices declined, millions of families have
been foreclosed upon, millions more find themselves owing more on their homes than their homes are worth, and
many communities have been destabilized. To make matters more difficult, private capital had all but disappeared
from the market. Without the unprecedented Federal
support provided to the housing market over the last five
years, the situation would be far more problematic.
Federal Housing Administration
The Federal Housing Administration (FHA) guarantees mortgage loans to provide access to homeownership
for people who may have difficulty obtaining a conventional mortgage. FHA has been a primary facilitator of
mortgage credit for first-time and minority buyers, a pioneer of products such as the 30-year self-amortizing mortgage, and a vehicle to enhance credit for many moderate
and low-income households.
FHA and the Mortgage Market
In the early 2000s, FHA’s market presence diminished
greatly as low interest rates increased the affordability of
mortgage financing and more borrowers used emerging
non-prime mortgage products, including subprime and

Alt-A mortgages. Many of these products had risky and
hard-to-understand features such as low “teaser rates”
offered for periods as short as the first two years of the
mortgage, high loan-to-value ratios (with some mortgages exceeding the value of the house), and interest-only
loans requiring full payoff at a set future date. The Alt-A
mortgage made credit easily available by waiving documentation of income or assets. This competition eroded
the market share of FHA’s single-family loans, reducing
it from 9 percent in 2000 to less than 2 percent in 2005.
Starting at the end of 2007 and continuing through
the present day, the availability of FHA and Government
National Mortgage Association (which supports the secondary market for federally-insured housing loans by
guaranteeing securities backed by such mortgages) credit
guarantees has been an important factor countering the
tightening of private-sector credit. The annual volume of
FHA’s single-family mortgages soared from $52 billion in
2006 to $330 billion in 2009.
FHA’s presence has supported the home purchase market and enabled many existing homeowners to re-finance
at today’s lower rates. If not for such re-financing options,
many homeowners would face higher risk of foreclosure
due to the less favorable terms of their current mortgages.
While the provision of FHA insurance is serving a
valuable role in addressing the needs of the present, the
potential return of conventional finance to the mortgage
market—with appropriate safeguards for consumers and
investors including proper assessment and disclosure of
risk—would broaden both the options available to borrowers and the sources of capital to fund those options. The
Administration supports a greater role for non-federally
assisted mortgage credit and a reduction toward historical market shares for Federal assistance, while recogniz-

379

22. Credit and Insurance

ing that FHA will continue to play an important role in
the mortgage market going forward.
Following its peak in 2009, FHA’s new origination loan
volume declined in 2012 to $213 billion. In line with the
volume decrease, the FHA’s market share for new home
purchase loans declined to 20 percent through the first 10
months of 2012, after peaking at 30 percent in 2009. Part
of this decline is likely due to the increased price of FHA
insurance, as discussed in detail below.
FHA’s Budget Costs
Throughout the recent period of stress in the mortgage
market and into the Budget’s projections for 2013, FHA,
like many mortgage market participants, has faced significant financial risk and incurred large costs associated
with defaults on loans made prior to the housing bubble’s
burst. Since 1992, the net cost of FHA Mutual Mortgage
Insurance (MMI) Fund insurance (comprised of nearly
all FHA single-family mortgages and, beginning with
2008 originations, Home Equity Conversion Mortgages)
has been reestimated and increased by a total of $65.8
billion excluding interest, with $37.7 billion of that reestimate occurring in the last four years.
FHA’s budget estimates can be volatile and prone to
forecast error because default claim rates are sensitive to
a variety of dynamics. Insurance premium revenues are
spread thinly but universally over pools of policyholders,
making those inflows generally stable and subject to less
forecast error than for mortgage defaults. Mortgage insurance costs, however, are concentrated in the small minority of borrowers who default and become claims, with
the average per claim cost much larger than the average
premium income. Therefore, if claims change by even a
small fraction of borrowers (e.g., 1 percent), net insurance
costs will move by a multiple of that change. For other
forms of insurance, such as life and health, these changes
tend to gradually occur over time, allowing actuaries to
anticipate the effects and modify risk and pricing models
accordingly. The history of FHA, however, has been spotted with rapid, unanticipated changes in claim costs and
recoveries. FHA is vulnerable to “Black Swans,” outlier
events that are difficult to predict and have deep effect.
For FHA, these include the collapse of house prices nationwide and the emergence of lending practices with very
high claim rates, such as the now illegal seller-financed
down-payment mortgage.
One of the major benefits of an FHA-insured mortgage
is that it provides a homeownership option for borrowers
who make only a modest down-payment, but show that
they are creditworthy and have sufficient income to afford
the house they want to buy. In 2010, 68 percent of new FHA
loans were financed with less than five percent down. The
disadvantage to these low down-payment mortgages is
that they have little in the way of an equity cushion should
house prices decline. When house price declines or stagnation combines with household income loss, limited equity
makes mortgage claims more likely, as the market price for
a home may not be sufficient to pay off the debt.
FHA has safeguards (such as requiring documented
income) to protect it from the worst credit-risk exposure,

such as that experienced in the private sector subprime
and Alt-A markets. Like many parties with credit-risk,
however, FHA has been significantly hurt by house price
depreciation.
Influenced by all these factors, FHA recorded a reestimate of $17.6 billion excluding interest in 2013 in the
expected costs of its outstanding loan portfolio of the MMI
Fund; an additional reestimate amount of $3.6 billion is
recorded in the General and Special Risk Insurance Fund
and is largely due to continued losses from Home Equity
Conversion Mortgages (HECMs) and other single family
commitments issued before 2009. Under the provisions of
the Federal Credit Reform Act, these subsidy reestimate
costs are recorded as mandatory outlays in the year the
reestimates are performed and will increase the 2013
budget deficit. According to its annual actuarial analysis,
FHA has been below the target minimum capital ratio of
2 percent since 2009. As the housing market recovers, the
actuarial review projects that the ratio will again exceed
2 percent by 2017. However, it is important to note that a
low capital ratio does not threaten FHA’s operations, either for its existing portfolio or for new books of business.
Unlike private lenders, the guarantee on FHA and other
Federal loans is backed by the full faith and credit of the
Federal Government and is not dependent on capital reserves to honor its commitments.
Policy Responses to Enhance FHA’s Risk
Management and Capital Reserve
Since 2008, FHA has increased insurance premiums
and tightened underwriting criteria to reduce risk, bolster its capital resources, and encourage the re-entry of
private financing into the mortgage market. These steps
resulted from analyzing: 1) the ongoing broader housing market stabilization and recovery; 2) the credit risk
of specific targeted populations; and 3) FHA MMI Fund
capital reserves. This approach balances the goal of rebuilding FHA’s capital reserves quickly against the risks
of compromising FHA’s mission and overcorrecting at this
critical phase of the housing market recovery.
To increase FHA’s capital resources and to encourage the return of large-scale private mortgage financing,
there have been five premium increases since 2008. This
year, FHA is implementing another increase of 0.1 percentage points in annual premiums. With this increase,
upfront fees on home purchase guarantees will be 1.75
percent and annual fees will be 1.35 percent. For a typical borrower, the cumulative increases since 2008 are 0.25
percentage points in the upfront premium and 0.85 percentage points in annual premiums. While this is a significant increase, its impact on the housing market should
be modest. With high housing affordability resulting from
low interest rates and decreased house prices, the main
obstacle to housing market recovery is not high financing
costs but limited credit availability.
In November, 2012, FHA announced the following steps
to bolster financial performance, in addition to the 2013
premium increase.
1.	 Reverse a policy to cancel required premium payments after borrowers achieve an amortized loan to

380

Analytical Perspectives

value ratio of 78 percent. Under the current practice
borrowers pay premiums for only about ten years
even though FHA’s 100 percent insurance guarantee
remains in effect for up to 30 years. This change will
apply only to new loans.
2.	 Revise its loss mitigation program to target deeper
levels of payment relief for struggling borrowers, allowing more families to retain their homes and avoid
foreclosure.
3.	 Expand the use of home short-sales, which provide
opportunities for distressed borrowers for whom
home retention is not feasible to transition to new
housing without going through foreclosure.
4.	 For loans above $625,000, raise the minimum cash
down-payment from 3.5 percent to 5 percent to create a larger borrower equity position.
5.	 For HECMs, institute a moratorium on new fulldraw mortgages to eliminate a costly version of the
product.
To increase FHA support of credit while the housing
market is troubled, several temporary higher loan limits
have been enacted since 2008. These limits cap the size
of FHA mortgages at the lesser of $729,750 or 125 percent of area median house price while the permanent
limits are the lesser of $625,500 or 115 percent of area
median price. The temporary limits expire at the end of
2013. Similar temporary loan limits for Fannie Mae and
Freddie Mac expired at the end of September 2011. As a
result, FHA faces less competition for eligible mortgages
between $625,500 and $729,750, the “jumbo” mortgages.
FHA increased insurance premiums in part to encourage
the return of private financing to the mortgage markets.
To further this objective and provide balance against
FHA’s advantage in jumbos, FHA increased the annual
premiums for jumbos by 0.25 percentage points in 2012.
In 2010, FHA implemented new loan-to-value (LTV)
and credit score requirements. FHA’s minimum credit
score was raised to 580 for borrowers making low downpayments of less than 10 percent (loan-to-value ratios
above 90 percent). Other borrowers, having the security
of possessing a high amount of home equity relative to
low down-payment borrowers, are eligible for FHA assistance with a credit score as low as 500. FHA also is
reducing allowable seller concessions from 6 percent to
3 percent or $6,000, whichever is higher. This conforms
closer to industry standards and reduces potential house
price over-valuation.
In addition to the single-family mortgage insurance provided through the MMI program, FHA’s General Insurance
and Special Risk Insurance (GISRI) loan guarantee programs facilitate the construction, rehabilitation, or refinancing of tens of thousands of apartments and hospital
beds in multifamily housing and healthcare facilities each
year. Annual loan volumes in these programs have exploded over the last several years, from less than $5 billion in

2008 to more than $22 billion in 2012 as private market
alternatives to FHA financing have largely disappeared.
Despite modest premium increases implemented for many
programs on October 1, 2012, GISRI loan volumes are expected to remain elevated through 2014 with low interest
rates contributing to a continued wave of refinancing activity. When existing FHA properties lower their debt service
burden by refinancing at a lower interest rate, credit risk
to FHA is reduced and the financial viability of multifamily
housing properties is increased.
VA Housing Program
The Department of Veterans Affairs (VA) assists veterans, members of the Selected Reserve, and active duty
personnel in purchasing homes as recognition of their service to the Nation. The housing program substitutes the
Federal guarantee for the borrower’s down payment, making the lending terms more favorable than loans without
a VA guarantee. VA provided 143,110 zero down payment
loans in  2012.  The number of loans VA guaranteed remained at a high level in 2012, as the tightened credit
markets continued to make the VA housing program more
attractive to eligible homebuyers. Additionally, the continued historically low interest rate environment of 2012
allowed 188,999 Veteran borrowers to lower the interest
rate on their home mortgages through refinancing. VA
provided $120 billion in guarantees to assist 542,036 borrowers in 2012, compared with $72 billion and 343,556
borrowers in 2011.
VA, in cooperation with VA-guaranteed loan servicers,
also assists borrowers through home retention options
and alternatives to foreclosure. VA intervenes when needed to help veterans and service members avoid foreclosure
through the acquired loan program, loan modifications,
and assistance to complete a short sale or deed-in-lieu of
foreclosure. These joint efforts helped resolve over 80 percent of defaulted VA-guaranteed loans in 2012.
Rural Housing Service
The Rural Housing Service (RHS) at the U.S. Department
of Agriculture (USDA) offers direct and guaranteed loans
to help very-low to moderate income rural residents buy
and maintain adequate, affordable housing. RHS housing
loans and loan guarantees differ from other Federal housing loan programs in that they are means-tested, making
them more accessible to low-income, rural residents.
The 2014 Budget continues to reflect a re-focusing of
USDA single family housing assistance programs to improve effectiveness by providing single family housing
assistance primarily through loan guarantees. Within its
$24 billion loan level, the Budget expects to provide at
least $5.7 billion in loans for low income rural borrowers,
which will provide 50,000 new homeownership opportunities to that income group.  Overall, the program could
potentially provide 171,000 new homeownership opportunities to low to moderate income rural residents in 2014.
For the single family housing guarantees, the Budget
continues to include an annual and an up-front fee structure. This fee structure serves to reduce the overall subsidy cost of the loans without adding significant burden to

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22. Credit and Insurance

the borrowers. The Budget also proposes to make USDA’s
guaranteed home loan program a direct endorsement program, which is consistent with VA and HUD’s guaranteed
home loan programs. This change will make RHS more efficient and allow the single family housing staff to refocus
on other unmet needs. For USDA’s single family housing
direct loan program, the Budget provides a reduced loan
level of $360 million for 2014.  This decision reflects that
with a $24 billion loan level for the single family housing
guarantees and interest rates at their lowest levels in decades, demand for the direct loans should be waning, and
hence the focus should be on the guarantee program.
For USDA’s multifamily housing portfolio, the Budget
focuses primarily on portfolio management. The Budget
fully funds this rehabilitation effort by providing $26.7
million for the multifamily housing revitalization activities, which include loan modifications, grants, zero percent loans, and soft second loans as well as some funding
for traditional multifamily housing direct loans to allow
USDA to better address its inventory property. These activities allow borrowers to restructure their debt so that
they can effectively rehabilitate properties within the
portfolio in order for them to continue to supply decent,
safe, affordable housing to the low and very-low income
population in rural America. In addition, rental assistance grants, which are vital to the proper underwriting
of the multifamily housing direct loan portfolio, are funded at $1.015 billion, which is sufficient to renew outstanding contracts. The Budget also provides $150 million in
guaranteed multifamily housing loans and $14 million in
budget authority for the Farm Labor Housing grants and
loans program. The combined 2014 Budget request in the
rural development multifamily housing portfolio reflects
the Administration’s support for the poorest rural tenant
population base.
Government-Sponsored Enterprises
in the Housing Market
The Federal National Mortgage Association, or Fannie
Mae, created in 1938, and the Federal Home Loan
Mortgage Corporation, or Freddie Mac, created in 1970,
were established to support the stability and liquidity of a
secondary market for residential mortgage loans. Fannie
Mae’s and Freddie Mac’s public missions were later broadened to promote affordable housing.
Growing stress and losses in the mortgage markets
in 2007 and 2008 seriously eroded the capital of Fannie
Mae and Freddie Mac, and responsive legislation enacted
in July 2008 strengthened GSE regulation and provided
the Treasury Department with authorities to bolster the
GSEs’ financial condition. In September 2008, reacting
to growing GSE losses and uncertainty that threatened
to paralyze the mortgage markets, the GSEs’ independent regulator, the Federal Housing Finance Agency, put
Fannie Mae and Freddie Mac under Federal conservatorship, and Treasury began to exercise its authorities
to provide assistance to stabilize the GSEs. The Budget
continues to reflect the GSEs as non-budgetary entities in
keeping with their temporary status in conservatorship.
However, all of the current Federal assistance being pro-

vided to Fannie Mae and Freddie Mac, including capital
provided by Treasury through the Senior Preferred Stock
Purchase Agreements (PSPA), is shown on-budget, and
discussed below.
The Federal Home Loan Bank (FHLB) System, created in 1932, is comprised of twelve individual banks
with shared liabilities. Together they lend money to financial institutions—mainly banks and thrifts—that are
involved in mortgage financing to varying degrees, and
they also finance some mortgages using their own funds.
Recent financial market conditions have led to strong net
interest income for the FHLBs, but several banks have
experienced significant losses on their investments in
private-label mortgage-backed securities. These securities constitute 2 percent of their total portfolio. Strict collateral requirements, superior lien priority, and joint debt
issuances backed by the entire system have helped the
FHLBs remain solvent, and stronger regulatory oversight
has led to growth in FHLB system-wide capital from just
above the regulatory ratio of 4 percent in 2008 to almost
7 percent in 2012.
Together these three GSEs currently are involved, in
one form or another, with approximately half of the $11
trillion residential mortgages outstanding in the U.S. today. Their share of outstanding residential mortgage debt
peaked at 55 percent in 2003. Subsequently, originations
of subprime and non-traditional mortgages led to a surge
of private-label Mortgage-Backed Securities (MBS), reducing the three GSEs’ market share to a low of 47 percent in 2006. Recent disruptions in the financial market,
however, have led to a resurgence of their market share.
The combined market share of the three GSEs was nearly
53 percent as of September 30, 2012.
Mission
The mission of the housing GSEs is to support certain
aspects of the U.S. mortgage market. Fannie Mae and
Freddie Mac’s mission is to provide liquidity and stability
to the secondary mortgage market and to promote affordable housing. Currently, they engage in two major lines of
business.
1.	 Credit Guarantee Business—Fannie Mae and
Freddie Mac guarantee the timely payment of principal and interest on mortgage-backed securities
(MBS). They create MBS by pooling mortgages acquired through either purchase from or swap arrangements with mortgage originators. Over time
these MBS held by the public have averaged about
one-quarter of the U.S. mortgage market, and as of
November 30, 2012, they totaled $3.9 trillion.
2.	 Mortgage Investment Business—Fannie Mae and
Freddie Mac manage retained mortgage portfolios
composed of their own MBS, MBS issued by others,
and individual mortgages. The GSEs finance the
purchase of these portfolio assets through debt issued in the credit markets. As of November 30, 2012,
these retained mortgages, financed largely by GSE
debt, totaled $1.2 trillion. As a term of their PSPA

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Analytical Perspectives

contracts with Treasury, the combined investment
portfolios of Fannie Mae and Freddie Mac were limited to no more than $1.8 trillion as of December 31,
2009, and this limitation was set to decline by 10
percent each year. To accelerate the return of private
capital to the mortgage markets and the wind-down
of the GSEs, Treasury revised the PSPA terms on
August 17th, 2012, setting the effective limitation at
$1.3 trillion as of December 31, 2012, and accelerating the reduction in this limitation to 15 percent
each year until December 31, 2018, when the combined limitation will be fixed at $500 billion ($250
billion for each company).
As of November 30, 2012, the combined debt and guaranteed MBS of Fannie Mae and Freddie Mac totaled $5.1
trillion.
The mission of the FHLB System is broadly defined
as promoting housing finance, and the System also has
specific requirements to support affordable housing. Its
principal business remains lending (secured by mortgages and financed by System debt issuances) to regulated
depository institutions and insurance companies engaged
in residential mortgage finance. Historically, investors in
GSE debt have included thousands of banks, institutional
investors such as insurance companies, pension funds,
foreign governments and millions of individuals through
mutual funds and 401k investments.
Regulatory Reform
The 2008 Housing and Economic Recovery Act (HERA)
reformed and strengthened the GSEs’ safety and soundness regulator by creating the Federal Housing Finance
Agency (FHFA), a new independent regulator for Fannie
Mae, Freddie Mac, and the Federal Home Loan Banks.
The FHFA authorities consolidate and expand upon the
regulatory and supervisory roles of what were previously three distinct regulatory bodies: the Federal Housing
Finance Board as the FHLB’s overseer; the Office of
Federal Housing Enterprise Oversight as the safety and
soundness regulator of the other GSEs; and HUD as their
public mission overseer. FHFA was given substantial authority and discretion to influence the size and composition of Fannie Mae and Freddie Mac investment portfolios through the establishment of housing goals, through
monitoring GSE compliance with those goals, and through
capital requirements.
FHFA is required to issue housing goals for each of the
regulated enterprises, including the FHLBs, with respect
to single family and multi-family mortgages and has the
authority to require a corrective “housing plan” if an enterprise does not meet its goals and statutory reporting
requirements, and in some instances impose civil money
penalties. In August of 2009, FHFA promulgated a final
rule adjusting the overall 2009 housing goals downward
based on a finding that current market conditions had
reduced the share of loans that qualify under the goals.
However, HERA mandated dramatic revisions to the
housing goals, which were implemented the following
year. The revised goals for 2010 and 2011, provided for

a retrospective and market-based analysis of the GSEs’
contributions toward the goals by expressing the goals as
a share of the GSEs’ total portfolio purchase activity. The
revised goals for Fannie Mae and Freddie Mac comprise
four single-family goals and one multifamily special affordability goal. FHFA has determined that Fannie Mae
narrowly missed two of the single-family purchase goals
for 2011 and that Freddie Mac missed all three purchase
goals. FHFA has instructed Freddie Mac to review the
reasons its goal qualifying share of single-family purchases are lower than the industry benchmarks, but
FHFA is not requiring corrective housing plans from either enterprise due to their conservatorship. Fannie Mae
and Freddie Mac both met the low-income refinance and
multifamily goals for 2011. The housing goals for 2012
through 2014, promulgated on November 13, 2012, establish revised benchmarks but maintain the structural
changes implemented for 2010 and 2011.
The expanded authorities of FHFA also include the
ability to place any of the regulated enterprises into conservatorship or receivership based on a finding of undercapitalization or a number of other factors.
Conservatorship
On September 6, 2008, FHFA placed Fannie Mae and
Freddie Mac into conservatorship. This action was taken in response to the GSEs’ declining capital adequacy
and to support the safety and soundness of the GSEs and
their role in the secondary mortgage market. HERA provides that as conservator FHFA may take any action that
is necessary to return Fannie Mae and Freddie Mac to
a sound and solvent condition and to preserve and conserve the assets of each firm. As conservator, FHFA has
assumed the powers of the Board and shareholders at
Fannie Mae and Freddie Mac. FHFA has appointed new
Directors and CEOs that are responsible for the day-today operations of the two firms. While in conservatorship,
FHFA expects Fannie Mae and Freddie Mac to continue
to fulfill their core statutory purposes, including their
support for affordable housing discussed above.
Department of Treasury GSE Support
Programs under HERA
On September 7, 2008, the U.S. Treasury launched
three programs to provide temporary financial support
to the GSEs under the temporary authority provided in
HERA. These authorities expired on December 31, 2009.
1.	 PSPAs with Fannie Mae and Freddie Mac
Treasury entered into agreements with Fannie Mae and
Freddie Mac to make investments in senior preferred stock
in each GSE in order to ensure that each company maintains a positive net worth. In exchange for the substantial
funding commitment, the Treasury received $1 billion in
preferred stock for each GSE and warrants to purchase
up to a 79.9 percent share of common stock at a nominal
price. The initial agreements were for up to $100 billion
in each of these GSEs. On February 18, 2009, Treasury
announced that the funding commitments for these

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22. Credit and Insurance

agreements would be increased to $200 billion each. On
December 24, 2009, Treasury announced that the funding
commitments in the purchase agreements would be modified to the greater of $200 billion or $200 billion plus cumulative net worth deficits experienced during 2010-2012,
less any surplus remaining as of December 31, 2012. In
total, as of December 31, 2012, $187.5 billion has been invested in the GSEs, and the redemption face value of GSE
preferred stock held by Treasury has increased accordingly. The agreements also require that Fannie Mae and
Freddie Mac pay quarterly dividends to Treasury. Prior
to calendar year 2013, the quarterly dividend amount was
based on an annual rate of 10 percent of the redemption
value of Treasury’s senior preferred stock. Amendments
to the PSPAs effected on August 17th, 2012, replace the 10
percent dividend with an amount equivalent to the GSE’s
positive net worth above a capital reserve amount. The
capital reserve amount for each company is initially set at
$3.0 billion for calendar year 2013, and declines by $600
million at the beginning of each calendar year thereafter
until it reaches zero. $55.2 billion in dividends have been
paid as of December 31, 2012. The Budget estimates additional net dividend receipts of $183.3 billion from January
1, 2013 through FY2023. The cumulative budgetary impact of the PSPA agreements from the first PSPA purchase through FY2023 is estimated to be savings of $51
billion. The Temporary Payroll Tax Cut Continuation Act
of 2011 signed into law on December 23, 2011, required
that the GSEs increase their fees by an average of at least
0.10 percentage points above the average guarantee fee
imposed in 2011. Revenues generated by this fee increase
are remitted directly to the Treasury for deficit reduction
and are not included in the PSPA amounts. The Budget
estimates resulting deficit reductions from this fee of $21
billion from FY2012 through FY2023.
2.	 GSE MBS Purchase Programs
Treasury initiated a temporary program during the financial crisis to purchase MBS issued by Fannie Mae and
Freddie Mac, which carry the GSEs’ standard guarantee
against default. The purpose of the program was to promote liquidity in the mortgage market and, thereby, affordable homeownership by stabilizing the interest rate
spreads between mortgage rates and corresponding rates
on Treasury securities. Treasury purchased $226 billion
in MBS from September 2008 to December 31, 2009,
when the statutory authority for this program expired. In
March of 2011, Treasury announced that it would begin
selling off up to $10 billion of its MBS holdings per month,
subject to market conditions. Treasury sold the last of its
MBS holdings in March 2012. The closing re-estimate included in the Budget indicates that the MBS purchase
program generated $11.9 billion in budgetary savings,
calculated on a net present value basis as required by the
Federal Credit Reform Act.

3.	 GSE Credit Facility
Treasury promulgated the terms of a temporary secured credit facility available to Fannie Mae, Freddie
Mac, and the Federal Home Loan Banks. The facility was
intended to serve as an ultimate liquidity backstop to
the GSEs if necessary. No loans were needed or issued
through December 31, 2009, when Treasury’s HERA purchase authority expired.
4.	 State Housing Finance Agency Programs
In December 2009, Treasury initiated two additional purchase programs under HERA authority to support state
and local Housing Financing Agencies (HFAs). Under the
New Issue Bond Program (NIBP) Treasury purchased
$15.3 billion in securities of Fannie Mae and Freddie
Mac to be comprised of new HFA housing issuances. The
Temporary Credit and Liquidity Program (TCLP) provides HFAs with credit and liquidity facilities supporting
up to $8.2 billion in existing HFA bonds. Treasury’s statutory authority to enter new obligations for these programs
expired on December 31, 2009. Due to uncertainties and
strain throughout the housing sector and the widening
of spreads in the tax-exempt market, HFAs experienced
challenges in issuing new bonds to fund new mortgage
lending and faced difficulties in renewing required liquidity facilities on non-punitive terms. In response, Treasury
has provided extensions to the NIBP and TCLP agreements. In November 2011, Treasury extended the contractual deadline for HFAs to use existing NIBP funds to
December 31, 2012. By that date, State and local HFAs
had used $13.2 billion to finance single and multi-family mortgages, and the remainder had been returned to
Treasury. In late 2012, Treasury granted three-year extensions to the TCLP agreements for six HFAs in order
to give these HFAs additional time to reduce their TCLP
balances. The revised agreements will expire by December
2015.  As of December 31, 2012, the remaining balance of
TCLP backed bonds had decreased to $3.3 billion.
Recent GSE Role in Administration Initiatives
to Relieve the Foreclosure Crisis
While under conservatorship, Fannie Mae and Freddie
Mac have continued to play a leading role in Government
and market initiatives to prevent homeowners who can
no longer afford to make their mortgage payments from
losing their homes. In March 2009, the Administration
announced its Making Home Affordable (MHA) program, which includes the Home Affordable Modification
Program (HAMP), and the Home Affordable Refinance
Program (HARP).
Fannie Mae and Freddie Mac are participating in
HAMP both for mortgages they own or guarantee and as
the Treasury Department’s contractual financial agents.
Under HAMP, investors, lenders, servicers, and borrowers
receive incentive payments to reduce eligible homeowners’ monthly payments to affordable levels. The incentive
payments for the modification of loans not held by the
GSEs are paid by Treasury’s TARP fund, while the incen-

384
tive payments for the modification of loans held by the
GSEs are paid by the GSEs. As of November 30, 2012,
almost 2 million trial modifications have been initiated,
resulting in more than 1.1 million permanent mortgage
modifications. Homeowners participating in HAMP programs have collectively experienced a 38 percent median
reduction in their mortgage payments. Additionally, the
MHA program has encouraged the mortgage industry to
adopt similar programs that have helped millions more at
no cost to the taxpayer.
Fannie Mae and Freddie Mac are also integral to HARP.
Under the program, borrowers with a mortgage that is
owned by Fannie Mae or Freddie Mac may be eligible to
refinance their mortgage to take advantage of the current
low interest rate environment regardless of their current
loan-to-value (LTV) ratio. Prior to HARP, the LTV limit of
80 percent for conforming purchase mortgages without a
credit enhancement such as private mortgage insurance
also applied to refinancing of mortgages owned by the
GSEs. Borrowers whose home values had dropped such
that their LTVs had increased above 80 percent could not
take advantage of the refinance opportunity. On October
24, 2011, FHFA announced that the HARP program would
be extended through 2013 and enhanced by lowering the
fees charged by Fannie Mae and Freddie Mac, streamlining the application process, and removing the previous
LTV cap of 125 percent. These changes coupled with record low mortgage interest rates have contributed to an
increase in HARP loan volumes; almost 800,000 HARP refinancings were completed from January through October
of 2012 alone and more than 1.8 million refinancings have
been completed since the program’s inception.
The Administration has also worked with FHFA to
develop a pilot program designed to convert foreclosed
homes into rental properties. These real estate owned
(REO) to rental property conversion programs will both
increase rental housing opportunities and support home
prices by reducing the supply of foreclosed homes on the
market. Fannie Mae closed on three bulk sales under this
initiative in September and November of 2012 comprising
more than 1,700 properties.
Future of the GSEs
In February 2011 the Administration transmitted a
white paper to Congress that outlined a commitment to
wind down the GSEs, facilitate the return of private capital to the housing market, and work with Congress to
reform the larger housing finance system. The paper outlined three broad options for a future system of housing
finance ranging from a mostly private mortgage market,
with the Government role limited to FHA and other existing programs, to a system with explicit Government guarantees for the majority of the secondary mortgage market. In addition to reforming the housing finance system,
the white paper stated continued support for a dedicated
budget-neutral mechanism to fund affordable housing
programs, similar to the Housing Trust Fund enacted in
the Housing and Economic Recovery Act of 2008, which
would have been funded by assessments on the GSEs but
has not been capitalized due to their conservatorship. The

Analytical Perspectives

white paper also identified mechanisms to wind down
the GSEs, including reducing the conforming loan limits,
shrinking the GSE investment portfolios, and increasing
pricing for GSE guarantees.
While the Administration and Congress continue to
evaluate long-term housing finance reform, meaningful
steps have already been taken to reduce the role of the
GSEs. Temporary GSE conforming loan limits of up to
$729,750 expired on September 30, 2011, and the allowable investment portfolios of Fannie Mae and Freddie Mac
will continue to be reduced by 15 percent each year, according to the terms of Treasury’s PSPA agreements with
the enterprises as amended in August 2012. Increases in
the guarantee fees charged by Fannie Mae and Freddie
Mac are also enhancing the price-competitiveness of nonGSE mortgages.
Education Credit Programs
Historically, the Department of Education (ED) helped
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. In March 2010, President Obama signed
the Student Aid and Fiscal Responsibility Act (SAFRA)
into law which ended the FFEL program and used the
$67 billion in savings estimated by CBO to increase Pell
Grants, provide more beneficial student loan repayment
terms, and create a new program supporting community
colleges and job training run by the Department of Labor.
On July 1, 2010, ED became the sole originator of Federal
student loans through the Direct Loan program, and despite significant technical challenges, ED made all loans
on time and without disruption.
The Direct 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 over 5,500 domestic and foreign schools, which
then disburse loan funds to students. Loans are available
to students regardless of income. However, borrowers with
low and moderate family incomes are eligible for loans
with more generous terms. For those loans, the Federal
Government provides a variety of subsidies, including not
charging interest while undergraduate borrowers are in
school, and during certain deferment periods.
The program offers a variety of flexible repayment
plans including income-based 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. In October 2011,
the Administration announced an initiative to accelerate these benefits for current and future college students
who have student loans. Under the plan, eligible borrowers are allowed to pay no more than 10 percent of their
discretionary incomes for their monthly student loan
payments and would forgive remaining balances after 20
years. This plan became available to certain eligible borrowers starting in December 2012 and will become available to all new borrowers starting in 2014.

22. Credit and Insurance

As part of the Administration’s broader focus on educating a globally competitive workforce while also putting the Nation on a sustainable fiscal path, the 2014
President’s Budget makes several proposals on Federal
student loans:
•	 Making Student Loan Interest Rates More MarketBased. Under current law, interest rates on subsidized Stafford loans are slated to rise this summer
from 3.4 percent to 6.8 percent. At a time when
the economy is still recovering and market interest
rates remain low, the Budget proposes a cost-neutral
reform to set interest rates, so they more closely follow market rates and provide students with more
affordable repayment options. The rate on new loans
would be set each year based on a market interest
rate, which would remain fixed for the life of the
loan so that borrowers would have certainty about
the rates they would pay. The Budget also expands
repayment options to ensure that borrowers do not
have to pay more than 10 percent of their discretionary income on loan payments.
•	 Reform and Expand the Perkins Loan Program. This
proposal, similar to the 2013 Budget proposal, would
create an expanded, modernized Perkins Loan program providing $8.5 billion in new loan volume
annually. Instead of being serviced by the colleges,
loans would be serviced by ED along with other Federal loans. The savings from this proposal would be
re-appropriated to the Pell Grant program.
•	 Reducing payments to guaranty agencies in the
FFEL program. This proposal would eliminate certain payments to guaranty agencies that “rehabilitate” defaulted student loans, and bring the fees
they earn in line with those associated with other
debt collection measures. The guaranty agencies
would bear the cost of this reform; affected borrowers would actually experience a modest reduction
in the debt they owe under this policy. The savings
from this proposal would be re-appropriated to the
Pell Grant program.
•	 Eliminate the TEACH program. The 2014 Budget
again proposes to eliminate this program and replace
it with a new Presidential Teaching Fellows program.
Small Business and Farm Credit
Programs and GSEs
The Government offers direct loans and loan guarantees to small businesses and farmers, who may have difficulty obtaining credit elsewhere. It also provides guarantees of debt issued by certain investment funds that invest
in small businesses. Two GSEs, the Farm Credit System
and the Federal Agricultural Mortgage Corporation, increase liquidity in the agricultural lending market.
Loans to Small Businesses
The President has said small businesses are “the engine of job growth in America,” and the 2014 Budget re-

385
flects the Administration’s commitment to creating a climate where innovation and entrepreneurship can thrive.
The Small Business Administration (SBA) 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. SBA
also helps home- and business-owners, as well as renters, cover the uninsured costs of recovery from disasters
through its direct loan program. At the end of 2012, SBA’s
outstanding balance of direct and guaranteed loans totaled approximately $103 billion.
The 2014 Budget proposes $112 million in business loan
subsidy costs and $152 million in administrative funds for
SBA to support nearly $24 billion in financing for small
businesses through the 7(a) General Business Loan program and the 504 Certified Development Company (CDC)
program. The 7(a) program will support $17.5 billion in
guaranteed loans that will help small businesses operate
and expand. This amount includes an estimated $15 billion
in term loans and $1.8 billion in revolving lines of credit;
the latter are expected to support $65 billion in total credit
assistance through draws and repayments over the life of
the guarantee. The 504 program will support $6.3 billion in
guaranteed loans for fixed-asset financing. In addition, SBA
will supplement the capital of Small Business Investment
Corporations (SBICs)  with up to $4 billion in  long-term,
guaranteed loans, representing a $1 billion increase,  to
support SBIC financing assistance for venture capital investments  in small businesses. In addition, the Budget
supports SBA’s disaster direct loan program at its 10-year
average volume of $1.1 billion in loans, and includes $192
million to administer the program. Of this amount, $159
million is provided through the Budget Control Act’s disaster relief cap adjustment for costs related to Stafford Act
(Presidentially-declared) disasters.
For the 2014 Budget, SBA recorded a net downward reestimate of $805 million in the expected costs of its outstanding
loan portfolio, which will decrease the 2013 budget deficit.
Due to improving economic conditions and refinements
in program cost estimation, the 7(a) program is projected
to have zero subsidy cost for 2014, a $231 million decrease
from 2013. As a result, SBA’s fees charged to lenders and
borrowers will decrease from recent levels, and the Budget
proposes to eliminate lender fees on loans of less than
$150,000 in order to expand participation and financing
availability. The 7(a) credit model will undergo continued
review throughout 2014 to ensure that it accurately forecasts the 7(a) program’s cost to taxpayers. The Budget provides $107 million in subsidy budget authority for the 504
program to support $6.3 billion in loan volume. Together
with anticipated carryover balances, the Budget authorizes $7.5 billion in 504 loan volume in 2014. In addition, the
Budget proposes to reauthorize the 504 loan refinancing
program, a zero subsidy program that helps small businesses lock-in low, long-term interest rates on commercial
mortgage debts and frees up resources that small business
owners can then re-invest in their business.
The Budget also requests $5 million in subsidy budget
authority for $25 million in direct loans, and $20 million

386
in technical assistance grant funds for the Microloan program. The Microloan program provides low-interest loan
funds to non-profit intermediaries who in turn provide
loans of up to $50,000 to new entrepreneurs.
To help small businesses drive economic recovery and
create jobs, the Small Business Jobs Act of 2010 created
two new mandatory lending-related programs administered by the Department of the Treasury, in addition to
other forms of support, such as tax cuts for entrepreneurs
and small business owners.
Treasury’s State Small Business Credit Initiative
(SSBCI) is designed to support state programs that make
new loans or investments to small businesses and small
manufacturers. SSBCI offered states and territories (and
in certain circumstances, municipalities) the opportunity
to apply for Federal funds to finance their programs that
partner with private lenders to extend new credit to small
businesses to create jobs. These funds allow States to build
on new or existing models for small business programs,
including collateral support programs, Capital Access
Programs (CAPs), loan guarantee programs, loan participation programs, and state venture capital programs. SSBCI
expects that all approved programs will demonstrate a
minimum overall leverage of $10 in new private lending
for every $1 in Federal funding. Treasury is providing approximately $1.5 billion for SSBCI, which is expected to
spur up to $15 billion in new lending to small businesses.
As of January 1, 2013, SSBCI had approved funding for
47 states, 5 territories, 4 municipalities, and the District
of Columbia for a total of over $1.4 billion in obligations,
of which $585 million had already been disbursed. During
2012, Treasury provided technical assistance to states that
focused on elements of good program design, operation, and
marketing.  SSBCI hosted two conferences during 2012 at
the San Francisco and Chicago Federal Reserve Banks for
state program managers to share their expertise in providing credit support to small businesses. During 2013 and
2014, Treasury plans to spend nearly $2 million to provide
intensive technical assistance to states  in order to maximize participation in and effectiveness of the program and
disseminate best practices.
The second Treasury program created by the Act was
the Small Business Lending Fund (SBLF), a dedicated investment fund that encourages lending to small businesses by providing capital to qualified community banks and
community development loan funds (CDLFs) with assets
of less than $10 billion. Because participating institutions
leverage their capital, the SBLF helps increase lending to
small businesses in an amount significantly greater than
the total capital provided to participating banks. In addition to expanding the lending capacity of all participants,
SBLF creates a strong incentive for banks to increase
small business loans by tying the cost of SBLF funding
to the growth of their portfolio of small business loans.
The initial dividend rate on SBLF funding was capped
at 5 percent. If a bank’s small business lending increases
by 10 percent or more, the rate will fall to as low as 1
percent.  Banks that increase their lending by amounts
less than 10 percent can benefit from rates set between
2 percent and 5 percent. For participants whose lending

Analytical Perspectives

does not increase in the first two years, however, the rate
will increase to 7 percent. After 4.5 years, the rate on all
outstanding SBLF funding will increase to 9 percent. The
application period for the program closed in June 2011,
with 332 institutions receiving slightly over $4 billion
in funding by the end of 2011. As of September 30, 2012,
institutions participating in SBLF have increased their
small business lending by $7.4 billion over a $36.5 billion baseline. The current reestimated subsidy rate and
actual program volume of $4.03 billion result in projected
budget savings of approximately $51 million, representing a decrease in the original projected subsidy cost of
$1.31 billion. As of publication of the 2014 Budget, SBLF
is working on a survey to help assess program participants’ small business lending policies, use of SBLF funding, and small business outreach activities. The survey
was administered in 2012, and results are expected to be
disseminated in 2013.
Loans to Farmers
The Farm Service Agency (FSA) assists low-income
family farmers in starting and maintaining viable farming operations. Emphasis is placed on 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, while
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 privatesector loans. 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. The subsidy rates for the
direct programs fluctuate largely because of changes in the
interest component of the subsidy rate.
The number of loans provided by these programs has
varied over the past several years. In 2012, FSA provided loans and loan guarantees to just over 32,000 family
farmers totaling $4.2 billion. Direct and guaranteed loan
programs provided assistance totaling $1.75 billion to
beginning farmers during 2012. Loans for socially disadvantaged farmers totaled $543 million, of which $269 million was in the farm ownership program and $274 million
in the farm operating program. The average size of farm
ownership loans was consistent over the past two years,
with new customers receiving the bulk of the direct loans.
In contrast, the majority of assistance provided in the operating loan program is to existing FSA farm borrowers.
Overall, demand for FSA loans—both direct and guaranteed—continues to be high. More conservative credit standards in the private sector continue to drive applicants
from commercial credit to FSA direct programs. Also, record high land prices, market volatility and uncertainty
are driving lenders to request guarantees in situations

22. Credit and Insurance

where they may not have in the past. In the 2014 Budget,
FSA proposes to make $5.6 billion in direct and guaranteed loans through discretionary programs.
Lending to beginning farmers was strong during 2012. 
FSA provided direct or guaranteed loans to more than
16,000 beginning farmers. Loans provided under the
Beginning Farmer Down Payment Loan Program represented over 37 percent of total direct ownership loans
made during the year, recording a substantial increase
over previous years. Fifty-four percent of direct operating loans were made to beginning farmers, an increase of
3% over 2011. Overall, as a percentage of funds available,
lending to beginning farmers was 7 percentage points
above the 2011 level. Lending to minority and women
farmers was a significant portion of overall assistance
provided, with $543 million in loans and loan guarantees
provided to more than 6,500 farmers. This represents
an increase of 11 percent in the overall number of direct
loans to minority borrowers. Outreach efforts by FSA
field offices to promote and inform beginning and minority farmers about FSA funding have resulted in increased
lending to these groups.
The 2014 Budget does not request budget authority for
subsidized guaranteed farm operating loans or direct conservation loans. The Budget only requests funding for the
guaranteed conservation loans. The overall loan level for
conservation loans is unchanged from the 2013 level.
FSA continues to evaluate the farm loan programs in
order to improve their effectiveness. FSA is releasing a new
Microloan program to increase lending to small niche producers and minorities.  This program dramatically reduces
application procedures for small loans, and implements
more flexible eligibility and experience requirements.  FSA
has also developed a nationwide continuing education program for its loan officers to ensure they remain experts in
agricultural lending, and it is transitioning all information technology applications for direct loan servicing into
a single, web-based application that will expand on existing capabilities to include all special servicing options. Its
implementation will allow FSA to better service its delinquent and financially distressed borrowers.
The Farm Credit System (Banks and Associations)
The Farm Credit System (FCS or System) is a
Government-sponsored enterprise (GSE) composed of a
nationwide network of borrower-owned cooperative lending institutions originally authorized by Congress in 1916.
The FCS’s mission continues to be providing sound and
dependable credit to American farmers, ranchers, producers or harvesters of aquatic products, their cooperatives,
and farm-related businesses.
The financial condition of the System’s banks and
associations remains fundamentally sound. Between
September 30, 2011, and September 30, 2012, the ratio
of capital to assets increased from 15.8 percent to 16.1
percent. Capital consisted of $35.2 billion in unrestricted
capital and $3.3 billion in restricted capital in the Farm
Credit Insurance Fund, which is held by the Farm Credit
System Insurance Corporation (FCSIC). For the first nine
months of calendar year 2012, net income equaled $3.16

387
billion, compared with $2.99 billion for the same period
of the previous year. The increase in net income resulted
primarily from a decrease in provision for loan losses and
an increase in net interest income.
Over the 12-month period ending September 30, 2012,
nonperforming loans as a percentage of total loans outstanding decreased from 1.94 percent to 1.53 percent,
primarily because of an improvement in the credit quality of loans to borrowers in certain agricultural sectors.
System assets grew 5.2 percent over the past 12 months
as growth in portfolios of agribusiness, energy. and rural
utilities outpaced declines in some segments of the agricultural portfolio. The number of FCS institutions continued to decrease because of consolidation. As of September
30, 2012, the System consisted of four banks and 82 associations, compared with seven banks and 104 associations in September 2002. Of the 86 FCS banks and associations, 75 had one of the top two examination ratings (1
or 2 on a 1 to 5 scale), 10 FCS institutions had a rating of
3, and 1 FCS institution had a rating of 4.
Over the 12-month period ending September 30, 2012,
the System’s loans outstanding grew by $14.8 billion, or
8.8 percent, while over the past five years they grew by
$49.1 billion, or 36.3 percent. As required by law, borrowers
are also stockholder-owners of System banks and associations. As of September 30, 2012, the System had 492,632
stockholders. Loans to young, beginning, and small farmers and ranchers represented 10.5 percent, 13.5 percent,
and 15.7 percent, respectively, of the total dollar volume
of all new farm loans made in 2011. The dollar volume of
new loans made to young farmers in 2011 rose 4.9 percent
from that of 2010, while new lending volume fell 5.1 percent to beginning farmers and 10.4 percent to small farmers. Young, beginning, and small farmers are not mutually
exclusive groups and, thus, cannot be added across categories. Maintaining special policies and programs for the
extension of credit to young, beginning, and small farmers
and ranchers is a legislative mandate for the System.
The System, while continuing to record strong earnings
and capital growth, remains exposed to a variety of risks
associated with its portfolio concentration in agriculture
and rural America. While there have been improvements
in certain stressed sectors of the rural economy, notably
forestry, the run-up in grain prices that began in the summer of 2010, while benefiting crop producers, continues
to negatively influence profit margins for livestock and
ethanol producers. As financial markets have improved
from the financial crisis, the System has maintained its
capacity to issue longer-term debt at extremely low yields.
The agricultural sector is also subject to future risks such
as a farmland price decline, a rise in interest rates, volatile commodity prices, rising production costs, weatherrelated catastrophes, and long-term environmental risks
related to climate change.
The FCSIC, an independent Government-controlled
corporation, ensures the timely payment of principal and
interest on FCS obligations on which the System banks
are jointly and severally liable. On September 30, 2012,
the assets in the Insurance Fund totaled $3.3 billion. As of
September 30, 2012, the Insurance Fund as a percentage

388
of adjusted insured debt was 1.96 percent. This was slightly below the statutory secure base amount of 2 percent.
During the first nine months of calendar year 2012, outstanding insured System obligations grew by 4.3 percent.
Federal Agricultural Mortgage
Corporation (Farmer Mac)
Farmer Mac was established in 1988 as a federally
chartered instrumentality of the United States and an institution of the FCS to facilitate a secondary market for
farm real estate and rural housing loans. Farmer Mac is
not liable for any debt or obligation of the other System
institutions, and no other System institutions are liable
for any debt or obligation of Farmer Mac. The Farm Credit
System Reform Act of 1996 expanded Farmer Mac’s role
from a guarantor of securities backed by loan pools to a
direct purchaser of mortgages, enabling it to form pools
to securitize. In May 2008, the Food, Conservation and
Energy Act of 2008 (2008 Farm Bill) expanded Farmer
Mac’s program authorities by allowing it to purchase and
guarantee securities backed by rural utility loans made
by cooperatives.
Farmer Mac continues to meet core capital and regulatory risk-based capital requirements. As of September
30, 2012, Farmer Mac’s total outstanding program volume
(loans purchased and guaranteed, AgVantage bonds purchased and guaranteed, and real estate owned) amounted
to $12.47 billion, which represents an increase of 5.3 percent from the level a year ago. Of total program activity,
$8.6 billion were on-balance-sheet loans and guaranteed
securities, and $3.9 billion were off-balance-sheet obligations. Total assets were $12.5 billion, with non-program
investments (including cash and cash equivalents) accounting for $3.5 billion of those assets. Farmer Mac’s net
income for the first three quarters of calendar year 2012
was $34.3 million, a significant increase from the same
period in 2011 during which Farmer Mac reported net
income of $0.5 million. Farmer Mac’s earnings are often
substantially influenced by unrealized fair-value gains
and losses. For example, fair-value changes on financial
derivatives resulted in an unrealized loss of $23.3 million for the first three quarters of 2012, compared with
$82.4 million for the same period in 2011 (both pre-tax).
Although unrealized fair-value changes experienced on
financial derivatives temporarily impact earnings and
capital, those changes are not expected to have any permanent effect if the financial derivatives are held to maturity, as is expected.
Energy and Infrastructure Credit Programs
This Administration is committed to constructing a
new foundation for economic growth and job creation, and
clean energy is a critical component of that. The general
public, as well as individual consumers and owners, benefits from clean energy and well-developed infrastructure.
Thus, the Federal Government promotes clean energy
and infrastructure development through various credit
programs.

Analytical Perspectives

Credit Programs to Promote
Clean and Efficient Energy
The Department of Energy (DOE) administers two
credit programs that serve to reduce emissions and enhance energy efficiency: a loan guarantee program to support innovative energy technologies and a direct loan program to support advanced automotive technologies.
The DOE’s Title 17 loan guarantee program is authorized to issue loan guarantees for projects that employ innovative technologies to reduce air pollutants or man-made
greenhouse gases. The program was first provided $4 billion
in loan volume authority in 2007. The 2009 Consolidated
Appropriations Act provided an additional $47 billion in
loan volume authority, allocated as follows: $18.5 billion for
nuclear power facilities, $2 billion for “front-end” nuclear
enrichment activities, $6 billion for new or retrofitted coalbased power facilities equipped with carbon capture and
sequestration (CCS) technologies, $2 billion for advanced
coal gasification, and $18.5 billion for energy efficiency,
renewable energy, and transmission and distribution projects. 2011 appropriations effectively reduced the available
loan volume authority for energy efficiency, renewable energy, and transmission and distribution projects by $17 billion and provided $170 million in credit subsidy to support
renewable energy or energy efficient end-use energy technologies. In 2012 and 2013, Congress provided no new loan
authority or credit subsidy for DOE’s Title 17 program. The
President’s 2014 Budget requests no new authority as the
program will focus on deploying the remaining resources
appropriated in prior years.
The American Reinvestment and Recovery Act of 2009
amended the program’s authorizing statute to allow loan
guarantees on a temporary basis for commercial or advanced renewable energy systems, electric power transmission systems, and leading edge biofuel projects. The
Recovery Act initially provided $6 billion in new budget
authority for credit subsidy costs incurred for eligible
loan guarantees. After funds were transferred to support
the Department of Transportation’s “Cash for Clunkers”
program in 2009 and $1.5 billion was rescinded to offset
the Education Jobs and Medicaid Assistance Act in 2010,
the program had $2.5 billion available for credit subsidy.
Early solicitations for the guarantee program attracted
many projects requesting 100 percent guarantees of DOEsupported loans. Consistent with Federal credit policies,
loans with 100 percent guarantees in this program are
made through the Federal Financing Bank, and therefore do not involve private sector lenders. The program’s
“Financial Institutions Partnership Program” solicitation, however, invited private sector lenders to participate
whereby DOE would provide guarantees for up to 80 percent of loan amounts financed by private sector financial
institutions. This structure utilizes private sector expertise, expedites the lending/underwriting process, and leverages the program’s funds by sharing project risks with
the private sector, while increasing private sector experience with financing energy technologies. The program
also added a new solicitation in 2010 specifically targeting projects in the United States that manufacture re-

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22. Credit and Insurance

newable energy systems or related components. While the
authority for the temporary program to extend new loans
expired September 30, 2011, DOE provided loan guarantees to 28 projects totaling over $16 billion in guaranteed
debt including: 12 solar generation, 4 solar manufacturing, 4 wind generation, 3 geothermal, 2 biofuels, and 3
transmission/energy storage projects. One biofuels and
one energy storage project have since withdrawn prior to
any disbursement of funds.
The DOE’s direct loan program, the Advanced
Technology Vehicle Manufacturing (ATVM) Direct Loan
program, was created to support the development of advanced technology vehicles and associated components
in the United States that would improve vehicle energy efficiency by at least 25 percent relative to a 2005
Corporate Average Fuel Economy standards baseline. In
2009, Congress appropriated $7.5 billion in credit subsidy
costs to support a maximum of $25 billion in loans under
ATVM. The program provides loans to automobile and automobile part manufacturers for the cost of re-equipping,
expanding, or establishing manufacturing facilities in the
United States, and for other costs associated with engineering integration.
Electric and Telecommunications Loans
Rural Utilities Service (RUS) programs of the United
States Department of Agriculture (USDA) provide loans
for rural electrification, telecommunications, distance
learning, telemedicine, and broadband, and also provide
grants for distance learning and telemedicine (DLT).
The Budget includes $4 billion in direct loans for electricity distribution, construction of renewable energy facilities, transmission, and carbon capture projects on facilities to replace fossil fuels. The Budget also provides
$690 million in direct telecommunications loans, $63 million in broadband loans, $10 million in broadband grants,
and $25 million in DLT grants.
USDA Rural Infrastructure and
Business Development Programs
USDA provides grants, loans, and loan guarantees to
communities for constructing facilities such as healthcare
clinics, police stations, and water 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
treatment facility loan and grant program in the 2014
President’s Budget is $1.55 billion. These funds are available to communities of 10,000 or fewer residents. The
Community Facility Program is targeted to rural communities with fewer than 20,000 residents. For 2014, it will
have a program level of $1.5 billion in direct loans and
$17 million in grants.
USDA also provides grants, direct loans, and loan
guarantees to assist rural businesses, cooperatives, nonprofits, and farmers in creating new community infrastructure (i.e. educational networks or healthcare coops)
and to diversify  the rural economy and employment op-

portunities. In 2014, USDA proposes to provide $782 million in loan guarantees and direct loans to entities that
serve communities of 50,000 or less through the Business
and Industry guaranteed loan program and the Rural
Microentrepreneur Assistance program and communities
of 25,000 or less through the Intermediary Relending program. These loans are structured to save or create jobs
and stabilize fluctuating rural economies.
The Rural Business Service is also responsible for the
Rural Energy for America program through which the
Budget proposes $90 million in funding to support $238
million in loan guarantees and grants to promote energy
efficiencies, renewable energy, and small business development in rural communities.
Transportation Infrastructure
Federal credit programs, offered through the
Department of Transportation (DOT), fund critical
transportation infrastructure projects, often using innovative financing methods. The two predominant programs are the program authorized by the Transportation
Infrastructure Finance and Innovation Act (TIFIA), and
the Railroad Rehabilitation and Improvement Financing
(RRIF) program.
Established by the Transportation Equity Act of the
21st century (TEA-21) in 1998, the TIFIA program is designed to fill market gaps and leverage substantial private
co-investment by providing supplemental and subordinate capital to projects of national or regional significance.
Through TIFIA, DOT provides Federal credit assistance
to highway, transit, rail, and intermodal projects. The 31
projects that have received TIFIA credit assistance represent over $42 billion of infrastructure investment in
the United States.  Government commitments in these
partnerships constitute nearly $10.5 billion in Federal
assistance with a budgetary cost of approximately $714
million.
TIFIA can help advance qualified, large-scale projects
that otherwise might be delayed or deferred because of
size, complexity, or uncertainty over the timing of revenues at a relatively low budgetary cost.  Each dollar of
subsidy provided for TIFIA can provide approximately
$10 in credit assistance, and leverage an additional $20 to
$30 in non-Federal transportation infrastructure investment. In recent years, the demand for the TIFIA program
has exceeded available resources, and the recent surface
transportation reauthorization program dramatically increased program resources in an effort to help meet demand, providing $750 million in 2013 and $1 billion for
the program in 2014. In 2014, the President’s Budget requests $1 billion in resources as provided in MAP-21 for
the TIFIA program. At the requested level, TIFIA could
provide approximately $10 billion in credit support for up
to $30 billion in new infrastructure projects. This funding
will accelerate critical transportation improvements and
attract private investment by lowering financing costs
and mitigating market imperfections.
DOT has also provided direct loans and loan guarantees to railroads since 1976 for facilities maintenance,
rehabilitation, acquisitions, and refinancing. Federal as-

390

Analytical Perspectives

sistance was created to provide financial assistance to
the financially-challenged portions of the rail industry.
However, following railroad deregulation in 1980, the
industry’s financial condition began to improve, larger
railroads were able to access private credit markets, and
interest in Federal credit support began to decrease.
Also established by TEA-21 in 1998, the RRIF program
provides loans with an interest rate equal to the Treasury
rate for similar-term securities. TEA-21 also stipulates
that non-Federal sources pay the subsidy cost of the loan,
thereby allowing the program to operate without Federal
subsidy appropriations. The RRIF program assists projects that improve rail safety, enhance the environment,
promote economic development, or enhance the capacity
of the national rail network. While refinancing existing
debt is an eligible use of RRIF proceeds, capital investment projects that would not occur without a RRIF loan
are prioritized.
The Safe,Accountable, Flexible, Efficient Transportation
Equity Act: A Legacy for Users (SAFETEA-LU) increased
the amount of total RRIF assistance available from $3.5
billion to $35 billion, and the Rail Safety Improvement
Act (RSIA) extended the maximum loan term from 25
to 35 years. Since enactment of TEA-21, over $1.7 billion in direct loans have been made under the RRIF program. Due to the recent disruptions in the credit markets
caused by the financial crisis, the RRIF program has seen
renewed interest from the railroad industry—both traditional short-line railroads and commuter rail operators—
as a means of project financing.
National Infrastructure Bank
To direct Federal resources for infrastructure to projects that demonstrate the most merit and may be difficult
to fund under the current patchwork of Federal programs,
the President has called for the creation of an independent, non-partisan National Infrastructure Bank (NIB),
led by infrastructure and financial experts. The NIB
would offer broad eligibility and unbiased selection for
transportation, water, and energy infrastructure projects.
Projects would have a clear public benefit, meet rigorous
economic, technical and environmental standards, and be
backed by a dedicated revenue stream. Geographic, sector,
and size considerations would also be taken into account.
Interest rates on loans issued by the NIB would be indexed to United States Treasury rates, and the maturity
could be extended up to 35 years, giving the NIB the ability to be a “patient” partner side-by-side with State, local, and private co-investors. To maximize leverage from
Federal investments, the NIB would finance no more than
50 percent of the total costs of any project.
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 private and sovereign borrowers.
These programs are intended to level the playing field for
U.S. exporters, deliver robust support for U.S. goods and
services, stabilize international financial markets, and
promote sustainable development.
Leveling the Playing Field
Federal export credit programs counter official financing that foreign governments around the world, largely
in Europe and Japan but also increasingly in emerging
markets such as China and Brazil, 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). In its current form, this agreement
has virtually eliminated direct interest rate subsidies,
significantly constrained tied-aid grants, and standardized the fees for corporate and sovereign lending across
all OECD ECAs –bringing the all-in costs of OECD export
credit financing broadly in line with market levels.  In
addition to ongoing OECD negotiations, US government
efforts resulted in the 2012 creation of the International
Working Group (IWG) on export credits.  This group includes China and other non-OECD providers of export
credits in discussions on a broader framework that would
bring common practices to ECAs throughout the world.
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 Export Credit Guarantee
Programs (also known as 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.
Stabilizing International Financial Markets
Consistent with U.S. obligations in the International
Monetary Fund regarding global financial stability, the Exchange Stabilization Fund managed by the
Department of the Treasury may provide loans or credits
to a foreign entity or government of a foreign country. A
loan or credit may not be made for more than six months
in any 12-month period unless the President gives the
Congress a written statement that unique or emergency
circumstances require that the loan or credit be for more
than six months.
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. DCA provides non-sovereign
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 finance sus-

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22. Credit and Insurance

tainable 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 host-country
capital and strengthening sub-national capital markets in the developing world.
OPIC mobilizes private capital to help solve critical
challenges such as renewable energy and infrastructure
development, and in doing so, advances U.S. foreign policy.
OPIC achieves its mission by providing investors with financing, guarantees, political risk insurance, and support
for private equity investment funds. These programs are
intended to create more efficient financial markets, eventually encouraging the private sector to supplant OPIC
finance in developing countries.

