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FISCAL YEAR I

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THE BUDGET DOCUMENTS
Data and analyses relating to the budget for 1977 are published in
four documents:
The Budget of the United States Government, 1977 contains the infor-

mation that most users of the budget would normally need, including
the Budget Message of the President. The Budget presents an overview
of the President's budget proposals and includes explanations of
spending programs and estimated receipts. This document also contains a description of the budget system and various summary tables
on the budget as a whole. (Price $3.45.)
The Budget of the United States Government, 1977—Appendix

con-

tains detailed information on the various appropriations and funds
which comprise the budget.
The Appendix contains more detailed information than any of the
other budget documents. It includes for each agency: the proposed
text of appropriation language, budget schedules for each account,
explanations of the work to be performed and the funds needed, proposed general provisions applicable to the appropriations of entire
agencies or groups of agencies, and schedules of permanent positions.
Supplementals, budget amendments, and rescissions for the current
year, and new legislative proposals, are presented separately. Information is also provided on certain activities whose outlays are not
part of the budget totals. (Price $19.20.)
Special Analyses,

Budget of the United States Government, 1977

contains 17 special analyses that are designed to highlight specified
program areas or provide other significant presentations of Federal
budget data.
This document includes analytical information about: Government
finances and operations as a whole and how they affect the economy;
Government-wide program and financial information for Federal
education, training and employment, health, income security, civil
rights, and crime reduction programs; trends and developments in the
areas of Federal aid to State and local governments, research and development, and environmental protection. (Price $2.70.)
The United States Budget in Brief, 1977 provides a more concise, less

technical overview of the 1977 budget than the above volumes.
Summary and historical tables on the Federal budget and debt are
also provided, together with graphic displays. (Price $1.15.)
GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise
noted.
2. Detail in the tables, text, and charts of this volume may
not add to the totals because of rounding.

TABLE OF CONTENTS
Page
PART 1. ECONOMIC A N D FINANCIAL ANALYSES
A. Federal transactions in the national income accounts
B. Funds in the budget
C. Borrowing, debt, and investment
D. Investment, operating, and other budget outlays
E. Federal credit programs
.
F. Tax expenditures
G. Principal Federal statistical programs
H. Civilian employment in the executive branch
PART 2. FEDERAL SOCIAL PROGRAMS
I. Federal education programs
J. Federal training and employment programs
K. Federal health programs
L. Federal income security programs
M. Federal civil rights activities
N. Federal programs for the reduction of crime
PART 3. SPECIALIZED ASPECTS A N D VIEWS OF FEDERAL PROGRAMS
0 . Federal aid to State and local governments
P. Federal research and development programs
Q. Federal environmental programs

5
7
32
45
64
88
116
138
149
159
161
178
192
219
230
242
253
255
276
296

PART 1

ECONOMIC AND FINANCIAL
ANALYSES

INTRODUCTION
Part 1 provides analyses and tabulations which cover Government
finances and operations as a whole, and reflect the ways in which Government finances affect the economy. These special analyses encompass those designated A through G.
Special Analysis A presents the Federal budget estimates in terms
of the national income accounts. It is designed to explain the relationships of the unified budget of the Federal Government to the national
income accounts, which constitute the most widely used measure of
aggregate economic activity in the United States. It also includes an
explanation of how the new "benchmark" revisions affect the Federal
sector receipts and expenditures.
Special Analysis B classifies budget information by the groups of
funds (Federal and trust) which comprise the budget.
Special Analysis C desciibes current developments and trends in
Federal borrowing and debt, and the investment by Government
accounts in Federal securities. It summarizes Federal and federally
assisted borrowing from the public in order to display some measure
of the Government's impact on the credit markets.
Special Analysis D classifies budget outlays in terms of the duration
and nature of the benefits derived, distinguishing those of an investment or development type from those which primarily yield current
benefits. Apart from this analysis the U.S. budget, unlike those of
some other governments, includes outlays which are for "capital" or
investment-type activities in the same accounts in which "current"
activities and costs are shown.
Special Analysis E covers Federal credit programs—direct loans,
guarantees of private loans,' and loans of federally sponsored credit
agencies. It includes estimates of loan subsidy costs, and provides
an aggregate measure of total credit supplied to the public under
Federal auspices.
Special Analysis F provides an enumeration of revenue losses due
to provisions of the Federal income tax laws that allow a special exclusion, exemption, or deduction from gross income or that provide
a special credit, preferential rate of tax, or deferral of tax liability.
Special Analysis G reflects obligation levels for the principal programs of the Federal Government for collecting current statistics, and
current spending for periodic statistics obtained in census-type surveys
usually conducted every 5 or 10 years. Also included are staffing levels
for major statistical agencies.
Special Analysis H deals with the levels of civilian employment in
the executive branch. It also contains figures on total Federal personnel
costs (including military personnel).

SPECIAL A N A L Y S I S

FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS

The budget is designed to serve several purposes:
• It is an economic document that reflects the taxing and spending
policies of the Government for promoting economic growth,
high employment, relative price stability, and a strong balanceof-payments position.
• It proposes an allocation of resources between the private and
public sectors and within the public sector. Through its impact
on consumption and investment decisions and the distribution
of income it also affects allocation decisions within the private
sector.
• It sets forth the President's request to Congress for appropriation
action on existing or new programs and for changes in tax legislation.
• I t is a report to the Congress and the people on how the Government
has spent the funds entrusted to it in past years.
No single budget concept can satisfy all these purposes fully. The
budget document and related Treasury reports provide complete,
detailed information on the finances of the Federal Government.
For study of aggregate economic activity, however, the national
income accounts (NIA) of the United States provide the most useful measures.
This special analysis shows the Federal budget as measured in the
national income accounts. The analysis is divided into four major
sections. The first shows the size, composition, and trends in Federal
sector receipts and expenditures. Additional details will be published
in the February 1976 issue of the Department of Commerce publication, Survey of Current Business. The second section shows quarterly
estimates of Federal sector receipts and expenditures seasonally
adjusted at annual rates. The third section explains how the recent
"benchmark" revisions in the gross national product (GNP) and
related accounts affect the Federal sector. The final section of this
analysis explains the major differences between the budget and the
NIA concepts. A discussion of fiscal policy can be found in the Economic Report of the President.
The Survey of Current Business data are almost always in terms of
calendar years. In contrast, in this special analysis and all budget
documents, all references to a year refer to a fiscal year unless specifically labeled to the contrary.
FEDERAL SECTOR RECEIPTS AND EXPENDITURES

Table A-l shows Federal sector NIA receipts, expenditures, and
deficits for 1975-77, including those for the transition quarter (TQ).1
1
The transition quarter is the quarter from July 1-September 30, 1976. Starting in calendar
year 1976 the Federal fiscal year will convert from a July 1-June 30 basis to an October 1-September 30 basis. This 3-month period is required to make the conversion to a new fiscal year and is being
maintained as a separate accounting period.

THE BUDGET FOR FISCAL YEAR

1977

Table A-l. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL
INCOME ACCOUNTS (in billions of dollars)
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

RECEIPTS

Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance.
Total receipts

126.4
40.6
22.4
92.0

136.4
47.5
24.0
99.5

41.5
13.3
5.8
25.9

160.4
58.2
24.3
121.8

281.5

307.4

86.5

364.7

117.6
(80.3)
(37.3)
134.8
(131.7)
(3.1)
48.3
22.0

130.0
(86.7)
(43.3)
158.7
(155.1)
(3.6)
57.8
26.0

33.1
(21.6)
(11.5)
40.1
(39.3)
(.8)
15.0
7.3

139.4
(92.8)
(46.6)
168.2
(164.4)
(3.8)
59.3
32.0

EXPENDITURES
Purchases of goods and services..
_
Defense
Nondefense..
Transfer payments
_
Domestic ("to persons").-Foreign
Grants-in-aid to State and local governments
Net interest paid...
Subsidies less current surplus of Government enterprises
_
Wage disbursements less accruals
Total expenditures

Deficit(-)

5.7
.4 .

6.2

1.7

5.6

328.7

378.7

97.2

404.5

-47.2

-71.3

-10.7

-39.8

Trends in Federal sector receipts.—Table A-l divides receipts
into four major categories, which are also illustrated in the chart on the
distribution of Federal sector receipts by category.
Personal tax and nontax receipts.—The largest receipt category—
personal tax and nontax receipts—is composed primarily of individual
income taxes but also includes estate and gift taxes and some miscellaneous receipts. Increases in income—because of both real growth
and inflation—automatically increase these receipts. Since personal
income taxes are progressive, these receipts normally grow at a faster
rate than personal income. However, tax reductions have been enacted
periodically over the past three decades that have offset most of the
increase in effective tax rates resulting from the progressive tax structure. This is illustrated in table A-2, which shows Federal sector
receipts at 10-year intervals as a percent of GNP.
Table A-2. FEDERAL SECTOR RECEIPTS AS A PERCENT OF GNP
Description

Personal tax and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts

1947
actual

1957

1967

1977
ttimate

8.4
4. 8
3.5
2.5

8.5
4.8
2.7
2.7

8.3
3.9
2.0
4.6

8.7
3.2
1.3
6.6

19.2

18.7

18.9

19.9

SPECIAL ANALYSIS A
Distribution of Federal Sector Receipts by Category
5-Yeaf Averages

Contributions for
Social Insurance

Indirect Business Tax
and Nontax Accruals

Personal Tax and
Nontax Receipts

Corporate profits tax accruals.—-These tax accruals are volatile because corporate profits are among the most volatile components of
national income. The NT A corporate profits taxes generally differ from
the corresponding budget category primarily because: (1) The NIA
show the deposit of earnings by the Federal Reserve System as
corporate profit taxes while the budget treats them as miscellaneous
receipts; and (2) the NIA record corporate profits taxes when the
profits are earned (that is, accrued), while the unified budget records
the cash receipts.
Estimates of corporate profits tax accruals are normally subject to
greater margins of error than any other category of receipts. The NIA
estimate is derived from estimates of corporate profits before tax
and effective tax rates. These estimates are subject to significant revisions based on later data. As is shown in table A-9, statistical revisions
have reduced the estimate of corporate profits tax accruals for 1974 by
$2.0 billion from the estimate of a year ago, even though both estimates were for a period that had ended.
The secular decline in corporate profits tax receipts relative to
GNP and to total receipts (as shown in the chart above) results mainly
from three factors: (1) a long-term decline in corporate profits relative
to GNP; (2) a narrowing of the corporate profits tax base resulting
from changes in the definition of corporate profits for tax purposes
(largely increases in permissible depreciation allowances); and (3) the
nearly constant nominal tax rate on taxable corporate profits.

THE BUDGET FOR FISCAL YEAR 1977

Indirect business tax and nontax accruals.—These receipts are composed of excise taxes, customs duties, rents, and royalties. Over time,
this category has become a much less important part of total Federal
sector receipts, partly because these taxes normally do not rise
in proportion to the increase in the economy and partly because
some of the applicable taxes, such as the automobile and telephone
excise taxes have been reduced or repealed. The import fees on crude
011 and petroleum products, most of which have been eliminated, are
classified as an indirect business tax.
Contributions for social insurance.—This group of receipts constitutes
the second largest category of Federal sector receipts. The rapid rise
in these receipts since World War II has been caused by the growth
in the labor force and in wage rates, the expanded coverage of existing
social insurance programs, the enactment of new ones, and the higher
taxable wage base and contribution rates needed to finance liberalization of benefits. As a result of the rapid rise in social insurance taxes
(mainly social security) and the passage of legislation reducing or
eliminating individual income taxes for many low- and moderateincome individuals and families, millions of Americans now pay
significantly higher social insurance taxes than income taxes.
Major tax changes.—Federal sector receipts in the budget reflect
the impact of tax changes scheduled under current law and proposed
tax legislation. The major changes in taxes reflected in the budget are
the following:
—The recently enacted Revenue Adjustment Act of 1975 extended
through the first half of calendar 1976 the withholding rates
in effect for the last 8 months of calendar year 1975. Had the
provision of the temporary tax reductions previously in effect
been permitted to expire, personal taxes would have increased
about $12 billion and corporate taxes by about $2 billion (seasonally adjusted annual rates) for January-June 1976.
—Proposed permanent individual and corporation income tax cuts
effective July 1, 1976. These reductions will reduce personal taxes
by about $22 billion and corporate profits tax accruals by about
by $3K billion in 1977.
—Elimination of the $2 import fee on crude oil, effective December 20, 1975, as a result of the recently enacted energy bill. This
reduces indirect business taxes about $3 billion (at annual rates) in
comparison to the last half of calendar year 1975.
—Increases, under current law, in the social security tax base from
$14,100 in calendar year 1975 to $15,300 and $16,500, respectively,
in the subsequent 2 years. Each of these base increases raises
contributions for social insurance by about $2 billion at annual
rates. In addition, legislation is proposed to increase the combined
employer-employee social security tax rate from 11.7% to 12.3%
effective January 1, 1977. This rate increase will increase receipts
$3K billion in 1977.
—Proposed increases in the unemployment insurance tax rate and
base starting January 1,1977, which would increase contributions
for social insurance by $2 billion (about $3 billion at annual rates)
in 1977.
Part 4 of the budget discusses tax changes and proposed legislation
(on a unified budget basis) in greater detail.

SPECIAL ANALYSIS A

Trends in Federal sector expenditures.—Federal sector expenditures are also divided into several major groupings. The primary
division is between purchases of goods and services (which are divided
between defense and nondefense purchases) and all other transactions.
Purchases are that portion of the Nation's output that is bought
directly by the Federal Government and therefore included in GNP.
The other expenditure categories consist primarily of payments to
individuals and grants to other levels of government. These groups,
in turn, can use the income to finance their own purchases of goods
and services, to save, and—in the case of State and local governments—to hold down taxes or make transfers to individuals.
A major shift in the composition of Federal sector expenditures has
been underway for years. As the chart on expenditures shows, defense
purchases of goods and services have been a declining share of Federal
spending ever since the Korean War. There has been a corresponding
rise in other components, especially grants-in-aid and domestic
transfer payments. While this shift has been underway for two
decades, it has accelerated in recent years. In 1975, defense purchases
as a percentage of Federal sector expenditures were at the lowest level
since the start of World War II.
Distribution of Federal Sector Expenditures by Category

1948-52

1953-57

FhcolYeas

1958-62

J963-67

J968-72

1973-77
Esfimote

THE BUDGET FOR FISCAL YEAR

1977

Table A-3 shows Federal sector expenditures by category as a
percent of GNP at 10-year intervals.
Table A-3. FEDERAL SECTOR EXPENDITURES AS A PERCENT OF GNP
Description

1947
actual

Defense purchases
Nondefense purchases
Domestic transfer payments
Foreign transfer payments
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises
Total expenditures

1957
actual

1967
actual

1977
estimate

4.3
1.7
3.7
.8
.7
1.8

9.8
1.3
3.3
.4
.9
1.2

8.7
2.5
4.8
.3
1.9
1.2

5.1
2.5
8.9
.2
3.2
1.7

13.3

17.5

20.0

22.0

Defense purchases and foreign transfer payments are largely devoted to the conduct of our national defense and foreign affairs.1 In
1947 defense purchases—reduced by receipts from large sales of
World War II materials—were only 4.3% of GNP while foreign
transfer payments were 0.8% of GNP. The total of these—5.1%—
roughly reflects the cost of the conduct of external affairs. In 1957—
after the Korean war defense buildup—they totaled 10.2% of GNP,
and by 1977 they will be back down to about 5.3% of GNP.
In contrast, spending on nondefense purchases, domestic transfer
payments, and grants-in-aid has risen dramatically. In 1947 this
spending was equal to 6.1% of GNP; in 1977 it is estimated to equal
14.7% of GNP.
Defense purchases of goods and services.—With the implementation
of the definitional changes in the NIA, defense purchases now consist
of all purchases of goods and services under programs included in the
national defense function in the budget document. Almost all defense
purchases are made by the Department of Defense—Military, but this
category also includes defense purchases by the Energy Research and
Development Administration (ERDA) and some other accounts.
The 1977 budget calls for an increase in defense purchases of $6.1
billion in 1977 ovei 1976. A large part of this increase offsets the
impact of inflation; but the budget plan calls for a reversal in the
pattern of reducing defense spending in real terms.
While defense purchases are not estimated in constant prices, the
budget includes constant price estimates of outlays in the national
defense function. There is sufficient similarity between this category
and defense purchases in the NIA that these figures give a rough
approximation of the same transactions. The unified budget estimates of national defense outlays in constant prices are as follows (in
billions of 1969 dollars):
1962
1967
1972
1976estimate
1977 estimate

64.3
75.6
62.8
53.7
54.2

1
Although in recent year* a significant portion of foreign transfers arises from payments under
general domestic social programs—for example, payments to social security retirees living abroad.

SPECIAL ANALYSIS A

Nondefense purchases of goods and services.—This category covers

the goods and services purchased by Federal nondefense agencies.
These include such programs as operation of national forest, park and
recreation areas; space exploration; promotion of commerce; acquisition and disposal of agricultural commodities; construction of flood
control and navigation projects; operation of the Federal airway
system; a wide variety of medical and other scientific research; the
capital outlay of Government enterprises; Federal law enforcement;
and operation of veterans hospitals. Table A-4 shows the composition
of this spending by agency for the years 1974 through 1977.
Table A-4. NONDEFENSE PURCHASES OF GOODS AND SERVICES BY
AGENCY (in billions of dollars)
1974

Department of Agriculture:
Commodity Credit Corporation (CCC)
Other
Department of Commerce
Department of Defense—Civil
Department of Health, Education, and Welfare
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
Energy Research and Development Administration
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Postal Service 1
Veterans Administration
All other 2
Total

1975

1976

—2. 2
1.9
.7
1.7
4.5
.9
1.7
1.1
.7
.7
2.8
2.0
.8
.4
1.0
3.2
.7
3.4
4.5

0.1
2.3
.8
2.0
5.4
.9
2.0
1.3
1.2
.7
2.9
2.6
1.3

30.5

1977

4.9

_*
2.5
1.0
2.2
6.0
1.0
2.3
1.5
1.7
1.1
3.3
2.8
2.1
.6
.3
3.4
.9
4.6
6.0

0.5
2.3
1.1
2.2
5.7
1.1
2.3
1.5
1.4
1.0
3.5
2.7
3.1
.5
.3
?.6
.9
5.0
7.9

37.3

43.3

46.6

.5
.4
3.2
.8
4.0

"Less than $50 million.
Not included in budget outlays.
Includes allowances for civilian agency pay raises and contingencies.
Note.—Excludes the transition quarter.

1
2

Generally, nondefense purchases consist mainly of the cost of operating the various nondefense agencies. In the case of Government enterprises (including the CCC and the Postal Service), however, the
purchases figures represent net capital formation.
Domestic transfer payments.—Ihis is now the largest category of
Federal sector expenditures. Spending for domestic transfers has
expanded rapidly in recent years, mainly because of more beneficiaries
and higher benefit payments under the social insurance programs.
Table A-3 shows the growth in domestic transfer payments as a percent of GNP at 10 year intervals, and the chart on the distribution
of Federal sector expenditures by category shows this growth trend
over time relative to total Federal sector expenditures. Table A-5
provides data on the composition of domestic transfer payments by
major program and by functional category. As can readily be seen,

Table A-5. FUNCTIONAL COMPOSITION OF DOMESTIC TRANSFER PAYMENTS (in billion* of doUars)
Actual

Description

1966

1967

1968

1969

1970

1971

1972

1973

Estimate

• '
1974

1975

1976

"
1977

61.5
3.0
7.0
12.6
.9
4.3
3.5
1.7
.5

70.3
3.5
8.3
18.1
1.0
4.7
4.6
1.3
.7

80.1
3.7
9.9
15.6
.9
5.4
4.1
.6
.7

HUMAN RESOURCES PROGRAMS

Income security:
Social security (OASDI)
Railroad retirement..
Civil service retirement
Unemployment benefits
Benefits for coal miners
Supplemental security income.
Foodstamps
Special payments, Treasury l
Other
Total._
Health:
Medicare
Other

Total

_
_

19.5
1.2
1.7
2.1

20.5
1.2
1.9
2.1

22.5
1.4
2.1
2.2

25.8
1.5
2.4
2.2

_
1

.2
_
.2

.2
.2

53.2
2.6
5.6
5.5
1.0
1.9
2.7
_
.4

_
_

28.6
1.6
2.7
3.0
*
_
.5

34.0
1.9
3.2
5.6
.3

38.0
2.1
3.7
6.5
.4

1.5

1.8

46.6
2.4
4.5
4.8
.9
2.1
_

24.6

26.0

28.5

32.3

36.7

46.7

52.8

61.7

72.8

95.1

112.5

120.8

3.0
.3

5.0
.3

6.2
.3

6.7
.4

7.5
.4

8.3
.4

9.0
.4

10.9
.4

14.1
.5

16.5
.6

18.7
.6

3.3

5.4

6.6

7.2

7.9

8.8

9.4

11.3

14.6

17.1

19.3

Education, training, employment, and social
services:
Education
Training and employment2
_
Total
Veterans benefits and services
Total human resources programs

2
.2

.4
.1

.7
.1

.9
.2

.9
.4

.9
.6

1.0
.5

1.4
1.1

1.6
1.2

1.5
1.0

1.0

1.3

1.5

2. 5

2. 8

2. 5

4.7

5.3

5.6

6.2

6.9

8.0

8.8

9.7

10.4

12. 7

14. 7

12. 9

30.0

35.1

40.4

45.9

51.8

64.0

71.9

82.4

96.0

124. 9

147. 1

155. 4

1.6

1.8

2.1

2.4

2.8

3.3

3.8

4.3

5.1

6.2

7.2

8.3

1.8

2.0

2.3

2.7

3.2

3.7

4.2

4.7

5.6

6.7

7.9

9.1

31.8

37.2

42.7

48.7

55.0

67.7

76.1

87.1

101.7

131.7

155.1

164.4

ALL OTHER FUNCTIONS

National defense (military retired pay)
All other functions (includes allowance for
contingencies)
Total functions not included in human
resources grouping
Total domestic transfer payments

•Less than $50 million.
Includes the $50 tax rebate and the earned income credit to the extent that tax credits exceed tax liabilities otherwise owed.
Includes a relatively small amount classified as social services.
Note.—Excludes the transition quarter. Data on the transition quarter are shown in table A—8.

1
2

THE BUDGET FOR FISCAL YEAR

1977

Composition of Federal Sector Expenditures
$ Billions
225

200 —
175Grants-in-Aid and
Domestic Transfer Payments

150 —
125
fOO7550All Othe

I960
Fiscal ¥*<»$

1965

f970

1975

1977
Estimate

spending on human resources programs—especially income security
programs—dominates domestic transfer payments. This spending is
expected to continue to rise in 1977, but at a much slower rate than
in most recent years. There is extensive discussion of program trends
(on a unified budget basis) in Part 5 of the budget and elsewhere in
the budget documents.
Grants-in-aid.—These expenditures comprise programs designed to
help State and local governments provide general public services or to
finance programs for the needy. There is a substantial degree of substitutability between grants-in-aid and domestic transfer payments and—
to a lesser degree—nondefense purchases. For example, low-income
veterans could be eligible for free medical care under medicaid (grants),
in a veterans hospital (nondefense purchases), or, perhaps, medicare
(transfer payments). The supplemental security income transfer payments are a substitute for the preexisting program of grants to States
for public assistance for the elderly and handicapped. In addition,
there is significant substitutability between different grant programs;
for example, the President has proposed to replace medicaid and several
other health programs by a block grant starting in 1977. Hence, in
some cases a more accurate picture of Federal efforts to meet domestic
needs through income transfers is obtained by treating grants and
domestic transfer payments together rather than looking at them
separately.

Table A-6. FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID (in billions of dollars)
Actual
1966
HUMAN RESOURCES PROGRAMS
Income security:
Public assistance cash benefits
Child nutrition and related programs
Administration of unemployment benefits..
Other
Total
Health:
Medicaid/General healthfinancingassistance.
Other (includes research, construction, services, and medical training)
Total..
Education, training, employment, and social
services:
Education...
Training and employment
Social services
Total
Veterans benefits and services
Total human resources programs
See footnotes at end of table.

Estimate

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

2.8
.2
.2

2.7
.2
.2

3.2
.2
.2
.1

3.6
.3
.3
.1

4.1
.4
.3
.1

5.5
.6
.4
.1

6.6
.9
.4
.1

5.9
1.1
.5
.1

5.4
1.2
.5
.2

5.1
1.7
.6
.3

5.9
2.4
.9
.3

3.2

3.7

4.2

4.9

6.6

7.9

7.6

7.3

7.6

9.6

1.2

1.8

2.3

2.7

3.4

4.6

5.8

6.8

8.1

9.0

1.2

1.1

1.4

1.6

1.9

2.3

2.2

1.7

1.3

1.9

2.7

3.1

3.9

4.5

6.0

6.2

7.6

9.2

10.4

10.7

1.9
.3
3

2.8
.3
.6

3.3
.5
.7

3.2
.5
.9

3.6
.5
1.1

3.9
.8
1.4

4.1
1.6
2.6

4.1
1.9
2.3

3.9
1.9
2.2

4.7
2.7
3.2

4.4
5.1
3.5

4.2
3.5
3.6

2.4

3.7

4.5

5.2

6.1

8.2

8.4

8.1

10.7

13.1

11.3

6.9

8.8

10.9

11.9

14.0

17.2

22.2

22.3

23.0

27.6

33.2

31.8

Table A-6. FUNCTIONAL COMPOSITION OF FEDERAL GRANTS-IN-AID (in billions of dollars)—Continued
Actual
1966

1967

1968

1969

1970

Estimate
1971

1972

1973

1974

1975

1976

1977

ALL OTHER FUNCTIONS
Natural resources, environment, and energy:
Environment
Other
Total
Community and regional development:
Urban renewal
Other H U D grants
Area and regional development
Other
Total
Commerce and transportation:
Highways (including safety)
Urban mass transit
Other (mainly airport construction)
Total

.1
.1

.2
.1

.2
.2

.5
.2

.5
.3

.7
.3

1.6
.3

2.0
.5

2.5
.5

4.0
.5

1.1

2.0

2.5

3.0

4.5

.3
*
.1
.3

.4
.1
.1
.3

.5
.1
.2
.4

.5
.2
.3
.3

1.0
.3
.3
.5

1.0
.5
.4
.4

1.2
.7
.4
.4

1.0
.9
.5

1.2
.8
.5
.4

1.4
.8
.6
.5

1.4
1.3
.8
.5

1.0
1.8
.8
.4

1.2

1.3

2.2

2.4

2.8

2.9

3.3

4.0

3.9

4.0

4.2
*
.1

4.2
.1
.1

4.4
.1
.1

4.6
.2
.1

4.7
.3
.1

4.7
.4
.2

4.5
.5
.2

4.7
.9
.3

6.4
1.5
.4

6.8
1.7
.4

4.0

4.1

4.3

4.4

4.9
4.6
— —: —

5.1

5.3

5.9

8.3

9.0

General science, space, and technology (mainly
research grants)
_
Law enforcement and justice._
Revenue sharing and general purpose fiscal
assistance:
General revenue sharing
Other

.5
*

.6
*

.7
*

.6
.2

.6
.3

.6
.5

.7
.7

.8
.7

.8
.8

__ _
.2

6.6
.4

6.1
.4

6.1
.5

6.3
.5

65
.4

7.0

6.5

6.7

All other functions (includes allowance for
contingencies)

1.2

Total functions not included in human
resources grouping

5.8

6.0

6.9

7.3

8.6

9.6

10.4

18.1

18.6

20.7

24.6

27.4

12.7

14.8

17.8

19.2

22.6

26.8

32.6

40.4

41.6

48.3

57.8

59.3

Total

Total grants-in-aid...

* Less than $50 million.
Note.—Excludes the transition quarter. Data on the transition quarter are shown in table A—8.

THE BUDGET FOR FISCAL YEAR 1977

The chart on the composition of Federal sector expenditures combines grants-in-aid and domestic transfer payments. Table A-6 shows
detail on grants-in-aid by budget function and major activity, and
table A-5 shows similar detail for domestic transfer payments.
Program detail on grant expenditures may be found in Special
Analysis O of this document. While the definition of Federal aid
used in that analysis differs somewhat from that used in the NIA,
the programs largely overlap and Special Analysis O shows the relationship between the two data series.
Foreign transfer payments.—There are three major types of foreign
transfer payments: expenditure of dollars to assist foreign economic
development, grants to foreign governments of foreign currencies that
are earned from the sale of surplus agricultural products, and payments
under social security and similar programs to individuals living abroad.
Although payments to individuals are gradually rising (roughly in
proportion with the rise in GNP), total foreign transfer payments have
been stable (and a declining proportion of GNP) for many years.
Net interest paid.—Net interest is highly dependent on the size of
Federal debt, loans outstanding, and the interest rates on both borrowing and lending. The coverage in this category has expanded substantially due to the net impact of two of the definitional changes that
are explained in detail below. These changes are the inclusion of
interest paid to and received from foreigners as part of net interest
paid and the imputation of interest payments by banks equal to the
value of their services provided to the Government without charge.
Subsidies less current surplus of Government enterprises.—Subsidies
less current surplus of Government enterprises consist of two elements:
(a) Subsidy payments to resident businesses (including farms); and
(b) the "current surplus" or "deficit" of Government enterprises. A
subsidy is a monetary grant to a unit engaged in commercial activities.
Examples are payments to farmers for land retirement, payments to
air carriers, and the construction and operating differential subsidies
paid to operators of U.S.-flag merchant ships.
"Government enterprise" is the term used in the NIA to designate
certain business-type operations of the Government (usually appearing
in the budget as public enterprise revolving funds). The operating
costs of Government enterprises are, to a great extent, covered by the
sale of goods and services to the public, as distinguished from tax
receipts. The difference between the sales and the current operating
expenses of a Government enterprise constitutes its surplus or deficit.
The largest of these enterprises are the Commodity Credit Corporation, the Postal Service (which is no longer included in the budget),
and the Tennessee Valley Authority.
Table A-7 shows the composition of this aggregation by major
category.

Table A-7. SUBSIDIES LESS CURRENT SURPLUS OF GOVERNMENT ENTERPRISES

(in biffions of dollars)
Estimate

Actual

Description

1966

Subsidies:
Commodity Credit Corporation
Maritime
Housing(HUD)
Railroad.
_
Small Business Administration
Other (mainly Agriculture)

1967

1970

1971

1972

3.1

4.2

3.7

4.2

4.4

5.2

7.3

5.2

4.2

4.3

4.8

1.6
8
-.1
-.2
—.1

.7
1.0
-.1
-.2
—.1

.3
.9
-.1
-.2
—.1

.5
.9
-.1
-.2
—.1

.6
1.3
-.2
-.2
—.1

.6
2.0
-.2
-.3
—.1

.6
1.4
-.2
-.3
—.2

1.3
1.3
-.2
-.3
—.1

1.5
2.0
-.3
-.1
—.1

.3
2.1
-.4
-.1
—.2

.4
2.4
-.3
-*
—.2

.3
1.7
-.4
-.1
—.2

-.1
-.2

-.1
-.3

-.1
-.2

-.1
-.3

-.1
-*

-.1
.1

-.2
-.2

-.2
-.1

-.2
-.2

Subtotal

1.7

1.0

1.1

1.7

1.2

1.8

2.7

1.5

1.9

Total subsidies less current surplus...

4.8

S.2

4.1

4.6

5.4

6.8

6.4

9.1

7.9

5.7

6.2

5.6

3.0
.4
1.3
.1

1977

* Lest than $50 million.
Includes impact of retroactive pay raises.
Note.—Excludes the transition quarter.

3.6
.4
.8
*

1976

Enterprise surpluses (—) or deficits:
Commodity Credit Corporation
Postal Service....
Tennessee Valley Authority
_
Federal Housing Administration..__
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance Corporation
Allotheri
_

3.1
.3
.5

1975

3.0
.3
.4

1974

2.6
.3
.3

1973

3.1
.3
.3

1969

4.0
.4
1.7
.1
.7
.4

Subtotal

2.0
3
.2

1968

2.4
.4
1.9
.1
*
.3

0.6
.5
2.1
.5

0.3
.6
2.4
.7

0.4
.7
3.0
.5

THE BUDGET FOR FISCAL YEAR 1977

Wage disbursements less accruals.—This is an adjustment item occasionally made in the NIA to take account of the fact that wages
and salaries are not always received at the same time as they are
earned. The national income component of wages and salaries is
counted in the GNP on an accrual basis; that is, when the income is
earned rather than when it is received. Personal income, however,
including wage and salary disbursements, is estimated on the basis of
when the cash is received.
Ordinarily, wage and salary payments disbursed in one period but
earned in the preceding period are approximately offset by payments
disbursed in the next period but earned in the current period, thus
making the adjustment between national income and personal income
small or zero.
QUARTERLY ESTIMATES

Table A-8 presents quarterly NIA receipts and expenditures estimates (at seasonally adjusted annual rates) for the period covered by
the budget.
The translation of the budget into national income accounts categories is necessarily inexact. The budget itself is a mixture of a forecast of what receipts and outlays are expected to be for some items
under current law and a Presidential request for congressional approval of proposed amounts for others. For this special analysis each
budget receipt and outlay is analyzed and translated into NIA
categories. Imprecision and possible error are inevitable even when
the translation is made using annual data. When these annual estimates are converted into quarterly distributions seasonally adjusted
at annual rates, the imprecision is further increased. The data presented in table A-8 are the best available estimates of the quarterly
NIA receipts and expenditures consistent with the 1977 budget, but
should be used with clear recognition of their limitations.

Table A-8. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME ACCOUNTS, QUARTERLY, 1975-77
(In billions of dollars; seasonally adjusted at annual rates)
Actual
Description

J lySept
1>74

OctDec
19/4

JanMar
1975

134.6
51.8
22.1
90.8

137.4
42.9
21.7
91.1

137.6
32.1
22.3
91.7

299.2

293.1

283.6

Estimated

AprJune
1975

JulySept
1975

OctDec 1
I975

JanMar
1976

AprJune
1976

JulySept
1976

OctDec
1976

JanMar
1977

AprJune
1977

JulySept
1977

99.3
35.5
23.5
91.9

130.5
43.4
25.5
93.9

135.2
46.8
25.4
96.4

136.6
48.5
22.6
103.4

142.2
51.1
22.7
106.3

143.6
53.5
23.1
108.7

152.0
55.2
23.9
111.4

155.5
56 1
24.1
123.7

162.3
59.4
24.4
126.3

172.8
62.2
24.9
129.0

250.1

293.3

303.8

311.1

322.3

328.9

342.5

359.4

372.4

388.9

RECEIPTS

Person* l t « and nontax receipts
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance
Total receipts
EXPENDITURES

Purchases of goods and services
113.6 118.2 119.4 119.2 124.2 129.8 131.4 134.5 133.5 137.1 139.0 140.3 141.1
DJcnse
(78.4) (80.5) (81.4) (82.1) (84.9) (87.4) (87.3) (87.3) (88.2) (90.9) (92.4) (93.7) (94.2)
Nondefense
(35.1) (37.7) (38.0) (37.1) (39.3) (42.3) (44.1) (47.2) (45.3) (46.2) (46.6) (46.6) (46.9)
Transfer payments
121.2 127.8 139.2 150.5 152.5 154.6 163.3 163.6 163.3 163.0 166.6 168.4 174.5
Domestic ("to persons")
(118.0) (124.8) (136.2) (147.3) (149.5) (151.5) (159.7) (159.6) (159.5) (159.2) (162.8) (164.6) (170.7)
Foreign
(3.2)
(3.0)
(3.0)
(3.2)
(3.0)
(3.1)
(3.6)
(4.0)
(3.8)
(3.8)
(3.8)
(3.8)
(3.8)
Grants-in-aid to State and local governments
44.0
45.0
50.1
52.8
56.8
57.1
58.2
59.1
60.8
59.0
59.3
59.5
59.5
Net interest paid
21.4
22.0
22.4
22.6
23.4
25.7
26.9
28.3
29.0
30.0
31.2
32.7
34.2
Subsidies less current surplus Government enterprises
5.5
5.1
6.3
7.1
6.9
7.0
4.8
5.9
5.2
5.4
5.4
5.4
5.8
Wage disbursements less accruals
1.5
Total expenditures
Deficit ( - )
1

307.2

318.6

-8.0

-25.5

337.4

352.3

363.8

374.2

384.6

391.4

391.8

394.5

401.5

406.3

415.1

-53.7-102.2

-70.5

-70.4

-73.5

-69.1

-62.9

-52.0

-42.1

-33.9

-26.2

Preliminary.
Note: Because of the methods normally used in seasonally adjusting NIA data, the average of seasonally adjusted data for the four quart rs of a fiscal year may not
be equal to the unadjusted fiscal year total.

THE BUDGET FOR FISCAL YEAR 1977

IMPACT OF THE "BENCHMARK" REVISIONS ON THE FEDERAL SECTOR

NIA
The Department of Commerce has recently competed a major
("benchmark") revision of the gross national product (GNP) and
subsidiary accounts. The data contained in this analysis are based on
the revised series.
The "benchmark" revisions made by the Department of Commerce
are of two kinds—"statistical" and "definitional."1 The statistical
changes are based on revised or new data—they are more accurate
estimates. Statistical revisions are a normal-and necessary—part
of the U.S. national economic accounting. The accounts are based
almost entirely on data produced by other agencies for other purposes
and adapted for national economic accounting. Since the timing,
quality of data, and comprehensiveness of coverage are primarily
determined by the producers of the raw data, there are significant gaps
and lags in producing GNP and related estimates. Yet the utility of the
GNP estimates is based largely on timeliness. To meet this need the
Department of Commerce has adopted a regular cycle for producing
and refining these data.
Even with a regular procedure for making corrections, some information may become available too late to be reasonably incorporated in
the regular revision cycle—after 3 years estimates become "final"
and are not further revised until a new "benchmark" is developed.
Thus, when a comprehensive "benchmark" revision occurs (the
previous one was in 1965) the Department of Commerce revises data
many years back if needed. While the revised series contain some
statistical revisions going back many years, those for years prior to
1972 are generally far smaller than the definitional revisions.
The definitional revisions are made because conditions change. In
any comprehensive data system such as that underlying the GNP a
great many judgmental decisions are made in classifying transactions.
Over time some of these judgments are made obsolete by changes
in the economy. These changes may be relatively minor at first but
become significant problems at a later date. In the case of atomic
energy activities (discussed below), for example, when the program
started it was clearly a defense program. Over time, the nature of the
program changed so that a significant part of the atomic energy
development program is now nondefense.
Table A-9 shows—for 1974—the total impact of both statistical
and definitional changes in the Federal sector NIA. As table A-9
shows, virtually all of the definitional changes involve transfers of
transactions from one expenditure category to another. Two definitional revisions affect receipts categories:
• Corporate tax accruals include a change in the treatment of
"carryback provisions" affecting receipts estimates as far back
as 1948. Losses are now recorded in the years when they occur
rather than when the tax liabilities are offset.
t Social insurance contributions include contributions for Federal
employees for workmen's compensation.
I Distinction may be made between "definitional" and "classificational" revisions. For purposes of
simplicity and clarity no such distinction is made in this section.

SPECIAL ANALYSIS A

Table A-9. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL
INCOME ACCOUNTS FOR 1974: COMPARISON OF JANUARY 1975 AND
CURRENT ESTIMATES (in billions of dollars)
January
1975 (
"actuals"

Description

Defini- Statistical
Current
tional
revisions "actuals"
revisions

RECEIPTS

Personal tax and nontax receipts.
Corporate profits tax accruals
Indirect business tax and nontax accruals
Contributions for social insurance

123.1
123.1
45.6
45.6
21.6
21.6
83.3
83.3
273.6

Total receipts._

- . 22
—2.0
-2.0
—.2
-.2
.1
.1

122.9
43.6
21.4
83.7

- 22..33

271.6

-.6
(-.4)
(-.2)
*
(•)
(*)
.1
*

104.5
(74.0)
(30.5)
104.7
(101.7)
(3.0)
41.6
19.8

()
0)

EXPENDITURES

Purchases of goods and services
Defense
Nondefense
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments
Net interest paid
Subsidies less current surplus of Government enterprises.
Wage disbursements less accruals

110.3
-5.2
(75.4)
(-1.0)
(34.9)
(-4.2)
104.2
.5
(101.3)
(.5)
(2.9)
41.5 __
_
17.4
2.4
4.7
.2 ..

Total expenditures

278.3

Deficit(-)

-4.7

2.6

7.9
.1

278.7

-2.4

-7.1

"Less than $50 million.
1
This adjustment affected many years but not 1974.

Table A-10 shows in detail the definitional changes affecting Federal
sector expenditures and these are discussed in the remainder of this
section.
Table A-10. COMPOSITION OF DEFINITIONAL REVISIONS TO FEDERAL
SECTOR EXPENDITURES (1974 data; in billions of dollars)

Definitional Revision

Foreign interest
CCC inventory valuation adjustment
Low-rent housing payments
Imputed bank service changes and interest
ERDA (AEC) nondefense
Fleet reserve payments
Maritime construction subsidies
Auto depreciation allowances
Reclassification of enterprises
Grossing of workmen's compensation
Total
*Less than $50 million.

Non- Domes*
Subsidies less
Defense defense
tic
Net
current surpurpur- trans- interest plus of govchases chases
fers
paid
ernmental
enterprises

-.8
—.4
.1

—3.1
—1.5
—1.2 _
.7
.8

3.1
1.5
1>2
—.7
.4

—.2
*
.3

.2
—.2
—.3
.3

-1.0

-4.2

2.4

2.6

THE BUDGET FOR FISCAL YEAR 1977

Foreign interest.—Under the prior definition interest payments to
and receipts from abroad were included in purchases of goods and
services; they are now included in net interest paid. At the time the
practice originated this category generally totaled well under $100
million annually; including these transactions as purchases eliminated
the need for a reconciliation line between net exports as shown in
the balance-of-payments figures and those shown in the national
income accounts. While this decision had pragmatic value when the
transactions were relatively minor, by 1975 they totaled $3}£ billion.
CCC adjustment.—The computation of a CCC adjustment creates
equal and offsetting changes in nondefense purchases and the current
surplus (or deficit) of this Government enterprise. Previously, the
nondefense purchase estimates were based on the acquisition price of
agricultural commodities for both the initial purchase and the subsequent sale. Under the new definition, nondefense purchases will be
based on current market prices for the acquisition and sale of commodities. The difference between the acquisition price and market
price will be reflected as part of the CCC surplus or deficit.
Low-rent housing payments.—A large portion of budget outlays for
low-rent public housing go to State or local government housing
agencies classified as Government enterprises. These payments were
included in nondefense purchases on the rationale that subsidies could
not be paid to Government enterprises; in effect, they were treated as
purchases of housing services for the benefit of the renter. Under the
new definition these payments are recognized as being subsidies; thus,
nondefense purchases are reduced and subsidies increased by the value
of these payments.
Imputed bank service charges and interest.—The Federal Government maintains interest-free accounts in commercial banks in exchange
for having those banks service Government checks and perform other
services without charge. Under the new definition the NIA includes
as nondefense purchases an imputed service charge by the banks for
the value of services rendered and includes an imputed receipt of
interest by the Government from banks equal to the imputed service
charge. This raises nondefense purchases and lowers net interest paid
by equal amounts.
ERDA (AEC) nondefense.—When the Atomic Energy Commission
(the predecessor agency to Energy Research and Development
Administration) was established it was clearly a national defense
program, and was so classified in both the budget and the NIA. Over
time, however, the AEC became involved in a large-scale nondefense
program, especially in the promotion and regulation of nuclear energy
for peaceful purposes. When the functional structure of the budget
was changed in the 1976 budget it took cognizance of this gradual
shift in operation of ERDA by dividing the outlays between national
defense and nondefense functions. The 1976 budget also anticipated
that ERDA nondefense activities would no longer be classified as
defense purchases in the NIA but the actual implementation of this
change occurred in the benchmark revision under discussion.

SPECIAL ANALYSIS A

Fleet reserve.—Fleet reserve retired pay in the budget is part of
the category "military retired pay." It arises when naval and marine
enlisted personnel complete 20 years of service and opt for retirement
instead of remaining a full 30 years. These personnel are subject to
being called up in case of an emergency, so the NIA treated these
payments as compensation (defense purchases), the same as reserve
pay. However, unlike other reservists, the recipients of fleet reserve
pay are retired from the Armed Forces and are not required to perform
any military duty to earn their payments. The NIA now treats these
expenditures as transfer payments.
Maritime construction subsidies.—The Maritime Administration
pays both construction and operating differential subsidies to encourage a strong domestic merchant marine. The operating differential
payments—which compensate for the higher wage levels on U.S.-flag
ships—have traditionally been counted as subsidies. But the construction differential subsidies have been counted as nondefense purchases.
Prior to 1957 the Maritime Administration would pay for the construction of merchant ships in U.S. shipyards and then sell the ships at
prices roughly comparable to foreign ship costs to U.S.-flag carriers.
The acquisition cost would count as purchases and the sale as negative
purchases. In July 1956, the program was converted to having U.S.ship operators purchase the ships from U.S. shipyards with the Maritime Administration paying the difference between the total cost and
the cost if the ship had been constructed abroad. This payment had
been canied as nondefense purchases but—under the revision—is
treated as subsidies retroactive to the time (July 1956) the financing
procedure was changed.
Auto depreciation allowances.—The auto depreciation adjustment
arose out of the Government reimbursing its employees for using
their personal cars in Government service. In the NIA the reimbursement was split into two categories—that part which was payment for the cost of fuel, oil, etc. and that part considered as depreciation on the value of the car. The former part of the payment was
always considered purchases of goods and services, but the depreciation
allowance was considered a transfer payment. Generally the recipients
of these payments fail to distinguish between the two components—
both are looked on as simply part of the value of service rendered.
This revision eliminates the distinction in the NIA; all of the reimbursement is now treated as a purchase of goods and services. The
bulk of these purchases are by defense agencies, but some nondefense
purchases are affected by the same revision.
Reclassification of enterprises.— Reclassification of certain Government agencies from being Government enterprises to "Government"
has resulted in raising nondefense purchases (as measured) and
reducing enterprise deficits (or raising enterprise surpluses). The
criterion for classifying an activity as a Government enterprise is that
operating income must cover at least one-half of the operating expenses. In the past, interest income was included in the operating
income in making these calculations but was excluded from the
calculations in estimating the enterprise surplus or deficit, since
interest was included in net interest paid. Under the new procedure,

THE BUDGET FOR FISCAL YEAR

1977

interest is left out of the computation in deciding whether an activity
is to be included as a Government enterprise. This resulted in reclassification of 9 activities—primarily credit programs—as being part
of Government rather than Government enterprises. The net transactions of these activities that would have—in the past—counted as
enterprise deficits now count as nondefense purchases.
Grossing workmen's compensation.—In the past the NIA treated
Federal budget outlays for workmen's compensation (for Federal
employees) as nondefense purchases; that is, as part of the cost of
maintaining the Federal labor force. This treatment is appropriate
in measuring the cost of the labor force to the Government. However,
these are also payments to individuals for which no current service
is rendered and, hence, are transfer payments. Under the new definition
the NIA will continue to show this amount as nondefense purchases
and will also show an identical amount of transfer payments and
imputed social insurance contributions. This is the same treatment
that has been given all along for unemployment compensation for
ex-Federal employees. Since receipts and expenditures are increased by
identical amounts, the surplus or deficit is unaffected by this change.
RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR OF THE
NATIONAL INCOME ACCOUNTS

Table A - l l shows the major differences between the budget and
the Federal sector of the NIA. These differences are explained below.
Table A-11. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR,
NIA (in billions of dollars)
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

281.0

297.5

81.9

351.3

5.1
2.4
-6.4
-.7

5.6
2.4
3.0
-1.1

1.5
.6
2.7
-.2

6.1
2.7
5.5
-.9

281.5

307.4

86.5

364.7

324.6

373.5

98.0

394.2

-4.8

-5.4

-1.2

-3.2

5.1
2.4
-.6
2.0
-.1

5.6
2.4
.5
2.6
-.5

1.5
.6
-1.5
.3
-.5

6.1
2.7
-.5
5.4
-.2

328.7

378.7

97.2

404.5

RECEIPTS
Total budget receipts

Government contribution for employee retirement
(grossing)
Other netting and grossing
Ad justment to accruals
Other
Federal sector, NIA receipts

EXPENDITURES
Total budget outlays

Lending and financial transactions..
Government contribution for employee retirement
(grossing)
Other netting and grossing
Defense timing adjustment
Bonuses on Outer Continental Shelf land leases
Other
Federal sector, NIA expenditures

SPECIAL ANALYSIS A

Lending and financial transactions.—Conceptually, the national
income accounts measure the Nation's current income and production,
and therefore do not include transactions—such as loans—that are
an exchange of assets and liabilities rather than current income or
production. Loan transactions have a significant economic impact,
affecting income and output, but they are analyzed more appropriately within a different accounting framework. Special Analysis C
(Borrowing, Debt, and Investment) and Special Analysis E (Federal
Credit Programs) both contain information on the financial market
implications of the budget.
Most of the lending and financial transactions shown in table
A - l l are shown in Special Analysis E. However, this total differs
from the total for direct loans shown in Special Analysis E because:
(a) The NIA records nonrecourse agricultural commodity loans as
purchases rather than loans; (b) capital contributions to international
financial institutions, while not technically loans, are excluded from
the NIA and treated as financial transactions; and (c) Special Analysis
E separately also shows credit transactions of privately owned Government-sponsored enterprises that are not included in the budget or
the Federal sector NIA (since they are private enterprises) and therefore do not require reconciliation.
Government contribution for employee retirement.—The contributions
of Government agencies to the retirement trust funds of their employees are not included in the budget totals. While the outlays are
recorded in each agency's budget, they are offset by an intragovernmental deduction. However, the NIA counts Government payments
for employee retirement as part of the compensation paid to Government employees and, therefore, as Government expenditures; this
treatment maintains comparability with the treatment of employee
retirement contributions in the rest of the economy. This category
includes contributions by Government enterprises such as the Postal
Service; Government enterprise contributions increase the current
deficit of enterprises rather than nondefense purchases. The receipt of
these retirement contributions is treated in the NIA as contributions
for social insurance. Since receipts and expenditures are increased by
equal amounts, this treatment has no effect on the surplus or deficit.
Over 75% of these payments go to the civil service retirement fund,
while most of the remainder is for Federal employees insured under
social security.
Other netting and grossing.—The budget normally counts as receiptsonly income from taxation or similar sources that arises from the
exercise of governmental power to compel payment. Money received
in the course of business-type transactions, therefore, is normally
shown as offsets against expenditures. For instance, receipts from
two major insurance programs operated by the Veterans Administration (National Service Life Insurance and U.S. Government Life
Insurance) are netted against expenditures in the budget since these
programs are voluntary, commercial-type activities. However, in
the NIA these insurance premiums are treated as social insurance
receipts just as are receipts from compulsory Government programs.
Adjustments of this type affect total receipts and expenditures

THE BUDGET FOR FISCAL YEAR 1977

equally and thus do not alter the surplus or deficit of either the
budget or the Federal sector NIA. Other netting and grossing also
includes some imputed contributions for social insurance for unemployment compensation and workmen's compensation for Federal
employees.
Timing adjustments.—The budget records receipts at the t me the
cash is collected regardless of when the income is earned, while outlays
(except interest) are generally recorded at the time the checks are
issued. The NIA attempt to record most receipts from the business
sector in the time period in which the income is earned rather than
when taxes are actually paid, while personal income taxes and social
insurance contributions are recorded at the time of payment by the
individual taxpayer.
The principal timing adjustment to expenditures is for defense
purchases. Procurement items (such as missiles or airplanes) purchased under most fixed-price contracts are recorded in the Federal
sector NIA as defense purchases at the time of delivery to the Federal Government rather than when they are fabricated or when they
are paid for; work in progress is counted as part of private business
inventories until the articles are completed and delivered to the
Government. In both the budget and the NIA accounts, public debt
interest is recorded when it accrues.
Bonuses on Outer Cont'nental Shelf land leases.—In recent years
bonuses paid on the Outer Continental Shelf oil leases have become a
significant reconciliation item between the unified budget and the
NIA. The budget records these bonuses as proprietary receipts and,
therefore, deducts them from budget outlays. The NIA excludes these
transactions as being a transfer of assets because the payments are
not included in calculating book profits under current corporate accounting practice.
Other.—This category includes some miscellaneous adjustments,
largely for certain specialized aspects of the national income accounts,
such as the purchase and sale of land and geographical exclusions
arising out of transactions with Puerto Rico, the Virgin Islands, and
other U.S. territories. Certain nondefense timing adjustments are
included here because of the difficulty in separating them from other
adjustment categories. This category includes adjustments for certain
foreign currency transactions that are not included in the budget and
transactions of Federa agencies or activities that are excluded from
the budget but included in the Federal sector NIA.

Table A-J 2. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1966-77 (in billions of dollars)
Actual
Description

1966

1967

1968

1969

1970

Estimate

1971

1972

1973

1974

1975

1976

1977

RECEIPTS, NATIONAL INCOME BASIS

Personal taxes and nontaxes.
Corporate profits tax accruals
_
Indirect business tax and nontax accruals
Contributions for social insurance. _ _
Total receipts, national income basis...
EXPENDITURES,

NATIONAL
BASIS

57.5
30.8
15.5
28.9

64.4
30.3
15.8
35.5

71.4
33.2
17.1
38.4

90.0
37.0
18.6
44.5

93.6
33.0
19.2
49.2

87.5
32.0
20.0
52.9

100.3
34.2
19.9
59.1

107.3
40.5
20.7
71.5

122.9
43.6
21.4
83.7

126.4
40.6
22.4
92.0

136.4
47.5
24.0
99.5

160.4
58.2
24.3
121.8

132.7

146.0

160.0

190.1

194.9

192.5

213.5

240.0

271.6

281.5

307.4

364.7

72.4
(54.1)
(18.3)
34.1
(31.8)
(2.3)
12.7
8.7

86.0
(67.0)
(19.0)
39.3
(37.2)
(2.2)
14.8
9.6

95.0
(74.9)
(20.1)
44.8
(42.7)
(2.1)
17.8
10.5

98.0
(76.1)
(21.9)
50.9
(48.7)
(2.2)
19.2
12.1

97.0
(75.3)
(21.7)
57.0
(55.0)
(2.0)
22.6
13.6

94.8
(72.1)
(22.7)
70.1
(67.7)
(2.3)
26.8
14.2

100.9
(72.5)
(28.4)
78.9
(76.1)
(2.8)
32.6
14.1

101.5
(73.2)
(28.4)
89.7
(87.1)
(2.7)
40.4
15.9

104.5
(74.0)
(30.5)
104.7
(101.7)
(3.0)
41.6
19.8

117.6
(80.3)
(37.3)
134.8
(131.7)
(3.1)
48.3
22.0

130.0
(86.7)
(43.3)
158.7
(155.1)
(3.6)
57.8
26.0

139.4
(92.8)
(46.6)
168.2
(164.4)
(3.8)
59.3
32.0

4.8

5.2

4.1

4.6

5.4
—.1

6.8
.1

6.4

9.1
—.5

7.9
.1

5.7
.4

6.2

5.6

132.7

154.9

172.2

184.7

195.6

212.7

232.9

256.1

278.7

328.7

378.7

404.5

-8.9

-12.2

+5.4

-.6

-20.2

-19.5

-16.1

-7.1

-47.2

-71.3

-39.8

INCOME

Purchases of goods and services
Defense....
Nondefense.
Transfer payments
Domestic ("to persons")
Foreign
Grants-in-aid to State and local governments.
Net interest paid
Subsidies less current surplus of Government
enterprises
__
_
Wage disbursements less accruals
Total expenditures, national
basis.
_

income

Excess of receipts (-f) or expenditures (—),
national income basis..

•$50 million or less.
Note.— Excludes the transition quarter. Data on the transition quarter are shown in table A—1.

SPECIAL ANALYSIS B
FUNDS IN THE BUDGET

This analysis classifies budget information by the groups of funds
that comprise the budget. It also presents information on the nature
of receipts for the largest trust funds.
DISTRIBUTION OF TOTALS, BY FUND GROUPS

Table B-l shows the distribution of total budget receipts and outlays
between the Federal funds and the trust funds. The two groups together, after deducting for transactions that flow between them, make
up the budget totals.
Table B-l. BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP
(in millions of dollars)
1975
actual

1976
estimate

TQ
estimate

1977
estimate

195,324
-1,265
-6,050
-505

207,620
-1,586
-6,357
- 1 , 304

56,799
-269
-1,411
-360

245,483
-1,502
-10,973
- 2 , 252

187,505

198, 373

54, 758

230, 755

125,831
-1,035
- 5 , 240
-967

144,180
-1,092
- 7 , 347
-988

35,826
-3
- 1 , 886
-153

168,147
-1,295
-8,096
-1,072

118,590

134,754

33,783

157,684

-25,098

-35,593

-6,647

-37,177

280,997

297,534

81,894

351,262

246,347
-1,265
-6,050
-505

286,170
-1,586
- 6 , 357
- 1 , 304

238,527

276,923

69, 764

286,243

118,412
-1,035
- 5 , 240
-967

141,631
-1,092
- 7 , 347
-988

36,897
-3
- 1 , 886
-153

155,634
-1,295
-8,096
-1,072

111.171

132,205

34,855

145,171

-25,098

-35,593

-6,647

-37,\77

Total budget outlays

324,601

373,535

97,971

394,237

Budget deficit

-43,604

-76,001

-16,077

-42,975

Description
RECEIPTS
Federal funds:
Total in fund accounts
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Receipts, Federal funds
Trust funds:
Total in fund accounts
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Receipts, trust funds
Interfund transactions
Total budget receipts
OUTLAYS
Federal funds:
Total in fund accounts
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Outlays, Federal funds
Trust funds:
Total in fund accounts
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Outlays, trust funds
Interfund transactions

71,805 300,971
-269 -1,502
- 1 , 4 1 1 - 1 0 , 973
- 3 6 0 - 2 , 252

SPECIAL ANALYSIS B

FEDERAL FUNDS

The Federal funds are derived mainly from taxes and borrowing.
Most of these funds are not restricted by law to any specific governmental purpose. There are four types of Federal fund accounts—
general funds, special funds, public enterprise (revolving) funds, and
intragovernmental revolving and management funds.
Table B-2. FEDERAL FUND RECEIPTS AND OUTLAYS (in millions of dollars)
Description

1975
actual

1976
estimate

estimate

1977
estimate

RECEIPTS BY SOURCE
Individual income taxes
Corporation income taxes
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total receipts, Federal funds

122,386
40,621
9,400
4,611
3,676
6,811

130,822
40,056
10,214
5,100
3,800
8,381

40,003
8,416
2,380
1,400
1,000
1,559

153,641
49,461
10,250
5,800
4,300
7,303

187,505

198,373

54,758

230,755

724
283
93

900
341
89

223
94
19

958
390
73

4,345

5,245

498

906
19

3,951

520
9,722
1,589
85,015
2,045
37,343
7,488
2,166
2,067
5,220

14,199
1,989
89,756
2,131
41,714
7,204
2,575
2,281
16,360
1,236
4,818
45,515
4,078
3,193

3,257

10,754
2,159
99,557
2,163
44,258
7,174
2,603
2,250
10,076
1,018
4,817
51,500
5,311
4,500
-605
3,674
16,980
16,214

OUTLAYS BY AGENCY
Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
Foreign assistance
Other
Agriculture
Commerce
Defense—Military 1
Defense—Civil
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Energy Research and Development Administration
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies
Undistributed offsetting receipts: Rents and royalties
on the Outer Continental Shelf
Allowances 2
Total outlays, Federal funds
Excess of outlays ( - )
1
2

818
3,824
41,371
3,165
2,530
-625
3,264
16,270
11,718

186

557
24,474

702
10,077
1,927

854
618
3,195

374
1,161
12,252
1,192

838
45
908

3,515
18,805
13,095

4,365
2,035

-3,000

-500

208

200

175

-6,000
2,260

276,923

69,764

286,243

-51,023 -78,550 -15,006

-55,488

-2,428

238,527

Includes allowances for civilian and military pay raises for Department of Defense.
Includes allowances for civilian agency pay raises, and contingencies.

Receipts and outlays.—The receipts of the general and special
funds in 1977 are estimated at $230.8 billion. Outlays of all the Federal
funds are estimated at $286.2 billion. The distribution of receipts by
source, and outlays by agency, is shown in table B-2. The proprietary

210-700 O - 76 - 3

THE BUDGET FOR FISCAL YEAR 1977

receipts of the general fund and special funds, the Federal 'intrafund
receipts and the collections credited to public enterprise and intragovernmental funds, have all been offset in arriving at the outlays
for each agency.
Obligations.—The obligations (net) for Federal funds are estimated
at $321.8 billion for 1977, as set forth in table B-3. These transactions largely flow from budget authority for Federal funds of
$311.9 billion for the year, although in part the obligations were
authorized by prior years' budget authority.
Table B-3. OBLIGATIONS INCURRED, NET, IN FEDERAL FUNDS
(in millions of dollars)
Department or other unit

Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
International security assistance
International development assistance
Other
Agriculture
Commerce
Def ense-Military»
Defense—Civil.
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
,._
Treasury
.-" — :
Energy Research and Development Administration
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Civil Service Commission
Export-Import Bank
Federal Home Loan Bank Board
Postal Service
Railroad Retirement Board
Other independent agencies
Allowances2
Undistributed offsetting receipts:
Rents and royalties on the Outer Continental Shelf.
Total
1
2

1975
actual

1976
estimate

TQ
estimate

1977
estimate

688
290
73

916
349
70

216
88
18

1,006
398
73

1,899
1,733
435
9,597
1,478
83,804
1,828
37,803
27,988
2,258
2,090
6,164
964
4,477
41 413
'
3,514
4,928
—801
3, 246
16,171
4,153

3,049
2,231
584
14,136
2,387
100,250
2,207
41,538
38,246
2,816
2,277
16,993
1,108
6,327
45 428
'
4,933
5, 350
195
3,965
19,270
5,184

—15
235
11
3,474
454
23,968
666
12,194
3,799
881
565
2,304
386
1,219
12 258
'
1, 302
1,244
61
931
4,465
128

915
1,875
4
4,461

-9
1,690
288
6,074
225

-87
431
10
2,326
150

2,567
1,590
242
10,893
1,865
107,289
2,207
45,775
27,755
2,524
2,142
9,014
1,084
5,986
51 520
'
6,047
6, 783
—584
3,693
16,945
7,717
3,348
-384
1,459
290
5,949
2,590

-2,428

-3,000

-500

-6,000

261,020

325,075

73,180

321,783

Includes allowances for civilian and military pay raises for Department of Defense.
Includes allowances for civilian agency pay raises and contingencies.

Balances of prior authority.—Table B-4 shows the balances of budget
authority carried forward in Federal funds at the end of each fiscal year.
To the extent that valid Government obligations have been incurred
and remain unpaid, amounts sufficient to pay them may be carried
over into the next year. Unobligated balances may be carried forward

Table B-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY (in millions of dollars)
Department or other unit

Legislative branch
The Judiciary
Executive Office of the President
Funds appropriated to the President:
International security assistance
International development assistance
Other
Agriculture
Commerce
Defense—Military i
Defense-Civil
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
.
.
Labor
.
.
State
Transportation
Treasury
Energy Research and Development Agency
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Administration
Civil Service Commission
Export Import Bank
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board
Other independent agencies .
_
Allowances2
._
Total

Start 1975
Obligated

End 1975

Unobligated

Obligated

End 1976

Unobligated

44
22
47

202
*
*

6
29
26

256
13
1

22
37
7

3,395
4,506
1,893
4,467
1,759
28,566
798
13,806
84,508
1,284
1,216
1,596
92
2,160
271
1,441
5,516
380
916
1,429
10

5
10,647
259
6,974
310
15,093
203
1,695
36,791
633
154
756
74
5,462
55
354
8,136
10
479
1,940
6

2,994
4,684
1,292
4,329
1,658
27,238
581
14,159
105,014
1,368
1,235
2,473
228
2,808
307
1,791
7,909
206
897
1,323
17

15
10,371
461
12,530
624
16,691
157
2,252
59,279
2,106
172
7,049
235
13,076
133
412
11,719
47
462
1,983
5

2,854
5,009
1,129
4,266
2,055
37,732
658
14,183
136,056
1,609
1,231
3,097
99
4,317
220
2,646
10,066
215
1,347
1,788
11

*
3,214

3,000
8,196
3,409

-10
2,896

3,000
9,271
2,819

163,335

104,848

185,459

155,141

* Less than $500 thousand.
Includes balances of allowances for civilian and military pay raises for Department of Defense.
Includes balances of allowances for civilian agency pay raises and contingencies.

1
2

Obligated

-13
3,055
25
233,722

End TQ

Unobligated

213
9

Obligated

15
31
6

End 1977

Unobligated

Obligated

Unobligated

209
6

64
39
6

116

2,883
4,601
1,018
4,623
1,658
44,958
666
17,818
158,509
1,558
1,069
1,143
176
5,545
245
3,492
12,755
251
1,389
1,854
11
11,135

9
10,588
275
12,206
339
14,797
32
692
18,967
1,339
54
1
20
8,632
2,403
500
20
7
52
2,108
5

10,278
337
12,430
519
12,270
75
1,663
31,704
1,599
57
2,423
12
11,049
2,435
500
7,140
24
50
2,051
4

2,473
4,745
1,074
4,484
1,952
37,227
622
16,301
137,928
1,636
1,177
2,206
110
4,375
^26
2,756
10,472
231
1,370
1,889
11

10,276
294
11,314
545
11,130
63
930
28,553
1,516
53
701
9
10,613
2,387
500
6,085
-2
51
1,957
5

3,000
7,280
11,357

-2
3,817

3,000
7,367
10,208

118,480

237,132

107,772

-8
3,945
330
281,735

3,000
7,751
10,031
93,943

THE BUDGET FOR FISCAL YEAR

1977

in accordance with specific provisions of law, usually in order to permit
completion of projects as contemplated at the time the appropriations
were first made, but also to provide funding for activities of a continuing nature (such as business-type enterprises) or for standby
emergency purposes (such as backup for insurance of the Federal
Deposit Insurance Corporation).
PUBLIC ENTERPRISE FUNDS

The public enterprise funds are a subgroup of Federal funds. They
carry on a cycle of business-type operations, primarily with the public,
on behalf of the Government. Some are incorporated enterprises;
others are unincorporated. The general fund usually supplies them with
capital, although in a few cases they may borrow from the public.
Data on public enterprise funds are included on a net outlay basis
in table B-2 through B-4. Gross outlays and applicable receipts are
shown in table B-5.
Receipts and outlays.—Receipts of public enterprise funds are estimated at $27.8 billion in 1977, and gross outlays are planned to total
$33.6 billion, resulting in net outlays of $5.8 billion.
TRUST FUNDS

The trust funds are collected and used for specific purposes; in this
sense they are administered in a fiduciary capacity by the Government. They include trust revolving funds, which, like the public
enterprise funds, carry on a cycle of business-type operations and are
normally stated net of collections by the funds.
Cash operations.—Trust fund receipts are estimated at $157.7 billion
in 1977, with outlays planned at $145.2 billion, as shown in table B-6.
The transactions of the Federal old-age and survivors and disability
insurance funds are far larger than any other trust fund.
In fiscal periods 1975-77, this group of funds has excesses of receipts,
except for the transition quarter,1 of the following amounts (in
millions of dollars):
1975
actual

Total receipts, trust funds
Total outlays, trust funds.

Excess of receipts or outlays ( - ) , trust funds

1976
estimate

118,590 134,754
111. 171 132,205
7,419

2,549

TQ
estimate

33,783
34,855
-1,072

1977
estimate

157,684
145,171
12,513

Receipts by funds.—Table B-7 presents information classifying the
trust fund receipts by major fund, and by source for each such fund.
Outlays by funds.—Corresponding information on trust fund outlays,
classifying the data for the larger funds, is found in table B-8.
1
Outlays exceed receipts primarily because Federal payments to the trust funds for retirement
benefits occurs in fiscal year 1977.

Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in millions of dollars)
Description

Funds appropriated to the President:
Foreign assistance
Other
Agriculture:
Commodity Credit Corporationl
Farmers Home Administration
Federal Crop Insurance Corporation
Commerce
Defense:
Military
Civil (Panama Canal Company)
Health, Education, and Welfare
Housing and Urban Development:
Government National Mortgage Association
Urban renewal fund
Low-rent public housing fund
Federal Housing Administration
Other
Interior
Transportation
Treasury
Energy Research and Development Administration.
Environmental Protection Agency
General Services Administration
Veterans Administration
See footnotes at end of table.

Applicable receipts
1975

1976

Gross outlays
1977

1975

1976

1977

492
*

808
*

152
*

535
*

688
1

741
2

135
1

495
2

3,297
8,261
55
61

3.528
7,119
74
69

580
1,854
18

3,564
9,095
74
78

4,038
7,059
74
25

5,160
7,619
71
34

1,020
1,969
2
25

4,256
8,331
79
33

4
254
148

6
275
161

1
73
47

6
309
157

44
251
254

12
278
336

2
73
77

12
307
287

2,052
597
695
1,298
260
142
51
3

6,343
626
658
1,286
265
438
65
1,302

1,891
157
164
328
62
111
17
1,500

1,314
736
658
1,449
269
478
55
2,101

4,156
1,944
641
2,386
347
302
795
1

1
3
1,007

*
1
200

1
3
1,353

*
1
794

2,082
457
164
533
109
135
387
1,500
1
*
*
224

1,463
1,712
658
2,279
510
602
1,643
2,101

1
3
794

6,813
2,051
658
2,447
647
509
1,412
1,301
3
1
2
881

*
2
950

Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in millions of dollars)—Continued
Applicable receipts
Description

Other independent agencies:
Emergency Loan Guarantee Board
Export-Import Bank
Farm Credit Administration
Federal Home Loan Bank Board:
Federal Savings and Loan Insurance Corporation
Revolvingfund
National Credit Union Administration
.
Pennsylvania Avenue Development Corporation.Small Business Administration
Tennessee Valley Authority
Total

1975
actual

1977
estimate

1
8

5
2,203
2

1975
actual

1976
estimate

*
8

TQ
estimate

*
7

1977
estimate

*
_.
8

1
3,509
8

496
35
32
-463
1,249

476
65
36

112
25
10

540
94
42

180
1,272
18

164
370
20

28
10
5

649
1,794

125
446

662
2,047

1,060
2,016

1,121
2,906

225
696

212
42
21
4
1,032
3,097

20,756

27,070

7,879

27,837

28,354

35,568

9,864

33,647

(18,247)
(2,509)

(23,735)
(3,335)

(7,197)
(682)

(24,666)
(3,171)

*Less than $500 thousand.
1 Receipts include advances from foreign assistance and special export programs
of $778 million in 1975. $1,090 million in 1976. $146 million in the TQ.and $1,169
million in 1977.

Gross outlays

TQ
estimate

7
7

Receipts from the public
Receipts from other accounts

1976
estimate

Table B-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS (in millions of dollars)
Outlays
Description

Federal old-age, and survivors, and disability insurance trust funds
Health insurance trust funds
State and local government fiscal assistance trust fund
Unemployment trust fund
Railroad employees retirement funds
Federal employees retirement funds
Airport and airway trust funds
Highway trust funds
Foreign military sales trust fund
Veterans life insurance trust funds
Other trust funds (nonrevolving)
Trust revolving funds
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Total

1975
actual

1976
estimate

64,658
73,767
14,781
17,433
6,138
6,272
13,211
18,500
3,077
3,474
7,128
8,506
579
820
4,843
6,625
3,537
5,900
816
728
444
658
-801 -1,054

Receipts

TQ
estimate

19,922
4,562
1,627
3,700
902
2,331
278
1,924
1,564
129
165
-207

1977
estimate

1975
actual

1976
estimate

TQ
estimate

1977
estimate

84,022
19,646
6,549
16,500
3,678
10,105
1,131
6,915
7,000
750
612
-1,273

66,676
16,904
6,205
8,195
2,772
11,468
1,058
6,774
4,415
873
491

70,782
18,559
6,355
16,700
3,255
13,032
1,117
6,328
6,500
904
649

18,864
5,059
1,626
3,400
494
2,124
283
1,902
1,664
241
168

84,819
23,028
6,542
16,900
3,771
15,935
1,240
7,115
7,200
970
628

118,412
-1,035
-5,240
-967

141,631
-1,092
-7,347
-988

36,897
-3
-1,886
-153

155,634
-1,295
-8,096
-1,072

125.831
-1,035
-5,240
-967

144,180
-1,092
-7,347
-988

35,826
-3
-1,886
-153

168,147
-1,295
-8,096
-1,072

111,171

132,205

34,855

145,171

118,590

134,754

33,783

157,684

THE BUDGET FOR FISCAL YEAR

1977

Table B-7. TRUST FUND RECEIPTS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description

Federal old-age, survivors, and disability insurance
trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement...
Other (mainly receipts of special Federal payments).
Proposed legislation

1975
actual

1976
estimate

TQ
estimate

1977
estimate

62,458
2.808

66,465
2,837

17,917
692

76,912
2,654

916
494

963
517

255
*

1,054
717
3,482

66,676

70,782

18,864

84,819

13,158
712

13,981
794

3,910
212

15,978
872

166
2,868

175
3,606
3

46
884
8

191
5,997
—10

16,904

18,559

5,059

23,028

6,205

6,355

1,626

6,542

6,771
639
785

7,723
465
8,512

2,214
86
1,100

9,964
336
5,700
900

8,195

16,700

3,400

16,900

Railroad employees retirement funds:
Social insurance taxes and contributions
Interest on Federal securities
Receipts from other trust funds
Other (mainly receipts of special Federal payments).
Proposed legislation

1,489
274
1,010
—2

1, 639
290
1,083
243

430
70

1,942
255
1,289
250
35

Subtotal Railroad employees retirement funds.

2,772

3,255

494

3,771

2,561
2,143

2, 760
2,434

703
728

2,804
2,733

5,769
967
28

6,605
988
6

537
153
3

9,320
1,072
6
*

2,124

15,935

Subtotal Federal old-age, survivors, and disability insurance trust funds
Health insurance trust funds:
Social insurance taxes and contributions
Interest on Federal securities
Federal payment as employer for employee retirement
Other (mainly receipts of special Federal payments).
Proposed legislation
Subtotal Health insurance trust funds
State and local governmentfiscalassistance trust fund:
Deposits for general revenue sharing
Unemployment trust fund:
Social insurance taxes and contributions.
Interest on Federal securities
Advances from general fund
Proposed legislation
Subtotal Unemployment trust fund

Federal employees retirement funds:
Social insurance taxes and contribution
Interest on Federal securities
Federal payment as employer for employee retirement (including payment on prior year liabilities):
Agencies included in budget
Agencies excluded from budget
Other receipts
Proposed legislation
Supplemental now requested
Subtotal Federal employees retirement funds.. _
See footnotes at end of table.

—6

239
11,468

13,032

SPECIAL ANALYSIS B

Table B-7. TRUST FUND RECEIPTS (in millions of dollars)-Continued
[Amounts under proposed legislation are shown separately]
Description

Airport and airway trust funds:
Excise taxes
Interest on Federal securities
Proposed legislation
Subtotal Airport and airway trust funds
Highway trust funds:
Excise taxes
Interest on Federal securities
Other receipts
Subtotal Highway trust funds
Foreign military sales trust fund
Veterans life insurance trust funds:
Interest on Federal securities
Other receipts
Subtotal Veterans life insurance trust funds
Other trust funds (nonrevolving)
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies
Total receipts

1975
actual

1976
estimate

TQ
estimate

1977
estimate

962
96

969
141
7

254
38
—9

1,046
186
8

1,058

1,117

283

1,240

6,188
586
*

5,711
617

1,746
156

6,502
613

6,774

6,328

1,902

7,115

4,415

6,500

1,664

7,200

399

425

117

460

474

479

124

510

873

904

241

970

491

649

168

628

125,831
-1,035
—5,240
-967
118,590

144,180
-1,092
—7,347
-988
134,754

35,826
-3
—1,886
-153
33,783

168,147
-1,295
—8,096
-1,072
157,684

"'Less than $500 thousand.

Table B-8. TRUST FUND OUTLAYS (in millions of dollars)
[Amounts under proposed legislation are shown separately]
Description

Federal old-age, survivors, and disability insurance
trust funds:
Benefit payments
Payments to other trust funds
Administrative expenses and other
Proposed legislation
Subtotal Federal old-age, survivors, and disability insurance trust funds

1975
actual

1976
estimate

TQ
estimate

62,469
1,010
1,179

71,386
1,083
1,298

19,581

64,658

73,767

19,922

353
—12

1977
estimate

82,166
1,289
1,393
—826
84,022

THE BUDGET FOR FISCAL YEAR 1977
Table B-8. TRUST FUND OUTLAYS (in millions of dollars)—Continued
[Amounts under proposed legislation are shown separately]
Description

Health insurance trust funds:
Benefit payments
Administrative expenses and other
Proposed legislation

1975
actual

1976
estimate

TQ
estimate

1977
estimate

14,118
663

16,871
877
-315

4,745
218
-401

20,995
882
-2,231

14,781

17,433

4,562

19,646

6,138

6,272

1,627

6,549

12,025
1,186

17,042
1,458

3, 329
371

14, 708
1,492
300

13,211

18,500

3,700

16,500

3,052
25

3,445
29

895
7

3,645
33

3,077

3,474

902

3,678

6,899
208
21

8,284
206
16

2,272
55
4
*

9,926
231
18
—70

7,128

8,506

2,331

10,105

579

671
149

160
118

654
476

Subtotal Airport and airway trust funds

579

820

278

1,131

Highway trust funds:
Current programs (mainly grants to States)
Supplemental now requested

4, 843

5,275
1,350

1,924

6,915

4,843

6,625

1,924

6,915

3,537
816
444
-801

5,900
728
658
-U)54

1,564
129
165
-207

7,000
750
612
-1,273

118,412
-1,035
—5,240
— 967

141,631
-1,092
—7,347
— 988

36,897
-3
—1,886
— 153

155,634
-1,295
—8,096
— 1,072

111,171

132,205

34,855

Subtotal Health insurance trust funds
State and local government fiscal assistance trust fund:
Payments for general revenue sharing
Unemployment trust fund:
Withdrawals for benefit payments
Administrative expenses and other
Proposed legislation
Subtotal Unemployment trust fund
Railroad employees retirement funds:
Benefit payments and claims
Administrative expenses and other
Subtotal Railroad employees retirement funds..
Federal employees retirement:
Benefit payments and claims
Refunds to former employees
Administrative expenses and other
Proposed legislation
Subtotal Federal employees retirement
Airport and airway trust funds:
Current programs
Proposed legislation

Subtotal Highway trust funds
Foreign military sales trust fund
Veterans life insurance trust funds
Other trust funds (nonrevolving)
Trust revolving funds
Subtotal
Intrafund transactions
Proprietary receipts from the public
Receipts from off-budget Federal agencies

Total outlays
•Less than $500 thousand.