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 most agencies that
lack sufficient historical experience budget for the cost associated with the risk of international lending. The cost of
lending by these 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.

Ongoing Coordination

Promoting Economic Growth and Poverty
Reduction through Debt Sustainability

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

The Enhanced Heavily Indebted Poor Countries
(HIPC) Initiative reduces the debt of some of the poorest
countries with unsustainable debt burdens that are committed to economic reform and poverty reduction.

III. INSURANCE PROGRAMS
Deposit Insurance
Federal deposit insurance promotes stability in the
U.S. financial system. Prior to the establishment of
Federal deposit insurance, depository institution failures
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 Great Depression, a system of
Federal deposit insurance was established to protect depositors and to prevent bank failures from causing widespread disruption in financial markets.
Today, the Federal Deposit Insurance Corporation
(FDIC) insures deposits in banks and savings associations (thrifts) using the resources available in its Deposit
Insurance Fund (DIF). The National Credit Union
Administration (NCUA) insures deposits (shares) in most
credit unions (certain credit unions are privately insured)
using the resources available in the National Credit
Union Share Insurance Fund (SIF). As of September 30,
2012, the FDIC insured $7.3 trillion of deposits at 7,181
commercial banks and thrifts, and the NCUA insured
$833.6 billion of shares at 6,888 credit unions.
Since its creation, the deposit insurance system has undergone a series of reforms. The Dodd-Frank Wall Street
Reform and Consumer Protection (Wall Street Reform)
Act, enacted July 21, 2010, allows the FDIC to more effectively and efficiently manage the DIF. The Act authorized
the FDIC to set the minimum DIF reserve ratio (ratio of
the deposit insurance fund balance to total estimated insured deposits) to 1.35 percent by 2020, up from 1.15 percent. In addition to raising the minimum reserve ratio,
the Wall Street Reform Act also:

•	 Eliminated the FDIC’s requirement to rebate premiums when the DIF reserve ratio is between 1.35 and
1.5 percent;
•	 Gave the FDIC discretion to suspend or limit rebates when the DIF reserve ratio is at least 1.5 percent, effectively removing the 1.5 percent cap on the
DIF; and
•	 Required the FDIC to offset the effect on small insured depository institutions (defined as banks with
assets less than $10 billion) when setting assessments to raise the reserve ratio from 1.15 to 1.35
percent.
In implementing the Wall Street Reform Act, the FDIC
issued a final rule setting a long-term (i.e., beyond 2020)
reserve ratio target of 2 percent, a goal that FDIC considers necessary to maintain a positive fund balance during
economic crises while permitting steady long-term assessment rates that provide transparency and predictability to the banking sector. This rule, coupled with other
provisions of the Wall Street Reform Act, will significantly
improve the FDIC’s capacity to resolve bank failures and
maintain financial stability during economic downturns.
The Wall Street Reform Act also permanently increased
the insured deposit level to $250,000 per account at banks
or credit unions insured by the FDIC or NCUA.
Recent Performance of the Federal
Deposit Insurance Funds
After seven consecutive quarters of negative balances,
the DIF balance became positive on June 30, 2011, standing at $3.9 billion on an accrual basis, then doubling to
$7.8 billion on September 30, 2011. Over the next four

392
quarters, the DIF balance more than tripled, growing to
$25.2 billion on September 30, 2012. The growth in the
DIF balance is a result of fewer bank failures and higher
assessment revenue. The reserve ratio on September 30,
2012 was 0.35 percent.
As of September 30, 2012, the number of insured institutions on the FDIC’s “problem list” (institutions with
the highest risk ratings) totaled 694, which represented
a decrease of nearly 18 percent from September 2011.
Furthermore, the assets held by problem institutions decreased by more than 22 percent.
The SIF ended September 2012 with assets of $11.9 billion. The NCUA’s equity ratio was 1.31 percent on December
31, 2012. If the equity ratio increases above the normal
operating level of 1.30 percent, a distribution is normally
paid to member credit unions to reduce the equity ratio
to the normal operating level. In March 2012, NCUA distributed $279 million to the Temporary Corporate Credit
Union Stabilization Fund (TCCUSF), which was created
under the authority of the Helping Families Save Their
Homes Act of 2009 (P.L. 111-22). Under this Act, SIF dividends must be paid to the TCCUSF when this fund has
an outstanding loan from the U.S. Treasury, which totaled
$3.2 billion on September 30, 2012.
Losses in the credit union industry have continued
their recent decline. The ratio of insured shares in “problem institutions” to total insured shares decreased to 2.9
percent in September 2012 from a high of 5.7 percent in
December 2009. With improving health of credit unions,
NCUA has been steadily reducing reserves held for losses.
As of September 2012, the SIF had set aside $399 million
in reserves to cover potential losses, over 60 percent less
than the $1.0 billion set-aside as of September 2011. Due
to the continuing decline in the insurance loss reserve,
there were no GAAP-based losses in 2011 or 2012.
Stabilizing Corporate Credit Unions
The NCUA also administers the Central Liquidity
Facility (CLF), which serves as a back-up lender for credit
unions when market sources of liquidity are unavailable.
By statute, the CLF is authorized to borrow up to 12 times
its subscribed capital stock and surplus. As of 2012, this
would allow the CLF to borrow up to approximately $46
billion. Throughout the economic crisis, liquidity advances into the corporate credit union system totaled $19.5
billion, all of which was repaid by December 2010. The
CLF did not borrow in 2012, due in part to the creation of
the TCCUSF in 2009. The TCCUSF has access to $6 billion in borrowing authority, which is reduced proportionally by any borrowings potentially made by the SIF. This
borrowing authority serves as a resource available to the
NCUA to support the corporate credit union system.
In 2012, TCCUSF had net borrowings of $3.2 billion
to support the Corporate System Resolution Program
(CSRP), which was created in September 2010. The CSRP
is a multi-stage plan for stabilizing the corporate credit
union system, providing short-term and long-term funding to resolve a portfolio of residential mortgage-backed
securities, commercial mortgage-backed securities, other
asset-backed securities and corporate bonds (collectively

Analytical Perspectives

referred to as the Legacy Assets) held by the failed corporate credit unions, and establishing a new regulatory
framework for corporate credit unions. Under the CSRP,
NCUA created a re-securitization program to provide
long-term funding for the Legacy Assets through the issuance of NCUA Guaranteed Notes (NGNs), which has
re-securitized nearly $30 billion in legacy assets to date.
The NGNs require the long-term monitoring, managing,
and reporting on very complex transactions for at least
the next 10 years. Accordingly, NCUA is working on a
long-term, stream-lined solution to oversee the daily requirements and activities in connection with the NGN
Program.
The NCUA successfully stabilized the corporate credit
union system, thereby ensuring that retail credit unions
were able to rely on many of the services provided by
corporate credit unions. The NCUA devised different approaches, such as providing emergency liquidity or spreading out the costs of losses over time, aimed at enabling the
credit union industry to minimize losses and emerge from
the crisis. The NCUA liquidated five corporate credit
unions in 2009 and 2010 that had become insolvent due
to investment losses in mortgage-backed securities. To
facilitate the resolution process, the Board chartered four
bridge corporate credit unions to purchase certain assets
and assume certain liabilities and member shares from
the liquidated credit unions. In October 2012, NCUA liquidated the last remaining bridge corporate credit union,
U.S. Central Bridge Corporate Credit Union, after transferring its essential services. As a result of its liquidation, U.S. Central ended its role as the agent member to
CLF and redeemed its CLF stock of $1.8 billion. Although
this was an outflow from CLF, it was previously funded by
U.S. Central. Additionally, since all NCUA activities are
funded through assessments on regulated credit unions,
these costs will have no impact on US taxpayers. NCUA
continues to seek compensation from the parties that created and sold the faulty mortgage-backed securities to
the five failed corporate credit unions.  In 2012, NCUA
filed four more lawsuits against several Wall Street firms
that underwrote these securities, alleging failure to disclose significant risks. As of December 31, 2012, NCUA
had reached settlements with three firms totaling $170
million. These settlements further the agency’s goal of
minimizing losses, and net proceeds will reduce the total
assessments that all credit unions have to pay for the corporate credit union system’s losses.
Restoration Plans
Pursuant to the Wall Street Reform Act, the restoration period for the FDIC’s DIF reserve ratio to reach 1.35
percent was extended to 2020 (prior to the Act, the DIF
reserve ratio was required to reach the minimum target
of 1.15 percent by the end of 2016). The Budget projects
that net outflows in 2013 will reduce the DIF reserve ratio to 0.22 percent at the year-end. From 2014, however,
it is expected to increase steadily, reaching the statutorily required level of 1.35 percent by 2020. In late 2009,
the FDIC Board of Directors adopted a final rule requiring insured institutions to prepay quarterly risk-based

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22. Credit and Insurance

assessments for the fourth quarter of CY 2009 and for
all of CY 2010, 2011, and 2012. The FDIC collected approximately $45 billion in prepaid assessments. Unlike a
special assessment, the prepaid assessments did not immediately affect bank earnings; it was booked as an asset
and amortized each quarter by that quarter’s assessment
charge. This prepaid assessment, coupled with annual
assessments on the banking industry, has provided the
FDIC with ample operating cash flows to effectively and
efficiently resolve bank failures during the short period in
which the DIF balance was negative. Although the FDIC
has authority to borrow up to $100 billion from Treasury
to maintain sufficient DIF balances, the Budget does not
anticipate FDIC utilizing their borrowing authority because the DIF is projected to maintain positive operating
cash flows over the entire 10-year budget horizon.
In 2010 and 2011, the NCUA Board approved assessments of $727 million and $930 million respectively on
federally insured credit unions in order to maintain the
target equity ratio of 1.30 percent. The Budget projects
that NCUA will collect $800 million in special assessments over the budget window.
Budget Outlook
The Budget estimates DIF net outlays of -$97.5 billion
(i.e. net inflows into the fund) over the 10-year budget window. As a result of updated economic assumptions, technical changes to OMB’s forecasting model, and modifications relating to the expiration of the Transaction Account

Guarantee program, the projected inflows through 2023
are lower than the 2013 Mid-Session Review (MSR) projection by approximately $104.8 billion. The latest public
data on the banking industry led to a downward revision
to bank failure estimates, which are consistent with longterm, historical averages in terms of failed bank assets
as a percentage of GDP. With the lower bank failure projection, the Budget projects much lower FDIC premiums
necessary to reach the minimum Wall Street Reform Act
DIF reserve ratio of 1.35 percent.
Pension Guarantees
The Pension Benefit Guaranty Corporation (PBGC) insures the pension benefits of workers and retirees in covered defined-benefit pension plans. PBGC pays benefits, up
to a guaranteed level, when a company’s plan closes without
enough assets to pay future benefits. PBGC’s claims exposure is the amount by which qualified benefits exceed assets
in insured plans. In the near term, the risk of loss stems
from financially distressed firms with underfunded plans.
In the longer term, loss exposure results from the possibility
that healthy firms become distressed and well-funded plans
become underfunded due to inadequate contributions, poor
investment results, or increased liabilities.
PBGC monitors companies with underfunded plans
and acts to protect the interests of the pension insurance program’s stakeholders where possible. Under its
Early Warning Program, PBGC works with companies to

Table 22–1.  Top 10 Firms Presenting Claims (1975-2012)
Single-Employer Program

Firm

Fiscal Year(s)
of Plan
Termination(s)

Claims (by firm)

Percent of
Total Claims
(1975-2011)

1

United Airlines

2005

$7,304,186,216

15.64%

2

Delphi

2009

6,387,327,984

13.68%

3

Bethlehem Steel

2003

3,702,771,655

7.93%

4

US Airways

2003, 2005

2,723,720,013

5.83%

5

LTV Steel*

2002, 2003, 2004

2,134,985,884

4.57%

6

Delta Air Lines

2006

1,720,156,504

3.68%

7

National Steel

2003

1,319,009,117

2.82%

8

Pan American Air

1991, 1992

841,082,434

1.80%

9

Trans World Airlines

2001

668,377,106

1.43%

2004

640,480,970

1.37%

10 Weirton Steel
Top 10 Total
All Other Total

$27,442,097,883

58.77%

19,251,487,046

41.23%

TOTAL
$46,693,584,930
100.00%
Sources: PBGC Fiscal Year Closing File (9/30/12), PBGC Case Management System, and
PBGC Participant System (PRISM).
Due to rounding of individual items, numbers and percentages may not add up to totals.
Data in this table have been calculated on a firm basis and, except as noted, include all
trusteed plans of each firm.
Values and distributions are subject to change as PBGC completes its reviews and establishes
termination dates.
* Does not include 1986 termination of a Republic Steel plan sponsored by LTV.

394
strengthen plan funding or otherwise protect the insurance program from avoidable losses. However, PBGC’s
authority to prevent undue risks to the insurance program is limited. Most private insurers can diversify or
reinsure their catastrophic risks as well as flexibly price
these risks. Unlike private insurers, PBGC cannot deny
insurance coverage or adjust premiums according to risk.
Both types of PBGC premiums—the flat rate (a per person charge paid by all plans) and the variable rate (paid
by underfunded single-employer plans) are set in statute.
CBO and others have noted that the premium rates are
far lower than what a private financial institution would
charge for insuring the same risk.
Claims against PBGC’s insurance programs are highly
variable. A single large pension plan termination may result in a larger claim against PBGC than the termination
of many smaller plans. Future results will continue to depend largely on the infrequent and unpredictable termination of a limited number of very large plans.
PBGC’s single-employer program has incurred substantial losses from underfunded plan terminations.
Table 22-1 shows the ten largest plan termination losses
in PBGC’s history. Nine of the ten happened since 2001.
As of September 30, 2012, the single-employer and
multi-employer programs reported deficits of $29.1 billion and $5.2 billion, respectively. Notwithstanding
these deficits, the Corporation has $85 billion in assets
and will be able to meet its obligations for a number of
years. However, neither program has the resources to
fully satisfy PBGC’s obligations in the long run. PBGC
estimates its long-term loss exposure to reasonably possible terminations (e.g., underfunded plans sponsored by
companies with credit ratings below investment grade) at
approximately $320 billion. For FY 2012, exposure was
concentrated in the following sectors: manufacturing (primarily automobile/auto parts and primary and fabricated
metals), transportation (primarily airlines), services, and
wholesale and retail trade.
The Moving Ahead for Progress in the 21st Century
Act (MAP-21), signed on July 6, 2012, increased PBGC
premiums for both single-employer and multiemployer
plans. Flat-rate premiums for single-employer plans were
increased to $42 for 2013, $49 for 2014, and will be indexed to inflation thereafter. Variable-rate premiums will
also increase, and will also be indexed to inflation for the
first time. Rates are expected to increase to $13 or $14
per $1000 of underfunding for 2014 and to $18 or $19 for
2015. The variable-rate premium will be capped in filing
year 2013 at $400 times the number of plan participants. 
The cap will be indexed thereafter. Flat-rate premiums
for multiemployer plans were increased to $12 for 2013,
and will be indexed thereafter.
While the legislation brings in much-needed resources
to improve PBGC’s financial condition, reforms are still
needed to bring PBGC’s premium structure more in line
with other government and private insurance programs.
The 2014 Budget proposes to give the PBGC Board the
authority to adjust premiums to better account for the
risk the agency is insuring and make the premium struc-

Analytical Perspectives

ture fair to all premium payers. The Board would be directed to raise an additional $25 billion over ten years.
Consistent with previous Administration proposals,
the Board would be required to consult with stakeholders prior to setting a new premium schedule and to establish a hardship waiver and other limitations on planspecific premium increases. PBGC would be directed to
try to make the premiums counter-cyclical and any increase would be phased in gradually. In determining the
new premium rates, the Board would consider a number
of factors, including a plan’s risk of losses to PBGC and
the amount of a plan’s underfunding.
Disaster Insurance
Flood Insurance
The Federal Government provides flood insurance
through the National Flood Insurance Program (NFIP),
which is administered by the Federal Emergency
Management Agency of the Department of Homeland
Security (DHS). Flood insurance is available to homeowners and businesses in communities that have adopted and
enforce appropriate floodplain management measures.
Coverage is limited to buildings and their contents. By
the end of 2012, the program had over 5.5 million policies
in more than 22,100 communities with over $1.2 trillion
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 affordable insurance coverage widely available, to combine a
program of insurance with flood mitigation measures to
reduce the nation’s risk of loss from flood, and to minimize Federal disaster-assistance expenditures. The NFIP
requires building standards and other mitigation efforts
to reduce losses, and operates a flood hazard mapping
program to quantify geographic variation in the risk of
flooding. These efforts have made substantial progress.
However, structures built prior to flood mapping and
NFIP floodplain management requirements, which make
up 21.5 percent of the total policies in force, currently pay
less than fully actuarial rates.
A major DHS goal is to have property owners be compensated for flood losses through flood insurance, rather
than through taxpayer-funded disaster assistance. The
agency’s marketing strategy aims to increase the number
of Americans insured against flood losses and improve retention of policies among existing customers. The strategy
includes:
1.	 Providing financial incentives to the private insurers that sell and service flood policies for the Federal
Government to expand the flood insurance business.
2.	 Conducting the national marketing and advertising
campaign, FloodSmart, which uses TV, radio, print
and online advertising, direct mailings, and public

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22. Credit and Insurance

relations activities to help overcome denial and resistance and increase demand.
3.	 Fostering lender compliance with flood insurance
requirements through training, guidance materials,
regular communication with lending regulators and
the lending community.
4.	 Conducting NFIP training for insurance agents via
instructor-led seminars, online training modules,
and other vehicles.
5.	 Seek opportunities to simplify and clarify NFIP processes and products to make it easier for agents to
sell and for consumers to buy.
While these strategies have resulted in steady policy
growth over recent years, the growth slowed somewhat
since 2009 due to the severe downturn in the economy. In
2012, the program lost 54,000 policies.
DHS also has a multi-pronged strategy for reducing
future flood damage. The NFIP offers flood mitigation assistance grants to assist flood victims to rebuild to current
building codes, including base flood elevations, thereby reducing future flood damage costs. In addition, flood mitigation assistance grants targeted toward repetitive and
severe repetitive loss properties not only help owners of
high-risk property, but also reduce the disproportionate
drain on the National Flood Insurance Fund these properties cause, through acquisition, relocation, or elevation.
DHS is working to ensure that the flood mitigation grant
program is closely integrated, resulting in better coordination and communication with State and local governments. Further, through the Community Rating System,
DHS adjusts premium rates to encourage community and
State mitigation activities beyond those required by the
NFIP. These efforts, in addition to the minimum NFIP requirements for floodplain management, save over $1 billion annually in avoided flood damages.
Due to the catastrophic nature of flooding, with
Hurricanes Katrina and Sandy as notable examples, insured flood damages far exceeded premium revenue in
some years and depleted the program’s reserve account,
which is a cash fund. On those occasions, the NFIP exercises its borrowing authority through the Treasury to
meet flood insurance claim obligations. While the program needed appropriations in the early 1980s to repay
the funds borrowed during the 1970’s, it was able to repay all borrowed funds with interest using only premium dollars between 1986 and 2004. In 2005, however,
Hurricanes Katrina, Rita, and Wilma generated more
flood insurance claims than the cumulative number of
claims from 1968 to 2004. Hurricane Sandy in 2012 also
generated significant flood insurance claims. As a result,
the Administration and Congress have increased the borrowing authority to $30.4 billion. The program’s debt is
currently $20.1 billion.
The catastrophic nature of the 2005 hurricane season also triggered an examination of the program, and
the Administration worked with Congress to improve

the program. On July 6, 2012, the Biggert Waters Flood
Insurance Reform Act of 2012 was signed into law. In addition to reauthorizing the NFIP for 5 years, the bill also
requires the NFIP generally to move to full risk-based
premium rates and strengthens the NFIP financially and
operationally.
Crop Insurance
Subsidized Federal crop insurance administered by
USDA’s Risk Management Agency (RMA) assists farmers in managing yield and revenue shortfalls due to bad
weather or other natural disasters. The 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 on reinsurance provided by the Federal Government
and also by the commercial reinsurance market to manage
their individual risk portfolio. The Federal Government
reimburses private companies for a portion of 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.
The 2014 Budget continues to propose policies that are
similar to those included in the 2013 Budget and recommended to the Joint Committee for Deficit Reduction:
1.	 Lower the cap for the crop insurance companies’ return on investment to 12 percent,
2.	 Lower the cap on the companies’ administrative expense reimbursement to $0.9 billion, adjusted annually for inflation,
3.	 More accurately price the premium for catastrophic
coverage,
4.	 Lower even further the subsidy for producer premiums by 3 percentage points for policies where the
Government subsidizes more than 50 percent of the
premium (previous proposals reduced these by only
2 percentage points), and
5.	 A new addition for the 2014 Budget, reduce premium
subsidy by 2 percentage points for revenue coverage
that provides protection for upward price movements at harvest time.
The most basic type of crop insurance is catastrophic
coverage (CAT), which compensates the farmer for losses
in excess of 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 an administrative fee. Higher levels of coverage, called “buy-up”, are also
available. A premium is charged for buy-up coverage. The
premium is determined by the level of coverage selected
and varies from crop to crop and county to county.
For 2012, the 10 principal crops, (barley, corn, cotton,
grain sorghum, peanuts, potatoes, rice, soybeans, tobacco,
and wheat) accounted for over 86 percent of total liabil-

396

Analytical Perspectives

ity, and approximately 80 percent of the total U.S. planted
acres of the 10 crops were covered by crop insurance. RMA
offers both yield and revenue-based insurance products.
Revenue insurance programs protect against loss of revenue stemming from low prices, poor yields, or a combination of the two. These programs extend traditional multiperil or yield crop insurance by adding price variability to
production history.
Pasture, Rangeland, and Forage Pilot Programs are based
on vegetation greenness and rainfall indices to meet the needs
of livestock producers who purchase insurance protection for
losses of forage produced for grazing or harvested for hay. In
2012, there were 21,976 vegetation and rainfall policies sold,
covering over 48 million acres of pasture, rangeland and forage. There was over $784.9 million in liability, and through
October 2012 nearly $118 million in indemnities paid to livestock producers who purchased coverage.
RMA is continuously working to develop new products
and to expand or improve existing products in order to
cover more agricultural commodities. Under the 508(h)
authorities and procedures RMA may advance payment
of up to 50 percent of expected reasonable research and
development costs for FCIC Board approved Concept
Proposals prior to the complete submission of the policy
or plan of insurance under 508(h) authorities. In 2012,
two submissions were approved as section 508(h) products and are available to producers for the 2013 crop year.
For more information and additional crop insurance
program details, please reference RMA’s web site: (www.
rma.usda.gov).
Insurance against Security-Related Risks
Terrorism Risk Insurance
The Terrorism Risk Insurance Program (TRIP) was authorized under P.L. 107-297 to help ensure the continued
availability of property and casualty insurance following the terrorist attacks of September 11, 2001. TRIP’s
initial three-year authorization enabled the Federal
Government to establish a system of shared public and
private compensation for insured property and casualty
losses arising from certified acts of foreign terrorism. In
2005, Congress passed a two-year extension (P.L. 109144), which narrowed the Government’s role by increasing the private sector’s share of losses, reducing lines of

insurance covered by the program, and adding a threshold event amount triggering Federal payments.
In 2007, Congress enacted a further seven-year extension of TRIP and expanded the program to include losses
from domestic as well as foreign acts of terrorism (P.L.
110-318). For all seven extension years, TRIP maintains a
private insurer deductible of 20 percent of the prior year’s
direct earned premiums, an insurer co-payment of 15 percent of insured losses above the deductible, and a $100
million minimum event cost triggering Federal coverage.
The 2007 extension also requires Treasury to recoup 133
percent of any Federal payments made under the program, and accelerates deadlines for recoupment of any
Federal payments made before September 30, 2017.
The Budget baseline includes the estimated Federal
cost of providing terrorism risk insurance through the
expiration of the program on December 31, 2014. Using
market data synthesized through a proprietary model,
the Budget projects annual outlays and recoupment for
TRIP. While the Budget does not forecast any specific triggering events, the estimates for this account represent
the weighted average of TRIP payments over a full range
of possible scenarios, most of which include no notional
terrorist attacks (and therefore no TRIP payments), and
some of which include notional terrorist attacks of varying magnitudes. On this basis, the Budget projects net
spending of $443 million over the 2014-2018 period and
$526 million over the 2014-2023 period.
Airline War Risk Insurance
The Department of Transportation’s authority to provide aviation war risk insurance expires on December 31,
2013. With the goal of building private capacity to manage aviation war risk, the Administration proposes to
transform the program into a co-insurance arrangement
in which DOT and a private insurer would jointly underwrite a common policy. In the case of a claim, DOT would
pay an established fraction of the losses, and the private
partner would pay the remainder. The Federal share
would be slightly reduced each year as private capacity
expands. The proposal would extend the existing program
through 2014, during which time DOT would propose
changes to its underlying statutory authority and work
with the private insurance industry to develop co-insurance policies. The Budget proposes that a co-insurance arrangement would begin to reduce the government’s share
of any losses, starting in 2015.

IV. Fair Value Budgeting for Credit Programs
Accurate cost and revenue estimates support a sound
budget—one that shows the fiscal position of the Federal
Government and allocates limited resources across competing needs. Cost estimation is challenging for Federal
credit programs because loans and loan guarantees create obligations for uncertain cash flows that can extend
far into the future.
The Federal Credit Reform Act of 1990 (FCRA) greatly
improved the accuracy of cost estimates for credit programs by reflecting the estimated lifetime costs of loans

and loan guarantees up front on a net present value basis, requiring policy officials to budget for those lifetime
costs when making programmatic decisions. Any change
to FCRA should be consistent with the original goals of
credit reform, to provide better information on the budgetary costs of credit programs and improve resource allocation by placing them on a comparable basis to other
credit programs and other forms of Federal spending.
The Congressional Budget Office (CBO) and others have
argued that credit programs impose costs on taxpayers

397

22. Credit and Insurance

that are not reflected under FCRA, such as the risk that
assets may perform worse than expected, and propose to
amend FCRA to require that the budget use fair value estimates to capture these costs. While fair value analysis
may offer some useful insights and help inform decisionmaking for specific programs, use of fair value for budgetary costs would have drawbacks that far exceed the advantages of fair value estimates. Fair value would impose
significant implementation costs and challenges, and have
more potential to introduce noise and distortion into credit
estimates than valuable information. Fair value as proposed would include costs not relevant to the Federal government and would make it more difficult to compare the
costs of credit programs to each other, or to other forms of
Federal spending. It would make cost estimates for credit
programs impossible to validate, and treat uncertainty in a
more punitive fashion for credit programs than other programs. Under fair value cost estimates, the cost estimate
and estimated impact on the deficit for the same program
could be different from one another, raising concerns about
consistency and transparency. Thus, current proposals to
use fair value for budgetary costs estimates would not be
consistent with the goals of FCRA.
Estimating Costs under FCRA and Fair Value
Costs under FCRA. Before FCRA, the budget reflected
the cash flows of loans and loan guarantees in the years
that the cash flows occurred. The cost of new direct loans
was greatly overstated—appropriations were required
for the full face value of loans and did not consider expected repayment over time. In contrast, new loan guarantees appeared free, and there was no requirement to
set aside a reserve to cover anticipated losses. FCRA
greatly improved the accuracy of cost estimates by capturing the lifetime expected cash flows for loans and loan
guarantees up front. Under FCRA, the subsidy cost is
equal to the present value of the cash flows to and from
the Government, netting out expected losses from default
or other adverse events. The present value is estimated using the Government’s cost of funds, as reflected in
Treasury rates, to discount these cash flows.
Costs under Fair Value.1 In contrast to FCRA where
estimated cash flows are discounted by the Government’s
cost of funds (Treasury rates), under fair value cash flows
would typically be discounted with interest rates that reflect estimated market pricing for the characteristics of
the loan or loan guarantee (comparable market rates), instead of Treasury rates. Comparable market rates would
need to be derived or estimated from available market
data, and applied to cash flows. Discount rates would
vary across programs, and in some cases by individual
loan or guarantee. Because fair value estimates reflect
market pricing of the uncertainty associated with loan
performance and other factors not included in FCRA estimates, fair value costs would be higher in most cases.

1  Pages 393-398 of the Analytical Perspectives volume of the 2013
Budget include more discussion of the issues raised in this section and
the following section on Implementation.

Accuracy of Budgetary Cost
Estimates under Fair Value
Accuracy and transparency in cost estimates. The budget should focus primarily on the accuracy and transparency of costs to the Government. FCRA costs reflect estimated cash flows, including expected losses due to default
and other adverse events. Actual experience may deviate
from initial estimates; however, through the reestimates
the subsidy costs are ultimately tied to actual cash flows
and these reestimates help agencies learn from past experience to improve techniques for generating new estimates. As a measure of expected budgetary cost, FCRA
estimates have been fairly accurate overall, although not
always on a program-by-program basis. Net lifetime reestimates of subsidy cost for credit programs2 over the
21 years that FCRA has been in place are $8.5 billion
upward—less than one percent of the face value of loans
and guarantees made under FCRA. Indeed, CBO’s rationale for fair value does not question the accuracy of
FCRA cost estimates in measuring expected cost to the
Government, but instead questions whether there are additional costs beyond those that would be captured under
FCRA that should be reflected in the budget. Fair value
cost estimates would include the same underlying credit
risk assumptions as FCRA estimates, and add an additional premium above the expected costs.
Posing an additional challenge to the goals of transparency and accuracy, fair value cost estimates include
unobservable factors—including the premium that a private actor would demand to compensate for uncertainty
of future performance. In contrast to FCRA, one could not
use actual cash flows of the credit programs to validate
estimates of fair value. Except in the limited cases where
a credit program intervened in a well-functioning liquid
market with observable prices, estimates of fair value
could only be compared to other estimates of fair value.
Thus, confirming the accuracy of fair value estimates
would be an insurmountable implementation challenge.
Inclusion of costs not relevant to taxpayers. Many of the
factors reflected in fair value pricing are not relevant to
taxpayers (versus market investors). As a result, fair value cost estimates overstate the cost to the Government.
These estimates reflect a premium for uncertainty.
However, the cost of uncertainty for the Federal government may be significantly lower than it would be for private sector lenders, particularly when dealing with assets that do not trade in well-functioning liquid markets
that allow diversification among private investors.3 The
Government is able to spread risk across a large number
of investments, and across a large set of stakeholders, including across generations, in ways that are not always
possible for private investors.
2  Excludes the Troubled Asset Relief Program and the International
Monetary Fund increases provided in the 2009 Supplemental Appropriations Act, where reestimates reflect the return of a market risk adjustment premium. Also excludes reestimates from the Small Business
Lending Fund, an equity program presented on a FCRA basis pursuant
to legislation.
3  See discussion on uncertainty premium on pages 397-398 of the
Analytical Perspectives volume of the 2013 Budget.

398
Other factors aside from the uncertainty premium would
also contribute to overstatement of the costs to taxpayers
under fair value cost estimates. Such factors include the
liquidity premium and a component related to the exemption of Treasuries from the State income tax. The liquidity
premium in particular is less relevant to taxpayers, because the Government can easily borrow in the Treasury
securities market with minimal transaction costs.
Lack of comparable market data. Due to the lack of historical data and market information, it is difficult to apply
standard private sector methods to calculate fair value
estimates for Federal credit programs. Often there are
not comparable market instruments for Federal credit.
The Government typically intervenes to improve efficiency in inefficient markets, so either comparable financial
products do not exist, or their prices are distorted. Market
information, including interest rates, can be also misleading during periods of financial instability. The availability
of historical data varies widely across programs. Even in
well-developed markets, the presence of Federal programs
can distort market prices. For example, information problems discussed earlier in this chapter lead to inefficiencies
in markets for student loans and small business loans. In
those cases, market interest rates may reflect other complex factors that cannot be captured.
Lack of estimation methods. Even if data and information were available, estimating fair value costs requires
advanced financial knowledge and sophisticated modeling techniques. Attempting to isolate the elements of fair
value that are relevant to the Government would require
judgment, and reasonable analysts would yield very different results. Estimating FCRA budget costs is much
more straightforward, as expected costs can be compared
to actuals, and actual experience can then inform new
cost estimates. In contrast, because market factors are
not observable and/or are difficult to estimate from market yields, there is no way to verify or validate the fair
value component of costs. Using private sector valuation
methods in these cases would produce highly subjective
costs estimates which would be difficult to validate and
raise conceptual concerns regarding consistency across
credit programs and other forms of Federal spending.
Implications for fair value cost estimates. While there
have been estimates of the “fair value” cost of credit programs, these estimates rely on analytical shortcuts to incorporate unobservable factors, and private sector valuation methods and assumptions that do not translate to
Federal assistance. In contrast, FCRA costs reflect estimated cashflows, including expected risks. So if an initial
FCRA cost estimate suggested a $2 million cost for a $100
million loan program, and actual lifetime costs proved to
be $4 million, the change in cost can be traced back to
the actual cashflows to and from the Government, and
updated through reestimates. Actual experience may deviate from initial estimates; however, through the reestimates FCRA subsidy costs are ultimately tied to actual
cashflows with the public and actual experience feeds into
future estimates as appropriate. In contrast, fair value
cost estimates include unobservable factors—including how the market would price specific contract terms,

Analytical Perspectives

expected losses, and the premium that a private actor
would demand to compensate for uncertainty of future
performance. The original fair value cost estimate may
be $10 million for the same program, but there would be
no way to compare the market price assumptions against
program experience after the fact, as these are not tied
to actual cashflows and these unobservable costs would
always remain unknown.
Imbalance in budgetary accounting. The primary role of
the budget is to reflect the fiscal position of the Federal
Government—and fair value as proposed would not produce an accurate estimate of the fiscal position. Where
FCRA cost estimates and budgetary accounting tie the
cost of credit programs to actual cash flows, fair value cost
estimates could cause an imbalance because the cost estimate for a program would exceed the expected cost to the
Government. Under fair value cost estimates, the cost estimate and estimated impact on the deficit for the same program could be different from one another, raising concerns
about consistency and transparency. A full accounting of
the scoring under fair value should result in the same net
deficit effect as credit programs under FCRA—so if legislators are scored higher costs for the premium charged on a
fair value basis, such scoring should also recognize the savings from the premium reflected in fair value costs.
Lack of Comparability across Federal Spending
FCRA placed loan and guarantee programs on a comparable basis, and also allowed comparison across forms of
Federal spending based on lifetime expected costs. Because
fair value estimates reflect market pricing, fair value costs
would be higher than the lifetime expected costs reflected
in FCRA estimates for credit programs, and cost estimates
for other forms of Federal spending. If the budget were to
include costs beyond the expected fiscal impact of Federal
spending for credit programs, it should include other economic and indirect effects for all programs—both costs and
benefits. For any program involving externalities, the economic costs may differ significantly from the budget costs.
For example, the budgetary cost of building a highway does
not include the social cost of environmental damages, or
the social benefit of lower transportation costs. The right
way to incorporate information beyond the fiscal impact
of government activities is cost-benefit analysis, which
weighs the social benefit of each program against its social
cost in a comprehensive manner.
Efficient allocation of Federal resources across programs. It would be inconsistent to incorporate the uncertainty premium for credit programs alone, when it may
also be relevant to many other Federal programs whose
costs are tied to economic conditions, such as unemployment insurance. Changes in mandatory programs and
tax law all have effects on the budget that need to be
weighed against each other and against changes in discretionary spending on the basis of their uncertain estimates. Compared with the uncertainty associated with
the deficit impact of mandatory programs and tax collection, the uncertainty in the outcomes of credit programs
is minuscule. Scoring economic costs only to credit pro-

399

22. Credit and Insurance

grams could distort decision making, placing a thumb on
the scale against credit assistance.
Implementation Costs and Challenges of Fair Value
Beyond the conceptual issues of fair value, there are
practical implementation issues that would need to be addressed. Premature or piecemeal implementation of fair
value could prove extremely costly, with little long-term
benefit in terms of more accurate cost information and efficient resource allocation. Depending on the nature of a fair
value proposal, it could require a significant investment in
OMB, Treasury, and Federal credit agency resources to implement, or it could divert limited administrative resources
from management and oversight of affected programs.
Methods for estimating fair value would need to be
explored and developed, along with guidance to ensure
consistent and appropriate application across programs.
While the components of market prices may be estimated,
the degree of accuracy can vary widely. Guidance would
also need to be developed to account for actual costs over
time to ensure transparency and accuracy in the costs of
outstanding loans and guarantees and the effects of policy changes on program costs. However, it is not clear that
it is possible to develop guidance that could overcome the
inherent problems identified above.
In implementing current FCRA requirements, some
Federal credit programs have faced significant administrative challenges in hiring staff with the right technical skill sets, and developing critical management
infrastructure, including financial accounting systems,
monitoring, and modeling capabilities. Fair value would
place much greater demands on agencies in all of these
areas. For some of these programs, greater investment
in preparing FCRA estimates might do more to improve
cost measurement than investment in preparing fair
value estimates.
The Troubled Asset Relief Program (TARP) implemented
a risk-adjusted cost estimate, similar to fair value, based on
the direction in the Economic Emergency Stabilization Act
of 2008. The Act provided Treasury permanent indefinite
budget authority to fund administrative costs, in contrast

to the funding for administrative expenses of most other
credit programs, which are annually appropriated and constrained by the discretionary caps. Implementation has
been extremely resource-intensive, requiring large investments in private sector financial advisors, datasets, and
systems. Agencies with limited administrative resources
may not be able to support necessary investments for accurate fair value estimates, or doing so could draw resources
away from mitigating risks and costs that otherwise may
be within the agency’s ability to control. Ultimately, the
lifetime cost to Government under TARP is expected to be
far lower than originally estimated, as premiums for market risk are returned to Treasury through downward reestimates over time, raising the question of the value of the
original fair value estimates.
Summary
Fair value cost of estimates for Federal credit programs
have the potential to capture elements of cost that are not
included in FCRA-based cost estimates. Using fair value
cost estimates in the budget, however, would not represent an improvement over the methods in use today. The
budget is more informative when it shows the direct cost
to the Government in an accurate and transparent manner, as opposed to the economic cost, or other definitions
of cost that depend on unobservable values. It is conceptually difficult to identify the uncertainty premium relevant
to taxpayers, which differs in many cases from the uncertainty premium for private investors. Even if conceptual
issues were resolved to a reasonable extent, it would be
very costly and difficult to estimate fair value costs due
to the paucity of historical data and limited relevance of
market information.
For some programs, greater investment in preparing
FCRA estimates might do more to improve cost measurement than investment in preparing fair value estimates.
Alternatives to fair value budgeting to inform decisionmaking for credit programs should be evaluated—including
greater investment in improving FCRA cost estimates, and
strengthened cost-benefit analyses at the program level.

Chart 22-1. Face Value of Federal
Credit Outstanding
Dollars in trillions
2.6
2.4
2.2
2.0
1.8
1.6
1.4
1.2
1.0

Loan Guarantees

0.8
0.6
Direct Loans

0.4
0.2
0.0
1970

1975

1980

1985

1990

1995

2000

2005

2010

2014

400

Analytical Perspectives

Table 22–2.  Estimated Future Cost of Outstanding Federal Credit Programs
(In billions of dollars)
Program

Outstanding 2011

Estimated Future
Costs of 2011
Outstanding 1

Outstanding 2012

Estimated Future
Costs of 2012
Outstanding 1

Direct Loans: 2
Federal Student Loans���������������������������������������������������������������������������������������������������
Troubled Asset Relief Program (TARP) 3 �����������������������������������������������������������������������
Education Temporary Student Loan Purchase Authority �����������������������������������������������
GSE Mortgage-Backed Securities Purchase Program ��������������������������������������������������
Farm Service Agency (excl. CCC), Rural Development, Rural Housing ������������������������
Rural Utilities Service and Rural Telephone Bank ���������������������������������������������������������
State Housing Finance Authority Direct Loans ��������������������������������������������������������������
Export-Import Bank �������������������������������������������������������������������������������������������������������
Housing and Urban Development ����������������������������������������������������������������������������������
Disaster Assistance �������������������������������������������������������������������������������������������������������
Department of Energy, Title 17, ATVM ��������������������������������������������������������������������������
Public Law 480 ��������������������������������������������������������������������������������������������������������������
Agency for International Development ���������������������������������������������������������������������������
Small Business Lending Fund 3 �������������������������������������������������������������������������������������
Other direct loan programs 3 �����������������������������������������������������������������������������������������
Total direct loans �������������������������������������������������������������������������������������������������������

378
100
98
71
52
47
15
9
9
8
7
5
4
4
30
837

–14
42
–13
–2
10
2
1
7
2
2
1
2
1
–*
10
51

510
40
95
.........
53
52
14
10
13
8
12
4
4
4
33
852

–17
24
–14
.........
9
2
1
8
2
2
2
3
1
–*
8
31

Guaranteed Loans: 2
FHA-Mutual Mortgage Insurance Fund �������������������������������������������������������������������������
Federal Student Loans ��������������������������������������������������������������������������������������������������
Department of Veterans Affairs (VA) Mortgages ������������������������������������������������������������
FHA-General and Special Risk Insurance Fund ������������������������������������������������������������
Farm Service Agency (excl. CCC), Rural Development, Rural Housing ������������������������
Small Business Administration (SBA) 4 �������������������������������������������������������������������������
Export-Import Bank �������������������������������������������������������������������������������������������������������
International Assistance ������������������������������������������������������������������������������������������������
Commodity Credit Corporation �������������������������������������������������������������������������������������
Government National Mortgage Association (GNMA) 4 ������������������������������������������������
Other guaranteed loan programs 4, 5 �����������������������������������������������������������������������������
Total guaranteed loans ���������������������������������������������������������������������������������������������

1,043
328
258
138
83
82
49
20
6
.........
10
2,017

28
10
5
8
4
5
1
3
*
*
1
64

1,118
291
296
144
97
87
57
21
5
.........
12
2,128

43
1
6
12
4
4
2
2
*
*
*
74

Total Federal credit ��������������������������������������������������������������������������������������������
2,854
115
2,980
105
* $500 million or less.
1 Direct loan future costs reflect the financing account allowance for subsidy cost and the liquidating account allowance for estimated uncollectible principal and interest. Loan
guarantee future costs reflect estimated liabilities for loan guarantees.
2 Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform, such as Commodity Credit Corporation (CCC) commodity price
supports. Defaulted guaranteed loans that result in loans receivable are included in direct loan amounts.
3 As authorized by the statute, table includes equity purchases under the TARP, the Small Business Lending Fund and IMF transactions resulting from the 2009 Supplemental
Appropriations Act. Future costs for the TARP and IMF transactions reflected here are calculated using the discount rate required by the Federal Credit Reform Act adjusted for market
risks, as directed in legislation.
4 To avoid double-counting, outstandings for SBA and GNMA secondary market guarantees of federally-guaranteed loans, and the TARP FHA Letter of Credit are excluded from the
totals.
5 Includes Department of Energy Title 17 loan guarantees financed by private lenders.

401

22. Credit and Insurance

Table 22–3.  Reestimates of Credit Subsidies on Loans Disbursed Between 1992-2012 1
(Outlays and receipts, in millions of dollars)
Agency and Program

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

DIRECT LOANS
Agriculture:
Agriculture Credit Insurance Fund ���������������������������������������
Farm Storage Facility Loans ������������������������������������������������
Apple Loans �������������������������������������������������������������������������
Emergency Boll Weevil Loans ���������������������������������������������
Distance Learning, Telemedicine, and Broadband Loans ���
Rural Electrification and Telecommunications Loans ����������
Rural Telephone Bank ���������������������������������������������������������
Rural Housing Insurance Fund ��������������������������������������������
Rural Economic Development Loans ����������������������������������
Rural Development Loan Program ��������������������������������������
Rural Community Facilities Program �����������������������������������
Rural Business and Industry Program ��������������������������������
Rural Water and Waste Disposal Program ��������������������������
Rural Community Advancement Program 2 �������������������������
P.L. 480 ��������������������������������������������������������������������������������
P.L. 480 Title I Food for Progress Credits ����������������������������

921
–1
–2
.........
1
–42
.........
–29
–1
–1
.........
.........
.........
3
65
.........

10
–7
1
1
–1
101
–3
–435
–1
–3
.........
.........
.........
–1
–348
–112

–701
–8
.........
*
–1
265
–7
–64
.........
.........
.........
.........
.........
–84
33
–44

–147
7
*
*
1
143
–6
–200
–2
–3
.........
.........
.........
–34
–43
.........

–2
–1
*
3
7
–197
–17
109
*
–2
.........
.........
.........
–73
–239
.........

–14
.........
*
.........
1
–108
–48
.........
–3
–7
.........
.........
.........
–77
–26
.........

–251
50
*
*
3
–149
–22
–13
3
*
4
–22
–13
.........
44
.........

–478
–47
–1
*
–3
293
36
–405
–1
–4
77
–5
72
.........
–163
.........

326
–11
–1
–*
1
248
1
18
–4
–4
–19
–5
–124
.........
–171
.........

–147
–19
–*
–*
–2
192
–4
170
–2
–4
–31
4
–52
.........
23
.........

93
–5
–*
–2
–30
–66
–2
297
*
–3
–100
–20
–84
.........
19
.........

1
–19
.........
*
22
199
1
188
–1
–2
–24
2
–193
.........
10
.........

Commerce:
Fisheries Finance ����������������������������������������������������������������

–1

–3

.........

1

–15

–12

11

–16

–*

*

*

–9

Defense—Military Programs:
Military Housing Improvement Fund ������������������������������������

.........

.........

.........

*

–4

–1

–8

–2

–13

–8

–29

–4

Federal Direct Student Loan Program: 3
Volume reestimate �����������������������������������������������������������
Other technical reestimate �����������������������������������������������

.........
.........

43
3,678

.........
1,999

.........
855

.........
2,827

.........
2,674

.........
408

.........
–45

.........
–1,176

.........
–5,624

.........
5,511

.........
–8,273

Temporary Student Loan Purchase Authority: 3
Volume reestimate �����������������������������������������������������������
Other technical reestimate �����������������������������������������������
College Housing and Academic Facilities Loans �����������������
Historically Black Colleges and Universities ������������������������
TEACH Grants ���������������������������������������������������������������������

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
*
11
.........

.........
.........
*
–16
.........

418
444
*
–24
.........

.........
1,076
*
–75
11

.........
–5,529
*
68
–5

.........
–1,434
–*
–4
18

.........
1,293
–*
–125
–15

Energy:
Advanced Technology Vehicle Manufacturing Fund ������������
Title 17 Innovative Technology Fund �����������������������������������

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

12
–*

–712
55

–985
409

–906
12

Health and Human Services:
Consumer Operated and Oriented Plan ������������������������������

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

3

Homeland Security:
Disaster Assistance �������������������������������������������������������������

–7

–6

*

4

*

*

*

.........

–18

–1

–252

–23

Interior:
Bureau of Reclamation Loans ���������������������������������������������
Bureau of Indian Affairs Direct Loans ����������������������������������
Assistance to American Samoa �������������������������������������������

–9
–1
.........

–14
2
.........

.........
*
*

17
*
*

1
*
.........

1
1
2

5
–1
.........

–3
.........
.........

–1
1
–4

–9
1
*

–9
*
–*

–*
.........
–*

Housing and Urban Development:
Green Retrofit Program for Multifamily Housing, Recovery
Act ����������������������������������������������������������������������������������

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

1

State:
Repatriation Loans ��������������������������������������������������������������

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

–7

–1

Transportation:
Alameda Corridor Loan �������������������������������������������������������
Transportation Infrastructure Finance and Innovation ���������
Railroad Rehabilitation and Improvement Program �������������

.........
.........
.........

.........
.........
.........

–12
.........
–5

.........
3
–14

.........
–11
–11

.........
7
–1

.........
11
15

.........
–163
–8

.........
92
15

.........
17
13

.........
–64
–16

.........
–55
–7

Education:

402

Analytical Perspectives

Table 22–3.  Reestimates of Credit Subsidies on Loans Disbursed Between 1992-2012 1—Continued
(Outlays and receipts, in millions of dollars)
Agency and Program

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

–7,075
–1
3,334
11,220
–368

–320
–*
–1,862
–7,113
32

Treasury:
GSE Mortgage-backed Securities Purchase Program ��������
Community Development Financial Institutions Fund ����������
Troubled Asset Relief Program Direct Loan 4 ����������������������
Troubled Asset Relief Program Equity 4 �������������������������������
Small Business Lending Fund 4 �������������������������������������������

.........
.........
.........
.........
.........

.........
*
.........
.........
.........

.........
–1
.........
.........
.........

.........
*
.........
.........
.........

.........
–1
.........
.........
.........

.........
1
.........
.........
.........

.........
*
.........
.........
.........

Veterans Affairs:
Veterans Housing Benefit Program Fund ����������������������������
Native American Veteran Housing ���������������������������������������
Vocational Rehabilitation Loans ������������������������������������������

–697
.........
.........

17
–3
*

–178
*
*

987
*
*

–44
*
–1

–76
1
1

–402
1
–1

20
*
1

69
–*
–*

45
2
*

389
6
–*

20
3
*

Environmental Protection Agency:
Abatement, Control and Compliance �����������������������������������

–1

*

–3

*

*

*

*

*

–*

–*

*

*

International Assistance Programs:
Foreign Military Financing ���������������������������������������������������

119

–397

–64

–41

–7

–6

7

.........

.........

.........

37

116

U.S. Agency for International Development:
Micro and Small Enterprise Development �����������������������

*

.........

*

.........

.........

.........

.........

.........

.........

.........

.........

.........

Overseas Private Investment Corporation:
OPIC Direct Loans �����������������������������������������������������������
IMF Quota and New Arrangements to Borrow 4 ������������������
Debt Reduction ��������������������������������������������������������������������

.........
.........
.........

–4
.........
*

–21
.........
–47

3
.........
–104

–7
.........
54

72
.........
–3

31
.........
.........

–15
.........
.........

–46
.........
.........

6
.........
.........

–12
17
.........

11
.........
.........

Small Business Administration:
Business Loans �������������������������������������������������������������������
Disaster Loans ���������������������������������������������������������������������

–2
–14

1
266

25
589

.........
196

–16
61

–4
258

4
–109

7
134

3
157

1
136

1
126

–2
1

Other Independent Agencies:
Export-Import Bank Direct Loans ����������������������������������������
Federal Communications Commission ��������������������������������

117
92

–640
346

–305
380

111
732

–257
–24

–227
11

–120
.........

7
–100

54
–23

394
12

382
3

353
–*

Agriculture:
Agriculture Credit Insurance Fund ���������������������������������������
Agriculture Resource Conservation Demonstration ������������
Biorefinery Assistance ���������������������������������������������������������
Commodity Credit Corporation Export Guarantees �������������
Rural Electrification and Telecommunications Loans ����������
Rural Housing Insurance Fund ��������������������������������������������
Rural Business and Industry Program ��������������������������������
Rural Community Facilities Program �����������������������������������
Rural Water and Waste Disposal Program ��������������������������
Rural Community Advancement Program 2 �������������������������
Rural Energy for America ����������������������������������������������������

40
.........
.........
.........
.........
–56
.........
.........
.........
17
.........

–36
1
.........
–13
.........
32
.........
.........
.........
91
.........

–33
–1
.........
–230
.........
50
.........
.........
.........
15
.........

–22
*
.........
–205
.........
66
.........
.........
.........
29
.........

–162
*
.........
–366
.........
44
.........
.........
.........
–64
.........

20
.........
.........
–232
*
.........
.........
.........
.........
–16
.........

–36
.........
.........
–225
*
–19
–9
–1
.........
.........
*

–48
.........
.........
–39
*
–24
–11
13
.........
.........
*

–4
.........
.........
9
–*
81
41
7
1
.........
2

–58
.........
*
–22
–*
183
72
11
*
.........
4

–75
.........
20
48
–*
312
178
13
–*
.........
13

–26
.........
–26
36
–*
662
90
–3
–*
.........
–*

Commerce:
Fisheries Finance ����������������������������������������������������������������
Emergency Steel Guaranteed Loans ����������������������������������
Emergency Oil and Gas Guaranteed Loans ������������������������

–1
.........
*

3
50
*

*
*
*

1
3
*

*
–75
–1

1
–13
*

*
1
*

*
–53
.........

*
.........
.........

*
.........
.........

*
.........
.........

–*
.........
.........

Defense—Military Programs:
Military Housing Improvement Fund ������������������������������������
Defense Export Loan Guarantee �����������������������������������������
Arms Initiative Guaranteed Loan Program ��������������������������

.........
.........
.........

.........
.........
.........

–3
.........
.........

–1
–5
.........

–3
.........
.........

–5
.........
.........

–1
.........
20

–2
.........
.........

–3
.........
2

–2
.........
–3

–2
.........
.........

–2
.........
–1

Federal Family Education Loan Program: 3
Volume reestimate ���������������������������������������������������������������
Other technical reestimate ���������������������������������������������������

.........
.........

277
–2,483

.........
–3,278

.........
1,348

.........
6,837

.........
–3,399

.........
.........
.........
–7,008 –14,455 –10,354

.........
–6,305

Energy:
Title 17 Innovative Technology Fund �����������������������������������

.........

.........

.........

.........

.........

.........

......... –8,165
2,054
.........
–2
2
......... –15,499 –4,195
......... –90,601 –47,207
.........
.........
.........

LOAN GUARANTEES

Education:
.........
.........
–189 –13,463
.........

.........

.........

*

12

–4

403

22. Credit and Insurance

Table 22–3.  Reestimates of Credit Subsidies on Loans Disbursed Between 1992-2012 1—Continued
(Outlays and receipts, in millions of dollars)
Agency and Program

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Health and Human Services:
Heath Center Loan Guarantees ������������������������������������������
Health Education Assistance Loans ������������������������������������

*
.........

*
–5

.........
–37

1
–33

*
–18

*
–20

–1
*

–2
–15

*
–5

–*
13

.........
–5

.........
25

Housing and Urban Development:
Indian Housing Loan Guarantee ������������������������������������������
Title VI Indian Guarantees ���������������������������������������������������
Native Hawaiian Housing �����������������������������������������������������
Community Development Loan Guarantees ������������������������
FHA-Mutual Mortgage Insurance ����������������������������������������
FHA-General and Special Risk Insurance Fund ������������������
Guarantees of Mortgage-backed Securities ������������������������

*
.........
.........
.........
–1,308
–403
.........

–1
–1
.........
.........
1,100
77
.........

*
1
.........
19
5,947
352
.........

–3
4
.........
–10
1,979
507
.........

–1
*
.........
–2
2,842
238
.........

*
–4
.........
4
636
–1,254
.........

–5
–3
.........
1
3,923
–362
.........

–7
–2
.........
–1
9,262
6,086
.........

–7
–2
–*
–9
8,435
571
.........

–2
–1
–*
–8
5,014
1,848
684

13
–2
*
2
5,628
–1,200
132

–9
–2
–1
5
17,642
3,626
97

Interior:
Bureau of Indian Affairs Guaranteed Loans ������������������������
Bureau of Indian Affairs Insured Loans �������������������������������

–1
.........

–2
.........

–2
.........

*
.........

15
.........

5
.........

–30
.........

–3
.........

11
.........

4
–*

–19
.........

.........
.........

Transportation:
Maritime Guaranteed Loans (Title XI) ���������������������������������
Minority Business Resource Center ������������������������������������

187
1

27
.........

–16
*

4
*

–76
.........

–11
*

–51
*

23
.........

8
–*

32
–*

3
–*

–15
–*

Treasury:
Air Transportation Stabilization Program �����������������������������
Troubled Asset Relief Program 4 �����������������������������������������

.........
.........

113
.........

–199
.........

292
.........

–109
.........

–95
.........

.........
.........

.........
.........

.........
–517

.........
–691

.........
28

.........
–159

Veterans Affairs:
Veterans Housing Benefit Fund Program ����������������������������

–163

–184

–1,515

–462

–842

–525

182

–70

494

1,084

654

1,162

–1
.........
–4

.........
.........
–15

1
2
48

–3
–2
–2

–2
.........
–5

2
–3
–11

11
*
–22

5
.........
7

–8
.........
–1

–6
–1
–10

4
.........
–6

–5
.........
–3

–34
.........
.........
.........

.........
.........
.........
.........

.........
–76
.........
.........

.........
–111
.........
.........

.........
188
7
.........

.........
34
14
.........

.........
–16
–12
.........

.........
–46
12
.........

.........
283
–11
.........

.........
–21
6
.........

.........
–316
–54
.........

.........
–35
213
–18

Overseas Private Investment Corporation:
OPIC Guaranteed Loans �������������������������������������������������

5

77

60

–212

–21

–149

–268

–26

–23

–13

39

–27

Small Business Administration:
Business Loans �������������������������������������������������������������������

–226

304

1,750

1,034

–390

–268

–140

931

3,746

3,711

1,512

–860

Other Independent Agencies:
Export-Import Bank Guarantees ������������������������������������������

–417

–2,042

–1,133

–655

–1,164

–579

–174

23

571

–370

–312

291

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 ���������������������������������������������������
Loan Guarantees to Israel �����������������������������������������������
Loan Guarantees to Egypt �����������������������������������������������
Loan Guarantees to Tunisia ���������������������������������������������

Total �������������������������������������������������������������������������������� –1,854
–142
3,468
6,008
9,003 –3,441
2,044
2,576 –107,214 –63,353
7,560
–338
* Less than $500,000.
1 Excludes interest on reestimates. Additional information on credit reform subsidy reestimates is available in the Federal Credit Supplement.
2 Includes Rural Water and Waste Disposal, Rural Community Facilities, and Rural Business and Industry programs through 2007.
3 Volume reestimates in mandatory programs represent a change in volume of loans disbursed in the prior years.
4 As authorized by law, table includes reestimated subsidy costs of equity purchases under the TARP and the Small Business Lending Fund, and IMF transactions authorized under the
Supplemental Appropriations Act of 2009. Subsidy costs for the TARP and IMF activity reflected on a credit reform basis are estimated using the discount rate required under the FCRA,
adjusted for market risks, as directed in legislation. The Administration proposes restating IMF amounts provided in 2009. Please see the Budget Appendix for more information.

404

Analytical Perspectives

Table 22–4.  Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2012–2014
(Dollars in millions)
2012 Actual
Agency and Program

Subsidy
rate 1

Subsidy
budget
authority

2013 CR
Loan
levels

Subsidy
rate 1

2014 Proposed

Subsidy
budget
authority

Loan
levels

Subsidy
rate 1

Subsidy
budget
authority

Loan
levels

Agriculture:
Agricultural Credit Insurance Fund Program Account ���������������������
Farm Storage Facility Loans Program Account �������������������������������
Rural Electrification and Telecommunications Loans Program
Account ���������������������������������������������������������������������������������������
Distance Learning, Telemedicine, and Broadband Program �����������
Rural Water and Waste Disposal Program Account ������������������������
Rural Community Facilities Program Account ���������������������������������
Multifamily Housing Revitalization Program Account ����������������������
Rural Housing Insurance Fund Program Account ���������������������������
Rural Microenterprise Investment Program Account �����������������������
Rural Development Loan Fund Program Account ���������������������������
Rural Economic Development Loans Program Account ������������������

5.27
–2.30

93
–5

1,751
200

4.65
–2.48

81
–7

1,758
309

3.72
–2.53

70
–8

1,906
309

–4.19
3.55
9.58
–3.03
52.12
6.68
.........
33.88
12.98

–202
2
91
–39
8
65
.........
6
6

4,822
69
947
1,271
15
973
.........
18
41

–6.20
9.47
8.07
–2.08
53.96
9.67
.........
32.04
12.39

–299
5
77
–27
11
83
.........
6
10

4,822
53
951
1,300
19
858
.........
19
78

–3.00
13.05
–0.87
–13.21
50.32
5.83
6.26
21.61
8.45

–140
34
–10
–198
18
28
3
4
6

4,690
257
1,200
1,500
36
472
46
19
73

Commerce:
Fisheries Finance Program Account �����������������������������������������������

–8.45

–6

65

–4.21

–4

83

–7.56

–6

83

Defense—Military Programs:
Defense Family Housing Improvement Fund �����������������������������������

14.07

20

143

16.26

60

367

.........

.........

.........

Education:
College Housing and Academic Facilities Loans Program Account 
Teacher Education Assistance ��������������������������������������������������������
Federal Perkins Loan Program Account ������������������������������������������
Federal Direct Student Loan Program Account �������������������������������

5.50
10.25
.........
–16.49

13
14
.........
–27,101

235
138
.........
164,302

6.29
1.48
.........
–17.94

20
2
.........
–26,141

318
125
.........
145,690

3.09
1.52
–30.07
–18.99

10
1
–1,409
–29,174

320
94
4,684
153,604

.........

.........

.........

2.........

.........

9,050

1.72

169

9,822

.........

.........

.........

25.44

4,224

16,602

.........

.........

.........

42.91

725

1,691

41.35

122

295

.........

.........

.........

Energy:
Title 17 Innovative Technology Loan Guarantee Program ���������������
Advanced Technology Vehicles Manufacturing Loan Program
Account ���������������������������������������������������������������������������������������
Health and Human Services:
Consumer Operated and Oriented Plan Program Account �������������
Consumer Operated and Oriented Plan Program Contingency
Fund �������������������������������������������������������������������������������������������

2

2

.........

.........

.........

37.66

68

180

.........

.........

.........

Homeland Security:
Disaster Assistance Direct Loan Program Account �������������������������

86.06

4

5

85.69

335

392

.........

.........

.........

Housing and Urban Development:
FHA-Mutual Mortgage Insurance Program Account ������������������������
FHA-General and Special Risk Program Account ���������������������������
Emergency Homeowners’ Relief Fund ��������������������������������������������

.........
.........
97.72

.........
.........
18

.........
.........
19

.........
.........
97.71

.........
.........
22

50
1
23

.........
.........
.........

.........
.........
.........

20
1
.........

State:
Repatriation Loans Program Account ����������������������������������������������

57.85

1

2

57.67

1

2

63.06

1

2

Transportation:
TIFIA General Fund Program Account, Federal Highway
Administration, Transportation ����������������������������������������������������
Federal-aid Highways ����������������������������������������������������������������������
Railroad Rehabilitation and Improvement Program �������������������������

1.05
5.50
–2.12

6
47
–3

546
852
139

8.28
9.66
.........

39
746
.........

466
7,723
600

.........
10.16
.........

.........
995
.........

.........
9,793
600

Treasury:
Community Development Financial Institutions Fund Program
Account ���������������������������������������������������������������������������������������

40.26

6

15

32.15

8

25

0.22

2

1,025

Veterans Affairs:
Veterans Housing Benefit Program Fund ����������������������������������������
Native American Veteran Housing Loan Program Account �������������

–1.93
–8.82

–3
–1

163
8

–12.20
–13.87

–33
–2

268
14

–21.58
–13.12

–89
–2

413
14

International Assistance Programs:
Development Credit Authority Program Account �����������������������������
Overseas Private Investment Corporation Program Account ����������

.........
–1.64

.........
–5

.........
422

27.42
–3.10

3
–23

10
750

27.14
–4.28

3
–51

10
1,200

2

405

22. Credit and Insurance

Table 22–4.  Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2012–2014—Continued
(Dollars in millions)
2012 Actual
Agency and Program

Subsidy
rate 1

Subsidy
budget
authority

2013 CR
Loan
levels

Subsidy
rate 1

Subsidy
budget
authority

2014 Proposed
Loan
levels

Subsidy
rate 1

Subsidy
budget
authority

Loan
levels

Small Business Administration:
Disaster Loans Program Account ����������������������������������������������������
Business Loans Program Account ��������������������������������������������������

11.03
19.43

52
9

463
42

11.11
15.71

455
7

4,100
43

8.48
18.64

93
5

1,100
25

Export-Import Bank of the United States:
Export-Import Bank Loans Program Account ����������������������������������

–13.69

–1,611

11,765

15.03

15

100

9.70

15

150

National Infrastructure Bank:
National Infrastructure Bank Program Account �������������������������������

.........

.........

.........

.........

.........

.........

2

11.57

58

500

Total ��������������������������������������������������������������������������������������������
N/A
–27,790
191,122
N/A
–20,136
197,444
N/A
N/A = Not applicable.
1 Additional information on credit subsidy rates is available in the Federal Credit Supplement.
2 Rate reflects notional estimate. Estimates will be determined at the time of execution, and will reflect the terms of the contracts and other characteristics.

–29,572

193,968

406

Analytical Perspectives

Table 22–5. Loan Guarantee Subsidy Rates, Budget Authority, and Loan Levels, 2012–2014
(Dollars in millions)
2012 Actual
Agency and Program

Subsidy
Subsidy budget
1
authority
rate

2013 CR
Loan
levels

Subsidy
Subsidy budget
1
rate
authority

2014 Proposed
Loan
levels

Subsidy
Subsidy budget
1
rate
authority

Loan
levels

Agriculture:
Agricultural Credit Insurance Fund Program Account ����������������������������������������������
Commodity Credit Corporation Export Loans Program Account ������������������������������
Rural Water and Waste Disposal Program Account �������������������������������������������������
Rural Community Facilities Program Account ����������������������������������������������������������
Rural Housing Insurance Fund Program Account ����������������������������������������������������
Rural Business Program Account �����������������������������������������������������������������������������
Rural Energy for America Program ���������������������������������������������������������������������������
Biorefinery Assistance Program Account �����������������������������������������������������������������

0.66
–0.69
1.59
4.73
–0.03
5.58
26.19
31.30

16
–29
*
10
–6
59
4
145

2,434
4,132
8
202
19,316
1,053
14
462

0.64
–1.16
1.06
6.70
–0.25
5.88
24.01
42.00

25
–64
2
8
–60
51
13
40

3,859
5,500
177
125
24,130
860
53
96

0.40
–1.14
0.71
6.21
–0.14
6.99
27.43
......

14
–63
1
3
–34
63
33
......

3,650
5,500
98
49
24,150
897
120
......

Health and Human Services:
Health Resources and Services �������������������������������������������������������������������������������

2.67

*

10

1.79

*

12

4.53

*

6

Housing and Urban Development:
Indian Housing Loan Guarantee Fund Program Account �����������������������������������������
Native Hawaiian Housing Loan Guarantee Fund Program Account �������������������������
Native American Housing Block Grant ���������������������������������������������������������������������
Community Development Loan Guarantees Program Account ��������������������������������
FHA-Mutual Mortgage Insurance Program Account �������������������������������������������������
FHA-General and Special Risk Program Account ����������������������������������������������������

1.46
0.93
10.80
2.48
–2.47
–1.98

12
*
2
5
–5,582
–438

792
4
20
206
226,523
22,050

1.35
0.50
10.91
2.46
–6.73
–4.21

5
1
5
9
–18,177
–996

368
14
45
364
270,180
23,670

Interior:
Indian Guaranteed Loan Program Account ��������������������������������������������������������������

8.38

6

73

5.53

4

73

5.75

4

70

Transportation:
Minority Business Resource Center Program ����������������������������������������������������������
Federal-aid Highways �����������������������������������������������������������������������������������������������
Railroad Rehabilitation and Improvement Program ��������������������������������������������������
Maritime Guaranteed Loan (Title XI) Program Account �������������������������������������������

1.81
......
......
......

*
......
......
......

5
......
......
......

1.73
7.60
......
9.02

*
10
......
38

18
132
100
421

1.76
......
......
......

*
......
......
......

18
......
100
......

Veterans Affairs:
Veterans Housing Benefit Program Fund �����������������������������������������������������������������

–0.11

–143

120,252

–0.10

–108

108,211

–0.02

–13

65,533

International Assistance Programs:
Loan Guarantees to Israel Program Account �����������������������������������������������������������
Tunisia Loan Guarantee Program Account ���������������������������������������������������������������
Development Credit Authority Program Account ������������������������������������������������������
Overseas Private Investment Corporation Program Account �����������������������������������

......
6.16
5.04
–8.84

......
30
26
–250

......
485
524
2,836

......
......
6.45
–5.99

......
......
47
–132

1,270
......
729
2,200

......
......
4.07
–6.57

......
......
25
–243

1,274
......
618
3,700

Small Business Administration:
Disaster Loans Program Account �����������������������������������������������������������������������������
Business Loans Program Account ���������������������������������������������������������������������������

......
0.36

......
195

......
54,309

1.94
0.48

*
428

18
88,731

......
0.14

......
101

......
73,427

Export-Import Bank of the United States:
Export-Import Bank Loans Program Account �����������������������������������������������������������

–1.40

–336

24,020

–3.07

–1,178

38,372

–2.60

–1,107

42,531

National Infrastructure Bank:
National Infrastructure Bank Program Account ��������������������������������������������������������

......

......

......

......

......

......

8.85

18

200

Total ���������������������������������������������������������������������������������������������������������������������

N/A

–6,274

479,730

N/A

–20,029

569,728

N/A

–14,993

445,590

GNMA:
Guarantees of Mortgage-backed Securities Loan Guarantee Program Account �����

–0.19

–737

388,029

–0.23

–580

252,000

–0.22

–542

246,500

Treasury:
Troubled Asset Relief Program, Housing Programs 3 �����������������������������������������������

4.00

9

234

2.48

129

5,229

......

......

......

SBA:
Secondary Market Guarantee Program ��������������������������������������������������������������������

......

......

3,926

......

......

12,000

......

......

12,000

0.33
6
1,818
0.53
1
38
12.10
5
45
......
......
500
–6.50 –12,959 199,336
–3.87
–848 21,912

2

ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS

Total, secondary guaranteed loan commitments ��������������������������������������������
N/A
–728 392,189
N/A
–451 269,229
N/A
–542 258,500
N/A = Not applicable.
* Less than $500,000.
1 Additional information on credit subsidy rates is available in the Federal Credit Supplement.
2 Rate reflects notional estimate. Estimates will be determined at the time of execution, and will reflect the terms of the contracts and other characteristics.
3 Amounts reflect the TARP FHA Refinance Letter of Credit program. Subsidy costs for this program are calculated using the discount rate required by the FCRA, adjusted for market
risks, as directed in legislation.

407

22. Credit and Insurance

Table 22–6. Summary of Federal Direct Loans and Loan Guarantees 1
(In billions of dollars)
Actual
2005

2006

2007

2008

Estimate

2009

2010

2011

2012

2013 CR

2014

Direct Loans:
Obligations ���������������������������������������������������������������������������������������������������������������
Disbursements ���������������������������������������������������������������������������������������������������������
New subsidy budget authority 2 �������������������������������������������������������������������������������
Reestimated subsidy budget authority 2,3 ����������������������������������������������������������������

56.3
50.6
2.1
3.8

57.8
46.6
4.7
3.1

42.5
41.7
1.4
3.4

75.6
41.1
3.7
–0.8

812.9
669.4
140.1
–0.1

246.0
218.9
–9.2
–125.1

296.3
186.7
–15.7
–66.8

191.1
170.0
–27.2
16.8

197.4
179.9
–20.1
–19.5

194.0
222.8
–26.7
.........

Total subsidy budget authority �����������������������������������������������������������������������

6.0

7.8

4.8

–1.3

140.0

–134.3

–82.5

–10.4

–39.6

–26.7

Loan Guarantees:
Commitments 4 ��������������������������������������������������������������������������������������������������������
Lender disbursements 4 �������������������������������������������������������������������������������������������
New subsidy budget authority 2 �������������������������������������������������������������������������������
Reestimated subsidy budget authority 2,3 ����������������������������������������������������������������

248.5
221.6
10.1
3.5

280.7
256.0
17.2
7.0

270.2
251.2
5.7
–6.8

367.7
354.6
–1.4
3.6

879.2
841.5
–7.8
0.5

507.3
494.8
–4.9
7.6

446.7
384.1
–7.4
–4.0

479.7
444.3
–6.9
–4.9

569.7
487.0
–20.5
20.8

445.6
383.6
–19.2
.........

Total subsidy budget authority �����������������������������������������������������������������������
13.6
24.2
–1.1
2.2
–7.2
2.8
–11.4
–11.8
0.3
–19.2
equity purchases under the TARP and the Small Business Lending Fund, and IMF increases provided in the Supplemental Appropriations Act of 2009, as authorized by law.
2 Credit subsidy costs for the TARP and IMF increases provided in the Supplemental Appropriations Act of 2009 are calculated using the discount rate required under the FCRA,
adjusted for market risks, as directed in legislation. The Administration proposes restating IMF amounts provided in 2009. Please see the Budget Appendix for more information.
3 Includes interest on reestimate.
4 To avoid double-counting, totals exclude GNMA secondary guarantees of loans that are guaranteed by FHA, VA, and RHS, SBA’s guarantee of 7(a) loans sold in the secondary
market, and the TARP FHA Letter of Credit.
1 Includes

408

Analytical Perspectives

Table 22–7.  Direct Loan Write-offs and Guaranteed Loan Terminations for Defaults
As a percentage of outstanding loans 1

In millions of dollars
Agency and Program

2012
Actual

2013
Estimate

2014
Estimate

2012
Actual

2013
Estimate

2014
Estimate

DIRECT LOAN WRITE-OFFS
Agriculture:
Agricultural Credit Insurance Fund �����������������������������������������������������������������������������������������������
Rural Business and Industry Program ������������������������������������������������������������������������������������������
Rural Community Facility ��������������������������������������������������������������������������������������������������������������
Rural Housing Insurance Fund �����������������������������������������������������������������������������������������������������
Rural Water and Waste Disposal ��������������������������������������������������������������������������������������������������

41
2
13
42
15

46
.........
.........
56
.........

54
.........
.........
56
.........

0.43
8.00
0.29
0.15
0.12

0.48
.........
.........
0.21
.........

0.54
.........
.........
0.21
.........

Commerce:
Economic Development Revolving Fund Liquidating Account ������������������������������������������������������

1

1

1

20.00

33.33

100.00

Defense—Military Programs:
Family Housing Improvement Fund ����������������������������������������������������������������������������������������������

.........

2

3

.........

0.14

0.18

Housing and Urban Development:
Emergency Homeowners’ Relief Fund �����������������������������������������������������������������������������������������
Guarantees of Mortgage-backed Securities ���������������������������������������������������������������������������������

.........
.........

24
1

20
1

.........
.........

23.53
12.50

20.83
14.29

International Assistance Programs:
Debt Reduction (Agency for International Development) �������������������������������������������������������������
Overseas Private Investment Corporation ������������������������������������������������������������������������������������

36
4

.........
4

.........
5

2.68
0.25

.........
0.19

.........
0.17

Small Business Administration:
Business Loans ����������������������������������������������������������������������������������������������������������������������������
Disaster Loans ������������������������������������������������������������������������������������������������������������������������������

5
163

2
158

2
198

2.72
2.04

1.10
1.60

1.08
1.79

Transportation:
Railroad Rehabilitation and Improvement Program ����������������������������������������������������������������������

.........

1

1

.........

0.09

0.06

Treasury:
Community Development Financial Institutions Fund �������������������������������������������������������������������
Small Business Lending Fund 2 ���������������������������������������������������������������������������������������������������
Troubled Asset Relief Program Equity Purchases 2 ���������������������������������������������������������������������

.........
.........
.........

2
6
3,013

2
13
3,930

.........
.........
.........

3.57
0.15
8.92

1.69
0.42
21.31

Veterans Affairs:
Veterans Housing Benefit Program ����������������������������������������������������������������������������������������������

12

32

14

1.41

3.63

1.13

Other Independent Agencies:
Export-Import Bank ����������������������������������������������������������������������������������������������������������������������
Spectrum Auction �������������������������������������������������������������������������������������������������������������������������

1
20

10
24

10
24

0.01
15.15

0.08
21.43

0.09
27.27

Total, direct loan write-offs ��������������������������������������������������������������������������������������������������

355

3,382

4,334

0.20

2.76

3.96

Agriculture:
Agricultural Credit Insurance Fund �����������������������������������������������������������������������������������������������
Biorefinery Assistance Guaranteed Loans �����������������������������������������������������������������������������������
Commodity Credit Corporation Export Loans �������������������������������������������������������������������������������
Rural Business and Industry Program ������������������������������������������������������������������������������������������
Rural Community Facility ��������������������������������������������������������������������������������������������������������������
Rural Energy for America Program �����������������������������������������������������������������������������������������������
Rural Housing Insurance Fund �����������������������������������������������������������������������������������������������������

138
38
.........
161
8
.........
561

78
7
92
232
10
8
501

78
10
92
264
10
8
586

0.91
17.27
.........
2.08
0.64
.........
0.69

0.47
2.33
0.84
2.92
0.71
7.55
0.52

0.44
2.02
0.82
3.31
0.70
7.48
0.52

Defense—Military:
Family Housing Improvement Fund ����������������������������������������������������������������������������������������������

.........

5

7

.........

1.14

1.53

Education:
Federal Family Education Loans ��������������������������������������������������������������������������������������������������
Health Education Assistance Loans 3 ������������������������������������������������������������������������������������������

13,480
.........

9,066
.........

7,404
13

4.11
.........

3.12
.........

2.86
2.78

Energy:
Title 17 Innovative Technology ������������������������������������������������������������������������������������������������������

.........

4

17

.........

0.12

0.43

Health and Human Services:
Health Center Loan Guarantees ���������������������������������������������������������������������������������������������������
Health Education Assistance Loans 3 ������������������������������������������������������������������������������������������

1
23

1
16

1
.........

1.14
3.78

1.14
3.24

1.22
.........

GUARANTEED LOAN TERMINATIONS FOR DEFAULT

409

22. Credit and Insurance

Table 22–7.  Direct Loan Write-offs and Guaranteed Loan Terminations for Defaults—Continued
As a percentage of outstanding loans 1

In millions of dollars
Agency and Program

2012
Actual

2013
Estimate

2014
Estimate

2012
Actual

2013
Estimate

2014
Estimate

Housing and Urban Development:
FHA-General and Special Risk Insurance Fund ���������������������������������������������������������������������������
FHA-Mutual Mortgage Insurance �������������������������������������������������������������������������������������������������
Home Ownership Preservation Equity Fund ��������������������������������������������������������������������������������
Indian Housing Loan Guarantee ���������������������������������������������������������������������������������������������������
Native American Housing Block Grant �����������������������������������������������������������������������������������������

2,242
15,849
1
15
2

5,245
45,459
2
16
2

5,223
32,557
2
16
2

1.42
1.24
0.83
0.52
1.41

3.08
3.28
1.64
0.43
1.29

2.88
2.39
1.69
0.34
1.20

Interior:
Indian Guaranteed Loans �������������������������������������������������������������������������������������������������������������

.........

2

2

.........

0.33

0.34

International Assistance Programs:
Development Credit Authority �������������������������������������������������������������������������������������������������������
Foreign Military Financing ������������������������������������������������������������������������������������������������������������
Housing and Other Credit Guaranty Programs ����������������������������������������������������������������������������
Overseas Private Investment Corporation ������������������������������������������������������������������������������������
Urban and Environmental Credit Program ������������������������������������������������������������������������������������

2
2
8
23
4

3
1
7
79
4

3
.........
8
55
4

0.47
0.46
1.37
0.32
1.62

0.56
0.34
1.36
0.81
1.71

0.48
.........
1.78
0.42
1.89

Small Business Administration:
Business Loans ����������������������������������������������������������������������������������������������������������������������������

3,279

2,966

2,764

3.22

2.74

2.37

Transportation:
Maritime Guaranteed Loan (Title XI) Program �����������������������������������������������������������������������������

.........

44

45

.........

1.84

2.31

Treasury:
Troubled Asset Relief Program, Home Affordable Modification ����������������������������������������������������

.........

1

6

.........

0.02

0.11

Veterans Affairs:
Veterans Housing Benefit Program ����������������������������������������������������������������������������������������������

2,057

2,173

2,473

0.54

0.54

0.54

Other Independent Agencies:
Export-Import Bank ����������������������������������������������������������������������������������������������������������������������

194

193

44

0.27

0.24

0.05

Total, guaranteed loan terminations for default ������������������������������������������������������������������

38,088

66,217

51,694

1.56

2.54

1.95

Total, direct loan write-offs and guaranteed loan terminations �����������������������������������

38,443

69,599

56,028

1.47

2.55

2.03

Agriculture:
Agricultural Credit Insurance Fund �����������������������������������������������������������������������������������������������
Biorefinery Assistance Guaranteed Loans �����������������������������������������������������������������������������������
Rural Business and Industry Program ������������������������������������������������������������������������������������������
Rural Energy for America Program �����������������������������������������������������������������������������������������������
Rural Housing Insurance Fund �����������������������������������������������������������������������������������������������������

18
33
63
10
47

10
.........
46
.........
125

10
.........
68
.........
126

11.54
86.84
12.48
100.00
6.00

6.21
.........
9.68
.........
12.65

5.75
.........
11.09
.........
11.26

Education:
Federal Family Education Loans ��������������������������������������������������������������������������������������������������
Health Education Assistance Loans 3 ������������������������������������������������������������������������������������������

1,450
.........

1,340
.........

1,253
21

3.02
.........

2.97
.........

2.96
2.54

Health and Human Services:
Health Education Assistance Loans 3 ������������������������������������������������������������������������������������������

28

22

.........

5.04

4.05

.........

Housing and Urban Development:
FHA-General and Special Risk Insurance Fund ���������������������������������������������������������������������������
FHA-Mutual Mortgage Insurance �������������������������������������������������������������������������������������������������

830
.........

962
126

1,166
142

13.81
.........

12.57
3.91

13.78
3.31

International Assistance Programs:
Overseas Private Investment Corporation ������������������������������������������������������������������������������������

9

20

10

4.86

8.58

4.00

Small Business Administration:
Business Loans ����������������������������������������������������������������������������������������������������������������������������

2,166

2,098

2,018

18.82

18.80

18.81

Veterans Affairs:
Veterans Housing Benefit Program ����������������������������������������������������������������������������������������������

2

4

2

13.33

12.90

10.53

Total, write-offs of loans receivable ������������������������������������������������������������������������������������
4,656
4,753
4,816
6.58
6.83
1 Loans outstanding at start of year plus new disbursements.
2 Equity purchases under the TARP and the Small Business Lending Fund are reflected here as authorized by law.
3 The Budget reflects the proposal to transfer the HEAL Loan Guarantee program from the Department of Health and Human Services to the Department of Education.

7.03

ADDENDUM: WRITE-OFFS OF DEFAULTED GUARANTEED
LOANS THAT RESULT IN LOANS RECEIVABLE

410

Analytical Perspectives

Table 22–8.  Appropriations Acts Limitations On Credit Loan Levels 1
(In millions of dollars)
Agency and Program

2012 Actual

2013 CR

2014 Estimate

DIRECT LOAN OBLIGATIONS
Agriculture:
Agricultural Credit Insurance Fund Direct Loan Financing Account ����������������������������������������������������������������������������������������������������������
Distance Learning, Telemedicine, and Broadband Direct Loan Financing Account ����������������������������������������������������������������������������������
Rural Economic Development Direct Loan Financing Account �����������������������������������������������������������������������������������������������������������������

1,812
69
33

1,726
53
33

1,906
257
33

Commerce:
Fisheries Finance Direct Loan Financing Account ������������������������������������������������������������������������������������������������������������������������������������

83

83

83

Education:
Historically Black College and University Capital Financing Direct Loan Financing Account ��������������������������������������������������������������������

368

368

320

Homeland Security:
Disaster Assistance Direct Loan Financing Account ���������������������������������������������������������������������������������������������������������������������������������

25

425

.........

Housing and Urban Development:
FHA-General and Special Risk Direct Loan Financing Account ����������������������������������������������������������������������������������������������������������������
FHA-Mutual Mortgage Insurance Direct Loan Financing Account ������������������������������������������������������������������������������������������������������������

20
50

20
50

20
20

Treasury:
Community Development Financial Institutions Fund Direct Loan Financing Account ������������������������������������������������������������������������������

25

25

1025

Veterans Affairs:
Vocational Rehabilitation Direct Loan Financing Account �������������������������������������������������������������������������������������������������������������������������

3

3

3

International Assistance Programs:
Development Credit Authority Direct Loan Financing Account ������������������������������������������������������������������������������������������������������������������

10

10

10

Total, limitations on direct loan obligations �������������������������������������������������������������������������������������������������������������������������������������

2,498

2,796

3,677

Agriculture:
Agricultural Credit Insurance Fund Guaranteed Loan Financing Account ������������������������������������������������������������������������������������������������

2,611

3,859

3,650

Commerce:
Economic Development Assistance Programs Financing Account �����������������������������������������������������������������������������������������������������������

70

70

.........

Housing and Urban Development:
Indian Housing Loan Guarantee Fund Financing Account ������������������������������������������������������������������������������������������������������������������������
Title VI Indian Federal Guarantees Financing Account �����������������������������������������������������������������������������������������������������������������������������
Native Hawaiian Housing Loan Guarantee Fund Financing Account ��������������������������������������������������������������������������������������������������������
Community Development Loan Guarantees Financing Account ���������������������������������������������������������������������������������������������������������������
FHA-General and Special Risk Guaranteed Loan Financing Account ������������������������������������������������������������������������������������������������������
FHA-Mutual Mortgage Insurance Fund Guaranteed Loan Financing Account ������������������������������������������������������������������������������������������

360
20
42
240
25,000
400,000

360
20
42
240
25,000
400,000

1,818
18
38
500
30,000
400,000

Interior:
Indian Guaranteed Loan Financing Account ���������������������������������������������������������������������������������������������������������������������������������������������

73

73

70

Transportation:
Minority Business Resource Center Guaranteed Loan Financing Account �����������������������������������������������������������������������������������������������

18

18

18

International Assistance Programs:
Development Credit Authority Guaranteed Loan Financing Account ��������������������������������������������������������������������������������������������������������

740

740

740

LOAN GUARANTEE COMMITMENTS

Small Business Administration:
Business Guaranteed Loan Financing Account 2 ��������������������������������������������������������������������������������������������������������������������������������������

28,000

28,000

35,500

Total, limitations on loan guarantee commitments �������������������������������������������������������������������������������������������������������������������������

457,174

458,422

472,352

Housing and Urban Development:
Guarantees of Mortgage-backed Securities Financing Account ���������������������������������������������������������������������������������������������������������������

500,000

500,000

500,000

Small Business Administration:
Secondary Market Guarantees ������������������������������������������������������������������������������������������������������������������������������������������������������������������

12,000

12,000

12,000

ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS

Total, limitations on secondary guaranteed loan commitments ����������������������������������������������������������������������������������������������������
512,000
512,000
512,000
1 Data represents loan level limitations enacted or proposed in appropriation acts. For information on actual and estimated loan levels supportable by new subsidy budget authority
requested, see Tables 22–4 and 22–5.
2 For SBA revolving credit facilities, amounts include maximum contingent liability.

411

22. Credit and Insurance

Table 22–9.  Face Value of Government-Sponsored Lending 1
(In billions of dollars)
Outstanding
2011
Government-Sponsored Enterprises:
Fannie Mae 2 �����������������������������������������������������������������������������������������������������
Freddie Mac 3 ����������������������������������������������������������������������������������������������������
Federal Home Loan Banks ��������������������������������������������������������������������������������
Farm Credit System �������������������������������������������������������������������������������������������

3,267
1,963
415
167

2012
3,241
2,031
412
180

Total �������������������������������������������������������������������������������������������������������������
5,812
5,864
originations including issuance of securities and investment portfolio purchases, net of purchases of
federally-guaranteed loans.
2 Data for Fannie Mae is net of purchases of federally-guaranteed loans and Freddie Mac issuances, as reported
by the FHFA.
3 Data for Freddie Mac is net of purchases of federally-guaranteed loans and Fannie Mae issuances, as reported
by the FHFA.
1 New

412

Analytical Perspectives

Table 22–10. Lending and Borrowing by GovernmentSponsored Enterprises (GSEs) 1
(In millions of dollars)
Enterprise

2012

LENDING
Federal National Mortgage Association:
Portfolio programs:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–67,889
654,269

Mortgage-backed securities:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

37,056
2,604,611

Federal Home Loan Mortgage Corporation:
Portfolio programs:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–111,167
567,966

Mortgage-backed securities:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

149,989
1,648,262

Farm Credit System:
Agricultural credit bank:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

24,917
69,945

Farm credit banks:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–12,374
97,404

Federal Agricultural Mortgage Corporation:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

627
12,468

Federal Home Loan Banks:
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

–7,589
463,076

Less federally-guaranteed loans purchased by:
Federal National Mortgage Association:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–3,539
71,891

Federal Home Loan Mortgage Corporation:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–364
3,847

Federal Home Loan Banks:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

2,979
13,091

Other:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

N/A
N/A

Less purchase of mortgage securities issued by other GSEs: 2
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

–32,702
80,318

BORROWING
Federal National Mortgage Association:
Portfolio programs:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–57,916
680,257

Mortgage-backed securities:
Net change ����������������������������������������������������������������������������������������������������������������

37,056

413

22. Credit and Insurance

Table 22–10. Lending and Borrowing by GovernmentSponsored Enterprises (GSEs) 1—Continued
(In millions of dollars)
Enterprise
Outstandings �������������������������������������������������������������������������������������������������������������

2012
2,604,611

Federal Home Loan Mortgage Corporation:
Portfolio programs:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–119,598
570,320

Mortgage-backed securities:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

149,989
1,648,262

Farm Credit System:
Agricultural credit bank:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

26,125
82,420

Farm credit banks:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

–17,100
113,879

Federal Agricultural Mortgage Corporation:
Net change ����������������������������������������������������������������������������������������������������������������
Outstandings �������������������������������������������������������������������������������������������������������������

1,034
11,640

Federal Home Loan Banks: 3
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

–23,350
679,448

DEDUCTIONS 4
Less borrowing from other GSEs:
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

N/A
N/A

Less purchase of Federal debt securities:
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

N/A
N/A

Less borrowing to purchase federally-guaranteed loans and securities:
Net change ��������������������������������������������������������������������������������������������������������������������
Outstandings �����������������������������������������������������������������������������������������������������������������

–924
88,829

Less borrowing to purchase mortgage securities issued by other GSEs: 2
Net change ��������������������������������������������������������������������������������������������������������������������
–32,702
Outstandings �����������������������������������������������������������������������������������������������������������������
80,318
N/A = Not available.
1 Data do not reflect an official view of future GSE activity. 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. Data for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks as reported by
the FHFA.
2 Includes Fannie Mae securities purchased by Freddie Mac and the Federal Home Loan Banks, and
Freddie Mac securities purchased by Fannie Mae and the Federal Home Loan Banks.
3 The net change in borrowings is derived from a year-over-year comparison of borrowings in the
Federal Home Loan Banks’ audited financial statements.
4 Where totals and subtotals have not been calculated, a portion of the total is unavailable.

23. Homeland Security Funding Analysis

Section 889 of the Homeland Security Act of 2002 requires that a homeland security funding analysis be incorporated in the President’s Budget. This analysis addresses that legislative requirement, and covers homeland
security funding and activities of all Federal agencies, not
just those carried out by the Department of Homeland
Security (DHS). Since not all activities carried out by DHS
constitute traditional homeland security funding (e.g. response to natural disasters and Coast Guard search and

rescue activities), DHS estimates in this section do not
encompass the entire DHS budget. As also required in
the Homeland Security Act of 2002, this analysis includes
estimates of State, local, and private sector expenditures
on homeland security activities.
The President’s highest priority is to keep the American
people safe. Homeland security budgetary priorities will
continue to be informed by careful, government-wide strategic analysis and review.

Table 23–1. Homeland Security Funding by Agency
(budget authority in millions of dollars)
Agency
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

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 �����������������������������������

2012
Actual
435.4
338.4
17,780.0
30.9
1,938.1
4,118.1
35,088.1
2.0
57.6
4,038.9
45.5
2,673.7
245.4
121.8
380.9
14.8
102.1
10.4
38.0
225.2
443.9
1.3
211.6
15.0
2.6
9.0
22.6
78.5
8.0
97.0
11.0

2012
Supplemental/
Emergency
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

2013 CR
445.3
542.5
17,481.4
31.4
1,926.1
4,080.3
35,717.5
2.0
56.6
4,053.7
36.5
2,795.7
235.0
123.7
367.5
15.0
102.0
9.0
18.0
212.3
443.9
1.3
242.2
25.0
1.6
9.0
22.6
78.5
8.0
101.1
11.0

2013
Supplemental
.........
.........
88.4
.........
.........
.........
2.0
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

2014
Request
607.3
2,567.6
17,360.1
33.0
1,920.4
4,723.1
35,837.3
1.0
56.9
4,172.9
36.8
2,995.9
211.2
124.0
375.5
13.6
102.3
9.1
371.0
225.9
423.0
.........
261.9
15.0
1.6
.........
24.7
73.2
8.0
101.2
11.0

Total, Homeland Security Budget Authority ������������������������������
68,585.7
Less Department of Defense ������������������������������������������������������ –17,780.0

......... 69,195.8
......... –17,481.4

90.4 72,664.4
–88.4 –17,360.1

Non-Defense Homeland Security BA ������������������������������������������
Less Fee-Funded Homeland Security Programs ������������������������
Less Mandatory Homeland Security Programs ��������������������������

.........
.........
.........

2.0
.........
.........

50,805.8
6,051.8
–3,092.7

51,714.4
6,412.2
–3,349.4

55,304.3
7,258.2
–5,394.1

Net Non-Defense Discretionary Homeland Security BA ������������
53,764.9
......... 54,777.2
2.0 57,168.4
* One-time funding increase in 2014 authorized by the Middle Class Tax Relief and Job Creation Act of 2012 to build a nationwide broadband
network for first responders.
** Funding for the Intelligence Community Management Account was moved under DoD beginning in 2013.
415

416

Analytical Perspectives

Data Collection Methodology and Adjustments

Prevent and Disrupt Terrorist Attacks

The Federal spending estimates in this analysis utilize funding and programmatic information collected
on the Executive Branch’s homeland security efforts.
Throughout the budget formulation process, the Office of
Management and Budget (OMB) collects three-year funding estimates and associated programmatic information
from all Federal agencies with homeland security responsibilities. These estimates do not include the efforts of 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 Internet at
www.budget.gov/budget/analytical_perspectives and on
the Budget CD-ROM.
To compile this data, agencies report information using standardized definitions for homeland security. The
data provided by the agencies are developed at the “activity level,’’ which incorporates a set of like programs or
projects, at a level of detail sufficient to consolidate the
information to determine total Governmental spending
on homeland security.
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
homeland security-related activities from host programs
and refine their characterizations. As in the Budget, where
appropriate, the data is also updated to reflect agency activities, Congressional action, and technical re-estimates.
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 the areas of intelligence-and-warning and
domestic counterterrorism aim to disrupt the ability of
terrorists to operate within our borders and prevent the
emergence of violent radicalization. Intelligence-andwarning funding covers activities designed to detect terrorist activity before it manifests itself in an attack so
that proper preemptive, preventive, and protective action
can be taken. Specifically, it is made up of efforts to identify, collect, analyze, and distribute source intelligence
information or the resultant warnings from intelligence
analysis. It also includes information sharing activities
among Federal, State, and local governments, relevant
private sector entities, and the public at large; it does not
include most foreign intelligence collection, although the
resulting intelligence may inform homeland security activities. In 2014, funding for intelligence-and-warning is
distributed between DHS (50 percent), primarily in the
Office of Intelligence and Analysis; and DOJ (48 percent),
primarily in the Federal Bureau of Investigation (FBI).
Activities to deny terrorists and terrorist-related weapons and materials entry into our country and across all
international borders include measures 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. Securing our borders
and transportation systems is a complex task. Security
enhancements in one area may make another avenue
more attractive to terrorists. Therefore, our border and
transportation security strategy aims to make the U.S.
borders “smarter’’ while facilitating the flow of legitimate
visitors and commerce. Government programs do this by
targeting layered resources toward the highest risks and
sharing information so that frontline personnel can stay
ahead of potential adversaries. The majority of funding
for border and transportation security ($24.6 billion, or 88
percent, in 2014) is in DHS, largely for the U.S. Customs
and Border Protection (CBP), the Transportation Security
Administration (TSA), and the U.S Coast Guard. Other
DHS bureaus and other Federal Departments, such as the
Department of State, also play a significant role. Many
of these activities support the Obama Administration’s
emphasis on reducing the illicit flow of drugs, currency,
weapons, and people across our borders as well as targeting transnational criminal organizations operating along
the Southwest border and elsewhere. The President’s
2014 request would keep funding for border and transportation security activities at a level consistent with the
2012 enacted level.
Funding for domestic counterterrorism contains
Federal and Federally-supported efforts to identify,
thwart, and prosecute terrorists in the United States. It
also includes pursuit not only of the individuals directly
involved in terrorist activity, but also their sources of support: the people and organizations that knowingly fund
the terrorists and those that provide them with logistical
assistance. In today’s world, preventing and interdicting
terrorist activity within the United States is a priority

Federal Expenditures
Total funding for homeland security has grown significantly since the attacks of September 11, 2001. For 2014,
the President’s Budget includes $72.7 billion of gross
budget authority for homeland security activities, a $4.1
billion (6 percent) increase above the 2012 enacted level.
Excluding mandatory spending, fees, and the Department
of Defense’s (DOD) homeland security budget, the 2014
Budget proposes a net, non-Defense, discretionary budget authority level of $57.2 billion, which is an increase of
$3.4 billion (6 percent) above the 2012 enacted level (see
Table 23–1).
A total of 31 agency budgets include Federal homeland
security funding in 2014. Six agencies—the Departments
of Homeland Security (DHS), Defense (DOD), Health and
Human Services (HHS), Justice (DOJ), State (DOS), and
Commerce (DOC)—account for approximately $67.7 billion (93 percent) of total Government-wide gross discretionary homeland security funding in 2014.
As required by the Homeland Security Act, this analysis
presents homeland security risk and spending in three broad
categories: Prevent and Disrupt Terrorist Attacks; Protect
the American People, Our Critical Infrastructure, and Key
Resources; and Respond To and Recover From Incidents.

417

23.  Homeland Security Funding Analysis

Table 23–2. Prevent and Disrupt Terrorist Attacks
(budget authority in millions of dollars)
Agency

2012
Supplemental/
Emergency

2012 Actual

2013 CR

2013
Supplemental

2014 Request

Department of Agriculture ������������������������������������������������������
Department of Commerce ������������������������������������������������������
Department of Energy ������������������������������������������������������������
Department of Homeland Security �����������������������������������������
Department of the Interior ������������������������������������������������������
Department of Justice ������������������������������������������������������������
Department of State ���������������������������������������������������������������
Department of Transportation �������������������������������������������������
Department of the Treasury ����������������������������������������������������
General Services Administration ��������������������������������������������

234.1
4.2
.........
27,657.7
0.4
3,416.1
2,587.5
42.8
71.4
.........

.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

243.3
4.4
.........
27,799.8
0.4
3,430.0
2,688.1
33.7
71.8
.........

.........
.........
.........
2.0
.........
.........
.........
.........
.........
.........

244.3
4.2
0.5
27,042.7
0.4
3,626.1
2,896.5
33.9
71.3
288.0

Total, Prevent and Disrupt Terrorist Attacks ����������������������

34,014.1

.........

34,271.5

2.0

34,207.9

for law enforcement at all levels of government. The largest contributors to the domestic counterterrorism goal are
law enforcement organizations, with DOJ (largely for the
FBI) and DHS (largely for ICE) accounting for 60 and 38
percent of funding for 2014, respectively.
Protect the American People, Our Critical
Infrastructure, and Key Resources
Critical infrastructure includes the assets, systems,
and networks, whether physical or virtual, so vital to the
United States that their destruction would have a debilitating effect on national economic or homeland security,
public health or safety, or any combination thereof. Key
resources are publicly or privately controlled resources
essential to the minimal operations of the economy and
government whose disruption or destruction could have
significant consequences across multiple dimensions, including national monuments and icons.
Efforts to protect the American people include defending against catastrophic threats through research,

development, and deployment of technologies, systems,
and medical measures to detect and counter the threat
of chemical, biological, radiological, and nuclear (CBRN)
weapons. Funding encompasses activities to protect
against, detect, deter, or mitigate the possible terrorist
use of CBRN weapons through detection systems and procedures, improving decontamination techniques, and the
development of medical countermeasures, such as vaccines, drugs and diagnostics to protect the public from the
threat of a CBRN attack or other public health emergency.
The agencies with the most significant resources to help
develop and field technologies to counter CBRN threats
are: HHS, largely for research at the National Institutes
of Health (NIH) and for advanced development of medical
countermeasures ($2.7 billion, or 42 percent, of the 2014
total); DOD ($1.6 billion, or 24 percent, of the 2014 total);
and DHS ($1.9 billion, or 29 percent, of the 2014 total).
Protecting the Nation’s critical infrastructure and
key resources (CI/KR) is a complex challenge for two
reasons: (1) the diversity of infrastructure and (2) the
high level of private ownership of the Nation’s critical

Table 23–3. Protect the American People, Our Critical Infrastructure, and Key Resources
(budget authority in millions of dollars)
Agency

2012 Actual

2012
Supplemental/
Emergency

2013 CR

2013
Supplemental

2014 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 ������������������������������������������������������������
Department of Veterans Affairs �����������������������������������������������
National Aeronautics and Space Administration ��������������������
National Science Foundation ��������������������������������������������������
Social Security Administration ������������������������������������������������
Other Agencies �����������������������������������������������������������������������

137.4
250.8
16,210.7
1,724.2
2,154.3
5,287.5
610.7
311.9
225.2
443.9
211.1
698.8

.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

137.8
238.2
15,956.9
1,685.7
2,175.0
5,525.2
611.6
308.5
212.3
443.9
241.8
676.0

.........
.........
25.6
.........
.........
.........
.........
.........
.........
.........
.........
.........

298.9
286.3
15,698.6
1,671.0
2,843.0
6,321.4
534.7
312.8
225.9
423.0
261.4
706.9

Total, Protect the American People, Our Critical
Infrastructure, and Key Resources ��������������������������������

28,266.5

.........

28,212.8

25.6

29,584.1

418

Analytical Perspectives

infrastructure and key assets. Efforts to protect CI/KR
include unifying disparate efforts to protect critical infrastructure across the Federal Government and with
State, local, and private stakeholders; accurately assessing CI/KR and prioritizing protective action based on
risk; and reducing threats and vulnerabilities in cyberspace. In fact, securing our cyberspace is a top priority
of the Obama Administration both to protect Americans
and our way of life and as a foundation for continuing to
grow the Nation’s economy. DOD continues to report the
largest share of funding in this category for 2014 ($14.1
billion, or 61 percent), which includes programs focusing
on physical security and improving the military’s ability to prevent or mitigate the consequences of attacks
against departmental personnel and facilities. DHS has
overall responsibility for prioritizing and executing infrastructure protection activities at the national level
and accounts for $4.5 billion (19 percent) of 2014 funding. Another 24 agencies also report funding to protect
their own assets and work with States, localities, and the
private sector to reduce vulnerabilities in their areas of
expertise.
The President’s 2014 request increases funding for activities to protect the Nation’s people, critical infrastructure and key resources by $1.3 billion, or 5 percent.

Respond To and Recover From Incidents
The ability to respond to and recover from incidents
requires efforts to bolster capabilities nationwide to prevent and protect against terrorist attacks, and also minimize the damage from attacks through effective response
and recovery. This includes programs that help to plan,
equip, train, and practice the capabilities of many different response units (including first responders, such as
police officers, firefighters, emergency medical providers,
public works personnel, and emergency management officials) that are instrumental in their preparedness to mobilize without warning for an emergency. Building this
capability encompasses a broad range of agency incident
management activities, as well as grants and other assistance to States and localities for first responder preparedness capabilities. Response to natural disasters and other
major incidents, including catastrophic natural events
such as Hurricane Katrina and chemical or oil spills, like
Deepwater Horizon, do not directly fall within the definition of a homeland security activity for funding purposes, as defined by section 889 of the Homeland Security
Act of 2002. Preparing for terrorism-related threats includes many activities that also support preparedness
for catastrophic natural and man-made disasters, how-

Table 23–4.  Respond To and Recover From Incidents
(budget authority in millions of dollars)
Agency
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 �����������������������������������������������
Environmental Protection Agency ������������������������������������������
Executive Office of the President ��������������������������������������������
General Services Administration ��������������������������������������������
Office of Personnel Management �������������������������������������������
Social Security Administration ������������������������������������������������
District of Columbia ����������������������������������������������������������������
Federal Communications Commission �����������������������������������
Intelligence Community Management Account** �������������������
National Archives and Records Administration ����������������������
Securities and Exchange Commission �����������������������������������

2012 Actual
63.9
83.4
1,569.2
1.2
213.9
1,963.9
2,142.9
2.0
4.4
12.1
18.1
7.7
22.3
34.9
69.1
54.2
5.2
3.0
0.4
0.4
15.0
2.6
9.0
1.3
5.0

2012
Supplemental/
Emergency
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

2013 CR
64.3
299.9
1,524.5
1.2
240.4
1,905.2
2,392.5
2.0
4.4
12.2
18.1
26.1
25.0
34.8
59.1
54.0
2.1
3.0
0.4
0.5
25.0
1.6
9.0
1.3
5.0

2013
Supplemental
.........
.........
62.8
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........
.........

2014 Request
64.1
2,277.0
1,661.4
1.2
248.9
1,880.1
2,473.2
1.0
4.7
12.1
18.3
26.1
24.8
34.9
62.7
53.0
2.3
3.0
.........
0.5
15.0
1.6
.........
1.3
5.0

Total, Respond To and Recover From Incidents ����������������
6,305.0
.........
6,711.6
62.8
8,872.3
* One-time funding increase in 2014 authorized by the Middle Class Tax Relief and Job Creation Act of 2012 to build a nationwide broadband network
for first responders.
** Funding for the Intelligence Community Management Account was moved under DoD beginning in 2013.