145,171

SPECIAL ANALYSIS B

Balances of the trust funds.—The balances of the trust funds continue to increase, as shown in the following end-of-year figures (in
millions of dollars):
1974
actual

Open book balances
Investments in U.S. securities:
Public debt
Agencydebt

Total

1975
actual

1976
estimate

TQ
estimate

1977
estimate

5,001

5,276

5,810

5,910

6,044

128,795
1,340

135,939
1,340

137,954
1,340

136,782
1,340

149,286
1,215

135,13S

142,555

145,104

144,032

156^545

A summary of the balances by fund is presented in table B-9. The
amounts include both open-book balances with Treasury and investments in U.S. securities. Part of the balances is obligated, part unobligated. The balances on an authorization basis exceed the cash
balances because for a few accounts budget authority is not the same
as receipts; these differences are listed in the note appended to the
table.
Table B-9. TRUST FUND BALANCES (in millions of dollars)
As of June 30
Description

Federal old-age, survivors, and disability
insurance trust funds
Health insurance trust funds
State and local government fiscal assistance
trustfund
Unemployment trust fund
Railroad retirement accounts
Federal employees retirement funds
Airport and airway trust funds
Highway trust funds
Foreign military sales trust fund
Veterans life insurance trust funds
Other trust funds (nonrevolving)
Trust revolving funds
Total

As of Sept. 30

1974
actual

1975
actual

1976
estimate

TQ
estimate

1977
estimate

46,136
9,172

48,153
11,294

45,169
12,420

44,110
12,916

44,908
16,298

1,607
12,428
4,581
34,480
1,534
7,667
1,202
7,594
669
8,066

1,674
7,412
4,275
38,821
2,013
9,597
2,081
7,651
716
8,867

1,756
5,612
4,056
43,346
2,311
9,300
2,681
7,826
708
9,920

1,756
5,312
3,649
43,139
2,316
9,278
2,781
7,938
710
10,127

1,750
5,712
3,741
48,969
2,424
9,479
2,981
8,158
726
11,400

135,136

142,555

145,104

144,032

156,545

Note.—The balances shown here cover the amounts on deposit with Treasury, and the U.S. securities held. In addition, certain funds have authority to obligate in advance of receiving moneys,
and to borrow from the public. The reconciliation is as follows:
Balance available on an authorization
basis
Unfinanced contract authority:
Airport and airway trust fund
Highway trust funds
Foreign military sales trust fund._
Other
Unappropriated receipts:
Available as needed, on an indefinite basis
Available for appropriation by
Congress:
Soldiers' Home permanent fund.
Airport and airway trust fund__
Highway trust funds
Retained as permanent endowment.
Balance available on a cash
basis

1974

1975

1976

155,766

166,299

168,661

165,642

179,114

1977

-1,008
-17,351
-10,768
-7

-514
-19,180
-15,046
-7

-494
-15,091
-18,318

-489
-13,715
-18,324

-484
-13,434
-20,054

-42

93
932
7,515
6

94
1,426
9,443
6

93
1,711
8,522
6

92
1,766
9,038
6

91
1,871
9,421
6

135,136

142,555

145,104

144,032

156,545

THE BUDGET FOR FISCAL YEAR

1977

For 1977, as in many recent years, the largest net investments are
expected to be those of the trust funds established by the Social
Security Act as amended.
Trust revolving funds.—The activities of the trust revolving fund
subgroup are shown in table B-10. The largest of these funds are those
used by the Civil Service Commission to buy insurance for Government employees.
Table B-10. T R U S T REVOLVING FUND TRANSACTIONS (in millions of dollars)
Description

Civil Service Commission
(employees' life insurance
and health benefits)
Federal Deposit Insurance
Corporation
All other trust revolving
funds
Total trust revolving
funds 1

Applicable receipts
1975

1976

866

3,840

2,062

2,702

736

212

836

520

263

298

404

231

3,614

4,152

1,154

1976

2,423

3,118

928

Receipts from the public... (2,194) (2,303)
Receipts from other accounts
(1,420) (1,850)
1

Gross outlays
1977

1975

5,080

2,813

1977
es .

759

3,373

128

138

268

365

947

3,806

3,098

(667) (2,879)
(488) (2,201)

Excludes right-of-way revolving fund which is a part of the highway trust funds.

SPECIAL ANALYSIS C
BORROWING, DEBT, AND INVESTMENT

The major fiscal operations of the Federal Government include not
only taxation and expenditure but also:
• The borrowing of cash to meet current requirements not covered
by receipts and to refinance maturing debt;
• The investment of balances that trust funds and other Government accounts do not currently need for outlays; and
• The provision of assistance, including Government guarantees,
for certain non-Federal borrowing.
This analysis summarizes current developments in Federal borrowing. It also discusses the size and growth of the Federal debt and the
interest on the Federal debt, agency borrowing, agency investment in
U.S. Government securities, the statutory debt limit, and borrowing
by Government-sponsored enterprises. The analysis concludes with a
brief discussion of the trend in Federal and federally assisted borrowing and the relationship of this trend to total funds raised by nonfinancial sectors in the economy. Excluded from this analysis are
other types of Federal liabilities, which include accounts payable,
obligations for undelivered orders, long-term contracts, insurance
commitments, and the obligation for such future payments as social
security, employee retirement, and veterans compensation.
Special Analysis E examines the related subject of Federal credit
programs, which include direct loans, loans by Government-sponsored
enterprises, and Government-guaranteed loans. The factors discussed
in both Special Analyses C and E are significant in appraising the
impact on financial markets of the programs contained in the 1977
Federal budget.
BORROWING AND REPAYING DEBT

The Federal Government borrows from two principal sources.
First, it sells debt to the public, primarily in order to finance Federal
deficits. Second, it sells debt to the Government agencies that accumulate surpluses in separate funds, primarily trust funds, required by
law to be invested in Federal securities. Most Federal debt has been
issued by the Treasury and is called "public debt," but a small portion
has been
issued by other Government agencies and is called "agency
debt." 1
The gross Federal debt includes debt held by both the public and
the agencies. Since Treasury borrowing from the agencies is an internal
transaction between two funds both within the Government itself,
only borrowing from the public affects the volume of securities sold
in the financial markets and the taxes required to pay interest on the
Federal debt.
1
The term "agency debt" is defined more narrowly in the budget than in the securities market,
where it may include not only the debt of the Government agencies listed in table C-5 but also the
debt of other issuers such as the Government-sponsored enterprises listed in table C— 8.

THE BUDGET FOR FISCAL YEAR 1977

Borrowing from the public—whether by the Treasury or by an
agency—has a significant impact on financial markets and the rest
of the economy, and it is consequently an important concern of
Federal fiscal policy. For most purposes borrowing from the Federal
Reserve System should be distinguished from borrowing from the rest
of the public. Federal Reserve purchases of debt are undertaken to
carry out monetary policy, not to earn income, and affect the economy
by expanding bank reserves and the money stock. They thus have a
markedly different motivation and effect on financial markets than
do purchases by other sectors of the public. The debt held outside the
Federal Reserve System, in contrast, enters into investment portfolios
of businesses and individuals and by this means affects interest rates,
other financial conditions, and the size and composition of private
assets. Almost all interest received by the Federal Reserve System is
returned to the Treasury as receipts, called deposits of earnings, so the
net cost to the Government of Federal Reserve holdings of debt is
very small. The estimates in this analysis for the current and future
years do not divide the debt held by the public between the Federal
Reserve System and the rest of the public, despite the significance of
this division, because the Federal Reserve's open market operations
depend on future economic developments and on policy decisions not
yet made.
Table C-l summarizes Federal borrowing from 1975 through 1977.
In 1975 the total Federal borrowing (net of the refunding of securities)—i.e., the rise in gross Federal debt—was $57.9 billion. The
borrowing from Government agencies was $7.0 billion, and the borTable C-1. FEDERAL BORROWING (in millions of dollars)
Borrowing or repayment ( —) of debt

Description

Gross Federal debt:
Treasurydebt 1
Agency debt 2__

1975
actual

Gross Federal debt 2
Less debt held by Government agencies:
Treasurydebt
Agency debt
Debt held by Government agencies....
Total, debt held by the public

Composed of:
Debt held by the Federal Reserve System...
Debt held by others
_

1976
TQ
1977
estimate estimate estimate

Debt
outstanding
end 1977
estimate

58,953
-1,069

90,000
-200

18,912 67,601
- 4 4 -1,229

709,701
9,810

57,884

89,800

18,868

66,372

719,511

7,077

2,321

-1,129

13,021

159,496

-46

-22

-2

-149

1,769

7,031

2,299

-1.131

12,872

161,265

50,853

87,500

20,000

53,500

558,246

4,344
46,509

NA
NA

NA= Not available.
* Includes $9 million of Federal Financing Bank debt in 1975.
Agency borrowing, gross Federal borrowing, and borrowing from the public in 1977 exclude the
reclassification on October I, 1976, of an estimated $340 million of Export-Import Bank certificates
of beneficial interest from loan asset sales to debt.
2

SPECIAL ANALYSIS C

rowing from the public was $50.9 billion. Of the amount borrowed
from the public, $4.3 billion was borrowed from the Federal Reserve
System and $46.5 billion from the rest of the public—commercial
banks, foreign central banks, other financial institutions and businesses, and individuals.
Borrowing from the public—after rising from $3.0 billion in 1974
to $50.9 billion in 1975—is expected to rise further to $87.5 billion
in 1976 and then fall to $53.5 billion in 1977. The very large increase
in borrowing in 1975 and 1976 has occurred primarily because the recession automatically reduced tax receipts and raised unemployment
benefits and because tax reductions and some expenditure programs
were enacted to stimulate the economy. The estimated decline in borrowing in 1977 is due to both the economic recovery and the President's
proposed program of budget restraint. By the end of 1977 gross
Federal debt is expected to be $719.5 billion, with 78% held by the
public (including the Federal Reserve System) and the remainder by
the agencies. Ninety-nine percent of the gross Federal debt will have
been issued by the Treasury.
Until recent years the Federal debt was held almost entirely by
domestic individuals and institutions. After World War II the debt
held in foreign balances and international accounts tended
to grow
gradually and at the end of 1969 amounted to $10 billion.2 However,
due to international monetary developments, in 1970 the foreign and
international holdings began to grow much faster, and by the end of
1975 they had risen to $66 billion. Most of the Treasury debt held
abroad is owned by foreign central banks. The annual borrowing from
abroad is shown below for 1970-75 in comparison with the annual
borrowing from the domestic public, exclusive of the Federal Reserve
System (in billions of dollars):
Foreign and international
Domestic (excluding Federal
System)

1970
3.7

1971
17.9

1972
17.3

1973
10.2

1974
-2.5

1975
9.1

-3.5

-6.3

-3.8

5.3

37.4

11.6

13.5

15.5

-2.5

46.5

Reserve

Total borrowing from the public
(excluding
Federal
Reserve
System)
*Lc»» than $50 million.

Whereas before 1970 total borrowing from the public was nearly
the same as borrowing from the domestic public, the table shows that
since that time they have been quite different. During 1970-72, $39
billion was borrowed from abroad while $14 billion of debt held by the
domestic public (exclusive of the Federal Reserve System) was redeemed. During most of 1973-75 borrowing from abroad remained
large, though not predominant, accounting for over a quarter of
Federal borrowing from the public (exclusive of the Federal Reserve
System).
2
The estimates of Federal debt held in foreign balances and international accounts do not include
agency debt, the holdings of which are believed to be small. The data were adjusted to exclude tht
special non-interest-bearing notes issued to the International Monetary Fund and international
lending agencies. These notes are not part of gross Federal debt.

THE BUDGET FOR FISCAL YEAR 1977
BORROWING AND GOVERNMENT DEFICITS

Table C-2 shows how borrowing from the public is related to the
Federal deficit. Until recent years the budget deficit constituted practically the entire deficit of the Federal Government, but during 197577 the deficit of the off-budget Federal agencies is also significant. In
1975 the total Government deficit was $53.1 billion. The greater
part of this amount, $50.9 billion, was financed by borrowing from the
public, and the remaining $2.3 billion was financed by other means.
Some of these other means of financing the deficit can be either
positive or negative. In years when they add up to a negative total,
such as is estimated for 1976, they, like the deficit itself, must be
financed by borrowing from the public.
Table C-2. MEANS OF FINANCING THE FEDERAL DEFICIT
(In millions of dollars)
1975
actual

1976
est.

TQ
est.

1977
est.

Budget surplus or deficit (—)
-43,604
Surplus or deficit (—) of off-budget Federal agencies *_
-9,544

-76,001
-9,342

-16,077
-4,040

-42,975
-11.060

-53,149

-85,343

-20,117

-54,035

-273

-1.411

1.362
579
626

167
-1,585
672

131

422

-182
168

-591
704

2,295

-2,157

117

535

Total, requirements for borrowing from the
public
-50,853
Reclassification of securities 3 _

-87,500

-20,000

-53,500
-340

87.500

20,000

53,840

Description

Total, surplus of deficit (—)
Means of financing other than borrowing from the
public:
Decrease or increase (—) in cash and monetary
assets
Increase or decrease (—) in liabilities for:
Checks outstanding, etc.2
_
Deposit fund balances
_ _
Seigniorage on coins
Total, means of financing other than borrowing
from the public

Change in debt held by the public. _ _

50,853

1
The off-budget Federal agencies consist of the Rural Electrification and Telephone revolving fund.
Rural Telephone Bank, Housing for the Elderly or Handicapped fund (as of September 1, 1974).
Pension Benefit Guaranty Corporation. Federal Financing Bank, Export-Import Bank (until October
1, 1976). Postal Service, certain activities of the United States Railway Association, and Energy
Independence
Authority.
2
Besides checks outstanding, includes military payment certificates, accrued interest (less unamortized discount) payable on Treasury debt, and, as an offsetting change in assets, certain collections
in transit.
3
On October 1, 1976, Federal debt held by the public is estimated to increase by $340 million due
to a reclassification of Export-Import Bank certificates of beneficial interest from loan asset salts
to debt.

The means of financing a deficit other than borrowing from the
public are:
• A decrease in cash or monetary assets;
• An increase in monetary liabilities for checks outstanding, etc.;
• An increase in deposit fund balances, which include the balances
of the Exchange stabilization fund and liabilities that arise when
the Federal Government temporarily holds money in deposit

SPECIAL ANALYSIS C

as an agent for someone else (such as State income taxes withheld
from Federal employees' salaries and not yet paid to the State);
and
• Seigniorage, which is the face value of minted coins less the cost
of their production.
As the figures in table C-2 indicate, the extent to which a large deficit
can be financed by means other than borrowing from the public is
very limited. Consequently, the total Government deficit and the
borrowing from the public tend to be closely related.
Borrowing from the agencies largely depends on the surpluses of
the trust funds, which own 93% of the Federal debt held by Government agencies. Agency investment in Federal securities and the total
trust fund surplus during 1974-77 are compared in the table below
(in billions of dollars):
Agency investment in Federal debt
Total trust fund surplus or deficit ( - ) _ . . .

1974
actual
14.8
14.0

1975
actual
7.0
7.4

1976
estimate
2.3
2.5

TQ
estimate
-1.1
-1.1

1977
estimate
12.9
12.5

As this table shows, the agency investment in Federal securities is
similar in size to the total trust fund surplus throughout this period,
and the yearly changes in level are likewise similar. The differences
are accounted for by two factors. Certain agencies other than trust
funds buy and sell Federal debt, as shown in table C-6,
and the trust
funds increase and decrease their open book balances.3
SIZE AND GROWTH OF FEDERAL D E B T

Gross Federal debt has risen substantially over most of the past
four and a half decades, from about $16 billion in 1929 to $544.1 billion
at the end of 1975. Table C-3 presents the detail of Federal debt since
1954 and shows that a sizable part of the increase is held in Federal
Government accounts (primarily trust funds) rather than being owed
to the public. From the end of 1954 to the end of 1975, gross Federal
debt rose by 101% while Federal debt held by the public rose by 77%.
Federal debt held by the public apart from the Federal Reserve
System rose still less, by 56%—an annual compound rate of growth of
2.2% over the 21 years—because during this period the Federal
Reserve System bought a large quantity of Federal debt in the
market, thereby expanding the reserves of the banking system and
providing for growth in the Nation's money stock.
During the depression of the 1930's and during World War II,
Federal debt held by the public increased greatly, not only in absolute
amount but also, as shown in the following chart, as a proportion of
total net indebtedness: Federal, State and local, and private. Whereas
Federal debt held by the public was only 9% of total net debt at the
end of calendar year 1929, it had risen to 62% by the end of calendar
year 1945. Federal borrowing was large during these years, particularly
to finance World War II, and borrowing by other sectors was restricted
by low incomes and poor credit-worthiness during the depression and
by controls and scarcities during the war.
3
Open book balances comprise cash assets not currently invested. As shown in Special Analysis B,
they are very small relative to trust fund holdings of Federal debt.

210-700 O - 76 - 4

T H E BUDGET FOR FISCAL YEAR

1977

Table C-3. COMPARISON OF TRENDS IN FEDERAL DEBT AND
NATIONAL PRODUCT (in billions of dollars)

GROSS

Debt outstanding, end of year
Held by
Fiscal year

1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 2* . . .
1970
1971
1972
1973 3
1974
1975.
1976 estimate _
TQ estimate 4 _ _
1977 estimate

Gross
Federal
debt

270.8
274.4
272.8
272.4
279.7
287.8
290.9
292.9
303.3
310.8
316.8
323.2
329.5
341.3
369.8
367.1
382.6
409.5
437.3
468.4
486.2
544.1
633.9
652.8
719.5

Federal
Government
accounts

46.3
47.8
50.5
52.9
53.3
52.8
53.7
54.3
54.9
56.3
59.2
61.5
64.8
73.8
79.1
87.7
97.7
105.1
113.6
125.4
140.2
147.2
149.5
148.4
161.3

GNP

The public

Total

224.5
226.6
222.2
219.4
226.4
235.0
237.2
238.6
248.4
254.5
257.6
261.6
264.7
267.5
290.6
279.5
284.9
304.3
323.8
343.0
346.1
396.9
484.4
504.4
558.2

Federal
Reserve
System

Other

25.0
23.6
23.8
23.0
25.4
26.0
26.5
27.3
29.7
32.0
34.8
39.1
42.2
46.7
52.2
54.1
57.7
65.5
71.4
75.2
80.6
85.0
NA
NA
NA

199.5
203.0
198.5
196.4
200.9
209.0
210.7
211.4
218.7
222.4
222.8
222.5
222.5
220.8
238.4
225.4
227.2
238.8
252.3
267.9
265.4
311.9
NA
NA
NA

363.5
381.0
410.9
433.3
441.7
471.3
498.3
509.0
545.8
577.1
616.4
658.0
722.4
773.5
830.3
904.2
960.2
,019.8
,111.8
, 238.4
1 ,358.6
,440.0
,593.0
NA
,837.0

Debt held
by public
as percent
of GNP

61.8
59.5
54.1
50.6
51.2
49.9
47.6
46.9
45.5
44.1
41.8
39.8
36.6
34.6
35.0
30.9
29.7
29.8
29.1
27.7
25.5
27.6
30.4
NA
30.4

From 1945 to 1974, however, private debt increased as a proportion
of total debt in every year, and in every year the Federal debt held by
the public (including the Federal Reserve System) decreased as a
proportion of the total. State and local government debt has risen in
amount every year and has risen in proportion to total debt for the
period as a whole. From the end of calendar year 1953 to the end of
1974, Federal debt held by the public rose 59%, State and local
government debt rose 570%, and private debt rose 561%. By the end
of calendar year 1974, Federal debt held by the public was only 13%
of total debt. As a result of these trends, Federal debt and borrowing,
although still significant, have become relatively much smaller influences in the financial markets. Complete data for calendar year
1975 are not yet available, but it is probable that the large Federal

SPECIAL ANALYSIS C

Percent Distribution of Net Indebtedness1
Percent

too

1930
1940
End of Calendar Year
1

1950

i960

1970

f 974

Federal net indebledneM ii the Federal debt held by the puUk (Indttdinj the Federal Reterve System). Private net indebtednen includes the debt of Hie Gownment-iponjored entet prttei, which are federally eifablithed and chartered bat pnvaltfy owned.

deficit caused Federal debt held by the public to rise as a percentage
of total debt. This does not significantly affect the comparison of trends
over three decades.
During the same period Federal debt has decreased relative to gross
national product. As shown in table C-3, debt held by the public
equaled 62% of gross national product at the end of 1954 but declined
steadily to 25% by the end of 1974. In 1975, however, debt held by
the public rose as a percentage of gross national product, and it is
expected to rise further in 1976 before leveling off in 1977.
The interest cost of the debt may be more significant than the
amount of the debt for some types of comparison designed to measure
the importance of Federal indebtedness. Interest on the debt held by
the public has risen much faster than the debt itself, due to a strong
upward trend since World War II in the interest rates that must be
paid on new borrowings and on refunded debt. Between 1954 and 1975
the Federal debt held by the public grew 77%, but, as shown in table
C-4, the interest paid to the public more than quadrupled. For this
period as a whole, interest payments to the public grew faster than
gross national product. In the first 5 years, 1954-58, interest was equal
to 1.39% of gross national product, whereas by the last 5 years, 1971—
75, the proportion had risen moderately to 1.59%. On the other hand,
the proportion of budget outlays devoted to paying interest on the
debt held by the public did not show any trend over the period as a
whole and fluctuated around an average of 7.7%. Interest as a percentage of both gross national product and budget outlays is expected
to rise in 1976 and 1977.

THE

Table C-4.

BUDGET FOB FISCAL YEAR

1977

COMPARISON OF T R E N D S IN INTEREST
DEBT (in billions of dollars)
Interest on the gross Federal debt

Interest on debt
held by the public
as a percent of

Paid to
Fiscal year

Total

The public

Federal
Government

ON FEDERAL

- GNP

Federal

Budget
outlays 2

System 1
1954__
1955
1956
1957
1958
1959__
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
....
1972 . .
1973 _
..__
1974
1975
1976 estimate _
TQ estimate
1977 estimate. __ __..

6.4
6.4
6.8
7.3
7.8
7.8
9.5
9.3
9.5
10.3
11.0
11.8
12.6
14.2
15.6
17.7
20.0
21.6
22.5
24.8
30.0
33.5
38.4
10.6
45.6

1.3
.2

5.2
5.2
5.6

0.5
.4
.5

5.9

.4
.4

6.3
6.4
8.1

.7
.8

7.8

.0
.0

1.6
1.6
1 A

7.9
8.7
9.2

.0
.1
.2

4.7
4.8
51
5 3
5.6
5.6
7.1
6 8
6.9
7.6
8 0

9.8

8.4

.44
.36
6?
53
.45
.50
50
49

10.4
11.6
12.6
14.1
15.6
16.3
16.6
18.5
22.4
24.7
29.2
8.1
36.0

.7
2.0
2.4

8 7
9.6
10.2
11.2
12.2
17 6
12.9
14.7
16.9
18 7
NA
NA
NA

1.51
1 57
1 56
1 63
1 60
1.49
1.49
1.65
1 71
1.83
NA
1.96

2.0
2.1
2.6
3.0

3.5
4.4
5.3
5.8
6.3

7.7
8.8
9.2
2.4
9.6

2.9
3.5
3.7
3.7
4.3

5.5
6.0
NA
NA
NA

1.42
1.36

35
M

.44

7.29
7.56
7.90
7.73
7.68
6.96
8.73
7.95
7.40
7.78
7.80
8.29
7.75
7.36
7.07
7.66
7.95
7.73
7.16
7.51
8.33
7.60
7.81
8.31
9.13

N A = N o t available.
1
Estimated as the average of calendar year figures. The 1975 estimate is tentative.
» Budget outlays for 1954-77 are given in the Budget, part 8. table 22.

Since the end of World War II the composition of the Federal debt
has changed, with an increasingly large proportion of Federal securities having a relatively short maturity. One contributing factor is
the statutory ceiling of 4%% that has been maintained since 1918 on the
interest rate that could be paid on Treasury bonds.4 Because longterm market rates exceeded 4J£% after 1965, the ceiling eventually
prevented the Treasury from selling long-term obligations. Since
1965 the average maturity of Treasury marketable debt has declined from about 5 years to about 3 years. This restriction on Treasury borrowing was relaxed in March 1971 by a law that allowed
the Treasury to issue up to $10 billion of long-term bonds at interest
rates above 4%%. In July 1973 the restriction was relaxed further by
exempting from this limit those bonds held by Government accounts
4
Until 1967. 5-year notes were the longest term security that could be issued without regard to this
limitation. In 1967 the maximum maturity of notes was raised to 7 years.

SPECIAL ANALYSIS C

and the Federal Reserve System. Treasury now has $18.7 billion of
bonds outstanding that have been sold since the change of law in 1971,
including bonds held by Government accounts and the Federal
Reserve System. The effective interest rates have been 6.1% and
higher with an average of 7.4%. The authority to sell bonds under
this exception has now been used up.
BORROWING BY FEDERAL AGENCIES

A few Government agencies are authorized to sell their own debt
instruments to the public and to other Government agencies and
funds. This agency borrowing is part of the gross Federal debt. For
those agencies included in the budget, the authorization to borrow is
budget authority and the disbursement of such borrowed money is a
budget outlay.
Agency debt includes the borrowings of off-budget Federal agencies,
which are Government owned and controlled but whose transactions
have been excluded from the budget totals under provisions of law.
The agencies that have borrowed while off-budget consist of the Export-Import Bank, the Postal Service, the Federal Financing Bank,
and the United States Railway Association. Part of the debt of the
Export-Import Bank and the Postal Service was issued during periods
when they were in the budget. The debt of the Federal Financing
Bank is classified by Treasury as public debt rather than agency debt.
Agency borrowing was shown in total in table C-l and is shown by
agency in table C-5. In 1975 the repayment of agency debt exceeded
new agency borrowing by $1.1 billion. In 1976 and 1977 repayments are expected to exceed new borrowing by small amounts. The
agency debt outstanding on September 30, 1977, is estimated to be
$9.8 billion, which is about 1% of gross Federal debt.
Agency debt will be increased by an estimated $340 million on
October 1, 1976, due to reclassifying as Federal debt the certificates of
beneficial interest in pools of loans issued by the Export-Import Bank
and classified up to that date as loan asset sales. Since this is a reclassification of existing securities, it does not constitute Federal borrowing. Therefore agency borrowing, borrowing from the public, and
gross Federal borrowing in 1977 will be an estimated $340 million less
than the change in debt from the end of the transition quarter to the
end of 1977. Certificates redeemed after the reclassification will show
as repayment of Export-Import Bank debt in table C-5. The issuance
of new certificates after the reclassification would be shown as borrowing, but the Export-Import Bank does not plan to sell more certificates
of beneficial interest after that date.
A further classification change arises from the transfer of all assets
and liabilities of certain expiring funds to the Revolving fund (liquidating programs) in the Department of Housing and Urban Development. Debt of $143 million was transferred from the Public facility
loan fund on April 1, 1975, and debt of $467 million is scheduled to
be transferred from the College housing fund on October 1, 1976.
These transfers do not constitute borrowing by the Revolving fund
(liquidating programs) or repayment of debt by the fund that expires.

THE BUDGET FOR FISCAL YEAR 1977
Table C-5. AGENCY BORROWING 1 (in millions of dollars)
Borrowing or repayment (—) of debt
Description

Borrowing from the public:
Agriculture: Farmers Home Admin.2
Defense
Health, Education, and Welfare 2
Housing and Urban Development!
College housing loans 23_
Public facility loans 2 3
Federal Housing Administration
Housing for the elderly 2
Gov. National Mortgage Association 2_
Revolving fund (liquidating programs) 2 3
Veterans Administration 2
Export-Import Bank 4
Postal Service
Small Business Administration 2
Tennessee Valley Authority
All other
Total, borrowing from the public 4 ...
Borrowing from other funds:
Agriculture: Farmers Home Admin.2
Defense.
Health. Education, and Welfare 2
Housing and Urban Development:
College housing loans2 3
Public facility loans 2 3
Federal Housing Administration
Housing for the elderly 2
Gov. National Mortgage Association 2 .
Revolving fund (liquidating programs)2 3
Veterans Administration 2
Export-Import Bank
Small Business Administration 2
Tennessee Valley Authority

1975
actual

1976
estimate

TQ
estimate

-1

1977
estimate

Debt
outstanding.
end 1977
estimate

-92

-25

-25
-98

291
900
125

61
_•

-73
*
-44
—295

"-41

-17

"-99

576
64
545

-39
4

-18

-4
-55
-789

-570

-100

-1,023

-178

-41

-15

-2

-87
-1
-1

-19
1

-55

-1,079

-21

-14
-3

391
553
2,144
250
227
1,975
2
8,042

156

128
65

1 .
18
*

67
33

-3

4
4
-6

-4

-62

442

-4

211
549

-46

-51 _

Total, borrowing from other funds __

-46

-22

-2

-149

1,769

Total, agency borrowing included
in gross Federal debt4

-1,069
-1,069

-200

-44

-1,229

9,810

MEMORANDUM
Borrowing from Federal Financing Bank:
Tennessee Valley Authority
Export-Import Bank
Postal Service.
United States Railway Association

1,435
4,049
1.000
34

1,100
1,437
1,280
-5

300
393
500
-1

1,000
2,028
1,398
-2

3,835
7.908
4.678
26

Total, agency borrowing from Federal Financing Bank

6,518

3,812

1,192

4,424

16,447

"Less than $500 thousand.
Excludes agency borrowing from Treasury.
Certificate of participation in loans issued by the Government National Mortgage Association
on3 behalf of several agencies.
The debt of the Public facility loan fund ($143 million) was transferred to the Revolving fund
(liquidating programs) on April 1. 1975, and the debt of the College housing fund ($467 million) is
scheduled
to be transferred on October 1, 1976.
4
Borrowing in 1977 does not include the reclassincation on October 1. 1976. of an estimated $340
million of Export-Import Bank certificates of beneficial interest as debt instead of loan asset sales.
1
2

SPECIAL ANALYSIS C

The Federal Financing Bank (FFB) was created in December 1973
under the Treasury Department in order to assist and coordinate
agency borrowing and Government-guaranteed borrowing and to
reduce the cost to the Government of some of its borrowing activities.
It was given the authority to purchase agency debt and Governmentguaranteed obligations and, in turn, to finance these transactions by
borrowing from the Treasury or the public. Since the FFB can borrow
from the Treasury (or the public) at lower interest rates than other
agencies would have to pay in the market, this procedure reduces
the cost of agency borrowing activities. The FFB thus serves as a
conduit for agency borrowing, and Treasury (or FFB) securities
replace the securities of other agencies in the market. Agency borrowing from the FFB is not included in gross Federal debt. It would
be double or triple counting to add together the agency borrowing
from the FFB, the FFB borrowing from Treasury, and the Treasury
borrowing from the public (or the FFB borrowing from the public)
that was necessary to provide the FFB with funds to lend to the
agencies.
The FFB began financial operations in May 1974 and borrowed $1.5
billion in 8-month bills from the public in July 1974. All its other
borrowing, however, has been from the Treasury, because Treasury
can borrow from the public at slightly lower interest rates than FFB
would have to pay. No further FFB borrowing from the public is
planned. The FFB has substantial authority to borrow from either the
Treasury or the public. With the approval of the Secretary of the
Treasury, the FFB is authorized to borrow from the Treasury without
a statutory limitation on the amount and also to have outstanding at
any one time up to $15 billion of publicly issued debt.
As shown in the memorandum section of table C-5, the FFB is
having a profound effect on agency borrowing.5 Four agencies that
would otherwise borrow mostly in the market borrowed $6.5 billion
from the FFB in 1975 and are expected to borrow $3.8 billion in 1976
and $4.4 billion in 1977. Because of this shift in the source of borrowing,
almost no new agency borrowing from the market took place in 1975 or
is scheduled to take place in 1976 and 1977. The change in agency debt
outstanding is thus determined almost solely by the repayment of
maturing debt and consequently is negative throughout the period.
If FFB did not exist and if agency borrowing were the same, the
agency component of gross Federal debt would be about $14 billion
higher at the end of 1977 than is now estimated and the Treasury
component would be correspondingly lower.
By the end of 1977, $4.4 billion of agency debt, or more than twofifths of the total, will be obligations of the four agencies listed in
table C-5 that plan to borrow in the future only from the FFB. A
total of $3.8 billion, or over a third of all agency debt, will consist of
certificates of participation in pools of loans issued by the Government
National Mortgage Association as trustee on behalf of several agencies,
which are identified in table C-5. The issuance of these certificates of
participation was discontinued after 1968. A further $1.0 billion of
agency debt will be family housing mortgages assumed a number of
years ago by the Department of Defense. The remaining agency debt,
•FFB purchases of Government-guaranteed obligations are shown in table C-9.

THE BUDGET FOR FISCAL YEAR 1977
Table C-6. AGENCY INVESTMENT IN FEDERAL SECURITIES
(In millions of dollars)
Increase or decrease ( —) in holdings
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Holdings.
end of
1977
estimate

Investment in Treasury debt:

Health, Education, and Welfare:
Federal old-age and survivors insurance
trust fund
Federal disability insurance trust fund.
Federal hospital insurance trust funcL_
Federal supplementary medical insurance trust fund
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association
Other
Labor: Unemployment trust fund
Transportation:
Highway trust fund
Airport and Airway trust fund
Treasury: Exchange stabilization fund l _ _
Veterans Administration:
National service life ins. trust fund
Other trust funds
Other
Civil Service Commission:
Civil Service retirement and disability
trust fund
Other trust funds
Federal Deposit Insurance Corp.: Trust
fund
Federal Home Loan Bank Board: FSLIC.
Postal Service
Railroad Retirement Board: Trust funds.
Other trust funds
Other Federal funds. _
Other off-budget Federal agencies
_
Total, investment in Treasury debt.
Investment in agency debt:
Agriculture: CCC_
_
Health, Education, and Welfare:
Federal old-age and survivors insurance
trust fund
Federal hospital insurance trust fund._
Housing and Urban Development:
Federal Housing Administration
Government National Mortgage Association._- : _.._.
_
Veterans Administration: National service life insurance trust fund
Civil Service Commission: Civil Service
retirement and disability trust fund. __
Federal Home Loan Bank Board: FSLIC.
See footnotes at end of table.

2,175
-37
1,897

-1,881
-1,131
1,476

-634
-424
583

1,038
-240
2,435

37,860
6,362
14,205

148

-295

-86

947

1,944

200

180

141

1,775

249
8
4,938

222
31
-1,800

28
5
-300

-108
23
400

1,459
200
5,484

1,937
1,058
-913

-285
366

-20
5

200
109

9,430
2,416
1,451

111
-6
33

210
6
32

117
8
8

326
14
32

7,369
1,065
390

4,276
359

4,494
421

-212
107

5,802
467

48.315
3,026

404
316
-72
-290
50
82
31

618
311
-583
-209
26
102
11

73
84
-120
-403
16
-10
-1

842
338

7,798
4,333

140
24
85
6

3,737
275
543
59

7,077

2,321

-1,129

13,021

159,496

-6

-6
._

_
_

-6

___

555
50

192

-21

-12

-2

-8

201

—75

235

-10

375
132

__
*

SPECIAL ANALYSIS C

Table C-6. AGENCY INVESTMENT IN FEDERAL SECURITIES—Continued
(In millions of dollars)
Increase or decrease ( —) in holdings
Description

TQ
cstiro&tc

Holdings

1975
ftccu&l

1975
cstimftcc

1977
IW
cstiiri&tc cstiro&tc

Postal Service.._
_
Railroad Retirement Board: Trust funds.

-19

-4

Total, investment in agency debt. _.

-46
-46

-22
-22

- 22

-149
-149

1,769

Total, agency investment in Federal
debt..

7,031

2,299

-1,131

12,872

161,265

860
7.144
-972

860
2,015
-576

161
-1,172
-121

486
12,379
6

9,254
150,501
1,510

-50

MEMORANDUM
Investment by Federal funds
Investment by trust funds
Investment by off-budget Federal agencies.

* Less than $500 thousand.
1
The change in holdings is not estimated due to the uncertainties in foreign exchange, and the
estimated 197/ year-end holdings are taken to be the actual holdings at the end of 1975.

which is mostly for programs that will continue to borrow from the
public, will constitute only 7% of the total—$643 million of Federal
Housing Administration debentures issued in payment of insurance
claims and $6 million of other obligations.
The Treasury provides capital to business-type Government enterprises both in the form of capital stock and in the form of debt. The
provision of debt is shown as "borrowing from Treasury" on the statements of financial condition for enterprises in the Budget Appendix.
However, the equity and the debt instruments are the same in substance; and it would be double counting to add together the agency
borrowing from the Treasury and the Treasury borrowing from the
public that was necessary to provide the agencies with this capital.
Therefore, agency borrowing from Treasury is excluded from figures
on agency borrowing and debt in all other parts of the budget documents.
AGENCY INVESTMENT IN FEDERAL SECURITIES

Trust funds and some public enterprise funds accumulate cash in
excess of current requirements in order to meet future claims and
demands. Such cash surpluses are invested mostly in Treasury debt
and, to a very small extent, in agency debt. Purchases of these securities are not counted as budget outlays, and redemptions are not
counted as budget receipts.
Net investment by trust funds and other Federal agencies declined
sharply from $14.8 billion in 1974 to $7.0 billion in 1975 and, as shown
in table C-6, is estimated to decline further to $2.3 billion in 1976.
In 1977 this decline is expected to be reversed, with agency investment
rising to $12.9 billion, which is near the 1974 level.
The major cause of the decrease in agency investment from 1974 to
1975 was the large rise in UP employment, which substantially increased the benefit payments of the unemployment trust fund and to
some lesser extent reduced the employment tax receipts of the social

THE BUDGET FOR FISCAL YEAR 1977

security trust funds. Disinvestment by the unemployment trust fund
is considerably reduced in 1976, despite much higher outlays, because
some State funds have disinvested entirely and the Labor Department
will advance $8.5 billion to the trust fund. However, the effect of
the unemployment trust fund is estimated to be offset by several
important factors, the largest of which is a sizable swing from investment to disinvestment by the old age, survivors, and disability
insurance trust funds. The expected rise in agency investment in
1977 is caused in large measure by continued economic recovery,
which reduces unemployment benefits and raises trust fund tax
receipts, and by proposed legislation to increase taxes for the social
security and unemployment trust funds by $5.4 billion.
Total agency holdings of Federal securities will reach an estimated
$161.3 billion by September 30, 1977. This will constitute 22% of
the gross Federal debt. Two major groups of trust funds—the social
security funds and the Civil Service Commission funds—will account
for 68% of total agency holdings, and all the trust funds together
will account for 93%. Ninety-nine percent of the holdings will be
Treasury debt, and the holdings of agency debt will continue to
decline by small amounts each year.
LIMITATIONS ON FEDERAL DEBT

Statutory limitations have customarily been placed on Federal
debt. Beginning with the enactment of the Second Liberty Bond
Act in 1917, the limitation on the amount of debt developed in several
steps from being an authorization of an amount for each specific
issue to being an overall ceiling on the total amount of most outstanding Federal debt. The latter type of limitation has been in effect since
1941. The limit currently applies to the total of:
• Almost all public debt issued by the Treasury since September
1917, whether held by the public or by the Government;
• Agency debt in the form of participation certificates issued during
1968 under the Participation Sales Act of 1966; and
• Other debt issued by Federal agencies (and the District of Columbia Armory Board) which, according to explicit statute, is
fully guaranteed as to principal and interest by the United States.
Until recently debt subject to limit also included $825 million of
special non-interest-bearing notes issued by the Treasury to the
Internationa] Monetary Fund. These notes, while part of the debt
subject to limit, were not part of gross Federal debt. On March 14,
1975, however, these notes were redeemed and replaced by a demand
liability in the form of a letter of credit of equal value, which does not
constitute any kind of debt. At one time special non-interest-bearing
notes were also issued to various international lending organizations,
but they were redeemed earlier. The redemption of these notes was
in accordance with a recommendation of the President's Commission
on Budget Concepts, which viewed them as representing an exchange
of assets (in the case of the International Monetary Fund) or an unpaid
obligation or contingent liability (in the case of the international
lending organizations) rather than a payment that had
been made
and that in turn had increased the Government's debt.6
8
Report of the President's Commission on Budget Concepts (Washington: U.S. Government Printing
Office. 1967). pp. 31-32 and 59.

SPECIAL ANALYSIS C

The statutory limit on the Federal debt was $495 billion from
June 30, 1974, to February 19, 1975. This limit consisted of a permanent limit of $400 billion and a temporary increase to that limit
of $95 billion. The $495 billion limit was scheduled to last until
March 31, 1975, but the Federal debt subject to limit increased faster
than expected. Consequently on February 19, 1975, the statutory
limit was temporarily raised to $531 billion. It was temporarily raised
further to $577 billion on June 30 and to $595 bilUon on November 14,
1975. The temporary increase to $595 billion expires on March 15,
1976, after which a further increase will be necessary to permit the
Federal Government to meet its obligations.
The outstanding debt subject to limit is shown in table C-7 and
compared with the gross Federal debt and the Federal debt held by
the public. The debt subject to limit was $534.2 billion at the end of
1975 and is expected to rise to $624.2 billion and $710.4 billion at
the end of 1976 and 1977, respectively. These amounts are substantially more than the permanent debt limit of $400 billion. The debt
subject to limit equals about 98% of the gross Federal debt. As table
C-7 shows, almost all of the difference is accounted for by agency debt
not subject to the general limitation.
Table C-7. DEBT SUBJECT TO STATUTORY LIMIT (in millions of dollars)
End of year

Description
1975
actual

1976
estimate

TQ
estimate

1977
estimate

Federal debt held by the public

396,906

484,406

504,406

558.246

Federal debt held by Government agencies

147,225

149,525

148,393

161,265

544,131

633,931

652,799

719.511

624

614

1,276
2,075
2,593
250
3,125
2
9,945

1,168
1,975
2,593
250
3,125
2
9,727

1,140
1,975
2,593
250
3,125
2
9,700

1,028
1,975
2,144
250
3.125
2
9.138

534,186
20

624,204
20

643,099
20

710,373
20

534,207

624,223

643,119

710,393

Total, gross Federal debt
Deduct:
Treasury debt not subject to limit l
_
Agency debt not subject to general limitation:
Department of Defense....
Tennessee Valley Authority
Export-Import Bank
Postal Service
Participation certificates 2__..
Coast Guard.
Total, Federal debt not subject to limit
Federal debt subject to statutory limit
District of Columbia Armory Board bonds
Total debt subject to statutory limit.

1
2

Includes $9 million of Federal Financing Bank debt in 1975.
Certificates of participation in loans issued by the Government National Mortgage Association on
behalf of several agencies (excluding certificates issued during 1968).

The debt subject to statutory limit is expected to increase more than
the debt held by the public in both 1976 and 1977: $90.0 billion
compared to $87.5 billion in 1976, and $67.3 billion compared to
$53.8 billion in 1977. The slower growth in the debt held by the
public is due primarily to the surpluses of certain funds in the Federal

THE BUDGET FOR FISCAL YEAR 1977

budget—principally the trust funds. Because these surpluses are
largely invested in Federal debt, they reduce the debt held by the
public. However, since the Federal debt acquired by these funds is
almost all subject to the statutory debt limit, this investment does not
reduce the amount of debt subject to limit.
Agency debt subject to the statutory limit is comprised almost
exclusively of debentures issued by the Federal Housing Administration and participation certificates sold in 1968. These two categories
together make up only about one-seventh of total agency debt. However, most other agency debt is subject to special statutory limits.
For example, the Postal Service is limited to $2 billion of annual
borrowing and $10 billion of outstanding bonds.
FEDERALLY ASSISTED BORROWING

The impact of the Government on borrowing includes not only its
own borrowing to finance Federal operations but also its assistance to
certain borrowing by the public. Federally assisted borrowing is of two
types: borrowing by Government-sponsored enterprises, and Government-guaranteed borrowing by non-Federal borrowers.
Seven Government-sponsored enterprises, which were federally
established and chartered but are entirely privately owned, borrow
under Government auspices. The transactions of these enterprises are
not included within the Federal budget, and their debt is not part of
gross Federal debt. These enterprises are essentially financial intermediaries, borrowing in the securities market and lending their
borrowed funds for specifically authorized purposes either directly or
by purchasing loans originated by the private group that they were
established to assist.
The borrowing programs of all seven enterprises are subject to
Federal supervision. In addition, they all consult the Treasury
Department, either by law or by custom, in planning their market
offerings. The Student Loan Marketing Association now borrows
exclusively from the Federal Financing Bank.' The Federal National
Mortgage Association and the Federal home loan banks are required
to obtain Treasury approval of the terms and timing of specific
offerings. In addition to their Federal sponsorship, all of the enterprises have a history of successful financial performance. Hence,
despite the absence of Federal guarantees, the obligations of these
enterprises are sold at interest rates only moderately higher than the
rates on Treasury issues.
As shown in table C-8, the borrowing of these seven Governmentsponsored enterprises was $11.9 billion in 1975 and is expected to
be $8.0 billion in 1976 and $14.9 billion in 1977. These figures are
calculated net of the borrowing by one Government-sponsored enterprise from another, a type of transaction that over this period consists
primarily of the Federal Home Loan Mortgage Corporation borrowing
from the Federal home loan banks or repaying its debt. During 197577, as in most years, borrowing largely reflects support for the housing
7
The securities of the other Government-sponsored enterprises are not Government guaranteed
and therefore cannot be bought by the FFB.

SPECIAL ANALYSIS C

market from the Federal home loan banks, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation.
Nearly two-thirds of the debt outstanding at the end of 1977 will have
been issued by these enterprises. The sharp rise in borrowing estimated
for 1977 is due to a large rise in mortgage purchases and advances to
savings institutions expected to be provided by these enterprises.
Special Analysis E discusses lending by the Government-sponsored
enterprises.
Table C-8. NET CHANGES IN DEBT OF GOVERNMENT-SPONSORED
ENTERPRISES (in millions of dollars)
Increase or decrease ( - )
Description
1975
actual

Health, Education, and Welfare: Student
Loan Marketing Association
Housing and Urban Development: Federal
National Mortgage Association
Farm Credit Administration:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank Board:
Federal home loan banks
Federal Home Loan Mortgage Corporation i
Total

1976
estimate

TQ
estimate

1977
estimate

Debt outstanding
end 1977
estimate

-10

165

335

800

3,004

1,801

750

3,710

34,497

612
1,500
3,000

496
1,553
2,399

389
408
695

450
1,759
2,618

4,502
13,299
19,876

3,963

-754

1.545

2,048

23,483

2,229

2,280

3,155

12,226

14,298

7,940

Less increase in holdings of debt issued
by Government-sponsored enterprises.-

2,379

Total, borrowing by Governmentsponsored enterprises

11,919

—39
7,978

491
4,337
94
4,243

14,076

108,684

—854

3,275

14,929

105,409

1
Figures include the sale of participation certificates, which in previous years were classified as
a sale of loan assets rather than as borrowing in the statement of financial condition for the FHLMC
in the Budget Appendix.

The other type of federally assisted borrowing, Governmentguaranteed borrowing, is borrowing by individuals, private corporations, State and local governments, or foreign countries for which the
United States Government guarantees the payment of principal
and/or interest in whole or in pait. Government-guaranteed borrowing is the same as Government-guaranteed lending. The major part of
Government-guaranteed debt consists of mortgages on residential
property. As shown in table C-9, Government-guaranteed borrowing
was $16.4 billion in 1975 and is expected to be $18.0 billion in 1976
and $13.2 billion in 1977. Special Analysis E presents detailed data
on the guarantee programs.
TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING

Table C-9 summarizes Federal and federally assisted borrowing
from the public. For the purpose of this table, Government-sponsored
enterprises are excluded from the public and defined in the same

THE BUDGET FOR FISCAL YEAR

1977

sector as the Federal Government. Federal borrowing from the public
is presented in total. Borrowing by Government-sponsored enterprises
and Government-guaranteed borrowing are presented both in total
and as net amounts, the latter having been adjusted in order to remove
double counting in the derivation of total Federal and federally
assisted borrowing from the public. Double counting would otherwise
occur when one type of Federal or federally assisted debt is bought or
sold by a Government agency or a Government-sponsored enterprise.
Table C-9. NET BORROWING FROM THE PUBLIC BY GOVERNMENT,
GOVERNMENT-SPONSORED
ENTERPRISES, AND GOVERNMENTGUARANTEED BORROWERS (in billions of dollars)
Borrowing or repayment ( —)

Description

Federal borrowing from the public 12
3

Borrowing by Government-sponsored enterprises
Less increase in holding? of Federal debt
_
Less increase in Government-sponsored debt held
by Federal agencies:
Federal Home Loan Bank Board
Federal Financing Bank
_
Net Government-sponsored borrowing from the
public
Government-guaranteed borrowing *
___
Less increase in Government-guaranteed loans held
by:
Federal agencies:
Federal Financing Bank
Government National Mortgage Corporation. _
Government-sponsored enterprises:
Student Loan Marketing Association
Federal National Mortgage Association
Federal Home Loan Banks
.
Federal Home Loan Mortgage Corporation
Net Government-guaranteed borrowing from
the public
_
Total, Federal and federally assisted borrowing from the public

Debt outstanding
end 1977
estimate

1975
actual

1976
est.

TQ
est.

1977
est.

50.9

87.5

20.0

53.5

558.2

11.9
2.3

8.0
—.5

4.2
*

14.9
*

105.4
2.5

1.2
.1

.3
.2

-*
.1

-.1
.3

1.5
.8

8.2

8.0

4.2

14.6

100.6

16.4

18.0

3.7

13.2

235.1

6.2
5.6
1.6 —2.0

2.8
—.1

8.3
—.1

22.9
2.8

.1
2.6
.2
.1

.2
1.2
-*
—.1

.1
.5
*
—*

.3
2.4
*
—.1

.8
32.0
.2
1.7

5.7

13.1

2.4

174.6

64.7 108.7

24.6

70.5

833.5

*Less than $50 million.
See table C-1.
Borrowing in 1977 excludes the reclassification on October 1. 1976, of an estimated $0.3 billion
of Export-Import Bank certificates of beneficial interest from loan asset sales to debt.
34 See table C-8.
The same as Government-guaranteed loans. See table E-7.
1
2

Federal and federally assisted borrowing from the public during
1975-77 is made up predominantly of Federal borrowing tofinancethe
large budget deficits. In addition, the Federal Financing Bank expects
to acquire almost half of the increase in Government-guaranteed
obligations over this period. Since the FFB finances these acquisitions
by borrowing from the Treasury, which in turn borrows from the
public, these transactions substitute Federal borrowing for Government-guaranteed borrowing in the market.

SPECIAL ANALYSIS C

The following chart depicts the trends in Federal and federally
assisted borrowing from the public between 1966 and 1977. The
series is volatile, and the recent and expected fluctuations are dominated by the Federal deficit. Total Federal and federally assisted
borrowing fell to $24.1 billion in 1974 because of a sharp drop in the
Federal deficit and rose dramatically to $64.7 billion in 1975 and to an
estimated $108.7 billion in 1976 because of large and rising deficits
in these years. The total is expected to decrease significantly in 1977
as the Federal deficit falls again.
Federal and Federally Assisted Borrowing
SBitlic

SBillle

100-

-10

1966

'67

Fiteol Years

As the chart shows, Federal and federally assisted borrowing is now
substantially higher than a decade ago. Much of the increase parallels
the growth in the economy and in the total funds raised by the nonfinancial sector through the sale of debt securities and other forms of
borrowing and through the sale of corporate equities. However,
although the existence of trends is difficult to discern because of the
volatility of the series, to some extent the total Federal and federally
assisted borrowing from the public seems to have increased as a proportion of the total funds raised. This proportion increased from 15%
during 1960-67 to 22% during 1968-74 and to 36% in 1975. Thus,
despite the generally decreasing share of Federal debt in total debt,
Government programs since 1968 have influenced the allocation of
funds raised in financial markets more than they did in the immediately preceding years. In 1975 the Government impact was unusually
large, and the estimated totals for Federal and federally assisted
borrowing imply that it will remain large relative to most years in
1976 and 1977.

SPECIAL ANALYSIS D
INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS

This analysis divides outlays between those that are of an investment or "capital" nature and those directed to operating or "current"
purposes. Budget outlays are classified into three categories; investment, current, and other. Each of the major classifications is further
subdivided so that civil and national defense outlays can be separately
analyzed. The national defense category uses the same definitions as
the national defense function in. the budget; the civil grouping includes
all other functions.
Investment-type outlays.—These outlays yield benefits over several
years: purchases of Federal physical assets, loans (both domestic and
foreign); State, local, and private physical assets; and developmental
expenditures that add to the Nation's capacity for better education,
technical innovation, and health services.
Current outlays.—These outlays provide benefits in the year that
they are made. Included are aid and special services to agriculture,
business, labor, homeowners, tenants, and veterans; payments to
other nations; and Federal welfare obligations. Also included are:
payments from retirement and social insurance trust funds established
to provide an assured income to contributors or their families in the
event of unemployment, retirement, disability, or death; and, other
services and current operating expenses. Finally, this category includes
transactions such as: operation and administration of Federal departments and agencies; repair, maintenance, and operation of physical
assets; regulatory and control activities; and interest.
Other outlays.—These outlays cannot be precisely classified in either
of the above two categories and are placed in this residual classification. Included are: Allowances for contingencies; and certain
financial adjustments that cannot be distributed, such as proprietary
receipts and the employer share of employee retirement.
These three categories of outlays are summarized in table D - l for
1975-77.
64

SPECIAL ANALYSIS D
Table D-1. SUMMARY OF INVESTMENT, OPERATING, AND OTHER
BUDGET OUTLAYS (in billions of dollars)
Outlays
1975
actual

1976
estimate

TQ
estimate

1977
estimate

4.7

6.4

1.6

3.9

4.1
.3
.9
19.2

4.8
.2
1.3
20.0

1.4
*
.4
5.9

5.5
—.1
1.3
23.7

9.9
*

12.3
*

3.4
*

14.5
*

29.5
9.7

35.7
10.0

8.9
2.7

34.3
11.4

Subtotal, investment-type outlays:
Civil
National defense

49.4
28.9

60.7
30.1

15.7
8.6

59.4
35.2

Total

78.4

90.8

24.4

94.6

55.6
5.2

65.7
7.8

15.3
1.8

62.1
8.0

101.6

118.2

30. 8

130. 2

23.3
17.4
58.2

26.8
19.7
61.8
.1

7.7
5.7
16.4
*

32.9
20.7
65.0
1.6

Subtotal, current outlays:
Civil
_
National defense

197.8
63.4

230.4
69.7

59.5
18.2

246.0
74.5

Total

261.2

300.0

77.6

320.5

—4.0

.2
—4.2

.2
—1.0

-8
1.5
—4.5

-5.3
-5.8

-6.3
-7.0

-1.4
-1.8

-10.0
-8.6

-9.3
-5.8

-10.3
-7.0

-2.2
-1.8

-12.2
-8.6

-15.0

-17.3

-4.0

-20.9

238.0

280.7

73.0

293.1

86.6

92.8

25.0

101.1

324.6

373.5

98.0

394.2

INVESTMENT-TYPE OUTLAYS

Additions to Federal assets:
Civil:
Loans and other financial investments
Physical assets:
Public w o r k s - . . . .
.
Major commodity inventories
Major equipment and other physical assets
National defense
Additions to State, local, and private assets:

Civil
National defense
Developmental outlays:

Civil
National defense

CURRENT OUTLAYS
Current expenses for aids and special services:
Civil
National defense
Retirement and social insurance benefits—civil
Other services and current operating expenses:
Civil:

Interest.
...
Other
National defense
Allowances, Department of Defense

OTHER

Allowances for:
Civilian agency pay raises
Contingencies
Employer share, employee retirement (—)
Proprietary receipts from the public (—):
Civil
__ _
National defense
Subtotal, other outlays:
Civil
National defense
Total
Total budget, outlays:
Civil

National defense
Total
*Less than $50 million.

http://fraser.stlouisfed.org/
210-700 O - 76 - 5
Federal Reserve Bank
of St. Louis

THE BUDGET FOR FISCAL YEAR 1977

Table D-2 shows civil investments and current operating outlays as
a percentage of total budget outlays. Net civil outlays will be 75.2%
of total budget outlays in 1976 and 74.3% in 1977. Investment-type
outlays are projected to drop from 16.2% of total budget outlays in
1976 to 15.1% in 1977, while current outlays increase from 61.7%
in 1976 to 62.4% in 1977.
Table D-2. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS
(Percent of total budget outlays)
1973
actual

1974
actual

1975
actual

1976
estimate

TQ
estimate

1977
estimate

INVESTMENT-TYPE OUTLAYS
Additions to Federal assets:

Loans
Other financial investments
Public works—sites and direct construction
Major commodity inventories
Major equipment
Other physical assets—acquisition
and improvement

0.2
.1

0.7
.2

1.3
.2

1.5
.3

1.4
.3

0.8
.2

1.3
-.2
.1

1.3
-.1
.1

1.3
.1
.1

1.4
*
.1

1.4
__*
.1

1.8

2.3

3.1

3.4

3.6

2.7

3.0
.4

3.0
.3

2.7
.3

3.0
.3

3.2
.2

3.4
.2

3.4

3.3

3.1

3.3

3.4

3.7

6.3
2.9

6.0
3.0

6.3
2.7

6.8
2.7

6.3
2.7

5.8
2.8

Subtotal, developmental outlays

9.2

9.0

9.1

9.6

9.0

8.7

Total investment-type outlays..

14.4

14.6

15.2

16.2

16.0

15.1

2.2
1.3
.6
.6
5A
.6
5.3
2.4

1.2
1.5
.6
.6
5.0
.5
5.8
2.4

.5
1.2
.6
.6
5.1
.6
6.5
2.2

.4
1.1
.9
.8
5.1
.3
6.9
2.1

3
1. 1
9
8
4. 4
2
5. 9
1. 9

4
1. 1
7
8
4. 4
4
6. 3
1. 6

18.1

17.6

17.1

17.6

15. 6

15. 8

Subtotal, additions to Federal
assets
Additions to State, local, and private
assets:

State and local assets
Private assets
Subtotal, additions to State,
local and private assets
Developmental outlays:

Education, training and health
Research and development
Engineering and natural resource
surveys

CURRENT OUTLAYS
Current expenses for aids and special
services:

Agriculture
Business
Labor
Homeowners and tenants
Veterans
International aids
Welfare aids
Other aids and special services
Subtotal, current expenses for
aids and special services

SPECIAL ANALYSIS D

Table D-2. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS
(Percent of total budget outlays)—Continued
1973

1974

1975

1976

1977
esti-

CURRENT OUTLAYS—Continued

Retirement and social insurance
benefits:
Insurance benefits
Unemployment benefits
Other retirement and social insurance
benefits

23.9
1.8

25.1
1.9

25.1
3.9

24.5
4.6

25.4
3.5

26.4
3.9

1.8

2.1

2.4

2.5

2.6

2.8

Subtotal, retirement and social
insurance benefits

27.5

29.1

31.3

31.6

31.4

33.0

Other services and current operating
expenses:
Repair, maintenance and operation
of physical assets (excluding special
services)
Regulation and control
Other operation and administration.
Net interest

.6
.9
4.6
7.1

.6
1.1
4.4
8.0

.4
1.2
3.8
7.2

.4
1.2
3.7
7.2

.5
1.2
4.1
7.8

.3
1.2
3.7
8.4

Subtotal, other services and
current operating expenses. _

13.2

14.1

12.5

12.4

13.7

13.6

Total current outlays

58.8

60.8

61.0

61.7

60.7

62.4

73.3
-3.8

75.4
-4.7

76.2
-2.9

77.9
-2.8

76.7
-2.3

77.5
-3.1

69.5

70.7

73.3

75.2

74.5

74.3

Total civil investments and current
operating outlays
Civil other
Net civil outlays
•Less than 0.5%.

OUTLAYS OF AN INVESTMENT NATURE

Outlays of an investment nature are divided into three categories:
(1) Additions to Federal assets; (2) additions to State, local, and
private assets; and (3) development outlays. Civil investment outlays
will be $59.4 billion, 15.1% of total outlays, while defense investment outlays will be $35.2 billion, 8.9% of the 1977 total.
Additions to Federal assets.—This category comprises additions
to both financial and physical assets of the Federal Government. Investment in Federal civil assets in 1977 is projected to be $10.7 billion,
decreasing by $2.0 billion, or 15.8% from such investment in 1976.
Investment in defense assets in 1977 will be $23.7 billion, an increase of $3.7 billion, or 18.4%, over investment in 1976. Financial
assets are primarily direct loans; for example, loans to finance private housing construction and encourage homeownership, to help
small businesses, and to promote economic development abroad.
Federal financial assets include both loans and other financial investments. Other financial investments include the capital provided
for certain international organizations such as the World Bank.

THE BUDGET FOR FISCAL YEAR 1977

Civil loans and financial investments are estimated to be $3.9
billion, a decrease of $2.5 billion from 1976. Civil loans are expected to
decrease by $2.4 billion. Special Analysis E discusses financial investments in greater detail.
Additions to physical assets include outlays for public works, such
as dam construction, flood control projects, Federal power systems,
changes in major commodity inventories, and outlays for major
equipment (including military equipment) and for the acquisition and
improvements of real property and other physical assets.
Additions to civil physical assets will be $6.8 billion in 1977, as compared to additions of $6.3 billion in 1976. Public works investments,
the largest part of this total will be $5.5 billion in 1977 as compared to
$4.8 billion in 1976.
Additions to State, local, and private assets.—Federal outlays
in this category add to State, local, and private assets. Grants that
add to the physical assets of State and local governments are primarily
for the construction of highways (mainly through the highway trust
fund), hospitals, airports, waste-treatment plants, watershed protection projects, schools in federally affected areas, and public facilities
under economic development programs for depressed regions.
Outlays that increase the value of privately owned assets are
largely for the conservation and improvement of private farmland
and water resources, for grants for construction of private nonprofit
hospitals and other health facilities, and for construction subsidies
to the merchant fleet.
Civil additions to State, local, and private assets in 1977 will be
$14.5 billion, an increase of $2.2 billion more than in 1976. The major
area of increased spending is in the Federal highway trust fund.
Developmental outlays.—Federal outlays of this type are principally for research and development, education and health, and other
programs that improve the knowledge, technical skills, and physical
vigor of America. The Federal outlays shown in this category do not
fully reflect the Government's contribution to the productivity of the
economy. Certain other programs that further this end are classified in
accordance with their principal purpose; thus, veterans educational
benefits are listed as current expenses for veterans aid rather than as
developmental outlays. Similarly, the training of military personnel
and other Government employees is treated as an operating expense
and not as part of the Government's education and training programs.
Civil research and developmental outlays will be $34.3 billion, a decrease of $1.4 billion from 1976. This includes increases for the financial
assistance for health care, Energy Research and Development Administration (ERDA), the Airport and airway trust fund, and the
National Aeronautics and Space Administration (NASA).
Civil developmental outlays for education, training, and health are
$22.9 billion in 1977, or 5.8% of total outlays.
Civil outlays for research and development will be $11.0 billion in
1977, an increase of $0.8 billion from 1976. The bulk of this increase
is: $0.5 billion for energy research, $0.1 billion for health research and
$0.1 billion for NASA.

SPECIAL ANALYSIS D

OUTLAYS OF A CURRENT NATURE

Outlays of a current nature are divided into the following categories:
(1) Current expenses for aids and special services; (2) retirement and
social insurance benefits; and (3) other services and current operating
expenses.
Current outlays for civil functions will be $246.0 billion in 1977, an
increase of $15.6 billion from 1976. The rate of increase will drop
from 16% in 1976 to 7% in 1977. Current outlays for defense
functions will be $74.5 billion, an increase of $4.8 billion from 1976.
Current expenses for aids and special services.—Outlays classified under this heading provide aids or special services to certain
groups, mainly in the year in which the outlays are made. In addition
to such items as outlays for the farm programs of the Commodity
Credit Corporation, maritime operating subsidies, veterans pensions,
and grants to foreign nations for economic and military assistance,
this category includes: (1) administrative and other operating expenses
attributable to investment-type programs that benefit specific groups;
and (2) the costs of maintaining the physical assets related to those
programs.
Only part of the Federal Government's aid to special groups is
reflected in this classification, which is limited by definition to current
expenses. For example, subsidies for the construction of private
merchant ships are classified as additions to private assets. Similarly,
outlays for which the Federal Government increases its holdings of
assets for collateral (as the acquisition of farm commodities by the
Commodity Credit Corporation) are treated as additions to Federal
assets. Many indirect Government aids are excluded from this classification because they either are not reflected in outlays or cannot
be readily measured. Examples of such indirect benefits are loan
guarantees, a subject discussed in Special Analysis E, "Federal Credit
Programs."
Although outlays in this category essentially provide a direct aid or
special service yielding immediate benefits, some of the items included
contribute indirectly to the Nation's future development. Among
these are grants for several community development purposes.
Aids to agriculture are expected to increase slightly, reaching $1.8
billion in 1977, an increase of $0.3 billion from 1976. Federal aid to
labor will decline $0.4 billion reaching $2.8 billion in 1977, almost
entirely because lower unemployment benefit payments will be
required as economic conditions improve. Aid to homeowners and
tenants is expected to be $3.3 billion in 1977, an increase of almost
$150 million over 1976.
Retirement
and social insurance benefits.—This category
applies only to trust funds. It covers benefit programs that are financed
from special taxes or contributions and provide insurance against the
loss of income due to unemployment, retirement, disability, or death.
It does not include outlays for Government employees' health and
life insurance programs, which are in the form of premium payments
to approved companies and are included with "other services and
current operating outlays".

THE BUDGET FOR FISCAL YEAR

1977

The growth in retirement and social insurance benefits is the result
of both a growing number of recipients and recently legislated increases. Outlays for these benefits are expected to increase 10.2% in
1977, to $130.2 billion and will be 33.0% of total outlays in 1977. A
large part of this increase, $12.0 billion, will come from the increase
in social security, railroad retirement, and medicare payments.
Other services and current operating outlays.—The outlays
reported under this heading support a wide range of activities. They
consist mainly of: pay and subsistence of military personnel; repair,
maintenance, and operation of physical assets of the national military
establishment and general purpose public buildings; conduct of
foreign affairs; tax collection; interest on the public debt; and operation
and administration of other direct Federal programs not elsewhere
classified.
These outlays are expected to increase by $10.3 billion and to be
$118.6 billion in 1977. Net interest accounts for $6.1 billion of this
increase and defense accounts for $3.2 billion. Defense costs will rise
primarily due to pay and price increases, while net interest outlays will
increase because of the large deficits in 1976 and 1977.
OTHER OUTLAYS

Certain outlay estimates cannot be classified precisely into any of
the categories described above and allowances are provided for them.
These include allowances for contigencies and for future pay increases
of government workers.
Intragovernmental receipts arise as a result of transactions between
Government agencies or funds. These transactions occur entirely
within Government accounts and are deducted from outlays to avoid
double counting. In order to provide a measure of outlays by category,
most intragovernmental receipts are allocated to a particular category
whenever possible. Government agency contributions for employee
retirement, which help to finance retirement benefits, cannot be and
are deducted a lump-sum amount.
Proprietary receipts from the public, arising from business-type
activities of the Government, are also offset against total outlays.
RELATIONSHIP TO CAPITAL BUDGET

The U.S. Government does not produce a capital budget in the
sense of a long-range program for the acquisition of assets, with
separate financing of capital outlays. Some foreign governments and
some State and local governments fund a portion of their capital
expenditures by separate borrowing. They exclude most or all such
expenditures from the computation of budget totals, except for annual
charges to amortize these capital outlays over a number of years. The
U.S. Government does not.
While this analysis does not provide a precise measure of the difference between capital and current items, it does indicate useful general

SPECIAL ANALYSIS D

magnitudes. It does not make any allowance for depreciation and
obsolescence on existing physical assets, anticipated losses on loan
programs, or profit or loss on sales of assets at figures different from
their book value. Agencies record such allowances for transactions only
where the data will serve program and management needs, as in the
case of the public enterprise funds. As a result, this analysis does not
estimate the net addition to the value of federally owned assets.
Recoverability of outlays.—In general, Government outlays for
assets are not expected to be recovered by specific revenues. However,
most loans, investment in commodity inventories, the construction
of powerplants, and outlays for range and forest improvements on
public domain and national forest lands are offset in whole or in part
by receipts to the Treasury through repayments and sales, specific
charges, or recoveries. Where activities are carried on through revolving funds, such as in the case of most loan programs, receipts are
credited directly against disbursements and only the difference is
included in the total of outlays in the budget and in this analysis. All
other receipts from the public arising from market-oriented or businesstype activities of the Government are offset against total outlays.
Whether recovered by specific receipts or not, investment and
developmental outlays for both physical and human capital add to
the wealth and income of the Nation, and by helping to expand the
tax base, augment the Government's potential future receipts. However, this analysis does not attempt to measure the degree of recoverability of developmental outlays, the potential gain in public receipts
that will be forthcoming, or the duration of future benefits and their
discounted present value.
Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays
ADDITIONS TO FEDERAL ASSETS
Loans:
Civil:
To domestic and private borrowers:
Department of Agriculture:
Commodity Credit Corporation: Price support
and related programs
Farmers Home Administration:
Rural housing insurance fund
Agricultural credit insurance fund
Rural development insurance fund
Other
Other*
Department of Health, Education, and Welfare:
Office of Education:
Higher education
Student loan insurance
Other
Other
See footnotes at end of table.

—446

608

235

—71

—944
—269
— 177
-6
*

132
75
-18
-4
*

158
-39
-10
-1

-796
-476
-62
-3

336
108
-2
50

282
102
-3
37

28
-1
29

88
-6
-3

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued
ADDITIONS TO FEDERAL ASSETS—Continued
Loans—Continued
Civil—Continued
To domestic and private borrowers—Continued
Department of Housing and Urban Development:
Housing
programs:
Federal
Housing
Administration
Government National Mortgage Association:
Special assistance functions fund
Management and liquidating functions
fund
Community planning and development and
other
Veterans Administration:
Loan guaranty revolving fund
Direct loans
Other1
.
Federal Deposit Insurance Corporation fund
(trust revolving fund)
Federal Home Loan Bank Board:
Federal Home Loan Bank Board revolving
fund
Federal Savings and Loan Insurance Corporation fund
Small Business Administration:
Business loans arid investments
Disaster loans
United States Railway Association: Payment for
the purchase of ConRail securities
Other agencies
Total to domestic and private borrowers
To State and local governments:
Department of Housing and Urban Development: Community planning and development
and housing programs
Department of Transportation: Federal Highway Administration and other *
District of Columbia
Other agencies
Total to State and local governments
To foreign borrowers:
Funds appropriated to the President:
International security assistance
International development assistance
Contingencies
Department of Agriculture: Public Law 480
credit sales
Export-Import Bank of the United States
Other agencies
Total to foreign borrowers
See footnotes at end of table.

2,054

-206

107
-54

-51

-33

-6

-20

-4

-44

49
-31
41

-30
-86
36

41
-14
9

-201
-219
28

1,247

303

-15

-52

-8

187
18

133
87

62
29

123
-34

400
68

200
19

2,970

2,374

778

-966

—101

—3

—68

643

454

349
-142

100

540
14

37
233
20

137
242
34

30
82
10

46
226
7

189

436

118

211

39
453

314
1,446
38

51
301
7

710
911
12

515

868

112

-10

-8

-3

741
1.423
-10

997

2,658

468

3,787

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Loans—Continued

National defense:
To domestic and private borrowers: Other agencies.

To foreign borrowers:
Funds appropriated to the President: International security assistance

467

457

121

175

4,626

5,924

1,486

3,207

569

966

277

902

164

68
52

95
40

156
17

1,135

1,204

436

1,258

161
29
17

136
27
20

48
10
4

142
24
14

82
13

46
36

8
15

38
44

262
44
14
82
133

293
57
60
88
135

89
8
18
28
12

353
80
74
76
150

127
31

144
41

42
13

142
34

211
14

231
23

54
1

236
8

Totalloans
Other financial investments—civil:

Investments in quasi-public institutions, trust funds,
and international institutions: Funds appropriated
to the President: International financial institutions
Public works—sites and direct construction:

Civil:
Funds appropriated to the President: Naval petroleum reserve/strategic petroleum storage
Department of Agriculture:
Agricultural Research Service
Forest Service:
Forest roads and trails
Other 1
Department of Defense—Civil:
Corps of Engineers:
Construction, general
„..
Flood control, Mississippi River and tributaries
Trustfunds
Other*
Department of Health, Education, and Welfare:
Health Services Administration: Indian health
facilities and other health services
National Institutes of Health: Biomedical research and buildings and facilities
Other*
Department of the Interior:
Bureau of Reclamation:
Construction and rehabilitation
Colorado River Basin project
Other i
National Park Service
Bonneville Power Administration
Bureau of Indian Affairs: Construction of schools
and roads
Other
Department of Transportation:
Coast Guard: Acquisition, construction, and
improvements
Federal Aviation Administration: Airway system
investment and development (Airport and
airway trust fund) and other
Other*
See footnotes at end of table.

THE BUDGET FOR FISCAL YEAR 19 77

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued

ADDITIONS TO FEDERAL ASSETS—Continued
Public works—sites and direct construction—Continued

Civil—Continued
Energy Research and Development Administration:
Plant and capital equipment
Other i
National Aeronautics and Space Administration:
Plant and capital equipment
Veterans Administration: Hospitals and other
Tennessee Valley Authority
Other agencies
National defense:
Department of Defense—Military:
Military construction
Family housing
Energy Research and Development Administration:
Plant and capital equipment
Total public works—sites and direct construction

292
39

407
32

118
10

632
40

85
119
913
85

115
186
1,038
121

31
73
250
30

126
303
1,137
135

1,371
299

1,713
320

455
75

1,710
287

179

204

215

5,962

6,991

1,982

7,722

302
4

235
2

-91
36

34
*
*

297

236

-55

102
38

119
93

49
23

150
73

16,042
108

16,486
91

4,975
23

20,354
96

16,358

16,861

5,084

20,741

192

173

141

506

548

139

383

121
39

134
40

21
13

164
42

Major commodity inventories:

Civil:
Department of Agriculture: Commodity Credit
Corporation: Agricultural commodities
Other agencies
National defense:
General Services Administration
Intragovernmental transactions (—)
Total major commodity inventories

-1
-9 .

Major equipment:

Civil:
Department of Transportation: Coast Guard and
other
Energy Research and Development Administration
Other agencies 1
National defense:
Department of Defense—Military: Procurement. _
Energy Research and Development Administration
Total major equipment
Other physical assets—acquisition and improvement:

Civil:
Department of Agriculture: Reforestation, range
improvements, and other
Department of Housing and Urban Development:
Federal Housing Administration and other
Department of the Interior:
Land and water conservation
Other
See footnotes at end of table.

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued
ADDITIONS TO FEDERAL ASSETS—Continued

Other physical assets—Acquisition and improvement—
Continued
Civil—Continued
Energy Research and Development Administration
Tennessee Valley Authority
Other agencies
National defense: Energy Research and Development
Administration
Total other physical assets—acquisition and
improvement
Total additions to Federal assets

—159
14
—42

29
91
—1

70
24
8

191
92
15

734

767

209

886

1,405

1,781

546

1,914

29,217

32,759

9, 409

34,431

236

248

242

103

119

202

183

154

306
77
9

213
47
4

47
10

184
34
2

66
3

238
3

23
2

110
5

157
69
21

160
77
37

40
20
8

158
79
38

292

375

355

4,561
29
529

6,152
50
573

1,811
11
248

6,552
159
1,179

ADDITIONS TO STATE, LOCAL, AND PRIVATE
ASSETS

State and local assets:
Civil:
Funds appropriated to the President: Appalachian
regional development programs and other.
Department of Agriculture:
Rural water and waste disposal grants and other
rural development
Watershed and flood prevention operations and
other conservation
Department of Commerce: Economic development
assistance programs and other___
Department of Health, Education, and Welfare:
Health resources
Education..
Human development
Department of Housing and Urban Development:
Housing programs revolving fund
New communities assistance
Department of the Interior:
Land and water conservation
United States Fish and Wildlife Service
Other
...
Department of Justice: Law enforcement assistance
Department of Transportation:
Grants-in-aid for airports (Airport and airway
trust fund)
___.
Federal Highway Administration:
Federal-aid highways (trust fund)
Other 1
Urban mass transportation
National Highway Traffic Safety Administration
Environmental Protection Agency: Construction
grants
Washington Metropolitan Area Transit Authority.
Other agencies l
National defense: Department of Defense—Military.
Total State and local assets
See footnotes at end of table.

3
1,938
175
4
45

2,350
182
8
48

600
40
2
12

3,770
185
9
41

8,957

11,230

3,151

13,538

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued
ADDITIONS TO STATE, LOCAL, AND PRIVATE
ASSETS—Continued
Private assets—Civil:

Department of Agriculture:
Agricultural conservation program
Cropland adjustment and other
Conservation operations
Watershed and flood prevention operations
Other conservation programs
Conservation loans and mutual and self-help
housing
Department of Commerce: Ship construction
Department of Health, Education, and Welfare:
Health resources
Other
Federal Energy Administration
Other agencies1

245
51
187
49
26

170
72
211
60
38

60
5
57
22
11

132
40
209
71
31

-22
241

30
242

-23
59

2
258

146
60

27
8

153
51
50
23

116
27
60
27

Total private assets

1,007

1,099

232

972

Total additions to State, local and private assets.

9,964

12,329

3,382

14,510

OTHER DEVELOPMENTAL EXPENDITURES
Education, training, and health:

Civil:
Funds appropriated to the President: Appalachian
regional development programs
Department of Agriculture: Extension Service and
other
Department of Commerce:
Job opportunities program
Other
Department of Health, Education, and Welfare:
Health services
Indian health services
Preventive health services
Biomedical research
Alcohol, drug abuse, and mental health
Health resources
Financial assistance for health care
Other health services l
Financial assistance for elementary and secondary education
Elementary and secondary education
School assistance in federally affected areas
Emergency school aid
Education for the handicapped
Occupational, vocational, and adult education. _
Higher education
Library resources
Educational development
Salaries and expenses and other education
Public assistance
See footnotes at end of table.

229

243

237

22
11

175
13

80
4

222
16

651
236
111
177
786
505

668
267
110
173
685
567

154
84
30
28
119
79

297
301
87
151
492
387
9,001
23

2, 277
598
216
143
612
1,431
217
160
160
6,931

2, 283
461
235
188
633
2,121
132
25
176
8,292

521
42
59
49
97
356
41
1
44
2,247

294
1, 927
379
221
166
591
2,023
95
2
210
-110

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued
OTHER DEVELOPMENTAL
EXPENDITURES—Continued
Education, training, and health—Continued

Civil—Continued
Department of Health, Education, and Welfare—
Continued
Other social and rehabilitation services
Supplemental security income program
Federal old-age survivors insurance trust fund__
Federal disability insurance trust fund
Howard University
Other special institutions
Human development
Other 1
Department of the Interior: Operation of Indian
programs.
Department of Justice:
Law enforcement assistance
Other
Department of Labor:
Employment and training assistance
Temporary employment assistance
Program administration
Community service employment for older
Americans
Emergency employment assistance
Veterans Administration: Medical care and other.
ACTION
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities 1
National Science Foundation
Smithsonian Institution
Other agencies l
National defense: Department of Health, Education,
and Welfare
Total education, training, and health
Research and development:
Civil:
Department of Agriculture:
Agricultural Research Service l
Cooperative State Research Service 1
Forest Service l
Other 1
Department of Commerce:
National Oceanic and Atmospheric Administration
.
____
Scienc and Technical Research
_
Other
.
Department of Health, Education, and Welfare:
Biomedical research and other National Institutes of Health
Alcohol, drug abuse, and mental health
Health resources
See footnotes at end of table.

17
35
8
71
71
27
455
13

40
57
8
91
11
33
472
24

3
33
19
9
125
4

12
53
7
84
68
41
452
32

219

240

244

59
43

83
47

24
13

90
42

2, 764
319
55

3,308
2,331
56

993
485
16

2,752
1,065
68

9
53
185
92
62

43
4
237
112
70

61
26
18

255
93
70

128
60
57
96

183
69
67
80

57
5
23
20

191
54
69
81

20, 446

25, 262

6, 144

22, 883

229
96
69
27

260
112
86
27

67
29
23
7

275
124
83
30

120
47
47

132
48
52

38
12
12

137
51
37

1,631
114
59

875
133
41

441
29
21

2,000
127
28

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Investment-type outlays—Continued

OTHER DEVELOPMENTAL
EXPENDITURES—Continued
Research and development—Continued

Civil—Continued
Department of Health, Education, and Welfare—
Continued
Occupational, vocational, and adult and other
education
National Institute of Education
__
Human development
_
1
Other
Department of Housing and Urban Development:
Policy development and research and other
Department of the Interior: Geological surveys,
mines and minerals and other *
Department of Justice: Law enforcement assistance
Department of Transportation:
Federal Aviation Administration
Federal Highway Administration
Urban Mass Transportation Administration
Other*
. . . ._
Energy Research and Development Administration i
Environmental Protection Agency
National Aeronautics and Space Administration i
Veterans Administration
National Science Foundation 1
Other agencies *
National defense:
Department of Defense—Military:
Military personnel
Research, development, test, and evaluation
Other
Energy Research and Development Administration
Total research and development

54
83
52
110

56
70
62
156

16
13
15
48

85
88
60
156

272

344

349

103
25
58
121

109
54
51
136

23
14
9
32

105
44
63
102

1,243
186

1,716
306

443
79

2,260
282

3,185
97
571
123

3,405
99
602
139

878
26
206
33

3,552
100
645
136

411
8,866
7
431

419
9, 107
6
489

107
2,471
137

420
10,435
1
5
544

18, 536

20, 207

5, 351

22, 432

Engineering and natural resources surveys—civil:

Funds appropriated to the President: Naval petroleum reserve/strategic petroleum storage
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
__
Department of the Interior:
Geological Survey
Other
Other agencies l
Intragovernmental transactions (—)

60
1

58
1

15
*

55
1

90
51
54
—33

115
65
66
—63

31
17
18
—11

120
67
61
—31

Total engineering and natural resources surveys-civil

223

241

352

Total other developmental expenditures

39,206

45, 710

11, 567

45,667

Total investment-type outlays

78,387

90,798

24,359

94,607

See footnotes at end of table.

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES
Agriculture—civil:
Department of Agriculture:
Departmental administration
Agricultural Stabilization and Conservation Service:
Salaries and expenses
Sugar Act program
Dairy and beekeeper indemnity program
Commodity Credit Corporation:
Price support and related programs
Other
Farmers Home Administration:
Salaries and expenses
Rural housing insurance
Agricultural credit insurance
_
Rural development insurance
Other
Agricultural Marketing Service l
__
Other 1
Other agencies
Total agriculture

Business—civil:
Department of Commerce:
Bureau of the Census
Domestic and international business
Minority business development
Patent and Trademark Office
Maritime operating-differential subsidies and
other 1
Other l
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
_
Department of Transportation:
Office of the Secretary
Coast Guard: Navigation aids and other l
Federal Aviation Administration: Operations and
other 1
Federal Railroad Administration
Civil Aeronautics Board: Payments to air carriers._
Small Business Administration:
Business loans and investments and other
Disaster loan fund
_
Other agencies
Intragovernmental transactions (—)
Total business
See footnotes at end of table.

158
77
3

148
12
7

154

746
35

521
45

172
1

567
36

134
45
136
8
3
76
117
9

154
135
117
61
3
86
106
12

40
-71
41
36
1
23
29
4

161
328
132
110
3
19
122
11

1,595

1,459

327

1,769

56
56
48
71

62
61
57
84

14
15
12
21

57
59
53
86

249
66

336
83

89
29

406
90

334
-16

359
-19

115
-6

309
-26

-2
594

*
658

192

723

1,288
471
64

1,441
679
72

389
134
18

1,533
549
73

264
160
53
-21

188
104
63
-22

18
1
16
-8

203
124
-26

3,735

4,206

1,049

4,266

THE BUDGET FOR FISCAL YEAR 19 77

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued

CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Labor—civil:

Department of Health, Education, and Welfare:
Work incentives
Department of the Interior: Mining Enforcement and
Safety Administrationl
Department of Labor:
Employment and Training Administration:
Federal unemployment benefits and allowances,
Grants to States for unemployment insurance
and employment services
Unemployment trust fund
Other i
Employment standards 1
Occupational safety and health
Labor statistics l
Departmental management
Equal Employment Opportunity Commission
Occupational Safety and Health Review Commission.
Railroad Retirement Board
Intragovernmental transactions (—)
Total labor

223

220

185

196

860

280

420

—19
1,185
24
80
91
50
27
56
5
4
1

94
1,458
39
108
119
63
35
63
6
288
—250

18
371
8
27
31
16
9
18
2
10

82
1,491
33
120
125
71
49
68
6
290
-250

1,985

3,181

868

2,776

2,072

2, 295

Homeowners and tenants—civil:
Department of Housing and Urban Development:
Housing programs:
Housing payments
Payments for operation of low-income housing
projects
Federal Housing Administration
Other
Government National Mortgage Association:
Special assistance functions and other
Federal Insurance Administration
Other
Federal Home Loan Bank Board
Other agencies
Total homeowners and tenants
Veterans—civil:
Department of Health, Education, and Welfare:
Payments to social security trust funds
Veterans Administration:
Compensation and pensions
Readjustment benefits
_
_
Medical care
General operating expenses
Supply fund
National service life insurance fund
U.S. Government life insurance fund
Veterans special life insurance fund
Other 1
See footnotes at end of table.

559 2,551

—61
-66

162
159
-19

130
-42
-1

462
98
-8

110
42
-3
-304
1

707
125
-1
-309
4

243
38
*
-100
*

315
199
-1
-353
8

1, 792

3,123

828

3,272

240

295

7,581
4,591
3,227
445
-18
698
89
—46
26

8,201
6,020
3,575
484
79
629
77
— 47
33

622
2,125
1,074
855
113
1
109
15
-14
7

8,087
4,242
3,820
512
9
663
72
-50
59

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Veterans—Civil—Continued

Other agencies1
I ntragovernmental transactions (—)
Total veterans

12
—246

12
—297

2
—1

10
—624

16,599

19,061

4,287

17,425

357
496
609
4
15

739
86
—139
77
51

79
10
4
19
13

679
6
320
34
48

263
76
87

222
56
78

34
4
24

43
—50

428
13
65
—117
41
—50

5,118

7,740

1,765

7,929

7,075

8,996

1,984

9,480

206

250

128

199

251

465
4, 599
123
1,452

301
5,625
129
2,110

61
1,169

1
4,708

392

291
2,000
80

8,156
130
58
112
958
5,118
1,053
2

2,156
25
20
32
225
1,392
228
1

8,615
75
37
141
906
5,800
1,046
5

International aids:

Civil:
Funds appropriated to the President:
International security assistance
Indochina postwar reconstruction assistance
International development assistance l
Contingencies
Other
Department of Agriculture: Foreign assistance
programs and special export programs Public
Law 480 donations of agricultural commodities.
Department of State
ACTION 1
Export-Import Bank of the United States
Other agenciesl
I ntragovernmental transactions ( —)
National defense:
Funds appropriated to the President: International
security assistance1
Department of Defense—Military: Military construction
Total international aids
Welfare aids-civil:
Funds appropriated to the President: Disaster relief.
Department of Agriculture:
Commodity Credit Corporation: Price support and
related programs
Funds for strengthening markets, income, and
supply (sec. 32) and other marketing services-Food stamp program
Special milk program
Child nutrition programs
Child nutrition reform
Other food and nutrition services
Department of Health, Education, and Welfare:
Public assistance
Work incentives
Program administration
Refugee assistance
Special benefits for disabled coal miners
Supplemental security income program.
Human development
Departmental management and other
See footnotes at end of table.

http://fraser.stlouisfed.org/
210-700 O - 76 - 6
Federal Reserve Bank of St. Louis

7,077
91
64
74
943
4, 590
1,082

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued

CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued
Welfare aids—civil—Continued

Department of the Interior: Operation of Indian
programs
Department of State: Special assistance to refugees
from Cambodia and Vietnam
Department of the Treasury: Payment where credit
exceeds liability for tax; refunding internal revenue
collections
Total welfare aids

271

1,200

600

20,961

25,756

5,816

24,876

189

175

85
45
40

174
56
54

47
18
18

165
52
55

3,119

3,818

878

5,949

839
250
256

902
270
324

238
68
86

953
322
318

400
26
61

543
28
96

129
5
24

552
8
104

96
536
1, 376
151

107
207
1, 375
182

300
46

1,000
231

157
72
148
45
15

221
72
260
59
6

52
41
78
10
1

241
32
259
42
6

138
108
164
47
525

184
125
713
42
506

46
34
112
9
130

182
143
340
42
365

-608
85

-74
24

-767
83

Other aids and special services—civil:

Department of Commerce: Economic development
andother 1
Department of Health, Education, and Welfare:
Health services
Alcohol, drug abuse, and mental health
Health resources
Social Security Administration:
Payments to social security trust funds
Federal old-age and survivors insurance trust
fund
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust
fund
Other
Other 1
Department of Housing and Urban Development:
Community planning and development:
Comprehensive planning grants
Miscellaneous expired accounts
Urban renewal fund—capital grants
Departmental management and other
Department of the Interior:
Bureau of Indian Affairs:
Operation of Indian programs
Miscellaneous appropriations
Miscellaneous trust funds
Other i
Other 1
Department of Transportation:
Federal Highway Administration: Federal-aid
highways and other
National Highway Traffic Safety Administration * _
Urban Mass Transportation Administration
Other
Community Services Administration
Federal Deposit Insurance Corporation (trust revolving fund)
Legal Services Corporation
See footnotes at end of table.

-508

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued
CURRENT EXPENSES FOR AIDS AND SPECIAL
SERVICES—Continued

Other aids and special services—civil—Continued
Postal Service
Other agencies
Intergovernmental transactions (•—)
Total other aids and special services
Total current expenses and aids and special
services

1,877
118
—3, 293

1,690
138
4,115

431
41
-960

1,459
136
-6,239

6, 992

7, 704

1, 900

6,281

60,734

73,486

17,059

70,146

54, 839
7,630
10, 353

62, 245
9,141
11, 869

17,023
2,546
2, 964

70,572
10,768
12,960

3,765
67

4,687
164

1.380
44

5,804
176

1,678
3,051

72
3,444

895

3,644

RETIREMENT AND SOCIAL INSURANCE
BENEFITS

Insurance benefits—civil:
Department of Health, Education, and Welfare:
Federal old-age and survivors insurance trust fund.
Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal supplementary medical insurance trust
fund
Department of Labor: Unemployment trust fund
Department of the Treasury: Special payment to
recipients of certain retirement and survivor benefits
Railroad Retirement Board
Total insurance benefits
Unemployment benefits—civil:
Department of Labor:
Employment and Training Administration:
Federal unemployment benefits and allowances-Unemployment trust fund
Total unemployment benefits
Other retirement and social insurance benefits:
Civil:
Department of Labor: Special benefits
Department of State: Foreign Service retirement
and disability fund
Department of Transportation: Coast Guard: Retired pay
Civil Service Commission:
Government payment for annuitants, employees
health benefits
.
Civil service retirement and disability fund
1
Other agencies
Intragovemmental transactions (—)
National defense: Central Intelligence Agency
Total other retirement and social insurance benefits
Total retirement and social insurance benefits^
See footnotes at end of table.

81,383

91,622

24,852

103,924

553
11,959

473
16,878

120
3,285

440
14,833

12,512

17,352

3,405

15,273

184

247

288

105

127

105

124

146

251
348
10,863
13,160
42
44
—3,865 —4,783
_ _

99
2,312
8
—15

452
17,175
50
—7,222
28

7,664

9,246

2,542

11,045

101, 559

118,219

30, 799

130,241

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued

OTHER SERVICES AND CURRENT OPERATING
EXPENSES
Repair, maintenance, and operation of physical assets:

Civil:
Legislative branch: Architect of the Capitol
Department of Agriculture: Forest Service *
Department of Defense—Civil:
Corps of Engineers
Miscellaneous accounts
Department of the Interior:
Bureau of Land Management*
Bureau of Reclamation
National Park Service *
Bonneville Power Administration
Other
.-.— --.Energy Research and Development Administration
Tennessee Valley Authority
Other agencies l
National defense:
Department of Defense—Military:
Operation and maintenance
Family housing
Energy Research and Development Administration
General Services Administration
Total repair, maintenance, and operation of
physical assets
Regulation and control—civil:
t h e Judiciary i_.._
Department of Agriculture: Animal and plant health
inspection service and other!
Department of Health, Education, and Welfare: Food
and Drug Administration and other
Department of Justice:
General administration
Legal activities
Federal Bureau of Investigation
Immigration and Naturalization Service
Federal Prison System !
Law Enforcement Assistance Administration
Drug Enforcement Administration
Department of Transportation:
Coast Guard
Federal Aviation Administration
_
Other
Department of the Treasury:
Bureau of Alcohol, Tobacco and Firearms
Customs Service
Internal Revenue Service
Secret Service
Other 1
See footnotes at end of table.

37
438

50
496

12
194

54
374

285
1

263
1

49
*

306
1

151
124
226
16
148
— 235
98

202
153
242
-213
41
151
-107
128

46
40
77
-16
12
55
-56
39

191
170
273
-171
47
204
-298
138

26,266
768

28,181
920

7,614
236

30.589
1,033

54
*

69
*

28,422

30,579

8,322

33,001

283

342

391

362

409

109

413

174

193

195

21
223
426
179
162
625
127

21
241
457
211
182
688
148

5
62
123
54
49
184
42

21
269
454
222
200
640
153

96
85
15

115
95
25

33
25
9

131
97
27

95
71
58
82
11

108
89
51
107
28

26
20
13
31
-7

123
78
50
108
12

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Regulation and control—civil—Continued

Environmental Protection Agency 1
Federal Communications Commission
Federal Trade Commission
Interstate Commerce Commission
National Labor Relations Board
Nuclear Regulatory Commission
Securities and Exchange Commission
Other agencies l
Total regulation and control

Other operation and administration:
Civil:
International activities:
Department of State:
Administration of Foreign Affairs 1
International organizations and conferences L
Educational exchange 1
Other
Board for International Broadcasting
United States Information Agency 1
Other agencies
Total international activities
Federal financial activities:
Legislative branch: General Accounting Office
and other
_
Department of Health, Education, and Welfare:
Supplemental security income program
Department of the Treasury:
Bureau of Government Financial Operations,
Customs Service
Bureau of the Public Debt
Internal Revenue Service
Other
Other agencies
Total Federal financial activities
Other direct Federal programs:
Legislative branch l
Executive Office of the President
Department of Commerce: National Oceanic and
Atmospheric Administration and other l
Department of Defense—Civil:
Corps of Engineers
The Panama Canal
Department of Health, Education, and Welfare:
Departmental management
See footnotes at end of table.

261
47
39
46
61
86
44
154

387
49
47
51
11
200
52
207

127
12
13
13
16
52
12
54

306
50
53
61
77
236
52
210

3,834

4,575

1,219

4,629

391
226
58
2
50
240
13

438
304
63
2
63
269
11

122
208
19
18
69
3

519
325
61
2
54
270
11

980

1,151

440

1,243

159

135

144

155

127
239
100
1,544
58
*

135
259
105
1,636
70
2

36
63
28
412
18
18

150
257
115
1,610
75
-1

2,357

2,412

609

2,422

534
81

679
81

170
18

697
71

270

292

335

42
64

44
60

12
16

46
66

THE BUDGET FOR FISCAL YEAR 1977

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

104

136

137

185
122
398

307
134
310

113
30
64

249
133
261

87
—63
-304
7
118
33

102
—9
-412
7
143
66

25
—16
-93
2
14
16

102
—76
-399
9
120
83

1,774

2,032

511

1,926

121

118

750

400

1,600

269

293

171

222

172
122

216
114

54
24

220
114

6,130
226
37
34

6,272
254
48
64

1,627
64
17
26

6,549
280
68
55

7,147

8,104

2,500

9,145

12,259

13,699

4,059

14,735

24,556
6,242
63
57
73
64
12
63
—7

25,076
7,325
73
57
73
—61
13
65
—6

6,586
1,977
17
13
14
—121
-1
12
—2

24,769
8,388
81
52
58
—144
10
41
—7

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Continued
Other operation and administration—Continued

Civil—Continued
Other direct Federal programs—Continued
Department of the Interior
Department of the Treasury: Bureau of Government Financial Operations and other 1
Environmental Protection Agency
General Services Administration *
Civil Service Commission:
Salaries and expenses
Employees health benefits fund
Employees life insurance fund
Other 1
Federal Energy Administration
Other agencies1
Total other direct Federal programs
Shared revenues and grants-in-aid:
Department of Agriculture: Forest Service
Department of Housing and Urban Development: Community development grants
Department of the Interior: Land management,
territorial affairs, and other
Department of the Treasury:
Customs Service
Internal Revenue Service
State and local government fiscal assistance
trust fund
District of Columbia
Tennessee Valley Authority
Other agencies
Total shared revenues and grants-in-aid
Total, other operation and administration,
civil
National defense:
Department of Defense—Military:
Military personnel
Retired military personnel
Operation and maintenance
Family housing
Civil defense
Revolving and management funds
Other __
Other agencies
Intragovernmental transactions (—)
Total other operation and
national defense

administration,

Total other operation and administration

31,123

32,615

8,495

33,248

43,382

46,314

12,554

47,983

SPECIAL ANALYSIS D

Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS
(In millions of dollars)—Continued
Description

1975
actual

1976
estimate

TQ
estimate

1977
estimate

32,665

37,700

10,400

45,000

236
8
*

334
8
*

62
2
*

396
8
*

244

342

404

—1,234
-7,667

—1,563
-8,015

—261
-2,110

—1,425
-8,373

—455
-249

—1,254
-388

—360
-73

—2,252
-430

Total net interest

23,304

26,822

7,659

32,924

Total other services and current operating
expenses

98,942

108,290

29,754

118,537

Current outlays—Continued
OTHER SERVICES AND CURRENT OPERATING
EXPENSES—Conti nued

Interest:
On the public debt
Other interest:
On refunds: Department of the Treasury
On uninvested funds: Department of the Treasury.
Intragovernmental transactions (—)
Total other interest
Intragovernmental transactions (—):
Interest on Government capital in enterprises (—)_
Interest received by trust funds ( - )
Receipts from off-budget Federal agencies: Interest
on Government capital in enterprises (—)
Proprietary receipts from the public ( - )

National defense allowances:
Department of Defense—Military: Allowances:
Civilian and military pay raises
Other legislation

1,390
..

163

1,553

261,234

300,046

77,641

320,477

__ __ __
. ___

200

175

760
1,500

-3,014
-967

-3,205
-988

-826
-153

-3,396
-1,072

-5,283
-5,757
324,601

-6,300
-7,016
373,535

-1,434
-1,790
97,971

-10,044
-8,596
394,237

Total national defense allowances
Total current outlays
Other
Allowances for:
Civilian agency pay raises
Contingencies
Employer share, employee retirement:
Interfund transactions ( - )
Receipts from off-budget Federal agencies ( - )
Proprietary receipts from the public (—):
Civil
National defense
Total budget outlays
*Less than $0.5 million.
Includes both Federal and trust funds.

SPECIAL ANALYSIS E
FEDERAL CREDIT PROGRAMS

Federal credit programs play a significant role in reallocating our
Nation's economic resources. These programs have one important
objective: To encourage certain types of economic activity by providing individuals, businesses and government bodies with credit at
more favorable terms than would otherwise be available in the
private market. Frequently such credit assistance is designed to
counteract rationing in private credit markets and to provide loans at
longer maturities and higher loan-to-value ratios, but most often it
reallocates resources with a lending rate that is lower than that
available on comparable private loans.
Federal credit assistance is provided to borrowers in a number of
ways. Direct loans are made by Federal agencies and by Governmentsponsored, privately owned credit enterprises. Federal Government
agencies also guarantee or insure private loans. And, serving as intermediaries, Government-sponsored credit enterprises improve access to
credit markets for certain borrowers. Because of the complex institutional arrangements that have evolved, several of these forms of credit
assistance are frequently combined in a single program; and sometimes
a single transaction is aided by two or more programs.
When a credit program is directly aimed at lowering interest rates
to specific borrowers, the interest subsidy may be explicit, as in the
case of direct loans where legislation provides for interest rates that
are less than market rates; or it may be implicit, as in the case of
guaranteed loans where the Government assumes the lender's risk.
Another implicit interest rate subsidy results from the tax exempt1
status of interest on the securities of State and local governments.
Occasionally, a lower interest rate is achieved by providing a particular
financial asset with greater liquidity as a result of Government assistance in the development of secondary markets. Government guarantees of some residential mortgages and the direct and indirect lines
of credit to institutions such as the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation have
contributed to the operation of a well organized secondary market
for residential mortgages.
The following analysis is intended to be a basic factual resource
rather than an evaluation of programs and policies. The chapter
highlights major trends in the credit activity of the Federal Government and its sponsored agencies over the last 10 years, and presents
the details of direct loans and loan guarantees by major program
category from 1975 to 1977. Because interest rate subsidies are an important element in Federal credit assistance, a special section is devoted
to measuring the value of this support for each progran The chapter
concludes with a summary of proposed and recently enacted legislation
that will affect the future course of Federal credit activities.
1
The credit subsidy effects of the tax-exempt status of State and local borrowing is not considered in
this analysis. However, see Special Analysis F. Tax Expenditures, p. 132.

SPECIAL ANALYSIS E

Questions of great analytical difficulty remain unanswered about
the impact and the distribution of benefits resulting from credit
assistance. One of the most important unanswered questions is the
degree to which federally assisted credit is substituted for private credit
transactions that would take place without government assistance.
Constraints on space require consolidation of information relating
to budget accounts and programs in this analysis. Additional detail is
available elsewhere. The Treasury Bulletin provides data on outstanding direct and guaranteed loans in the most recently completed
year
or quarter for both accounts and programs within accounts.2 Part IV
of the Budget Appendix contains an expanded table displaying disbursements, repayments and net outlays for each budget account
containing direct loan transactions.
TRENDS AND DIRECTIONS

The total amount of credit provided under Federal auspices has
risen rapidly during the past decade, both from the expansion of
existing programs and from the initiation of new ones. Table E-l
summarizes data on Federal participation in domestic credit markets
over the last decade.
The volume of credit advanced under Federal auspices (direct and
guaranteed loans) increased in absolute value each year from 1966
to the present. However, with the exception of 1967 and 1970,
Federal Government advances held steady in the narrow range of
13 to 16% of all funds advanced in U.S. credit markets. In 1975,
the Federal participation rate increased to 15.1% as a result of reduced
private credit demands and expanded Federal mortgage credit programs implemented to increase the rate of housing production. The
components of Federal participation caused by mortgage credit programs are expected to be lower in 1976, but to increase again in 1977
as a result of large increases in mortgage purchases and advances to
savings institutions.
Changes in housing support have had similar impacts in the past:
The decline in the proportion of funds advanced under Federal
auspices in 1967 was due largely to the repayment of funds advanced
by the Federal Home Loan Bank System during 1966 in support of
the mortgage market. Similarly, the dramatic increase in the Federal
proportion during 1970 reflected greater support of the mortgage
market by the Federal Home Loan Bank System and the Federal
National Mortgage Association. Federal support of mortgage credit
also increased in 1973 and 1974 but was not readily apparent in the
Federal participation rate because of the significant increase in all
lending that occurred during those two years.
On the borrowing side, the Federal participation rate has been
higher and more variable than it has been for lending, fluctuating
in a range of 2 to 36% of funds raised in U.S. credit markets. The
difference between the Federal proportion of borrowing and lending
is a result of the surplus or deficit in the Federal budget. The budget
deficit in 1975 increased Federal borrowing significantly as taxes were
cut and expenditures increased in response to the weakening economy.
The 1976 deficit, which is now expected to be $76 billion, will produce
a similar effect on 1976 credit demands.
2 See table GA 11-2. Treasury Bulletin.

Table E l . FEDERAL PARTICIPATION IN DOMESTIC CREDIT MARKETS (dollars in bUlions)
Actual
1966

Total funds advanced in U.S. credit markets l
(includes equities)
Advanced under Federal auspices2
Direct loans:
On-budget
Off-budget
Guaranteed loans
Sponsored agency loans
Federal participation rate (percent)
Total funds raised in U.S. credit markets !
Raised under Federal auspices2
Federal borrowing from public
Guaranteed borrowing
Sponsored agency borrowing
Federal participation rate (percent)
1
2
3

1967

1968

1969

Estimates

1971

1972

1973

1974

1975

1976

1977

59.1
5.8

95.2
14.9

95.9
15.0

90.5
17.4

120.6
16.5

155.2
22.8

193.8
26.7

181.2
26.6

177.9
26.9

(3)
34.4

((33))
9.2

((33))
31.2

4.4

5.3

8.0

2.9

4.5

3.0

2.7
.2
15.6
4.3
14.7
155.2
39.7
19.4
15.6
4.7
25.6

.3
.7
14.0
. ,.v
1 i r
11.6
13.8

2.2
2.2
.*
v6.2
tc
*
16.3

4.3
8.5
-,..
5.7
o c
8.5

4.3
7.9

1.1
3.4
..4
.
A
*
4.3

10.0
2.4-,
«..
c n
*16.7

14.7

193.8
46.4
19.3
14.0
IT. u
13.2
23.9

181.2
24.1
3.0
6.2L
u.
14.8
13.3

15.1
177.9
64.7
50.9
J.I
5.7

3.8
1.9
13.6
74.4
8.7
3.1
3.8
1.8
11.7

2.1
-1.9
9.8
59.1
1.1
2.8
2.1
—3.8
1.8

5.6
1.3
15.6
95.2
31.3
23.1
5.6
2.6
32.9

7.8
4.3
15.7
95.9
11.3
-1.0
7.8
4.5
11.8

2.3
10.6
19.2
90.5
16.4
3.8
2.3
10.3
18.1

12.2
1.3
13.7
120.6
32.3
19.4
12.2
.6
26.8

8.2

36.4

74.4
10.1

Nonfinancial sectors. Source: Federal Reserve Board Flow of Funds Accounts.
Estimates from table E—10.
Not estimated.

1970

13.1,
,^.
n n

9.0
(3)

108.7
87.5
13.1
\J.\

8.0

(3)

24.6
20.0
.-T
.4

4.2

2.1

(3)
70.5
53.5
A.T
2.4
14.6

•

SPECIAL ANALYSIS E

The credit component of the budget has become a less useful
indicator of Federal credit activities because of the substitution of
loan guarantee programs for direct loan programs; sales of direct loan
assets; the creation of enterprises which are privately owned, but
Government-sponsored; and the legislated removal of some Government programs and agencies from the budget.
The Federal Financing Bank, established in late 1974, continues to
represent the most significant organizational development in the area
of Federal credit. The bank, an adjunct of the U.S. Treasury, was
created to provide more efficient financing for obligations issued,
sold, or guaranteed by Federal agencies, thereby reducing unnecessary
costs to the Government and to the borrower. Treasury may require
Federal agencies authorized to borrow in private capital markets to
borrow from the FFB instead. Similary, Treasury may direct agency
sales of direct loan assets to FFB. The FFB's preferential status in
capital markets and its authority to borrow from the Treasury at the
Treasury's own borrowing rate permit it to charge lower interest
rates than those usually available to the borrowing agency if that
agency were to borrow directly from capital markets. The FFB is
also authorized to purchase the securities and loans of private borrowers and Government corporations where Federal agencies guarantee
the loan. Although this support involves no direct cost to the Government, the assisted borrowers receive substantial implicit subsidies in
the form of lower interest rates. Because of its off-budget status,
loans originated by the Federal agencies and sold to the FFB are
not considered as budget outlays. Transactions of the FFB are
summarized in table E-2. As the table indicates, the FFB now holds
a large volume of the federally sponsored debt incurred by private
individuals, Government corporations and Federal agencies.
Table E-2. FFB NET ACQUISITIONS OF OBLIGATIONS (in millions of dollars)
1975
actual

Loans and loan purchases: l
Student Loan Marketing Association
Farmers Home Administration
Military assistance loans
Rural Electrification Administration
New York City seasonal
Other2
Total loans
Agency debt:
On-budget:
Tennessee Valley Authority
Export-Import Bank
Off-budget:
U.S. Postal Service
United States Railway Associ?tion
Export-Import Bank
Total net purchases of obligations
1

1976
estimate

140
5,000
112
255

165
3, 978
412
614

673

432

6,180

1977
estimate

60
1,222
150
170
1,100
81

335
5,926
650
632
—100
831

5,601

2,783

8,275

1,435

1,100

300

1,000
2,028

1,000
34
4,049

1,280
—5
1,437

500
—1
393

1,398
—2

12,698

9,414

financing

FFB purchases may vary, depending on credit conditions and program levels.
2 GSA, HEW, HUD. OPIC, SBA. WMATA, and Amtrak.

TQ
estimate

3,975

12,698

THE BUDGET FOR FISCAL YEAR 1977

Another significant credit development during 1974 and 1975 was
the dramatic increase in Federal support of the residential mortgage
market. Shortages of mortgage credit, high interest rates, overbuilding,
depressed real income and inflation led to a severe decline in housing
production. The Federal Government supported the depressed housing
industry through four special programs designed to provide a source
of financing for individual mortgage loans and to reduce monthly
payments required of a new home buyer or apartment owner. From
January 1974 to May 1975, the Government National Mortgage
Association (GNMA) committed itself to purchase $9.9 billion of
FHA/VA mortgages at subsidized interest rates under its tandem
plan. The Federal Home Loan Mortgage Corporation made commitments to purchase $3 billion of conventional mortgages with
below-market interest rates during 1974, and was authorized to
finance the purchase of these mortgages with Treasury borrowing.
The Federal Home Loan Bank System (FHLBS) advanced $3.5
billion at subsidized interest rates to savings and loan associations in
the last half of 1974. From October 1974 to August 1975, GNMA
offered commitments to purchase $7.75 billion in conventional and
FHA/VA mortgages at below-market interest rates. Finally, beginning
in January 1976, $3 billion in mortgage purchase assistance will be
provided by GNMA to encourage construction of multifamily projects.
These programs could finance $27 billion in mortgages over and above
the volume of credit made available through the existing Federal
housing credit programs. Because some portion of the subsidized
mortgage funds go to home buyers who would have purchased homes
at unsubsidized mortgage rates, and because Government lending
tends to squeeze some private lending out of the market, the net
addition to housing will undoubtedly be much less than the $27
billion provided by these programs.
With the exception of the $3 billion released in January 1976, funds
provided by these programs have been committed. Because savings
inflows to thrift institutions have been proceeding at record rates this
year, no new initiatives are being planned. However, in response to
continued depressed conditions in the housing sector, the Department
of Housing and Urban Development has reactivated the section 235
single-family housing program for middle-income families to begin in
January 1976. Although the loans will be provided by private lenders,
annual payments of up to $264 million have been authorized to reduce
the interest rate on these mortgages down to as low as 5%, depending
upon income of the beneficiary household. It is expected that this
authorization will be sufficient to provide assistance to 250,000 housing
units.
DIRECT LOANS

Direct loans are made by both on- and off-budget Federal agencies,
and are financed by Treasury or agency borrowing. The major Federal
programs that provide direct loans are identified in tables E-3 and E-4.
Loan outlays of on-budget Federal agencies (which are defined net
of repayments) are reflected in budget outlays, and are accounted for
in the budget surplus or deficit. However, in recent years legislation
has been enacted which places a number of direct-lending agencies or
programs outside of the budget. Because their economic effects are
identical to those of direct loan programs included in the budget,
they are also presented in this analysis.

SPECIAL ANALYSIS E

Repayments of outstanding loans are not classified as receipts in
the budget, but are offset against new loan disbursements for loan
revolving accounts and against general outlays in the case of nonrevolving accounts. For this reason, outlays for loan programs are net
of repa3^ments and may understate significantly the level of newlending activity. Gross loan disbursements, which are shown in table
E-3, provide a more comprehensive measure of program activity
levels.3
Tables E-3 and E-4 provide data on direct loan activity by major
agency and program.4 Table E-3 reports loan commitments and disbursements for 1975-77. Commitments to make direct loans tend to
forecast future financial flows because commitments are often made
in advance of the time when funds are actually disbursed. An apparent
anomaly occurs in the relationship between commitments and disbursements for low-rent public housing and urban renewal notes.
Disbursements are higher than commitments because they include
short-term interim construction financing notes which are "rolled
over" several times, while commitments are counted only once.
Table E-4 shows net changes in direct loan programs and outstanding loan levels for 1975-76. Increased direct lending activity in
Fiscal Years 1975 and 1976 represent part of the Federal effort to
achieve economic recovery. A large portion of the total is focused on
housing, with the Farmer's Home Administration, Housing and
Urban Development, and Veterans Administration housing programs
making up more than 60 percent of all direct lending in 1975 and 1976.
The anticipated recovery will permit a reduction in direct lending to
housing programs by 1977.
Loan repayments and net loan disbursements reflect sales of direct
loan assets as well as actual loan repayments and prepayments.
Table E-5 identifies the major loan sales within the repayment totals.
Prior to 1974 a large portion of loan sales were to private investors or
to the FNMA. Most sales are now being directed to the FFB.
GUARANTEED LOANS
5

Guaranteed loans are loans made to private borrowers and Government corporations for which the Federal Goverment assumes part
or all of the customary credit risks. Prior to 1974, these loans were
typically held by private lenders; however, the FFB has since become
a major purchaser of guaranteed loans. The major agencies and programs making loan guarantees are shown in tables E-6 and E-7. Also
considered as guaranteed loans are loans on which the Government
3
Some guaranteed loans are ultimately supported by direct loans as a result of claims paid under
guarantee programs when the Government receives either the original loan or the collateral.
4
Because loan disbursements and repayments in foreign currencies are not included in the budget,
the tables in this analysis include only data on loans that are both disbursed and repayable in dollars.
Government agency direct loan transactions disbursed or repayable in foreign currencies (in millions
of dollars) are:
1975
1976
TQ
1977
Outstanding, start of year
2,794
2,587
2,453
2,421
Disbursements (dollar equivalents)
4
4
Repayments—dollars(—)
—2
—4
—1
Repayments—local currencies( - )
-194
-134
-32
-4
Net disbursements
-192
-134
-33
-129
Adjustments
-114
-133

Outstanding, end of year
4

2,587

2,453

As used here, guaranteed loans include those designated as "insured."

2,421

2,288

Table E-3. DIRECT LOAN COMMITMENTS AND GROSS DISBURSEMENTS (in millions of dollars)
Gross disbursements1

Commitments
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance
Agriculture:
Farmers Home Administration
Commodity Credit Corporation
Public Law 480 long-term export credits
Commerce: Economic Development Administration
Health, Education, and Welfare:
Health programs
..__
Claims on insured student loans...
.
Other education programs
Housing and Urban Development:
Low-rent public housing—interim financing
Federal Housing Administration—insurance claims
Government National Mortgage Association:
FHA/VA tandem plan
Conventional tandem plan
Other
Community development loans
Other mortgage credit. _
Interior.
Justice: LEAA loans
Transportation
Treasury:
New York City seasonal financing
Liquidation programs

1976
estimate

1975
actual

1977
estimate

TQ
estimate

1976
estimate

1975
actual

1977
estimate

TQ
estimate

437
478

1,689
553

27
122

1,886
532

624
530

829
581

206
138

937
471

4,481
1,101
747
15

4,960
2,264
956

,243
480
118
15

4,526
1,719
838
42

5,579
1,101
747
23

5,322
2,264
956
38

1,568
480
118

6,099
1,719
838
38

97
130
316

159
125
324

29
33

28
135
1

113
119
344

137
124
293

47
35
15

89
124
312

130

645
914

650
779

162
189

650
646

6,843
4,936

3,610
2,000

3,217
422

3,045
2,480

103
1,600

687

508

154
3

731
47
57
44
138

152
16
19
21
30

700
19
29
20
47

1,300

1,500

2,100

22
40
37

25
627

43
137

9
20
30

4
33
20
47

1,300

1,500

2,100

12
21
40

Veterans Administration:
Housing loans and guarantee claims
Insurance policy loans
District of Columbia
Export-Import Bank 2
Federal Deposit Insurance Corporation
Federal Home Loan Bank Board
Small Business Administration:
Business and investment loans
Disaster loans
United States Railway Association4
Other agencies and programs

370
154
232

434
157
241

115
40
42

457
160
225
5,075

100
1,305

338

59
40
200
2

235
140
540
7

463
221

250
240
400
9

23,044

20,586

4,142

900
160
3,813
34
6,958

1,061
180
4,450
250
525
6,506

Total off-budget agencies

11,865

Grand total

34,909

Total budget agencies
Off-budget direct loans:
Rural electrification and telephone revolving fund
Rural Telephone Bank
Export-Import Bank
HUD: Housing for the elderly or handicapped 5
United States Railway Association
Federal Financing Bank
Energy Independence Authority

279
241

370
154
233

437
157
242

115
40
82

457
160
226
2,800

100 _
1,305

338

462
240
400
43

106
65
200
9

456
114
540
18

18,838

17,995

22,134

7,035

20,324

250
45
1,105
125

1,000
180

1,022
178

9,800
3,000

925
160
2,772
5
525
6,506

231
40
646
3

2,878

855
130
2,817
*
34
6,958

2,878

9,800
650

12,972

4,403

14,355

10,794

10,894

3,798

11,775

33,558

8,546

33,193

28,783

33,027

10,833

32,100

375

126

*Less than $0.5 million.
1
Gross disbursements in this year's analysis are defined to include actual disbursements for primary loans, disbursements for guarantee claims, and extension of sales
credits. In previous analyses these were included net of writeoffs, forgiveness credits and other accounting a d j u s t m e n t s .
2
Returned to on-budget status by statute effective Oct. 1, 1976, with outstanding loans of $11,247 million. In addition, securities previously sold by E x i m b a n k , representing an e s t i m a t e d $340 million in loans, have been reclassified from loan sales to a g e n c y debt i s s u e s , t h u s restoring these loans to portfolio. R e p a y m e n t s during 1 9 / 7
are expected to reduce the net effect of these reflected in 1977 year-end o u t s t a n d i n g s to $251 million.
3
Represents a special loan to the new owners of the Franklin National Bank. N o t e : loan assets acquired from banks in liquidation have not been reported for the
credit analysis.
* Includes both debentures and repayable preferred stock of ConRail.
5
Transferred off-budget effective Aug. 31, 1974, with outstanding loan balance of $519 million.

Table E-4. NET DIRECT LOAN OUTLAYS AND LOANS OUTSTANDING (in millions of dollars)

Funds appropriated to the President:
International security assistance
International development assistance
__
Agriculture:
Farmers Home Administration
Commodity Credit Corporation
Public Law 480 long-term export credits
Commerce: Economic Development Administration
Health, Education, and Welfare:
Health programs
Claims on insured student loans
Other education programs
Housing and Urban Development:
Low-rent public housing—interim financing
Federal Housing Administration—insurance claims
Government National Mortgage Association:
FHA/VA tandem plan
Conventional tandem plan
Other
Community development loans
Other mortgage credit
Interior
Justice: LEA A loans
Transportation
Treasury:
New York City seasonal financing
Liquidating programs

Outstanding

Net loan outlays

Agency or program

1975
actual

_
_

1976

1977

1975

1976

1977

2,886
11,205

108 -1,323
235
-71
112
741
3
12

2,387
10,830
1,822
1,262
3,954
491

2,956
11,289
2,114
2,104
4,934
507
542
410
3,391
29
2,890

401
407

499
376

1,395
—1,395
-446
515
4

184
608
868
13

55
108
331

47
102
278

22
28
11

-17
88
296

474
280
3,102

-41
643

454

107

349

29
2,328

520
382
3,380
29
2,782

1,906 -1,819
1,784
421
-204
-324
21
109
-67
-40
50
17
35
17
39
138

-7
-5
-48
-2
-6
17
11
30

-17
-19
-126
-25
-87
20
-17
-79

2,189
421
2,875
301
3,734
267
140
187

370
2,206
2,671
409
3,693
317
157
325

363
2,201
2,623
111
3,984
334
168
355

3,446
11,527
791
2,033
5,675
519
526
498
3,687
29
3,239
346
2,181
2,497
86
3,897
354
152
111

-116

3,743

3,574

3,458

-169

70
84

490
238

2,006
1,870
4,821
504

Veterans Administration:
Housing loans and guarantee claims *
Insurance policy loans
District of Columbia
Export-Import Bank 2
Federal Deposit Insurance Corporation 3
Federal Home Loan Bank Board
Small Business Administration:
Business and investment loans
Disaster loans
United States Railway Association4
Other agencies and programs
Total budget agencies

17
41
198

—116
36
170

27
9
42

—420
28
150
1,423

1,792
1,131
1,014

1,676
1,167
1,183

1,704
1,175
1,225

100
1,369

100
1,664

100
1,654

1284
1203
1,375
12,921
100
1,624

100
1,266

295

—10

—31

-36

133
87
400
3

62
29
200
-2

123
—34
540
-24

1,718
1,357
482

1,851
1,444
400
484

1,913
1,473
600
482

2,036
1,439
1,140
458

4,251

4,301

1,129

2,092

49,777

54,079

55,207

68,798

651
129
1,504
-5
34
6,180

696
158
1,458
-1
-5
5,601

170
39
374
2
-1
2,783

759
174

7,847
273
9,415
514
34
6,282

8,543
432
10,873
513
29
11,883

8,713
471
11,247
514
28
14,667

9,472
645

8,493

7,908

3,367

9,975

24,364

32,272

35,640

34,367

12,744

12,210

4,496

12,067

74,142

86,351

90,847

103,165

187
18

OFF-BUDGET DIRECT LOANS
Rural electrification and telephone revolving fund
Rural Telephone Bank
Export-Import Bank
HUD: Housing for the elderly or handicapped 5
United States Railway Association
Federal Financing Bank
Energy Independence Authority
Total off-budget agencies
Grand total

120
-2
8,275
650

634
26
22,941
650

1
Claims paid under insurance and guarantee programs become classified as direct loans until acquired loans or collateral are paid off or liquidated. Proceeds of liquidations2 are classified as repayments and realized losses then become writeoffs.
See footnote 2, table E-3.
3
See footnote 3, table E-3.
4
See footnote 4, table E-3.
6
See footnote 5, table E-3.

THE BUDGET FOR FISCAL YEAR 1977
Table E-5—DIRECT LOAN ASSET SALES AND REPAYMENTS
(In millions of dollars)
1975
actual

Loan sales:
Agriculture, Farmers Home Administration:
Agricultural credit insurance fund
Rural housing insurance fund
Rural development insurance fund
Health, Education, and Welfare:
Health maintenance organization loans
Medical facilities loans
Treasury: New York City seasonal financing loans__
Veterans Administration:
Direct loan revolving fund
Loan guaranty revolving fund
Small Business Administration
Subtotal, budget agency loan sales excluding
Tandem plans
Housing and Urban Development (GNMA special assistance fund):
FHA/VA tandem plan
Conventional tandem plan

1976
estimate

1,863
3,868
677

813
3,184
746

30
56

163

60
318
150

TQ
estimate

1977
estimate

329
634
259

1, 154
4,423
721

25
1, 100

30
59
1,000

10
32

201
504
150
8,242

6,626

5,356

2,389

1,296

2,625
2,900

103
1,600

687

Subtotal, budget agency loan sales
Scheduled repayments and prepayments

7,922
5,383

10,881
6,564

4,092
1,715

8,928
8,816

Total repayment credits
Memos:
Farmers Home repurchases
Off-budget loan sales: Export-Import Bank
Sales to FFB included above:
Farmers Home Administration
Health, Education, and Welfare
Treasury
Small Business Administration

13,305

17,445

5,807

17, 744

1,281
20

945
25

339
6

1,675

5,000
55

3,978
86

1,222
25
1,100

5,926
89
1,000
150

5,055
2,887

4,739
6,667

2,357
1,741

7,165
1,763

Total sales to FFB
Sales to public (includes off-budget)

150

pays a significant share of the interest, even though principal repayments are not assured. Federal long-term direct leases and
guarantees of private leases are also classed as guarantees of the
underlying credit. Tables E-6 and E-7 measure the full principal
amount of the loan, although in some cases the Government guarantees
less than 100% of the principal amount of the loan.
Data on loan guarantees in tables E-6 and E-7 are comparable to
tables E-3 and E-4 for direct loans.6 As with direct loans, the data in
table E-6 on commitments permits some forecasting of future guarantee activity. It also gives an insight into program-by-program variations in the rates at which commitments are converted into guarantees.
0
Adjustments to eliminate double counting have been made in the
E-7 to make possible the aggregation of guaranteed loans with other
ance. Adjustments are required when the same credit extension is
guaranteed loans are converted to direct loans. Additional adjustments
in tables E—8 and E—9 for Government-sponsored credit enterprises.

data shown in tables E-6 and
forms of Federal credit assistguaranteed twice, and when
are made for double counting

SPECIAL ANALYSIS E

Guaranteed loans, like off-budget direct loans, are not reflected in
the budget at the time credit is extended. Budget impacts from loan
guarantee programs, excepting additional subsidies and administrative
costs, occur only when defaults require the Federal Government to pay
lenders' claims. Losses for older guaranteed loan programs have been
relatively low because most older programs involved guarantees with
liens on property. However, loans made under some housing subsidy
programs have experienced very high default loss rates in spite of the
security of real property. Other recent programs generate higher risks
because there has been a tendency to move toward the guarantee of
loans which require little or no collateral in connection with the
guarantee, and, as a result, these programs are experiencing much
higher loss rates.
Table E-7 summarizes the net changes in guaranteed loans and the
total dollar value of guaranteed loans outstanding at the end of 197577 by agency and program. Outstanding guaranteed loans are expected
to grow at a rapid pace, up to almost $275 billion in 1977. However,
the growth is less spectacular after certain necessary adjustments have
been made. In some cases a single loan may be guaranteed more than
once, resulting in double counting. For example, HEW guarantees
SLMA obligations and GNMA guarantees securities backed by FHA
and VA guaranteed mortgages. In addition, the Federal Financing
Bank is purchasing an increasing share of guaranteed loans, converting
them to off-budget, direct loans funded from Treasury borrowing.
Thus, while the gross amounts of net guaranteed loans have increased
at an average annual rate of 11% over the period reported, the annual
growth rate is reduced to 4% aftei these adjustments.
GOVERNMENT-SPONSORED CREDIT ENTERPRISES OUTSIDE THE BUDGET

Several major Government-sponsored credit enterprises, created to
facilitate the financing of selected programs, are privately owned and
managed. All, however, are subject to some form of Federal supervision
and consult the Treasury Department in planning the marketing of
their debt obligations. The enterprises included in this category are
the Federal Home Loan Bank System, the three components of the
Farm Credit System, the Federal National Mortgage Association, and
the Student Loan Marketing Association.
These enterprises differ from other private institutions in that they
have been given special preferences, including rights to assess their
constituents, certain tax exemptions and preferences, and preferential
eligibility for investment in their securities by federally regulated
institutions and other fiduciaries. These, plus the enterprises' implied
Federal backing, give their security obligations a preferred position in
the securities market. This enables them to borrow at interest
rates well below the rates charged on the best grade corporate securities, and only moderately above the Government's own rates.

Table E-6. LOAN GUARANTEE COMMITMENTS AND LOANS GUARANTEED (in millions of dollars)
Commitments
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance
Agriculture:
Farmers Home Administration
Rural Electrification Administration
Commerce: Maritime Administration
Defense
Health, Education, and Welfare:
Health programs
_ _ __
Student loan insurance fund
Guarantees of SLMA obligations
College facilities: Subsidized loans
Housing and Urban Development:
Low-rent public housing
Federal Housing Administration
Community development loans
New communities fund
College housing: Subsidized loans
GNMA mortgage-backed securities
Other mortgage credit
Interior: Indian programs
Transportation:
Rail programs
WMATA bonds
Aircraft loans
General Services Administration
Energy Research and Development Administration
Veterans Administration: Housing loans

1975
actual

Loans guaranteed

1976
TQ
1977
estimate estimate estimate

1975
actual

1976
TQ
estimate estimate

1977
estimate

616
26

1,445
43

1,355
54

858
72

1,223
121

240
25

650
219

7,171
1,406
699

5,331
1,536
1,087
4

1,406
385
180
1

6,927
1,506
1,471
1

6,884
255
799

5,386
945
716
184

1,471
234
185
1

6,813
1,182
609
1

89
1,299

413 _._
.
1,551
688
165
60

30
1,639
335

377
1,182
422

30
1,406
165
194

642
60
8

30
1,485
335
36

741
11,221
493
18

1,171
12,056
100
43

64
4,548

458
15,161

7,341
6,130
690
21

8,500
6,436
727
62

2,200
1,168
72

10,300
4,905
400
17

5,905

10,000

2,600

10,000

5,905

10,000

2,600

10,000

109

__ ___
177

2,002

__ _

161
177

134
2,000
10,850

144
200
10,982

8,436

14
2,811

109

8,254

1,231

529

17
134
2,000
10,444

56
14
2,708

626
144
200
10,882

Emergency Loan Guarantee Board
Energy Independence Authority
Export-Import Bank
.
Federal Deposit Insurance Corporation1
Small Business Administration
Other agencies and programs2
Total (gross)
Less secondary guarantees:3
GNMA guarantees of FHA/VA pools
_
HEW guarantees of SLMA insured student loan interests
Total primary guarantees

Less guaranteed loans acquired for direct loan portfolios:
By budget agencies: GNMA.
By off-budget Federal agencies: Federal Financing Bank
By federally sponsored enterprises:
Federal National Mortgage Association
Federal home loan banks
Federal Home Loan Mortgage Corporation
Student Loan Marketing Association
Total primary guaranteed loans (adjusted)

_
8,708
1,723
1,365
6

14,575

3,601

6,000
14,725

1,351

1,200
5,347

2,041
6

514
2

2,644
6

514
3

2,644
33

50,172

66,672

16,902

73,691

47,195

58,148

14,081

58,011

5,905

10,000
165

2,600
60

10,000
335

5,905

10,000
165

2,600
60

10,000
335

44,267

56,507

14,242

6,842
6,958

3,610
6,506

63,356

41,290

47,983

11,421

47,674

2,878

9,800

3,242
6,958

3,045
6,506

103
2,878

687
9,800

4,239
30
153
144

3,090

4,403
5
150
586

4,239
30
160
144

3,090

150
287

945
2
40
116

150
287

945
2
40
116

4,403
5
150
586

25,901

42,864

10,261

48,412

26,517

34,905

7,337

32,043

4,428
6,045
1,723 „ __
1,365
2,041
78
32

1
FDIC assumed liability for the New York Federal Reserve Bank's loan to Franklin National Bank in connection with its receivership.
23 Includes less active or expiring small programs (EDA, NOAA, DPA, TVA, ICC. D.C. stadium bonds).
Secondary guarantees are defined in this table to cover securities representing loans assets which are also guaranteed. Secondary guarantees by Export-Import Bank
of the debt of the Private Export Finance Corporation have not been esti mated and are excluded from both sections of the table.

Table E-7. NET GUARANTEED AND INSURED LOANS OUTSTANDING (in millions of dollars)
Net loans guaranteed
Agency or program

Funds appropriated to the President:
International security assistance
International development assistance
Agriculture:
Farmers Home Administration
Rural Electrification Administration
Commerce: Maritime Administration
Defense
Health Education and Welfare:
Health programs
Student loan insurance fund
Guarantees of SLMA obligations
College facilities: Subsidized loans
Housing and Urban Development:
Low-rent public housing- _
Federal Housing Administration
Community development loans
New communities fund
..__
GNMA: Mortgage-backed securities
College housing: Subsidized loans
Interior: Indian programs
Transportation:
Railprograms .
__
WMATA bonds
Aircraftloans
Energy Research and Development Administration
General Services Administration
Veterans Administration: Housing loans

1975
actual

1976
estimate

Outstanding
1977
estimate

1975
actual

1976
estimate

TQ
estimate

1977
estimate

755
66

1,053
114

200
24

300
205

1,047
585

2,100
700

2,300
723

2,600
929

5,108
255
700
-3

3,925
945
584
183

1,055
234
150
1

4,592
1,182
450
-1

14,867
255
2,366

18,792
1,199
2,950
183

19,847
1,434
3,100
184

24,439
2,616
3,550
183

355
209
-10
409

-18
888
165
178

-15
427
60
4

-153
848
335
18

930
5,356
240
1,146

912
6,244
405
1,323

897
6,671
465
1,327

744
7,519
800
1,345

13,153 14,089
14,254
85,424 83,443 82,566
3,513 3,176 2,998
274
336
336
17,723 27,000 29,000
579
579
579
102
99

15,201
78,675
2,303
353
37,500
579
134

712
936
111 -1,981
-326
-336
21
62
4,844
9,277
-76
*
102
161
177
-3
___.

TQ
estimate

68
5,088

165
947
- 8 7 7 -3,891
-178
-695
\7
2,000
8,500
-3

1,231

529

626

14
2,000
130
4,653

53
13
1,200

484
997
26

-11
197
135
830
4,995 57,983

1,715
997
40
2,000
960
62,636

2,244
997
93
2,000
973
63,836

2,870
997
82
2,197
1,108
68,831

Emergency Loan Guarantee Board
Energy Independence Authority
Export-Import Bank
Federal Deposit Insurance Corporation!
Small Business Administration
Other agencies and programs 2
Total (gross)
Less secondary guarantees: 3
GNMA guarantees of FHA/VA pools
H E W guarantees of SLMA insured student loan interests
Total, primary guarantees,___

Less guaranteed loans acquired for direct loan portfolios:
By budget agencies, GNMA
By off-budget Federal agencies: Federal Financing Bank
By federally sponsored enterprises:
Federal National Mortgage Association
Federal Home Loan Banks
Federal Home Loan Mortgage Corporation
Student Loan Marketing Association
Total primary guaranteed loans (adjusted)

....
„
..

-25

-25
411

1,200
1,235
-700
1,671
1

195

170

4,464
1,464
4,112
262

6,749
1,384
5,229
274

7,160
1,384
5,501
273

170
1,200
8,395
684
7,172
271

1,021
1,464
93
67

2,285
-80
1,118
11

272
*

21,240

27,414

5,725

4,844

9,277

2,000

8,500

17,723

27,000

29,000

37,500

-10

165

335

240

405

465

800

16,406

17,972

3,665

13,201

200,310

218,282

221,947

235,148

1,584 -2,022
6,180
5,601

-55
2,783

-142
8,275

5,062
6,282

3,040
11,883

2,985
14,667

2,843
22,941

2,424
1
-89
336

27,900
244
1,934
225

29,141
195
1,813
401

29,595
197
1,790
463

32,019
198
1,701
799

2,649
182
65
81

1,241
-50
-121
176

454
2
-23
62

5,665

13,147

442

22,037 218,273 245,687 251,412 273,448

2,396 158,663 171,809 172,250 174,647

*Less than $0.5 million.
FDIC assumed liability for the New York Federal Reserve Bank's loan to Franklin National Bank in connection with its receivership.
Includes less active or expiring small programs (EDA, NOAA, DPA, TVA. ICC. D.C. stadium bonds).
Secondary guarantees are denned in this table to cover securities representing loan assets which are also guaranteed. Secondary guarantees by Export-Import Bank
of the debt of the Private Export Finance Corporation have not been estimated and are excluded from both sections of the table.
1
2
3

Table E-8. LOAN COMMITMENTS AND GROSS DISBURSEMENTS OF FEDERALLY SPONSORED CREDIT INTERMEDIARIES
(In millions of dollars)
Commitments
1975

Student Loan Marketing Association. _
Federal National Mortgage Association *
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks

Gross disbursements

1977

1975

1976

1977

144
4,434

287
6,950

116
2,075

586
9,350

144
4, 794

287
4,055

116
1,335

586
5,960

8,896
7,410

10,152
8,621

2,572
2,505

11,617
10,135

8,895
7,410

10,152
8,621

2,572
2,505

11,617
10,135

____

4,604

4,709

1,111

5,032

4,604

4,709

1,111

5,032

10,860

7,262

8,197

15,205

10,860

7,262

8,197

15,205

1,834

5,000

1,500
_

5,000

38,182

42,981

18,076

56,925

39,162

37,732

16,586

52,286

140

165

335

140
2,028

165
303

335

38,042

42,816

18,016

56,590

36,994

37,264

16,526

51,951

__..

Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:1
Corporation accounts
Participation certificate pool 2

_
•

Total
Less secondary funds advanced from Federal sources:
SLMAfromFFB
FHLMC from FHLBB
Total primary lending

1976

.._

2,455
(508)

2,646
(2,300)

750
(725)

3,751
(4,175)

1
Loans purchased at discount are recorded at acquisition cost.
2
Participation certificates (pass-through type) sold against mortgage pools are counted as sales of loan assets and are therefore not reflected on the Corporation's balance sheet. Loan purchases in parentheses ( ) are excluded from totals (interfund transfers).

SPECIAL ANALYSIS E

105

All Government-sponsored credit enterprises are essentially financial intermediaries, channeling funds from one sector of the capital
market to another. They borrow mainly in the "agency sector" of the
bond markets and disburse these funds for specifically authorized
purposes, 7either directly to lenders or by purchasing loans originated
by them. Some of the agencies also serve as reserve facilities or
provide secondary marketing functions, furnishing liquidity for
constituent lenders by making temporary advances or buying portfolio loans for resale.
Funds lent by Government-sponsored credit enterprises are obtained mostly from borrowing in the capital markets. Sale of capital
stock and retained earnings also provide a small portion of resources
used for lending. The timing of borrowing and lending varies from
year to year. For example, the lending activity of FNMA and
FHLBS largely depends on conditions in the mortgage credit market
and is thus highly volatile. Tables E-8 and E-9 show both the lending
and borrowing sides of these credit institutions.
FUNCTIONAL AREAS SUPPORTED BY FEDERAL CREDIT ASSISTANCE

Table E—10 presents a functional distribution of direct loan disbursements and the face-value of federally guaranteed loans. From
this distribution, it is clear that the most significant Federal credit
programs are in support of the housing industry and international
affairs (primarily the Export-Import Bank). Credit assistance to the
energy area in 1975-76 is accounted for almost exclusively by the
program of the Rural Electrification Administration. However, recent
legislation to encourage development of domestic energy sources
relies heavily upon direct loans and loan guarantees to private industry. As a result of these new programs, credit assistance in this
area is expected to increase rapidly in future years, with the first
significant increment in 1977.
SUMMARY OF FEDERAL AND FEDERALLY ASSISTED CREDIT
TRANSACTIONS

Table E - l l summarizes the components of Federal financial activity. Components within aggregates vary widely from year-to-year for
many reasons. For example, recent Federal Financing Bank purchases
of large amounts of guaranteed loans have shifted them to off-budget
direct loans; and recent legislation will shift the Export-Import Bank
from off-budget to on-budget status in 1977. FFB lending has similar
effects on the borrowing side. In addition, Federal borrowing from the
public varies to reflect budget deficit financing in addition to borrowing to finance Federal credit activities.
7
The program of the Government National Mortgage Association (a budget agency in HUD) to
guarantee mortgage-backed securities achieves a very similar "intermediation" result. GN MA
guarantees securities issued against privately held pools of federally guaranteed or insured mortgages.
The F R B flow-of-funds data, for example, include this GNMA program within the definition of
Government-sponsored credit enterprises. GNMA data appear in memorandum entries of tables
E-6 and E-7.

Table E-9. NET CREDIT ADVANCED AND NET CREDIT RAISED BY FEDERALLY SPONSORED CREDIT INTERMEDIARIES
(In millions of dollars)
Net change
1975
actual

1976
estimate

Outstanding

TQ
estimate

1977
estimate

1975
actual

1976
estimate

TQ
estimate

1977
estimate

LENDING (Funds advanced)
Student Loan Marketing Association
Federal National Mortgage Association i
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:*
Corporation accounts
Participation certificate pool 2
Total lending (unadjusted)
Less loans to Federal agencies: FHL banks to FHLBB
Less loans between sponsored agencies:
FHL banks to FHLMC
FHLB interbank loans
Less loans from Federal agencies:
FFBtoSLMA
.
FHLBB to FHL banks
Total primary lending
Memo: Federal Reserve banks 3

._.

81
3,264

176
2,212

62
834

336
3,972

225
29,092

401
31,304

463
32,138

799
36,110

638
1,540
3,037

682
1,670
2,777

287
445
705

614
1,869
2,966

3,371
10,021
15,437

4,053
11,691
18,213

4,340
12,136
18,918

4,954
14,005
21,885

1,157

-113

1,485

3,248

20,462

20,350

21,834

25,083

1,723
433

193
2,113

-15
525

-577
3,775

4,814
1,213

5,007
3,326

4,992
3,851

4,415
7,626

11,873
—10

9,710

4,328

16,203

84,635

94,345

98,672

114,877

2,028
-37

213
-5

-15

-752

3,537
45

3,750
40

3,735
40

2,983
40

140
1,247

165
303

60
-15

335
-51

240
1,247

405
1,550

465
1,535

800
1,483

8,505
-2,272

9,034
(*)

4,293
(*)

16,671
(*)

79,566
1,242

88,600
(4)

92,897
(4)

109,571
(4)

BORROWING (Funds raised)
Student Loan Marketing Association
Federal National Mortgage Association
Farm Credit System:
Banks for cooperatives
Federal intermediate credit banks
Federal land banks
Federal Home Loan Bank System:
Federal home loan banks
Federal Home Loan Mortgage Corporation:
Corporation accounts
Participation certificates 2
Total borrowing (unadjusted)
Less: Borrowing from other sponsored agencies:
FHLB loans to FHLMC
Other
Less: Borrowing from Federal agencies:
FFB loans to SLMA
FHLBB loan to FHL banks
Less: Loans to Federal agencies:
Investments in Federal securities
FHL bank loans to FHLBB
Total borrowing (adjusted)

—10
3,004

165
1.801

60
750

335
3.710

240
28,236

405
30,037

465
30,787

800
34,497

612
1,500
3.000

496
1,553
2,399

389
408
695

450
1,758
2.618

3,168
9,580
14,164

3,663
11,113
16,563

4,052
11,541
17,258

4,502
13,299
19,876

3, 963

-754

1,545

2,048

20,644

19,890

21,435

23,483

1,795
433

167
2,113

-34
525

-620
3,775

5,087
1,213

5,254
3,326

5,220
3,851

4,600
7.626

14,298

7,940

4,337

14,076

82,332

90,271

94,608

108,684

2,028
350

213
-251

-15
109

-752
-102

3,537
536

3,750
285

3,735
394

2,983
292

140
1,247

165
303

60
-15

335
-52

240
1.247

405
1,550

465
1,535

800
1,483

2,312
-10 _

-522

2,965

2,443

2,444

2,481

8,230

8,033

4,196

14,609

73,806

81,839

86,035

100,645

*Less than $0.5 million.
1 See footnote 1, table E-8.
23 See footnote 2, table E-8.
Federal Reserve bank's loans to member banks are excluded from totals since these are not estimated for fiscal years not yet completed. Data shown exclude a loan to
Franklin
National Bank, which has been assumed by FDIC (shown as FDIC guaranteed loan in tables E-6 and E-7).
4
Not estimated.

Table E-10. DIRECT LOAN DISBURSEMENTS AND NEW LOANS GUARANTEED BY FUNCTION (in millions of dollars)
Function

Direct loan disbursements1

1975
4.

1976
1

4, *

actual

National defense:
Department of Defense—Military
Military assistance

estimate

4, *

4 . 1

actual

TQ
4, *

1977
4,

estimate

* * • > *

estimate

1
240

1
650

516

155

229

858

1,407

241

651

1,332
2,817

1,889
2,772

315
646

2,031
2,800

72
4,428

121
6,045

25
1,351

219
5,347

4,150

4,661

961

4,832

4,501

6,166

1,376

5,566

855

925

231

1,672

255

2,945

234

2,582

Agriculture: Farm income stabilization

3,096

3,718

911

3,062

2,254

1,605

464

1,478

Commerce and transportation:
Mortgage credit and thrift insurance
Advancement of commerce
Ground transportation
Air transportation
Water transportation

9,057
469
73

9,758
468
1,064

2,761
108
230

5,573
462
587

8,482
1,364
338

799

1,699
513
529
56
185

8,641
2,649
626

6,074
2,056
1,231
17
716

3,100

6,625

10,983

10,094

2,982

12,525

Total

34
9,601

11,294

1976
4 . * * .

estimate

184
1,223

Natural resources, environment, and energy: Energy

estimate

858

Total

570

estimate

1975

227

International affairs:
Foreign economic and financial assistance
International financial programs

1
515

4. * _ _

1977

154

Total

2
569

New loans guaranteed

609

-vYcwpm

822
667
221

960
965
240

224
305
65

902
903
114

711
834
4

789
1,220
5

72
376
1

417
987
5

1,710

2,165

594

1,919

1,549

2,014

449

1,409

Education, training, employment, and social services: Higher education.

473

452

436

1,604

1,600

650

1,521

Health:
Health
Health care services
Health planning and construction

50
2
61

37
38
63

29
18

8
21
50

377

113

137

Income security: Public assistance (public housing project notes)

646

653

164

Veterans benefits and services:
Income security for veterans
Veterans housing

152
370

153
437

522

590

Community development
Area and regional development
Disaster relief and insurance
Total

Total

377

654

7,341

8,500

2,200

10,300

39
115

156
457

8,254

10,444

2,708

10,882

154

613

8,254

10,444

2,708

10,882

134

144

38,048

44,938

11,318

47,089

General government: General property management
Revenue sharing and general purpose assistance: General purpose fiscal assistance

Other programs

56
21,832

Grand total

1,340

1,540

2,140

26,523

7,955

22,300

*Less than $0.5 million.
See footnote 1, table E-3 for definition.
Off-budget accounts are included (except sponsored agencies); double counting is eliminated by excluding FFB from direct loans, and certain GNMA and SLMA
items from guarantees.
1
2

Table E—11- SUMMARY

OF CREDIT ADVANCED AND CREDIT

RAISED

UNDER

FEDERAL AUSPICES (in billions of dollars)

Net change
1975
actual

1976
estimate

Outstanding

TQ
estimate

1977
estimate

1975
actual

1976
estimate

1977

LENDING (Credit advanced)
Direct loans (from table E-4):
On-budget agencies
Off-budget agencies
Guaranteed loans (primary, adjusted, from table E-7)
Loans by federally sponsored credit intermediaries (from E-9)
Total, credit advanced to the public under Federal auspices1
Outside the budget

4.3
8.5
5.7
8.5

4.3
7.9
13.1
9.0

1.1
3.4
.4
4.3

2.1
10.0
2.4
16.7

49.8
24.4
158.5
79.6

54.1
32.3
171.8
88.6

55.2
35.6
172.2
92.9

68.8
34.4
174.6
109.6

26.9
22.7

34.4
30.0

9.2
8.2

31.2
29.0

312.4
262.6

346.8
292.7

356.0
300.8

387.4
318.6

50.9
5.7
8.2

87.5
13.1
8.0

20.0
.4
4.2

53.5
2.4
14.6

396.9
158.6
73.8

484.4
171.8
81.8

504.4
172.2
86.0

558.2
174.6
100.6

64.7
-37.8

108.7
-74.3

24.6
-15.4

70.5
-39.3

629.3

738.0

762.6

833.5

BORROWING (Credit raised)
Federal borrowing from the public (from table C-l)
Guaranteed borrowing (same as guaranteed loans, above)
Borrowing by federally sponsored credit intermediaries (net, from table E-9)._
Total, credit raised from the public under Federal auspices1
Net credit advanced

1
Excludes Federal Reserve credit.
2
Debt held by the public is projected to increase by $53,840 million; but $340 million of this is from the reclassification of Export-Import Bank certificates and is
not new borrowing. See footnote 2, Table E— 3.

SPECIAL ANALYSIS E

111

INTEREST SUBSIDIES

To achieve the objective of reallocating resources to specific sectors
of the economy, most Federal credit programs, by using guarantees
or direct interest subsidies, offer private borrowers and Government
corporations credit on terms that are more favorable than those
available in private markets. Most frequently the improved terms
take the form of an interest rate that is lower than the rate charged
to private borrowers, although the length of the loan and the loan-tovalue ratio may also be affected. Other subsidies, not treated here,
result from fees or premiums inadequate to cover costs of administration and losses on credit guarantees and insurance programs, waivers
of such fees or premiums, or forgiveness of part or all of the loan
principal.
This section attempts to measure the value of the interest rate
subsidy that accrues to federally assisted borrowers. The interest
subsidy is defined as the value of the difference between the interest
rate that the borrower pays under Government assistance and the
rate that he would have to pay for a comparable private loan. These
interest differentials come about for many reasons. In some direct
loan programs the interest rate established by statute may be at rates
below those of the private market. In other direct loan programs the
laws provide for interest rates to be set to recover the costs of borrowing by the Treasury, thereby providing private borrowers loans at
rates otherwise available only to the U.S. Government. In guaranteed
loan programs, the guarantee itself provides an implicit subsidy
because, by eliminating the risk of loss through default, it allows the
borrower to obtain an interest rate less than that available on riskier
unguaranteed loans for comparable purposes. Additional subsidies in
the form of explicit interest subsidy payments to the borrower or
lender are often added to guaranteed loans.
To evaluate the implicit subsidies in loan programs, it is necessary
to estimate the interest rate that the borrower would have had to pay
in private credit markets. For some loans, particularly those for
housing, private-credit market rates are readily available for use in
measuring the subsidy. But for other programs—student loans and
public housing, for example—no comparable private loans exist.
Because of the difficulty of determining what private, unassisted rates
would have been on a program-by-program basis, a 10% rate has been
adopted as a reasonable estimate of the average private sector cost of
borrowing for all activities and loan terms presented. Because interest
subsidies occur throughout the life of the loan, the measurement of
interest subsidies requires the conversion of a stream of payments
into a single "present-value." This capitalization is accomplished by
discounting future subsidies before accumulating them into a single
amount. A discount rate of 10% per annum has been used in this
analysis.
Using this method of measurement, table E-12 presents the estimated value of Federal subsidies provided by new direct and guaranteed loan commitments made in each of the years being considered.

Table E-12. ESTIMATED INTEREST SUBSIDY VALUES FOR MAJOR DIRECT AND GUARANTEED LOAN COMMITMENTS
(Dollars in millions)
Agency and program

Borrower 1 loan
terms
Percent

Years

Annual
subsidy
per $100
million 2

Commitments
1975

1976

Subsidy—Present value at 10%
discount
1977

1975

1976

1977

DIRECT LOANS

Funds appropriated to the President:
International security assistance
International development assistance
Agriculture:
Price support
CCC: Public Law 480.
Farmers Home Administration
Rural Electrification Administration
Health, Education, and Welfare:
Education and health education
Medical facilities
Housing and Urban Development:
Urban renewal
Low-rent public housing
Federal Housing Administration
Government National Mortgage Association
Housing for elderly
Veterans Administration:
Insurance policy loans
Education loans
Housing
District of Columbia
Export-Import Bank
Federal Financing Bank purchases of unsubsidized
loans
Federal Home Loan Bank Board

6.0
4.0

10.0
40.0

2.5
5.2

437
478

1,689
553

27
122

1,885
532

69
243

267
281

4
62

298
270

7. I
2.3
5.2
5.5

2.1
33.0
33.7
35.0

1.6
6.1
4.1
3.9

1,101
747
4,481
1,060

2,264
956
4,960
1,241

480
118
1,243
295

1,719
838
4,526
2,800

33
436
1,758
398

68
558
1,946
466

14
69
488
111

52
489
1,776
1,052

3.0
6.7

15.0
25.0

4.6
2.7

380
30

342
94

29
29

8
17

133
7

120
23

10
7

3
4

6. 8
9.5
8.5
9.8

7
1.5
40.0
27.0
40.0

1.8
8.4
.5
1.2
.2

493
82
842
11,779

100
130
728
5,610
250

7
175

51
577

6
9
39
1,371

1
8

6
27

125

375

1
15
34
653
6

5.0
6.5
9.0
8.0
8.1

15.0
6.0
29.4
30.0
6.0

3.4
2.1
.9
1.7
1.1

152
1
369
232
3,813

153
3
434
241
4,450

39
1
114
42
1,105

156
2
457
225
5,075

40
*
30
38
191

40
*
36
40
223

10
*
9
7
55

41
*
38
37
255

7.8
8.0

5.0
30.0

1.3
1.8

1,125
1,305

862
338

426
9

1,115
38

57
219

44
57

22
2

57
6

Small Business Administration:
Business and investment loans
Disaster loan fund
United States Railway Association.

6.9
5.3
7.5

8.7
11.0
20.0

1.9
3.0
2.5

Total—Major subsidized direct loans

279
241

250
240
400

___

59
40
200

235
140
540

31
48

28
48
85

7
8
43

26
28
115

5,156

5,039

940

4,589

22
345

6
69
412

21
566
206

GUARANTEED LOANS
Health, Education, and Welfare:
Health maintenance organizations
Medical facilities
Student loan insurance
Housing and Urban Development:
Urban renewal
Low-rent public housing
Mortgage insurance (subsidized)
Interior: Indian loans
Department of Transportation: WMATA guarantees

7.0
6.7
4.4

20.0
25.0
13.0

? *
17
3.7

89
1,299

30
283
1,551

4.6
5.0
8.0

.7
41.5
40.0
20.0

65
7.8
4.4
1 5

493
741
476

100
1, 171
1,397
109

6.3

40.0

3.3

177 .

30
688

1,639

64
867

458
2,684
52

6
183

435

4
894
604
15

49
375

350
1,160
7

1,217

2,003

606

1,958

41
29

32
37

9
14

29
40

70
6,443

69
7,111

23
1,569

69
6,616

Total—Major subsidized guaranteed loans_AGENCY DEBT ISSUES FINANCED BY
FEDERAL FINANCING BANK
Tennessee Valley Authority.
U.S. Postal Service

8.0
8.0

Total debt issue subsidies 3
Grand total
'"Less than $0.5 million.
If terms vary, these are estimated averages.
Based on 10% value of funds.
Interest savings are passed through to private users.

1
2
3

3.0
3.0

1.1
1.1

1,435
1,000

1,100
1,280

300
500

1,000
1,398

114

THE BUDGET FOR FISCAL YEAR 1977
PROPOSED LEGISLATION

The administration has proposed legislation to create new credit
programs or substantially change existing ones. These proposals are
summarized below.
Legislation has been introduced in Congress to establish an Energy
Independence Authority (ElA) to provide up to $100 billion in loans
and loan guarantees to selected private sector energy projects during
the next decade. The administration also supports legislation to amend
the existing authorities of the Energy Research and Development
Administration (ERDA) to provide $2 billion in loan guarantees
during 1976 for the commercial demonstration of synthetic fuel production from coal, oil shale, and other domestic resources. With the
enactment of EIA legislation in 1977 these ERDA projects will be
transferred to EIA. In addition, Fedeial cooperative arrangements
and temporary financial assurances for privately owned uranium
enrichment facilities have been proposed. In the unlikely event that a
commercial uranium enrichment venture fails, Treasury funds would
be used to repay domestic investors.
In another energy-related credit initiative, the administration has
proposed creation of a multinational financing facility to assist industralized nations in meeting financial commitments resulting from
high oil prices. The U.S. contingent commitment to the fund is
expected to be $7 billion.
In transportation, the administration has proposed legislation that
would provide, over a period of 6 years, $2 billion in loan guarantees
to rehabilitate nationwide rail facilities. There has also been proposed
legislation authorizing the purchase of over $2 billion of debt and debtlike securities in Con Rail, the successor corporation to several Northeast-Midwest railroads.
Other proposals include: Removal of the 5% interest rate ceilings
on certain agriculture credit programs, coupled with a requirement
that these loans carry interest rates comparable to rates prevailing
in the private market on similar loans; amendment of the Rural
Electrification Act so that the interest rates on loans to rural electric
and telephone systems more nearly reflect the utilities' ability to pay;
and amendment of the guaranteed student loan program by making
student loans nondischargeable in bankruptcy during the 5-year
period after a student's first payment is due and by making any student who defaults on a guaranteed student loan ineligible to receive
certain other types of student assistance.
NEWLY ENACTED CREDIT LEGISLATION

This list summarizes legislation enacted during the last session of
Congress that authorizes new Federal credit programs or revises
existing programs in major respects. It excludes simple extensions of
expiring laws and changes in funds for continuing programs.
Geothermal Energy Research, Development, and Demonstration Act of

1974—Public Law 93-410
Provides loan guarantee authority of $50 million annually to
encourage and assist industry in the commercial development of
useful energy from geothermal resources.

SPECIAL ANALYSIS E

115

Regional Rail Reorganization Act Amendments of 1975—Public Law
94-5

Provides a $150 million increase in loan guarantee authority to
permit Penn Central and other Northeast railroads to continue transportation services until ConRail assumes operation in 1976.
Emergency Livestock Credit Act Amendments—Public Law 94-35
Extends until December 31, 1976, the FMHA guarantee loan program for cattlemen in an amount not to exceed $1,500 million at any
time. In addition, amendments to the act broaden program eligibility and liberalize certain loan benefits.
Emergency Cooperation and Special Unemployment Assistance Act of
1975—Public Law 94-45
Authorizes general revenue loans to the Virgin Islands and its
unemployment compensation program.
Emergency Housing Act of 1975—Public Law 94-50
Authorizes the Secretary of HUD to insure or make loans on behalf
of homeowners to avoid foreclosure. Extends and revises HUD's
authority to purchase residential mortgages and authorizes an additional $10 billion for such purchases.
Consolidated Farm and Rural Development Act—Public Law 94-68
Amends the FMHA emergency disaster loan program to (a) broaden
program eligibility and simplify program administration; (b) require
a "credit elsewhere test"; and (c) provide additional credit assistance.
It also increases the interest rate charged for certain Small Business
Administration disaster loans.
Rehabilitation and Betterment Act—Public Law 94-102
Expands existing statutory eligibility for loans to rehabilitate and
improve certain federally constructed systems and for certain other
federally constructed water resource development projects.
New York City Seasonal Financing Act—Public Law 94-143
Authorize^ direct loans up to $2.3 billion outstanding at any one
time to New York City, each loan to mature before the end of the New
York City fiscal year (June 30) in which the loan is made. Authority
terminates June 30, 1978.
Arts and Artifacts Indemnity Act—Public Law 94-158
Authorizes the Federal Council on the Arts and Humanities, under
certain conditions, to provide Federal indemnities against loss or
damage of certain exhibits of art, artifacts and other objects. Limits
Federal contingent liability at any one time to $250 million.
Energy Policy and Conservation Act—Public Law 94-163
Authorizes the Federal Energy Administration, under certain
conditions, to guarantee loans for developing new underground coal
mines. Limits total amount of loan guarantee to $750 million and
guarantees to any one person to $30 million.