23.  Homeland Security Funding Analysis

ever. Additionally, lessons learned from the response to
Hurricane Katrina have been used to revise and strengthen catastrophic response planning. The agencies with the
most significant participation in this effort are: DHS ($2.5
billion, or 28 percent, of the 2014 total); DOC ($2.3 billion,
or 26 percent of the 2014 total, which is new funding to
build a nationwide broadband network for first responders); HHS ($1.9 billion, or 21 percent of the 2014 total);
and DOD ($1.7 billion, or 19 percent of the 2014 total).
Nineteen other agencies include emergency preparedness and response funding. The President’s 2014 request
would increase funding by $2.6 billion (41 percent) above
the 2012 enacted level.
Continue to Strengthen the Homeland
Security Foundation
Preventing and disrupting terrorist attacks; protecting
the American people, critical infrastructure, and key resources; and responding to and recovering from incidents
that do occur are enduring homeland security responsibilities. For the long-term fulfillment of these responsibilities it is necessary to continue to strengthen the principles, systems, structures, and institutions that cut across
the homeland security enterprise and support our activities to secure the Nation. Long-term success across several cross-cutting areas is essential to protect the United
States. In addition, an all-of-Nation integration of effort
and the leveraging of resources that exist in local communities, as manifest in the Obama Administration’s “Whole
of Community” initiative, for example, are essential to effective preparedness and incident response capabilities.
While these areas are not quantifiable in terms of budget
figures, they are important elements in the management
and budgeting processes. As the Administration sets
priorities and determines funding for new and existing
homeland security programs, consideration must be given
to areas such as the assessment and management of risk,
which underlie the full spectrum of homeland security activities. This includes decisions about when, where, and
how to invest resources in capabilities or assets that eliminate, control, or mitigate risks. Likewise, research and
development initiatives promote the application of science and technology to homeland security activities and
can drive improvements in processes and efficiencies to
reduce the vulnerability of the Nation.
Non-Federal Expenditures1
State and local governments and private-sector firms
also have devoted resources of their own to the task of
defending against terrorist threats. Some of the spending has been of a one-time nature, such as investment in
new security equipment and infrastructure; some spending has been ongoing, such as hiring more personnel, and
increasing overtime for existing security personnel. In
many cases, own-source spending has supplemented the
resources provided by the Federal Government.
1   OMB does not collect detailed homeland security expenditure data
from State, local, or private entities directly.

419
Many governments and businesses, though not all,
place a high priority on, and provide additional resources, for security. A 2004 survey conducted by the National
Association of Counties found, that as a result of intergovernmental homeland security planning and funding processes, three out of four counties believed they were better
prepared to respond to terrorist threats. Moreover, almost
40 percent of the surveyed counties had appropriated
their own funds to assist with homeland security. Ownsource resources supplemented funds provided by States
and the Federal Government. However, the same survey
revealed that 54 percent of counties had not used any of
their own funds.2 The survey’s findings were based on the
responses from 471 counties (15 percent) nationwide, out
of 3,140 counties or equivalents.3 	
A study conducted by the Heritage Foundation, one
of the few organizations to compile homeland security
spending estimates from States and localities, provides
data on State and local spending in support of homeland
security activities.4 The report surveyed 43 jurisdictions
that are eligible for DHS’ Urban Areas Security Initiative
(UASI) grant funds due to the risk of a terrorist attack.5
These jurisdictions are home to approximately 145 million people or 47 percent of the total United States population. According to the report, the 2007 homeland security budgets for the jurisdictions examined (which include
26 States and the District of Columbia, 50 primary cities,
and 35 primary counties) totaled $37 billion, while the
same entities received slightly more than $2 billion in
Federal homeland security grants.6 The report further
states that from 2000 - 2007, these States and localities
spent $220 billion on homeland security activities, which
includes increases of three to six percent a year for law
enforcement and fire services budgets, and received over
$10 billion in Federal grants. California, the most populous State, is also the largest recipient of Federal homeland security funds, having received almost $1.5 billion
from 2000 - 2007, while spending over $45 billion in State
and local funding. Over the same time period, the top ten
most populous States (including California) spent $148
2   Source: National Association of Counties, “Homeland Security
Funding—2003 State Homeland Security Grants Programs I and II.’’
3   The National Association of Counties conducted a survey through
its various state associations (48), responses were received from 471
counties in 26 states.
4   Source: Matt A. Mayer, “An Analysis of Federal, State, and Local
Homeland Security Budgets,” A Report of the Heritage Center for Data
Analysis, CDA09-01, March 9, 2009, at http://www.heritage.org/Research/HomelandSecurity/upload/ CDA_09_01.pdf. Figures cited in
this report have not been independently verified by the Office of Management and Budget.
5   The Heritage Foundation report’s methodology in selecting the
states, cities, and counties to include in the report is as follows: the state
had to possess a designated UASI jurisdiction and the city and county
had to belong to a designated UASI jurisdiction that had received at
least $15 million from 2003 to 2007 from the DHS.
6   The Heritage Foundation report’s budget data for homeland security included primary law enforcement agencies, fire departments, homeland security offices, and emergency management agencies. In some
cases, state and local emergency management agency budget data was
embedded in the fire department budget data and was not separately
noted in its own category.

420

Analytical Perspectives

billion on State and local homeland security related activities.
There is also a diversity of responses in the businesses
community. A 2003 survey of 199 corporate security directors conducted by the Conference Board showed that
just over half of the companies reported that they had
permanently increased security spending post-September
11, 2001.7 About 15 percent of the companies surveyed
had increased their security spending by 20 percent or
more.8 Large increases in spending were especially evident in critical industries, such as transportation, energy,
financial services, media and telecommunications, information technology, and healthcare. However, about onethird of the surveyed companies reported that they had
not increased their security spending after September
7   Source: Thomas E. Cavanagh and Meredith Whiting, “2003 Corporate Security Management: Organization and Spending Since 9/11,”
The Conference Board. R-1333-03-RR. July 2003. This report references sample size of 199 corporate security directors, of which 96 were in
“critical industries”, while the remaining 103 were in “non-critical industries.” In the report, the Conference Board states that it followed the
DHS usage of critical industries, “defined as the following: transportation; energy and utilities; financial services; media and telecommunications; information technology; and healthcare.”
8   The Conference Board survey cites the sample size for this statistic
was 192 corporate security directors.

11th.9 Given the difficulty of obtaining survey results
that are representative of the universe of States, localities, and businesses, it is likely that there will be a wide
range of estimates of non-Federal security spending for
critical infrastructure protection.
Additional Tables
The tables in the Federal expenditures section of this
chapter present data based on the President’s policy for
the 2014 Budget. The tables below present additional
policy and baseline data, as directed by the Homeland
Security Act of 2002.
An appendix of account-level funding estimates is
available on the Internet at www.budget.gov/budget/
analytical_perspectives and on the Budget CD ROM.

9   The Conference Board survey cites the sample size for this statistic
was 199 corporate security directors.

Table 23–5.  Discretionary Fee-Funded Homeland Security Activities by Agency
(budget authority in millions of dollars)
Agency

2012
Actual

2012
Supplemental/
Emergency

2013
CR

2013
Supplemental

2014
Request

Department of Commerce ������������������������������������������������������
Department of Energy ������������������������������������������������������������
Department of Homeland Security �����������������������������������������
Department of State ���������������������������������������������������������������
General Services Administration ��������������������������������������������
Social Security Administration ������������������������������������������������
Federal Communications Commission �����������������������������������
Securities and Exchange Commission �����������������������������������

.........
–13.4
–3,297.2
–2,489.0
–30.0
–211.6
–2.6
–8.0

.........
.........
.........
.........
.........
.........
.........
.........

.........
–17.8
–3,543.0
–2,589.6
–10.0
–242.2
–1.6
–8.0

.........
.........
.........
.........
.........
.........
.........
.........

–257.0
–17.8
–3,551.0
–2,798.0
–363.0
–261.9
–1.6
–8.0

Total, Discretionary Homeland Security Fee-Funded
Activities ���������������������������������������������������������������������������

–6,051.8

.........

–6,412.2

.........

–7,258.2

Table 23–6. Mandatory Homeland Security Funding by Agency
(budget authority in millions of dollars)
Agency
Department of Agriculture ������������������������������������������������������
Department of Commerce* �����������������������������������������������������
Department of Defense ����������������������������������������������������������
Department of Energy ������������������������������������������������������������
Department of Health and Human Services ���������������������������
Department of Homeland Security �����������������������������������������
Department of Labor ��������������������������������������������������������������

2012
Actual
199.0
2.5
266.5
10.0
0.3
2,603.8
10.6

2012
Supplemental/
Emergency

2013
CR

2013
Supplemental

2014
Request

.........
.........
.........
.........
.........
.........
.........

208.0
214.0
273.6
15.0
0.3
2,636.8
1.7

.........
.........
.........
.........
.........
.........
.........

211.6
2,174.0
266.2
15.0
0.3
2,725.3
1.7

Total, Homeland Security Mandatory Programs ����������������
3,092.7
.........
* Funding increase authorized to build a nationwide broadband network for first responders.

3,349.4

.........

5,394.1

421

23.  Homeland Security Funding Analysis

Table 23–7.  Baseline Estimates—Total Homeland Security Funding by Agency
(budget authority in millions of dollars)
Agency

Baseline
2013

2014

2015

2016

2017

2018

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 ������������������������������������

449
543
17,253
31
1,927
4,079
35,461
2
57
4,054
38
2,796
236
123
368
15
103
9
18
213
444
1
242
25
2
9
23
78
8
102
11

458
2,509
17,566
32
1,967
4,157
36,505
2
58
4,182
36
2,852
244
127
376
15
107
9
18
217
453
1
262
25
2
9
23
80
8
106
11

471
2,463
17,895
32
2,004
4,242
37,534
2
60
4,304
37
2,911
254
129
386
16
107
9
18
221
461
1
267
26
2
9
24
84
8
109
11

482
8,944
18,232
33
2,045
4,324
38,573
2
62
4,435
37
2,969
261
134
396
16
111
10
18
226
470
1
272
26
2
10
24
85
8
114
12

489
2,776
18,570
33
2,084
4,413
39,638
2
66
4,566
37
3,032
271
137
405
16
115
10
19
230
479
1
277
27
2
10
25
88
9
118
12

498
367
18,918
34
2,126
4,499
40,721
2
67
4,705
38
3,093
282
140
414
16
118
10
19
233
487
1
282
27
2
10
25
91
9
122
12

Total, Homeland Security Budget Authority ��������������������������������
Less Department of Defense �������������������������������������������������������

68,720
–17,253

72,417
–17,566

74,097
–17,895

82,334
–18,232

77,957
–18,570

77,368
–18,918

Non-Defense Homeland Security BA ��������������������������������������������
Less Fee-Funded Homeland Security Programs �������������������������
Less Mandatory Homeland Security Programs ���������������������������

51,467
–6,443
–3,352

54,851
–6,522
–5,393

56,202
–6,645
–5,424

64,102
–6,771
–11,953

59,387
–6,900
–5,825

58,450
–7,031
–3,450

Net Non-Defense, Discretionary Homeland Security BA ������������

41,672

42,936

44,133

45,378

46,662

47,969

Obligations Limitations
Department of Transportation Obligations Limitation �������������������

.........

.........

.........

.........

.........

.........

422

Analytical Perspectives

Table 23–8. Homeland Security Funding by Budget Function
(budget authority in millions of dollars)
2012
Actual

Budget Function

2013
CR

2014
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 ������������������������������������������������������������������������������������������������

22,831
2,674
749
114
300
426
205
11,233
2,569
167
4,110
24
14
212
381
21,143
1,429

22,338
2,792
737
125
298
437
417
11,400
2,601
175
4,069
26
5
242
368
21,167
1,539

22,465
2,992
734
124
316
599
2,517
10,825
2,639
177
4,712
25
1
262
376
22,091
1,906

Total, Homeland Security Budget Authority ���������������������������������������������������������
Less National Defense, DoD �������������������������������������������������������������������������������

68,581
–17,778

68,736
–17,253

72,761
–17,357

Non-Defense Homeland Security BA ���������������������������������������������������������������������
Less Fee-Funded Homeland Security Programs �������������������������������������������������
Less Mandatory Homeland Security Programs ���������������������������������������������������

50,803
–6,028
–3,094

51,483
–6,384
–3,352

55,404
–7,455
–5,393

Net Non-Defense, Discretionary Homeland Security BA �������������������������������������

41,681

41,747

42,556

Table 23–9.  Baseline Estimates—Homeland Security Funding by Budget Function
(budget authority in millions of dollars)
Budget Function

Baseline
2013

2014

2015

2016

2017

2018

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 ����������������������������������������������������������������������������������������������������������

22,338
2,792
737
125
298
437
417
11,384
2,601
175
4,069
26
5
242
368
21,167
1,539

22,777
2,848
752
128
305
446
2,381
11,694
2,653
180
4,146
27
3
262
376
21,875
1,564

23,229
2,907
765
132
311
459
2,331
12,031
2,702
184
4,229
29
3
267
386
22,538
1,594

23,696
2,965
781
134
319
469
8,810
12,378
2,755
191
4,311
30
3
272
396
23,200
1,624

24,166
3,028
795
137
329
476
2,639
12,740
2,811
195
4,398
32
3
277
405
23,871
1,655

24,649
3,089
808
141
336
484
227
13,106
2,863
201
4,484
33
3
282
414
24,563
1,685

Total, Homeland Security Budget Authority ������������������������������������������������������������������
Less National Defense, DoD �����������������������������������������������������������������������������������������

68,720
–17,253

72,417
–17,566

74,097
–17,895

82,334
–18,232

77,957
–18,570

77,368
–18,918

Non-Defense, Discretionary Homeland Security BA �����������������������������������������������������
Less Fee-Funded Homeland Security Programs �����������������������������������������������������������
Less Mandatory Homeland Security Programs �������������������������������������������������������������

51,467
–6,443
–3,352

54,851
–6,522
–5,393

56,202
–6,645
–5,424

64,102
–6,771
–11,953

59,387
–6,900
–5,825

58,450
–7,031
–3,450

Net Non-Defense, Discretionary Homeland Security BA ����������������������������������������������

41,672

42,936

44,133

45,378

46,662

47,969

Obligations Limitations
Department of Transportation Obligations Limitation �����������������������������������������������������

.........

.........

.........

.........

.........

.........

24.  Federal Drug Control Funding

In support of the 2013 National Drug Control Strategy
(Strategy), the President requests $25.4 billion in Fiscal
Year (FY) 2014 to reduce drug use and its consequences in the United States. The 2013 Strategy articulates
the Administration’s vision for a modern, balanced drug
policy, one that is based on a sophisticated approach to a
complicated problem, encompassing prevention, early intervention, treatment, recovery, criminal justice reform,
effective law enforcement, and international cooperation.
The budget will continue to support a balanced approach
that brings all sectors of society together in a national effort to improve public health and public safety.
Consistent with the restructuring of the drug control
budget in FY 2012, the FY 2014 request includes one
new program. This new program is the Byrne Memorial
Justice Assistance Grant program. This program provides critical assistance to state and local law enforcement in addressing community problems with narcotics
and much needed support for their local efforts to reduce
substance abuse.

Program evaluation and performance measurement
are important tools for the Office of National Drug
Control Policy (ONDCP) in its oversight of Federal agencies –enabling ONDCP to assess the extent to which the
Strategy is meeting its goals and objectives, and the contributions of drug control agencies. A key performance
tool for ONDCP is the Performance Reporting System
which was designed to appraise the performance of the
large and complex interagency Federal effort set forth in
the Strategy. The first report using this data was published in April 2012, and was developed through an extensive interagency process that brought together subject
matter experts, policy and program analysts, researchers,
statisticians, and leadership from Federal drug control
agencies to capture 25 measures for the seven objectives
of the Strategy. The targets identified in the report were
determined by interagency groups for each measure,
based on baseline and trend data. The next report will be
published in 2013 and will address progress to date.

Table 24–1.  Federal Drug Control Funding, 2012–2014 1
(Budget authority, in millions of dollars)
Department/Agency

2012 Enacted

2013 Continuing 2014 President’s
Resolution
Budget

Department of Agriculture:
U.S. Forest Service ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������

15.2

15.2

13.2

Court Services and Offender Supervision Agency for D.C.: ������������������������������������������������������������������������������������������������������������

56.3

57.5

60.6

Department of Defense: 2
Drug Interdiction and Counterdrug Activities ������������������������������������������������������������������������������������������������������������������������������������
Defense Health Program �������������������������������������������������������������������������������������������������������������������������������������������������������������������

1,775.1
94.4

1,632.5
108.2

1,084.0
119.7

Total DOD ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

1,869.4

1,740.7

1,203.6

Department of Education: ��������������������������������������������������������������������������������������������������������������������������������������������������������������������

63.7

58.9

137.1

Federal Judiciary: ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

1,118.1

1,125.4

1,153.2

Department of Health and Human Services:
Administration for Children and Families ������������������������������������������������������������������������������������������������������������������������������������������
Centers for Medicare and Medicaid Services 3 ���������������������������������������������������������������������������������������������������������������������������������
Health Resources and Services Administration ��������������������������������������������������������������������������������������������������������������������������������
Indian Health Service �����������������������������������������������������������������������������������������������������������������������������������������������������������������������
National Institute on Alcohol Abuse and Alcoholism �������������������������������������������������������������������������������������������������������������������������
National Institute on Drug Abuse �������������������������������������������������������������������������������������������������������������������������������������������������������
Substance Abuse and Mental Health Services Administration 4 �������������������������������������������������������������������������������������������������������

20.0
3,500.0
17.8
98.0
61.6
1,051.4
2,479.3

20.0
3,720.0
17.9
96.4
62.0
1,058.6
2,447.0

20.0
4,670.0
18.2
112.4
62.2
1,071.6
2,415.8

Total HHS ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

7,228.1

7,421.9

8,370.2

Department of Homeland Security:
Customs and Border Protection �������������������������������������������������������������������������������������������������������������������������������������������������������
Federal Law Enforcement Training Center �����������������������������������������������������������������������������������������������������������������������������������������
Immigration and Customs Enforcement �������������������������������������������������������������������������������������������������������������������������������������������
Office of Counternarcotics Enforcement �������������������������������������������������������������������������������������������������������������������������������������������
U.S. Coast Guard5 �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2,280.3
48.5
523.5
1.8
1,332.5

2,280.3
48.7
523.5
1.8
1,253.3

2,344.6
48.8
485.0
0.0
1,127.8

Total DHS ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

4,186.6

4,107.6

4,006.2
423

424

Analytical Perspectives

Table 24–1.  Federal Drug Control Funding, 2012–2014 1—Continued
(Budget authority, in millions of dollars)
Department/Agency

2012 Enacted

2013 Continuing 2014 President’s
Resolution
Budget

Department of Housing and Urban Development:
Continuum of Care ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������

446.0

446.0

570.0

Department of the Interior:
Bureau of Indian Affairs ��������������������������������������������������������������������������������������������������������������������������������������������������������������������
Bureau of Land Management ������������������������������������������������������������������������������������������������������������������������������������������������������������
National Park Service ������������������������������������������������������������������������������������������������������������������������������������������������������������������������

10.0
5.1
3.3

9.5
5.1
3.3

9.5
5.1
3.3

Total DOI �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

18.4

17.9

17.9

Department of Justice:
Asset Forfeiture Fund ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Bureau of Prisons �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Criminal Division ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Drug Enforcement Administration �����������������������������������������������������������������������������������������������������������������������������������������������������
Interagency Crime and Drug Enforcement ���������������������������������������������������������������������������������������������������������������������������������������
Federal Prisoner Detention / [Office of Federal Detention Trustee] ���������������������������������������������������������������������������������������������������
Office of Justice Programs ����������������������������������������������������������������������������������������������������������������������������������������������������������������
National Drug Intelligence Center �����������������������������������������������������������������������������������������������������������������������������������������������������
U.S. Attorneys ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
U.S. Marshals Service �����������������������������������������������������������������������������������������������������������������������������������������������������������������������

230.3
3,396.9
39.6
2,357.0
527.5
580.1
243.4
20.0
78.8
248.8

232.8
3,377.7
41.0
2,400.4
530.7
580.1
237.5
20.1
75.0
250.5

244.5
3,517.7
40.2
2,428.9
523.0
656.3
380.9
0.0
76.4
251.5

Total DOJ ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

7,722.5

7,746.0

8,119.3

Department of Labor:
Employment and Training Administration �������������������������������������������������������������������������������������������������������������������������������������������

6.6

6.6

6.6

Office of National Drug Control Policy:
Operations ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
High Intensity Drug Trafficking Area Program �����������������������������������������������������������������������������������������������������������������������������������
Other Federal Drug Control Programs ����������������������������������������������������������������������������������������������������������������������������������������������

24.5
238.5
105.6

24.7
240.0
106.2

22.6
193.4
95.4

Total ONDCP ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

368.6

370.8

311.4

Department of State: 6
Bureau of International Narcotics and Law Enforcement Affairs ������������������������������������������������������������������������������������������������������
Economic Support and Development Assistance �����������������������������������������������������������������������������������������������������������������������������

494.6
173.7

494.6
173.7

510.5
134.6

Total DOS �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

668.3

668.3

645.1

Department of the Transportation:
Federal Aviation Administration ���������������������������������������������������������������������������������������������������������������������������������������������������������
National Highway Safety Administration ��������������������������������������������������������������������������������������������������������������������������������������������

28.7
2.7

27.6
2.7

28.1
2.2

Total DOT �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

31.4

30.3

30.3

Small Business Administration: ���������������������������������������������������������������������������������������������������������������������������������������������������������

0.0

0.0

0.0

Department of the Treasury:
Internal Revenue Service �����������������������������������������������������������������������������������������������������������������������������������������������������������������

60.3

60.3

60.9

Department of Veterans Affairs:
Veterans Health Administration 7 �������������������������������������������������������������������������������������������������������������������������������������������������������

637.8

663.0

687.4

24,497.2
24,536.4
25,393.2
Total Federal Drug Budget ������������������������������������������������������������������������������������������������������������������������������������������������������������������
1 Detail may not add due to rounding.
2 As the Overseas Contingency Operations (OCO) amounts have not yet been finalized, this amount includes FY 2014 base budget resources only.
3 The estimates for the Centers for Medicare & Medicaid Services reflect Medicaid and Medicare benefit outlays for substance abuse treatment; they do not reflect budget authority. The
estimates were developed by the CMS Office of the Actuary.
4 Includes budget authority and funding through evaluation set-aside authorized by Section 241 of the Public Health Service (PHS) Act.
5 The USCG budgets by appropriation rather than individual missions. The USCG projects resource allocations by mission through use of an activity-based costing system. Actual
allocations will vary depending upon operational environment and mission need.
6 State Department amounts include funding appropriated or requested for overseas contingency operations.
7 VA Medical Care receives advance appropriations; FY 2014 funding was provided in the Consolidated and Furthering Continuing Appropriations Act, 2013 (Public Law 113-6).

25. California Bay-Delta Federal Budget Crosscut

The California Bay-Delta program is a cooperative effort among the Federal Government, the State of
California, local governments, and water users, to proactively address the water management and aquatic ecosystem needs of California’s Central Valley. This valley, one
of the most productive agricultural regions of the world,
is drained by the Sacramento River in the north and the
San Joaquin River in the south. The two rivers meet
southwest of Sacramento, forming the Sacramento-San
Joaquin Delta, and drain west into San Francisco Bay.
The Bay-Delta is the hub of the Nation’s largest water
delivery system, providing drinking water to 25 million
Californians. According to the State of California, it supports about $400 billion of annual economic activity, including a $28 billion agricultural industry and a robust
and diverse recreational industry.
The extensive development of the area’s water resources
has boosted agricultural production, but has also adversely affected the region’s ecosystems. Bay-Delta program
participants recognized the need to provide a high-quality, reliable and sustainable water supply for California,
while at the same time restoring and maintaining the
ecological integrity of the area and mitigating flood risks.
This recognition resulted in the 1994 Bay-Delta Accord,
which laid the foundation for the CALFED Bay-Delta
Authorization Act of 2004 (P.L. 108-361). The program
has since adapted and evolved into a broader Bay-Delta
program that includes the Bay-Delta Conservation Plan,
the Delta Science Program, and the soon-to-be-released
Delta Plan. Federal activities are currently coordinated
though the Interim Federal Action Plan (established in
2010), under the leadership of the White House Council
on Environmental Quality, the Department of the Interior,
and California’s Delta Stewardship Council.

The Interim Federal Action Plan uses an adaptive
management approach to water resources development
and management, and continues to develop strategies to
balance and achieve the program’s four objectives: a renewed Federal-state partnership, smarter water supply
and use, habitat restoration, and drought and floodplain
management. The partners signed a Record of Decision
in 2000 and a Memorandum of Understanding in 2009,
detailing the different program components and goals.
The program uses scientific monitoring to track progress made towards reaching near-term objectives and
longer-range success. Federal agencies contributing to
the Bay-Delta program include: the Department of the
Interior’s Bureau of Reclamation, U.S. Fish and Wildlife
Service, and U.S. Geological Survey; the Department of
Agriculture’s Natural Resources Conservation Service;
the Department of Defense’s Army Corps of Engineers;
the Department of Commerce’s National Oceanic and
Atmospheric Administration; and the Environmental
Protection Agency.
The 2014 Budget includes a crosscut of estimated
Federal funding by each of the participating agencies,
fulfilling the reporting requirements of P.L. 108-361.
Additional tables and narratives that further account
for recent programmatic and funding changes are available online at www.budget.gov/budget/analytical_perspectives and on the Budget CD-ROM. Please note that
some funding amounts included in previous budgets have
been updated to align with the programs and activities
outlined in the Interim Federal Action Plan. More information about the Interim Federal Action Plan can be
found at this website: http://www.doi.gov/documents/
CAWaterWorkPlan.pdf.

Table 25–1.  Bay-Delta Federal Funding Budget Crosscut
(in millions of dollars)
Agency

Enacted
1998

1999

2000

Bureau of Reclamation
153.4 114.7 138.5
Corps of Engineers ��������������������������������������������� 100.7 103.3 93.8
Natural Resources Conservation Service ����������
0.0 14.5 12.9
NOAA Fisheries (NMFS) ������������������������������������
0.3
0.4
0.5
Geological Survey ����������������������������������������������
3.2
3.2
4.3
Fish and Wildlife Service ������������������������������������
0.9
1.1
3.7
Environmental Protection Agency 2 ��������������������
3.2
3.1 57.3

2001

2002

79.8 103.3
54.2 58.2
17.0 39.1
0.6
0.6
5.4
5.1
18.2
5.6
53.4 54.3

2003
74.2
57.8
38.4
0.8
4.9
11.2
20.7

2004
75.7
72.6
48.8
0.8
4.9
13.7
62.8

2005
81.1
52.3
36.4
0.8
5.4
8.9
97.7

Pres. Budget
2006

2007

99.8 101.3
91.3 87.4
34.6 26.9
0.8
0.5
5.2
4.1
10.7
7.5
36.6 36.1

2008
66.1
51.2
40.9
0.5
3.7
22.0
68.3

2009 1

2010

2011

2012

2013

2014

156.8 94.7 185.5 175.2
140.7 72.5 98.1 44.5
44.4 39.7 56.1 56.1
0.5
0.5
1.5
1.4
3.7
3.4
6.0
8.1
24.2
6.5
5.2
4.9
161.5 123.7 78.0 85.9

110.8
53.8
44.1
1.4
9.9
4.9
84.7

153.7
86.1
52.2
1.3
10.6
4.9
69.2

Totals:
261.6 240.3 310.8 228.4 266.2 208.0 279.3 282.6 279.0 263.9 252.8 531.9 341.1 430.4 376.0
1 The FY 2009 total includes American Recovery and Reinvestment Act projects and activities.
2 EPA’s 2012-2014 figures include estimated projections of California’s total State Revolving Fund (SRF) allocations. Prior year columns do not.
Note: The 2012-2014 columns reflect categories in the Bay-Delta Interim Federal Action Plan. In some cases it may include different projects.

309.6

377.9

425

Technical Budget Analyses

427

26. Current Services Estimates

Current services, or “baseline,” estimates are designed
to provide a benchmark against which policy proposals
can be measured. A baseline is not a prediction of the final
outcome of the annual budget process, nor is it a proposed
budget. It can be a useful tool in budgeting, however. It
can be used as a benchmark against which to measure the
magnitude of the policy changes in the President’s Budget
or other budget proposals, and it can also be used to warn
of future problems if policy is not changed, either for the
Government’s overall fiscal health or for individual tax
and spending programs.
Ideally, a current services baseline would provide a
projection of estimated receipts, outlays, deficits or surpluses, and budget authority needed to reflect this year’s
enacted policies and programs for each year in the future.
Defining this baseline is challenging because funding for
many programs in operation today expires within the
10-year budget window. Most significantly, funding for
discretionary programs is provided one year at a time in
annual appropriations acts. Mandatory programs are not
subject to annual appropriations, but many operate under
multi-year authorizations that expire within the budget
window. The framework used to construct the baseline
must address whether and how to project forward the
funding for these programs beyond their scheduled expiration dates.
Since the early 1970s, when the first requirements for
the calculation of a “current services” baseline were enacted, the baseline has been constructed using a variety
of concepts and measures. Shortly after a detailed set
of rules for calculating a baseline was enacted through
amendments to the Balanced Budget Emergency Deficit
Control Act of 1985 (BBEDCA) made by the Budget
Enforcement Act of 1990 (BEA), there was a consensus to
define the current services estimates according to those
rules. The BBEDCA baseline rules were recently reinstated through amendments to BBEDCA enacted in the
Budget Control Act of 2011 (BCA).
The Administration believes adjustments to the
BBEDCA baseline are needed to better represent the deficit outlook under current policy and to serve as a more
appropriate benchmark for measuring policy changes.
This section provides detailed estimates of an adjusted
baseline that corrects for some of the shortcomings in the
BBEDCA baseline. It also discusses alternative formulations for the baseline. Table 26–1 shows estimates of receipts, outlays, and deficits under the Administration’s adjusted baseline for 2012 through 2023. The estimates are
based on the economic assumptions described later in this
chapter. They are shown on a unified budget basis; i.e.,
the off-budget receipts and outlays of the Social Security
trust funds and the Postal Service Fund are added to the
on-budget receipts and outlays to calculate the unified

budget totals. The table also shows the Administration’s
estimates by major component of the Budget. Estimates
based on the BBEDCA baseline rules are shown as a
memorandum in the table.
Conceptual Basis for Estimates
Receipts and outlays are divided into two categories
that are important for calculating the baseline: those controlled by authorizing legislation (direct spending and
receipts) and those controlled through the annual appropriations process (discretionary spending). Different estimating rules apply to each category. There are numerous
alternative rules that could be used to develop current
services estimates for both categories. The next section
discusses some alternatives that might be considered.
Direct spending and receipts.—Direct spending includes
the major entitlement programs, such as Social Security,
Medicare, Medicaid, Federal employee retirement, unemployment compensation, and the Supplemental Nutrition
Assistance Program (SNAP). It also includes such programs as deposit insurance and farm price and income
supports, where the Government is legally obligated to
make payments under certain conditions. Receipts and
direct spending are alike in that they involve ongoing activities that generally operate under permanent or longstanding authority, and the underlying statutes generally specify the tax rates or benefit levels that must be
collected or paid, and who must pay or who is eligible to
receive benefits.
The baseline generally—but not always—assumes that
receipts and direct spending programs continue in the future as specified by current law. The budgetary effects of
anticipated regulatory and administrative actions that are
permissible under current law are also reflected in the estimates. Exceptions to this general rule are described below:
•	 Consistent with the BBEDCA, expiring excise taxes
dedicated to a trust fund are assumed to be extended at current rates. During the projection period of
2013 through 2023, the taxes affected by this exception are taxes deposited in the Airport and Airway
Trust Fund, which expire on September 30, 2015;
taxes deposited in the Highway Trust Fund, the
Leaking Underground Storage Tank Trust Fund,
and the Sport Fish Restoration and Boating Trust
Fund, which expire on September 30, 2016; tobacco
assessments deposited in the Tobacco Trust Fund,
which expire on September 30, 2014; taxes deposited
in the Oil Spill Liability Trust Fund, which expire
on December 31, 2017; and taxes deposited in the
Patient-Centered Outcomes Research Trust Fund,
which expire on September 30, 2019.

429

430
•	 The BBEDCA requires temporary direct spending
programs that were enacted before the Balanced
Budget Act of 1997 to be extended if their current
year outlays exceed $50 million. For example, the
Supplemental Nutrition Assistance Program is
scheduled to expire at the end of 2013. The baseline estimates provided here assume continuation
of this program through the projection period. For
programs enacted since the Balanced Budget Act
of 1997, programs that are explicitly temporary in
nature expire in the baseline even if their current
year outlays exceed the $50 million threshold. For
example, the tobacco buyout payments from the Tobacco Trust Fund enacted in the Fair and Equitable
Tobacco Reform Act of 2004 are scheduled to expire
in 2014 even though current year outlays are estimated to be $960 million, and even though the receipts used to finance these payments are assumed
to be continued in the baseline as noted in the previous bullet.
•	 The following tax credits provided to individuals and
families under the American Recovery and Reinvestment Act of 2009 (ARRA), which were extended
through 2017 by the American Taxpayer Relief Act
of 2012 (ATRA), are further extended through 2023
in the adjusted baseline: increased refundability of
the child tax credit, expansions in the earned income
tax credit (EITC) for larger families and married
taxpayers filing a joint return, and the American opportunity tax credit (AOTC).
•	 Medicare payment updates to physicians are determined under a formula, commonly referred to as
the “sustainable growth rate” (SGR). This formula
has called for reductions in physician payment rates
since 2002, which Congress has consistently overridden for over 10 years. Under the SGR formula,
physician payment rates would be reduced by nearly 25 percent in 2014. Rather than the large cuts
scheduled under current law, the adjusted baseline
includes the costs of expected Medicare physician
payments, assuming a zero percent update for physician payment rates.
•	 Under the Postal Accountability and Enhancement
Act of 2006 (P.L. 109-435), the United States Postal
Service (USPS) is required to make specified annual
payments through 2016 to the Postal Service Retiree
Health Benefits (RHB) Fund in the Office of Personnel Management. These payments are designed to
prefund unfunded liabilities for health costs for future Postal retirees. Starting in 2017, the USPS’s
remaining unfunded liability is amortized over a
40-year period. Because of its current financial challenges, the USPS defaulted on two statutory RHB
payments due in 2012, totaling $11.1 billion. In its
notification letter to the White House and the Congress, the USPS also indicated that, absent changes
to its financial forecast (largely dependent on legislative action), it would likely default on its $5.6
billion payment due September 30, 2013. While the

Analytical Perspectives

BBEDCA baseline shows USPS making this $5.6
billion payment in 2013 as required, the adjusted
baseline does not reflect the payment being made,
given the likelihood of additional default. While defaulted payments remain as outstanding statutory
liabilities, any default is factored into the 40-year
amortization schedule mentioned above.
Discretionary spending.—Discretionary programs differ
in one important aspect from direct spending programs:
the Congress provides spending authority for almost all
discretionary programs one year at a time. The spending
authority is normally provided in the form of annual appropriations. Absent appropriations of additional funds in
the future, discretionary programs would cease to operate
after existing balances were spent. If the baseline were
intended strictly to reflect current law, then a baseline
would reflect only the expenditure of remaining balances
from appropriations laws already enacted. Instead, the
BBEDCA baseline provides a mechanical definition to reflect the continuing costs of discretionary programs. Under
the BBEDCA, the baseline estimates for discretionary programs in the current year are based on enacted appropriations.1 For the budget year and beyond, the spending authority enacted in the current year is adjusted for inflation,
using specified inflation rates. 2 The definition attempts to
keep discretionary spending roughly level in real terms.
The Administration’s baseline projection is based on the
following modifications to the BBEDCA baseline:
•	 The adjusted baseline reflects the costs of continuing the annually appropriated portion of the Pell
grant program for all eligible students at the maximum award amount of $4,860 specified in existing
appropriations. While the Pell program has traditionally been funded largely through discretionary
appropriations, this baseline treatment reflects the
reality that the program has effectively operated as
an entitlement, in which funding is provided to meet
the specified award level for all eligible students.
•	 The adjusted baseline reflects the discretionary
“caps” enacted in the BBEDCA, as amended by the
BCA, which limit the amount of discretionary budget
authority that can be provided through the annual
appropriations process. (Chapter 12 of this volume,
“Budget Concepts,” provides more information on
the effects of the BBEDCA, as amended by the BCA.)
1  When current year appropriations have not been enacted, as was
the case when this Budget was prepared, the BBEDCA requires the
baseline estimates for discretionary spending and collections for the current year to be based on the levels provided in the full-year continuing
resolution or the annualized level of the part-year continuing resolution.
2  The Administration’s baseline uses the same inflation rates for
discretionary spending as required by the BBEDCA, despite the fact
that this allows for an overcompensation for Federal pay inherent in
the BBEDCA definition. At the time the BEA was enacted, it failed
to account for the nearly contemporaneous enactment of the Federal
Employees Compensation Act of 1991 that shifted the effective date of
Federal employee pay raises from October to January. This oversight
was not corrected when the baseline definition was reinstated by the
BCA amendments to BBEDCA. Correcting for this error would have
only a small effect on the discretionary baseline.

431

26. Current Services Estimates

Table 26–1. Category Totals for the Adjusted Baseline
(in billions of dollars)
2012
Receipts ���������������������������������������������������������������������������������������

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2,450

2,712

3,000

3,277

3,476

3,660

3,865

4,097

4,325

4,559

4,785

5,045

Discretionary:
Defense �����������������������������������������������������������������������������
Non-defense ����������������������������������������������������������������������
Subtotal, discretionary ��������������������������������������������������

671
614
1,285

630
596
1,226

574
592
1,166

608
576
1,184

614
576
1,190

624
580
1,204

634
585
1,219

645
596
1,241

663
609
1,272

679
623
1,302

725
656
1,381

758
679
1,438

Mandatory:
Social Security �������������������������������������������������������������������
Medicare ����������������������������������������������������������������������������
Medicaid and CHIP ������������������������������������������������������������
Other mandatory ����������������������������������������������������������������
Subtotal, mandatory �����������������������������������������������������
Disaster costs 1 ����������������������������������������������������������������������
Net interest �����������������������������������������������������������������������������
Total, outlays ��������������������������������������������������������������������������������

768
466
260
539
2,032
0
220
3,537

812
498
276
595
2,182
1
222
3,632

860
519
314
543
2,235
5
222
3,627

911
546
339
572
2,368
7
252
3,812

965
597
367
598
2,527
8
298
4,023

1,022
614
385
612
2,633
9
370
4,216

1,081
639
399
629
2,749
9
459
4,437

1,144
702
422
670
2,938
10
544
4,733

1,210
756
446
692
3,105
10
616
5,003

1,277
813
473
729
3,292
10
677
5,282

1,350
902
501
789
3,542
10
741
5,674

1,427
941
535
804
3,706
10
804
5,959

Unified deficit(+)/surplus(–) ����������������������������������������������������
On-budget ��������������������������������������������������������������������������
Off-budget ��������������������������������������������������������������������������

1,087
1,149
–62

919
953
–33

627
646
–19

536
543
–7

547
550
–3

556
548
8

571
556
16

637
612
25

678
632
46

723
672
52

889
819
70

913
817
96

Outlays:

Memorandum:
BEA baseline deficit ����������������������������������������������������������������
1,087
912
687
655
698
728
764
815
869
928
1,041
1,041
Adjustments to reflect current tax policies �������������������������
0
0
0
0
0
0
2
30
31
32
33
33
Adjustments to reflect current spending policies and
disasters �����������������������������������������������������������������������
0
7
19
27
36
36
34
38
40
42
45
45
Set discretionary budget authority at cap levels ����������������
0
*
–20
–34
–43
–48
–53
–57
–62
–68
–71
–74
Reflect Joint Committee enforcement ��������������������������������
0
0
–50
–86
–101
–105
–107
–108
–108
–109
–48
–15
Remove non-recurring emergency costs ���������������������������
0
0
–9
–27
–40
–46
–50
–52
–55
–56
–58
–59
Related debt service ����������������������������������������������������������
0
*
–*
–*
–2
–8
–18
–29
–37
–46
–53
–58
Adjusted baseline deficit ���������������������������������������������������������
1,087
919
627
536
547
556
571
637
678
723
889
913
* $500 million or less.
1 These amounts represent the probability of major disasters requiring Federal assistance for relief and reconstruction. Such assistance might be provided in the form of discretionary
or mandatory outlays or tax relief. These amounts are included as outlays for convenience.

•	 The BBEDCA caps also allow for adjustments for
disaster relief spending and for emergency requirements. The adjusted baseline does not reflect funding under the disaster relief or emergency cap adjustments beyond what has already been enacted for
2013. (See discussion of additional disaster funding below.) While the BBEDCA baseline projects
forward the enacted supplemental appropriations
for Superstorm Sandy, increased by the BBEDCA
inflation rates, the adjusted baseline removes this
extrapolation.3
Reclassification of transportation spending. — To provide an appropriate baseline for assessing the budgetary
impact of the Administration’s proposal for a five-year,
$40 billion rail reauthorization, the adjusted baseline
reclassifies Federal subsidies for the National Railroad
Passenger Corporation (Amtrak) that will be included in
the more comprehensive rail reauthorization from discretionary to mandatory.   The Administration proposes
3  The BBEDCA caps also allow for adjustments for program integrity
activities and Overseas Contingency Operations (OCO). The adjusted
baseline reflects enacted funding for these cap adjustments inflated at
the specified inflation rates in the BBEDCA baseline.

to fund this proposal with mandatory Contract Authority
(with associated mandatory outlays) out of a new Rail
Account of an expanded Transportation Trust Fund (formerly Highway Trust Fund).  This reclassification, which
is a zero-sum shift of outlays from the discretionary category to the mandatory category, provides a more transparent presentation of the difference between baseline
levels and the rail proposal, and allows accounting for the
proposal under the PAYGO system of budget enforcement.
Disaster funding. — An allowance for the possible future costs of major natural or man-made disasters during the remainder of 2013 and in subsequent years is assumed in the Administration’s baseline in order to make
budget totals more realistic. Baselines would be more
meaningful if they did not project forward whatever disaster funding happened to have been provided in the
current year. Rather, baselines should replace the projection of enacted current-year funding—which might be
unusually low or unusually high—with plausible estimates of future costs.
Joint Committee Enforcement. — Because the Joint
Select Committee process under Title IV of the BCA did

432

Analytical Perspectives

not result in enactment of legislation that reduces the
deficit by at least $1.2 trillion, the BCA stipulates that,
absent intervening legislation, enforcement procedures
will be invoked on an annual basis to reduce the levels of
discretionary and mandatory spending to accomplish deficit reduction.  The reductions pursuant to the sequestration orders for 2013 and 2014 are already reflected in the
BBEDCA baseline for the affected accounts. The adjusted
baseline reflects the future enforcement procedures for
discretionary cap reductions in 2014 onward and mandatory sequestrations for 2015 and beyond in the form of
an allowance in the amount of the required reductions in
spending.
Economic Assumptions. — As discussed, baselines can
be used as a benchmark against which policy proposals
are measured. However, this purpose is achieved only if
the policies and the baseline are constructed under the
same set of economic and technical assumptions. For this
reason, the Administration uses the same assumptions –
for example, the same inflation assumptions – in preparing its current service estimates and its Budget.

current law. For discretionary programs, these acts instituted a precise definition of the baseline with numerous
rules for its construction.
It is clear, however, that a number of baseline definitions could be developed that differ from those presented
in this chapter:
•	 Extend provisions affecting mandatory programs. Currently, mandatory programs that have outlays of over
$50 million in the current year are generally assumed
to continue, unless the programs are explicitly temporary. With the exception of current Medicare physician
payment rates, individual provisions of law that affect
mandatory programs are assumed to expire as scheduled. If instead, these expiring provisions were extended, baseline outlays would be higher. For example,
the cost of extending Qualified Individuals (QI), a component of the Medicaid program that pays Medicare
Part B premiums for certain low-income seniors and
is scheduled to expire at the end of December, 2013,
would be $11.9 billion over 2014-2023.
•	 Do not extend any authorizing laws that expire. If
all mandatory programs were assumed to expire as
scheduled, deficits for 2014 through 2023 would be
$1,443 billion lower than in the Administration’s
baseline, including debt service. (See the section below on major program assumptions for additional
information on mandatory program extensions assumed in the estimates.) If excise taxes dedicated
to trust funds were assumed to expire as scheduled under current law, the deficit would be $484
billion higher over the period 2014 through 2023,
including debt service. If the tax relief provided
to individuals and families that was extended only
through taxable year 2017 under ATRA was assumed to expire, the deficit would be $177 billion
lower over the 10 years.

Alternative Formulations of Baseline
Throughout much of U.S. history, congressional budget
proposals were often compared with either the President’s
request or the previous year’s budget. In the early 1970s,
policymakers developed the concept of a baseline to provide a more neutral benchmark for comparisons. While
the Congressional Budget Act of 1974 included a requirement that OMB and the Congressional Budget Office
(CBO) provide estimates of a current services baseline,
the definition of the baseline was very general and specific guidance was not provided.
Subsequent budget laws have specified in increasing detail the requirements for constructing baselines.
Current services estimates for direct spending programs
and receipts are generally estimated based on laws currently in place and most major programs are assumed to
continue even past sunset dates set in law. In the case of
receipts, the BBEDCA requires only the extension of trust
fund excise taxes, but otherwise bases the estimates on

•	 Account for inflation and population growth. While
the baseline assumes that discretionary budgetary
resources are constrained by the BBEDCA caps and
Joint Committee enforcement, an alternative would

Table 26–2.  Alternative Baseline Assumptions
(in billions of dollars)
Totals
2013
Adjusted baseline deficit �����������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

919

627

536

547

556

571

637

678

723

889

913

–20
.........
.........
0
–*
.........

–99
.........
.........
–15
77
–571

–108
1
.........
–21
127
–960

–114
14
.........
–23
159
–1,104

–128
56
.........
–24
187
–1,211

–141
59
–2
–25
217
–1,328

–152
63
–31
–30
249
–1,446

–161
67
–33
–33
281
–1,551

–171
71
–35
–37
315
–1,650

–180
75
–37
–41
300
–1,801

–189
78
–40
–43
309
–1,933

2014–
2018
2,837

2014–
2023
6,678

Alternative assumptions (“+” represents deficit
increase): 1
Do not extend any authorizing laws:
Mandatory spending ��������������������������������������������
Trust fund excise taxes ����������������������������������������
ATRA tax credit extensions ����������������������������������
Medicare physician payment relief ����������������������
Account for inflation and population growth �������������
Do not extend any appropriations ����������������������������
* $500 million or less.
1 Includes costs or savings from debt service.

–591 –1,443
130
484
–2
–177
–108
–292
766
2,221
–5,173 –13,552

433

26. Current Services Estimates

be to assume growth with inflation and population,
so that real resources per person (or the real cost per
person of funding these programs) remains constant
over time. Such an alternative would increase total
outlays by $77 billion in 2014 and $2,221 billion over
the period 2014-2023 relative to the baseline, including costs from debt service.
•	 Do not extend any appropriations. Discretionary
spending continues in the BBEDCA baseline whether there is authorization for the program or not and
whether funds have already been provided or not.
In nearly all cases, funds for discretionary programs
have not been provided in advance for years beyond
the current year. If instead the baseline were constructed using a strict “current law” approach, the
only discretionary outlays that would be included
in the baseline would be the lagged spending from
budgetary resources already provided in the current year or past years; otherwise, no new budgetary
resources would be provided. If this rule were followed, outlays in 2014 would be reduced by $571 billion relative to the Administration’s baseline, which
includes savings from debt service. However, clearly
this would provide an unrealistic estimate of future
spending and the Government’s future fiscal position.
Table 26–2 provides estimates, including effects on
debt service, for a variety of changes in baseline definitions that could be considered.

Economic Assumptions
The estimates for the baseline are prepared using
the same economic assumptions as the President’s
Budget. These assumptions are based on enactment
of the President’s Budget proposals. The economy and
the budget interact. Changes in economic conditions
significantly alter the estimates of tax receipts, unemployment benefits, entitlement payments that receive
automatic cost-of-living adjustments (COLAs), income
support programs for low-income individuals, and interest on the Federal debt. In turn, Government tax and
spending policies influence prices, economic growth,
consumption, savings, and investment. Because of
these interactions, it would be reasonable, from an economic perspective, to assume different economic paths
for the baseline projection and the President’s Budget.
However, this would diminish the value of the baseline
estimates as a benchmark for measuring proposed policy changes, because it would then be difficult to separate the effects of proposed policy changes from the effects of different economic assumptions. By using the
same economic assumptions for the baseline and the
President’s Budget, this potential source of confusion
is eliminated. The economic assumptions underlying
the Budget and the Administration’s baseline are summarized in Table 26–3. The economic outlook underlying these assumptions is discussed in greater detail in
Chapter 2 of this volume.

Table 26–3. Summary of Economic Assumptions
(Fiscal years; dollar amounts in billions)
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Gross Domestic Product (GDP):
Levels, dollar amounts in billions:
Current dollars �������������������������������������������������������������� 15,704.8 16,383.8 17,234.8 18,180.6 19,192.1 20,247.3 21,275.2 22,247.1 23,219.4 24,216.4 25,252.5 26,330.8
Real, chained (2005) dollars ����������������������������������������� 13,600.0 13,907.1 14,357.5 14,863.7 15,398.8 15,943.4 16,441.4 16,872.6 17,282.6 17,691.6 18,103.8 18,525.7
Percent change, year over year:
Current dollars ��������������������������������������������������������������
Real, chained (2005) dollars �����������������������������������������

4.2
2.3

4.3
2.3

5.2
3.2

5.5
3.5

5.6
3.6

5.5
3.5

5.1
3.1

4.6
2.6

4.4
2.4

4.3
2.4

4.3
2.3

4.3
2.3

Inflation measures (percent change, year over year):
GDP chained price index ����������������������������������������������
Consumer price index (all urban) ����������������������������������

1.9
2.1

2.0
2.1

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

1.9
2.2

Unemployment rate, civilian (percent) ������������������������������������

8.1

7.7

7.2

6.7

6.2

5.7

5.5

5.4

5.4

5.4

5.4

5.4

Interest rates (percent):
91-day Treasury bills ����������������������������������������������������������
10-year Treasury notes ������������������������������������������������������

0.1
1.8

0.1
2.0

0.2
2.6

0.4
3.1

1.3
3.7

2.3
4.1

3.2
4.4

3.6
4.6

3.7
4.8

3.7
5.0

3.7
5.0

3.7
5.0

MEMORANDUM:
Related program assumptions:
Automatic benefit increases (percent):
Social security and veterans pensions ��������������������
3.6
1.7
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
Federal employee retirement �����������������������������������
3.6
1.7
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
Food stamps 1 ���������������������������������������������������������
0.0
0.0
–5.5
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
2.2
Insured unemployment rate ������������������������������������������
2.7
2.6
2.5
2.4
2.3
2.2
2.1
2.1
2.1
2.1
2.1
2.1
1 Enhanced Thrifty Food Plan (TFP) benefits provided by the Recovery Act (P.L. 111–5) are set to expire on October 31, 2013. Benefits will return to regular levels and will be updated
annually based on the TFP from the proceeding June.

434

Analytical Perspectives

Major Programmatic Assumptions
A number of programmatic assumptions must be
made in order to calculate the baseline estimates.
These include assumptions about annual cost-of-living
adjustments in the indexed programs and the number of beneficiaries who will receive payments from
the major benefit programs. Assumptions about various automatic cost-of-living-adjustments are shown in
Table 26–3, and assumptions about baseline caseload
projections for the major benefit programs are shown
in Table 26–4. These assumptions affect baseline estimates of direct spending for each of these programs,
and they also affect estimates of the discretionary baseline for a limited number of programs. For Pell Grants
and the administrative expenses for Medicare, Railroad
Retirement, and unemployment insurance, the discretionary baseline is increased (or decreased) for changes
in the number of beneficiaries in addition to the adjustments for inflation described earlier.4
It is also necessary to make assumptions about the
continuation of expiring programs and provisions. As explained above, in the baseline estimates provided here, expiring excise taxes dedicated to a trust fund are extended
at current rates. Certain tax relief provided to individuals
and families only through taxable year 2017 is assumed
to be permanent for purposes of calculating revenue estimates. Medicare payments to physicians are assumed to
be maintained at their current payment rates. In general,
mandatory programs with spending of at least $50 million in the current year are also assumed to continue, unless the programs are explicitly temporary in nature. For
example, under the Fair and Equitable Tobacco Reform
Act of 2004, tobacco buyout payments will expire in 2014,
even though current year outlays are $960 million. Table
26–5 provides a listing of mandatory programs and taxes
assumed to continue in the baseline after their expiration.
All discretionary programs with enacted non-emergency
appropriations in the current year and the 2013 costs for
overseas contingency operations in Iraq and Afghanistan
and other recurring international activities are assumed
to continue.
Many other important assumptions must be made in
order to calculate the baseline estimates. These include
assumptions about the timing and substance of regulations that will be issued over the projection period, the
use of administrative discretion provided under current
law, and other assumptions about the way programs operate. Table 26–5 lists many of these assumptions and
their effects on the baseline estimates. It is not intended
to be an exhaustive listing; the variety and complexity
of Government programs are too great to provide a complete list. Instead, some of the more important assumptions are shown.

4  Although these adjustments are applied at the account level, they
have no effect in the aggregate because baseline levels are constrained
to the BBEDCA caps.

Current Services Receipts, Outlays,
and Budget Authority
Receipts.—Table 26–6 shows the Administration’s
baseline receipts by major source. Total receipts are projected to increase by $288 billion from 2013 to 2014, by
$865 billion from 2014 to 2018, and by $1,180 billion from
2018 to 2023. These increases are largely due to assumed
increases in incomes resulting from both real economic
growth and inflation.
Individual income taxes are estimated to increase by
$124 billion from 2013 to 2014, by $542 billion from 2014
to 2018, and by $660 billion from 2018 to 2023 under baseline assumptions. This average annual rate of growth of
7.3 percent between 2014 and 2023 is primarily the effect
of increased collections resulting from rising aggregate
personal incomes.
Corporation income taxes are estimated to increase by
$47 billion from 2013 to 2014, by $111 billion from 2014 to
2018, and by $76 billion from 2018 to 2023 under baseline
assumptions. This average annual rate of growth of 5.1
percent between 2014 and 2023 is primarily attributable
to growth in corporate profits.
Social insurance and retirement receipts are estimated
to increase by $81 billion from 2013 to 2014, by an additional $235 billion between 2014 and 2018, and by an additional $325 billion between 2018 and 2023. These baseline estimates reflect expiration of the two-percentage
point payroll tax holiday on December 31, 2012, increases
in total wages and salaries paid, and scheduled increases
in the Social Security taxable earnings base from $113,700
in 2013 to $134,400 in 2018 and to $165,000 in 2023, as
shown in Table 26-7.
Other baseline receipts (excise taxes, estate and gift
taxes, customs duties and miscellaneous receipts) are projected to increase by $36 billion between 2013 and 2014,
and to rise to $371 billion by 2023.
Outlays.—Outlays in the Administration’s baseline are
estimated to decrease from $3,632 billion in 2013 to $3,627
billion in 2014, a 0.1 percent decrease. Between 2013 and
2018, the baseline outlays are projected to increase at an
average annual rate of 4.1 percent, and between 2013 and
2023 are projected to increase at an average annual rate
of 5.1 percent. Table 26–8 shows the growth from 2013 to
2014 and average annual growth over the five-year and
ten-year periods for certain discretionary and major mandatory programs.
Discretionary budget authority is assumed to be capped
at the levels specified in the BCA, including the limited
upward adjustments specified in previous sections of this
chapter, and reduced for estimated Joint Committee enforcement. Outlays for discretionary programs decrease
by 4.9 percent from $1,226 billion in 2013 to $1,166 billion
in 2014, largely due to the effects of Joint Committee enforcement in 2014, which are larger than the reductions for
2013, and reductions in OCO funding. Discretionary outlays decrease at an average annual rate of 0.1 percent from
2013 to 2018 and increase at an average annual rate of 1.6
percent from 2013 to 2023.

26. Current Services Estimates

Entitlement and other mandatory programs are estimated to increase by 2.4 percent from $2,182 billion in
2013 to $2,235 billion in 2014. Several programs show
notable outlay growth between 2013 and 2014: outlays
for Medicaid, Medicare, and other health care programs
increase by 11.5 percent; outlays for veterans programs
increase by 6.2 percent; Social Security outlays increase
by 5.8 percent; and Federal employee retirement and disability outlays increase by 4.2 percent. These increases
are offset by reduced spending on unemployment compensation (29.4 percent), farm programs (19.1 percent), other
income security programs (3.5 percent), and other mandatory programs (104.2 percent). The outlay reduction from
2013 to 2014 for other mandatory programs is largely
due to projected increases in the dividends received by
Treasury under Preferred Stock Purchase Agreements
with Fannie Mae and Freddie Mac; a $5.7 billion projected refund of prepaid FDIC Deposit Insurance Fund
assessments in 2013 followed by the revival of cash assessments following several years of prepaid Fund premiums in 2014; and elevated spending in 2013 for the
National Flood Insurance Program to pay claims related
to Superstorm Sandy.

435
Mandatory outlays increase each year after 2013, reaching $3,706 billion in 2023, which is due mostly to increased
spending on Medicaid, Medicare, other health care programs, veterans programs and Social Security. Over the
same time period, outlays for unemployment compensation decline at an average annual rate of 4.2 percent. Net
interest payments are projected to increase at an average
annual rate of 13.7 percent from $222 billion in 2013 to
$804 billion in 2023 due to increases in the amount of debt
outstanding and to the average interest rate on the debt.
Tables 26–9 and 26–10 show the Administration’s
baseline outlays by function and by agency, respectively. A
more detailed presentation of outlays (by function, category, subfunction, and program) is available as Table 26–13
online at www.whitehouse.gov/omb/budget/Analytical_
Perspectives and on the Budget CD-ROM.
Budget authority.—Tables 26–11 and 26–12 show
estimates of budget authority in the Administration’s
baseline by function and by agency, respectively. A more
detailed presentation of budget authority with program
level estimates is also part of Table 26–13 online at www.
whitehouse.gov/omb/budget/Analytical_Perspectives
and on the Budget CD-ROM.

436

Analytical Perspectives

Table 26–4.  Baseline Beneficiary Projections for Major Benefit Programs
(Annual average, in thousands)
Actual
2012

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Farmers receiving Federal payments �������������������������������������
Federal direct student loans ���������������������������������������������������
Federal Pell Grants �����������������������������������������������������������������
Medicaid/Children’s Health Insurance Program ��������������������
Medicare-eligible military retiree health benefits ��������������������

1,329
11,270
8,965
63,155
2,183

1,322
11,089
9,171
63,276
2,230

1,315
11,420
9,373
71,658
2,266

1,308
11,773
9,515
76,997
2,293

1,301
12,139
9,660
79,939
2,317

1,294
12,517
9,771
79,963
2,344

1,288
12,908
9,874
78,868
2,367

1,282
13,314
10,044
79,167
2,390

1,276
13,735
10,153
80,362
2,413

1,270
14,171
10,276
80,901
2,435

1,264
14,622
10,390
81,448
2,457

1,258
15,090
10,515
82,005
2,480

Medicare:
Hospital insurance �������������������������������������������������������������

49,856

51,490

53,109

54,742

56,361

57,998

59,665

61,370

63,122

64,908

66,729

68,576

Supplementary medical insurance:
Part B ����������������������������������������������������������������������������
Part D ���������������������������������������������������������������������������

46,011
36,962

47,540
37,996

48,990
39,032

50,424
40,138

51,848
41,187

53,283
42,232

54,748
43,321

56,249
44,440

57,844
45,841

59,448
47,153

61,075
48,427

62,737
49,734

31,230
5,732
13,202
566
2,544
2,237
8,893

34,541
3,455
14,546
565
2,564
2,253
8,970

36,736
2,296
14,868
562
2,604
2,264
9,172

38,477
1,661
14,195
559
2,619
2,273
9,095

40,203
984
13,447
556
2,636
2,282
8,940

41,403
830
12,644
551
2,654
2,291
8,740

42,468
853
12,477
547
2,672
2,300
8,561

43,563
877
12,820
542
2,692
2,309
8,475

44,939
902
13,308
536
2,712
2,318
8,464

46,226
928
13,894
529
2,733
2,329
8,481

47,474
953
14,541
521
2,753
2,340
8,503

48,755
980
15,179
512
2,774
2,350
8,525

46,609
35,034

47,105
35,401

44,734
35,775

42,629
36,097

40,656
36,424

38,755
36,756

36,979
37,093

35,373
37,434

34,046
37,781

33,173
38,132

32,616
38,489

32,274
38,852

Prescription Drug Plans and Medicare Advantage:
Prescription Drug Plans ������������������������������������������������
Retiree Drug Subsidy ��������������������������������������������������������
Managed Care Enrollment 1 ����������������������������������������������
Railroad retirement �����������������������������������������������������������������
Federal civil service retirement �����������������������������������������������
Military retirement �������������������������������������������������������������������
Unemployment insurance �������������������������������������������������������
Supplemental Nutrition Assistance Program (formerly Food
Stamps) �����������������������������������������������������������������������������
Child nutrition �������������������������������������������������������������������������
Foster care, Adoption Assistance and Guardianship
Assistance �������������������������������������������������������������������������

598

609

622

638

653

670

690

710

730

753

773

797

Supplemental security income (SSI):
Aged ���������������������������������������������������������������������������������
Blind/disabled ��������������������������������������������������������������������
Total, SSI ����������������������������������������������������������������������
Child care and development fund 2 �����������������������������������������

1,094
6,846
7,940
2,271

1,092
7,011
8,103
2,230

1,103
7,119
8,222
2,258

1,115
7,219
8,334
2,240

1,129
7,282
8,411
2,160

1,145
7,307
8,452
2,056

1,163
7,322
8,485
1,957

1,183
7,338
8,521
2,021

1,207
7,368
8,575
1,958

1,232
7,386
8,618
1,897

1,258
7,409
8,667
1,838

1,286
7,440
8,726
1,773

Social security (OASDI):
Old age and survivor insurance �����������������������������������������
Disability insurance ������������������������������������������������������������
Total, OASDI �����������������������������������������������������������������

45,066
10,700
55,766

46,371
10,946
57,318

47,782
11,125
58,907

49,263
11,280
60,543

50,825
11,415
62,240

52,439
11,526
63,965

54,084
11,607
65,691

55,760
11,670
67,430

57,468
11,726
69,194

59,013
11,840
70,853

60,601
11,969
72,571

62,198
12,087
74,285

Veterans compensation:
Veterans ����������������������������������������������������������������������������
Survivors (non-veterans) ���������������������������������������������������
Total, Veterans compensation ���������������������������������������

3,440
348
3,788

3,648
355
4,003

3,846
365
4,211

4,016
375
4,391

4,174
387
4,561

4,322
399
4,721

4,456
412
4,868

4,579
425
5,004

4,698
439
5,137

4,812
452
5,264

4,922
466
5,388

5,027
480
5,507

Veterans pensions:
Veterans ����������������������������������������������������������������������������
314
314
315
315
316
316
316
317
317
317
318
318
Survivors (non-veterans) ���������������������������������������������������
204
202
202
202
202
203
203
203
203
203
203
203
Total, Veterans pensions �����������������������������������������������
518
516
517
517
518
519
519
520
520
520
521
521
1 Enrollment figures include only beneficiaries who receive both Part A and Part B services through managed care.
2 Assumes CCDF reauthorization proposed in President’s Budget and includes children served through the CCDF (including TANF transfers) and through funds spent directly on child
care in the Social Services Block Grant and TANF programs.

437

26. Current Services Estimates

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline
(Outlays in millions of dollars)
Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

EXPIRING AUTHORIZATIONS
Programs Extended in the Adjusted Baseline
Spending:
Agriculture:
Natural Resources Conservation Service (NRCS):
Environmental Quality Incentives Program ����������������������������������
Wildlife Habitat Incentives Program ���������������������������������������������
Farm and Ranch Land Protection Program ���������������������������������
Conservation Stewardship Program ��������������������������������������������
Chesapeake Bay Watershed Initiative �����������������������������������������
Conservation Reserve Program ��������������������������������������������������
Farm Service Agency (FSA) Programs:
Agricultural Commodity Marketing Loans ������������������������������������
Conservation Reserve Program ��������������������������������������������������
Dairy Product Price Support Program �����������������������������������������
Agricultural Commodity Counter-Cyclical Program ���������������������
Average Crop Revenue Election (ACRE) Program ����������������������
Direct Crop Payments ������������������������������������������������������������������
Market Access Program -- FAS ���������������������������������������������������
Forest Service (FS):
Federal Lands Recreation Enhancement Fund ���������������������������
Child Nutrition Programs:
State Administrative Expenses ���������������������������������������������������
Summer Food Service Program ��������������������������������������������������
NSLP Commodity Support (Bonus - Section 6(e)(1)(B) of NSLA) ����
Supplemental Nutrition Assistance Program (SNAP) (formerly Food
Stamps) ��������������������������������������������������������������������������������������
Education:
Rehabilitation Services and Disability Research �������������������������

.........
.........
.........
.........
.........
.........

.........
.........
.........
.........
18
32

1,625
69
187
1,177
11
28

1,684
74
193
1,585
3
25

1,723
78
199
1,830
.........
21

1,745
80
200
2,110
.........
18

1,750
82
200
2,377
.........
16

1,750
84
200
2,643
.........
11

1,750
85
200
2,429
.........
7

1,750
85
200
2,437
.........
3

1,750
85
200
2,454
.........
3

.........
.........
.........
.........
.........
.........
.........

46
11
31
.........
.........
.........
32

19
59
29
.........
.........
4,945
178

22
201
27
40
1,818
4,945
200

29
315
24
32
184
4,944
200

4
423
22
25
11
4,989
200

18
556
20
20
14
4,978
200

5
623
17
15
11
4,975
200

12
709
16
12
13
4,971
200

4
920
14
7
10
4,967
200

3
1,080
12
.........
12
4,991
200

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

273
514
.........

279
542
.........

284
570
.........

290
600
.........

297
632
.........

305
665
100

316
700
100

326
738
100

.........

74,058

72,300

71,262

70,270

69,364

68,594

68,172

68,511

67,640

67,141

.........

3,302

3,375

3,449

3,525

3,602

3,682

3,763

3,845

3,930

4,016

Health and Human Services:
Centers for Medicare & Medicaid Services:
Children’s Health Insurance Program �����������������������������������������
Administration for Children and Families:
Child Care Entitlements to States ������������������������������������������������
Promoting Safe and Stable Families ��������������������������������������������
TANF ��������������������������������������������������������������������������������������������
Contingency Fund ������������������������������������������������������������������������

.........

.........

.........

.........

9,100

6,400

5,900

5,800

5,700

5,700

5,700

2,908
.........
16,835
.........

2,915
.........
16,981
.........

2,917
.........
17,182
612

2,917
.........
16,817
612

2,917
93
16,722
612

2,917
270
16,722
612

2,917
317
16,722
612

2,917
338
16,722
612

2,917
345
16,722
612

2,917
345
16,722
612

2,917
345
16,722
612

Homeland Security:
National Flood Insurance Fund�����������������������������������������������������

.........

.........

.........

.........

.........

6,266

6,396

6,537

6,844

6,996

7,153

Interior:
Federal Land Recreation and Enhancement Act �������������������������
Sport Fish Restoration and Boating Trust Fund 1 �������������������������

.........
460

.........
427

–17
443

1
454

1
473

0
497

–1
522

–1
547

0
574

–2
600

–1
627

Labor:
Trade Adjustment Assistance for Workers ����������������������������������

.........

.........

32

241

410

484

528

568

607

643

675

Veterans Affairs:
Veterans Compensation Cost of Living Adjustment ���������������������

.........

1,033

2,385

3,870

5,469

7,183

9,006

10,942

12,996

15,169

17,448

Revenues:
Airport and Airway Trust Fund Taxes �����������������������������������������������������
Highway Trust Fund Taxes ���������������������������������������������������������������������
Leaking Underground Storage Tank (LUST) Trust Fund Taxes ��������������

.........
.........
.........

.........
.........
.........

.........
.........
.........

12,755
.........
.........

13,293
40,049
183

13,817
40,290
183

14,272
40,468
181

14,703
40,582
179

15,157
40,965
178

15,615
41,349
179

16,103
41,447
177

438

Analytical Perspectives

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Oil Spill Liability Trust Fund Taxes ���������������������������������������������������������
Sport Fish Restoration and Boating Safety Trust Fund Taxes 3 �������������
Tobacco Assessment �����������������������������������������������������������������������������
Fee on Insured and Self Insured Plans �������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

.........
.........
.........
.........

.........
.........
.........
.........

.........
.........
960
.........

.........
.........
960
.........

.........
634
960
.........

404
663
960
.........

533
694
960
.........

529
725
960
538

523
754
960
572

521
785
960
608

536
816
960
648

20
.........
.........

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

20
2
1

.........
.........
.........

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

20
10
1,000

.........
.........
.........

11
67
386

12
67
218

13
67
123

13
67
77

13
67
68

13
67
84

13
67
65

13
67
65

13
67
65

13
67
45

.........
.........
.........

2
1
3

10
8
20

19
13
33

19
20
50

19
20
50

19
20
50

19
20
50

19
20
50

19
20
50

19
20
50

.........

2

5

5

5

5

5

5

5

5

5

.........

10

10

10

10

10

10

10

10

10

10

.........

55

55

55

55

55

55

55

55

55

55

.........
.........
.........
.........
.........
.........

60
105
10
35
164
1

65
105
13
35
245
2

68
105
14
35
245
2

70
105
14
35
245
3

70
105
15
35
245
3

70
105
15
35
245
3

70
105
15
35
245
3

70
105
15
35
245
3

70
105
15
35
245
3

70
105
15
35
245
3

.........
.........
.........

18
.........
.........

34
4
6

35
8
8

35
9
10

35
9
10

35
9
10

35
9
10

35
9
10

35
9
10

35
9
10

.........
.........
8
.........
.........

279
.........
9
.........
10

262
.........
9
2
10

246
.........
9
2
10

231
23
9
2
10

217
19
9
2
10

203
20
9
2
10

190
20
10
2
10

178
20
10
2
10

166
21
10
2
10

155
21
10
2
10

.........

257

319

319

319

319

319

319

319

319

319

.........

270

–45

–45

45

100

135

220

260

280

300

.........

405

785

875

970

1,075

1,185

1,315

1,450

1,600

1,755

Programs and Provisions Not Extended in the Adjusted Baseline
Spending:
Agriculture:
Departmental Management/Office of Advocacy and Outreach:
Outreach and Technical Assistance for Socially Disadvantaged
Farmers and Ranchers �����������������������������������������������������������
Sec. 9002 Biobased Markets Program ����������������������������������������
Sec. 9006 Biodiesel Fuel Education Program �����������������������������
Farm Service Agency (FSA) Programs:
Biomass Crop Assistance Program (BCAP) ��������������������������������
Voluntary Public Access ��������������������������������������������������������������
Disaster Relief Fund ��������������������������������������������������������������������
Natural Resources Conservation Service (NRCS):
Healthy Forests Reserve Program �����������������������������������������������
Grasslands Reserve Program �����������������������������������������������������
Wetlands Reserve Program ���������������������������������������������������������
National Institute of Food and Agriculture (NIFA):
Beginning Farmers and Ranchers Development Program ����������
Organic Agriculture Research and Extension Iniitative ����������������
Specialty Crop Research Initiative �����������������������������������������������
Animal and Plant Health Inspection Service:
National Clean Plant Network ������������������������������������������������������
Agricultural Marketing Service:
Farmers Market Promotion Program (2008 Farm Bill, Sec.
10106) �������������������������������������������������������������������������������������
Specialty Crop Block Grants Program (2008 Farm Bill, Sec.
10109) �������������������������������������������������������������������������������������
Rural Business-Cooperative Service:
Rural Energy for America Program ����������������������������������������������
Bioenergy Program for Advanced Biofuels ����������������������������������
Value Added Agricultural Market Development Program �������������
Repowering Assistance Program ������������������������������������������������
Biorefinery Assistance Program ��������������������������������������������������
Rural Microentrepreneur Assistance Program �����������������������������
Trade Assistance Programs:
Foreign Market Development (Cooperator) Program ������������������
Technical Assistance Specialty Crops ����������������������������������������
Emerging Markets �����������������������������������������������������������������������
Forest Service (FS):
Forest County Safety Net Payments (Departments of Agriculture
and the Interior) ��������������������������������������������������������������������
Federal Land and Facility Enhancement Fund ����������������������������
Administration of Rights-of-Way and Other Land Uses Fund ������
Sect. 420 Sale of botanical products pilot program ���������������������
Stewardship Contracting ��������������������������������������������������������������
Health and Human Services:
TANF Supplemental Grants �������������������������������������������������������
Medicaid:
Transitional Medical Assistance 4 ������������������������������������������������
Medicare Low-Income Premium Assistance (Qualified
Individuals) 4 ��������������������������������������������������������������������������

439

26. Current Services Estimates

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Interior:
Oil and Gas Permit Processing Improvement Fund ������������������������
Payments in Lieu of Taxes ���������������������������������������������������������������

.........
.........

.........
411

.........
419

18
426

17
434

17
442

16
449

16
458

15
466

14
474

14
482

Labor:
Alternative Trade Adjustment Assistance ����������������������������������������

.........

.........

4

14

25

28

29

30

31

32

33

Social Security:
SSI Extension for Elderly and Disabled Refugees Act (SSI) ������������

.........

46

53

.........

.........

.........

.........

.........

.........

.........

.........

9,300
125
330
47

9,600
100
340
53

10,400
100
.........
.........

14,800
.........
.........
.........

12,100
.........
.........
.........

7,000
.........
.........
.........

6,000
.........
.........
.........

5,800
.........
.........
.........

5,700
.........
.........
.........

5,700
.........
.........
.........

5,700
.........
.........
.........

–159
3,607
34,861
31,759
9,359
66,936

–182
4,293
35,901
34,373
10,709
83,864

–198
–213
–226
–239
–254
–270
–289
–307
–326
4,465
4,608
4,689
4,912
5,137
5,375
5,623
5,883
6,154
37,119 38,588 40,226 42,042 43,976 46,060 48,290 50,676 53,244
36,738 38,452 41,099 44,310 47,487 51,018 54,842 58,888 63,183
11,878 12,933 13,623 14,246 14,928 15,517 16,256 17,052 17,895
98,142 110,096 119,393 129,280 139,506 148,938 159,950 171,814 184,261

–660
–470
.........
.........

–730
–1,070
–230
–2,000

–780
–1,340
–270
–2,000

–840
–1,990
–290
–2,000

–910
–2,450
–300
–2,000

–990
–2,630
–310
–2,000

–1,080
–2,820
–330
–2,000

–1,180
–3,020
–350
–2,000

–1,290
–3,250
–370
–2,000

–1,380
–3,490
–390
–2,000

–1,480
–3,740
–410
–2,000

OTHER IMPORTANT PROGRAM ASSUMPTIONS
Health and Human Services:
Children’s Health Insurance Program (Title XXI):
State allotments ���������������������������������������������������������������������������
Contingency fund �������������������������������������������������������������������������
Performance bonus ����������������������������������������������������������������������
Child health quality activities ��������������������������������������������������������
Medicaid:
Financial management reviews ���������������������������������������������������
Vaccines for Children, Total program costs ����������������������������������
Institutional long-term care ���������������������������������������������������������
Home and community based institutional alternatives ����������������
Pharmaceuticals (FFS, net of rebates) ���������������������������������������
Managed care (Including Medicaid MCOs, PHPs, and PCCM) ����
Medicare:
Contracting Reform 5 �������������������������������������������������������������������
DME Competitive Bidding 5 ���������������������������������������������������������
LTCH payments policy for referrals from acute hospitals 5 �����������
Medicare Administrative Savings �������������������������������������������������
State Grants and Demonstrations:
Ticket to Work Health Grant Programs:
Infrastructure Grant Program ������������������������������������������������������
Demonstration to maintain independence and employment ��������
Partnerships for Long-Term Care �����������������������������������������������������
Alternate Non-Emergency Care �������������������������������������������������������
Psychiatric Residential Treatment Demonstration ����������������������������
Money Follows the Person Program:
Money Follows the Person (MFP) Demonstration �����������������������
Money Follows the Person (MFP) Evaluation and Support ���������
Medicaid Transformation Grants �������������������������������������������������������
Medicaid Integrity Program ���������������������������������������������������������������
Grants to Improve Outreach and Enrollment ������������������������������������
Application of Prospective Payment system �������������������������������������
Medicaid Emergency Psychiatric Demonstration �����������������������������
Incentives for Prevention of Chronic Diseases in Medicaid ��������������
Emergency Health Services for Undocumented Aliens ��������������������
Katrina/Rita Support �������������������������������������������������������������������������
Katrina Relief ������������������������������������������������������������������������������������

22
*
3
1
50

.........
*
.........
.........
50

.........
.........
.........
.........
6

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

.........
.........
.........
.........
.........

525
2
5
96
18
1
13
35
16
*
*

531
2
.........
86
20
.........
17
27
16
.........
.........

531
2
.........
88
26
.........
20
17
2
.........
.........

520
2
.........
85
12
.........
13
11
.........
.........
.........

340
1
.........
87
1
.........
8
3
.........
.........
.........

340
.........
.........
89
.........
.........
3
.........
.........
.........
.........

340
.........
.........
91
.........
.........
1
.........
.........
.........
.........

174
.........
.........
93
.........
.........
.........
.........
.........
.........
.........

.........
.........
.........
94
.........
.........
.........
.........
.........
.........
.........

.........
.........
.........
92
.........
.........
.........
.........
.........
.........
.........

.........
.........
.........
92
.........
.........
.........
.........
.........
.........
.........

Approved and Implemented Demonstrations and Pilot Programs:
Medicare, HI:
Rural Community Hospital:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������

167
196

177
234

188
248

191
253

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

440

Analytical Perspectives

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Medicare, SMI:
Coordinated Care Disease Management Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Frontier Extended Stay Clinic Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Part D Retroactive & Immediate Coverage for New Dual Eligible
Individuals: 6
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Multi-Payer Advanced Primary Care Demo:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Assess Appropriate Use of Imaging Services (MIPPA sec. 135):
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Power Mobility Device Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Medicare: HI and SMI:
Acute Care Episode Bundling Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
ESRD Disease Management Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Home Health Third-Party Liability Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Physician Group Practice Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
PACE for Profit:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Medicare Health Care Quality Demonstration Programs:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Nursing Home Value Based Purchasing Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Medicare Advantage Quality Bonus Payment Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
A/B Rebilling Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
RAC Prepay Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Medicare Independence at Home Demonstration:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

14
14

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

1
1

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

403
403

458
458

129
128

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

116
97

135
108

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

5
5

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

262
242

262
232

262
242

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

76
73

8
8

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

3
3

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

220
220

28
28

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

331
356

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

31
31

43
43

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

4,913
4,753

3,917
3,810

.........
153

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
17

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
2,525

.........
1,900

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

3,464
3,464

3,764
3,764

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

1,816
1,586

1,816
1,496

1,816
1,476

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

310
297

322
309

221
212

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

441

26. Current Services Estimates

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Center for Medicare and Medicaid Innovation (CMMI) - Medicare:
Pioneer Accountable Care Organizations:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Advance Payment ACOs: 7
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
FQHC Demonstration:
Baseline estimates ������������������������������������������������������������������
Demonstration estimates ��������������������������������������������������������
Bundled Payments for Care Improvement:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Comprehensive ESRD Care (CEC):
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Center for Medicare and Medicaid Innovation (CMMI) - Medicare
and Medicaid:
Partnerships for Patients:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Initiative to Reduce Avoidable Hospital Admissions Among
Nursing Facility Residents:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Health Care Innovation Awards:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Comprehensive Primary Care Initiative:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
State Innovation Models:
Baseline estimate �������������������������������������������������������������������
Demonstation estimate �����������������������������������������������������������
Center for Medicare and Medicaid Innovation (CMMI) - Medicaid:
Strong Start for Mothers and Newborns:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
State Demonstrations and Financial Models to Integrate Care for
Medicare-Medicaid Enrollees:
Massachusetts:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Ohio:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Washington:
Baseline estimate �������������������������������������������������������������������
Demonstration estimate ����������������������������������������������������������
Medicaid:
Alabama Family Planning:
Baseline estimate �������������������������������������������������������������������
Arizona AHCCCS:
Baseline estimate �������������������������������������������������������������������
Arkansas Family Planning:
Baseline estimate �������������������������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

6,620
6,470

6,950
6,790

7,300
7,200

7,660
7,440

8,100
8,220

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

7,000
6,982

7,350
7,387

7,718
7,674

8,103
8,117

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

1,620
1,580

1,660
1,620

1,710
1,640

1,760
1,680

1,820
1,700

460
480

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

1,524
1,529

1,575
1,562

1,628
1,613

1,683
1,668

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

3,583
3,646

3,673
3,644

3,388
3,313

3,884
3,770

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

1,102
1,099

1,150
1,139

1,189
1,168

1,235
1,201

1,288
1,278

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

TBD
TBD

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

20
20

119
121

253
253

312
305

79
82

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

49

28

.........

.........

.........

.........

.........

.........

.........

.........

.........

8,862

10,155

11,216

12,362

.........

.........

.........

.........

.........

.........

.........

13

6

.........

.........

.........

.........

.........

.........

.........

.........

.........

442

Analytical Perspectives

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Arkansas TEFRA:
Baseline estimate �������������������������������������������������������������������
California Bridge to Reform:
Baseline estimate �������������������������������������������������������������������
Colorado Adults without Dependent Children:
Baseline estimate �������������������������������������������������������������������
Delaware Diamond State Health Plan:
Baseline estimate �������������������������������������������������������������������
District of Columbia Childless Adults II:
Baseline estimate �������������������������������������������������������������������
Florida Family Planning:
Baseline estimate �������������������������������������������������������������������
Florida MEDS-AD Program: 8
Baseline estimate �������������������������������������������������������������������
Florida Medicaid Reform:
Baseline estimate �������������������������������������������������������������������
Georgia Planning for Healthy Babies:
Baseline estimate �������������������������������������������������������������������
Hawaii Health QUEST:
Baseline estimate �������������������������������������������������������������������
Healthy Indiana Plan: 9
Baseline estimate �������������������������������������������������������������������
Idaho Adult Access Card:
Baseline estimate �������������������������������������������������������������������
Illinois/Cook County Care:
Baseline estimate �������������������������������������������������������������������
Illinois Family Planning: 9
Baseline estimate �������������������������������������������������������������������
IowaCare:
Baseline estimate �������������������������������������������������������������������
Iowa Family Planning:
Baseline estimate �������������������������������������������������������������������
Kansas:
Baseline estimate �������������������������������������������������������������������
Kentucky Health Care Partnership Program: 10
Baseline estimate �������������������������������������������������������������������
Louisiana Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Louisiana GNO Community Health Connection:
Baseline estimate �������������������������������������������������������������������
Maine HIV:
Baseline estimate �������������������������������������������������������������������
MaineCare Childless Adults:
Baseline estimate �������������������������������������������������������������������
Maryland Health Choice:
Baseline estimate �������������������������������������������������������������������
Massachusetts MassHealth:
Baseline estimate �������������������������������������������������������������������
Michigan Adult Benefits:
Baseline estimate �������������������������������������������������������������������
Michigan Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Minnesota Prepaid Med. Assist. Project Plus:
Baseline estimate �������������������������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

55

14

.........

.........

.........

.........

.........

.........

.........

.........

.........

9,914

9,607

7,868

656

.........

.........

.........

.........

.........

.........

.........

46

24

.........

.........

.........

.........

.........

.........

.........

.........

.........

868

225

.........

.........

.........

.........

.........

.........

.........

.........

.........

43

13

.........

.........

.........

.........

.........

.........

.........

.........

.........

14

4

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

7,689

6,311

.........

.........

.........

.........

.........

.........

.........

.........

.........

526

132

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,044

267

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,612

405

.........

.........

.........

.........

.........

.........

.........

.........

.........

*

*

.........

.........

.........

.........

.........

.........

.........

.........

.........

184

61

.........

.........

.........

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

106

28

.........

.........

.........

.........

.........

.........

.........

.........

.........

18

5

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,307

1,831

1,960

2,101

2,249

572

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

20

5

.........

.........

.........

.........

.........

.........

.........

.........

.........

11

3

.........

.........

.........

.........

.........

.........

.........

.........

.........

58

15

.........

.........

.........

.........

.........

.........

.........

.........

.........

3,256

887

.........

.........

.........

.........

.........

.........

.........

.........

.........

5,349

4,309

.........

.........

.........

.........

.........

.........

.........

.........

.........

153

165

.........

.........

.........

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

434

113

.........

.........

.........

.........

.........

.........

.........

.........

.........

443

26. Current Services Estimates

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Minnesota Family Planning:
Baseline estimate �������������������������������������������������������������������
Mississippi Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Mississippi - Healthier Mississippi:
Baseline estimate �������������������������������������������������������������������
Montana Basic Medicaid for Able-Bodied Adults:
Baseline estimate �������������������������������������������������������������������
Montana Family Planning:
Baseline estimate �������������������������������������������������������������������
Missouri Family Planning:
Baseline estimate �������������������������������������������������������������������
Missouri Gateway to Better Health:
Baseline estimate �������������������������������������������������������������������
New Jersey Comprehensive Waiver:
Baseline estimate �������������������������������������������������������������������
New Mexico State Coverage Insurance:
Baseline estimate �������������������������������������������������������������������
New York Federal-State Health Reform Partnership:
Baseline estimate �������������������������������������������������������������������
New York Partnership Plan:
Baseline estimate �������������������������������������������������������������������
North Carolina Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Ohio Metro Health:
Baseline estimates ������������������������������������������������������������������
Oklahoma Sooner Care: 11
Baseline estimate �������������������������������������������������������������������
Oregon Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Oregon Health Plan:
Baseline estimate �������������������������������������������������������������������
Pennsylvania Family Planning: 9
Baseline estimate �������������������������������������������������������������������
Rhode Island Global:
Baseline estimate �������������������������������������������������������������������
TennCare II:
Baseline estimate �������������������������������������������������������������������
Texas Family Planning: 12
Baseline estimate �������������������������������������������������������������������
Texas Healthcare Transformation and Quality Improvement
Program:
Baseline estimate �������������������������������������������������������������������
Utah Primary Care Network:
Baseline estimate �������������������������������������������������������������������
Vermont Long Term Care Plan:
Baseline estimate �������������������������������������������������������������������
Vermont Global Commitment to Health:
Baseline estimate �������������������������������������������������������������������
Washington Take Charge/Family Planning:
Baseline estimate �������������������������������������������������������������������
Washington Transitional Bridge:
Baseline estimate �������������������������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

15

4

.........

.........

.........

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

70

18

.........

.........

.........

.........

.........

.........

.........

.........

.........

48

10

.........

.........

.........

.........

.........

.........

.........

.........

.........

2

1

.........

.........

.........

.........

.........

.........

.........

.........

.........

25

7

.........

.........

.........

.........

.........

.........

.........

.........

.........

19

5

.........

.........

.........

.........

.........

.........

.........

.........

.........

5,049

5,049

5,654

6,017

4,726

.........

.........

.........

.........

.........

.........

198

212

.........

.........

.........

.........

.........

.........

.........

.........

.........

7,869

4,190

18,257

9,704

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

68

26

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,698

1,878

2,046

522

.........

.........

.........

.........

.........

.........

.........

18

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

3,502

4,533

5,281

5,937

6,680

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

1,572

625

.........

.........

.........

.........

.........

.........

.........

.........

.........

5,329

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

TBD

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

15,005

16,761

18,010

19,277

.........

.........

.........

.........

.........

.........

.........

114

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

210

227

245

.........

.........

.........

.........

.........

.........

.........

.........

837

229

.........

.........

.........

.........

.........

.........

.........

.........

.........

20

3

.........

.........

.........

.........

.........

.........

.........

.........

.........

225

57

.........

.........

.........

.........

.........

.........

.........

.........

.........

444

Analytical Perspectives

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013
Wisconsin BadgerCare: 13
Demonstration estimate ���������������������������������������������������������
Wisconsin BadgerCare Plus:
Baseline estimate �������������������������������������������������������������������
Wyoming Family Planning:
Baseline estimate �������������������������������������������������������������������
Pharmacy Plus:
Wisconsin Pharmacy Plus:
Demonstration estimate ����������������������������������������������������������
Children’s Health Insurance Program (CHIP)/Medicaid
Demonstrations:
New Jersey FamilyCare:
Demonstration estimate (CHIP funds) ������������������������������������
New Jersey Comprehensive Waiver:
Demonstration estimate (CHIP funds) ������������������������������������
Oregon Health Plan 2:
Demonstration estimate (CHIP funds) ������������������������������������
Arkansas ARKids B:
Baseline estimate (CHIP) �������������������������������������������������������
Arkansas Safety Net Benefit Program:
Demonstration estimate (CHIP funds) ������������������������������������
Baseline estimate (Medicaid funds) ����������������������������������������
Colorado:
Demonstration estimate (CHIP funds) ������������������������������������
Idaho:
Demonstration estimate (CHIP funds) ������������������������������������
New Mexico:
Demonstration estimate (CHIP funds) ������������������������������������
Virginia:
Demonstration estimate (CHIP funds) ������������������������������������
Old Age and Survivors Insurance (OASI), Disability Insurance (DI)
and Supplemental Security Income (SSI):
Performance of CDRs in 2011 and Subsequent Years:
OASDI ������������������������������������������������������������������������������������������
SSI �����������������������������������������������������������������������������������������������
Collection of Overpayments:
OASI ��������������������������������������������������������������������������������������������
DI �������������������������������������������������������������������������������������������������
SSI �����������������������������������������������������������������������������������������������
Debts Written off as Uncollectible (no effect on outlays):
OASI ��������������������������������������������������������������������������������������������
DI �������������������������������������������������������������������������������������������������
SSI (Federal) �������������������������������������������������������������������������������
Payments to States for Vocational Rehabilitation (excludes ticket
payments):
OASDI ������������������������������������������������������������������������������������������
SSI �����������������������������������������������������������������������������������������������
Research and Demonstration Projects:
OASDI ������������������������������������������������������������������������������������������
SSI �����������������������������������������������������������������������������������������������
State Supplementation Benefit Payments (SSI):
Payments from States ������������������������������������������������������������������
Benefit Payments �������������������������������������������������������������������������
Fees for Federal Administration of SSI State Supplemental Benefit
Payments:
Treasury Share ����������������������������������������������������������������������������

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

108

28

.........

.........

.........

.........

.........

.........

.........

.........

.........

39

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

835

1,162

1,228

311

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

323

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

5

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

87

91

.........

.........

.........

.........

.........

.........

.........

.........

.........

14
1,745

.........
467

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

21

22

.........

.........

.........

.........

.........

.........

.........

.........

.........

*

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

62

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

11

.........

.........

.........

.........

.........

.........

.........

.........

.........

.........

–33
–27

–160
–260

–191
–532

–193
–855

–193
–1,045

–188
–1,164

–182
–1,448

–175
–1,629

–168
–1,792

–162
–2,088

–156
–2,070

–1,172
–989
–1,196

–1,235
–1,026
–1,272

–1,306
–1,063
–1,348

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–1,384
–1,100
–1,446

–150
–482
–27

–158
–500
–27

–167
–518
–28

–177
–536
–30

–177
–536
–30

–177
–536
–30

–177
–536
–30

–177
–536
–30

–177
–536
–30

–177
–536
–30

–177
–536
–30

104
42

122
48

138
52

148
57

158
60

164
61

168
63

171
64

174
66

176
68

178
69

19
33

18
40

.........
42

.........
43

.........
44

.........
44

.........
45

.........
46

.........
47

.........
48

.........
49

–3,337
3,310

–3,320
3,435

–3,447
3,580

–3,591
4,020

–3,726
3,860

–3,860
3,660

–3,984
4,085

–4,094
4,195

–4,205
4,310

–4,320
4,795

–4,445
4,570

–135

–136

–137

–150

–139

–127

–139

–140

–140

–152

–141

445

26. Current Services Estimates

Table 26–5. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline—Continued
(Outlays in millions of dollars)
Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

SSA Share �����������������������������������������������������������������������������������
–166
–173
–181
–205
–197
–188
–213
–221
–230
–259
–248
Performance of Non-Disability SSI Redeterminations ����������������������
460
–898
–351
–138
–107
–58
–60
–41
–28
–24
38
* Indicates baseline amount rounds to zero.
1 The amounts shown are the outlays for USFWS only. US Coast Guard and the USACE receive funding from the Sport Fish and Boating Trust Fund.
2 Estimates are based on current year amount.
3 The amounts shown are the excise tax estimates for the Sport Fish Restoration and Boating Trust Fund.
4 Current law expires December 31, 2013.
5 Medicare regulations reflect net of premium outlays.
6 Part D Retroactive & Immediate Coverage for New Dual Eligible Individuals demo amount for FY 2014 includes Q1 only as demo expires December 31, 2014.
7 OACT estimates that advance payment ACOs are expected to generate $60M in savings for the Medicare Shared Savings Program (MSSP) in the first three performance periods,
reflected in the baseline and in the MSSP regulatory impact analysis. These savings are included in the above estimate.
8 Demonstration will expend accumulated budget neutrality savings from prior years.
9 The demonstration is on temporary extension.
10 The demonstration ended December 31, 2012, with all beneficiaries moving into a 1915(b) waiver.
11 The demonstration populations (children and pregnant women) are transitioning to the Medicaid and CHIP state plans effective January 1, 2013. However, the state will continue to
have section 1115 authority in order to continue to provide title XXI funds for pregnant women through 185 percent of the FPL in the Medicaid state plan.
12 The demonstration ended December 31, 2012.
13 The demonstration includes only state plan eligible beneficiaries and has been provided no expenditure authority. This demonstration is presumed budget neutral.

446

Analytical Perspectives

Table 26–6.  Receipts By Source in the Projection of Adjusted Baseline
(in billions of dollars)
2012
Actual
Individual income taxes ������������������������������������������������
Corporation income taxes ���������������������������������������������
Social insurance and retirement receipts ���������������������
On-budget ����������������������������������������������������������������
Off-budget ����������������������������������������������������������������
Excise taxes �����������������������������������������������������������������
Estate and gift taxes �����������������������������������������������������
Customs duties �������������������������������������������������������������
Miscellaneous receipts �������������������������������������������������

1,132.2
242.3
845.3
(275.8)
(569.5)
79.1
14.0
30.3
107.0

Estimate
2013

2014

2015

2016

2017

2018

2019

1,234.1
287.7
951.1
(277.6)
(673.5)
85.3
12.9
33.6
107.3

1,358.2
335.1
1,031.9
(292.3)
(739.7)
93.0
13.0
39.3
129.9

1,511.8
376.4
1,084.5
(305.6)
(778.9)
98.8
13.6
42.8
148.8

1,644.6
398.7
1,148.4
(320.9)
(827.5)
100.4
15.1
46.0
122.9

1,776.0
427.0
1,203.5
(332.6)
(870.9)
104.5
16.4
49.3
83.4

1,899.8
446.2
1,267.3
(348.0)
(919.3)
112.0
17.8
52.5
69.7

2,017.5 2,144.0 2,273.8 2,402.1 2,559.5
464.8
475.1
487.4
504.3
522.6
1,329.1 1,386.9 1,462.4 1,527.0 1,592.0
(362.5) (378.0) (397.9) (411.1) (429.3)
(966.6) (1,008.9) (1,064.6) (1,115.9) (1,162.7)
125.2
130.0
137.4
145.1
155.1
19.0
20.1
21.2
22.3
23.3
55.3
58.4
61.4
64.7
68.3
85.8
110.2
114.9
119.8
124.2

2020

2021

2022

2023

Total, receipts �������������������������������������������������������� 2,450.2 2,712.2 3,000.3 3,276.8 3,476.0 3,660.2 3,865.3 4,096.7 4,324.6 4,558.6 4,785.2 5,045.0
On-budget ������������������������������������������������������������ (1,880.7) (2,038.7) (2,260.6) (2,497.9) (2,648.5) (2,789.2) (2,946.0) (3,130.0) (3,315.7) (3,494.0) (3,669.3) (3,882.3)
Off-budget ������������������������������������������������������������ (569.5) (673.5) (739.7) (778.9) (827.5) (870.9) (919.3) (966.6) (1,008.9) (1,064.6) (1,115.9) (1,162.7)

Table 26–7.  Effect on Receipts of Changes in the Social Security Taxable Earnings Base
(In billions of dollars)
2014
Social security (OASDI) taxable earnings base increases:
$113,700 to $115,800 on Jan. 1, 2014 ��������������������������������������������
$115,800 to $119,100 on Jan. 1, 2015 ��������������������������������������������
$119,100 to $123,600 on Jan. 1, 2016 ��������������������������������������������
$123,600 to $128,700 on Jan. 1, 2017 ��������������������������������������������
$127,800 to $134,400 on Jan. 1, 2018 ��������������������������������������������
$134,400 to $140,700 on Jan. 1, 2019 ��������������������������������������������
$140,700 to $146,400 on Jan. 1, 2020 ��������������������������������������������
$146,400 to $152,400 on Jan. 1, 2021 ��������������������������������������������
$152,400 to $158,700 on Jan. 1, 2022 ��������������������������������������������
$158,700 to $165,000 on Jan. 1, 2023 ��������������������������������������������

1.0
.........
.........
.........
.........
.........
.........
.........
.........
.........

2015
2.6
1.6
.........
.........
.........
.........
.........
.........
.........
.........

2016
2.9
4.3
2.3
.........
.........
.........
.........
.........
.........
.........

2017
3.2
4.8
6.1
2.7
.........
.........
.........
.........
.........
.........

2018
3.6
5.3
6.8
7.1
3.1
.........
.........
.........
.........
.........

2019
3.9
5.9
7.5
7.8
8.0
3.4
.........
.........
.........
.........

2020
3.4
6.4
8.2
8.5
8.7
8.7
3.0
.........
.........
.........

2021
3.4
5.5
8.5
9.5
9.6
9.7
8.0
3.2
.........
.........

2022
4.0
5.8
7.5
9.8
10.6
10.6
8.8
8.4
3.4
.........

2023
4.5
6.6
8.0
8.5
11.1
11.6
9.5
9.2
8.9
3.4

447

26. Current Services Estimates

Table 26–8. Change in Outlay Estimates by Category in the Adjusted Baseline
(Dollar amounts in billions)
Change 2013 to
2014

2013

2014

2018

2023

Amount

Percent

Change 2013 to
2018

Amount

Annual
average
rate

Change 2013 to
2023

Amount

Annual
average
rate

Outlays:
Discretionary:
Defense ��������������������������������������������������������������������������������������������
Non-defense �������������������������������������������������������������������������������������
Subtotal, discretionary ��������������������������������������������������������������������������

630
596
1,226

574
592
1,166

634
585
1,219

758
679
1,438

–56
–4
–60

–8.9%
–0.7%
–4.9%

4
–11
–7

0.1%
–0.4%
–0.1%

128
83
212

1.9%
1.3%
1.6%

Mandatory:
Farm programs ���������������������������������������������������������������������������������
20
16
14
15
–4 –19.1%
–6
–6.5%
–5
–2.6%
Medicaid �������������������������������������������������������������������������������������������
267
304
392
529
37
14.0%
126
8.0%
263
7.1%
Other health care ������������������������������������������������������������������������������
42
78
146
195
35
83.1%
103
28.0%
153
16.5%
Medicare �������������������������������������������������������������������������������������������
498
519
639
941
21
4.2%
141
5.1%
443
6.6%
Federal employee retirement and disability ��������������������������������������
131
136
152
184
6
4.2%
21
3.1%
53
3.5%
Unemployment compensation ����������������������������������������������������������
76
54
44
53
–22 –29.4%
–32 –10.3%
–23
–3.6%
Other income security programs ������������������������������������������������������
285
275
276
303
–10
–3.5%
–8
–0.6%
18
0.6%
Social Security ����������������������������������������������������������������������������������
812
860
1,081
1,427
48
5.8%
269
5.9%
614
5.8%
Veterans programs ���������������������������������������������������������������������������
81
86
103
145
5
6.2%
22
5.0%
64
6.0%
Other mandatory programs ��������������������������������������������������������������
62
–3
5
36
–64 –104.2%
–57 –40.0%
–26
–5.2%
Undistributed offsetting receipts �������������������������������������������������������
–92
–89
–105
–122
2
–2.5%
–13
2.7%
–30
2.9%
Subtotal, mandatory �����������������������������������������������������������������������������
2,182
2,235
2,749
3,706
53
2.4%
567
4.7%
1,524
5.4%
Disaster costs 1 ������������������������������������������������������������������������������������
1
5
9
10
3 241.8%
8
46.5%
9
21.9%
Net interest �������������������������������������������������������������������������������������������
222
222
459
804
–*
–0.1%
237
15.6%
582
13.7%
Total, outlays ����������������������������������������������������������������������������������������������
3,632
3,627
4,437
5,959
–4
–0.1%
805
4.1%
2,327
5.1%
* $500 million or less.
1 These amounts represent the statistical probability of a major disaster requiring federal assistance for relief and reconstruction. Such assistance might be provided in the form of
discretionary or mandatory outlays or tax relief. These amounts are included as outlays for convenience.

448

Analytical Perspectives

Table 26–9. Outlays by Function in the Adjusted Baseline
(in billions of dollars)
Function
National Defense:
Department of Defense—Military ����������������
Other ������������������������������������������������������������
Total, National Defense ��������������������������������
International Affairs �������������������������������������������
General Science, Space, and Technology ��������
Energy ��������������������������������������������������������������
Natural Resources and Environment ����������������
Agriculture ��������������������������������������������������������
Commerce and Housing Credit ������������������������
On-Budget ���������������������������������������������������
Off-Budget ���������������������������������������������������
Transportation ���������������������������������������������������
Community and Regional Development �����������
Education, Training, Employment, and Social
Services �������������������������������������������������������
Health ���������������������������������������������������������������
Medicare �����������������������������������������������������������
Income Security ������������������������������������������������
Social Security ��������������������������������������������������
On-Budget ���������������������������������������������������
Off-Budget ���������������������������������������������������
Veterans Benefits and Services ������������������������
Administration of Justice �����������������������������������
General Government ����������������������������������������
Net Interest �������������������������������������������������������
On-Budget ���������������������������������������������������
Off-Budget ���������������������������������������������������
Allowances �������������������������������������������������������

2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

616.7
25.8
642.5
60.1
32.0
5.3
47.9
21.0
–20.0
(–20.3)
(0.3)
99.5
16.6

627.8
26.3
654.1
61.1
32.7
4.4
49.0
21.4
–20.0
(–20.3)
(0.3)
99.9
15.8

644.8
26.8
671.5
62.3
33.7
4.8
50.5
21.9
–26.1
(–26.3)
(0.3)
101.7
15.4

660.9
27.3
688.1
63.8
34.5
4.5
51.2
22.2
–18.1
(–18.4)
(0.3)
103.6
15.8

704.9
29.4
734.3
65.4
35.2
4.6
52.1
22.6
–21.0
(–21.3)
(0.3)
105.9
15.3

736.9
30.5
767.5
66.2
35.8
4.0
53.5
23.0
–23.2
(–23.5)
(0.3)
108.2
15.3

650.9
27.0
677.9
47.2
29.1
14.9
41.6
17.8
40.8
(38.2)
(2.7)
93.0
25.1

613.1
25.3
638.3
56.0
30.0
14.6
38.2
26.6
16.5
(16.2)
(0.3)
93.8
37.2

555.3
26.4
581.7
57.1
30.0
12.2
41.4
22.9
–39.2
(–39.5)
(0.3)
98.4
32.3

591.3
25.8
617.1
58.2
30.6
8.9
43.0
20.4
–40.7
(–40.9)
(0.3)
99.7
26.3

598.0
25.1
623.0
59.3
31.1
5.6
45.9
22.2
–37.8
(–38.1)
(0.3)
99.4
18.9

607.6
25.4
633.0
59.9
31.5
3.7
47.1
20.8
–26.6
(–26.8)
(0.3)
99.8
17.2

90.8
346.7
471.8
541.3
773.3
(140.4)
(632.9)
124.6
56.3
28.0
220.4
(332.8)
(–112.4)
.........

71.7
368.0
504.2
556.0
818.0
(56.3)
(761.8)
140.7
57.6
29.3
221.9
(327.5)
(–105.6)
4.6

84.5
438.6
525.3
530.0
865.6
(28.6)
(837.0)
149.0
62.8
26.4
221.8
(321.9)
(–100.0)
–24.3

89.9
512.1
552.4
527.7
917.5
(32.6)
(884.9)
157.8
61.1
25.6
252.3
(348.0)
(–95.6)
–52.1

95.5
555.7
604.3
542.5
971.1
(36.0)
(935.1)
171.0
62.0
25.7
297.9
(389.9)
(–92.0)
–67.0

104.5
112.2
117.7
122.2
126.1
131.1
134.1
582.4
599.8
634.6
671.2
706.6
746.5
792.7
621.5
647.2
710.6
764.4
822.2
911.8
951.4
542.2
541.3
561.5
575.1
590.0
614.3
616.1
1,028.3 1,087.8 1,150.6 1,217.2 1,284.5 1,357.2 1,434.1
(39.6)
(43.3)
(47.3)
(51.3)
(55.5)
(59.8)
(64.5)
(988.7) (1,044.5) (1,103.3) (1,165.8) (1,229.1) (1,297.4) (1,369.6)
172.4
174.2
190.0
198.9
208.0
226.0
226.5
60.2
61.8
63.5
65.3
67.1
71.5
73.7
25.2
25.7
26.5
27.7
28.3
29.1
30.0
370.2
459.1
544.5
615.9
677.2
740.9
804.4
(460.9)
(548.4)
(635.1)
(705.0)
(767.2)
(827.8)
(889.9)
(–90.7)
(–89.4)
(–90.6)
(–89.1)
(–89.9)
(–86.8)
(–85.5)
–70.3
–72.5
–73.9
–76.3
–79.5
–49.9
–32.7

–68.3

–66.1

–65.6

–66.0

–67.4

–72.6

–74.7

–77.2

–79.8

–82.5

–85.3

–88.1

Undistributed Offsetting Receipts:
Employer share, employee retirement (onbudget) ���������������������������������������������������
Employer share, employee retirement (offbudget) ���������������������������������������������������
Rents and royalties on the Outer Continental
Shelf �������������������������������������������������������
Sale of major assets ������������������������������������
Other undistributed offsetting receipts ���������
Total, Undistributed Offsetting Receipts ������
On-Budget �����������������������������������������������
Off-Budget �����������������������������������������������

–15.6

–16.2

–16.8

–17.7

–18.6

–19.4

–20.3

–21.3

–22.3

–23.3

–24.5

–25.5

–6.6
–13.0
.........
–103.5
(–87.9)
(–15.6)

–6.8
–2.6
.........
–91.7
(–75.6)
(–16.2)

–7.0
.........
.........
–89.4
(–72.6)
(–16.8)

–7.2
.........
–4.8
–95.6
(–77.9)
(–17.7)

–7.4
.........
–9.4
–102.9
(–84.3)
(–18.6)

–7.3
.........
–7.7
–107.0
(–87.6)
(–19.4)

–7.1
.........
–2.6
–104.6
(–84.3)
(–20.3)

–7.6
.........
–4.4
–110.6
(–89.2)
(–21.3)

–8.2
.........
–4.4
–114.7
(–92.4)
(–22.3)

–8.4
.........
.........
–114.3
(–90.9)
(–23.3)

–8.6
.........
.........
–118.5
(–93.9)
(–24.5)

–8.3
.........
.........
–122.0
(–96.5)
(–25.5)

Total ������������������������������������������������������������������

3,537.1

3,631.5

3,627.4

3,812.3

4,023.4

4,216.1

4,436.8

4,733.3

5,002.5

5,281.9

5,674.4

5,958.5

On-Budget ���������������������������������������������������
Off-Budget ���������������������������������������������������

(3,029.5) (2,991.3) (2,906.9) (3,040.4) (3,198.7) (3,337.3) (3,501.6) (3,741.7) (3,947.9) (4,165.8) (4,488.1) (4,699.6)
(507.6)
(640.3)
(720.4)
(771.9)
(824.7)
(878.8)
(935.1)
(991.6) (1,054.7) (1,116.1) (1,186.3) (1,258.9)

449

26. Current Services Estimates

Table 27–10. Outlays by Agency in the Adjusted Baseline
(in billions of dollars)
Agency
Legislative Branch �����������������������������������������������������������
Judicial Branch ����������������������������������������������������������������
Agriculture �����������������������������������������������������������������������
Commerce �����������������������������������������������������������������������
Defense—Military Programs ��������������������������������������������
Education �������������������������������������������������������������������������
Energy �����������������������������������������������������������������������������
Health and Human Services ��������������������������������������������
Homeland Security ����������������������������������������������������������
Housing and Urban Development ������������������������������������
Interior �����������������������������������������������������������������������������
Justice �����������������������������������������������������������������������������
Labor �������������������������������������������������������������������������������
State ��������������������������������������������������������������������������������
Transportation ������������������������������������������������������������������
Treasury ���������������������������������������������������������������������������
Veterans Affairs ���������������������������������������������������������������
Corps of Engineers—Civil Works ������������������������������������
Other Defense Civil Programs �����������������������������������������
Environmental Protection Agency �����������������������������������
Executive Office of the President �������������������������������������
General Services Administration �������������������������������������
International Assistance Programs ����������������������������������
National Aeronautics and Space Administration �������������
National Science Foundation �������������������������������������������
Office of Personnel Management ������������������������������������
Small Business Administration ����������������������������������������
Social Security Administration �����������������������������������������
On-Budget ������������������������������������������������������������������
Off-Budget ������������������������������������������������������������������
Other Independent Agencies �������������������������������������������
On-Budget ������������������������������������������������������������������
Off-Budget ������������������������������������������������������������������
Allowances ����������������������������������������������������������������������

2012
Actual
4.4
7.2
139.7
10.3
650.9
57.2
32.5
848.1
47.4
49.6
12.9
31.2
104.6
26.9
75.1
464.7
124.1
7.8
77.3
12.8
0.4
1.8
20.0
17.2
7.3
79.5
2.9
821.1
(188.2)
(632.9)
32.9
(30.2)
(2.7)
.........