SPECIAL ANALYSIS F
TAX EXPENDITURES

The Congressional Budget Act of 1974 requires a listing of tax expenditures in the budget. Tax expenditures are defined by that act 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." Tax expenditures are one means by which
public policy objectives are pursued by the Federal Government and,
in most cases, can be viewed as alternatives to budget outlays, credit
assistance, or other instruments of public policy.
Tax expenditures have varied objectives. Most tax expenditures are
meant either to encourage certain economic activities or to reduce
income tax liabilities for taxpayers in special circumstances. Among
the economic activities encouraged by tax expenditures are investment,
exporting, petroleum exploration and development, spending by State
and local governments, and support of charitable institutions. The
deductibility of medical expenses, casualty losses, and personal exemptions for the aged and blind are examples of adjustments of tax
liabilities to meet special circumstances.
The benefits of tax expenditures designed to encourage certain types
of economic activity typically do not rest fully or even mostly with the
corporations or individuals whose taxes are initially affected. An initial
reduction in taxes tends to attract more resources to the preferred
activity thereby competing away some or all of the short-run advantage conferred to particular taxpayers by the tax expenditures.
Thus benefits often accrue to others in the form of lower prices for
particular goods or services, or in other ways become widely diffused.
For example, the deductibility of charitable contributions does not
merely lower individual or corporate liabilities; the institutions that
receive the contributions also benefit as do individual beneficiaries of
charitable institutions.
This Special Analysis only provides measures of the quantitative
importance of various tax expenditures and does not attempt to evaluate their effectiveness. It should be emphasized that the listing of
specific tax expenditure items does not imply either approval or disapproval of specific sections of the Internal Revenue Code any more
than the listing of outlay items in the budget implies approval or
disapproval.
DEFINING TAX EXPENDITURES

Income tax provisions resulting in tax expenditures are further
defined in the legislative history of the Congressional Budget Act as
exceptions to the "normal structure" of the individual and corporate
income tax. They reduce tax liabilities for particular groups of tax116

SPECIAL ANALYSIS F

117

payers. Excluded from this analysis, by definition, are negative tax
expenditures or tax penalties, that is, exceptions to the normal structure of income taxes that result in increased tax liabilities for certain
groups of taxpayers. There are only a few such exceptions: one example
is the nondeductibility of gambling losses in excess of gambling gains
where gambling is engaged in for profit; another is limitations on the
duductibility of capital losses.
The "normal structure" is not defined in the tax code. The concept
has evolved in recent years from various congressional and public
reviews of the U.S. tax system focusing on the definition of the income
tax base and the rates applied to that base. Conceptually, it would be
more appealing to begin with a theoretically pure tax structure as a
standard. Tax rates under such a tax structure would be applied to
all "economic income," which could be defined as receipts available
to support consumption or additions to net wealth, plus the imputed
value of in-kind consumption and imputed changes in net wealth. Tax
expenditures could then be defined to result from any departures from
a theoretically pure income tax. However, this is not possible. The
concept of the normal structure recognizes that it is impractical to
make the necessary imputations. Furthermore, the normal structure
includes the separate taxation of individuals and corporations whereas
a theoretically pure tax structure would integrate these two income
taxes. Theoretically pure tax structures could be specified for other
types of taxes such as a tax on income used for Consumption spending
rather than on all income.
Sections of the tax code that specify the structure of progressive
rates and that exclude low-income persons from tax liability are
deemed a part of the normal tax structure. Existing rates are accepted
even though there is no theoretical foundation upon which to support
any particular degree of progressivity in the individual income tax
rate structure or any particular corporate income tax rate. If a set of
tax rates could be agreed to on normative grounds, it would be conceptually possible to identify and measure both positive and negative
tax expenditures against such a norm. For example, if a single tax
rate were taken as the norm, lower actual rates would result in tax
expenditures and higher rates in negative tax expenditures or tax
penalties.
When the rate structure is changed, for whatever reason, the new
rates become part of the new normal structure according to the definition used in the analysis of tax expenditures. The Tax Reduction Act
of 1975 and the Revenue Adjustment Act of 1975 increased the low
income allowance (minimum standard deduction) and introduced a
tax credit for each personal exemption claimed by a taxpayer, thus
altering the normal tax structure. Those alterations reduced the estimated revenue losses associated with many tax expenditure items
primarily because fewer taxpayers will itemize their deductions. The
President's tax proposals will have a similar impact on tax
expenditures.
The existing rate structure for individuals, ranging from 14% to
70%, and the 48% corporate tax rate cannot be presumed to exist
independently from current tax expenditures. If major tax expenditure items were deleted and budget outlays remained constant, tax
rates would undoubtedly be set at lower levels so as to maintain an
appropriate fiscal policy. Moreover, because tax expenditures tend to

118

THE BUDGET FOR FISCAL YEAR 1977

reduce the effective progressivity of the tax structure, it is quite likely
that a less progressive set of tax rates would be established if tax
expenditures were eliminated.
In several areas of the tax code the concept of a normal tax structure
becomes quite ambiguous and some arbitrary decisions have to be
made in arriving at an operational definition of tax expenditures.
The following paragraphs highlight some of these areas.
• The progressive rate schedules for the individual income tax. No tax
expenditure results because some income is taxed at lower rates
than other income when progressive rate schedules are applied to
all taxable income. The income averaging provision of the tax
code is a part of the normal structure since it limits the impact of
progressive rates when income increases significantly. The
maximum tax of 50% on earned income could be viewed as part
of the normal structure of the individual income tax, and higher
marginal rates on unearned income considered as resulting in
negative tax expenditures, but is treated as a tax expenditure
in this analysis because it fits the definitional term "preferential
rate of tax."
• Personal exemptions and the low income allowance. These set levels
of income, depending upon family size, that are not taxed by the
individual income tax. However, deductions for additional personal exemptions for those over 65 and for the blind do result in
tax expenditures because they depend upon more special circumstances. The percentage standard deduction, to the extent it
exceeds the low income allowance, also results in a tax expenditure
because it substitutes for itemized deductions that are tax
expenditure items.
• Separate rate schedules for single and married taxpayers, married
taxpayers filing separately, and heads of households. Existing provisions regarding the definition of taxpaying units are accepted as
part of the normal tax structure.
• Deduction of business expenses. The deduction of business expenses
is necessary to determine taxable income. Tax expenditures do not
ordinarily result from applying the definitions of business expenses
prescribed by the Internal Revenue Code and Internal Revenue
Service interpretative regulations. Tax expenditures do occur
when, the tax code permits business or investment expenditures
that are capital outlays in economic terms to be treated as current
expenses. A case in point is expensing research and development
costs whether or not they result in substantial future benefits.
Another example is the expensing of interest and taxes during the
construction oi a building. In the case of depreciation the Internal
Revenue Code allows as a deduction "a reasonable allowance for
the exhaustion, wear and tear (including a reasonable allowance
for obsolescence)" on property used in a trade or business or for
the production of income. To avoid judging every taxpayer's depreciation deductions against a standard of reasonableness, the
code permits standard depreciation techniques and useful lives to
be used. In some cases, such as accelerated depreciation on buildings, tax expenditures result because the permitted technique
clearly results in excess depreciation being claimed. In other cases,
such as 5-year amortization of railroad rolling stock, tax expendi-

SPECIAL ANALYSIS F

119

tures result because the useful life is artificially short. With
respect to machinery and equipment, the asset depreciation range
(ADR) system, which became effective in 1971, defines a band
within which estimates of useful life are deemed to be "reasonable." That band is determined by reference to broad classes of
property and ranges 20% up and 20% down from a published
figure designated as the "asset guideline period." This analysis
treats the ADR system as a mechanism to arrive at a "reasonable
allowance" and hence no tax expenditure is listed in table F - l .
The ADR system has been included as a tax expenditure item
in lists published by congressional committees with estimates of
$1,270 million and $140 million in 1975 and $1,440 million and
$150 million in 1976 for corporations and individuals, respectively.
Capital gains and losses. Although the base of a theoretically
pure income tax would include net capital gains on an accrual
basis, practical problems prevent identifying and taxing unrealized capital gains for many types of assets, and the normal
structure taxes only wealth accruals which are "realized." For
this reason the failure to tax unrealized gains during the holder's
lifetime is not listed as a tax expenditure. The exclusion from
taxable income of one-half of realized capital gains, and the
option of having up to $50,000 of realized capital gains
taxed at a 25% rate, clearly results in a tax expenditure. At
death, an individual may hold assets which have appreciated or
depreciated in value. As the assets pass to an heir or other
beneficiary, that new holder takes the market value of the assets
at the date the estate is valued as the basis against which to
measure any future appreciation or loss. No gain or loss is relized as income during the last year of the decedent's life. The
failure to impute any such gain or loss is not considered for
purposes of this analysis to result in a tax expenditure, since it
is not clear how such gains would be taxed, if at all, under a
normal tax structure. A wide range of alternatives can be conceived. At the extreme, such gains could be taxed as ordinary
income to the decedent in the last year of life, that is, taxed less
favorably than realized capital gains. Under such a tax law,
revenues would have been about $4.8 billion greater in 1975,
$5.0 billion in 1976, and $5.4 billion in 1977, after accounting
for reduced estate tax collections. This is the assumption on
which estimates published by congressional committees have been
based. Another option would be to tax such gains like other capital gains during the last year of life. The revenue gain would have
been about $2.4 billion in 1975, $2.5 billion in 1976, and $2.7
billion in 1977, again accounting for reduced estate tax collections. Still another technique would be to require beneficiaries
to take the same basis for inherited assets as the decedent's.
Under such a tax law revenues would have increased about
$0.6 billion in each year. Under all alternatives the revenue gain
would be even smaller if the appreciation on assets transferred to a
surviving spouse were exempted in a manner similar to the estate
tax exemption for surviving spouses. Moreover, these estimates
are all based on the unrealistic assumptions that any new tax law
would not be phased in and that asset-holding behavior would not
change.

120

THE BUDGET FOR FISCAL YEAR 1977

Imputed income from owner-occupied housing and other sources.

A theoretically pure income tax could include in its base an
imputation for the income received in kind from the occupancy
of a home owned by the taxpayer and imputations for in-kind
income from the ownership of other durable assets including art
collections, furniture, and books. Because such imputations are
difficult to make and are foreign to usual concepts of income,
they are not considered in the computation of tax expenditures
even though such exclusions of imputed income affect the allocation of the economy's resources, particularly by providing a
stimulus to owner-occupied housing.
Gifts and bequests. The tax system subjects gifts and bequests,
which are usually made within a family, to taxes separate from
the income tax and therefore their exclusion from taxable income
under the individual income tax does not result in a tax expenditure. Tax expenditures could be defined to include departures
from "normal" gift and estate taxes, though to do so would be
beyond the scope of this analysis.
The value of Government services received by individuals.

The

exclusion from gross income of direct cash payments to individuals
by the Government, such as social security payments, does
result in a tax expenditure. Other Government programs extend
benefits in kind to individuals. Examples are medicare and public
education. Since these benefits are received in kind they cannot
be used, like cash, for purposes fully consistent with the recipient's preferences. The exclusion of such imputed values from
income subject to tax does not result in tax expenditures. The
dividing line between nontaxable Government benefits that do
result in tax expenditures and those that do not is essentially
arbitrary. The most ambiguous case is that of the bonus value of
food stamps. They are so nearly the equivalent of cash that their
exclusion from income subject to tax might be considered to
result in a tax expenditure. If the exclusion of the bonus value
of food stamps were deemed to be a tax expenditure, the estimate
(about $135 million for 1975, $185 million in 1976, and $220
million in 1977) would be small relative to program outlays, since
only a few participants have income large enough to be taxable.
Exclusion of the bonus value of food stamps is not listed as a
tax expenditure in table F - l .
Treatment of individuals and corporations as separate

taxpaying

entities. A theoretically pure income tax would integrate the
taxation of individual and corporate income so as to avoid multiple
taxation of any particular type of income. Only individuals would
be taxed; corporate income would be taxed as dividends are paid
and retained earnings would be imputed to shareholders. However,
for practical reasons, separate taxation is accepted as part of
the normal tax structure for purposes of this analysis.
Foreign tax credits. To avoid the double taxation of income
earned abroad, and thus accommodate the U.S. tax system to
international norms, the normal structure of income taxes includes tax credits for foreign taxes paid.
Forms of business organization. The tax law recognizes different
forms of business organization including corporations, partner

SPECIAL ANALYSIS F

121

ships, small corporations treated like partnerships, cooperatives,
mutual insurance companies, and individual proprietorships.
The provisions of the tax law that accommodate different forms
of business organization do not generally result in tax expenditures so long as income is subject to tax at either the corporate or
individual level. The dividing line is, however, by no means
clear. For example, cooperatives may deduct cash and noncash
patronage dividends based on net income earned on business done
with patrons as long as 20% of the total dividend is paid in cash
and the patron has agreed to take the entire dividend into his
income. Per-unit retains, that is, amounts retained from the value
of products marketed for patrons, may be deducted by the cooperative if patrons agree to take the face amounts into current
income. Agricultural cooperatives meeting certain requirements
are permitted to deduct dividends on capital stock and payments
to patrons from nonpatronage income. Rural electric and telephone cooperatives may deduct noncash patronage dividends
and patrons generally need not take such dividends into income.
If noncash patronage dividends, retains, dividends on capital
stock, and payments to patrons out of nonpatronage income
were not deductible, corporate taxes would have been about
$395 million higher in 1975 and individual taxes about $160
million lower, since noncash patronage dividends and retains
would no longer be taken into current income by patrons. The
comparable estimates for 1976 and 1977 would be $410 million
and $455 million, respectively, for the gain in corporate taxes
and $155 million and $160 million, respectively, for the offsetting
reduction in individual taxes. This tax treatment of cooperatives
is considered to be a function of their status as a particular form
of business organization and is not listed as a tax expenditure
in table F - l .
• Income of controlled foreign corporations. The income of foreign
corporations controlled by U.S. corporations or citizens is generally not subject to U.S. tax until that income is repatriated.
This feature of the normal tax structure has the effect of allowing
such corporations to be taxed like other corporations doing business in particular foreign countries and is in accord with international norms of taxation. Consequently, this is not considered to be a tax expenditure in table F - l . There are certain
exceptions to this general feature of the tax law in order to avoid
abuse in tax-haven countries. The scope of these exceptions was
expanded by the Tax Reduction Act of 1975, and this makes the
concept of normal tax treatment somewhat ambiguous. If the
general treatment of controlled foreign corporations were defined
as a tax expenditure, the estimates would be $590 million in
1975, $525 million in 1976, and $365 million in 1977.
The above discussion does not exhaust the definitional complexities
inherent in the tax expenditure concept nor does this analysis consider
all special tax provisions. Some items have not been considered because the issues have not been fully studied or because there is insufficient information available on which to base a sound estimate. Some
items are omitted because of their relatively small quantitative
importance. As the concept is sharpened, additional provisions of
the tax law examined, and estimating techniques improved, further
changes are bound to be made in the list of tax expenditures.

122

THE BUDGET FOR FISCAL YEAR 1977

The distinction between the normal tax structure and those exceptions leading to tax expenditures does not imply that the features of the normal tax system should be exempt from periodic
analysis and review. Like tax expenditures, many features of the
normal tax structure have major effects upon the level and composition
of economic activity and the distribution of income; some features
affect the everyday activities of corporations, trusts, and partnerships. Budget outlays, or other policy instruments, are alternative
means to achieve the objectives of some of the features of the normal
tax structure just as they are often a potential substitute for tax
expenditures.
MEASURING TAX EXPENDITURES

The tax expenditure estimates reported below in table F - l have
been prepared by the Treasury Department. The Congressional
Budget Act requires that tax expenditures be estimated "under
existing law." The impact of the President's proposals on tax expenditures is discussed separately beginning on page 135. In recognition
of the temporary nature of some of the provisions of the Revenue
Adjustment Act of 1975, "current law" has been interpreted, for
estimating purposes, to mean that the same number of individuals
will itemize their deductions as they file returns for 1976 and 1977 as
would be the case if the provisions of the Revenue Adjustment Act
regarding standard deductions for individuals were annualized.
Several of the estimates for itemized deductions are sensitive to the
proportion of returns claiming itemized deductions. For fiscal years
the estimates show the loss of budget receipts resulting from each of
these particular features of the tax system. No separate estimates
can reasonably be made for the transition quarter.
Each estimate is based upon two major assumptions. The first is that
only the tax provision in question is deleted and all other features of
the tax system, including the structure of rates, remain unchanged.
The hypothetical deletion of the special tax provision increases the
estimated taxable income for corporations or individuals; the existing
marginal tax rates are then applied to the change in taxable income,
giving the estimated tax expenditure. If, however, major tax expenditures were in fact deleted, as was noted earlier, some features of the
normal income tax, such as rate structures or personal exemptions,
would probably be changed so that the marginal rates used in making
the estimates would no longer apply. Outlay or credit programs might
also be altered or new tax expenditure items added. Such actions cannot, of course, be anticipated when individual tax expenditure estimates are made. For each itemized nonbusiness deduction for individuals the estimated revenue loss is based upon the amount by which
the standard deduction is exceeded.
The second major assumption used to make the estimates is that
taxpayer behavior and general economic conditions remain unchanged
in response to the hypothetical change in the tax laws. This assumption
is required to estimate tax expenditures but it is, in most cases,
unrealistic. In particular, to the extent that tax expenditures designed
to encourage certain economic activities have been successful, their
elimination would presumably change taxpayer behavior. Thus, if the
tax credit for investment were deleted, both taxpayer behavior and
general economic conditions would be expected to change with a resulting impact on budget receipts generally.

SPECIAL ANALYSIS F

123

Whenever possible, sample data from tax returns are used to estimate tax expenditures. These data are not, however, available for the
years presented in this analysis, as these returns have not yet been
filed or tabulated. Consequently, the estimates must be made by
extrapolating sample tax return data from past years by means of other,
more current information including the economic forecast used in
estimating budget receipts and outlays (see Part 3 of the Budget).
Moreover, many tax expenditures result from excluded income, not
reported on tax returns In these cases estimates must be based upon
other data sources. Any changes scheduled by existing law, such as the
phas ng in or out of specific provisions, are accounted for in the
estimates.
The estimates of tax expenditures presented in this analysis are
reduced by any minimum tax liabilities associated with particular
items. The 10% minimum tax for tax preferences was introduced by
the Tax Reform Act of 1969 in an attempt to insure that individuals
and corporations receiving such tax preferences do not escape paying
a share of the tax burden Among the tax expenditure items included
in the base of the minimum tax are accelerated depreciation on real
property, excess reserves of financial institutions for losses on bad
debts, percentage depletion in excess of cost depletion, and one-half of
net long term capital gains. The minimum tax is, in general, applied to
the sum of preference items reduced by a $30,000 exemption and
the affected taxpayer's regular income tax liability for the year.
Some tax expenditure items affect the timing of deductions or the
receipt of taxable income. Examples are depreciation in excess of
straight line for buildings and rental housing and the deferral of income
by domestic international sales corporations (DISC's). These provisions create a permanent tax expenditure even though for a
particular taxpayer, transaction, or asset, the special provision may
defer a tax rather than el minate it. However, for a stable or growing
business with an indefinite life, the deferral of taxes continues forever
under most of these provisions. Furth rmore, as the economy grows,
these amounts increase over time. Estimates for these items attempt
to show the difference between budget receipts under the current law
and budget receipts if a different law had always been in effect. These
figures therefore show more than the revenue that could be obtained
in the first years of a transition from one tax law to another. They are
long-run estimates at the levels of economic activity assumed for the
years in question.
Tax expenditure estimates cannot be simply added together to form
totals for functional areas or a grand total. In some cases the revenue
gain resulting from the deletion of two tax expenditure items would be
greater than the sum of the individual estimates. For example, if
interest income from State and local government securities were made
taxable and capital gains were taxed at ordinary rates, many individuals would be pushed into higher tax brackets than if just one of
these sources of income became fully taxable; the combined effect on
revenue would be greater than the sum of the two separate estimates.
In other cases, the revenue gain from the deletion of two items would
be smaller than the sum of the individual estimates. For example, if
the deductibility of mortgage interest payments and homeowner
property taxes were both repealed, and the standard deduction
unchanged, many individuals who now itemize their deductions would

124

THE BUDGET FOR FISCAL YEAR 1977

opt for the standard deduction, thus limiting the revenue gain. In
general, elimination of multiple items that are personal deductions
would increase revenue by less than the simple sum of the revenue
gains from eliminating each item measured separately since many
taxpayers would switch to using the standard deduction. Conversely,
elimination of multiple items that are exclusions from adjusted gross
income would increase revenue by more than the sum of the individual
gains as taxpayers would be pushed into higher tax brackets. Moreover, if several major tax expenditure items were eliminated, the
assumptions of no changes in economic behavior and conditions or in
other features of the tax system would have little validity.
A few aggregations of related tax expenditure items are presented
and discussed in the next section. These aggregates have been specially
estimated so as to account for the interactions referred to above but
do not consider the effect of changes in behavior. Where tax expenditures for both individuals and corporations result from the same tax
code provision, such as the investment tax credit, the two estimates
may appropriately be added together.
TAX EXPENDITURES BY FUNCTION

Estimates of tax expenditures are grouped together by functional
category and presented in table F - l . The estimates are shown separately for individuals and corporations. Whenever possible, particular
tax expenditures have been classified according to the functional
categories used for budget outlays. Many tax expenditures do not,
however, fit into these categories and for this reason three special
functional categories have been added: business investment, personal
investment, and other tax expenditures.
A brief description of each of the special tax provisions for which a
tax expenditure estimate is shown in table F - l follows.
National defense.—The supplements to salaries of military personnel, including provision of quarters and meals on military bases and
quarters allowances for military families, and virtually all salary
payments and reenlistment bonuses to military personnel serving in
combat zones, are excluded from tax. Disability-related military
pensions are largely excluded from taxable income.
International affairs.—-For citizens of the United States who are not
employees of the Federal Government, income earned abroad up to
$20,000 for each complete tax year is exempted from taxation if the
taxpayer is a bona fide resident of a foreign country for an uninterrupted period that includes 1 full tax year or if he or she is present there
510 days during a period of 18 consecutive months. After 3 years,
foreign resident taxpayers can exclude up to $25,000 a tax year. Certain allowances received by Federal employees working abroad are also
tax exempt.
When a foreign subsidiary of a U.S. corporation operating in a less
developed country (LDC) repatriates dividends to its parent corporation, that income may be reported net of foreign income taxes paid.
U.S. tax liability is then calculated on that net amount and the foreign
tax is taken as a credit. For non-LDC corporations income must be
reported gross of foreign taxes paid. The failure to "gross up" dividends by the amount of the foreign taxes paid to LDC's results in a
tax expenditure.

SPECIAL ANALYSIS F

125

Table F-l. TAX EXPENDITURE ESTIMATES BY FUNCTION*
(in millions of dollars)
Corporations
Description

1975

1976

1977

Individuals
1975

National defense:
Exclusion of benefits and allowances to Armed
Forces personnel
650
Exclusion of military disability pensions
70
International affairs:
Exclusion of income earned abroad by U.S.
citizens
130
Exclusion of gross-up on dividends of LDC
corporations
55
55
55
Deferral of income of domestic international sales
corporations (DISC)
1,130 1,360 1,560
Special rate for Western Hemisphere trade corporations
50
50
50
Agriculture:
105 115 475
Expensing of certain capital outlays
135
30
40 455
Capital gain treatment of certain income
30
Natural resources, environment and energy:
Exclusion of interest on State and local govern170
35
ment pollution control bonds
75
Expensing of exploration and development costs.
500
650 840 120
465
Excess of percentage over cost depletion
2,010 1,080 1,020
15
Pollution control: 5-year amortization
30
20
Capital gain treatment of royalties on coal and
40
15
20
iron ore
10
60
155 165
Capital gain treatment of certain timber income.
145
Commerce and transportation:
Exemption of credit unions
115
125
135
Corporate surtax exemption
3,345 5,020 4,180
Deferral of tax on shipping companies
70
105
130
Railroad rolling stock: 5-year amortization
55
30
10
Financial institutions: excess bad debt reserves. _
880
815
570
Deductibility of nonbusiness State gasoline taxes _
820
Community and regional development:
Housing rehabilitation: 5-year amortization
40
35
25
65
Education, training, employment, and social
services:
Exclusion of scholarships and fellowships
200
Parental personal exemptions for student age 19
and over
670
Deductibility of contributions to educational
institutions
205
215
280
440
Deductibility of child and dependent care expenses
295
Child care facilities: 5-year amortization
5
5
5
Credit for employing AFDC recipients and public
assistance recipients under work incentive program
10
10
10
Health:
Exclusion of employer contributions to medical
insurance premiums and medical care
3,275
Deductibility of medical expenses
2,315
See footnote at end of table.

1976

1977

650
80

650
90

145

160

355
490

360
565

50
155
500

75
195
575

45
60

50
65

575
55

600
40

210

220

690

715

450

500

330

420

3,665
2,020

4,225
2,095

126

THE BUDGET FOR FISCAL YEAR 1977

Table F-1. TAX EXPENDITURE ESTIMATES BY FUNCTION*—Continued
(in millions of dollars)
Corporations
Description

1975

1976

1977

Individuals
1975

1976

Income security:
Exclusion of social security benefits:
Disability insurance benefits
275
OASI benefits for aged
.
2,740
Benefits for dependents and survivors
450
Exclusion of railroad retirement system benefits. _
170
Exclusion of unemployment insurance benefits
2, 300
Exclusion of workmen's compensation benefits
505
Exclusion of public assistance benefits
105
Exclusion of special benefits for disabled coal
miners
50
Exclusion of sick pay
315
Net exclusion of pension contributions and earnings:
Employer plans
5,225
Plans for self-employed and others
390
Exclusion of other employee benefits:
Premiums on group term life insurance
740
Premiums on accident and accidental death
insurance
50
Income of trusts tofinancesupplementary unemployment benefits
5
Meals and lodging
265
Exclusion of capital gain on home sales if over 65__
40
Excess of percentage standard deduction over
low income allowance
1,385
Additional exemption for the blind
20
Additional exemption for over 65
1,100
Retirement income credit
130
Earned income credit
Veterans benefits and services:
Exclusion of veterans disability compensation
540
Exclusion of veterans pensions
25
Exclusion of GI bill benefits
255
General government: Credits and deductions for
political contributions
40
Revenue sharing and general purpose fiscal assistance:
Exclusion of interest on general purpose State and
local debt
2,675 2,890 3,150 1,130
Exclusion of income earned in U.S. possessions
245
240
285
Deductibility of nonbusiness State and local taxes
(other than on owner-occupied homes and
gasoline)
8,490
Interest: Deferral of interest on savings bonds
525
See footnote at end of table.

1977

315
370
3.045 3.525
495
565
185
200
3.305 2,855
555
640
115
130
50
330

50
350

5.745 6,475
770
965
805

895

5
285
45

5
305
50

1, 465

20
1, 155
120
290

1.560
25
1.220
110
140

590
30
330

595
30
280

1,280

1,390

6,505
605

6,680
685

SPECIAL ANALYSIS F

127

Table F-l. TAX EXPENDITURE ESTIMATES BY FUNCTION*—Continued
(in millions of dollars)
Corporations
Description

1975

1976

Individuals

1977

1975

Business investment:
Exclusion of interest on State and local industrial
development bonds
120
150
195
Excessfirst-yeardepreciation
175
145
165
Depreciation on rental housing in excess of
straight line
115
120
125
Depreciation on buildings (other than rental
housing) in excess of straight line
220
275
280
Expensing of research and development expenditures
635
660
695
Expensing of construction period interest and
taxes
985 1,020 1,065
Capital gain: corporate (other than farming and
timber)
695
760
900
Investment credit
4,860 6,850 6,550
Personal investment:
Dividend exclusion,
Capital gain: individual (other than farming and
timber)
Exclusion of interest on life insurance savings
Deferral of capital gain on home sales
Deductibility of mortgage interest on owneroccupied homes
Deductibility of property taxes on owner-occupied
homes
Deductibility of casualty losses
Credit for purchase of new home

1976

1977

55
100

75
80

90
85

405

430

455

220

215

525

545

570

950 1,410

1,445

315

335

350

5,090 5,455
1,545 1,695
805
845

6,225
1,855
890

5,405 4,545

4,710

4,510 3,690
280
300
625

3,825
330
100

525 4,385 3,820
1,185 1,040
160
175

3,955
1,075
190

Other tax expenditures:

Deductibility of charitable contributions (other
than education)
Deductibility of interest on consumer credit
Maximum tax on earned income

385

395

* All estimates are based on the tax code as of Dec. 31,1 975, with the exception that the provisions
of the Revenue Adjustment Act of 1975 regarding the standard deduction for individual income
taxpayers are treated as if they were permanent.

The profits of a domestic international sales corporation (DISC) are
not taxed to the DISC but instead are taxed to the shareholders when
distributed to them. This deferral is available for 50% of the export
income of a DISC. To qualify as a DISC at least 95% of a corporation's gross receipts must arise from export activities. The resulting
tax expenditure is expected to increase from $1.1 billion in 1975 to
$1.6 billion in 1977 as additional DISC's are created and a larger volume of export income is deferred. The Tax Reduction Act of 1975
denied DISC benefits to exporters of energy products.
Domest'c corporations qualifying as Western Hemisphere trade
corporations are entitled to a special deduction which reduces their
tax rate from 48% to 34%.
Agriculture.—-Farmers, including corporations engaged in agriculture, may deduct certain costs as current expenses even though these
expenditures were for inventories on hand at the end of the year or
capital improvements.

128

THE BUDGET FOR FISCAL YEAR 1977

Capital gains treatment generally applies to the sale of livestock,
orchards, vineyards, and comparable agricultural activities.
Natural resources, environment, and energy.—State and local governments issue bonds, the interest income from which is exempt from
Federal tax, to finance pollution control facilities used by private
firms. The total volume of tax-exempt bonds issued for this purpose
has grown rapidly in recent years.
Certain capital costs necessary to bring a mineral deposit into
production may be deducted as current expenses rather than spread
over the useful life of the property. Included in this category are the
intangible drilling costs of oil and gas wells, such as the wages of
drilling crews, and the cost of developing other mineral deposits, such
as expenditures for mine shafts, tunnels, and stripping.
Extractive industries may generally choose between two methods of
recovering capital costs invested in the development of natural
resources. Under one method, actual outlays, to the extent not
immediately expensible, may be deducted as "cost depletion" over
the productive life of the property, much as other businesses may take
deductions for the depreciation of capital goods. Alternatively, businesses in the extractive industries may deduct a prescribed percentage
of gross income (at rates ranging from 22% for oil and gas to 5% for
certain minerals, but not more than 50% of net income or 65% of net
income in the case of oil and gas) where "percentage depletion"
exceeds "cost depletion." Percentage depletion is not limited to the
cost of the investment as is cost depletion. The basis for "cost depletion" is reduced to the extent certain costs are recovered through
expensing of exploration and discovery costs and intangible drilling
costs. There is no comparable reduction in "percentage depletion" to
allow for costs which are allowed as expenses. A tax expenditure
estimated on the assumption that both were eliminated would be
significantly smaller than the sum of the two separate items because
percentage depletion would exceed cost depletion by a lesser amount
if the basis for cost depletion were increased by depreciating exploration, discovery, and intangible drilling costs that are currently
expensed. The Tax Reduction Act of 1975 significantly reduced the
tax expenditure resulting from the application of percentage depletion
to producers of oil and gas by limiting application of the provision
to independent producers and royalty owners and to specific quantities
of output. For those still eligible, the Act phases the percentage rate
down from 22% through 1980 to 15% in 1984 and thereafter.
Royalties from coal or iron ore deposits are treated as capital gains,
rather than ordinary income.
The gain on the cutting of timber is taxed at rates applicable to
long-term capital gains, rather than at ordinary income rates.
Taxpayers may elect to amortize a certified pollution control facility
over a 5-year period rather than its longer expected useful life. If they
so elect they may not claim the investment tax credit on the capital
cost of the facility. This provision applies only to facilities placed in
service before 1976.
Commerce and transportation.—Credit unions are exempt from
Federal income tax.

SPECIAL ANALYSIS F

129

Corporations under the permanent tax code, pay income tax at the
rate of 22% on all taxable income plus a surtax of 26% on taxable
income in excess of $25,000. Each corporation therefore enjoys a
surtax exemption of $25,000. This exemption is intended to encourage
small or new business. For 1975 only, the Tax Reduction Act of 1975
provided that the tax rate on the first $25,000 of taxable income be
reduced to 20% and that the surtax exemption apply to the second
$25,000 of taxable income. This temporary provision was extended
for 6 months by the Revenue Adjustment Act of 1975.
Certain companies which operate U.S.-flag vessels on foreign trade
routes receive an indefinite deferral of income taxes on that portion
of their net income which is used for shipping purposes, primarily
construction, modernization, and major repairs of ships.
Specified classes of railroad rolling stock are eligible for amortization over a 5-year period whether owned by railroad companies or by
lessors, rather than their longer, expected useful life. If 5-year amortization is elected the investment tax credit cannot be claimed. This
provision applies only to rolling stock placed in service before 1976.
Commercial banks, mutual savings banks, and savings and loan
associations are permitted to deduct and set aside additions to bad
debt reserves in excess of actual loss experience and reasonable expectations as to future losses. Commercial banks may maintain a
reserve of 1.2% of uninsured loans. The ratio will phase down to 0.6%
in calendar year 1981. Mutual savings banks and savings and loan
associations may deduct 43% of income in calendar year 1976,
provided they
maintain stipulated fractions of their assets in "qualifying assets/7 primarily residential mortgages. Under current law their
maximum deduction will phase down to 40% in 1979 and thereafter.
Individuals who itemize their deductions may deduct State and
local gasoline excise taxes paid. The deduction of excise taxes on gasoline used for business purposes does not result in a tax expenditure
since they would in any case be deductible as a business expense.
Community^ and regional development.—Taxpayers may, under
certain conditions, elect to compute depreciation on rehabilitation
expenditures for low- and moderate-income rental housing o\er a
5-year period. Qualified rehabilitation expenditures may not exceed
$15,000 per dwelling unit and must exceed $3,000. This provision
expired on December 31, 1975.
Education, training, employment, and social services.—Taxpayers
may elect to amortize over a 5-year period expenditures incurred in
acquiring, constructing, reconstructing, or rehabilitating child care
or on-the-job training facilities. This provision expires at the end of
1976.
Recipients of scholarships and fellowships may exclude such amounts
from taxable income, subject to certain limitations. The exclusion of
educational benefits under the GI bill are included in Veterans Benefits and Services.
Taxpayers may claim personal exemptions for dependent children
19 or over who receive income of $750 or more per year only if the
children are full-time students. The student may also claim an exemp-

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76 - 9
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130

THE BUDGET FOR FISCAL YEAR 1977

tion on his or her own tax return, in effect providing a double exemption, one on the parents' return and one on the student's.
Contributions to nonprofit educational institutions are allowed as a
deduction for individuals and corporations. (See the discussion of
other charitable contributions under "Other Tax Expenditures.")
Child and dependent care expenses incurred to permit the taxpayer
and his spouse to work may be taken as an itemized deduction up to a
maximum of $400 per month. The deduction is reduced by 50 cents for
each dollar of adjusted gross income in excess of a limit that was
increased from $18,000 to $35,000 per year by the Tax Reduction
Act of 1975.
A credit is allowed against income tax liability equal to 20% of
first-year wages and salaries of employees placed in employment under
the work incentive program. The credit for a taxable year cannot
exceed $25,000 plus 50% of the excess over that amount. A similar
credit, on a temporary basis, was provided for employment of AFDC
recipients by the Tax Reduction Act of 1975.
Health.—Payments by employers for health insurance premiums
and other medical expenses are deducted as business expenses by
employers and excluded from income by employees. The exclusion from
employees' income gives rise to the tax expenditure.
Medical expenses in excess of 3% of adjusted gross income, including
expenditures for prescribed drugs and medicines in excess of 1% of
adjusted gross income, may be deducted by individuals as itemized
nonbusiness deductions. Individuals may also deduct half of the
premiums they pay for medical care insurance up to a maximum
deduction of $150 per year, without regard to the 3% limitation.
Income security.—Most forms of government transfer payments to
individuals, such as social security and unemployment benefits, are
excluded from taxable income. If the taxpayer had no other source of
income, these payments, even if taxable, would not generally be sufficient to result in any tax liability, given personal exemptions and
minimum standard deductions. Since some recipients have property
income, receive earnings (perhaps for only part of a year), or may file
jointly with working spouses, tax expenditures result from these
exclusions. The estimates include the effect of excluding from tax the
$50 payment made to recipients of social security and certain other
Federal programs provided by the Tax Reduction Act of 1975.
Certain payments, up to $100 per week, financed by an employer in
lieu of wages during periods of employee injury or sickness are excluded
from the employee's taxable income.
Certain contributions to pension plans paid by employers, and
amounts set aside by the self-employed and employees not covered
by an employer's plan, are excluded from current individual gross
income. The investment income earned by pension funds is not taxable currently. The resulting tax expenditures are composed of two
elements: lower effective tax rates after retirement, due to lower
incomes and special tax provisions enjoyed by the aged; and the excess
of aggregate current contributions and investment earnings over
aggregate amounts paid out in benefits. The self-employed can make
deductible contributions to their own retirement plans equal to

SPECIAL ANALYSIS F

131

15% of their income, up to a maximum of $7,500 per year. Employees
not covered by an employer's plan may deduct annual contributions
of 15% of compensation, up to a maximum of $1,500.
In addition to pension plans, many employers provide other employee benefits that are excluded from employee income. The employer's share of these benefits are deductible business expenses.
Included in the meals and lodging item is the exclusion from the
taxable income of ministers of the rental value of parsonages and
housing allowances.
A taxpayer 65 or older may exclude from gross income any capital
gain allocated to the first $20,000 of the adjusted sales price on a
sale of a personal residence. This is a once-in-a-lifetime exclusion.
The percentage standard deduction—15% of adjusted gross income
up to a limit of $2,000—sets an upper limit on the tax liability for
many taxpayers, predominately in the lower and middle-income
range, and for that reason is classified under income security. For
calendar year 1975 only, the Tax Reduction Act of 1975 provided
a percentage standard deduction of 16% up to a limit of $2,600
for married persons filing joint returns and $2,300 for single persons.
The Revenue Adjustment Act of 1975 maintained the 16% late and
made additional upward revisions in the limits for the percentage
standard deduction for the first 6 months of calendar year 1976. The
percentage standard deduction is a substitute for itemizing deductions; the estimates shown are for the amount by which the percentage standard deduction exceeds the low income allowance or
the itemized deductions that would be taken in the absence of this
provision, whichever is greater. This provision also encourages taxpayers to use the simplified short form 1040A.
Additional personal exemptions of $750 may be deducted by taxpayers who are over 65 or who are blind. These additional exemptions
may not be claimed foi the taxpayer's dependents.
A retirement income tax credit may be claimed by individuals who
are retired, or over age 65, of up to $228.60 (15% of $1,524) for a
single person, oi $342.90 (15% of $2,286) for a married couple,
based on retirement income from all sources except social security,
railroad retirement, and other tax-exempt benefits. The provision was
designed to permit taxpayers with taxable retirement income a
tax benefit approximately comparable to that accorded recipients of
social security and similar tax-exempt benefit payments.
The aggregate effect of excluding social security and railroad retirement benefits for retirees, the additional exemption for persons
over 65, and the retirement income credit are revenue losses of $4,590
million in 1975, $4,970 million in 1976, and $5,530 million in 1977.
These aggregates are greater than the sum of the individual estimates
because more elderly persons would be pushed to taxpaying levels of
income or into higher tax brackets if all of these items were deleted
from the tax code.
The Tax Reduction Act of 1975 established, for calendar year
1975 only, an earned income credit for low-income workers with
families. The maximum credit is 10% of a worker's first $4,000 of
earned income and phases out at $8,000 of earned income or adjusted
gross income, whichever is greater. To the extent that the credit
reduces or eliminates tax liabilities it results in a tax expenditure.

132

THE BUDGET FOR FISCAL YEAR 19 77

Credits in excess of tax liabilities are rebated to individuals. These
rebates are treated as budget outlays and are estimated to be $1.2
billion in 1976. The Revenue Adjustment Act of 1975 extended the
earned income credit through calendar year 1976 at a 5% late in
order to make it equivalent to a 6-month extension.
Veteran benefits and services.—All compensation due to death or
disability and pensions paid by the Veterans Administration are
excluded from taxable income. GI bill benefits are also excluded.
General government.—Political contributions up to a maximum of
$100 ($200 in the case of joint returns) may be deducted, or tax
credits may be taken up to one-half of contributions but limited to
$25 ($50 on joint returns).
Revenue sharing and general purpose fiscal assistance.—The

interest

on State and local government debt is excluded from Federal taxation.
Both corporations, mainly commercial banks, and individuals receive
this tax-exempt income. As a result, these governments are able to
sell debt obligations at a lower interest cost than would be possible
if such interest were subject to tax. The exclusion of interest on State
and local government industrial development bonds and securities
issued to finance pollution control facilities are classified elsewhere;
only the effect of excluding interest on general purpose obligations and
revenue bonds for public purposes such as toll roads is estimated for
this function.
U.S. citizens and corporations receiving income from sources in a
U.S. possession may, under certain conditions, exclude such income
from tax.
The deductibility of nonbusiness State and local taxes provides
indirect assistance to these governments. The deductibility of property
taxes on owner-occupied homes and excise taxes on gasoline are classified elsewhere. The estimates shown here are primarily for the deductibility of State and local income and sales taxes.
Interest.—Holders of U.S. savings bonds are not required to include
the interest on these securities in their taxable income until the bonds
are redeemed, thereby deferring tax liabilities.
Business investment.—The interest on industrial development bonds
issued by State and local governments is excluded from taxable income.
The proceeds of these bonds are used to finance private investment in
manufacturing plants and other facilities. For that reason this item
is classified as business investment rather than under revenue sharing
and general purpose fiscal assistance to State and local governments.
To the extent that allowable depreciation for tax purposes exceeds
the rate at which assets actually depreciate, business tax liabilities
are deferred. Businesses may employ a variety of depreciation schedules for tax purposes, some of which cause a much larger part of asset
values to be written off in early years of the asset's useful life than do
others. An extra first-year depreciation deduction of 20% may be
claimed for $10,000 of tangible personal property ($20,000 on a
joint return) having a useful life of at least 6 years. The revenue
costs of allowing buildings and rental housing to be depreciated for

SPECIAL ANALYSIS F

133

tax purposes by methods that reduce asset value more rapidly than
straight-line depreciation (the method typically used in financial
statements) are shown.
Research and development expenditures typically result in new
products or processes, cost reductions, or other outcomes the benefits
from which will, in nearly all cases, accrue on into the future. For tax
purposes businesses may deduct all research and development expenditures in the year during which they are incurred rather than
amortizing them over a number of years. The tax expenditure is
estimated as if such expenditures were amortized over a 5-year period.
Taxpayers may deduct on a current basis interest and property tax
payments made during the period when a building is under construction rather than include such costs of construction, along with other
costs, in the value of the completed structure which would then be
depreciated over its useful life.
Corporations may elect a 30% alternative tax rate on capital gains.
The tax expenditure is estimated on the assumption that these gains
would otherwise be taxed at 48%.
The investment tax credit was substantially modified by the Tax
Reduction Act of 1975. For calendar years 1975 and 1976 the rate of
the credit was increased from 7% to 10% (from 4% to 10% in the
case of public utilities). The percentage is applied to the cost of
qualifying property (generally, tangible personal property used in a
trade or business) having a useful life of over 7 years. The investment
tax credit cannot be claimed for investments in land or buildings or
for property used abroad. Lower rates apply to property with useful
lives of 3 to 7 years. The maximum credit which may be offset directly
against income tax liability in a taxable year is limited to $25,00*0
plus one-half of the excess of tax liability over $25,000. Excess credits
may geneially be carried back 3 taxable years and forward 7 taxable years, after which they expire if still unused. The Act provides
a temporary increase in maximum credits that can be claimed by
public utilities. The amount of used equipment on which the credit
may be claimed was temporarily increased from $50,000 to $100,000.
An extra 1% credit may be claimed for 1975 and 1976 by corporations which elect to contribute that amount to an employee stock
ownership plan funded by transfers of employer shares. As a permanent change, the Act allows investment tax credit to be claimed
as progress payments are made on property that takes 2 or more
years to construct.
Personal investment.—Grouped together in this category are a
number of tax expenditure items that affect individuals as investors
and holders of real and financial assets.
The first $100 ($100 per taxpayer on a joint return) of dividend
income may be excluded from taxable income.
Half of the gains from the sale of capital assets held more than 6
months is excluded from income and up to $25,000 of included gains
may be taxed at a rate of 50%. Capital losses may be deducted from
gains but no more than $1,000 of long-term losses may be deducted
in any one year from ordinary income. No special recognition is made

134

THE BUDGET FOR FISCAL YEAR

1977

of the effect of inflation on the value of assets. The estimates are
computed on the assumption that the half of the long-term gains
currently excluded would be taxed at ordinary rates.
Life insurance policies, other than term policies, generally have a
saving element in them. Savings in the form of policyholder reserves
are accumulated from premium payments, and interest is earned on
the e reserves. Such interest income is taxable neither as it accrues
nor as an element of death benefits.
Capital gains on the sale of a home are recognized only to the extent
that the "adjusted sales price" exceeds the cost of a new home purchased and occupied within 18 months before or after the sale (if a
new house is constructed it must be occupied within 2 years after the
sale). The "adjusted sales price" is the amount realized (gross proceeds less selling expenses) minus qualified "fixing up" expenses. A
loss on a sale of a home is not deductible.
Owner-occupants of homes may deduct mortgage interest and
proper y taxes (but not maintenance outlays or depreciation because
the in-kind income from home ownership is not recognized) as itemized
nonbusiness deductions. The tax expenditure from these two items
comb ned would be $7.7 billion for 1977. This is less than the sum of
the two separately because if both were deleted more taxpayers would
save by using the standard deduction.
Taxpayers may deduct as an itemized nonbusiness deduction the
amount in excess of $100 for each loss due to fire, theft, or other
casualty to the extent not compensated by insurance or other payments.
The Tax Reduction Act of 1975 provided, for part of calendar year
1975 only and subject to certain conditions, a tax credit equal to 5%
of the purchase price of a new home, up to a maximum credit of
$2,000. In a few cases taxpayers will not be able to claim the credit
until they file their 1976 returns during fiscal year 1977.
Other tax expenditures.—Interest paid on consumer credit for any
purpose is allowed as an itemized nonbusiness deduction for individuals.
Contributions to charitable, religious, or certain other nonprofit
organizations are allowed as an itemized deduction for individuals,
generally up to 50% of adjusted gross income. Taxpayers whose contributions to charitable or educational organizations are in the form of
capital assets, usually securities, which have appreciated in value
above their cost, obtain a deduction for the contribution at the appreciated value of the asset without taxation on the appreciation in
value. Contributions to educational institutions are reported under
Education, Training, and Employment, and Social Services.
Corporations may deduct charitable contributions (including those
made to educational institutions, which are separately reported) up
to 5% of their income. In the absence of this provision of the tax
code some of these contributions might be deductible as business
expenses. The estimates are based on all reported contributions.
The Tax Reform Act of 1969 introduced a maximum tax rate of
50% on earned income.

SPECIAL ANALYSIS F

135

PROPOSED CHANGES IN TAX EXPENDITURES

The tax proposals that are a part of the 1977 budget would reduce
somewhat nearly every estimated tax expenditure for 1977 presented
in table F - l . The proposed increase in personal exemptions from $750
to $1,000, change in the standard deduction to $2,500 for a married
couple filing jointly and to $1,800 for a single taxpayer, elimination
of the percentage standard, and changes in rate schedules would
become fully effective on January 1, 1977; temporary provisions are
proposed for calendar year 1976 that take into account the provisions
of the Revenue Adjustment Act of 1975 affecting tax liabilities for
1976. These proposed changes in the normal structure of the individual income tax would reduce the number of taxpayers who itemize
their deductions and would alter marginal tax rates in many instances.
The proposed reduction in the basic corporate tax rate from 48% to
46% beginning on July 1, 1976, would reduce the tax expenditures
associated with the corporate income tax. Reestimates reflecting the
impact of these proposals have not been made for every item.
Several proposals do affect particular tax expenditures more specifically and these will be briefly discussed. The estimates for these
specific changes are shown in table F-2. The impact on revenues in
1978 and subsequent years through 1981 would be greater and are
reflected in the long-range receipt estimates shown in Part 3 of the
budget.
Table F-2. ESTIMATES OF PROPOSED CHANGES IN TAX EXPENDITURES,
1977 (in millions of dollars)
Description

Excess of percentage standard deduction over low income allowance. __
Additional exemption for the blind
Additional exemption for over 65
Investment credit
Corporate surtax exemption
Financial institutions: excess bad debt reserves
Mortgage interest income tax credit
Electric utilities:
Investment credit (excess of 12% over 10% credit and progress payment basis)
Pollution control: 5-year amortization
Conversion facilities: 5-year amortization
Depreciation of progress payments
Deferral of tax on reinvested dividends
Broaden stock ownership plan
Accelerated depreciation in areas of high unemployment
1

Corporate

1,215
1, 675
—215
470

Individual

—1,560
5
235
100
10

105
0)
(x)
320
250

350
300
40

No significant revenue effect in first year.

Excess of percentage standard deduction over low income allowance.—

The percentage standard deduction would be eliminated and hence
the tax expenditure associated with the excess of the percentage
standard deduction over the low income allowance would disappear.
Elimination of the percentage standard deduction would simplify
tax returns; the resulting revenue gain would be more than offset by
other proposed changes. Elimination of the percentage standard
deduction is not proposed apart from the other proposed changes in
personal exemptions, low income allowances, and rate schedules.

136

THE BUDGET FOR FISCAL YEAR 19 77

Additional personal exemptions.—The additional personal exemption
for taxpayers who are blind or over 65 would be increased from $750
to $1,000.
Investment tax credit.—The increase in the investment tax credit
from 7% to 10%, which was enacted for calendar years 1975 and 1976
on'y by the Tax Reduction Act of 1975, is proposed to be made
permanent.
Corporate surtax exemption.—The features of the Tax Reduction
Act of 1975 which, for calendar year 1975 only, reduced taxes on the
first $50,000 of corporate income are proposed to be made permanent
beginning July 1, 1976.
Financial institutions.—The 1977 budget anticipates enactment of
legislation that would reform the operation of the Nation's financial
institutions. A part of that reform would be to adopt uniform tax
rules for all types of banks. Special provisions currently allowing the
deduction of excess bad debt allowances in order to determine taxable
income for savings and loan associations and mutual savings banks
would be eliminated. In order to encourage financial institutions to
hold residential mortgages a new tax credit would be introduced.
The credit would be a percentage of interest income received on
residential mortgages and would range from 1.5% to 3.8% depending
upon the fraction of the institution's assets held in the form of
residential mortgages. Individuals holding residential mortgages
would be eligible for the credit at the 1.5% rate. The estimates shown
in table F-2 assume that these tax changes become effective January 1,
1977.
Electric utilities.—The 1977 budget proposals include tax relief
for the electric utility industry in order to stimulate construction of
additional facilities and insure that long-run economic growth is not
limited by capacity shortages in the production of electricity. The
proposal would:
—Increase the investment tax credit permanently to 12% on all
electric utility property except generating facilities fueled by
petroleum products.
—Give electric utilities full, immediate investment tax credits on
progress payments for construction of property that takes 2 years
or more to build, except generating facilities fueled by petroleum
products.
—Extend to January 1, 1981, the period during which pollution
control facilities installed in a pre-1969 plant or facility may
qualify for 5-year straight-line amortization in lieu of normal
depreciation and the investment credit.
—Permit 5-year amortization of the costs of either converting a
generating facility fueled by petroleum products into a facility
not fueled by petroleum products or replacing a petroleum-fueled
facility with one not fueled by petroleum.

SPECIAL ANALYSIS F

137

—Permit a utility to elect to begin depreciation of accumulated
construction progress expenditures during the construction period.
—Permit a shareholder of a regulated public electric utility to postpone tax on dividends paid by the utility on its common stock by
electing to take additional common stock of the utility in lieu of
cash dividends.
The estimates shown in table F-2 assume that these tax changes
become effective July 1, 1976. The provisions regarding the investment tax credit and depreciation would apply only if the tax benefits
are "normalized" for ratemaking purposes.
Tax incentives for broadened stock ownership.—Tax incentives are
proposed to induce broader ownership of common stock. This plan
will provide a tax deferral for funds invested in stock-purchase plans
established by employers or directly by individuals. Funds must
remain invested for at least 7 years, and are subject to tax at the time
of withdrawal. This proposal will become effective July 1, 1976, and
the full deduction will be allowed for calendar year 1976. There will
be a limit on the maximum annual amount on which taxes can be
deferred and the maximum will be phased out at higher income levels.
Accelerated depreciation for investment in areas of high unemployment.—A tax incentive is also proposed to encourage construction of
new facilities or expansion of old facilities in areas experiencing
unemployment in excess of 7%. This will be accomplished by allowing
very rapid amortization for nonresidential buildings and capital
equipment. Buildings will be amortized over a period equal to one-half
their useful life. Capital equipment put in place in new or expanded
facilities will be amortized over 5 years; the full investment tax credit
can be claimed on such capital equipment. This incentive will apply to
projects begun after January 19, 1976, and before January 20, 1977,
and that are completed within 36 months.

SPECIAL ANALYSIS G
PRINCIPAL FEDERAL STATISTICAL PROGRAMS

This special analysis presents an overview of the major statistical
programs of the Federal Government, as reflected in the 1977 budget.
As noted below for many specific programs, the recommended funding
levels of the principal Federal statistical programs were developed
within the Presidential objective of holding down the rate of growth
in Federal spending. As a result, total obligations for current statistical
programs will increase by only $5.8 million, or 1.2% over 1976.
Periodic programs will increase by $7.9 million, or 16.9% over 1976,
primarily because of accelerated planning activity for the 1980
decennial census. Total obligations for all principal Federal statistical
programs will increase by $13.7 million, or 2.5% over 1976.
A limited number of program increases are recommended in 1977
to permit improvements in the statistical data base that are essential
to more effective Federal policy making and program management.
In most statistical agencies it will be necessary to reduce the resources
applied to lower priority statistical programs in order to provide for
quality improvement and to offset the rising costs of maintaining
many of the basic continuing programs.
In addition to assuring more effective use of dollar resources within
the statistical agencies, the Administration, in combination with the
Commission on Federal Paperwork, will continue to seek ways to
reduce the burden on the American public of completing Federal
report forms, including those that are the basis for statistical programs
covered in this special analysis. The cost of such reporting is an
important factor to many respondents, and the willingness of many
individuals and businesses to provide information voluntarily is
limited. It is imperative that the reporting burden be kept to the
minimum possible, given the need for information.
The Federal statistical S3^stem continually strives to increase
the accessibility of data series to the public. In response to the President's directive, a new monthly statistical chartbook, focusing on
social and economic developments of domestic importance, will be
developed for publication prior to 1977. This publication, which will
emphasize graphic presentation of statistical series in order to enhance
public usefulness, will draw upon the statistical output of all Federal
agencies. The purpose of this publication will be to increase public
access to and awareness of the vast output of the Federal statistical
system and to provide a framework for monitoring important domestic
developments to which the statistics relate.
The quality, timeliness, and integrity of Federal statistics are the
product of the professional staff engaged in production and analysis
of these series. Information on full-time permanent staff for major
statistical agencies is presented in table G-l. In addition to these
138

SPECIAL ANALYSIS G

139

professional resources directly employed by major statistical agencies,
there are many statisticians working in smaller statistical units in
other agencies and departments. Their work is complemented by
statistical analyses and other professional reviews of the data series
as they apply to specific program areas. The staff figures do not cover
part-time or temporary employment. The full-time permanent
numbers are presented because they are the only consistently defined
numbers that are currently available.
The variations in staff levels relative to the program sizes are partially explained by the different natures of the various agency programs. For example, the Bureau of the Census does a great deal of
work for other agencies on a reimbursable basis for which no funds
are included in the Census Bureau's budget. The National Center for
Education Statistics, on the other hand, has proportionately more
work done under contract than some of the other major statistical
agencies.
Table G-1. PERMANENT POSITIONS BY AGENCY
1975
actual

Department of Agriculture:
Statistical Reporting Service
Department of Commerce:
Bureau of the Census
Bureau of Economic Analysis
Department of Health, Education, and Welfare:
National Center for Education Statistics
National Center for Health Statistics
Department of Labor:
Bureau of Labor Statistics
Total for six agencies reporting
1

1976
estimate

1977
estimate

1,128

1,235

1,279

4,436
500

4,385
517

4,444
539

171
522

i
i

191
522

1
1

179
522

1, 658

1,774

1,864

8,415

8,624

8,827

These estimated figures are subject to further Departmental review.

In summary, the combination of dollar resources represented in the
budget, the cooperation of businesses and individuals in supplying
statistical information, and the creativity and analytical ability
of professionals in statistical services are all essential to the maintenance
and dissemination of high quality statistics which are vital to informed
public and private decisionmaking.
Program funding by major subject area is summarized in table
G-2 and program improvements within each area are discussed
in some detail below.

140

THE BUDGET FOR FISCAL YEAR

1977

Table G-2. OBLIGATIONS FOR PRINCIPAL CURRENT STATISTICAL
PROGRAMS, BY BROAD SUBJECT AREAS1 (in millions of dollars)
1975
actual

Prices and price indexes
Labor statistics
Production and distribution statistics
Housing and construction statistics
Economic and business financial accounts
Energy statistics
Environmental statistics
Health statistics
Education statistics
Income maintenance and welfare statistics
Population statistics
Criminal justice statistics
Total, principal current programs
1

15.1
66.0
86.3
15.8
35.2
14.3
30.9
76.5
16.6
19.9
6.3
45.2
428.1

1976
estimate

1977
estimate

18.4
84.5
104.2
19.0
40.5
18.9
26.2
89.2
27.4
21.2
6.5
42.4

24.7
83.2
110.4
19.6
41.0
17.6
26.8
91.2
21.4
22.9
7.4
38.0

498.4

504.2

Classifications are based on primary use of statistics.

CURRENT PROGRAMS
PRICES AND PRICE INDEXES

Consumer Price Index ($3.4 million).—The increase in 1977 for the
Bureau of Labor Statistics (BLS) provides for a number of improvements in the Consumer Price Index (CPI). The first is the publication
of a new CPI covering the entire urban population, as well as a revised
index covering only urban wage earners and clerical workers. More
than 50% of the value of the items in each index will be priced monthly
with virtually all of the rest being priced bimonthly. Thus, the new
index will provide a more accurate description of current price movements than is now the case. Publication of these indexes is scheduled to
start in 1977. In addition, the funds will provide for a continuing
point-of-purchase survey to determine where consumers purchase
items priced in the CPI. This survey will provide the basis for updating
the sample of outlets from which prices are collected. Further, the
increase will provide for the development of a continuing consumer
expenditure survey that will reflect more current expenditure patterns
of consumers when the CPI weights are revised. The consumer expenditure survey will also provide a continuous body of consumption
and income data, classified by characteristics of the population, for
use in analyzing changing patterns of consumption.
International price program ($04 million).—Because of the increasing
importance of foreign trade and the policy implications of changing
world prices, the expansion of the BLS international price program is
being continued, adding approximately 15% of the value of U.S.
exports and 20% of the value of U.S. imports to the existing coverage.
Thus, by the end of 1977, 70% of total exports and 60% of total
imports will be covered by the indexes.

SPECIAL ANALYSIS G

141

Prices received by farmers ($0.3 million).—-Additional funds are
provided for the price statistics program of the Statistical Reporting
Service of the Department of Agriculture to institute improvements
in the estimates of prices received by farmers for grains. Improvements
in these statistics are needed because of the increased volatility of today's agricultural prices and changes in domestic and foreign marketing patterns.
LABOR STATISTICS

Employment cost index ($0.2 million).—-The 1977 budget provides an
increase to continue expansion of the employment cost index by adding
the government sector so that, starting in calendar 1978, the index will
reflect changes in employer expenditures for total compensation of
labor in all sectors of the economy except private households.
PRODUCTION AND DISTRIBUTION STATISTICS

Agricultural list sampling frame ($1.9 million).—-The Statistical
Reporting Service (SRS) of the Department of Agriculture collects a
large amount of information on agricultural production and distribution. The sampling methodology that has been developed to enhance
the precision of agricultural estimates relies on a multiple-frame approach combining area samples for direct enumeration and list
samples for mail surveys. In 1976, SRS obtained funds to initiate the
development of a general purpose list sampling frame. An increase in
funds provided in 1977 will enable SRS to continue the project of
compiling a complete and unduplicated list of potential respondents
throughout the United States, including data on size and type of farm
operation.
ECONOMIC AND BUSINESS FINANCIAL ACCOUNTS

The economic accounts of the United States, prepared by the
Bureau of Economic Analysis (BEA), center around the national
income and product accounts, summarized by the gross national
product (GNP), and also include wealth accounts, interindustry
accounts, regional accounts, and balance-of-payments accounts. The
Economic Policy Board's Subcommittee on Economic Statistics has
expressed a strong interest in strengthening the quality of the estimates. Strategies to raise quality involve improving the basic data,
which are collected largely by other agencies and used by BEA in
constructing the estimates, and strengthening BEA's capability to
analyze the data.
Inventory statistics ($0.5 million).—Changes in the business inventories component of GNP are particularly difficult to estimate. In 1977,
funds are provided to improve the basic data collected by the Bureau
of Census. The Bureau will conduct an annual benchmark survey of inventories held by wholesalers ($0.2 million). This survey will improve
the accuracy of the monthly inventory reports used by BEA in its
quarterly GNP estimates. An increase is also provided for a study of
the composition and turnover rate of manufacturers' inventories ($0.3
million). Further improvements in basic data on inventories will
require substantial research continuing through 1977.

142

THE BUDGET FOR FISCAL YEAR

1977

Local area income estimates ($0.8 million).—To improve BEA's
analytical capability, funds are provided for revising and strengthening
the estimates of personal income for States, metropolitan areas, and
counties. A major improvement in this series will be the incorporation
of new data on dividends, interest, and on nonfarm proprietors'
income by county, and the accelerated incorporation of farm income
and expenditures information.
Input-output statistics ($0.2 million).—BEA will also substantially
expand the detail in the national input-output tables to provide
better information on the production and consumption of different
types of energy and other potentially scarce resources. This additional
information will be used to evaluate the impact of changes in the level
and composition of GNP on requirements for these resources.
Commodity classifications ($04 million).—The 1977 budget includes
funds for the Bureau of the Census to improve the comparability of
commodity classifications used in collecting data on imports, exports,
and domestic production and to carry out other responsibilities mandated by the Trade Act of 1974.
ENERGY STATISTICS

The Federal Energy Administration (FEA), which conducts statistical activities in energy supply, distribution, and consumption to
support analytical, policymaking, and regulatory activities, will
improve many of its existing data systems in 1977. The estimates
presented in this analysis do not reflect the full impact of the recently
signed Energy Policy and Conservation Act, which extends many of
FEA's regulatory activities and authorizes several new programs in
energy conservation. Any funds that may be necessary for activities
or programs authorized by this act are covered by the allowance for
contingencies.
Other agencies are active in the collection and analysis of energy
information. FEA and the Bureau of Mines have recently entered into
an agreement, which will be implemented in 1976 and 1977, to pursue
cooperative arrangements for monthly petroleum data collection and
processing with a minimum of duplication. The Federal Interagency
Council on Energy Information, comprised of some 12 departments
and agencies, was recently established to enhance coordination and
development of energy data systems. The Council will work to achieve
better integration of existing data sources throughout 1977.
HEALTH STATISTICS

The 1977 funding level of $24.0 million for the National Center for
Health Statistics is a $1.6 million decrease from the expected 1976
level. One of the major programs of the National Center continues to
be its Federal-State-local cooperative health statistics system (CHSS).
The Department of Health, Education, and Welfare's first health
statistics plan, developed by the Health Data Policy Committee,
emphasized the importance CHSS will play in future collection of
health statistics. During 1977, major efforts will be undertaken to

SPECIAL ANALYSIS G

143

develop standard classifications and concepts to provide for further
improvements in health statistics.
Increases in health statistics activities are limited to areas in which
Federal programs or responsibilities have been expanding:
Drug abuse statistics ($3.0 million).—The Alcohol, Drug Abuse, and
Mental Health Administration has an increase for a longitudinal
followup of clients in federally funded drug treatment centers.
Consumer product safety statistics ($0.3 million).—The Consumer
Product Safety Commission (CPSC) is provided an increase for
assessing the impact of proposed standards and regulation? on industry
and the consumer ($0.2 million). In total, however, the 1977 CPSC
statistical budget shows a $1.0 million decrease from the 1975 level.
Biomedical research statistics ($3.9 million).—Within the National
Institutes of Health, the National Cancer Institute is provided an
increase for statistical programs supporting continued operation
of population-based cancer epidemiology research centers, conducting environmental carcinogen studies, and completing the thiid
national cancer survey ($0.7 million). In addition, an increase is provided for studying high-risk groups and for examining the relationship
between cancers, congenital defects, and other diseases ($1.8 million).
The National Heart and Lung Institute has an increase for research
on the origins of heart disease and for statistical support of its three
major clinical trials ($0.5 million). The National Institute of Environmental Health Sciences has an increase for data collection to
improve the description and prediction of the biological effects of
environmental hazards ($0.8 million).
Medicare statistics ($0.4 million).—The Social Security Administration will undertake increased analysis of medicare program data
from health insurance and related research.
EDUCATION STATISTICS

The 1977 budget for the National Center for Education Statistics
is $13.0 million, unchanged from the 1976 level. The Center will
continue to develop its Federal-State cooperative statistical piogram.
In addition, the Center will undertake several surveys including a
third followup of the participants in the national longitudinal study
of the high school class of 1972. The design of a second longitudinal
survey of high school seniors will be undertaken. Work will begin
on the development of a study to assess the educational needs of
young children. Work will continue on the characteristics of institutions of both collegiate and noncollegiate postsecondary education. The
Center has begun to increase its emphasis on analysis, an effort which
will intensify in 1977. Areas of especial attention will include the cost
of education and the prevalence of handicapping conditions. The
Center will continue to make adaptations in Federal analytical models
for use by State and local education agencies.
The Office of Education shows a $6.0 million decrease in 1977,
because of the completion of a large-scale survey that estimates the
number of children living in poverty households.

144

THE BUDGET FOR FISCAL YEAR

1977

INCOME MAINTENANCE AND WELFARE STATISTICS

The total for income maintenance statistics will grow to provide
for further strengthening of program evaluation, maintenance of
progiam data bases, and the development of improved capabilities
for estimating the population eligible to participate in agency
programs.
New income survey ($1.9 million).—The largest increase is provided
to the Department of Health, Education, and Welfare for developmental work for a new income survey that will focus on population
groups that are the object of income maintenance programs. This
survey, which is expected to be fully operational at the end of the
decade, will include data on annual income and assets, as well as income
for periods shorter than a year. Data from administrative records
will be used to improve estimates of income that is poorly reported
in household surveys. Measurement of income of the same family
for several quarters will add a crucial dimension to our understanding
of the resources available to families over the course of a year.
Retirement history project ($0.7 million).—Additional funds will
provide for the fifth wave of data collection in the retirement history
project, which will supply information on the actual changes in the
lives of workers as a result of retirement and aging.
Social security statistics ($1.3 million).—Analysis of the impact of
social security and the development of aggregate measures of social
welfare expenditures will be intensified ($0.4 million). Additional
funding will also be provided for evaluation of the effectiveness
of the social security program through review of beneficiary rolls
($0.4 million). The social security program data base will be improved
through the addition of $0.4 million. An increase is provided for
continued research on disability, using data collected through the
operation of the disability insurance program ($0.5 million). Commitments for special supplements to Census Bureau surveys will
decrease by $0.4 million, because of the completion in 1976 of field
work on the congressionally mandated survey of income and education.
Veterans statistics ($0.5 million).—The Veterans Administration is
provided funding for a pretest of a survey on veterans and their
widows in 1977 to be undertaken by the Bureau of the Census as part
of the current population survey.
CRIMINAL JUSTICE STATISTICS

The largest single activity within the criminal justice statistics area
is the comprehensive data system (CDS), a Federal-State cooperative
program of the Law Enforcement Assistance Administration (LEAA).
Funding for this program has shown a gradual decline from a 1975
high of $24.2 million to $18.0 million in 1977. Once activities under the
CDS program are implemented, the States assume the responsibility
for maintenance funding. Much of the 1977 funding will be expended
to implement new privacy regulations promulgated in 1975. These
regulations require improvements in the recordkeeping practices of a

SPECIAL ANALYSIS G

145

significant number of the 46,000 criminal justice agencies in the United
States. LEAA also projects expenditures of approximately $3.1 million
to maintain grant management information systems both for the
agency and for the State Criminal Justice Planning Agencies.
Altogether, the LEAA program level is $35.1 million, which is a
$4.1 million decrease from the 1976 level. In addition to a decrease in
the CDS program, the basic statistics program of LEAA shows a $0.7
million decrease in 1977 from the 1976 level.
The Federal Bureau of Investigation (FBI) is provided $2.6 million
in 1977, a reduction of $0.3 million from 1976. These funds will be
used to support the unifoim crime reporting program. The FBI and
LEAA have been cooperating in the development of a program to
transfer the primary responsibility for the collection of data from
local police agencies to the States under the CDS program.
PERIODIC PROGRAMS

1977 Census of Governments.—The Bureau of the Census collects
information from State and local governments every fifth year on
receipts and expenditures, indebtedness, employees, and tax base.
The 1977 budget includes funds for expanded data collection on taxable property values, planning for finance and employment data
collection, and completion of the governmental organization information base.
1977 economic censuses.—The quinquennial economic censuses provide a comprehensive data base on production, trade, inventories,
and economic structure for the Nation's manufacturing, mining, distribution, and selected service industries. These data are widely used
for analysis, as inputs to the gross national product and interindustry
accounts, and for calculation of industrial production indexes. Funds
in the 1977 budget will provide for design and printing of forms and
preparation for data collection and tabulation.
1974 Census of Agriculture.—Funds provided in 1977, the final year
of this program, will allow for completion of data tabulations and publication of the remaining special, subject matter, and State reports. The
data will be tabulated according to both the new and old definitions
of a farm to provide a linkage of prior statistics with those to be
produced under the new definition.
1978 Census of Agriculture.—Legislation is pending which would
accelerate the taking of the next two censuses of agriculture and result
in a common base year with the economic censuses in 1982. A common
base year will enable more complete analysis of the total U.S. economy
and the relationship between the agricultural and nonagricultural
sectors. The 1977 funding will permit developing and testing of forms,
obtaining lists of respondents, initiating studies on linking with data
from nonagricultural sources, and expanding the use of administrative
records.

210-700 O - 76 - 10

146

THE BUDGET FOR FISCAL YEAR 1977

Preparation for the 1980 decennial census.—The major planning
and development activities for the 1980 decennial census begin in
1977. A total of $17.5 million is provided in 1977 for census development, an increase of $12.5 million over 1976. The expansion and maintenance of the geographic base file and other geographical activities
pertaining to the 1980 census will require $8.0 million. These funds will
also be used to conduct boundary and annexation surveys in places with
a population of less than 2,500 persons and to develop guides to permit
the coding of addresses in places of 25,000 to 50,000 population,
places which are not now included in the automated geographic base
file.
Funds are also included to continue user education through a
program of conferences, workshops, and seminars concerning the
access and use of decennial census data; to develop recommendations
for 1980 user tape documentation standards; and to design public use
samples and pubKc use computer programs to increase the utility of
the census results.
The 1977 funds will also be used to prepare for the
"dress rehearsal7' for the 1980 census which will be held in April
1978. Because of theleadtime required, all questionnaires, instructions,
and data processing procedures must be virtually completed in 1977.
Finally, funds are provided to upgrade the Census Bureau's data processing center in preparation for the heavy workload of the decennial
census.
Intercensal demographic estimates.—The intercensal demographic
estimates program provides for biennial estimates of the population
and per capita income of approximately 39,000 general purpose governmental units. The 1977 budget includes $1.9 million for this program, a decrease of $5.0 million from 1976 because of the completion
of the coding and processing of place of residence information collected
on the 1975 tax forms.
Registration and voting survey.—The Voting Rights Act of 1965, as
amended in 1975, mandates biennial surveys of registration and voting
in areas with characteristics specified in the act. The 1977 budget
provides $2.7 million for completing the work to be started in 1976
relating to the November 1976 elections.

SPECIAL ANALYSIS G

147

Table G-3. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in millions of dollars)
Agency

1975
actual

1976
estimate

TQ
estimate

1977
estimate

CURRENT PROGRAMS
Department of Agriculture:
• Agricultural Research Service
• Economic Research Service
• Foreign Agricultural Service
Statistical Reporting Service
Department of Commerce:
Bureau of the Census
Bureau of Economic Analysis
• Domestic and International Business Administration
• Economic Development Administration
• National Bureau of Fire Prevention
• National Marine Fisheries Service
Department of Defense:
• Corps of Engineers
Department of Health, Education, and Welfare:
• Alcohol, Drug Abuse, and Mental Health Administration
• Center for Disease Control
• Food and Drug Administration
Health Resources Administration:
• National Center for Health Statistics
• Other Health Resources Administration
• Health Services Administration
• National Center for Education Statistics
• National Institutes of Health
• Office of Assistant Secretary for Human Development
• Office of Assistant Secretary for Planning and
Evaluation
• Office of Education
• Social and Rehabilitation Service
• Social Security Administration
• Department of Housing and Urban Development
Department of the Interior:
• Bureau of Mines.
• Fish and Wildlife Service
....
• Mining Enforcement and Safety Administration.
Department of Justice:
• Drug Enforcement Administration
• Federal Bureau of Investigation
• Law Enforcement Assistance Administration.. _
Department of Labor:
Bureau of Labor Statistics
• Employment Standards Administration
• Employment and Training Administration
• Occupational Safety and Health Administration.
Department of Transportation:
• Office of the Secretary
• Federal Highway Administration
• Federal Railroad Administration
• National Highway Traffic Safety Administration
• Urban Mass Transportation Administration
See footnotes at end of table.

0.5
5.6
.3
28.8

1.9
7.2
.6
36.4

0.5
1.8
.2
9.2

1.9
7.2
.6
38.7

39.5
10.0

41.9
11.8

11.0
3.1

44.5
12.5

5.2
.6
.3
3.1

5.8
.6
.8
3.5

1.5
.2
.2
.9

5.8
.6
.8
3.5

1.7

1.8

2.0

7.7
5.4
2.1

6.6
4.3
1.9

.3
1.0
.5

9.7
4.1
2.1

20. 3
1.0
2.8
7.7
19.4

25.6
1.4
3.2
13.0
22.5

6.5
.1
.8
3.2
5.2

24.0
1.4
3.2
13.0
26.4

2.6

4.4

1.3

3.0

2.8
8.9
4.9
22. 6
8. 8

6.3
14.3
5.2
25.0
11.0

1.1
1.3
6.7
2.3

5.0
8.3
5.4
27.0
11.3

10.3
4.3
1.6

12.2
4.5
1.2

3.2
1.2
.3

12.6
4.7
1.2

1.1
2.2
42.7

1.1
2.8
39.3

.3
.7
9.2

1.1
2.6
35.1

47.8
.5
16.4
5. 6

57.8
.6
27.9
6.0

14.5
.1
5.5
1.5

67.0
.5
22.6
6.2

2.5
4.9
.8

3.1
5.1
1.0

.8
1.2
.2

2.9
4.5
.9

7.1
.4

10.2
1.4

2.6
.3

13.2
1.6

148

THE BUDGET FOR FISCAL YEAR 1977

Table G-3. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY
AGENCY (in millions of dollars)—Continued
Agency

1975
actual

1976
estimate

TQ
estimate

1977
estimate

CURRENT PROGRAMS—Continued
Department of the Treasury:
• Office of the Secretary
• Internal Revenue Service
• U.S. Customs Service
Civil Aeronautics Board
Consumer Product Safety Commission
Environmental Protection Agency
Federal Energy Administration
Federal Home Loan Bank Board
Federal Power Commission
Federal Trade Commission
Interstate Commerce Commission
National Science Foundation
Securities and Exchange Commission
Special Action Office for Drug Abuse Prevention!_
Veterans Administration
Total, current programs

0.6

0.1

11.8
3.2
1.8
2.7

13.6

26.0
9.3
2.3
1.9

21.0
12.1

0.1

2.7
2.5
1.6
1.2
3.0
.6

3.4
.8
.5
.2
5.5
2.8
.7
.6
.4
.3
.6
.2

2.1

1.1

428.1

498.4

117.1

504.2

.7
.7
3.6
9.7

3.4

1.5
1.5

6.1
2.0
3.3

2.4
.6
1.0
.8
1.0
.4

17.5

1.9
1.9
.4

5.0
6.9
1.0
3.0
5.8
1.5

6.6
.4

7.3
1.5

1.8
.4

5.7
1.5

29.7

46.7

11.7

54.6

457.8

545.1

128.8

558.8

1.2
1.2
3.3
.5
1.0

3.2
2.0
1.5

12.5

3.2
2.2
1.8
21.4
10.4

2.8
2.9
1.6
1.2
3.7
.6

PERIODIC PROGRAMS
Department of Commerce: Bureau of the Census:
1972 Census of Governments
1977 Census of Governments
1972 economic censuses
1977 economic censuses
1974 Census of Agriculture
1978 Census of Agriculture
1980 decennial census
Intercensal demographic estimates
Registration and voting survey
Periodic programs geographic support
Data processing equipment2
General administration and other3
Department of Labor: Bureau of Labor Statistics:
Revision of Consumer Price Index
Standard industrial classification revision program.
Total, periodic programs
Total, principal statistical programs

.2
.3
5.8

8.8
2.0
1.4

1.9
2.7
2.8
6.1
1.6

1
The legislative authority for the Special Action Office for Drug Abuse Prevention expired June 30,
1975.
2
Includes capital outlays for large-scale data processing equipment acquisitions.
3
Includes depreciation, other capital outlays, and changes in selected resources.
• =Covers only funds for agency's statistical activities.

SPECIAL ANALYSIS H
CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH

Total Federal civilian employment in the executive branch was
2,848,022 as of June 30, 1975. Excluding Postal Service employment,
which by law is not subject to Presidental control, and excluding
other employment exempted from ceilings, the total was 2,106,374.
Total employment for the executive branch, excluding the Postal
Service, is estimated to increase by about 10,300 between June
30, 1975, and June 30, 1976. From June 30, 1976, to September 30,
1977, it will decrease by 26,200 or 15,900 below the June 30, 1975,
level. A portion of this decrease stems from seasonal differences between employment in June and September, since, generally, temporary employment is higher in June than in September.
Except for 1973, executive branch civilian employment on September 30, 1977 is estimated to reach its lowest level since 1966.
FULL-TIME PERMANENT CIVILIAN EMPLOYMENT

Full-time permanent employment as of June 30, 1975, was 2,475,663.
Excluding the Postal Service, executive branch full-time permanent
employment was 1,917,352.
While recognizing that increases are necessary in some special
areas, the President has asked all agency heads to hold agencywide
employment to the minimum necessary to accomplish agency missions.
The results of the President's instructions are reflected in the 1977
column of table H - l . Full-time permanent employment will decrease
by 12,500 between 1976 and 1977, with the largest decreases occurring
in the Departments of Defense; Health, Education, and Welfare; and
Treasury.
Table H - l displays, by major agency, the yearend full-time permanent employment in the executive bianch and planned changes
between June 30, 1976, and September 30, 1977.