Estimate
2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

4.8
7.3
154.2
9.3
616.1
36.7
27.3
900.1
59.5
57.7
10.0
33.3
91.3
29.5
79.4
489.5
140.3
6.8
59.7
9.1
0.4
0.9
25.5
17.3
8.3
84.3
0.9
872.0
(110.2)
(761.8)
46.8
(46.5)
(0.3)
1.6

4.9
7.7
141.8
9.1
594.0
48.1
30.2
959.2
53.1
39.1
13.0
38.5
68.4
31.5
81.5
505.3
148.5
8.1
61.2
8.5
0.4
0.1
25.3
18.3
7.2
83.6
1.2
921.7
(84.7)
(837.0)
22.8
(22.5)
(0.3)
–65.0

5.0
5.0
5.1
5.2
5.4
5.5
5.7
5.9
6.0
7.8
8.0
8.2
8.4
8.6
8.9
9.1
9.4
9.6
137.3
139.6
138.4
139.0
140.3
142.1
144.0
145.1
146.7
9.5
11.3
9.8
10.4
9.7
9.7
10.0
10.3
10.5
648.4
663.5
678.1
690.9
705.2
724.7
743.3
761.6
779.9
53.4
58.9
67.3
74.2
79.1
82.8
85.8
90.0
92.2
28.8
26.3
26.0
28.1
26.9
27.5
28.0
28.5
29.2
1,033.1 1,113.8 1,146.2 1,184.1 1,274.4 1,357.4 1,441.7 1,561.3 1,637.0
51.3
47.2
47.9
48.9
49.1
50.4
52.4
55.6
57.2
36.0
34.8
33.2
32.6
32.3
31.8
31.7
31.9
31.8
13.9
14.1
14.7
14.8
15.0
15.3
15.7
15.9
16.2
36.2
36.1
33.8
34.6
35.5
36.5
37.5
38.5
39.5
60.3
58.5
59.3
60.4
62.5
65.3
68.1
70.8
73.2
31.8
32.9
33.5
33.8
34.3
34.8
35.5
36.1
36.9
81.4
81.1
81.1
80.3
80.6
81.8
83.1
84.7
86.3
559.4
616.0
699.9
797.8
896.9
980.1 1,058.1 1,133.4 1,207.5
157.3
170.5
171.9
173.7
189.5
198.4
207.5
225.5
225.9
9.0
9.9
10.3
10.3
10.3
10.6
10.5
10.8
11.1
63.3
69.7
67.4
63.4
69.9
72.2
74.7
83.1
79.1
8.7
9.0
8.8
9.1
9.4
9.7
9.9
10.2
10.4
0.4
0.4
0.7
0.5
4.8
4.6
0.5
0.5
0.5
–0.2
–0.8
–1.6
–1.7
–1.8
–1.8
–1.9
–1.9
–1.9
26.1
26.1
26.1
26.1
26.6
27.3
28.1
28.9
29.0
18.8
19.3
19.5
19.9
20.3
20.8
21.3
21.7
22.1
7.2
7.2
7.3
7.2
7.4
7.9
8.1
8.3
8.4
87.9
92.1
103.6
107.2
112.1
117.0
121.8
126.9
132.2
1.4
1.1
1.2
1.2
1.2
1.3
1.3
1.3
1.4
977.0 1,037.9 1,092.7 1,149.3 1,219.0 1,287.7 1,357.2 1,437.6 1,511.3
(92.1) (102.8) (104.0) (104.8) (115.7) (121.9) (128.1) (140.2) (141.7)
(884.9) (935.1) (988.7) (1,044.5) (1,103.3) (1,165.8) (1,229.1) (1,297.4) (1,369.6)
19.5
20.2
22.0
27.2
25.5
20.6
34.0
32.1
30.8
(19.2)
(19.9)
(21.8)
(26.9)
(25.2)
(20.3)
(33.7)
(31.8)
(30.5)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
(0.3)
–112.1 –135.8 –144.2 –150.1 –154.9 –159.9 –165.7 –108.8
–77.4

Undistributed Offsetting Receipts
On-Budget ������������������������������������������������������������������ (–102.7) (–126.5) (–122.7) (–132.1) (–140.0) (–142.0) (–140.2) (–150.1) (–157.0) (–162.0) (–169.3) (–173.4)
Off-Budget ������������������������������������������������������������������ (–128.0) (–121.8) (–116.8) (–113.3) (–110.7) (–110.2) (–109.6) (–112.0) (–111.5) (–113.3) (–111.4) (–111.0)
Total ��������������������������������������������������������������������������������� 3,537.1 3,631.5 3,627.4 3,812.3 4,023.4 4,216.1 4,436.8 4,733.3 5,002.5 5,281.9 5,674.4 5,958.5
On-Budget ������������������������������������������������������������������ (3,029.5) (2,991.3) (2,906.9) (3,040.4) (3,198.7) (3,337.3) (3,501.6) (3,741.7) (3,947.9) (4,165.8) (4,488.1) (4,699.6)
Off-Budget ������������������������������������������������������������������ (507.6) (640.3) (720.4) (771.9) (824.7) (878.8) (935.1) (991.6) (1,054.7) (1,116.1) (1,186.3) (1,258.9)

450

Analytical Perspectives

Table 26–11.  Budget Authority by Function in the Adjusted Baseline
(in billions of dollars)
Function

2012
Actual

Estimate
2015

2016

2017

National Defense:
Department of Defense—Military �������������������������������
655.4
581.3
571.5
Other ���������������������������������������������������������������������������
26.0
25.0
24.3
Total, National Defense �����������������������������������������������
681.4
606.3
595.8
International Affairs ����������������������������������������������������������
93.3
54.4
50.6
General Science, Space, and Technology �����������������������
29.2
27.9
29.9
Energy �����������������������������������������������������������������������������
7.7
10.9
9.7
Natural Resources and Environment �������������������������������
37.0
41.0
41.9
Agriculture �����������������������������������������������������������������������
20.9
24.1
22.0
Commerce and Housing Credit ���������������������������������������
12.4
52.4
–18.3
On-Budget ������������������������������������������������������������������
(10.2)
(52.4) (–18.3)
Off-Budget ������������������������������������������������������������������
(2.3)
.........
.........
Transportation ������������������������������������������������������������������
88.6
98.1
88.6
Community and Regional Development ��������������������������
18.5
55.8
13.4
Education, Training, Employment, and Social Services ���
91.7
68.3
75.0
Health ������������������������������������������������������������������������������
361.9
360.5
425.6
Medicare ��������������������������������������������������������������������������
484.3
504.1
525.5
Income Security ���������������������������������������������������������������
548.9
540.6
527.9
Social Security �����������������������������������������������������������������
777.6
822.4
869.6
On-Budget ������������������������������������������������������������������ (140.4)
(56.1)
(28.4)
Off-Budget ������������������������������������������������������������������ (637.2) (766.4) (841.3)
Veterans Benefits and Services ���������������������������������������
124.5
137.6
149.9
Administration of Justice ��������������������������������������������������
55.3
51.9
66.7
General Government �������������������������������������������������������
26.5
28.2
25.2
Net Interest ����������������������������������������������������������������������
219.9
221.9
221.8
On-Budget ������������������������������������������������������������������ (332.3) (327.5) (321.9)
Off-Budget ������������������������������������������������������������������ (–112.4) (–105.6) (–100.0)
Allowances ����������������������������������������������������������������������
.........
10.9
–43.0

586.7
24.8
611.5
50.1
30.6
8.2
43.4
20.1
–12.5
(–12.5)
(0.0)
90.7
14.1
89.3
525.3
552.4
528.4
921.4
(32.5)
(888.9)
157.6
57.3
25.1
252.3
(348.0)
(–95.6)
–68.2

599.0
25.1
624.2
51.4
31.2
7.0
44.6
22.2
–7.6
(–7.6)
.........
91.8
13.9
97.6
543.0
604.2
543.0
975.5
(36.0)
(939.5)
166.3
60.7
25.7
297.9
(389.9)
(–92.0)
–71.3

613.3
627.7
642.3
657.8
673.4
743.4
761.6
25.6
26.1
26.6
27.1
27.6
30.5
31.1
639.0
653.8
668.9
684.9
701.0
773.8
792.6
53.3
56.4
60.4
63.2
65.0
67.3
68.7
31.9
32.5
33.2
33.9
34.6
35.4
36.1
5.2
5.3
6.0
6.5
6.2
6.0
5.3
46.8
48.4
49.4
50.9
52.0
53.1
54.5
21.0
21.2
21.6
22.1
22.4
22.8
23.2
0.8
4.5
10.3
10.4
6.6
6.9
7.0
(0.8)
(4.5)
(10.3)
(10.4)
(6.6)
(6.9)
(7.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
92.9
94.1
95.2
96.5
97.8
99.1
100.4
14.1
15.1
15.4
15.7
16.2
16.6
16.9
106.4
113.7
119.7
123.5
127.8
132.9
136.0
574.1
598.1
633.3
681.0
707.2
748.1
794.0
621.8
647.4
710.8
764.8
822.5
911.9
951.9
548.1
553.6
568.9
582.2
596.6
614.7
622.5
1,032.8 1,092.6 1,155.7 1,222.6 1,290.0 1,363.0 1,440.4
(39.6)
(43.3)
(47.3)
(51.3)
(55.5)
(59.8)
(64.5)
(993.2) (1,049.3) (1,108.4) (1,171.3) (1,234.6) (1,303.2) (1,375.9)
173.8
182.9
191.5
200.5
209.6
219.0
228.3
60.6
62.2
64.0
65.8
67.6
72.0
74.2
26.3
27.0
27.7
28.5
29.3
30.2
31.1
370.2
459.1
544.5
615.9
677.2
740.9
804.4
(460.9) (548.4) (635.1) (705.0) (767.2) (827.8) (889.9)
(–90.7) (–89.4) (–90.6) (–89.1) (–89.9) (–86.8) (–85.5)
–72.0
–74.1
–75.6
–78.4
–81.9
–28.1
–29.0

Undistributed Offsetting Receipts:
Employer share, employee retirement (on-budget) ����
Employer share, employee retirement (off-budget) ����
Rents and royalties on the Outer Continental Shelf ����
Sale of major assets ���������������������������������������������������
Other undistributed offsetting receipts ������������������������
Total, Undistributed Offsetting Receipts ���������������������
On-Budget ��������������������������������������������������������������
Off-Budget ��������������������������������������������������������������

–66.0
–17.7
–7.2
.........
–4.8
–95.6
(–77.9)
(–17.7)

–67.4
–18.6
–7.4
.........
–9.4
–102.9
(–84.3)
(–18.6)

–72.6
–19.4
–7.3
.........
–7.7
–107.0
(–87.6)
(–19.4)

–68.3
–15.6
–6.6
–13.0
.........
–103.5
(–87.9)
(–15.6)

2013

–66.1
–16.2
–6.8
–2.6
.........
–91.7
(–75.6)
(–16.2)

2014

–65.6
–16.8
–7.0
.........
.........
–89.4
(–72.6)
(–16.8)

2018

–74.7
–20.3
–7.1
.........
–2.6
–104.6
(–84.3)
(–20.3)

2019

–77.2
–21.3
–7.6
.........
–4.4
–110.6
(–89.2)
(–21.3)

2020

–79.8
–22.3
–8.2
.........
–4.4
–114.7
(–92.4)
(–22.3)

2021

–82.5
–23.3
–8.4
.........
.........
–114.3
(–90.9)
(–23.3)

2022

–85.3
–24.5
–8.6
.........
.........
–118.5
(–93.9)
(–24.5)

2023

–88.1
–25.5
–8.3
.........
.........
–122.0
(–96.5)
(–25.5)

Total ��������������������������������������������������������������������������������� 3,576.2 3,625.4 3,588.4 3,801.6 4,018.3 4,240.1 4,489.1 4,790.4 5,075.7 5,333.7 5,767.2 6,036.6
On-Budget ������������������������������������������������������������������ (3,064.7) (2,980.8) (2,864.0) (3,026.0) (3,189.5) (3,357.0) (3,549.5) (3,794.0) (4,015.8) (4,212.4) (4,575.3) (4,771.8)
Off-Budget ������������������������������������������������������������������ (511.5) (644.6) (724.4) (775.6) (828.8) (883.1) (939.7) (996.5) (1,059.8) (1,121.3) (1,191.8) (1,264.8)
MEMORANDUM
Discretionary budget authority:
National Defense ��������������������������������������������������������
International affairs �����������������������������������������������������
Domestic ���������������������������������������������������������������������
Total, discretionary ��������������������������������������������������

669.6
54.3
472.3
1196.2

598.0
51.9
476.0
1125.8

588.1
56.3
422.6
1067.0

603.1
57.6
435.8
1096.4

615.8
58.8
445.6
1120.2

630.6
60.1
455.9
1146.6

645.4
61.5
467.5
1174.4

660.3
62.8
480.7
1203.7

676.2
64.2
492.7
1233.1

692.1
65.6
504.9
1262.5

764.9
67.0
550.1
1382.0

783.5
68.5
564.2
1416.2

451

26. Current Services Estimates

Table 26–12.  Budget Authority by Agency in the Adjusted Baseline
(in billions of dollars)
Agency

2012
Actual

Estimate
2015

2016

2017

Legislative Branch ����������������������������������������������
Judicial Branch ���������������������������������������������������
Agriculture ����������������������������������������������������������
Commerce ����������������������������������������������������������
Defense—Military Programs �������������������������������
Education ������������������������������������������������������������
Energy ����������������������������������������������������������������
Health and Human Services �������������������������������
Homeland Security ���������������������������������������������
Housing and Urban Development �����������������������
Interior ����������������������������������������������������������������
Justice ����������������������������������������������������������������
Labor ������������������������������������������������������������������
State �������������������������������������������������������������������
Transportation �����������������������������������������������������
Treasury ��������������������������������������������������������������
Veterans Affairs ��������������������������������������������������
Corps of Engineers—Civil Works �����������������������
Other Defense Civil Programs ����������������������������
Environmental Protection Agency ����������������������
Executive Office of the President ������������������������
General Services Administration ������������������������
International Assistance Programs ���������������������
National Aeronautics and Space Administration 
National Science Foundation ������������������������������
Office of Personnel Management �����������������������
Small Business Administration ���������������������������
Social Security Administration ����������������������������
On-Budget �����������������������������������������������������
Off-Budget �����������������������������������������������������
Other Independent Agencies ������������������������������
On-Budget �����������������������������������������������������
Off-Budget �����������������������������������������������������
Allowances ���������������������������������������������������������

4.5
7.2
151.8
8.0
655.4
57.5
22.7
874.5
45.9
40.1
11.5
31.4
105.4
30.1
70.1
442.6
124.0
6.8
81.1
10.8
0.4
–1.0
63.2
17.8
7.2
83.6
2.7
826.0
(188.8)
(637.2)
25.6
(23.3)
(2.3)
.........

2013
4.3
7.0
152.4
7.8
586.3
33.1
21.5
892.2
67.1
67.9
11.7
28.2
89.3
28.7
82.7
530.3
137.2
9.8
59.3
8.5
0.4
0.3
25.1
17.0
6.8
86.9
1.0
876.4
(110.0)
(766.4)
28.5
(28.5)
.........
5.9

2014
4.7
7.5
145.2
10.3
640.6
38.7
25.7
946.4
42.4
44.1
12.4
41.7
68.4
31.0
72.1
498.1
149.5
8.7
61.4
8.6
0.4
–1.5
19.1
18.3
7.3
85.3
1.1
925.7
(84.4)
(841.3)
29.9
(29.9)
.........
–115.3

4.8
7.8
143.6
9.5
656.7
53.3
26.1
1,046.3
44.4
45.1
12.8
32.3
60.6
31.6
73.6
553.9
157.1
9.0
63.5
8.8
0.4
–1.6
17.9
18.7
7.5
89.3
1.1
981.0
(92.0)
(888.9)
33.1
(33.1)
(0.0)
–141.4

5.0
8.0
145.9
13.1
672.4
60.9
26.5
1,101.5
45.4
46.1
13.1
34.9
60.3
32.3
74.1
613.9
165.8
9.3
65.5
9.0
0.4
–1.6
18.5
19.1
7.6
93.4
1.2
1,042.0
(102.5)
(939.5)
33.4
(33.4)
.........
–148.0

5.1
5.3
5.5
5.6
5.8
6.0
6.1
8.3
8.5
8.8
9.0
9.3
9.6
9.8
144.9
145.6
146.5
148.1
150.3
151.0
152.5
9.1
9.4
9.6
9.9
10.1
10.4
10.7
688.5
705.2
722.4
740.1
758.3
776.8
796.0
68.9
75.4
80.6
83.6
87.1
91.4
93.7
26.8
27.5
28.0
28.6
29.1
29.6
30.3
1,138.4 1,182.5 1,274.2 1,368.0 1,442.8 1,563.0 1,638.8
46.7
48.7
50.2
51.6
53.2
57.3
59.1
47.1
48.1
49.3
50.5
51.6
52.9
54.2
13.9
14.3
14.7
15.3
15.4
15.8
16.2
34.0
34.8
35.8
36.7
37.7
38.7
39.7
60.1
60.3
61.6
63.7
65.9
68.2
70.1
33.0
33.8
34.5
35.3
36.1
36.9
37.7
74.6
75.2
75.8
76.4
77.0
77.7
78.3
699.8
799.0
898.5
981.2 1,059.4 1,134.7 1,208.9
173.3
182.4
191.0
200.0
209.1
218.5
227.8
9.6
9.9
10.2
10.6
10.9
11.3
11.6
67.5
68.1
70.2
72.5
74.9
77.5
79.3
9.3
9.5
9.8
10.0
10.2
10.5
10.8
0.7
0.5
4.8
4.6
0.5
0.5
0.6
–1.6
–1.6
–1.7
–1.7
–1.7
–1.7
–1.7
19.7
22.0
25.3
27.2
28.3
29.6
30.1
19.5
20.0
20.4
20.9
21.3
21.8
22.3
7.7
7.9
8.0
8.2
8.4
8.5
8.7
105.3
109.8
114.6
119.5
124.7
130.3
135.7
1.2
1.2
1.2
1.3
1.3
1.3
1.4
1,097.3 1,154.4 1,224.2 1,293.2 1,362.7 1,443.1 1,517.6
(104.1)
(105.2)
(115.7)
(122.0)
(128.1)
(139.9)
(141.7)
(993.2) (1,049.3) (1,108.4) (1,171.3) (1,234.6) (1,303.2) (1,375.9)
34.2
36.1
38.0
38.7
39.6
39.9
39.8
(34.2)
(36.2)
(38.0)
(38.7)
(39.6)
(39.9)
(39.8)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
(–0.0)
–150.6
–155.0
–159.4
–164.4
–170.6
–63.1
–65.0

2018

2019

2020

2021

2022

2023

Undistributed Offsetting Receipts
On-Budget �����������������������������������������������������
Off-Budget �����������������������������������������������������

(–102.7)
(–128.0)

(–126.5)
(–121.8)

(–122.7)
(–116.8)

(–132.1)
(–113.3)

(–140.0)
(–110.7)

(–142.0)
(–110.2)

(–140.2)
(–109.6)

(–150.1)
(–112.0)

(–157.0)
(–111.5)

(–162.0)
(–113.3)

(–169.3)
(–111.4)

(–173.4)
(–111.0)

Total �������������������������������������������������������������������

3,576.2

3,625.4

3,588.4

3,801.6

4,018.3

4,240.1

4,489.1

4,790.4

5,075.7

5,333.7

5,767.2

6,036.6

On-Budget ����������������������������������������������������� (3,064.7) (2,980.8) (2,864.0) (3,026.0) (3,189.5) (3,357.0) (3,549.5) (3,794.0) (4,015.8) (4,212.4) (4,575.3) (4,771.8)
Off-Budget �����������������������������������������������������
(511.5)
(644.6)
(724.4)
(775.6)
(828.8)
(883.1)
(939.7)
(996.5) (1,059.8) (1,121.3) (1,191.8) (1,264.8)

27. Trust Funds and Federal Funds

As is common for State and local government budgets,
the budget for the Federal Government contains information about collections and expenditures for different
types of funds. This chapter presents summary information about the transactions of the two major fund groups
used by the Federal Government, trust funds and Federal
funds. It also presents information about the income and
outgo of the major trust funds and a number of Federal
funds that are financed by dedicated collections in a manner similar to trust funds.
The Federal Funds Group
The Federal funds group includes all financial transactions of the Government that are not required by law to
be recorded in trust funds. It accounts for a larger share
of the budget than the trust funds group.
The Federal funds group includes the “general fund,”
which is used for the general purposes of Government
rather than being restricted by law to a specific program.
The general fund is the largest fund in the Government
and it receives all collections not dedicated for some other
fund, including virtually all income taxes and many excise taxes. The general fund is used for all programs that
are not supported by trust, special, or revolving funds.
The Federal funds group also includes special funds
and revolving funds, both of which receive collections
that are dedicated by law for specific purposes. Where the
law requires that Federal fund collections be dedicated
to a particular program, the collections and associated
disbursements are recorded in special fund receipt and
expenditure accounts.1 An example is the portion of the
Outer Continental Shelf mineral leasing receipts deposited into the Land and Water Conservation Fund. Money
in special fund receipt accounts must be appropriated before it can be obligated and spent. The majority of special
fund collections are derived from the Government’s power
to impose taxes or fines, or otherwise compel payment, as
in the case of the Nuclear Waste Disposal Fund. In addition, a significant amount of collections credited to special
funds is derived from certain types of business-like activity, such as the sale of Government land or other assets or
the use of Government property. These collections include
receipts from timber sales and royalties from oil and gas
extraction.
Revolving funds are used to conduct continuing cycles
of business-like activity. Revolving funds receive proceeds
from the sale of products or services, and these proceeds finance ongoing activities that continue to provide products
or services. Instead of being deposited in receipt accounts,
1  There are two types of budget accounts: expenditure (or appropriation) accounts and receipt accounts. Expenditure accounts are used to
record outlays and receipt accounts are used to record governmental
receipts and offsetting receipts.

the proceeds are recorded in revolving fund expenditure
accounts. The proceeds are generally available for obligation and expenditure without further legislative action.
Outlays for programs with revolving funds are reported
both gross and net of these proceeds; gross outlays include
the expenditures from the proceeds and net program outlays are derived by subtracting the proceeds from gross
outlays. Because the proceeds of these sales are recorded as
offsets to outlays within expenditure accounts rather than
receipt accounts, the proceeds are known as “offsetting
collections.”2 There are two classes of revolving funds in
the Federal funds group. Public enterprise funds, such as
the Postal Service Fund, conduct business-like operations
mainly with the public. Intragovernmental funds, such as
the Federal Buildings Fund, conduct business-like operations mainly within and between Government agencies.
The Trust Funds Group
The trust funds group consists of funds that are designated by law as trust funds. Like special funds and
revolving funds, trust funds receive collections that are
dedicated by law for specific purposes. Many of the larger
trust funds are used to budget for social insurance programs, such as Social Security, Medicare, and unemployment compensation. Other large trust funds are used to
budget for military and Federal civilian employees’ retirement benefits, highway and transit construction and
maintenance, and airport and airway development and
maintenance. There are a few trust revolving funds that
are credited with collections earmarked by law to carry
out a cycle of business-type operations. There are also a
few small trust funds that have been established to carry
out the terms of a conditional gift or bequest.
There is no substantive difference between special
funds in the Federal funds group and trust funds, or between revolving funds in the Federal funds group and
trust revolving funds. Whether a particular fund is designated in law as a trust fund is, in many cases, arbitrary.
For example, the National Service Life Insurance Fund is
a trust fund, but the Servicemen’s Group Life Insurance
Fund is a Federal fund, even though both receive dedicated collections from veterans and both provide life insurance payments to veterans’ beneficiaries.3
2  See Chapter 15 in this volume for more information on offsetting
collections and offsetting receipts.
3  Another example is the Violent Crime Reduction Trust Fund, which
expired in 2000. Despite the presence of the words “Trust Fund” in its
official name, the Fund was classified as a Federal fund because it was
not required by law to be classified as a trust fund. In addition, the Fund
was substantively a means of accounting for general fund appropriations and did not contain any dedicated receipts. Programs formerly
funded through the Fund are now funded through general appropriations.

453

454
The Federal Government uses the term “trust fund” differently than the way in which it is commonly used. In common usage, the term is used to refer to a private fund that
has a beneficiary who owns the trust’s income and may also
own the trust’s assets. A custodian or trustee manages the
assets on behalf of the beneficiary according to the terms
of the trust agreement, as established by a trustor. Neither
the trustee nor the beneficiary can change the terms of the
trust agreement; only the trustor can change the terms of
the agreement. In contrast, the Federal Government owns
and manages the assets and the earnings of most Federal
trust funds and can unilaterally change the law to raise or
lower future trust fund collections and payments or change
the purpose for which the collections are used. Only a few
small Federal trust funds are managed pursuant to a trust
agreement whereby the Government acts as the trustee;
even then the Government generally owns the funds and
has some ability to alter the amount deposited into or paid
out of the funds.
Deposit funds, which are funds held by the Government
as a custodian on behalf of individuals or a non-Federal entity, are similar to private-sector trust funds. The
Government makes no decisions about the amount of
money placed in deposit funds or about how the proceeds
are spent. For this reason, these funds are not classified
as Federal trust funds, but are instead considered to be
non-budgetary and excluded from the Federal budget.4
The income of a Federal Government trust fund must
be used for the purposes specified in law. The income of
some trust funds, such as the Federal Employees Health
Benefits fund, is spent almost as quickly as it is collected.
In other cases, such as the Social Security and Federal
civilian employees’ retirement trust funds, the trust fund
income is not spent as quickly as it is collected. Currently,
these funds do not use all of their annual income (which
includes intragovernmental interest income). This surplus of income over outgo adds to the trust fund’s balance,
which is available for future expenditures. The balances
are generally required by law to be invested in Federal
securities issued by the Department of the Treasury.5 The
National Railroad Retirement Investment Trust is a rare
example of a Government trust fund authorized to invest
balances in equity markets.
A trust fund normally consists of one or more receipt
accounts (to record income) and an expenditure account
(to record outgo). However, a few trust funds, such as the
Veterans Special Life Insurance fund, are established by
law as trust revolving funds. Such a fund is similar to a
revolving fund in the Federal funds group in that it may
consist of a single account to record both income and outgo. Trust revolving funds are used to conduct a cycle of
business-type operations; offsetting collections are credited to the funds (which are also expenditure accounts)
and the funds’ outlays are displayed net of the offsetting
collections.
4  Deposit funds are discussed briefly in Chapter 12 of this volume,
“Coverage of the Budget.”
5  Securities held by trust funds (and by other Government accounts),
debt held by the public, and gross Federal debt are discussed in Chapter
5 of this volume, “Federal Borrowing and Debt.”

Analytical Perspectives

Income and Outgo by Fund Group
Table 27–1 shows income, outgo, and the surplus or
deficit by fund group and in the aggregate (netted to
avoid double-counting) from which the total unified budget receipts, outlays, and surplus or deficit are derived.
Income consists mostly of governmental receipts (derived
from governmental activity, primarily income, payroll,
and excise taxes). Income also consists of offsetting receipts, which include proprietary receipts (derived from
business-like transactions with the public), interfund collections (derived from payments from a fund in one fund
group to a fund in the other fund group), and gifts. Outgo
consists of payments made to the public or to a fund in the
other fund group.
Two types of transactions are treated specially in the
table. First, income and outgo for each fund group exclude
all transactions that occur between funds within the
same fund group.6 These intrafund transactions constitute outgo and income for the individual funds that make
and collect the payments, but they are offsetting within
the fund group as a whole. The totals for each fund group
measure only the group’s transactions with the public
and the other fund group. Second, outgo is calculated net
of the collections from Federal sources that are credited to
expenditure accounts (which, as noted above, are referred
to as offsetting collections); the spending that is financed
by those collections is included in outgo and the collections from Federal sources are subsequently subtracted
from outgo.7 Although it would be conceptually correct to
add interfund offsetting collections from Federal sources
to income for a particular fund, this cannot be done at
the present time because the budget data do not provide
this type of detail. As a result, both interfund and intrafund offsetting collections from Federal sources are offset
against outgo in Table 27–1 and are not shown separately.
The vast majority of the interfund transactions in the
table are payments by the Federal funds to the trust
funds. These payments include interest payments from
the general fund to the trust funds for interest earned on
trust fund balances invested in interest-bearing Treasury
securities. The payments also include payments by
Federal agencies to Federal employee benefits trust funds
and Social Security trust funds on behalf of current employees and general fund transfers to employee retirement trust funds to amortize the unfunded liabilities of
these funds. In addition, the payments include general
fund transfers to the Supplementary Medical Insurance
trust fund for the cost of Medicare Parts B (outpatient
6  For example, the railroad retirement trust funds pay the equivalent of Social Security benefits to railroad retirees in addition to the
regular railroad pension. These benefits are financed by a payment from
the Federal Old-Age and Survivors Insurance trust fund to the railroad
retirement trust funds. The payment and collection are not included in
Table 27–1 so that the total trust fund income and outgo shown in the
table reflect disbursements to the public and to Federal funds.
7  Collections from non-Federal sources are shown as income and
spending that is financed by those collections is shown as outgo. For
example, postage stamp fees are deposited as offsetting collections in
the Postal Service Fund. As a result, the Fund’s income reported in
Table 27–1 includes Postage stamp fees and the Fund’s outgo is gross
disbursements, including disbursements financed by those fees.

455

27. Trust Funds and Federal Funds

Table 27–1.  Receipts, Outlays and Surplus or Deficit by Fund Group
(In billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Receipts:
Federal funds cash income:
From the public ���������������������������������������������������������
From trust funds ��������������������������������������������������������
Total, Federal funds cash income ������������������������
Trust funds cash income:
From the public ���������������������������������������������������������
From Federal funds:
Interest �����������������������������������������������������������������
Other ��������������������������������������������������������������������
Total, Trust funds cash income ����������������������������

1,897.5
2.3
1,899.8

2,063.4
1.9
2,065.3

2,306.5
1.8
2,308.3

2,548.1
1.7
2,549.8

2,704.8
1.6
2,706.4

2,845.8
1.6
2,847.4

3,001.9
1.6
3,003.5

1,042.5

1,154.1

1,241.0

1,308.6

1,399.6

1,467.0

1,532.0

127.1
588.2
1,757.9

156.6
521.5
1,832.2

150.2
510.6
1,901.8

149.8
558.2
2,016.6

147.8
613.3
2,160.7

145.2
646.5
2,258.6

145.4
660.2
2,337.5

Offsetting collections from the public and receipts:
Federal funds ������������������������������������������������������������
Trust funds ����������������������������������������������������������������
Total, offsetting collections from the public and
receipts �����������������������������������������������������������
Total, unified budget receipts ������������������������������������
Federal funds �������������������������������������������������������
Trust funds �����������������������������������������������������������

–356.2
–851.3

–366.3
–819.1

–369.0
–807.4

–367.7
–866.9

–371.3
–934.3

–373.3
–972.2

–378.9
–988.1

–1,207.5
2,450.2
1,543.6
906.6

–1,185.4
2,712.0
1,699.0
1,013.1

–1,176.4
3,033.6
1,939.3
1,094.4

–1,234.7
3,331.7
2,182.0
1,149.7

–1,305.6
3,561.5
2,335.1
1,226.4

–1,345.5
3,760.5
2,474.1
1,286.4

–1,367.0
3,974.0
2,624.6
1,349.4

Outlays:
Federal funds cash outgo ���������������������������������������������
Trust funds cash outgo �������������������������������������������������

3,076.6
1,668.0

3,105.9
1,764.5

3,129.5
1,824.7

3,244.4
1,898.5

3,385.7
2,009.8

3,511.0
2,082.0

3,646.2
2,170.1

–356.2
–851.3

–366.3
–819.1

–369.0
–807.4

–367.7
–866.9

–371.3
–934.3

–373.3
–972.2

–378.9
–988.1

–1,207.5
3,537.1
2,720.4
816.7

–1,185.4
3,684.9
2,739.5
945.4

–1,176.4
3,777.8
2,760.5
1,017.3

–1,234.7
3,908.2
2,876.6
1,031.5

–1,305.6
4,089.8
3,014.4
1,075.5

–1,345.5
4,247.4
3,137.6
1,109.8

–1,367.0
4,449.2
3,267.3
1,182.0

Offsetting collections from the public and receipts:
Federal funds ������������������������������������������������������������
Trust funds ����������������������������������������������������������������
Total, offsetting collections from the public and
receipts �����������������������������������������������������������
Total, unified budget outlays �������������������������������������
Federal funds �������������������������������������������������������
Trust funds �����������������������������������������������������������

Surplus or deficit(–):
Federal funds ����������������������������������������������������������������
–1,176.8
–1,040.6
–821.2
–694.6
–679.3
–663.5
–642.7
Trust funds ��������������������������������������������������������������������
89.9
67.6
77.0
118.1
150.9
176.6
167.4
Total, unified surplus/deficit(–) ����������������������������������
–1,087.0
–972.9
–744.2
–576.5
–528.4
–486.9
–475.3
Note: Receipts include governmental, interfund, and proprietary, and exclude intrafund receipts (which are offset against intrafund payments so that cash income and cash outgo are
not overstated).

and physician benefits) and D (prescription drug benefits)
that is not covered by premiums (or, for Part D, transfers
from States).
In 2011, 2012, and 2013, general fund transfers were
made to the Social Security trust funds to hold the funds
harmless for the two-year (2 percentage point) reduction
in the Social Security payroll tax rate initially enacted in
the Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 and subsequently extended
in the Temporary Tax Cut Continuation Act of 2011 and
the Middle Class Tax Relief and Job Creation Act of 2012.
These transfers substitute for the payroll tax revenue lost
by the payroll tax reduction, so that the balances of the
Social Security trust funds are the same as they would
have been in the absence of the legislation. As a result,
the payroll tax reduction did not impact the long-term solvency of the trust funds.

In addition to investing their balances with Treasury,
some funds in the Federal funds group and most trust
funds are authorized to borrow from the general fund of
the Treasury.8 Similar to the treatment of funds invested
with Treasury, borrowed funds are not recorded as receipts of the fund or included in the income of the fund.
Rather, the borrowed funds finance outlays by the fund
in excess of available receipts. Subsequently, any excess
fund receipts are transferred from the fund to the general
fund in repayment of the borrowing. The repayment is not
recorded as an outlay of the fund or included in fund out8  For example, the Unemployment trust fund borrowed $22 billion
from the general fund in 2011 for unemployment benefits; the Bonneville Power Administration Fund, a revolving fund in the Department of
Energy, is authorized to borrow from the general fund; and the Black
Lung Disability Trust Fund, a trust fund in the Department of Labor,
is authorized to receive appropriations of repayable advances from the
general fund, which constitutes a form of borrowing.

456

Analytical Perspectives

Table 27–2. Comparison of Total Federal
Fund and Trust Fund Receipts to Unified
Budget Receipts, Fiscal Year 2012
(In billions of dollars)
Gross Trust fund receipts �������������������������������������������������������������������������������������� 1,748.7
Gross Federal fund receipts ��������������������������������������������������������������������������������� 1,715.6
Total, gross receipts ����������������������������������������������������������������������������������������� 3,464.3
Deduct intrafund receipts (from funds within same fund group):
Trust fund intrafund receipts �����������������������������������������������������������������������
–9.1
Federal fund intrafund receipts �������������������������������������������������������������������
–4.8
Subtotal, intrafund receipts ��������������������������������������������������������������������
–13.9
Total Trust funds and Federal Funds cash income ����������������������������������������������� 3,450.4
Deduct other offsetting receipts:
Trust fund receipts from Federal funds:
Interest in receipt accounts �������������������������������������������������������������������� –127.1
General fund payments to Medicare Parts B and D ������������������������������ –210.5
Employing agencies’ payments for pensions, Social Security, and
Medicare �������������������������������������������������������������������������������������������
–72.8
General fund payments for unfunded liabilities of Federal employees’
retirement funds ��������������������������������������������������������������������������������
–98.2
Transfer of taxation of Social Security and RRB benefits to OASDI, HI,
and RRB �������������������������������������������������������������������������������������������
–46.6
Other receipts from Federal funds ��������������������������������������������������������� –160.1
Subtotal, Trust fund receipts from Federal funds ������������������������������ –715.4
Federal fund receipts from Trust funds �������������������������������������������������������
–2.3
Proprietary receipts ������������������������������������������������������������������������������������ –273.9
Offsetting governmental receipts ����������������������������������������������������������������
–8.6
Subtotal, offsetting receipts ������������������������������������������������������������������� –1,000.2
Unified budget receipts ����������������������������������������������������������������������������������������� 2,450.2
Note: Offsetting receipts are included in cash income for each fund group, but are
deducted from outlays in the unified budget.

go. This treatment is consistent with the broad principle
that borrowing and debt redemption are not budgetary
transactions but rather a means of financing deficits or
disposing of surpluses.9
Some income in both Federal funds and trust funds
consists of offsetting receipts.10 Offsetting receipts are
not considered governmental receipts (such as taxes),
but they are instead recorded on the outlay side of the
budget. Expenditures resulting from offsetting receipts
are recorded as gross outlays and the collections of offsetting receipts are then subtracted from gross outlays to
derive net outlays. Net outlays reflect the government’s
net transactions with the public.
As shown in Table 27-1, 37.0 percent of all governmental receipts were deposited in trust funds in 2012 and
the remaining 63.0 percent of receipts were deposited in
Federal funds, which, as noted above, include the general
fund. Although accounting for well over one-third of all
receipts, the trust funds accounted for a much smaller
share, only 23.1 percent, of outlays. The significance of
this difference between the trust fund share of receipts
and the trust fund share of outlays is discussed in the
next section.
9 

Borrowing and debt repayment are discussed in Chapter 5 of this
volume, “Federal Borrowing and Debt,” and Chapter 11 of this volume,
“Budget Concepts.”
10  Interest on borrowed funds is an example of an intragovernmental
offsetting receipt and Medicare Part B’s premiums are an example of
offsetting receipts from the public.

Because the income for Federal funds and trust funds
recorded in Table 27–1 includes offsetting receipts and offsetting collections from the public, offsetting receipts and
offsetting collections from the public must be deducted
from the two fund groups’ combined gross income in order
to reconcile to total governmental receipts in the unified
budget. Similarly, because the outgo for Federal funds and
trust funds in Table 27–1 consists of outlays gross of offsetting receipts and offsetting collections from the public,
the amount of the offsetting receipts and offsetting collections from the public must be deducted from the sum of
the Federal funds’ and the trust funds’ gross outgo in order to reconcile to total (net) unified budget outlays. Table
27–2 reconciles, for fiscal year 2012, the gross total of all
trust fund and Federal fund receipts with the net total of
the cash income of the Federal fund group and the trust
fund group (as shown in Table 27–1) and with the receipt
total of the unified budget.
Income, Outgo, and Balances of Trust Funds
Table 27–3 shows, for the trust funds group as a whole,
the funds’ balance at the start of each year, income and
11
outgo during the year, and the end-of-year balance. 
Income and outgo are divided between transactions with
the public and transactions with Federal funds. Receipts
from Federal funds are divided between interest and other interfund receipts.
The definitions of income and outgo in this table differ
from those in Table 27–1 in one important way. Trust fund
collections that are offset against outgo (offsetting collections from Federal sources) within expenditure accounts
instead of being deposited in separate receipt accounts are
classified as income in this table, but not in Table 27–1.
This classification is consistent with the definitions of income and outgo for trust funds used elsewhere in the budget. It has the effect of increasing both income and outgo
by the amount of the offsetting collections from Federal
sources. The difference was approximately $47 billion in
2012. Table 27–3, therefore, provides a more complete
summary of trust fund income and outgo.
The trust funds group is expected to have large surpluses over the projection period. As a consequence, trust
fund balances are estimated to grow substantially, continuing a trend that has persisted over the past several
decades.12 The size of the anticipated balances is unprecedented and results mainly from changes in the way some
trust funds (primarily Social Security and the Federal retirement funds) are financed.
Because of these changes and economic growth (both
real and inflationary), trust fund balances increased from
$205 billion in 1982 to $4.4 trillion in 2012. The current
balances are estimated to increase by approximately 17
percent by the year 2018, rising to $5.1 trillion. Almost all
11  The Budget’s proposal to move to chained CPI will likely affect
trust funds, but those effects are not reflected in tables in this chapter.
12  Because of the economic downturn, Social Security trust fund collections from the public (payroll taxes) fell well below Social Security
benefit payments in 2010, 2011, and 2012; however, because of interest
earnings on trust fund investments, Social Security trust fund balances
continued to grow in these years.

457

27. Trust Funds and Federal Funds

Table 27–3. Income, Outgo, and Balances of Trust Funds Group
(in billions of dollars)
Estimate

2012
Actual

2013

2014

2015

2016

2017

2018

Balance, start of year ��������������������������������������������������������
Adjustments �����������������������������������������������������������������������
Total balance, start of year �������������������������������������������

4,297.8
0.8
4,298.6

4,388.5
.........
4,388.5

4,456.0
.........
4,456.0

4,533.1
.........
4,533.1

4,651.2
.........
4,651.2

4,802.1
.........
4,802.1

4,978.7
.........
4,978.7

Income:
Governmental receipts �������������������������������������������������
Offsetting governmental receipts ����������������������������������
Proprietary receipts ������������������������������������������������������

906.6
*
135.9

1,013.1
*
141.0

1,094.4
*
146.6

1,149.7
3.0
155.9

1,226.4
9.4
163.8

1,286.4
8.6
171.9

1,349.4
2.2
180.3

Receipts from Federal funds:
Interest ����������������������������������������������������������������������
Other �������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������

128.5
634.3
1,805.3

158.5
566.7
1,879.3

151.5
557.8
1,950.3

151.0
607.2
2,066.8

149.0
664.6
2,213.2

146.7
700.4
2,314.0

147.7
716.9
2,396.6

Outgo (–):
To the public �����������������������������������������������������������������
To Federal funds �����������������������������������������������������������
Subtotal, outgo ���������������������������������������������������������

–1,716.8
1.4
–1,715.4

–1,810.6
–1.0
–1,811.6

–1,872.2
–1.0
–1,873.2

–1,947.6
–1.1
–1,948.7

–2,061.2
–1.1
–2,062.3

–2,136.2
–1.2
–2,137.4

–2,227.9
–1.3
–2,229.1

Change in fund balance:
Surplus or deficit (–):
Excluding interest �����������������������������������������������������
–38.6
–90.8
–74.4
–32.9
1.9
29.9
19.8
Interest from Federal funds ���������������������������������������
128.5
158.5
151.5
151.0
149.0
146.7
147.7
Subtotal, surplus or deficit (–) ������������������������������
89.9
67.6
77.0
118.1
150.9
176.6
167.4
Borrowing/Transfers/lapses (net) ����������������������������������
0.2
0.2
*
.........
.........
.........
.........
Subtotal, change in fund balance �����������������������������
0.2
0.2
*
.........
.........
.........
.........
Balance, end of year ����������������������������������������������������������
4,388.5
4,456.0
4,533.1
4,651.2
4,802.1
4,978.7
5,146.2
Note: In contrast to table 27–1, income also includes income that is offset within expenditure accounts as offsetting collections from Federal sources, instead of being deposited in
receipt accounts.

of these balances are invested in Treasury securities and
earn interest. The balances represent the value, in current dollars, of the unspent portion of (1) taxes and fees
received by the Government and dedicated to trust funds
and (2) intragovernmental payments (from the general
fund and from agencies) to the trust funds.
Until the 1980s, most trust funds operated on a payas-you-go basis as distinct from a pre-funded basis. Taxes
and fees were set at levels sufficient to finance current
program expenditures and administrative expenses, and
to maintain balances generally equal to one year’s worth
of expenditures (to provide for unexpected events). As a
result, trust fund balances tended to grow at about the
same rate as the fund’s annual expenditures.
For some of the larger trust funds, pay-as-you-go financing was replaced in the 1980s by full or partial advance
funding. The Social Security Amendments of 1983 raised
payroll taxes above the levels necessary to finance current expenditures. Similarly, in 1985, a new system took
effect that funded military retirement benefits on a full
accrual basis and, in 1986, full accrual funding of retirement benefits was mandated for Federal civilian employees hired after December 31, 1983. The two retirement
programs now require Federal agencies and employees
together to pay the trust funds that disburse Federal civilian and military retirement benefits an amount equal
to those accruing retirement benefits. Since many years

will pass between the time when benefits are earned (or
accrued) and when they are paid, the trust funds will accumulate substantial balances over time.
From the perspective of the trust fund, these balances
represent the value, in today’s dollars, of taxes, fees, and
other income that the trust fund has received in the past
for the purpose of funding future benefits and services.
Trust fund assets held in Treasury bonds are legal claims
on the Treasury, similar to bonds issued to the public.
Like all other fund assets, these are available to the fund
for future benefit payments and other expenditures.
From the perspective of the Government as a whole, the
trust fund balances do not represent net additions to the
Government’s balance sheet. The trust fund balances are
assets of the agencies responsible for administering the
trust fund programs. The trust fund balances are also liabilities of the Treasury. These assets and liabilities cancel each other out in the government-wide balance sheet.
When trust fund holdings are redeemed to fund the payment of benefits, the Department of the Treasury finances
the expenditure in the same way as any other Federal
expenditure—by using current receipts if the unified budget is in surplus or by borrowing from the public if it is in
deficit. Therefore, the existence of large trust fund balances, while representing a legal claim on the Treasury, does
not, by itself, determine the Government’s ability to pay
benefits. From an economic standpoint, the Government

458
is able to pre-fund benefits only by increasing saving and
investment in the economy as a whole, which increases
future national income and, as a result, strengthens the
Nation’s ability to support future benefits. This can be
accomplished by simultaneously running trust fund surpluses while maintaining an unchanged Federal fund
surplus or deficit, so that the trust fund surplus reduces
the unified budget deficit or increases the unified budget
surplus.
This demonstrates the need to follow a fiscal policy
that is consistent with the Government’s obligation to repay the bonds when needed to pay benefits in the future.
This means saving more now before the obligations become due and pursuing policies that will increase longrun growth and national income. Otherwise, the Nation
will have fewer resources available in the future to meet
its obligations and will face more difficult choices among
cutting spending, raising taxes, or borrowing from private
credit markets.
Table 27–4 shows estimates of income, outgo, and balances for 2012 through 2018 for the major trust funds.
With the exception of transactions between trust funds,
the data for the individual trust funds are conceptually
the same as the data in Table 27–3 for the trust funds
group. As explained previously, transactions between
trust funds are shown as outgo of the fund that makes the
payment and as income of the fund that collects it in the
data for an individual trust fund, but the collections are
offset against outgo in the data for the trust fund group as
a whole. A brief description of the funding sources for the
major trust funds is given below; additional information
for these and other trust funds can be found in the Status
of Funds tables in the Budget Appendix.
•	 Social Security Trust Funds: The Social Security
trust funds are funded by payroll taxes from employers and employees, interest earnings on trust fund
balances, Federal agency payments as employers,
and a portion of the income taxes paid on Social Security benefits.
•	 Medicare Trust Funds: Like the Social Security
trust funds, the Medicare Hospital Insurance (HI)
trust fund is funded by payroll taxes from employers and employees, Federal agency payments as employers, and a portion of the income taxes paid on
Social Security benefits. In addition, the HI trust
fund receives transfers from the general fund of the
Treasury for certain HI benefits. The other Medi-

Analytical Perspectives

care trust fund, Supplementary Medical Insurance
(SMI), finances Part B (outpatient and physician
benefits) and Part D (prescription drug benefits).
SMI receives premium payments from covered individuals and transfers from the general fund of
the Treasury for the portion of Part B and Part D
costs not covered by premiums or, for Part D, transfers from States. In addition, like other trust funds,
these two trust funds receive interest earnings on
any trust fund balances.
•	 Unemployment Trust Fund: The Unemployment
Trust Fund is funded by taxes on employers, payments from Federal agencies, taxes on certain employees, and interest earnings on trust fund balances.  In addition, as noted above, some trust funds
have the authority to borrow from the general fund
of the Treasury and in 2012 the Unemployment
Trust Fund borrowed $12.9 billion from the general
fund.  This borrowed amount is repayable with interest and allowed the trust fund to meet its legal
obligations to pay benefits and make repayable advances to States.
•	 Civilian and military retirement trust funds: The
Civil Service Retirement and Disability Fund is
funded by employee and agency payments, general
fund transfers for the unfunded portion of retirement costs, and interest earnings on trust fund balances. The Military Retirement Fund is funded by
payments from the Department of Defense, general
fund transfers for unfunded retirement costs, and
interest earnings on trust fund balances.
As noted, trust funds are funded by a combination of
payments from the public and payments from Federal
funds, including payments directly from the general fund
and payments from agency appropriations. Just as the
funding sources for trust funds are specified in law, the
uses for trust fund balances are specified in law.
Table 27–5 shows income, outgo, and balances of five
Federal funds–three revolving funds and two special
funds. These five funds are similar to trust funds in that
they are financed by dedicated receipts, the excess of income over outgo is invested in Treasury securities, the
interest earnings add to fund balances, and the balances
remain available to cover future expenditures. The table
is illustrative of the Federal funds group, which includes
many other revolving funds and special funds.

459

27. Trust Funds and Federal Funds

Table 27–4. Income, Outgo, and Balance of Major Trust Funds
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Airport and Airway Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

10.3
.........
10.3

11.6
.........
11.6

11.6
.........
11.6

11.5
.........
11.5

12.0
.........
12.0

13.1
.........
13.1

14.9
.........
14.9

Income:
Governmental receipts ���������������������������������������������������������������������������������������������

12.5

11.9

13.0

13.5

14.1

14.7

15.3

Offsetting governmental receipts
Proprietary receipts ��������������������������������������������������������������������������������������������������

.........

*

*

*

*

*

*

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

0.2
0.1
.........
12.8

0.2
0.1
.........
12.3

0.2
*
.........
13.3

0.2
*
.........
13.8

0.2
*
.........
14.4

0.3
*
.........
15.1

0.4
*
.........
15.8

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–11.5
.........
–11.5

–12.3
.........
–12.3

–13.4
.........
–13.4

–13.3
.........
–13.3

–13.3
.........
–13.3

–13.3
.........
–13.3

–13.6
.........
–13.6

Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

1.1
0.2
1.3
.........
1.3
11.6

–0.3
0.2
–0.1
.........
–0.1
11.6

–0.3
0.2
–0.1
.........
–0.1
11.5

0.3
0.2
0.5
.........
0.5
12.0

0.9
0.2
1.1
.........
1.1
13.1

1.5
0.3
1.8
.........
1.8
14.9

1.8
0.4
2.2
.........
2.2
17.1

Civil Service Retirement and Disability Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

803.8
.........
803.8

826.6
.........
826.6

839.7
.........
839.7

847.6
.........
847.6

852.7
.........
852.7

860.0
.........
860.0

865.8
.........
865.8

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

3.7
.........
.........

3.7
.........
.........

4.5
.........
.........

5.2
.........
.........

6.1
.........
.........

6.4
.........
.........

6.6
.........
.........

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

34.6
58.4
.........
96.8

31.6
57.8
.........
93.2

30.0
58.9
.........
93.3

28.7
60.0
.........
94.0

27.6
61.6
.........
95.2

27.0
63.7
.........
97.1

27.5
65.3
.........
99.4

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–74.1
–*
–74.1

–80.0
–*
–80.0

–85.5
–*
–85.5

–88.9
–*
–88.9

–87.9
–*
–87.9

–91.4
–*
–91.4

–95.0
–*
–95.0

–11.9
34.6
22.7
.........
22.7
826.6

–18.5
31.6
13.2
.........
13.2
839.7

–22.1
30.0
7.9
.........
7.9
847.6

–23.6
28.7
5.1
.........
5.1
852.7

–20.3
27.6
7.3
.........
7.3
860.0

–21.3
27.0
5.7
.........
5.7
865.8

–23.1
27.5
4.4
.........
4.4
870.2

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

460

Analytical Perspectives

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Federal Employees Health Benefits Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

19.1
.........
19.1

21.2
.........
21.2

21.8
.........
21.8

22.0
.........
22.0

21.9
.........
21.9

21.6
.........
21.6

21.4
.........
21.4

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

.........
.........
13.1

.........
.........
13.4

.........
.........
14.2

.........
.........
14.9

.........
.........
15.9

.........
.........
16.9

.........
.........
18.0

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

0.2
31.5
.........
44.7

0.3
32.2
.........
46.0

0.2
33.6
.........
48.0

0.2
35.2
.........
50.3

0.2
37.3
.........
53.3

0.3
39.7
.........
56.9

0.6
42.3
.........
60.9

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–42.6
.........
–42.6

–45.3
.........
–45.3

–47.8
.........
–47.8

–50.4
.........
–50.4

–53.7
.........
–53.7

–57.0
.........
–57.0

–60.6
.........
–60.6

Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

1.9
0.2
2.1
–*
2.1
21.2

0.3
0.3
0.6
.........
0.6
21.8

–*
0.2
0.2
.........
0.2
22.0

–0.3
0.2
–0.1
.........
–0.1
21.9

–0.6
0.2
–0.4
.........
–0.4
21.6

–0.4
0.3
–0.1
.........
–0.1
21.4

–0.3
0.6
0.3
.........
0.3
21.7

Foreign Military Sales Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

18.5
.........
18.5

18.9
.........
18.9

18.1
.........
18.1

17.8
.........
17.8

17.3
.........
17.3

17.0
.........
17.0

17.0
.........
17.0

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

.........
.........
26.3

.........
.........
31.4

.........
.........
33.0

.........
.........
35.0

.........
.........
35.0

.........
.........
34.4

.........
.........
32.7

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

.........
.........
.........
26.3

.........
.........
.........
31.4

.........
.........
.........
33.0

.........
.........
.........
35.0

.........
.........
.........
35.0

.........
.........
.........
34.4

.........
.........
.........
32.7

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–25.9
.........
–25.9

–32.2
.........
–32.2

–33.3
.........
–33.3

–35.6
.........
–35.6

–35.3
.........
–35.3

–34.5
.........
–34.5

–32.7
.........
–32.7

0.4
.........
0.4
.........
0.4
18.9

–0.8
.........
–0.8
.........
–0.8
18.1

–0.3
.........
–0.3
.........
–0.3
17.8

–0.6
.........
–0.6
.........
–0.6
17.3

–0.2
.........
–0.2
.........
–0.2
17.0

–0.1
.........
–0.1
.........
–0.1
17.0

*
.........
*
.........
*
17.0

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

461

27. Trust Funds and Federal Funds

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Medicare: Hospital Insurance (HI) Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

245.7
0.1
245.8

229.3
.........
229.3

200.7
.........
200.7

186.1
.........
186.1

183.5
.........
183.5

181.0
.........
181.0

184.5
.........
184.5

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

201.7
.........
10.9

209.1
.........
9.6

224.5
.........
9.8

238.4
.........
9.8

254.7
.........
10.0

269.1
.........
10.2

284.8
.........
10.5

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

11.3
25.0
.........
248.9

10.0
21.1
.........
249.8

8.8
26.3
.........
269.3

8.3
29.0
.........
285.6

8.2
31.9
.........
304.8

8.0
34.7
.........
322.0

7.8
37.7
.........
340.9

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–265.3
.........
–265.3

–278.4
.........
–278.4

–283.9
.........
–283.9

–288.2
.........
–288.2

–307.4
.........
–307.4

–318.5
.........
–318.5

–335.3
.........
–335.3

Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

–27.8
11.3
–16.5
.........
–16.5
229.3

–38.7
10.0
–28.7
–*
–28.7
200.7

–23.4
8.8
–14.6
.........
–14.6
186.1

–10.9
8.3
–2.6
.........
–2.6
183.5

–10.8
8.2
–2.5
.........
–2.5
181.0

–4.5
8.0
3.5
.........
3.5
184.5

–2.3
7.8
5.6
.........
5.6
190.0

Medicare: Supplementary Medical Insurance (SMI) Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

72.8
.........
72.8

71.7
.........
71.7

69.9
.........
69.9

68.6
.........
68.6

72.4
.........
72.4

71.4
.........
71.4

79.3
.........
79.3

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

2.8
.........
74.4

4.2
.........
79.0

3.0
.........
82.3

3.0
.........
88.4

3.0
.........
95.1

3.8
.........
102.6

4.1
.........
111.3

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

2.9
212.7
.........
292.9

2.1
233.0
.........
318.3

3.0
255.5
.........
343.8

3.0
277.5
.........
372.0

3.3
299.5
.........
400.9

3.6
313.3
.........
423.3

3.9
329.2
.........
448.4

Outgo (–):
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–293.9
.........
–293.9

–320.2
.........
–320.2

–345.0
.........
–345.0

–368.2
.........
–368.2

–401.9
.........
–401.9

–415.4
.........
–415.4

–433.0
.........
–433.0

–4.0
2.9
–1.1
.........
–1.1
71.7

–3.9
2.1
–1.9
–*
–1.9
69.9

–4.2
3.0
–1.2
.........
–1.2
68.6

0.8
3.0
3.8
.........
3.8
72.4

–4.3
3.3
–1.0
.........
–1.0
71.4

4.2
3.6
7.9
.........
7.9
79.3

11.6
3.9
15.4
.........
15.4
94.7

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

462

Analytical Perspectives

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Military Retirement Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

368.6
.........
368.6

375.7
.........
375.7

422.3
.........
422.3

470.7
.........
470.7

524.8
.........
524.8

577.9
.........
577.9

635.2
.........
635.2

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

.........
.........
.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

.........
.........
.........