149

150

THE BUDGET FOR FISCAL YEAR 1977
Table H-1. SUMMARY OF FULL-TIME PERMANENT CIVILIAN
EMPLOYMENT IN THE EXECUTIVE BRANCH *
Agency

Agriculture
Commerce
Defense—military functions
Defense—civil functions
Health, Education, and Welfare
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Energy Research and Development Administration
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration..
Veterans Administration
Other:
Agency for International Development
Civil Service Commission
Federal Energy Administration
Nuclear Regulatory Commission
Panama Canal
Selective Service System
Small Business Administration
Tennessee Valley Authority
United States Information Agency
Miscellaneous

As of June 30
1975
1976
actual
estimate

As of Sept.
30, 1977 Change
estimate 1976-77

79,133
28,711
954,721
29,069
129,285
15,142
58,088
49,032
13,427
22,324
70,345
108,138

80,400
28,900
930,700
29,100
135,000
15,000
59,200
51,600
14,600
22,900
72,400
113,500

80,400
28,700
924,000
29,100
128,900
15,700
59,300
51,700
14,900
22,900
72,600
110,000

7,457
9,160
36,400
24,333
184,502

8,300
9,600
36,800
24,300
196,600

8,400
9,600
36,000
23,800
198,100

6,185
6,670
2,978
2,006
13,768
2,121
4,127
14,084
8, 662
37,484

6,200
6,800
3,200
2, 300
13,800
200
4,300
15,100
8, 800
40,200

Subtotal
Contingencies 3

1,917,352

1,929,800
2,000

1,914,300
5,000

-15,500
3,000

Subtotal
Postal Service

1,917,352 1,931,800
558,311
542,600

1,919,300
543,600

-12,500
1,000

2,475,663 2,474,400

2,462,900

-11,500

Total

6,200
6,900
1,800
2,500
13,800
100
4,400
15,500
8,800
40,200

-200
-6,700
-6,100
700
100
100
300
200
-3,500
100
-800
-500
1,500

100
-1,400
200
" " " — 100
100
400

1
Excludes developmental positions under the worker-trainee opportunity program and certain
disadvantaged
youth programs.
2
Excludes the impact of the Energy Policy and Conservation Act of 1975. Allowance for any
necessary
additional
staff is included in contingencies.
3
Subject to later distribution.

While executive branch full-time permanent employment, excluding
the Postal Service, is planned to remain nearly level between June 30,
1975, and September 30, 1977, significant reallocations within agencies
are planned. For example:
• In the Department of Agriculture, 700 administrative positions
will be eliminated. In addition, under proposed legislation to
consolidate child-feeding programs 320 positions in the Food and
Nutrition Service will become available for reallocation. These
positions will be used to permit additional staffing for meat and
poultry inspection and for programs administered by the Farmers
Home Administration.

SPECIAL ANALYSIS H

151

• In the Commerce Department, reductions due to productivity improvements will result in a decrease of 360 positions, mainly in
the Patent Office, the National Bureau of Standards, and NOAA.
However, these reductions will be partially offset by an increase
of 300 positions required primarily for new energy, fire, and
Census programs.
• The Department of Health, Education, and Welfare will seek
legislation to discontinue Federal operation of the Public Health
Service hospital system and provide for beneficiary care on a
contract basis, thereby reducing Federal employment by 4,000.
The consolidation of narrow categorical health and education
programs into two block grants will permit a further reduction of
about 2,400 positions. These reductions are offset in part by
increases of 4,600 positions for the Social Security Administration, mainly for the supplemental security income program, but
also for improved claims processing. Another 400 positions for
the Office of Education are primarily to help prevent fraud and
abuse in student assistance and other programs.
• The increase in the Department of Housing and Urban Development staffing is necessary to accommodate a substantial increase
in workload associated with mortgage insurance and housing
subsidy piograms. The reactivation of the section 235 homeownership assistance program will require an estimated 700 additional positions in 1977. An increase in the disposition of HUDowned properties and the number of flood insurance studies in
1977 over 1976 will also require additional staff. The 1977 estimates include continued reductions in certain categorical programs, which have been replaced by the more staff-efficient community development grant program. Productivity improvements
will free small numbers of personnel to move to the areas of
increasing workload.
• Most of the increase within the Department of Justice will occur
in 1976. There will be significant shifts in personnel, reflecting
the President's emphasis on law enforcement and speedier processing of court cases. Employment in administration, support units,
and routine activities will decline or be held constant, making
room for growth in the enforcement arms of the several bureaus
and agencies. An effort is being made to bring investigative capabilities into balance with prosecutorial and judicial resources.
To illustrate:
—Legal activities will increase by more than 700 positions,
nearly all in the field offices of the U.S. attorneys and marshals
and in the Antitrust Division.
—Federal Prison System will increase by more than 900 or 11%
over the 2-year period, reflecting the activation of new correctional faciJities.
—Drug Enforcement Administration will grow by 164; emphasis
will be placed on conspiracy investigations and implementation
of recommendations contained in the Domestic Council's
White Paper on Drug Abuse.
• The Treasury Department is making significant reallocations,
both within and among bureaus, in light of new or revised requirements, changing priorities, and anticipated productivity
increases. An unexpected decline in travelers and import entries

152

THE BUDGET FOR FISCAL YEAR 1977

in the past year and efficiencies in tax administration have reduced personnel levels by 500 positions in the U.S. Customs Service and the Internal Revenue Service. Increases in the number
of check and debt issuances, bank examinations, Secret Service
protective assignments, and firearms investigations have increased personnel levels by 2,300 positions in other Treasury
Bureaus.
• The General Services Administration will reduce cleaning, main
tenance and other real property operations by approximately 1,500
positions. Some of the effect of these reductions may be offset by
contracting with private firms. These reductions will be partially
offset by increases of about 1,100 positions required by the transfer of transportation audit responsibilities from the General
Accounting Office and workload increases in records and administrative support activities.
In some areas expanding programs require net staffing increases in
1977, for example:
• The Department of Labor is increasing by 300 positions, primarily
to improve the enforcement of occupational safety and health
laws, to continue implementation of the responsibilities of the
Pension Benefit Guarantee Corporation under the Employee
Retirement Income Security Act, and for improved labor
statistics.
• In the Department of Transportation, increases of 200 positions
are planned for additional air traffic controllers and support of
the U.S.-Iranian joint commission agreement.
• The Veterans Administration is increasing by 1,500 positions to
remedy the remaining medical care staffing deficiencies identified
in the 1974 "Quality Care" survey.
• The Tennessee Valley Authority plans a 400 position increase for
expanded operations in its power program.
TOTAL FEDERAL GOVERNMENT EMPLOYMENT

In 1977, full-time permanent employment will comprise about 88%
of all civilian employees in the executive branch (including the Postal
Service). The remaining 12% is made up of part-time employees,
intermittent employees (those employed on an irregular basis), and
full-time temporary employees (those in positions occupied for less
than one year). As presented in table H-2, "Total Federal Government Employment/' includes civilian employees of the executive
branch (as described above), employees of the legislative and judicial
branches, and military personnel. A separate entry is also included to
cover those categories of employees specifically exempted from employment controls, for example, certain employees under the workertrainee opportunity program and disadvantaged summer and parttime workers under such Civil Service Commission programs as
summer aides, stay-in-school, and junior fellowship.
The Department of Defense portion of total executive branch
(civilian and military) employment has declined from 74% in 1968 to
62% in 1977. The Postal Service accounts for 14% of the total work
force, the Veterans Administration for 5%, and the balance of the
executive branch (all other departments and agencies) makes up the
remaining 19%.

SPECIAL ANALYSIS H

153

Table H-2. TOTAL FEDERAL EMPLOYMENT
Description

Civilian employment in the executive branch:
Full-time permanent
Other than full-time permanent
Subtotal

As of June 30
1975

1976

As of Sept.
30, 1977
estimate

1,917,352 1,931,800 1,919,300
189,022
184,900
171,200
2,106,374 2,116,700 2,090,500

Postal Service:
Full-time permanent
Other than full-time permanent
Subtotal
1

Exempt from ceilings

Subtotal, executive branch civilian employment

558,311
134,965

542,600
136,900

543,600
135,800

693,276

679,500

679,400

48,372

54,000

27,000

2,848,022 2,850,200 2,796,900

Military personnel on active duty:
Department of Defense
Department of Transportation (Coast Guard)
Subtotal, military personnel
Total, executive branch employment
Legislative and judicial personnel: 3
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches
Grand total

2,127,293 2,086,700 2,101,000
36, 788
37,900
38,000
2,164,081 2,124,600 2,139,000
5,012,103 4,974,800 4,935,900
29,571
19,348
48,919
5,061,022

1
Developmental positions under the worker-trainee opportunity program and disadvantaged
summer and part-time workers under such Civil Service Commission programs as summer aides,
stay-in-school,
and junior fellowship. Decrease from 1976 to 1977 reflects seasonal differences.
2
Excludes reserve components.
» 1976 and 1977 estimates are not available.

PERSONNEL COMPENSATION AND BENEFITS

Direct compensation of the Federal work force includes regular pay,
Sunday and holiday pay, premium pay for overtime, differentials for
night work and overseas duty, and flight and other hazardous duty
pay. Related compensation in the form of personnel benefits consists
primarily of the Government's share (as employer) of health insurance;
term life insurance; and Federal retirement and old-age survivors'
disability insurance. Retirement costs include the Government's
payment to cover interest on the unfunded retirement liability—the
excess of the present value of the anticipated benefits payable from
the retirement fund over the present value of fund assets and anticipated receipts. Some additional benefits are uniform allowances
(when paid in cash), cost-of-living and overseas quarters allowances, and, in the case of uniformed military personnel, reenlistment
bonuses.

154

THE BUDGET FOR FISCAL YEAR

1977

Table H - 3 . PERSONNEL COMPENSATION AND BENEFITS
(in millions of dollars)
Description

Civilian personnel costs:
Executive branch:*
Direct compensation
Personnel benefits
Unfunded retirement liability interest
Subtotal
Legislative and judiciary:
Direct compensation
Personnel benefits

1975
actual

1976
estimate

29,008
6,702
(2,465)

31,530
7,720
(3,200)

35,710

39,250

TQ
estimate

1977
estimate

8,130
32,320
840 2 10,520
(
)
(4,280)
8,970

42,840

Subtotal

464
41

550
50

140
10

610
60

505

600

150

670

Allowance for civilian pay raise
Total, civilian personnel costs
Military personnel costs: 4
Direct compensation
Personnel benefits

Subtotal

1,320
36,215

39,850

9,120

44,830

21,302

21,760

5,520

21,670

1,8 2

1,870

23,114

23,630

500

1,870

6,020

23,540

Allowance for military pay raise
Total, military pay costs
Grand total, personnel costs
1

1,040
23,114
59,329

23,630
63,480

6,020
15,140

24,580
6

69,410

Excludes Postal Service, reflecting conversion to independent status, consistent with the
Postal Service Reorganization Act of 1970.
2
A one-time payment of $1,364 million is included in 1977 to restore unfunded retirement liability
interest lost due to the change of the fiscal year.
3
Excludes members and officers of Congress.
* Excludes Reserve components.
5
Excludes payments to current military retirees which amounted to $6,356 million in 1 975, and
are estimated to be $7,001 million in 1976, $1,805 million in the transition quarter, and $8,640 million in 1977.
6
Includes effects of restraints reflected in table H - l , and in the narrative material following this
table.

SPECIAL ANALYSIS H

155

Obligations for civilian personnel compensation and benefits in
1977 are projected to be $44.8 billion, excluding the Postal Service.
The increase in obligations is due to pay adjustments and the increase
in the Government's contribution for Federal employee health benefits.
In addition, the need for a one-time payment to restore interest lost
due to the change of the fiscal year adds significantly to the estimate
for civilian personnel benefits for 1977. The estimated costs for
civilian and military pay increases for 1977 are covered by lump sum
allowances in the 1977 Budget.
Under the Federal Pay Comparability Act, salary rates for Federal
employees under the "General Schedule" and most other statutory
pay systems are adjusted periodically so as to be related to rates paid
for the same work levels in the private sector. The bases for these
adjustments are annual surveys conducted on a nationwide basis
by the Bureau of Labor Statistics. Under the act, the President may
propose an alternative pay plan if he considers the required pay
adjustments inappropriate because of national emergency or economic conditions affecting the general welfare. The pay raise estimates
in the budget and in table H-3 assume that pay increases for October
1976 will be limited to 5% (with a minimum of 3%).
Current law provides that pay scales for blue-collar workers under
the Federal wage-board system are to be adjusted annually so as to
achieve rates corresponding to the prevailing area rates in private
industry. Legislation will be proposed to reform certain aspects of the
law governing wage board pay rates in accordance with the recommendations of the President's "Panel on Federal Compensation." The
pay raise estimates in the budget and in table H-3 include the effect
of this legislation.
The panel also made policy recommendations on how the Federal
Government can best determine the appropriate level of total compensation for its employees under the principle of comparability with
the private work force. The budget assumes implementation of those
recommendations that can be effected through administrative action.
A number of recommendations refining the comparability principle
will require changes in law. These include splitting the present General
Schedule into two schedules, and setting salaries in the clerical and
technical schedule on a locality basis. Appropriate legislation will be
submitted to the Congress.
GOVERNMENT EMPLOYMENT AND POPULATION COMPARISONS

Federal civilian employment as a percentage of the total employed
labor force is projected at 3% for 1977—the lowest it has been since
World War II.
Employment for all governmental units as a percentage of the total
employed labor force has been steadily rising due to significant increases in State and local government employment.

156

THE

BUDGET FOR FISCAL YEAR

1977

The proportion of Federal civilian employment relative to total
employment of all governmental units (Federal, State and local) is
projected at 18.4% for 1977. As the accompanying chart and table
H-4 illustrate, the Federal segment of all governmental employment
has declined significantly over the last three decades—from more
than one-third to less than one-fifth.
Government Civilian Employment
Millions of Employee*

1614
12-

10)82%
8-

6—

'18%

1947

1950

End of Fiscal Year

1955

I960

J965

1970

1975

Estimate

157

SPECIAL ANALYSIS EC

Table H -4. G O V E R N M E N T E M P L O Y M E N T AND P O P U L A T I O N , 1947-77
Government employment

1947 .
1948
1949 .
1950 .
1951
1952
1953
1954
1955
1956
1957. _
1958.. .
1959
I960 2
1961 2
1962
1963 3 .
1964 3
1965
1966
1967_
1968
1969 4
19702
1971 2
1972
1973 _
1974
1975_ ._
1976(est.)__
1977(est)__

Population

Federal

State and

All govern-

Federal as

branch *
(thousands)

ments
(thousands)

units
(thousands)

all governmental
units

2,082
2,044
2,075
1,934
2,456
2,574
2,532
2,382
2,371
2,372
2,391
2,355
2,355
2,371
2,407
2,485
2,490
2,469
2,496
2,664
2,877
2,951
2,980
2,944
2,883
2,823
2,775
2,847
2,848
2,850
2,797

3,568
3,776
3,906
4,078
4,031
4,134
4,282
4,552
4,728
5,064
5,380
5,630
5,806
6,073
6,295
6,533
6,834
7,236
7,683
8,259
8,730
9,141
9,496
9,869
10,257
10,640
11,065
11,463
12,025

5,650
5,820
5,981
6,012
6,487
6,708
6,814
6,934
7,099
7,436
7,771
7,985
8,161
8,444
8,702
9,018
9,324
9,705
10,179
10,923
11,607
12,092
12,476
12,813
13,140
13,463
13,840
14,310
14,873

36,8
35.1
34.7
32.2
37.9
38.4
37.2
34.4
33.4
31.9
30,8
29.5
28.8
28.1
27.7
27.6
26.7
25.4
24.5
24.4
24.8
24.4
23.9
23.0
21.9
21.0
20.0
19.9
19.1
18.9
18.4

Total
United
States
(thousands)

144,698
147,208
149,767
152,271
154,878
157,553
160,184
163,026
165,931
168,903
171,984
174,882
177,830
180,671
183,691
186,538
189,242
191,889
194,303
196,560
198,712
200,706
202,677
204,875
207,045
208,842
210,396
211,909
213,450
215,074
216,814

Federal
ment per
1,000
population

14.4
13.9
13.9
12.7
15.9
16.3
15.8
14.6
14.3
14.0
13.9
13.5
13.2
13.1
13.1
13.3
13.2
12.9
12.8
13.6
14.5
14.7
14.7
14.4
13.9
13.5
13.2
13.4
13.3
13.2
12.9

1
Covers total end-of-year employment in full-time permanent, temporary, part-time, and intermittent positions in the executive branch, including the Postal Service, and, beginning in 1970.
includes
various disadvantaged worker-trainee programs.
2
Includes temporary employees for the decennial census.
3
Excludes 7,411 project employees in 1963 and 406 project employees in 1964 for the public
works
acceleration program.
4
On Jan. 1, 1969, 42,000 civilian technicians of the Army and Air Force National Guard converted by law from State to Federal employment status. They are included in the Federal employment
figures in this table after and including 1969.
5
An official projection of State and local government employment is not available. The percentages shown for these years are consistent with a range of reasonable estimates based on recent
trends in population and State and local government activity.

When compared to the Nation's population, the ratio of Federal
civilian employment is estimated to be 12.9 per thousand in 1977—
a ratio that is lower than all but three of the 30 years displayed in
table H-4.

PART 2

FEDERAL SOCIAL PROGRAMS

159

INTRODUCTION
Part 2 furnishes Government-wide program and financial information in six social program areas—education, training and employment,
health, income security, civil rights, and crime reduction. It includes
the special analyses designated I through N.
The figures used in these analyses differ from the data shown under
somewhat similarly titled categories of the functional classification
used in Part 5 of the Budget and elsewhere. In the functional classification, each activity is categorized according to its major purpose;
thus all the military spending of the Department of Defense falls into
the functional category, National defense. In these special analyses,
however, all spending for education, health, etc., is included, even if
the activity has a different primary purpose. Thus the tabulations
here are more comprehensive with regard to these particular types of
social programs.
Special Analysis I discusses education-related programs, including
direct Federal activities, and programs that provide aid to States and
localities, to institutions of higher education, and to individuals.
Special Analysis J identifies the Federal programs designed to increase the skills and employment opportunities of persons already in
the work force and of persons who desire to join the work force but
lack vocational preparation or face other employment barriers.
Special Analysis K summarizes Federal spending for health and
health-related activities.
Special Analysis L discusses Federal benefits to maintain or supplement income of persons and families whose capacity for self-support
is reduced b}^ old age, d sability, illness, unemployment, poverty, or
death of the primary wage earner.
Special Analysis M summarizes Federal spending for civil rights
activities, concentrating on enforcement efforts.
Special Analysis N discusses the Federal crime reduction program
which complements activities of State and local governments. Federal
assistance in the form of grants-in-aid, training, and technical assistance contributes to the effectiveness of State and local crime reduction
programs.
160

SPECIAL ANALYSIS I
FEDERAL EDUCATION PROGRAMS

Federal expenditures for education-related programs are estimated
at $18.2 billion in 1977. These consist of programs that provide aid to
State and local educational agencies, to institutions of higher education, to individuals, and direct Federal activities.
The criteria for inclusion in the analysis are the purposes of the
program: support of student-teacher relationships for the transmission
of organized knowledge, or the provision of services to the community at-large aimed at expanding individuals' opportunities for professional
or career advancement. The analysis is further organized by level of
education and type of support. As in previous years, all Federal programs directly supporting educational activities or involving the use
of educational resources to achieve other purposes are included.
Amounts for noneducational research conducted at academic institutions not falling within the above purposes are excluded. For comparability with the analyses that accompanied the 1973 and earlier
budgets, these amounts are shown at the bottom of table 1-1.
OVERVIEW:

1977

Total Federal education outlays are estimated at $18.2 billion in
1977.
Outlays are estimated to be:
—$9.2 billion for programs whose primary purpose is education;
—$4.6 billion for elementary and secondary education;
—$3.6 billion for higher education; and
—$1.0 billion for adult, continuing, and other education.
In addition, four tax expenditures ranging in size from $0.2 billion to
$0.8 billion each will also support higher education in 1977.
Substantial Federal educationally related expenditures are directed
toward activities whose purposes are not primarily educational. The
Federal Government invests in specialized education for many activities, the largest of which is defense related and the second largest of
which is in the health field. An estimated $8.7 billion in outlays
will be provided in 1977 which are beneficial to the interests of education but directed toward other ancillary purposes.
161

210-700 O - 76 - 11

162

THE BUDGET FOR FISCAL YEAR 1 9 7 7
Table 1-1. FEDERAL OUTLAYS FOR EDUCATION
Outlays (millions)
Purpose and program
1975
actual

Financial Assistance for Elementary and Secondary
Education Act
Educationally deprived children
Support innovation consolidation
Emergency school aid
Federally affected areas
OtherESEA
Salaries and expenses
Basic opportunity grants
Other higher education student support (OE)
Other higher education (OE)
Student loan insurance fund and H E F L I F
Occupational, vocational, adult
Educational development
Education for the handicapped
Library instructional resources consolidation
Library resources
Other Office of Education
National Institute of Education
Special institutions
Student grants (OASDI)
Office of Human Development
Other H E W
Other

TQ
estimate

1977
estimate

400
39
59
47
69
33
122
186
54
24
108
1
52
39
16
14
13
34
356
130
92
170

294
1, 628
152
221
395
119
113
1,016
804
230
104
663
4
175
79
47
75
88
128
1,460
472
304
656

226
42
83
124
1,120
441
294
524

1,818
80
235
485
303
109
796
1, 355
281
118
674
31
199
82
139
49
70
146
1,255
478
297
649

9,006

9,649

2,058

9,227

Federal outlays—education support for other basic
purposes:
Health professions education
Veterans readjustment
Defense. _
Child nutrition
Other

662
4,228
963
1,832
1,266

552
5,654
1,034
2,333
1,611

155
987
288
499
449

519
3,938
1,106
2,000
1,097

Subtotal, education support for other purposes,
Federal outlays—salary supplements

8,951
259

11,184
284

2, 378
66

8,660
305

18,216

21,117

4,502

18,192

2,228

2,389

Subtotal, programs which are primarily educational

Total, education outlays
Amounts previously carried for academic research not
directed toward educational objectives

1,960

1976
estimate

216
619
317
96
342
1,175
321
127
653
175
151
_

565

2,599

RENEWAL AND REFORM

The provision of basic educational services in the United States is
essentially the responsibility of State and local educational authorities.
The Federal role is one that strives to stimulate and encourage improvements in the educational process through reform, innovation,

SPECIAL ANALYSIS I

163

capacity building and research, and assuring equal access to educational opportunity.
Federal initiatives in 1977 are directed toward:
• Consolidation of some 27 categorical programs under the Financial
Assistance for Elementary and Secondary Education Act (see
below).
• Providing aid to school districts facing problems in eliminating
discrimination.
• Reform of the impact aid program.
• Full funding of basic educational opportunity grants for all eligible
undergraduate postsecondary students.
Financial Assistance for Elementary and Secondary Education Act.—
Legislation will be proposed totaling $3,300,000 and includes the following programs: Education of the disadvantaged; support and innovation; education for the handicapped; occupational, vocational, and
adult education; and library resources.
This initiative is aimed at providing States with maximum flexibility
and responsibility in determining their own educational priorities and
funding needs.
Impact aid.—Legislation will be proposed, in 1977, that would provide for a major reform of this program. Specifically, it would target
funds toward those districts that have enrollments of "A" category
children (those whose parents both live and work on Federal property).
It would also provide support for the special provisions and payments
to other Federal agencies for the education of Federal employees'
dependents. This proposal is rooted in the policy of only providing
support for those districts that are adversely impacted by Federal
activities.
Emergency school aid.—In 1977, support for this activity will be
provided to continue assistance to those school districts that are in the
process of eliminating discrimination. Increased support will be provided for title IV of the Civil Rights Act of 1964 which will provide
greater advisory support and technical assistance to help educational
institutions move toward equality of educational opportunity.
Basic opportunity grants.—The $1,100 million requested for basic
grants is expected to provide full entitlement awards averaging $850 for
1,270,000 full- and part-time undergraduate students in academic year
1977-78. At full funding, grants will range from $200 to a maximum
of $1,400. The size of the grant is determined on the basis of the expected family and student contribution, specified by the needs analysis
system approved annually by Congress, up to a maximum of one-half
of the student's need.

164

THE BUDGET FOR FISCAL YEAR 1977

Education and work.—Improving the connections between education and the world of work will continue to be addressed by the Office of
Career Education, the Fund for the Improvement of Postsecondary
Education, and the National Institute of Education. These agencies
provide educators with information and technical assistance concerning
the transition from school to work.
National Institute of Education.—The Institute (NIE) will continue
as the focal point for the conduct of educational research and development. Emphasis will be placed on career education, school finance,
productivity, local educational agency problem solving, the dissemination of research products, educational technology, and basic skills. The
1977 outlays for the NIE will total $88 million^
OTHER PROGRAM DEVELOPMENTS

Health professions education.—Legislation submitted by the Administration emphasizes support to medical and dental schools that
agree to address speciality and geographic maldistribution of health
professionals in the Nation today. Categorical student assistance programs will continue to be phased out in favor of scholarships which
require service commitments.
Veterans benefits.—In 1977, 2.2 million GI bill beneficiaries are
expected to enroll in education courses covered by this special analysis
at an average cost of $1,816, up from $1,739 in 1976.
Child nutrition.—The Administration is proposing a Child Nutrition
Reform Act to help States feed needy children. The new program
will provide greater funds to feed needy children than now available
under existing law while permitting substantial Federal savings by
the elimination of subsidies for the nonpoor.
PROGRAMS WHICH ARE PRIMARILY EDUCATIONAL

Programs whose primary purpose is education are estimated to
account for $9.2 billion of educational expenditures in 1977. Elementary and secondary levels will receive $4.6 billion of this amount.
Higher education will draw an estimated $3.6 billion and the remaining $1,023 million directed toward adult and continuing education, libraries, research, and cultural activities. Approximately 75%
of elementary and secondary school levels are administered by the
Education Division of the Department of Health, Education, and
Welfare. In 1977, the U.S. Office of Education will provide $3.4
billion. Other HEW programs account for another $985 million.
The Office of Child Development will provide $463 million in 1977
for elementary and secondary education, principally in the Head
Start program. Under the social security system (OASDI), survivors
of insured workers between the ages of 18 and 22 who are still in
school receive benefits, while those not in school do not. In 1977, an
estimated $277 million of social security payments will be made to
high school students. Legislation is proposed to eliminate this educational benefit for those becoming eligible in the future.

165

SPECIAL ANALYSIS I
Table 1-2. FEDERAL OUTLAYS FOR PROGRAMS WHICH ARE
PRIMARILY EDUCATIONAL BY LEVELS
Purpose and program

Elementary and secondary:
Financial Assistance for Elementary and Secondary
Education Act
Educationally deprived children (ESEA)
Support—innovation consolidation
OtherESEA
Federally affected areas
Emergency school aid
Educational development
Library resources/consolidation
Education for the handicapped
Occupational and vocational education
Office of Child Development
Student grants (OASDI)
Other HEW
Bureau of Indian Affairs...
Other

Outlays (millions)
1975
actual

1976
estimate

TQ
estimate

1977
estimate

316
619
216
160
127
151
375
426
213
219
164
55

1, 818
80
281
485
235
25
146
198
403
468
238
222
184
55

400
39
61
47
59
1
44
51
60
127
68
60
56
15

294
1, 628
152
102
395
221
2
93
175
365
463
277
245
186
52

5,001

4,838

1,088

4,650

342

796

122

1,016

499
254
345
137
81
230
117
89
840
118
36
51

650
309
293
137
73
200
96
105
941
110
44
64

65
84
12
20
12
44
17
25
267
32
6
12

326
349
12
136
66
193
53
88
1,095
108
50
62

3,139

3,818

718

3,554

101
62
67
101
15

95
55
75
118
20

21
10
21
32
5

97
27
88
142
21

Subtotal, adult and continuing education

346

363

375

Other:
Office of Education, salaries and expenses
Student loan insurance fund
National Institute of Education
Smithsonian Institution
Corporation for Public Broadcasting
National Foundation on the Arts and the Humanities.
Other

%
46
42
47
62
32
195

109
45
36
55
70
53
262

33
12
7
20
18
17
56

113
38
52
54
70
63
258

520

630

163

648

9,006

9,649

2,058

9,227

Subtotal, elementary and secondary
Higher education:
Basic opportunity grants
Work-study, supplementary grants and student supplementary incentive grants
Guaranteed student loans
Direct student loans
Vocational education
Student loan insurance fund and HEFLIF
Disadvantaged students and developing institutions.
Other Office of Education
Special institutions
Student grants (OASDI)
OtherHEW
National Science Foundation
Other
Subtotal, higher education
Adult and continuing education:
Occupational and adult education (OE)
Public libraries (OE)
Social Security Administration
Library of Congress
Other

Subtotal, other
Total

1,960

166

THE BUDGET FOR FISCAL YEAR 1977

The Federal Government additionally aids or directly provides
education for certain groups including Indians, Cuban refugees, and
residents of Pacific territories. The National Science Foundation and
National Foundation on the Arts and the Humanities also provide
some support to elementary and secondary school levels.
An estimated $3.5 billion will be spent in 1977 for higher education,
an increase of $415 million over the 1975 level. Expenditures for higher
education are 39% of total expenditures for educational goals. The
Office of Education will provide $2.2 billion of the $3.6 billion total.
The majority of the funds for educational purposes at the higher
education level is for student support. In 1972, the year in which
Congress enacted higher education amendments, $933 million for
Office of Education student support programs (work-study, supplementary grants, guaranteed student loans and direct student loans)
constituted 43% of the total. In 1977, under Administration proposals,
Office of Education student aid expenditures will reach $1,703 million,
nearly twice the 1972 level. Social security benefits to students at
institutions of higher education will provide an additional $1,095
million of student support in 1977, an increase of $154 million over
the 1976 level and $255 million above the 1975 level. As noted above,
this benefit would be eliminated for future students by proposed
legislation. The focus of higher education aid will continue to shift
from institutional support to direct student support with the full
funding of basic opportunity grants.
Adult and continuing education will be provided $1,023 million in
1977, a 3% increase over 1976. The Library of Congress and the
Smithsonian Institution are among the activities included in this
category.
EDUCATION SUPPORT FOR OTHER PURPOSES

Almost half the expenditures for education are in programs directed
toward multiple purposes.
The largest single program in this category is veterans readjustment
benefits (the GI bill). Veterans readjustment is designed primarily to
compensate veterans for opportunities lost while they were in the
service. Expenditures reflect estimated use of program benefits by
veterans, active duty personnel and other beneficiaries. Outlays for
those education activities coverd by this analysis are estimated to
peak in 1976 at $5.7 billion, an increase of $1,425 million over the
1975 level. The 1977 expenditures reflect a decreasing number of
persons eligible to receive benefits. School lunch, breakfast, milk,
and other feeding programs provided $2.3 billion in, benefits for
nutrition in 1976. The Administration's Child Nutrition Reform Act
will replace the existing fragmented, overlapping, and administratively
complex programs for needy children. The Administration's initiative
will provide $2.0 billion in 1977 for needy children including nearly
700,000 needy children who are not currently receiving benefits.
The GI bill and child nutrition programs will comprise 6 1 % of the
educational outlays from noneducational programs in 1977. The
largest training program is for defense personnel. The Department of
Defense trains inservice personnel and educates future service personnel
through the service academies and Reserve Officer Training Corps.
Outlays for training will total $371 million in 1977, a 14% increase
over 1976.

167

SPECIAL ANALYSIS I

Table 1-3. FEDERAL OUTLAYS FOR OTHER BASIC PURPOSES BY LEVEL
Level and program

Elementary and secondary:
Child nutrition
District of Columbia capital improvements
Community planning and development
Veterans readjustment
Other

Outlays (millions)
1975
ictual

1976

1977

1,832

2,333

61
41
152
182

499
10
5
18
144

2,000

45
52
114
207
2,250

2,769

676

2,254

3,479

4,652

266
179
199
553
173
93
144

820
67
57
56
155
28
11
54

3,291

239
165
199
662
177
121
117

Subtotal, higher education

5,159

6,259

1,248

4,808

Adult and continuing education:
Agriculture Extension Service
Veterans readjustment
Other

219
636
82

228
850
84

57
149
21

219
568
77

111

864

Subtotal, elementary and secondary
Higher education:
Veterans readjustment
Military service academies
Reserve Officers Training Corps
Other DOD
Health Resources Administration
Research training (NIH)
Alcohol, Drug, and Mental Health Administration
Other

Subtotal adult and continuing education
Training of Federal military employees:
Defense
Coast Guard
Subtotal, training of Federal military employeesOther:
Department of State
Public service jobs
International development assistance
Other
Subtotal, other
Total

937

1,162

34
24
80
116

276
184
206
519
151
55
126

304
22

326
23

87
6

371
24

326

349

395

32
126
60
61

34
456
82
73

6
86
25
17

36
175
85
43

279

645

134

339

8,951

11,184

2,378

8,660

168

THE BUDGET FOR FISCAL YEAR 1977
SALARY SUPPLEMENTS

Salary supplements in the form of educational allowances or direct
provision of education for Federal employees or for their dependents
will reach an estimated $305 million in 1977, a 7% increase over 1976.
These supplements consist almost entirely of Defense Department expenditures for overseas dependents education and for off-duty education of military personnel. The two programs account for $302 million
in 1977.
Table 1-4. FEDERAL EDUCATION OUTLAYS FOR SALARY SUPPLEMENTS
Level and program

Total, salary supplements
Elementary and secondary
Higher education
Adult education
Other
Defense:
Overseas dependents education
Off-duty military personnel
Other

Outlays (millions)
1975
Lctual

1976
estimate

TQ
estimate

1977
estimate

259

284

305

229

245

261

26
4

34
5

229
26
4

248
33
3

54
9
3

39
5

264
38
3

EDUCATIONAL PERSONNEL TRAINING AND RESEARCH

Educational personnel training and research is funded under many
programs already identified as directed toward education goals. They
account for $624 million in 1977 or 3% of total educational expenditures. Training funds ($192 million) increase in 1977 by $18 million
over 1976 levels. Educational research, estimated at $432 million in
1977 remains essentially at the level in previous years ($16 million above
the 1975 and $10 million above the 1976 levels).
The largest contributors to these categories are the Office of Education (80% of training funds) and the National Institute of Education
(24% of research funds).

169

SPECIAL ANALYSIS I
Table 1-5. FEDERAL OUTLAYS FOR PERSONNEL TRAINING AND
RESEARCH IN EDUCATION
Outlays (millions)
Program
1975
actual

Education personnel training:
Educational development
Occupational, adult and vocational
E m e ^ n c y school assistance
Education for the handicapped
E lementary and secondary education
National Science Foundation
Other
Subtotal, education personnel training
Education research:
Educational development
Elementary and secondary education
Education for the handicapped
Occupational, vocational, and adult education
Special projects and training
Assistant Secretary for Education
National Institute of Education
National Foundation on the Arts and Humanities., _
National Science Foundation
Other
Subtotal, educational research

Total

1976
estimate

TQ
estimate

1977
estimate

98
34
15
36
9
13
17

15
65
12
37
14
9
22

11
4
11
3
3
5

1
82
14
42
13
6
34

222

174

192

77
78
38
45

1
34
13
10
4

10
83
46
30
9

16
103
46
48
4
11
70
80
32
12

2
90
56
34
19
10

13
20
10
1

36
9

416

422

106

432

638

596

143

624

EDUCATIONAL SPENDING BY PURPOSE AND LEVEL

The table that follows (1-6) displays educational support funding
by purpose and level.

170

THE BUDGET FOR FISCAL YEAR 19 77

Table 1-6. FEDERAL OUTLAYS FOR EDUCATION BY PURPOSE AND LEVEL
Outlays (millions)
1975
actual

Elementary and secondary:
Education
Other basic purposes
Salary supplements
Total, elementary and secondary
Higher education:
Education
Other basic purposes
Salary supplements
Total, higher education
Adult and continuing education:
Education
Other basic purposes
Salary supplements
Total, adult and continuing education
Other:
Education
Other basic purposes
Salary supplements
Total, other
Total, outlays for education

1976
estimate

TQ
estimate

1977
estimate

5,001
2,250
229

4,838
2,769
245

1,088
676
55

4,650
2,254
261

7,480

7,852

1,819

7,165

3,139
5,159

3,818
6,259

718
1,248

3,554
4,808

1,966

8,362

8,298

10,077

346
937
26

363
1,162
34

89
227
10

375
864
39

1,309

1,559

326

1,278

520
605
4

630
994
5

163
227

648
734
5

1,129

1,629

391

1,387

4, 502

18,192

18, 216

21,117

Table 1-7. F E D E R A L O U T L A Y S F O R E L E M E N T A R Y A N D S E C O N D A R Y
EDUCATION B Y SUBLEVEL A N D TYPE O F SUPPORT
Outlays (millions)
Sublevel and type of support
1975
actual

Total, elementary and secondary

1976
estimate

TQ
estimate

1977
estimate

7,480

7,852

1,819

7,165

Early childhood
Elementary and secondary
Supporting services

566
6,588
326

592
7,025
235

157
1,602
60

577
6,366
222

Current operations
Facilities and equipment
Student support
Education personnel training
Educational research

6,412
289
354
191
234

6,813
261
426
138
214

1,580
44
102
31
62

6,286
150
392
129
208

SPECIAL ANALYSIS I

171

Elementary and secondary education support is provided primarily
through grants to State and local educational agencies. Higher education support is not channeled generally through State and local
government. Grants or loans are provided to an educational institution
or to a student who then selects an institution to attend. Federal
support for higher education continues to shift from institutional to
student assistance. In 1977 an estimated $6,710 million or 81% of
total higher education outlays will be direct grants or subsidies via
loans to students. Another $1,570 million will go to institutions for
current operations or facilities and equipment. This amount is essentially the same as the 1976 level.
The Federal Government also aids education through four tax
expenditures whose benefits are predominantly at the higher education
level. The exclusion from taxable income of veterans readjustment
benefits (the GI bill) is estimated to reduce Federal revenues by $0.3
billion in 1977. The similar exclusion for other scholarships and
fellowships results in a revenue loss of $0.2 billion in 1977. Parents
may claim a personal exemption for full-time students over 18, even
if the students have an income of their own. This tax expenditure of
$0.7 billion in 1977 aids families with older children in school. Finally,
the deductibility of contributions to educational institutions is estimated to reduce Federal receipts by $0.8 billion, in 1977.
Table 1-8. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF
INSTITUTION AND TYPE OF SUPPORT
Outlays (millions)
1975
actual

Total, higher education

1976
estimate

TQ
estimate

1977
estimate

8,298

10,077

1,966

8,362

2-year institutions
Other undergraduate
Graduate and professional

2,730
4,060
1,508

3,576
4,899
1,602

638
977
351

2,850
4,156
1,356

Current operations
Facilities and equipment
Student support
Education personnel training
Educational research

1,286
375
6,558
23
56

1,334
244
8,406
27
66

299
61
1,592
4
10

1,208
362
6,710
18
64

172

THE BUDGET FOR FISCAL YEAR 1977

The reduction in student support in 1977 (approximately $1.7 billion
below the 1976 level) is attributable principally to the decline in
total veterans benefits as the eligible veterans population declines.
Student support continues to be the predominant higher education
expenditure. Outlays for 2- and 4-year institutions in 1977 decrease
by approximately 18% below the 1976 level.
STUDENT SUPPORT

An estimated $7.1 billion will be available for student support in
1977, 83% of which is for undergraduate student assistance. The
GI bill will provide 4 1 % of the total for all student assistance. The
Office of Education will spend another 26% or about $1.9 billion to
support various grant and loan programs.
The Office of Education estimates that about 3.7 million student
grants and loans will be made in 1977 under its programs. Students
receiving aid under more than one program account for at least onethird of this total. The number of students aided is estimated to
increase about 8% from 1976 to 1977 after allowances for program
overlap are taken into account.

Table 1-9. STUDENT SUPPORT BY AGENCY: FEDERAL OUTLAYS AND NUMBER OF STUDENTS
Outlays (millions)
Agency

Undergraduate:
Health, Education, and Welfare:
Office of Education
Social Security Administration.
Health agencies and other
Veterans Administration
Defense
Justice
Other
Subtotal, undergraduate
Graduate:
Health, Education, and Welfare:
National Institutes of Health. _
Office of Education
Other HEW______.
Veterans Administration
National Science Foundation
Defense
Other
Subtotal, graduate
Total
1

1975
actual

1976
estimate

1.466

2,060

818
43

916
30

3,079

192
35
41
5,674

189
38
47
7,401

1977
estimate

1976
estimate

TQ
estimate

3,677

496
30

515
17

2,912

1,569

1,952

185
18
45

89
35

88
24

1,382

5,930

9
977
59
254
2

10
413
23
116

475

143
8

1,695
1,067

340
14

26
44
45
94
1
101
6

105
183
92
379
17
405
12

1,239

1,393

317

1,193 _

6,913

8,794

1975
actual

2,403

294
260
15
726
60

116
193
147
535
15
367
20

125
165
\84
400

Student totals not shown because some students receive awards under more than one program.

4,121

Students (thousands)

TQ
estimate

1,699

7,123 _

1,059

106
204
2
418
14

1,118

507
17
894
58
47
8

1977
estimate

2,872

577
2
1,329

57
39
28

9
858
28
173
2
534
12

174

THE BUDGET FOR FISCAL YEAR 1977
OUTLAYS BY EDUCATIONAL SUBLEVEL

In order to provide data in a form comparable with earlier education
special analyses, the following tables are provided which display
program and ageticy outlays by education sublevels in 1975, 1976,
the transition quarter, and 1977.
Table 1-10. FEDERAL OUTLAYS FOR ELEMENTARY AND SECONDARY
EDUCATION BY AGENCY
Sublevel, agency and program

Outlays (millions)
1976
estimate

TQ
estimate

1977
estimate

71
28
24
426
17

49
33
25
468
17

9
10
7
127
4

39
39
18
463
18

566

592

157

577

1,832
252

2,333
274

499
63

2,000
290

1,932
232
619
216
60
374
127
32
213
148
157
45
114
235

1,790
273
485
235
92
399
146
28
238
150
176
30
152
224

395
77
47
59
22
60
44
7
68
43
54
2
18
144

294
1,598
190
395
221
51
364
93
39
277
148
178
9
80
139

6,588

7,025

1,602

6,366

Supporting services:
Office of Education:
Elementary and secondary education
Educational development
Education for the handicapped
National Institute of Education
National Science Foundation
Other

42
153
63
34
20
14

70
24
73
29
17
22

20
1
19
5
7
8

58
2
84
31
14
33

Subtotal supporting services

326

235

222

7,480

7,852

1,819

7,165

Early childhood:
Elementary and secondary
Education for the handicapped
Appalachian regional development
Child development
Other
Subtotal, early childhood
Elementary and secondary:
Food and Nutrition Service
Defense
Office of Education:
Financial Assistance for Elementary and Secondary Education Act
Educationally deprived children
Other ESEA
Federally affected areas
Emergency school aid
Education for the handicapped
Occupational and vocational education
Library resources and library consolidation
Other, Office of Education
Student grants (OASDI)
Other HEW
Bureau of Indian Affairs
Community planning and development
Veterans readjustment
Other
Subtotal, elementary and secondary

Total

1975
actual

175

SPECIAL ANALYSIS I

Table 111. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY AGENCY
Outlays (millions)
Sublevel, agency and program
1975
actual

1976
estimate

TQ
estimate

1977
estimate

2-year institutions:
Office of Education:
Basic opportunity grants
Other higher education
Occupational and vocational education
Student grants (OASDI).
Health Resources Administration
Veterans readjustment
Other

171
286
137
179
71
1,759
127

398
318
134
201
65
2,351
109

61
40
19
57
18
415
28

503
186
136
234
45
1,663
83

Subtotal, 2-year institutions

2,730

3.576

638

2,850

239
187
109

266
205
85

67
66
22

276
210
79

171
351
209
120

398
459
248
100

61
40
69
19

508
199
279
98

182
255
638
52
61
38
26
1.320
21
81

160
216
715
67
59
24
27
1,766
24
80

35
8
203
15
20
3
5
311
3
30

152
8
832
52
59
11
29
1,249
25
90

4,060

4,899

977

4,156

11
177
109
482
66
22
37
400
135
15
54

17
173
85
402
76
25
39
535
153
19
78

5
28
9
115
12
7
10
94
47
3
21

14
151
55
395
49
29
35
378
173
23
54

Subtotal, graduate and professional

1.508

1,602

351

1,356

Total

8,298

10,077

1,966

8,362

Other undergraduate:
Military service academies
Reserve Officers Training Corps
Research training (NIH)
Office of Education:
Basic opportunity grants
Work-study and supplementary grants
Guaranteed student loans
Other higher education
Disadvantaged students and developing institutions
Direct student loans
Student grants (OASDI)
Special institutions
Office of the Secretary
Other Office of Education and HEW
Bureau of Indian Affairs
Veterans readjustment
National Science Foundation
Other
Subtotal, other undergraduate
Graduate and professional:
Health Services Administration
Research training (NIH)
ADAMHA
Health Resources Administration
Higher education
Student grants (OASDI)
Special institutions
Veterans readjustment
Department of Defense
National Science Foundation
Other

176

THE BUDGET FOR FISCAL YEAR 19 77

Table 1-12. FEDERAL OUTLAYS FOR ADULT EDUCATION AND OTHER
ACTIVITIES BY AGENCY
Sublevel. agency and program

Adult basic and extension:
Agriculture extension service
Office of Education
Social Security Administration
Veterans readjustment
Department of Defense
Other

Outlays (millions)
1975
actual

1976

1977

219
106
67
636
59
31

228
105
75
850
72
22

57
24
21
149
20
4

219
109
88
568
81
10

Subtotal, adult basic and extension

1,118

1,352

275

1,075

Public and national library services:
Library of Congress
Library resources (Office of Education)
Other

101
62
16

118
55
18

32
10
4

142
27
18

179

191

187

12
9
3
23

16
10
15
23

304
22

326
23

87
6

371
24

326

349

395

31
58

33
80

6
25

34
84

113

118

109
214
36
55
70
53
456
116

33
48
7
20
18
17
86
22

113
228
52
54
70
63
175
62

1,109

251

817

3,188

717

2,665

Subtotal, public and national library services
Training of Federal, State, and local civilian employees:
Justice
.:---.
Federal Aviation Administration
Commerce Department
Department of the Treasury
Other
Subtotal, training of public civilian employees. _ _
Training of Federal military employees:
Defense

4
16
15
17
21

Coast Guard
Subtotal, training of Federal military employeesForeign educational activities:
State
International development assistance
Subtotal, foreign educational activities
Other:
Office of Education, salaries and expenses
Other Office of Education
National Institute of Education
Smithsonian Institution
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities
Public service jobs
Other
Subtotal, other
Total

96
187
42
47
62
32
126
75
667
2,438

SPECIAL ANALYSIS I

177

Table 1-13. FEDERAL AID FOR EDUCATION BY AGENCY
Outlays (millions)
Agency
1975
actual

Legislative branch:
Library of Congress
_
Funds appropriated to the President:
International Development Assistance
Appalachian Regional Commission
Agriculture
Commerce
Defense—Military
Defense-Civil.
Health, Education, and Welfare:
Office of Education
OtherHEW
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Energy Research Development Administration.
Environmental Protection Agency
General Services Administration
National Aeronautics and Space Administration
Veterans Adminstration_
Other independent agencies:
ACTION
Corporation for Public Broadcasting
National Foundation on the Arts and Humanities
National Science Foundation
Smithsonian Institution
United States Information Agency
Total

210-700 O - 76 - 12

101

1976
estimate

TQ
estimate

1977
estimate

Budget
authority
(million)
1977

118

142

145

60
81
64
65
2,180 2,662
13
16
1,217
1,315
1 - 1

25
16
676
5
351
2

85
51
2,267
19
1,409
- 2

140
41
2,264
17
1,399
17
6,794
2,732

6,419
3,086
41
221
60
126
39
37
59
6
4
13
5
4,228

6,753
3,150
48
241
63
456
41
41
88
8
7
14
4
5,654

1,262
839
—4
68
26
86
9
10
28
2
2
3
1
987

6,118
3,217
—15
246
32
175
44
41
96
6
6
14
4
3,938

242
13
60
45
44
81
6
5
14
4
3,861

8
62

7
70

2
18

5
70

4
70

56
60
47
3

92
65
55
4

22
13
20
1

98
68
54

108
71
55
4

18,216

21,117

4,502

18,192

18,236

SPECIAL ANALYSIS J
FEDERAL TRAINING AND EMPLOYMENT PROGRAMS
SCOPE OF T H I S A N A L Y S I S

Federal training and employment programs aim to increase the
skills and employment opportunities of individuals already in the
work force and of persons who desire to join the work force but lack
vocational preparation or face other employment barriers. The programs provide skill training, rehabilitation, transitional employment
experience, job placement assistance, and related child care and
support services.
These programs are distinguished from regular educational
programs by their operating characteristics. Generally, they: (1)
operate outside the normal educational process, (2) provide skill
training for nonprofessional jobs, (3) provide services for less than 1
year, and (4) target on the disadvantaged or unemployed.
This analysis covers all programs classified as training and employment services in the functional classification of the budget. It also
includes some programs directed toward similar objectives from
other functional classifications such as income security, and veterans
benefits and services.
Outlays in 1977 are expected to be $7.2 billion, about $1.8 billion
less than 1976. The decline is primarily due to the phaseout of temporary public service jobs as the economy continues to improve, plus
the effect in 1976 of start-up delays on 1975 spending.
TAX EXPENDITURES

Certain provisions of the personal and corporate income tax that
are designed to achieve particular economic and social objectives
give rise to revenue losses that are called tax expenditures. This
concept, and the elements counted under it for the budget as a whole,
are discussed more fully in Special Analysis F. Two tax expenditures
are specifically related to employment and training. Since they do
not result in obligation, workload and outlay figures comparable to
the more traditional programs, amounts for each are noted here but
not included in the tables in the body of the special analysis.
Child and dependent care expenses.—Child and dependent care
expenses incurred to permit the taxpayer and spouse to work may be
taken as an itemized deduction up to a maximum of $400 per month.
The deduction is reduced by 50 cents for each dollar of adjusted gross
income in excess of a ceiling which has been $18,000 per year but increases to $35,000 beginning in calendar 1976.
WIN/AFDC tax credit.—Employers may take an income tax
credit equal to 20% of the first-year wages and salaries of employees
placed in employment under the work incentive program. Beyond
$25,000 a year, the credit is allowable only at half this rate. The
Department of Labor estimates that credits for some 26,000 WIN
178

SPECIAL ANALYSIS J

179

recipients were taken in 1975. The Tax Reduction Act of 1975 temporarily extended a similar credit to all AFDC recipients and made the
credit applicable to private employers of domestics. However, in
this case the maximum amount of wages on which credit may be
taken is $5 thousand. Estimates of the tax receipts lost due to these
provisions are:
[In millions of dollars]

Child and dependent care

1975
estimate
295

1976
estimate
330

WIN/AFDC

1977
estimate
420
10

PROGRAM DEVELOPMENTS
BLOCK GRANTS

The use of block grants for appropriate Federal programs provides
needed project design and management flexibility at State and local
government levels. It also reduces the reporting burden of those
governments so that they collect and maintain the detailed data
which is required for responsible program management, but only
submit necessary summary data to the national level. In this way
Federal field staff retain access to the data but unnecessary paperwork
is eliminated. For the purposes of this special analysis, therefore,
block grant type program data is more frequently available at the
"program" level, than at the "approach" level as in prior years.
SUPPORTIVE SERVICES

Many programs provide supportive services (for example, health
care, child care, transportation, basic or remedial education, family
planning, legal services, counseling, testing), allowances, and subsidized
wages to participants. While these may form a large part of program
outlays, they are intended to facilitate the primary activity (training,
placement, public service jobs, etc.). Therefore, these items are not
broken out into separate approaches, as child care was, for example, in
previous analyses. The applicable costs for support services for selected
programs is displayed in table J-8.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

1976 is the final year for outlays for both the model cities multipurpose categorical grants and the Community development training
and urban fellowship (CDTUF) grants. Outlays begin in 1976 for
employment and training activities under the Housing and Community Development Act of 1974. This block grant includes funding
of the same approaches as the model cities and CDTUF grants (for
example, on-the-job training, institutional, and work support). The
1976 and 1977 estimates are derived from a preliminary review of
proposed usage of program funds by a limited sample of program
recipients.

180

THE BUDGET FOR FISCAL YEAR 1977
FINANCIAL ASSISTANCE FOR COMMUNITY SERVICES

Legislation to provide financial assistance for community services
is proposed which will incorporate social services under title XX of the
Social Security Act, together with State and local training for public
assistance, in a block grant to the State.
TEMPORARY EMPLOYMENT ASSISTANCE

Temporary employment assistance grants were made in 1975 and
1976 to States, localities and Indian tribes to hire about 260,000 unemployed workers in temporary public service jobs through 1976.
Additional funds are proposed in 1976 (to be spent in 1976, the transition quarter, and 1977) to permit continued support of that portion of
those jobs which are in the areas with unemployment rates over 6.5%.
This program will phase out completely by the end of 1977.
JOB OPPORTUNITIES PROGRAM

This program was one of several temporary aids to the unemployed
enacted as part of the Emergency Jobs and Unemployment Assistance
Act of 1974 (Public Law 93-567). Funds were appropriated to the
Department of Commerce which reviewed and provided financial
assistance for project proposals from other Federal agencies and
regional commissions. Projects were new or accelerated activity which
were expected to create new jobs rapidly under existing agency
authorities. Although a broad range of services, construction and other
activity was financed, the principal purpose of all projects was to
create employment. For the purposes of this special analysis, therefore,
the entire activity is classified under the "public service employment"
approach. The projects selected are scheduled to be completed by the
end of 1977 in order to provide jobs while they are most needed. However, past experience with similar projects would indicate that a large
number of projects may continue into 1978 or later. Some 100,000 job
opportunities of varying duration are expected to be financed by the
program. Only obligation and outlay data are included in the tables in
this Special Analysis.
WORK INCENTIVES (WIN)

PROGRAM

Legislation is proposed for 1977 which will realine the WIN program to focus greater attention on job placement for all employable
AFDC applicants. WIN will no longer finance its own training
program. WIN participants may utilize work and training opportunities under the Comprehensive Employment and Training Act.
WORK/STUDY

PROGRAM

FOR

VOCATIONAL

EDUCATION

STUDENTS

This activity is included in a block grant funding proposal to
commence in 1977. The program's 1977 data are therefore based on
estimates of State allocation plans for 1977.

SPECIAL ANALYSIS J

181

PROGRAM APPROACHES

Training and employment programs are classified into major
approaches as follows:
—On-the-job training—provides training for regular job vacancies
generally by reimbursing employers for the added costs of hiring
and training disadyantaged individuals. Employers are expected
to retain the individual once reimbursement ends.
—Institutional training—provides instruction in vocational skills
and job related remedial education in a classroom setting.
—Vocational rehabilitation—helps individuals overcome physical
and mental handicaps to employment, through skill training,
counseling, allowances, and supportive services.
—Work experience—provides temporary employment experience,
generally part time, primarily for }^outh and older workers.
—Public service employment—provides employment, generally
intended to be transitional, in public sector jobs for individuals
who need to acquire work discipline and skills to compete for
nonsubsidized jobs, or who are temporarily unable to find regular
employment.
—Labor market services—encompasses services to assist individuals
in obtaining employment, including (a) job placement assistance,
(b) collection and analysis of labor market information, (c) equal
employment opportunity activities (excluding individual agency
civil rights activities other than contract compliance—see
Special Analysis M), and (d) other miscellaneous activities.
—Federal program support—includes research, development, and
evaluation activities as well as planning, technical assistance, and
program direction.
Some programs can be classified entirely under one approach.
Others, such as the Comprehensive Employment and Training Act
programs (Employment and training assistance account—ETA)
offer a range of work and training services, and thus are divided
among several approaches.
Estimates by approach for State and local programs under ETA
are based on projections from program operating plans submitted
by prime sponsors.
PROGRAM MEASURES

The three principal measures used to summarize the level of program
services are:
—Years of service, which measures the average year-round
enrollment;
—New enrollees, which counts the number of individuals entering
the activity during the year; and
—Outlays, which measures the level of spending during the year.

182

THE

BUDGET FOR

FISCAL

YEAR

19 77

Years of Service
Millions

Millio

3.0-1

— 3.0
Public Service
Employment

t968

1969

1970

1971

J972

1973

1974

Fiscal Yeois

J975

f976

f977

Esti m ate

New Enrollees
Millions

Million!

— 4.0

4.0

1971

1972

1973

1974

1975 1976

183

SPECIAL ANALYSIS J

Outlays
$ Billions

$B;IIK

Labor Market Services and Program Direction

1964 1965 1966 1967 1968 1969 1970 1971 f972 1973 1974 *975 ?9?6 1977
Years

Table J-1.

Estimate

DISTRIBUTION OK APPROACH

Years of service

0 utlays
1975

Public service employment _
Work experience
On-the-job training
I nstitutional training
Rehabilitation
Labor market services

20
20
8
21
16
15

1976

38
16
6
17
10
13

CATEGORIES

1977

25
18
5
20
13
19

1975

8
25
8
19
40

1976

15
24
7
18
36

(in percent)

N ew enrollees

1977

9
24
7
19
41

1975

12
37
5
31
15

1976

8
43
5
30
14

1977

2
44
4
34
16

PROGRAMS BY APPROACH

The following tables show activity of major programs by approach.
Narratives with each table reference only significant changes and
include brief program descriptions if necessary. More complete
program descriptions may be found under the appropriate account
title in the Budget Appendix.
On-the-job training (OJT).—Estimates for veterans OJT begin
to decline in 1977 in proportion to the number of eligible veterans.

184

THE BUDGET FOR FISCAL YEAR 1977

Table J-2.

ON-THE-JOB

TRAINING

(outlays in millions, individuals in thousands)
Individuals served

Program

Outlays
1975
actual

Employment and training
assistance
WIN
On-the-job training for
veterans
Other
Total

1976
est.

Years of service
1977
est.

1975
actual

1976
est.

New enrollees

1977
est.

1975
actual

1976
est.

1977
est.

119
81

161
94

145
0

26
10

36
9

32
0

82
25

90
27

89
0

263
15

215
9

119
3

118
3

102
2

66
23

73
18

28
3

478

532

369

158

165

136

196

208

120

Institutional training.—Included in this approach under ETA is
the Job Corps, a specialized program conducted in a residential setting,
for youth aged 14 to 21 for which an outlay of $175 million is expected in 1977.
The entry for Social services on this table and hereafter is for
programs operated by State agencies for public assistance recipients,
but is exclusive of service provided by the WIN program.
Other institutional training includes programs for Indians and
individuals in Federal prisons.
Table J-3. INSTITUTIONAL TRAINING (outlays in millions,individuals in thousands)
Individuals served
Program

Outlays
1975
actual

Employment and training assistance
WIN
Social services training
Other
Total

635
55
548
37

1976
est.

804
54
632
39

Years of service
1977
est.

1975
actual

1976
est.

New enrollees

1977
est.

1975
actual

360
44
739
24

1976
est.

1977
est.

744
0
672
34

127
15
223
9

166
12
239
12

152
0
238
14

369
35
794
23

367
0
791
19

1,274 1,528 1,450

374

428

404 1,166 1,222 1,178

Table J-4. VOCATIONAL R E H A B I L I T A T I O N
(outlays in millions, individuals in thousands)
Individuals served
Program
1975

HEW vocational rehabilitation
Veterans vocational rehabilitation
Total

1976

New enrollees

Years of service

Outlays
1977

1975

1976

1977

1975

1976

1977

885

807

853

788

850

860

565

540

543

967

892

936

802

861

871

579

552

554

SPECIAL ANALYSIS J

185

Work experience.—Estimates for ETA include in-school, out-ofschool and summer youth, as well as non-youth activity.
Table J - 5 . WORK EXPERIENCE

(outlays in millions, individuals in thousands)
Individuals served

Program

Outlays
1975
actual

1976
est.

Years of service
1977
est.

1975
actual

Employment and training assistance
1,097 1,363 1,204
Federal agency youth programs
75
70
82
WIN
8
10
Other
25
61
14
Total

1,205 1,503 1,301

1976
est.

New enrollees

1977
est.

428

514

22
3
43

18
3
58

496

593

1975
actual

1976
est.

1977
est.

447 1,321 1,685 1,475
20

53
17
25

36
16
26

48
17

511 1,415 1,763 1,540

Public service employment.—ETA includes authority for public
service employment under regular prime sponsor grants (title I),
special grants in areas with an unemployment rate of 6.5% or more for
3 consecutive months (title II) and national programs (title III).
The entry for "EEA" is the final spend out of the 1973 appropriation
for the expired Emergency Employment Act. Shown separately on the
line "ETA/EEA" is the effect of a one-time appropriation enacted at
the end of 1974 under CETA transitional authority to extend financing of projects originally funded by the expired Emergency Employment Act.
Table J-6. PUBLIC SERVICE EMPLOYMENT
(Outlays in millions, individuals in thousands)
Individuals Served
Program

Employment and Training assistance
EEA
ETA/EEA
Temporary employment assistance
WIN
Job Opportunities program
Total

Years of service

Outlays

New enrollees

1975 1976
actual1 est.

1977
est.

1975
actual

1976
est.

601
53
202

507

69
8
28

44
6

274
5

125

158
7

271 ___.
12 .--_

156 376

184

461

342

784
45

319 2,331 1,065
66
83
22
175 222
1,264 3,418 1,794

1977
est.

1975
actual

244

1976 1977
est. est.

Labor market services.—Job placement assistance.—The State
Employment Service (ES), is the major federally financed deliverer
of job placement assistance for the general labor force, as well as the
disadvantaged. In cooperation with welfare agencies, ES also provides
placement services to WIN and food stamp recipients. Other specialized placement assistance is provided by the Veterans Administration
and the Bureau of Indian Affairs.

186

THE BUDGET FOR FISCAL YEAR

1977

Labor market information.—Activities are those of the Department
of Labor's Employment and Training Administration and Bureau of
Labor Statistics.
Equal employment opportunity.—Includes the Equal Employment
Opportunity Commission, the Employment Standards Administration of the Department of Labor (including the Office of Federal
Contract Compliance Programs (OFCCP), and the equal pay and age
discrimination programs), and contract compliance activities within
other agencies conducted under OFCCP aegis.
Table J-7. JOB PLACEMENT ASSISTANCE, LABOR MARKET INFORMATION
AND EQUAL EMPLOYMENT OPPORTUNITY (in millions of dollars)
Outlays
1975
actual

Job placement assistance:
Employment service
Work incentive program
Food stamp recipient services
Other placement assistance
Labor market information
Equal employment opportunity
Total

1976
estimate

415
66
19
46
36
94

492
75
28
48
51
108

677

801

1977
estimate

527
243
29
50
57
116
1,022

Table J-8. PERCENT OF PROGRAM COSTS USED FOR SUPPORTIVE
SERVICES FOR SELECTED PROGRAMS
1975
actual

CETATitlel
CETA Title II
Work incentive program
HEW Vocational rehabilitation
Veterans programs (VA)
Indian programs (Interior)

12
1
33
59
5
16

1976
estimate

12
1
29
59
5
16

1977
estimate

12
1
29
59
5
16

Federal program support.—Activities shown are funded primarily
by the Department of Labor. Program direction includes costs for
national program planning and administration.
Table J-9.

FEDERAL PROGRAM SUPPORT (in millions of dollars)
Outlays
Pro

1975
actual

Research, development, and evaluation
Program direction
Total

1976
estimate

1977
estimate

19
112

19
126

19
123

131

145

143

SPECIAL ANALYSIS J

187

Unit costs by approach.—Costs include the various labor market
and supportive services usually provided to supplement the indicated
training or work program, as well as administrative costs. Cost
changes frequently reflect minimum wage increases and other general
economic factors rather than substantive program change. All CETA
work experience, except summer youth, is reported under "postschool."
Table J—10.

UNITS COSTS BY APPROACH, 1973 AND 1975

On-the-job training
Institutional training
Vocational rehabilitation
In-school work experience
Postschool work experience
Public service employment

Average
duration of
enrollment
(years)

Year of
service unit
cost (dollars)

Participant
unit cost
(dollars)

1973 1975

0.72 0.77 2,625 3,102 1,885
.28 .30 2,669 3,934
742
1.25 1.32 1,091 1,337 1,364
.64 .29 1,275 2,003
815
.28 .36 2,290 2,903
645
.92 .70 7,963 8,220 7,332

2,376
1,161
1,759
584
1,033
5,793

IMPACT OF EMPLOYMENT AND TRAINING PROGRAMS

There are significant limitations to the ability to discern the impact
that employment and training programs exert on national economic
conditions, especially since impact on total employment conditions
cannot yet be adequately measured or controlled. This constrains
assumptions of the value of program change as a means of altering
basic economic conditions. For example, the potential impact of one
of the largest approaches, public service employment, is diluted by
substitution effects. Analysis indicates that a substantial portion of
funds for programs financing transitional public service employment do
not create new jobs. Instead, sponsors tend to substitute Federal funding for jobs that would otherwise be funded by the States and localities.
The degree of substitution tends to increase substantially the longer a
public jobs program is in place.
In other programs, services are oriented first toward overcoming
individual barriers to employment, not to affecting overall labor market conditions.
In addition, experience has shown that it is extremely difficult
from the national level to precisely design programs that can target
effects properly on the particular nature of problems for local workers
affected by discrete economic factors. The goal of decentralized
block grant programs is to enable more direct response to local needs
in accord with broad national direction.

188

THE BUDGET FOR FISCAL YEAR

1977

Evaluations of training and employment programs have often been
flawed by inadequate methodology, insufficient scale, and other problems that have limited their utility for judging national program impact. The Department of Labor is undertaking a large-scale, long-term
evaluation of the main training and employment programs, titles I and
II of the Comprehensive Employment and Training Act. This study
should, for the first time, provide meaningful information on the impact of these programs on individual earnings and employment. It will
also systematically evaluate on a national basis the performance of the
CETA administrative mechanism. Initial useful data should begin to
be available in 1 to 2 years.
People served.—Most Federal employment and training programs
focus on low-income individuals and others with severe barriers to employment as they are least likely to be able to improve their employment opportunities without assistance. Changes over time in characteristics of participants frequently result from the addition of new
programs or changes in the relative amount of resources among
programs rather than shifts within the population served by individual
programs. For example, a decrease in the proportion of those with less
than a high school education is largely reflective of increases in the
proportion of program resources for public service jobs programs,
which include jobs with relatively high entry standards.
Training and employment programs generally target by statute
on the poor, the unemployed, the less educated, members of minorities,
youth, and welfare recipients.
Table J—11. CHARACTERISTICS OF UNEMPLOYED WORKERS, ADULT
POVERTY POPULATION AND PROGRAM PARTICIPANTS (in percent)
Unemployed
workers
civilian
noninstitutional
1973
Age 21 or less
Male
Less than high school education, _
Poor
Welfare recipients
Minority 2
1
2

39
52
48
21
NA
21

Poverty population (age 14—64)
civilian
noninstitutional

1974 1975 1973 1974 1975 1973 1974 1975
39
53
47
20
NA
20

33
56
44
16
NA
19

31
32
39
39
66 NA
100 100
27
22
32
31

Data excludes estimates for in-school and summer student activity.
Data for poverty population does not include Spanish-speaking.

Manpower program
participants
(age 14 and
above) 1

32
39
64
100
26
30

31
44
44
72
45
35

31
44
43
67
42
35

29
42
38
71
42
40

189

SPECIAL ANALYSIS J

Table J—12. CHARACTERISTICS OF ENROLLEES BY PROGRAM, 1973, 1974,
1975 (in percent)
21 or
younger

Poor
1973

CETA title I
CETA title II
TEA
Job Corps
WIN
HEW vocational rehabilitation _
Indian OJT
Veterans OJT

NA
NA
NA
100
87
60
100
15

1974

1975

93
NA
NA
100
90
62
100
15

77
48
44
100
100
67
100
15

CETA title I
CETA title II ._
TEA
Job Corps
WIN
HEW vocational rehabilitation,
Indian OJT
Veterans OJT

NA
NA
NA
74
30
54
49
99

NA
NA
NA
100
18
25
10
6

1974

1975

84
NA
NA
100
16
25
10
6

62
24
21
100
19
27
20
6

Minority race

Male
1973

1973

Less than high
school• education

1974

1975

55
NA
NA
74
28
54
49
99

54
66
70
75
25
57
45
99

1973

NA
NA
NA
63
48
22
100
8

1974

1975

53
NA
NA
63
44
22
100
8

56
43
39
71
46
24
100
8

1973

NA
NA
NA
91
58
45
65
15

1974

81
NA
NA
90
60
43
65
15

1975

61
28
27
89
59
43
65
15

Welfare recipients
1973

NA
NA
NA
40
100
16
25

1974

31
NA
NA
37
100
17
25

1975

27
16
14
35
100
19
25

NA—Not available.

PROGRAM ACCOMPLISHMENTS IN

1975

— 346,700 individuals placed in jobs through ETA training
programs.
—170,600 WIN participants found jobs.
—Assistance provided to programs serving 373,000 apprentices.
—2.7 million individuals placed in 4-day or longer jobs by the
Employment Services.
— 324, 000 persons rehabilitated by HEW vocational rehabilitation
programs including 115,700 who were severely disabled.
FUNDS BY AGENCY

The following table shows obligations and outlays by administering
agency and major program or account. Two agencies—the Departments of Labor, and Health, Education, and Welfare will account
for about 89% of all outlays in 1976,

w
o

Table J-13. FEDERAL FUNDS FOR TRAINING AND EMPLOYMENT PROGRAMS BY ADMINISTERING AGENCY (in millions of dollars)
Outlays

Obligations
Agency

rogr am

Department of Commerce: Job opportunities program.
Community Services Administration
Department of Health, Education, and Welfare:
Social services
Vocational rehabilitation
High school work study
CETA support
Subtotal, HEW.
Department of Housing and Urban Development _
Department of Justice: Prisoner training
Department of the Interior: Indian programs
Department of Labor:
Employment and training assistance
Emergency employment assistance
Temporary employment assistance

1975
actual

125
29

1976

375
29

1976

1975

1977

22
28

175
30

80
7

222
31

632
807
9
2

78
165
3

672
853
9
2

632
841
10
2

78
217
3

672
871
10
2

548
885
8

1,401

1,485

298

1,554

1,441

1,450

247

1,536

27
5
44

20
6
47

4
2
14

23
6
49

34
5
43

33
6
47

5
2
14

19
6

3,095

2,995

599

2,794

3,348

1,003

"""872

3,328

2,803
53
319

2,331

"""485

550
842
10

49
2,795

T665

5
>

Work incentive program
Food stamp recipient services
Older Americans community service employment
Employment service
Labor market information
Equal employment opportunity
Program administration
Subtotal, Labor
Veterans Administration:
On-the-job training for veterans
Veterans vocational rehabilitation
Veterans assistance centers
Subtotal, VA
Equal Employment Opportunity Commission: Equal employment opportunity. _
Other Federal agencies:
Disadvantaged youth programs
Federal contract compliance
Total

210
19
12
477
17
9
85
4,797

400
28
30 _.
510
25
12
88
7,415

80
7

260
29

385
28
43
510
25
12
92

80
7

260
29

546
27
13
88

314
19
9
429
17
9
88

133
6
3
22

546
27
13
92

850

3,758

4,060

6,773

1,740

4,826

257
80
7

111
88
8

62
25
2

211
82
8

263
82
7

263
85
8

61
24
2

215
83
7

345

367

300

352

355

305

75
29

70
33

52
8

82
36

75
28

70
32

52
8

82
35

6,931

9,911

1,343

5,909

6,144

9,034

2,258

7,180

SPECIAL ANALYSIS K
HEALTH SPECIAL ANALYSIS

FEDERAL HEALTH PROGRAMS

Overview.—Federal spending for health programs will total almost
$46 billion in 1977, an increase of $3.5 billion or 8.1% over 1976.
Federal health outlays continue to assume a growing share of the
Federal budget, as shown in Table K - l .
Table K-1. FEDERAL OUTLAYS FOR HEALTH COMPARED TO THE TOTAL
FEDERAL BUDGET (dollars in billions)
Actual
1971

1972

1973

Estimated
1974

1975

1976

Total Federal outlays
$211.4 $231.9 $246.5 $268.4 $324.6 $373.5
Federal health outlays
$20.2 $24.5 $26.0 $29.2 $36.8 $42.5
Health as percent of total
outlays
9.6
10.6
10.6
10.9
11.3
11.4

1977

$98.0 $394.2
$10.9 $45.9
11.1

11.7

Table K-2 summarizes and distributes Federal health outlays
by major category for 1975 through 1977. Expenditures for financing
or providing health services, primarily through medicare and the
proposed Financial Assistance for Health Care program, account for
$38.8 billion in 1977.
Table K-2. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED
ACTIVITIES BY CATEGORY (in millions of dollars)
Outlays
1975
actual

Development of health resources, total
Health research
Training and education
Construction
Health planning and statistics
Provision of hospital and medical services, total
Direct Federal services
Indirect services
Prevention and control of health problems, total
Total, health programs
192

1976
estimate

5,108
2,459
1,384
949
316
30,450
5,567
24,883
1,232

5,721
2,826
1,477
1,082
336
35,416
6,046
29,370
1, 349

36,790

42,486

TQ
estimate

1,356
711
322
240
83
9,169
1,490
7,679
337
10,862

1977
estimate

5,983
3,048
1,217
1,309
409
38,681
6,285
32,396
1,270
45,935

193

SPECIAL ANALYSIS K
NATIONAL HEALTH CARE TRENDS

Over the last quarter century, one of the most prominent trends in
the health sector has been the increase in both private and public
spending for health. Total expenditures for health have grown from $12
billion in 1950 to $119 billion in 1975, or from $78 to $547 per capita.
Spending by Federal, State, and local governments has also increased
dramatically during this period—from $3 billion to $50 billion, or from
26% to 42% of the total—primarily due to the enactment of the
medicare and medicaid programs in 1965. Figure K-3 illustrates
both the increase in public financing and the increase in total expenditures from 1965 to 1975.
Public and Private Health Expenditures

K-3

PUBLIC

Fiscal Year

1965
$38.9 Billion

Fiscal Y i a r

1975
$118.5 Billion

In the 5 years from 1970 to 1975, spending for health services and
supplies has grown from $64 billion—6.7% of the gross national
product (GNP)—to $111 billion—7.8% of the GNP. Per capita health
services expenditures rose from $309 to $514 during the same period.
Annually these sums purchase over 1 billion physician visits by
the U.S. civilian population, approximately 33 million hospital
stays averaging over 7 days, 2.5 billion drug prescriptions, and other
health services.

210-700 O - 76 - 13

194

THE BUDGET FOR FISCAL YEAR 1977

Factors which contribute to this growth in spending include an
increased demand for health services by the public, payment mechanisms that reduce out-of-pocket expenditures by individual consumers, changes in medical therapies, and expansion of health
resources. Figure K-4 depicts health care expenditures per capita for
different age groups and financing sources in 1974.
Personal Health Care Expenditures Per Capita

K-4

Dollars

1400-

-1400
FISCAL YEAR 1974
$1,218

1200

— 1200

1000—

—1000
Federal

800-

600

h-600
State and Local
$420

400

200 —

— 400

$183

Private

— 200

A second significant trend in the health sector is the rapid growth
in health resources, such as the supply of health professionals, biomedical researchers, hospitals, and other health facilities. The Nation's
supply of hospital beds, for example, has expanded from 730,000 in
1963 to 912,000 in 1974, or from 3.9 per 1,000 population to 5.0 per
1,000 population. In addition, the number of active physicians has
risen from 272,000 in 1963 to an estimated 378,000 in 1975 (Chart
K-5). During the same time, the number of active registered nurses
has grown from 582,000 to about 906,000. Presently, more than 4.4
million persons are employed in health-related careers—about 4%
of the civilian labor force. Health workers comprise the third largest
occupational grouping in the United States.

195

SPECIAL ANALYSIS K

Active Physicians, Domestic and Foreign Trained
Thousands Active M.D.'s and D.O.'s
594
r - 600

Thousands Active M.D. t and D.O.'s
600j Foreign Trained Physicians (Including Canada Graduates)
U.S. Trained Physicians

27.6% S

500-

500

447

400

300-

— 300

272

— 200

200-

81.4%

— roo

100-

•":";:;
1963'.
Calendar Year

1970

1975

1980

198S

1990

Projected

Physicians and other health professionals in the United States are
not evenly distributed geographically. Among the States, the number
of active, non-Federal physicians per 100,000 population in 1973
ranged from 218 in New York and 201 in Massachusetts, to 79 in
Mississippi and 73 in South Dakota. Chart K-6 shows the tendency
for physicians to locate in metropolitan rather than rural areas.
Approximately one quarter of the Nation's 25,000 ps3^chiatrists, for
example, practice in the New York, Boston, and Washington, D.C.,
metropolitan areas. General practitioners are found in somewhat
larger proportions in nonmetropolitan counties.

196

THE BUDGET FOR FISCAL YEAR 19 77

Active M.D.'s Per 100,000 Population in Metropolitan and
Non-metropolitan Counties, 1973

Total,
Non-Federal M.D.'s

Total,
Primary Care M.D.'s

•?*••••••

i;i

• ;

; :

;

- 1 7 1

141

General Practice

Internal Medicine

J Metropolitan Counties
|

Pediatrics

_J Non-Metropolitan Counties

Obstetrics,
Gynecology

100

150

200

HEALTH STATUS

There has been a significant decrease in the death rate in the United
States since the beginning of the twentieth century. This decrease has
taken place during a period of significant economic and social change,
as well as advances in health research and medical practice. Knowledge
about the causes, prevention, and treatment of certain infectious
diseases has led to their virtual elimination. These advances have
lengthened life for many persons. On the other hand, the degenerative
processes of aging have resulted in the increased prevalence of chronic
diseases, which are generally more difficult and costly to treat than
acute and infectious diseases.

SPECIAL ANALYSIS K

197

T<ible K-7. SELECTED HEALTH STATUS INDICATORS
1950

Birth rate (per 1,000 population)
Death rate (per 1,000 population)
Average life expectancy at birth in years
Infant mortality rate (deaths under 1 year of age per
1,000 live births)
Leading causes of death (per 100,000 population):
Diseases of the heart
Cancer
Cerebrovascular disease
Accidents
Tuberculosis, all forms
Kidney diseases, all forms
Diabetes
Cirrhosis of liver

1960

(annual rates)

1974

1970

24.1
9. 6
68.2

23.7
9.5
69.7

18.4
9.5
70.9

15.0
9.1
72.0

29.2

26.0

20.0

16.5

355.5
139.8
104.0
60.6
22.5
20. 8
16.2
9.2

369.0
149.2
108.0
52.3
6.1
11.9
16.7
11.3

362.0
162.8
101.9
56.4
2.6
8.4
18.9
15.5

353.1
169.5
97.2
48.9
1.8
6.4
17.4
16.0

Despite the decline in the U.S. death rate in the twentieth century,
the recent growth in U.S. health resources, and the highest per capita
health expenditures in the world, the health status of Americans,
as measured by conventional standards, does not appear to be much
different from that of other advanced industrialized nations. Average
U.S. life expectancy rates, for example, are not significantly better
than those of a number of Western European countries and Canada.
Table K-8. LIFE EXPECTANCY BY SEX AT SELECTED AGES, BY
SELECTED COUNTRIES: 1970
Age in years

Male

Sweden
Canada
France _ _
Italy
United Kingdom: England and
Wales
Germany: Federal Republic
United States:
Total
White
Other

Country

Female

Male

Female

Male

38
37
38

44
44
43

21
20
20

25
26
24

14
13
13

37
36

42
41

19
19

24
23

12
12

36
37

42
43

20
20

25
25

13
13

17
17
17
16
16
15
17

17
16

The uneven distribution of health personnel is frequently cited as
a reason that this country's health status is not better in relation to
other cduntries. The relationship between the availability of physicians
and life expectancy—a common indicator of health status—is, however,
ambiguous. Life expectancy rates are generally no higher in States
with more physicians per capita than in States with fewer physicians
per capita (Chart K-9). For example, the life expectancy rate is
virtually the same in Arkansas, Ohio, and New York, even though the
number of physicians varies from 80 per 100,000 population in Arkansas
to 116 in Ohio and 198 in New York.

198

THE BUDGET FOR FISCAL YEAR

1977

The availability of health care is only one factor among many that
bear upon health status. Other important determinants of health
status are heredity, the quality of the natural environment, social and
economic well-being, working conditions, housing, sanitation, nutrition, and personal lifestyle.
Physician Supply and Life Expectancy in Selected States, 1970

K-9

Life Expectancy in Years

M.D.'s Per 100,000 Population
fS?7p| Active Non-Federal M.D.'s Providing Patient Care
H
Per 100,000 Population (December 31, 1970)
I
[ Life Expectancy in Years (1969-1971)

-60

150-

100

50-

UNITED
STATES

South
Dakota

Arkansas

Mississippi

Hawaii

New York

Ohio

THE FEDERAL ROLE IN THE HEALTH SECTOR

Federal health programs attempt to improve the health status of
Americans by adding to the knowledge of human disease, translating
research findings into accepted medical practice, regulating known
health hazards, improving financial and physical access to health
professionals and facilities, and reforming the existing health care
service system.
Health resources.—Federal programs for the development of
health resources encompass support for health research, health
professions training and education, construction of health care facilities, and health planning and statistics. The combined outlays for these
programs, as shown in Table K-10, will be $5,975 million in 1977, an
increase of $254 million from 1976.

199

SPECIAL ANALYSIS K

Table K-10. FEDERAL OUTLAYS FOR THE DEVELOPMENT OF HEALTH
RESOURCES (in millions of dollars)
Outlays
1975
actual

Health research (excluding research facilities)
Training and education
Construction
Health planning
Total

1976
estimate

TQ
estimate

1977
estimate

2,459
1, 384
949
316

2,826
1,477
1,082
336

711
322
240
83

3,048
1,217
1,309
409

5,108

5,721

1,356

5,983

Health research.—Through the support of both basic and applied
research, Federal biomedical and behavioral research programs attempt to provide new knowledge for use in the prevention, diagnosis,
and treatment of disease. Paralleling the increasing incidence of chronic
diseases in the United States, Federal research support places emphasis upon degenerative illnesses, such as cancer and cardiovascular
disease, and upon environmentally induced health problems. Table
K-12 indicates the allocation of Federal funds among research fields
and includes funding for construction of research facilities.
Funds for Medical Research and Development

K-II
$ Billions

5
Oher Suppsit
tCMrer Private Sospu.r and ?iatc and Local Government)

industry Support

—4

4 Federal Support'

—3

- 2

—I

1955
Fiscal Yeats

I960

1965

1970

* Covers obligations (or medical Odd health-related research and development »

1975

200

THE BUDGET FOR FISCAL YEAR

1977

Federal outlays for health research have risen over the past decade,
from $1,369 million in 1967 to $3,074 million in 1977. The Federal
Government currently funds almost 60% of all biomedical research
in this country.
The National Institutes of Health (NIH), within the Department
of Health, Education, and Welfare, is the largest Federal biomedical
research agency, and will administer 64% of the total Federal health
research funds in 1977. NIH conducts an extensive research program
in its own laboratories and clinical facilities, in addition to its research
grant and contract activities. The Department of Health, Education,
and Welfare also conducts and sponsors substance abuse and health
services research to improve the organization, delivery, quality, and
financing of health care.
Table K-12. FEDERAL OUTLAYS FOR HEALTH RESEARCH AND
RESEARCH FACILITIES
(In millions of dollars)
Outlays
1975

1976

1977

Cancer
Cardiovascular
Mental health_____
Neurological and visual
Population and family planning
Environmental health
Aging
Metabolic diseases
Child health
Infectious diseases
Pulmonary
Dental......
Health services research and development
Other research and development
Research facilities

Total

499
266
110
155
58
300
53
137
72
130
48
42
79
507
80

572
286
127
174
73
408
49
197
105
153
53
46
65
519
36

2,539

2,862

128
62
26
50
18
122
13
32
25
57
12
10
32
123
5
716

666
311
113
188
65
528
63
188
96
160
56
57
51
507
26
3,074

Other Federal agencies support and conduct health research in
support of their program missions. The three largest are the Energy
Research and Development Administration, the Department of
Defense, and the Veterans Administration. Together, these agencies
account for 15% of all Federal biomedical research expenditures.
Training and education.—Over 40% of the revenues of the
Nation's medical schools are derived from Federal grants or contracts.
Table K-13 shows the Federal funds provided to medical schools from
selected agencies. These outlays do not include payments for medical
services from medicare and medicaid.

SPECIAL ANALYSIS K

201

Table K-13. FEDERAL FUNDS TO MEDICAL SCHOOLS
(In millions of dollars)
Outlays

Agency
1975
actual

Department of Health, Education, and Welfare
Research and development
Education and training
Construction
Department of Defense
Education and training
Veterans Administration:
Education and training
National Aeronautics and Space Administration:
Research and development
Energy Research and Development Administration:
Research and development
Other agencies:
Research and development
Total
Research and development
Education and training
Construction

1976
estimate

1, 191
(808)
(283)
(100)
13
(11)

TQ
estimate

1977
estimate

216 1,242
(125)
(909)
(73)
(234)
(18)
(99)
9
58
(8)
(19)

,213
(884)
(263)
(66)
23
(16)

1,235
(837)
(298)
(100)

35
1

1,304
(915)
(316)
(72)

239
(131)
(89)
(18)

1,365
(941)
(288)
(137)

The Federal Government will spend a total of $1,217 million in
1977 for health training and education, as shown in table K-14. The
principal programs of direct support for health professions schools,
which are administered by HEW, include:
• institutional operating cost support grants tied to conditions
designed to improve geographic and specialty distribution of
health professionals;
• special projects to demonstrate educational reforms and innovations in such areas as improving access to health professions
education for the disadvantaged, developing new types of health
workers, stimulating the practice of family medicine, and integrating medical education with health care delivery in medical
scarcity areas.
Table K-14. FEDERALLY AIDED HEALTH TRAINING AND EDUCATION
(In millions of dollars)
Outlays
1975
actual

Degree or certificate training
Research personnel
Physicians
Dentists.
Nurses
Mental health professionals
Other health professionals
Paramedical personnel
All other training
Total

1,186
(114)
(491)
(86)
(155)
(51)
(145)
(144)
197
1,384

1976
estimate

,278
(112)
(560)
(96)
(144)
(44)
(161)
(161)
199
1,477

TQ
estimate

1977
estimate

272
1,035
(14)
(90)
(127)
(485)
(25)
(74)
(38)
(104)
(24)
(7)
(26)
(114)
(35)
(144)
50
182
322

1,217

202

THE BUDGET FOR FISCAL YEAR 197 7

A program of national health service scholarships—funded at a
level of $.35 million in 1977—will support approximately 4,600 medical,
osteopathic, and dental students in return for periods of service to
meet public needs. This program helps to meet student financial needs,
as well as Federal requirements for health professionals to staff programs such as the Indian Health Service. It also addresses the problem
of geographic maldistribution of health personnel by placing physicians
and dentists as private practitioners in provider scarcity areas or
through such Federal programs as the National Health Service Corps.
The National Health Service Corps seeks to demonstrate the
ability of health care provider shortage areas to support health
personnel. The program will locate 676 health professionals in underserved areas in 1977.
Construction of health care facilities.—The Nation is well
supplied in the aggregate with medical facilities. Chart K-15 suggests
that the less populous States are relatively well endowed with hospital
beds in contrast to the distribution of health professionals. This
geographic distribution of hospital beds reflects in part the impact
of over 30 years of Federal hospital construction assistance through
the Hill-Burton program. Under its statutory formula, which favored
the less populous and poorer areas, the Hill-Burton program allocated
more than $4.4 billion in grants to the States.
General Hospital Beds Per 1,000 Population in Selected States, 1974 K-15

North Dakota

J6.8

South Dakota

6.6

Kansas
l

6.7

1
s

Nebraska

t
6.5

West Virginia
1

^ ] 6.S

Minnesota
I

I
5.0

UNITED STATES
1

[«

Alaska

s
°
a

x
«

Connecticut

4.0

Washington
3.7

Hawaii

4.0

3.7

Utah

3.6

Maryland

SPECIAL ANALYSIS K

203

The basic goal of the Hill-Burton program—to improve the supply
of health facilities in shortage areas—has been largely accomplished.
Hill-Burton program expenditures have declined from 13% of the
total $1.5 billion national medical facility construction expenditures
in 1963 to 2.4% of the total estimated $4.6 billion construction expenditures in 1975. The vast majority of medical facility construction
is now financed through long-term debt service of loans from the
private capital markets.
Depreciation costs and debt servicing are legitimate expenses included in reimbursements from health insurance. In the 6 years from
1969 to 1975, for instance, the percentage of private nonprofit hospital
construction being financed by debt service increased from 40% to
60%. This trend offsets reductions in the share of construction costs
borne by government, philanthropy, and the hospitals themselves
through depreciation funds.
Federal programs for the construction of health care facilities include
the support of both community facilities to serve the general public,
and facilities operated by Federal agencies for special beneficiary
groups. In 1977, Federal outlays for the construction of health care
facilities, including environmental health facilities, are estimated at
$1,300 million.
Table K-16. HOSPITAL AND HEALTH FACILITY CONSTRUCTION
(In millions of dollars)
Outlays
1975
actual

Federally supported construction:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Health professions educational facilities
Other facilities

1976

1977

55
91
23
80
159
53
174
34

60
109
21
36
159
52
129
49

12
11
7
5
50
13
5
11

21
85
15
26
244
34
111
47

Total, federally supported

669

615

115

582

Federal hospitals and health facilities:
Hospitals, new
Hospitals, modernized and replaced
Long-term care facilities
Research facilities
Environmental health facilities
Ambulatory care facilities
Other facilities

51
159
8
15
39
6
3

95
267
8
29
46
16

3
80
2
8
11
17
2

34
529
11
37
36
22
57

Total, Federal

281

467

125

111

Total, construction

949

1,082

240

1,309

204

THE

BUDGET FOR FISCAL YEAR

1977

In 1977, States will be able to use a portion of their Financial Assistance for Health Care block grant funds for construction of health
care facilities. Federal assistance for the construction of community
health facilities will also continue to be provided through the Department of Housing and Urban Development, which funds mortgage
insurance for construction of hospitals, nursing homes, and group
practice facilities.
Health planning.—Funding for health planning will be incorporated into the new Financial Assistance for Health Care program in
1977. Inclusion of health planning reflects the traditional State and
local responsibility for planning.
Other agencies besides HEW will spend a total of $196 million in
1977 on health planning activities, including statistical programs.
Nearly $160 million of these funds are for health planning activities
in other countries supported by the State Department and the Agency
for International Development.
Table K-17. FEDERAL OUTLAYS FOR HEALTH
AND STATISTICS

PLANNING

(In millions of dollars)
1975
actual
Financing of health planning, total
State-wide health planning
Substate health planning
Other health planning
Direct planning of Federal health activities
Health statistical activities, total
General purpose statistics
Federal program management statistics
Total, health planning activities

1976
estimate

TQ
estimate

1977
estimate

245
(46)
(86)
(IB)
30
41
(20)
(21)

253
(29)
(68)
(155)
34
49
(26)
(23)

63
(8)
(13)
(42)
8
12
(7)
(5)

329
(43)
(83)
(203)
30
50
(26)
(24)

316

336

409

FINANCING AND PROVIDING MEDICAL SERVICES

Since enactment of the medicare and medicaid programs in 1965,
public funds have become a major source of financing for most health
services, particularly hospital and nursing home care. Chart K-18
indicates the relative importance of public funds, which account for
over 42% of national health expenditures.
The impact of increased public spending for health care for the lowincome population is reflected in changing utilization patterns for
health services. The number of physician visits and hospitalizations
per capita has increased across the board in the past decade. In addition, the low-income population is now using these health resources
at higher rates than the nonpoor population (see Table K-19). This
development stems largely from increased Government financing of
medical services through the medicare and medicaid programs for
the aged, disabled, and low-income.

205

SPECIAL ANALYSIS K
Sources of Health Expenditures
$ Billions

Hospital

Nursing Home
Care

Physicians
Services

Drugs

Table K-19. ANNUAL U.S. DOCTOR VISITS PER PERSON, 1964 AND 1974
1964
Poor

Allages
Under17years
17to44years_
45to64years
65 years and over

4.3
2.3
4.1
5.1
6.0

1974

Not poor

4.6
4.0
4.7
5.1
7.3

Poor

5.4
3.6
5.5
6.3
6.4

Not poor

4.9
4.3
4.7
5.4
7.3

Federal programs to finance or provide hospital and medical services include medicare and the proposed Financial Assistance for Health
Care program—which account for 74% of outlays for these purposes—
as well as programs for health services directly administered by the
Department of Defense, the Veterans Administration, and HEW.
Table K-20 shows Federal expenditures for financing and providing
hospital and medical services.

206

THE BUDGET FOR FISCAL YEAR 1977

Table K-20. FEDERAL FINANCING AND PROVISION OF HEALTH SERVICES
(In millions of dollars)
Outlays
1975
actual

Financing of indirect hospital and medical services:
General hospital inpatients
Psychiatric hospital inpatients
Long-term care inpatients
Outpatient mental health services
Outpatient services
Other services
Total, financing of indirect services

1976
estimate

1977
estimate

15, 792
360
2,833
521
3,887
1,490

18,386
393
3,321
444
4,817
2,009

4,667
107
904
81
1,305
616

20,107
452
3,473
399
5,382
2,584

24,883

29,370

7,679

32,396

Provision of direct hospital and medical services:
General hospital inpatients
Psychiatric hospital inpatients
Long-term care inpatients
Outpatient mental health services
Outpatient services
Other services

3,045
652
177
37
1,444
212

3,285
796
194
44
1,579
245

Total, provision of direct services

5,567
30,450

Total,financingand provision of services

TQ
estimate

796
176
48
11
393
66

3,367
761
210
50
1,645
251

6,046

1,490

6, 285

35,416

9,169

38,681

Medicare and the proposed Financial Assistance for Health Care
block grant are the Federal Government's largest health activities.
In 1977, they will account for $28.6 billion, or 62%, of Federal health
outlays.
Medicare.—Medicare finances health care for the aged, disabled,
and persons suffering from chronic kidney disease. It includes both
hospital insurance (HI)—which pays for inpatient care, posthospitalization skilled nursing home care, and home health benefits—and
supplementary medical insurance (SMI)—which pays for physician
and other outpatient services.
HI is financed largely through social security taxes on earnings,
while SMI is financed by premiums from enrollees—currently $6.70 per
month—and contributions from general tax revenues. Both insurance
components are administered primarily through private insurance
companies under contract with the Social Security Administration.
Medicare has increased rapidly in cost in recent years—rising 123%
from 1972 to 1977, even excluding proposed savings of $2.2 billion
in 1977. Estimated outlays of $19.6 billion in 1977 will provide average
benefits of nearly $2,200 for the 5.9 million persons receiving HI
benefits, and over $400 for the 14.2 million persons receiving SMI
benefits.

SPECIAL ANALYSIS K

207

Proposed legislation, the Medicare Improvements of 1976, will
provide protection against catastrophic health care costs and make
other reforms in medicare cost-sharing provisions. The catastrophic
health insurance proposals would establish a limitation on beneficiary
cost-sharing of $500 per year for HI benefits and $250 per year for
SMI benefits. These limits will reduce cost-sharing by a total of $538
million for over 3 million persons with high medical expenses. Costsharing proposals include coinsurance equal to 10% of charges above
the deductible for all Hi-covered services, and an SMI deductible
adjusted with increases in social security cash benefits. These provisions will improve patient incentives for economical use of health
services.
The 1977 budget also proposes legislation to limit increases in
medicare reimbursement rates. The legislation sets upper limits of
7% on annual increases in hospital per diem payments and 4% on
annual increases in physician charges for 1977 and 1978. These
limits are designed to slow health cost inflation and restrain the
growth of program outlays.
The HI trust fund is currently underfinanced. The proposed legislation will improve the balance of trust fund income and outlays, as well
as permit funding of catastrophic insurance. The following table shows
the budgetary impact of the proposed legislation in 1976-78.
Table K-21. MEDICARE IMPROVEMENTS OF 1976 (in millions of dollars)
Outlays
1976

Catastrophic insurance:
Hospital insurance ($500 limit)
Supplementary medical insurance ($250 limit)
Subtotal
Cost-sharing reforms:
Hospital insurance (10% coinsurance)
Supplementary medical insurance:
Dynamic deductible ($77 on January 1, 1977)
Coinsurance on hospital-based services
Subtotal
Reimbursement limits:
Hospital insurance (7% per diem)
___
Supplementary medical insurance (4% charges) ___ _

1978

+15

+330
+208

+420
+634

+15

+538

+1,054

-330

-1,730

-2,020

-330

Subtotal
Total

1977

-315

-111
—19

-255
—38

-1,860

-2,313

—730
—179

—1,905
—301

-909

-2,206

-2,231

-3,465

The following table displays basic data concerning the medicare
program coverage, benefits, and administration.

208

THE BUDGET FOR FISCAL YEAR

1977

Table K-22. MEDICARE COVERAGE, BENEFITS, AND ADMINISTRATION
(Dollars in millions)
1975
actual

Hospital insurance (HI):
Persons with protection (millions)
Beneficiaries receiving services (millions)
Benefit payments
Administrative expenses
Claims received (millions)
Supplementary medical insurance (SMI):
Persons with protection (millions)
Beneficiaries receiving services (millions)
Benefit payments
Administrative expenses
Claims received (millions)

1976

1977

23. 7
5.5
$10,353
$259
10. 3

5.7

5.9

$11,869
$327
11.9

$12,960
$321
12.7

23. 3
12.6
$3, 765
$405
97.5

23.9
13.2
$4,687
$550
107.8

24.6
14.2
$5,804
$561
121.1

24.3

24.9

Although medicare offers identical benefits to all enrollees, its
reimbursements differ substantially in various regions of the country.
These differences reflect variations in resource availability, utilization
practices, and service costs. Table K-23 summarizes information on
these patterns for 1974.
Table K-23. MEDICARE UTILIZATION AND REIMBURSEMENT BY
GEOGRAPHIC REGION
Northeast

Hospital insurance (HI):
Hospital beds per 1,000 population !
Hospital admissions per 1,000 enrollees *
Average length of hospital stay (days) 1
HI reimbursement per enrollee
Supplementary medical insurance (SMI):
Physicians per 100,000 population
SMI reimbursement per enrollee
1

North
Central

South

West

4.4
290
13.9
$400

4.8
350
11.9
$350

4.3
360
10.7
$290

3.9
330
9.2
$360

161
$150

112
$110

109
$120

148
$170

Excludes specialty hospitals.

Financial Assistance for Health Care.—The proposed Financial
Assistance for Health Care program will consolidate 16 categorical
health programs, including medicaid, into a new block grant to the
States. The $9 billion in outlays in 1977 will be used primarily to help
provide health services to the low-income. Up to 10% of the funds
will be available for other health-related purposes.
Other support for health services.—The Federal Government
assists in the provision of health services through a variety of activities in addition to medicare and the proposed Financial Assistance
for Health Care program.
Limited support is provided to health maintenance organizations
(HMOs) in order to help demonstrate the HMO concept in the
delivery and organization of health services. Health maintenance
organizations deliver comprehensive medical care and disease prevention services on a prepaid basis.

SPECIAL ANALYSIS K

209

A total of $482 million will be provided for drug abuse treatment,
rehabilitation, prevention, and research activities in 1977, an increase
of $27 million over 1976 (Table K-24). Most of the federally supported
drug abuse activities are funded by HEW through the Social and
Rehabilitation Service and the National Institute on Drug Abuse
(NIDA) within the Alcohol, Drug Abuse, and Mental Health Administration. NIDA funding will increase from $222 million in 1976
to $248 million in 1977. Drug abuse treatment capacity will be expanded in 1977 and priority given to treating that drug abuse most
costly to society. Defense and VA will continue efforts to remedy drug
problems among military personnel and veterans. Within the Department of Justice, the Bureau of Prisons administers drug abuse treatment and rehabilitation services for Federal prisoners, the Drug
Enforcement Administration conducts education and research programs, and the Law Enforcement Assistance Administration supports
a broad range of community efforts to prevent the abuse of drugs.
Drug abuse law enforcement activities are discussed in Special
Analysis N.
The Federal Government also finances or provides medical services
for certain special categories of beneficiaries, particularly American
Indians and Alaska Natives; armed forces personnel, dependents,
retirees, and veterans; and Federal Government employees.
Indian health services.—The funding level for Indian health services and facilities will rise to $355 million in 1977, a $24 million
increase over 1976. These funds are used to provide comprehensive
health care, with an emphasis on ambulatory care, as well as to construct hospitals, clinics, personal quarters, and sanitation facilities.
Over the last quarter century, the health status of Indians and
Alaska Natives has greatly improved. Since 1950, for example, there
has been an increase in Indian average life expectancy of 4.6 years
or 8%, a 78% decline in infant mortality, and a 72% decline in
deaths due to diseases such as influenza and pneumonia. In recent
years, the overall health status of Indians and Alaska Natives has
come closer to that of the general U.S. population, as indicated in
Table K-25. Differences in health status remain, however, especially in
connection with causes of death associated with reservation social
conditions. Efforts to further improve the health status of American
Indians will continue in the coming years.
Based on an eligible federally recognized Indian population of
518,000 in 1977, spending by the Indian Health Service in 1977 will
result in over $685 per beneficiary, or over $2,740 per Indian family
of four. This includes over $40 million for the construction of Indian
hospitals, clinics, sanitation projects, and staff housing for Indian
Health Service personnel, but does not include spending from other
Federal sources for the same beneficiary group.

O - 76 - 14
Digitized for 210-700
FRASER

210

THE BUDGET FOR FISCAL YEAR 1977

Table K-24. ESTIMATED OBLIGATIONS FOR DRUG ABUSE PREVENTION
PROGRAMS (in millions of dollars)
Obligations
1975

1976

1977

Treatment and rehabilitation (total)
Department of Health, Education, and Welfare:
Alcohol, Drug Abuse, and Mental Health Administration
Social and Rehabilitation Service1
Office of Human Development
Department of Defense
Veterans Administration
Department of Housing and Urban Development. __
Department of Justice
Department of Transportation
Other 2

320.4

344.7

65.9

372.8

122.4
79.0
8.8
48.2
33. 2
2.8
21.9
.1
3.9

139.9
88.0
8.8
47.4
35.1
4.0
20.4
.1
.9

13.9
23.0
2.2
11.5
9.1
.9
5.1
.2

162.8
94.0
9.4
46.0
36.4
4.7
18.6
.1
.8

Prevention, education, and information (total)
Department of Health, Education, and Welfare:
Alcohol, Drug Abuse, and Mental Health Administration
Office of Education
Department of Defense
Veterans Administration
Department of Housing and Urban Development___
Department of Justice
Department of Transportation
Other 2

69.6

52.4

4.5

50.5

48.7
4.0
9.9
.4
.1
2. 3
.1
4.2

36.0
2.0
8.9
.4
.1
2.6
.1
2.3

1.0

36.2

2.2
.1

9.1
.4
.1
2.5
.1
2.1

Research (total)
Department of Health, Education, and Welfare:
Alcohol, Drug Abuse, and Mental Health Administration
Department of Defense
Veterans Administration
Department of Justice
Department of Transportation
Other 2

43.8

39.7

5.0

40.1

34.0
3. 7
1.0
1.6
.6
2.9

31.6
2.4
1.0
2.7
.5
1.5

3.6
__
.7
.1
.4

34.0
.2
1.0
2.6
.8
1.5

Planning, Evaluation, and Coordination (total)

24.3

18.3

3.7

18.9

14.7
2.2
.2
.8
6.4

14.5
2.6
.2
.7
.3

2.8
.6
.2
.1

15.2
2.5
.2
.6
.4

458.1

455.1

79.1

482.2

Department of Health, Education, and Welfare:
Alcohol, Drug Abuse, and Mental Health Administration
Department of Defense
Veterans Administration
Department of Justice
Other 2
Total

1
In 1977, drug abuse treatment funds in this agency would be included in the proposed Financial
Assistance
for Health Care program.
2
Includes drug abuse prevention activities within the Departments of Labor, State, and Agriculture; the terminated Special Action Office for Drug Abuse Prevention; and other agencies.

SPECIAL ANALYSIS K

211

Table K-25. SELECTED INDICATORS OF HEALTH STATUS OF AMERICAN
INDIANS AND THE GENERAL U.S. POPULATION (annual rates)
Indians and Alaska Natives
1950

Birth rate (per 1,000 population)
Death rate (per 1,000 population)
Average life expectancy at birth (years)
Infant mortality rate (deaths under 1 year of
age per 1,000 live births) !
Leading causes of death (per 100,000 population):
Heart
Accidents
Influenza and pneumonia
Certain diseases of early infancy
Cancer
_.
Cirrhosis of liver
1

General
population
1970 1974

1960

1970

1974

36.2
12.9
60.0

42.7
9.1
61.7

32.6
7.7
64.0

30.8
7.1
64.6

18.4
9.5
70.9

15.0
9.1
72.0

85.8

50.3

23.8

18.7

20.0

16.5

148.8
125.9
108.0
77.3
60.3
7.7

135.5
155.2
95.0
66.7
65.2
20.7

142.0
157.1
38.6
29.6
62.6
45.5

133.4
140.5
29.7
21.0
66.6
46.2

362.0 353.1
56.4 48.9
30.9 25.7
21.3 13.2
162.8 169.5
15.5
16.0

Excludes Alaska Natives.

Medical care to active and retired military personnel and their de-

pendents.—In 1977, DOD will operate 180 hospitals directly and will
contract with Icommunit}^ facilities to provide additional care for its
beneficiaries. Outlays for these services will be $3.8 billion in 1977,
or $326 million more than in 1976.
Medical care to veterans.—The Veterans Administration (VA) will
operate 172 hospitals, 107 long-term care facilities, and 229 outpatient clinics. It will provide VA inpatient care for 1.3 million
veterans and will fund over 15.7 million outpatient medical and dental
visits to VA facilities. It also will finance care for 92,000 inpatients,
and 2.4 million outpatient medical visits in non-VA facilities. Total
VA outlays for health activities, including construction of health care
facilities, will be $4.5 billion in 1977—an increase of $379 million
over 1976.
Health insurance jor Federal employees.—Health benefits are provided to 3.1 million Federal civilian employees and annuitants and
their 6.2 million dependents under the Federal employees health
benefits programs managed by the Civil Service Commission. In 1977,
Federal payments to finance these programs will increase by $40
million to a total of $383 million.
Tax expenditures.—After the proposed Financial Assistance for
Health Care block grant and medicare, the largest Federal support for
health care results from special provisions of the tax laws. The exclusion of employer health insurance contributions from the taxable
income of employees is estimated to result in a $4.2 billion tax
subsidy for employees in 1977. An additional $2.1 billion in revenue
loss will result from itemized deductions that individuals take in
their income tax computations for certain health expenditures and
insurance premiums.
Distribution of health care outlays by age group and economic status.—Table K-26 distributes Federal outlays for the
financing and direct provision of hospital and medical services among
three major age groups and between indigent and nonindigent persons.

212

THE BUDGET FOR FISCAL YEAR 1977

Federal funds for the development of health resources and for prevention and control of health problems are excluded from the table,
since they are not normally distributed by population group or income.
Unlike other tables in this special analysis, Table K-26 does not
include funds for health care provided to foreign nationals, since
poverty levels in other countries differ from the U.S. poverty level.
The Financial Assistance for Health Care program will require that
90% of the funds be used by States to provide personal health services.
Table K-26 and other tables in this special analysis assume that
Financial Assistance for Health Care funds will initially be spent
along the same general lines as the grant funds they replace.
Table K-26. ESTIMATED FEDERAL HEALTH CARE OUTLAYS BY
POPULATION AND INCOME GROUPS (in millions of dollars)
Outlays
1975
actual

Total, all recipients
Aged (65 and over)
Other adults (19-64)
Children and youth (0-18)
Indigent persons, total
Aged (65 and over)
Other adults (19-64)
Children and youth (0-18)
Nonindigent persons, total

Aged (65 and over)
Other adults (19-64)
Children and youth (0-18)

1976
estimate

TQ
estimate

1977
estimate

30,425

35,364

9,154

38,611

16,888
10,722
2,816

19,660
12,411
3,292

5,111
3,179
864

21,759
13,331
3,521

9,002

10,531

2,632

11,038

3,851
4,122
1,029

4,663
4,696
1,172

1,161
1,162
308

4,856
4,996
1,187

21,423

24,833

6, 522

27,573

13,036
6,600
1,787

14,998
7,715
2,120

3,949
2,017
556

16,903
8,335
2,334

PREVENTION AND CONTROL OF HEALTH PROBLEMS

The Federal Government supports programs to prevent and control
health problems, mainly in the areas of communicable disease control,
occupational health, consumer safety, environmental control, accident
prevention, and foreign health assistance. Table K-27 shows Federal
outlays for the prevention and control of health problems, which are
estimated at $1,270 million in 1977.
Table K-27. FEDERAL OUTLAYS FOR THE PREVENTION AND CONTROL
OF HEALTH PROBLEMS (in millions of dollars)
Outlays
1975
actual

Disease prevention and control
Mental illness prevention and control
Environmental control
Consumer safety
Occupational safety and health
Total, prevention and control

460
124
51
424
173
1,232

1976
estimate

462
135
70
471
211
1,349

TQ
estimate

98
32
22
126
58
337

1977
estimate

366
98
79
477
251
1,270

SPECIAL ANALYSIS K

213

Disease prevention and control.—The Federal Government supports various programs to prevent diseases and injuries through research, regulatory activities, provision of preventive services, and
public education. Categorical Federal grants for State and local
activities in disease prevention and control will be consolidated into
the new Financial Assistance for Health Care program.
The 1977 budget places priority on efforts to detect and eliminate
hazards in the workplace. Outlays for these activities will increase
by $40 million to $251 million in 1977. An increased number of
occupational safety and health standards will be developed and
promulgated by HEW and the Departments of Labor and the
Interior.
The Alcohol, Drug Abuse, and Mental Health Administration will
continue to support clearinghouses, media campaigns, and other
activities to help reduce mental illness in 1977. These efforts assist
States and localities in developing mental health programs and
provide the public with accurate information about mental health
and substance abuse problems.
Consumer safety.—In 1976, outlays of $477 million will be spent
on efforts to protect the public from unsafe foods, drugs, and other
products, and to reduce injuries from automobile accidents.
The Food and Drug Administration (FDA) in HEW will expand its
efforts to help assure the quality and safety of drugs, medical devices,
and foods. FDA and the Environmental Protection Agency will
continue support of long-term studies of the effects of low concentrations of chemicals in the environment and foods.
In 1977, the Consumer Product Safety Commission will continue
research, information dissemination, and regulatory measures to protect consumers from unreasonable risks from certain consumer products. The Department of Transportation will also work to prevent
automobile accidents and reduce injuries from accidents through
various motor vehicle and highway design safety standards. In
1974, about 46,000 deaths resulted from motor vehicle accidents, a
17% reduction from the 56,000 deaths in 1973. Much of the decline
is thought to be related to lower speed limits on highways.
Environmental control.—The major Federal effort in environmental control is administered by the Environmental Protection
Agency, which maintains surveillance of the effects of environmental
pollution on the health of the American people, promulgates environmental standards, and monitors compliance.
FOREIGN HEALTH ASSISTANCE

In 1977, the United States will provide $291 million for health
assistance to other nations. These funds will support efforts by the
Agency for International Development, the Peace Corps, and international agencies to which the United States contributes financially,
such as the World Health Organization and the Pan American
Health Organization. The funds are distributed across all categories
of health activities.

214

THE BUDGET FOR FISCAL YEAR 1977
EXPENDITURES FOR H E A L T H ACTIVITIES BY AGENCY

The following tables distribute the health-related outlays of Federal
agencies by the categories used in this analysis. Health activities of
HEW, the Consumer Product Safety Commission, and parts of the
Civil Service Commission and the Departments of Agriculture,
Housing and Urban Development, Interior, and Labor are included
under the health function (550) in Part 5 of the budget document.
Health-related outlays of all other agencies are, because of their
major missions, assigned to other functions. The following tables,
therefore, indicate the predominant budget functional code for each
agency. Other special analyses such as those on research and development, education, and work force also include some of the same
outlays in their tabulations.

Table K-28. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1975 (in millions of dollars)

Functional

Training
and

Health

Construc-

Health
planning

Direct
Federal
hospital
medical

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health.___
Social Security Administration
Social and Rehabilitation Service
Other HEW_
_
Department of Defense,_.
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
_
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
___
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1975.

550
551
550
550
553
550
553
550
551

1,867
9
58
114
42
1,598
27

551
550

2
13

051
703

104
93

928
28
528
152
2
177

300
400
750

551

47
20
59
143
1

44
35
15

162
11
126

31
82
1

255
208

23,002
578
6

515

1
3

231
198

96
122

164
1

451
350
304
250
251
553
150
250

542
48
369

22
38

Indirect
Federal
hospital
and
medical

235
2,261
3,018

567
211

59
26

1
259

3
2

3
13

2,459

1,384

949

639
153
12
96
111
33
172

11
14,781
6,876

6
9
7

Prevention and
control
of health
problems

71
316

8
9
23

5,567

3
40
1,050
24,883

3
95
81

Total

27,396
1,035
1,099
950
154
1,889
201
45
14,781
6,879

^
«

361
3,285
3,665

203
307
20
62
244
91
44
44

23
3
77

60
32
239
1,050

1,232

36,790
I

Table K-29. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1976 (in millions of dollars)

Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration-.
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Social Security Administration
Social and Rehabilitition Service
OtherHEW
Department of Defense
Veterans Administrations
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1976

550
551
550
550
553
550
553
550
551
551
550
051
703
451
350
304
250
251
553
150
250
300
400
750

Health
research

2,109
14
33
134
43
1,837
28
7
1
13
114
97
59
63
67
173
3
43
39
24
2
35
2,826

Training
and
education

939
32
558
127
1
173

Construetion

512
80
340
36
47
3
1

Health
planning
activities

160
12
116

Direct
Federal
hospital
and
medical

Indirect
Federal
hospital
and
medical

280
222
53

5
1

47
249
253

5
171
191
168
6

6
23
23

2,404
3,326

Prevention and
control
of health
problems

27,047
712
5
425

16
17,433
8,220
235
549
251
14

10
14
8

4
1
2
15

109

1,477

1,082

336

1
9

10
24

551
6,046

4
46
1,450
29,370

664
144
9
105
113
39
191
5
59
29
5
286
3
117
103
27
2
26
3
84
1,349

Total

31,711
1,217
1,062
880
157
2,095
222
59
17,433
8,222
365
3,517
4,142
209
351
63
70
300
119
49
43
54
70
36
302
1,450
42,486

Table K-30. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, TRANSITION QUARTER
(In millions of dollars)
Functional
code

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration.
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Social Security Administration
Social and Rehabilitation Service
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation
Department of the Interior..
Department of Transportation
_ _
Department of Justice
Other agencies
Agency contributions to employee health funds
Total outlays for health, transition quarter

Training
and

Health

Construe-

Health
planning

Direct
Federal
hospital
medical
services

550
551
550
550
553
550
553
550
551
551
550
051
703
451
350
304
250

517
3
25
30
16
434
7
1

251

553
150
250
300
400
750

29
25

180
9
118
17

74
17
41
6

8
1

41
3
31

6
7
67
65

15
16
20

1
26
74
54
3

83
65

1
6

603
795

Indirect
Federal
hospital
and
medical
services

7,059
181
2
75

5
4,562
2,230
4
135
61
6

11
10
10

140
26
2
25
31
6
49
1

8
2
80
1
31
28
22

3
3
4

Prevention and
control
of health
problems

2
2

2
6
1

711

322

240

1,490

551

1
10
405
7,679

4
1
20
337

Total

8,095
306
218
170
47
476

57
15
4,562
2,230
14
867
1,026
62
98
16
21

85
31
37
11
13
19
9
66
406

10,862

Table K-31. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1977 (in millions of dollars)

Functional

Department of Health, Education, and Welfare (total)
Health Services Administration
Health Resources Administration
Alcohol, Drug Abuse, and Mental Health Administration
Center for Disease Control
National Institutes of Health
Food and Drug Administration
Assistant Secretary for Health
Social Security Administration
Social and Rehabilitation Service
Other HEW
Department of Defense
Veterans Administration
Department of Housing and Urban Development
Department of Agriculture
Environmental Protection Agency
National Aeronautics and Space Administration
Energy Research and Development Administration
Department of Labor
Department of State
National Science Foundation
Department of the Interior
Department of Transportation
Department of Justice
Other agencies
Agency contributions to employee health funds
Total outlays for health, 1977

Training
and

Health

550
551
550
550

2,187
2
26
128

553

550
553
550
551

1,955
29
8

551
550

051
703

125
97

451
350
304
250
251
553
150
250
300
400
750

551

60
80
72
253
6

Construe-

planning

Indirect

Preven-

hospital
and
medical

control
of health
problems

204
143

656
23
388
62

360
56
241
11

38
4
1

1
5

246
271

325
308

1
151

213
10
151

2,512
3,532

265
5
1
20
8

49
40

8,980
19,646

34
18

585
301

2
2

1
2

148

1,217

29,634
608
4
343

48
2

3,048

Direct
hospital
and
medical

1,309

409

21
26

6,285

4
37

531
104
8
72

Total

33,792
946
819
687

127

44
194
20

2,188
227
9,062
19,646

47
11
307
4
142
99
34
2
20
3

37
53
3,841
4,521

308
371
80
76
415
125
59
49
53
101
37
312

1,793

32,396

1,270 45,935

SPECIAL ANALYSIS L
FEDERAL INCOME SECURITY PROGRAMS

Federal income security programs provide essential income protection for millions of Americans. A major, although not exclusive,
objective of these programs is to increase the income of people at
the lower end of the income scale. The programs included in this
analysis are divided into two broad categories:
—Cash benefits, such as social security and other income replacement programs.
—In-kind benefits, such as health care and food stamps, which
effectively increase real income by providing necessary goods.
In addition, tax expenditures for income security are expected to
result in lost revenues of over $20 billion in 1977.
The projections shown under medicaid for 1977 assume that States
will spend 97% of the total spent under the proposed Financial
Assistance for Health Care Act for medicaid purposes (the same
proportion projected for 1977 under existing law) and distribute it
among target groups as estimated for 1976.
OVERVIEW

Total Federal income security benefits are estimated to exceed
$177 billion in 1977. This represents an increase of over $43 billion
or about 27%, from the 1975 total of $139 billion.
Several factors account for this change:
—Increases in the number of beneficiaries;
—Increases in the bases (usually, past earnings) used in computing
benefits;
—Adjustments required by law to compensate for cost of living
increases; and,
—Higher prices for in-kind benefits (notably, food and medical
care) provided under some programs.
Table L-1. FEDERAL INCOME SECURITY BENEFITS (in millions of dollars)
1975
actual

Federal outlays for cash benefits:
Social security (OADSI)
Federal employee benefits
Veterans benefits
Public assistance
Unemployment insurance
Railroad retirement
Other programs
Proposed legislation included above
Subtotal, cash benefit outlays
Federal outlays for in-kind benefits:
Food and nutrition
Healthcare
Housing
Proposed legislation included above
Subtotal, in-kind benefits outlays
Total benefits

1976
estimate

TQ
estimate

1977
estimate

62,469
13,986
8,140
8,672
12,221
3,034
1,063

71,386
16,458
8,782
9,745
17,902
3,422
1,164

19,569
4,478
2,268
2,713
3,609
893
285
(—33)

81,340
18,922
8,679
10,870
15,428
3,624
1,113
(—906)

109,585

128,859

33,815

140,026

6,468
21,513
2,072

7,968
25,341
2,295
(-447)

30,053

35,604

8,939

37,047

139,638

164,463

42,755

177,073

1,658
6,334
6,722
28,162
559
2,551
(-701) (-4,449)

219

220

THE BUDGET FOR FISCAL YEAR 1977
TARGET GROUPS

Federal income security programs maintain or supplement income
of persons and families whose capacity for self-support is reduced by
old age, disability, illness, unemployment, poverty, or death of the
primary wage earner.
Where self-support is possible in part or in the future, income
security programs provide supplementary or temporary support.
Where self-support is not possible, income security programs provide
basic support.
The analysis below is organized by target group, i.e., programs
are discussed as they provide support to people sharing similar
problems and circumstances—the aged (annuitants and others), the
unemployed, mothers with small children and no breadwinner, and
those low-income persons who do not earn enough to provide for basic
needs. Needs-tested benefits are included in this analysis by target
group and are presented in a separate summary table (L-9).
Table L-2. INCOME SECURITY BENEFITS BY TARGET GROUPS
(In millions of dollars)
1975
actual
Annuitants
Other aged
Disabled
Mothers and children
Temporarily unemployed
Other transitional low income
Other
Total

39,743
41,419
21,297
7,358
12,774
9,720
7,328

1976
1977
estimate estimate
45,921
46,797
25,045
8,289
18,375
11,559
8,476

Change Percent
1975-77 change
1975-77

52,581
51,791
28,478
9,113
15,868
11,253
7,989

12,838
10,371
7,181
1,755
3,094
1,533
661

32.3
25.0
33.7
23.9
24.2
15.8
9.0

139,638 164,463 177,073

37,435

26.8

T H E AGED

Income security benefits for the elderly consist of wage replacement
for workers retired from full-time gainful employment, benefits to
survivors who depended on their spouses' incomes as the main source
of support, and assistance to those who were needy before they became aged.
In-kind program benefits received by the aged include medical
care services, food, and shelter.
Several provisions of the Federal personal income tax are designed
to benefit the aged. The largest benefits result from the extra personal
exemptions available to persons 65 or over and from the exclusion
of all social security benefits (not just the portion representing a
return of contributions) from taxable income. These two tax expenditures are expected to result in a loss of receipts of $1.2 billion
and $3.5 billion, respectively, in 1977. In addition, the retirement
income credit and the exclusion from income of railroad retirement
benefits are tax expenditures estimated at $0.1 billion and $0.2
billion in 1977. The combined loss of tax receipts from the retired
and elderly due to these four provisions is an estimated $5.5 billion
in 1977 (larger than their simple sum, due to the compounding, in
some cases, of the effects of these tax expenditure provisions in the
progressive tax system).

SPECIAL ANALYSIS L

221

Other tax provisions are directed to the future security of aged
persons by encouraging provision for retirement years. The major
benefits flow from the exclusion from both the employer's and employee's taxable income of employer contributions to and earnings of
qualified pension funds. After allowing for deferred taxes collected
from present retirees, the net loss in receipts from this tax expenditure
is estimated to be $6.5 billion in 1977. Similar tax provisions for
noncovered or self-employed persons will result in an estimated tax
expenditure of $1.0 billion for these persons in 1977.
Table L-3. INCOME SECURITY BENEFITS FOR THE AGED
(In millions of dollars)
Benefits
1975
actual

Covered employment:
Social security (OASI) members
Federal civilian employees
Railroad employees
Uniformed services members
Coal miners'widows
Supplemental security income
Income-tested veterans pension

1976
estimate

1977
estimate

Percent
increase
1975-77

51,764
5,460
2,797
1,085
218
1,817
1,540

58,895
6,585
3,158
1,238
240
1,838
1,639

66,888
7,826
3,339
1,340
260
1,932
1,555

29.2
43.3
19.4
23.4
19.0
6.3
0.9

64,682

73, 594

83,139

28.5

12,752
2,561
1,334

14,703
3,064
1,582

16,384
3,259
1,634

28.5
27.3
22.4

Subtotal, in-kind benefit outlays

16,648

19,349

21,227

27.8

Total

81,329

92,944 104,416

28.4

Subtotal, cash benefit outlays
Medicare
Medicaid
Other in-kind

Annuitants.—In all four federally run contributory retirement
systems, the benefit calculations are based upon past earnings and
are subsequently increased to reflect cost-of-living increases.
Under old-age and survivors insurance (OASI), 13.5 million retired
workers received pensions in 1975. Some 413,000 recipients in 1975
were primary beneficiaries under the railroad retirement system, but
about 39% of these retirees were also beneficiaries under the social
security system. A total of 745,000 persons were beneficiaries of the
civil service retirement system and of the foreign service retirement
system. Approximately 43% of the beneficiaries of the two Federal
civilian employee systems are also receiving social security.
The probable total number of primary beneficiaries of all the contributory retirement systems is thus 14.2 million persons in 1975
and 15.6 million in 1977.

222

THE BUDGET FOR FISCAL YEAR 1977

Table L-4. ANNUITIES TO PRIMARY BENEFICIARIES IN CONTRIBUTORY
RETIREMENT SYSTEMS: BENEFITS, BENEFICIARIES, AND AVERAGE
PAYMENTS BY SYSTEM
Benefit outlays
(in millions of dollars)
1975
actual

1976
est.

1977
est.

Number of primary
beneficiaries
(thousands)
1975
actual

1976
est.

1977
est.

Average monthly
payments
(in dollars)
1975 1976 1977
actual est. est.

Old-age and survivors
insurance
33,312 38,367 43,858 13,494 14,056 14,692
206 227 249
Civil Service Commission
4,753 5,711 6,781
720
764
810
550 623 698
Railroad
Retirement
Board
1,632
1,787
1,875
413
426
417
329 350 375
Foreign Service retirement
46
56
68
3
4
4 1,152 1,330 1,442
Total

39,743 45,921 52,851

Other aged.—This category includes income support to the aged
in which the benefits are based upon criteria other than past earnings.
The criteria of the program may be a work history of some related
person, and is not necessarily based on any measure of need. Underlying the purpose of these programs is the presumption that persons
past a certain age (for example, 65) are generally not self-supporting
through their own current earnings.
Aged widows.—Aged widows account for $16.5 billion in benefit
outlays in 1977, or 31% of all benefits to the aged outside of annuities
to primary beneficiaries. The increase in benefit outlays to aged widows
between 1975 and 1977 is due to increased benefit levels under the
social security and the railroad retirement systems. Some 4.9 million
aged widows will receive benefits from social security in 1977 with
1.0 million widows covered in other programs. There is considerable
overlap of these program beneficiaries with those covered by social
security. Tax expenditures again augment the value of these benefits.
The exclusion from taxable income of social security benefits for dependents and survivors is estimated to result in a $0.6 billion revenue
loss in 1977.
Aged wives of retirees.—The entitlement of wives under OASI and
railroad retirement is independent of any contribution history of
their own, and requires only that they exceed a particular age. Where
a wife has dual entitlement under social security based upon her
earnings history, as well as her husband's, she will receive only the
larger benefit. In the railroad retirement system, she receives both
benefits. In 1977, aged wives of retirees will receive $5.2 billion in
social security benefits. Of these, 650,000 wives will have dual entitlement under social security in which the wife's benefit exceeds the
benefit based upon her own earnings.

SPECIAL ANALYSIS L

223

Table L-5. BENEFITS FOR THE AGED EXCEPT ANNUITIES TO PRIMARY
BENEFICIARIES: BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)

Number of beneficiaries
(thousands)

Average monthly
payments
(in dollars)

1975
actual

1975 1976 1977
ac- esti- estitual mate mate

1976
estimate

1977
estimate

Civilian covered employment:
Social security
18,452 20,528 23,030 11,474
Federal civilian employees
494
593
714
194
Railroad employees _ __
1,165 1,371 1,464
536
Coal miners'widows..
218
240
260
96
Medicare..
12,752 14,703 16,384 16,100
Uniformed services:
Aged widows
497
544
557
238
Aged retirees
589
694
782
87
Aged veterans and
widows: Income
tested
1,540 1,639 1,555 1,822
Supplemental security
income*
1,817 1,838 1,932 2,013
Medicaid
2,561 3,064 3,259 4,170
In-kind benefits to needy
aged:
Food
959 1,167 1,181 3,846
Housing
375
415
453 1,025
Total
1

41,419 46,797 51,571

1976
estimate

1977
estimate

11,707

11,575

134

146

166

203
208 212 244 286
&3
554 181 207 220
102
108 189 196 200
16,700 17,600
66
73
78
238
92

238
98

174
562

191 195
625 668

1,815

1,751

2,110
4,233

2,203
4,296

75
51

73
60

73
63

4,170
1,112

3,939
1,348

21
30

23
31

25
28

_ __ _-__ .__.

Federal payment only.

Payments based on the minimum.—These are statutory minimum
amounts paid to retired workers, to the dependents of such retired
workers, and to noninsured beneficiaries age 72 and over. In 1977,
these social security payments will be $1.1 billion.
Aged retirees of the uniformed services.—The retirement systems
for the uniformed and military services are noncontributory, with
benefits based on time in service and the rank achieved at the time
of retirement, rather than the overall earnings history of the individual. Because military service is credited for social security coverage,
there is substantial overlap between the military retirement systems
and OASI.
THE DISABLED

Disabled.—The disabled constitute the second target group for
whom there is a presumption of permanent inability to achieve
self-support. Eligibility for an income security benefit for the disabled person may be based on: membership in a contributory retirement system (OASDI or civil service), on military service, on
occupation (coal miner), or on indigency (welfare).
Members of the social security system and the railroad retirement
system are eligible for disability benefits computed on their earnings
history to the date of permanent disability. They are also eligible for
medicare benefits. Federal civilian employees receive a disability
benefit based on total disability for their previous occupation—
paying a minimum benefit of 40% of the average of their highest 3
years of earnings.

224

THE BUDGET FOR FISCAL YEAR

1977

Benefits to the disabled in the uniformed services are scaled to
the degree of physical impairment rather than previous levels of
earnings. Disability retirement from the military, and veterans
compensation and indemnities, both are provided for disabilities
which are presumptively service-connected. Veterans' pensions are
paid to persons with non-service-connected total disability who served
in the armed services during wartime and whose income falls below
minimum levels.
Under the Federal Coal Mine Health and Safety Act, compensation
is paid to black lung victims in amounts related to the workers'
compensation law provided for Federal employees (FECA). Eligible
persons began registering for benefits in the spring of 1970. Many
received a one-time retroactive benefit in 1974.
Beginning in 1974, 1.3 million needy disabled received assistance
under the new Federal supplemental security income program enacted
in 1972 to replace State administered programs of assistance to the
blind and disabled. By 1977, that number will grow to 2.3 million
needy disabled.
Approximately 4.6 million persons will receive disability benefits
under social security in 1977. Another 302,000 individuals will receive benefits through Federal civilian employee programs. There is
a substantial overlap between these two groups and those receiving
disability benefits because of prior military service or employment
in coal mines.
Table L-6. BENEFIT OUTLAYS FOR THE DISABLED: BENEFITS,
BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)
1975
actual

Civilian covered employment:
Disability insurance...
Federal civilian employees
Railroad employees. __
Coal miners
Medicare

Uniformed services:
Service-connected disability
Other: Income-tested..
Public assistance to the
disabled:
Supplemental security
income

AFDC (disabled male
head of family)
Mcdicaid

In-kind benefits to needy
disabled: Food
Total

1976
estimate

1977
estimate

Number of beneficiaries
(thousands)

Average monthly
payments
(in dollars)

1975
actual

1975 1976 1977
ac- esti- estitual mate mate

1976
estimate

1977
estimate

7,630

9,141 10,768

3,912

4,357

4,573

163

175

196

1,359
206
612

1,658
230
621

1,965
251
557

1,368

1,853

2,213

271
45
353
2,025

290
46
343
2,255

306
47
321
2,565

418 477
381 417
144 151
56 68

536
445
145
72

4,736
503

5,198
536

5,353
505

3,167
513

3,177
510

3,178
488

125
82

136
88

140
86

2,264

2,707

3,313

1,622

1,950

2,317

116

119

574

650

700

1,740

2,081

2,363

1,380
2,497

1,440
2,534

1,410
2,572

35
58

38
68

41
77

305

370

323

1,062

1,141

938

21,297 25,045 28,311

SPECIAL ANALYSIS L

225

It is estimated that in 1977 5.2 million adults and children will be
supported by public assistance based on disability. Nearly all of these
persons are eligible for medicaid benefits.
Disabled persons benefit from the exclusion from taxable income of
social security disability insurance benefits, of workers' compensation benefits, and of payments such as sick pay and private disability
payments. These exclusions are estimated to reduce receipts in 1977
by $0.4 billion, and $0.6 billion, and $0.4 billion, respectively. The
exclusion from taxable income of veterans service-connected disability compensation is an additional tax expenditure of $0.6 billion.
Mothers and dependent children.—Benefit eligibility varies
considerably for this last target group for whom self-support is not
assumed to be universally possible. This group includes mothers with
dependent children and no male breadwinner. Eligibility is determined either by the work history of a deceased husband or through a
means test.
Table L-7. BENEFITS FOR MOTHERS WITH DEPENDENT CHILDREN AND
NO HUSBAND: BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT

Benefits to widows of
covered employees:
Social
security
(OASDI) members.
Federal civilian employees
Railroad employees. _.
Uniformed
service
members
Coal miners
Public assistance (AFDC)
mothers with preschool children:
Cash payments
Medicaid
_
Total

Benefit outlays
(in millions of dollars)

Number of beneficiaries
(thousands)

1975
actual

3,075
126
31

1976
est.

1977
est.

3,350

3,684

151

182
34

Average monthly
payments
(in dollars)
1975 1976 1977
actual est. est.

1976
est.

1977
est.

1,936

1,767

130

144

174

44
11

46
11

48
10

240
235

275
258

319
283

1,974

395
35

440
37

457
35

556
25

562
24

559
22

59
117

65
129

68
133

2,248
1,447

2,546
1,732

2,754
1,842

5,450
9,006

5,650
9,366

5,550
9,741

7,358

8,289

8,988

Transitional low income.—The intent of income security outlays
for able-bodied persons is to tide them over periods in which they
cannot support themselves, until other measures correct the causes
of such inability to provide self-support.
The major system of unemployment insurance, constituting 90%
of unemployment benefits paid in 1975, is State-administered. As
a result, states varied in eligibility requirements, benefit levels, and
duration of benefits.

Digitized for210-700
FRASER
O - 76 - 15

226

THE

BUDGET FOR FISCAL YEAR

1977

Table L-8. BENEFITS FOR TRANSITIONAL LOW INCOME AND OTHER:
BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENT
Benefit outlays
(in millions of dollars)

Number of beneficiaries
(thousands)

Average monthly
payments
(in dollars)

1975
actual

1975 1976
actual est.

1976
est.

1977
est.

^976
est.

1977
est.

Temporary unemployment:
Unemployment
insurance system
12,141 17,678 15,432 11,461 11,009 9,218
88 134 140
Other unemployment
benefits
633
697
736
579
575
536
91 101 114
Long-term unemployment:
Unemployed fathers,
229
260
280
541
575
565
35
38
41
Mothers with all
children in school1,537
1,741
1,887 3,701 3,835 3,775
35
38
42
Other
income
1
tested
550
625
603
693
722
708
66
72
71
In-kind benefits, low
income:
Food 2
4,564 5,675 4,830 29,714 32,246 25,921
13
15
21
Housing*
1,697
1,880 2,098 4,927 5,303 6,324
29
30
28
Medicaid_.___
1,092
1,307
1,389 6,794 7,066 7,348
13
15
16
Uniformed services retirees under 65
4,866 5,735 6,465
792
838
885 512 570 609
Food for
non-needy
children
639
755
26,783 28,133
_ . . . . . . . ..._
Other
1,823
1,986 2,113
_
.... ....
Total, transitional
lowincome_.__ 29,771 38,339 35,833
1
2

Includes all assistance to refugees and Indians.
Includes all benefits to AFDC and UF families.

Special unemployment benefit programs are provided for Federal
employees and ex-servicemen, railroad employees, and unemployed
workers in industries adversely affected by foreign trade. A temporary
program enacted in December, 1974 when unemployment was rising,
and expiring March 31, 1977, provides compensation for the temporarily unemployed not covered in another system. These programs
are federally financed, but except for railroad retirement unemployment insurance, are State-administered.
The exclusion from taxable income of unemployment compensation
benefits is a tax expenditure expected to grow from $2.3 billion in
1975 to $2.9 billion in 1977.
A second set of programs providing income security benefits to
able-bodied men and women are means-tested cash and in-kind
programs.
Benefits based neither on need, lack of employment or age, are
provided to uniformed services retirees under the age of 65 because
of their length of service.
Needs-tested benefits.—The foregoing tables have provided displays of benefits for various target groups. Within these target groups,
benefits may or may not be based on a needs or means test. Public
assistance, veterans and survivors pension, medicaid, and food and

SPECIAL ANALYSIS L

227

housing programs, on the other hand, are those which provide benefits
to individuals based on a test of need. In addition to that test, eligibility for cash assistance may be limited by such considerations as
prior military service, age, disability, or absence of a male breadwinner
in a family. The following table addresses only those program benefits
that are available to each target group on a needs-tested basis.
Table L-9. NEEDS-TESTED BENEFITS BY TARGET GROUPS AND
PROGRAM (in millions of dollars)
Benefit outlays
1975
actual

1976
estimate

1977

estimate

By target group:
Benefits to the aged:
Public assistance
Veterans and survivors pension
Medicaid
Other

1,817
1,540
2,561
1,334

1,838
1,639
3,064
1,582

1,932
1,555
3,259
1,634

Subtotal, benefits to the aged

7,253

8,124

8,380

2,837

3,356

4,013

503

536

505

1,740

2,081

2,213

305

370

323

5,385

6,343

7,054

2,248
1,447

2,546
1,732

2,754
1,842

217

230

222

3,912

4,508

4,818

1,766
1,092
4,564
1,697

2,001
1,307
5,675
1,880

2,167
1,389
4,830
2,098

600

696

673

9,720

11,559

11,157

Benefits to the disabled:
Public assistance
Veterans and survivors pension
Medicaid
Other
Subtotal, benefits to the disabled
Benefits to mothers:
Public assistance
Medicaid
Other
Subtotal, benefits to mothers
Benefits to the unemployed and other low income:
Public assistance
Medicaid
Food
Housing
Other
Subtotal, benefits to unemployed
Total needs-tested benefits

26,270

30,535

31,409

By program:
Public assistance
Veterans and survivors pension
Medicaid
Food
Housing

8,790
2,739
6,840
5,828
2,072

9,929
2,914
8,184
7,213
2,295

11,050
2,771
8,703
6,334
2,551

26,270

30,535

31,409

Total needs-tested benefits

228

THE BUDGET FOR FISCAL YEAR

1977

Table L-10. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM (in millions of dollars)
Benefit outlays

Department, agency and program

Department of Health, Education, and Welfare:
Social security:
Old-age and survivors insurance
Disability insurance
Hospital insurance
Supplementary medical insurance
Supplemental security income
Public assistance:
Maintenance payments
Medicaid
Special benefits for disabled coal miners
Assistance to refugees
Public health service officers retirement
Medical care for retired commissioned officers
Proposed legislation included above
Total Health, Education, and Welfare

1975
actual

1976
estimate

TQ
estimate

1977
estimate

54,839
7,630
10,355
3,765
4,081

62,245
9,141
11,869
4,687
4,545

17,023
2,546
2,964
1,380
1,255

70,572
10,768
12,960
5,804
5,245

4,592
6,840
939
70
21
5

5,200
8,184
960
135
24
6
(-315)

1,458
5,625
2,220
8,703
225
906
33
128
7
28
2
7
(-413) (-3,057)

93,136

106,996

29,113

120,746

4,680
2,739

5,114
2,914

1,306
783

5,220
2,771

Life insurance (net subsidy)
Other veterans benefits
Proposed legislation included above

527
193

544
210

137
41
(—21)

568
120
(—85)

Total Veterans Administration

8,140

8,782

2,268

8,679

11,958
183
67

16,878
800
164

3,285
250
44

14,832
300
176

553
13
186
6

473
60
249
20

120
30
76
5

12,966

18,644

3,810

16,186

6,242
548

7,325
595

1,977
156

8,247
688
(—225)

6,790

7,920

2,133

8,935

4,357
1,832
124
155

5,283
2,333
103
249
(-132)

1,077
499

4,307
2,000

82
(-300)

6,468

7,968

1,658

Veterans Administration:
Disability and dependency and indemnity compensation
Veterans and survivors pensions

Department of Labor:
Unemployment insurance (State programs)
Special unemployment assistance
Railroad unemployment
Unemployment compensation for Federal
ployees and ex-servicemen..
Trade adjustment activities
Federal employee worker's compensation
Special benefits for disabled coal miners
Proposed legislation included above

TotalLabor
Department of Defense—Military:
Military retirement..
Medical care for retirees..
Proposed legislation included above._
Total Defense
Department of Agriculture:
Food stamps
Child nutrition
_
Specialmilk
Removal of surplus commodities
Proposed legislation included above

Total Agriculture

em-

440
120
291
27
(300)

27
(-2,218)

6,334

SPECIAL ANALYSIS L

229

Table L-10. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY
DEPARTMENT AND PROGRAM (in millions of dollars)—Continued
Benefit outlays
Department, agency and program
1975
actual

1976
estimate

6,825

8,198

2,248

9,753
(~69)

6,825

8,198

2,248

9,753

Railroad Retirement Board: Railroad Retirement

3,034

3,322

893

3,624

Total Railroad Retirement Board__._

3,034

3,322

893

3,624

Department of Housing and Urban Development:
Public housing
Rent and mortgage interest supplements

1,312
761

1,429
866

316
243

1,489
1,062

2,072

2,295

559

2,551

Civil Service Commission: Civil service retirement
Proposed legislation included above
Total Civil Service Commission

Total Housing and Urban Development
Department of Transportation: Coast Guard retirement
Total Transportation
Department of State: Foreign Service retirement
Proposed legislation included above
Total State
Department of the Interior: General assistance to
Indians
Total Interior
Department of Commerce: NOAA officers retirement..
Total Commerce
Total Federal outlays

TQ
estimate

1977
estimate

105

122

133

105

122

133

139,638

164,463

42,755

177,073

SPECIAL ANALYSIS M
FEDERAL CIVIL RIGHTS ACTIVITIES
COVERAGE AND SCOPE OF THE ANALYSIS

This analysis of Federal civil rights activities comprises more than
the traditional programs and policies related to civil rights enforcement. In addition to Federal activities regarding the protection of
such rights as voting, public accommodations, fair housing, and equal
employment opportunity in the public and private sectors, there are
included Federal programs related to civil rights research and information dissemination and to the conciliation and prevention of racial
disputes. Outlays to enforce these civil rights
have risen from $346
million in 1975 to $430 million in 1977.1
Outlays (or Civil Rights Enforcement

M-I

1976

1977
Estimate

230

SPECIAL ANALYSIS M

231

Programs relating to problems of the economically and socially
disadvantage^ whether in employment and training, community
development, or bilingual education, will not be treated as civil
rights activities, even when they include substantial minority participation, for they are more properly considered in other analyses
in this document.2
Federal service equal opportunities.—The
head of each
Federal Executive department and agency is charged by Executive
Order 11478 and the Civil Rights Act of 1964, as amended by the
Equal Employment Opportunity Act of 1972 (Public Law 92-261),
with establishing and maintaining an affirmative program of equal
employment opportunity within the agency. Enforcement responsibility for the Government-wide program is assigned to the Civil
Service Commission and special procedures are available to employees
and applicants who believe they have been discriminated against
in any aspect of Federal service. Under these procedures, 36,933
persons contacted equal employment opportunity counselors during
1975 for advice and assistance, and, of this total, 5,563 filed formal
discrimination complaints. If equal employment opportunity counseling, impartial investigation, and a third-party hearing do not resolve
the matter to an individual's satisfaction, the complainant may appeal
to the Commission's Appeals Review Board or may file a civil action
in U.S. district court.
Table M-1. FEDERAL CIVIL RIGHTS OUTLAYS BY PROGRAM CATEGORY
(In millions of dollars)
1976

1977

145.62
37.50
94.07
16.69
16.78
22.25
9.05
3.57

173.43
40.48
106.48
21.51
17.56
24.53
10.50
3.84

44.90
12.83
28.80
5.48
4.41
6.77
3.29
.98

187.66
40.10
115.01
23.91
18.13
26.73
14.17
4.16

345.54

398.32

107.46

429.85

1975
Civil rights enforcement:J
Federal service equal employment opportunities
Military services equal opportunities 2
Private sector equal employment opportunities
Equal educational opportunity 3
Fair housing 4
Enforcement and investigation 5
Research and information dissemination
Civil rights conciliation and prevention of disputes
Total

1
Civil rights enforcement programs guarantee and protect the basic civil rights as defined by law.
2
Excludes outlays of $18.8 million for contract compliance, fair housing and title VI activities reported
elsewhere. Includes U.S. Coast Guard.
3
Excludes outlays under the Emergency School Aid Act. Cf. table M-4.
4
Excludes funds for contract compliance and departmental personnel who directly administer
housing and urban development programs but also concern themselves with the objectives of fair
housing laws.
5 Includes all title VI efforts except HEW and HUD.

Government policy is clear that personnel actions shall be free from
discrimination based on race, color, religion, sex, or national origin and
that Federal agencies shall take affirmative action to assure equal
employment opportunity. Agency equal employment opportunity pro2
For example, expenditures for minority participants in employment and training programs (40%)
are not included. See Special Analysis J, Training and Employment.

232

THE BUDGET FOR FISCAL YEAR 197 7

Increase in Minorities by Grades 1 — November 1973—November 1974
Percent Change
15

Percent Change
15

5-8

16-18

nd Similar Giade Gro«pin9«.

grams are documented in written plans of action which must be submitted to the Commission annually for review and approval. Careful consideration is to be given to assure that recruitment activities
reach all sources of job candidates, that present employee skills are
fully utilized, that opportunities for upward mobility are provided
and that managers are trained with regard to their equal employment opportunity responsibilities.
Outlays for Federal civil service equal employment opportunity
programs (including upward mobility) will increase by 29% in the 2
years, 1975 to 1977, to $188 million. Work-years in these programs
will increase to 11,839.
As of November 30, 1974, over one-fifth (21.0%) of Federal employees were members of minority groups. Recent surveys have
reflected a continuing trend of more minorities in the middle and upper
grade and pay levels. As of October 31, 1974, women represented 41.7%
of the nonpostal, full-time Federal white-collar work force. Between
October 1973 and October 1974, women represented 61.0% (38,843) of
the total increase (63,677) in general schedule employment.
Under the Intergovernmental Personnel Act of 1970 (IPA), the
Civil Service Commission provides technical and financial assistance
to State and local governments and their agencies for improving
personnel management and employee development, with a concerted
emphasis on equal employment opportunity. State and local governments across the country have made considerable progress recently
toward the goal of assuring equal opportunity for employment and

SPECIAL ANALYSIS M

233

promotion in the public service. Under this program in 1975, the
Commission has:
• Awarded $830 thousand in IPA grant funds to State and local
governments for 30 projects relating to equal employment opportunity.
• Provided assistance on request to more than 1,000 jurisdictions on
affirmative action planning, removing artificial personnel barriers
and improving job-related selection procedures.
• Developed and issued a variety of publications for State and local
use, aimed wholly or partially at improving equal employment
opportunity.
In 1977, the Commission will continue to provide technical and
financial assistance in this area.
Military services equal opportunities.—Each of the military
services has placed equal opportunity officers and their staffs at various
levels within individual command structures. They guide, monitor,
and evaluate all matters pertaining to the equal opportunity and treatment of military personnel and their dependents and are responsible
for and participate in race relations councils, seminars, and training.
In 1977, outlays for insuring equal opportunities for members of the
Armed 3Services, excluding fair housiDg expenditures, will total $40.1
million and provide for more than 3,150 work-years.
Equal opportunity for servicewomen will receive added emphasis.
As the number of women in the military services continues to rise at
a rapid rate, greater utilization is being made of their talents. For
example, the Army has now opened 92% of their enlisted occupational
specialities to women. All services are now also training women as
noncombat pilots and, beginning in 1976, women will attend the
service academies. Service ROTC programs are also open to women.
The Defense Race Relations Institute, located at Patrick Air Force
Base, Fla., trains officers and enlisted members for service with their
units as instructors. The Institute has graduated over 3,857 instructors from all the services in the past 5 years.
Recruiting efforts will continue to insure balanced minority participation in the military services. All services have increased the percentage of minority recruiters. As an example of their success, there are
over 1,500 minority cadets enrolled in the service academies today.
Significant progress has also been made in procuring minority officers
from reserve officer training programs and officer candidate training
schools and in the detailing of qualified minority officers to attend
senior and intermediate level professional military schools.
For the first time in history, there is a minority at the 4-star general
rank. In addition, there are 17 other minority general officers on active
duty whereas, prior to 1971, only 4 minority officers had ever achieved
general/flag officer rank in the entire history of Armed Services. The
top enlisted position in the Air Force continues to be held by
a minority.
Private sector opportunities.—Title VII of the Civil Rights Act
of 1964, as amended, prohibits discrimination in employment on the
basis of race, color, religion, sex, or national origin by either employers,
3

Military services equal opportunities includes the U.S. Coast Guard.

234

THE BUDGET FOR FISCAL YEAR 19 77

Equal Employment Opportunity Commission Activities
$ Millions

Completed Investigations
75,000

I Completed Investigations
"

EEOC Expenditures

50,000

50-

25,000

$23.0,

{2,032

J972

1973

Fiscal Years
1

Includes ins-eitijation. by EEOC i

1974

1975'

19771

1976'
Estimate

[ ai by defetral agencitt and administrative clofl»ei.

unions, or employment agencies. Executive Order 11246, as amended,
requires Federal and federally assisted Government contractors and
subcontractors to provide similar opportunities. Outlays for the
agencies charged with these responsibilities, the Equal Employment
Opportunity Commission, the Justice Department, the Department4
of Labor, and 17 cooperating agencies, will total $115 million in 1974.
The Equal Employment Opportunity Commission will spend $68
million in 1977 to carry out its responsibilities relating to nondiscrimination in employment in the private sector and State and local
government. An estimated 80,500 charge resolutions are projected
through the combined efforts of the Commission and the State and
local agencies to which, under law, charges are deferred. The Commission will increase the amount of its grants by 33% to $8 million
for State and local agencies which administer fair-employment
practices statutes to strengthen the Federal/State partnership in
handling charges. As a result of these actions, an estimated 82,532
persons will receive $159 million in cash benefits in 1977.
Enforcement of title VII, as amended, is also the responsibility of
the Justice Department which, through conciliation and litigation,
seeks to secure compliance with the law where it finds patterns or
practices of employment discrimination in State and local governments
and their agencies. In 1977, the Justice Department plans to spend
$1.5 million to help eliminate such discrimination in the State and local
public sectors.
* Excludes amounts for nondiscrimination against the aged, handicapped, and veterans.

235

SPECIAL ANALYSIS M

Federal Contract Compliance Activities
$ Million*
60

Hires and Promotions, (Thousands)

569,000

600

Hires and Promotions'
Contract Compliance Expenditures

50 —

500

$39.6

-400

300

30 —
250,000

20-

-200

$18.1

10-

100

1972
Fiscal Years
1

1973

1974

1975

1976

f977
Esti mat e

From afflrmotiv action plant in non-conirruction contract*. Excludes Portal Service Outlays*

Executive Order 11246, as amended, prohibits the practice of
discrimination in Federal contracts, subcontracts, and on federally
assisted construction projects. Nondiscrimination assurances cover
construction as well as industrial work forces and require affirmative
action on the part of recipients of Federal contract moneys to promote
the equal employment of minorities and women. In 1977, the Federal
agencies responsible for implementing this order will spend $39.6
million. More than 550,000 new hires and promotions will be effected
by such affirmative action goals.
Sixty-nine "citywide" plans for affirmative action in the construction industry, including the well-known "Philadelphia plan,"
have been put into effect. In addition, the Office of Federal Contract
Compliance programs, Department of Labor, is continuing to develop proposals for statewide construction contracts. The goal for
1977 is to insure that all areas with substantial minority populations
are covered under either a voluntary or imposed affirmative action
plan.
Other highlights include:
• The Federal Communications Commission will continue to
investigate complaints of employment discrimination by broadcasters, cable television systems, and common carriers and
review licensees' annual reports of employment patterns as part
of its program to enforce the rules of the Commission relating
to equal employment opportunity.

236

THE BUDGET FOR FISCAL YEAR

1977

• The Department of Labor will spend $4.1 million in administering
the Equal Pay Act. In 1975, as a result of these efforts, $26.5
million in wages was received by 31,843 employees, primarily
women, to rectify illegal pay practices. An additional $7.4 million
in back wages was also restored to 17,889 employees.
Equal educational opportunity.—Responsibility
for insuring
equality of educational opportunity rests both with the Department
of Health, Education, and Welfare and with the Department of
Justice. This responsibility includes guaranteeing students the full
range of educational opportunity, as well as promoting a nondiscriminatory policy with regard to school staff and administration.
In 1977, educational activities in support of these goals will expend
$23.9 million excluding capital assistance to predominantly
black
colleges and the emergency school assistance piogram.5
To enforce Federal laws requiring equal education opportunities
for public school students, the Justice Department will spend $2.0
million in the coming year. Although substantial compliance with
the constitutional mandate has been achieved in recent years, the
Justice Department continues its enforcement supervision
through
over 200 cases involving some 500 school systems. 6 In addition, the
Department engaged in active litigation in 103 of these cases to
assure full compliance with the law, including nondiscrimination in
the hiring and promoting of school personnel. Currently, the Federal
Government is also taking steps to provide demonstration programs
for non-English-speaking pupils to provide them full equality of
opportunity. Title IX of the Higher Education Amendments of 1972
charged the Department of Health, Education, and Welfare with the
responsibility of insuring nondiscrimination on the basis of sex in
some 2,700 institutions of higher education throughout the United
States. In 1977, the Department expects to conduct 150 onsite
compliance reviews and to investigate 100 complaints.
Fair housing.—Title VIII of the Civil Rights Act of 1968 prohibits
discrimination in the sale, rental, or financing of housing, and in the
provision of brokerage services, on the basis of race, color, religion,
sex or national origin. The Department of Housing and Urban Development (HUD) is charged with the administration and enforcement
of this act and the promotion of fair housing throughout the United
States. All executive agencies and departments are required to cooperate with HUD—the lead agency in this area—and to conduct
their programs in a manner that affirmatively furthers fair housing
opportunities for all Americans.
5
~

6«

Excludes aiiiouiits
amounts ifor
L^ACIUUCS
or nondiscriminati
nonaiscn
J
_
£
1
1
•
The desegregation
of
schools
is

..•

nation, i nese discretionary runas win permit a flexible approacn to insure educational acnievement
districts that are desegregating.
Since this money represents project grant money rather than an enforcement effort directed by
i the scene Federal personnel, it is included under minority assistance programs in table M-4.

SPECIAL ANALYSIS M

237

Expenditures for the administration of fair housing programs in
executive departments and agencies will inciease in 1977 to $18.1
million.
• HUD will spend $5.1 million to strengthen its efforts under title
VIII and enable it to reduce the backlog in the reactive complaint
system.
• The Department of Justice will spend $2.1 million in the development, litigation, and negotiation of cases to enforce title VIII.
• The Department of Defense will spend $6.1 million to assure the
rights of all military personnel to available offbase housing.
• The General Services Administration (GSA) will spend $1.1
million to assure that federally constructed or leased space is
located where there is an adequate supply of low- and moderateincome housing available on a nondiscriminatory basis.
• Pursuant to the Equal Credit Opportunity Act (title V of Public
Law 93-495), the Federal Reserve Board published final regulations in November 1975, to prevent discrimination in providing
credit on the basis of sex or marital status.
Table M-2. FEDERAL CIVIL RIGHTS OUTLAYS BY TYPE OF ACTIVITY
(In millions of dollars)
1975

actual

Civil rights enforcement:1
Complai nt conciliation
Complaint investigation
Compliance review and monitoring
Legal enforcement
Program direction, research and information dissemination
Technir al assistance
Upward mobility
Military services equal opportunities
Total
1

1976

1977

21.12
48.62
66.30
23.64

24.42
56.13
76.97
28.12

6.63
15.40
20.09
7.54

26.99
61.78
84.28
29.61

82.14
6.21
60.00
37.50

91.95
6.45
73.80
40.48

24.65
1.72
18.60
12.83

101.15
6.65
79.30
40.10

345.54

398.32

107.46

429.85

Civil rights enforcement programs guarantee and protect the basic civil rights as defined by law.