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

–36.3
92.2
.........
55.9

4.9
95.4
.........
100.3

5.8
98.0
.........
103.8

11.2
100.0
.........
111.2

13.5
102.9
.........
116.4

12.3
105.9
.........
118.2

12.8
109.3
.........
122.1

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–48.8
.........
–48.8

–53.7
.........
–53.7

–55.4
.........
–55.4

–57.1
.........
–57.1

–63.3
.........
–63.3

–60.9
.........
–60.9

–57.8
.........
–57.8

Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

43.4
–36.3
7.1
.........
7.1
375.7

41.7
4.9
46.6
.........
46.6
422.3

42.6
5.8
48.4
.........
48.4
470.7

42.9
11.2
54.1
.........
54.1
524.8

39.6
13.5
53.1
.........
53.1
577.9

45.0
12.3
57.3
.........
57.3
635.2

51.4
12.8
64.2
.........
64.2
699.4

Railroad Retirement Trust Funds
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

18.6
.........
18.6

20.3
.........
20.3

18.8
.........
18.8

17.2
.........
17.2

15.7
.........
15.7

14.0
.........
14.0

12.6
.........
12.6

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

4.3
.........
3.5

4.9
.........
0.6

5.0
.........
0.5

5.3
.........
0.6

5.5
.........
0.6

5.6
.........
0.7

5.8
.........
0.7

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

*
0.9
4.7
13.4

*
0.8
4.3
10.6

*
0.7
4.6
10.8

*
0.7
4.8
11.4

*
0.7
4.6
11.4

*
0.8
5.1
12.2

*
0.8
5.2
12.5

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–11.6
–0.1
–11.7

–12.0
–0.1
–12.1

–12.3
–0.1
–12.5

–12.7
–0.1
–12.9

–13.0
–0.2
–13.2

–13.4
–0.2
–13.6

–13.7
–0.2
–14.0

1.7
*
1.7
*
1.7
20.3

–1.5
*
–1.5
–*
–1.5
18.8

–1.7
*
–1.7
.........
–1.7
17.2

–1.5
*
–1.5
.........
–1.5
15.7

–1.8
*
–1.7
.........
–1.7
14.0

–1.5
*
–1.4
.........
–1.4
12.6

–1.5
*
–1.4
.........
–1.4
11.1

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

463

27. Trust Funds and Federal Funds

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Social Security:
Old-Age, Survivors and Disability Insurance (OASDI) Trust Funds
Balance, start of year
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year

2,653.5
.........

2,718.1
.........

2,751.1
.........

2,770.3
.........

2,777.7
.........

2,779.8
.........

2,771.5
.........

2,653.5

2,718.1

2,751.1

2,770.3

2,777.7

2,779.8

2,771.5

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

569.5
.........
0.1

673.5
.........
0.1

739.1
.........
0.1

778.3
.........
0.1

825.6
.........
0.1

868.7
.........
0.1

917.5
.........
0.1

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

112.4
167.4
.........
849.4

105.6
84.1
.........
863.3

100.0
57.7
.........
896.9

95.6
62.9
.........
936.9

92.0
67.5
.........
985.2

90.7
72.1
.........
1,031.6

89.4
76.7
.........
1,083.6

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–779.3
–5.5
–784.9

–825.0
–5.2
–830.2

–872.2
–5.5
–877.7

–923.7
–5.8
–929.5

–977.5
–5.5
–983.1

–1,033.8
–6.1
–1,039.9

–1,092.8
–6.2
–1,099.0

–47.8
112.4
64.6
0.2
64.8

–72.5
105.6
33.1
0.2
33.3

–80.9
100.0
19.2
.........
19.2

–88.3
95.6
7.4
.........
7.4

–89.9
92.0
2.1
.........
2.1

–99.0
90.7
–8.3
.........
–8.3

–104.7
89.4
–15.4
.........
–15.4

2,718.1

2,751.1

2,770.3

2,777.7

2,779.8

2,771.5

2,756.1

Transportation Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

21.6
0.7
22.3

15.6
.........
15.6

9.5
.........
9.5

9.8
.........
9.8

30.1
.........
30.1

71.0
.........
71.0

117.7
.........
117.7

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

40.2
*
0.1

38.7
*
*

39.0
*
.........

39.4
*
.........

39.8
*
.........

40.0
*
.........

40.3
*
.........

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

*
0.1
2.4
42.8

*
6.6
.........
45.2

.........
15.5
.........
54.5

.........
37.5
.........
76.9

.........
58.8
.........
98.6

.........
65.9
.........
105.9

.........
51.2
.........
91.5

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–49.5
.........
–49.5

–51.3
.........
–51.3

–54.2
.........
–54.2

–56.6
.........
–56.6

–57.7
.........
–57.7

–59.2
.........
–59.2

–60.8
.........
–60.8

–6.7
*
–6.7
–*
–6.7
15.6

–6.1
*
–6.1
–*
–6.1
9.5

0.3
.........
0.3
.........
0.3
9.8

20.3
.........
20.3
.........
20.3
30.1

40.9
.........
40.9
.........
40.9
71.0

46.7
.........
46.7
.........
46.7
117.7

30.7
.........
30.7
.........
30.7
148.4

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

464

Analytical Perspectives

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Unemployment Trust Fund
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

–26.7
.........
–26.7

–12.6
.........
–12.6

–3.6
.........
–3.6

4.7
.........
4.7

14.1
.........
14.1

35.9
.........
35.9

58.2
.........
58.2

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

66.6
.........
1.2

60.6
.........
*

58.2
.........
*

58.0
.........
0.4

69.1
.........
0.2

69.1
.........
0.2

66.1
.........
0.2

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

0.5
42.1
.........
110.4

0.6
31.9
.........
93.1

0.7
8.2
.........
67.2

0.9
1.0
.........
60.2

1.0
0.9
.........
71.2

1.1
0.9
.........
71.3

1.4
0.9
.........
68.5

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to Federal funds ���������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–96.2
.........
–96.2

–84.1
.........
–84.1

–58.8
.........
–58.8

–50.8
.........
–50.8

–49.4
.........
–49.4

–49.0
.........
–49.0

–49.0
.........
–49.0

Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

13.7
0.5
14.2
*
14.2
–12.6

8.4
0.6
8.9
.........
8.9
–3.6

7.6
0.7
8.3
.........
8.3
4.7

8.5
0.9
9.4
.........
9.4
14.1

20.8
1.0
21.8
.........
21.8
35.9

21.2
1.1
22.3
.........
22.3
58.2

18.1
1.4
19.5
.........
19.5
77.6

Veterans Life Insurance Funds
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

9.5
.........
9.5

8.9
.........
8.9

8.1
.........
8.1

7.4
.........
7.4

6.6
.........
6.6

5.8
.........
5.8

5.0
.........
5.0

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

.........
.........
0.3

.........
.........
0.3

.........
.........
0.2

.........
.........
0.2

.........
.........
0.2

.........
.........
0.2

.........
.........
0.1

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

0.5
.........
.........
0.8

0.4
.........
.........
0.7

0.4
.........
.........
0.6

0.3
.........
.........
0.5

0.3
.........
.........
0.4

0.2
.........
.........
0.4

0.2
.........
.........
0.3

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–1.5
.........
–1.5

–1.4
.........
–1.4

–1.4
.........
–1.4

–1.3
.........
–1.3

–1.2
.........
–1.2

–1.1
.........
–1.1

–1.1
.........
–1.1

–1.1
0.5
–0.7
.........
–0.7
8.9

–1.2
0.4
–0.8
.........
–0.8
8.1

–1.1
0.4
–0.8
.........
–0.8
7.4

–1.1
0.3
–0.8
.........
–0.8
6.6

–1.0
0.3
–0.8
.........
–0.8
5.8

–1.0
0.2
–0.8
.........
–0.8
5.0

–0.9
0.2
–0.7
.........
–0.7
4.3

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
Interest ������������������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
Total, change in fund balance �������������������������������������������������������������������������������
Balance, end of year ������������������������������������������������������������������������������������������������������

465

27. Trust Funds and Federal Funds

Table 27–4. Income, Outgo, and Balance of Major Trust Funds—Continued
(in billions of dollars)
Estimate

2012
Actual

2013

2014

2015

2016

2017

2018

Other Trust Funds
Balance, start of year ����������������������������������������������������������������������������������������������������
Adjustments �������������������������������������������������������������������������������������������������������������������
Total balance, start of year ���������������������������������������������������������������������������������������

82.4
*
82.4

83.2
.........
83.2

88.1
.........
88.1

99.5
.........
99.5

122.5
.........
122.5

153.7
.........
153.7

195.8
.........
195.8

Income:
Governmental receipts ���������������������������������������������������������������������������������������������
Offsetting governmental receipts ������������������������������������������������������������������������������
Proprietary receipts ��������������������������������������������������������������������������������������������������

5.2
*
6.1

6.6
*
6.5

8.1
*
6.4

8.6
3.0
6.5

8.6
9.4
6.6

8.9
8.6
6.7

9.0
2.2
6.7

Receipts from Federal funds:
Interest ������������������������������������������������������������������������������������������������������������������
Other ���������������������������������������������������������������������������������������������������������������������
Receipts from Trust funds �����������������������������������������������������������������������������������������
Subtotal, income ���������������������������������������������������������������������������������������������������

2.0
3.9
*
17.3

2.8
3.7
0.1
19.7

2.4
3.4
0.1
20.4

2.5
3.3
0.1
24.0

2.7
3.4
0.1
30.8

3.1
3.4
0.1
30.8

3.8
3.5
0.1
25.3

Outgo:
To the public �������������������������������������������������������������������������������������������������������������
Payments to other funds �������������������������������������������������������������������������������������������
Subtotal, outgo �����������������������������������������������������������������������������������������������������

–16.6
–*
–16.6

–14.7
–0.1
–14.7

–8.9
–0.1
–9.0

–0.9
–0.1
–1.0

0.5
–0.1
0.4

11.4
–0.2
11.2

17.5
–0.2
17.3

Change in fund balance:
Surplus or deficit(–):
Excluding interest �������������������������������������������������������������������������������������������������
–1.4
2.2
8.9
20.5
28.5
39.0
38.8
Interest ������������������������������������������������������������������������������������������������������������������
2.0
2.8
2.4
2.5
2.7
3.1
3.8
Subtotal, surplus or deficit(–) ���������������������������������������������������������������������������
0.7
4.9
11.4
23.0
31.2
42.1
42.6
Borrowing/Transfers/lapses (net) ������������������������������������������������������������������������������
–*
–*
*
.........
.........
.........
.........
Total, change in fund balance �������������������������������������������������������������������������������
0.7
4.9
11.4
23.0
31.2
42.1
42.6
Balance, end of year ������������������������������������������������������������������������������������������������������
83.2
88.1
99.5
122.5
153.7
195.8
238.4
Note: The effects for 2014 through 2018 of the Budget’s Medicare savings proposals are included in “Other Trust Funds” in Table 27-4, because the detailed estimates of the effects of
those proposals on the Medicare Hospital Insurance and Supplementary Medical Insurance trust funds and associated receipt accounts were not available in time for publication. 

466

Analytical Perspectives

Table 27–5. Income, Outgo, and Balance of Major Federal Funds
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Abandoned Mine Reclamation Fund
Balance, start of year ���������������������������������������������������������������������������������������������
Adjustments ������������������������������������������������������������������������������������������������������������
Total balance, start of year ��������������������������������������������������������������������������������

2.7
.........
2.7

2.8
.........
2.8

2.8
.........
2.8

2.8
.........
2.8

2.9
.........
2.9

2.9
.........
2.9

2.9
.........
2.9

Income:
Governmental receipts ��������������������������������������������������������������������������������������
Proprietary receipts �������������������������������������������������������������������������������������������

0.2
.........

0.2
.........

0.3
.........

0.3
.........

0.3
.........

0.3
.........

0.3
.........

Receipts from Federal funds:
Interest �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Receipts from Trust funds ����������������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������������������������������������������������

0.1
.........
.........
0.3

0.1
.........
.........
0.3

*
.........
.........
0.3

*
.........
.........
0.3

*
.........
.........
0.3

*
.........
.........
0.3

0.1
.........
.........
0.3

Outgo (–):
To the public ������������������������������������������������������������������������������������������������������
Payments to other funds ������������������������������������������������������������������������������������
Subtotal, outgo ����������������������������������������������������������������������������������������������

–0.3
.........
–0.3

–0.2
.........
–0.2

–0.2
.........
–0.2

–0.2
.........
–0.2

–0.3
.........
–0.3

–0.3
.........
–0.3

–0.4
.........
–0.4

Surplus or deficit(–):
Excluding interest ������������������������������������������������������������������������������������������
Interest �����������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ��������������������������������������������������������������������
Borrowing/Transfers/lapses (net) �����������������������������������������������������������������������
Total, change in fund balance ������������������������������������������������������������������������
Balance, end of year �����������������������������������������������������������������������������������������������

–*
0.1
*
.........
*
2.8

–*
0.1
*
.........
*
2.8

*
*
*
.........
*
2.8

*
*
*
.........
*
2.9

–*
*
*
.........
*
2.9

–*
*
*
.........
*
2.9

–0.1
0.1
–*
.........
–*
2.9

Credit Union Share Insurance Fund
Balance, start of year ���������������������������������������������������������������������������������������������
Adjustments ������������������������������������������������������������������������������������������������������������
Total balance, start of year ��������������������������������������������������������������������������������

10.7
.........
10.7

10.3
.........
10.3

10.6
.........
10.6

10.8
.........
10.8

11.1
.........
11.1

11.5
.........
11.5

12.2
.........
12.2

Income:
Governmental receipts ��������������������������������������������������������������������������������������
Proprietary receipts �������������������������������������������������������������������������������������������

.........
0.3

.........
0.6

.........
0.5

.........
0.5

.........
0.5

.........
0.7

.........
0.8

Receipts from Federal funds:
Interest �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Receipts from Trust funds ����������������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������������������������������������������������

0.2
*
.........
0.5

0.2
.........
.........
0.8

0.2
.........
.........
0.7

0.3
.........
.........
0.7

0.4
.........
.........
0.9

0.4
.........
.........
1.2

0.5
.........
.........
1.3

Outgo (–):
To the public ������������������������������������������������������������������������������������������������������
Payments to other funds ������������������������������������������������������������������������������������
Subtotal, outgo ����������������������������������������������������������������������������������������������

–0.7
.........
–0.7

–0.5
.........
–0.5

–0.4
.........
–0.4

–0.4
.........
–0.4

–0.4
.........
–0.4

–0.5
.........
–0.5

–0.5
.........
–0.5

–0.4
0.2
–0.2
–0.3
–0.5
10.3

0.1
0.2
0.3
.........
0.3
10.6

*
0.2
0.2
.........
0.2
10.8

*
0.3
0.3
.........
0.3
11.1

0.1
0.4
0.4
.........
0.4
11.5

0.3
0.4
0.7
.........
0.7
12.2

0.3
0.5
0.8
.........
0.8
13.0

Change in fund balance:

Change in fund balance:
Surplus or deficit(–):
Excluding interest ������������������������������������������������������������������������������������������
Interest �����������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ��������������������������������������������������������������������
Borrowing/Transfers/lapses (net) �����������������������������������������������������������������������
Total, change in fund balance ������������������������������������������������������������������������
Balance, end of year �����������������������������������������������������������������������������������������������

467

27. Trust Funds and Federal Funds

Table 27–5. Income, Outgo, and Balance of Major Federal Funds
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Department of Defense Medicare-Eligible Retiree Health Care Fund
Balance, start of year ���������������������������������������������������������������������������������������������
Adjustments ������������������������������������������������������������������������������������������������������������
Total balance, start of year ��������������������������������������������������������������������������������

186.1
.........
186.1

175.9
.........
175.9

184.9
.........
184.9

190.0
.........
190.0

194.9
.........
194.9

200.2
.........
200.2

205.9
.........
205.9

Income:
Governmental receipts ��������������������������������������������������������������������������������������
Proprietary receipts �������������������������������������������������������������������������������������������

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

.........
.........

Receipts from Federal funds:
Interest �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Receipts from Trust funds ����������������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������������������������������������������������

–19.4
.........
17.9
–1.6

4.2
.........
14.7
18.8

4.1
.........
10.5
14.6

4.2
.........
10.7
14.9

4.5
.........
11.3
15.8

4.9
.........
11.8
16.7

6.3
.........
12.4
18.7

Outgo (–):
To the public ������������������������������������������������������������������������������������������������������
Payments to other funds ������������������������������������������������������������������������������������
Subtotal, outgo ����������������������������������������������������������������������������������������������

–8.7
.........
–8.7

–9.9
.........
–9.9

–9.5
.........
–9.5

–10.0
.........
–10.0

–10.5
.........
–10.5

–11.0
.........
–11.0

–11.5
.........
–11.5

Change in fund balance:
Surplus or deficit(–): ������������������������������������������������������������������������������������������
Excluding interest ������������������������������������������������������������������������������������������
Interest �����������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ��������������������������������������������������������������������
Borrowing/Transfers/lapses (net) �����������������������������������������������������������������������
Total, change in fund balance ������������������������������������������������������������������������
Balance, end of year �����������������������������������������������������������������������������������������������

.........
9.2
–19.4
–10.2
.........
–10.2
175.9

.........
4.8
4.2
9.0
.........
9.0
184.9

.........
1.0
4.1
5.1
.........
5.1
190.0

.........
0.7
4.2
5.0
.........
5.0
194.9

.........
0.8
4.5
5.3
.........
5.3
200.2

.........
0.8
4.9
5.7
.........
5.7
205.9

.........
0.9
6.3
7.2
.........
7.2
213.1

Overseas Private Investment Corporation Noncredit Account
Balance, start of year ���������������������������������������������������������������������������������������������
Adjustments ������������������������������������������������������������������������������������������������������������
Total balance, start of year ��������������������������������������������������������������������������������

5.1
.........
5.1

5.2
.........
5.2

5.3
.........
5.3

5.4
.........
5.4

5.5
.........
5.5

5.7
.........
5.7

5.8
.........
5.8

Income:
Governmental receipts ��������������������������������������������������������������������������������������
Proprietary receipts �������������������������������������������������������������������������������������������

.........
0.1

.........
*

.........
*

.........
*

.........
*

.........
*

.........
*

Receipts from Federal funds:
Interest �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Receipts from Trust funds ����������������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������������������������������������������������

0.2
*
.........
0.3

0.2
*
.........
0.2

0.1
*
.........
0.2

0.1
*
.........
0.2

0.1
*
.........
0.2

0.1
*
.........
0.2

0.1
*
.........
0.2

Outgo (–):
To the public ������������������������������������������������������������������������������������������������������
Payments to other funds ������������������������������������������������������������������������������������
Subtotal, outgo ����������������������������������������������������������������������������������������������

–0.1
.........
–0.1

–0.1
.........
–0.1

–0.1
.........
–0.1

–0.1
.........
–0.1

–0.1
.........
–0.1

–0.1
.........
–0.1

–0.1
.........
–0.1

*
0.2
0.2
–0.1
0.1
5.2

*
0.2
0.2
–0.1
0.1
5.3

*
0.1
0.1
–0.1
0.1
5.4

–*
0.1
0.1
.........
0.1
5.5

–*
0.1
0.1
.........
0.1
5.7

–*
0.1
0.1
.........
0.1
5.8

–*
0.1
0.1
.........
0.1
5.9

Change in fund balance:
Surplus or deficit(–):
Excluding interest ������������������������������������������������������������������������������������������
Interest �����������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ��������������������������������������������������������������������
Borrowing/Transfers/lapses (net) �����������������������������������������������������������������������
Total, change in fund balance ������������������������������������������������������������������������
Balance, end of year �����������������������������������������������������������������������������������������������

468

Analytical Perspectives

Table 27–5. Income, Outgo, and Balance of Major Federal Funds
(in billions of dollars)
2012
Actual

Estimate
2013

2014

2015

2016

2017

2018

Pension Benefit Guaranty Corporation Fund
Balance, start of year ���������������������������������������������������������������������������������������������
Adjustments ������������������������������������������������������������������������������������������������������������
Total balance, start of year ��������������������������������������������������������������������������������

15.6
.........
15.6

15.8
.........
15.8

16.8
.........
16.8

18.4
.........
18.4

23.5
.........
23.5

28.2
.........
28.2

31.9
.........
31.9

Income:
Governmental receipts ��������������������������������������������������������������������������������������
Proprietary receipts �������������������������������������������������������������������������������������������

.........
5.5

.........
6.8

.........
7.9

.........
12.2

.........
12.7

.........
12.8

.........
13.0

Receipts from Federal funds:
Interest �����������������������������������������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Receipts from Trust funds ����������������������������������������������������������������������������������
Subtotal, income ��������������������������������������������������������������������������������������������

0.7
.........
.........
6.2

0.7
.........
.........
7.4

0.7
.........
.........
8.6

0.8
.........
.........
13.0

1.0
.........
.........
13.7

1.1
.........
.........
13.9

1.2
.........
.........
14.2

Outgo (–):
To the public ������������������������������������������������������������������������������������������������������
Payments to other funds ������������������������������������������������������������������������������������
Subtotal, outgo ����������������������������������������������������������������������������������������������

–5.9
.........
–5.9

–6.5
.........
–6.5

–7.0
.........
–7.0

–7.9
.........
–7.9

–9.0
.........
–9.0

–10.2
.........
–10.2

–11.3
.........
–11.3

–0.4
0.7
0.4
–0.1
0.3
15.8

0.3
0.7
1.0
.........
1.0
16.8

0.9
0.7
1.6
.........
1.6
18.4

4.2
0.8
5.1
.........
5.1
23.5

3.7
1.0
4.7
.........
4.7
28.2

2.6
1.1
3.7
.........
3.7
31.9

1.7
1.2
2.9
.........
2.9
34.8

Change in fund balance:
Surplus or deficit(–):
Excluding interest ������������������������������������������������������������������������������������������
Interest �����������������������������������������������������������������������������������������������������������
Subtotal, surplus or deficit(–) ��������������������������������������������������������������������
Borrowing/Transfers/lapses (net) �����������������������������������������������������������������������
Total, change in fund balance ������������������������������������������������������������������������
Balance, end of year �����������������������������������������������������������������������������������������������

28. National Income and Product Accounts

The National Income and Product Accounts (NIPAs) are
an integrated set of statistics prepared by the Department
of Commerce that measure aggregate U.S. economic activity. Because the NIPAs include Federal transactions and are
widely used in economic analysis, it is important to understand the differences between the NIPAs’ distinctive presentation of Federal transactions and that of the budget.
The main purpose of the NIPAs is to measure the
Nation’s total production of goods and services, known as
gross domestic product (GDP), and the incomes generated
in its production. GDP excludes intermediate production
to avoid double counting. Government consumption expenditures along with government gross investment —
State and local as well as Federal — are included in GDP
as part of final output, together with personal consumption expenditures, gross private domestic investment, and
net exports of goods and services (exports minus imports).
Not all government expenditures are counted in GDP.
Benefit payments to individuals, grants to State and local
governments, subsidies, and interest payments are not
purchases of final output and are therefore not included
in GDP. However, these transactions are recorded in the
NIPA government account that records current receipts
and expenditures because all of these affect the government’s claim on economic resources.
Federal transactions are included in the NIPAs as part
of the government sector.1  The Federal subsector is designed to measure certain important economic effects of
Federal transactions in a way that is consistent with the
conceptual framework of the entire set of integrated accounts. The NIPA Federal subsector is not a budget, because it is not a financial plan for proposing, determining,
and controlling the fiscal activities of the Government. For
example, it omits from its current receipts and current expenditures certain “capital transfers’’ (such as estate tax
receipts and grants to States for capital investment) that
are recorded in the budget. These capital transfers are
therefore not counted in net Federal Government saving,
but are displayed separately to show their effect on net
Federal lending or borrowing. NIPA concepts also differ
in many other ways from budget concepts, and therefore
the NIPA presentation of Federal finances is significantly
different from that of the budget.
Differences between the NIPAs and the Budget
Federal transactions in the NIPAs are measured according to NIPA accounting concepts and as a result they differ
from the budget in netting and grossing, timing, and coverage. These differences cause current receipts and expendi1  The NIPA government sector consists of the Federal subsector and
a State and local subsector that is a single set of transactions for all U.S.
State and local units of government, treated as a consolidated entity.

tures in the NIPAs to differ from total receipts and outlays in
the budget, albeit by relatively small amounts.2 Differences
in timing and coverage also cause the NIPA measure of net
Federal Government saving to differ from the budget surplus
or deficit. Unlike timing and coverage differences, netting
and grossing differences have equal effects on receipts and
expenditures and thus have no effect on net Government
saving. The NIPAs also combine transactions into different
categories from those used in the budget.
Netting and grossing differences arise because the
budget records certain transactions as offsets to outlays
that are recorded as current receipts in the NIPAs (or
vice versa). The budget treats all income that comes to
the Government due to its sovereign powers—mainly,
but not exclusively, taxes—as governmental receipts. The
budget offsets against outlays any income that arises
from voluntary business-type transactions with the public. The NIPAs generally follow this concept as well, and
income to Government revolving accounts (such as the
Government Printing Office) is offset against their expenditures. However, the NIPAs have a narrower definition of
“business-type transactions’’ than does the budget. Rents
and royalties, and some regulatory or inspection fees,
which are classified as offsets to outlays in the budget,
are recorded in the NIPAs as Government receipts. The
NIPAs include Medicare premiums as Government receipts, while the budget classifies them as business-type
transactions (offsetting receipts). In addition, the NIPAs
treat the net surplus of Government enterprises, such as
the Postal Service, as a component of current receipts.
In the budget, any intragovernmental income paid
from one account to another is offset against outlays rather than being recorded as a receipt so that total outlays
and receipts measure only transactions with the public.
For example, Government contributions for Federal employee social insurance (such as Social Security) are offset
against outlays. In contrast, the NIPAs treat the Federal
Government like any other employer and show contributions for Federal employee social insurance as expenditures by the employing agencies and as current receipts,
rather than offsets against outlays. The NIPAs also display certain transactions that are not recorded explicitly
in the budget. For example, unemployment benefits for
Federal employees are financed by direct appropriations
rather than social insurance contributions. The NIPAs
impute the social insurance contributions to the expenditures of employing agencies—again, treating the Federal
Government like any other employer.
2  Over the period 1994–2012, NIPA current expenditures averaged
3.8 percent higher than budget outlays, while NIPA current receipts averaged 3.9 percent higher than budget receipts. Including capital transfers and net investment, NIPA total expenditures averaged 6.7 percent
higher than budget outlays, while NIPA total receipts averaged 5.0 percent higher than budget receipts.

469

470
Timing differences for receipts occur because the
NIPAs generally record business taxes when they accrue,
while the budget generally records receipts when cash
is received. Thus the NIPAs attribute corporations’ final
settlement payments back to the quarter(s) in which the
profits that gave rise to the tax liability occurred. The
delay between accrual of liability and Treasury receipt
of payment can result in significant timing differences
between NIPA and budget measures of receipts for any
given accounting period.
Timing differences also occur for current expenditures,
such as when the first day of a month falls on a weekend
or holiday and therefore monthly benefit checks normally
deposited on the first day of the month may be deposited a
day or two earlier. The budget then reflects two payments
in one month and none the next. As a result, the budget
totals occasionally reflect 13 monthly payments in one
year and only 11 the next. NIPA expenditure figures always reflect 12 benefit payments per year, giving rise to a
timing difference compared to the budget. Similar timing
differences also occur in gross investment, particularly in
national defense investment, where work in progress over
long-term production timelines are recognized as business inventories in the NIPAs until the item is completed
and delivered to the Government. The budget reflects all
payments as current outlays in the period in which the
work is undertaken.
Coverage differences arise on the expenditure side because of the NIPA treatment of Government investment.
The budget includes outlays for Federal investments as
they are paid, while NIPA current expenditures exclude
current investments but include a depreciation charge
on past investments (“consumption of general government fixed capital’’).’ The inclusion of depreciation on
fixed capital (structures, equipment and software) in current expenditures can be thought of as a proxy for the
services that capital renders; i.e., for its contribution to
Government output of public services. The depreciation
charge is not a full reflection of capital services, however,
since it does not include the net return to capital that in
a private corporation would appear as interest income or
profit. The NIPAs would need to include an imputed interest charge for government capital to assure a fully parallel treatment.
Certain items in the budget are excluded from the
NIPA Federal current account because they are related to
the acquisition, sale, or transfer of assets, and not linked
to current consumption or income. Examples include
Federal grants to State and local governments for capital investment, investment subsidies to business, lump
sum payments to amortize the unfunded liability of the
Department of Defense Medicare-Eligible Retiree Health
Care Fund and the Postal Service Retiree Health Benefits
Fund, and forgiveness of debt owed by foreign governments. Likewise, estate and gift taxes, included in budget receipts, are excluded from NIPA current receipts as
being capital transfers. The NIPAs also exclude the proceeds from the sales of non-produced assets such as land.
Bonuses paid on Outer Continental Shelf oil leases and

Analytical Perspectives

proceeds from broadcast spectrum auctions are shown as
offsetting receipts in the budget and are deducted from
budget outlays. In the NIPAs these transactions are excluded from the Federal current account as an exchange
of assets with no current production involved. The NIPAs
are not strictly consistent in this interpretation since they
do include in total revenues the taxation of capital gains.
Financial transactions such as loan disbursements,
loan repayments, loan asset sales, and loan guarantees
are excluded from the NIPA current accounts on the
grounds that such transactions simply involve an exchange of assets rather than current production, income,
or consumption. In contrast, under the Federal Credit
Reform Act of 1990, the budget records the estimated subsidy cost of the direct loan or loan guarantee as an outlay
at the time when the loan is disbursed. The cash flows
with the public are recorded in non-budgetary accounts as
a means of financing the budget rather than as budgetary
transactions. This treatment recognizes that a Federal direct loan is an exchange of assets with equal value after
allowing for the subsidy to the borrower implied by the
terms of the loan. It also recognizes the subsidy element
in loan guarantees. In the NIPA current accounts, these
subsidies are not recognized. Exclusion from the NIPA
current accounts of asset purchases, direct loans, and
loan guarantees under the Troubled Asset Relief Program
(TARP) and other financial stabilization measures gave
rise to the largest differences between budget and NIPA
expenditures totals in 2009 through 2011.3
The treatment of Government pension plan income
and outgo creates a coverage difference. Whereas the
budget treats employee contributions to these pension
plans as governmental receipts, and employer contributions by agencies as offsets to outlays because they are
intragovernmental, the NIPAs treat employee contributions as a transfer of income within the household sector, in the same way as it treats contributions to pension
plans in the private (household) sector, and treats employer contributions as personal income. Likewise, the
budget records a Government pension payment to a retired Government employee as an outlay, but under NIPA
concepts, no Government expenditure occurs at that time;
the payment is treated (like private pension payments) as
a transfer of income within the household sector.
3  The range of the Government’s financial stabilization efforts is discussed further in Chapter 3 of this volume, “Financial Stabilization Efforts and their Budgetary Effects.” Many of the Treasury’s financial
stabilization programs, including TARP equity purchases, are recorded
in the budget on a credit basis, in which the budget recognizes the estimated subsidy value of direct loans, loan guarantees, and equity purchases at the time the loan or purchase is made. This credit treatment
extends to equity purchases under TARP, as well as loans. The NIPAs
normally exclude the principal disbursements and repayments of credit
transactions as exchanges of assets with no current production involved;
the interest and dividend receipts, however, are included in NIPA current receipts as receipts on assets. For certain transactions, the NIPAs
recognize the subsidy conveyed by these transactions by recording capital transfers, calculated as the difference between the actual price paid
for the financial asset and an estimate of its market value. Purchase of
Government Sponsored Enterprise (GSE) preferred stock is recorded in
the budget on a cash basis, but is excluded from the NIPA current accounts; GSE preferred stock purchases, however, are shown as capital
transfers.

471

28. National Income and Product Accounts

Table 28–1.  Federal Transactions in the National Income and Product Accounts, 2003–2014
(In billions of dollars)
Estimate
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

CURRENT RECEIPTS
Current tax receipts ����������������������������������������������������������
Personal current taxes �������������������������������������������������
Taxes on production and imports ���������������������������������
Taxes on corporate income �����������������������������������������
Taxes from the rest of the world ����������������������������������
Contributions for government social insurance �����������������
Income receipts on assets ������������������������������������������������
Current transfer receipts ���������������������������������������������������
Current surplus of government enterprises ����������������������

1056.5
781.5
88.7
177.8
8.4
753.4
21.6
24.9
4.0

1115.7
782.3
93.4
230.8
9.3
795.4
23.1
27.8
1.7

1346.2
913.2
98.0
323.0
12.0
847.9
24.1
32.4
–3.7

1538.5
1033.7
99.1
393.8
11.8
892.7
25.2
38.1
–3.3

1632.0
1140.6
94.4
380.8
16.1
936.6
28.4
42.2
–2.3

1511.7
1122.9
95.2
277.1
16.4
969.4
32.2
49.1
–3.5

1178.9
900.1
90.4
170.7
17.7
952.5
41.9
69.9
–4.1

1259.7
863.7
94.7
287.2
14.2
960.9
52.2
70.3
–5.6

1472.3
1040.0
105.0
311.3
16.0
935.0
55.4
68.9
–10.9

1625.7
1131.9
118.6
358.4
16.7
931.1
50.5
54.0
–12.0

1720.2
1203.8
122.3
375.7
18.4
1057.0
46.6
59.5
–37.0

1928.8
1340.6
149.6
420.7
17.9
1136.2
65.2
92.8
–17.7

Total current receipts ���������������������������������������

1860.4

1963.7

2246.9

2491.2

2636.9

2558.9

2239.1

2337.5

2520.7

2649.3

2846.3

3205.3

CURRENT EXPENDITURES
Consumption expenditures �����������������������������������������������
Defense �����������������������������������������������������������������������
Nondefense �����������������������������������������������������������������
Current transfer payments ������������������������������������������������
Government social benefits �����������������������������������������
Grants-in-aid to State and local governments �������������
Other transfers to the rest of the world ������������������������
Interest payments �������������������������������������������������������������
Subsidies �������������������������������������������������������������������������
Wage disbursements less accruals ����������������������������������

646.3
422.9
223.4
1317.0
960.5
328.4
28.1
215.7
48.1
0.0

704.7
469.7
235.0
1392.2
1014.9
347.8
29.5
215.8
44.6
0.0

756.5
507.3
249.3
1473.4
1076.9
359.6
37.0
242.8
57.6
0.0

797.6
531.3
266.3
1566.0
1166.6
360.9
38.5
284.4
54.6
0.0

831.2
562.8
268.4
1661.2
1249.5
373.9
37.8
302.9
47.6
0.0

906.7
616.3
290.4
1808.0
1372.3
389.8
45.9
314.2
48.9
0.0

969.8
653.6
316.3
2074.0
1561.6
458.7
53.7
239.2
56.9
0.0

1040.6
694.5
346.1
2286.8
1714.0
520.1
52.6
276.4
55.1
0.0

1061.8
710.6
351.2
2325.2
1748.1
518.7
58.3
322.5
60.0
0.0

1073.0
708.7
364.3
2263.0
1750.8
461.6
50.6
308.5
60.6
0.0

1077.5
689.3
388.2
2389.7
1849.1
483.1
57.5
307.4
71.7
0.0

1075.7
673.1
402.6
2548.1
1939.9
555.8
52.4
311.6
71.8
0.0

Total current expenditures �������������������������������

2227.1

2357.3

2530.3

2702.6

2842.9

3077.8

3339.9

3658.9

3769.5

3705.1

3846.3

4007.2

Net Federal Government saving ����������������������

–366.7

–393.6

–283.4

–211.4

–206.0

–518.9 –1100.8 –1321.4 –1248.8 –1055.8 –1000.0

–801.9

ADDENDUM: TOTAL RECEIPTS AND EXPENDITURES
Current receipts ����������������������������������������������������������������
Capital transfer receipts ����������������������������������������������������

1860.3
21.7

1963.7
24.7

2246.9
24.6

2491.2
27.7

2636.9
25.8

2558.9
28.6

2239.1
23.3

2337.5
18.3

2520.7
7.3

2649.3
13.8

2846.3
12.8

3205.3
12.9

Total receipts �����������������������������������������������������
Current expenditures ��������������������������������������������������������

1882.0
2227.1

1988.4
2357.3

2271.5
2530.3

2518.9
2702.6

2662.7
2842.9

2587.5
3077.8

2262.4
3339.9

2355.8
3658.9

2528.0
3769.5

2663.1
3705.1

2859.1
3846.3

3218.2
4007.2

Gross government investment:
Defense �������������������������������������������������������������������
Nondefense �������������������������������������������������������������

61.4
33.7

67.1
33.5

73.8
34.8

78.6
40.0

86.1
40.1

98.7
41.9

111.1
45.4

114.4
50.3

110.8
52.3

106.2
48.3

102.0
44.6

87.3
41.2

Less: Consumption of fixed capital:
Defense �������������������������������������������������������������������
Nondefense �������������������������������������������������������������
Capital transfer payments �������������������������������������������������
Net purchases of nonproduced assets �����������������������������

61.4
29.0
51.3
*

63.7
29.7
62.2
0.1

67.8
31.3
83.7
–0.7

72.0
33.0
69.5
–0.3

76.3
34.8
69.4
–13.9

81.6
36.4
90.7
–10.0

85.8
38.0
268.3
–16.6

89.7
39.0
176.7
0.1

94.8
40.7
131.1
–0.1

97.8
42.5
126.9
0.1

100.3
45.6
115.1
0.1

99.6
46.8
111.5
0.1

Total expenditures ��������������������������������������������

2283.0

2427.0

2622.7

2785.5

2913.5

3181.1

3624.3

3871.7

3928.1

3846.3

3962.2

4100.9

Net lending or net borrowing (–) �������������������������

–400.9

–438.7

–351.3

–266.6

–250.8

–593.6 –1361.9 –1515.9 –1400.1 –1183.2 –1103.1

–882.7

Net investment:

The NIPAs, like the budget, include all interest transactions with the public, including interest received by and
paid to the loan financing accounts4; and both the NIPAs
and the budget include administrative costs of credit program operations.
4  The budget excludes interest transactions between the public and
the nonbudgetary financing accounts, but includes interest transactions
between Treasury and the financing accounts.

Similarly to loan transactions, deposit insurance outlays for resolving failed banks and thrift institutions are
excluded from the NIPAs on the grounds that there are no
offsetting current income flows from these transactions.
The budget treats these deposit insurance transactions
on a cash basis. This exclusion from the NIPAs created
a particularly large difference in 2009, because of large
outlays to liquidate failed bank deposits. In a similar
episode in 1991, this exclusion was the largest differ-

472

Analytical Perspectives

ence between the NIPAs and the budget and made NIPA
net Government saving a significantly smaller negative
number than the budget deficit that year. In subsequent
years, as assets acquired from failed financial institutions
were sold, these collections tended to make the budget
deficit a smaller negative figure than NIPA net Federal
Government saving.
Federal Sector Current Receipts
Table 28–1 shows the NIPA classification of Federal
current receipts in five major categories and four of the
subcategories used to measure taxes, which are similar
to the budget categories but with some significant differences.
Current tax receipts is the largest category of current
receipts, and its personal current taxes subcategory —
composed primarily of the individual income tax — is the
largest single subcategory. The NIPAs’ taxes on corporate
income subcategory differs in classification from the corresponding budget category primarily because the NIPAs
include the deposit of earnings of the Federal Reserve
System as corporate income taxes, while the budget treats
these collections as miscellaneous receipts. (The timing
difference between the NIPAs and the budget is especially
large for corporate receipts.) The taxes on production and
imports subcategory is composed of excise taxes and customs duties.
Contributions for Government social insurance is the
second largest category of current receipts. It differs from
the corresponding budget category primarily because: (1)
the NIPAs include Federal employer contributions for so-

cial insurance as a government receipt, while the budget
offsets these contributions against outlays as undistributed offsetting receipts; (2) the NIPAs include premiums for
Parts B and D of Medicare as government receipts, while
the budget nets them against outlays; (3) the NIPAs treat
Government employee contributions to their pension
plans as a transfer of personal income within the household sector (as if the pension system were private), while
the budget includes them in governmental receipts; and
(4) the NIPAs impute employer contributions for Federal
employees’ unemployment insurance and workers’ compensation.
The income receipts on assets category consists mainly of interest payments received on Government direct
loans (such as student loans), rents and royalties on Outer
Continental Shelf oil leases, and, beginning in 2009, dividends received on preferred stock purchased from the
Government-sponsored enterprises (GSEs) Fannie Mae
and Freddie Mac. The current transfer receipts category,
virtually all of which is netted against outlays in the
budget, consists primarily of deposit insurance premiums, regulatory and other fees, fines and other receipts
from both individuals and businesses, and net insurance settlements from the National Flood Insurance
Program, which can be negative or positive receipts depending on whether flood insurance claims paid exceed
premiums collected for the current period. The current
surplus (or deficit) of Government enterprises category
is the profit or loss of “Government enterprises,’’ such as
the Postal Service, which are business-type operations of
Government that usually appear in the budget as public
enterprise revolving funds. Depreciation (consumption

Table 28–2.  Relationship of the Budget to the Federal Sector, NIPAs
(In billions of dollars)
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

RECEIPTS
Budget receipts �����������������������������������������������������������������������������
Contributions to government employee retirement plans ��������
Capital transfers received ��������������������������������������������������������
Other coverage differences �����������������������������������������������������
Netting and grossing ����������������������������������������������������������������
Timing differences �������������������������������������������������������������������

1782.3
–4.6
–21.7
–5.4
87.2
22.6

1880.1
–4.6
–24.7
–6.4
91.5
27.7

2153.6
–4.5
–24.6
–6.9
97.6
31.6

2406.9
–4.4
–27.7
–7.0
110.9
12.6

2568.0
–4.3
–25.8
–7.5
121.8
–15.4

2524.0
–4.2
–28.6
–7.7
137.1
–61.7

2105.0
–4.1
–23.3
–7.8
168.1
1.2

2162.7
–4.1
–18.3
–8.3
219.8
–14.3

2303.5
–4.1
–7.3
–8.0
172.7
63.9

2450.2
–3.7
–13.8
–9.6
151.7
74.6

2712.0
–3.7
–12.7
–9.6
148.5
11.8

3033.6
–4.5
–12.8
–9.3
211.9
–13.7

NIPA current receipts ��������������������������������������������������������

1860.3

1963.7

2246.9

2491.2

2636.9

2558.9

2239.0

2337.6

2520.7

2649.3

2846.2

3205.2

EXPENDITURES
Budget outlays ������������������������������������������������������������������������������
Government employee retirement plan transactions ���������������
Deposit insurance and other financial transactions �����������������
Capital transfer payments ��������������������������������������������������������
Net purchases of nonproduced assets ������������������������������������
Net investment �������������������������������������������������������������������������
Other coverage differences �����������������������������������������������������
Netting and grossing differences ���������������������������������������������
Timing differences �������������������������������������������������������������������

2159.9
33.0
–1.8
–45.7
–*
–4.7
–1.9
87.2
1.1

2292.8
33.2
–0.9
–46.8
–0.1
–7.3
–8.2
91.5
3.1

2472.0
38.9
–0.5
–65.1
0.7
–9.5
–12.4
97.6
8.6

2655.0
41.6
–9.8
–51.8
0.3
–13.6
–23.3
110.9
–6.5

2728.7
39.9
–12.7
–53.1
13.9
–15.1
9.7
121.8
9.6

2982.5
52.0
–57.9
–59.2
10.0
–22.7
20.9
137.1
15.0

3517.7
30.6
–511.0
–236.3
16.6
–32.7
396.9
168.1
–9.8

3456.2
51.0
–35.7
–142.2
–0.1
–35.9
149.6
219.8
–3.9

3603.1
62.0
28.4
–99.0
0.1
–27.6
53.1
172.7
–23.3

3537.1
–14.2
–58.8
–97.7
–0.1
–14.2
88.7
151.7
112.3

3684.9
37.1
–79.2
–88.0
–0.1
–0.7
130.4
148.5
13.4

3777.8
32.4
–97.9
–88.4
–0.1
17.8
139.2
211.9
14.5

NIPA current expenditures ������������������������������������������������

2227.0

2357.4

2530.2

2702.7

2842.8

3077.8

3340.0

3658.9

3769.4

3705.0

3846.3

4007.2

ADDENDUM
Budget surplus or deficit (–) ����������������������������������������������������
NIPA net Federal Government saving �������������������������������������
* $50 million or less.

–377.6
–366.7

–412.7
–393.7

–318.4
–283.3

–248.1
–211.5

–160.7
–205.9

–458.5 –1412.7 –1293.5 –1299.6 –1086.9 –972.9
–518.9 –1101.0 –1321.3 –1248.7 –1055.7 –1000.1

–744.2
–802.0

473

28. National Income and Product Accounts

of enterprise fixed capital) is netted in calculating the
current surplus of Government enterprises.

between NIPA current receipts and expenditures and total receipts and expenditures.

Federal Sector Current Expenditures

Differences in the Estimates

Table 28–1 shows the five major NIPA categories for
current expenditures and five subcategories, which differ
greatly from the corresponding budget categories.
Government
consumption
expenditures
consist of goods and services purchased by the Federal
Government, including compensation of employees and
depreciation on fixed capital. Gross investment (shown
among the addendum items in Table 28–1) is excluded
from current expenditures and does not figure in computing net Government saving on a NIPA basis, whereas
depreciation—charges on federally-owned fixed capital
(“consumption of general government fixed capital’’)—is
included. The NIPAs treat State and local investment
and capital consumption in the same way—regardless
of the extent to which it is financed with Federal aid
(capital transfer payments) or from State and local ownsource receipts.
Although gross investment is not included in
Government current expenditures, Government gross
investment is included in total GDP along with current consumption expenditures (including depreciation), which makes the treatment of the government sector in the NIPAs similar to that of the private sector.
Investment includes structures, equipment, and computer software.
The largest expenditure category, current transfer
payments, consists mainly of payments for Government
income security and health benefits, such as Social
Security and Medicare. Payment of pension benefits to
former Government employees is not included, as explained previously. Grants-in-aid to State and local governments help finance a range of programs, including
income security, Medicaid, and education (but capital
transfer payments for construction of highways, airports, waste-water treatment plants, and mass transit
are excluded). “Current transfer payments to the rest of
the world (net)’’ consists mainly of grants to foreign governments and U.S. territories.
Interest payments consist of the interest paid by the
Government on its debt to the public and debt held by
Federal employee pension plans. Where the budget nets
interest received on loans against outlays, the NIPAs
treat it as current receipts.
Subsidies consist of subsidy payments for resident
businesses (excluding subsidies for investment). NIPA
subsidies do not include the imputed credit subsidies estimated as budget outlays under credit reform.
Rather, as explained previously loans and guarantees
are excluded from the NIPAs except for associated interest and fees.
Wage disbursements less accruals is an adjustment
that is necessary to the extent that the wages paid in a
period differ from the amount earned in the period.
The addendum to Table 28–1 shows the capital transfers and net investment adjustments necessary to bridge

Since the introduction of the unified budget in January
1968, NIPA current receipts have been greater than budget
receipts in most years. This is due principally to grossing
differences and the fact that estate and gift taxes, which
the NIPAs exclude as capital transfers, have been roughly
matched by Medicare premiums, which the NIPAs include
as a government receipt, but the budget nets against the
outlay total. Since 1986, NIPA current expenditures have
usually been higher than budget outlays (from which the
Medicare premiums and employer retirement contributions are netted out), despite the omission from NIPA expenditures of capital transfer grants and pension benefit
payments to former Government employees.
Two components of budget outlays, however, are sometimes sufficiently large in combination to exceed the usual netting and grossing adjustments. These are financial
transactions and net investment (the difference between
gross investment and depreciation). Large outlays associated with resolving the failed savings and loan associations and banks in 1990 and 1991 caused those year’s
budget outlays to exceed NIPA current expenditures.
With the change in budgetary treatment of direct loans
in 1992 under credit reform, the cost of direct loans to the
public recorded in the budget has been reduced, bringing
it closer to the NIPA treatment. Disbursement and repayment of loans made since that time are recorded outside
the budget; only credit subsidies are recorded as budget
outlays, unlike the NIPAs which do not include this element of government expenditure.
Every year during the period 1975–1991, the budget
deficit showed a larger fiscal imbalance than the amount
of (negative) net Federal Government saving as measured
in the NIPAs. The largest difference, $74.1 billion, occurred in 1991 as a result of resolving failed financial institutions as discussed above; the budget deficit was then
$269.2 billion, while the NIPA net Government saving
was $195.1 billion. Beginning in 1992, deposit insurance
and other financial transactions caused the relationship
to reverse, and in 1992–2002, the budget deficit or surplus showed a more positive fiscal picture than the NIPA
measure, with NIPA (negative) net Federal Government
saving exceeding in magnitude the budget deficit when
the budget was in deficit and (positive) net Federal
Government saving falling short of the budget surplus
during the years the budget was in surplus. Over the last
decade, the difference between the budget deficit and the
NIPA net Federal Government saving has not shown a
distinct positive or negative pattern, except in 2009 when
the budget deficit exceeded the NIPA measure by an historically high difference of $311.9 billion, due primarily
to differing treatment of TARP and other financial stabilization measures. Over the eight years from 2007 to
the projected year 2014, the NIPA measure exceeds the
unified budget deficit in five of them, with no positive or

474
negative difference, aside from 2009, exceeding the previous historical high difference from 1991.
Table 28–1 displays Federal transactions using NIPA
concepts with actual data for 2003–2012 and estimates
for 2013 and 2014 consistent with the Administration’s
Budget proposals. Table 28–2 summarizes the reasons
for differences between the NIPA and budget measures.
Annual NIPA data for 1948–2014 are published in Section

Analytical Perspectives

14 of a separate budget volume, Historical Tables, Budget
of the U.S. Government, Fiscal Year 2014.
Detailed estimates of NIPA current receipts and expenditures consistent with the Budget and including quarterly estimates will be published in a forthcoming issue of the
Department of Commerce publication, Survey of Current
Business and on the Bureau of Economic Analysis website
at www.bea.gov.

29. Comparison of Actual to Estimated Totals

In successive budgets, the Administration publishes estimates of the surplus or deficit for a particular fiscal year.
Initially, the year appears as an outyear projection at the
end of the budget horizon. In each subsequent budget, the
year advances in the estimating horizon until it becomes
the “budget year.’’ One year later, the year becomes the
“current year’’ then in progress, and the following year, it
becomes the just-completed “actual year.’’
The budget is legally required to compare budget year
estimates of receipts and outlays with the subsequent actual receipts and outlays for that year. Part I of this chapter meets that requirement by comparing the actual re-

sults for 2012 with the current services estimates shown
in the 2012 Budget, published in February 2011.
Part II of the chapter presents a broader comparison of estimates and actual outcomes. This part first
discusses the historical record of budget year estimates versus actual results over the last three decades.
Second, it lengthens the focus to estimates made for
each year of the budget horizon, extending four years
beyond the budget year. This longer focus shows that
the differences between estimates and the eventual actual results grow as the estimates extend further into
the future.

PART I: COMPARISON OF ACTUAL TO ESTIMATED TOTALS FOR 2012
This part of the chapter compares the actual receipts,
outlays, and deficit for 2012 with the current services estimates shown in the 2012 Budget, published in February
2011.1 This part also presents a more detailed comparison for mandatory and related programs, and reconciles
the actual receipts, outlays, and deficit totals shown here
with the figures for 2012 previously published by the
Department of the Treasury.
1  The current services concept is discussed in Chapter 26, “Current
Services Estimates.’’ For mandatory programs and receipts, the February 2011 current services estimate was based on laws then in place,
adjusted to reflect extension of certain expiring tax provisions. For discretionary programs the current services estimate was based on the current year enacted appropriations, adjusted to reflect full-year funding
of Overseas Contingency Operations and increased for inflation. The
current services estimates published in the 2012 Budget re-classified
a large number of surface transportation programs as mandatory. The
estimate for nondefense discretionary spending was $608 billion and
$2,115 billion for mandatory outlays in the published Budget. This proposal was not subsequently enacted, so the applicable costs are shown
as discretionary in this chapter for comparability. For a detailed explanation of the 2012 estimate, see “Current Services Estimates,” Chapter
27 in Analytical Perspectives, Budget of the United States Government,
Fiscal Year 2012.

Receipts
Actual receipts for 2012 were $2,450 billion, $158 billion less than the $2,609 billion current services estimate
in the 2012 Budget. As shown in Table 29–1, this decrease was the net effect of legislative and administrative
changes that differed from what was assumed in the current services estimate, economic conditions that differed
from what had been expected, and technical factors that
resulted in different tax liabilities and collection patterns
than had been assumed.
Policy differences. The February 2011 current services estimate of 2012 receipts reflected permanent extension of estate, gift, and generation-skipping transfer
taxes at parameters in effect for calendar year 2009 (a
top rate of 45 percent and an exemption amount of $3.5
million); annual indexation of the 2011 parameters of
the AMT as enacted in the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of
2010; and permanent extension of most of the income
tax reductions for middle-income taxpayers enacted in
2001 and 2003 (as amended by subsequent legislation)
that were scheduled to expire on December 31, 2012.

Table 29–1. Comparison of Actual 2012 Receipts with the Initial Current Services Estimates
(In billions of dollars)
Changes
Estimate
(February 2011)

Policy

Economic

Technical

Total changes

Actual

Individual income taxes ����������������������������������������������������������������������������������
Corporation income taxes �������������������������������������������������������������������������������
Social insurance and retirement receipts �������������������������������������������������������
Excise taxes ���������������������������������������������������������������������������������������������������
Estate and gift taxes ���������������������������������������������������������������������������������������
Customs duties �����������������������������������������������������������������������������������������������
Miscellaneous receipts �����������������������������������������������������������������������������������

1,145
327
927
80
13
31
86

32
–1
–84
1
.........
–2
.........

–24
–22
–11
–1
*
–*
3

–20
–62
13
–*
1
1
18

–12
–85
–82
–1
1
–1
21

1,132
242
845
79
14
30
107

Total receipts ���������������������������������������������������������������������������������������������
*$500 million or less.