During 1975, HUD received 3,167 complaints, and closed 2,575. In
addition, 355 conciliation agreements were negotiated, generally including both specific relief for the complainant and actions to eliminate
any discriminatory practices found as a result of the complaint. Enforcement of title VIII is also implemented through requiring the
display of fair housing posters, overseeing advertising guidelines and
reviewing affirmative marketing plans.
Finally, title VIII requirements are an integral part of HUD
regulations implementing title I of the Housing and Community
Development Act of 1974, which provides for community block grants,
and title II of that act, which establishes the new section 8 housing
assistance payments program. To assure nondiscrimination under these
programs, the Department will continue communitywide administrative meetings; expand compliance reviews; and increase cooperative
efforts with other agencies, particularly the independent Federal

238

THE BUDGET FOR FISCAL YEAR

1977

financial regulatory agencies, in order to insure the affirmative administration of all programs relating to housing. HUD's enforcement
efforts herein are supplemented by the Department of Justice and by
private civil suits which may be brought pursuant to title VIII.
The Justice Department has brought or participated in 229 suits
against some 700 defendants in 34 States and the District of Columbia.
At least 221 court orders have been entered, most of them requiring
comprehensive affirmative relief to correct the effects of past housing
discrimination and to maximize equal opportunity in the future.
The Department has also obtained supplemental relief or brought
contempt of court proceedings in 21 cases where defendants had
failed to implement provisions of earlier orders and voluntary compliance agreements have been concluded with the real estate boards
of major cities.
The Defense Department expects to continue its successful implementation of the open offbase housing program. Today, 99% of surveyed facilities are pledged to a policy of nondiscrimination. Recently,
Defense revised its procedures to take stronger measures against
landlords practicing race and sex discrimination. In 1977, Defense will
devote 469 work-years of effort to furthering this record of achievement.
GSA, under Executive Order 11512, will expend 43 work-years on
matters relating to the positive impact that selection of sites for
Federal facilities can have on the social and economic conditions in
the area. GSA and HUD are continuing to develop affirmative action
plans where necessary to insure that an adequate supply of low- and
moderate-income housing will be available on a nondiscriminatonr
basis.
Civil rights enforcement.—Primary
responsibility for the
enforcement of civil rights laws and constitutional guarantees is vested
in the Justice Department. This includes the development, negotiation,
conciliation, and litigation of cases and complaints. In 1977, the
Justice Department and other agencies with enforcement responsibilities will spend $26.7 million to carry out the above mandate.
In addition the efforts of the Department will focus on its ongoing
coordination of Federal agencies, enforcement efforts under title VI of
the 1964 Civil Rights Act which prohibits discrimination in federally
assisted programs and under the general revenue sharing legislation.
The Department will also carry on enforcement activities directed
toward compliance with laws which prohibit the interference with
basic civil rights, including the right to vote and the use of public
accommodations and facilities.
In 1977, the Justice Department will continue to allocate resources
for investigation and litigation to protect the civil rights of citizens
who may have suffered violence or threats of violence including special
protections for migrant workers, prison inmates, and, along with the
Interior Department, American Indians. Attention will also be
directed, as before, to civil litigation involving injustices and substandard conditions in correctional institutions, mental hospitals,
and juvenile homes.
The voting rights program will expand its efforts to secure to all
citizens, including non-English-speaking citizens, the right to register

SPECIAL ANALYSIS M

239

and vote without discrimination or intimidation. In addition, all proposed changes affecting voting under section 5 of the Voting Rights
Act of 1965, as amended, are submitted to the Attorney General and
must be investigated, reviewed, and adjudicated in the Department of
Justice. 652 submissions involving 2,080 changes were processed
in 1975. In support of the voting rights program, the Civil Service
Commission provides personnel to prepare and maintain lists of eligible
voters and to observe election procedures in States or other political
subdivisions designated by the Attorney General. The Commission
receives complaints, hears and determines challenges, and assists in
the defense of challenge cases filed in the U.S. circuit courts of appeals.
In 1977, the Commission will spend $1.4 million to assist in this
responsibility.
Civil rights research and information dissemination.—Expenditures grouped in this category include all moneys for civil rights
activities not counted elsewhere as well as Federal research and information dissemination efforts. Outlays in this area will total $14.2 million
in 1977.
• The Commission on Civil Rights will spend $8.9 million to carry
on its factfinding function relating to denials of equal protection
under the law.7
• The Women's Bureau, Department of Labor, will devote $2.1
million to questions and issues relating to the utilization of
womanpower and the economic, legal, and civil status of women.
The Bureau works with appropriate State, national, international,
local, and union organizations, and concerned individuals in
achieving its goals and also provides support services to the
Citizens Advisory Council on the Status of Women.
• A $5 million appropriation is requested to enable the National
Commission on the Observance of International Women's Year
to convene a national conference evaluating the progress of
American women over the past 200 years. Preparatory to that
conference, State meetings are to be held assessing the current
status of women and developing ways to eliminate remaining
inequalities in this country. Expenditures for the Commission
in 1977 will total $2.9 million.
• The women's action program, Department of Health, Education,
and Welfare (HEW), in association with the Secretary's Advisory Committee on the Rights and Responsibilities of Women,
will spend $0.3 million to analyze the effects of HEW programsr
on women and develop the changes required to help attain equalit}
for women.
Civil rights conciliation and prevention of disputes.—The
Community Relations Service of the Department of Justice was
established by title X of the Civil Rights Act of 1964 to provide
Excludes expenditures authorized under the Age Discrimination Act of 1975.

240

THE BUDGET FOR FISCAL YEAR 19 77

assistance to communities in resolving difficulties arising from discriminatory practices which disrupt peaceful relations among citizens.
It also seeks to reduce and prevent racial tensions. The Service actively
cooperates with appropriate Federal, State, and local agencies, private and public groups, and individuals on methods and programs
for the peaceful resolution of racial disputes.
In 1977, the Service will spend $4.2 million for this purpose. This will
permit an expansion in crisis resolution and State liaison activities.
State liaison representatives continue to work with State and local
officials in developing their own crisis contingency plans to enable
communities to eventually provide community relations services for
themselves.
Table M-3. FEDERAL CIVIL RIGHTS OUTLAYS BY DEPARTMENT AND
AGENCY (in millions of dollars)
1975
actual

Civil rights enforcement:x
Department of Agriculture
Department of Commerce
Department of Defense
Department of Health, Education, and Welfare
Department of Housing and Urban Development ___
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Treasury Department
Civil Service Commission2
Commission on Civil Rights
Energy Research and Development Administration 3_
Environmental Protection Agency
Equal Employment Opportunity Commission
Federal Communications Commission
General Services Administration
National Commission, IWY 4
Postal Service5
Small Business Administration
Veterans Administration
Other independent agencies
Total

1976
estimate

5.30
1.00
53.72
17. 69
10.91
1.65
20.61
10.63
*
3.55
.95
146.00
6.92
2. 35
.75
56.13
.29
4.53

TQ
estimate

1977
estimate

5.74
.97
57.22
24. 15
11.78
2.00
21.48
12.44
*
3.98
1.00
174.65
7.92
2.23
.90
62.99
.30
5.17
.26

1.41
.24
17.05
6. 19
2.89
.51
5.42
3.14
*
1.02
.25
45.18
2.26
.55
.17
17.87
.08
1.36
.44

5.88
1.02
58.47
26. 53
11.85
2.05
22.53
12.98
*
4.30
2.38
189.09
8.90
2.24
.90
68.04
.39
5.91
2.90

1.05
.87
.64

1.08
1.28
.78

.99
.32
.12

1.13
1.57
.79

345.54

398.32

107.46

429.85

1
Civil rights enforcement programs guarantee and protect the basic civil rights as defined by
law.
2
All Federal service equal employment opportunity outlays, including upward mobility, are
reported
under the lead agency, Civil Service Commission.
3
The Atomic Energy Commission expired Jan. 19, 1975. The majority of its resources were transferred
to this new agency upon its expiration.
4
National Commission on the Observance of International Women's Year, 1975.
5
Postal Service outlays appear in the Annexed Budget.
*Less than $10 thousand.

SPECIAL ANALYSIS M

241

Table M-4. FEDERAL MINORITY ASSISTANCE PROGRAMS
Minority Assistance Outlays by Program Category J
(In millions of dollars)

Indian programs2
Minority business enterprise 3
Emergency School Aid Act
Minority higher education assistance4
Total

1975
actual

1976
estimate

TQ
estimate

1977
estimate

1,244.20
1,029.51
215.94
105.79

1,594.60
1,440.44
234.66
105.24

460.00
316.06
58.82
27.66

1,535.50
1,562.80
220.79
114.33

2,595.44

3,374.94

862.54

3,433.42

1
Minority assistance programs broaden opportunities for economic participation and self-determination.
2
The composition of Indian outlays remains unchanged from the prior to 1976 format to exclude
programs not specifically established for Indians. These amounts include outlays from Indian tribal
funds
held in trust by the Federal Government.
3
Excludes the minority bank deposit program and Indian programs, but includes loans, surety
bonds,
guarantees and 8(a) contracts at obligated values.
4
Outlays shown in the above table for predominantly black colleges reflect only the HEW program
for strengthening developing minority institutions and assistance to minority institutions from the
National Science Foundation and the Department of Agriculture. They exclude other Federal financial
assistance in this area and the Federal share of Howard University expenses.

Minority Assistance Outlays by Agency *
(In millions of dollars)
1975
actual
Department of Agriculture
..
Department of Commerce
Department of Defense
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior 2
Department of Labor
Department of Transportation
Energy Research and Development Administration
National Aeronautics and Space Administration
Small Business Administration 3
Veterans Administration
Other agencies
Total....

1976
estimate

TQ
estimate

15. 92
20.86
85.70
88.28
98.00
110.00
684. 31
797.77
28.18
29.27
847. 65 1,104.45
52.60
40.19
48.99
37. 81
10. 25
11.80
13. 74
15.50
660.66 1,024.78
20.50
16.00
52.53
54.64

6.41
19.47
30.00
206.44
3.37
326.61
12.93
15.88
2.90
2.50
223.41
2.00
10.62

22.36
78.65
125.00
775.37
30.74
1,055.70
55.23
91.35
15.60
16.00
1,093.22
17.00
57.20

862.54

3,433.42

2,595.44

3,374.94

1977
estimate

1
Minority assistance programs broaden opportunities for economic participation and selfdetermination and include Indian programs. Loans, surety bonds, guarantees and 8(a) contracts
are2 included at their obligated values.
These amounts include outlays from Indian tribal funds held in trust by the Federal Government.
3
All Federal procurement from minorities through sec. 8(a) of the Small Business Act is reported
under the lead agency. Small Business Administration.

210-700 O - 76 - 16

SPECIAL ANALYSIS N
FEDERAL PROGRAMS FOR THE REDUCTION OF CRIME

Two basic responsibilities of government are to maintain public order
and administer justice. Federal programs are designed to identify the
underlying causes of criminal behavior, gain better understanding of
the magnitude and nature of the crime problem, and prevent or reduce
crime through more effective law enforcement, public education, and
treatment of adult and juvenile offenders. The objective is to reverse
the trend of rising crime, thereby reducing the tragic loss of human
and economic resources associated with crime and alleviating the
fear of criminal abuse and exploitation in our communities.
Recognizing that State and local governments have the primary
responsibility for controlling crime, the Federal Government will :
— Provide leadership by improving the quality of Federal laws and
the criminal justice system.
—Vigorously enforce laws covering criminal conduct that cannot
be controlled effectively at the State and local level.
—Provide financial and technical assistance to State and local law
enforcement agencies.
—Emphasize Federal law enforcement efforts against organized and
white collar crime, illegal commerce in firearms, large scale
trafficking in narcotics and dangerous drugs and illegal aliens.
ACCOMPLISHMENTS OF THE PAST YEAR

Accomplishments of the past year reflect the high priority the
Administration has placed on combating crime and improving our
entire system of criminal justice. During the past year:
• The President transmitted a special message to Congress in which
he proposed:
—a comprehensive "Criminal Justice Reform Act" which
would combine diverse Federal statutes into a uniform coherent code;
—a "career criminal program" to assure quick identification
and prosecution of repeat offenders;
—pretrial treatment programs for certain first offenders;
—additional Federal District court judgeships and expanded
criminal jurisdictions of U.S. magistrates;
—new and upgraded prison facilities to reduce overcrowding;
—strengthened Federal firearms laws to prohibit the manufacture, assembly, and sale of cheap, highly concealable
handguns;
—reauthorization of the Law Enforcement Assistance Administration through 1981, and continued financial and
technical assistance to State and local governments.
• The Domestic Council completed a comprehensive study on drug
abuse which recommended a reordering of enforcement priorities
and a coordinated national effort to combat drug abuse.
242

SPECIAL ANALYSIS N

243

• The Treasury Department's Bureau of Alcohol, Tobacco and
Firearms began intensive investigative efforts against illegal
commerce in firearms in three large metropolitan areas; 180
additional firearms investigators were assigned to these areas in
1976, and an additional 320 will be provided in 1977.
• The Treasury Department began training law enforcement officers
at a new facility in Glynco, Georgia.
• The Presidential Clemency Board, established pursuant to a
proclamation and Executive order issued on September 16, 1974,
successfully completed its work and ceased operations after
reviewing and preparing recommendations on 15,500 requests
for clemency.
1977 BUDGET HIGHLIGHTS

In 1977, Federal programs for the reduction of crime will build upon
the numerous directives and recommendations contained in the
President's special message to Congress on crime. Federal outlays for
crime reduction programs will total almost $3.1 billion in 1977, approximately the same as in 1976 and $254 million greater than 1975.
It is estimated that total expenditures by all levels of government—
Federal, State, and local—will exceed $17.9 billion in 1977.
Recognizing that the heaviest burden of enforcing our criminal laws
rests upon State and local governments, over $1.1 billion in Federal
expenditures will be used to improve State and local criminal justice
systems and assist communities in preventing crimes and juvenile
delinquency. Federal outlays channeled to State and local governments
through the Justice Department's Law Enforcement Assistance Administration (LEAA) will total $815 million in 1977, compared with
$896 million in 1976.
The Department of Justice anticipates outlays of $1.9 billion in 1977
for crime reduction programs. The Administration will place specific
emphasis on enhancing the Department's capabilities in the following
program areas:
—litigation and court support by extensive use of automated data
processing systems and by adding 291 U.S. attorneys and 87
U.S. marshals to increase criminal and civil litigation capabilities
in the field offices;
—corrections through activation of three new prison facilities,
renovation and rehabilitation of existing facilities and construction of four new institutions. Also, expanded research and evaluation efforts in the field of corrections is being funded through the
National Institute of Corrections;
—drug enforcement by adding 102 new posit:ons to imp^ment the
comprehensive Federal enforcement strategy as well as recommendations contained in the Domestic Council's White Paper
on Drug Abuse.
—illegal alien control, by emphasizing enforcement activities and
expanding detention and deportation capabilities to assure that
illegal aliens are effectively deported or otherwise removed from
the country.
The Department of Treasury has the second largest Federal crime
reduction program and will spend $393 million in 1977. To carry out
the President's directive to control illegal firearms, the Bureau of

244

THE BUDGET FOR FISCAL YEAR

1977

Alcohol, Tobacco, and Firearms will expand enforcement efforts
against illegal commerce in firearms from 3 to 11 large metropolitan
areas.
Total Federal outlays for drug law enforcement are expected to
exceed $300 million in 1977. Emphasis will be placed on attaining a
coordinated, effective Federal effort in consort with State and local
enforcement organizations in the battle against drugs.
Table N-l. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
AGENCY i (in thousands of dollars)
Outlays
1975
actual

The Judiciary
Department of Agriculture
Department of Commerce
Department of Defense-Civil
Department of Health, Education, and Welfare
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
General Services Administration
Veterans Administration
Other independent agencies
Total Federal outlays

1976
estimate

1977
estimate

120,680
144,963
150,188
9,685
12,204
12,738
3,206
2,715
2,715
6,763
7,419
7,888
284,140
245,781
222,100
20, 931
13, 736
14,267
44,765
60,446
63,093
1,822,948 2,017,416 1,997,541
3,395
3,554
3,430
15,250
48,000
36,000
41,399
44,164
46,973
335,024
387,940
393,175
3,453
4,340
4,716
108,326
136,933
119,922
1,435
1,309
880
2,821,400 3,130,920 3,075,626

1
Does not include Department of Defense—Military and $38.3 million of outlays for the U.S
Postal Service which are included in the Annexed Budget for 1977.

CRIME REDUCTION PROGRAMS BY ACTIVITIES

Budget outlays included in this special analysis represent all Federal
programs directly related
to crime reduction except those of the Department of Defense.1 The analysis excludes general social programs,
even though such programs may indirectly reduce the causes of crime,
and does not include resources devoted to background investigations for employment, administiative inspections, or investigations of a
regulatory nature which might in rare cases result in the application of
criminal sanctions. Where activities involve both criminal and civil
proceedings, such as operation of Federal courts, an allocation of outays to the crime-related function has been estimated. The narrative
is not intended to be all-inclusive, but rather to highlight the wide
range of activities and agencies involved in Federal crime reduction
programs.

Defense Department outlays for law enforcements are estimated as follows (in thousands of dollars):

1975
Department of the Army__
Department of the Navy
Department of the Air Force
Total. Department of Defense

1976 1977

306,535
14,990
193,917

325,856
16,259
201,863

321,028
23,156
187,849

515,442

543,978

532,033

SPECIAL ANALYSIS N

245

Table N-2. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR
PROGRAM AND SELECTED ACTIVITY 1 (in thousands of dollars)
Major program and selected activity

Outlays
1975
actual

1976
estimate

1977
estimate

Crime research and statistics:

Statistics on crime, criminals, and criminal justice system
Research on criminal behavior and sociology of crime
Program total
Reform of criminal laws

94,952
11,938

107,669
12, 757

97,017
10,286

106,890

120,426

107,303

3,891

4,174

3,462

14,311
258, 776
110,577
35,910

16,184
226, 683
116,630
27, 783

13,144
214, 324
106,099
19, 852

419,574

387,280

353,419

821, 109
50, 842
244, 336

909,609
60,420
274,010

942,484
61,806
269,547

Services for prevention of crime:

Public education on law observance, enforcement, and crime
prevention
Special programs for the treatment of narcotic addicts..Prevention and control of juvenile delinquency
Development of other community crime prevention services..
Program total
Criminal law enforcement:

Investigations into violations of Federal criminal law
Federal protection of individuals and facilities
Assistance to State and local governments for enforcement-_
Program total

1,116,287 1,244,039 1,273,837

Law enforcement support:

Criminal intelligence and information systems
Education and training of enforcement officers
Laboratories and criminalistics
International programs in support of domestic law enforcement
Program total

57,413
165,054
48, 311

62,138
210,373
51, 303

63,537
170,263
47,365

31,806

70,348

57,056

302,584

394,162

338,221

82,471
98,973

96,147
112,838

114,671
115,784

78,007

80,814

70,056

259,451

289,799

300,511

182,797
48, 157
10,816
21,600
1,152

217,976
62, 737
13,161
24,094
1,692

226,868
73,654
12,705
26, 380
1, 860

264,071

279,825

261,796

528,593

599,485

603,263

84,130

91,555

95,610

2,821,400 3,130,920

3,075,626

Administration of criminal justice:

Conduct of Federal criminal prosecutions
Operation and support of Federal court systems.
Assistance to States and localities for improved administration of justice
Program total
Corrections:

Operation of Federal correctional institutions....
Federal probation, parole, and community treatment
Federal inmate education and training
Federal inmate medical treatment
Other programs supporting Federal corrections
Assistance to States and localities for improved correctional
programs
Program total
Planning and coordination of crime reduction programs

Total Federal outlays
1

Does not include Department of Defense—Military and U.S. Postal Service.

246

THE BUDGET FOR FISCAL YEAR 1977

Crime research and statistics.—Crime research and statistics encompass Federal activities which produce numerical data and other information concerning crime, criminals, and the criminal justice system
which contribute to the development of new techniques and methods
for effective law enforcement. Total Federal outlays for crime research
and statistics are estimated to be $107 million in 1977—$97 million
for the collection of quantitative data, and $10 million for research.
• The National Institute of Law Enforcement and Criminal Justice
engages in applied research, evaluation, and technology transfer
activities to improve existing strategies for crime prevention and
control. Projects include studies of community crime prevention;
police discretion, patrol, and corruption; sentencing disparities
among courts; standards and goals for corrections; and the National Evaluation Program.
• The National Criminal Justice Statistics and Information Service
has an ongoing data collection program. Project SEARCH, which
is a 50-State consortium of representatives from the criminal
justice community, will support projects involving the development of information systems technology and initiate additional
efforts to strengthen the capacity of State and local governments
in data collection.
• The Drug Enforcement Administration will improve its capability
to monitor drug abuse trends and develop techniques for determining sources of illegal drugs. Research will focus on developing
tools and techniques for determining sources of illegal drugs and
on improving productivity of investigators and agents.
• The Coast Guard research program will include the design and
testing of an ocean dumping surveillance system to detect hazardous substances discharged illegally in the marine environment.
• The U.S. Postal Service will seek means to improve postal security through development of devices such as a letter tracing system, antitampering devices for mail sacks, and portable containers
for suspect letter bombs.
Reform of criminal laws.—Criminal law reform consists of efforts to
improve the effectiveness of criminal statutes and assure that they
accurately reflect the values and standards of our society. The Administration places high priority on reform of Federal criminal laws, and
$3.4 million will be spent on criminal law reform in 1977. Approximately 70% of these expenditures will support law reform efforts of
State and local governments.
• One of the top legislative priorities of the Administration in 1977
is enactment of the "Criminal Justice Reform Act" (S. 1). This
bill would combine and reform the Federal criminal laws into a
uniform, coherent code and would serve as a model for reform of
State and local laws.
• The Administration will work closely with the Congress to achieve
enactment of legislation to strengthen Federal firearms laws. The
President has proposed that the manufacture, assembly, and sale
of cheap handguns, often referred to as "Saturday night specials,"
be banned and that only bona fide gun dealers be permitted to
obtain Federal licenses to engage in the business of selling firearms.

SPECIAL ANALYSIS N

247

• During 1977, the Commission to Review the National Policy
Toward Gambling will submit its final recommendations to the
President and Congress. The final report will include recommendations to change existing law enforcement practices and Federal
laws and regulations on gambling. Also, the report will propose
model legislation to accomplish similar changes in State practices.
Prevention of crime.—Crime prevention includes Government efforts
to reduce crime through means other than direct enforcement or
general correctional activities, i.e., actions taken before the fact. The
category therefore includes public education, drug addict treatment,
juvenile offender programs, and projects to improve police/community
relations. An estimated $353 million will be concentrated on crime
prevention programs in 1977.
• The National Institute on Drug Abuse (NIDA) located within
the Alcohol, Drug Abuse, and Mental Health Administration,
has the principal responsibility for the Federal drug treatment,
rehabilitation, research, and prevention programs. In 1977, funds
will be provided to support a variety of community-based treatment programs for narcotic addicts and drug abusers and to
support demonstration programs that are established to evaluate
the effectiveness of existing or new treatment programs. Also,
NIDA will match State funds (based on a predetermined formula)
for operational costs of treatment activities which offer detoxification, institutional (medical, psychological, educational), and
community-based aftercare services.
• The Bureau of Prisons will maintain its specialized institutional
treatment programs for narcotic addicts and for other drugdependent offenders who use drugs such as amphetamines,
barbiturates, and hallucinogens.
• The Justice Department's Law Enforcement Assistance Administration will fund projects which promote more citizen participation in criminal justice proceedings.
• The Veterans Administration will provide assistance to eligible
veterans through its drug dependence treatment program. The
program combines medical, social, psychiatric, and vocational
treatment designed to remove dependence on opiates and other
drugs, thereby alleviating the need for the addict to commit
crimes to support his habit.
Criminal law enforcement.—Criminal law enforcement includes
activities to detect, identify, and apprehend violators of criminal laws.
Federal support of State and local enforcement is also included in this
category. High Federal priority will be placed on white collar and
organized crime, narcotic trafficking, illegal alien control, and an
intensification of Federal firearms law enforcement. Criminal law
enforcement will account for $1.2 billion in outlays during 1977,
including $269.5 million in support of State and local enforcement
programs.
• The Federal Bureau of Investigation will stress quality of caseload rather than quantity. This new policy of prioritizing investigations will permit the FBI to concentrate additional resources

248

THE BUDGET FOR FISCAL YEAR 1977

on white collar and organized crime offenders, and to vigorously
investigate civil rights cases and counterespionage matters.
• The Drug Enforcement Administration will add 102 positions to
implement the comprehensive Federal enforcement strategy and
recommendations contained in the Domestic Council's White
Paper on Drug Abuse. Conspiracy investigations will be stressed
in 1977 and increased emphasis will be devoted to regulatory and
compliance activities aimed at preventing diversion of amphetamines and barbiturates into the illicit market.
• The Immigration and Naturalization Service will redeploy its
staff, expand detention and deportation capabilities and emphasize strict enforcement to assure that illegal aliens are effectively apprehended and deported or otherwise removed from the
country.
• The Bureau of Alcohol, Tobacco and Firearms will intensify its
enforcement efforts in the 11 largest metropolitan areas by adding
320 firearms investigators.
• The Customs Service will continue its efforts to intercept drugs
and other contraband at the Nation's borders. Efforts will
include air and sea interception, coordinated with highly mobile
ground interception units. A computerized intelligence lookout
system and sophisticated communications will help direct enforcement efforts against suspected smugglers and known fugitives.
• The Federal strike force program, initiated in 1966 and supervised
by the Department of Justice, will concentrate efforts in 17 large
metropolitan and outlying areas in 1977. Strike forces consist of
representatives from Federal investigative agencies and selected
State and local law enforcement agencies operating under the
legal guidance of the Criminal Division and the U.S. Attorneys.
In 1977, this consolidated force will maintain pressure on organized and white collar violators, those who manipulate welfare
and pension funds, drug and tax offenders, and other major
violators of Federal criminal laws.
• The Department of Transportation and the Criminal Division
will combine efforts with those of other Federal agencies to foster
improvements in State car title and registration systems in order
to frustrate false documentation by auto theft rings.
• The Securities and Exchange Commission will place top priority
on investigation of cases involving organized crime, particularly
those instances where there is evidence of criminal infiltration into
the securities industry.
Law enforcement support.—Law enforcement support includes contributions to the operation of criminal intelligence systems, education
and training of enforcement officers, activities of forensic laboratories,
and international programs supporting domestic enforcement efforts—
primarily in the area of narcotics control. Outlays of $338.2 million
are projected for law enforcement support in 1977. Of this amount,
$206 million will assist State and local enforcement by funding laboratories, training programs, and criminal intelligence networks.
• In 1977 the Federal Law Enforcement Training Center will
operate a criminal investigation and police school as well as
conduct a full-time driver training program at new facilities in
Glynco, Georgia.

SPECIAL ANALYSIS N

249

• The Veterans Administration will provide financial assistance for
veterans pursuing approved and supervised programs of on-thejob training in law enforcement.
• The Bureau of Alcohol, Tobacco and Firearms will train and
provide assistance to police officers and organizations in the areas
of explosives and firearms investigations.
• During 1977, the Department of State will use Foreign Assistance
Act funds to assist foreign governments and international organizations in their efforts to disrupt the flow of illicit narcotics
through training in drug enforcement and intelligence, equipment
procurement, advisory assistance, crop substitution projects, and
drug abuse prevention activities.
• Reductions are proposed in 1977 for education and training
assistance to loca] law enforcement officers. The Law Enforcement
Education Program of LEAA, which provides financial assistance
for pursuit of college studies, is being reduced from $40 million
to $5 million. In addition, the budget proposes that 50% of the
training costs incurred by the FBI for local law enforcement
officers be paid for by local governments.
Administration of criminal justice.—This category includes the preparatipn and prosecution of criminal cases, operation of court systems,
trial of cases, provision of adequate defense, and related activities.
The President highlighted this activity as one requiring particular
attention in 1977. Over $300 million will be devoted to prosecution of
criminal cases and administration of criminal justice in 1977, including
$70 million for assisting State and local prosecution and court systems.
Operation of the Federal judiciary will require expenditure of $115
million, while criminal prosecutions will account for $114 million.
• Staff of the U.S. Attorneys' offices will be expanded by 9%,
adding significantly to the U.S. Attorneys' capabilities to prosecute criminal cases.
• The fees and expenses of witnesses appearing on behalf of the
Federal Government to provide factual information or expert
testimony will require expenditure of $19.4 million in 1977.
• The Commission on Revision of the Federal Appellate Court
System will continue its study of the jurisdiction and procedures
of the Federal Courts of Appeals.
• In coordination with the Criminal Division and the Internal
Revenue Service, the Tax Division of the Justice Department will
increase its prosecutive efforts against organized crime racketeers
during 1977.
• The U.S. Marshals Service will enhance its witness security program with 87 additional deputies and continue upgrading the
service of Federal warrants by deputy marshals.
Corrections.—These programs encompass Government custody and
treatment of criminal offenders, including supervision and operation
of correctional institutions, inmate and offender treatment and
training programs, probation and parole services, and other supportive
functions. Particular emphasis will be placed on activating prison
facilities and constructing new ones in 1977. Expenditure of $603
million will support correctional activities in 1977, of which $261
million will be allocated to non-Federal correctional activities.

250

THE BUDGET FOR FISCAL YEAR 1977

• During 1977, $282 million will be spent on correctional programs
of the Bureau of Prisons, with emphasis on developing a balanced
system of community and institutional facilities for the reintegration of offenders into society. Three new prisons will be
activated and funds are provided for the construction of
four additional facilities to replace outdated prisons and relieve
overcrowding.
• The U.S. Board of Parole will receive a 12% staff increase;
decentralization and new decisionmaking criteria will contribute
to greater equity, consistency, and speed in the parole process in
1976 and 1977.
Planning and coordination.—Included in this category are outlays
supporting State and local criminal justice planning, coordination of
Federal enforcement activities, and coordination of enforcement efforts.
Approximately $96 million will be spent on planning and coordination
of crime reduction programs in 1977. The Law Enforcement Assistance
Administration will spend $95 million to assist State and local governments to plan and evaluate their criminal justice activities, an increase
of about $4 million over 1976. The Department of State will work with
foreign governments and international organizations to implement
drug control policies and to coordinate interagency participation in
international narcotics control.
Table N-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
MAJOR PROGRAM AND AGENCY i (in thousands of dollars)
Major program and agency

Crime research and statistics:
The Judiciary
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Justice
Department of Transportation
Department of the Treasury
General Services Administration
Program total
Reform of criminal laws:
Department of Justice
Other Independent Agencies.
Program total
Services for prevention of crime:
Department of Defense—Civil
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
_____
__
Department of Justice
Department of Transportation
Veterans Administration
General Services Administration
Program total
See footnotes at end of table.

Outlays
1975
tctual

1976
estimate

1977
estimate

1,386
18
2,686
99,429
2,468
840
63

2,978
20
2,961
110,674
2,453
840
500

2,758
65
1,972
98,529
2,839
840
300

106,890

120,426

107,303

2,943
948

3,404
770

3,178
284

3,891

4,174

3,462

169
238, 539
\7,287
1,266
127,369
125
34,813
6

178
199,915
7, 154
2,305
140,487
500
36,733
8

192
180, 828
3, 237
2,519
127,579
1,000
38,022
42

419,574

387,280

353,419

SPECIAL ANALYSIS N

251

Table N-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY
MAJOR PROGRAM AND AGENCY 1 (in thousands of dollars)-Continued
Outlays

Major program and agency
1975
ictual

1976
estimate

1977
estimate

Criminal law enforcement:

Department of Agriculture
Department of Defense-Civil
Department of the Interior
Department of Justice
Department of Labor
Department of Transportation
Department of the Treasury
Department of Housing and Urban Development
General Services Administration
Other independent agencies
Program total

9,685
5,126
40,384
694,454
3,395
38,723
323,332
80
621
487
1,116,287

12,204
5,605
52,731
762, 576
3,554
41, 121
363,059
1, 892
758
539
1,244,039

12,738
5,893
54,587
783,077
3,430
43,036
365,207
4,415
858
596
1,273,837

Law enforcement support:

Department of Defense—Civil
Department of Health, Education, and Welfare
Department of the Interior
Department of Justice
Department of State
Department of Transportation
Department of the Treasury
General Services Administration
Veterans Administration
Department of Commerce
Department of Housing and Urban Development

164
5
563
196,167
15,250
81
10,852
2,753
73,513
3,206
30

174
5
935
214,208
48,000
88
24,041
3,061
100,200
2,715
735

186
0
1,442
183,540
36,000
96
27, 128
3,500
81,900
2,715
1,714

302,584

394,162

338,221

81,195
101
1,499
176,618
2
35
1

91,901
102
2,136
195,627
2
30
1

87,791
105
2,089
210,523
2
0
1

259,451

289,799

300,511

38,099
1,185
42,875
3,524
1,053
441,857

50,084
1,340
42,870
3,712
2,339
499,140

59,639
1,447
39,300
4, 334
2,456
496,087

528,593

599,485

603,263

Department of Justice
Other

84,111
19

91,300
255

95,028
582

Program total

84,130

91,555

95,610

2,821,400 3,130,920

3,075,626

Program total
Administration of criminal justice:

The Judiciary
Department of Defense—Civil
Department of the Interior
Department of Justice...
Department of Transportation
Department of Health, Education, and Welfare
General Services Administration
Program total
Corrections:

The Judiciary
Department of
Department of
Department of
Department of
Department of

Defense—Civil
Health, Education, and Welfare
Housing and Urban Development
the Interior
Justice

Program total
Planning and coordination of crime reduction programs:

Total Federal outlays
1

Does not include Department of Defense—Military and U.S. Postal Service.

252

THE BUDGET FOR FISCAL YEAR 1977

Table N-4. SELECTED CRIME REDUCTION DATA (dollars in thousands)
1973

1974

1975

Federal outlays for crime reduction:
Federal crime reduction outlays assisting States and
localities...
$966,863 $1,023,906 $1,142,297
Federal crime reduction outlays for reduction of Federal
crimes..
$1,326,831 $1,407,227 $1,679,103
Total Federal outlays for reduction of crime
Federal personnel:
Full-time Federal criminal investigators i
U.S. attorneys and assistant attorneys (work-years on
criminal workload)
Attorneys—criminal division (work-years)
U.S. district court judgeships
State and local crimes: 3
Serious crimes recorded (UCR-table 2)
Violent crimes recorded (UCR-table 2)__
Rate of serious crimes per 100,000 inhabitants (UCR—
table 2)
Rate of violent crimes per 100,000 inhabitants (UCR—
table 2)
Percent index crimes cleared by arrest (UCR—table 14 in
1973, table 18 in 1974)
Percent found guilty of persons charged by police (UCR—
table 18 in 1973, table 22 in 1974)
Federal investigations:
FBI, investigative matters received
Immigration and Naturalization Service (investigations
completed)
Postal Service, criminal caseload
IRS, case closed
U.S. Customs Service, cases closed
Secret Service, cases closed
Bureau of Alcohol, Tobacco, and Firearms, cases closed.
Disposition of Federal criminal matters:
Investigative matters presented for prosecutive decision—
prosecution declined
Federal criminal cases commenced 8
Federal criminal cases terminated 6
Federal criminal cases pending 6
Federal criminal defendants convicted
High echelon organized crime figures convicted
Corrections:
Average Federal jail population
Average Federal prison population
Court commitments to Federal institutions
Average Federal prison sentences (months)
Persons under supervision of Federal probation system
(end of year)
Federal paroles granted
Warrants issued for violation of conditions of release from
prison
Executive clemency petitions granted
1
2
3
4

$2,293,694 $2,431,133
19,117

19,515

19,205

722
366
400

775
324
400

834
386
400

8,666,200
871,450

10,192,000
969,820

(*)

4,129

4,821

(*)

415

459

(*)

21.2

21.3

(*)

63.7

63.3

(<)

774,583

745, 840

673, 957

30,940
347,528
8,500
40,276
124,389
5,403

32,101
319,293
7,215
21,981
128,947
5,455

38,067
307,509
8,000
24,508
139,159
5, 203

93,926
46, 663
47,853
28,352
37, 261
69

102,535
47,050
48,200
27,202
34, 699
69

105,737
46,951
46,467
27,898
49,281
54

5,870
22,294
16,402
50. 9

5, 877
23, 332
16,144
48.0

5, 738
23,034
17,718
50.9

54,346
6,339

59,615
5,540

64,261
8,886

1,635
207

1,591
195

2,212
156

CSC jobs classified in series 1811.
Includes internal security functions transferred into the Criminal Division.
From FBI uniform crime report.
Not available.
* Reflects closing out case backlog where no further investigation was warranted.
* Excludes transfers.

$2,821,400

PART 3

SPECIALIZED ASPECTS AND
VIEWS OF FEDERAL PROGRAMS

253

INTRODUCTION
Part 3 discusses trends and developments in selected areas of
Government activity—aid to State and local governments, research
and development, and environmental quality. It groups three special
analyses, those designated O through Q.
Special Analysis 0 summarizes Federal grants to State and local
governments as well as assistance provided through loans, tax expenditures, and indirect aid. It traces the development of Federal aids
over time and relates them to the finances of both the Federal Government and State and local governments. This analysis also provides a
profile of Federal grants by region, and a description of the State and
local government sector of the national income accounts.
Special Analysis P identifies Federal programs for the conduct of
research and development, and for facilities related to such activities.
Special Analysis Q identifies Federal funding for selected environmental activities, including pollution control and abatement, environmental protection and enhancement, and understanding, describing,
and predicting the environment.
254

SPECIAL ANALYSIS O
FEDERAL AID TO STATE AND LOCAL GOVERNMENTS
Federal aid to State and local governments is defined as the provision of resources by the Federal Government in support of a State or
local program of governmental service to the public. This includes both
grants-in-aid and loans. In 1977, Federal grant-in-aid outlays are
expected to total $60.5 billion. This amount—a small increase over
1976—represents a 22% increase over the amount provided in 1975,
and an annual average increase of 14%! since 1967. Net loan outlays
aie expected to be $211 million in 1977.
Federal Grants to State and Local Governments

i
1967

1968

1969

fiscal Years

1970

1971

H.ghways

1972

1973

I
1974

1975

1976

1977

Estimate

1
Unless specifically i n d i c a t e d t o t h e c o n t r a r y , reference to " F e d e r a l a i d " or " g r a n t s " from t h i s
point f o r w a r d is confined to g r a n t s - i n - a i d , a n d excludes net lending.

255

256

THE BUDGET FOR FISCAL YEAR 1977

A major revision has been made in the classification of Federal aid
to State and local governments. The bulk of budget outlays for the
food stamp program—the benefit payments or "bonus costs"—have
been reclassified from grants to direct Federal payments, reflecting
the current national nature of the program. From 1971 forward, only
the Federal matching payments to State and local governments to
pay for program administration are considered Federal grants. This
revision is further explained later in this analysis.
HIGHLIGHTS OF THE FEDERAL AID PROGRAM

The 1977 budget continues the policy of consolidating and simplifying grant programs with proposals for four major consolidations and
a number of other significant structural changes.
The Administration's proposal to extend the general revenue sharing
program through 1982 exemplifies efforts to seek a better balance
among political and managerial accountability, regional and local
needs and priorities, and the financial means to support public
services. Extension of this program—which was proposed to the
Congress last spring—will allow State and local governments to plan
on the basis of assured entitlements.
The major grant proposals of the 1977 budget are listed below. They
are divided into major grant consolidations, other major structural
changes, and other highlights.
Major grant consolidations.—The 1977 budget proposes major
changes in the structure of Federal grant programs, including the
formation of four major block grants, which will be phased in over
several years. All matching requirements would be eliminated by
these reforms. The proposals are the following:
—The Financial Assistance for Health Care Act—the largest Federal
grant-in-aid program ever proposed—will consolidate medicaid
and 15 other health programs. The primary purpose of this grant
will be to assist States in providing health care for their lowincome population. Proposed 1977 budget authority of $10 billion
will be distributed according to a formula based on State lowincome population, ability to pay, and tax effort. More information about this proposed block grant is provided in Part 5 of
the 1977 budget document.
—The Financial Assistance for Elementary and Secondary Education
Act will consolidate 27 separate grants into one program. Like
some other education programs, the block grant would be forwardfunded. The 1977 budget authority of $3.3 billion represents an
increase of more than $260 million over the separate grant programs. A discussion of reforms in elementary and secondary education grant programs is provided in Part 5 of the 1977 budget
document.
—Under the proposed Child Nutrition Reform Act, 15 complex and
overlapping child nutrition programs will be consolidated into
one child nutrition block grant. This program will provide
benefits to the 700,000 needy children who are not receiving
assistance, while permitting savings of over $700 million in 1977
by eliminating subsidies for the nonpoor. The child nutrition

SPECIAL ANALYSIS 0

257

block grant program is treated in greater detail in Part 5 of the
1977 budget document.
—The program providing social services to the poor and needy will
be amended by the Financial Assistance for Community Services
Act, substantially reducing Federal requirements and increasing
the options open to recipient governments. The 25% matching
provivion would be eliminated. The overall outlay ceiling on this
program would be maintained at $2.5 billion.
Other major structural changes.—There are a number of
other modifications of Federal grant programs in the proposed budget.
Chief among these are:
—The total Federal long-range commitment for waste water treatment plants. Proposed legislation will reduce this by eliminating
ing legislation will eventually obligate the Federal Government
to $333 billion of subsidies to build municipal waste water treatment plants. Proposed legislation will reduce this by eliminating
marginally useful but very costly activities. Despite this longrange phase down, both new construction activity and outlays
for this program will rise substantially in 1977.
—Mass transit formula grants, primarily aimed at subsidizing capital investment in this area, have been heavily used for operating
subsidies. Proposed reforms will provide that no more than 50%
of these funds be used for operating subsidies.
—Funding levels for highway assistance programs, which were increased in 1975 and 1976 as economy stimulation measures, will
return to more normal levels in 1977 and 1978. Proposed 1977
outlays will increase 8% to $6.8 billion, reflecting the 1975-76
expansion of the highway program. Levels of new contract authorizations are being restrained, and the proposal to permit State
takeover of $1 billion of motor fuel taxes is being withdrawn. In
addition, the numerous non-interstate categorical grants are
proposed to be consolidated into three programs.
—The Administration is again proposing to reform the impact aid
program. Recognizing that Federal activities provide an economic
benefit to host communities, the reform will limit Federal aid
to those school districts where free education is provided for
children whose parents both live and work on Federal property.
Since Federal property is exempt from local taxes, these families
do not contribute to the cost of education, as other families do,
and Federal contributions are fully justified.
—The Allied Services Act is proposed to encourage coordination of
all human service delivery programs at the State and local level.
—New legislation is proposed for the work incentive program
(WIN) to emphasize direct placement and training of participants through the Employment Services and the Comprehensive
Employment and Training Act (CETA) programs.
Other highlights.—Other program changes of interest are the
following:
—State and local governments are not subject to the Federal
unemployment tax from which funds for grants to States to
administer the unemployment insurance program and employment services are derived. However, some employees of these

http://fraser.stlouisfed.org/
210-700 O - 76 - 17
Federal Reserve Bank of St. Louis

258

THE BUDGET FOR FISCAL YEAR 1977

governments are covered. Accordingly, the Administration has
proposed legislation providing that effective in 1977 such grants
be adjusted to omit administrative expenses resulting from
coverage of State and local government workers. As a part of
this proposed legislation, State and local workers in public schools
and hospitals would be added to those State and local workers
now covered. State or local governments will reimburse the
unemployment insurance trust fund for benefits paid to their
insured workers.
—Outlays for direct law enforcement assistance will decline 5% to
$716 million in 1977. A lower level of grant awards will be coupled
with greater emphasis on evaluation and research. Such evaluation will provide guidance for basic decisions to be made on
future directions for this program.
—Outlays for the temporary employment assistance program will
decline in 1977, reflecting improved economic conditions. Outlays
of $1.1 billion will generally be limited to areas with unemployment over 6.5%.
—Under the newly authorized New York City Seasonal Financing
Fund, the Treasury Department is authorized to lend the city up
to $2.3 billion each year through 1978. The city will be charged
an interest rate one precentage point above Treasury borrowing
rates and must repay all loans by June 30, the end of its fiscal
year. The difference in the Federal and New York City fiscal
years will result in estimated net loans of $1.1 billion in the transition quarter and $ — 0.1 billion in 1977. However, because the
Federal Financing Bank will purchase all loans outstanding at
the end of the Federal fiscal period, there will be no impact on
Federal budget outlays.
—New commitments under the community development grant
program will increase $446 million in 1977 to $3.2 billion. Outlays,
which reflect the rate at which recipient jurisdictions carry out
projects, are estimated to be $1.6 billion.
—Outlays for the housing assistance programs will increase 23% to
$2.0 billion in 1977. Rents charged public housing tenants will be
adjusted to better reflect their ability to pay, permitting a savings
of $112 million in 1977.
—Outlays for vocational rehabilitation will rise by $45 million to
$775 million in 1977.
—The summer youth program for 1977 anticipates $400 million for
about 670,000 jobs.
—Outlays for planning and management assistance under the HUD
"701" program are estimated to decrease to $75 million in 1977.
—Outlays for the Community Services Administration's aid programs are estimated to decrease $139 million in 1977, due to the
statutory requirement for an increased non-Federal matching
share and the proposed elimination of duplicative categorical
programs.
—Outlays for airport development and improvement are estimated
at $355 million, $20 million less than 1976, but $63 million over
the 1975 level.

SPECIAL ANALYSIS 0

259

FEDERAL GRANT-IN-AID PROGRAMS BY FUNCTION AND BY AGENCY

Pursuant to the Congressional Budget Act of 1974, Congress reviews the budget and sets targets by function. Consequently, the
budget by function has become an important analysis and control
mechanism, as well as a means of describing Federal activities by
program. Part 5 of the budget discusses the entire Federal budget by
function, and comparison permits the setting of Federal grants-in-aid
against the broader perspective of all Federal activities in each function.
Table 0 - 1 . FEDERAL GRANT-IN-AID OUTLAYS BY FUNCTION
(In millions of dollars)
Function

National defense
Natural resources, environment, and energy
Agriculture
Commerce and transportation
Community and regional development
Education, training, employment, and social services _._
Health
Income security
Veterans benefits and services
Law enforcement and justice
General government
Revenue sharing and general purpose fiscal assistance. _
Total outlays

1975
actual

1976
estimate

74
2,479
404
5,872
3,335
11,638
8,810
9,279
32
725
102
6,971

77
3,088
499
8,227
4,008
14,422
10,032
11,212
73
838
145
7,166

49,723

59,787

TQ
estimate

1977
estimate

17
67
789
4,505
98
556
2,371
8,990
1,063
3,917
3,518
12,497
2,602
10,188
2,778
11,434
17
80
111
805
42
135
2,039
7,349
15,561

60,523

Table O-l provides a functional distribution of Federal grant-in-aid
outlays. Major trends in 1977 include increases in natural resources, environment, and energy reflecting spending for water and
sewer construction, and a decline in education, training, employment
and social services as the economy improves and spending for programs
to alleviate the effects of unemployment decreases.
Table 0-2. FEDERAL GRANT-IN-AID OUTLAYS BY AGENCY
(In millions of dollars)
1975
actual

Department of Agriculture
Department of Commerce
Department of Defense—Military
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
D epartment of Transportation
Department of the Treasury
Environmental Protection Agency
Veterans Administration
Community Services Administration
District of Columbia
Washington Metropolitan Area Transit Authority
Other
Total outlays

1976
estimate

2,936
299
74
22,010
3,439
557
722
4,012
5,688
6,423
2,025
32
510
226
175
595

3,626
498
77
24,060
4,289
618
750
6,888
8,029
6,603
2,532
73
478
254
182
830

49,723

59,787

TQ
estimate

805
136
17
6,015
1,201
249
203
1,789
2,327
1,704
651
17
120
64
40
223
15,561

1977
estimate

3,403
477
67
24,125
4,769
542
717
5,081
8,797
6,883
3,955
80
339
280
185
823
60,523

260

THE BUDGET FOR FISCAL YEAR 1977

In total, Federal aid will finance about 23% of State and local expenditures in 1977. As can be seen in Table 0-2, about 40% of this aid is
administered by the Department of Health, Education, and Welfare.
Technical note.—One reclassification that has been made affects
the grant total significantly—the reclassification of the food stamp
bonus (benefit payment) as a direct Federal payment.
When the food stamp program began in 1961 as a series of pilot
programs, it fell well within the budget definition of Federal grantsin-aid. The local government issued the food stamps, and the Federal
Government paid 100% of the bonus costs and part of the administrative costs. In 1964, the program was made permanent, but retained
its essentially local character. Eligibility standards were prescribed
by State agencies.
The program has now become a uniform national program, administered by State and local jurisdictions, but with uniform income
and resource eligibility standards. While the program changed gradually, the most significant turning point was the 1969 amendments to
the Food Stamp Act. These amendments, which became effective in
fiscal year 1971, resulted in the participation rate almost doubling
in one year with outlays almost trebling. As a result, the reclassification of the bonus from grants to nongrants was carried back through
1971.
THE IMPACT OF FEDERAL AID

The effect of Federal aid is not limited to direct resources made
available to States and localities. Many grant programs are intended
to encourage innovation by State and local governments. Other
programs require States to establish and maintain specific agencies,
though many of these provisions are being phased out. Most importantly, many programs require the recipient government to match
Federal aid funds with its own resources. In the last few years, State
and local governments have allocated about 10% of their own revenue
to meet matching requirements for Federal grant moneys. The enactment of the four major grant consolidation proposals will significantly
reduce this percentage.
The functional composition of the grant program has changed significantly over the years, as shown in Table O-3. The most dramatic
growth has occurred in the health area, which has increased from 4%
of Federal aid in 1957 to an estimated 17% in 1977. Other recent
changes are the addition of general revenue sharing, increases in outlays for environmental protection, and the relative decline in grants
for transportation programs.
Tax expenditures.—Federal aid is also provided through a number
of tax expenditures. (More information on tax expenditures is provided
in Special Analysis F, "Tax Expenditures".) First, the deductibility
of most State and local taxes permits taxpayers to offset part of these
taxes with a reduced Federal income tax liability. Hence, a State or
locality can raise a dollar of revenue with significantly less than a
dollar net cost to its taxpayers. The receipts foregone by the Federal
Government in 1977 are estimated to be $0.6 billion for gasoline taxes,
$3.8 billion for property taxes on owner-occupied homes, and $6.7
billion for other nonbusiness State and local taxes.

SPECIAL ANALYSIS 0

261

Table 0-3. PERCENTAGE FUNCTION DISTRIBUTION OF FEDERAL GRANTSIN-AID
Actual

Natural resources, environment and
energy
Agriculture
Commerce and transportation
Community and regional development
Education, training, employment,
and social services
Health
Income security
Revenue sharing and general purpose
fiscal assistance
Other

Total

1952

1957

1
4
18

1
9
24

1962

2
6
36
3

Estimates

1967

1972

1975

1976

2
3
27

2
15

7
1
15

5
1

1977

5
1

9
8
57

8
4
49

8
5
38

25
10
25

26
17
26

23
18
19

24
17
19

21
17
19

2
*

3
1

2
*

1
1

14
2

12
2

100

100 100

* Less than 0.5%.

Second, the exclusion of interest on State and local securities from
Federal taxable income permits these jurisdictions to borrow at
reduced interest rates. The tax expenditures for the exclusion of
interest on State and local general purpose debt is estimated to be
$4.5 billion in 1977, with a somewhat smaller benefit going to these
Governments. Interest on industrial revenue bonds—which are
nominally governmental debt, but are backed only by revenues from
private industry—is also excluded from income. Benefits from this
tax-exempt borrowing go largely to private companies. The exclusion
on debt to finance pollution control facilities will reduce Federal
receipts by $0.2 billion; the exclusion on general-purpose industrial
development borrowing will cost $0.3 billion.
Impact of other programs.—Certain other activities proposed in the
1977 budget may have a noticeable effect on State or local government activities. Chief among these are:
—Federal aid to higher education will emphasize grants and loans
to students, rather than institutional support. This may affect
State aid to certain of its institutions and State and local scholarship and grant-in-aid programs for students. Further information about Federal programs in higher education is to be found
in Special Analysis I, "Federal Education Programs."
—Federal assistance to railroads and the restructuring of the Northeast railroads may affect certain State programs for transportation
and regional and local development.
—Reforms in the food stamp program have been proposed to
simplify and improve its administration and assure that benefits
go only to the needy.
—The Administration is proposing unemployment insurance legislation that will require the upper limits on an individual's weekly
benefit be no lower than two-thirds of the State's average covered
wage. In this way, benefits will rise with average wages. To
strengthen financing, the proposal increases the amount of wages
on which employers pay the Federal unemployment tax from
$4,200 to $6,000 and temporarily increases the tax rate.

262

THE BUDGET FOR FISCAL YEAR 1977

—A national commission on unemployment insurance to study the
need for reform is proposed.
—A major study of the need for the employment service and its
future direction will be undertaken.
—The proposed Medicare Improvements Act of 1976 will improve
protection of the elderly by limiting out-of-pocket payments for
covered expenses to $500 for hospital and nursing home care per
illness and to $250 annually for physician services. The proposed
Medicare Improvements Act will limit increases in medicare
payment rates to help slow down health-care cost inflation.
—While the Federal Government is permitted by law to withhold
State and local income taxes from the pay of its civ lian employees,
it is specifically prohibited from withholding military pay. The
law, therefore, hampers and discourages States from collecting
revenues which are properly due them and may make it more
difficult for military personnel to meet their State income tax
obligations. Three initiatives have already been proposed in the
Congress to correct this situation. The Administration will soon
submit its own initiatives, which would benefit both military
personnel and the affected States and reduce to a minimum the
administrative workload associated with implementing such an
action.
—In addition, there will be increased emphasis to reduce paperwork
and other burdens on States and localities in administering
Federal programs, to simplify Federal grant requirements, and
to improve coordination and streamline delivery of services to
States and localities through Federal Regional Councils, joint
funding simplification and other intergovernmental initiatives.
Distribution of grants by region.—Table 0-4 shows that Federal aid
on a per capita basis varies widely among regions. The thinly populated
Western States traditionally rank high because of highway construction grants and shared revenues from Federal land holdings. For example, the Rocky Mountain States have the lowest regional population
density, extensive Federal land holdings, and, until recently, the
highest per capita aid.
This effect has diminished in recent years, however, as human
resource programs have grown relative to physical resource programs.
Further, the addition of general revenue sharing has tended to equalize
per capita figures among the regions. Region VIII, which had per
capita grants 37% above the national average in 1969, now has
grants only 14% over the average, while region V has risen from 22%
below the average to only 16% below. Region II has experienced the
most rapid growth during the period.

SPECIAL ANALYSIS 0

263

Table 0-4. DISTRIBUTION OF GRANTS, SELECTED FISCAL YEARS
Per capita

Federal region l

I—Maine, Vermont, New Hampshire, Massachusetts,
Connecticut, Rhode Island
II—New York, New Jersey, Puerto Rico, Virgin Islands
III—Virginia, Pennsylvania, Delaware, Maryland,
West Virginia, District of Columbia
IV—Kentucky, Tennessee, North Carolina, South
Carolina, Georgia, Alabama, Mississippi, Florida
V—Illinois, Indiana, Michigan, Ohio, Wisconsin,
Minnesota
VI—Arkansas, Louisiana, Oklahoma, New Mexico,
Texas
VII—Iowa, Kansas, Missouri, Nebraska
VIII—Colorado, Montana, North Dakota, South
Dakota, Utah, Wyoming
IX—Arizona, California, Nevada, Hawaii, other
territories
X—Idaho, Oregon, Washington, Alaska
United States

1975 2
total
grants

1969

1975

Percent
change
1969-75

$3.0

$102

$247

142

8.1

103

283

175

6.1

256

172

7.3

101

207

105

8.8

195

153

4.7
2.3

213
197

1.6

111
88
136

266

92
124
96

6.0
1.9

116
117

236
267

103
128

49.7

233

135

These are not the same regions as those used for National Income Account computations.
2
In billions of dollars.
See "Federal Aid to States," Department of the Treasury, for additional information concerning
State distribution of Federal grants.

HISTORICAL PERSPECTIVES

Though grants from the National Government technically predate
the Constitution, they were very small until the end of the 19th
century, and did not become a truly significant factor in government
expenditure until after World War II. In 1950, Federal grants to
State and local governments totaled $2 billion, and by 1965 they had
risen to $11 billion. In 1975, they were $50 billion, an average annual
increase of 18.3% since 1965. This compares to an average annual
growth of 11% for total Federal outlays over the same period.
Table O-5 shows the recent growth in grant outlays, and illustrates
that Federal aid has become an increasingly important factor in the
finances of all levels of Government over the past two decades. In 1977,
Federal grants will constitute 15.4% of total Federal outlays, and
21.1% of domestic Federal outlays. Despite the irregular pattern
reflected in the table, the growth of Federal grant outlays has
been relatively steady. Outlays for 1972 reflect a $1 billion advance
payment of public assistance funds, and are therefore not precisely
comparable with other years. Grant outlays for 1973 are understated
by this amount, but are still abnormally high, reflecting the payment
of retroactive 1972 general revenue sharing entitlements. In addition,
the conversion of the public assistance program for the aged, blind,
and disabled fiom a grant-in-aid program in 1973 to a direct Federal
program (supplemental security income) in 1974 significantly distorts
the trend. Finally, the slight percentage drop in 1975-77 is due to the
large increase in total Federal outlays in those years—notably in direct

264

THE BUDGET FOR FISCAL YEAR

1977

Federal payments to individuals—rather than a net decrease in grants.
Federal aid has also increased as a percentage of State and local
governmental expenditures, growing from 10% in 1955 to 15% in 1965
and 23% in 1977.
Table 0 - 5 . IMPACT OF FEDERAL G R A N T OUTLAYS (dollar amounts in millions)
Federal grants as a percent of
Federal outlays
ranis

1950
1955
1960
1965
1969
1970
1971
1972
1973
1974
1975

$2,253
3.207
7,020
10,904
20,255
24,018
28,109
34,372
41,832
43,308
49,723
59,787
15,561
60,523

1976 estimate
TQ estimate
1977 estimate
1
2

Domestic 1

Total

5.3
4.7
7.6
9.2
11.0
12.2
13.3
14.8
17.0
16.1
15.3
16.0
15.9
15.4

8.8
12.1
15.9
16.6
20.1
21.1
21.4
22.8
24.8
23.3
21.3
21.7
21.7
21.1

State
and local
expenditures 2

10.4
10.1
14.7
15.3
18.0
19.4
19.9
22.0
24.3
22.7
23. A
25.2
24.3
23.0

Defined for this purpose as excluding national defense and international programs.
As defined in the National Income Accounts.

THE STATE AND LOCAL

GOVERNMENT SECTOR

OF THE

NATIONAL

INCOME ACCOUNTS 1

The national income accounts (NIA) provide a detailed statistical
description of the U.S. economy, with State and local government
receipts and expenditure data a part of that description. These State
and local data provide a measure of the relationships between these
governments as a sector of the economy and other sectors. The data
are not designed to serve as financial measures of State or local
financial condition.
There are two basic differences between NIA data and the budgetary
accounting for a government's revenue and expenditures. First, only
those State and local governmental revenue and expenditure activities
that figure into the calculation of national income are included in the
NIA data. Excluded are such items as financial transactions and the
purchase and sale of land. Second, a large number of transactions in
the NIA accounts are recorded on an accrual basis, while in general
many governments keep their accounts on a cash basis. As a result of
these differences, NIA totals are not the same as an aggregate of
these governments' financial budgets. However, they do provide
timely estimates of total State and local fiscal transactions not otherwise available.
NIA State and local sector.—Table O-6 provides a historical
tabulation of these data with the surplus or deficit broken into two
1
Special Analysis A of this volume provides general information on the national income accounts.
NIA data in this analysis are adjusted to incorporate the "benchmark" revisions just issued. These
resulted in virtually no change in grants-in-aid estimates from the prior usage.

265

SPECIAL ANALYSIS 0

Table 0 - 6 . N A T I O N A L INCOME ACCOUNTS, S T A T E A N D LOCAL SECTOR
(In billions of dollars)
Receipts

Expenditures

Surplus or
deficit ( - )
sector

1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966 .
1967 .
1968
1969
1970
1971
1977.
1973
1974

Calendar year

...
.__

_.
...
_

__.
...
___.
___.

21.3
23.4
25.4
27.4
29.0
31.7
35.0
38.5
42.0
46.4
49.9
54.0
58.5
63.2
69.5
75.1
84.8
93.6
107.2
119.7
134.9
152.6
177.4
193.8
209.4

22.5
23.9
25.5
27.3
30.2
32.9
35.9
39.8
44.3
46.9
49.8
54.4
58.0
62.8
68.5
75.1
84.3
94.7
106.9
117.6
132.2
148.9
163.7
180.9
201.3

Surplus or
deficit ( - )
State and

Surplus or
deficit ( - )

funds

-1.2
-.4
_*
.1
-1.1
-1.3
-.9
-1.4
-2.4
-.4
.1
-.4
.5
.5
1.0
*
.5
-1.1
.3
2.1
2.8
3.7
13.7
12.9
8.1

0.7
.8
.0
1.0
1.2
1.3
1.5
1.6
1.8
2.0
2.3
2.4
2.6
2.8
3.2
3.4
4.0
4.8
5.3
5.9
6.8
7.5
8.1
8.8
9.8

-1.9
-1.3
-1.0
-.9
-2.4
-2.6
-2.3
-3.0
-4.1
-2.5
-2.2
-2.8
-2.1
-2.4
-2.2
-3.4
-3.5
-5.9
-5.0
-3.7
-4.0
-3.8
5.6
4.1
-1.7

SEASONALLY ADJUSTED, ANNUAL RATES

1973:
T
II
III
IV
1974:
I
II
III
IV
1975:
T
II
III

Calendar quarter

___

190.3
192.1
195.2
197.6

174.4
178.9
182.8
187.5

15.9
13.2
12.4
10.1

8.6
8.8
8.9
9.1

7.3
4.4
3.6
1.0

201.9
207.3
213.5
214.9

192.6
199.1
204.5
209.0

9.4
8.2
9.1
5.9

9.3
9.6
10.0
10.2

.1
-1.4
-0.9
-4.3

221.2
228.2
237.7

215.5
219.4
224.8

5.7
8.8
12.9

10.8
11.1
11.2

-5.0
-2.2
1.7

basic components, social insurance funds and the operating account.1
As the table shows, the insurance funds have been in surplus since
1950. The funds accumulate assets to pay for their future liabilities.
Because surpluses of these insurance funds are not generally available
to pay for deficits in operating accounts, the operating account is
generally thought to be a better measure of State and local fiscal
condition than the sector as a whole. However, the accrued liability
of many of these social insurance funds exceeds their assets, posing a
potential threat to State and local financial health in future years.
1
The operating account is defined here as all activities except those of social insurance funds.
This includes expenditures for capital investment.

266

THE BUDGET FOR FISCAL YEAR

1977

Since the late 1940's the operating account has generally been in
deficit. This is not unusual, since it includes capital expenditures, often
financed through borrowing. Surpluses in 1972 and 1973 were generated b}^ the first general revenue sharing distributions and new
revenues generated by significant tax increases in 1971-72.
In 1974, the operating account returned to a deficit situation.
In part, this reflected a return to previous patterns, as State and local
expenditure increases absorbed the new, higher income streams. It
also reflected the worsening economic situation, with State and local
governments opting to draw down on balances accumulated during
1972-73 rather than enact new tax increases. As Table 0-7 illustrates,
increases in own-source revenues during 1973-75 were mainly generated by changes in economic conditions. This contrasts significantly
with the 1971-72 period, during which major increases in revenue
were generated by changes in tax structure, in addition to those
generated by economic growth. The return of the operating account
to a surplus position in the third quarter of 1975 was generated
primarily by a significant increase in federal grants.
Table 0-7. STATE AND LOCAL GOVERNMENT RECEIPTS, CHANGE FROM
PREVIOUS YEAR (in billions of dollars)
1971

Total receipts, national income and product accounts basis
Less:
Contributions to social insurance funds
Federal grants-in-aid
Equals:
Own-source revenues, total
Due to economic growth and inflation
Due to tax structure changes
Personal taxes and nontaxes, total
Due to economic growth and inflation
Due to tax structure changes
Indirect business tax and nontax accruals, total
Due to economic growth and, inflation
Due to tax structure changes
Corporate profits tax accruals, total

Due to economic growth and inflation
Due to tax structure changes

1972

1973

1974

1975
estimate

17.7

24.8

16.4

15.6

23.0

1.0
4. 6

.9
8.5

1.2
3.0

1.4
3.3

10.6

12.1
10.1
2.0
3.3
2.4
.9
8.3
7.5
.8

15.4
11.2

12.1
11.5

10.9
10.9

4.2
6.7
3.8

.6
3.4
3.4

.2
.3

2.9

8.0
6.8
1.2
.8
.6
.2

7.9
7.5
.4
.7
.6
.2

3.3
3.5
-.2
6.6
6.4
.2
1.0
1.0

1.4

11.1

9.9
1.2
3.8
3.6
.2
7.4
6.8
.6
-.1
-.5
.5

Includes $1.3 billion shift in withholding patterns.
Source: Based on unpublished material from the Bureau of Economic Analysis.

Three measures of Federal aid.—The national income accounts and
the Census Bureau have statistical series for Federal grants-in-aid
different from the budget series exhibited in this special analysis.
The budget series is designed to provide a comprehensive picture of
Federal aid, focusing on programs that are financed but not directly
administered by the Federal Government. The census and NIA series
are parts of broader statistical concepts encompassing the entire
economy, and as a consequence they define Federal aid somewhat

SPECIAL ANALYSIS 0

267

differently from the budget series. They both omit the following items
which the budget series includes:
• Federal aid to the Governments of Puerto Rico and U.S.
territories;
• Payments in-kind, primarily commodities purchased by the Department of Agriculture and donated to the school lunch and
other nutrition programs;
• Food stamp benefit payments prior to 1971; and
• Payments to private, nonprofit entities (such as manpower
training programs and nonprofit hospitals) which operate under
State auspices or within a State plan.
Table 0-8. THREE MEASURES OF FEDERAL AID TO STATE AND LOCAL
GOVERNMENTS, 1965-74 (in billions of dollars)
1965

Budget (Special 0)
Less principal exclusions:
Agricultural commodities
Food stamps (bonus)
Geographical exclusions
Plus payments for research
Allother.net

1968

1971

28.1

1972

18.6

—.4
—*
—.3
.8
*

— .5
—.2
—.3
1.1
-.7

—.4
1.4
-1.0

—.4
1.1
-.9

Federal payments (Census)
Less low-rent public housing
Allother.net

11. 1
11.1
—. 22

27. 5
—.. 5
—. 2

33. 6

41. 7

42.9

7
—. 3

-1. 0

18. 1
_ 3
*

—. 3

-1.1
-.2

Grants in-aid (national income accounts)

10.9

17.8

26.8

32.6

40.4

41.6

—.6

41.8

1974

10.9

—.6

34.4

1973

—.5
—.6
1.2
-.2

43.3
—.6
—.7
1.3
-.4

'"Less than $50 million.

One major group of payments that the budget definition of grants
excludes but census and the NIA series include is payments for
research conducted by public universities. The budget series excludes
these payments because they are considered to be a purchase of
services for the Federal Government rather than aid for State programs. Since both census and the NIA series focus on cash payments to State and local governments, they count these as grants.
One major kind of outlay included in the budget and census definitions but excluded from the NIA series is payments for low-rent public
housing, which the NIA count as subsidies by the Federal Government
rather than as grants. In addition, there are other minor differences in
the three series.
Table O-8 illustrates the major differences. As the table demonstrates, differences among the series frequently offset each other
numerically.
DETAILED FEDERAL AID TABLES

The following two tables present detailed Federal aid data for the
3 budget years and the transition quarter. Table O-9, "Federal
Grants to State and Local Governments—Outlays and Budget Authority/ 7 provides detailed budget authority and outlay data for grants
and shared revenues. This is the first year budget authority figures
have been published in this table. Table O-10, "Federal Loans to
State and Local Governments," provides disbursement and net outlay
data for loan programs.

Table 0 - 9 . F E D E R A L G R A N T S T O S T A T E A N D LOCAL G O V E R N M E N T S — O U T L A Y S A N D B U D G E T A U T H O R I T Y
(In millions of dollars)
1975
actual

1976
estimate

TQ
estimate

1977
estimate

Functional
code

National defense:
Department of Defense-Military:

OUTLAYS
39
34

42
35

9
8

37
30

94
9
32

108
11
32

1
5

7
18

17
19

9
157
72
6
7
2.025

*
1
40
20
3
2
651

9
160
79
7
9
2.532
50
48

17
1

2,479

3,088

789

Agency and program

*
9
158
81
9
6
3,955
60
68
4,505

Civil Preparedness Agency
National Guard centers construction

Total, natural resources, environment and energy.

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY
051
051

43
38

43
28 ..

301
302
302

56
8
36

58
10
33

15
3

302
306

15
19

18
21

Total, national defense.
Natural resources, environment and energy:
Department of Agriculture:
Watershed planning and flood control
Resource conservation and development
Forest Service
Department of Commerce:
NOAA coastal zone management
NOAA—Operations research and facilities
Department of the Interior:
Bureau of Reclamation
Office of Water Research and Technology
Land and water conservation fund
Fish and Wildlife Service
Preservation of historic properties
Energy Research and Development Administration
Environmental Protection Agency
Federal Energy Administration
Tennessee Valley Authority (shared revenue)
Water Resources Council

1975
actual

301
301
303
303
303
305
304
305
301
301

2
7
180
82

11
7
7.917

5
8,345

5
5
5

1
9
176
89
11
9

174
55

1
44
19
3
2
23

4
28
23
20
*
12
176
94
6
6
107

5 _.
669

124

585

92
183
128
*

108
192
199

28
48
23

120
185
251

404

499

556

6
2
*

10
4
2

3
1

5
3

1
5
292
26
4,573
29
74
*
688
175

1
2
95
11
1,816
11
24
10
358
40

6
375
46
6,170
48
87
19
1,276
182

5,872

8,227

2,371

8,990

6
355
40
6,567
158
93
73
1,503
185

306
131

33 •
158

94
35

321
158

35
4
2

62
9
2

16
2

84
8

209
41

204
79

34
12

174
42

See footnote at end of table.

Agriculture:
Cooperative State Research Service
Cooperative Agricultural Extension Work
Commodity Credit Corporation—Donations
Agricultural Marketing Service—Cooperative Projects in Marketing _ _

352
352
351
352

111
194

28
48

118
183

282

304

301

401
403
404

10
2

407
406
405
404
404
404
404
404
404
404

1
6

2
6
350

1
88

Total, agriculture.
Commerce and transportation:
Department of Agriculture: FmHA: Housing
Department of Commerce: EDA—Minority business development
Department of Housing and Urban Development: Urban transportation
Department of Transportation:
Grants-in-aid for natural gas pipeline safety
State boating safety assistance
Airport and airway trust fund
Highway beautification
Highway trust fund
Other highway aid
National Highway Traffic Safety Administration
Federal Railroad Administration
Urban Mass Transportation Administration
Washington Metropolitan Area Transit Authority
Total, commerce and transportation
Community and regional development:
Funds appropriated to the President:
Appalachian regional development programs
Disaster relief__..
Department of Agriculture:
Rural water and waste disposal grants
Rural development grants
Rural community fire protection grants
Department of Commerce:
Economic Development Administration
Regional Action Planning Commissions

98
182

2 .

75
6,248
286
198
1
8,816
127

2,984
40 __
56
26
680
100

2
6
350
32
6,254
26
103
201
655
116

15,769

4,247

125

7,747

452
453

274
140

307
105

12
26

359
70

451
452
452

30
14
4

125
2

452
452

178
46

218
87

54
15

146
41

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1975
actual

1976
estimate

TQ
estimate

1977
estimate

Agency and program

Functional
code

OUTLAYS

750
1,375

400
300

1,600
1,000

601
96
3
2
1
493

444
107
3
2
2
478

23
25
2
1
*
120

110
75
5
2
*
339

1,063

3,917

4,008

175

222

2,276
24
577
214
58
653
83
210

2,277
24
438
232
96
674
33
128
4
26
330

520
5
40
58
23
108
6
41
3
1
75

294
1,925
20
344
219
75
662
25
94
37
3
243

118
304

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY

38
1.374

3,335

1975
actual

Department of Housing and Urban Development:
Community development block grants
Urbanrenewal
.
Other categorical programs replaced by community development
block grants
Comprehensive planning grants
New Communities Administration
Department of the Interior: Bureau of Indian Affairs
Joint Federal-State Land Use Planning Commission for Alaska
Community Services Administration

451
451

2,432
48

451
451
451
452
452
451

Total, community and regional development
Education, employment, training, and social services:
Department of Commerce: Job opportunities program
Department of Health, Education, and Welfare:
Financial assistance for elementary and secondary education
Elementary and secondary education
Indian education
School assistance in federally affected areas
Emergency school assistance
Education for the handicapped
Occupational, vocational, and adult education
Higher education
Library resources
Special projects and training
Educational development
Work incentives

1,838

3,248

70
100

5
1
547

10
1
394

1
*
86

2
*
308

3,162

207

4,199

3,889
504
501
501
501
501
501
501
501
502
503
503
503
504

125

374

2,252
25
612
213
100
689
15
155

2,344
25
389
240
100
663
3
62
25

196

380

2,079
64
*
75
220

3,300
139
25
272
248
9
539

137
64
75

243

2,047

2,358

607

2,546

430
1,166

466
1,122

127
242

458
1,098
5
28

2,504
3,050
319
2,331
53
4
94
-19
481
434
62
70
14
22
17 .

925
485

2,494
1,065

18
114
18
14

82
466
70
22

11,638

14,422

567
59
590
672

595
56
508
613

161
9
90
102

285
23
375
433
9,001

6,840

8,184

2,220

1
37
8,810

3,518

12,497

10,032

2,602

10,188

See footnote at end of table.

Social services
506
Assistant Secretary for Human Development:
Child development
501
Youth, aging, and vocational rehabilitation programs
506
Allied services
506
Department of the Interior: Bureau of Indian Affairs, Indian education
programs
501
Department of Labor:
Employment and training assistance
504
Temporary employment assistance
_ 504
Emergency employment assistance
504
Grants for employment services
504
Unemployment trust fund: training and employment
504
Corporation for Public Broadcasting
503
National Foundation on the Arts and Humanities
503
Community Services Administration
501
Total, education, employment training and social services
Health:
Special Action Office for Drug Prevention
Department of Agriculture: Animal and Plant Health Inspection
Service-meat and poultry
Department of Health, Education and Welfare:
Health Services Administration
Center for Disease Control
Alcohol, Drug Abuse, and Mental Health Administration
Health Resources Administration
Financial assistance for health care
Medicaid
Department of the Interior: Mining Enforcement and Safety Administration
Department of Labor: Occupational Safety and Health Administration.
Total, health

1,995

2,810

607

2,546

470
1,103

468
1,031

114
258
_._

464
1,004
20

2,552
875

2,548
3,325

524

2,494

64
419
62
22

77
451
70
22

18
105
18
14

82
466
70
22

11,973

15,437

4,314

12,034

553

551
553
551
552
555
551

698
58
487
433

540
34
425
240

134
6
48
47

-19

6,996

8,262

2,220

553
553

1
37

1
36

*
9

1
38

8,721

9,571

2,474

10,405

197
153
10,002

Table 0-9. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—OUTLAYS AND BUDGET AUTHORITY—Continued
(In millions of dollars)
1975
actual

1976
estimate

TQ
estimate

1977
estimate

OUTLAYS

494

294

-5
22

136

230

245
6

1,565

2,225

388

291

2,000

5,121
1,326

5,898
1,609

1,576
452

5,959
1,979

636

939

235

938

9,279

11,212

2,778

11,434

22
1

Income security:
Department of Agriculture:
Agricultural Marketing Service—Funds for strengthening markets,
income and supply-donations
Institutional nutrition support
Food stamps—administration
Special nutrition supplements
Child nutrition and special milk programs
Food donations
Child nutrition reform
Department of Health, Education, and Welfare: Public assistance—
maintenance
Department of Housing and Urban Development: Housing assistance.
Department of Labor: Unemployment trust fund: administration of
payments

1
5
42
4

Total, veterans benefits and services

6
*

3
6

Functional
code

1975
actual

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY

604
604
604
604
604
604
604

276

250

1.650

2,218
17

427
4

22
275
6

2,000

604
604

4,862
25,496

5,898
13,785

1,576
102

5,959
10,728

603

759

924

144

888

33,293

23,318

2,316

19,878

22
1
10

25
1
10

28
1
10
35
5

Total, income security
Veterans benefits and services:
Veterans Administration:
Medical care
Medical administrative expenses
Grants for construction of State nursing homes
Health training
Grants for State cemeteries

25
1
6
41

Agency and program

703
703
703
703
705

750
6
82

203
1
23

1
716
8
80

725

838

227

805

Ill

Law enforcement and justice:
National Institute of Corrections
Department of Justice: Law enforcement assistance
Equal Employment Opportunity Commission
Legal Services Corporation

754
754
751
751

734
4

665
6
85

141
2
23

2
608
8
78

738

756

165

695

15
69

26
89

4
17

21
81

130

112

852
852

121
4

91
4

118
1

37
4

852
852
852

178
3
17

179
3
19

145

127
3
18

852
852
851
852

161
112
6.205
226

216
114
6,355
254

54
24
1,626
64

220
114
6,542
280

7,027

7,235

2,037

7,346

90,258

64,964

11,890

63,435

Total, law enforcement and justice
General government:

102

145

135

121
4

118
4

37
1

178
3
17

179
3
31

145
1

127
3
19

172
122
6.130
226

216
114
6,272
254

54
24
1,627
64

220
114
6,549
280

6,971

7,166

2,039

7,349

49,723

59,787

15,561

60,523

Department of Interior:
Administration of Territories-Trust Territory of the Pacific Islands
General Services Administration
Civil Service Commission (intergovernmental personnel assistance).

806
806
804
806

Total, general government

Vli

25
80
20
10

Revenue sharing and general purpose fiscal assistance:

Department of Agriculture: Forest Service (shared revenue)
Department of Defense: Flood Control Act (shared revenue)
Department of Interior:
Bureau of Land Management
Fish and Wildlife Service
Internal revenue collections for the Virgin Islands (shared revenue). _
Department of the Treasury:
Customs receipts for Puerto Rico and the Virgin Islands (shared
revenue)
Intel nal revenue collections for Puerto Rico (shared revenues)
General revenue sharing
Federal payment to the District of Columbia (shared revenue)
Total, revenue sharing and general purpose fiscal assistance
Total, grants and shared revenues

F
>
>
SIS

8
18
11
4

SPE

22
89
18
16

16
69
2

* Less than $500 thousand.

Table O-10. FEDERAL LOANS TO STATE AND LOCAL GOVERNMENTS (in millions of dollars)
Disbursements
Agency and program by function

1975
actual

1976
estimate

Net outlays

TQ
estimate

1977
estimate

1975
actual

1976
estimate

TQ
estimate

1977
estimate

Natural resources, environment and energy:

Department of the Interior: Reclamation loans

10.1

20.8

16.4

13.1

10.1

...
37.0
-.2

100.0
36.9
-.2

25.0

36.8

20.8

16.4

13.1

46.6
-.2

___
37.0
-.2

100.0
36.9
-.2 _

25.0

5.0

46.6
-.2

136.7

30.0

46.4

36.8

136.7

30.0

46.4
—
. :—.,

17.5

31.0

7.5

32.0

2.6

6.0

1.5

4.0

556.2
23.8
-.5

656.2
_._
6.3

152.0

700.0

50.0

4.6

13.8

-28.5
16.5
-6.8

Commerce and transportation:

Department of Transportation:
Federal aid highways (trust fund).
Right-of-way revolving fund_
Urban Mass Transportation Administration
Total, commerce and transportation

___

Community and regional development:

Department of Commerce: Economic development assistance
Department of Housing and Urban Development:
Urban renewal fund—loans and planning advances..
_
Public facility loans
Revolving fund (liquidating programs)

-6.8

-25.0
1.4

-43.1

£SSiaout.ay.----------

Advances to stadium sinking fund, armory board

1 « - J 2 0 . 3 41.6 185.1 192.1 2 0 , 3 41.6
.o

Total, community and regional development

759.9

Education, training, employment, and social services:
Department of Health, Education, and Welfare:
Higher education
Higher education facilities
_ _ _ _ _ — Department of Housing and Urban Development: College housing loans—.
Total, education, training, employment and social services"Department of Health, Education, and Welfare: Medical facilities
using and Urban Development: Low-rent public housing..