2,609

–55

–54

–50

–158

2,450

475

476
Those provisions were estimated to reduce 2012 receipts by a net $36 billion relative to then-current law;
however, they were not enacted before October 1, 2012
and had no effect on 2012 receipts. Several laws were
enacted after February 2011 that reduced 2012 receipts
by a net $91 billion, $55 billion more than the net tax
reductions reflected in the current services estimate.
The bulk of the legislated tax reductions enacted after
February 2011 that affected 2012 receipts were provided
in the Temporary Payroll Tax Cut Continuation Act of
2011 and the Middle Class Tax Relief and Job Creation
Act of 2012, which reduced 2012 receipts by an estimated $21 billion and $64 billion, respectively. The major provisions of these two laws extended the two-percentage point reduction in the Social Security payroll
tax rate for employees and self-employed individuals to
apply to taxable wages and self-employment earnings
received during calendar year 2012. Other legislation
enacted after February 2011 that affected 2012 receipts
included the Trade Adjustment Assistance Extension
Act of 2011, the Moving Ahead for Progress in the 21st
Century (MAP-21) Act, and the FAA Modernization and
Reform Act of 2012.
Economic differences. Differences between the economic assumptions upon which the current services estimates
were based and actual economic performance reduced
2012 receipts by a net $54 billion below the February
2011 estimate. These differences had the greatest effect
on individual income taxes, corporation income taxes, and
social insurance and retirement receipts, reducing those
sources of receipts by $24 billion, $22 billion, and $11 billion, respectively. The reduction in individual income tax
receipts was primarily attributable to lower-than-anticipated wages and salaries and other sources of taxable
personal income than assumed in February 2011. Lowerthan-anticipated wages and salaries and proprietors’
income—the tax base for Social Security and Medicare
payroll taxes—were in large part responsible for the
reduction in social insurance and retirement receipts.
Corporations were less profitable than initially projected, which reduced collections of corporation income taxes
below the February 2011 estimate. Reductions in these
three sources of receipts were partially offset by a net $2
billion increase in other sources of receipts. An increase
in deposits of earnings of the Federal Reserve System
of $3 billion, attributable to different interest rates and
other economic factors than projected in February 2011,
was in large part responsible for the net increase in other
sources of receipts.
Technical factors. Technical factors reduced receipts by
a net $50 billion relative to the February 2011 current
services estimate. These factors had the greatest effect
on individual and corporation income taxes, reducing collections by $20 billion and $62 billion, respectively. The
models used to prepare the February 2011 estimates of
individual and corporation income taxes were based on
historical economic data and then-current tax and collections data that were all subsequently revised. These
revisions indicated that: (1) sources of income that are
not part of the economic forecast, but subject to tax, such

Analytical Perspectives

as capital gains and pensions, differed from what was
expected at the time the February 2011 estimates were
prepared; (2) for most sources of income subject to individual and corporation income taxes, both the percentage
that was subject to tax and the effective tax rate on the
portion subject to tax differed from what was anticipated;
and (3) the timing of the payment of tax liability was different from what had been assumed. These reductions in
corporation and individual income taxes were partially
offset by increases in social insurance and retirement receipts and miscellaneous receipts of $13 billion and $18
billion, respectively. An increase in deposits by States
to the unemployment insurance trust fund to replenish
depleted balances accounted for $9 billion of the $13 billion increase in social insurance and retirement receipts
relative to the February 2011 estimate. The additional
$4 billion increase in social insurance and retirement receipts—primarily Social Security and Medicare payroll
taxes—was attributable in large part to models based
on historical economic data and then-current data from
employer returns that underestimated the percentage of
wages and salaries and self-employment earnings subject
to payroll taxes. Changes in the size and composition of
the investments of the Federal Reserve System from what
was assumed in February 2011 were primarily responsible for the $18 billion increase in miscellaneous receipts.
Outlays
Outlays for 2012 were $3,537 billion, $162 billion less
than the $3,699 billion current services estimate in the
2012 Budget. Table 29–2 distributes the $162 billion net
decrease in outlays among discretionary and mandatory
programs and net interest.2 The table also shows rough
estimates according to three reasons for the changes: policy; economic conditions; and technical estimating differences, a residual.
Policy differences. Policy changes are the result of legislative actions that change spending levels, primarily
through higher or lower appropriations or changes in
authorizing legislation, which may themselves reflect responses to changed economic conditions. For 2012, policy
changes decreased outlays by less than $1 billion relative
to the initial current services estimates. Final 2011 discretionary appropriations were not enacted at the time of
the 2012 Budget, so the February 2011 estimate of discretionary outlays was based on an annualized continuing
resolution rate that was higher than the final bill.  The
combined policy changes from final 2011 and 2012 appropriations, including Overseas Contingency Operations,
reduced discretionary outlays by $47 billion.
Policy changes increased mandatory outlays by a net
$46 billion above current law. Much of this increase was
the result of changes in unemployment compensation
enacted in 2011 and 2012 that increased 2012 outlays
by $31 billion. The extension of relief from scheduled re2  Discretionary programs are controlled by annual appropriations,
while mandatory programs are generally controlled by authorizing legislation. Mandatory programs are primarily formula benefit or entitlement programs with permanent spending authority that depends on
eligibility criteria, benefit levels, and other factors.

477

29. Comparison of Actual to Estimated Totals

Table 29–2. Comparison of Actual 2012 Outlays with the Initial Current Services Estimates
(in billions of dollars)
Changes
Estimate

Policy

Economic

Total
changes

Technical

Actual

Discretionary:
Defense �����������������������������������������������������������������������������������������������������
Nondefense 1 ��������������������������������������������������������������������������������������������
Subtotal, discretionary ���������������������������������������������������������������������������

735
662
1,398

–23
–23
–47

.........
.........
.........

–42
–25
–67

–65
–48
–113

671
614
1,285

Mandatory:
Social Security �������������������������������������������������������������������������������������������
Medicare and Medicaid �����������������������������������������������������������������������������
Other programs 1 ��������������������������������������������������������������������������������������
Subtotal, mandatory ������������������������������������������������������������������������������

761
737
557
2,055

–*
13
33
46

15
1
–7
10

–8
–35
–35
–78

7
–21
–9
–23

768
717
548
2,032

Disaster costs 2 ����������������������������������������������������������������������������������������������

7

.........

.........

–7

–7

.........

Net interest �����������������������������������������������������������������������������������������������������

240

*

–28

9

–20

220

Total outlays �����������������������������������������������������������������������������������������������
3,699
–*
–19
–143
–162
3,537
* $500 million or less.
1 The current services estimates published in the 2012 Budget re-classified a large number of surface transportation programs as mandatory. The estimate for nondefense
discretionary spending was $608 billion and $2,115 billion for mandatory outlays in the published Budget. This proposal was not subsequently enacted, so the applicable costs are shown
as discretionary in this table for comparability.
2 These amounts were included in the 2012 Budget to represent the statistical probability of a major disaster requiring Federal assistance for relief and reconstruction. Such assistance
might be provided in the form of discretionary, or mandatory outlays or tax relief. These amounts were included as outlays for convenience.

ductions in Medicare physician payments enacted in the
Temporary Payroll Tax Cut Continuation Act of 2011 and
the Middle Class Tax Relief and Job Creation Act of 2012
increased outlays by an additional $13 billion. Debt service costs associated with the policy changes increased
outlays by less than $1 billion.
Economic differences. There was a net decrease in outlays of $19 billion as a result of differences between actual
economic conditions and those forecast in February 2011.
The greatest change was in net interest, where lowerthan-anticipated inflation and other changes in economic
factors decreased outlays by $28 billion. Unemployment
compensation spending was $7 billion lower than the current services estimate due to economic factors. However,
these reductions were partially offset by increases in
Social Security spending of $15 billion due to differences
in economic conditions: the cost of living adjustment for
January 2012 projected in the 2012 Budget was 0.9 percent but the actual adjustment was 3.6 percent.
Technical factors. Technical estimating factors resulted in a net decrease in outlays of $143 billion. Technical

changes result from changes in such factors as the
number of beneficiaries for entitlement programs, crop
conditions, or other factors not associated with policy
changes or economic conditions. Outlays for discretionary programs decreased by $67 billion, as agencies spent
resources more slowly than assumed in February 2011,
particularly following enactment of lower spending caps
for discretionary programs as part of the Budget Control
Act of 2011. Outlays for mandatory programs decreased
a net $78 billion; the largest change was a $26 billion decrease in unemployment compensation due to a reduction
in the insured unemployment rate relative to the broader
civilian unemployment rate and a lower-than-anticipated
portion of the unemployed receiving benefits. There were
also $18 billion and $17 billion decreases in Medicare
and Medicaid spending, respectively. This was partially
offset by a $15 billion upward reestimate of the cost of
the Troubled Asset Relief Program (TARP).3 Net interest
outlays increased by $9 billion due to technical factors.

3  For more information on TARP costs, please see Chapter 3 of this
volume, “Financial Stabilization Efforts and their Budgetary Effects.”

Table 29–3. Comparison of the Actual 2012 Deficit with the Initial Current Services Estimate
(in billions of dollars)
Changes
Estimate
Receipts ����������������������������������������������������������������������������������������������������������
Outlays �����������������������������������������������������������������������������������������������������������

2,609
3,699

Policy

Economic
–55
–*

Deficit ���������������������������������������������������������������������������������������������������������
1,090
55
Note: Deficit changes are outlays minus receipts. For these changes, a positive number indicates an increase in the deficit.
* $500 million or less.

Total
changes

Technical

Actual

–54
–19

–50
–143

–158
–162

2,450
3,537

35

–93

–4

1,087

478

Analytical Perspectives

Deficit
The preceding two sections discussed the differences
between the initial current services estimates and the actual amounts of Federal government receipts and outlays
for 2012. This section combines these effects to show the
net deficit impact of these differences.
As shown in Table 29–3, the 2012 current services
deficit was initially estimated to be $1,090 billion. The
actual deficit was $1,087 billion, which was a $4 billion
decrease from the initial estimates. Receipts and outlays
were $158 billion and $162 billion less than the initial
estimate, respectively. The table shows the distribution of the changes according to the categories in the
preceding two sections. The net effect of policy changes
for receipts and outlays increased the deficit by $55 billion. Economic conditions that differed from the initial
assumptions in February 2011 increased the deficit by
$35 billion. Technical factors decreased the deficit by an
estimated $93 billion.
Comparison of the Actual and Estimated Outlays
for Mandatory and Related Programs for 2012
This section compares the original 2012 outlay estimates for mandatory and related programs in the current services estimates of the Budget with the actual
outlays. Major examples of these programs include
Social Security and Medicare benefits, Medicaid and
unemployment compensation payments, and deposit
insurance for banks and thrift institutions. This category also includes net interest outlays and undistributed offsetting receipts.
A number of factors may cause differences between
the amounts estimated in the Budget and the actual mandatory outlays. For example, legislation may
change benefit rates or coverage, the actual number
of beneficiaries may differ from the number estimated,
or economic conditions (such as inflation or interest
rates) may differ from what was assumed in making
the original estimates.
Table 29–4 shows the differences between the actual
outlays for these programs in 2012 and the current services estimates included in the 2012 Budget.4 Actual
outlays for mandatory spending and net interest in
2012 were $2,252 billion, which was $42 billion less
than the current services estimate of $2,295 billion in
February 2011.
As Table 29–4 shows, actual outlays for mandatory
human resources programs were $2,059 billion, $28
billion less than originally estimated. This decrease
was the net effect of legislative action, differences between actual and assumed economic conditions, differences between the anticipated and actual number
of beneficiaries, and other technical differences. Most
significantly, outlays for Medicaid decreased by $19
billion. Outlays for programs in other functions were
4  See

footnote 1 for an explanation of the current services concept.

$11 billion more than originally estimated, largely due
to upward reestimates in the Troubled Asset Relief
Program, and net outlays for undistributed offsetting
receipts were $6 billion lower than expected.
Outlays for net interest were $220 billion, or $20 billion
less than the original estimate. As shown on Table 29–4,
interest payments on Treasury debt securities decreased
by $115 billion, offset by reduced interest earnings. This
difference is chiefly due to a large adjustment to reflect
a change in the accounting method for interest transactions with Defense Civil Programs from an accrual basis
to a cash basis. This accounting change resulted in a $75
billion reduction of Treasury intragovernmental interest outlays to reflect the premiums that would have been
recorded at the time of purchase under the cash-based
method. The change resulted in offsetting increases in
net outlays for interest received by trust funds and other
interest of $49 billion and $26 billion respectively. This
intragovernmental interest adjustment had no net effect
on the deficit.
Reconciliation of Differences with Amounts
Published by the Treasury for 2012
Table 29–5 provides a reconciliation of the receipts,
outlays, and deficit totals for 2012 published by the
Department of the Treasury in the September 2012
Monthly Treasury Statement (MTS) and those published in this Budget. The Department of the Treasury
made adjustments to the estimates for the Combined
Statement of Receipts, Outlays, and Balances, which
decreased outlays by $160 million. Additional adjustments for the 2014 Budget increased receipts by $1,071
million and decreased outlays by $1,159 million. The
largest adjustment relates to a conceptual difference
in reporting for the National Railroad Retirement
Investment Trust (NRRIT). NRRIT reports to the
Department of the Treasury with a one-month lag
so that the fiscal year total provided in the Treasury
Combined Statement covers September 2011 through
August 2012. The Budget has been adjusted to reflect
transactions that occurred during the actual fiscal
year, which begins October 1. Because the returns on
NRRIT’s investments in private securities are highly
volatile, this adjustment can lead to large changes in
the reported fiscal year outlay totals, in this case $2,040
million for 2012. Aside from this timing difference, the
Budget includes a number of financial transactions that
are not reported to the Department of the Treasury,
including those for the Public Company Accounting
Oversight Board, the Affordable Housing Program,
the Securities Investor Protection Corporation, the
Electric Reliability Organization, the Standard Setting
Body, and the United Mine Workers of America benefit
funds. The Budget also reflects agency adjustments to
2012 outlays reported to Treasury after preparation of
the Treasury Combined Statement.

479

29. Comparison of Actual to Estimated Totals

Table 29–4. Comparison of Actual and Estimated Outlays for Mandatory
and Related Programs Under Current Law
(in billions of dollars)
2012
Estimate

Actual

Change

Mandatory outlays: 1
Human resources programs:
Education, training, employment, and social services:
Higher education ������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, education, training, employment, and social services �������������������������������������������������������������������������������������������������

–9
12
3

–14
10
–5

–5
–2
–8

Health:
Medicaid ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, health ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������

269
38
307

251
36
286

–19
–2
–20

Medicare �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

468

466

–2

Income security:
Retirement and disability �����������������������������������������������������������������������������������������������������������������������������������������������������������
Unemployment compensation ���������������������������������������������������������������������������������������������������������������������������������������������������
Food and nutrition assistance ����������������������������������������������������������������������������������������������������������������������������������������������������
Other ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, income security �����������������������������������������������������������������������������������������������������������������������������������������������������������

129
93
100
160
482

130
91
99
156
476

1
–2
–1
–4
–6

Social Security ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

761

768

7

Veterans benefits and services:
Income security for veterans ������������������������������������������������������������������������������������������������������������������������������������������������������
Other ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, veterans benefits and services ������������������������������������������������������������������������������������������������������������������������������������

55
11
66

56
12
68

1
1
2

Total, mandatory human resources programs ���������������������������������������������������������������������������������������������������������������������������

2,087

2,059

–28

Other functions:
Agriculture ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
International ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Mortgage credit ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Deposit insurance ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Other advancement of commerce (includes the Troubled Asset Relief Program) ��������������������������������������������������������������������������
Other functions �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, other functions �������������������������������������������������������������������������������������������������������������������������������������������������������������

12
–1
6
4
12
31
65

12
–3
–2
7
34
29
77

–*
–1
–8
2
21
–3
11

Undistributed offsetting receipts:
Employer share, employee retirement �������������������������������������������������������������������������������������������������������������������������������������������
Rents and royalties on the Outer Continental Shelf ������������������������������������������������������������������������������������������������������������������������
Other undistributed offsetting receipts ��������������������������������������������������������������������������������������������������������������������������������������������
Total, undistributed offsetting receipts ����������������������������������������������������������������������������������������������������������������������������������

–81
–7
–9
–97

–84
–7
–13
–104

–3
1
–4
–6

Total, mandatory ������������������������������������������������������������������������������������������������������������������������������������������������������������������������

2,055

2,032

–23

Net interest:
Interest on Treasury debt securities (gross) ���������������������������������������������������������������������������������������������������������������������������������������
Interest received by trust funds ����������������������������������������������������������������������������������������������������������������������������������������������������������
Other interest ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total, net interest ����������������������������������������������������������������������������������������������������������������������������������������������������������������������

474
–181
–54
240

359
–127
–12
220

–115
53
42
–20

Total, outlays for mandatory and net interest ��������������������������������������������������������������������������������������������������������������������������������������
2,295
2,252
* $500 million or less.
1 The current services estimates published in the 2012 Budget re-classified a large number of surface transportation programs as mandatory. The estimate for nondefense
discretionary spending was $608 billion and $2,115 billion for mandatory outlays in the published Budget. This proposal was not subsequently enacted, so the applicable costs are
excluded from this table for comparability.

–42

480

Analytical Perspectives

Table 29–5.  Reconciliation of Final Amounts for 2012
(in millions of dollars)
Receipts
Totals published by Treasury (September MTS)

Outlays

Deficit

2,449,093

3,538,446

1,089,353

Miscellaneous Treasury adjustments ���������������������������������������������������������������������������������������

.........

–160

–160

Totals published by Treasury in Combined Statement ������������������������������������������������������������������

2,449,093

3,538,286

1,089,193

National Railroad Retirement Investment Trust �����������������������������������������������������������������������
Standard Setting Body �������������������������������������������������������������������������������������������������������������
Public Company Accounting Oversight Board �������������������������������������������������������������������������
Affordable Housing Program ���������������������������������������������������������������������������������������������������
Securities Investor Protection Corporation ������������������������������������������������������������������������������
Electric Reliability Organization �����������������������������������������������������������������������������������������������
United Mine Workers of America benefit funds �����������������������������������������������������������������������
Federal Retirement Thrift Investment Board program expenses ���������������������������������������������
Other ����������������������������������������������������������������������������������������������������������������������������������������

.........
39
215
286
396
100
35
.........
.........

–2,040
39
229
286
220
100
35
–13
–15

–2,040
.........
14
.........
–176
.........
.........
–13
–15

Total adjustments, net ����������������������������������������������������������������������������������������������������������

1,071

–1,159

–2,230

Totals in the Budget ����������������������������������������������������������������������������������������������������������������������

2,450,164

3,537,127

1,086,963

1,071

–1,319

–2,390

MEMORANDUM:
Total change since year-end statement �����������������������������������������������������������������������������������

Part II: HISTORICAL COMPARISON OF ACTUAL TO ESTIMATED SURPLUSES OR DEFICITS
This part of the chapter compares estimated surpluses or deficits to actual outcomes over the last three
decades. The first section compares the estimate for the
budget year of each budget with the subsequent actual
result. The second section extends the comparison to
the estimated surpluses or deficits for each year of the
budget window: that is, for the current year through the
fourth year following the budget year. This part concludes with some observations on the historical record of
estimates of the surplus or deficit versus the subsequent
actual outcomes.
Historical Comparison of Actual to
Estimated Results for the Budget Year
Table 29–6 compares the estimated and actual surpluses or deficits since the deficit estimated for 1982 in the
1982 Budget. The estimated surpluses or deficits for each
Budget include the Administration’s policy proposals.
Therefore, the original deficit estimate for 2012 differs
from that shown in Table 29–3, which is on a current services basis. Earlier comparisons of actual and estimated
surpluses or deficits were on a policy basis, so for consistency the figures in Table 29–6 are on this basis.
On average, the estimates for the budget year underestimated actual deficits (or overestimated actual surpluses)
by $51 billion over the 31-year period. Policy outcomes that
differed from the original proposals increased the deficit by
an average of $68 billion. Differences between economic assumptions and actual economic performance increased the
deficit an average of $25 billion. Differences due to these
two factors were partly offset by technical revisions, which
reduced the deficit an average of $42 billion.

The relatively small average difference between actual
and estimated deficits conceals a wide variation in the differences from budget to budget. The differences ranged
from a $1,005 billion underestimate of the deficit to a $192
billion overestimate. The $1,005 billion underestimate in
the 2009 Budget was due largely to enactment of housing, economic stabilization, emergency unemployment
assistance, and economic recovery legislation in response
to a weak economy, lower 2009 receipts due to weak economic performance, and emergency supplemental appropriations for combat operations in Iraq and Afghanistan
in 2008 and 2009. The $192 billion overestimate of the
deficit in the 2007 Budget stemmed largely from higherthan-anticipated collections of individual and corporation
income taxes due to different collection patterns and effective tax rates than initially assumed, as well as lowerthan-expected outlays due to technical factors.
Because the average deficit difference obscures the
degree of under- and over-estimation in the historical
data, a more appropriate statistic to measure the magnitude of the differences is the average absolute difference.
This statistic measures the difference without regard to
whether it was an under- or overestimate. Since 1982, the
average absolute difference has been $129 billion.
Other measures of variability include the standard deviation and the root mean squared error. These measures
calculate the dispersion of the data around the average
value. As shown in Table 29–6, the standard deviation of
the deficit differences since 1982 is $218 billion and the
root mean squared error is $224 billion. Similar to the
average absolute difference, these measures illustrate the
high degree of variation in the difference between estimates and actual deficits.

481

29. Comparison of Actual to Estimated Totals

One challenge in looking at historical values is adjusting for the relative size of the economy and the Federal
Government. When total change in the deficit is expressed
as a percent of GDP in the budget year, the average underestimation of the deficit is 0.6 percent of GDP over the
31-year period. The change from the 2009 Budget to the
actual is still the greatest deficit increase over this period
on this basis. The 1998 Budget had the largest downward
revision to the deficit as a percent of GDP, going from deficit to surplus.
The large variability in errors in estimates of the surplus or deficit for the budget year underscores the inherent
uncertainties in estimating the future path of the Federal
budget. Some estimating errors are unavoidable, because
of differences between the President’s original budget proposals and the legislation that Congress subsequently enacts. Occasionally such differences are very large, such as

additional spending in 2002 for disaster recovery, homeland security, and military operations in Afghanistan in
response to the terrorist attacks of September 11, 2001,
which could not have been anticipated in the Budget submitted in February 2001. Even aside from differences in
policy outcomes, errors in budget estimates can arise from
new economic developments, unexpected changes in program costs, shifts in taxpayer behavior, and other factors.
The budget impact of changes in economic assumptions is
discussed further in Chapter 2 of this volume, “Economic
Assumptions and Interactions with the Budget.’’
Five-Year Comparison of Actual to
Estimated Surpluses or Deficits
The substantial difference between actual surpluses
or deficits and the budget year estimates made less than

Table 29–6. Comparison of Estimated and Actual Surpluses or Deficits Since 1982
(In billions of dollars)
Budget
1982 �������������������������������������
1983 �������������������������������������
1984 �������������������������������������
1985 �������������������������������������
1986 �������������������������������������
1987 �������������������������������������
1988 �������������������������������������
1989 �������������������������������������
1990 �������������������������������������
1991 �������������������������������������
1992 �������������������������������������
1993 �������������������������������������
1994 �������������������������������������
1995 �������������������������������������
1996 �������������������������������������
1997 �������������������������������������
1998 �������������������������������������
1999 �������������������������������������
2000 �������������������������������������
2001 �������������������������������������
2002 �������������������������������������
2003 �������������������������������������
2004 �������������������������������������
2005 �������������������������������������
2006 �������������������������������������
2007 �������������������������������������
2008 �������������������������������������
2009 �������������������������������������
2010 �������������������������������������
2011 �������������������������������������
2012 �������������������������������������

Surplus (–)
or deficit (+)
estimated for
budget year 1
62
107
203
195
180
144
111
130
91
63
281
350
264
165
197
140
121
–10
–117
–184
–231
80
307
364
390
354
239
407
1,258
1,267
1,101

Differences due to
Enacted
legislation
–15
12
21
12
8
–2
9
22
21
–21
36
8
8
18
–6
–1
9
22
42
129
104
86
122
67
141
85
165
595
75
295
44

Economic
factors

Technical
factors

70
67
–38
17
27
16
19
–10
31
85
21
13
–16
–1
–53
4
–48
–56
–88
–32
201
34
22
11
–6
–7
98
234
121
–*
35

Average ��������������������������������
68
25
Absolute average 2 ���������������
71
48
Standard deviation ����������������
116
68
Root mean squared error �����
135
72
* $500 million or less.
1 Surplus or deficit estimate includes the effect of the Budget’s policy proposals.
2 Absolute average is the average without regard to sign.

Total
difference

11
22
*
–12
7
–8
16
11
79
143
–48
–115
–52
–18
–30
–121
–151
–82
–73
–41
84
177
–39
–123
–277
–270
–44
176
–160
–261
–93

66
101
–17
17
41
6
44
23
131
206
9
–95
–61
–1
–89
–118
–190
–116
–119
56
389
297
105
–45
–142
–192
219
1,005
36
33
–14

–42
88
111
119

51
129
218
224

Actual
surplus (–)
or deficit (+)
128
208
185
212
221
150
155
153
221
269
290
255
203
164
107
22
–69
–126
–236
–128
158
378
413
318
248
162
459
1,413
1,294
1,300
1,087

Total difference as
a percent of GDP
2.1
2.9
–0.5
0.4
0.9
0.1
0.9
0.4
2.3
3.5
0.2
–1.4
–0.9
–0.0
–1.2
–1.4
–2.2
–1.3
–1.2
0.5
3.7
2.7
0.9
–0.4
–1.1
–1.4
1.5
7.2
0.3
0.2
–0.1
0.6
1.4
1.9
2.0

482

Analytical Perspectives

Table 29–7.  Differences Between Estimated and Actual Surpluses
or Deficits for Five-Year Budget Estimates Since 1982
(Dollar amounts in billions)
Estimate for budget year plus
Current year Budget year One year
estimate
estimate
(BY+1)
In dollars:
Average difference �����������������������������������������
Average absolute difference 1 ������������������������
Standard deviation ������������������������������������������
Root mean squared error �������������������������������

62
91
120
135

–51
128
218
224

–154
231
337
370

Two years Three years Four years
(BY+2)
(BY+3)
(BY+4)
–224
313
407
464

As a percent of GDP:
Average difference �����������������������������������������
0.5
–0.6
–1.5
–2.0
Average absolute difference ��������������������������
0.9
1.4
2.3
3.0
Standard deviation ������������������������������������������
1.0
1.9
2.8
3.2
Root mean squared error �������������������������������
1.1
2.0
3.2
3.8
Note: A positive figure represents an overestimate of the deficit or an underestimate of the surplus.
1 Average absolute difference is the difference without regard to sign.

two years earlier raises questions about the degree of
variability for estimates of years beyond the budget year.
Table 29–7 shows the summary statistics for the differences for the current year, budget year, and the four succeeding years. These are the years that are required to
be estimated in the budget by the Balanced Budget and
Emergency Deficit Control Act, as amended.
On average, the budget estimates since 1982 overstated
the deficit in the current year by $62 billion, but underestimated the deficit in the budget year by $51 billion.
The budget estimates on average understated the deficit

–275
368
435
515

–297
396
428
521

–2.5
3.5
3.4
4.2

–2.7
3.8
3.4
4.3

in the years following, by amounts growing from $154 billion one year beyond the budget year to $297 billion four
years beyond the budget year. While these results suggest
a tendency to underestimate deficits toward the end of the
budget horizon, the averages are not statistically different
from zero in light of the high variation in the data. Chapter
2 of this volume, “Economic Assumptions and Interactions
with the Budget,’’ further discusses the variability in the
difference between estimated and actual deficits over the
budget horizon and includes Chart 2–2, which is based on
the variability measures shown in Table 29–7.

30.  Budget and Financial Reporting

The budget is a plan for allocating financial resources
of the Federal Government and a means to control the allocation of resources. It is also the primary mechanism for
reporting fiscal results. Each year, the President’s Budget
proposes a fiscal plan for the current year and the coming
budget year, includes projections for subsequent years,
and reports budget results for prior fiscal years. Budget
reporting occurs throughout the year with the Monthly
Treasury Statement, which culminates in the first report of fiscal-year-end results in the September Monthly
Treasury Statement.
In addition to the budget, another key source of financial
information for the Government is the annual Financial
Report of the U.S. Government. The Financial Report
provides information on the cost of the Government’s
operations, the relationship between the Government’s
operating cost and the Government’s budget deficit, the
Government’s financial position at the beginning and end
of the fiscal year, and forward-looking information on the
Government’s financial condition. Financial reporting
and budget reporting use much of the same underlying
data pertaining to agency financial transactions, but financial reports1 compile the data using different methods
and present the data using different formats, as explained
in this chapter.
Although discussed only briefly in this chapter, a third
source of Government financial information is the integrated macroeconomic accounts, which are a series of
accounts that relate flows of production, income, saving,
and investment to financial holdings and physical capital
stocks for the major sectors of the U.S. economy.2 Federal
Government financial transactions are included as a separate sector of the integrated accounts. The integrated
accounts combine the national income and product accounts with the flow of funds accounts,3 and the treatment of Federal transactions under national income and
product accounting and under budgetary accounting is
1  As used in this chapter, “Financial Report” refers to the Financial
Report of the United States Government, which is the consolidated financial report for the Executive Branch and some Legislative and Judicial
Branch entities, and “financial reports” refer to both the Financial Report and the Agency Financial Reports or Performance and Accountability Reports issued by Executive Branch agencies. The Financial Report
is issued by the Department of the Treasury in coordination with the
Office of Management and Budget.
2  The integrated accounts follow the guidelines of the System of National Accounts 1993 and are prepared jointly by the Bureau of Economic Analysis and the staff of the Board of Governors of the Federal
Reserve.
3  The national income and product accounts show production, income,
and expenditures for each sector of the economy and how these measures relate to wealth. Flow of funds accounts show financial flows (in
the form of borrowing, lending, and investment) through the various sectors of the economy.

compared in Chapter 28 of this volume, “National Income
and Product Accounts.”
The Purpose of Budget and Financial Reporting
Budget and financial reporting provide accountability
and transparency in Government spending and revenue.
For example, the exercise of the authority to tax means
that the Government should be accountable to the public
for its use of tax dollars and be transparent in its activities by reporting the amount of money raised by taxation
and other means, the programs on which the money was
spent, and whether the money was spent in accordance
with the requirements of appropriations, authorizing,
and other applicable laws. In addition, the Government
should report balances for, among other things, cash on
hand, other financial assets, and dedicated funds,4 and to
report on Government borrowing needs.
In addition to providing information about how financial resources are obtained and used, accountability requires that the Government provide information about its
operating performance. This includes information about
the costs and results of Government programs and activities, and the degree to which their performance was
efficient or effective. Chapters 6, 7, 8, and 9 of this volume, “Social Indicators,” “Delivering a High-Performance
Government,” “Program Evaluation and Data Analytics,”
and “Benefit-Cost Analysis” provide more information
about the Government’s operating performance and
performance measurement. Unlike a private entity,
Government performance cannot be summed up in a single measure such as net income or net loss found on an income statement or net position found on a balance sheet.
The budget and financial reports provide information to
hold the Government accountable, reporting on how and
how well the Government has obtained, used, and managed its financial and other resources. The budget and
financial reports seek to provide information in a transparent manner. Transparency is an important element of
accountability for past actions, allowing the public to see
the assets and liabilities remaining after those actions occurred. Transparency is equally important when looking
to the future. Future plans can only be evaluated based
on how clearly and how completely they are explained.
As a financial plan, the President’s Budget contains
detailed information about the Government’s fiscal policies for the coming fiscal year and the ten-year budget
window. In addition, the Budget provides long-term (75year) information about projected spending and projected
receipts in Chapter 4 of this volume, “Long Term Budget
Outlook.” The Financial Report also contains information
4  In this chapter, “dedicated” funds or collections refer to those Government collections that are designated for a particular purpose; the
collections may be voluntary or compulsory and include collections in
trust, special, and revolving funds.

483

484
about the Government’s long-run fiscal condition, showing projections of long-run sustainability and detailed
information about social insurance5 programs. The detailed historical and projected information contained in
the Budget and the financial reports provide the public
with transparent information about the Government’s financial activities.
The Budget
As noted above, the budget serves as both a forwardlooking planning tool and a backward-looking accountability report. To serve these dual purposes, the President’s
Budget contains both budget projections and historical
budget data. The budget projections and historical data
contain measures that represent flows or amounts over a
period of time (usually a year) and measures that represent balances or amounts at a point in time (such as the
end of a fiscal year). These budget measures generally reflect either a cash basis or an accrual basis of accounting.
Cash-based measures record transactions when cash is
either paid or received, regardless of when the expense is
incurred or when the revenue is earned or due, and accrual-based measures record transactions when they occur
regardless of when the cash is exchanged.
Measures
Budget measures that represent flows include budget
authority, obligations, outlays, receipts,6 and the deficit
or surplus. Budget measures that represent balances at
a point in time are referred to as “stocks” in budgetary
accounting and economics literature and include debt
held by the public, debt net of financial assets, and gross
Federal debt.
Budget authority is the amount of resources made
available by the Congress and the President for use during a given period, usually a year. Obligations are legal
financial commitments incurred during a year and cannot exceed the available budget authority. Both budget
authority and obligations are generally recorded when
a transaction occurs, rather than when cash is actually
received or paid out by the Government.7 Budget authority and obligations are used to control the amount of
resources the Government uses. Government agencies
record their use of budget authority, or obligations, on an
5  As used in this chapter, “social insurance” refers to Social Security, Medicare, Unemployment Insurance, Railroad Retirement, and the
Black Lung Programs.
6  The term “receipts” is used in this chapter to refer to governmental
receipts. It does not refer to other collections such as offsetting receipts
or offsetting collections, nor does it refer to the repayment of loans. See
Chapter 11 of this volume, “Budget Concepts,” for an explanation of the
difference between governmental receipts, offsetting receipts, and offsetting collections.
7  Budget authority and obligations for loans and loan guarantees, or
credit programs, are measured on a net present value basis. The present value of the cash outflows and inflows associated with the loan or
loan guarantee is recorded as budget authority and obligations when
the loan or guarantee is made. A present value represents the value
today of some future amount and, thus, reflects the time value of money.
A present value can be used as an accrual measure. In addition to being
used for Federal credit programs, present values are used in budgetary
accounting for Federal employee defined-benefit pension plans.

Analytical Perspectives

ongoing basis as they conduct business so that they do not
exceed the resources provided.
Outlays are the liquidation or payment of obligations
during a year, and are measured primarily on a cash basis.8 Whereas budget authority and obligations are used
to control the amount of resources used, outlays reflect
the actual use of Government resources and can have an
impact on the economy. If outlays exceed Government
receipts, the Government generally must borrow money
from the public to cover the difference. Receipts are inflows of financial resources to the Government during a
year resulting from the Government’s sovereign authority to impose taxes or otherwise compel payment and are
measured on a cash basis. Because the deficit or surplus
is the difference between outlays and receipts for a given
year, it represents an annual flow and (like outlays and
receipts) is measured primarily on a cash basis.
In contrast to all of these measures that generally represent flows, the debt held by the public is a stock measure, and it can be viewed as the accumulation of past
deficits less past surpluses. Debt held by the public is
measured as the principal amount due at maturity (also
called par value or face value) less any unamortized discount or plus any unamortized premium.9 Chapter 11
of this volume, “Budget Concepts,” and Chapter 5 of this
volume, “Federal Borrowing and Debt,” contain more complete definitions of these concepts.
The President’s Budget presents budget authority, obligations, outlays, and receipts at a summary level, for
example, for the Government as a whole and by agency.
In addition, the Budget presents all four of these measures at a very detailed level, by program, activity, and account. In addition to summary and detailed budget data,
the Budget presents total obligations by object class and
total budget authority and outlays by function and subfunction. The Budget presents the deficit (or surplus) and
debt held by the public (and other measures) in nominal
and inflation-adjusted dollar amounts, and as a percent of
gross domestic product (GDP).10
8  In contrast to most Government outlays, which are measured on
a cash basis, outlays for interest on debt held by the public are measured on an accrual basis. Budget authority and obligations for interest on debt held by the public are measured on an accrual basis, which
is generally consistent with budget authority and obligations measures
for most other programs. Outlays for credit programs are measured on
a net present value basis with the present value of the cash outflows
and inflows recorded as an outlay when the loan or guarantee is made.
From an agency perspective, budget authority, obligations, and outlays
for Federal employee defined-benefit pension plans are recorded on an
accrual basis (with the actuarially accruing defined-benefit costs estimated by using present values). From a government-wide perspective,
however, budget authority, obligations, and outlays for Federal employee
defined benefit pensions are recorded on a cash basis. This is because
agency payments to a Government defined-benefit pension plan–such as
Military Retirement or Civil Service Retirement–are recorded as collections by the plan trust funds and net to zero within the unified budget.
As a consequence of this netting, only the defined-benefit payments to
current retirees constitute budget authority, obligations, and outlays in
the budget, and only these payments are reflected in the deficit.
9  For inflation-indexed securities, debt is measured as the par value
plus a periodic adjustment for inflation.
10  The deficit and debt, as well as other measures, are presented as a
percent of gross domestic product because these measures are best compared over time by looking at them in relation to the size of the economy

485

30.  Budget and Financial Reporting

Summary and detailed data for budget authority, obligations, outlays, and receipts; object class data; and functional classification data are reported for the prior fiscal
year, the current fiscal year, and the budget year. In addition, many of these measures are presented for the entire
ten-year budget horizon, and the summary measures are
presented historically, in the Historical Tables volume,
and projected for 75 years in Chapter 4 of this volume,
“Long Term Budget Outlook.”
Structure
The President’s Budget consists of multiple volumes,
including the main Budget volume, the Budget Appendix,
the Analytical Perspectives volume, the Historical Tables,
the Federal Credit Supplement, and other supplemental
materials. In addition, the Mid-Session Review, with revised budget estimates, is issued later in the calendar
year, in the middle of the Congressional session. The
main Budget volume is primarily a textual summary of
the budget, discussing the Administration’s fiscal plan, including its policy and program priorities, and significant
proposed changes to current law. The Budget Appendix
contains the proposed appropriations language for each
program, activity, or account that receives an appropriation, whether the appropriation is annual, biennial, or
permanent. The Analytical Perspectives volume provides
historical and cross-cutting analyses of the budget, and
the Historical Tables volume reports historical data for
summary budget measures; many are expressed in nominal and inflation-adjusted dollars and as a percent of
GDP. The Federal Credit Supplement provides detailed
information about the Government’s loan and loan guarantee programs that are governed by the Federal Credit
Reform Act (FCRA). In addition to the documents that
comprise the President’s Budget, the budget transmittal
to the Congress involves the transmittal of Congressional
Budget Justifications for each agency subject to the appropriations process and the transmittal of authorizing
legislation in support of the President’s Budget.
The Financial Reports
As noted above, financial reports are primarily an accountability tool. The Government’s financial reports are
not plans, although they provide information that can be
used in developing a fiscal plan. The Financial Report
provides information about the Government’s financial
position at the end of the prior fiscal year and how the
financial position changed during the course of the fiscal
year. In addition, like the budget, the financial reports
contain measures11 that represent flows and measures
that represent balances at a point in time or stocks. The
financial reports contain measures that are reported on
modified-cash and accrual bases of accounting, and the
Financial Report is intended for five groups of users: citizens, citizen intermediaries (such as the media or nonas a whole, as measured by GDP.
11  The term “measures” is used in this chapter to refer to both budget
and financial measures; however, the Statements of Federal Financial
Accounting Concepts and Standards refer to the financial measures as
“elements.”

profit groups that monitor Government activities), the
Congress, Federal executives, and program managers.12
Measures
The financial reporting measures that represent flows
include revenues, expenses, and net operating cost, which
is the difference between revenues and expenses. The
measures that represent stocks include assets, liabilities,
and net position, which is the difference between assets
and liabilities. The most widely cited of these measures
are the net operating cost and net position.
Generally, roughly 10 percent of the Government’s revenues are recognized on an accrual basis in the financial
reports, and the remainder, approximately 90 percent of
revenues, is recognized on a cash basis; overall, revenues
are said to be recognized on a “modified-cash” basis of accounting. Assets (e.g., property, plant, and equipment)
are generally measured at historical or acquisition cost,
but some assets (e.g., holdings of debt) are measured at
fair market value. Expenses are measured on an accrual
basis.
Net operating cost and net position are derived from
revenues and expenses and from assets and liabilities, respectively. Even though they are derived from measures
(including revenues) that are not pure accrual measures,
both net operating cost and net position are generally considered to be accounted for on an accrual basis.
Structure
The Financial Report consists of seven basic financial
statements organized as follows: the Statement of Net
Cost, the Statement of Operations and Changes in Net
Position, the Reconciliation of Net Operating Cost and
Unified Budget Deficit, the Statement of Changes in Cash
Balance from Unified Budget and Other Activities, the
Balance Sheet, the Statement of Social Insurance,13 and
the Statement of Changes in Social Insurance. Reported
with the basic statements are required note disclosures. In
addition, the Financial Report contains a Management’s
Discussion and Analysis section that summarizes the
highlights of the statements, required supplementary
disclosures (which include a Statement of Long-Term
Fiscal Projections), supplementary stewardship information, and the auditor’s report. The Financial Report is
the government-wide report for the Executive Branch
and contains some financial data from the Legislative and
Judicial Branches.
Individual agencies produce Agency Financial Reports
or Performance and Accountability Reports, which include financial information that is used to develop the
Financial Report and program performance information that is unique to each agency. The financial statements for agencies consist of four to seven basic statements. Five of the statements are similar to statements
in the Financial Report: the Statement of Net Cost, the
Statement of Operations and Changes in Net Position, the
Balance Sheet, and, if applicable, the Statements of Social
12  Federal financial reporting is conducted in accordance with generally accepted accounting principles (GAAP).
13  See footnote 6 for a definition of social insurance.

486
Insurance and Changes in Social Insurance.14 Two statements required at the agency level are not included in the
Financial Report: the Statement of Budgetary Resources
and, if applicable, the Statement of Custodial Activity.15
Comparison of the Budget and Financial Reports
Revenues in the Financial Report and budgetary receipts are quite similar, with revenues recognized on a
modified cash basis and receipts recognized on a pure cash
basis. The revenues recognized on an accrual basis are
those resulting from Government business-like transactions with the public, for example the sale of stamps by the
Postal Service, the recreation fees paid at National Parks,
and premiums for Supplementary Medicare Insurance;
these revenues are referred to as “earned revenues.”16 As
noted above, earned revenues are generally 10 percent of
total earned and unearned revenues. Because the cash
and accrual bases of earned revenues are themselves
quite similar and because most revenues are recognized
on a cash basis, the difference between total revenues and
total receipts tends to be relatively small.
Expenses in the financial reports are recognized on an
accrual basis and in this regard are similar17 to budgetary
obligations. However, because expenses are subtracted
from revenues to derive net operating cost, they are more
frequently compared with budgetary outlays. In contrast
to expenses, outlays are generally recognized on a cash
basis.18 As a result of the difference between cash and
accrual accounting, the difference between total expenses
(referred to as net cost in the Financial Report) and total
budgetary outlays can sometimes be significant.
Net operating cost and the budget deficit are the most
widely compared measures. They are similar in that both
represent the annual increase or decrease in Government
resources resulting from financial transactions. The primary difference between net operating cost and the deficit
results from the accrual of certain expenses that affect
net operating cost but not the budget deficit. For example,
the net operating cost includes certain accrued expenses
such as expenses for civilian and military employee retirement and veterans programs, expenses for environmental cleanup and disposal, and depreciation expense.
In addition, the full cost of asset acquisitions (or usable
segments thereof) are included in the deficit up front,
14  Only agencies with social insurance programs are required to prepare the two social insurance statements.
15  Only agencies with custodial accounts are required to prepare the
Statement of Custodial Activity.
16  Earned revenue may be received before goods or services are provided, in which case it is referred to as “deferred” revenue. Examples
include Department of Energy collections from utility companies for the
future cost of disposing of nuclear waste, Federal Communications Commission collections from its competitive bidding system for the recovered analog spectrum for licenses that have not been granted, and Postal
Service collections for prepaid postage, outstanding money orders, and
prepaid P.O. box rentals. The budget recognizes these amounts when
they are received.
17  Undelivered orders are treated as obligations, but are not recognized as expenses. Once an undelivered order is delivered, it is recognized as an expense.
18  Some items that are reflected in budget outlays on an accrual basis
were noted in footnote 8 above.

Analytical Perspectives

Table 30–1.  2012 Budget and Financial Measures
and CY 2011 Integrated Accounts Measures
(In Billions of Dollars)
2012 Budget Measures
Receipts. ��������������������������������������������������������������������������������������������
Less: Outlays �������������������������������������������������������������������������������������
Surplus/(Deficit) ����������������������������������������������������������������������������
New Borrowing from the Public ��������������������������������������������������������
Debt Held by the Public ���������������������������������������������������������������������

2450.2
3537.1
(1087.0)
1152.9
11,281.1

2012 Financial Measures
Revenues �������������������������������������������������������������������������������������������
Less: Expenses ���������������������������������������������������������������������������������
Less: Unmatched Transactions ����������������������������������������������������������
Net Operating Cost �����������������������������������������������������������������������
Assets ������������������������������������������������������������������������������������������������
Less: Liabilities ����������������������������������������������������������������������������������
Net Position ����������������������������������������������������������������������������������

2518.2
3814.3
20.2
(1316.3)
2748.3
18,849.3
(16,101.0)

CY 2011 Integrated Macroeconomic Accounts Measures
Current Receipts ��������������������������������������������������������������������������������
Less: Current Expenditures ���������������������������������������������������������������
Net Saving ������������������������������������������������������������������������������������
Net Borrowing, Capital ����������������������������������������������������������������������
Net Borrowing, Financial ������������������������������������������������������������������
Assets ������������������������������������������������������������������������������������������������
Less: Liabilities ����������������������������������������������������������������������������������
Net Worth �������������������������������������������������������������������������������������

2519.6
3757.0
(1237.4)
1394.1
1358.9
3514.6
12258.8
(8744.1)

when the asset is acquired, but these costs are included
in net operating cost only over time, once the asset begins
to be used up or depreciated. Because net operating cost
is derived from revenues and expenses and the deficit is
derived from receipts and outlays, the difference between
net operating cost and the deficit results from the differences, discussed above, between revenues and receipts
and between expenses and outlays. Both the deficit and
the net operating cost are measures of “cost,” reflecting
generally the difference between resources collected and
used in a given year.
Liabilities recorded in the financial statements satisfy
an accounting definition of that term, which includes, but
is not limited to, legal liabilities. This is in contrast to
budgetary accounting, where budget authority reflects
the legal authority to incur budgetary obligations, obligations are legal commitments, and outlays are the liquidation of those budgetary obligations. Debt held by the
public is the primary budgetary stock that is cited as a
measure of the Government’s cumulative fiscal results.
Debt held by the public, which is a legal liability, is shown
as a liability on the Government’s balance sheet along
with other accounting liabilities. Total liabilities (as defined by generally accepted accounting principles), as of
2012, were approximately 67 percent greater than debt
held by the public.
Assets are generally recorded in the financial statements at either historical cost or at fair market value.
The full cost of an asset is recorded as a budget outlay
when the asset is purchased. Assets are not generally

30.  Budget and Financial Reporting

reflected in any budget measures after they are acquired,
apart from certain financial assets, such as cash balances
and loan receivables, which are reflected in a measure of
debt held by the public net of financial assets. Net position, which is the difference between assets and liabilities,
reported in the financial reports does not have a budgetary analog.
The prior fiscal-year data included in the budget and
the fiscal-year results reported in the financial reports
are generally all taken from the same source, the Federal
Agencies’ Centralized Trial-Balance System, known as
FACTS I and II. These data are required to be audited for
certain Federal agencies19 and for the government-wide
financial statements; the related audit reports, which include audits of prior fiscal year data, are included in the
financial reports.
The Federal Sector of the Integrated
Macroeconomic Accounts
The integrated macroeconomic accounts are a series of
tables that show production, income, saving, capital formation, financial transactions, and asset valuations for
each of six major sectors of the economy. The integrated
accounts also show how each sector relates to the other
sectors and the economy as a whole. The six sectors include as a separate sector the Federal Government.20 As
noted earlier in this chapter, budget reporting is done primarily for planning and control purposes, and financial
reporting is done primarily for accountability purposes.
The reporting of the integrated macroeconomic accounts
data is done primarily for analytic purposes.
The integrated accounts present seven accounts for
each of the six sectors of the economy, including the
Federal Government sector. 21 These seven accounts reflect seven different types of economic activity and include,
among others, a balance sheet account, a current account,
a capital account, and a financial account.22 The information presented in the Federal Government sector of the
integrated accounts is similar to information presented in
the Budget and the financial reports; however, the data in
the integrated accounts follow the conventions of national
income accounting. As noted above, budget and financial
measures are based primarily on transaction data from
FACTS I and FACTS II. The integrated accounts use
data from the Bureau of Economic Analysis’ national income and product accounts (NIPAs), the Federal Reserve
Board’s flow of funds accounts, and other sources.23
19 

Audits are conducted for more than 100 Executive Branch agencies, including the 24 agencies covered by the Chief Financial Officers
Act of 1990 and an additional 11 significant Executive Branch entities.
Audits are not conducted for some of the smaller entities that are included in the Financial Report.
20  The other five sectors are households and nonprofit institutions
serving households, nonfinancial noncorporate business, nonfinancial
corporate business, financial business, and State and local governments.
21  Current data can be found at http://www.bea.gov/national/
nipaweb/Ni_FedBeaSna/Index.asp.
22  The other three accounts are the other changes in volume account,
the revaluation account, and the changes in balance sheet account.
23  The NIPA data can be found at http://www.bea.gov/iTable/iTable.
cfm?ReqID=9&step=1 and the flow of funds data can be found at http://

487
The data in the integrated accounts are different from
those presented in the Budget and financial reports, but
the measures presented in the Federal Government sector of the integrated accounts represent the same underlying Government activity as the Budget and financial
reports. All three seek to measure the cost or the value of
Government activity over a period of time and have measures that reflect the Government’s financial position at
a point in time. The measures in the integrated accounts
that represent flows include net saving and net lending/
net borrowing, and the measures that represent stocks or
balances at a point in time include assets, liabilities, and
net worth.
The “current” account for the Government sector shows
how much the Government contributed to current production and current consumption over a period of time.
“Current” is used in the integrated accounts to distinguish
production and consumption in the current period from
production and consumption in other periods. Net saving
shown in the current account for the Federal Government
sector measures the difference between current receipts
and current expenditures. Current receipts include most
taxes24 and fees; some taxes such as the estate and gift
taxes are not included in current receipts.25 Current
expenditures include goods and services purchased by
the Government (including the cost of future retirement
benefits for current Federal employees and depreciation
expenses for Government fixed assets); social insurance
payments; most grants to State, local, and foreign governments; and most subsidies to businesses. Both the
Budget and the financial reports show the subsidy cost
or the present value cost of Government loans and loan
guarantees in the period in which the loan or loan guarantee is made. In contrast, the integrated accounts do not
show these subsidy costs as expenditures in any period,
but they do show in the current account all interest and
fees the Government receives from the public for loans
and loan guarantees.26
If net saving in the current account were positive, the
balance would represent an amount that could be used
to invest in capital assets or financial assets or to reduce
debt. (Investment in capital is necessary to increase future production and future consumption.) Negative net
saving reflects the amount that must be financed. Net
saving is similar in some ways to both the deficit and the
net operating cost because it reflects the difference bewww.federalreserve.gov/apps/fof/FOFTables.aspx.
24  Individual income taxes are reported in the integrated accounts
when they are received by the Government, which is the same as in the
budget and financial reports. By contrast, corporate income taxes are
reported in the integrated accounts when they are accrued, whereas the
budget and financial reports show these taxes when they are received
by the Government.
25  Estate and gift taxes are excluded from the current account because they are not taxes on current production or current income, but
are instead taxes on the transfer of wealth. As capital transfers from
the household sector to the government, these taxes are reflected in the
capital account.
26  Differences between the NIPAs and the budget are shown in Table
28-2 of this volume and shown in more detail at the NIPA website cited
in footnote 23.

488
tween inflows and outflows of financial resources over a
period of time.
The capital account for the Government sector shows
how much the Government contributed to capital formation in the economy as a whole over a period of time.
Net lending/net borrowing in the Government capital account reflects net saving plus net capital formation and
capital transfers. Net capital formation is investment in
fixed assets less depreciation, so the full cost of asset acquisitions is reflected in the capital account when assets
are purchased. Capital transfers are transfers from the
Government to another sector of the economy that are
linked to the acquisition or disposal of capital assets. For
example, capital transfers include capital grants to State
and local governments (e.g., grants for highway construction) and capital subsidies to homeowners and businesses
(e.g., subsidies for home acquisition or financial stabilization payments to Government sponsored enterprises). In
addition, estate and gift taxes (which as noted above are
not reflected in the current account) are reflected in the
capital account. Because of the inclusion in the capital
account of these additional items, net lending/net borrowing in the capital account is more similar to the deficit
than to the net operating cost. A positive net lending/net
borrowing balance represents an amount that is available
for purchasing assets or retiring debt held by the public,
and a negative amount represents an amount that must
be borrowed.
The financial account for the Government sector shows
the Government’s financial activity for the year. Net lending/net borrowing in the Government financial account
reflects the Government’s borrowing needs for the year. It
is the change in financial assets held by the Government
less the change in debt held by the public, which is reported in the Budget. Theoretically, net lending/net borrowing in the financial account should be the same as
net lending/net borrowing in the capital account because
saving that is not spent on fixed assets should increase
the amount of financial assets held by the Government.
Similarly, borrowing that is used to purchase fixed assets
leads to financial liabilities. However, because of the differences in when flows are recorded and other statistical
differences, the net lending/net borrowing in the capital

Analytical Perspectives

account is almost never equal to that of the financial account.
The assets, liabilities, and net worth shown in the balance sheet account for the Federal Government measure
the value of the Government’s financial and nonfinancial
assets, liabilities, and net worth at the end of the calendar
year. These measures are similar conceptually to the assets, liabilities, and net position reported on the balance
sheet in the financial reports. One difference between
the balance sheet account and the balance sheet in the
financial reports is that reproducible fixed assets in the
balance sheet account are measured at replacement cost
whereas the analogous property, plant, and equipment on
the balance sheet of the financial reports are measured at
acquisition or historical cost. Other differences are the
way in which employee retirement liabilities are measured and the exclusion from the balance sheet account of
veteran benefits and environmental liabilities.
Conclusion
Budget and financial reporting each provide the public
with detailed information on how the Government raised
and spent financial resources. The budget uses a conceptual framework based primarily on cash transactions, as
laid out in the 1967 Report of the President’s Commission
on Budget Concepts. The Budget of the United States
Government is recognized and used widely both within
and outside of the Government, and the budget process
is the primary way that the Government reaches agreement on public policy goals and allocates resources among
competing uses.
Financial reporting uses much the same underlying
data as the budget to develop reports prepared in accordance with generally accepted accounting principles promulgated by the Federal Accounting Standards Advisory
Board and adopted for Executive Branch agencies by the
Office of Management and Budget. Financial reporting
focuses on the results of financial operations, including
the cost of operations, financial position, and financial
condition of the Government. Together, budget and financial reporting provide complementary information and
a comprehensive view of the Government’s financial resources and responsibilities.

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