^°

864.6

198.2

899.7

176.8

251.3

185.1
.8

44.5 121.8

8.0

~-z
8.0
—

:~z
1.0

T-J:
4.0

:~z
-1.3
4 0
-9

*J{
-2.0
2U 7
~
-

-.9
^*-*

8.0

1-°

-42.2

-21.7

~5-7

-3.2

61.4

62.5

18.0

-7.0

-9.0

645.1

650.0

162.0

-°

195.0
650.0

6.4
-41.5

6.5

*°
-4.0

_._

General government:
Department of the Interior: Administration of TerritoriesRevenue sharing and general purpose fiscal assistance:
District of Columbia: Repayable advances
Total

-—

2.2

2.0

40.0

1,563.5

1,784.6

2.0

2.2

2.0 .

40.0

465.6

1,850.2

188.5

435.7

2.0
40.0

40.0

118.2 211.1

SPECIAL ANALYSIS P
FEDERAL RESEARCH AND DEVELOPMENT PROGRAMS

The significant increases in the funding of research and development
(R. & D.) reflected in this analysis demonstrate the Administration's
belief that science and technology are important to the Nation's
future defense, economy and human welfare. The Federal Government, through its budget and tax policies, seeks also to encourage
continued and expanded private funding of R. & D., which now
constitutes nearly half the annual national investment in R. & D.
This analysis summarizes the funding of R. & D. incorporated in
individual agency budgets. Research and development is not a separately programed or budgeted activity of the Federal Government.
Its funding must therefore be considered primarily in light of the
potential contributions of science and technology to meeting agency
or national goals and not as an end in itself.
The first part of this analysis presents a summary and highlights of
the 1977 budget as it affects Federal funding of research and development; the second part describes the longer term trends in Federal
support of R. & D.; and the last portion describes the 1977 programs of
the 11 major agencies which together account for about 98% of total
Federal spending for R. & D.
PART I: HIGHLIGHTS OF THE 1977 BUDGET

Federal obligations for R. & D. in 1977 will total $24.7 billion,
an increase of 11% over 1976. Outlays will increase by 10% to $23.5
billion. Specific amounts for the conduct of R. & D. and for related
facilities in 1975, 1976, the transition quarter, and 1977 are shown
in Table P - l .
Table P-1. TOTAL FEDERAL FUNDING FOR CONDUCT OF R. & D. AND
RELATED FACILITIES (in billions of dollars)1
Obli,gations
1975

Conduct of R. &D_
R. & D. facilities.__
Total

1976

Outlays
1977

1975

1976

1977
estimate

19.0
.8

21.3
.9

5. 4
1

23.5
1.2

18.7
.8

20.4
.9

5.4
.2

22.9
.6

19.8

22.2

5. 5

24.7

19.5

21.3

5.6

23.5

1
For budget analysis purposes, R. & D. includes basic and applied research, and the design, testing
and demonstration of prototypes and new processes, but does not include routine product testing
collection of general purpose statistics, or training of scientific manpower.

CONDUCT OF RESEARCH AND DEVELOPMENT

Increases in obligations for the conduct of research and development
by major program area are shown in Table P-2.
276

SPECIAL ANALYSIS P

277

Table P-2. CONDUCT OF R. & D . BY MAJOR PROGRAM AREA
(Obligations in billions of dollars)
Program

Conduct of R. &D.:
Defense1
Space2
Civilian (other than space)
Total

1975
actual

1976
estimate

TQ
estimate

1977
estimate

9.6
2.5
6.9

10.6
2.7
8.0

2.7
.7
2.0

12.0
2.9
8.6

19.0

21.3

5.4

23.5

1
Includes military-related programs of the Energy Research and Development Administration—
transferred from the AEC.
2
Includes all NASA programs except aeronautical research, space applications (e.g., pollution
monitoring, communications, earth observations), energy technology applications, and technology
utilization, which are classified as civilian programs.

Some of the more important developments in each of the major
program areas are illustrated in the following summary.
• Defense. Obligations for R. & D. will increase by 13%. Highlights of the 1977 budget include:
—the start of advanced development of both the air-launched
and sea-launched cruise missiles;
—increases in programs aimed at improving ballistic missile
warheads and providing options for a new intercontinental
ballistic missile system;
—development of weapons systems to modernize the tactical
forces, including an advanced air combat fighter for the Air
Force, an attack helicopter for the Army, and a surface-to-air
missile system known as SAM-D.
• Space. Funds for R. & D. will increase slightly. They provide for:
—continued development of the space shuttle, leading to an
initial manned orbital flight in 1979;
—continued development of automated spacecraft to explore the
solar system;
—initiation of a new satellite, the solar maximum mission,
which will be launched in 1979 to study the Sun during the
next period of peak solar flare activity in 1979-80.
Civilian. R. & D. funding for civilian programs will rise by 8%.
More specifically, the 1977 budget includes amounts to:
—expand research on the basic biological processes underlying
agricultural production, and expand development of additional
sources of useable vegetable protein;
—continue research on human biological processes and the causes,
prevention, diagnosis and treatment of disease, including
increased support for research on immunology, aging, and
environmental health;
—define and evaluate alternatives relating to mass transit and
develop advanced traffic management systems;
—increase aeronautical R. & D. to achieve more energy-efficient
aircraft;

278

THE BUDGET FOR FISCAL YEAR 1977

—expand the development of fusion technology and the breeder
demonstration program (particularly the Clinch River Breeder
Reactor) and increase efforts in the light water reactor program,
especially in nuclear fuel waste management;
—accelerate the development of technologies to use domestic
fossil fuel resources in an environmentally acceptable manner
through gasification and liquefaction of coal, and increase
assistance to industry in advancing energy conservation, solar
and geothermal technologies.
The major agencies involved in energy technologies will increase their
budget authority for direct energy research and development (including facilities) by 37% from $1.9 billion in 1976 to $2.6 billion in 1977.
Indirect or supporting energy research will also increase, including
research on environmental, health and safety aspects of energy
systems and research in basic energy sciences. More detailed analysis
of the Federal energy R. & D. effort is provided in the annual "National Plan for Energy Research, Development and Demonstration"
published by the Energy Research and Development Administration.
RESEARCH AND DEVELOPMENT FACILITIES

Obligations for the construction and renovation of facilities or for
the acquisition of major items of equipment used to conduct R. & D.
will increase by $0.3 billion, from $0.9 billion in 1976 to $1.2 billion
in 1977. Of particular significance is the inclusion of funds to begin
construction of the large colliding beam facility for the Stanford
linear accelerator designed to develop and test new theories in highenergy physics concerning the ultimate nature of matter. Also included are funds to initiate construction of a new wind tunnel at
NASA's Langley Research Center and an aircraft engine test complex
at DOD's Arnold Research Center. The unique Very Large Array
radio telescope in New Mexico will be placed in limited operation.
OTHER HIGHLIGHTS
BASIC RESEARCH

Included in the totals above for the conduct of R. & D. is Federal
support for basic research, which will increase from about $2.4 billion in
1976 to more than $2.6 billion in 1977, for an increase of 11%. Within
this total, support by the National Science Foundation, as the key
agency in fostering basic research in all fields of science, will grow by
almost 20%. These amounts exclude support for research facilities
(such as the colliding beam facility mentioned above) and for major
items of equipment, particularly the cost of launch vehicles for space
missions devoted to basic research.
COLLEGES AND UNIVERSITIES

Federal funds furnish the largest source of support for research
and development activities undertaken by colleges and universities.
Federal agencies are expected to commit more than $2.6 billion to
colleges and universities for this purpose in 1977, a 9% increase over
the $2.4 billion estimated in 1976. More information may be found in
Table P-10.

279

SPECIAL ANALYSIS P
INDIRECT SUPPORT OF RESEARCH AND DEVELOPMENT

In addition to the amounts for direct Federal support of R. & D.
reflected in the tables and analysis above, the Federal Government
encourages the support of R. & D. through tax provisions which permit
businesses to treat R. & D. expenditures as current costs rather than
investments to be depreciated over a number of years. This results in a
tax saving for industr}^. Assuming that R. & D. is on the average a
5-year investment, the tax saving is estimated to grow from over
$600 million in 1975 to nearly $700 million in 1977. Tax expenditures
in general are discussed in Special Analysis F.
The amounts in this Special Analysis also do not reflect Federal
allowances to contractors for performing independent R. & D. associated with particular contracts. These allowances are estimated to
approximate $500 million for each of the years mentioned. Further,
the Federal Government provides incentives to State and local
governments and to the private sector, particularly in the energy and
agricultural R. & D. areas, through such mechanisms as cost-sharing
in research and demonstration projects. While estimates of the nonFederal investment stimulated by these incentives are unavailable,
these incentives contribute substantially to the overall national
R. & D. effort.
PART II: LONG-TERM TRENDS

Federal funding for R. & D. has increased tenfold since the early
1950's and significant changes in the focus of that funding have taken
place. Chart P-l shows the trends of the Federal R. & D. effort over
the last 25 years.
Conduct of Research and Development — Oblations
SBillic

1953

1955

Fiscal Years

280

THE BUDGET FOR FISCAL YEAR

1977

At the time of the Soviet launching of Sputnik in 1957 and before
the establishment of NASA, Federal R. & D. funding was concentrated
in Defense, the Atomic Energy Commission, and the Department of
Health, Education, and Welfare (principally for medical research).
Total funding for national defense, including defense-related nuclear
programs of the Atomic Energy Commission, alone accounted for 87%.
Following the decision to land a man on the Moon by 1970, the space
program grew rapidly in the early 1960's. Space funding reached its
peak in 1966, when it represented 33% of Federal R. & D. spending.
Funding for space programs thereafter declined to a level commensurate with the development of the space shuttle and the continuation
of programs in space science and applications of space technology.
Funding for civilian R. & D., other than space programs, while
steadily climbing since the late 1950's, has grown markedly since
1969. Energy-related R. & D. in particular has received major increases since 1974. In 1977, Federal obligations for R. & D. devoted
to civilian programs will amount to approximately 37% of the total,
space R. & D. will account for 12%, and defense R. & D., 51%.
PART III:

AGENCY R. & D. PROGRAMS

More than 99% of Federal R. & D. is supported by 14 departments
and major agencies. Table P-3 summarizes obligations and outlays
for the conduct of R. & D. by these agencies, and table P-4 separately
aggregates obligations and outlays for the construction and renovation
of facilities used in the conduct of R. & D. and for the acquisition of
major items of equipment.
DEPARTMENT OF DEFENSE

MILITARY

Department of Defense obligations in 1977 for research and development, including construction of R. & D. facilities and the cost of
associated military personnel, will increase by $1,499 million over
the 1976 level, reaching a total of $11,554 million. Basic research
undertaken or sponsored by DOD will increase from $330 million in
1976 to $383 million in 1977. The increase in facilities obligations,
from $176 in 1976 to $356 million in 1977, reflects funding of the
Aeropropulsion System Test Facility, an aircraft engine test complex
to be built at the Arnold Engineering Development Center, Tullahoma, Tenn. Obligations for the conduct of research will increase by
$279 million to a level of $2,035 million, and obligations for development programs will increase by $1,040 million to a level of $9,163
million.
In the strategic area, funding for development of the Trident long
range submarine and missile system and the B-1 strategic bomber
will decrease as these systems enter procurement. These decreases are
offset by increases in programs aimed at ballistic missile warhead
improvements and at providing options for a new intercontinental
ballistic missile system for fixed or mobile employment. In addition,

Table P-3. CONDUCT OF RESEARCH AND DEVELOPMENT OF MAJOR DEPARTMENTS AND AGENCIES (in millions of dollars)
Obligations

Department or agency

Defense—Military functions
National Aeronautics and Space Administration
Energy Research and Development Administration
Health, Education, and Welfare
National Science Foundation
Agriculture
__
Transportation
Interior
Environmental Protection Agency
Commerce
Veterans Administration
Nuclear Regulatory Commission
Housing and Urban Development
Justice.
Allother

1975
actual

8,987
3,088
2,071
2,395
604
424
291
296
258
222
99
61
57
44
126

1976
estimate

9,879
3,473
2,812
2,369
628
483
340
332
305
247
108
97
62
65
138

Outlays

TQ
stimate

1977
stimate

2,510
921
756
526
158
123
76
80
87
63
28
23
16
11
35

11,198
3,573
3,282
2,570
726
507
319
316
241
243
106
109
70
41
164

1975
actual

9,189
3,181
1,862
2,108
571
418
307
265
207
220
97
54
52
44
124

1976
stimate

9,468
3,402
2,423
2,366
602
486
338
307
324
239
99
88
57
50
142

TQ
stimate

1977
stimate

2,537
877
643
578
204
136
74
83
83
64
26
23
19
14
37

10,762
3,550
3,042
2,512
647
510
304
310
298
233
100
103
67
44
156

Total

19,023

21,338

5,413

23,465

18,699

20,391

5,398

22,638

Total, conduct of research
Total, conduct of development

6,759
12,264

7,150
14,188

1,860
3,553

7,782
15,683

6,355
12,344

7,192
13,199

1,835
3,563

7,709
14,929

5
CO

Table P-4. RESEARCH AND DEVELOPMENT FACILITIES BY MAJOR DEPARTMENTS AND AGENCIES (in millions of dollars)
Department or agency

Energy Research and Development Administration
Defense—Military functions
National Aeronautics and Space Administration
National Science Foundation
Health, Education, and Welfare
Transportation
Agriculture
Commerce
Environmental Protection Agency
Allother
Total facilities

Obligations
1975
actual

1976
estimate

393
164
143
31
39
13
8
10
2
18

461
176
82
52
27
20
36
8
7
40

821

909

Outlays

TQ
estimate

1977
estimate

66
36
11
8
4
3
1
3

1
6

139

638
356
124
34
11
16
3

1975
actual

1976
estimate

418
185
115
49
38
15
14

4
23

415
152
85
29
81
15
8
11
11
19

1,215

826

882

5
36

TQ
estimate

1977
estimate

119
43
31
10
5
3
8
7

1
7
230

454
179
126
33
26
14
8
6
5
25
876

W
Cj
O
O

ui
9
P
.
a
>

SPECIAL ANALYSIS P

283

full-scale development of both the air-launched and sea-launched
long-range cruise missiles will be initiated. In the strategic defensive
area, antiballistic missile technology efforts will be continued to guard
against technological surprise and to provide future deployment
options if they are needed.
In the tactical forces area, a number of major programs are continued which will allow significant future modernization of the tactical
forces. For example, the Air Force will continue development of the
F-16 air combat fighter and systems to neutralize enemy air defenses.
In conjunction with the other services, the Air Force is exploring the
combat potential of remotely piloted vehicles and of high energy
lasers. Army developments include a new tactical transport helicopter
and an advanced attack helicopter. The SAM-D theater air defense
system will enter full-scale development and the Army will continue
work to adapt the French/German short-range air defense system to
U.S. mission requirements.
The Navy will continue to emphasize antisubmarine warfare and
fleet air defense missile systems and continue the development of
the Surface Effects Ship. Full-scale development of a tactical cruise
missile will be initiated to provide ships other than aircraft carriers
with an improved strike capability.
Table P-5. DEPARTMENT OF DEFENSE—MILITARY RESEARCH
DEVELOPMENT (obligations in millions of dollars)
1975
actual

Conduct of R . & D . :
Research, development, test, and evaluation:
Military sciences
Aircraft and related equipment
Missiles and related equipment
Military astronautics and related equipment _
Ships, small craft and related equipment
Ordnance, combat vehicles and related equipment. _ _
Other equipment
Program wide management and support
Other appropriations
Total conduct of R. & D., obligations
Total conduct of research, included above
Total conduct of development, included a b o v e - . .
R. & D. facilities, obligations
Total obligations

1976
estimate

TQ
estimate

AND

1977
estimate

405
1, 648
2,160
527
634
471
1,844
869
429

442
1,941
2,277
582
608
556
2,096
935
442

115
443
562
139
165
171
538
263
114

513
2, 260
2, 504
593
736
751
2, 361
1,037
443

8,987

9,879

2,510

11,198

1,661
7,326
164

1,756
8,123
176

519
1,991
36

2,035
9,163
356

9,151

10,055

2,546

11,554

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

The 1977 NASA budget—classified entirely as research and development—provides for ongoing and new programs in manned space
flight, space science, space applications, and aeronautics. Funds
for R. & D., including construction of facilities, will increase by $142
million over the 1976 level, reaching a total of $3,697 million.
Manned space flight activities will be concentrated on development
of the space shuttle. The shuttle is a partially reusable vehicle which
will be the key component of a transportation system expected to

284

THE BUDGET FOR FISCAL YEAR

1977

provide a major advancement in U.S. space capabilities beginning in
the early 1980's. NASA will be progressing toward key schedule
milestones, including the roll-out of the first shuttle orbiter in September 1976 and horizontal flight tests in early 1977. The first launch
of a shuttle orbiter will follow in mid-1979.
The space science program emphasizes the exploration of the solar
system and the universe using unmanned spacecraft. Two Pioneer
spacecraft are continuing the exploration of the outer planets—one
spacecraft is now escaping the solar system and the other will fly by
Saturn in 1979. Two Viking unmanned orbiter/lander spacecraft
launched to Mars in 1975 will start the search for life on that planet
in July 1976. Two Mariner spacecraft are being developed for the
Jupiter-Saturn flyby missions scheduled for launch in 1977. An orbiter
and probe are being developed to be launched to Venus in 1978 to
initiate atmospheric investigations of that planet.
In addition to these planetary missions, development will continue
on spacecraft to conduct high energy and ultraviolet astronomy from
Earth orbit. Development will continue on the High Energy Astronomy Observatories to be launched during 1977-79 to study X-ray
and gamma-ray sources in the galaxy and distant parts of the
universe. A new satellite, the Solar Maximum Mission, will be initiated
in 1977 and launched in 1979 to study the Sun during the next period
of peak solar flare activity during 1979-80.
In the space applications program, NASA is continuing development
of a third Earth resources technology satellite (LANDSAT), scheduled
to be launched in 1977, to conduct experiments on the utility of space
gathered information for agricultural, geologic, and other applications.
Development is proceeding on a new generation of satellites to provide
improvements in weather forecasting, the first of which, Tiros-N, will
be launched in 1978. Work is continuing on a spacecraft, the Heat
Capacity Mapping Mission, to be launched in 1978 to locate and map
potential sources of geothermal energy. Nimbus-G is being developed
Table P-6. NATIONAL AERONAUTICS AND SPACE ADMINISTRATIONRESEARCH AND DEVELOPMENT (budget plan in millions of dollars)
Program and type of activity

Conduct of R. &D.:
Space
flight
Space sciences
Space applications
Space research and technology
Aeronautical research and technology
Supporting activities
Research and program management
Total conduct of R. & D. budget plan

Total conduct of research, included above
Total conduct of development, included above
R. & D. facilities, budget plan
Total budget plan

1975
actual

1,188
454
186
76
166
253
765

1976
estimate

492
496
185
81
175
248
796

TQ
estimate

1977
estimate

392
130
48
21
44
65
221

1,581
429
212
82
189
266
814

3,088

3,473

921

3,573

795
2,293

824
2,649

215
706

864
2,709

143

124

3,231

3,555

932

3,697

SPECIAL ANALYSIS P

285

for launch in 1978 to demonstrate the capability of monitoring pollution from space. An additional satellite, Seasat-A, is being developed
to be orbited in 1978 to monitor ocean conditions (e.g., sea surface
winds and wave heights). A new satellite will be started in 1977 and
launched in 1980 to improve mapping of the Earth's magnetic field.
Aeronautical research and technology will continue to explore ways
to reduce aircraft engine noise, to improve aircraft performance, and
to mitigate undesirable environmental effects of civil and military
aircraft. In 1977, NASA will also increase research aimed at ways to
reduce aircraft energy requirements.
Funds are provided to continue the development of new technology
for future missions in space science and applications. The areas of
emphasis include improved materials, structures, propulsion, electric
power sources, communications and data handling systems.
ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION

Obligations for the conduct of research and development supported by the Energy Research and Development Administration
will increase from $2,812 million in 1976 to $3,282 million in 1977 and
obligations for related construction and equipment will total $638
million.
Obligations for the conduct of ERDA direct energy research and
development programs will increase by 26% in 1977 in order to
accelerate the achievement of greater long-term energy independence.
In direct nuclear energy research and development, ERDA will
expand efforts to improve the use of current commercial reactors by
increasing R. & D. on the long-term management of radioactive wastes,
fuel reprocessing, and safeguards against theft of nuclear materials.
In addition, funding for the Liquid Metal Fast Breeder Reactor
(LMFBR) program will be increased to support continued construction of the LMFBR demonstration plant. Research to determine the
scientific feasibility of controlled thermonuclear fusion will also
increase significantly.
In ERDA's direct nonnuclear energy research and development
programs, the major funding will continue to be devoted to fossil
energy development. ERDA will accelerate the development of technology to substitute coal for oil and natural gas, increase fuel conversion efficiencies, and increase the recovery of oil and gas from
fields in the United States.
Significant increases will also be provided to develop those solar
energy systems and applications that are economically attractive and
environmentally acceptable for supplementing other available energy
resources. Expanded development of drilling and exploration techniques along with the development of environmentally acceptable
long-range applications will be pursued in order to stimulate commercial development of geothermal resources. All programs of conservation R. & D. will be maintained or increased, particularly those
concerned with energy storage, transportation, buildings and industrial
processes.

210-700 O - 76 - 19

Table P-7. ENERGY RESEARCH AND DEVELOPMENT ADMINISTRATION—RESEARCH AND DEVELOPMENT
(In millions of dollars)
Obligations

Programs and groups of programs

1975
actual

Conduct of research and development:
Direct nuclear energy research and development:
Fission power reactor and nuclear fuel cycle
User and magnetic fusion
Subtotal
Direct nonnuclear energy research and development:
Fossil
Solar
Geothermal
Conservation
Environmental control technology

._-

Subtotal
Supporting energy research and development:
Biomedical and environmental effects
Basic energy sciences
Subtotal
Nuclear weapons and naval reactors
Other:
High energy physics
Nuclear space power and other programs
Subtotal
Total conduct of research and development
Total conduct of research, included above
Total conduct of development, included above
Research and development facilities
Total

___.

1976
estimate

Outlays

TQ
estimate

1977
estimate

1975
actual

1976
estimate

TQ
estimate

—

——
1977
estimate

466
144

584
197

167
67

921
239

462
132

511
180

140
55

796
225

610

781

234

1,160

594

69?

195

K02?

264
40
25
34
8

492
111
33
75
13

97
33
12
16
4

422
142
49
113
16

138
15
20
21
7

327
81
31
53
11

61
25
9
13
3

413
111
44
88
14

37?

724

162

742

201

503

142
156

175
174

46
49

183
183

135
151

164
167

43
45

175
174

298
620

349
749

95
212

366
775

286
613

33?
702

88
196

349
776

136
36

153
56

37
16

168
71

132
36

148
48

38
15

163
63

172

209

239

168

196

226

2,071

2,812

756

3,282

1,862

2,423

643

3,042

563
1,508
393

694
2,118
461

186
570
66

743
2,539
638

509
1,353
415

640
1,783
418

169
474
119

707
2,335
454

2,464

3,273

822

3,920

2,277

2,841

762

3,496

670

SPECIAL ANALYSIS P

287

A strong effort will be maintained on programs to determine the biomedical and environmental effects of nuclear and nonnuclear energy
sources and to solve fundamental scientific and engineering problems
that constrain the development of energy technologies. ERDA will
also continue current levels of activity to develop improved nuclear
weapons and naval propulsion reactors for the Department of Defense.
ERDA's budget for construction of R. & D. facilities will include
$6 million to proceed with the design and initial construction of a
major new positron-electron colliding beam facility for high energy
physics. Total construction costs for the facility, located at the
Stanford Linear Accelerator Center in California, are estimated to be
$78 million over a 4-year period. Other major R. & D. facilities under
construction include fossile fuel demonstration projects, the fusion
test reactor, and the fast flux test facility, which will provide data
on the performance of LMFBR fuels and materials.
HEALTH, EDUCATION, AND WELFARE

Department of Health, Education, and Welfare (HEW) obligations
in 1977 for the conduct of R. & D. will increase by $201 million over
the 1976 level, reaching a total of $2,570 million. Obligations for R. &
D. facilities will be $11 million.
The largest share of the Department's R. & D. funds is devoted to
the biomedical area. The National Institutes of Health (NIH) is
the primary source of support for health research in the United
States. R. & D. obligations by NIH will increase by $181 million from
$1,797 million in 1976 to $1,978 million in 1977. These funds will
support research into human biological processes and the mechanisms
of such diseases as cancer, heart and lung diseases, arthritis, diabetes
and venereal disease. While maintaining current levels of effort in
cancer and heart disease research, NIH will increase support for
emerging areas of national importance such as immunology, aging and
environmental health.
Preventive health care research is being pursued by other HEW
components through investigation into infant and child health; new
approaches to drug abuse treatment; new ways to treat, prevent and
control alcohol abuse; basic and chemical research on the multiple
causes of alcoholism; and development of new approaches to the
causes, diagnosis, treatment and prevention of mental illness. In
addition, demonstrations of health maintenance organizations, family
planning, and emergency medical systems will be funded.
The National Institute for Education (NIE) is the focal point for
educational R. & D. NIE supports research in the areas of equality of
education; essential skills education; education and work; dissemination of research information; and school finance, productivity, organization and management. R. & D. obligations by NIE will increase by
$20 million, from $70 million in 1976 to $90 million in 1977.

Table P-8. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE—RESEARCH AND DEVELOPMENT
(in millions of dollars)
Obligations

Conduct of R . & D . :
Health:
National Institutes of Health
Alcohol, Drug Abuse, and Mental Health Administration
Food and Drug Administration
Center for Disease Control
Health Resources Administration
Assistant Secretary for Health.-.
Health Services Administration
Subtotal, health
Education:
Office of Assistant Secretary for Education..
Office of Education
National Institute of Education
Subtotal, education
Welfare:
Office of Human Development
Social Security Administration
Departmental Management
Social and Rehabilitation Service
Subtotal, welfare
Total conduct of R. & D
Conduct of research, included above
Conduct of development, included above
R. & D. facilities
Total

_
_

Outlays

^75

—j—

—-

—

actual

estimate

actual

estimate

,977
estimate

1,856
140
35
41
42
6
17

1,797
125
36
44
34
13
14

407
32
9
12
5
2
3

1,978
128
45
50
32
14
2

1,630
114
27
42
60
6
10

1,878
91
28
43
34
11
14

439
20
7
16
25
2
3

1,999
88
32
38
27
12
5

2,187

2,063

470

2,249

1,889

2,099

512

2,201

12
59
70

12
102
70

7
20

\2
102
90

II
51
83

12
68
70

19
14

11
92
88

141

184

204

145

150

191

59
23
26

62
26
25
9

13
7
7

56
27
25

42
21
9

54
22
32

15
5
11

57
25
30
8

117

122

117

120

2,395

2,369

526

2,570

2,108

2,366

578

2,512

1,930
465
39

1,901
468
27

437
89
4

2,070
500
11

1,681
427
81

1,932
434
38

471
107
5

2,031
481
26

2,434

2,396

530

2,581

2,189

2,404

583

2,538

SPECIAL ANALYSIS P

289

The total obligations for the conduct of R. & D. on human services
and welfare programs will decrease by $5 million, from $122 million
in 1976 to $117 million in 1977.
The Office of Human Development will continue to fund R. & D.
activities which support its role in providing ameliorative services to
the aged, physically and mentally handicapped, Native Americans,
children and other subgroups of the population-at-risk.
The Social and Rehabilitation Service will emphasize development
of an effective child support enforcement program, upgrading longterm care, and studying child care standards.
Table P-8 displays obligations and outlays by agency within the
Department.
NATIONAL SCIENCE FOUNDATION

National Science Foundation obligations for the conduct of R. &D.
will increase from $628 million in 1976 to $726 million in 1977. In
addition, $34 million will be obligated for facilities in 1977.
Fundamental research that contributes basic knowledge in all fields
of science will be strengthened and special emphasis will be given to
research in the physical sciences, including physics, engineering, chemistry, and materials; to oceanography, earth, and atmospheric sciences;
and to biology, especially in the plant sciences.
Emphasis in applied research programs will move away from energy
research (which has been shifted to the Energy Research and Development Administration) to new areas such as productivity, where
research not currently being undertaken by mission agencies can yield
comparatively short-term results. The Foundation's programs in
polar research and a broad range of international science and technology efforts conducted through bilateral and multinational arrangements will continue.
Funding will continue for construction of the Very Large Array
radio telescope near Socorro, New Mexico; this unique instrument will
be placed in limited operation by mid-1977.
DEPARTMENT OF AGRICULTURE

Obligations of the Department of Agriculture for the conduct of
research and development, excluding construction of facilities, will
increase from $483 million in 1976 to $507 million in 1977.
At no time in recent history has the need for new technology for
increasing our capacity to produce food been more apparent. In addition to reductions in reserves of basic commodities, consumers face
higher costs for all kinds of food and fiber products. Agricultural
efficiency is increasingly vital to our national well-being. Improved
efficiency in American agricultural production can also help ease critical
worldwide food shortages.

290

THE BUDGET FOR FISCAL YEAR 1977

Obligations for basic research will increase from $177 million in 1976
to $197 million in 1977. Emphasis will be in such areas as cell biology, improvements in the photosynthesis process, and new research on nitrogen fixation; increased efficiency in the production
of meat animals; developing additional sources of usable proteins
from vegetable sources; and protecting against devastating losses
to major food crops resulting from genetic vulnerability to disease
by collecting, testing, and preserving diverse germplasmic materials.
Environmental research will include the further development of
nonchemical means of controlling agricultural pests, and the development of information required for the clearance of agricultural pesticides
for use in cooperation with the Environmental Protection Agency.
The Department of Agriculture, in cooperation with State and private research organizations, will continue development of a national
system designed to improve coordination in the planning, financing,
and evaluation of agricultural research. The goal of such a system will
be to increase the overall efficiency and effectiveness of agricultural
research.
DEPARTMENT OF TRANSPORTATION

The research and development obligations for the Department of
Transportation, including facilities, are estimated at $360 million for
1976 and $335 million for 1977. The $25 million decrease is primarily
a result of an unusually high level of obligations in 1976. The 1977 obligations will provide funding of research to solve the near-term transportation problems facing the Nation, as well as some funding for
longer range, high-payoff technology development needed for future
transportation systems. Transportation alternatives are being better
defined and tradeoffs are being evaluated so that the near-term problems of energy conservation, urban mobility, environmental protection, improved safety, and cost reduction will receive appropriate
emphasis and attention.
Urban mass transportation R. & D. will support the evaluation
of improved transit vehicles, urban rail systems, and the development
of automated guideway transit systems. The program of demonstrating improved transit service, methods, and management techniques, which encourages low-cost service and management innovation to improve the use of current urban transportation systems will
be emphasized.
Highway R. & D. will seek to increase highway safety and reduce
the growth rate of construction and maintenance costs. Advanced
traffic management systems will be developed to investigate methods
of increasing capacity and reducing delays on roadways. Efforts
will be made to improve the environmental compatibility of the
present and future highway system. Highway traffic safety research
will emphasize accident investigation and data analysis and will
support the establishment of Federal safety standards leading to
improved vehicle occupant protection, the reduction of drug- and
alcohol-related accidents, and the improvement of driver performance.

SPECIAL ANALYSIS P

291

Railroad R. & D. funding will emphasize improved freight and
safety research including studies of equipment and human failures.
The industry problems and intermodal freight system demonstration
programs will be expanded to reduce the cost of freight service. The
energy/electrification and propulsion programs provide a knowledge
base for rail transportation planners and provide options for improving future rail transportation.
Air transportation research funding will provide for continued
upgrading of the air traffic control system and for increasing airport
and airway capacity through improved surveillance, communication
and landing aid development, and increased automation of air traffic
control. Increased funding will permit the development of air traffic
control equipment and systems needed to operate the air transportation networks of the 1980's. Aviation safety, aircraft noise and pollution abatement activities will also be emphasized.
Coast Guard R. & D. will emphasize pollution control and abatement, all-weather harbor traffic monitoring and control, improved
aids to navigation, and programs to improve vessel safety including
commercial and recreational boating safety.
DEPARTMENT OF THE INTERIOR

Obligations for the Department of the Interior for conduct of
research and development will show a net decrease from $332 million
in 1976 to $316 million in 1977, although outlays will increase to $310
million. The $16 million reduction in obligations results from several
changes, the largest of which are: a reduction of $6 million for direct
geothermal research by the Geological Survey (which is offset by a
corresponding increase for contract research in the ERDA budget),
and a reduction of $9 million in obligations by the Bureau of Mines
resulting from an unusually high level of obligations in 1976.
The R. & D. activities of the Department support a broad range of
responsibilities for encouraging wise development of the Nation's
energy, mineral, water, land, and recreation resources, and for managing those resources on the public lands.
The research programs of the Department provide an accurate appraisal of the Nation's mineral resources, and include research on new
or improved methods, techniques and instruments for mineral exploration. Basic information is developed on geologic principles and
processes relating to terrain conditions and causes of earthquakes. An
extensive program is aimed at new methods of coal mining which will
increase productivity, improve the health and safety of mine workers,
and minimize damage to the environment. Research also is conducted
to improve the extraction and processing of nonenergy minerals
to meet national needs.
Public land use problems, the quality of the environment, and
the efficient allocation and conservation of scarce water and waterrelated resources will continue to be studied. Special attention will
be accorded studies directed toward better understanding of basic
principles of hydrology necessary for the appraisal and evaluation of
the Nation's water resources for improving the quantity and quality
of water for municipal and industrial uses, and for augmenting water
supply by precipitation management, water salvage and improved
water methods.

292

THE BUDGET FOR FISCAL YEAR 1977

Electrical energy R. & D. by the Bonneville Power Administration
features the development of new transmission equipment design
concepts, development and adaptation of new power system control
techniques, development and design of ultra-high voltage transmission
systems, and participation in the Federal wind energy program.
Research is conducted to improve the management of habitat to
protect fish and wildlife resources and the environment in general.
Studies also support the direct management of fisheries and migratory birds. These studies include population dynamics, bird banding, fish disease prevention and control, restoration of endangered
species, effects of toxic substances, and the effects of non-energy-related
development.
Energy-related studies of the Bureau of Land Management and
the Fish and Wildlife Service include data collection and analyses as
necessary background for understanding potential impacts of energy
development on the environment and as a basis for managing resource
programs on the public lands.
DEPARTMENT OF COMMERCE

Department of Commerce obligations for the conduct of research
and development and facilities will decrease b}^ $9 million, from $258
million in 1976 to $249 million in 1977. This reflects increases for the
research and development programs of the National Oceanic and
Atmospheric Administration (NOAA) and offsetting decreases for the
R. & D. program of the Economic Development Administration
(EDA). Other programs, including those of the National Bureau of
Standards and the Maritime Administration, will be continued at
about the 1976 level.
The principal objectives of the R. & D. programs in the Department
of Commerce are to improve the Nation's weather prediction and
warning capabilities, to improve the competitive position of the U.S.
maritime industry, and to encourage general technological advancement through application of improved standards of measurement.
R. & D. activities conducted by EDA will decline in 1977 as a result
of a reduction of the EDA program to assist economically distressed
areas.
NOAA will continue research on improving the detection and
tracking of weather systems and violent storms, extending environmental forecasting and data gathering programs, and modifying
severe storms and hurricanes. NOAA will also continue its development of systems and components in the area of mapping and charting,
and research aimed at the conservation, development, and management of fisheries resources.
The National Fire Prevention and Control Administration will
continue to conduct research to reduce the loss of life and property
from fires and will provide the essential technical knowledge on which
new and improved fire prevention efforts can be based.
The technology development and utilization programs of the
National Bureau of Standards will continue to improve standards and
measurement procedures for organic water pollution, computer
security, and energy conservation and efficiency. R. & D. efforts of
the Mantime Administration will be directed toward improving
methods of building ships, developing new, improved ship machinery,

SPECIAL ANALYSIS P

293

and increasing automation aboard ships. Maritime Administration
programs also aim to improve ship operations by new communication
and navigation systems using satellites; to improve ship operations
management and control techniques by using computerized systems;
and to improve machinery and propulsion systems for better energy
utilization.
ENVIRONMENTAL PROTECTION AGENCY

EPA obligations for the conduct of R. & D. will decrease by $64
million, from $305 million in 1976 to $241 million in 1977. This
decrease is due in part to significant increases in budget authority
in 1975 that were not obligated until 1976, and in part to planned
completion of certain aspects of the energy-related R. & D. program
and to reductions in some lower-priority R. & D. activities.
EPA research and development efforts are directed at determining
the sources and effects of pollution and developing and testing pollution control technologies. The overall objective is to provide a strong
scientific basis for development of standards and effective control
strategies, as well as attempting to identify and evaluate long-range
suspected environmental problems.
Air pollution R. & D. seeks to develop predictive models for pollutant emission, transport and removal, and to verify these models by
actual measurements. In 1977, research will be conducted in qualitative assessment of pollutants (carcinogenic v. noncarcinogenic) and
their quantitative effects (i.e., dose-response relationships) in order to
determine estimates to risk in human populations. Work on acid rain
will assess its extent, examine its effects upon soil fertility, and
determine what techniques or natural processes may be used to
restore affected areas. The industrial processes research program will
be expanded to allow pollution control technology assessment and
demonstration or controls for metallic particulate and industrial
hydrocarbon sources.
The goals of the water quality research program are to develop:
(1) criteria for clean, safe, ecologically stable water in various aquatic
environments, (2) useful and validatable monitoring methods, (3)
cost-effective and efficient wastewater treatment technology for both
municipalities and industries, and (4) strategies for control of pollution from various nonpoint sources such as farming, mining, and oil
spills. In 1977, research will be expanded on viral problems related to
land application of wastewater and sludges; the ecological impacts of
ocean outfalls, ocean dumping, and dredging operations; and on ecosystem perturbations caused by heavy metals, persistent organics,
and petroleum hydrocarbons.
The primary purpose of water supply research is to support the
Agency's mission in establishing standards for water supply systems,
monitoring for compliance with these standards, and investigating
potential hazards. In 1977, research will be conducted to provide
recommendations on treatment processes for the removal of organics
from drinking water.
Efforts in the solid waste area are directed toward the development
of improved disposal and resource recovery technology to enable
local agencies to handle effectively and economically their solid waste
problems.
EPA conducts an extensive research program on pesticides released
into the environment to determine their effects on human, animal

294

THE BUDGET FOR FISCAL YEAR

1977

and aquatic life and to develop better analytic methods for measuring
residues in plant and animal tissue. This program will continue to
strengthen the data base for classification of pesticides, to support
standards setting for applicator certification, and to provide information for the formulation of a national plan for monitoring pesticides.
Environmental assessment programs in coal gasification, coal
liquefaction, fluidized bed combustion, coal cleaning, Eastern coal
mining, and offshore oil and gas production will be completed.
Standards for first-generation facilities and guidelines for the exploitation of indigenous resources will be developed. Work on flue gas
desulfurization system improvements, sludge fixation processes, and
studies of various pollutants will be expanded. Baseline data studies
will be completed in order to provide a basis for the early assessments
of the impacts of deepwater ports, floating nuclear power plants,
and expanded resource extraction activities.
The socioeconomic program will be increased in 1977 to develop a
comprehensive report on the benefits of water pollution control and
to complete the development of a simple, understandable system for
ranking pollution problems, with emphasis on human exposure. An
automated regional laboratory analytical system will be implemented.
NUCLEAR REGULATORY COMMISSION

Obligations of the Nuclear Regulatory Commission for the conduct
of E. & D. will increase from $97 million in 1976 to $109 million in
1977, and obligations for related construction and equipment will
total $8 million in 1977.
This research is directed towards the improvement of data needed
on the safety of nuclear power plants in order to assure an independent
technical basis for licensing these facilities; the health effects associated
with the nuclear power cycle; environmental impact of nuclear power;
waste treatment and disposal; and the transportation of radioactive
materials.
RESEARCH AND DEVELOPMENT IN COLLEGES AND UNIVERSITIES

A portion of the funds discussed above will be committed by
agencies to colleges and universities to perform R. & D. As shown
in table P-10, the 1977 budget will provide $2,635 million in obligations for this purpose as contrasted with $2,407 million in 1976.
Within this total, the National Science Foundation will increase its
support activities in colleges and universities by nearly 20%, from
$465 million in 1976 to $550 million in 1977.
Federal funds are expected to continue to furnish more than half of
the total support for college and university R. & D. activities. The
funds assist faculty researchers and also provide valuable experience
and training for graduate students employed on R. & D. projects.

Table P-9. RESEARCH AND DEVELOPMENT IN COLLEGES AND UNIVERSITIES *
(in millions of dollars)
Department or agency

Health, Education, and Welfare
National Science Foundation
Department of Defense—Military
Agriculture
Energy Research and Development Administration
National Aeronautics and Space Administration
Allothers
Total
1

Obligations
1975
actual

1976
estimate

Outlays

TQ
estimate

1977
estimate

1975
actual

1976
estimate

TQ
estimate

1977
estimate

1,269
447
190
108
135
108
142

1,218
465
202
120
141
107
154

260
117
52
30
39
27
31

1,302
550
225
128
166
107
157

1,176
440
182
102
119
98
111

1,307
475
196
118
137
97
130

237
160
55
30
36
24
30

1,366
504
216
129
158
97
141

2,399

2,407

556

2,635

2,228

2,460

572

2,611

£
5
w
8
^

Amounts reported in this table are included in totals for conduct of R. & D. in previous tables.

to
CO

SPECIAL ANALYSIS Q
FEDERAL ENVIRONMENTAL PROGRAMS
INTRODUCTION

In 1977, 21 Federal agencies and departments expect to have outlays of $8.7 billion for environmental programs. This is an increase of
21% over 1976 Federal outlays of $7.2 billion. Although covering a
wide range of activities, Federal environmental programs are classified
in three broad categories: pollution control and abatement; understanding, describing and predicting the environment; and environmental protection and enhancement activities. Chart Q-l shows the
trends in total Federal expenditures for each category from 1972-77.
The following table depicts the
relationship between budget authority
and outlays in each category.1
1
Not included in this analysis is $245 million in lost Federal revenue resulting from the
tax exempt status of interest income from pollution control bonds.

Environmental Outlays, by Category, 1972-1977
$ Billions

fBttlions

Protection and Enhancement

—6

Understanding, Describing and Predicting
Pollution Control and Abatement

1976

1977
Estimate

296

SPECIAL ANALYSIS Q

297

Table Q-1. BUDGET AUTHORITY AND OUTLAYS—FEDERAL
ENVIRONMENT PROGRAMS (in millions of dollars)
Activities

1975
actual

1976
estimate

TQ
estimate

1977
estimate

1,248.2
1, 352.4
1,802.5
7,810.4

1,300.9
1,486.5
1,843.9
173.2

296.9
375.3
409.5
16.0

1,381.4
1,607.1
1, 870.5
174.2

1,097.7

5,033.2

BUDGET AUTHORITY
Protection and enhancement
Understanding, describing, and predicting
Pollution control and abatement
Construction grants 1
Total

12,213.5

4,804.5

OUTLAYS
Protection and enhancement
Understanding, describing, and predicting
Pollution control and abatement
Construction grants 1
Total

1,128.5
1,296.4
1,510.3
2,060.5

1,242.6
1,467.5
1,992.8
2,474.4

328.5
382.9
486.5
633.7

1,327.0
1,524.8
1,910.1
3,913.0

5,995.7

7,177.3

1,831.6

8,674.9

Includes but is not limited to grants under the Water Pollution Control Act Amendments of
1972 which provided $18 billion in contract authority to EPA. Obligations and outlays from this
authority in 1976, transition quarter, and 1977 are funded from carryover balances.

As chart Q-1 and table Q-1 indicate, total Federal outlays being
directed to environmental programs have been increasing significantly.
Pollution control and abatement activities, including construction
grants, represent the largest category of programs while understanding,
describing and predicting, and protection and enhancement rank
second and third, respectively, in size of programs.
Federal expenditures can occur either as direct outlays by a Federal
agency (funding of in-house activities) or as a transfer (grants) to
State or local governments or to the private sector. The distribution of
1977 Federal outlays for environmental programs according to direct
or transfer spending is summarized below. It should be noted that
State and local governments have been receiving increasingly greater
amounts of financial assistance through transfer payments from the
Federal Government.
1977 FEDERAL OUTLAYS FOR ENVIRONMENTAL PROGRAMS
[In millions of dollars]
Outlays

Enhancement
Understanding, describing and predicting
Pollution abatement (excluding construction grants)
Construction grants
1

Total
Not applicable.

—

Direct

Transfer

858.9
1,524.8
1, 604.3
0)

468.1
(})
305.8
3,913.0

3,988.0

4,686.9

POLLUTION CONTROL AND ABATEMENT

Pollution control and abatement expenditures, including construction grant funds, represent 67% of total Federal outlays on the
environment. These expenditures are directed toward cleaning up the

298

THE BUDGET FOR FISCAL YEAR 1977

environment and preventing further deterioration. Outlays for 1977
are estimated at $5,823.1 million. Principal activities funded include
actions necessary to reduce pollution from Federal facilities; the establishment and enforcement of standards; research and development of
new control technology; and the identification of pollutants, their
sources, and their impact on health.
Two other types of pollution control and abatement activities are
also funded. A major Federal grants program provides substantial
financial assistance to State and local governments to establish and
develop pollution control programs, and a smaller grants program to
fund manpower development and training activities. Legislation will
be proposed which provides a basis for formulating a multiyear
program, commencing in 1978, for the construction of wastewater
treatment plants. The legislation strikes a more appropriate balance
between Federal and non-Federal responsibilities in meeting the goals
of the FWPCA.
In table Q-2, budget authority and outlays for pollution control
and abatement activities are presented by function. Federal expenditures for these programs are estimated to reach $5,823.1 million in
1977, representing an increase of 30% over 1976 outlays of $4,467.2
million.
Table Q-2. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
FUNCTION (in millions of dollars)
Activity

1975
actual

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY

Financial aid to State, interstate, and local governments 1
Research and development
Standard setting and enforcement
Reduce pollution from Federal facilities
Manpower development
Other
Total

8,077.3
710.9
354.3
367.1
11.8
91.5

363.9
707.9
392.0
426.4
17.4
109.5

43.7
177.3
119.4
58. 6
1.7
24.8

306.3
716.9
433.4
474.3
7.0
106.8

9,612.9

2,017.1

425.5

2,044.7

2,189.0
569.6
368.8
334.2
14.7
94.5

2,718.6
740.5
404.7
475.0
14.3
114.1

706.0
180.5
133.4
76.1
1.1
23.1

4,143.7
743.0
377.5
441.8
8.6
108.5

3,570.8

4,467.2

1,120.2

5,823.1

OUTLAYS

Financial aid to State, interstate, and local governments1
Research and development
Standard setting and enforcement
Reduce pollution from Federal facilities
Manpower development
Other
Total

1
Includes but is not limited to grants under the Water Pollution Control Act Amendments of
1972 which provided $18 billion in contract authority to EPA. Obligations and outlays from this
authority in 1976, transition quarter, and 1977 are funded from carryover balances.

Activities involved.—Financial aid.—Federal outlays for 1977 in
the financial aid category are estimated at $4,143.7 million. Of this
total, $3,913.0 million will be directed toward the construction of
sewage treatment facilities. These federally funded grants cover 75%
of the total eligible costs of these projects. The remainder of these
grant funds are utilized in funding the air and water pollution control

SPECIAL ANALYSIS Q

299

programs of State, areawide and local agencies. Specifically, these
funds—$231 million—will be used to support objectives such as
the development of the national primary and secondary ambient air
quality monitoring systems, emission inventories, the development of
effective and enforceable standards, and the development of transportation control and air pollution emergency plans.
The Environmental Protection Agency (EPA), the Department of
Housing and Urban Development (HUD), and the Department of
Commerce (DOC) respectively are the agencies most active in supporting the sewage treatment facilities construction grants program while
EPA plays a leading role in funding the planning and agency support
grants.
Research, development, and demonstration.—Federal outlays on research and development for pollution control and abatement are
expected to reach $743 million in 1977.
These outlays cover two types of research and development activities:
primary, where pollution control and abatement is the sole objective;
and secondary, where pollution control and abatement activities
are not the principal goal but rather represent an auxiliary benefit
from research having some other primary purpose.
Research and development programs, by their nature, involve a
variety of separately identifiable activities. In the abatement and
control of pollutants, the sequential development of research and
development programs leads first to the identification of pollutants and
their sources, then to an assessment of their impact on health and the
environment in general, next to development of control technologies,
and, finally to systems and procedures for monitoring both point
source emissions and ambient quality of air and water.
Once it is determined that a specific pollutant has an adverse
impact on man or the environment, efforts need to be directed toward
initiation of programs that will determine the actual adverse health
effects of the pollutant. Such programs seek to determine at what level
pollutants become hazardous and establish realistic exposure limits.
These steps are necessary in order to establish a logical framework
within which decisions can be made relative to the development of
appropriate abatement strategies and control technologies. The
primary mission of health effects research and development programs
is to develop a sufficient quantitative data base on chemical, physical,
and biological environmental factors affecting human health to
initiate a scientific strategy for control measures.
Haying established a basis for the development of control technologies, research and development efforts can then be directed toward
processes and procedures to curb and/or eliminate undesirable or
hazardous pollutants. Generally, two methods of control are available—utilization of retrofit devices which remove emitted pollutants,
and the reduction of the initial generation of pollutants through
changes in production methods.
The final stage of research and development activities in the pollution control and abatement category involves efforts to develop
techniques for monitoring the emission of pollutants. These programs
are concerned with the improvement in technology—both in devices
and techniques—for monitoring point source emissions as well as
the ambient quality of air and water. Federal research and develop

300

THE BUDGET FOR FISCAL YEAR 1977

ment efforts in this area have generally been concentrated on improving monitoring techniques and sampling procedures; whereas,
the development of monitoring equipment has been concentrated in
the private sector.
Examples of pollution abatement related research and development
activities in 1977 will include:
1. Turbidity studies and sediment and waste runoff control measures designed to improve water quality. These programs result in
safer water supplies for human use and an improved environment for
marine life.
2. Field investigation programs, air pollution modeling and epidemiological and toxicological studies relating to air quality research and
development. These activities are directed toward measurement of the
effects of air pollutants on man and animals.
3. Demonstration of stack gas technology designed to effect
transition to clean fuels and to promote energy conservation.
Standard setting and enforcement.—Twelve Federal agencies reported
1977 outlays of $377.5 million. Primary emphasis, in terms of program
funding in this area, is placed on Federal support of monitoring,
surveillance, standard setting and enforcement. Monitoring programs
are those that measure discharged pollutants from point sources while
surveillance refers to testing of ambient levels of pollution. These
monitoring and surveillance data provide a basis for Federal efforts to
develop and review new and/or existing standards, and establish effective
enforcement programs.
Those agencies funding major programs in this area are EPA,
NRC, DOT, ERDA, and the Corps of Engineers. Spending is concentrated on monitoring, standard setting and enforcement, technical
support and surveillance.
Pollution abatement from Federal facilities. —Federal agencies also
have active programs to abate pollution from their own facilities in
order to be in compliance with Federal laws and the substantive
requirements of the 1State and local governments in which Federal
facilities are located.
In 1977, Federal agencies reporting expenditures on environmental
programs estimate spending of $441.8 million on abatement of
pollutants from their facilities. Outlays under this category of activity
fund remedial actions, process changes, and fuel switching to abate
emission of pollutants. Related administrative costs are also included.
About 80% ($355 million) of Federal outlays in this area of
activity occur in remedial action programs. These programs involve
the installation of retrofit devices on existing facilities or facilities
under construction. Retrofit devices treat pollution only after generation and are separately identifiable abatement equipment such as
electrostatic precipitators or dust collectors.
Expenditures on process changes are defined as those outlays
incurred due to the incorporation of pollution abatement processes
within an existing system. The process change approach to pollution
abatement reduces or eliminates pollution by modifying the procedures which generate pollutants. Process changes may take the form
1
Outlays are for facilities or properties which are either owned or leased by the Federal Government and reflect expenditures on existing facilities, additions to existing facilities or new facilities.

SPECIAL ANALYSIS Q

301

of material substitution, reuse of waste or water, and equipment or
production process alternatives. $29 million in 1977 Federal outlays
are directed to this program.
While remedial action continues to command the major portion
of outlays in this category, a shift toward larger relative outlays
in process changes can be expected as standards become more clearly
defined, technological capabilities expand, and older facilities are
replaced.
In addition to the programs mentioned above, Federal outlays of
$52 million are required to support incremental costs of fuel switching and operating costs. Fuel switching costs are those incremental
costs associated with the increased fuel or power costs incurred
from using low-sulfur or low-polluting fuels or from the operation
of remedial equipment or process change procedures. Outlays for
operating costs include those expenditures incurred due to cleaning,
servicing, and monitoring remedial action or process change devices.
Expenditures for these two activities represent 12% of Federal outlays
for the abatement of pollution from Federal facilities.
Manpower development.—In 1977, Federal outlays of $8.6 million
will be directed toward funding various manpower development
programs which relate to improving pollution abatement efforts.
These Federal funds are used to support such activities as inhouse
training, fellowships, and training grants.
Pollution abatement

by media.—Table Q-3 presents Federal

outlays and obligations for pollution control and abatement categorized by media in contrast to the functional distribution shown in table
Q-2. Outlays and obligations for water programs receive the largest
share of Federal funds because of the large grant and loan programs
which fund the construction of waste treatment facilities. It should
also be noted that only funding for those activities that directly lead to
pollution abatement are included in table Q-3. Programs that may
ultimately lead to abatement and control of pollutants but which do
not have abatement as their primary objective are excluded.
Examples of activities which are excluded from table Q-3 are:
• Pest management and control programs developed in the Department of Agriculture and designed to control pests by
means other than the use of chemical pesticides.
• Urban Mass Transit Authority programs in the Department of
Transportation that work to improve transit operations and
rapid rail vehicles, thereby reducing pollution as a secondary
benefit.
• Development of associated air and water quality monitoring
instruments by NASA. These instruments were developed for
use in advanced spacecrafts but can also be utilized in more
generalized pollution control efforts.

http://fraser.stlouisfed.org/
210-700 O - 76 - 20
Federal Reserve Bank of St. Louis

302

THE BUDGET FOR FISCAL YEAR

1977

Table Q-3. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
MEDIA OR POLLUTANT (in millions of dollars)
Obligations
Outlays
1975
actual

Media polluted:
Water
.
Construction grants or loans
Other
Air
Land
Other (e.g., living things, materials).
Multimedia (i.e., more than one of
above)
Total
Selected pollutants:J
Solid wastes
Pesticides
Radiation
Noise
1

1975
actual

1976
estimate

TQ
estimate

1977
estimate

2,658.8
2,100.6
558.2
274.3
52.7
400.7

5,179.2
4,407.8
771.4
347.8
57.5
433.6

5,491.9
4,717.7
774.2
334.4
66.0
573.5

1,193.3
1,048.6
144.7
83.1
18.3
165.8

6,979.7
6,294.3
685.4
356.5
107.5
463.6

82.5

85.0

116.6

31.7

117.5

3,469.0

6,103.1

6,582.4

1,492.2

8,024.8

152.3
56.8
164.9
58.4

173.5
58.6
160.1
49.6

196.1
69.2
188.9
77.7

59.6
20.5
51.6
14.5

194.5
102.5
231.0
53.2

Funds for selected pollutants are included in "media" distribution above.

Pollution control and abatement programs in air and water (excluding construction grants) are primarily directed toward research
and development activities, grants to States and local control agencies,
and such direct Federal operations as monitoring and enforcement.
Most of the activities relating to the abatement of pollutants on land
are concentrated in the research and development area and encompass
such projects as studies of acid mine drainage, nutrients, pesticides
and solid waste disposal. Federal activities concerned with the selected
pollutants shown in table Q-3 are, for the most part, directed toward
research in effects, control technology, standard setting and
enforcement.

Pollution control and abatement by agency.—Federal budget

authority and outlays on pollution control and abatement are
presented by agency in table Q-4. Twenty agencies reported budget
authority and outlays for this category of environmental expenditures
in 1977.

303

SPECIAL ANALYSIS Q

Table Q-4. POLLUTION CONTROL AND ABATEMENT ACTIVITIES—BY
AGENCY (in millions of dollars)
Agency

1976
estimate

TQ
estimate

1977
estimate

8,516.5
346.9

771.5
423.1

188.6
47.7

718.2
469.9

175.5
116.9
88.6
83.4
83.9
54.3
58.9
37.3
24.3
26.4

199.6
144.2
99.3
93.4
74.9
54.3
63.1
36.0
24.7
33.0

61.4
41.1
18.3

230.7
129.5

0.9
23.4

2.9

104.6
76.8
56.2
56.8
36.0
31.5
35.8

9,612.9

2,017.1

425.5

2,044.7

2,530.5
318.1
159.0
142.5
79.9
79.2
75.3
52.6
52.1
37.3
23.1
21.2

3,192.6
458.9
200.4
167.7
94.8
73.8
83.0
52.2
54.9
36.0
23.8
29.1

844.0
65.3
51.3
57.6
15.3
20.0
22.0
12.0
13.5
7.2
6.0
6.0

4,500.0
436.0
224.9
195.3
92.8
83.6
85.0
52.8
53.0
36.0
30.2
33.5

3,570.8

4,467.2

1,120.2

5,823.1

1975
ictual

BUDGET AUTHORITY

Environmental Protection Agency
Defense—Military
Energy Research and Development Administration
Agriculture
Transportation
Housing and Urban Development
National Aeronautics and Space Administration
Interior
Commerce
Defense—Civil
Nuclear Regulatory Commission
Other agencies
Total

11.8
15.5
7.7
6.2

98.7

OUTLAYS

Main agency activities.—The Environmental Protection Agency
programs represent over 77% ($4,500.0 million) of the total expected
outlays in this category primarily because of its sewage treatment
grant program. Outlays by EPA will increase by more than 40% over
1976 outlay levels of $3,192.6 million.
The operating budget of EPA, which excludes construction grants,
highlights various other programs conducted by this agency. Research
and development programs ($280 million) will account for some 38%
of EPA's operating budget, with major program support going to
sources and effects, control technology, and health effects activities.
In its abatement and control operations, EPA devotes much of
its effort to standard setting and enforcement, technical support,
and grants for these activities. In 1977, outlays are expected to reach
$305 million. These funds support a wide variety of programs, ranging
from enforcement of standards to the issuance of permits and the
provision of assistance in assessing the impacts of air, water, solid
waste, noise, hazardous materials, and pesticides pollution.

304

THE BUDGET FOR FISCAL YEAR 1977

In the Department of Defense—Military, research programs leading to
reduction of pollution from its facilities are continuing. In 1977, outlays
are expected to reach $436.0 million, with the major portion of these
expenditures being directed toward remedial actions. Abatement and
control outlays on environmental programs by the Corps of Engineers
(JDOD—Civil) have primarily been used in improving and expanding
knowledge relating to water quality and management. Programs include assessment of the environmental impact of pollutants on fish,
wildlife, and aquatic systems, as well as on man. The Corps has expanded its activities relating to the governing of the discharge of
dredged or fill material into navigable waters or the ocean and the
implementing of the "Endangered Species Act."
The Energy Research and Development Administration will increase
its pollution and abatement control outlays by more than 10% from
$200.4 million in 1976 to $224.9 million in 1977. ERDA will concentrate
its efforts in abatement and control operations, research and development, and remedial action. Specifically, ERDA is expanding
efforts in: (1) research and development of pilot plant programs to
convert coal to fuel gas with less pollution, (2) health research to
determine human thresholds of exposure to hazardous agents, and
(3) environmental research on offshore powerplant siting and oil
drilling and exploration. Additionally, programs are being continued
in ecological effects of thermal effluents, alternative methods of cooling
water disposal, and the toxicity of chemicals added to prevent fouling
of cooling systems.
Problems of agriculture-related pollution are being researched by
the Department of Agriculture. Continued emphasis is being placed on
the development of methods to abate pollution from the production
and processing of agricultural products; the recycling of animal
wastes; and preventing degradation of air, water, and soil by agricultural chemicals. Programs relating to sediment control and agricultural runoff are being maintained as part of water quality and management programs. In addition, the Farmers Home Administration
provides funding for construction of facilities in rural areas to improve
the collection, processing, and disposal of wastes.
The Department of Transportation will expend $92.8 million for
pollution control and abatement programs in 1977. Major programs
in noise control are being funded by DOT. The Federal Aviation
Agency is concentrating its efforts on the demonstration of technical,
operational, and economic feasibility of reducing noise, sonic boom,
and pollution generated by aircraft. The Urban Mass Transportation
Administration continues to support programs that have as their
objective a reduction in emission of hydrocarbon and carbon monoxide
and the conservation of energy used by mass transportation systems.
The Coast Guard is funding programs to improve its ability to investigate oil spills and to initiate preventive and cleanup actions in order to
alleviate the adverse environmental impacts of such pollution.
Environmental programs in the Department of Housing and Urban
Development are continuing in the areas of sewage treatment grants
and public facilities loans. The Department also conducts research
and development programs providing for the development and
application of improved control technology in the areas of solid and
liquid waste management and noise abatement.

SPECIAL ANALYSIS Q

305

The National Aeronautics and Space Administration (NASA) plans to
spend $85.0 million in outlays in 1977 for pollution control and
abatement research and development programs. For example, NASA
is conducting programs to reduce and control aircraft noise and
emission pollutants. Through the use of satellites, NASA is monitoring
atmospheric pollution. For example, a pollution monitoring satellite,
the Stratospheric Aerosol and Gas Experiment (SAGE), is now
under development to provide data on the concentrations and distributions of aerosols in the ozone layer of the upper atmosphere.
UNDERSTANDING, DESCRIBING, AND PREDICTING THE ENVIRONMENT

Fourteen Federal agencies will spend $1,524.8 million in 1977 to
describe the physical characteristics of the environment, to increase
understanding of the environment, and to predict environmental
conditions. This is a 4% increase over estimated 1976 expenditures
of $1,467.5 million. Programs in these areas protect and enhance
the environment as well as control pollution.
As table Q-5 indicates, almost half of these expenditures will
support environmental observation and measurement efforts that
help describe and predict weather, ocean conditions, and earthquakes.
Also included are efforts to investigate and report on climate fluctuations and the funding of weather satellite programs to provide improved environmental warning services.
Locating and describing natural resources account for $394.1
million in 1977 expenditures. Activities such as the Earth Resources
Survey Program are increasing man's understanding of existing natural
resource systems and identifying, evaluating, and monitoring new
natural resources.
Other expenditures will be for further ecological research, for
physical environmental survey activities, and for aerial reconnaissance
of tropical cyclones and winter storms. There also are expenditures for
earthquake engineering and polar research projects.

306

THE BUDGET FOR FISCAL YEAR 1977

Table Q-5. UNDERSTANDING. DESCRIBING, AND PREDICTING THE
ENVIRONMENT—BY FUNCTION (in millions of dollars)
Activity

1975
actual

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY

Observe and predict weather, ocean conditions, and
disturbances:
Research and development
Operations-.....-Locating and describing natural resources:
Research and development
Operations
Physical environmental surveys:
Research and development
Operations
Weather modification activities
Research on environmental impact on man
Ecological and other basic environmental research.
Total

196.8
404.0

212.3
471.4

62.7
111.9

230.8
507.5

201.5
177.4

211.4
193.7

53.1
47.6

214.7
195.7

13.6
138.1
22.3
67. 3
131.4

12.6
135.6
17.5
75.4
156. 6

3.1
34.2
7.8
16.7
38.2

14.9
152.3
18.4
94.9
177.9

1,352.4

1,486.5

375.3

1,607.1

192.9
402.2

212.3
449.0

67.2
106.6

232.1
469.0

179.8
170.9

212.2
197.7

52.2
50.1

204.4
189.7

14.7
130.7
23.5
56. 8
124.9

13.5
131.3
18.0
77. 3
156.2

3.1
33.3
10.7
17.5
42.2

13.9
140.5
20.2
86.3
168.7

1,296.4

1,467.5

382.9

1,524.8

OUTLAYS
Observe and predict weather, ocean conditions, and
disturbances:
Research and development
Operations
...
Locating and describing natural resources:
Research and development
Operations
Physical environmental surveys:
Research and development
Operations
Weather modification activities
Research on environmental impact on man
Ecological and other basic environmental research_
Total

SPECIAL ANALYSIS Q

307

Table Q-6 shows the distribution of total budget authority and
outlays by the major agencies involved.
Table Q-6. UNDERSTANDING, DESCRIBING, AND PREDICTING THE
ENVIRONMENT—BY AGENCY (in millions of dollars)
Agency
*
*

1 9 7 5
,
actual

1 9 7 6

estimate

T0
estimate

1 9 7 7

estimate

BUDGET AUTHORITY

Commerce
Interior
Defense—Military
National Science Foundation
National Aeronautics and Space Administration. _
Agriculture
Energy Research and Development Administration
Health, Education, and Welfare
Defense—Civil
Transportation
Smithsonian Institution
Other
Total
OUTLAYS
Commerce
Interior
Defense—Military
National Science Foundation
National Aeronautics and Space Administration. _
Agriculture
Energy Research and Development Administration
Health, Education, and Welfare
Defense—Civil
Transportation
Smithsonian Institution
Other
Total

371.7
234.3
204.3
128.6
162.7
135.0

429.1
254.5
215.0
141.6
166.6
146.1

107.6
65.0
53.6
39.0
42.6
34.8

470.7
248.3
235.4
155.9
190.2
146.7

32.1
35.7
18.0
13.6
11.4

5.0

41.9
34.6
17.9
15.3
12.7
11.2

10.6
7.8
4.4
3.8
3.3
2.8

50.2
46.7
19.7
17.8
13.3
12.2

1,352.4

1,486.5

375.3

1,607.1

371.5
212.0
200.2
126.5
149.5
132.9

409.4
262.3
204.2
139.6
167.7
150.2

107.7
67.8
47.4
46.9
42.3
37.7

429.2
239.8
222.8
153.2
186.9
143.1

30.1
26.0
18.0
13.3
11.6
4.8

39.9
37.2
17.9
15.4
13.0
10.7

10.2
8.7
4.4
3.8
3.4
2.6

48.2
39.3
19.7
17.7
13.1
11.8

1,296.4

1,467.5

382.9

1,524.8

Agencies involved.—The National Science Foundation plans to
spend $153.2 million in 1977 in support of research to increase the
Nation's knowledge of the environment. Particular emphasis will
be on increasing the capacity for more accurate and long-range
weather forecasts and for accurate assessments of their impact on
human affairs. Other efforts will be directed toward finding ways to
minimize the adverse effects of extracting and processing natural
resources and to expand environmentally acceptable ways of recovering, converting, storing, and distributing energy resources.
Major programs include the Global Atmospheric Research Program,
the International Decade of Ocean Exploration, and the Climate
Dynamics Program.

308

THE BUDGET FOR FISCAL YEAR 1977

The Department of Commerce, primarily through the National
Oceanic and Atmospheric Administration (NOAA), conducts environmental monitoring and prediction activities, surveys for mapping and
charting, data storage and dissemination, and related research. NOAA
plans to spend $367 million on such environmental observation and
measurement activities as observing, predicting, and reporting on
climatic fluctuations. NOAA hopes to reduce loss of life and property
from recurring natural disasters through their weather warning and
weather reconnaissance efforts. Further procurement and use of
satellite systems accounts for much of NOAA's 1977 expenditure
increase. Other activities that will increase in 1977 are efforts to
analyze man's impact on marine ecosystems. For example, the effect
of offshore waste disposal on aquatic life will be investigated.
The Department of Interior through several of its bureaus will spend
$239.8 million in 1977 for its efforts to understand, describe, and
predict the environment. Most of this money (90%) will be spent by
the Geological Survey to continue programs such as urban pilot area
studies that provide land and water resource and hazard data in order
to improve the basis for urban planning; topographic mapping to
describe the physical environment; and resource evaluation of the
Outer Continental Shelf.
The Bureau of Reclamation performs various ecological research
programs; for example, it studies the effects of water projects on the
ecology of local areas or river basins, and analyzes the effects of vegetation management on wildlife along the Lower Colorado River. Through
their cloud seeding efforts, the Bureau has found that precipitation can
be increased 10% to 30% annually under certain conditions with only
minor and transitory environmental impacts. The Bureau hopes that
these research activities will be utilized to manage the amount and
use of precipitation as part of the Nation's total water resources
program.
The National Aeronautics and Space Administration (NASA) plans
to spend $87 million in 1977 on research and development in environmental observation and measurement. These activities include (1)
developing the capacity to make accurate short- and long-term
weather predictions through use of satellites; (2) improving atmospheric temperature sounding and wind measurements through the
all-weather atmospheric sounding satellite; and (3) using temperature
soundings for earlier detections of tornados.
NASA will also be spending $91 million on its efforts to develop
new capabilities to locate and describe natural resources. The Earth
Resources Survey Program, by utilizing satellites, is conducting
experiments throughout the world in taking inventories of natural
resources and monitoring their changes over time. Research and
technology activities underway involve improved approaches to detection and utilization of Earth resources information, such as
expansion of efforts into the thermal infrared region through the
development of the Thematic Mapper.

SPECIAL ANALYSIS Q

309

The Department of Defense—Military plans to spend 70% of its
outlays in this category for activities in environmental observation
and measurement to describe and predict weather, ocean conditions,
and disturbances important to military operations. The Corps of
Engineers (DOD—Civil) is spending 20% of its outlays in this
category on other observation efforts. Research is continuing in
oceanographic instrumentation development. The Corps also conducts
studies of terrestrial and marine ecologicial systems to determine the
impact of engineering works. These studies are designed to develop
technology and methodology for minimizing the impact of these
projects on the ecosystem and environment, while at the same time
permitting national economic growth.
The Soil Conservation Service (SCS) in the Department of Agriculture will spend $117 million during 1977 on programs that locate
and describe natural resources. Specifically, SCS conducts soil, snow,
and river basin surveys, and makes water-supply forecasts. The Forest
Service will spend $22 million in the same period, with most expenditures used for environmental research. The Forest Service is
attempting to better understand ecosystems so that management
practices can lead to improved productivity and quality of the
environment. Other research efforts attempt to solve the complex
problems concerning forests and related ecosystems and their interface
with urban areas.
The Agricultural Research Service (ARS) also conducts research
in this area. By utilizing remote sensing, ARS is devising improved
capabilities for (1) determining soil characteristics and updating soil
maps and watershed measurements; and (2) assessing environmental
and ecological conditions and interactions between man and the
environment.
ENVIRONMENTAL PROTECTION AND ENHANCEMENT

In 1977, 10 Federal agencies are expected to spend $1.3 billion to
protect and enhance the environment. This is a 7% increase over
1976 outlays. As table Q-7 shows, 35% of these expenditures are
Federal grants to State and local governments and the balance are for
direct Federal activities.

310

THE BUDGET FOR FISCAL YEAR 1977
Table Q-7. ENVIRONMENTAL PROTECTION AND ENHANCEMENT
ACTIVITIES-BY FUNCTION (in millions of dollars)
Activities

1975
actual

1976
estimate

TQ
estimate

1977
estimate

151.6
.1
156.1
97.8
20.2
46.9

143.8
2.0
155.7
110.5
20.2
56.9

8.0
.3
37.8
25.1
4.7
1.1

161.8
5.4
156.1
119.9
10.2
75.9

472.7

489.1

77.0

529.3

154.5
155.2
188.4
137.8
65. 2
74.4

129.1
221.8
191.6
143.8
44.6
80.9

33.7
63.7
63.2
34.2
12.7
12.4

125.4
250.1
188.4
160.2
43.5
84.5

775.5

811.8

219.9

852.1

1,248.2

1,300.9

296.9

1,381.4

110.1
.1
150.9
89.9
11.3
40.8

122.1
2.0
151.4
101.7
14.0
55.9

31.6
.3
37.4
24.6
4.7
9.6

126.2
3.6
149.7
105.9
10.6
72.1

403.1

447.1

108.2

468.1

145.2
163.6
189.3
127.8
60.5
39.0

141.3
226.4
197.2
140.6
46. 3
43.7

35.0
61.8
62.9
35.8
13.1
11.7

128.9
269.5
203.7
162.6
49.5
44.7

725.4

795.5

220.3

858.9

1,128.5

1,242.6

328.5

1,327.0

BUDGET AUTHORITY

Financial aid to State and local government:
Purchase, development and operations:
City recreation
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other State local aid
Subtotal
Direct Federal activities:
Purchase, development and operations:
City recreation
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other direct activities
Subtotal
Total
OUTLAYS
Financial aid to State and local government:
Purchase, development and operations:
City recreation
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other State local aid
Subtotal
Direct Federal activities:
Purchase, development and operations:
City recreation
Preserve unique areas
Noncity general recreation
Sport fish and wildlife
Historic preservation and rehabilitation
Other direct activities
Subtotal
Total

SPECIAL ANALYSIS Q

311

The major activities in this category are:
• City recreation projects which establish or develop parks and
recreational facilities in urban areas.
• Preservation of unique natural areas and protection of endangered
species including national parks, monuments, scenic rivers, trails,
wildernesses, seashores, and refuges for endangered species.
• General recreation projects outside of cities—including expenditures for national recreation areas, recreation programs in national
forests, and recreation sites at Federal water projects.
• Management of sport fish and wildlife at national wildlife refuges,
national fish hatcheries, and other similar projects.
• Historic preservation and rehabilitation, including national
historic sites, military parks, and other federally assisted historic
preservation and rehabilitation projects.
These enhancement and protection activities are categorized in
table Q-7 as direct Federal spending or as grants to States and local
governments for these activities. Table Q-8 lists the departments and
agencies making these expenditures.
Table Q-8. ENVIRONMENTAL PROTECTION AND ENHANCEMENT—
BY AGENCY (in millions of dollars)
Agency

1975
actual

1976
estimate

TQ
estimate

1977
estimate

BUDGET AUTHORITY

Interior
Housing and Urban Development
Agriculture
Defense—Civil
Commerce
Tennessee Valley Authority
Other agencies
Total
OUTLAYS
Interior
Housing and Urban Development
Agriculture
Defense—Civil
Commerce
Tennessee Valley Authority
Other agencies
Total

908.2
150.3
102.0
77.8
50.3
4.7
7.6

229.2
38.3
19.5
6.8
1.6
1.5

941.7
182.0
100.6
85.6
58.2
4.8
8.5

1,248.2

1,300.9

296.9

1,381.4

797.9
104.9
87.4
72.8
38. 3
4.7
22.5

861.8
122.4
98.7
82.3
48.9
4.5
24.0

226.7
34.5
36.6
20.6
6.8
1.6
1.7

917.6
160.1
97.7
90.5
48.9
4.4
7.8

1,128.5

1,242.6

328.5

1,327.0

875.9
136.0
93.0
77.3
38. 6
4. 3
23. 1

Agencies involved.— The Department of the Interior through the
Fish and Wildlife Service administers 89 hatcheries and 379 units
in the National Wildlife Refuge System encompassing 33.5 million
acres. The Service also manages 353 wildlife refuges with 9.8 million
acres for migratory birds. In 1977, $132 million will be spent for
direct Federal activities and $90 million will be granted to State
and local governments for fish and wildlife restoration, management
and research.

312

THE BUDGET FOR FISCAL YEAR 1977

The Bureau of Outdoor Recreation promotes coordination of
outdoor recreation programs. It also administers the Land and Water
Conservation Fund which provides grants for planning, acquisition,
and development of State and local recreation areas and provides
funds for Federal purchases of nationally important lands. Outlays
for these programs in 1977 will be $336 million, of which $158 million
will be for grants to State and local governments and $178 million
for direct Federal activities.
The National Park Service will spend $340 million for all activities
of the National Park System. These funds will be for operation,
maintenance, general administration, planning and construction of
facilities, and restoration or rehabilitation of historic areas within the
National Park System. States and local governments will receive
approximately $10 million in matching funds for acquiring historic
properties to help preserve them for future generations.
The Department oj Housing and Urban Development estimates outlays
of $160.1 million for financial aid to States and local governments for
environmental protection and enhancement activities. One such program in HUD is the Community Development Block Grant Program
which will fund, at the grant recipient's discretion, the protection
and improvement of properties having scenic, recreation, conservation and/or historic value. Grants for open space can also be obtained.
The Department oj Agriculture carries out a variety of enhancement
activities, particularly through the Forest Service and the Soil Conservation Service. The Forest Service will spend $67 million in 1977
primarily for direct Federal activities including administration of
concession and recreation special use permits, enhancement of wildlife
and fish habitat, and improvement and protection of rare and endangered species habitats on National Forest lands.
The Soil Conservation Service will spend $29 million for protection and enhancement activities—primarily for recreation area
improvement.
In the Department oj Defense—Civil, the Corps of Engineers will
spend $90.5 million to protect and enhance lands and shorelines within
its jurisdiction. For example, in the Forest Management Program, the
forest resources at civil works projects are managed to increase their
value for recreation and wildlife habitat and to promote natural
ecological conditions by following accepted conservation practices.
Activities of this nature are also funded by the Fish and Wildlife
Management Program and the Lakeshore Management Program.
The National Oceanic and Atmospheric Administration in the
Department oj Commerce will be spending $16 million for improving the management of the Nation's coastal zones through joint
projects with the States. For example, the onshore impact of oil and
gas facilities in coastal areas will be studied and States will be assisted
m establishing a national system of estuarine sanctuaries for research
and educational purposes. NOAA will also spend $33 million on
other protection and enhancement projects. For example, programs
conserving marine resources which include marine mammal conservation and endangered species research will be undertaken.

SPECIAL ANALYSIS Q

313

RESEARCH AND DEVELOPMENT

A description of funding for environmental research and development programs appears elsewhere in this analysis. However, because
research and development expenditures occur in more than one
category of activity, these expenditures have been summarized in
table Q-9. Total Federal funding for research and development programs related to environmental improvement will reach an estimated
$1,468.6 million in 1977. This represents an increase of 26% over
actual 1975 outlays of $1,162.2 million and an increase of 3 % over
1976 funding levels of $1,430 million.
Federal funding for environmental research and development programs are almost evenly distributed between pollution control and
abatement activities and programs relating to understanding, describing, and predicting the environment. Research and development
expenditures for environmental protection and enhancement programs,
to the extent that they exist, are not included in table Q-9 because
these outlays are not reported separately.
Table Q-9. ENVIRONMENTAL RESEARCH AND DEVELOPMENT ACTIVITIES
(In millions of dollars)
Category

1975
actual

1976
estimate

TQ
estimate'

1977
estimate

BUDGET AUTHORITY

Pollution control and abatement*
Understanding, describing, and predicting
Total

710.9
632.9

707.9
685.8

1,343.8

1,393.7

569.6
592. 6

740.5
689.5

1,162.2

1,430.0

177. 3
181.6

716.9
751.6

358.9

1,468.5

OUTLAYS

Pollution control and abatement!
Understanding, describing, and predicting
Total
1

Includes both primary and secondary research and development.

180.5
192.9
373.4

743.0
725.6
1,468.6